UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 10-K

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, ~~2009~~2010
OR
[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from _________ to ___________

Commission File Number		Registrant; State of Incorporation; Address and Telephone Number		IRS Employer Identification No.

1-11459		PPL Corporation (Exact name of Registrant as specified in its charter) (Pennsylvania) Two North Ninth Street Allentown, PA 18101-1179 (610) 774-5151		23-2758192

1-32944		PPL Energy Supply, LLC (Exact name of Registrant as specified in its charter) (Delaware) Two North Ninth Street Allentown, PA 18101-1179 (610) 774-5151		23-3074920

1-905		PPL Electric Utilities Corporation (Exact name of Registrant as specified in its charter) (Pennsylvania) Two North Ninth Street Allentown, PA 18101-1179 (610) 774-5151		23-0959590

Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Name of each exchange on which registered

Common Stock of PPL Corporation			New York Stock Exchange

Corporate Units of PPL Corporation			New York Stock Exchange

Senior Notes of PPL Energy Supply, LLC
	7.0% due 2046		New York Stock Exchange

~~Preferred Stock of PPL Electric Utilities Corporation~~
	~~4-1/2%~~ ~~4.40% Series~~		~~New York Stock Exchange~~ ~~New York Stock Exchange~~

Junior Subordinated Notes of PPL Capital Funding, Inc.
	2007 Series A due 2067		New York Stock Exchange

Senior Notes of PPL Capital Funding, Inc.
	6.85% due 2047		New York Stock Exchange

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

Common Stock of PPL Electric Utilities Corporation

Indicate by check mark whether the ~~Registrants~~registrants are well-known seasoned issuers, as defined in Rule 405 of the Securities Act.

PPL Corporation	Yes X	No
PPL Energy Supply, LLC	Yes	No X
PPL Electric Utilities Corporation	Yes	No X

Indicate by check mark if the ~~Registrants~~registrants are not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

PPL Corporation	Yes	No X
PPL Energy Supply, LLC	Yes	No X
PPL Electric Utilities Corporation	Yes	No X

Indicate by check mark whether the ~~Registrants~~registrants (1) have 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 ~~Registrants~~registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.

PPL Corporation	Yes X	No
PPL Energy Supply, LLC	Yes X	No
PPL Electric Utilities Corporation	Yes X	No

Indicate by check mark whether the ~~Registrants~~registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the ~~Registrants~~registrants were required to submit and post such files).

PPL Corporation	Yes X	No
PPL Energy Supply, LLC	Yes	No
PPL Electric Utilities Corporation	Yes	No

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

	PPL Corporation	[ X ]
	PPL Energy Supply, LLC	[ X ]
	PPL Electric Utilities Corporation	[ X ]

Indicate by check mark whether the ~~Registrants~~registrants are large accelerated filers, accelerated filers, non-accelerated filers, or a smaller reporting company. See definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

	Large accelerated filer	Accelerated filer	Non-accelerated filer	Smaller reporting company
PPL Corporation	[ X ]	[ ]	[ ]	[ ]
PPL Energy Supply, LLC	[ ]	[ ]	[ X ]	[ ]
PPL Electric Utilities Corporation	[ ]	[ ]	[ X ]	[ ]

Indicate by check mark whether the ~~Registrants~~registrants are shell companies (as defined in Rule 12b-2 of the Act).

PPL Corporation	Yes	No X
PPL Energy Supply, LLC	Yes	No X
PPL Electric Utilities Corporation	Yes	No X

As of June 30, ~~2009,~~2010, PPL Corporation had ~~376,144,172~~482,187,931 shares of its $.01 par value Common Stock outstanding. The aggregate market value of these common shares (based upon the closing price of these shares on the New York Stock Exchange on that date) held by non-affiliates was ~~$12,397,711,909.~~$12,030,588,878. As of January ~~29, 2010,~~31, 2011, PPL Corporation had ~~377,900,179~~484,392,173 shares of its $.01 par value Common Stock outstanding.

As of January ~~29, 2010,~~31, 2011, PPL Corporation held all 66,368,056 outstanding common shares, no par value, of PPL Electric Utilities Corporation.

PPL Corporation indirectly holds all of the membership interests in PPL Energy Supply, LLC.

PPL Energy Supply, LLC ~~meets~~and PPL Electric Utilities Corporation meet the conditions set forth in General Instructions (I)(1)(a) and (b) of Form 10-K and isare therefore filing this form with the reduced disclosure format.

Documents incorporated by reference:

PPL Corporation ~~and PPL Electric Utilities Corporation have~~has incorporated herein by reference certain sections of PPL Corporation's ~~2010~~2011 Notice of Annual Meeting and Proxy ~~Statement, and PPL Electric Utilities Corporation's 2010 Notice of Annual Meeting and Information~~ Statement, which will be filed with the Securities and Exchange Commission not later than 120 days after December 31, ~~2009.~~2010. Such Statements will provide the information required by Part III of this Report.

PPL CORPORATION

PPL ENERGY SUPPLY, LLC

PPL ELECTRIC UTILITIES CORPORATION

FORM 10-K ANNUAL REPORT TO

THE SECURITIES AND EXCHANGE COMMISSION

FOR THE YEAR ENDED DECEMBER 31, ~~2009~~2010

TABLE OF CONTENTS

This combined Form 10-K is separately filed by PPL Corporation, PPL Energy Supply, LLC and PPL Electric Utilities Corporation. Information contained herein relating to PPL Energy Supply, LLC and PPL Electric Utilities Corporation is filed by PPL Corporation and separately by PPL Energy Supply, LLC and PPL Electric Utilities Corporation on their own behalf. No registrant makes any representation as to information relating to any other registrant, except that information relating to the two PPL Corporation subsidiaries is also attributed to PPL Corporation.

Item			Page			Page
PART I	PART I			PART I
		Glossary of Terms and Abbreviations	i		Glossary of Terms and Abbreviations	i
		Forward-Looking Information	v		Forward-Looking Information	viii
1.		Business	1		Business	1
1A.		Risk Factors	9		Risk Factors	17
1B.		Unresolved Staff Comments	16		Unresolved Staff Comments	27
2.		Properties	17		Properties	28
3.		Legal Proceedings	18		Legal Proceedings	30
4.		Submission of Matters to a Vote of Security Holders	18
		Executive Officers of the Registrants	19

PART II	PART II			PART II
5.		Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	21		Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	31
6.		Selected Financial and Operating Data	21		Selected Financial and Operating Data	31
7.		Management's Discussion and Analysis of Financial Condition and Results of Operations			Management's Discussion and Analysis of Financial Condition and Results of Operations
		PPL Corporation and Subsidiaries	24		PPL Corporation and Subsidiaries	33
		PPL Energy Supply, LLC and Subsidiaries	51		PPL Energy Supply, LLC and Subsidiaries	69
		PPL Electric Utilities Corporation and Subsidiaries	75		PPL Electric Utilities Corporation and Subsidiaries	97
7A.		Quantitative and Qualitative Disclosures About Market Risk	87		Quantitative and Qualitative Disclosures About Market Risk	112
		Reports of Independent Registered Public Accounting Firm	89		Reports of Independent Registered Public Accounting Firms	113
8.		Financial Statements and Supplementary Data	93		Financial Statements and Supplementary Data
					FINANCIAL STATEMENTS
					PPL Corporation
					Consolidated Statements of Income for the years ended December 31, 2010, 2009 and 2008	118
					Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008	119
					Consolidated Balance Sheets at December 31, 2010 and 2009	120
					Consolidated Statements of Equity for the years ended December 31, 2010, 2009 and 2008	122
					Consolidated Statements of Comprehensive Income for the years ended December 31, 2010, 2009 and 2008	123
					PPL Energy Supply, LLC
					Consolidated Statements of Income for the years ended December 31, 2010, 2009 and 2008	124
					Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008	125
					Consolidated Balance Sheets at December 31, 2010 and 2009	126
					Consolidated Statements of Equity for the years ended December 31, 2010, 2009 and 2008	128
					Consolidated Statements of Comprehensive Income for the years ended December 31, 2010, 2009 and 2008	129
					PPL Electric Utilities Corporation
					Consolidated Statements of Income for the years ended December 31, 2010, 2009 and 2008	130
					Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008	131
					Consolidated Balance Sheets at December 31, 2010 and 2009	132
					Consolidated Statements of Shareowners' Equity for the years ended December 31, 2010, 2009 and 2008	134

					COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
					1. Summary of Significant Accounting Policies	135
					2. Segment and Related Information	150
					3. Regulatory Assets and Liabilities	153
					4. Earnings Per Share	158
					5. Income and Other Taxes	159
					6. Preferred Securities	168
					7. Financing Activities	169
					8. Acquisitions, Development and Divestitures	178
					9. Discontinued Operations	179
					10. Acquisition of E.ON.U.S. LLC	183
					11. Leases	185
					12. Stock-Based Compensation	186
					13. Retirement and Postemployment Benefits	191
					14. Jointly Owned Facilities	205
					15. Commitments and Contingencies	206
					16. Related Party Transactions	226
					17. Other Income (Expense) - net	228
					18. Fair Value Measurements and Credit Concentration	228
					19. Derivative Instruments and Hedging Activities	234
					20. Goodwill and Other Intangible Assets	245
					21. Asset Retirement Obligations	247
					22. Variable Interest Entities	249
					23. Available-for-Sale Securities	249
					24. Subsequent Events	252

					SUPPLEMENTARY DATA
					Schedule I - PPL Corporation Condensed Unconsolidated Financial Statements	253
					Quarterly Financial, Common Stock Price and Dividend Data - PPL Corporation	257
					Quarterly Financial Data - PPL Energy Supply, LLC	259

9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	195		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	260
9A.		Controls and Procedures	195		Controls and Procedures	260
9A(T).		Controls and Procedures	195
9B.		Other Information	196		Other Information	261

PART III	PART III			PART III
10.		Directors, Executive Officers and Corporate Governance	196		Directors, Executive Officers and Corporate Governance	261
11.		Executive Compensation	197		Executive Compensation	264
12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	197		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	264
13.		Certain Relationships and Related Transactions, and Director Independence	198		Certain Relationships and Related Transactions, and Director Independence	265
14.		Principal Accounting Fees and Services	198		Principal Accounting Fees and Services	265

PART IV	PART IV			PART IV
15.		Exhibits, Financial Statement Schedules	199		Exhibits, Financial Statement Schedules	267
		Shareowner and Investor Information	200		Shareowner and Investor Information	268
		Signatures	202		Signatures	270
		Exhibit Index	205		Exhibit Index	273
		Computation of Ratio of Earnings to Fixed Charges	215		Computation of Ratio of Earnings to Fixed Charges	287
		Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	218		Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	290
		Certificates of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	224		Certificates of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	296
		Examples of Wholesale Energy, Fuel and Emission Allowance Price Fluctuations - 2005 through 2009	230		Examples of Wholesale Energy, Fuel and Emission Allowance Price Fluctuations - 2006 through 2010	302

GLOSSARY OF TERMS AND ABBREVIATIONS

PPL Corporation and its current and former subsidiaries

~~Emel~~KU - ~~- Empresas Emel S.A.,~~Kentucky Utilities Company, a ~~Chilean electric~~public utility subsidiary of LG&E and KU Energy LLC engaged in the regulated generation, transmission, distribution ~~holding company~~and sale of electricity, primarily in ~~which~~Kentucky. The subsidiary was acquired by PPL ~~Global had a majority ownership interest until its sale~~ in November ~~2007.~~2010.

~~Hyder~~LG&E - Louisville Gas and Electric Company, a public utility subsidiary of LG&E and KU Energy LLC engaged in the regulated generation, transmission, distribution and sale of electricity and the distribution and sale of natural gas in Kentucky. The subsidiary was acquired by PPL in November 2010.

LKE- ~~Hyder Limited,~~LG&E and KU Energy LLC (formerly E.ON U.S. LLC), a subsidiary of ~~WPDL that was~~PPL and the ~~previous owner~~parent of ~~South Wales Electricity plc. In March 2001, South Wales Electricity plc was~~LG&E and KU. PPL acquired ~~by WPDH Limited~~E.ON U.S. LLC in November 2010 and ~~renamed WPD (South Wales).~~changed the name to LG&E and KU Energy LLC. Within the context of this document, references to LKE also relate to the consolidated entity.

PPL - PPL Corporation, the parent holding company of PPL Electric, PPL Energy Funding, LKE and other subsidiaries.

PPL Capital Funding - PPL Capital Funding, Inc., a wholly owned financing subsidiary of PPL.

PPL Electric - PPL Electric Utilities Corporation, a ~~regulated~~public utility subsidiary of PPL that transmits and distributes electricity in its service territory and provides electric supply to retail customers in this territory as a PLR.

PPL Energy Funding - PPL Energy Funding Corporation, a subsidiary of PPL and the parent company of PPL Energy Supply.

PPL EnergyPlus - PPL EnergyPlus, LLC, a subsidiary of PPL Energy Supply that markets and trades wholesale and retail electricity and gas, and supplies energy and energy services in ~~deregulated~~competitive markets.

PPL Energy Supply - PPL Energy Supply, LLC, a subsidiary of PPL Energy Funding and the parent company of PPL Generation, PPL EnergyPlus, PPL Global and other subsidiaries. In January 2011, PPL Energy Supply distributed its membership interest in PPL Global, representing 100% of the outstanding membership interests of PPL Global, to PPL Energy Supply's parent, PPL Energy Funding.

PPL Gas Utilities - PPL Gas Utilities Corporation, a regulated utility that provided natural gas distribution, transmission and storage services, and the competitive sale of propane, which was a subsidiary of PPL until its sale in October 2008.

PPL Generation - PPL Generation, LLC, a subsidiary of PPL Energy Supply that owns and operates U.S. generating facilities through various subsidiaries.

PPL Global - PPL Global, LLC, a subsidiary of PPL Energy Supply that primarily owns and operates a business in the U.K., WPD, that is focused on the regulated distribution of electricity. In January 2011, PPL Energy Supply distributed its membership interest in PPL Global, representing 100% of the outstanding membership interests of PPL Global, to PPL Energy Supply's parent, PPL Energy Funding.

PPL Holtwood - PPL Holtwood, LLC, a subsidiary of PPL Generation that owns hydroelectric generating operations in Pennsylvania.

PPL Investment Corp. - PPL Investment Corporation, a subsidiary of PPL Energy Supply.

PPL Maine - PPL Maine, LLC, a subsidiary of PPL Generation that ~~owns~~owned generating operations in ~~Maine.~~Maine, until their sales in 2009 and 2010.

PPL Martins Creek - PPL Martins Creek, LLC, a subsidiary of PPL Generation that owns generating operations in Pennsylvania.

PPL Montana - PPL Montana, LLC, an indirect subsidiary of PPL Generation that generates electricity for wholesale sales in Montana and the Pacific Northwest.

PPL Services - PPL Services Corporation, a subsidiary of PPL that provides shared services for PPL and its subsidiaries.

PPL Susquehanna - PPL Susquehanna, LLC, the nuclear generating subsidiary of PPL Generation.

~~PPL Transition Bond Company~~ ~~- PPL Transition Bond Company, LLC, a subsidiary of PPL Electric that was formed to issue transition bonds under the Customer Choice Act. This subsidiary was dissolved in June 2009.~~

~~SIUK Capital Trust I~~ ~~- a business trust created to issue preferred securities, the common equity of which was held by WPD LLP. The preferred securities were redeemed in February 2007.~~

WPD - - refers collectively to WPDH Limited and ~~WPDL.~~

~~WPD LLP~~ ~~- Western Power Distribution LLP, a wholly owned subsidiary of WPDH Limited, which owns WPD (South West) and WPD (South Wales).~~its subsidiaries.

WPD (South Wales) - Western Power Distribution (South Wales) plc, a British regional electric utility company.

WPD (South West) - Western Power Distribution (South West) plc, a British regional electric utility company.

WPDH Limited - Western Power Distribution Holdings Limited, an indirect, wholly owned U.K. subsidiary of PPL Global. Indirectly, WPDH Limited wholly owns WPD ~~LLP.~~(South Wales) and WPD (South West).

~~WPDL~~WKE - ~~- WPD Investment Holdings Limited, an indirect wholly owned~~Western Kentucky Energy Corp., a subsidiary of ~~PPL Global. WPDL owns 100% of the common shares of Hyder.~~LKE that leased certain non-utility generating stations in western Kentucky until July 2009.

Other terms and abbreviations

~~401(h) account~~ ~~- A sub-account established within a qualified pension trust to provide for the payment of retiree medical costs.~~

£ - British pounds sterling.

1945 First Mortgage Bond Indenture - PPL Electric's Mortgage and Deed of Trust, dated as of October 1, 1945, to Deutsche Bank Trust Company Americas, as trustee, as supplemented.

~~2001 Senior Secured Bond Indenture~~401(h) account - ~~PPL Electric's Indenture, dated as~~A sub-account established within a qualified pension trust to provide for the payment of ~~August 1, 2001,~~retiree medical costs.

Acid Rain Program - allowance trading system established by the Clean Air Act to reduce levels of sulfur dioxide. Under this program, affected power plants are allocated allowances based on their fuel consumption during specified baseline years and a specific emissions rate.

Act 129 - became effective in October 2008. The ~~Bank of New York Mellon (as successor~~law amends the Pennsylvania Public Utility Code and creates an energy efficiency and conservation program and smart metering technology requirements, adopts new PLR electricity supply procurement rules, provides remedies for market misconduct and makes changes to ~~JPMorgan Chase Bank), as trustee, as supplemented.~~the existing Alternative Energy Portfolio Standard.

AFUDC (Allowance for Funds Used During Construction) - the cost of equity and debt funds used to finance construction projects of regulated businesses, which is capitalized as part of construction cost.

A.M. Best - A.M. Best Company, a company that reports on the financial condition of insurance companies.

AMT- alternative minimum tax.

AOCI - - accumulated other comprehensive income or loss.

ARO - - asset retirement obligation.

Baseload generation - includes the output provided by PPL's nuclear, coal, hydroelectric and qualifying facilities.

Basis - when used in the context of derivatives and commodity trading, the commodity price differential between two locations, products or time periods.

Bcf - - billion cubic feet.

Black Lung Trust - a trust account maintained under federal and state Black Lung legislation for the payment of claims related to disability or death due to pneumoconiosis.

Bridge Facility - an up to $6.5 billion Senior Bridge Term Loan Credit Agreement between PPL Capital Funding, as borrower, and PPL, as guarantor, and a group of banks syndicated in June 2010, to serve as a backstop in the event alternative financing was not available prior to the closing of PPL's acquisition of E.ON U.S.

CAIR - the EPA's Clean Air Interstate Rule.

Clean Air Act - federal legislation enacted to address certain environmental issues related to air emissions, including acid rain, ozone and toxic air emissions.

COLA - - license application for a combined construction permit and operating license from the ~~NRC.~~NRC for a nuclear plant.

CTC - - competitive transition charge on customer bills to recover allowable transition costs under the Customer Choice Act.

Customer Choice Act - the Pennsylvania Electricity Generation Customer Choice and Competition Act, legislation enacted to restructure the state's electric utility industry to create retail access to a competitive market for generation of electricity.

DDCP - - Directors Deferred Compensation Plan.

DEP - - Department of Environmental Protection, a state government agency.

~~DOE~~Dodd-Frank Act - the Dodd-Frank Wall Street Reform and Consumer Protection Act that was signed into law in July 2010.

DOE - Department of Energy, a U.S. government agency.

DRIP - - Dividend Reinvestment and Direct Stock Purchase Plan.

E.ON AG - a German corporation and the parent of E.ON US Investments.

E.ON US Investments - E.ON US Investments Corp., a Delaware corporation and the former parent of E.ON U.S. LLC. PPL acquired E.ON U.S. LLC in November 2010 and changed its name to LG&E and KU Energy LLC.

Economic Stimulus Package - The American Recovery and Reinvestment Act of 2009, generally referred to as the federal economic stimulus package, which was signed into law in February 2009.

EMF - - electric and magnetic fields.

EPA - - Environmental Protection Agency, a U.S. government agency.

EPS - - earnings per share.

~~ESOP~~Equity Unit - consists of a Purchase Contract and, initially, a 5.0% undivided beneficial ownership interest in $1,000 principal amount of PPL Capital Funding 4.625% Junior Subordinated Notes due 2018. Equity Units were issued in June 2010 to help fund PPL's acquisition of LKE.

ESOP - Employee Stock Ownership Plan.

~~EWG~~Euro - the basic monetary unit among participating members of the European Union.

EWG - exempt wholesale generator.

~~FASB~~ ~~- Financial Accounting Standards Board, a rulemaking organization that establishes financial accounting and reporting standards.~~

FERC - - Federal Energy Regulatory Commission, the federal agency that regulates, among other things, interstate transmission and wholesale sales of electricity, hydroelectric power projects and related matters.

Fitch- Fitch, Inc., a credit rating agency.

FTR - financial transmission rights, which are financial instruments established to manage price risk related to electricity transmission congestion. They entitle the holder to receive compensation or require the holder to remit payment for certain congestion-related transmission charges that arise when the transmission grid is congested.

~~GAAP~~Fundamental Change - as it relates to the terms of the Equity Units, will be deemed to have occurred if any of the following occurs with respect to PPL, subject to certain exceptions: (i) a change of control; (ii) a consolidation with or merger into any other entity; (iii) common stock ceases to be listed or quoted; or (iv) a liquidation, dissolution or termination.

GAAP - generally accepted accounting principles in the U.S.

~~GWh~~GBP - British pound sterling.

GHG – greenhouse gas(es).

GWh - gigawatt-hour, one million kilowatt-hours.

~~HMRC~~Health Care Reform - The Patient Protection and Affordable Care Act (HR 3590) and the Health Care and Education Reconciliation Act of 2010 (HR 4872), signed into law in March 2010.

HMRC - HM Revenue & Customs. The tax authority in the U.K., formerly known as Inland Revenue.

IBEW - - International Brotherhood of Electrical Workers.

ICP - - Incentive Compensation Plan.

ICPKE - - Incentive Compensation Plan for Key Employees.

Intermediate and peaking generation - includes the output provided by ~~PPL Energy Supply's~~PPL's oil- and natural gas-fired units.

Ironwood - a natural gas-fired power plant in Lebanon, Pennsylvania with a winter rating of ~~759~~763 MW.

IRS - Internal Revenue Service, a U.S. government agency.

IRC Sec. 481 - the Internal Revenue Code Section that ~~prescribes~~identifies the tax year in which ~~adjustments to taxable income resulting from a change in a tax~~ accounting method ~~must be recognized.~~change differences are recognized in federal taxable income.

ISO - - Independent System Operator.

ITC - - intangible transition charge on customer bills to recover intangible transition costs associated with securitizing stranded costs under the Customer Choice Act.

KPSC - Kentucky Public Service Commission, the state agency that has jurisdiction over the regulation of rates and service of utilities in Kentucky.

KU 2010 Mortgage Indenture - KU's Indenture dated as of October 1, 2010, to The Bank of New York Mellon, as trustee, as supplemented.

kVA - kilovolt-ampere.

kWh - - kilowatt-hour, basic unit of electrical energy.

LCIDA - Lehigh County Industrial Development Authority.

LG&E 2010 Mortgage Indenture - LG&E's Indenture, dated as of October 1, 2010, to The Bank of New York Mellon, as trustee, as supplemented.

LIBOR - London Interbank Offered Rate.

Long Island generation business- includes a 79.9 MW gas-fired plant in the Edgewood section of Brentwood, New York and a 79.9 MW oil-fired plant in Shoreham, New ~~York.~~York and related tolling agreements. This business was sold in February 2010.

MACT - - maximum achievable control technology.

MISO (Midwest Independent System Operator) - an independent system operator and the regional transmission organization that provides open-access transmission service and monitors the high voltage transmission system in all or parts of Illinois, Indiana, Iowa, Michigan, Minnesota, Missouri, Montana, Nebraska, North Dakota, Ohio, South Dakota, Wisconsin and Manitoba, Canada.

Montana Power - The Montana Power Company, a Montana-based company that sold its generating assets to PPL Montana in December 1999. Through a series of transactions consummated during the first quarter of 2002, Montana Power sold its electricity delivery business to NorthWestern.

Moody's - - Moody's Investors Service, Inc., a credit rating agency.

MW - - megawatt, one thousand kilowatts.

MWh - - megawatt-hour, one thousand kilowatt-hours.

NDT - -PPL Susquehanna's nuclear plant decommissioning trust.

NERC - - North American Electric Reliability Corporation.

NorthWestern - NorthWestern Corporation, a Delaware corporation, and successor in interest to Montana Power's electricity delivery business, including Montana Power's rights and obligations under contracts with PPL Montana.

NPDES - - National Pollutant Discharge Elimination System.

NPNS - - the normal purchases and normal sales exception as permitted by derivative accounting rules.

NRC - - Nuclear Regulatory Commission, the federal agency that regulates nuclear power facilities.

NUGs ~~(Non-Utility Generators)~~ - non-utility generators, generating plants not owned by public utilities, whose electrical output must be purchased by utilities under the PURPA if the plant meets certain criteria.

NYMEX - New York Mercantile Exchange.

OCI - - other comprehensive income or loss.

Ofgem - Office of Gas and Electricity Markets, the British agency that regulates transmission, distribution and wholesale sales of electricity and related matters.

OVEC - Ohio Valley Electric Corporation, located in Piketon, Ohio, an entity in which LKE indirectly owns an 8.13% interest. OVEC owns and operates two coal-fired power plants, the Kyger Creek Station in Ohio and the Clifty Creek Station in Indiana, with combined nameplate capacities of 2,390 MW.

PEDFA - Pennsylvania Economic Development Financing Authority.

PJM (PJM Interconnection, L.L.C.) - operator of the electric transmission network and electric energy market 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.

PLR (Provider of Last Resort) - the role of PPL Electric in providing default electricity supply to retail customers within its delivery territory who have not chosen to select an alternative electricity supplier under the Customer Choice Act.

PP&E - property, plant and equipment.

PPL Electric 2001 Mortgage Indenture - PPL Electric's Indenture, dated as of August 1, 2001, to The Bank of New York Mellon (as successor to JPMorgan Chase Bank), as trustee, as supplemented.

PUC - Pennsylvania Public Utility Commission, the state agency that regulates certain ratemaking, services, accounting and operations of Pennsylvania utilities.

PUC Final Order - final order issued by the PUC on August 27, 1998, approving the settlement of PPL Electric's restructuring proceeding.

PUHCA - - Public Utility Holding Company Act of 1935, legislation passed by the U.S. Congress. Repealed effective February 2006 by the Energy Policy Act of 2005.

Purchase Contract - a contract that is a component of the Equity Unit that requires holders to purchase shares of PPL common stock on or prior to July 1, 2013.

PURPA - Public Utility Regulatory Policies Act of 1978, legislation passed by the U.S. Congress to encourage energy conservation, efficient use of resources and equitable rates.

PURTA - The Pennsylvania Public Utility Realty Tax Act.

RAB - - regulatory asset base. This term is also commonly known as RAV.

RECs - - renewable energy credits.

~~Regulation S-K~~ ~~- SEC regulation governing the content of reports and other documents required to be filed pursuant to the federal securities laws.~~

RFC - ReliabilityFirst Corporation (the regional reliability entity that replaced the Mid-Atlantic Area Coordination Council).

RMC - - Risk Management Committee.

~~RMR~~RTO - - reliability must run. Describes a generation facility that is operated at the request of an ISO to ensure system reliability, generally in a transmission constrained area of the electricity system.Regional Transmission Organization.

~~RTO~~S&P - ~~- Regional Transmission Organization.~~Standard & Poor's Ratings Services, a credit rating agency.

Sarbanes-Oxley - Sarbanes-Oxley Act of 2002, which sets requirements for management's assessment of internal controls for financial reporting. It also requires an independent auditor to make its own assessment.

SCR - - selective catalytic reduction, a pollution control process. for the removal of nitrogen oxide from exhaust gases.

Scrubber - - an air pollution control device that can remove particulates and/or gases (such as sulfur dioxide) from exhaust gases.

SEC - - Securities and Exchange Commission, a U.S. government agency whose primary mission is to protect investors and maintain the integrity of the securities markets.

~~S&P~~SIFMA Index - ~~- Standard & Poor's Ratings Services.~~the Securities Industry and Financial Markets Association Municipal Swap Index.

Smart meter - an electric meter that utilizes smart metering technology.

Smart metering technology - technology that can measure, among other things, time of electricity consumption to permit offering rate incentives for usage during lower cost or demand intervals. The use of this technology also strengthens network reliability.

SNCR - selective non-catalytic reduction, a pollution control process for the removal of nitrogen oxide from exhaust gases.

Superfund - - federal environmental legislation that addresses remediation of contaminated sites; states also have similar statutes.

~~Synfuel projects~~ - production facilities that manufactured synthetic fuel from coal or coal byproducts. Favorable federal tax credits, which expired effective December 31, 2007, were available on qualified synthetic fuel products.

Tolling agreement - agreement whereby the owner of an electric generating facility agrees to use that facility to convert fuel provided by a third party into ~~electric energy~~electricity for delivery back to the third party.

Total shareowner return - increase in market value of a share of the Company's common stock plus the value of all dividends paid on a share of the common stock during the applicable performance period, divided by the price of the common stock as of the beginning of the performance period.

~~VaR~~TRA - Tennessee Regulatory Authority, the state agency that has jurisdiction over the regulation of rates and service of utilities in Tennessee.

VaR - value-at-risk, a statistical model that attempts to estimate the value of potential loss over a given holding period under normal market conditions at a given confidence level.

VEBA - - Voluntary Employee Benefit Association Trust, trust accounts for health and welfare plans for future benefit payments for employees, retirees or their beneficiaries.

VIE - variable interest entity.

Volumetric risk - the risk that the actual load volumes provided under full-requirement sales contracts could vary significantly from forecasted volumes.

VSCC - Virginia State Corporation Commission, the state agency that has jurisdiction over the regulation of Virginia corporations, including utilities.

VWAP - as it relates to the Equity Units issued by PPL, the per share volume-weighted-average price as displayed under the heading Bloomberg VWAP on Bloomberg page "PPL <EQUITY> AQR" (or its equivalent successor if such page is not available) in respect of the period from the scheduled open of trading on the relevant trading day until the scheduled close of trading on the relevant trading day (or if such volume-weighted-average price is unavailable, the market price of one share of PPL common stock on such trading day determined, using a volume-weighted-average method, by a nationally recognized independent investment banking firm retained for this purpose by PPL).

FORWARD-LOOKING INFORMATION

Statements contained in this Form 10-K concerning expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements which are other than statements of historical fact are "forward-looking statements" within the meaning of the federal securities laws. Although PPL, PPL Energy Supply and PPL Electric believe that the expectations and assumptions reflected in these statements are reasonable, there can be no assurance that these expectations will prove to be correct. Forward-looking statements are subject to many risks and uncertainties, and actual results may differ materially from the results discussed in forward-looking statements. In addition to the specific factors discussed in "Item 1A. Risk Factors" and in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10-K report, the following are among the important factors that could cause actual results to differ materially from the forward-looking statements.

·	fuel supply cost and availability;

·	continuing ability to recover fuel and natural gas supply costs in a timely manner at LG&E and KU;

·	weather conditions affecting generation, customer energy use and operating costs;

·	operation, availability and operating costs of existing generation facilities;

·	transmission and distribution system conditions and operating costs;

·	potential expansion of alternative sources of electricity generation;

·	potential laws or regulations to reduce emissions of "greenhouse" gases;

·	collective labor bargaining negotiations;

·	the outcome of litigation against PPL and its subsidiaries;

·	potential effects of threatened or actual terrorism, war or other hostilities, or natural disasters;

·	the commitments and liabilities of PPL and its subsidiaries;

·	market demand and prices for energy, capacity, transmission services, emission allowances and delivered fuel;

·	competition in retail and wholesale power and natural gas markets;

·	liquidity of wholesale power markets;

·	defaults by counterparties under energy, fuel or other power product contracts;

·	market prices of commodity inputs for ongoing capital expenditures;

·	capital market conditions, including the availability of capital or credit, changes in interest rates, and decisions regarding capital structure;

·	stock price performance of PPL;

·	the fair value of debt and equity securities and the impact on defined benefit costs and resultant cash funding requirements for defined benefit plans;

·	interest rates and their effect on pension, retiree medical and nuclear decommissioning liabilities;

·	volatility in or the impact of ~~the current~~other changes in financial or commodity markets and economic ~~downturn;~~conditions;
·	~~the effect of electricity price deregulation beginning in 2010 in PPL Electric's service territory;~~

·	the profitability and liquidity, including access to capital markets and credit facilities, of PPL and its subsidiaries;

·	new accounting requirements or new interpretations or applications of existing requirements;

·	changes in securities and credit ratings;

·	foreign currency exchange rates;

·	current and future environmental conditions, regulations and other requirements and the related costs of compliance, including environmental capital expenditures, emission allowance costs and other expenses;

·	political, regulatory or economic conditions in states, regions or countries where PPL or its subsidiaries conduct business;

·	receipt of necessary governmental permits, approvals and rate relief;

·	new state, federal or foreign legislation, including new tax, environmental, healthcare or pension-related legislation;

·	state, federal and foreign regulatory developments;

·	the outcome of any rate cases by PPL Electric at the ~~PUC;~~PUC, by LG&E or KU at the KPSC, VSCC or the TRA, or by WPD at Ofgem in the U.K.;

·	the impact of any state, federal or foreign investigations applicable to PPL and its subsidiaries and the energy industry;

·	the effect of any business or industry restructuring;

·	development of new projects, markets and technologies;

·	performance of new ventures; and

·	business or asset acquisitions and dispositions.

Any such forward-looking statements should be considered in light of such important factors and in conjunction with other documents of PPL, PPL Energy Supply and PPL Electric on file with the SEC.

New factors that could cause actual results to differ materially from those described in forward-looking statements emerge from time to time, and it is not possible for PPL, PPL Energy Supply or PPL Electric to predict all such factors, or the extent to which any such factor or combination of factors may cause actual results to differ from those contained in any forward-looking statement. Any forward-looking statement speaks only as of the date on which such statement is made, and PPL, PPL Energy Supply and PPL Electric undertake no obligation to update the information contained in such statement to reflect subsequent developments or information.

PART I

ITEM 1. BUSINESS

BACKGROUND

PPL Corporation, headquartered in Allentown, PA, is an energy and utility holding company that was incorporated in 1994. Through ~~its~~ subsidiaries, PPL generates electricity from power plants in the northeastern, northwestern and ~~western~~southeastern U.S., markets wholesale or retail energy primarily in ~~the~~ northeastern and ~~western~~northwestern portions of the U.S. ~~and~~, delivers electricity to ~~approximately 4 million~~ customers in Pennsylvania, Kentucky, Virginia, Tennessee and the U.K. and delivers natural gas in Kentucky. On November 1, 2010, PPL acquired all of the limited liability company interests of E.ON U.S. LLC from a wholly owned subsidiary of E.ON AG. Upon completion of the acquisition, E.ON U.S. LLC was renamed LG&E and KU Energy LLC (LKE). LKE is engaged in regulated uti lity operations through its subsidiaries, KU and LG&E. PPL acquired LKE for approximately $7.6 billion, including debt assumed through consolidation. See Note 10 to the Financial Statements for additional information on the acquisition. The acquisition of LKE substantially reapportions the mix of PPL's ~~significant~~regulated and competitive businesses by increasing the regulated portion of its business, strengthens PPL's credit profile and enhances rate-regulated growth opportunities as the regulated businesses make investments to improve infrastructure and customer reliability. An increase in regulated assets provides earnings stability through regulated returns and the ability to recover costs of capital investments, in contrast to the competitive supply business where earnings and cash flows are subject to market conditions. In 2011, PPL projects that 50% of its net income will be provided by its regulated businesses and the remainder will be provided by its c ompetitive supply businesses. As of December 31, 2010, PPL has:

·	More than $10 billion in projected annual revenues (up from $8.5 billion recorded by PPL in 2010 including two months of LKE revenue).

·	5.3 million utility customers (including 1.3 million served by the Kentucky-based companies).

·	Approximately 19,000 MW of generation (including 7,700 MW of regulated capacity in the Kentucky-based companies).

·	Approximately 14,000 full-time employees (including about 3,100 in Kentucky).

As of December 31, 2010, PPL's principal subsidiaries are shown ~~below:~~below (* denotes a SEC registrant):

In January 2011, PPL Energy Supply distributed its 100% membership interest in PPL Global to its parent, PPL Energy Funding, to better align PPL's organizational structure with the manner in which it manages its businesses and reports segment information in its consolidated financial statements.

In addition to PPL Corporation, the other SEC registrants included in this filing are:

PPL Energy Supply, LLC, an indirect wholly owned subsidiary of PPL formed in 2000, is an energy company engaged through its subsidiaries in the generation and marketing of ~~power,~~electricity, primarily in the northeastern and ~~western~~northwestern power markets of the U.S. and in the delivery of electricity in the U.K. PPL Energy Supply's major operating subsidiaries are PPL Generation, PPL EnergyPlus and PPL Global. As noted above, in January 2011, PPL Energy Supply distributed its 100% membership interest in PPL Global to its parent, PPL Energy Funding. At December 31, ~~2009,~~2010, PPL Energy Supply owned or controlled ~~11,719~~11,729 MW of electric power generation capacity and ~~has plans to implement~~is implementing capital projects at certain of its existing generation facilities in Pennsylvania and Montana to provide ~~239~~247 MW of additional generating capacity by ~~2014.~~2013, and is in the process of disposing of certain non-core generation facilities with a capacity of 961 MW in 2011.

PPL Electric Utilities Corporation, incorporated in 1920, is a direct subsidiary of PPL and a regulated public utility. PPL Electric ~~provides~~delivers electricity ~~delivery service~~ in its Pennsylvania service territory ~~in Pennsylvania~~ and provides electricity supply to retail customers in that territory as a PLR under the Customer Choice Act.

PPL's utility subsidiaries, and to a lesser extent certain of its non-utility subsidiaries, are subject to extensive regulation by the FERC including: wholesale sales of power and related transactions, electric transmission service, accounting practices, issuances and sales of securities, acquisitions and sales of utility properties and payments of dividends. PPL is subject to certain FERC regulations as a holding company under PUHCA 2005 and the Federal Power Act, including with respect to accounting and record-keeping, inter-system sales of non-power goods and services and acquisitions of securities in, or mergers with, certain types of electric utility companies or holding companies.

Segment Information

(PPL)

Following the November 1, 2010 acquisition of LKE, PPL is organized into ~~three~~four segments: ~~Supply,~~Kentucky Regulated, International Regulated (formerly International Delivery), Pennsylvania ~~Delivery~~Regulated (formerly Pennsylvania Delivery) and ~~International Delivery.~~ Supply. Other than PPL adding a Kentucky Regulated segment, there were no other changes to reportable segments except the renaming of segments and allocating interest expense related to the Equity Units to the Kentucky Regulated segment.

(PPL Energy Supply)

At December 31, 2010, PPL Energy Supply's segments ~~consist~~consisted of Supply and International ~~Delivery.~~ Regulated (formerly International Delivery). In 2010, there were no changes to these segments except the renaming of segments. However, in January of 2011, PPL Energy Supply distributed its 100% membership interest in PPL Global to its parent, PPL Energy Funding to better align PPL's organizational structure with the manner in which it manages its businesses and reports segment information in its consolidated financial statements.

(PPL Electric)

PPL Electric operates in a single business segment.

(PPL, PPL Energy Supply, and PPL Electric)

See Note 2 to the Financial Statements for financial information about the segments and geographic financial data.

(PPL)

·	Kentucky Regulated Segment

	Consists of the operations of LKE, which owns and operates regulated public utilities engaged in the generation, transmission, distribution and sale of electricity and the distribution and sale of natural gas, representing primarily the activities of LG&E and KU. The Kentucky Regulated segment also includes interest expense related to the Equity Units issued in June 2010 to partially finance the acquisition of LKE.

LKE became a wholly owned subsidiary of PPL on November 1, 2010. LG&E and KU are engaged in the regulated generation, transmission, distribution and sale of electricity in Kentucky and, in KU's case, Virginia and Tennessee. KU provides electric service to approximately 514,000 customers in 77 counties in central, southeastern and western Kentucky, to approximately 30,000 customers in five counties in southwestern Virginia and less than ten customers in Tennessee. In Virginia, KU operates under the name Old Dominion Power Company. KU also sells wholesale electricity to 12 municipalities in Kentucky. LG&E provides electric service to approximately 395,000 customers in Louisville and adjacent areas in Kentucky, covering approximately 700 square miles in nine counties. LG&E provides natural gas service to approximately 320,000 customers in its electric service area and eight additional counties in Kentucky.

PPL Acquisition

In September 2010, the KPSC approved a settlement agreement among PPL and all of the intervening parties to PPL's joint application to the KPSC for approval of its acquisition of ownership and control of LKE. In the settlement agreement, the parties agreed that LG&E and KU would commit that no base rate increases would take effect before January 1, 2013. The rate increases for LG&E and KU that took effect on August 1, 2010 (as described below) are not impacted by the settlement. Under the terms of the settlement, LG&E and KU retain the right to seek approval for the deferral of "extraordinary and uncontrollable costs." Interim rate adjustments will continue to be permissible during that period through existing fuel, environmental and demand side management recovery mechanisms. & #160;The agreement also substitutes an acquisition savings shared deferral mechanism for the previous requirement that LG&E and KU file a synergies plan with the KPSC post-closing. This mechanism, which will be in place until the earlier of five years or the first day of the year in which a base rate increase becomes effective, permits LG&E and KU to each earn up to a 10.75% return on equity. Any earnings above a 10.75% return on equity will be shared with customers on a 50%/50% basis. The KPSC Order and the settlement agreement contained a number of other commitments by LG&E and KU with regard to operations, workforce, community involvement and other matters.

In October 2010, both the VSCC and the TRA approved the transfer of control of LKE to PPL. Certain of these Orders contained additional commitments with regard to operations, workforce, community involvement and other matters.

Also in October 2010, the FERC approved the application for the transfer of control of the utilities. The approval includes various conditional commitments, such as a continuation of certain existing undertakings with protesters in prior cases, an agreement not to terminate certain KU municipal customer contracts prior to January 2017, an exclusion of any transaction-related costs from wholesale energy and tariff customer rates to the extent that LG&E and KU have agreed to not seek recovery of the same transaction-related cost from retail customers and agreements to coordinate with protesters in certain open or ongoing matters.

Franchises and Licenses

LG&E and KU provide electric delivery service, and LG&E provides natural gas distribution service, in their various service territories pursuant to certain franchises, licenses, statutory service areas, easements and other rights or permissions granted by state legislatures, cities or municipalities or other entities.

Competition

There are currently no other electric public utilities operating within the electric service areas of LKE. Neither the Kentucky General Assembly nor the KPSC has adopted or approved a plan or timetable for retail electric industry competition in Kentucky. The nature or timing of any legislative or regulatory actions regarding industry restructuring and their impact on LKE, which may be significant, cannot currently be predicted. Virginia, formerly a deregulated jurisdiction, has enacted legislation which implemented a hybrid model of cost-based regulation; KU's operations in Virginia have been and remain regulated.

Alternative energy sources such as electricity, oil, propane and other fuels provide indirect competition for natural gas revenues of LKE. Marketers may also compete to sell natural gas to certain large end-users. Approximately 25% of LG&E's annual throughput is purchased by large commercial and industrial customers directly from alternate suppliers for delivery through LG&E's distribution system. LG&E's natural gas tariffs include gas price pass-through mechanisms relating to its sale of natural gas as a commodity; therefore, customer natural gas purchases from alternative suppliers do not generally impact profitability. However, some large industrial and commercial customers may physically bypass LG&E's facilities and seek delivery service directly from interstate pipelines or other natural gas distribution systems.

In April 2010, the KPSC commenced a proceeding to investigate the regulatory, financial and operational aspects of natural gas retail competition programs, and the potential benefits to Kentucky consumers. A number of entities, including LG&E, were parties to the proceeding. In December 2010, the KPSC issued an Order in the proceeding declining to endorse natural gas competition at the retail level, noting the existence of a number of transition or oversight costs and an uncertain level of economic benefits in such programs. With respect to existing natural gas transportation programs available to large commercial or industrial users, the Order indicates that the KPSC will review utilities' current tariff structures, user thresholds and other terms and conditions of such programs, as part of such utili ties' next regular natural gas rate cases.

Electric Operations

LKE serves approximately 939,000 electric customers. LKE's transmission and distribution system territory covers approximately 7,300 square miles. For the period from acquisition through December 31, 2010, 83% of the Kentucky Regulated segment's operating revenues were derived from electric operations. Details of electric revenues by customer class for the period from acquisition through December 31, 2010 are shown below.

	Revenue		% of Revenue

Industrial and commercial	$	187		46
Residential		163		40
Municipal		15		4
Other retail		37		9
Wholesale		6		1
Total	$	408		100

Power Supply

At December 31, 2010, LKE owned, controlled or had ownership interest in generating capacity (winter rating) of 7,933 MW in Kentucky, Indiana, and Ohio. See "Item 2. Properties - Kentucky Regulated Segment" for a complete list of LKE's generating capacity. For the period from acquisition through December 31, 2010, LKE's power plants generated 6,008 GWh of electricity.

During 2010, approximately 95% of the electricity generated by LG&E, and 98% of that generated by KU, was produced by their coal-fired electric generating stations. The remainder was generated by natural gas and oil-fired combustion turbines and hydroelectric power plants. Also during 2010, substantially all of the electricity generated was used to supply its retail and municipal customer base.

See "Item 2. Properties - Kentucky Regulated Segment" and Note 8 to the Financial Statements for additional information regarding Unit 2 of the Trimble County generating station (TC2). With limited exceptions LKE took care, custody and control of TC2 on January 22, 2011, and has dispatched the unit to meet customer demand since that date. LG&E and KU and the contractor agreed to a further amendment of the construction agreement whereby the contractor will complete certain actions relating to identifying and completing any necessary modifications to allow operation of TC2 on all fuels in accordance with initial specifications prior to certain dates, and amending the provisions relating to liquidat ed damages. LKE cannot currently estimate the ultimate outcome of these matters. LKE owns a 75% interest in Unit 2. Unit 2 is coal-fired and has a capacity of 760 MW, of which LKE's share is 570 MW.

Fuel Supply

Coal is expected to be the predominant fuel used by LG&E and KU for baseload generation for the foreseeable future, with natural gas and oil being used for intermediate and peaking capacity and flame stabilization in coal-fired boilers.

Fuel inventory is maintained at levels estimated to be necessary to avoid operational disruptions at coal-fired generating units. Reliability of coal deliveries can be affected from time to time by a number of factors including fluctuations in demand, coal mine production issues and other supplier or transporter operating difficulties.

LG&E and KU have entered into coal supply agreements with various suppliers for coal deliveries through 2016 and normally augment their coal supply agreements with spot market purchases.

For their existing units, LG&E and KU expect for the foreseeable future to purchase most of their coal from western and eastern Kentucky, West Virginia, southern Indiana, southern Illinois and Ohio. With the installation of flue gas desulfurization systems (sulfur dioxide removal systems, or scrubbers), LG&E and KU expect their use of higher sulfur coal to increase. In 2011 and beyond, LG&E and KU may purchase certain quantities of ultra-low sulfur content coal from Wyoming for blending at Unit 2 of the Trimble County generating station. Coal is delivered to the generating stations primarily by barge, truck and rail.

Natural Gas

LG&E purchases, transports, distributes or stores natural gas for 320,000 customers in Kentucky. Its service area covers over 700 square miles in 17 counties and includes 391 miles of transportation mains, consisting of natural gas transmission lines of 255 miles, natural gas storage lines of 119 miles and natural gas combustion turbine lines of 17 miles. LG&E's natural gas distribution system includes 4,235 miles of distribution mains. For the period from acquisition through December 31, 2010, 17% of the Kentucky Regulated segment's operating revenues were derived from natural gas operations. Shown below are details of natural gas revenues by customer class for the period from acquisition through December 31, 2010.

	Revenue		% of Revenue

Residential	$	56		66
Industrial and commercial		22		26
Other retail		5		6
Wholesale		2		2
Total	$	85		100

LG&E's natural gas billings include a weather normalization adjustment mechanism which adjusts the distribution cost component of residential and commercial customer bills based on normal temperatures during the heating season months of November through April, somewhat mitigating the effect of above- or below-normal weather on residential and commercial revenues.

Five underground natural gas storage fields, with a current working natural gas capacity of approximately 15 Bcf, help provide economical and reliable natural gas service to ultimate consumers. By using natural gas storage facilities, LG&E avoids the costs typically associated with more expensive pipeline transportation capacity to serve peak winter heating loads. Natural gas is stored during the summer season for withdrawal the following winter heating season. Without this storage capacity, LG&E would be forced to buy additional natural gas and pipeline transportation services during winter months when customer demand increases and when the prices for natural gas supply and transportation services are typically at their highest. Several suppliers under contracts of varying duration prov ide competitively priced natural gas. The underground storage facilities, in combination with its purchasing practices, enable LG&E to offer natural gas sales service at competitive rates. At December 31, 2010, LG&E had a 12 Bcf inventory balance of natural gas stored underground valued at $60 million.

A number of large commercial and industrial customers purchase their natural gas requirements directly from alternate suppliers for delivery through LG&E's distribution system. These large commercial and industrial customers account for approximately 25% of LG&E's annual throughput.

Natural Gas Supply

LG&E also has a portfolio of supply arrangements of various terms with a number of suppliers designed to meet its firm sales obligations. These natural gas supply arrangements include pricing provisions that are market-responsive. In tandem with pipeline transportation services, these natural gas supplies provide the reliability and flexibility necessary to serve LG&E's natural gas customers.

LG&E purchases natural gas supply transportation services from two pipelines. LG&E has contracts with one pipeline that are subject to termination by LG&E between 2013 and 2018. Total winter capacity under these contracts is 184,900 MMBtu/day and summer on-demand natural gas capacity is 60,000 MMBtu/day. LG&E has a contract with the other pipeline that expires in 2012. Total winter and summer capacity under this contract is 51,000 MMBtu/day.

Rates and Regulation

LG&E and KU are subject to the jurisdiction of the KPSC and the FERC in virtually all matters related to electric and natural gas utility regulation. In addition, KU is subject to the VSCC and the TRA. LG&E and KU withdrew from the MISO in 2006. Since exiting from the MISO, LG&E and KU have been operating under a FERC-approved open access transmission tariff. LG&E and KU now contract with the Tennessee Valley Authority to act as their transmission reliability coordinator and Southwest Power Pool, Inc. to function as their independent transmission operator, pursuant to FERC requirements. Certain operations of LKE are subject to the Occupational Safety and Health Act of 1970 and comparable state statutes. LKE is subject to certain FERC regulations as a holding comp any under PUHCA 2005 and the Federal Power Act.

LG&E's and KU's Kentucky base rates are calculated based on a return on capitalization (common equity, long-term debt and notes payable) including certain adjustments to exclude non-regulated investments and environmental compliance costs recovered separately through the environmental cost recovery (ECR) mechanism. As such, regulatory assets are generally earning a return. See Note 3 to the Financial Statements for additional information on cost recovery mechanisms.

KU's Virginia base rates are calculated based on a return on rate base. All regulatory assets and liabilities are excluded from the return on rate base utilized in the calculation of Virginia base rates. In January 2011, KU filed a notice of intent to file a rate case with the VSCC for the test year ended December 31, 2010. The case is expected to be filed on or after April 1, 2011.

KU's wholesale requirements rates for municipal customers are calculated based on annual updates to a rate formula that utilizes a return on rate base (net utility plant less deferred taxes and miscellaneous deductions). All regulatory assets and liabilities are excluded from the return on rate base utilized in the development of municipal rates.

See Note 3 to the Financial Statements for additional information on cost recovery mechanisms.

2010 Kentucky Rate Case

In January 2010, LG&E and KU filed applications with the KPSC requesting increases in electric base rates of approximately 12%, or annual increases of $95 million and $135 million, respectively. In addition, LG&E requested an increase in its natural gas base rates of approximately 8%, or $23 million annually. In June 2010, LG&E and KU and certain intervenors agreed to a stipulation providing for increases in LG&E's and KU's electric base rates of $74 million and $98 million on an annual basis, and LG&E's natural gas base rates of $17 million on an annual basis, and those parties filed a request with the KPSC to approve such stipulation. In July 2010, the KPSC issued an Order in the proceeding approving all the provisions of the stipulation, including a return on equity range of 9.75-10. 75%, with rates effective on and after August 1, 2010.

Virginia Rate Case

In June 2009, KU filed an application with the VSCC requesting an increase in electric base rates for its Virginia jurisdictional customers in an amount of $12 million annually or approximately 21%. The proposed increase reflected a proposed rate of return on rate base of 8.586% based on a return of equity of 12%. As permitted pursuant to a VSCC Order, KU elected to implement the proposed rates effective November 1, 2009, on an interim basis. During December 2009, KU and the VSCC Staff agreed to a Stipulation and Recommendation authorizing a base rate revenue increase of $11 million annually and a return on rate base of 7.846% based on a 10.5% return on common equity. In March 2010, the VSCC issued an Order approving the stipulation, with the increased rates to be put into effect as of April 1, 2010. As part of the stipulation, KU refunded approximately $1 million in interim rate amounts in excess of the ultimate approved rates.

FERC Wholesale Rate Case

In 2008, KU filed an application with the FERC for increases in electric base rates applicable to wholesale power sale contracts or interchange agreements involving, collectively, twelve Kentucky municipalities. The application requested a shift from an all-in stated unit charge rate to an unbundled formula rate, including an annual adjustment mechanism. In 2009, the FERC issued an Order approving a settlement among the parties in the case, incorporating increases of approximately 3% from prior rates and a return on equity of 11%. In May 2010, KU submitted to the FERC the proposed current annual adjustments to the formula rates, which incorporated certain proposed increases. Updated rates, including certain further adjustments from a review process involving wholesale requirements customers, bec ame effective as of July 1, 2010.

(PPL and PPL Energy Supply)

·	International Regulated Segment

	Includes WPD, a regulated electricity distribution company in the U.K.

WPD, headquartered in Bristol, England, operates two of the 15 distribution networks providing electricity service in the U.K. through indirect wholly owned subsidiaries. WPD (South West) serves 1.5 million end-users in a 5,560 square mile area of southwest England. WPD (South Wales) serves 1.1 million end-users in a 4,550 square mile area within Wales.

Details of revenue by category for the years ended December 31, are shown below.

	2010				2009				2008
	Revenue		% of Revenue		Revenue		% of Revenue		Revenue		% of Revenue

Utility revenues	$	727		96	$	684		96	$	824		96
Energy-related businesses		34		4		32		4		33		4
Total	$	761		100	$	716		100	$	857		100

WPD's energy-related businesses revenues include ancillary activities that support the distribution business, including telecommunications and real estate. WPD's telecommunication subsidiary derives revenue from the rental of fiber optic cables primarily attached to WPD's overhead electricity distribution network. WPD also provides meter services to businesses across the U.K.

Franchise and Licenses

WPD is authorized by the U.K. government to provide electric distribution services within its concession areas and service territories, subject to certain conditions and obligations. For instance, WPD is subject to governmental regulation of the prices it can charge and the quality of service it must provide, and WPD can be fined or have its licenses revoked if it does not meet the mandated standard of service.

Competition

Although WPD operates in non-exclusive concession areas in the U.K., it currently faces little competition with respect to end-users connected to its network. WPD (South West) and WPD (South Wales) are thus regulated monopolies which operate under regulatory price controls.

Rates and Regulation

The operations of WPD (South West) and WPD (South Wales) are regulated under their distribution licenses under which income is generated subject to a price cap regulatory framework set by the regulatory body, Ofgem, that provides economic incentives to minimize operating, capital and financing costs. The charges made for the use of the distribution networks are regulated on the basis of the "RPI plus/minus X" formula where RPI is a measure of inflation and X is an efficiency factor established by Ofgem following their review. Under the review, Ofgem assesses the revenue and capital expenditure plans of companies and determines what they consider an efficient level of that expenditure. Ofgem also considers the required cost of capital sufficient to encourage the required investment and determines customer s ervice targets. In December 2009, Ofgem completed its rate review for the period from April 1, 2010 through March 31, 2015. Ofgem allowed WPD an average increase in total revenues, before inflationary adjustments, of 6.9% in each of the five years. The revenue increase includes reimbursement to electricity distributors for higher operating and capital costs to be incurred. Also, Ofgem set the weighted average cost of capital at 4.7%, which includes pre-tax debt and post-tax equity costs and excludes adjustments for inflation, for all distribution companies. This is a 0.8% decrease from the previous regulatory period. Additionally, Ofgem has established strong incentive mechanisms to provide significant opportunities to enhance overall returns by improving network efficiency, reliability or customer service. In October 2010, Ofgem announced a new pricing model that will be effective for the electricity distribution sector, inclu ding WPD, beginning April 2015. The model, known as RIIO (Revenues = Incentives + Innovation + Outputs), is intended to encourage investment in regulated infrastructure. Key components of the model are: an extension of the price review period to eight years, increased emphasis on outputs and incentives, enhanced stakeholder engagement including network customers, a stronger incentive framework to encourage more efficient investment and innovation, expansion of the current Low Carbon Network Fund to stimulate innovation and continued use of a single weighted average cost of capital.

Customers

The majority of WPD's revenue is derived from the delivery of electricity to end-users and thus its customers are the suppliers to those end-users. It is a requirement of Ofgem that all licensed electricity distributors and suppliers become parties to the Distribution Connection and Use of System Agreement. This agreement sets out how creditworthiness will be determined and, as a result, whether the supplier needs to provide collateral.

(PPL and PPL Electric)

·	Pennsylvania Regulated Segment

	Includes the regulated electric delivery operations of PPL Electric.

PPL Electric is subject to regulation as a public utility by the PUC, and certain of its transmission activities are subject to the jurisdiction of the FERC under the Federal Power Act. PPL Electric delivers electricity to approximately 1.4 million customers in a 10,000-square mile territory in 29 counties of eastern and central Pennsylvania. PPL Electric also provides electricity supply in this territory as a PLR.

Details of electric revenues by customer class for the years ended December 31, are shown below.

	2010				2009				2008
	Revenue		% of Revenue		Revenue		% of Revenue		Revenue		% of Revenue

Residential	$	1,469		60	$	1,473		45	$	1,468		43
Industrial		123		5		519		16		568		17
Commercial		588		24		1,173		35		1,165		34
Other (a) (b)		275		11		127		4		200		6
Total	$	2,455		100	$	3,292		100	$	3,401		100

(a)	Includes regulatory over- or under-recovery reconciliation mechanisms, pole attachment revenues, street lighting and 2010 transmission revenues, net.

(b)	Included in these amounts are $7 million, $74 million and $111 million of retail and wholesale electric to affiliate revenue which is eliminated in consolidation for PPL.

Franchise, Licenses and Other Regulations

PPL Electric is authorized to provide electric public utility service throughout its service area as a result of grants by the Commonwealth of Pennsylvania in corporate charters to PPL Electric and companies to which it has succeeded and as a result of certification by the PUC. PPL Electric is granted the right to enter the streets and highways by the Commonwealth subject to certain conditions. In general, such conditions have been met by ordinance, resolution, permit, acquiescence or other action by an appropriate local political subdivision or agency of the Commonwealth.

Certain operations of PPL Electric are subject to the Occupational Safety and Health Act of 1970 and comparable state statutes.

Competition

Pursuant to authorizations from the Commonwealth of Pennsylvania and the PUC, PPL Electric operates a regulated transmission and distribution monopoly in its service area. Accordingly, PPL Electric does not face competition in its electricity transmission and distribution businesses.

Rates and Regulation

Transmission and Distribution

PPL Electric's transmission facilities are within PJM, which operates the electric transmission network and electric energy market in the Mid-Atlantic and Midwest regions of the U.S.

PJM serves as a FERC-approved RTO to promote greater participation and competition in the region it serves. Besides operating the electric transmission network, PJM also administers regional markets for energy, capacity and ancillary services. A primary objective of any RTO is to separate the operation of, and access to, the transmission grid from market participants that buy or sell electricity in the same markets. Electric utilities continue to own the transmission assets and to receive their share of transmission revenues, but the RTO directs the control and operation of the transmission facilities. PPL Electric is entitled to fully recover from customers the charges that it pays to PJM for transmission-related services.

In November 2004, Pennsylvania enacted the Alternative Energy Portfolio Standard Act (the AEPS), which requires electric distribution companies and retail electric suppliers to ultimately provide 18% of the electricity sold to retail customers in Pennsylvania from alternative energy sources by 2020. Under this state law, alternative energy sources include hydro, wind, solar, waste coal, landfill methane and fuel cells. If an electric distribution company is unable to meet these targets, it will pay an alternative compliance payment of $45 (or, in the case of solar, 200% of the average market value of solar credits) for each MWh that it is short. PPL Electric's initial compliance obligation covered the period January 1, 2010 to May 31, 2010. PPL Electric was required to supply about 6.7% of the t otal amount of electricity it delivered to its PLR customers from alternative energy sources during this period. Under the PUC-approved Competitive Bridge Plan, PPL Electric obtained full requirements service that included the generation or credits that PPL Electric needed to comply with the AEPS in 2010. AEPS compliance requirements for June 1, 2010 through May 31, 2011 are about 9% of the total amount of electricity delivered to PLR Customers.

Act 129 became effective in October 2008. The law creates an energy efficiency and conservation program and smart metering technology requirements, establishes new PLR electricity supply procurement rules, provides remedies for market misconduct, and makes changes to the existing AEPS.

See "Regulatory Issues - Pennsylvania Activities" in Note 15 to the Financial Statements for additional information regarding Act 129, other legislative and regulatory impacts and PPL Electric's actions to provide default electricity supply for periods after 2009.

PLR

The Customer Choice Act requires electric distribution companies, including PPL Electric, to act as a PLR of electricity supply and provides that electricity supply costs will be recovered by such companies pursuant to regulations established by the PUC. As part of the PUC Final Order, PPL Electric agreed to supply this electricity at predetermined capped rates through 2009. To mitigate the risk that PPL Electric would not be able to obtain adequate energy supply at the "capped" rates, PPL Electric entered into full-requirement energy supply contracts with PPL EnergyPlus sufficient for PPL Electric to meet its PLR obligation through the end of 2009. Under these contracts, PPL EnergyPlus supplied PPL Electric's entire PLR load at predetermined prices equal to the capped generation rates that PPL Electric wa s authorized to charge its customers. Prior to the expiration of the rate caps, PPL Electric's customers had limited incentive to purchase generation supply from other providers because, in recent years, the contracts between PPL Electric and PPL EnergyPlus provided a below-market price for these customers. As a result, a limited amount of "shopping" occurred.

PPL Electric's PLR obligation after 2009 is governed by the PUC pursuant to the Public Utility Code as amended by Act 129, PLR regulations and a policy statement regarding interpretation and implementation of those regulations. Effective January 1, 2010, PPL Electric's cost of electric generation is based on a competitive solicitation process. The PUC has approved PPL Electric's default service plan for the period January 2011 through May 2013 which includes 14 solicitations for supply beginning January 1, 2011 with a portion extending beyond May 2013. Pursuant to this plan, PPL Electric had contracted for all of the 2010 electricity supply for residential, small commercial and small industrial customers, large commercial and large industrial customers who elect to take that service in 2010. 0;In addition, PPL Electric completed two solicitations in 2009 and four solicitations in 2010 for supply starting January 2011 to May 2015. The solicitations include a mix of long-term and short-term purchases ranging from five months to five years to fulfill PPL Electric's obligation to provide for customer supply as a PLR. See "Energy Purchase Commitments" in Note 15 to the Financial Statements for additional information regarding PPL Electric's solicitations for 2011 and its actions to provide default electricity supply for periods after 2011.

In addition, several alternative suppliers have offered to provide generation supply in PPL Electric's service territory. Whether its customers purchase supply from these alternative suppliers or from PPL Electric as a PLR, the purchase of such supply has no impact on the financial results of PPL Electric. The cost to purchase PLR supply is passed directly by PPL Electric to its customers without markup.

2010 Rate Case

In March 2010, PPL Electric filed a request with the PUC to increase distribution rates by approximately $115 million or approximately 2.4% over PPL Electric's projected 2010 revenues, to be effective January 1, 2011. In December 2010, the PUC approved a settlement filed by the parties that provides for a rate increase of $77.5 million, or 1.6%, over PPL Electric's projected 2010 revenues. The approved rates became effective for service rendered on and after January 1, 2011. In January 2011, the PP&L Industrial Customers Alliance (PPLICA) filed a Petition for Reconsideration of the PUC's order regarding PPLICA's proposal for a special rate schedule for certain large commercial and industrial customers. Also in January 2011, the PUC granted reconsideration for the purpose of evaluating the me rits of the petition. PPL Electric cannot predict the outcome of this evaluation.

See Note 3 to the Financial Statements for additional information on rate mechanisms.

(PPL)

Sale of Businesses

See Note 9 to the Financial Statements for information on the 2008 sale of PPL's natural gas distribution and propane businesses.

(PPL and PPL Energy Supply)

·	Supply Segment -

	Owns and operates competitive domestic power plants to generate electricity; markets and trades this electricity and other purchased power to ~~deregulated~~competitive wholesale and retail markets; and acquires and develops competitive domestic generation projects. Consists primarily of the activities of PPL Generation and PPL EnergyPlus.

PPL Energy Supply has generation assets that are located in the eastern and ~~western~~northwestern U.S. markets. The eastern generation assets are located in the ~~Northeast/~~Northeast and Mid-Atlantic energy markets, - including PJM ~~the New York ISO~~ and ISO New England. PPL Energy Supply's ~~western~~northwestern generating capacity is located in ~~markets within~~Montana.

Details of revenue by category for the ~~Western Electricity Coordinating Council.~~years ended December 31, are shown below.

		2010				2009				2008
		Revenue		% of Revenue		Revenue		% of Revenue		Revenue		% of Revenue

Electric and Gas
	Wholesale (a)	$	4,347		85	$	4,761		90	$	5,020		91
	Retail		415		8		152		3		151		2
	Trading		2				17				(121)		(2)
	Total electric and gas		4,764		93		4,930		93		5,050		91
Energy-related businesses (b)			364		7		379		7		478		9
Total		$	5,128		100	$	5,309		100	$	5,528		100

(a)	Included in these amounts are $320 million, $1,806 million and $1,826 million of wholesale electric sales to an affiliate which are eliminated in consolidation for PPL.

(b)	In addition to these amounts, PPL has $11 million, $12 million and $8 million of revenue which is not applicable to PPL Energy Supply.

The Supply segment's energy-related businesses revenues include activities that primarily support its generation, marketing and trading businesses. These activities include developing renewable energy projects and providing energy-related products and services to commercial and industrial customers, through its mechanical contracting and services subsidiaries. The renewable energy business builds, owns, operates and maintains renewable energy facilities throughout the Mid-Atlantic and Northeast regions, and includes solar, wind and landfill gas to energy plants. At December 31, 2010, the renewable energy business owned and operated 33 MW of renewable capacity. The revenues of the mechanical contracting and services subsidiaries are included in "Energy-related businesses" on the Statements of Inc ome.

Customer Choice Act

With the expiration of the long-term power purchase agreements between PPL Electric and PPL EnergyPlus, PPL EnergyPlus has multiple options as to how, and to whom, it sells the electricity produced by PPL Energy Supply's generation plants. These sales are based on prevailing market rates. The expiration of the long-term supply agreements with PPL Electric also enables PPL Energy Supply to adjust its exposure to fluctuations in demand that existed with supplying PPL Electric's PLR load. Entry of new generation suppliers into the Pennsylvania marketplace provides PPL Energy Supply the opportunity to provide generation supply to additional wholesale customers but also exposes the Supply segment to increased competition (see "Competition" below).

Power Supply ~~Owned or Controlled Generation Capacity~~

PPL Energy Supply owned or controlled generating capacity (winter rating) of ~~11,719~~11,729 MW at December 31, ~~2009.~~2010. Through subsidiaries, PPL Generation owns and operates power plants ~~primarily~~ in Pennsylvania, Montana, Illinois ~~Connecticut, New York~~ and ~~Maine. The total owned or~~Connecticut. Generating capacity controlled ~~generating capacity~~by PPL Generation and other PPL Energy Supply subsidiaries includes power obtained through PPL EnergyPlus' tolling or power purchase agreements (including Ironwood and other facilities that consist of NUGs, wind farms and landfill gas facilities). See "Item 2. Properties - Supply Segment" for a complete listing of PPL Energy Supply's generating capacity.

See Note 9 to the Financial Statements for information on the 2010 sale of the Long Island Generation business, consisting of plants in New York and the 2010 and 2009 sales of hydroelectric facilities located in Maine. Also, see Note 9 to the Financial Statements for information on the anticipated sale of certain non-core generation facilities consisting of natural gas-fired facilities in Wallingford, Connecticut and University Park, Illinois and a PPL Energy Supply subsidiary's interest in Safe Harbor Water Power Corporation, which owns a hydroelectric facility in Conestoga, Pennsylvania.

PPL Energy Supply's ~~U.S.~~ generation subsidiaries are EWGs, which sell electricity into ~~the~~ wholesale ~~market. PPL Energy Supply's~~markets. EWGs are subject to regulation by the FERC, which has authorized these EWGs to sell ~~generation from their facilities~~the electricity generated at market-based prices. ~~The~~This electricity ~~from these plants~~ is sold to PPL EnergyPlus under FERC-jurisdictional power purchase agreements.

PPL Generation operates its Pennsylvania and Illinois power plants in conjunction with PJM. PPL Generation's Pennsylvania and Illinois power plants and PPL EnergyPlus are members of the RFC. Refer to "Pennsylvania Delivery Segment" for information regarding PJM's operations and functions and the RFC.

~~Pennsylvania generation had a total capacity of 9,583 MW at December 31, 2009. These plants are fueled by uranium, coal, natural gas, oil, water and other fuels.~~

PPL Susquehanna, a subsidiary of PPL Generation, owns a 90% undivided interest in each of the two nuclear-fueled generating units at its Susquehanna station in Pennsylvania. Allegheny Electric Cooperative, Inc. owns the remaining 10% undivided interest. PPL's 90% share of Susquehanna's generating capacity was 2,206 MW at December 31, 2009. The Illinois natural gas-fired station has a total capacity of 585 MW.

~~The Montana coal-fired and hydroelectric-powered stations have a capacity of 1,286 MW. PPL Montana's power plants are operated in conjunction with the Western Electricity Coordinating Council.~~

~~The Connecticut natural gas-fired station has a total capacity of 244 MW, is operated in conjunction with ISO New England and the Northeast Power Coordinating Council.~~

The New York oil/gas-fired stations have a capacity of 159 MW. These generating assets are operated in conjunction with the New York ISO and the Northeast Power Coordinating Council. Tolling agreements are in place for 100% of the capacity and output of this business. See Note 9 to the Financial Statements for additional information on the anticipated sale of the Long Island generation business.

The Maine hydroelectric-powered stations have a total capacity of 12 MW. The Maine generating assets are operated in conjunction with ISO New England and the Northeast Power Coordinating Council. See Note 9 to the Financial Statements for information on the November 2009 sale of the majority of the Maine hydroelectric business, the sale of PPL's interest in an oil-fired unit in Maine and the conditional agreement of sale for the remaining three hydroelectric facilities.

PPL Generation has current plans for capital projects at certain of its generation facilities in Pennsylvania and Montana to provide 239 MW of additional generation capacity for its use by 2014. See "Item 2. Properties - Supply Segment" for additional information regarding these capital projects.

Refer to the "Power Supply" section for additional information regarding electricity generated by the power plants operated by PPL Generation and to the "Fuel Supply" section for a discussion of fuel requirements and contractual arrangements for fuel.

A subsidiary of PPL Energy Supply develops renewable energy plants on various sites using technologies such as turbines, reciprocating engines and photovoltaic solar panels. Included in PPL Energy Supply's owned or controlled generating capacity reported in "Item 2. Properties - Supply Segment" is approximately 28 MW of installed capacity from these projects that serve commercial and industrial customers.

Certain PPL Energy Supply subsidiaries are subject to the jurisdiction of certain federal, regional, state and local regulatory agencies with respect to air and water quality, land use and other environmental matters. PPL Susquehanna is subject to the jurisdiction of the NRC in connection with the operation of the Susquehanna nuclear units. Certain of PPL Energy Supply's other subsidiaries are subject to the jurisdiction of the NRC in connection with the operation of their fossil plants with respect to certain level and density monitoring devices.

Certain operations of PPL Generation's subsidiaries are also subject to the Occupational Safety and Health Act of 1970 and comparable state statutes.

~~Energy Marketing~~

PPL EnergyPlus sells the electricity produced by PPL Generation subsidiaries, along with purchased power, FTRs, natural gas, oil, uranium, emission allowances and RECs in competitive wholesale and deregulated retail markets in order to take advantage of opportunities in the competitive energy marketplace.

PPL EnergyPlus purchases and sells electric capacity and energy at the wholesale level at competitive prices under FERC market-based prices. PPL EnergyPlus enters into these agreements to market available energy and capacity from PPL Generation's assets and to profit from market price fluctuations. Within the constraints of its hedging policy, PPL EnergyPlus actively manages its portfolios to optimize the value of PPL's generating assets and to limit exposure to price fluctuations. PPL EnergyPlus also enters into over-the-counter and futures contracts to purchase and sell energy and other commodity-based financial instruments in accordance with PPL's risk management policies, objectives and strategies.

PPL EnergyPlus had contracted to provide electricity to PPL Electric sufficient for it to meet its PLR obligation through 2009 at the predetermined capped rates PPL Electric was entitled to charge its customers. These contracts accounted for 29% of PPL Energy Supply's operating revenues in 2009 and expired December 31, 2009. See Note 15 to the Financial Statements for more information concerning these contracts.

PPL EnergyPlus is licensed to provide retail electric supply to customers in Delaware, Maine, Massachusetts, Maryland, Montana, New Jersey and Pennsylvania and provides electricity to industrial and commercial customers in Montana and Pennsylvania. PPL EnergyPlus provides natural gas to customers in Pennsylvania, New Jersey, Delaware and Maryland.

~~Competition~~

The ~~unregulated businesses and markets in which PPL and its subsidiaries participate are highly competitive. Since the early 1990s, there has been increased competition in U.S. energy markets because~~system capacity of federal and state deregulation initiatives. For example, in 1992 the Energy Act amended the Federal Power Act to provide open access to electric transmission systems for wholesale transactions. In 1996, the Customer Choice Act was enacted in Pennsylvania to restructure the state's electric utility industry to create a competitive market for electricity generation. Certain other states in which PPL's subsidiaries operate have also adopted "customer choice" plans to allow customers to choose their electricity supplier. PPL and its subsidiaries believe that competition in deregulated energy markets will continue to be intense.

The Supply segment faces competition in wholesale markets for available energy, capacity and ancillary services. Competition is impacted by electricity and fuel prices, new market entrants, construction by others of generating assets, technological advances in power generation, the actions of environmental and other regulatory authorities and other factors. The Supply segment primarily competes with other electricity suppliers based on its ability to aggregate generation supply at competitive prices from different sources and to efficiently utilize transportation from third-party pipelines and transmission from electric utilities and ISOs. Competitors in wholesale power markets include regulated utilities, industrial companies, non-utility generators, unregulated subsidiaries of regulated utilities and other energy marketers. See "Item 1A. Risk Factors - Risks Related to Supply Segment" and PPL's and PPL Energy Supply's "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview" for more information concerning the risks faced with respect to competition in deregulated energy markets.

~~Power Supply~~

PPL Energy Supply's owned or controlled ~~system capacity (winter rating) at December 31, 2009 was 11,719 MW. The capacity of generating units~~generation is based upon a number of factors, including the operating experience and physical condition of the units, and may be revised periodically to reflect changes in circumstances. ~~See "Item 2. Properties - Supply Segment" for a description of~~

During 2010, PPL Energy Supply's ~~plants at December 31, 2009.~~

~~During 2009, PPL Energy Supply's~~power plants, excluding renewable facilities that are discussed separately below, generated the following amounts of electricity.

State			Millions of kWh

Pennsylvania		~~46,019~~	48,140
Montana		~~8,120~~
~~Maine~~	~~261~~ 8,409
Connecticut		~~108~~	220
New York (a)
Illinois		64	164
Maine			75
Total		~~54,572~~	57,008

(a)

7215 million kWhs were excluded as tolling agreements were in place for 100% of the output.

This generation represented a 4% increase above 2009 output. Of this generation, ~~49%~~50% of the ~~energy~~electricity generated was from coal-fired stations, ~~32%~~29% from ~~nuclear operations at~~ the Susquehanna nuclear station, ~~11%~~14% from oil/natural gas-fired stations and 8%7% from hydroelectric stations.

Substantially all of PPL Energy ~~Supply estimates that, on average, approximately 94% of its~~Supply's total expected ~~annual~~ generation ~~output for 2010 will~~in 2011 is anticipated to be used to meet ~~EnergyPlus'~~its committed contractual sales. PPL Energy Supply has also entered into commitments of varying quantities and terms for the years ~~2011~~2012 and beyond. These commitments are consistent with, and integral to, PPL Energy Supply's business strategy to capture profits while managing exposure to adverse movements in energy and fuel prices. See "Commodity Volumetric Activity" in Note 1819 to the Financial Statements for the strategies PPL Energy Supply employs to optimize the value of its wholesale and retail energy portfolio.

~~Subsidiaries of~~ PPL Energy Supply ~~controlled existing~~subsidiaries own or control renewable energy projects located in Pennsylvania, New Jersey, Vermont and New Hampshire with a generating capacity (winter rating) of 2833 MW. PPL EnergyPlus sells the energy and RECs produced by these plants to commercial, industrial and institutional customers. During ~~2009,~~2010, the projects owned and operated by these ~~projects generated 145 million kWhs. In addition, a~~ PPL Energy Supply ~~subsidiary owns renewable energy facilities with capacity of 6 MW that have power purchase agreements in place. During 2009, these projects~~subsidiaries generated 23154 million kWhs.

PPL EnergyPlus ~~also~~ purchases the ~~full output~~capacity, energy and RECs from two wind farms in Pennsylvania with a combined capacity of 50 MW. These contracts extend through 2027.

See "Item 2. Properties - Supply Segment" for additional information regarding PPL Generation's plans for capital projects in Pennsylvania and Montana that are expected to provide 247 MW of additional electric generating capacity by 2013.

Fuel Supply

PPL EnergyPlus acts as agent for PPL Generation to procure and optimize its various fuels.

Coal

Pennsylvania

~~PPL Generation, by and through its agent~~ PPL EnergyPlus actively manages PPL's coal requirements by purchasing coal principally from mines located in central and northern Appalachia.

During ~~2009,~~2010, PPL Generation ~~by and through its agent PPL EnergyPlus,~~ purchased 100% of the coal delivered to PPL Generation's wholly owned Pennsylvania stations under short-term and long-term contracts. These contracts provided PPL Generation ~~7.3~~7.0 million tons of coal. Contracts currently in place are expected to provide ~~7.8~~7.9 million tons of coal in ~~2010.~~2011. The amount of coal in inventory varies from time to time depending on market conditions and plant operations.

PPL Generation, by and through its agent PPL EnergyPlus, ~~entered into a long-term coal purchase~~has an agreement ~~with CONSOL Energy Inc. The contract will provide~~that provides more than one-third of PPL Generation's projected annual coal needs for the Pennsylvania power plants from ~~2010~~2011 through 2018. PPL Generation has other contracts that, in total, will provide additional coal supply for ~~PPL's~~their projected annual needs from ~~2010~~2011 through 2013.

A PPL Generation subsidiary owns a 12.34% interest in the Keystone station and in Keystone Fuels, LLC and a 16.25% interest in the Conemaugh ~~station.~~station and in Conemaugh Fuels, LLC. The Keystone station contracts with Keystone Fuels, LLC for its coal ~~requirements. In 2009, Keystone Fuels, LLC~~requirements, which provided ~~4.8~~4.5 million tons of coal to the Keystone ~~station.~~station in 2010. The Conemaugh station requirements are purchased under contract from Conemaugh Fuels, ~~LLC. In 2009, Conemaugh Fuels,~~ LLC, which provided ~~4.8~~4.0 million tons of coal to the Conemaugh ~~station. A PPL Generation subsidiary also owns a 12.34% equity interest~~station in ~~Keystone Fuels, LLC and a 16.25% equity interest in Conemaugh Fuels, LLC.~~2010.

~~Scrubbers were placed in service at Montour in 2008 and at Brunner Island in 2009.~~ ~~At December 31, 2009, scrubbers were in place at all of~~All PPL ~~Generation's Pennsylvania coal stations.~~ ~~Contracts are in place for all the limestone requirements for all the scrubbers at PPL Generation's wholly owned~~Generation Pennsylvania coal stations ~~through 2010. It~~have scrubbers installed. Limestone is ~~projected~~necessary to operate the scrubbers. Acting as agent for PPL Brunner Island, LLC and PPL Montour, LLC, PPL EnergyPlus has entered into long-term contracts with limestone suppliers that ~~annual~~will provide for those plants' limestone requirements ~~will be approximately 600,000 tons.~~through 2012. During ~~2009, approximately 325,000~~2010, 457,000 tons of limestone were delivered to ~~PPL Generation's wholly owned Pennsylvania stations~~Brunner Island and Montour under long-term contracts. Annual limestone requirements approximate 600,000 tons.

Montana

PPL Montana has a 50% leasehold interest in Colstrip Units 1 and 2, and a 30% leasehold interest in Colstrip Unit 3. NorthWestern owns a 30% leasehold interest in Colstrip Unit 4. PPL Montana and NorthWestern have a sharing agreement to govern each party's responsibilities regarding the operation of Colstrip Units 3 and 4, and each party is responsible for 15% of the respective operating and construction costs, regardless of whether a particular cost is specified to Colstrip Unit 3 or 4. However, each party is responsible for its own fuel-related costs. PPL Montana, along with the other owners, is party to contracts to purchase 100% of its coal requirements with defined coal quality characteristics and specifications. ~~In 2007,~~ PPL Montana, ~~entered into~~along with the other owners, has a long-term purchase and supply agreement with the current supplier for Units 1 and 2 ~~beginning January 1, 2010. The contract is to provide~~which, provides these units 100% of their coal requirements through December 2014, and at least 85% of such requirements from January 2015 through December 2019. The coal supply contract for Unit 3's requirements is in effect through December 2019.~~Scrubbers are~~

These units were built with scrubbers and PPL Montana has entered into a long-term contract that commences in ~~place at all of~~January 2011 through December 31, 2030, to purchase the lime requirements for these units.

Coal supply contracts are in place to purchase low-sulfur coal with defined quality characteristics and specifications for PPL Montana's Corette station. The contracts covered 100% of the station's coal requirements in ~~2009,~~2010, and similar contracts are ~~currently~~ in place to supply 100% of the expected coal requirements through 2012.

Oil and Natural Gas

Pennsylvania

PPL Generation's Martins Creek Units 3 and 4 burn both oil and natural gas. ~~PPL EnergyPlus is responsible for procuring the oil and natural gas supply for all PPL Generation operations.~~ During ~~2009,~~2010, 100% of the physical gas ~~and oil~~ requirements for the Martins Creek units were purchased on the spot ~~market.~~market while oil requirements were supplied from inventory. At December 31, ~~2009, PPL EnergyPlus had~~2010, there were no long-term agreements for oil or ~~gas.~~natural gas for these units.

~~PPL EnergyPlus has a short-term~~Short-term and long-term gas transportation ~~contract~~contracts are in place for approximately 30% of the maximum daily requirements of the Lower Mt. Bethel facility. During 2010, 100% of the physical gas requirements for Lower Mt. Bethel were purchased on the spot market.

In 2008, PPL EnergyPlus acquired the rights to an existing long-term tolling agreement associated with the capacity and energy of the Ironwood facility. PPL EnergyPlus has long-term transportation contracts to serve approximately 25% of Ironwood's maximum daily requirements, which ~~begins~~began in the fourth quarter of 2010. ~~For the first three quarters of 2010,~~ Ironwood will be served through a combination of transportation capacity release transactions and delivered supply to the plant. PPL EnergyPlus currently has no long-term physical supply agreements to purchase natural gas for Ironwood. During 2010, 100% of the physical gas requirements for Ironwood were purchased on the spot market.

Illinois

At December 31, ~~2009,~~2010, there were no long-term delivery or supply agreements to purchase natural gas for the University Park facility.

Connecticut

PPL EnergyPlus has a long-term contract for approximately 40% of the expected pipeline transportation requirements of the Wallingford facility, but has no long-term physical supply agreement to purchase natural gas.

Nuclear

The nuclear fuel cycle consists of several material and service components: the mining and milling of uranium ore to produce uranium concentrates; the conversion of these concentrates into uranium hexafluoride, a gas component; the enrichment of the hexafluoride gas; the fabrication of fuel assemblies for insertion and use in the reactor core; and the temporary storage and final disposal of spent nuclear fuel.

PPL Susquehanna has a portfolio of supply contracts, with varying expiration dates, for nuclear fuel materials and services. These contracts are expected to provide sufficient fuel to permit Unit 1 to operate into the first quarter of 2016 and Unit 2 to operate into the first quarter of ~~2015.~~2017. PPL Susquehanna anticipates entering into additional contracts to ensure continued operation of the nuclear units.

Federal law requires the ~~federal~~U.S. government to provide for the permanent disposal of commercial spent nuclear ~~fuel. Under the Federal Nuclear Waste Policy Act, the DOE carried out an analysis of a site in Nevada for a permanent nuclear waste repository. There~~fuel, but there is no definitive date by which a repository will be operational. As a result, it was necessary to expand Susquehanna's on-site spent fuel storage capacity. To support this expansion, PPL Susquehanna contracted for the design and construction of a spent fuel storage facility employing dry cask fuel storage technology. The facility is modular, so that additional storage capacity can be added as needed. The facility began receiving spent nuclear fuel in 1999. PPL Susquehanna estimates that there is sufficient storage capacity in the spent nuclear fuel pools and the on-site spent fuel storage facility at Susquehanna to accommodate spent fuel discharged through ~~approximately~~approxi mately 2017 under current operating conditions. If necessary, the on-site spent fuel storage facility can be expanded, assuming appropriate regulatory approvals are ~~obtained. If additional on-site~~obtained, such that, together, the spent fuel pools and the expanded dry fuel storage facility will accommodate all of the spent fuel expected to be discharged through the current licensed life of the plant.

In 1996, the U.S. Court of Appeals for the District of Columbia Circuit ruled that the Nuclear Waste Policy Act imposed on the DOE an unconditional obligation to begin accepting spent nuclear fuel on or before January 31, 1998. In 1997, the Court ruled that the contracts between the utilities and the DOE provide a potentially adequate remedy if the DOE failed to begin accepting spent nuclear fuel by January 31, 1998. The DOE did not, in fact, begin to accept spent nuclear fuel by that date. The DOE continues to contest claims that its breach of contract resulted in recoverable damages. In January 2004, PPL Susquehanna filed suit in the U.S. Court of Federal Claims for unspecified damages suffered as a result of the DOE's breach of its contract to accept and dispose of spent nuclear fuel. &# 160;Discovery in the case has concluded but the Court has not yet set a date for trial. PPL cannot predict the outcome of these proceedings.

Energy Marketing

PPL EnergyPlus sells the capacity and electricity produced by PPL Generation subsidiaries, along with purchased power, FTRs, natural gas, oil, uranium, emission allowances and RECs in competitive wholesale and competitive retail markets.

PPL EnergyPlus purchases and sells capacity and electricity at the wholesale level at competitive prices under FERC market-based prices. Within the constraints of its hedging policy, PPL EnergyPlus actively manages its portfolios of energy and energy-related products to optimize their value and to limit exposure to price fluctuations.

PPL EnergyPlus is ~~required, supplementary storage~~licensed to provide retail electric supply to customers in Delaware, Maine, Massachusetts, Maryland, Montana, New Jersey and Pennsylvania and provides retail natural gas supply to customers in Pennsylvania, New Jersey, Delaware, and Maryland.

Competition

Since the early 1990s, there has been increased competition in U.S. energy markets because of federal and state competitive market initiatives. While some states, such as Pennsylvania and Montana, have created a competitive market for electricity generation, other states continue to consider different types of regulatory initiatives concerning competition in the power and gas industry. Some states that were considering creating competitive markets have slowed their plans or postponed further consideration. In addition, states that have created competitive markets have, from time to time, considered new market rules and re-regulation measures that could result in more limited opportunities for competitive energy suppliers. The activity around re-regulation, however, has slowed due to the current environment of declining power prices. As such, the competitive markets in which PPL and its subsidiaries participate are highly competitive.

The Supply segment faces competition in wholesale markets for available energy, capacity ~~will be pursued.~~and ancillary services. Competition is impacted by electricity and fuel prices, congestion along the power grid, new market entrants, construction by others of generating assets, technological advances in power generation, the actions of environmental and other regulatory authorities and other factors. The Supply segment primarily competes with other electricity suppliers based on its ability to aggregate generation supply at competitive prices from different sources and to efficiently utilize transportation from third-party pipelines and transmission from electric utilities and ISOs. Competitors in wholesale power markets include regulated utilities, industrial companies, non-utility generators, competitive subsidiari es of regulated utilities and other energy marketers. See "Item 1A. Risk Factors - Risks Related to Supply Segment" and PPL's and PPL Energy Supply's "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview" for more information concerning the risks faced with respect to competitive energy markets.

Franchise and Licenses

See "Background - Segment Information - Supply Segment - Energy Marketing" for a discussion of PPL EnergyPlus' licenses in various states. PPL EnergyPlus also has an export license from the DOE to sell capacity and/or energy to electric utilities in Canada.

PPL Susquehanna operates Units 1 and 2 pursuant to NRC operating ~~licenses. In November 2009, the NRC approved PPL Susquehanna's application for 20-year license renewals for each of the Susquehanna units, extending the license expiration dates to~~licenses that expire in 2042 for Unit 1 and toin 2044 for Unit 2. ~~See Note 8 to the Financial Statements for additional information.~~

In 2008, PPL Susquehanna received NRC approval for its request to increase the generation capacity of the Susquehanna nuclear plant. The project is being completed in phases over several years. PPL Susquehanna's share of the total expected capacity increase is ~~159 MW, of which PPL Susquehanna's 90% ownership share would~~estimated to be ~~143~~195 MW. The ~~first uprate for~~final phase of the Unit 1 ~~totaling 50 MW~~uprate was completed in ~~2008~~2010 and yielded 55 MW for PPL Susquehanna. The final phase of the ~~second~~Unit 2 uprate is scheduled for 2011 and is projected to ~~be completed in 2010. The first uprate for Unit 2 totaling~~yield an additional 50 MW ~~was completed in 2009, and the second uprate is scheduled to be completed in 2011. The remaining total capacity increase is 59 MW, of which~~for PPL ~~Susquehanna's share is 53 MW.~~ Susquehanna. PPL Susquehanna's share of the expected ~~capital cost for the total uprate of 143 MW~~remaining expenditures is ~~$345~~$15 million.

In ~~October~~ 2008, a PPL subsidiary submitted a COLA to the NRC for a new nuclear generating unit (Bell Bend) to be built adjacent to the Susquehanna plant. ~~The~~Also in 2008, the COLA was accepted for review by the ~~NRC in December 2008.~~NRC. In ~~May 2009,~~February 2010, the NRC published its official review schedule that culminates with the issuance of Bell Bend's final safety evaluation report in 2012. See Note 8 to Financial Statements for additional information.

PPL Holtwood operates the Holtwood hydroelectric generating station pursuant to a license that was recently extended by the FERC to expire in 2030. PPL Holtwood operates the Wallenpaupack hydroelectric generating station pursuant to a license renewed by the FERC in 2005 and expiring in 2044. PPL Holtwood also owns one-third of the capital stock of Safe Harbor Water Power Corporation (Safe Harbor), which holds a project license that extends ~~the~~ operation of its hydroelectric generating station until 2030. The total capacity of the Safe Harbor generating station ~~is 421~~was 423 MW at December 31, 2010, and PPL Holtwood is entitled by contract to one-third of the total capacity. In September 2010, PPL Energy Supply subsidiaries signed definitive agreements to sell their ownership interests in Safe Harbor and two other non-core generating facilities. See Note 9 to the Financial Statements for additional information.

In 2007, PPL requested FERC approval to expand its Holtwood plant by 125 MW. In 2008, PPL withdrew the application in light of prevailing economic conditions, including the high cost of capital and projections of future energy prices. PPL reconsidered its Holtwood expansion project in view of the tax incentives and potential loan guarantees for renewable energy projects contained in the Economic Stimulus Package. In April 2009, PPL resubmitted the expansion application to FERC and in October 2009, the FERC approved the request to expand the Holtwood plant and extended the operating license through August 2030. See Note 8 to the Financial Statements for additional information.

The 11 hydroelectric facilities and one storage reservoir in Montana are licensed by the FERC. ~~These licenses expire periodically and the generating facilities must be relicensed at such times.~~ The FERC license for the Mystic facility ~~expired in 2009 but has been extended,~~was relicensed, effective January 1, 2010, for an additional 40-year term. The Thompson Falls and Kerr licenses expire in 2025 and 2035, respectively; and the licenses for the nine Missouri-Madison facilities expire in 2040.

In connection with the relicensing of these ~~generation~~generating facilities, applicable law permits the FERC ~~may, under applicable law,~~to relicense the original licensee or license a new licensee, or allow the U.S. government ~~may~~to take over the facility. If the original licensee is not relicensed, it is compensated for its net investment in the facility, not to exceed the fair value of the property taken, plus reasonable damages to other property affected by the lack of relicensing.

·	~~Pennsylvania Delivery Segment -~~

	~~Includes the regulated electric delivery operations of PPL Electric.~~

~~PPL Electric~~

PPL Electric delivers electricity to approximately 1.4 million customers in a 10,000-square mile territory in 29 counties of eastern and central Pennsylvania. The largest cities in this territory are Allentown, Bethlehem, Harrisburg, Hazleton, Lancaster, Scranton, Wilkes-Barre and Williamsport.

~~PPL Electric is the sole electricity distribution provider in its service territory, and also provides electricity supply in that territory as a PLR.~~ As part of the PUC Final Order, PPL Electric agreed to supply this electricity at predetermined capped rates through 2009. PPL Electric entered into two contracts to purchase electricity from PPL EnergyPlus sufficient for PPL Electric to meet its PLR obligation through 2009 at the capped rates. As discussed below, PPL Electric's PLR obligation after 2009 is governed by the PUC pursuant to the Public Utility Code as amended by Act 129, PLR regulations and a policy statement regarding interpretation and implementation of those regulations. Both the regulations and the policy statement became effective in September 2007. The PUC has approved PPL Electric's procurement plans for 2010 and for the period from January 2011 through May 2013. Refer to Notes 14 and See Note 15 to the Financial Statements for additional ~~information.~~

information on the Kerr Dam license.

~~During 2009, about 98% of~~ (PPL, ~~Electric's operating revenues were derived from regulated electricity delivery~~PPL Energy Supply and ~~supply as a PLR. The remaining 2009 operating revenues were from wholesale revenues, primarily the sale to~~ PPL EnergyPlus of power purchased from NUGs. During 2009, about 46% of electricity delivery and PLR revenues were from residential customers, 37% from commercial customers, 16% from industrial customers and 1% from other customer classes.Electric)

PPL Electric's transmission facilities are operated as part of PJM, which operates the electric transmission network and electric energy market in the mid-Atlantic and Midwest regions of the U.S. Bulk electricity is transmitted to wholesale users throughout a geographic area including all or part of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia. As of January 1, 2006, PPL Electric became a member of the RFC. The purpose of the RFC is to preserve and enhance electric service reliability and security for the interconnected electric systems within its territory and to be a regional entity under the framework of the NERC. The RFC's key functions are the development of regional standards for reliable planning and operation of the bulk electric system and non-discriminatory compliance monitoring and enforcement of both NERC and regional standards.

PJM serves as a FERC-approved RTO in order to promote greater participation and competition in the region. An RTO, like an ISO, is a designation provided by the FERC to a FERC-approved independent entity that operates the transmission system and typically administers a competitive power market. PJM also administers regional markets for energy, capacity and ancillary services. A primary purpose of the RTO/ISO is to separate the operation of, and access to, the transmission grid from market participants that buy or sell electricity in the same markets. Electric utilities continue to own the transmission assets, but the RTO/ISO directs the control and operation of the transmission facilities. PPL Electric is entitled to fully recover from retail customers the charges that it pays to PJM for transmission-related services. PJM imposes these charges pursuant to its FERC-approved Open Access Transmission Tariff.

~~PPL Electric is subject to regulation as a public utility by the PUC, and certain of its activities are subject to the jurisdiction of the FERC under the Federal Power Act.~~

PPL Electric also is subject to the jurisdiction of certain federal, regional, state and local regulatory agencies with respect to land use and other environmental matters. Certain operations of PPL Electric are subject to the Occupational Safety and Health Act of 1970 and comparable state statutes.

In November 2004, Pennsylvania enacted the Alternative Energy Portfolio Standard (the AEPS), which requires electric distribution companies, such as PPL Electric, and retail electric suppliers serving retail load to ultimately provide 18% of the electricity sold to retail customers in Pennsylvania from alternative energy sources by 2020. Under this state law, alternative energy sources include hydro, wind, solar, waste coal, landfill methane and fuel cells. An electric distribution company will pay an alternative compliance payment of $45 (or, in the case of solar, 200% of the average market value of solar credits) for each MWh that it is short of its required alternative energy supply percentage. PPL Electric became subject to the requirements of this legislation beginning in 2010. In 2010, PPL Electric is required to supply about 9% of the total amount of electricity it delivers to its PLR customers from alternative energy sources. PPL Electric has purchased all of the supply required to meet its 2010 default service obligations pursuant to a PUC-approved Competitive Bridge Plan (the Plan). Under the Plan, PPL Electric obtained full requirements service which includes the generation or credits that PPL Electric will need to comply with the AEPS in 2010.

See "Regulatory Issues - Pennsylvania Activities" in Note 14 to the Financial Statements for additional information regarding Act 129, other legislative and regulatory impacts and PPL Electric's actions to provide default electricity supply for periods after 2009.

~~Competition~~

Pursuant to authorizations from the Commonwealth of Pennsylvania and the PUC, PPL Electric operates a regulated distribution monopoly in its service area. Accordingly, PPL Electric does not face competition in its electricity distribution business.

Effective January 1, 2010, PPL Electric's rates for generation supply as a PLR are no longer capped and the cost of electric generation is based on a competitive solicitation process. Prior to the expiration of the generation rate caps, PPL Electric's customers' interest in purchasing generation supply from other providers was limited because, in recent years, the long-term supply agreement between PPL Electric and PPL EnergyPlus provided a below-market cost of generation supply for these customers. As a result, a limited amount of "shopping" occurred. In 2010, several alternative suppliers have offered to provide generation supply in PPL Electric's service territory. When its customers purchase supply from these alternative suppliers or from PPL Electric as PLR, the purchase of such supply has no significant impact on the operating results of PPL Electric. The cost to purchase PLR supply is passed directly by PPL Electric to its customers without markup. ~~PPL Electric remains the distribution provider for all the customers in its service territory and charges a regulated rate for the service of delivering that electricity.~~

~~Provider of Last Resort Supply~~

The Customer Choice Act requires electric distribution companies, like PPL Electric, to act as a PLR of electricity supply and provides that electricity supply costs will be recovered by such companies pursuant to regulations established by the PUC. In May 2007, the PUC approved PPL Electric's plan to procure default electricity supply for 2010 - after its current supply agreements with PPL EnergyPlus expire - for retail customers who do not choose an alternative competitive supplier. Pursuant to this plan, PPL Electric completed six competitive supply solicitations and has contracted for all of the 2010 electricity supply it expects to need for residential, small commercial and small industrial customers. In October 2009, PPL Electric purchased supply for fixed-price default service to large commercial and large industrial customers who elect to take that service in 2010. In November 2009, PPL Electric purchased supply to provide hourly default service to large commercial and industrial customers in 2010. See "Energy Purchase Commitments" in Note 14 to the Financial Statements for additional information regarding PPL Electric's solicitations for 2010 and its actions to provide default electricity supply for periods after 2010.

~~Franchise and Licenses~~

·	~~International Delivery Segment -~~

	~~Includes WPD, a regulated electricity distribution company in the U.K.~~

WPD, through indirect wholly owned subsidiaries, operates two of the 15 distribution networks providing electricity service in the U.K. The WPD subsidiaries together serve approximately 2.6 million end-users in the U.K. WPD (South West) serves 1.5 million customers in a 5,560 square mile area of southwest England. WPD (South Wales) serves an area of Wales opposite the Bristol Channel from WPD (South West)'s territory. Its 1.1 million customers occupy 4,550 square miles within Wales. WPD is headquartered in Bristol, England. See "Franchise and Licenses" for additional information about WPD's regulator, Ofgem, which sets price controls and grants distribution licenses.

~~Competition~~

~~Although WPD operates in non-exclusive concession areas in the U.K., it currently faces little competition with respect to residential customers. See "Franchises and Licenses" for more information.~~

~~Franchise and Licenses~~

WPD operates under distribution licenses granted, and price controls set, by Ofgem. The price control formula that governs WPD's allowed revenue is normally determined every five years. Ofgem completed a rate review in December 2009 for the five-year period from April 1, 2010 through March 31, 2015. See PPL's and PPL Energy Supply's "Results of Operations - Segment Results - International Delivery Segment" in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information.

SEASONALITY

~~Demand~~The demand for and market prices of electricity and natural gas are affected by weather. As a result, PPL's, ~~overall~~PPL Energy Supply's and PPL Electric's operating results in the future may fluctuate substantially on a seasonal basis, especially when more severe weather conditions such as heat waves or winter storms make such fluctuations more pronounced. The pattern of this fluctuation may change depending on the type and location of the facilities ~~PPL owns~~owned and the terms of ~~its~~ contracts to purchase or sell electricity.

FINANCIAL CONDITION

See PPL's, PPL Energy Supply's and PPL Electric's "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for this information.

CAPITAL EXPENDITURE REQUIREMENTS

See "Financial Condition - Liquidity and Capital Resources - Forecasted Uses of Cash - - Capital Expenditures" in PPL's, PPL Energy Supply's and PPL Electric's "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for information concerning projected capital expenditure requirements for the years ~~2010-2012.~~2011-2015. See Note 1415 to the Financial Statements for additional information concerning the potential impact on capital expenditures from environmental matters.

ENVIRONMENTAL MATTERS

PPL and ~~certain PPL subsidiaries, including PPL Electric and PPL Generation~~its subsidiaries are subject to certain existing and developing federal, regional, state and local laws and regulations with respect to air and water quality, land use and other environmental matters. The EPA is in the process of proposing and finalizing an unprecedented number of environmental regulations over the next few years that will directly affect the electric industry. These initiatives cover all sources - air, water and waste. See PPL's and PPL Energy Supply's "Financial Condition - Liquidity and Capital Resources" in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Forecasted Uses of Cash - Capital Expenditures" for information concerning environmental capital expenditures during ~~2009~~2010 and projected environmental capital expenditures ~~for~~fo r the years ~~2010-2012. See~~2011-2015. Also, see "Environmental Matters" in Note 1415 to the Financial Statements for ~~information regarding these laws~~additional information. To comply with air related requirements, PPL's forecast for capital expenditures reflects a best estimate projection of expenditures that may be required within the next five years. Such projections are a combined $2.1 billion for LG&E and ~~regulations~~KU and $400 million for PPL Energy Supply. Actual costs may be significantly lower or higher depending on the ~~status of PPL's~~final requirements. Environmental compliance costs incurred by LG&E and ~~its subsidiaries' compliance and remediation activities, as well as legal and regulatory proceedings involving PPL and its subsidiaries.~~KU are subject to recovery through a rate recovery mechanism. See Note 3 to the Financial Statements for additional information.

PPL and its subsidiaries are unable to predict the ultimate effect of evolving environmental laws and regulations upon their existing and proposed facilities and operations and competitive positions. In complying with statutes, regulations and actions by regulatory bodies involving environmental matters, including, among other things, air and water quality, ~~greenhouse gas~~GHG emissions, hazardous and solid waste management and disposal, and regulation of toxic substances, PPL's subsidiaries may be required to modify, replace or cease operating certain of their facilities. PPL's subsidiaries may also incur significant capital expenditures and operating expenses in amounts which are not now determinable, but could be significant.

EMPLOYEE RELATIONS

As of December 31, ~~2009,~~2010, PPL and its subsidiaries had the following full-time employees.

PPL Energy Supply
	PPL Generation	~~2,665~~	2,773
	PPL EnergyPlus (a)		1,923
~~PPL EnergyPlus~~	~~2,020~~	~~(a)~~
PPL Global (primarily WPD)	~~2,369~~	2,432
	Total PPL Energy Supply	~~7,054~~	7,128
PPL Electric		~~2,166~~	2,293
LKE			3,122
PPL Services and other		~~1,269~~	1,266
Total PPL		~~10,489~~	13,809

(a)

Includes labor union employees of mechanical contracting subsidiaries, whose numbers tend to fluctuate due to the nature of this business.

Approximately ~~4,980,~~5,800 employees, or ~~61%~~51%, of PPL's domestic workforce are members of labor unions, with ~~three~~four IBEW locals representing approximately ~~3,540~~4,300 employees. ~~Other unions primarily represent employees of the mechanical contractors.~~ The bargaining agreement with the largest labor union, an IBEW local, ~~was negotiated in May 2006 and~~which expires in May ~~2010. This agreement~~2014, covers approximately ~~3,200~~1,600 PPL Electric, 1,200 PPL Energy Supply and 400 other employees. ~~The~~Approximately 830 employees of LKE were represented by an IBEW ~~representing~~local and a United Steelworkers of America (USWA) local. Both LG&E and KU have a three-year labor agreement with the IBEW local. LG&E's agreement expires in November 2011 and KU's agreement expires in August 2012. LKE's agreement with the USWA expires in August 2011. PPL Montana's largest bargaining unit, an IBEW local, represents approximately ~~260~~270 employees at the ~~Montana~~ Colstrip ~~power plants, is covered under a~~plant. The four-year labor agreement ~~expiring~~expires in April 2012. ~~In January 2008, a~~PPL Montana's second largest bargaining unit, also an IBEW local, represents approximately 85 employees at hydroelectric facilities and the Corette plant. This four-year ~~contract that~~labor agreement expires in April ~~2012 was renegotiated with the IBEW local of Montana that represents approximately 80 employees at the hydroelectric facilities and at the Corette plant.~~2012.

Approximately ~~1,860,~~1,870, or ~~79%~~77%, of PPL's U.K. workforce are members of labor unions. WPD recognizes ~~five~~four unions, the largest of which represents ~~37%~~40% of its union workforce. WPD's Electricity Business Agreement, which covers approximately ~~1,810~~1,820 union ~~employees; it~~employees may be amended by agreement between WPD and the unions and is terminable with 12 months notice by either side.

See "Separation Benefits" in Note 1213 to the Financial Statements for information on a 2009 cost reduction initiative, which resulted in the elimination of approximately 200 domestic management and staff positions at PPL.

AVAILABLE INFORMATION

PPL's Internet ~~Web site~~website is www.pplweb.com. On the Investor Center page of that ~~Web site,~~website, PPL provides access to all SEC filings of PPL, PPL Energy Supply and PPL Electric free of charge, as soon as reasonably practicable after filing with the SEC. Additionally, PPL registrants' filings are available at the SEC's ~~Web site~~website (www.sec.gov) and at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549, or by calling 1-800-SEC-0330.

ITEM 1A. RISK FACTORS

PPL, PPL Energy Supply and PPL Electric face various risks associated with their businesses. While we have identified below the risks we currently consider material, these ~~risks~~ are not the only risks ~~that~~ we face. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Our businesses, financial condition, cash flows or results of operations could be materially adversely affected by any of these risks. In addition, this report also contains forward-looking and other statements about our businesses that are subject to numerous risks and uncertainties. See "Forward-Looking Information," "Item 1. Business," "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 1415 to the Financial Statements for more information concerning the risks described below and for other risks, uncertainties and factors that could impact our businesses and financial results.

As used in this Item 1A., the terms "we," "our" and "us" generally refer to PPL and its consolidated subsidiaries taken as a whole, or to PPL Energy Supply and its consolidated subsidiaries taken as a whole within the Supply and International ~~Delivery~~Regulated segment discussions, or PPL Electric and its consolidated subsidiaries taken as a whole within the Pennsylvania ~~Delivery~~Regulated segment discussion.

~~Risks Related to Supply Segment~~

(~~PPL and PPL Energy Supply~~)

~~We are exposed to operational, price and credit risks associated with selling and marketing products in the wholesale electricity markets.~~

We purchase and sell electricity in wholesale markets under market-based tariffs authorized by the FERC throughout the U.S. and also enter into short-term agreements to market available electricity and capacity from our generation assets with the expectation of profiting from market price fluctuations. If we are unable to deliver firm capacity and electricity under these agreements, we could be required to pay damages. These damages would generally be based on the difference between the market price to acquire replacement capacity or electricity and the contract price of any undelivered capacity or electricity. Depending on price volatility in the wholesale electricity markets, such damages could be significant. Extreme weather conditions, unplanned generation facility outages, environmental compliance costs, transmission disruptions, and other factors could affect our ability to meet our obligations, or cause significant increases in the market price of replacement capacity and electricity.

Our power agreements typically include provisions requiring us to post collateral for the benefit of our counterparties if the market price of energy varies from the contract prices in excess of certain pre-determined amounts. At December 31, 2009, we had posted $242 million of collateral, in the form of letters of credit, under these contracts. At December 31, 2009, we maintained $4.1 billion of liquidity facilities to provide for potential additional collateral obligations. We currently believe that we have sufficient credit to fulfill our potential collateral obligations under these power contracts. Our obligation to post collateral could exceed the amount of our facilities or our ability to increase our facilities could be limited by financial market or other factors.

We also face credit risk that parties with whom we contract will default in their performance, in which case we may have to sell our electricity into a lower-priced market or make purchases in a higher-priced market than existed at the time of contract. Whenever feasible, we attempt to mitigate these risks by various means, including agreements that require our counterparties to post collateral for our benefit if the market price of energy varies from the contract price in excess of certain pre-determined amounts. However, there can be no assurance that we will avoid counterparty nonperformance, which could adversely impact our ability to perform our obligations to other parties, which could in turn subject us to claims for damages.

~~Adverse changes in commodity prices and related costs may decrease our future energy margins, which could adversely affect our earnings and cash flows.~~

Our energy margins, or the amount by which our revenues from the sale of power exceed our costs to supply power, are impacted by changes in market prices for electricity, fuel, fuel transportation, emission allowances, RECs, electricity transmission and related congestion charges and other costs. Unlike most commodities, the limited ability to store electric power requires that it must be consumed at the time of production. As a result, wholesale market prices for electricity may fluctuate substantially over relatively short periods of time and can be unpredictable. Among the factors that influence such prices are:

·	~~demand for electricity and supplies of electricity available from current or new generation resources;~~
·	~~variable production costs, primarily fuel (and the associated fuel transportation costs) and emission allowance expense for the generation resources used to meet the demand for electricity;~~
·	~~transmission capacity and service into, or out of, markets served;~~
·	~~changes in the regulatory framework for wholesale power markets;~~
·	~~liquidity in the wholesale electricity market, as well as general credit worthiness of key participants in the market; and~~
·	~~weather and economic conditions impacting demand for electricity or the facilities necessary to deliver electricity.~~

See Exhibit 99(a) for more information concerning the market fluctuations in wholesale energy, fuel and emission allowance prices over the past five years. The volatility of these business factors has increased significantly with the current economic downturn.

Our risk management policy and programs relating to electricity and fuel prices, interest rates, foreign currency and counterparties may not work as planned, and we may suffer economic losses despite such programs.

We actively manage the market risk inherent in our generation energy marketing activities, as well as our debt, foreign currency and counterparty credit positions. We have implemented procedures to monitor compliance with our risk management policy and programs, including independent validation of transaction and market prices, verification of risk and transaction limits, portfolio stress test, sensitivity analyses and daily portfolio reporting of various risk management metrics. Nonetheless, our risk management programs may not work as planned. For example, actual electricity and fuel prices may be significantly different or more volatile than the historical trends and assumptions upon which we based our risk management calculations. Additionally, unforeseen market disruptions could decrease market depth and liquidity, negatively impacting our ability to enter into new transactions. We enter into financial contracts to hedge commodity basis risk, and as a result are exposed to the risk that the correlation between delivery points could change with actual physical delivery. Similarly, interest rates or foreign currency exchange rates could change in significant ways that our risk management procedures were not designed to address. As a result, we cannot always predict the impact that our risk management decisions may have on us if actual events result in greater losses or costs than our risk models predict or greater volatility in our earnings and financial position.

In addition, our trading, marketing and hedging activities are exposed to counterparty credit risk and market liquidity risk. We have adopted a credit risk management policy and program to evaluate counterparty credit risk. However, if counterparties fail to perform, the risk of which has increased due to the economic downturn, we may be forced to enter into alternative arrangements at then-current market prices. In that event, our financial results are likely to be adversely affected.

~~We do not always hedge against risks associated with electricity and fuel price volatility.~~

We attempt to mitigate risks associated with satisfying our contractual electricity sales obligations by either reserving generation capacity to deliver electricity or purchasing the necessary financial or physical products and services through competitive markets to satisfy our net firm sales contracts. We also routinely enter into contracts, such as fuel and electricity purchase and sale commitments, to hedge our exposure to fuel requirements and other electricity-related commodities. However, based on economic and other considerations, we may not hedge the entire exposure of our operations from commodity price volatility. To the extent we do not hedge against commodity price volatility, our results of operations and financial position may be adversely affected.

~~We face intense competition in our energy supply business, which may adversely affect our ability to operate profitably.~~

Unlike our regulated delivery businesses, our energy supply business is dependent on our ability to operate in a competitive environment and is not assured of any rate of return on capital investments through a predetermined rate structure. Competition is impacted by electricity and fuel prices, new market entrants, construction by others of generating assets and transmission capacity, technological advances in power generation, the actions of environmental and other regulatory authorities and other factors. These competitive factors may negatively impact our ability to sell electricity and related products and services, as well as the prices that we may charge for such products and services, which could adversely affect our results of operations and our ability to grow our business.

We sell our available energy and capacity into the competitive wholesale markets through contracts with various durations. Competition in the wholesale power markets occurs principally on the basis of the price of products and, to a lesser extent, on the basis of reliability and availability. We believe that the commencement of commercial operation of new electric facilities in the regional markets where we own or control generation capacity and the evolution of demand side management resources will continue to increase the competitiveness of the wholesale electricity market in those regions, which could have a material adverse effect on the prices we receive for electricity.

We also face competition in the wholesale markets for electricity capacity and ancillary services. We primarily compete with other electricity suppliers based on our ability to aggregate supplies at competitive prices from different sources and to efficiently utilize transportation from third-party pipelines and transmission from electric utilities and ISOs. We also compete against other energy marketers on the basis of relative financial condition and access to credit sources, and our competitors may have greater financial resources than we have.

Competitors in the wholesale power markets in which PPL Generation subsidiaries and PPL EnergyPlus operate include regulated utilities, industrial companies, non-utility generators and unregulated subsidiaries of regulated utilities. In the past, PUHCA significantly restricted mergers and acquisitions and other investments in the electric utility sector. Entirely new competitors, including financial institutions, have entered the energy markets as a result of the repeal of PUHCA. The repeal of PUHCA also may lead to consolidation in our industry, resulting in competitors with significantly greater financial resources than we have.

~~Disruptions in our fuel supplies could occur, which could adversely affect our ability to operate our generation facilities.~~

We purchase fuel from a number of suppliers. Disruption in the delivery of fuel and other products consumed during the production of electricity (such as lime, limestone and other chemicals), including disruptions as a result of weather, transportation difficulties, global demand and supply dynamics, labor relations, environmental regulations or the financial viability of our fuel suppliers, could adversely affect our ability to operate our facilities, which could result in lower sales and/or higher costs and thereby adversely affect our results of operations.

Despite federal and state deregulation initiatives, our supply business is still subject to extensive regulation, which may increase our costs, reduce our revenues, or prevent or delay operation of our facilities.

Our generation subsidiaries sell electricity into the wholesale market. Generally, our generation subsidiaries and our marketing subsidiaries are subject to regulation by the FERC. The FERC has authorized us to sell generation from our facilities and power from our marketing subsidiaries at market-based prices. The FERC retains the authority to modify or withdraw our market-based rate authority and to impose "cost of service" rates if it determines that the market is not competitive, that we possess market power or that we are not charging just and reasonable rates. Any reduction by the FERC in the rates we may receive or any unfavorable regulation of our business by state regulators could materially adversely affect our results of operations. See "FERC Market-Based Rate Authority" in Note 14 to the Financial Statements for information regarding recent court decisions that could impact the FERC's market-based rate authority program, and "PJM RPM Litigation" in Note 14 to the Financial Statements for information regarding the FERC's proceedings that could impact PJM's capacity pricing model.

In addition, the acquisition, construction, ownership and operation of electricity generation facilities require numerous permits, approvals, licenses and certificates from federal, state and local governmental agencies. We may not be able to obtain or maintain all required regulatory approvals. If there is a delay in obtaining any required regulatory approvals or if we fail to obtain or maintain any required approval or fail to comply with any applicable law or regulation, the operation of our assets and our sales of electricity could be prevented or delayed or become subject to additional costs.

~~Our generation facilities may not operate as planned, which may increase our expenses or decrease our revenues and, thus, have an adverse effect on our financial performance.~~

Our ability to manage operational risk with respect to our generation plants is critical to our financial performance. Operation of our power plants at expected capacity levels involves many risks, including the breakdown or failure of equipment or processes, accidents, labor disputes and fuel interruption. In addition, weather and natural disasters can disrupt our generation plants. Weather conditions also have a direct impact on the river flows required to operate our hydroelectric plants at expected capacity levels. Depending on the timing and duration of both planned and unplanned, complete or partial outages at our power plants (in particular, if such outages are during peak periods or during periods of, or caused by, severe weather), or if our planned uprates at power plants are not completed as scheduled, our revenues from expected energy sales could significantly decrease and our expenses significantly increase, and we could be required to purchase power at then-current market prices to satisfy our energy sales commitments or, in the alternative, pay penalties and damages for failure to satisfy them. Many of our generating units are reaching mid-life, and we face the potential for more frequent unplanned outages and the possibility of planned outages of longer duration to accommodate significant investments in major component replacements at these facilities.

~~Changes in technology may negatively impact the value of our power plants.~~

A basic premise of our business is that generating electricity at central power plants achieves economies of scale and produces electricity at relatively low prices. There are alternate technologies to produce electricity, most notably fuel cells, microturbines, windmills and photovoltaic (solar) cells, the development of which has been expanded due to global climate change concerns. Research and development activities are ongoing to seek improvements in alternate technologies. It is possible that advances will reduce the cost of alternate methods of electricity production to a level that is equal to or below that of certain central station production. Also, as new technologies are developed and become available, the quantity and pattern of electricity usage (the "demand") by customers could decline, with a corresponding decline in revenues derived by generators. These alternative energy sources could result in a decline to the dispatch and capacity factors of our plants. As a result of all of these factors, the value of our generation facilities could be significantly reduced.

The load following contracts that PPL EnergyPlus is awarded do not provide for specific levels of load, and actual load significantly below or above our forecasts could adversely affect our energy margins.

We generally hedge our load following obligations with energy purchases from third parties, and to a lesser extent with its owned generation. If the actual load is significantly lower than the expected load, we may be required to resell power at a lower price than was purchased to supply the load obligation, resulting in a financial loss. Alternatively, a significant increase in load could adversely affect our energy margins because we are required under the terms of the load following contracts to provide the energy necessary to fulfill increased demand at the contract price, which could be lower than the cost to procure additional energy on the open market. Therefore, any significant decrease or increase in load compared to our forecasts, could have a material adverse effect on our results of operations or financial position.

Our earnings may be affected by whether we decide to, or are able to, continue to enter into or renew long-term power sale, fuel purchase and fuel transportation agreements to mitigate market price and supply risk.

As a result of the PLR contracts and certain other agreements, a substantial portion of our generation production and capacity value was committed through 2009 under power sales agreements of various terms that included fixed prices for electric power. With the expiration of these agreements we have been actively selling our generation at fixed prices in the wholesale energy market and participating in load-following or full requirements auctions with utility companies in the PJM, New England Power Pool and Midwest ISO regions. In connection with these activities, we have entered into longer-term fuel purchase and fuel transportation agreements that include fixed prices for a significant portion of our forecasted needs. Whether we decide to, or are able to, continue to enter into such agreements or renew existing agreements in the future, prevailing market conditions will affect our financial performance. For example, in the absence of long-term power sales agreements, we would sell the energy, capacity and other products from our facilities in the competitive wholesale power markets under contracts of shorter duration at then-current market prices. Current forward prices for electricity are lower than the prices under some of our existing power sales agreements. In addition, if we do not secure or maintain favorable fuel purchase and transportation agreements for our power generation facilities, our fuel costs (and associated fuel transportation costs) could exceed the revenues we derive from our energy sales. Given the volatility and potential for material differences between actual electricity prices and fuel and other costs, if we do not secure or maintain long-term electricity sales and fuel purchase and fuel transportation agreements, our margins will be subject to increased volatility and, depending on future electricity and fuel costs (and associated fuel transportation costs), our financial results may be materially adversely affected.

~~If market deregulation is reversed or discontinued, our business prospects and financial condition could be materially adversely affected.~~

In some markets, state legislators, government agencies and other interested parties have made proposals to change the use of market-based pricing, re-regulate areas of these markets that have previously been deregulated or permit electricity delivery companies to construct or acquire generating facilities. The ISOs that oversee the transmission systems in certain wholesale electricity markets have from time to time been authorized to impose price limitations and other mechanisms to address volatility in the power markets. These types of price limitations and other mechanisms may reduce profits that our wholesale power marketing and trading business would have realized under competitive market conditions absent such limitations and mechanisms. Although we generally expect electricity markets to continue to be competitive, other proposals to re-regulate our industry may be made, and legislative or other action affecting the electric power restructuring process may cause the process to be delayed, discontinued or reversed in states in which we currently, or may in the future, operate.

We rely on transmission and distribution assets that we do not own or control to deliver our wholesale electricity. If transmission is disrupted, or not operated efficiently, or if capacity is inadequate, our ability to sell and deliver power may be hindered.

We depend on transmission and distribution facilities owned and operated by utilities and other energy companies to deliver the electricity and natural gas we sell to the wholesale market, as well as the natural gas we purchase for use in our electric generation facilities. If transmission is disrupted (as a result of weather, natural disasters or other reasons) or not operated efficiently by ISOs, in applicable markets, or if capacity is inadequate, our ability to sell and deliver products and satisfy our contractual obligations may be hindered, or we may be unable to sell products on the most favorable terms.

The FERC has issued regulations that require wholesale electric transmission services to be offered on an open-access, non-discriminatory basis. Although these regulations are designed to encourage competition in wholesale market transactions for electricity, there is the potential that fair and equal access to transmission systems will not be available or that transmission capacity will not be available in the amounts we desire. We cannot predict the timing of industry changes as a result of these initiatives or the adequacy of transmission facilities in specific markets or whether ISOs in applicable markets will efficiently operate transmission networks and provide related services.

Our costs to comply with existing and new environmental laws are expected to continue to be significant, and we plan to incur significant capital expenditures for pollution control improvements that, if delayed, would adversely affect our profitability and liquidity.

Our business is subject to extensive federal, state and local statutes, rules and regulations relating to environmental protection. To comply with existing and future environmental requirements and as a result of voluntary pollution control measures we may take, we have spent and expect to spend substantial amounts in the future on environmental control and compliance.

In order to comply with existing and recently enacted federal and state environmental laws and regulations primarily governing air emissions from coal-fired plants, in 2005 PPL began a program to install scrubbers and other pollution control equipment (primarily aimed at sulfur dioxide, particulate and nitrogen oxides with co-benefits for mercury emissions reduction). The cost to install this equipment was approximately $1.6 billion, of which $19 million remains to be spent. The remaining unspent balance is included in the 2010 through 2012 capital budget. The scrubbers at our Montour and Brunner Island plants are now in service. Many states and environmental groups have challenged certain federal laws and regulations relating to air emissions as not being sufficiently strict. As a result, it is possible that state and federal regulations will be adopted that impose more stringent restrictions than are currently in effect, which could require us to significantly increase capital expenditures for pollution control equipment.

We may not be able to obtain or maintain all environmental regulatory approvals necessary for our planned capital projects or which are otherwise necessary to our business. If there is a delay in obtaining any required environmental regulatory approval or if we fail to obtain, maintain or comply with any such approval, operations at our affected facilities could be halted or subjected to additional costs. Furthermore, at some of our older generating facilities it may be uneconomic for us to install necessary equipment, which could cause us to close those units.

Additionally, the expanding national and international focus on climate change and the related desire to reduce carbon dioxide and other greenhouse gas emissions has lead to numerous federal legislative and regulatory proposals, and several states already have passed legislation capping carbon dioxide emissions. The continuation of this trend may heighten or make more likely the risks identified above.

For more information regarding environmental matters, including existing and proposed federal, state and local statutes, rules and regulations to which we are subject, see "Environmental Matters - Domestic" in Note 14 to the Financial Statements.

We are subject to the risks of nuclear generation, including the risk that our Susquehanna nuclear plant could become subject to revised security or safety requirements that would increase our capital and operating expenditures, and uncertainties associated with decommissioning our plant at the end of its licensed life.

~~Nuclear generation accounted for about 32% of our 2009 generation output. The risks of nuclear generation generally include:~~

·	~~the potential harmful effects on the environment and human health from the operation of nuclear facilities and the storage, handling and disposal of radioactive materials;~~
·	~~limitations on the amounts and types of insurance commercially available to cover losses and liabilities that might arise in connection with nuclear operations; and~~
·	uncertainties with respect to the technological and financial aspects of decommissioning nuclear plants at the end of their licensed lives. The licenses for our two nuclear units expire in 2042 and 2044. See Note 20 to the Financial Statements for additional information on the ARO related to the decommissioning.

The NRC has broad authority under federal law to impose licensing requirements, including security, safety and employee-related requirements for the operation of nuclear generation facilities. In the event of noncompliance, the NRC has authority to impose fines or shut down a unit, or both, depending upon its assessment of the severity of the situation, until compliance is achieved. In addition, revised security or safety requirements promulgated by the NRC could necessitate substantial capital or operating expenditures at our Susquehanna nuclear plant. In addition, although we have no reason to anticipate a serious nuclear incident at our Susquehanna plant, if an incident did occur, any resulting operational loss, damages and injuries could have a material adverse effect on our results of operations, cash flows or financial condition.

~~Risks Related to International Delivery Segment~~

(~~PPL and PPL Energy Supply~~)

~~Our U.K. delivery business is subject to risks with respect to rate regulation and operational performance.~~

Our U.K. delivery business is rate regulated and operates under an incentive-based regulatory framework. In addition, its ability to manage operational risk is critical to its financial performance. Disruption to the distribution network could reduce profitability both directly through the higher costs for network restoration and also through the system of penalties and rewards that Ofgem has in place relating to customer service levels.

In December 2009, Ofgem completed its rate review for the five-year period from April 1, 2010 through March 31, 2015, thus reducing regulatory rate risk in the International Delivery Segment until the next rate review which will be effective April 1, 2015. The results of the rate review are further discussed in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations." The regulated income of the International Delivery Segment and also the RAB are to some extent linked to movements in the Retail Price Index (RPI). Reductions in the RPI would adversely impact revenues and the debt/RAB ratio.

Our U.K. delivery business exposes us to risks related to U.K. laws and regulations, taxes, economic conditions, foreign currency exchange rate fluctuations, and political conditions and policies of the U.K. government. These risks may reduce the results of operations from our U.K. delivery business.

~~The acquisition, financing, development and operation of projects in the U.K. entail significant financial risks including:~~

·	~~changes in laws or regulations relating to U.K. operations, including tax laws and regulations;~~
·	~~changes in government policies, personnel or approval requirements;~~
·	~~changes in general economic conditions affecting the U.K.;~~
·	~~regulatory reviews of tariffs for distribution companies;~~
·	~~severe weather and natural disaster impacts on the electric sector and our assets;~~
·	~~changes in labor relations;~~
·	~~limitations on foreign investment or ownership of projects and returns or distributions to foreign investors;~~
·	~~limitations on the ability of foreign companies to borrow money from foreign lenders and lack of local capital or loans;~~
·	fluctuations in currency exchange rates and in converting U.K. revenues to U.S. dollars, which can increase our expenses and/or impair our ability to meet such expenses, and difficulty moving funds out of the country in which the funds were earned; and
·	~~compliance with U.S. foreign corrupt practices laws.~~

~~Risks Related to Pennsylvania Delivery Segment~~

(~~PPL and PPL Electric~~)

~~Regulators may not approve the rates we request.~~

Our Pennsylvania delivery business is rate-regulated. While such regulation is generally premised on the recovery of prudently incurred costs, including energy supply costs for customers, and a reasonable rate of return on invested capital, the rates that we may charge our delivery customers are subject to authorization of the applicable regulatory authorities. Our Pennsylvania delivery business is subject to substantial capital expenditure requirements over the next several years, which will require rate increase requests to the regulators. There is no guarantee that the rates authorized by regulators will match our actual costs or provide a particular return on invested capital at any given time.

~~Our transmission and distribution facilities may not operate as planned, which may increase our expenses or decrease our revenues and, thus, have an adverse effect on our financial performance.~~

Our ability to manage operational risk with respect to our transmission and distribution systems is critical to the financial performance of our delivery business. Our delivery business also faces several risks, including the breakdown or failure of or damage to equipment or processes (especially due to severe weather or natural disasters), accidents and labor disputes and other factors. Operation of our delivery systems below our expectations may result in lost revenues or increased expenses, including higher maintenance costs.

~~We may be subject to higher transmission costs and other risks as a result of PJM's regional transmission expansion plan (RTEP) process.~~

PJM and the FERC have the authority to require upgrades or expansion of the regional transmission grid, which can result in substantial expenditures for transmission owners. As discussed in Note 8 to the Financial Statements, we expect to make substantial expenditures to construct the Susquehanna-Roseland transmission line that PJM has determined is necessary for the reliability of the regional transmission grid. Although the FERC has granted our request for incentive rate treatment of such facilities, we cannot predict the date when these facilities will be in service or whether delays may occur due to public opposition or other factors. Delays could result in significant cost increases for these facilities and decreased reliability of the regional transmission grid. As a result, we cannot predict the ultimate financial or operational impact of this project or other RTEP projects on PPL Electric.

~~We could be subject to higher costs and/or penalties related to mandatory reliability standards.~~

Under the Energy Policy Act, owners and operators of the bulk power transmission system are now subject to mandatory reliability standards promulgated by the NERC and enforced by the FERC. Compliance with reliability standards may subject us to higher operating costs and/or increased capital expenditures, and violations of these standards could result in substantial penalties.

~~We could be subject to higher costs and/or penalties related to Pennsylvania Conservation and Energy Efficiency Programs.~~

~~Act 129 became effective in October 2008.~~ This law created requirements for energy efficiency and conservation programs and for the use of smart metering technology, imposed new PLR electricity supply procurement rules, provided remedies for market misconduct, and made changes to the existing Alternative Energy Portfolio Standard. Utilities not meeting the requirements of Act 129 are subject to significant penalties that cannot be recovered in rates. The law also requires electric utilities to meet specified goals for reduction in customer electricity usage and peak demand by specified dates (2011 and 2013). Although we expect to meet these requirements, numerous factors outside of our control could prevent compliance with these requirements and result in penalties to us. See "Regulatory Issues - Energy Policy Act of 2005 - Reliability Standards" in Note 14 to the Financial Statements for additional information.

~~Rate deregulation remains subject to political risks.~~

Although prior initiatives have not resulted in the enactment of legislation, the possibility remains that certain Pennsylvania legislators could introduce legislation to extend generation rate caps or otherwise limit cost recovery through rates for Pennsylvania utilities after the end of applicable transition periods, which in PPL Electric's case was December 31, 2009. If such legislation were introduced and ultimately enacted, PPL Electric could face severe financial consequences including operating losses and significant cash flow shortfalls. In addition, continuing uncertainty regarding PPL Electric's ability to recover its market supply and other costs of operating its business could adversely affect its credit quality, financing costs and availability of credit facilities necessary to operate its business.

~~Other~~ Risks Related to All Segments

(PPL, PPL Energy Supply and PPL Electric)

We will selectively pursue growth of generation and transmission and distribution capacity, which involves a number of uncertainties and may not achieve the desired financial results.

We will pursue expansion of our generation and transmission and distribution capacity over the next several years through power uprates at certain of our existing power plants, the potential construction of new power plants, the potential acquisition of existing plants, the potential construction or acquisition of transmission and distribution projects and capital investments to upgrade transmission and distribution infrastructure. We will rigorously scrutinize opportunities to expand our generating capability and may determine not to proceed with any expansion. These types of projects involve numerous risks. Any planned power uprates could result in cost overruns, reduced plant efficiency and higher operating and other costs. With respect to the construction of new plants, the acquisition of ~~existing~~ex isting plants, or the construction or acquisition of transmission and distribution projects, we may be required to expend significant sums for preliminary engineering, permitting, resource exploration, legal and other expenses before it can be established whether a project is feasible, economically attractive or capable of being financed. The success of both a new or acquired project would likely be contingent, among other things, upon the negotiation of satisfactory operating contracts, obtaining acceptable financing and maintaining acceptable credit ratings, as well as receipt of required and appropriate governmental approvals. If we were unable to complete construction or expansion of a ~~facility,~~project, we ~~would generally~~may not be ~~unable~~able to recover our investment in the project. Furthermore, we might be unable to ~~run~~operate any new or acquired plants as efficiently as projected, which could result in higher than projected operating and other costs and reduced earnings.

~~The~~Adverse conditions in the economic and financial markets in which we operate could adversely affect our financial condition and results of operations.

~~In 2008,~~Adverse conditions in the financial markets ~~became disruptive to~~during 2008 and the ~~processes of managing credit risk, responding to liquidity needs, measuring at fair value derivatives and other financial instruments and managing market risk. The~~associated contraction of liquidity in the wholesale energy markets ~~and accompanying significant decline~~contributed significantly to declines in wholesale energy prices, significantly ~~impacted~~impacting our earnings during the second half of 2008 and the first half of 2009. The breadth and depth of these negative economic conditions had a wide-ranging impact on the U.S. and international business environment, including our ~~businesses, and may continue to do so.~~businesses. As a result of the economic downturn, demand for energy commodities has declined significantly. This reduced demand will continue to impact the key domestic wholesale energy markets we serve (such as PJM) and our Pennsylvania ~~delivery business,~~and Kentucky utility businesses, especially industrial customer demand. The combination of lower demand for power and ~~natural~~natu ral gas and other fuels has put downward price pressure on ~~the~~ wholesale energy ~~market~~markets in general, further impacting our energy marketing results. In general, current economic and commodity market conditions will continue to challenge ~~the~~ predictability regarding our unhedged future energy margins, liquidity and overall financial condition.

Our businesses are heavily dependent on credit and capital, among other things, for capital expenditures and providing collateral to support hedging in our energy marketing business. Global bank credit capacity ~~was reduced~~declined and the cost of renewing or establishing new credit facilities increased significantly in 2008, primarily as a result of general credit concerns nationwide, thereby introducing uncertainties as to our businesses' ability to enter into long-term energy commitments or reliably estimate the longer-term cost and availability of credit. Although bank credit conditions have improved since mid-2009, and we currently expect to have adequate access to needed credit and capital based on current conditions, deterioration in the financial markets could adversely affect our financial condition and liquidity.

~~The current condition~~ Additionally, regulations to be adopted to implement the Dodd-Frank Financial Reform Act of 2010 may impose requirements on our businesses and the ~~economic~~businesses of others with whom we contract such as banks or other counterparties, or simply result in increased costs to conduct our business or access sources of capital and ~~financial markets in~~liquidity upon which ~~we operate is expected to continue to impact numerous other aspects~~the conduct of our ~~business operations discussed elsewhere in this Risk Factor section.~~businesses is dependent.

Our operating ~~results~~revenues could fluctuate on a seasonal basis, especially as a result of severe weather conditions.

Our businesses are subject to seasonal demand cycles. For example, in some markets demand for, and market prices of, electricity peak during hot summer months, while in other markets such peaks occur in cold winter months. As a result, our overall operating results in the future may fluctuate substantially on a seasonal basis if weather conditions such as heat waves, extreme cold weather or severe storms occur. The patterns of these fluctuations may change depending on the type and location of our facilities and the terms of our contracts to sell electricity.

Operating expenses could be affected by weather conditions, including storms, as well as by significant man-made or accidental disturbances, including terrorism or natural disasters.

Weather and these other factors can significantly affect our profitability or operations by causing outages, damaging infrastructure or requiring significant repair costs. Storm outages and damage often directly decrease revenues or increase expenses, due to reduced usage and higher restoration charges. In addition, weather and other disturbances may affect capital markets and general economic conditions and impact future growth.

Our businesses are subject to physical, market and economic risks relating to potential effects of climate change.

Climate change may produce changes in weather or other environmental conditions, including temperature or precipitation changes, and thus may impact consumer demand for electric power. Temperature increases could result in increased overall electricity volumes or peaks and precipitation changes could result in altered availability of water for plant cooling operations. These or other meteorological changes could lead to increased operating costs, capital expenses or power purchase costs. Conversely, climate change could have a number of potential impacts tending to reduce demand. Changes may entail more frequent or more intense storm activity, which, if severe, could temporarily disrupt regional economic conditions and adversely affect electricity demand levels. Greenhouse gas regulation could increase the cost of electric powe r, particularly power generated by fossil-fuels, and such increases could have a depressive effect on the regional economy. Reduced economic and consumer activity in our service areas --both generally and specific to certain industries and consumers accustomed to previously low-cost power -- could reduce demand for the power we generate, market and deliver. Also, demand for our energy-related services could be similarly lowered should consumers' preferences or market factors move toward favoring energy efficiency, low-carbon power sources or reduced electric usage generally.

We cannot predict the outcome of the legal proceedings and investigations currently being conducted with respect to our current and past business activities. An adverse determination could have a material adverse effect on our financial condition, results of operations or cash flows.

We are involved in legal proceedings, claims and litigation and subject to ongoing state and federal investigations arising out of our business operations, the most significant of which are summarized in "Legal Matters," "Regulatory Issues" and in "Environmental Matters - Domestic" in Note 1415 to the Financial Statements. We cannot predict the ultimate outcome of these matters, nor can we reasonably estimate the costs or ~~liability~~liabilities that could potentially result from a negative outcome in each case.

We ~~may need significant additional financing~~could be negatively affected by rising interest rates, downgrades to ~~pursue growth opportunities.~~our bond credit ratings or other negative developments in our ability to access capital markets.

~~We continually review potential acquisitions~~In the ordinary course of business, we are reliant upon adequate long-term and development projects and may enter into significant acquisition agreements or development commitments in the future. An acquisition agreement or development commitment may require access to substantial capital from outside sources on acceptable terms. We also may need externalshort-term financing means to fund our significant capital expenditures, ~~including capital expenditures necessary~~debt interest or maturities and operating needs. As a capital-intensive business, we are sensitive to ~~comply with environmental~~developments in interest rate levels; credit rating considerations; insurance, security or ~~other regulatory requirements. Our ability to arrange financing~~collateral requirements; market liquidity and ~~our cost of capital are dependent on numerous factors, including general economic conditions,~~ credit availability and refinancing opportunities necessary or advisable to respond to credit market changes. Changes in these conditions could result in increased costs and decreased liquidity to our financial performance. The inability to obtain sufficient financing on terms that are acceptable to us could adversely affect our ability to pursue acquisition and development opportunities and fund capital expenditures.domestic regulated utility businesses.

A downgrade in our credit ratings could negatively affect our ability to access capital and increase the cost of maintaining our credit facilities and any new debt.

~~Our current credit~~Credit ratings assigned by Moody's, Fitch and S&P ~~including~~to our businesses and their financial obligations have a ~~January 2009 review~~significant impact on the cost of capital incurred by S&P that resulted in a negative outlook for us, are listed in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Liquidity and Capital Resources - Credit Ratings." Whileour businesses. Although we do not expect these ratings to limit our ability to fund short-term liquidity needs or access new long-term debt, any ratings downgrade could increase our short-term borrowing costs and negatively affect our ability to fund short-term liquidity needs and access new long-term debt. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Liquidity and Capital Resources - Ratings Triggers" for additional information on the impact of a downgrade in our credit rating.

Significant increases in our operation and maintenance expenses, including health care and pension costs, could adversely affect our future earnings and liquidity.

We continually focus on limiting and reducing where possible our operation and maintenance expenses. However, we expect to continue to face increased cost pressures in our operations. Increased costs of materials and labor may result from general inflation, increased regulatory requirements ~~especially~~(especially in respect of environmental ~~protection,~~regulations), the need for ~~higher cost~~higher-cost expertise in the workforce or other factors. In addition, pursuant to collective bargaining agreements, we are contractually committed to provide specified levels of health care and pension benefits to certain current employees and retirees. We provide a similar level of benefits to our management employees. These benefits give rise to significant expenses. Due to general inflation with respect to such costs, the aging demographics of our workforce and other factors, we have experienced significant health care cost inflation in recent years, and we expect our health care costs, including prescription drug coverage, to continue to increase despite measures that we have taken and expect to take to require employees and retirees to bear a higher portion of the costs of their health care benefits. In addition, we expect to continue to incur significant costs with respect to the defined benefit pension plans for our employees and retirees. The measurement of our expected future health care and pension obligations, costs and liabilities is highly dependent on a variety of assumptions, most of which relate to factors beyond our control. These assumptions include investment returns, interest rates, health care cost trends, benefit improvements, salary increases and the demographics of plan participants. If our assumptions prove to be inaccurate, our future costs and cash ~~contribution~~contri bution requirements to fund these benefits could increase significantly.

~~There is a risk that we~~We may be required to record impairment charges in the future for certain of our investments, which could adversely affect our earnings.

Under GAAP, we are required to test our recorded goodwill for impairment on an annual basis, or more frequently if events or circumstances indicate that these assets may be impaired. Although no goodwill impairments were recorded based on our annual review in the fourth quarter of ~~2009,~~2010, we are unable to predict whether future impairment charges may be necessary.

We also review our long-lived assets for impairment when events or circumstances indicate that the carrying value of these assets may not be recoverable. During 2009, PPL recorded impairment charges related to certain sulfur dioxide emission allowances and the Long Island generation business that is being sold. During 2008, PPL recorded impairment charges related to a cancelled hydroelectric expansion project, certain emission allowances and its natural gas distribution and propane businesses that were sold in 2008. During 2007, PPL impaired certain transmission rights, certain domestic telecommunications assets, certain assets of the natural gas distribution and propane businesses, and the net assets of our Bolivian businesses prior to their sale in 2007. See Notes 8, 9 and 1718 to the Financial Statements for additional information on ~~these charges.~~impairment charges taken during the reporting periods. We are unable to predict whether impairment charges, or other losses on sales of other assets or businesses, may occur in future years.

We may incur liabilities in connection with discontinued operations.

In connection with various divestitures, we have indemnified or guaranteed parties against certain liabilities and with respect to certain transactions. These indemnities and guarantees relate to, among other things, liabilities which may arise with respect to the period during which we or our subsidiaries operated the divested business, and to certain ongoing contractual relationships and entitlements with respect to which we or our subsidiaries made commitments in connection with the divestiture.

We are subject to liability risks relating to our generation, transmission and distribution businesses.

The conduct of our physical and commercial operations subjects us to many risks, including risks of potential physical injury, property damage or other financial effects, caused to or caused by employees, customers, contractors, vendors, contractual or financial counterparties and other third parties.

Our facilities may not operate as planned, which may increase our expenses or decrease our revenues and, thus, have an adverse effect on our financial performance.

Operation of power plants, transmission and distribution facilities, information technology systems and other assets and activities subjects us to a variety of risks, including the breakdown or failure of equipment, accidents, security breaches, viruses or outages affecting information technology systems, labor disputes, obsolescence, delivery/transportation problems and disruptions of fuel supply and performance below expected levels. These events may impact our ability to conduct our businesses efficiently or lead to increased costs, expenses or losses. Operation of our delivery systems below our expectations may result in lost revenue or increased expense, including higher maintenance costs which may not be recoverable from customers. Planned and unplanned outages at our power plants can require us to purchase pow er at then-current market prices to satisfy our commitments or, in the alternative, pay penalties and damages for failure to satisfy them.

Although we maintain customary insurance coverage for certain of these risks, no assurance can be given that such insurance coverage will be sufficient to compensate us fully in the event losses occur.

We are subject to risks associated with federal and state tax laws and regulations.

Changes in tax law as well as the inherent difficulty in quantifying potential tax effects of business decisions could negatively impact our results of operations. We are required to make judgments in order to estimate our obligations to taxing authorities. These tax obligations include income, property, sales and use and employment-related taxes. We also estimate our ability to utilize tax benefits and tax credits. Due to the revenue needs of the states and jurisdictions in which our businesses operate, various tax and fee increases may be proposed or considered. We cannot predict whether legislation or regulation will be introduced or enacted or the effect of any such changes on our businesses. If enacted, any changes could increase tax expense and could have a negative impact on ou r results of operations and cash flows.

(PPL and PPL Electric)

Risks Related to Domestic Regulated Utility Operations

Our domestic regulated utility businesses face many of the same risks, in addition to those risks that are unique to the Kentucky Regulated segment and the Pennsylvania Regulated segment. Set forth below are risk factors common to both domestic regulated segments, followed by sections identifying separately the risks specific to each of these segments.

Our profitability is highly dependent on our ability to recover the costs of providing energy and utility services to our customers and earn an adequate return on our capital investments. Regulators may not approve the rates we request.

We currently provide services to our utility customers at rates approved by one or more federal or state regulatory commissions, including those commissions referred to below. While such regulation is generally premised on the recovery of prudently incurred costs and a reasonable rate of return on invested capital, the rates that we may charge our regulated generation, transmission and distribution customers are subject to authorization of the applicable regulatory authorities. There can be no assurance that such regulatory authorities will consider all of our costs to have been prudently incurred or that the regulatory process by which rates are determined will always result in rates that achieve full recovery of our costs or an adequate return on our capital investments. While our rates are generally reg ulated based on an analysis of our costs incurred in a base year, the rates we are allowed to charge may or may not match our costs at any given time. With respect to PPL's November 1, 2010 acquisition of LKE, each of LG&E and KU has agreed with the KPSC, subject to certain limited exceptions such as fuel and environmental cost recoveries, that no base rate increases would take effect for their Kentucky retail customers before January 1, 2013. Our regulated utility businesses are subject to substantial capital expenditure requirements over the next several years, which will require rate increase requests to the regulators. If our costs are not adequately recovered through rates, it could have an adverse affect on our business, results of operations, cash flows or financial condition.

Our domestic utility businesses are subject to significant and complex governmental regulation.

Various federal and state entities, including but not limited to the FERC, the KPSC, the VSCC, the TRA and PUC regulate many aspects of the domestic utility operations of PPL, including:

·	the rates that we may charge and the terms and conditions of our service and operations;

·	financial and capital structure matters;

·	siting, construction and operation of facilities;

·	mandatory reliability and safety standards and other standards of conduct;

·	accounting, depreciation and cost allocation methodologies;

·	tax matters;

·	affiliate restrictions;

·	acquisition and disposal of utility assets and securities; and

·	various other matters.

Such regulations or changes thereto may subject us to higher operating costs or increased capital expenditures and failure to comply could result in sanctions or possible penalties. In any rate-setting proceedings, federal or state agencies, intervenors and other permitted parties may challenge our rate requests, and ultimately reduce, alter or limit the rates we seek.

We could be subject to higher costs and/or penalties related to mandatory reliability standards.

Under the Energy Policy Act of 2005, owners and operators of the bulk power transmission system are now subject to mandatory reliability standards promulgated by the NERC and enforced by the FERC. Compliance with reliability standards may subject us to higher operating costs and/or increased capital expenditures, and violations of these standards could result in substantial penalties which may not be recoverable from customers.

Changes in transmission and wholesale power market structures could increase costs or reduce revenues.

Wholesale revenues fluctuate with regional demand, fuel prices and contracted capacity. Changes to transmission and wholesale power market structures and prices may occur in the future, are not estimable and may result in unforeseen effects on energy purchases and sales, transmission and related costs or revenues. These can include commercial or regulatory changes affecting power pools, exchanges or markets in which PPL participates.

Our domestic regulated businesses undertake significant capital projects and these activities are subject to unforeseen costs, delays or failures, as well as risk of inadequate recovery of resulting costs.

The domestic regulated utility businesses are capital intensive and require significant investments in energy generation (in the case of LKE) and transmission, distribution and other infrastructure projects, such as projects for environmental compliance and system reliability. The completion of these projects without delays or cost overruns is subject to risks in many areas, including:

·	approval, licensing and permitting;

·	land acquisition and the availability of suitable land;

·	skilled labor or equipment shortages;

·	construction problems or delays, including disputes with third party intervenors;

·	increases in commodity prices or labor rates;

·	contractor performance;

·	environmental considerations and regulations;

·	weather and geological issues; and

·	political, labor and regulatory developments.

Failure to complete our capital projects on schedule or on budget, or at all, could adversely affect our financial performance, operations and future growth if such expenditures are not granted rate recovery by our regulators.

Risks Specific to Kentucky Regulated Segment

(PPL)

The costs of compliance with, and liabilities under, environmental laws are significant and are subject to continuing changes.

Extensive federal, state and local environmental laws and regulations are applicable to LG&E's and KU's generation business, including its air emissions, water discharges and the management of hazardous and solid waste, among other business related activities; and the costs of compliance or alleged non-compliance cannot be predicted with certainty but could be material. In addition, our costs may increase significantly if the requirements or scope of environmental laws or regulations, or similar rules are expanded or changed. Costs may take the form of increased capital or operating and maintenance expenses, monetary fines, penalties or forfeitures or other restrictions. Many of these environmental law considerations are also applicable to the operations of our key suppliers, or customers, such as coal producers and industr ial power users, and may impact the costs of their products or demand for our services.

Risks Specific to Pennsylvania Regulated Segment

(PPL and PPL Electric)

We may be subject to higher transmission costs and other risks as a result of PJM's regional transmission expansion plan (RTEP) process.

PJM and the FERC have the authority to require upgrades or expansion of the regional transmission grid, which can result in substantial expenditures for transmission owners. As discussed in Note 8 to the Financial Statements, we expect to make substantial expenditures to construct the Susquehanna-Roseland transmission line that PJM has determined is necessary for the reliability of the regional transmission grid. Although the FERC has granted our request for incentive rate treatment of such facilities, we cannot be certain that all costs that we may incur will be recoverable. In addition, the date when these facilities will be in service, whether due to delays related to public opposition or other factors, is subject to the outcome of future events that are not all within our control. As a resul t, we cannot predict the ultimate financial or operational impact of this project or other RTEP projects on PPL Electric.

We could be subject to higher costs and/or penalties related to Pennsylvania Conservation and Energy Efficiency Programs.

Act 129 became effective in October 2008. This law created requirements for energy efficiency and conservation programs and for the use of smart metering technology, imposed new PLR electricity supply procurement rules, provided remedies for market misconduct, and made changes to the existing Alternative Energy Portfolio Standard. The law also requires electric utilities to meet specified goals for reduction in customer electricity usage and peak demand by specified dates (2011 and 2013). Utilities not meeting these requirements of Act 129 are subject to significant penalties that cannot be recovered in rates. Although we expect to meet these requirements, numerous factors outside of our control could prevent compliance with these requirements and result in penalties to us. See "Regul atory Issues - Energy Policy Act of 2005 - Reliability Standards" in Note 15 to the Financial Statements for additional information.

Cost recovery remains subject to political risks.

Although prior initiatives have not resulted in the enactment of such legislation, the possibility remains that certain Pennsylvania legislators could introduce legislation to reinstate generation rate caps or otherwise limit cost recovery through rates for Pennsylvania utilities after the end of applicable transition periods, which in PPL Electric's case was December 31, 2009. If such legislation were introduced and ultimately enacted, PPL Electric could face severe financial consequences including operating losses and significant cash flow shortfalls. In addition, continuing uncertainty regarding PPL Electric's ability to recover its market supply and other costs of operating its business could adversely affect its credit quality, financing costs and availability of credit facilities necessary to operate its b usiness.

(PPL and PPL Energy Supply)

Risks Related to International Regulated Segment

Our U.K. delivery business is subject to risks with respect to rate regulation and operational performance.

In December 2009, Ofgem completed its rate review for the five-year period from April 1, 2010 through March 31, 2015, thus reducing regulatory rate risk in the International Regulated segment until the next rate review which will be effective April 1, 2015. The regulated income of the International Regulated segment and also the RAB are to some extent linked to movements in the Retail Price Index (RPI). Reductions in the RPI would adversely impact revenues and the debt/RAB ratio.

Our U.K. distribution business exposes us to risks related to U.K. laws and regulations, taxes, economic conditions, foreign currency exchange rate fluctuations, and political conditions and policies of the U.K. government. These risks may reduce the results of operations from our U.K. distribution business.

The acquisition, financing, development and operation of projects in the U.K. entail significant financial risks including:

·	changes in laws or regulations relating to U.K. operations, including tax laws and regulations;

·	changes in government policies, personnel or approval requirements;

·	changes in general economic conditions affecting the U.K.;

·	regulatory reviews of tariffs for distribution companies;

·	severe weather and natural disaster impacts on the electric sector and our assets;

·	changes in labor relations;

·	limitations on foreign investment or ownership of projects and returns or distributions to foreign investors;

·	limitations on the ability of foreign companies to borrow money from foreign lenders and lack of local capital or loans;

·	fluctuations in foreign currency exchange rates and in converting U.K. revenues to U.S. dollars, which can increase our expenses and/or impair our ability to meet such expenses, and difficulty moving funds out of the country in which the funds were earned; and

·	compliance with U.S. foreign corrupt practices laws.

Risks Related to Supply Segment

(PPL and PPL Energy Supply)

We face intense competition in our energy supply business, which may adversely affect our ability to operate profitably.

Unlike our regulated utility businesses, our energy supply business is dependent on our ability to operate in a competitive environment and is not assured of any rate of return on capital investments through a predetermined rate structure. Competition is impacted by electricity and fuel prices, new market entrants, construction by others of generating assets and transmission capacity, technological advances in power generation, the actions of environmental and other regulatory authorities and other factors. These competitive factors may negatively impact our ability to sell electricity and related products and services, as well as the prices that we may charge for such products and services, which could adversely affect our results of operations and our ability to grow our business.

We sell our available energy and capacity into the competitive wholesale markets through contracts of varying duration. Competition in the wholesale power markets occurs principally on the basis of the price of products and, to a lesser extent, on the basis of reliability and availability. We believe that the commencement of commercial operation of new electric facilities in the regional markets where we own or control generation capacity and the evolution of demand side management resources will continue to increase competition in the wholesale electricity market in those regions, which could have an adverse effect on the prices we receive for electricity.

Competitors in the wholesale power markets in which PPL Generation subsidiaries and PPL EnergyPlus operate include regulated utilities, industrial companies, non-utility generators and competitive subsidiaries of regulated utilities. In the past, PUHCA significantly restricted mergers and acquisitions and other investments in the electric utility sector. Entirely new competitors, including financial institutions, have entered the energy markets as a result of the repeal of PUHCA in 2006. The repeal of PUHCA also may lead to consolidation in our industry, resulting in competitors with significantly greater financial resources than we have.

Adverse changes in commodity prices and related costs may decrease our future energy margins, which could adversely affect our earnings and cash flows.

·	supply and demand for electricity available from current or new generation resources;

·	variable production costs, primarily fuel (and the associated fuel transportation costs) and emission allowance expense for the generation resources used to meet the demand for electricity;

·	transmission capacity and service into, or out of, markets served;

·	changes in the regulatory framework for wholesale power markets;

·	liquidity in the wholesale electricity market, as well as general creditworthiness of key participants in the market; and

·	weather and economic conditions impacting demand for electricity or the facilities necessary to deliver electricity.

See Exhibit 99(a) for more information concerning the market fluctuations in wholesale energy, fuel and emission allowance prices over the past five years.

We do not always hedge against risks associated with electricity and fuel price volatility.

We attempt to mitigate risks associated with satisfying our contractual electricity sales obligations by either reserving generation capacity to deliver electricity or purchasing the necessary financial or physical products and services through competitive markets to satisfy our net firm sales contracts. We also routinely enter into contracts, such as fuel and electricity purchase and sale commitments, to hedge our exposure to fuel requirements and other electricity-related commodities. However, based on economic and other considerations, we may decide not to hedge the entire exposure of our operations from commodity price risk. To the extent we do not hedge against commodity price risk, our results of operations and financial position may be adversely affected.

We are exposed to operational, price and credit risks associated with selling and marketing products in the wholesale electricity markets.

We purchase and sell electricity in wholesale markets under market-based tariffs authorized by the FERC throughout the U.S. and also enter into short-term agreements to market available electricity and capacity from our generation assets with the expectation of profiting from market price fluctuations. If we are unable to deliver firm capacity and electricity under these agreements, we could be required to pay damages. These damages would generally be based on the difference between the market price to acquire replacement capacity or electricity and the contract price of any undelivered capacity or electricity. Depending on price volatility in the wholesale electricity markets, such damages could be significant. Extreme weather conditions, unplanned generation facility outages, environmental com pliance costs, transmission disruptions, and other factors could affect our ability to meet our obligations, or cause significant increases in the market price of replacement capacity and electricity.

Our power agreements typically include provisions requiring us to post collateral for the benefit of our counterparties if the market price of energy varies from the contract prices in excess of certain pre-determined amounts. We currently believe that we have sufficient credit to fulfill our potential collateral obligations under these power contracts. Our obligation to post collateral could exceed the amount of our facilities or our ability to increase our facilities could be limited by financial markets or other factors. See Note 7 for a discussion of PPL's credit facilities.

We also face credit risk that parties with whom we contract will default in their performance, in which case we may have to sell our electricity into a lower-priced market or make purchases in a higher-priced market than existed at the time of contract. Whenever feasible, we attempt to mitigate these risks using various means, including agreements that require our counterparties to post collateral for our benefit if the market price of energy varies from the contract price in excess of certain pre-determined amounts. However, there can be no assurance that we will avoid counterparty nonperformance risk, which could adversely impact our ability to meet our obligations to other parties, which could in turn subject us to claims for damages.

The load following contracts that PPL EnergyPlus is awarded do not provide for specific levels of load and actual load significantly below or above our forecasts could adversely affect our energy margins.

We generally hedge our load following obligations with energy purchases from third parties, and to a lesser extent with our own generation. If the actual load is significantly lower than the expected load, we may be required to resell power at a lower price than was contracted for to supply the load obligation, resulting in a financial loss. Alternatively, a significant increase in load could adversely affect our energy margins because we are required under the terms of the load following contracts to provide the energy necessary to fulfill increased demand at the contract price, which could be lower than the cost to procure additional energy on the open market. Therefore, any significant decrease or increase in load compared to our forecasts could have a material adverse effect on our results of operation s or financial position.

We may experience disruptions in our fuel supply, which could adversely affect our ability to operate our generation facilities.

We purchase fuel from a number of suppliers. Disruption in the delivery of fuel and other products consumed during the production of electricity (such as coal, natural gas, oil, water, uranium, lime, limestone and other chemicals), including disruptions as a result of weather, transportation difficulties, global demand and supply dynamics, labor relations, environmental regulations or the financial viability of our fuel suppliers, could adversely affect our ability to operate our facilities, which could result in lower sales and/or higher costs and thereby adversely affect our results of operations.

Our risk management policy and programs relating to electricity and fuel prices, interest rates, foreign currency and counterparty credit and non-performance risks may not work as planned, and we may suffer economic losses despite such programs.

We actively manage the market risk inherent in our generation and energy marketing activities, as well as our debt, foreign currency and counterparty credit positions. We have implemented procedures to monitor compliance with our risk management policy and programs, including independent validation of transaction and market prices, verification of risk and transaction limits, portfolio stress tests, sensitivity analyses and daily portfolio reporting of various risk management metrics. Nonetheless, our risk management programs may not work as planned. For example, actual electricity and fuel prices may be significantly different or more volatile than the historical trends and assumptions upon which we based our risk management calculations. Additionally, unforeseen market disruptions could decrea se market depth and liquidity, negatively impacting our ability to enter into new transactions. We enter into financial contracts to hedge commodity basis risk, and as a result are exposed to the risk that the correlation between delivery points could change with actual physical delivery. Similarly, interest rates or foreign currency exchange rates could change in significant ways that our risk management procedures were not designed to address. As a result, we cannot always predict the impact that our risk management decisions may have on us if actual events result in greater losses or costs than our risk models predict or greater volatility in our earnings and financial position.

In order to comply with existing and proposed federal and state environmental laws and regulations primarily governing air emissions from coal-fired plants, in 2005 PPL began a program to install scrubbers and other pollution control equipment (primarily aimed at sulfur dioxide, particulate matter and nitrogen oxides with co-benefits for mercury emissions reduction). The cost to install this equipment was approximately $1.6 billion. The scrubbers at our Montour and Brunner Island plants are now in service. Many states and environmental groups have challenged certain federal laws and regulations relating to air emissions as not being sufficiently strict. As a result, it is possible that state and federal regulations will be adopted that would impose more stringent restrictions than are currently in effect, which could require us to significantly increase capital expenditures for additional pollution control equipment.

We may not be able to obtain or maintain all environmental regulatory approvals necessary for our planned capital projects which are necessary to our business. If there is a delay in obtaining any required environmental regulatory approval or if we fail to obtain, maintain or comply with any such approval, operations at our affected facilities could be halted, reduced or subjected to additional costs. Furthermore, at some of our older generating facilities it may be uneconomic for us to install necessary pollution control equipment, which could cause us to retire those units.

We depend on transmission and distribution facilities owned and operated by utilities and other energy companies to deliver the electricity and natural gas we sell in the wholesale market, as well as the natural gas we purchase for use in our electric generation facilities. If transmission is disrupted (as a result of weather, natural disasters or other reasons) or not operated efficiently by ISOs and RTOs, in applicable markets, or if capacity is inadequate, our ability to sell and deliver products and satisfy our contractual obligations may be hindered, or we may be unable to sell products at the most favorable terms.

The FERC has issued regulations that require wholesale electric transmission services to be offered on an open-access, non-discriminatory basis. Although these regulations are designed to encourage competition in wholesale market transactions for electricity, there is the potential that fair and equal access to transmission systems will not be available or that transmission capacity will not be available in the amounts we require. We cannot predict the timing of industry changes as a result of these initiatives or the adequacy of transmission facilities in specific markets or whether ISOs and RTOs in applicable markets will efficiently operate transmission networks and provide related services.

Our generation subsidiaries sell electricity into the wholesale market. Generally, our generation subsidiaries and our marketing subsidiaries are subject to regulation by the FERC. The FERC has authorized us to sell generation from our facilities and power from our marketing subsidiaries at market-based prices. The FERC retains the authority to modify or withdraw our market-based rate authority and to impose "cost of service" rates if it determines that the market is not competitive, that we possess market power or that we are not charging just and reasonable rates. Any reduction by the FERC in the rates we may receive or any unfavorable regulation of our business by state regulators could materially adversely affect our results of operations. See "FERC Market-Based Rate Authority" in Note 15 to the Financial Statements for information regarding recent court decisions that could impact the FERC's market-based rate authority program, and "PJM RPM Litigation" in Note 15 to the Financial Statements for information regarding the FERC's proceedings that could impact PJM's capacity pricing model.

If market deregulation is reversed or discontinued, our business prospects and financial condition could be materially adversely affected.

In some markets, state legislators, government agencies and other interested parties have made proposals to change the use of market-based pricing, re-regulate areas of these markets that have previously been competitive or permit electricity delivery companies to construct or acquire generating facilities. The ISOs that oversee the transmission systems in certain wholesale electricity markets have from time to time been authorized to impose price limitations and other mechanisms to address extremely high prices in the power markets. These types of price limitations and other mechanisms may reduce profits that our wholesale power marketing and trading business would have realized under competitive market conditions absent such limitations and mechanisms. Although we generally expect electricity markets to continue to be competitive, other proposals to re-regulate our industry may be made, and legislative or other actions affecting the electric power restructuring process may cause the process to be delayed, discontinued or reversed in states in which we currently, or may in the future, operate. See "New Jersey Capacity Legislation" in Note 15 to the Financial Statements.

Changes in technology may negatively impact the value of our power plants.

A basic premise of our generation business is that generating electricity at central power plants achieves economies of scale and produces electricity at relatively low prices. There are alternate technologies to produce electricity, most notably fuel cells, micro turbines, windmills and photovoltaic (solar) cells, the development of which has been expanded due to global climate change concerns. Research and development activities are ongoing to seek improvements in alternate technologies. It is possible that advances will reduce the cost of alternate methods of electricity production to a level that is equal to or below that of certain central station production. Also, as new technologies are developed and become available, the quantity and pattern of electricity usage (the "demand") by custome rs could decline, with a corresponding decline in revenues derived by generators. These alternative energy sources could result in a decline to the dispatch and capacity factors of our plants. As a result of all of these factors, the value of our generation facilities could be significantly reduced.

We are subject to certain risks associated with nuclear generation, including the risk that our Susquehanna nuclear plant could become subject to increased security or safety requirements that would increase capital and operating expenditures, uncertainties regarding spent nuclear fuel, and uncertainties associated with decommissioning our plant at the end of its licensed life.

Nuclear generation accounted for about 29% of our 2010 generation output. The risks of nuclear generation generally include:

·	the potential harmful effects on the environment and human health from the operation of nuclear facilities and the storage, handling and disposal of radioactive materials;

·	limitations on the amounts and types of insurance commercially available to cover losses and liabilities that might arise in connection with nuclear operations; and

uncertainties with respect to the technological and financial aspects of decommissioning nuclear plants at the end of their licensed lives. The licenses for our two nuclear units expire in 2042 and 2044. See Note 21 to the Financial Statements for additional information on the ARO related to the decommissioning.

The NRC has broad authority under federal law to impose licensing requirements, including security, safety and employee-related requirements for the operation of nuclear generation facilities. In the event of noncompliance, the NRC has authority to impose fines or shut down a unit, or both, depending upon its assessment of the severity of the situation, until compliance is achieved. In addition, revised security or safety requirements promulgated by the NRC could necessitate substantial capital or operating expenditures at our Susquehanna nuclear plant. There also remains substantial uncertainty regarding the temporary storage and permanent disposal of spent nuclear fuel, which could result in substantial additional costs to PPL that cannot be predicted. In addition, although we have no reason t o anticipate a serious nuclear incident at our Susquehanna plant, if an incident did occur, any resulting operational loss, damages and injuries could have a material adverse effect on our results of operations, cash flows or financial condition. See Note 15 to the Financial Statements for a discussion of nuclear insurance.

ITEM 1B. UNRESOLVED STAFF COMMENTS

PPL Corporation, PPL Energy Supply, LLC and PPL Electric Utilities Corporation

None.

ITEM 2. PROPERTIES

~~Supply~~(PPL)

Kentucky Regulated Segment

~~PPL Energy Supply's system~~LKE's properties consist primarily of regulated generation facilities, electric transmission and distribution assets and natural gas transmission and distribution mains in Kentucky. The electric generating capacity ~~(winter rating)~~ at December 31, ~~2009,~~2010 was:

Plant
Total MW
Capacity (a)
% Ownership
PPL Energy Supply's Ownership
or Lease Interest
in MW
Primary Fuel

Pennsylvania
Susquehanna 2,451 90.00 2,206 Nuclear
Montour 1,530 100.00 1,530 Coal
Brunner Island 1,476 100.00 1,476 (b) Coal
Martins Creek 1,672 100.00 1,672 Natural Gas/Oil
Keystone 1,718 12.34 212 Coal
Conemaugh 1,718 16.25 279 Coal
Ironwood (c) 759 100.00 759 Natural Gas
Lower Mt. Bethel 624 100.00 624 Natural Gas
Combustion turbines 465 100.00 465 Natural Gas/Oil
Safe Harbor Water Power Corp. 421 33.33 140 Hydro
Hydroelectric 172 100.00 172 Hydro
Other (c) (d) 48 100.00 48 Various
13,054 9,583
Montana
Colstrip Units 1 & 2 614 50.00 307 Coal
Colstrip Unit 3 740 30.00 222 Coal
Corette 153 100.00 153 Coal
Hydroelectric 604 100.00 604 Hydro
2,111 1,286

Illinois
University Park 585 100.00 585 Natural Gas

Connecticut
Wallingford 244 100.00 244 Natural Gas

New York
Shoreham and Edgewood 159 100.00 (e) Natural Gas/Oil

Maine
Hydroelectric 12 100.00 12 Hydro

New Jersey
Other 11 100.00 5 (f) Landfill Gas/Solar

Vermont
Moretown 3 100.00 3 Landfill Gas

New Hampshire
Colebrook 1 100.00 1 Landfill Gas

Total System Capacity 16,180 11,719

					PPL's Ownership or
		Total MW Capacity (a)			Lease Interest in MW (a)
Primary Fuel/Plant		Winter Rating	Summer Rating	% Ownership	Winter Rating	Summer Rating	Location

Coal
	Ghent	1,897	1,918	100.00	1,897	1,918	Kentucky
	Mill Creek	1,491	1,472	100.00	1,491	1,472	Kentucky
	E.W. Brown	691	684	100.00	691	684	Kentucky
	Cane Run	563	563	100.00	563	563	Kentucky
	Trimble County - Unit 1 (b)	515	511	75.00	386	383	Kentucky
	Green River	173	163	100.00	173	163	Kentucky
	OVEC - Clifty Creek (c)	1,304	1,304	8.13	106	106	Indiana
	OVEC - Kyger Creek (c)	1,086	1,086	8.13	88	88	Ohio
	Tyrone	73	71	100.00	73	71	Kentucky
		7,793	7,772		5,468	5,448
Natural Gas/Oil
	Trimble County	1,080	960	100.00	1,080	960	Kentucky
	E.W. Brown (d)	1,039	947	100.00	1,039	947	Kentucky
	Paddy's Run	216	193	100.00	216	193	Kentucky
	Haefling	42	36	100.00	42	36	Kentucky
	Zorn	16	14	100.00	16	14	Kentucky
	Cane Run	14	14	100.00	14	14	Kentucky
		2,407	2,164		2,407	2,164
Hydro
	Ohio Falls	34	52	100.00	34	52	Kentucky
	Dix Dam	24	24	100.00	24	24	Kentucky
		58	76		58	76

Total		10,258	10,012		7,933	7,688

(a)

The capacity of generation units is based on a number of factors, including the operating experience and physical conditions of the units, and may be revised periodically to reflect changed circumstances.

(b)

~~PPL Energy Supply expects a reduction~~This unit is jointly owned. Each owner is entitled to its proportionate share of ~~up to 30 MW in net generation capability due~~the unit's total output and funds its proportionate share of fuel and other operating costs. See Note 14 to the ~~estimated increase in station service usage during the scrubber operation.~~Financial Statements for additional information.

(c)	This unit is owned by OVEC. LKE owns 8.13% of OVEC's equity, which is accounted for as a cost-method investment, and has a power purchase agreement that entitles LKE to its proportionate share of the unit's total output and LKE funds its proportionate share of fuel and other operating costs.

(d)	Includes a leasehold interest. See Note 11 to the Financial Statements for additional information.

With limited exceptions LKE took care, custody and control of TC2 on January 22, 2011, and has dispatched the unit to meet customer demand since that date. LG&E and KU and the contractor agreed to a further amendment of the construction agreement whereby the contractor will complete certain actions relating to identifying and completing any necessary modifications to allow operation of TC2 on all fuels in accordance with initial specifications prior to certain dates, and amending the provisions relating to liquidated damages. LKE cannot currently estimate the ultimate outcome of these matters. LKE owns a 75% interest in TC2. TC2 is coal-fired and has a capacity of 760 MW, of which LKE's share is 570 MW.

For a description of LKE's service territory, see "Item 1. Business - Background." At December 31, 2010, LKE's transmission system included in the aggregate, 177 substations (86 of which are shared with the distribution system) with a total capacity of approximately 20 million kVA and 4,987 circuit miles of lines. The distribution system included 575 substations (86 of which are shared with the transmission system) with a total capacity of approximately 12 million kVA, 18,043 circuit miles of overhead lines and 4,571 circuit miles of underground wires.

LKE's natural gas transmission system included 391 miles of transmission mains (consisting of natural gas transmission lines of 255 miles, natural gas storage lines of 119 miles and gas combustion turbine lines of 17 miles) and the natural gas distribution system included 4,235 miles of distribution mains. Five underground natural gas storage fields, with a current working natural gas capacity of approximately 15 Bcf, help provide economical and reliable natural gas service to ultimate consumers.

Substantially all of LG&E's and KU's respective real and tangible personal property located in Kentucky and used or to be used in connection with the generation, transmission and distribution of electricity and, in the case of LG&E, the storage and distribution of natural gas, is subject to the lien of either the LG&E 2010 Mortgage Indenture or the KU 2010 Mortgage Indenture. See Note 7 to the Financial Statements for additional information.

(PPL and PPL Energy Supply)

International Regulated Segment

For a description of WPD's service territory, see "Item 1. Business - Background." At December 31, 2010, WPD had electric distribution lines in public streets and highways pursuant to legislation and rights-of-way secured from property owners. In 2010, electricity distributed totaled 26,820 GWh based on operating revenues recorded by WPD. WPD's distribution system in the U.K. includes 649 substations with a total capacity of 25 million kVA, 28,838 circuit miles of overhead lines and 24,131 cable miles of underground conductors.

(PPL and PPL Electric)

Pennsylvania Regulated Segment

For a description of PPL Electric's service territory, see "Item 1. Business - Background." At December 31, 2010, PPL Electric had electric transmission and distribution lines in public streets and highways pursuant to franchises and rights-of-way secured from property owners. PPL Electric's system included 377 substations with a total capacity of 31 million kVA, 33,122 circuit miles of overhead lines and 7,368 cable miles of underground conductors. All of PPL Electric's facilities are located in Pennsylvania. Substantially all of PPL Electric's distribution properties and certain transmission properties are subject to the lien of the PPL Electric 2001 Mortgage Indenture.

See Note 8 to the Financial Statements for information on the construction of the Susquehanna-Roseland 500-kilovolt transmission line.

(PPL and PPL Energy Supply)

Supply Segment

PPL Energy Supply's electric generating capacity at December 31, 2010 was:

					PPL Energy Supply's
					Ownership or
		Total MW Capacity (a)			Lease Interest in MW (a)
Primary Fuel/Plant		Winter Rating	Summer Rating	% Ownership	Winter Rating	Summer Rating	Location

Natural Gas/Oil
	Martins Creek	1,690	1,671	100.00	1,690	1,671	Pennsylvania
	Ironwood (b)	763	660	100.00	763	660	Pennsylvania
	Lower Mt. Bethel	628	559	100.00	628	559	Pennsylvania
	University Park (c)	579	528	100.00	579	528	Illinois
	Combustion turbines	420	358	100.00	420	358	Pennsylvania
	Wallingford (c)	241	209	100.00	241	209	Connecticut
		4,321	3,985		4,321	3,985

Coal
	Montour	1,550	1,517	100.00	1,550	1,517	Pennsylvania
	Brunner Island	1,490	1,447	100.00	1,490	1,447	Pennsylvania
	Colstrip Units 1 & 2 (d)	614	614	50.00	307	307	Montana
	Conemaugh (e)	1,718	1,714	16.25	279	279	Pennsylvania
	Colstrip Unit 3 (d)	740	740	30.00	222	222	Montana
	Keystone (e)	1,715	1,719	12.34	212	212	Pennsylvania
	Corette	153	153	100.00	153	153	Montana
		7,980	7,904		4,213	4,137

Nuclear
	Susquehanna (e)	2,501	2,449	90.00	2,251	2,204	Pennsylvania

Hydro
	Various	596	604	100.00	596	604	Montana
	Safe Harbor Water Power Corp. (c)	423	423	33.33	141	141	Pennsylvania
	Various	174	174	100.00	174	174	Pennsylvania
		1,193	1,201		911	919

Qualifying Facilities
	Renewables (f)	25	23	100.00	25	23	Pennsylvania
	Renewables (g)	8	8	100.00	8	8	Various
		33	31		33	31

Total		16,028	15,570		11,729	11,276

(a)	The capacity of generation units is based on a number of factors, including the operating experience and physical conditions of the units, and may be revised periodically to reflect changed circumstances.

(b)	Facilities not owned by PPL Energy Supply, but there is a tolling agreement or power purchase agreement in place.

~~(d)~~(c)		~~Includes renewable energy facilities owned by a~~ In September 2010, certain PPL Energy Supply ~~subsidiary.~~
~~(e)~~		~~Facilities owned by PPL Energy Supply, but there are tolling~~subsidiaries signed definitive agreements ~~in place for 100% of the output. In May 2009, PPL Generation signed a definitive agreement~~ to sell their ownership interests in these facilities. The sale is expected to close in the ~~Long Island generation business. The tolling agreements related to these plants will be transferred to the new owner upon completion~~first quarter of ~~the sale.~~2011. See Note 9 to the Financial Statements for additional information on the anticipated sale.

(d)	Represents the leasehold interest held by PPL Montana. See Note 11 to the Financial Statements for additional information.

(e)	This unit is jointly owned. Each owner is entitled to their proportionate share of the unit's total output and funds their proportionate share of fuel and other operating costs. See Note 14 to the Financial Statements for additional information.

(f)	Includes renewable energy facilities owned by a PPL Energy Supply subsidiary.

(g)	Includes renewable energy facilities owned by a PPL Energy Supply subsidiary for which there are power purchase agreements in place.

Amounts guaranteed by PPL Montour and PPL Brunner Island in connection with an $800 million secured energy marketing and trading facility are secured by mortgages on the generating facilities owned by PPL Montour and PPL Brunner Island. See Note 7 to the Financial Statements for additional information.

PPL Energy Supply continuously reexamines development projects based on market conditions and other factors to determine whether to proceed with the projects, sell, cancel or expand them, execute tolling agreements or pursue other options. At December 31, ~~2009,~~2010, PPL ~~Generation~~Energy Supply subsidiaries planned to implement the following incremental capacity increases.

Project Primary Fuel
Total MW
Capacity (a)

PPL Energy Supply
Ownership or Lease
Interest in MW

Expected
In-Service Date (b)

Pennsylvania
Holtwood (c) Hydro 125 125 (100%) 2013
Susquehanna (d) Nuclear 59 53 (90%) 2010 - 2011
Martins Creek (e) Natural Gas/Oil 30 30 (100%) 2011
Chrin Landfill Landfill Gas 3 3 (100%) 2011
Montana
Great Falls (f) Hydro 28 28 (100%) 2012
Total 245 239

				PPL Energy Supply		Expected
			Total MW	Ownership or Lease		In-Service
	Primary Fuel/Plant	Location	Capacity (a)	Interest in MW		Date (b)

Hydro
	Holtwood (c)	Pennsylvania	136	136	(100%)	2011 - 2013
	Great Falls (d)	Montana	28	28	(100%)	2012

Nuclear
	Susquehanna (e)	Pennsylvania	56	50	(90%)	2011

Natural Gas/Oil
	Martins Creek (f)	Pennsylvania	30	30	(100%)	2011

Landfill Gas
	Chrin Landfill	Pennsylvania	3	3	(100%)	2011

Total			253	247

(a)

The capacity of ~~generation~~generating units is based on a number of factors, including the operating experience and physical condition of the units, and may be revised periodically to reflect changed circumstances.

(b)

The expected in-service dates are subject to receipt of required approvals, permits and other contingencies.

(c)

This project ~~includes~~primarily involves the installation of two additional large turbine-generators.

(d)	This project primarily involves the reconstruction of a powerhouse.

(e)

This project involves the extended upgrade of Units 1 and 2 and is being implemented in two uprates per ~~unit, the first increase being an average of 50 MW per~~ unit. The ~~first uprate~~uprates for Unit 1 ~~occurred in 2008. The second uprate is planned to occur in 2010.~~have been completed. The first uprate for Unit 2 ~~occurred~~was completed in ~~2009. The~~2009 and the second uprate is planned to occur in 2011.

~~(e)~~	(f)	This project involves the replacement of LPcertain rotors and ~~stationary blading~~blades for Unit 4.
~~(f)~~		~~This project involves reconstruction of a powerhouse.~~

~~Pennsylvania Delivery Segment~~

For a description of PPL Electric's service territory, see "Item 1. Business - Background." At December 31, 2009, PPL Electric had electric transmission and distribution lines in public streets and highways pursuant to franchises and rights-of-way secured from property owners. PPL Electric's system included 371 substations with a total capacity of 30 million kVA, 33,053 circuit miles of overhead lines and 7,310 cable miles of underground conductors. All of PPL Electric's facilities are located in Pennsylvania. Substantially all of PPL Electric's distribution properties and certain transmission properties are subject to the lien of PPL Electric's 2001 Senior Secured Bond Indenture.

~~See Note 8 to the Financial Statements for information on the construction of a new 500-kilovolt transmission line.~~

~~International Delivery Segment~~

For a description of WPD's service territory, see "Item 1. Business - Background." At December 31, 2009, WPD had electric distribution lines in public streets and highways pursuant to legislation and rights-of-way secured from property owners. In 2009, electricity distributed totaled 26,358 GWh based on operating revenues recorded by WPD. WPD's distribution system in the U.K. includes 651 substations with a total capacity of 25 million kVA, 28,877 miles of overhead lines and 23,896 cable miles of underground conductors.

ITEM 3. LEGAL PROCEEDINGS

See ~~Note 14~~Notes 3 and 15 to the Financial Statements for information regarding legal, regulatory and environmental proceedings and matters.

~~ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS~~

~~There were no matters submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the fourth quarter of 2009.~~

~~EXECUTIVE OFFICERS OF THE REGISTRANTS~~

Officers of PPL, PPL Energy Supply and PPL Electric are elected annually by their Boards of Directors (or Board of Managers for PPL Energy Supply) to serve at the pleasure of the respective Boards. There are no family relationships among any of the executive officers, nor is there any arrangement or understanding between any executive officer and any other person pursuant to which the officer was selected.

There have been no events under any bankruptcy act, no criminal proceedings and no judgments or injunctions material to the evaluation of the ability and integrity of any executive officer during the past five years.

~~Listed below are the executive officers at December 31, 2009.~~

~~PPL Corporation~~

~~Name~~	~~Age~~	~~Positions Held During the Past Five Years~~	~~Dates~~

~~James H. Miller~~	61	~~Chairman, President and Chief Executive Officer~~	~~October 2006 - present~~
		~~President~~	~~June 2006 - September 2006~~
		~~President and Chief Operating Officer~~	~~August 2005 - June 2006~~
		~~Executive Vice President and Chief Operating Officer~~	~~September 2004 - July 2005~~

~~William H. Spence~~	52	~~Executive Vice President and Chief Operating Officer~~	~~June 2006 - present~~
		~~President-PPL Generation~~	~~June 2008 - present~~
		~~Senior Vice President-Pepco Holdings, Inc.~~	~~August 2002 - June 2006~~
		~~Senior Vice President-Conectiv Holdings~~	~~September 2000 - June 2006~~

~~Paul A. Farr~~	42	~~Executive Vice President and Chief Financial Officer~~	~~April 2007 - present~~
		~~Senior Vice President-Financial~~	~~January 2006 - March 2007~~
		~~Senior Vice President-Financial and Controller~~	~~August 2005 - January 2006~~
		~~Vice President and Controller~~	~~August 2004 - July 2005~~

~~Robert J. Grey~~	59	~~Senior Vice President, General Counsel and Secretary~~	~~March 1996 - present~~

~~Robert D. Gabbard (a)~~	50	~~President-PPL EnergyPlus~~	~~June 2008 - present~~
		~~Senior Vice President-Trading-PPL EnergyPlus~~	~~June 2008 - June 2008~~
		~~Senior Vice President Merchant Trading Operations-Conectiv Energy~~	~~June 2005 - May 2008~~
		~~Vice President and General Manager Power Trading-Conectiv Energy~~	~~April 1998 - June 2005~~

~~Rick L. Klingensmith (a)~~	49	~~President-PPL Global~~	~~August 2004 - present~~

~~David G. DeCampli (a)~~	52	~~President-PPL Electric~~	~~April 2007 - present~~
		~~Senior Vice President-Transmission and Distribution Engineering and Operations-PPL Electric~~	~~December 2006 - April 2007~~
		~~Vice President-Asset Investment Strategy and Development-Exelon Energy Delivery-Exelon Corporation~~	~~April 2004 - December 2006~~

~~James E. Abel~~	58	~~Vice President-Finance and Treasurer~~	~~June 1999 - present~~

~~J. Matt Simmons, Jr.~~	44	~~Vice President and Controller~~	~~January 2006 - present~~
		~~Vice President-Finance and Controller-Duke Energy Americas~~	~~October 2003 - January 2006~~

~~(a)~~

~~Designated an executive officer of PPL by virtue of their respective positions at a PPL subsidiary.~~

~~PPL Electric Utilities Corporation~~

~~Name~~	~~Age~~	~~Positions Held During the Past Five Years~~	~~Dates~~

~~David G. DeCampli~~	52	~~President~~	~~April 2007 - present~~
		~~Senior Vice President-Transmission and Distribution Engineering and Operations~~	~~December 2006 - April 2007~~
		~~Vice President-Asset Investment Strategy and Development-Exelon Energy Delivery-Exelon Corporation~~	~~April 2004 - December 2006~~

~~Gregory N. Dudkin (a)~~	52	~~Senior Vice President-Operations~~	~~June 2009 - present~~
		~~Independent Consultant~~	~~February 2009 - June 2009~~
		~~Senior Vice President of Technical Operations and Fulfillment-Comcast Corporation~~	~~July 2006 - January 2009~~
		~~Regional Senior Vice President-Comcast Corporation~~	~~January 2005 - June 2006~~

~~James E. Abel~~	58	~~Treasurer~~	~~July 2000 - present~~

~~J. Matt Simmons, Jr.~~	44	~~Vice President and Controller~~	~~January 2006 - present~~
		~~Vice President-Finance and Controller-Duke Energy Americas~~	~~October 2003 - January 2006~~

~~(a)~~

~~On June 29, 2009, Gregory N. Dudkin was elected Senior Vice President-Operations of PPL Electric.~~

~~PPL Energy Supply, LLC~~

~~Item 4 is omitted as PPL Energy Supply meets the conditions set forth in General Instruction (I)(1)(a) and (b) of Form 10-K.~~

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY,

RELATED STOCKHOLDER MATTERS AND

ISSUER PURCHASES OF EQUITY SECURITIES

PPL Corporation

Additional information for this item is set forth in the sections entitled "Quarterly Financial, Common Stock Price and Dividend Data," "Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" and "Shareowner and Investor Information" of this report. At January ~~29, 2010,~~31, 2011, there were ~~72,013~~70,223 common stock shareowners of record.

~~Issuer Purchases of Equity Securities during the Fourth Quarter of 2009:~~

(a) (b) (c) (d)
Period
Total Number of
Shares (or Units)
Purchased (1)
Average Price Paid
per Share
(or Unit)
Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs (2)
Maximum Number (or
Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (2)
October 1 to October 31, 2009 $57,495
November 1 to November 30, 2009 14,124 $29.44 $57,495
December 1 to December 31, 2009 $57,495
Total 14,124 $29.44 $57,495

Issuer Purchase of Equity Securities during the Fourth Quarter of 2010:

(a)

(b)

(c)

(d)

Maximum Number (or

Approximate Dollar

Total Number of

Value) of Shares

Shares (or Units)

(or Units) that May

Total Number of

Average Price

Purchased as Part of

Yet Be Purchased

Shares (or Units)

Paid per Share

Publicly Announced

Under the Plans

Period

Purchased

(or Unit)

Plans of Programs

or Programs (1)

October 1 to October 31, 2010

$57,495

November 1 to November 30, 2010

$57,495

December 1 to December 31, 2010

$57,495

Total

$57,495

(1)		Represents shares of common stock withheld by PPL at the request of its executive officers to pay taxes upon the vesting of the officers' restricted stock awards, as permitted under the terms of PPL's ICP and ICPKE.
~~(2)~~		In June 2007, PPL announced a program to repurchase from time to time up to $750 million of its common stock in open market purchases, pre-arranged trading plans or privately negotiated transactions.

PPL Energy Supply, LLC

There is no established public trading market for PPL Energy Supply's membership interests. PPL Energy Funding, a direct wholly owned subsidiary of PPL, owns all of PPL Energy Supply's outstanding membership interests. Distributions on the membership interests will be paid as determined by PPL Energy Supply's Board of Managers. PPL Energy Supply made cash distributions to PPL Energy Funding of $4,692 million in 2010 and $943 million in ~~2009 and $750 million~~2009. See Note 24 regarding the distribution of PPL Energy Supply's membership interests in ~~2008.~~PPL Global to PPL Energy Funding on January 31, 2011.

PPL Electric Utilities Corporation

There is no established public trading market for PPL Electric's common stock, as PPL owns 100% of the outstanding common shares. Dividends paid to PPL on those common shares are determined by PPL Electric's Board of Directors. PPL Electric paid common stock dividends to PPL of $71 million in 2010 and $274 million in ~~2009 and $98 million in 2008.~~2009.

ITEM 6. SELECTED FINANCIAL AND OPERATING DATA

PPL Energy Supply, LLC and PPL Electric Utilities Corporation

Item 6 is omitted as PPL Energy Supply ~~meets~~and PPL Electric meet the conditions set forth in General Instructions (I)(1)(a) and (b) of Form 10-K.

ITEM 6. SELECTED FINANCIAL AND OPERATING DATA

PPL Corporation (a)(b) 2009 2008 2007 2006 2005
Income Items - millions

Operating revenues $ 7,556 $ 8,007 $ 6,462 $ 6,096 $ 5,498
Operating income 961 1,793 1,659 1,485 1,242
Income from continuing operations after income taxes attributable to PPL 447 907 1,001 825 666
Net income attributable to PPL 407 930 1,288 865 669
Balance Sheet Items - millions (c)

Total assets 22,165 21,405 19,972 19,747 17,926
Short-term debt 639 679 92 42 214
Long-term debt (d) 7,143 7,838 7,568 7,746 7,081
Long-term debt with affiliate trusts 89 89
Noncontrolling interests 319 319 320 361 107
Common equity 5,496 5,077 5,556 5,122 4,418
Total capitalization (d) 13,597 13,913 13,536 13,360 11,909
Capital lease obligations 10 11
Financial Ratios
Return on average common equity - % 7.48 16.88 24.47 17.81 15.44
Ratio of earnings to fixed charges - total enterprise basis (e) 2.0 3.2 2.9 2.8 2.3
Common Stock Data
Number of shares outstanding - Basic - thousands
Year-end 377,183 374,581 373,271 385,039 380,145
Average 376,082 373,626 380,563 380,754 379,132
Income from continuing operations after income taxes available to PPL common shareowners - Basic EPS $ 1.18 $ 2.42 $ 2.62 $ 2.16 $ 1.75
Income from continuing operations after income taxes available to PPL common shareowners - Diluted EPS $ 1.18 $ 2.41 $ 2.60 $ 2.13 $ 1.74
Net income available to PPL common shareowners - Basic EPS $ 1.08 $ 2.48 $ 3.37 $ 2.26 $ 1.76
Net income available to PPL common shareowners - Diluted EPS $ 1.08 $ 2.47 $ 3.34 $ 2.24 $ 1.74
Dividends declared per share of common stock $ 1.38 $ 1.34 $ 1.22 $ 1.10 $ 0.96
Book value per share (c) $ 14.57 $ 13.55 $ 14.88 $ 13.30 $ 11.62
Market price per share (c) $ 32.31 $ 30.69 $ 52.09 $ 35.84 $ 29.40
Dividend payout ratio - % (f) 128 54 37 49 55
Dividend yield - % (g) 4.27 4.37 2.34 3.07 3.27
Price earnings ratio (f) (g) 29.92 12.43 15.60 16.00 16.90
Sales Data - millions of kWh

Domestic - Electric energy supplied - retail 38,912 40,374 40,074 38,810 39,413
Domestic - Electric energy supplied - wholesale (h) 38,988 42,712 33,515 30,427 31,530
Domestic - Electric energy delivered 36,717 38,058 37,950 36,683 37,358
International - Electric energy delivered (i) 26,358 27,724 31,652 33,352 33,146

ITEM 6. SELECTED FINANCIAL AND OPERATING DATA

PPL Corporation (a) (b)					2010 (c)		2009		2008		2007		2006

Income Items - millions
	Operating revenues			$	8,521	$	7,449	$	7,857	$	6,327	$	5,998
	Operating income				1,866		896		1,703		1,606		1,448
	Income from continuing operations after income taxes
		attributable to PPL			955		414		857		973		807
	Net income attributable to PPL				938		407		930		1,288		865
Balance Sheet Items - millions (d)
	Total assets				32,837		22,165		21,405		19,972		19,747
	Short-term debt				694		639		679		92		42
	Long-term debt (e)				12,663		7,143		7,838		7,568		7,746
	Long-term debt with affiliate trusts												89
	Noncontrolling interests				268		319		319		320		361
	Common equity				8,210		5,496		5,077		5,556		5,122
	Total capitalization (e)				21,835		13,597		13,913		13,536		13,360
	Capital lease obligations												10
Financial Ratios
	Return on average common equity - %				13.26		7.48		16.88		24.47		17.81
	Ratio of earnings to fixed charges - total enterprise
		basis (f)			2.7		1.9		3.1		2.8		2.7
Common Stock Data
	Number of shares outstanding - thousands
			Year-end		483,391		377,183		374,581		373,271		385,039
			Average		431,345		376,082		373,626		380,563		380,754
	Income from continuing operations after income taxes
		available to PPL common shareowners - Basic EPS		$	2.21	$	1.10	$	2.28	$	2.53	$	2.09
	Income from continuing operations after income taxes
		available to PPL common shareowners - Diluted EPS		$	2.20	$	1.10	$	2.28	$	2.51	$	2.06
	Net income available to PPL common shareowners -
		Basic EPS		$	2.17	$	1.08	$	2.48	$	3.37	$	2.26
	Net income available to PPL common shareowners -
		Diluted EPS		$	2.17	$	1.08	$	2.47	$	3.34	$	2.24
	Dividends declared per share of common stock			$	1.40	$	1.38	$	1.34	$	1.22	$	1.10
	Book value per share (d)			$	16.98	$	14.57	$	13.55	$	14.88	$	13.30
	Market price per share (d)			$	26.32	$	32.31	$	30.69	$	52.09	$	35.84
	Dividend payout ratio - % (g)				65		128		54		37		49
	Dividend yield - % (h)				5.32		4.27		4.37		2.34		3.07
	Price earnings ratio (g) (h)				12.13		29.92		12.43		15.60		16.00
Sales Data - millions of kWh
	Domestic - Electric energy supplied - retail (i)				14,595		38,912		40,374		40,074		38,810
	Domestic - Electric energy supplied - wholesale (i) (j)				75,489		38,988		42,712		33,515		30,427
	Domestic - Electric energy delivered (i)				42,341		36,717		38,058		37,950		36,683
	International - Electric energy delivered (k)				26,820		26,358		27,724		31,652		33,352

(a)		The earnings each year were affected by several items that management considers special. See "Results of Operations - Segment Results" in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for a description of special items in 2010, 2009 ~~2008~~ and ~~2007.~~2008.
(b)		See "Item 1A. Risk Factors" and Note 1415 to the Financial Statements for a discussion of uncertainties that could affect PPL's future financial condition.
(c)		The year 2010 includes LKE's earnings and sales data for the two month period from acquisition through December 31, 2010 and all balance sheet accounts at December 31, 2010.
(d)		As of each respective year-end.
~~(d)~~(e)		The year 2007 excludes amounts related to ~~PPL's~~the natural gas distribution and propane businesses that had been classified as held for sale at December 31, 2007.
~~(e)~~(f)		Computed using earnings and fixed charges of PPL and its subsidiaries. Fixed charges consist of interest on short- and long-term debt, amortization of debt discount, expense and premium - net, other interest charges, the estimated interest component of operating rentals and preferred securities distributions of subsidiaries. See Exhibit 12(a) for additional information.
~~(f)~~(g)		Based on diluted EPS.
~~(g)~~(h)		Based on year-end market prices.
~~(h)~~(i)		The domestic trends for 2010 reflect the expiration of the PLR contract between PPL Energy Plus and PPL Electric as of December 31, 2009. See Note 16 for additional information.
(j)		All years include kWh associated with certain non-core generation facilities that have been classified as Discontinued Operations, the Long Island generation business that was sold in 2010 and ~~the majority of~~ PPL Maine's hydroelectric generation business that ~~have been classified as Discontinued Operations.~~was sold in two separate transactions in 2009 and 2010.
~~(i)~~(k)		Years 2007 and earlier include the deliveries associated with the Latin American businesses, until the ~~dates~~date of their ~~sales~~sale in 2007.

ITEM 6. SELECTED FINANCIAL AND OPERATING DATA

PPL Electric Utilities Corporation (a)(b) 2009 2008 2007 2006 2005
Income Items - millions

Operating revenues $ 3,292 $ 3,401 $ 3,410 $ 3,259 $ 3,163
Operating income 329 375 350 418 377
Net income 142 176 163 194 147
Income available to PPL 124 158 145 180 145
Balance Sheet Items - millions (c)

Total assets 5,092 5,416 4,986 5,315 5,537
Short-term debt 95 41 42 42
Long-term debt 1,472 1,769 1,674 1,978 2,411
Shareowners' equity 1,896 1,646 1,586 1,559 1,375
Total capital provided by investors 3,368 3,510 3,301 3,579 3,828
Financial Ratios
Return on average common equity - % 9.08 12.00 11.35 14.33 11.20
Ratio of earnings to fixed charges (d) 2.8 3.4 2.7 2.9 2.1
Ratio of earnings to combined fixed charges and preferred stock dividends (e) 2.3 2.7 2.3 2.5 2.1
Sales Data
Customers (thousands) (c) 1,398 1,394 1,387 1,377 1,365
Electric energy delivered - millions of kWh
Residential 14,256 14,419 14,411 13,714 14,218
Commercial 13,837 13,942 13,801 13,174 13,196
Industrial 8,435 9,508 9,547 9,638 9,777
Other 189 189 191 157 167

Total electric energy delivered 36,717 38,058 37,950 36,683 37,358

Electric energy supplied as a PLR - millions of kWh 36,695 38,043 37,919 36,577 36,917

~~(a)~~		Earnings for the years 2009, 2007, 2006 and 2005 were affected by several items that management considers special. See "Results of Operations - Earnings" in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for a description of special items in 2009 and 2007.
~~(b)~~		~~See "Item 1A. Risk Factors" and Note 14 to the Financial Statements for a discussion of uncertainties that could affect PPL Electric's future financial condition.~~
~~(c)~~		~~As of each respective year-end.~~
~~(d)~~		Computed using earnings and fixed charges of PPL Electric and its subsidiaries. Fixed charges consist of interest on short- and long-term debt, other interest charges, amortization of debt discount, expense and premium - net, and the estimated interest component of operating rentals. See Exhibit 12(c) for additional information.
~~(e)~~		Computed using earnings, fixed charges and preferred stock dividend requirements of PPL Electric and its subsidiaries. Fixed charges consist of interest on short- and long-term debt, other interest charges, amortization of debt discount, expense and premium - net, and the estimated interest component of operating rentals. See Exhibit 12(c) for additional information.

PPL CORPORATION AND SUBSIDIARIES

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

The information provided in this Item 7 should be read in conjunction with PPL's Consolidated Financial Statements and the accompanying Notes. Terms and abbreviations are explained in the glossary. Dollars are in millions unless otherwise noted.

PPL, headquartered in Allentown, PA, is an energy and utility holding company ~~with headquarters~~that was incorporated in ~~Allentown, Pennsylvania. Refer to "Item 1. Business - Background" for descriptions of its reportable segments, which are Supply, International Delivery and Pennsylvania Delivery.~~1994. Through ~~its~~ subsidiaries, PPL ~~is primarily engaged~~generates electricity from power plants in the ~~generation~~northeastern, northwestern and ~~marketing of electricity~~southeastern U.S., markets wholesale or retail energy primarily in ~~two key markets - the~~ northeastern and ~~western~~northwestern portions of the U.S. ~~- and in the delivery of~~, delivers electricity to customers in Pennsylvania, Kentucky, Virginia, Tennessee and the U.K. and delivers natural gas in Kentucky. On November 1, 2010, PPL acquired all of the limited liability company interests of E.ON U.S. LLC from a wholly owned subsidiary of E.ON AG. Upon completion of the acquisition, E.ON U.S. LLC was renamed LG&E and KU Energy LLC (LKE). LKE is engaged in regulated utility operations through its subsidiaries, KU and LG&E. ;PPL acquired LKE for approximately $7.6 billion, including debt assumed through consolidation. See Note 10 to the Financial Statements for additional information on the acquisition. The acquisition of LKE substantially reapportions the mix of PPL's regulated and competitive businesses by increasing the regulated portion of its business, strengthens PPL's credit profile and enhances rate-regulated growth opportunities as the regulated businesses make investments to improve infrastructure and customer reliability. The increase in regulated assets provides earnings stability through regulated returns and the ability to recover costs of capital investments, in contrast to the competitive supply business where earnings and cash flows are subject to market conditions. In 2011, PPL projects that 50% of its net income will be provided by its regulated businesses and the remainder will be provided by its competitive supply businesses. As of December 31, 201 0, PPL has:

·	More than $10 billion in projected annual revenues (up from $8.5 billion recorded by PPL in 2010 including two months of LKE revenue).

·	5.3 million utility customers (including 1.3 million served by the Kentucky-based companies).

·	Approximately 19,000 MW of generation (including 7,700 MW of regulated capacity in the Kentucky-based companies).

·	Approximately 14,000 full-time employees (including about 3,100 in Kentucky).

As of December 31, 2010, PPL's principal subsidiaries are shown below (* denotes a SEC registrant):

PPL's overall strategy is ~~to achieve disciplined growth in energy supply margins while limiting volatility in both cash flows and earnings and~~ to achieve stable, long-term growth in its regulated electricity delivery businesses through efficient operations and strong customer and regulatory ~~relations.~~relations, and disciplined growth in energy supply margins while limiting volatility in both cash flows and earnings. More specifically, PPL's strategy for its regulated businesses is to own and operate these businesses at the most efficient cost while maintaining high quality customer service and reliability, as well as grow this part of the business. PPL's strategy for its competitive electricity generation and marketing ~~business~~businesses is to match energy supply with load, or customer demand, under contracts of varying lengths with creditworthy counterparties to capture profits while effectively managing exposure to energy and fuel price volatility , counterparty credit risk and operational risk.

To manage financing costs and access to credit markets, a key objective for PPL's ~~strategy for its electricity delivery businesses~~business is to ~~own and operate these businesses at the most efficient cost while~~maintain a strong credit profile. PPL continually focuses on maintaining ~~high quality customer service and reliability.~~

PPL faces several risks in its supply business, principally electricity and capacity wholesale price risk, fuel supply and price risk, electricity and fuel basis risk, power plant performance, evolving regulatory frameworks and counterparty credit risk. PPL attempts to manage these risks through various means. For instance, PPL operates a portfolio of generation assets that is diversified as to geography, fuel source, costan appropriate capital structure and operating characteristics. PPL expects to expand its generation capacity over the next several years through power uprates at certain of its existing power plants, and is continually evaluating the potential construction of new plants and the potential acquisition of existing plants or businesses. PPL is and will continue to remain focused on the operating efficiency and availability of its existing and any newly constructed or acquired power plants.

liquidity position. In addition, PPL has executed and continues to pursue contracts of varying lengths for energy sales and fuel supply, while using other means to mitigate risks associated with adverse changes in the difference, or margin, between the cost to produce electricity and the price at which PPL sells it. PPL's future profitability will be affected by prevailing market conditions and whether PPL decides to, or is able to, continue to enter into long-term or intermediate-term power sales and fuel purchase agreements or renew its existing agreements. Currently, PPL's commitments for energy sales are satisfied through its own generation assets and supply purchased from third parties. PPL markets and trades around its physical portfolio of generating assets through integrated generation, marketing and trading functions.

PPL has adopted financial and operational risk management programs that, among other things, are designed to monitor and manage its exposure to earnings and cash flow volatility related to changes in energy and fuel prices, interest rates, foreign currency exchange rates, counterparty credit quality and the operating performance of its generating units.

The principal challenge that PPL faces in its electricity delivery businesses is to maintain high quality customer service and reliability in a cost-effective manner. PPL's electricity delivery businesses are rate-regulated. Accordingly, these businesses are subject to regulatory risk with respect to costs that may not be recovered and investment returns that may not be collected through customer rates. See "Customer Choice - End of Transition Period" below for information on additional risks PPL's domestic electricity business may face.

PPL faces additional financial risks in conducting U.K. operations, such as fluctuations in foreign currency exchange rates and the effect these rates have on the conversion of U.K. earnings and cash flows to U.S. dollars. PPL attempts to manage these financial risks through its risk management programs.

In order to manage financing costs and access to credit markets, a key objective for PPL's business as a whole is to maintain a strong credit profile. PPL continually focuses on maintaining an appropriate capital structure and liquidity position.

See "Item 1A. Risk Factors" for more information concerning these and other material risks PPL faces in its businesses.

~~In May 2009,~~Following the November 1, 2010 acquisition of LKE, PPL ~~Generation signed~~is organized into four segments: Kentucky Regulated, International Regulated (formerly International Delivery), Pennsylvania Regulated (formerly Pennsylvania Delivery) and Supply. Other than PPL adding a ~~definitive agreement~~Kentucky Regulated segment, there were no other changes to ~~sell its Long Island generation business~~reportable segments except the renaming of segments and allocating interest expense related tolling agreements, and expects the sale to close on or about February 26, 2010. In November 2009, PPL Maine completed the sale of the majority of its hydroelectric generation business. These businesses are included in the Supply segment. In 2008, PPL sold its natural gas distribution and propane businesses, which were included in the Pennsylvania Delivery segment. In 2007, PPL sold its regulated electricity delivery businesses in Latin America, which were included in the International Delivery segment. See Note 9 to the ~~Financial Statements~~Equity Units to the Kentucky Regulated segment. Refer to "Item 1. Business - Background" for additional ~~information.~~information on PPL's reportable segments.

~~The purpose of "Management's~~"Management's Discussion and Analysis of Financial Condition and Results of Operations" ~~is to provide~~provides information concerning PPL's performance in implementing the strategies and managing the risks and challenges mentioned above. Specifically:

·	"Results of Operations" provides an overview of PPL's operating results in 2010, 2009 ~~2008~~ and ~~2007,~~2008, including a review of earnings, with details of results by reportable segment. It also provides a brief outlook for ~~2010.~~2011.

"Financial Condition - Liquidity and Capital Resources" provides an analysis of PPL's liquidity position and credit profile, including its sources of cash (including bank credit facilities and sources of operating cash flow) and uses of cash (including contractual obligations and capital expenditure requirements) and the key risks and uncertainties that impact PPL's past and future liquidity position and financial condition. This subsection also includes ~~a listing and discussion of~~rating agency actions on PPL's ~~current~~ credit ratings.

·	"Financial Condition - Risk Management - Energy Marketing & Trading and Other" provides an explanation of PPL's risk management programs relating to market risk and credit risk.

·	"Application of Critical Accounting Policies" provides an overview of the accounting policies that are particularly important to the results of operations and financial condition of PPL and that require its management to make significant estimates, assumptions and other judgments.

~~The information provided in this Item 7 should be read in conjunction with PPL's Consolidated Financial Statements and the accompanying Notes.~~

~~Terms and abbreviations are explained in the glossary. Dollars are in millions unless otherwise noted.~~

~~Customer Choice – End~~See "Item 1. Business - Background - Segment Information - Pennsylvania Regulated Segment" for a discussion of ~~Transition Period~~

In 1996, the Customer Choice Act was enacted to restructure Pennsylvania's electric utility industry in order to create retail access to a competitive market for generation of electricity. The Customer Choice Act required each Pennsylvania electric utility, including PPL Electric, to file a restructuring plan to "unbundle" its rates into separate generation, transmission and distribution components and to permit its customers to directly access alternate suppliers of electricity. Under the Customer Choice Act,Electric's PLR obligations, PPL Electric was required to act as a PLR. As part of a settlement approved by the PUC and in connection with the restructuring plan PPL Electric filed under the Customer Choice Act, PPL Electric agreedElectric's agreement to provide electricity as a PLR at ~~predetermined~~ "capped" rates through ~~2009. In addition,~~ the ~~PUC authorized recovery~~end of approximately $2.97 billion of competitive transition or "stranded" costs (generation-related costs that might not otherwise be recovered in a competitive market) from customers during an 11-year transition period. For PPL Electric, this transition period ended on December 31,2009, and plans for default electricity supply procurement after 2009.

AsWhen comparing 2010 with 2009, certain line items on PPL's financial statements were impacted by the Customer Choice Act, Act 129 and other related issues. Overall, the expiration of generation rate caps and a ~~result~~long-term full requirements contract between PPL EnergyPlus and PPL Electric at the end of 2009 had a significant positive impact on PPL's results of operations, financial condition and cash flows during 2010.

The primary impact of the ~~PUC settlement order~~expiration of these generation rate caps and this contract is reflected in PPL's unregulated gross energy margins. See "Statement of Income Analysis" for an explanation of this non-GAAP financial measure. In 2010, PPL sold the ~~PLR obligation, PPL Electric, through 2009, generally bore the risk that it would not be able~~majority of its generation supply to ~~obtain adequate energy supply~~unaffiliated parties under various wholesale and retail contracts at prevailing market rates at the "capped" rates it could charge to its customers who did not select an alternate electricity supplier. To mitigate this risk, PPL Electric entered into full requirements energy supply agreements with PPL EnergyPlus. Under these agreements, throughtime the contracts were executed. In 2009, ~~PPL EnergyPlus supplied PPL Electric's entire PLR load at predetermined prices equal to~~ the ~~capped~~majority of generation ~~rates that PPL Electric~~produced by PPL's generation plants was ~~authorized to charge its customers.~~

~~Related~~sold to PPL Electric's ~~transition period, the following has occurred or will occur:~~customers as PLR supply under predetermined capped rates.

·	In August 1999, CTC of $2.4 billion were converted to intangible transition costs when they were securitized by the issuance of transition bonds. The intangible transition costs were amortized over the life of the transition bonds, through December 2008, in accordance with an amortization schedule filed with the PUC. These transition bonds matured in tranches, with the final tranche being repaid in December 2008.

·	During the transition period, PPL Electric was authorized by the PUC to bill its customers $130 million for a portion of the costs associated with decommissioning of the Susquehanna nuclear plant. Under the power supply agreements between PPL Electric and PPL EnergyPlus, these revenues were passed on to PPL EnergyPlus. Similarly, these revenues were passed on to PPL Susquehanna under a power supply agreement between PPL EnergyPlus and PPL Susquehanna and invested in the NDT funds. Effective January 1, 2010, these ratepayer billings have ceased.

·	In December 2009, PPL Electric filed with the PUC a final reconciliation of CTC and ITC recoveries during the transition period. At December 31, 2009, PPL Electric has recorded a net regulatory liability of $33 million related to these recoveries. The net overcollection will be reflected in customer rates in 2010.

·	~~At December 31, 2009, PPL Electric's long-term power purchase agreements with PPL EnergyPlus (effective since 2000 and 2002) expired.~~

·	To mitigate 2010 rate increases, PPL Electric implemented two programs in 2008 and 2009 that allowed customers to make prepayments toward their 2010 and 2011 electric bills or to defer any 2010 electric bill increases exceeding 25%. Any deferred amounts are to be repaid by 2012. At December 31, 2009, PPL Electric has recorded a liability of $36 million for these programs.

·	Effective January 1, 2010, PPL Electric's rates for generation supply as a PLR are no longer capped and the cost of electric generation is based on a competitive solicitation process. During 2007 through 2009, PPL Electric procured through PUC-approved solicitation procedures, the electric generation supply it will need in 2010 for customers who do not choose an alternative supplier. The prices in these contracts will result in an average residential customer paying approximately 30% higher rates, as compared to the previously-capped rates on delivered electricity. PPL Electric is currently procuring the PLR supply it will need for the January 2011 through May 2013 period. The results of all procurements continue to require the approval of the PUC.

·	For those customers who choose to procure generation supply from other providers, PPL Electric will provide services for these alternative generation suppliers to bill usage charges, among other duties. As required by a PUC-approved plan, PPL Electric will be purchasing certain receivables from alternative suppliers at a discount.

In October 2008, Act 129 became effective. This law created requirements for energy efficiency and conservation programs and for the use of smart metering technology, imposed new PLR electricity supply procurement rules, provided remedies for market misconduct, and made changes to the existing Alternative Energy Portfolio Standard.

~~Prior to~~Regarding PPL's Pennsylvania regulated electric delivery operations, the expiration of ~~the~~ generation rate caps, ~~customers' interest~~the resulting competitive solicitations for power supply, the migration of customers to alternative suppliers, the Customer Choice Act and Act 129 had minimal impact on Pennsylvania gross delivery margins, as approved recovery mechanisms allow for cost recovery of associated expenses, including the cost of energy provided as a PLR. However, PPL Electric's 2010 Pennsylvania gross delivery margins were negatively impacted by the expiration of CTC recovery in ~~purchasing generation supply from other providers was limited because in recent years, the long-term supply agreement between~~December 2009. PPL Electric and PPL EnergyPlus provided a below-market cost of generation supply for these customers. As a result, a limited amount of "shopping" occurred. In 2010, several alternative suppliers have offeredcontinues to ~~provide generation supply in PPL Electric's service territory. When its customers purchase supply from these alternative suppliers or from PPL Electric as PLR,~~remain the ~~purchase of such supply has no significant impact on the operating results of PPL Electric. The cost to purchase PLR supply is passed directly by PPL Electric to its customers without markup.~~ For those customers who receive their supply from an alternative supplier, PPL Electric may act as billing agent or the alternative supplier may bill for their supply directly, and in either case, PPL Electric does not record revenues or expenses related to this supply. ~~PPL Electric remains the distribution~~delivery provider for all ~~the~~ customers in its service territory and ~~charges~~charge a regulated rate for the service of delivering ~~that~~ electricity.

Lower demand for electric power due to increased prices, the economic downturn or the conservation provisions of Act 129 that require PPL Electric to reduce its customers' electricity usage in future periods, could impact future revenues. The reduction in volume could be offset by changes in customer rates for this service, subject to PUC approval, depending on PPL Electric's cost structure. Act 129 includes one-time penalties of up to $20 million for not attaining the required reductions by 2011 and 2013. At this time, PPL Electric expects to meet these targeted reductions. The costs of complying with the other provisions of Act 129 would, subject to PUC approval, be recoverable through an automatic adjustment clause. None of the above changes are expected to have a significant impact on PPL Electric's 2010 financial condition, operating results or cash flows.

With the expiration of the long-term power purchase agreements between PPL Electric and PPL EnergyPlus, PPL EnergyPlus now has multiple options as to how, and to whom, it sells the electricity produced by PPL Energy Supply's generation plants. These sales are based on prevailing market rates, as compared to pre-determined capped rates under the expired supply agreements with PPL Electric. PPL EnergyPlus has entered into various wholesale and retail contracts to sell this power and at this time has hedged almost 100% of expected 2010 baseload generation output. The expiration of the long-term supply agreements with PPL Electric also provides PPL Energy Supply the ability to adjust its exposure to fluctuations in demand that existed with supplying PPL Electric's PLR load. Entry of new generation suppliers into the Pennsylvania marketplace provides PPL Energy Supply the ability to provide generation supply to additional wholesale customers. Overall, these changes and the resulting level of hedged electricity prices are expected to have a positive impact on the financial condition, operating results and cash flows of PPL Energy Supply.

PPL Electric's customers are no longer funding contributions to Susquehanna's NDT funds. PPL will continue to manage the NDT funds until the PPL Susquehanna plant is decommissioned. If the balance of the NDT funds is not adequate to cover decommissioning costs, PPL Susquehanna will be responsible to fund 90% of the shortfall. The Susquehanna nuclear units currently are licensed to operate until 2042 and 2044.

The final expiration of generation rate caps in Pennsylvania, applicable to three other large regulated utilities, is scheduled to occur at the end of 2010. Discussions concerning generation rate caps and rate increase mitigation are continuing. The final result of those discussions and the future impact on the financial condition and future cash flows of PPL cannot be predicted at this time.

~~See Note 14 to the Financial Statements for additional information on Pennsylvania legislative and other regulatory activities.~~

~~Market Events~~

In 2008, conditions in the financial markets became disruptive to the processes of managing credit risk, responding to liquidity needs, measuring derivatives and other financial instruments at fair value, and managing market risk. Bank credit capacity was reduced and the cost of renewing or establishing new credit facilities increased, thereby introducing uncertainties as to PPL's ability to enter into long-term energy commitments or reliably estimate the longer-term cost and availability of credit. In general, bank credit capacity has increased from the significantly constrained levels of 2008 and early 2009. In addition, the cost of renewing or establishing new credit facilities has improved when compared with the 2008 and early 2009 periods.

~~Commodity Price Risk~~

The contraction in wholesale energy market liquidity and accompanying decline in wholesale energy prices due to conditions in the financial and commodity markets significantly impacted PPL's earnings during the second half of 2008 and the first half of 2009. See "Statement of Income Analysis - ~~Domestic Gross Energy~~ Margins - ~~Domestic Gross Energy Margins By Region"~~Pennsylvania Gros s Delivery Margins" for ~~further discussion.~~additional information.

~~Credit Risk~~

~~Credit risk is the risk that PPL would incur a loss as a result~~See "Regulatory Issues - Enactment of ~~nonperformance by counterparties of their contractual obligations. PPL maintains credit policies and procedures to limit counterparty credit risk. Conditions~~Financial Reform Legislation" in the financial and commodity markets have generally increased PPL's exposure to credit risk. See Notes 17 and 18 to the Financial Statements, and "Risk Management - Energy Marketing & Trading and Other - Credit Risk"Note 15 for ~~more~~ information on ~~credit risk.~~

~~Liquidity Risk~~

~~PPL expects to continue to have access to adequate sources of liquidity through operating cash flows, cash and cash equivalents, credit facilities and, from time to time,~~ the issuance of capital market securities. PPL's ability to access capital markets may be impacted by conditions in the overall financial and capital markets, as well as conditions specific to the utility sector. See "Financial Condition - Liquidity and Capital Resources" for an expanded discussion of PPL's liquidity position and a discussion of its forecasted sources of cash.

~~Valuations in Inactive Markets~~

Conditions in the financial markets have generally made it difficult to determine the fair value of certain assets and liabilities in inactive markets. Management has reviewed the activity in the energy and financial markets in which PPL transacts, concluding that all of these markets were active at December 31, 2009, with the exception of the market for auction rate securities. See Notes 17 and 21 to the Financial Statements and "Financial Condition - Liquidity and Capital Resources - Auction Rate Securities" for a discussion of these investments.

~~Securities Price Risk~~

Declines in the market price of debt and equity securities result in unrealized losses that reduce the asset values of PPL's investments in its defined benefit plans and NDT funds. Both the defined benefit plans and the NDT funds earned positive returns in the second half of 2009, thereby recovering a portion of the negative returns incurred in 2008 and the first quarter of 2009. PPL actively monitors the performance of the investments held in its defined benefit plans and NDT funds and periodically reviews the funds' investment allocations. See "Financial Condition - Risk Management - Energy Marketing & Trading and Other - NDT Funds - Securities Price Risk" for additional information on securities price risk.

Determination of the funded status of defined benefit plans, contribution requirements and net periodic defined benefit costs for future years are subject to changes in various assumptions, in addition to the actual performance of the assets in the plans. See "Application of Critical Accounting Policies - Defined Benefits" for a discussion of the assumptions and sensitivities regarding those assumptions.

~~The Economic Stimulus Package~~

The Economic Stimulus Package was intended to stimulate the U.S. economy through federal tax relief, expansion of unemployment benefits and other social stimulus provisions, domestic spending for education, health care and infrastructure, including the energy sector. A portion of the benefits included in the Economic Stimulus Package are offered in the form of loan fee reductions, expanded loan guarantees and secondary market incentives, including delayed recognition for tax purposes of income related to the cancellation of certain types of debt. See "Financial Condition - Liquidity and Capital Resources" for a discussion of the applicability to the purchase of notes by PPL.

Funds from the Economic Stimulus Package have been allocated to various federal agencies, such as the DOE, and provided to state agencies through block grants. The DOE has made awards of the funds for smart grid, efficiency-related and renewable energy programs. The Commonwealth of Pennsylvania has also made awards for funding certain energy projects, including solar projects. As discussed in Note 8 to the Financial Statements, PPL has reconsidered and decided to pursue its Holtwood expansion project in view of the tax incentives and potential loan guarantees for renewable energy projects contained in the Economic Stimulus Package. ~~PPL Energy Supply has applied for DOE loan guarantees for the Holtwood expansion project and, through its subsidiary PPL Montana, for the Rainbow redevelopment project.~~ In addition, in July 2009, PPL Electric proposed to the DOE that the agency provide funding for one-half of a $38 million smart grid project. The project would use smart grid technology to strengthen reliability, save energy and improve electric service for 60,000 Harrisburg, Pennsylvania area customers. It would also provide benefits beyond the Harrisburg region, helping to speed power restoration across PPL Electric's 29-county service territory. In October 2009, PPL Electric received notification that its grant proposal had been selected by the DOE for award negotiations. PPL Electric cannot predict the outcome of these award negotiations.Dodd-Frank Act.

Results of Operations

~~PPL presents tables~~Tables analyzing changes in amounts between periods within "Segment Results" and "Statement of Income Analysis" are presented on a constant U.K. foreign currency exchange rate basis, where applicable, in order to isolate the impact of the change in the exchange rate on the item being explained. Results computed on a constant U.K. foreign currency exchange rate basis are calculated by translating current year results at the prior year weighted-average foreign currency exchange rate.

~~Earnings~~

~~Net income attributable to PPL and the related EPS were:~~

Earnings							Earnings
	2009		2008		2007
								2010		2009		2008
Net income attributable to PPL	$	407	$	930	$	1,288

Net Income Attributable to PPL Corporation							Net Income Attributable to PPL Corporation	$	938	$	407	$	930
EPS - basic	$	1.08	$	2.48	$	3.37	EPS - basic	$	2.17	$	1.08	$	2.48
EPS - diluted	$	1.08	$	2.47	$	3.34	EPS - diluted	$	2.17	$	1.08	$	2.47

The changes in ~~net income attributable~~Net Income Attributable to PPL Corporation from year to year were, in part, due to several special items that management considers significant. Details of these special items are provided within the review of each segment's earnings.

The "Statement of Income Analysis" explains the year-to-year changes in significant earnings components, including ~~domestic~~certain income statement line items, unregulated gross energy margins by region and ~~significant income statement line items,~~Pennsylvania gross delivery margins by component. As a result of the November 1, 2010, acquisition, LKE's results for the two months ended December 31, 2010 are ~~explained~~included in PPL's results with no comparable amounts for 2009. When discussing PPL's results of operations for 2010 compared with 2009, the ~~"Statement~~results of ~~Income Analysis.~~LKE are isolated for purposes of comparability. LKE's results are shown separately within "Segment Results - Kentucky Regulated Segment." See Note 10 to the Financial Statements for additional information regarding the acquisition.

Segment Results

Net Income Attributable to PPL Corporation by segment and for "Unallocated Costs" was:

	2010		2009		2008

Kentucky Regulated	$	26
International Regulated		261	$	243	$	290
Pennsylvania Regulated		115		124		161
Supply		612		40		479
Unallocated Costs (a)		(76)
Total	$	938	$	407	$	930

(a)

2010 includes $22 million, after tax, of certain third-party acquisition-related costs, including advisory, accounting, and legal fees associated with the acquisition of LKE that are recorded in "Other Income (Expense) – net" on the Statement of Income. 2010 also includes $52 million, after tax, of Bridge Facility costs that are recorded in "Interest Expense" on the Statement of Income. These costs are considered special items by management. See Note 10 to the Financial Statements for additional information on the acquisition and related financing.

Kentucky Regulated Segment

The Kentucky Regulated segment consists primarily of LKE's results from the operation of regulated electricity generation, transmission and distribution assets, primarily in Kentucky, as well as in Virginia and Tennessee. This segment also includes LKE's results from the regulated distribution and sale of natural gas in Kentucky.

The Kentucky Regulated segment Net Income Attributable to PPL Corporation for the two-month period from acquisition through December 31, 2010 was:

		2010
Operating revenues
	External	$	493
	Total Operating revenues		493
Fuel and energy purchases
	External		207
Other operation and maintenance			139
Depreciation			49
Taxes, other than income			2
	Total operating expenses		397
Other Income (Expense) - net			(1)
Interest Expense (a)			55
Income Taxes			16
Income from Discontinued Operations			2
Net Income Attributable to PPL Corporation		$	26

(a)	Includes interest expense allocated to the Kentucky Regulated segment of $31 million related to the Equity Units. See Note 7 to the Financial Statements for additional information.

The following after-tax amounts, which management considers special items, impacted the Kentucky Regulated segment's earnings.

(a)	Represents net unrealized losses on contracts that economically hedge anticipated cash flows.

2011 Outlook

Excluding special items, earnings in 2011 are expected to be generally driven by high-performing utilities in Kentucky, which are in a defined service area with a constructive regulatory environment and by the results of electric and natural gas base rate increases that became effective August 1, 2010. The Kentucky Regulated segment is expected to contribute approximately 20% of PPL's ~~earnings~~2011 earnings.

Earnings beyond ~~2009~~2010 are subject to various risks and uncertainties. See "Forward-Looking Information," "Item 1. Business," "Item 1A. Risk Factors," the rest of this Item 7 and Note 1415 to the Financial Statements for a discussion of the risks, uncertainties and factors that may impact ~~PPL's~~ future earnings.

~~Segment Results~~

~~Net income attributable to PPL by segment was:~~

2009 2008 2007

Supply $ 40 $ 479 $ 568
International Delivery 243 290 610
Pennsylvania Delivery 124 161 110
Total $ 407 $ 930 $ 1,288

~~Supply~~International Regulated Segment

The ~~Supply~~International Regulated segment primarily ~~consists of~~includes the ~~domestic energy marketing and trading activities, as well as the generation and development~~electric distribution operations of PPL Energy Supply. In December 2009, PPL Maine sold its 8.33% ownership interest in Wyman Unit 4. In November 2009, PPL Maine completed the sale of the majority of its hydroelectric generation business. In May 2009, PPL Generation signed a definitive agreement to sell its Long Island generation business and expects the sale to close on or about February 26, 2010. In August 2007, PPL completed the sale of its domestic telecommunication operations. See Notes 8 and 9 to the Financial Statements for additional information.

The Supply segment results reflect the classification of the Long Island generation business, the majority of the Maine hydroelectric generation business, and the 8.33% ownership interest in Wyman Unit 4, as Discontinued Operations.WPD. See Note 9 to the Financial Statements for additional ~~information.~~

~~Supply segment net income attributable to PPL was:~~

2009 2008 2007
Energy revenues
External (a) $ 3,227 $ 3,371 $ 1,576
Intersegment 1,806 1,826 1,810
Energy-related businesses 391 486 732
Total operating revenues 5,424 5,683 4,118

Fuel and energy purchases
External (a) 3,608 3,108 1,419
Intersegment 70 108 156
Other operation and maintenance 867 827 707
Depreciation 226 193 163
Taxes, other than income 29 19 31
Energy-related businesses 380 467 745
Total operating expenses 5,180 4,722 3,221

Other Income - net 50 24 40
Other-Than-Temporary Impairments 18 36 3
Interest Expense 191 200 154
Income Taxes 31 283 221
Income (Loss) from Discontinued Operations (13 ) 15 12
Net Income 41 481 571
Net Income Attributable to Noncontrolling Interests 1 2 3
Net Income Attributable to PPL $ 40 $ 479 $ 568

~~(a)~~

~~Includes impact from energy-related economic activity. See "Commodity Price Risk (Non-trading) - Economic Activity" in Note 18 to the Financial Statements for additional information.~~

~~The after-tax changes in net income attributable to PPL between these periods were due to the following factors.~~

2009 vs. 2008 2008 vs. 2007

Eastern U.S. non-trading margins $ (3 ) $ (62 )
Western U.S. non-trading margins 20 5
Net energy trading margins 81 (95 )
Energy-related businesses (3 ) (4 )
Other operation and maintenance (30 ) 18
Depreciation (19 ) (18 )
Taxes, other than income (6 ) 7
Other income - net 9 (8 )
Interest expense 5 (28 )
Income taxes (16 ) (61 )
Discontinued operations (Note 9) (9 ) 3
Other 1 2
Special items (469 ) 152
$ (439 ) $ (89 )

·	~~See "Domestic Gross Energy Margins" for an explanation of non-trading margins and net energy trading margins.~~

·	Other operation and maintenance expenses increased in 2009 compared with 2008, primarily due to increased payroll-related costs, higher contractor-related costs and other costs at PPL's generation plants. ~~Other operation and maintenance expenses decreased in 2008 compared with 2007, primarily due to lower costs at PPL's nuclear power plants and lower defined benefit costs.~~

·	Depreciation expense increased in 2009 compared with 2008, primarily due to the scrubbers at Brunner Island and Montour and the portions of the Susquehanna uprate projects that were placed in service in 2008 and 2009. ~~Depreciation expense increased in 2008 compared with 2007, primarily due to the Montour scrubbers and the Susquehanna uprate project that were placed in service in 2008.~~

·	~~Interest expense increased in 2008 compared with 2007, primarily due to increased interest on long-term debt resulting from new issuances, partially offset by hedging activities.~~

·	~~Income taxes increased in 2009 compared with 2008, in part due to lower domestic manufacturing deductions in 2009.~~ ~~Income taxes increased in 2008 compared with 2007, primarily due to the loss of synfuel tax credits as the projects ceased operation at the end of 2007.~~

·	Special items decreased in 2009 compared with 2008, primarily due to a $476 million after-tax change in energy-related economic activity. The change is primarily the result of certain power and gas cash flow hedges failing hedge effectiveness testing in the third and fourth quarters of 2008, as well as the first quarter of 2009. Hedge accounting is not permitted for the quarter in which this occurs and, accordingly, the entire change in fair value for the periods that failed was recorded to the income statement. However, these transactions were not dedesignated as hedges, as prospective regression analysis demonstrated that these hedges are expected to be highly effective over their term. For 2008, an after-tax gain of $298 million was recognized in earnings as a result of these hedge failures. During the second, third and fourth quarters of 2009, fewer power and gas cash flow hedges failed hedge effectiveness testing; therefore, a portion of the previously recognized unrealized gains recorded in the second half of 2008 and the first quarter of 2009 associated with these hedges were reversed. For 2009, after-tax losses of $215 million were recognized in earnings.

~~The following after-tax amounts, which management considers special items, also impacted the Supply segment's earnings.~~

2009 2008 2007

Energy-related economic activity (Note 18) $ (225 ) $ 251 $ 32
Sales of assets
Long Island generation business (a) (33 )
Interest in Wyman Unit 4 (Note 9) (4 )
Majority of Maine hydroelectric generation business (Note 9) 22
Domestic telecommunication operations (Note 8) (23 )
Impairments
Impacts from emission allowances (b) (19 ) (25 )
Other asset impairments (c) (4 ) (15 )
Adjustments - NDT investments (d) (17 )
Transmission rights (e) (13 )
Workforce reduction (Note 12) (6 ) (1 ) (4 )
Other
Change in tax accounting method related to repairs (Note 5) (21 )
Montana hydroelectric litigation (Note 14) (3 )
Synthetic fuel tax adjustment (Note 14) (13 )
Montana basin seepage litigation (Note 14) (5 )
Off-site remediation of ash basin leak (Note 14) 1
Settlement of Wallingford cost-based rates (f) 33
PJM billing dispute (1 )
Total $ (293 ) $ 176 $ 24

~~(a)~~		~~Consists primarily of the initial impairment charge recorded in June 2009 when this business was classified as held for sale. See Note 9 to the Financial Statements for additional~~ information on ~~the anticipated sale.~~
~~(b)~~		~~2009 primarily consists of a pre-tax charge of $37 million related to sulfur dioxide emission allowances. See Note 17 to the Financial Statements for additional information.~~ ~~2008 consists of charges related to annual nitrogen oxide allowances and put options. See Note 14 to the Financial Statements for additional information.~~
~~(c)~~		2008 primarily consists of a pre-tax charge of $22 million related to the cancellation of the Holtwood hydroelectric expansion project. See Note 8 to the Financial Statements for additional information.
~~(d)~~		~~Represents other-than-temporary impairment charges on securities, including reversals of previous impairments when previously impaired securities were sold.~~
~~(e)~~		~~See "Other Operation and Maintenance" for more information on the $23 million pre-tax impairment recorded in 2007.~~
~~(f)~~		In 2003, PPL Wallingford and PPL EnergyPlus sought from the FERC cost-based payments based upon the RMR status of four units at the Wallingford, Connecticut generating facility. In 2007, as a result of a settlement agreement, PPL recognized $55 million of revenue and $4 million of interest income.

~~2010 Outlook~~

Excluding special items, PPL projects higher earnings from its Supply segment in 2010 compared with 2009, due to growth in energy margins. The forecast for growth in energy margins is based on hedged power and fuel prices as well as established capacity prices in PJM. These positive factors are expected to be partially offset by higher depreciation, financing costs and operation and maintenance expenses.

~~International Delivery Segment~~

~~The International Delivery segment consists primarily of the electricity distribution operations in the U.K. In 2007, PPL completed~~ the sale of its Latin American businesses. In 2008, the International Delivery segment recognized income tax benefits and miscellaneous expenses in Discontinued Operations in connection with the dissolution of certain Latin American holding companies. In 2009, the International Delivery segment recognized $24 million of income tax expense in Discontinued Operations related to a correction of the calculation of tax bases of thePPL's Latin American businesses ~~sold~~ in 2007. ~~See Note 9 to the Financial Statements for additional information.~~

The International ~~Delivery~~Regulated segment results in 2009 and 2008 reflect the classification of its Latin American businesses as Discontinued Operations.

International ~~Delivery~~Regulated segment ~~net income attributable~~Net Income Attributable to PPL Corporation was:

	2009			2008		2007					2010		2009		2008

Utility revenues	$	684		$	824	$	863		Utility revenues		$	727	$	684	$	824
Energy-related businesses		32			33		37		Energy-related businesses			34		32		33
Total operating revenues		716			857		900
										Total operating revenues		761		716		857
Other operation and maintenance		140			186		252		Other operation and maintenance			182		140		186
Depreciation		115			134		147		Depreciation			117		115		134
Taxes, other than income		57			66		67		Taxes, other than income			52		57		66
Energy-related businesses		16			14		17		Energy-related businesses			17		16		14
Total operating expenses		328			400		483
Other Income - net		(11	)		17		26
										Total operating expenses		368		328		400
Other Income (Expense) - net									Other Income (Expense) - net			3		(11)		17
Interest Expense		87			144		183		Interest Expense			135		87		144
Income Taxes		20			45		(43	)
Income Tax Expense									Income Tax Expense					20		45
Income (Loss) from Discontinued Operations		(27	)		5		313		Income (Loss) from Discontinued Operations					(27)		5
Net Income		243			290		616
Net Income Attributable to Noncontrolling Interests							6
Net Income Attributable to PPL	$	243		$	290	$	610
Net Income Attributable to PPL Corporation									Net Income Attributable to PPL Corporation		$	261	$	243	$	290

The after-tax changes in ~~net income attributable~~Net Income Attributable to PPL Corporation between these periods were due to the following factors.

2009 vs. 2008 2008 vs. 2007
U.K.
Delivery margins $ 17 $ 12
Other operating expenses 7 22
Other income - net (4 ) (7 )
Depreciation (4 ) 4
Interest expense 28 5
Income taxes 24 24
Foreign currency exchange rates (69 ) (14 )
Gain on transfer of equity investment (5 )
Other (4 ) (3 )
Discontinued Operations (Note 9) (5 ) (49 )
U.S. interest expense 17
U.S. income taxes 1 (32 )
Gain (loss) on economic hedges (Note 15) (12 ) 10
Other 2 6
Special items (28 ) (310 )
$ (47 ) $ (320 )

		2010 vs. 2009		2009 vs. 2008
U.K.
	Utility revenues	$	30	$	10
	Other operation and maintenance		(34)		16
	Other income (expense) - net		1		(7)
	Depreciation		(2)		(4)
	Interest expense		(36)		28
	Income taxes		13		24
	Foreign currency exchange rates		6		(69)
	Other		5		(3)
Discontinued operations, excluding special item (Note 9)					(5)
U.S. income taxes			(32)		1
Other			7		(10)
Special items			60		(28)
Total		$	18	$	(47)

·	~~Lower~~ U.K. ~~other operating expenses~~utility revenues increased in ~~2008~~2010 compared with ~~2007, were~~2009, primarily due to price increases in April 2010 and 2009, partially offset by lower ~~compensation and lower pension costs.~~

·	~~Lower~~ regulatory recovery due to a revised estimate of network electricity losses. U.K. ~~interest expense~~utility revenues increased in 2009 compared with 2008, ~~was~~due to higher regulatory recovery primarily due to ~~lower inflation rates on U.K. Index-linked Senior Unsecured Notes~~a revised estimate of network electricity losses and ~~lower debt balances.~~higher prices.

·	~~Lower~~ U.K. ~~income taxes~~other operation and maintenance increased in 2010 compared with 2009, primarily due to higher pension expense resulting from an increase in amortization of actuarial losses. U.K. other operation and maintenance decreased in 2009 compared with 2008, ~~were~~primarily due to lower pension cost resulting from an increase in discount rates and lower inflation rates.

·	U.K. interest expense increased in 2010 compared with 2009, primarily due to higher inflation rates on index-linked Senior Unsecured Notes and interest expense related to the March 2010 debt issuance. U.K. interest expense decreased in 2009 compared with 2008, primarily due to lower inflation rates on index-linked Senior Unsecured Notes and lower debt balances.

·	U.K. income taxes decreased in 2010 compared with 2009, primarily due to realized capital losses that offset a gain relating to a business activity sold in 1999, partially offset by favorable settlements of uncertain tax positions in 2009. U.K. income taxes decreased in 2009 compared with 2008, primarily due to HMRC's determination related to the valuation of a business activity sold in 1999 and to the deductibility of foreign currency exchange losses, partially offset by the ~~items in 2008 mentioned below.~~ ~~Lower U.K. income taxes in 2008 compared with 2007, were primarily due to HMRC's determination related to deductibility~~settlement of ~~imputed interest on a loan from Hyder~~uncertain tax positions and a change in the tax law ~~that included the phase-out of tax depreciation on industrial buildings over a four-year period.~~in 2008.

·	Changes in foreign currency exchange rates positively impacted U.K. earnings for 2010 compared with 2009, and negatively impacted U.K. earnings for ~~both periods.~~2009 compared with 2008. The weighted-average exchange rates for the British pound sterling were approximately $1.56 in 2010, $1.53 in 2009 and $1.91 in ~~2008 and $2.00 in 2007.~~2008.

·	~~Higher~~ U.S. income taxes increased in ~~2008~~2010 compared with ~~2007, was~~2009, primarily due to changes in the ~~change in a U.S. income tax reserve resulting from the lapse in 2007~~taxable amount of ~~an applicable statute of limitations.~~planned U.K. cash repatriations.

The following after-tax amounts, which management considers special items, also impacted the International ~~Delivery~~Regulated segment's earnings.

2009 2008 2007

Foreign currency-related economic hedges - unrealized impacts (Note 18) $ 1
Sales of assets
Latin American businesses (Note 9) (27 ) $ 259
Impairments (1 )
Workforce reduction (Note 12) (2 ) $ (1 ) (4 )
Other
Change in U.K. tax rate (Note 5) 54
Total $ (29 ) $ (1 ) $ 309

		2010		2009		2008

Foreign currency-related economic hedges (a)		$	1	$	1
Sales of assets:
	Latin American businesses (Note 9)				(27)
Asset impairments					(1)
Workforce reduction (Note 13)					(2)	$	(1)
Other:
	Change in U.K. tax rate (Note 5)		18
	U.S. Tax Court ruling (b)		12
Total		$	31	$	(29)	$	(1)

~~2010~~

(a)	Represents unrealized gains on contracts that economically hedge anticipated earnings denominated in British pounds sterling.

(b)	Represents the net tax benefit recorded as a result of the U.S. Tax Court ruling that the U.K. Windfall Profits Tax is creditable for U.S. tax purposes, excluding the reversal of accrued interest. See Notes 5 and 15 to the Financial Statements for additional information.

2011 Outlook

Excluding special items, ~~PPL projects lower~~ earnings ~~from its International Delivery segment~~ in 2011 are projected to be comparable with 2010 ~~compared with 2009,~~earnings as a result of higher ~~income taxes, higher operation and maintenance expenses and higher financing costs. These negative factors are expected to be partially offset by higher electricity~~electric delivery ~~margins~~revenue and a more favorable currency exchange ~~rate.~~rate offset by higher income taxes, higher depreciation and higher financing costs.

~~In December 2009, Ofgem completed its rate review~~

Earnings beyond 2010 are subject to various risks and uncertainties. See "Forward-Looking Information," "Item 1. Business," "Item 1A. Risk Factors," the rest of this Item 7 and Note 15 to the Financial Statements for ~~the five-year period from April 1, 2010 through March 31, 2015. Ofgem allowed WPD an average increase in total revenues, before inflationary adjustments, of 6.9% in each~~a discussion of the ~~five years. The revenue increase includes reimbursement to electricity distributors for higher operating~~risks, uncertainties and capital costs to be incurred. Also, Ofgem set the weighted average cost of capital at 4.7%, which includes pre-tax debt and post-tax equity costs and excludes adjustments for inflation, for all distribution companies. This is a 0.8% decrease from the previous regulatory period. Additionally, Ofgem has established strong incentive mechanisms to provide companies significant opportunities to enhance overall returns by improving network efficiency, reliability or customer service.factors that may impact future earnings.

Pennsylvania ~~Delivery~~Regulated Segment

The Pennsylvania ~~Delivery~~Regulated segment includes the regulated electric delivery operations of PPL Electric. In October 2008, PPL sold its natural gas distribution and propane businesses. See Note 9 to the Financial Statements for additional information.

The Pennsylvania ~~Delivery~~Regulated segment results in 2008 ~~and 2007~~ reflect the classification of PPL's natural gas distribution and propane ~~businesses'~~businesses as Discontinued Operations.

Pennsylvania ~~Delivery~~Regulated segment ~~net income attributable~~Net Income Attributable to PPL Corporation was:

2009 2008 2007
Operating revenues
External $ 3,222 $ 3,293 $ 3,254
Intersegment 70 108 156
Total operating revenues 3,292 3,401 3,410

Fuel and energy purchases
External 114 163 207
Intersegment 1,806 1,826 1,810
Other operation and maintenance 417 410 406
Amortization of recoverable transition costs 304 293 310
Depreciation 128 131 132
Taxes, other than income 194 203 200
Total operating expenses 2,963 3,026 3,065

Other Income - net 10 14 31
Interest Expense 118 111 135
Income Taxes 79 102 81
Income (Loss) from Discontinued Operations 3 (32 )
Net Income 142 179 128
Net Income Attributable to Noncontrolling Interests 18 18 18
Net Income Attributable to PPL $ 124 $ 161 $ 110

		2010		2009		2008
Operating revenues
	External	$	2,448	$	3,218	$	3,290
	Intersegment		7		74		111
	Total operating revenues		2,455		3,292		3,401
Energy purchases
	External		1,075		114		163
	Intersegment		320		1,806		1,826
Other operation and maintenance			502		417		410
Amortization of recoverable transition costs					304		293
Depreciation			136		128		131
Taxes, other than income			138		194		203
	Total operating expenses		2,171		2,963		3,026
Other Income (Expense) - net			7		10		14
Interest Expense			99		118		111
Income Taxes			57		79		102
Income from Discontinued Operations							3
Net Income			135		142		179
Net Income Attributable to Noncontrolling Interests (Note 6)			20		18		18
Net Income Attributable to PPL Corporation		$	115	$	124	$	161

The after-tax changes in ~~net income attributable~~Net Income Attributable to PPL Corporation between these periods were due to the following factors.

2009 vs. 2008 2008 vs. 2007

Delivery revenues (net of CTC/ITC amortization, interest expense on transition bonds and ancillary charges) $ (16 ) $ 32
Other operation and maintenance 3 (5 )
Other income - net (2 ) (10 )
Interest expense (12 ) 1
Discontinued operations (Note 9) (9 ) (3 )
Other 2 (3 )
Special items (3 ) 39
$ (37 ) $ 51

	2010 vs. 2009		2009 vs. 2008

Pennsylvania gross delivery margins	$	2	$	(18)
Other operation and maintenance		(29)		3
Interest expense		11		(12)
Income taxes and other		(2)		2
Discontinued Operations, excluding special item (Note 9)				(9)
Special items		9		(3)
Total	$	(9)	$	(37)

See "Pennsylvania Gross Delivery ~~revenues decreased~~Margins by Component" in ~~2009 compared with 2008, primarily due to unfavorable economic conditions, including industrial customers scaling back on production and~~ the ~~unfavorable impact~~"Statement of ~~weather on sales volumes. See "Revenue Recognition" in Note 1 to~~Income Analysis" section for an explanation of margins generated by the ~~Financial Statements for information on a true-up of FERC formula-based transmission revenues.~~regulated electric delivery operations.

~~Delivery revenues increased in 2008 compared with 2007, primarily due to a base rate increase effective January 1, 2008 and normal load growth.~~

·	Other operation and maintenance ~~expenses~~ increased in ~~2008~~2010 compared with ~~2007,~~2009, primarily due to ~~insurance recovery of storm costs in 2007,~~ higher ~~vegetation management~~payroll-related costs and higher ~~regulatory asset amortization.~~contractor costs related to vegetation management.

~~Other income - net~~Interest expense decreased in ~~2008~~2010 compared with ~~2007,~~2009, primarily due to ~~a decrease in intersegment interest income resulting from a decrease in the average balance outstanding on a note receivable and a~~ lower average ~~floating~~debt balances in 2010 compared with 2009 and the interest ~~rate.~~related to the over-recovery of recoverable transition costs.


·	Interest expense increased in 2009 compared with 2008, primarily due to $400 million of debt issuances in October 2008 that prefunded a portion of August 2009 debt maturities.

The following after-tax amounts, which management considers special items, also impacted ~~the Pennsylvania Delivery segment's~~ earnings.

2009 2008 2007

Sales of assets
Gas and propane businesses (Note 9) $ (6 ) $ (44 )
Impairments $ (1 )
Workforce reduction (a) (5 ) (1 )
Other
Change in tax accounting method related to repairs (Note 5) (3 )
Total $ (9 ) $ (6 ) $ (45 )

		2009		2008

Sales of assets:
	Gas & propane businesses (Note 9)			$	(6)
Asset impairments		$	(1)
Workforce reduction (Note 13)			(5)
Other:
	Change in tax accounting method related to repairs (Note 5)		(3)
Total		$	(9)	$	(6)

~~(a)~~

~~See Note 12 to the Financial Statements for additional information related to the 2009 workforce reduction.~~

~~2010~~2011 Outlook

Excluding special items, ~~PPL projects lower~~higher earnings ~~from its Pennsylvania Delivery segment~~are projected in ~~2010~~2011 compared with ~~2009, as a net result of lower~~2010, due to higher distribution revenues ~~primarily due to continued slow economic growth and weak customer demand; higher operation and maintenance expenses; offset by lower financing costs.~~resulting from an approved distribution base rate increase effective January 1, 2011.

~~In late March~~

Earnings beyond 2010 ~~PPL Electric expects~~are subject to ~~file a request with~~various risks and uncertainties. See "Forward-Looking Information," "Item 1. Business," "Item 1A. Risk Factors," the ~~PUC seeking an increase in its distribution rates beginning in January 2011.~~

~~See~~rest of this Item 7 and Note 1415 to the Financial Statements for a discussion of ~~items~~the risks, uncertainties and factors that ~~could~~may impact future earnings. See "Item 1. Business - Segment Information - Pennsylvania Regulated Segment" for additional information on the 2010 rate case.

Supply Segment

The Supply segment primarily consists of the energy marketing and trading activities, as well as the competitive generation and development operations of PPL Energy Supply. In September 2010, certain PPL Energy Supply subsidiaries signed definitive agreements to sell their entire ownership interests in certain non-core generation facilities. The sale is expected to close in the first quarter of 2011, subject to the receipt of necessary regulatory approvals and third-party consents. The operating results of these facilities have been classified as Discontinued Operations. In 2010 and 2009, PPL Energy Supply subsidiaries also completed the sale of several businesses, which have been classified as Discontinued Operations. See Note 9 to the Financial Statements for additional informa tion.

Supply segment Net Income Attributable to PPL Corporation was:

		2010		2009		2008
Energy revenues
	External (a)	$	4,444	$	3,124	$	3,224
	Intersegment		320		1,806		1,826
Energy-related businesses			375		391		486
	Total operating revenues		5,139		5,321		5,536
Fuel and energy purchases
	External (a)		2,440		3,586		3,071
	Intersegment		3		70		108
Other operation and maintenance			934		865		821
Depreciation			254		212		179
Taxes, other than income			46		29		19
Energy-related businesses			366		380		467
	Total operating expenses		4,043		5,142		4,665
Other Income (Expense) - net			(9)		48		22
Other-Than-Temporary Impairments			3		18		36
Interest Expense			224		182		192
Income Taxes			228		6		249
Income (Loss) from Discontinued Operations			(19)		20		65
Net Income			613		41		481
Net Income Attributable to Noncontrolling Interests (Note 22)			1		1		2
Net Income Attributable to PPL Corporation		$	612	$	40	$	479

(a)	Includes impact from energy-related economic activity. See "Commodity Price Risk (Non-trading) - Economic Activity" in Note 19 to the Financial Statements for additional information.

The after-tax changes in Net Income Attributable to PPL Corporation between these periods were due to the following factors.

	2010 vs. 2009		2009 vs. 2008

Eastern U.S. non-trading margins	$	607	$	(3)
Western U.S. non-trading margins		9		20
Net energy trading margins		(9)		81
Other operation and maintenance		(32)		(33)
Depreciation		(25)		(19)
Income taxes and other		94		(7)
Discontinued operations, excluding special items (Note 9)		13		(9)
Special items		(85)		(469)
Total	$	572	$	(439)

·	See "Unregulated Gross Energy Margins By Region" in the "Statement of Income Analysis" section for an explanation of non-trading margins and net energy trading margins.

Other operation and maintenance increased in 2010 compared with 2009, primarily due to increased payroll-related costs, higher contractor-related costs and other costs at Susquehanna. Also contributing to the increase were higher support group costs, higher expenses at western fossil/hydro plants due to the Corette overhaul and lease expense related to the use of the streambeds in Montana. See Note 15 to the Financial Statements for additional information on continuing litigation regarding the streambeds in Montana.

Other operation and maintenance increased in 2009 compared with 2008, primarily due to increased payroll-related costs, higher contractor-related costs and other costs at generation plants.

·	Depreciation increased in 2010 compared with 2009, primarily due to the Brunner Island environmental equipment that was placed in service in 2009 and early 2010.

Depreciation increased in 2009 compared with 2008, primarily due to the scrubbers at Brunner Island and Montour and portions of the Susquehanna uprate projects that were placed in service in 2008 and 2009.

Income taxes decreased in 2010 compared with 2009, primarily due to a release of valuation allowances related to deferred tax assets for Pennsylvania net operating loss carryforwards, investment tax credits at Holtwood and Rainbow, a release of tax reserves in 2010, and a tax benefit from the manufacturing deduction.

The following after-tax amounts, which management considers special items, also impacted the Supply segment's earnings.

		2010		2009		2008

Adjusted energy-related economic activity, net (a)		$	(121)	$	(225)	$	251
Sales of assets:
	Maine hydroelectric generation business (Note 9)		15		22
	Sundance indemnification		1
	Long Island generation business (b)				(33)
	Interest in Wyman Unit 4 (Note 9)				(4)
Impairments:
	Impacts from emission allowances (c)		(10)		(19)		(25)
	Adjustments - NDT investments (d)						(17)
	Other asset impairments (e)				(4)		(15)
Workforce reduction (Note 13)					(6)		(1)
LKE acquisition-related costs:
	Monetization of certain full-requirement sales contracts (f)		(125)
	Anticipated sale of certain non-core generation facilities (g)		(64)
	Discontinued cash flow hedges and ineffectiveness (Note 19)		(28)
	Reduction of credit facility (Note 7)		(6)
Other:
	Montana hydroelectric litigation (Note 15)		(34)		(3)
	Health Care Reform - tax impact (Note 13)		(8)
	Montana basin seepage litigation (Note 15)		2				(5)
	Change in tax accounting method related to repairs (Note 5)				(21)
	Synfuel tax adjustment (Note 15)						(13)
	Off-site remediation of ash basin leak (Note 15)						1
Total		$	(378)	$	(293)	$	176

(a)	See "Reconciliation of Economic Activity" below.

(b)	Consists primarily of the initial impairment charge recorded in June 2009 when this business was classified as held for sale. See Note 9 to the Financial Statements for additional information.

(c)

2010 and 2009 include impairments of sulfur dioxide emission allowances. 2009 also includes a pre-tax gain of $4 million related to the settlement of a dispute regarding the sale of certain annual nitrogen oxide allowance put options. See Note 18 to the Financial Statements for additional information.

2008 consists of charges related to annual nitrogen oxide allowances and put options. See Note 18 to the Financial Statements for additional information.

(d)	Represents other-than-temporary impairment charges on securities, including reversals of previous impairments when securities previously impaired were sold.

(e)	2008 primarily consists of a pre-tax charge of $22 million related to the Holtwood hydroelectric expansion project. See Note 8 to the Financial Statements for additional information.

(f)	See "Components of Monetization of Certain Full-Requirement Sales Contracts" below.

(g)	Consists primarily of an impairment charge recorded when these facilities were classified as held for sale, and allocated goodwill that was written off. See Note 9 to the Financial Statements for additional information.

Reconciliation of Economic Activity

The following table reconciles unrealized pre-tax gains (losses) from the table within "Commodity Price Risk (Non-trading) - Economic Activity" in Note 19 to the Financial Statements to the special item identified as "Adjusted energy-related economic activity, net."

			2010		2009		2008
Operating Revenues
		Unregulated retail electric and gas	$	1	$	6	$	5
		Wholesale energy marketing		(805)		(229)		1,056
Operating Expenses
		Fuel		29		49		(79)
		Energy Purchases		286		(155)		(553)
		Energy-related economic activity (a)		(489)		(329)		429
		Option premiums (b)		32		(54)
Adjusted energy-related economic activity				(457)		(383)		429
Less: Unrealized economic activity associated with the monetization of certain
	full-requirement sales contracts (c)			(251)
Adjusted energy-related economic activity, net, pre-tax			$	(206)	$	(383)	$	429

Adjusted energy-related economic activity, net, after-tax			$	(121)	$	(225)	$	251

(a)	The components of this item are from the table within "Commodity Price Risk (Non-trading) - Economic Activity" in Note 19 to the Financial Statements.

(b)	Adjustment for the net deferral and amortization of option premiums over the delivery period of the item that was hedged or upon realization. After-tax amount for 2010 was $19 million and for 2009 was $31 million.

(c)	See "Components of Monetization of Certain Full-Requirement Sales Contracts" below.

Components of Monetization of Certain Full-Requirement Sales Contracts

The following table provides the components of the "Monetization of Certain Full-Requirement Sales Contracts" special item.

	2010

Full-requirement sales contracts monetized (a)	$	(68)
Economic activity related to the full-requirement sales contracts monetized		(146)
Monetization of certain full-requirement sales contracts, pre-tax (b)	$	(214)

Monetization of certain full-requirement sales contracts, after-tax	$	(125)

(a)	See "Commodity Price Risk (Non-trading) – Monetization of Certain Full-Requirement Sales Contracts" in Note 19 to the Financial Statements for additional information.

(b)

Includes unrealized losses of $251 million from the "Reconciliation of Economic Activity" table above. These amounts are reflected in "Wholesale energy marketing - Unrealized economic activity" and "Energy purchases - Unrealized economic activity" on the Statement of Income. Also includes net realized gains of $37 million, which are reflected in "Wholesale energy marketing - Realized" and "Energy purchases - Realized" on the Statement of Income. This economic activity will continue to be realized through May 2013.

2011 Outlook

Excluding special items, lower earnings ~~including Pennsylvania legislative~~are projected from the Supply segment in 2011 compared with 2010 as a result of lower energy margins driven by lower energy and ~~other regulatory activities.~~capacity prices in the East, higher average fuel costs, and higher operation and maintenance expense.

Statement of Income Analysis --

~~Domestic Gross Energy~~ Margins

Non-GAAP Financial ~~Measure~~Measures

The following discussion includes financial information prepared in accordance with GAAP, as well as atwo non-GAAP financial ~~measure, "Domestic Gross Energy Margins." The presentation of "Domestic~~measures: "Unregulated Gross Energy Margins" ~~is intended to supplement the investor's understanding of PPL's domestic non-trading~~ and ~~trading activities by combining applicable income statement line items and related adjustments to calculate a single financial measure.~~"Pennsylvania Gross Delivery Margins." PPL believes that ~~"Domestic Gross Energy Margins"~~these measures provide additional criteria to make investment decisions. These performance measures are ~~useful~~used, in conjunction with other information, internally by senior management and ~~meaningful~~the Board of Directors to ~~investors because they provide them with the results of PPL's domestic non-trading and trading activities as another criterion in making their investment decisions.~~manage its operations. PPL's management also uses ~~"Domestic~~"Unregulated Gross Energy Margins" in measuring certain corporate performance goals used in determining variable compensation. ~~Other companies may use different measures to present the results of their non-trading and trading activities. Additionally, "Domestic~~

"Unregulated Gross Energy Margins" is a single financial performance measure of PPL's competitive energy non-trading and trading activities. In calculating this measure, the Supply segment's energy revenues are offset by the cost of fuel and energy purchases, and adjusted for other related items. This performance measure is relevant to PPL due to the volatility in the individual revenue and expense lines on the Statements of Income that comprise "Unregulated Gross Energy Margins." This volatility stems from a number of factors, including the required netting of certain transactions with ISOs and significant swings in unrealized gains and losses. Such factors could result in gains or losses being recorded in either "Wholesale energy marketing" or "Energy purchases" on the Statements of Income. This performance measure includes PLR revenues from energy sales to P PL Electric by PPL EnergyPlus. In addition, PPL excludes from "Unregulated Gross Energy Margins" the Supply segment's energy-related economic activity, which includes the changes in fair value of positions used to economically hedge a portion of the economic value of PPL's competitive generation assets, full-requirement and retail activities. This economic value is subject to changes in fair value due to market price volatility of the input and output commodities (e.g., fuel and power) prior to the delivery period that was hedged. Also included in this energy-related economic activity is the ineffective portion of qualifying cash flow hedges, net losses on the monetization of certain full-requirement sales contracts and premium amortization associated with options. This economic activity is deferred, with the exception of the net losses on the full-requirement sales contracts that were monetized, and included in unregulated gross energy margins over the delivery pe riod that was hedged or upon realization.

"Pennsylvania Gross Delivery Margins" is a single financial performance measure of PPL's Pennsylvania regulated electric delivery operations, which includes transmission and distribution activities, including PLR supply. In calculating this measure, Pennsylvania regulated utility revenues and expenses associated with approved recovery mechanisms, including energy provided as a PLR, are offset. These mechanisms allow for full cost recovery of certain expenses; therefore, certain expenses and revenues offset with minimal impact on earnings. As a result, this measure represents the net revenues from PPL's Pennsylvania regulated electric delivery operations.

These measures are not intended to replace "Operating Income," which is determined in accordance with GAAP, as an indicator of overall operating performance. Other companies may use different measures to analyze and to report on the results of their operations.

Unregulated Gross Energy Margins

The following table ~~provides a reconciliation between~~reconciles "Operating Income" ~~and "Domestic~~to "Unregulated Gross Energy Margins" as defined by PPL.

2009 2008 2007

Operating Income (a) $ 961 $ 1,793 $ 1,659
Adjustments:
Energy-related businesses, net (b) (27 ) (38 ) (7 )
Other operation and maintenance (a) 1,424 1,423 1,365
Amortization of recoverable transition costs (a) 304 293 310
Depreciation (a) 469 458 442
Taxes, other than income (a) 280 288 298
Revenue adjustments (c) (1,705 ) (3,219 ) (1,981 )
Expense adjustments (c) 25 566 (262 )
Domestic gross energy margins $ 1,731 $ 1,564 $ 1,824

		2010		2009		2008

Operating Income (a)		$	1,866	$	896	$	1,703
Adjustments:
	Utility (a)		(3,668)		(3,902)		(4,114)
	Energy-related businesses, net (b)		(26)		(27)		(38)
	Other operation and maintenance (a)		1,756		1,418		1,414
	Amortization of recoverable transition costs (a)				304		293
	Depreciation (a)		556		455		444
	Taxes, other than income (a)		238		280		288
	Revenue adjustments (c)		920		2,217		958
	Expense adjustments (c)		1,128		90		616
Unregulated gross energy margins		$	2,770	$	1,731	$	1,564

(a)

As reported on the Statements of Income.

(b)

Amount represents the net of "Energy-related businesses" revenue and expense as reported on the Statements of Income.

(c)

The components of these adjustments are detailed in the ~~tables~~table below.

The following ~~tables provide~~table provides the income statement line items and other adjustments that comprise ~~domestic~~unregulated gross energy margins.

2009 2008 Change
Revenue
Utility (a) $ 3,902 $ 4,114 $ (212 )
Unregulated retail electric and gas (a) 152 151 1
Wholesale energy marketing (a) 3,062 3,344 (282 )
Net energy trading margins (a) 17 (121 ) 138
Revenue adjustments (b)
WPD utility revenue (684 ) (824 ) 140
Domestic delivery component of utility revenue (1,265 ) (1,325 ) 60
Other utility revenue (61 ) (52 ) (9 )
Impact from energy-related economic activity (c) 274 (1,061 ) 1,335
Gains from sale of emission allowances (d) 2 6 (4 )
Revenues from Supply segment discontinued operations (e) 29 37 (8 )
Total revenue adjustments (1,705 ) (3,219 ) 1,514
5,428 4,269 1,159
Expense
Fuel (a) 931 1,084 (153 )
Energy purchases (a) 2,791 2,187 604
Expense adjustments (b)
Impact from energy-related economic activity (c) (109 ) (632 ) 523
Domestic electric ancillaries (f) (43 ) (54 ) 11
Gross receipts tax (g) 112 113 (1 )
Other 15 7 8
Total expense adjustments (25 ) (566 ) 541
3,697 2,705 992
Domestic gross energy margins $ 1,731 $ 1,564 $ 167

2008 2007 Change
Revenue
Utility (a) $ 4,114 $ 4,114
Unregulated retail electric and gas (a) 151 102 $ 49
Wholesale energy marketing (a) 3,344 1,436 1,908
Net energy trading margins (a) (121 ) 41 (162 )
Revenue adjustments (b)
WPD utility revenue (824 ) (863 ) 39
Domestic delivery component of utility revenue (1,325 ) (1,308 ) (17 )
Other utility revenue (52 ) (48 ) (4 )
RMR revenues (52 ) 52
Impact from energy-related economic activity (c) (1,061 ) 145 (1,206 )
Gains from sale of emission allowances (d) 6 109 (103 )
Revenues from Supply segment discontinued operations (e) 37 36 1
Total revenue adjustments (3,219 ) (1,981 ) (1,238 )
4,269 3,712 557
Expense
Fuel (a) 1,084 890 194
Energy purchases (a) 2,187 736 1,451
Expense adjustments (b)
Impact from energy-related economic activity (c) (632 ) 200 (832 )
Domestic electric ancillaries (f) (54 ) (50 ) (4 )
Gross receipts tax (g) 113 112 1
Other 7 7
Total expense adjustments (566 ) 262 (828 )
2,705 1,888 817
Domestic gross energy margins $ 1,564 $ 1,824 $ (260 )

				2010		2009		Change		2009		2008		Change
Revenue
	Unregulated retail electric and gas (a)			$	415	$	152	$	263	$	152	$	151	$	1
	Wholesale energy marketing (a)				4,027		2,955		1,072		2,955		3,194		(239)
	Net energy trading margins (a)				2		17		(15)		17		(121)		138
	Revenue adjustments (b)
		Exclude the impact from the
			Supply segment's energy-related
			economic activity (c)		483		274		209		274		(1,061)		1,335
		Include PLR revenue from energy supplied
			to PPL Electric by PPL EnergyPlus (d)		320		1,806		(1,486)		1,806		1,826		(20)
		Include gains from sale of emission allowances/RECs (e)					2		(2)		2		6		(4)
		Include revenue from Supply segment
			discontinued operations (f)		117		135		(18)		135		187		(52)
	Total revenue adjustments				920		2,217		(1,297)		2,217		958		1,259
					5,364		5,341		23		5,341		4,182		1,159
Expense
	Fuel (a)				1,235		920		315		920		1,057		(137)
	Energy purchases (a)				2,487		2,780		(293)		2,780		2,177		603
	Expense adjustments (b)
		Exclude fuel and energy purchases from the
			Kentucky Regulated segment		(207)				(207)
		Exclude the impact from the
			Supply segment's energy-related
			economic activity (g)		63		(109)		172		(109)		(632)		523
		Exclude external PLR energy purchases (h)			(1,068)		(40)		(1,028)		(40)		(52)		12
		Include expenses from Supply segment
			discontinued operations (i)		33		22		11		22		37		(15)
		Include ancillary charges (e)			24		19		5		19		15		4
		Include gross receipts tax (j)			15				15
		Other			12		18		(6)		18		16		2
	Total expense adjustments				(1,128)		(90)		(1,038)		(90)		(616)		526
					2,594		3,610		(1,016)		3,610		2,618		992
	Unregulated gross energy margins			$	2,770	$	1,731	$	1,039	$	1,731	$	1,564	$	167

(a)

As reported on the Statements of Income.

(b)

To include/exclude the impact of any revenues and expenses ~~not associated with domestic gross energy margins,~~ consistent with the way management reviews ~~domestic~~unregulated gross energy margins internally.

(c)

See "Commodity Price Risk (Non-trading) - Economic Activity" in Note 1819 to the Financial Statements for additional ~~information regarding economic activity.~~information. In addition, 2010 and 2009 includes a pre-tax gain of $28 million and a loss of $51 million related to the amortization of option premiums, and in 2010 a realized gain of $293 million related to the monetization of certain full-requirement sales contracts. These amounts are reflected in "Wholesale energy marketing – Realized" on the Statements of Income.

(d)	Included in "Utility" on the Statements of Income.

(e)	Included in "Other operation and maintenance" on the Statements of Income.

~~(e)~~

(f)

Represents ~~revenues associated with~~ the ~~Long Island generation business and the majority~~operating revenues of the ~~Maine hydroelectric generation business.~~Supply segment businesses classified as discontinued operations. See Note 9 to the Financial Statements for additional information.

~~(f)~~(g)

See "Commodity Price Risk (Non-trading) - Economic Activity" in Note 19 to the Financial Statements for additional information. In addition, 2010 and 2009 includes a pre-tax gain of $4 million and a loss of $3 million related to the amortization of option premiums, and in 2010 a realized loss of $256 million related to the monetization of certain full-requirement sales contracts. These amounts are reflected in "Energy purchases – Realized" on the Statements of Income.

(h)	Included in "Energy purchases" on the Statements of Income.

~~(g)~~(i)

Represents fuel costs and energy purchases associated with the anticipated sale of certain non-core generation facilities that are classified as discontinued operations. See Note 9 to the Financial Statements for additional information.

(j)	Included in "Taxes, other than income" on the ~~Statements~~Statement of Income.

~~Domestic~~Unregulated Gross Energy Margins By Region

~~Domestic~~Unregulated gross energy margins are generated through ~~PPL's~~ non-trading and trading activities. ~~PPL manages its~~The non-trading energy business is managed on a geographic basis that is aligned with its generation assets.

2009 2008 Change
Non-trading
Eastern U.S. $ 1,391 $ 1,396 $ (5 )
Western U.S. 323 289 34
Net energy trading 17 (121 ) 138
Domestic gross energy margins $ 1,731 $ 1,564 $ 167

2008 2007 Change
Non-trading
Eastern U.S. $ 1,396 $ 1,502 $ (106 )
Western U.S. 289 281 8
Net energy trading (121 ) 41 (162 )
Domestic gross energy margins $ 1,564 $ 1,824 $ (260 )

		2010		2009		Change		2009		2008		Change
Non-trading:
	Eastern U.S.	$	2,429	$	1,391	$	1,038	$	1,391	$	1,396	$	(5)
	Western U.S.		339		323		16		323		289		34
Net energy trading			2		17		(15)		17		(121)		138
Unregulated gross energy margins		$	2,770	$	1,731	$	1,039	$	1,731	$	1,564	$	167

Eastern U.S.

Eastern U.S. non-trading margins were ~~$5 million~~higher in 2010 compared with 2009, primarily due to significantly higher pricing in 2010 for eastern baseload generation compared with prices realized under the PLR contract with PPL Electric that expired at the end of 2009. Partially offsetting the increase were lower realized margins from full-requirement sales contracts due to lower customer demand and customer migration.

Eastern U.S. non-trading margins were lower in 2009 compared with ~~2008. This decrease was~~2008, primarily due to lower margins on full-requirement sales contracts resulting from mild weather, decreased demand, and customer migration. Also contributing to the decrease were higher average baseload generation fuel costs, ~~of 7%,~~ primarily due to higher coal prices. Partially offsetting these lower margins were net gains resulting from the settlement of economic positions associated with rebalancing ~~PPL's~~ portfolios to better align them with current strategies, higher capacity revenue, higher baseload generation output due to unplanned major outages in 2008, and ~~a 2.2%~~an increase in the ~~PLR sales prices in accordance with the PUC Final Order.~~

Eastern U.S. non-trading margins were $106 million lower in 2008 compared with 2007. This decrease was primarily due to higher fuel costs, up 16%, primarily due to higher coal prices. Also contributing to the decrease was lower baseload generation, down 4%, primarily due to the unplanned outages at the eastern coal-fired units and retirement of the Martins Creek coal-fired units in September 2007. Partially offsetting these lower margins were higher margins from the hedged sale of generation in the wholesale market and a 1.4% increase in PLR sales prices in accordance with the PUC Final Order.

Western U.S.

Western U.S. non-trading margins were ~~$34 million~~ higher in ~~2009~~2010 compared with ~~2008. This increase was~~2009, primarily due to higher ~~wholesale volumes of 6% and increased generation from the hydroelectric units of 5%.~~average prices, partially offset by lower volumes.

Western U.S. non-trading margins were ~~$8 million~~ higher in ~~2008~~2009 compared with ~~2007. This increase was~~2008, primarily due to higher wholesale volumes and increased generation from the hydroelectric ~~units of 2%.~~units.

Net Energy Trading

PPL enters into energy contracts to take advantage of market opportunities. As a result, PPL may at times create a net open position in its portfolio that could result in significant losses if prices do not move in the manner or direction anticipated. However, these trading activities are subject to risk management program limits that are designed to protect PPL from undue financial loss. The margins from these trading activities are reflected in the Statements of Income as "NetNet energy trading ~~margins." These physical~~margins decreased in 2010 compared with 2009, consisting of lower trading margins related to power and ~~financial contracts cover~~gas, partially offset by higher trading ~~activity associated with electricity, emission allowances, uranium, FTRs, natural gas, and oil.~~margins related to FTRs.

Net energy trading margins increased ~~by $138 million~~ in 2009 compared with ~~2008. This increase consisted of $215 million of higher unrealized margins partially offset by $77 million of lower realized margins. These changes were~~2008, primarily due to increased margins in the power, gas and oil trading positions resulting from unrealized trading losses in 2008 due to a dramatic decline in energy prices and a severe contraction of liquidity in the wholesale power markets.

~~Net energy trading~~Pennsylvania Gross Delivery Margins

The following table reconciles "Operating Income" to "Pennsylvania Gross Delivery Margins" as defined by PPL.

		2010		2009		2008

Operating Income (a)		$	1,866	$	896	$	1,703
Adjustments:
	Unregulated retail electric and gas (a)		(415)		(152)		(151)
	Wholesale energy marketing (a)		(4,027)		(2,955)		(3,194)
	Net energy trading margins (a)		(2)		(17)		121
	Energy-related businesses, net (b)		(26)		(27)		(38)
	Fuel (a)		1,235		920		1,057
	Energy purchases (a)		2,487		2,780		2,177
	Other operation and maintenance (a)		1,756		1,418		1,414
	Depreciation (a)		556		455		444
	Taxes, other than income (a)		238		280		288
	Revenue adjustments (c)		(1,540)		(2,490)		(2,650)
	Expense adjustments (c)		(1,273)		(256)		(288)
Pennsylvania gross delivery margins		$	855	$	852	$	883

(a)	As reported on the Statements of Income.

(b)	Amount represents the net of "Energy-related businesses" revenue and expense as reported on the Statements of Income.

(c)	The components of these adjustments are detailed in the table below.

The following table provides the income statement line items and other adjustments that comprise Pennsylvania gross delivery margins.

				2010		2009		Change		2009		2008		Change
Revenue
	Utility (a)			$	3,668	$	3,902	$	(234)	$	3,902	$	4,114	$	(212)
	Revenue adjustments (b)
		Exclude revenue from the Kentucky Regulated
			segment (c)		(493)				(493)
		Exclude WPD utility revenue (c)			(727)		(684)		(43)		(684)		(824)		140
		Exclude PLR revenue from energy supplied to
			PPL Electric by PPL EnergyPlus (c)		(320)		(1,806)		1,486		(1,806)		(1,826)		20
	Total revenue adjustments				(1,540)		(2,490)		950		(2,490)		(2,650)		160
					2,128		1,412		716		1,412		1,464		(52)
Expense
	Amortization of recoverable transition costs (a)						304		(304)		304		293		11
	Expense adjustments (b)
		Include external PLR energy purchases (d)			1,068		40		1,028		40		52		(12)
		Include gross receipts tax (e)			129		186		(57)		186		198		(12)
		Include Act 129 (f)			54				54
		Other			22		30		(8)		30		38		(8)
	Total expense adjustments				1,273		256		1,017		256		288		(32)
					1,273		560		713		560		581		(21)
Pennsylvania gross delivery margins				$	855	$	852	$	3	$	852	$	883	$	(31)

(a)	As reported on the Statements of Income.

(b)	To include/exclude the impact of any revenues and expenses consistent with the way management reviews Pennsylvania gross delivery margins internally.

(c)	Included in "Utility" on the Statements of Income.

(d)	Included in "Energy purchases" on the Statements of Income. Excludes NUG purchases, the sales of which are not included in "Utility" revenue.

(e)	Included in "Taxes, other than income" on the Statements of Income.

(f)	Included in "Other operation and maintenance" on the Statements of Income.

Pennsylvania Gross Delivery Margins by Component

Pennsylvania gross delivery margins ~~decreased by $162 million~~are generated through domestic regulated electric distribution activities, including PLR supply, and transmission activities.

	2010		2009		Change		2009		2008		Change

Distribution	$	679	$	702	$	(23)	$	702	$	731	$	(29)
Transmission		176		150		26		150		152		(2)
Pennsylvania gross delivery margins	$	855	$	852	$	3	$	852	$	883	$	(31)

Distribution

The decrease in ~~2008~~2010 compared with ~~2007. This~~2009 was primarily due to margins realized in 2009 related to the collection of CTC, which ended in December 2009, partially offset by favorable recovery mechanisms for certain energy related costs.

The decrease ~~consists of $135 million of~~in 2009 compared with 2008 was primarily due to lower ~~unrealized~~CTC/ITC margins ~~and $27 million of lower realized~~in 2009, ITC collections ended in 2008. Lower margins ~~both driven~~were also attributable to unfavorable economic conditions, including industrial customers scaling back on production. In addition, weather had an unfavorable impact on sales volumes, offset by ~~significant decreases~~favorable price increases.

Transmission

The increase in ~~power and gas prices~~2010 compared with 2009 was primarily due to increased investment in rate base, an increase in the ~~second half~~cost of ~~2008.~~capital due to an increase in equity and the recovery of additional costs through FERC formula-based rates.

Utility Revenues

The changes in utility revenues were attributable to:

2009 vs. 2008 2008 vs. 2007
Domestic:
Retail electric revenue (PPL Electric)
Delivery $ (60 ) $ 17
PLR (21 ) 19
Other 9 3

U.K.:
Foreign currency exchange rates (154 ) (42 )
Electric delivery revenue 14 3
$ (212 ) $

		2010 vs. 2009		2009 vs. 2008
Domestic:
	PPL Electric retail electric revenue (a)	$	(770)	$	(72)
	LKE		493
U.K.:
	Electric delivery revenue		41		14
	Foreign currency exchange rates		2		(154)
Total		$	(234)	$	(212)

~~The decreases~~

(a)	See "Pennsylvania Gross Delivery Margins" and "Pennsylvania Gross Delivery Margins by Component" above.

U.K. electric delivery revenues increased in ~~utility~~2010 compared with 2009, primarily due to price increases in April 2010 and 2009, partially offset by lower regulatory recovery due to a revised estimate of network electricity losses.

U.K. electric delivery revenues ~~for~~increased in 2009 compared with 2008, ~~excluding foreign currency exchange rate impacts, were~~ primarily due ~~to:~~

~~lower domestic retail electric revenues, attributable~~to price increases in April 2009 and 2008, increased regulatory recovery due to unfavorable economic conditions, including industrial customers scaling back on production. In addition, weather had an unfavorable impact on sales volumes. These decreases were partially offset by favorable price increases. See "Revenue Recognition" in Note 1 to the Financial Statements for information on a true-up of FERC formula-based transmission revenues.

~~higher U.K. electric delivery revenues, attributable primarily to an increase in prices effective April 1,~~ a revised estimate of network electricity losses, and favorable changes in customer mix. These increases were partially offset by lower volumes due to unfavorable economic conditions, including industrial customers scaling back on production, and a decrease in engineering and metering services performed for third parties.

The increases in utility revenues for 2008 compared with 2007, excluding foreign currency exchange rate impacts, were primarily due to higher PLR revenue, attributable to normal load growth and a favorable price increase, and higher domestic delivery revenue, primarily due to a base rate increase effective January 1, 2008, as well as normal load growth. These increases were partially offset by ~~the~~lower volumes due to unfavorable ~~impact of weather~~economic conditions, including industrial customers scaling back on ~~residential~~production and ~~commercial sales~~a decrease in ~~2008.~~engineering and metering services performed for third parties.

~~Energy-related~~Energy-Related Businesses

~~Energy-related~~The changes in contributions from energy-related businesses ~~contributed $11 million less to operating income in 2009 compared with 2008. The decrease was primarily attributable~~were due to:

	2010 vs. 2009		2009 vs. 2008

Domestic Mechanicals (a)	$	(7)	$	(7)
WPD (b)		2		(4)
Other		4
Total	$	(1)	$	(11)

·(a)	~~contributions from domestic energy services-related businesses decreasing by $7 million, primarily due~~Primarily attributable to a decline in construction activity caused by the slowdown in the ~~economy; and~~economy.

·(b)	Changes in contributions from U.K. energy-related businesses ~~decreasing by $4 million,~~were primarily due to increases in remote metering business activity in 2010 and decreases related to changes in foreign currency exchange ~~rates.~~rates in 2009.

~~Energy-related businesses contributed $31 million more to operating income in 2008 compared with 2007. The increase was primarily attributable to:~~

·	~~a $39 million impairment in 2007 of domestic telecommunication operations that were sold in 2007; and~~
·	~~an $11 million increase in contributions from domestic energy services-related businesses mainly due to increased construction activity; partially offset by~~
·	$11 million of lower pre-tax contributions from synfuel projects. This reflects a $77 million net gain recorded in 2007 on options purchased to hedge the risk associated with the phase-out of synthetic fuel tax credits. This decrease was partially offset by $66 million less in operating losses from synfuel projects as the projects ceased operation at the end of 2007; and
·	~~$5 million less in contributions from the domestic telecommunication operations sold in 2007.~~

See Note 8 to the Financial Statements for additional information on the sale of domestic telecommunications assets. See Note 14 to the Financial Statements for additional information on the shutdown of the synfuel facilities in 2007.

Other Operation and Maintenance

The ~~increases~~changes in other operation and maintenance expenses were due to:

2009 vs. 2008 2008 vs. 2007

Payroll-related costs $ 29 $ 2
Defined benefit costs - U.S. (Note 12)
18 (7 )
Domestic and international workforce reductions (Note 12) 18 (7 )
WPD distribution costs 15 7
Montana hydroelectric litigation (Note 14) 8 1
Other costs at fossil/hydroelectric stations 7 1
Other nuclear related expenses 7 (10 )
Lower gains on sales of emission allowances 4 103
Impairment of transmission rights (a) (23 )
Contractor-related expenses (15 )
U.K. foreign currency exchange rates (24 ) (8 )
Impairment of cancelled generation expansion project in 2008 (Note 8) (22 ) 22
Defined benefit costs - U.K. (Note 12) (16 ) (28 )
PUC-reportable storm costs (11 ) (4 )
WPD recoverable engineering services (9 ) (17 )
Impairment and other charges - emission allowances (Notes 14 and 17) (9 ) 42
Montana basin seepage litigation (Note 14) (8 ) 8
WPD meter operator expenses (7 ) (6 )
Other - Domestic 6
Other - U.K. (5 ) (3 )
$ 1 $ 58

	2010 vs. 2009		2009 vs. 2008

LKE	$	139
Act 129 costs incurred (a)		54
Montana hydroelectric litigation (Note 15)		48	$	8
Defined benefit costs - U.K. (Note 13)		32		(16)
Other costs at Susquehanna nuclear plant		23		14
Vegetation management costs (b)		13		(5)
Payroll-related costs - PPL Electric		13		3
Outage costs at Susquehanna nuclear plant		11
Other costs at fossil/hydroelectric plants		2		17
Outage costs at fossil/hydroelectric plants				23
Workforce reductions (Note 13)		(22)		18
Impacts from emission allowances (c)		(16)		(9)
Defined benefit costs - U.S. (Note 13)		(3)		18
U.K. foreign currency exchange rates		(1)		(24)
Impairment of cancelled generation expansion project in 2008 (Note 8)				(22)
Montana basin seepage litigation (Note 15)				(8)
Other - Domestic		31		(7)
Other - U.K.		14		(6)
Total	$	338	$	4

(a)

~~In 2007, Maine Electric Power Company (MEPCO), ISO New England~~Relates to costs associated with a PUC-approved energy efficiency and ~~other New England transmission owners submitted a filing~~conservation plan. These costs are recovered in customer rates. See "Regulatory Issues - Pennsylvania Activities" in Note 15 to the ~~FERC seeking to roll the revenue requirement of the MEPCO transmission facilities into the regional transmission rates~~Financial Statements for additional information on this plan. These costs are included in New England and to change certain rules concerning the use of the transmission line for energy and capacity. PPL protested this proposal and recorded an impairment of the transmission rights based on their estimated fair value."Pennsylvania Gross Delivery Margins" above.

(b)

In 2010, PPL Electric increased its vegetation management around its 230- and 500-kV major transmission lines in response to federal reliability requirements for transmission vegetation management. See "Regulatory Issues - Energy Policy Act of 2005 - Reliability Standards" in Note 15 to the Financial Statements for additional information.

~~Amortization of Recoverable Transition Costs~~

(c)

For the period 2010 compared to 2009, $21 million relates to lower impairment charges of sulfur dioxide emission allowances. See Note 18 to the Financial Statements for additional information. Partially offsetting the decrease was a $5 million increase in the charge for the settlement of a dispute regarding the sale of certain annual nitrogen oxide allowance put options.

For the period 2009 compared to 2008, $33 million relates to lower impairment charges of nitrogen oxide allowances partially offset by $37 million of higher impairment charges of sulfur dioxide allowances. See Note 18 to the Financial Statements for additional information. Also contributing to the difference was a $13 million decrease in the charge for the settlement of a dispute regarding the sale of certain annual nitrogen oxide allowance put options.

Amortization of recoverable transition costs increased by $11 million in 2009 compared with 2008 and decreased by $17 million in 2008 compared with 2007. The amortization of recoverable transition costs was based on a PUC amortization schedule, adjusted for ITC and CTC recoveries in customer rates and related expenses. Since the amortization substantially matches the revenue recorded based on recovery in customer rates, there is minimal impact on earnings. At the end of 2009, PPL's recoverable transition costs have been fully amortized.

Depreciation

~~Increases~~The changes in depreciation expense were due to:

	2009 vs. 2008			2008 vs. 2007			2010 vs. 2009		2009 vs. 2008

Additions to PP&E (a)	$	43		$	39		$	52	$	43
LKE								49
U.K. foreign currency exchange rates		(25	)		(7	)				(25)
Extension of useful lives of certain WPD network assets in mid-2007 (Note 1)					(13	)
Other		(7	)		(3	)				(7)
	$	11		$	16
Total							$	101	$	11

(a)

~~Primarily attributable to~~Additions included Susquehanna generation uprates and the completion of ~~the Susquehanna generation uprate and~~Brunner Island environmental projects in 2008 through 2010 as well as the Montour scrubber ~~projects~~project in ~~2008 and the Brunner Island scrubber projects in 2009.~~2008.

Taxes, Other Than Income

The ~~decreases~~changes in taxes, other than income were due to:

	2009 vs. 2008			2008 vs. 2007				2010 vs. 2009		2009 vs. 2008

Pennsylvania gross receipts tax (a)							Pennsylvania gross receipts tax (a)	$	(42)	$	(12)
U.K. foreign currency exchange rates	$	(12	)	$	(3	)	U.K. foreign currency exchange rates				(12)
Pennsylvania gross receipts tax (a)		(12	)		6
Domestic property tax expense (b)		10			(8	)	Domestic property tax expense (b)		1		10
Domestic sales and use tax		4			(4	)	Domestic sales and use tax		2		4
Other		2			(1	)
	$	(8	)	$	(10	)
LKE							LKE		2
Other (c)							Other (c)		(5)		2
Total							Total	$	(42)	$	(8)

(a)

The decrease in 2010 compared with 2009 was primarily due to a decrease in electricity revenue as customers chose alternative suppliers in 2010. This tax is included in "Unregulated Gross Energy Margins" and "Pennsylvania Gross Delivery Margins" above. The decrease in 2009 compared with 2008 was primarily due to a decrease in the tax rate in 2009.

(b)	The increase in ~~2008~~2009 compared with ~~2007 was primarily due to an increase in the tax rate in 2008. Gross receipts tax is passed through to customers.~~
~~(b)~~		~~The change in both periods~~2008 was primarily due to a $7 million property tax credit recorded by PPL Montana in 2008.

(c)	The decrease in 2010 compared with 2009 primarily relates to lower WPD real estate tax expense due to reductions in tax rates.

Other Income (Expense) - net

See Note 1617 to the Financial Statements for ~~details of other income.~~details.

Other-Than-Temporary Impairments

Other-than-temporary impairments decreased by $15 million in 2010 compared with 2009 and by $18 million in 2009 compared with ~~2008,~~2008. The decrease for both periods was primarily due to stronger ~~investment~~ returns on NDT investments caused by improved market conditions within the financial markets.

~~Other-than-temporary impairments increased by $33 million in 2008 compared with 2007, primarily due to negative investment returns caused by the downturn in the financial markets in 2008.~~

Interest Expense

The ~~decreases~~changes in interest expense were due to:

	2009 vs. 2008			2008 vs. 2007				2010 vs. 2009		2009 vs. 2008

Bridge Facility costs related to the acquisition of LKE (Notes 7 and 10)							Bridge Facility costs related to the acquisition of LKE (Notes 7 and 10)	$	80
PPL Capital Funding Junior Subordinated Notes (a)							PPL Capital Funding Junior Subordinated Notes (a)		27
Inflation adjustment on U.K. Index-linked Senior Unsecured Notes							Inflation adjustment on U.K. Index-linked Senior Unsecured Notes		23	$	(29)
LKE (Note 7)							LKE (Note 7)		20
Hedging activities	$	(30	)	$	(28	)	Hedging activities		15		(30)
Inflation adjustment on U.K. Index-linked Senior Unsecured Notes		(29	)		6
U.K. foreign currency exchange rates		(17	)		(8	)
Repayment of transition bonds		(13	)		(22	)	Repayment of transition bonds				(13)
Capitalized interest		13			(1	)	Capitalized interest		14		13
Amortization of debt issuance costs							Amortization of debt issuance costs		13		3
Montana hydroelectric litigation (Note 15)							Montana hydroelectric litigation (Note 15)		10
Other long-term debt interest expense							Other long-term debt interest expense		6		2
Short-term debt interest expense		6			7		Short-term debt interest expense		(1)		6
Long-term debt interest expense		4			28
Amortization of debt issuance costs		3			5
U.K. foreign currency exchange rates							U.K. foreign currency exchange rates		(3)		(17)
Other		4			(4	)	Other		2		5
	$	(59	)	$	(17	)
Total							Total	$	206	$	(60)

(a)	Interest related to the June 2010 issuance to support the LKE acquisition. See Notes 7 and 10 for additional information.

Income Taxes

The changes in income taxes were due to:

2009 vs. 2008 2008 vs. 2007

Higher (lower) pre-tax book income $ (298 ) $ 32
Tax on foreign earnings (a) (43 ) (3 )
Synthetic fuel and other tax credits (b) (17 ) 72
Valuation allowance adjustments (13 )
Tax return adjustments (c) 40 (8 )
Domestic manufacturing deduction 13 (2 )
U.K. Finance Act adjustments (d) 8 46
Tax reserve adjustments (a) (c) (e) 1 44
Other 9 (10 )
$ (300 ) $ 171

	2010 vs. 2009		2009 vs. 2008

Higher (lower) pre-tax book income	$	258	$	(287)
State valuation allowance adjustments		(52)		(13)
Federal income tax credits		(10)		(17)
Domestic manufacturing deduction		(8)		13
Federal and state tax reserve adjustments		(55)		(11)
Federal and state tax return adjustments		(25)		23
U.S. income tax on foreign earnings net of foreign tax credit		50		5
U.K. Finance Act adjustments		(18)		8
U.K. capital loss benefit				(46)
Foreign tax reserve adjustments		(17)		12
Foreign tax return adjustments				17
Health Care Reform		8
LKE		27
Other				5
Total	$	158	$	(291)

~~(a)~~		~~During 2009, WPD recorded a $46 million foreign tax benefit (and a full tax reserve reflected in "Tax reserve adjustments") related to losses generated by restructuring.~~
~~(b)~~		The Section 29/45K synthetic fuel tax credits expired at the end of 2007. During 2008, PPL recorded a $13 million adjustment to its estimated 2007 fuel tax credits as a result of the IRS publishing the final 2007 inflation-adjusted credit in April 2008.
~~(c)~~		During 2009, PPL received consent from the IRS to change its method of accounting for certain expenditures for tax purposes. PPL deducted the resulting IRC Sec. 481 adjustment on its 2008 tax return and recorded a $24 million adjustment to federal and state income tax expense, which results from the reduction of federal income tax benefits, related to the domestic manufacturing deduction and a reduction of certain state tax benefits related to state net operating losses and regulated depreciation. During 2008, WPD recorded tax benefits of approximately $17 million from tax return adjustments that were fully reserved.
~~(d)~~		The U.K.'s Finance Act of 2008, enacted in July 2008, included a phase-out of tax depreciation on certain buildings. As a result, WPD recorded an $8 million deferred tax benefit during 2008 related to the reduction in its deferred tax liabilities. The U.K.'s Finance Act of 2007, enacted in July 2007, included a reduction in the U.K.'s statutory income tax rate. Effective April 1, 2008, the statutory income tax rate was reduced from 30% to 28%. As a result, WPD recorded a $54 million deferred tax benefit during 2007 related to the reduction in its deferred tax liabilities.
~~(e)~~		PPL recorded an $8 million and $35 million benefit in 2008 and 2007 as a result of the expiration of applicable statutes of limitations. Additionally, PPL recorded tax benefits of $27 million in 2009 for the settlement of a tax dispute and foreign currency exchange losses.

See Note 5 to the Financial Statements for additional information on income taxes.

Discontinued Operations

See Note 9 to the Financial Statements for information related ~~to:~~

·	~~the anticipated sale of the Long Island generation business;~~
·	~~the sale of the majority of the Maine hydroelectric generation business in 2009;~~
·	~~the sale of the 8.33% interest in Wyman Unit 4 in 2009;~~
·	~~the sale of the Latin American businesses in 2007 and the substantial dissolution of the remaining holding companies in 2008; and~~
·	~~the sale of the natural gas distribution and propane businesses in 2008.~~

to various 2010 and 2009 sales, including the anticipated sale of certain non-core generation facilities expected to occur in the first quarter of 2011.

Financial Condition

Liquidity and Capital Resources

PPL expects to continue to have adequate liquidity available through operating cash flows, cash and cash equivalents and its credit facilities. Additionally, subject to market conditions, PPL currently plans to access ~~debt~~ capital markets in ~~2010. PPL currently does not plan to access commercial paper markets or equity capital markets in 2010.~~2011.

PPL's cash flows from operations and access to cost-effective bank and capital markets are subject to risks and uncertainties including, but not limited to:

·	changes in market prices for electricity;

·	changes in commodity prices that may increase the cost of producing power or decrease the amount PPL receives from selling power;

·	operational and credit risks associated with selling and marketing products in the wholesale power markets;

·	potential ineffectiveness of the trading, marketing and risk management policy and programs used to mitigate PPL's risk exposure to adverse electricity and fuel prices, interest rates, foreign currency exchange rates and counterparty credit;

·	unusual or extreme weather that may damage PPL's transmission and distribution facilities or affect energy sales to customers;

·	reliance on transmission and distribution facilities that PPL does not own or control to deliver its electricity and natural gas;

·	unavailability of generating units (due to unscheduled or longer-than-anticipated generation outages, weather and natural disasters) and the resulting loss of revenues and additional costs of replacement electricity;

·	the ability to recover and the timeliness and adequacy of recovery of costs associated with regulated utility businesses;

·	costs of compliance with existing and new environmental laws and with new security and safety requirements for nuclear facilities;

·	any adverse outcome of legal proceedings and investigations with respect to PPL's current and past business activities;

·	deterioration in the financial markets that could make obtaining new sources of bank and capital markets funding more difficult and more costly; and

·	a downgrade in PPL's or its rated subsidiaries' credit ratings that could adversely affect their ability to access capital and increase the cost of credit facilities and any new debt.

See "Item 1A. Risk Factors" for further discussion of risks and uncertainties affecting PPL's cash flows.

At December 31, PPL had the following:

	2009		2008		2007		2010		2009		2008

Cash and cash equivalents	$	801	$	1,100	$	430	$	925	$	801	$	1,100
Short-term investments (a) (b)				150		108		163				150
	$	801	$	1,250	$	538	$	1,088	$	801	$	1,250
Short-term debt	$	639	$	679	$	92	$	694	$	639	$	679

(a)	2010 amount represents tax-exempt bonds issued by Louisville/Jefferson County, Kentucky on behalf of LG&E that were subsequently purchased by LG&E. Such bonds were remarketed to unaffiliated investors in January 2011. See Note 7 to the Financial Statements for further discussion.

(b)	2008 amount represents tax-exempt bonds issued by the PEDFA in December 2008 on behalf of PPL Energy Supply and purchased by a subsidiary of PPL Energy Supply upon issuance. Such bonds were refunded in April 2009. See Note 7 to the Financial Statements for further discussion.
~~(b)~~		~~Includes $15 million of auction rate securities at December 31, 2007. See below for a discussion of auction rate securities.~~

The changes in PPL's cash and cash equivalents position resulted from:

2009 2008 2007

Net Cash Provided by Operating Activities $ 1,852 $ 1,589 $ 1,571
Net Cash Used in Investing Activities (880 ) (1,627 ) (614 )
Net Cash Provided by (Used in) Financing Activities (1,271 ) 721 (1,326 )
Effect of Exchange Rates on Cash and Cash Equivalents (13 ) 5
Net Increase (Decrease) in Cash and Cash Equivalents $ (299 ) $ 670 $ (364 )

~~Auction Rate Securities~~

PPL held auction rate securities with an aggregate par value of $25 million and $29 million at December 31, 2009 and 2008. Historically, an active market existed for such investments, and the auctions provided an opportunity for investors either to hold an investment at a periodically reset interest rate or to sell the investment at its par value for immediate liquidity. In early 2008, investor concerns about credit and liquidity in the financial markets, generally, as well as investor concerns over specific insurers that guarantee the credit of certain of the underlying securities, created uncertainty in the auction rate securities market and these securities generally failed to be remarketed through their established auction process. The auctions continue to fail and the resulting illiquidity continues to impact PPL's investment in auction rate securities.

At December 31, 2008, PPL estimated that the fair value of its auction rate securities was $24 million, which is reflected in "Other investments" on the Balance Sheet and represented a temporary decline of $5 million from par value.

In 2009, PPL liquidated $4 million of auction rate securities at par. At December 31, 2009, PPL estimated that the fair value of its auction rate securities was equal to par value, which was $25 million and is reflected in "Other investments" on the Balance Sheet. PPL reversed the previously recorded temporary impairment.

Because PPL intends and has the ability to hold these auction rate securities until they can be liquidated at par value, PPL believes that it does not have significant exposure to realize losses on these securities. Based upon the evaluation of available information, PPL believes these investments continue to be of high credit quality. Additionally, PPL does not anticipate having to sell these securities to fund operations. See Notes 17 and 21 to the Financial Statements for further discussion of auction rate securities.

	2010		2009		2008

Net cash provided by operating activities	$	2,033	$	1,852	$	1,589
Net cash used in investing activities		(8,229)		(880)		(1,627)
Net cash provided by (used in) financing activities		6,307		(1,271)		721
Effect of exchange rates on cash and cash equivalents		13				(13)
Net Increase (Decrease) in Cash and Cash Equivalents	$	124	$	(299)	$	670

Operating Activities

Net cash provided by operating activities increased by 10%, or $181 million in 2010 compared with 2009. The expiration of the long-term power purchase agreements between PPL Electric and PPL EnergyPlus at the end of 2009 enabled PPL EnergyPlus to sell power at higher market prices and had a positive impact on net income, and specifically on "unregulated gross energy margins" which increased over $600 million, after-tax, in 2010 compared with 2009, and therefore, was the primary driver to the above increase. The positive impact of additional earnings was partially offset by a reduction in the amount of counterparty collateral received and by additional defined benefit plan contributions.

Net cash provided by operating activities increased by 17%, or $263 million in 2009 compared with 2008, primarily as a result of cash collateral received from counterparties and the benefit of lower income tax payments due to the change in method of accounting for certain expenditures for tax purposes. These increases were partially offset by a decrease in accounts payable and the unfavorable impact of foreign currency exchange rates in 2009 compared with 2008.

Net cash provided by operating activities increased by 1%, or $18 million, in 2008 compared with 2007, primarily as a result of higher revenues, primarily due to the hedged sale of generation in the wholesale market, increased retail electric sales volumes and a 1.4% increase in domestic delivery sales prices, as well as less U.S. income tax payments, primarily as a result of a refund received in 2008, and operating losses incurred in 2007 in connection with synfuel projects that ceased operation at the end of 2007. The increases to cash provided by operating activities resulting from these items were partially offset by increased expenditures for fuel, primarily due to higher coal prices, lower realized net energy trading margins, driven by significant decreases in power and gas prices, higher interest paid, primarily due to higher debt levels in 2008, cash flows provided by Latin America's operations in 2007 but not 2008, due to the sale of the Latin American businesses in 2007, and an insurance recovery of storm costs in 2007.

A significant portion of PPL's operating cash flows is derived from its Supply segment baseload generation business activities. PPL employs a formal hedging program for its baseload generation fleet, the primary objective of which is to provide a reasonable level of near-term cash flow and earnings certainty ~~over the next three years,~~ while preserving upside potential ifof power ~~prices increase~~price increases over the medium term. See Note 1819 to the Financial Statements for further discussion. ~~Based on~~Despite its ~~generation portfolio contracting~~hedging practices, ~~(including related fuel purchases and commitments),~~ PPL expects ~~to achieve relatively stable cash flows related to baseload generation during the next three years, although,~~its future cash flows from operating activities ~~are expected~~from its Supply segment to be more influenced ~~more~~ by commodity prices than during the past ~~nine~~ years when long-term supply contracts were in place between PPL EnergyPlus and PPL Electric. ~~As discussed in "Item 1. Business,"~~In the near-term, PPL ~~estimates that, on average, approximately 94%~~expects its Supply segment operating cash flows to decline as a result of its total expected annual generation output (which includes baseload and other generation) for 2010 is committed under power sales contracts. PPL has also entered into commitments of varying quantities and terms for the years 2011 and beyond. In addition,lower commodity prices. PPL expects to ~~be able to achieve relatively stable~~see an increase in cash flows ~~related to PPL Electric's role as PLR~~from operating activities in the near-term from its Pennsylvania Regulated segment due to ~~contracts it~~its $77.5 million, or 1.6% rate increase that became effective on January 1, 2011. Finally, the acquisition of LKE (i.e. Kentucky Regulated segment) is expected to provide additional cash flows from operating activities through its regulated rate base that has ~~entered into~~been added to procure the 2010 and a portion of 2011 PLR electricity supply it expects to need for residential, small commercial and small industrial customers who do not choose an alternative supplier. See Note 14 to the Financial Statements for information on these energy purchase contracts.PPL's portfolio.

PPL's contracts for the sale and purchase of electricity and fuel often require cash collateral or other credit enhancements, or reductions or terminations of a portion of the entire contract through cash settlement, in the event of a downgrade of PPL's or its subsidiaries' credit ratings or adverse changes in market prices. For example, in addition to limiting its trading ability, if PPL's or its subsidiaries' ratings were lowered to below "investment grade" and there was a 10% adverse movement in energy prices, PPL estimates that, based on its December 31, ~~2009~~2010 positions, it would have had to post additional collateral of approximately ~~$291~~$441 million ~~compared~~ with ~~$815 million at December 31, 2008.~~respect to electricity and fuel contracts. PPL has in place risk management programs that are designed to monitor and manage its exposure to volatility of cash flows related to changes in energy and fuel prices, interest rates, foreign currency exchange rates, counterparty credit quality and the operating performance of its generating units.

Investing Activities

The primary use of cash in investing activities isin 2010 was for the acquisition of LKE. In 2009 and 2008, the primary use of cash in investing activities was capital expenditures. See "Forecasted Uses of Cash" for detail regarding capital expenditures in ~~2009~~2010 and projected expenditures for the years 2011 through 2015.

Net cash used in investing activities increased by $7.3 billion in 2010 ~~through 2012.~~compared with 2009, primarily as a result of $6.8 billion used for the acquisition of LKE. Net cash used in investing activities also increased, to a lesser extent, due to an increase of $372 million in capital expenditures, a decrease of $154 million from proceeds from the sale of other investments, and a change of $133 million from restricted cash and cash equivalents. See Note 10 to the Financial Statements for a discussion of the acquisition of LKE. The increase in cash used in investing activities from the above items was partially offset by the change in proceeds received from the sale of businesses, which are discussed in Note 9 to the Financial Statements. PPL received proceeds of $81 million from the sale of the maj ority of the Maine hydroelectric generation business in 2009, compared to proceeds of $162 million received in 2010 from the sales of the Long Island generation business and the remaining Maine hydroelectric generation business assets.

Net cash used in investing activities decreased by 46%, or $747 million, in 2009 compared with 2008, primarily as a result of a change of $289 million from restricted cash and cash equivalents, a change of $249 million from purchases and sales of other investments, a change of $241 million from purchases and sales of intangible assets and a decrease of $193 million in capital expenditures. See Note 1 to the Financial Statements for a discussion of restricted cash and cash equivalents and Note 7 to the Financial Statements for a discussion of the purchase and sale by a subsidiary of PPL Energy Supply of Exempt Facilities Revenue Bonds issued by the PEDFA on behalf of PPL Energy Supply. The decrease in cash used in investing activities from the above items was partially offset by the change in proceeds received ~~from~~fr om the sale of businesses, which are discussed in Note 9 to the Financial Statements. PPL received $303 million from the sale of the gas and propane businesses in 2008 compared to proceeds of $81 million received from the sale of the majority of the Maine hydroelectric generation business in 2009.

Financing Activities

Net cash provided by financing activities was $6.3 billion in 2010 compared with $1.3 billion of cash used in ~~investing~~financing activities in 2009. The change from 2009 to 2010 primarily reflects increased ~~165%, or $1.0 billion, in 2008 compared with 2007, as PPL received $303 million from the sale~~issuances of ~~the gas~~long-term debt and ~~propane businesses in 2008 compared to aggregate proceeds of $898 million received from the sale of the Latin American businesses and telecommunication operations in 2007. See Notes 8 and 9~~equity related to the ~~Financial Statements for a discussion~~acquisition of ~~these sales. Additionally, there was a change~~LKE in 2010, as well as fewer retirements of ~~$354 million from purchases and sales of other investments and a change of $359 million from purchases and sales of intangible assets. The increase~~long-term debt in cash used in investing activities from the above items was partially offset by a decrease of $239 million in capital expenditures and a decrease of $54 million in the amount of cash and cash equivalents that became restricted.

~~Financing Activities~~2010.

Net cash used in financing activities was $1.3 billion in 2009 compared with $721 million of cash provided by financing activities in ~~2008 and net cash used in financing activities of $1.3 billion in 2007.~~2008. The change from 2008 to 2009 primarily reflects fewer issuances and increased retirements of long-term debt in 2009, as well as the net repayment of short-term borrowings in 2009. ~~The change~~

In 2010, cash provided by financing activities primarily consisted of net debt issuances of $4.7 billion and $2.4 billion of net proceeds from ~~2007 to 2008 primarily reflects increased issuances and lower retirements of long-term debt, lower repurchases~~the issuance of common stock, partially offset by common stock dividends paid of $566 million and ~~increased short-term borrowings in 2008.~~debt issuance and credit facility costs paid of $175 million.

In 2009, cash used in financing activities primarily consisted of net debt retirements of $770 million and common stock dividends paid of $517 million, partially offset by $60 million of common stock sale proceeds.

In 2008, cash provided by financing activities primarily consisted of net debt issuances of $1.3 billion and $19 million of common stock sale proceeds, partially offset by common stock dividends paid of $491 million and the repurchase of 802,816 shares of common stock for $38 million.

In 2007, cash used in financing activities primarily consisted of net debt retirements of $170 million, the repurchase of 14,929,892 shares of common stock for $712 million and common stock dividends paid of $459 million, partially offset by $32 million of common stock sale proceeds. See Note 7 to the Financial Statements for a discussion of the common stock repurchase program.

See "Forecasted Sources of Cash" for a discussion of PPL's plans to issue debt and equity securities, as well as a discussion of credit facility capacity available to PPL. Also see "Forecasted Uses of Cash" for a discussion of plans to pay dividends on common and preferred securities in the future, as well as maturities of long-term debt.

PPL's debt financing activity in ~~2009~~2010 was:

Issuances (a) Retirements

PPL Capital Funding Senior Unsecured Notes $ (201 )
PPL Energy Supply Senior Unsecured Notes (a) (220 )
PPL Electric Senior Secured Bonds (b) $ 298 (586 )
Variable Rate Pollution Control Facilities Note (9 )
PPL Electric short-term debt (95 )
WPD short-term debt (net change) 43
Total $ 341 $ (1,111 )
Net decrease $ (770 )

		Issuances (a)		Retirements

PPL Capital Funding Junior Subordinated Notes (b)		$	1,150	$	(19)
PPL Capital Funding Senior Unsecured Notes					(1)
LG&E and KU Energy LLC Senior Unsecured Notes			870
LG&E First Mortgage Bonds			531
KU First Mortgage Bonds			1,489
WPD Senior Unsecured Notes			597
Other long-term debt			5
LG&E short-term debt			163
PPL Energy Supply short-term debt (net change)			65
WPD short-term debt (net change)					(158)
	Total	$	4,870	$	(178)
Net increase		$	4,692

(a)	Issuances are net of pricing discounts, where applicable and exclude the impact of debt issuance costs.

(b)	~~In March 2009, PPL Energy Supply~~Issuance is related to the Equity Units. Retirement reflects amount paid ~~$220 million, plus accrued interest,~~ to ~~complete tender offers to purchase up to $250~~repurchase $20 million aggregate principal amount of certain of its outstanding senior notes in order to reduce future interest expense. Under the Economic Stimulus Package, PPL will be permitted to defer recognition of income related to the extinguishment of these notes for tax purposes. No amounts will be included in taxable income for the first five years. Beginning in 2014, income related to the extinguishment of these notes will be included in taxable income ratably over five years.
~~(b)~~		~~Issuance is net of pricing discount. Retirements exclude a $9 million premium paid in connection with the December 2009 redemption of PPL Electric's 4.30% Senior Secured Bonds due 2013.~~junior subordinated notes.

See Note 7 to the Financial Statements for more detailed information regarding PPL's financing activities in ~~2009.~~2010.

Forecasted Sources of Cash

PPL expects to continue to have significant sources of cash available in the near term, including various credit facilities, a commercial paper program and operating leases. PPL currently ~~does not plan to access commercial paper markets in 2010 and~~ plans to issue up to ~~$300 million and £400~~$750 million in long-term debt securities in ~~2010,~~2011, subject to market ~~conditions.~~conditions, in addition to remarketing certain bonds at LG&E to unaffiliated investors as discussed below. Additionally, PPL's cash flows will include a full year of LKE's cash flows in 2011 and forward.

Credit Facilities

At December 31, ~~2009,~~2010, PPL's total committed borrowing capacity under credit facilities and the use of this borrowing capacity were:

Committed Capacity Borrowed Letters of Credit Issued (a)
Unused Capacity

PPL Energy Supply Domestic Credit Facilities (b) $ 4,125 $ 285 $ 662 $ 3,178
PPL Electric Credit Facilities (c) 340 6 334
Total Domestic Credit Facilities (d) $ 4,465 $ 285 $ 668 $ 3,512

WPDH Limited Credit Facility (e) ₤ 150 ₤ 132 n/a ₤ 18
WPD (South West) Credit Facilities (f) 214 60 ₤ 3 151
Total WPD Credit Facilities (g) ₤ 364 ₤ 192 ₤ 3 ₤ 169

		Committed				Letters of		Unused
		Capacity		Borrowed		Credit Issued (a)		Capacity

LG&E Credit Facility (b)		$	400	$	163			$	237
KU Credit Facility (b)			400			$	198		202
PPL Energy Supply Domestic Credit Facilities (c)			3,500		350		185		2,965
PPL Electric Credit Facilities (d)			350				13		337
	Total Domestic Credit Facilities (e)	$	4,650	$	513	$	396	$	3,741

WPDH Limited Credit Facility (f)		₤	150	₤	115		n/a	₤	35
WPD (South West) Credit Facility (g)			210				n/a		210
	Total WPD Credit Facilities (h)	₤	360	₤	115		n/a	₤	245

(a)

The borrower under each of these facilities has a reimbursement obligation to the extent any letters of credit are drawn upon.

(b)

Borrowings under LG&E's and KU's credit facilities generally bear interest at LIBOR-based rates plus a spread, depending upon the respective company's senior unsecured long-term debt rating. LG&E and KU also each have the capability to request the lenders to issue up to $400 million of letters of credit under its respective facility, which issuances reduce available borrowing capacity. Additionally, subject to certain conditions, LG&E and KU may each request that its respective facility's capacity be increased by up to $100 million. Both facilities expire in 2014.

The credit facilities each contain a financial covenant requiring the respective borrower's debt to total capitalization not to exceed 70% and other customary covenants. At December 31, 2010, LG&E's and KU's debt to total capitalization percentages, as calculated in accordance with the credit facilities, were 43% and 41%. The credit facilities also contain standard representations and warranties that must be made for LG&E or KU to borrow under them.

LG&E repaid its $163 million borrowing in January 2011 with proceeds received from the remarketing of certain tax exempt bonds.

~~(b)~~

(c)

PPL Energy Supply has the ability to borrow ~~$3.6~~$3.0 billion under its credit facilities. Such borrowings generally bear interest at LIBOR-based rates plus a spread, depending upon the company's ~~public~~senior unsecured long-term debt rating. PPL Energy Supply also has the capability to cause the lenders to issue up to ~~$3.9~~$3.5 billion of letters of credit under these facilities, which issuances reduce available borrowing capacity. ~~Under~~Subject to certain conditions, PPL Energy Supply may request that the capacity of one of its facilities be increased by up to $500 million.


		These credit facilities contain a financial covenant requiring debt to total capitalization not to ~~not~~ exceed 65%. At December 31, ~~2009~~2010 and ~~2008,~~2009, PPL Energy Supply's consolidated debt to total capitalization percentages, as calculated in accordance with its credit facilities, were ~~46%~~44% and ~~44%~~46%. The credit facilities also contain standard representations and warranties that must be made for PPL Energy Supply to borrow under them.


		The committed capacity expires as follows: ~~$600 million in 2010,~~ $300 million in 2011, $200 million in 2013 and ~~$3.2~~$3.0 billion in ~~2012. PPL Energy Supply intends to renew or replace the two credit facilities that expire in 2010 in order to maintain its current total committed capacity level.~~2014.


~~(c)~~	(d)	Borrowings under PPL Electric's ~~$190~~$200 million syndicated credit facility generally bear interest at LIBOR-based rates plus a spread, depending upon the company's ~~public~~senior secured long-term debt rating. PPL Electric also has the capability to request the lenders to issue up to ~~$190~~$200 million of letters of credit under this facility, which issuances reduce available borrowing capacity. ~~Under~~Subject to certain conditions, PPL Electric may request that the facility's capacity be increased by up to $100 million.


		The syndicated credit facility contains a financial covenant requiring debt to total capitalization not to ~~not~~ exceed 70%. At December 31, ~~2009 and 2008,~~2010, PPL Electric's consolidated debt to total capitalization ~~percentages,~~percentage, as calculated in accordance with its credit facility, ~~were 44% and 53%~~was 43%. The syndicated credit facility also contains standard representations and warranties that must be made for PPL Electric to borrow under it.


		Committed capacity includes a $150 million credit facility related to an asset-backed commercial paper program through which PPL Electric obtains financing by selling and contributing its eligible accounts receivable and unbilled revenues to a special purpose, wholly owned subsidiary on an ongoing basis. The subsidiary pledges these assets to secure loans of up to an aggregate of $150 million from a commercial paper conduit sponsored by a financial institution. At December 31, ~~2009,~~2010, based on accounts receivable and unbilled revenue pledged, $150 million was available for borrowing.


		The committed capacity expires as follows: $150 million in ~~2010~~2011 and ~~$190~~$200 million in ~~2012.~~2014. PPL Electric intends to renew its existing $150 million asset-backed credit facility in ~~2010~~2011 in order to maintain its current total committed capacity level.


~~(d)~~	(e)	The commitments under PPL's domestic credit facilities are provided by a diverse bank group, with no one bank and its affiliates providing an aggregate commitment of more than ~~15%~~12% of the total committed capacity.


~~(e)~~	(f)	Borrowings under WPDH Limited's credit facility bear interest at LIBOR-based rates plus a spread, depending upon the company's ~~public debt~~long-term credit rating.

		This credit facility contains financial covenants that require WPDH Limited to maintain an interest coverage ratio of not less than 3.0 times consolidated earnings before income taxes, depreciation and amortization and a RAB that exceeds total net debt by the higher of an amount equal to 15% of total net debt or £150 million, in each case as calculated in accordance with the credit facility. At December 31, ~~2009~~2010 and ~~2008,~~2009, WPDH Limited's interest coverage ratios, as calculated in accordance with its credit facility, were ~~4.3~~3.5 and ~~4.6.~~4.3. At December 31, ~~2009~~2010 and ~~2008,~~2009, WPDH Limited's RAB, as calculated in accordance with the credit facility, exceeded its total net debt by £364 million, or 27%, and £325 million, or 25%~~, and £385 million, or 31%~~.

(g)
~~(f)~~		Borrowings under WPD (South West) ~~has two~~'s credit facilities: one under which it can make cash borrowings and another under which it has the capability to cause the lender to issue up to approximately £4 million of letters of credit. Borrowingsfacility bear interest at LIBOR-based rates plus a margin.

		~~The~~ This credit facility ~~under which it can make cash borrowings~~ contains financial covenants that require WPD (South West) to maintain an interest coverage ratio of not less than 3.0 times consolidated earnings before income taxes, depreciation and amortization and total net debt not in excess of 85% of RAB, in each case as calculated in accordance with the credit facility. At December 31, 2010 and 2009, WPD (South West)'s interest coverage ~~ratio,~~ratios, as calculated in accordance with its credit facility, ~~was~~were 3.6 and 5.3. At December 31, 2010 and 2009, WPD (South West)'s total net debt, as calculated in accordance with the credit facility, was 75% and 67% of RAB.


~~(g)~~	(h)	The commitments under WPD's credit facilities are provided by eight banks, with no one bank providing more than 25% of the total committed capacity.

		The committed capacity ~~of WPD's credit~~under the facilities expires as follows: ~~£4 million in 2010,~~ £210 million in 2012 and £150 million in 2013. ~~WPD (South West) intends to renew its letter of credit facility that expires in 2010 in order for WPD to maintain its current total committed capacity level.~~


		At December 31, ~~2009,~~2010, the unused capacity of WPD's credit facilities was approximately ~~$276~~$381 million.

In addition to the financial covenants noted in the table above, the credit agreements governing the credit facilities contain various other covenants. Failure to comply with the covenants after applicable grace periods could result in acceleration of repayment of borrowings and/or termination of the agreements. PPL monitors compliance with the covenants on a regular basis. At December 31, ~~2009,~~2010, PPL was in material compliance with these covenants. At this time, PPL believes that these covenants and other borrowing conditions will not limit access to these funding sources.

See Note 7 to the Financial Statements for further discussion of PPL's credit facilities.

Commercial Paper

PPL ~~Energy Supply and PPL~~ Electric usually maintain commercial paper programs, under which commercial paper issuances are supported by certain credit facilities of each company, to provide an additional financing source to fund their short-term liquidity needs, if and when necessary.

As discussed below under "Credit Ratings," S&P lowered its rating on PPL Energy Supply's commercial paper to A-3 from A-2 in January 2009. Since PPL Energy Supply did not plan to issue any commercial paper during 2009 and there was essentially no liquidity in commercial paper markets for paper with an A-3 rating, PPL Energy Supply closed its $500 millionmaintains a commercial paper program ~~in January 2009 and requested that Moody's, S&P and Fitch each withdraw their ratings on its commercial paper program, which each rating agency subsequently did.~~

~~PPL Energy Supply may reopen its commercial paper program in the future, depending on market conditions and credit ratings,~~for up to $200 million to provide an additional financing source to fund its short-term liquidity needs, if and when necessary. ~~Any future commercial~~Commercial paper issuances ~~would be~~are currently supported by PPL ~~Energy Supply's credit facilities.~~

~~PPL Electric has a~~Electric's $200 million ~~commercial paper program~~syndicated credit facility, which expires in place. As noted below under "Credit Ratings," commercial paper for PPL Electric is rated P-2, A-2 and F2 by Moody's, S&P and Fitch. Market conditions to issue commercial paper with these ratings have strengthened significantly since 2008, when the downturn in the financial markets created extremely limited liquidity resulting in high borrowing rates. December 2014, based on available capacity.

PPL Electric did not issue any commercial paper during ~~2009.~~2010. Based on its current cash position and anticipated cash flows, PPL Electric currently does not plan to issue any commercial paper during ~~2010,~~2011, but it may do so from time to time, subject to market conditions, to facilitate short-term cash flow needs.

Operating Leases

PPL and its subsidiaries also have available funding sources that are provided through operating leases. PPL's subsidiaries lease office space, land, buildings and certain equipment. These leasing structures provide PPL additional operating and financing flexibility. The operating leases contain covenants that are typical for these agreements, such as maintaining insurance, maintaining corporate existence and timely payment of rent and other fees.

PPL, through its subsidiary PPL Montana, leases a 50% interest in Colstrip Units 1 and 2 and a 30% interest in Unit 3, under four 36-year, non-cancelable operating leases. These operating leases are not recorded on PPL's Balance Sheets. The leases place certain restrictions on PPL Montana's ability to incur additional debt, sell assets and declare dividends. At this time, PPL believes that these restrictions will not limit access to these funding sources or cause acceleration or termination of the leases. See Note 7 to the Financial Statements for a discussion of other dividend restrictions related to PPL subsidiaries.

See Note 1011 to the Financial Statements for further discussion of the operating leases.

Long-Term Debt and Equity Securities

~~Subject~~In January 2011, LG&E remarketed to ~~market conditions,~~unaffiliated investors $163 million of tax-exempt bonds issued by Louisville/Jefferson County, Kentucky on behalf of LG&E. The proceeds from the remarketing were used for the repayment of short-term debt under its syndicated credit facility.

In addition to the remarketing, PPL and its subsidiaries currently plan to issue up to ~~$300 million and £400~~$750 million in long-term debt securities in ~~2010.~~2011, subject to market conditions. PPL expects to use the proceeds from ~~these issuances for~~ the ~~repayment~~issuance of ~~short-term~~long-term debt securities primarily to refund PPL Energy Supply's 2011 debt maturity, to fund capital expenditures and for general corporate purposes.

PPL currently plans to issue new shares of common stock in ~~2010~~2011 in an aggregate amount ~~of approximately $75~~up to $300 million under various employee stock-based compensation plans and its ~~dividend reinvestment plan.~~DRIP.

The Economic Stimulus Package

In April 2010, PPL Electric entered into an agreement with the DOE, in which the agency is to provide funding for one-half of a $38 million smart grid project. The project would use smart grid technology to strengthen reliability, save energy and improve electric service for 60,000 Harrisburg, Pennsylvania area customers. It would also provide benefits beyond the Harrisburg region, helping to speed power restoration across PPL Electric's 29-county service territory. Work on the project is progressing on schedule, and PPL Electric is receiving reimbursements under the grant for costs incurred. The project is scheduled to be completed by the end of September 2012.

Forecasted Uses of Cash

In addition to expenditures required for normal operating activities, such as purchased power, payroll, fuel and taxes, PPL currently expects to incur future cash outflows for capital expenditures, various contractual obligations, payment of dividends on its common and preferred securities and possibly the purchase or redemption of a portion of debt securities.

Capital Expenditures

The table below shows PPL's actual spending for the year ~~2009~~2010 and current capital expenditure projections for the years ~~2010~~2011 through ~~2012.~~2015.

Actual Projected
2009 2010 2011 2012
Construction expenditures (a) (b)
Generating facilities $ 361 $ 671 $ 673 $ 507
Transmission and distribution facilities 511 862 1,097 990
Environmental 178 63 19 99
Other 75 114 107 106
Total Construction Expenditures 1,125 1,710 1,896 1,702
Nuclear fuel 140 151 173 171
Total Capital Expenditures $ 1,265 $ 1,861 $ 2,069 $ 1,873

			Actual		Projected
			2010		2011		2012		2013		2014		2015
Construction expenditures (a) (b)
	Generating facilities		$	582	$	781	$	641	$	554	$	364	$	501
	Transmission and distribution facilities			702		1,035		1,241		1,553		1,488		1,145
	Environmental			60		381		614		789		1,054		1,045
	Other			162		193		223		177		179		395
		Total Construction Expenditures		1,506		2,390		2,719		3,073		3,085		3,086
Nuclear fuel				138		152		159		161		158		160
		Total Capital Expenditures	$	1,644	$	2,542	$	2,878	$	3,234	$	3,243	$	3,246

(a)

Construction expenditures include capitalized interest and AFUDC, which are expected to be approximately ~~$190~~$290 million for the years ~~2010~~2011 through ~~2012.~~2015.

(b)

Includes expenditures for certain intangible assets.

PPL's capital expenditure projections for the years ~~2010~~2011 through ~~2012~~2015 total approximately ~~$5.8~~$15.1 billion. Capital expenditure plans are revised periodically to reflect changes in operational, market and regulatory conditions. ~~This~~For the years presented, this table includes projected costs related to the planned ~~239~~817 MW of incremental capacity increases, PPL Electric's asset optimization program focused on the replacement of aging transmission and distribution assets, ~~and~~ the PJM-approved regional transmission line expansion ~~project.~~project, and LKE's and Energy Supply's environmental projects related to anticipated new EPA air compliance standards. See Note 8 to the Financial Statements for information on the PJM-approved regional transmission line expansion project and the other significant development projects.

PPL plans to fund its capital expenditures in ~~2010~~2011 with cash on hand, cash from operations and proceeds from the issuance of common stock and debt securities.

Contractual Obligations

PPL has assumed various financial obligations and commitments in the ordinary course of conducting its business. At December 31, ~~2009,~~2010, the estimated contractual cash obligations of PPL were:

	Total		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years				Total		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years

Long-term Debt (a)	$	7,066			$	500	$	1,447	$	5,119	Long-term Debt (a)		$	12,604	$	502	$	1,137	$	1,610	$	9,355
Interest on Long-term Debt (b)		8,342	$	421		812		705		6,404	Interest on Long-term Debt (b)			11,794		636		1,205		1,113		8,840
Operating Leases(c)		968		108		216		223		421			891		122		237		218		314
Purchase Obligations ~~(c)~~(d)		8,123		3,153		2,212		868		1,890			8,605		2,908		2,537		1,336		1,824
Other Long-term Liabilities Reflected on the Balance Sheet under GAAP (d) (e)		80		62		18
Other Long-term Liabilities											Other Long-term Liabilities
												Reflected on the Balance
												Sheet under GAAP (e) (f)		480		260		185		35
Total Contractual Cash Obligations	$	24,579	$	3,744	$	3,758	$	3,243	$	13,834	Total Contractual Cash Obligations		$	34,374	$	4,428	$	5,301	$	4,312	$	20,333

(a)

Reflects principal maturities only based on ~~legal~~stated maturity ~~dates.~~dates, except for PPL Energy Supply's 5.70% Reset Put Securities (REPS). See Note 7 to the Financial Statements for a discussion of the remarketing feature related to ~~PPL Energy Supply's 5.70% REset Put Securities,~~the REPS, as well as discussion of variable-rate remarketable bonds issued ~~by the PEDFA~~ on behalf of PPL Energy Supply, LG&E and ~~PPL Electric.~~KU. PPL does not have any significant capital lease obligations.

(b)

Assumes interest payments through ~~maturity.~~stated maturity, except for the REPS, for which interest is reflected to the put date. The payments herein are subject to change, as payments for debt that is or becomes variable-rate debt have been estimated and payments denominated in British pounds sterling have been translated to U.S. dollars at a current foreign currency exchange rate.

(c)	See Note 11 to the Financial Statements for additional information.

(d)

The payments reflected herein are subject to change, as certain purchase obligations included are estimates based on projected obligated quantities and/or projected pricing under the contracts. Purchase orders made in the ordinary course of business are excluded from the amounts presented. The payments also include obligations related to nuclear fuel and the installation of the scrubbers, which are also reflected in the Capital Expenditures table presented above.

~~(d)~~

(e)

The amounts reflected represent WPD's contractual deficit pension funding requirements arising from an actuarial valuation performed in March ~~2007.~~2010. The U.K. electricity regulator currently allows a recovery of a substantial portion of the contributions relating to the plan deficit; however, WPD cannot be certain that this will continue beyond the current ~~and next~~ review ~~periods,~~period, which ~~extend~~extends to March 31, 2015. Based on the current funded status of PPL's U.S. qualified pension plans, no cash contributions are required. See Note 1213 to the Financial Statements for a discussion of expected contributions. The amount also represents currently projected cash flows for LKE's construction commitments.

~~(e)~~

(f)

At December 31, ~~2009,~~2010, total unrecognized tax benefits of ~~$212~~$251 million were excluded from this table as PPL cannot reasonably estimate the amount and period of future payments. See Note 5 to the Financial Statements for additional information.

Dividends

PPL views dividends as an integral component of shareowner return and expects to continue to pay dividends in amounts that are within the context of maintaining a capitalization structure that supports investment grade credit ratings. In ~~2009,~~2010, PPL increased the annualized dividend rate on its common stock from ~~$1.34~~$1.38 to ~~$1.38~~$1.40 per share, effective with the April 1, ~~2009~~2010 dividend payment. Future dividends will be declared at the discretion of the Board of Directors and will depend upon ~~available~~future earnings, cash flows, financial and legal requirements and other relevant factors at the time. As discussed in Note 7 to the Financial Statements, subject to certain exceptions, PPL may not declare or pay any cash dividend on its common stock during any period in which PPL Capital Funding defers interest payments on its 2007 Series A Junior Subordinated Notes due ~~2067.~~2067 or its 4.625% Junior Subordinated Notes due 2018 or until deferred contract adjustment payments on PPL's Purchase Contracts have been paid. No such deferrals have occurred or are currently anticipated.

PPL Electric expects to continue to pay quarterly dividends on its outstanding preferred securities, if and as declared by its Board of Directors.

See Note 7 to the Financial Statements for other restrictions related to distributions on capital interests for PPL subsidiaries.

Purchase or Redemption of Debt Securities

PPL will continue to evaluate purchasing or redeeming outstanding debt securities and may decide to take action depending upon prevailing market conditions and available cash.

Credit Ratings

Moody's, S&P and Fitch periodically review the credit ratings on the debt and preferred securities of PPL and its subsidiaries. Based on their respective independent reviews, the rating agencies may make certain ratings revisions or ratings affirmations.

A credit rating reflects an assessment by the rating agency of the creditworthiness associated with an issuer and particular securities that it issues. The credit ratings of PPL and its subsidiaries are based on information provided by PPL and other sources. The ratings of Moody's, S&P and Fitch are not a recommendation to buy, sell or hold any securities of PPL or its subsidiaries. Such ratings may be subject to revisions or withdrawal by the agencies at any time and should be evaluated independently of each other and any other rating that may be assigned to the securities. A downgrade in PPL's or its subsidiaries' credit ratings could result in higher borrowing costs and reduced access to capital markets.

~~The following table summarizes the credit~~In prior periodic reports, PPL described its then-current debt ratings in connection with, and to facilitate, an understanding of ~~PPL and~~ its ~~rated subsidiaries at December 31, 2009:~~

		~~Moody's~~	~~S&P~~	~~Fitch~~ ~~(a)~~
~~PPL~~
	~~Issuer Rating~~	~~Baa2~~	~~BBB~~	~~BBB~~
	~~Outlook~~	~~Negative~~	~~Negative~~	~~STABLE~~

~~PPL Capital Funding~~
	~~Issuer Rating~~			~~BBB~~
	~~Senior Unsecured Debt~~	~~Baa2~~	~~BBB-~~	~~BBB~~
	~~Junior Subordinated Notes~~	~~Baa3~~	~~BB+~~	~~BBB-~~
	~~Outlook~~	~~Negative~~		~~STABLE~~

~~PPL Energy Supply~~ ~~(b)~~
	~~Issuer Rating~~		~~BBB~~	~~BBB~~
	~~Senior Unsecured Notes~~	~~Baa2~~	~~BBB~~	~~BBB~~
	~~Outlook~~	~~STABLE~~	~~Negative~~	~~STABLE~~

~~PPL Electric~~ ~~(c)~~
	~~Senior Unsecured/Issuer Rating~~	~~Baa1~~	A-	~~BBB~~
	~~First Mortgage Bonds/ Senior Secured Bonds~~	A3	A-	A-
	~~Commercial Paper~~	~~P-2~~	~~A-2~~	F2
	~~Preferred Stock~~	~~Baa3~~	~~BBB~~	~~BBB~~
	~~Preference Stock~~	~~Baa3~~	~~BBB~~	~~BBB~~
	~~Outlook~~	~~Negative~~	~~Negative~~	~~STABLE~~

~~PPL Montana~~
	~~Pass-Through Certificates~~	~~Baa3~~	~~BBB-~~	~~BBB~~
	~~Outlook~~	~~STABLE~~	~~STABLE~~

~~WPDH Limited~~
	~~Issuer Rating~~	~~Baa3~~	~~BBB-~~	~~BBB-~~
	~~Senior Unsecured Debt~~	~~Baa3~~	~~BBB-~~	~~BBB~~
	~~Short-term Debt~~		~~A-3~~
	~~Outlook~~	~~STABLE~~	~~Negative~~	~~POSITIVE~~

~~WPD LLP~~
	~~Issuer Rating~~			~~BBB~~
	~~Outlook~~			~~POSITIVE~~

~~WPD (South Wales)~~
	~~Issuer Rating~~		~~BBB+~~	~~BBB+~~
	~~Senior Unsecured Debt~~	~~Baa1~~	~~BBB+~~	A-
	~~Short-term Debt~~		~~A-2~~	F2
	~~Outlook~~	~~STABLE~~	~~Negative~~	~~POSITIVE~~

~~WPD (South West)~~
	~~Issuer Rating~~	~~Baa1~~	~~BBB+~~	~~BBB+~~
	~~Senior Unsecured Debt~~	~~Baa1~~	~~BBB+~~	A-
	~~Short-term Debt~~	~~P-2~~	~~A-2~~	F2
	~~Outlook~~	~~STABLE~~	~~Negative~~	~~POSITIVE~~

~~(a)~~		~~All Issuer Ratings for Fitch are "Issuer Default Ratings."~~
~~(b)~~		Excludes Exempt Facilities Revenue Bonds issued by the PEDFA on behalf of PPL Energy Supply, which are each currently supported by a letter of credit and are rated on the basis of the credit enhancement.
~~(c)~~		Excludes Pollution Control Revenue Bonds issued by the LCIDA and the PEDFA on behalf of PPL Electric, of which the LCIDA bonds are insured and may be rated on the basis of relevant factors, including the insurer's ratings.

In January 2009, S&P completed a review of PPL, PPL Energy Supply and PPL Electric and revised its outlook for all three entities to negative from stable. At that time, S&P affirmed the BBB issuer rating of both PPL and PPL Energy Supply and affirmed the A- issuer rating of PPL Electric.liquidity position. As a result of the ~~negative outlook at~~passage of the Dodd-Frank Act and the attendant uncertainties relating to the extent to which issuers of non-asset backed securities may disclose credit ratings without being required to obtain rating agency consent to the inclusion of such disclosure, or incorporation by reference of such disclosure, in a registrant's registration statement or section 10(a) prospectus, PPL ~~Energy Supply, S&P lowered~~is limiting its credit rating disclosure to a description of the actions taken by the rating agencies with respect to PPL's ratings, but without stating what ratings have been assigned to PPL or its subsidiaries, or their securities. The ratings assigned by the rating agencies to PPL and its subsidiaries and their respective securities may be found, without charge, on each of the respective ratings agencies' websites, which ratings together with all other information contained on such rating agency websites is hereby explicitly not incorporated by reference in this report.

The rating agencies took the following actions related to PPL and its subsidiaries in 2010.

Moody's

In April 2010, Moody's took the following actions:

·	Revised the outlook for PPL, PPL Capital Funding and PPL Electric;

·	Lowered the issuer rating of PPL and the senior unsecured debt rating of PPL Capital Funding;

·	Lowered the rating of PPL Capital Funding's junior subordinated notes and PPL Electric's preferred securities;

·	Lowered the issuer rating of PPL Electric;

·	Affirmed the senior secured debt rating and commercial paper rating of PPL Electric; and

·	Affirmed the senior unsecured notes rating and the outlook of PPL Energy Supply.

Moody's stated in its press release that the revisions in the ratings for PPL, PPL Capital Funding, and PPL Electric, while reflective of PPL's then-announced agreement to acquire LKE, are driven more by weakening financial metrics and the outlooks that had been in place for PPL and PPL Electric for the past year.

In August 2010, Moody's affirmed all of PPL Energy ~~Supply to A-3 from A-2.~~ Supply's ratings.

In October 2010, Moody's affirmed the ratings for PPL and PPL Capital Funding following PPL's receipt of FERC approval of its then-pending acquisition of LKE.

In November 2010, Moody's took the following actions:

·	Assigned a senior unsecured debt rating to LG&E and KU Energy LLC; and

·	Assigned a senior secured debt rating to LG&E and KU.

S&P

In April 2010, S&P took the following actions:

·	Revised the outlook of PPL, PPL Energy Supply and PPL Capital Funding;

·	Revised the outlook of WPDH Limited, WPD (South Wales) and WPD (South West); and

·	Affirmed its credit ratings for PPL, PPL Capital Funding, PPL Energy Supply, PPL Electric, WPDH Limited, WPD (South Wales) and WPD (South West).

S&P stated in its press release ~~regarding PPL and PPL Energy Supply~~ that the ~~revision in~~change to the outlook for PPL and PPL Energy Supply ~~was based primarily on lower than expected cash flows for 2008 combined with concerns over further pressure on financial metrics~~considers the greater regulated mix that will result from PPL acquiring LKE, resulting in ~~2009.~~a pro forma "strong" consolidated business risk profile. S&P also stated in its press release regarding PPL Electric that the revision in its outlook reflects the linkage with PPL along with their expectation that PPL Electric's financial metrics could weaken beginning in 2010.

~~At the request of PPL Energy Supply, in the first quarter of 2009, Moody's, S&P and Fitch each withdrew their commercial paper rating for PPL Energy Supply.~~

In February 2009, S&P revised its outlook to negative from stable for each of WPDH Limited, WPD LLP, WPD (South Wales) and WPD (South West) and affirmed the issuer and short-term debt ratings of each of the entities. S&P stated in its press release that the revision in the outlook for WPD is a reflection of the change to PPL's outlook and is not a result of any change in WPD's stand-alone credit profile.

In May 2009, Moody's completed a review of PPL, PPL Energy Supply and PPL Electric. As a result of that review, Moody's revised its outlook for PPL, PPL Capital Funding, and PPL Electric to negative from stable. AtOctober 2010, S&P took the ~~same time, Moody's affirmed the Baa2 senior unsecured rating and stable outlook of PPL Energy Supply. Moody's~~following actions:

·	Revised the outlook of PPL, PPL Capital Funding, PPL Energy Supply, and PPL Electric;

·	Raised the issuer rating of PPL and PPL Energy Supply;

·	Raised the senior unsecured and junior subordinated debt ratings of PPL Capital Funding;

·	Raised the senior unsecured debt rating of PPL Energy Supply; and

·	Affirmed its credit ratings for PPL Electric.

S&P stated in its press release that the ~~revision in~~upgrades reflect S&P's opinion of an improved credit profile of the consolidated company following the closing of PPL's then-pending acquisition of LKE.

In November 2010, S&P affirmed its credit rating and revised the outlook for PPL Electric reflects Moody's expectation that PPL Electric's financial metrics will deteriorate beyond 2009 and considers the potential for additional pressure on cash flows. Moody's also stated that the revision in the outlook for PPL and PPL Capital Funding reflects the increasing support for corporate earnings and cash flow anticipated from PPL Energy Supply and the subordinate position of the unsecured lenders at these entities relative to the unsecured lenders at the subsidiary levels.Montana's Pass Through Certificates due 2020.

~~At WPD's request,~~Also in ~~September 2009,~~November 2010, S&P ~~withdrew its ratings for WPD LLP, since it did not have any securities outstanding.~~took the following actions:

~~In October 2009,~~

·	Assigned a senior unsecured debt rating to LG&E and KU Energy LLC; and

·	Assigned a senior secured debt rating to LG&E and KU.

Fitch completed a review of PPL, PPL Electric and PPL Energy Supply. As a result of that review, Fitch lowered the rating of PPL Energy Supply's senior unsecured notes to BBB from BBB+ and affirmed all other ratings of PPL Energy Supply. At the same time, Fitch affirmed all ratings of PPL, PPL Capital Funding and PPL Electric. Fitch stated in its press release that the change in the rating of PPL Energy Supply's senior unsecured notes aligns such rating with the BBB Issuer Default Rating in a manner that is consistent with the approach Fitch applies to other competitive generators and also recognizes a lower valuation of PPL Energy Supply's power assets based on current and forward wholesale power prices. The rating also reflects Fitch's forecast of lower than previously expected improvement in PPL Energy Supply's earnings and cash flow in 2010 and 2011.

In January 2010, as a result of implementing its ~~recently~~ revised guidelines for rating preferred stock and hybrid securities, Fitch lowered the rating of PPL Capital Funding's junior subordinated notes ~~to BB+ from BBB-~~ and lowered the ratings of PPL Electric's preferred stock and preference ~~stock to BBB- from BBB.~~stock. Fitch stated in its press release that the new guidelines, which apply to instruments issued by companies in all sectors, typically resulted in downgrades of one notch for many instruments that provide for the ability to defer interest or dividend payments. Fitch stated that it has no reason to believe that such deferral will be activated.

In April 2010, Fitch affirmed its credit ratings for PPL, PPL Capital Funding, PPL Energy Supply and PPL Electric and retained the outlook for these entities following PPL's then-announced agreement to acquire LKE.

In May 2010, Fitch affirmed its rating and issued an outlook for PPL Montana's Pass Through Certificates due 2020.

In October 2010, Fitch affirmed its credit ratings for and revised the outlook of WPDH Limited, WPD (South Wales) and WPD (South West).

In November 2010, Fitch took the following actions:

·	Assigned an outlook, issuer ratings and senior unsecured debt rating to LG&E and KU Energy LLC; and

·	Assigned an outlook, issuer ratings and senior secured debt rating to LG&E and KU.

Ratings Triggers

~~WPD (South West)'s 1.541% Index-linked Notes due 2053 and 2056 and WPD (South Wales)'s 4.80436% Notes due 2037~~As discussed in Note 7 to the Financial Statements, certain of WPD's senior unsecured notes may be put by the holders back to the issuer for redemption if the long-term credit ratings assigned to the notes by Moody's, S&P or Fitch are withdrawn by any of the rating agencies or reduced to a non-investment grade rating of Ba1 or BB+ in connection with a restructuring event. A restructuring event includes the loss of, or a material adverse change to, the distribution license under which WPD (South West) and WPD (South Wales) operate. These notes totaled ~~£467 million~~£1.3 billion (approximately ~~$766 million)~~$2.0 billion) at December 31, ~~2009.~~2010.

PPL and PPL Energy Supply have various derivative and non-derivative contracts, including contracts for the sale and purchase of electricity and fuel, commodity transportation and storage, tolling agreements, and interest rate and foreign currency instruments, which contain provisions requiring PPL and PPL Energy Supply to post additional collateral, or permit the counterparty to terminate the contract, if PPL's or PPL Energy Supply's credit rating were to fall below investment grade. See Note 1819 to the Financial Statements for a discussion of "Credit Risk-Related Contingent Features," including a discussion of the potential additional collateral that would have been required for derivative contracts in a net liability position at December 31, ~~2009.~~2010. At December 31, ~~2009,~~2010, if PPL's and PPL Energy Supply's ~~credit~~cre dit ratings had been below investment grade, PPL would have been required to prepay or post an additional ~~$298~~$455 million of collateral to counterparties for both derivative and non-derivative commodity and commodity-related contracts used in its generation, marketing and trading operations and interest rate and foreign currency contracts.

Guarantees for Subsidiaries

~~At times,~~ PPL ~~provides~~ guarantees ~~for~~certain consolidated affiliate financing arrangements tothat enable certain ~~transactions for its consolidated affiliates, excluding PPL Electric.~~transactions. Some of the guarantees contain financial and other covenants that, if not met, would limit or restrict the consolidated affiliates' access to funds under these financing arrangements, require early maturity of such arrangements or limit the consolidated affiliates' ability to enter into certain transactions. At this time, PPL believes that these covenants will not limit access to relevant funding sources. See Note 1415 to the Financial Statements for additional information about guarantees.

Off-Balance Sheet Arrangements

PPL has entered into certain agreements that may contingently require payment to a guaranteed or indemnified party. See Note 1415 to the Financial Statements for a discussion of these agreements.

Risk Management - Energy Marketing & Trading and Other

Market Risk

See Notes 1, ~~17,~~18, and 1819 to the Financial Statements for information about PPL's risk management objectives, valuation techniques and accounting designations.

The forward-looking information presented below provides estimates of what may occur in the future, assuming certain adverse market conditions and model assumptions. Actual future results may differ materially from those presented. These disclosures are not precise indicators of expected future losses, but only indicators of possible losses under normal market conditions at a given confidence level.

Commodity Price Risk (Non-trading)

PPL segregates its non-trading activities into two categories: hedge activity and economic activity. Transactions that are accounted for as hedge activity qualify for hedge accounting treatment. The economic activity category includes transactions that address a specific risk, but were not eligible for hedge accounting or for which hedge accounting was not elected. This activity includes the changes in fair value of positions used to hedge a portion of the economic value of PPL's generation assets, ~~load-following~~full-requirement sales contracts and retail activities. This economic activity is subject to changes in fair value due to market price volatility of the input and output commodities (e.g., fuel and power). Although they do not receive hedge accounting treatment, these ~~transactions~~transaction s are considered non-trading activity. The net fair value of economic positions at December 31, ~~2009~~2010 and ~~2008~~2009 was a net liability of ~~$77~~$400 million and ~~$52~~$77 million. See Note 1819 to the Financial Statements for additional information on economic activity.

To hedge the impact of market price volatility on PPL's energy-related assets, liabilities and other contractual arrangements, PPL ~~EnergyPlus~~ sells and purchases physical energy at the wholesale level under FERC market-based tariffs throughout the U.S. and enters into financial exchange-traded and over-the-counter contracts. PPL's non-trading commodity derivative contracts mature at various times through 2017.

Within PPL's non-trading portfolio, the decision to enter into energy contracts is influenced by the expected value of PPL's generation. In determining the number of MWhs that are available to be sold forward, PPL first reduces the potential output by the amount of unavailable generation due to planned maintenance on a particular unit. The potential output is further reduced by the amount of MWhs that historically is not produced by a plant due to such factors as equipment breakage. Finally, the potential output of certain plants (such as peaking units) is reduced if their higher cost of production will not allow them to economically run during all hours.

PPL's non-trading portfolio also includes full requirements energy contracts. The net obligation to serve these contracts changes minute-by-minute. Anticipated usage patterns and energy peaks are affected by expected load changes, regional economic drivers, customer shopping or migration and seasonal weather patterns. PPL analyzes historical on-peak and off-peak usage patterns, expected load changes, regional economic drivers, and weather patterns, among other factors, to determine monthly levels of electricity that best fits usage patterns to minimize earnings exposure. To satisfy its full requirements obligations, PPL generally enters into contracts to purchase unbundled products of electricity, capacity, RECs and other ancillary products. To a lesser extent, PPL reserves a portion of its generation for full requirements contracts that is expected to be the best match with anticipated usage patterns and energy peaks.

The following ~~chart~~table sets forth the net fair value of PPL's non-trading commodity derivative contracts. See Notes 1718 and 1819 to the Financial Statements for additional information.

Gains (Losses)
2009 2008

Fair value of contracts outstanding at the beginning of the period $ 402 $ (305 )
Contracts realized or otherwise settled during the period 189 (49 )
Fair value of new contracts entered into during the period 143 101
Changes in fair value attributable to changes in valuation techniques (a) 158
Other changes in fair value 546 497
Fair value of contracts outstanding at the end of the period $ 1,280 $ 402

~~(a)~~

~~Amount represents the reduction of valuation reserves related to capacity and FTR contracts upon the adoption of fair value accounting guidance.~~

	Gains (Losses)
	2010		2009

Fair value of contracts outstanding at the beginning of the period	$	1,280	$	402
Contracts realized or otherwise settled during the period		(478)		189
Fair value of new contracts entered into during the period		(5)		143
Changes in fair value attributable to changes in valuation techniques		(23)
Fair value of LKE derivative contracts at the acquisition date		(24)
Other changes in fair value		197		546
Fair value of contracts outstanding at the end of the period	$	947	$	1,280

The following table segregates the net fair value of PPL's non-trading commodity derivative contracts at December 31, ~~2009~~2010 based on whether the fair value was determined by prices quoted in active markets for identical instruments or other more subjective means.

													Net Asset (Liability)
													Maturity						Maturity
	Net Asset (Liability)												Less Than		Maturity		Maturity		in Excess		Total Fair
	Maturity Less Than 1 Year			Maturity 1-3 Years		Maturity 4-5 Years		Maturity In Excess of 5 Years		Total Fair Value			1 Year		1-3 Years		4-5 Years		of 5 Years		Value
Source of Fair Value												Source of Fair Value
Prices quoted in active markets for identical instruments
Prices based on significant other observable inputs	$	363		$	736	$	73			$	1,172	Prices based on significant other observable inputs	$	351	$	592	$	8			$	951
Prices based on significant unobservable inputs		(1	)		13		30	$	66		108	Prices based on significant unobservable inputs		3		(29)		(4)	$	26		(4)
Fair value of contracts outstanding at the end of the period	$	362		$	749	$	103	$	66	$	1,280	Fair value of contracts outstanding at the end of the period	$	354	$	563	$	4	$	26	$	947

PPL sells electricity, capacity and related services and buys fuel on a forward basis to hedge the value of energy from its generation assets. If PPL were unable to deliver firm capacity and energy or to accept the delivery of fuel under its agreements, under certain circumstances it could be required to pay liquidating damages. These damages would be based on the difference between the market price and the contract price of the commodity. Depending on price changes in the wholesale energy markets, such damages could be significant. Extreme weather conditions, unplanned power plant outages, transmission disruptions, nonperformance by counterparties (or their own counterparties) with which it has energy contracts and other factors could affect PPL's ability to meet its obligations, or cause ~~significant~~signi ficant increases in the market price of replacement energy. Although PPL attempts to mitigate these risks, there can be no assurance that it will be able to fully meet its firm obligations, that it will not be required to pay damages for failure to perform, or that it will not experience counterparty nonperformance in the future.

Commodity Price Risk (Trading)

PPL's trading contracts mature at various times through 2015. The following table sets forth changes in the net fair value of PPL's trading commodity derivative contracts. See Notes 1718 and 1819 to the Financial Statements for additional information.

Gains (Losses)
2009 2008

Fair value of contracts outstanding at the beginning of the period $ (75 ) $ 16
Contracts realized or otherwise settled during the period 2 (18 )
Fair value of new contracts entered into during the period 31 28
Changes in fair value attributable to changes in valuation techniques (a) 11
Other changes in fair value 36 (112 )
Fair value of contracts outstanding at the end of the period $ (6 ) $ (75 )

~~(a)~~

In the fourth quarter of 2008, PPL refined its valuation approach for FTR and PJM basis positions, consistent with PPL's practice of pricing other less active trading points, resulting in changes in valuation techniques.

	Gains (Losses)
	2010		2009

Fair value of contracts outstanding at the beginning of the period	$	(6)	$	(75)
Contracts realized or otherwise settled during the period		(12)		2
Fair value of new contracts entered into during the period		39		31
Other changes in fair value		(17)		36
Fair value of contracts outstanding at the end of the period	$	4	$	(6)

PPL will reverse unrealized ~~gains~~losses of approximately $1$2 million over the next three months as the transactions are realized.

The following table segregates the net fair value of PPL's trading commodity derivative contracts at December 31, ~~2009~~2010 based on whether the fair value was determined by prices quoted in active markets for identical instruments or other more subjective means.

															Net Asset (Liability)
															Maturity						Maturity
	Net Asset (Liability)														Less Than		Maturity		Maturity		in Excess	Total Fair
	Maturity Less Than 1 Year			Maturity 1-3 Years			Maturity 4-5 Years		Maturity in Excess of 5 Years		Total Fair Value				1 Year		1-3 Years		4-5 Years		of 5 Years	Value
Source of Fair Value														Source of Fair Value
Prices quoted in active markets for identical instruments	$	1									$	1
Prices based on significant other observable inputs		(4	)	$	(5	)	$	2	$	1		(6	)	Prices based on significant other observable inputs	$	(1)	$	2	$	3		$	4
Prices based on significant unobservable inputs		(1	)									(1	)
Fair value of contracts outstanding at the end of the period	$	(4	)	$	(5	)	$	2	$	1	$	(6	)	Fair value of contracts outstanding at the end of the period	$	(1)	$	2	$	3		$	4

VaR Models

PPL utilizes a VaR model to measure commodity price risk in domestic gross energy margins for its non-trading and trading portfolios. VaR is a statistical model that attempts to estimate the value of potential loss over a given holding period under normal market conditions at a given confidence level. PPL calculates VaR using a Monte Carlo simulation technique based on a five-day holding period at a 95% confidence level. Given the company's conservative hedging program, PPL's non-trading ~~VAR~~VaR exposure is expected to be limited in the short term. At December 31, ~~2009~~2010 and December 31, ~~2008,~~2009, the VaR for PPL's portfolios using ~~end-of-quarter~~end-of-month results for the period was as follows.

Trading VaR Non-Trading VaR
2009 2008 2009 2008
95% Confidence Level, Five-Day Holding Period
Period End $ 3 $ 3 $ 8 $ 10
Average for the Period 4 10 9 14
High 8 22 11 20
Low 1 3 8 9

		Trading VaR				Non-Trading VaR
		2010		2009		2010		2009
95% Confidence Level, Five-Day Holding Period
	Period End	$	1	$	3	$	5	$	8
	Average for the Period		4		4		7		9
	High		9		8		12		11
	Low		1		1		4		8

The trading portfolio includes all speculative positions, regardless of the delivery period. All positions not considered speculative are considered non-trading. PPL's non-trading portfolio includes PPL's entire portfolio, including generation, with delivery periods through the next 12 months. Both the trading and non-trading VaR computations exclude FTRs due to the absence of reliable spot and forward markets. The fair value of the non-trading and trading FTR positions was insignificant at December 31, ~~2009 was an unrealized loss of $3 million and consisted of the following.~~

2010 2011

Trading (a)
Non-trading $ (2 ) $ (1 )
Total $ (2 ) $ (1 )

~~(a)~~

~~The amount of trading FTR positions was less than $1 million at December 31, 2009.~~

2010.

Interest Rate Risk

PPL and its subsidiaries have issued debt to finance their operations, which exposes them to interest rate risk. PPL utilizes various financial derivative instruments to adjust the mix of fixed and floating interest rates in its debt portfolio, adjust the duration of its debt portfolio and lock in benchmark interest rates in anticipation of future financing, when appropriate. Risk limits under the risk management program are designed to balance risk exposure to volatility in interest expense and changes in the fair value of PPL's debt portfolio due to changes in the absolute level of interest rates.

At December 31, 2010 and 2009, PPL's potential annual exposure to increased interest expense, based on a 10% increase in interest rates, was ~~$1 million, compared with $3 million at December 31, 2008.~~insignificant.

PPL is also exposed to changes in the fair value of its domestic and international debt portfolios. PPL estimated that a 10% decrease in interest rates at December 31, ~~2009~~2010 would increase the fair value of its debt portfolio by ~~$285~~$420 million, compared with ~~$327~~$285 million at December 31, ~~2008.~~2009.

~~At December 31,~~ PPL had the following interest rate hedges ~~outstanding.~~outstanding at:

2009 2008

Exposure
Hedged
Fair Value, Net - Asset (Liability) (a)
Effect of a 10%
Adverse Movement
in Rates (b)

Exposure
Hedged
Fair Value, Net - Asset (Liability) (a)
Effect of a 10%
Adverse Movement
in Rates (b)

Cash flow hedges
Interest rate swaps (c) $ 425 $ 24 $ (24 ) $ 200 $ (11 ) $ (12 )
Cross-currency swaps (d) 302 8 (41 ) 302 54 (8 )
Fair value hedges
Interest rate swaps (e) 750 31 (12 ) 500 54 (5 )

		December 31, 2010						December 31, 2009
						Effect of a						Effect of a
				Fair Value,		10% Adverse				Fair Value,		10% Adverse
		Exposure		Net - Asset		Movement		Exposure		Net - Asset		Movement
		Hedged		(Liability) (a)		in Rates (b)		Hedged		(Liability) (a)		in Rates (b)
Cash flow hedges
	Interest rate swaps (c)	$	500	$	(19)	$	(28)	$	425��	$	24	$	(24)
	Cross-currency swaps (d)		302		35		(18)		302		8		(41)
Fair value hedges
	Interest rate swaps (e)		349		20		(3)		750		31		(12)
Economic hedges
	Interest rate swaps (c)		179		(34)		(7)

(a)

Includes accrued interest, if applicable.

(b)

Effects of adverse movements decrease assets or increase liabilities, as applicable, which could result in an asset becoming a liability.

(c)

PPL utilizes various risk management instruments to reduce its exposure to the expected future cash flow variability of its debt instruments. These risks include exposure to adverse interest rate movements for outstanding variable rate debt and for future anticipated financing. While PPL is exposed to changes in the fair value of these instruments, any changes in the fair value of ~~these instruments~~such cash flow hedges are recorded in equity and any changes in the fair value of such economic hedges are recorded in regulatory assets and liabilities. The changes in fair value of these instruments are then reclassified into earnings in the same period during which the item being hedged affects earnings. Sensitivities represent a 10% adverse movement in interest rates.

(d)

WPDH Limited uses cross-currency swaps to hedge the interest payments and principal of its U.S. dollar-denominated senior notes with maturity dates ranging from December 2017 to December 2028. While PPL is exposed to changes in the fair value of these instruments, any change in the fair value of these instruments is recorded in equity and reclassified into earnings in the same period during which the item being hedged affects earnings. Sensitivities represent a 10% adverse movement in both interest rates and foreign currency exchange rates.

(e)

PPL utilizes various risk management instruments to adjust the mix of fixed and floating interest rates in its debt portfolio. The change in fair value of these instruments, as well as the offsetting change in the value of the hedged exposure of the debt, is reflected in earnings. Sensitivities represent a 10% adverse movement in interest rates.

Foreign Currency Risk

PPL is exposed to foreign currency risk, primarily through investments in U.K. affiliates. In addition, PPL's domestic operations may make purchases of equipment in currencies other than U.S. dollars. See Note 1 to the Financial Statements for additional information regarding foreign currency translation.

PPL has adopted a foreign currency risk management program designed to hedge certain foreign currency exposures, including firm commitments, recognized assets or liabilities, anticipated transactions and net investments. In addition, PPL enters into financial instruments to protect against foreign currency translation risk of expected earnings.

~~At December 31,~~ PPL had the following foreign currency hedges ~~outstanding.~~outstanding at:

															December 31, 2010						December 31, 2009
																			Effect of a 10%						Effect of a 10%
																	Fair Value,		Adverse Movement				Fair Value,		Adverse Movement
	2009							2008							Exposure		Net - Asset		in Foreign Currency		Exposure		Net - Asset		in Foreign Currency
	Exposure Hedged		Fair Value, Net - Asset (Liability)		Effect of a 10% Adverse Movement in Foreign Currency Exchange Rates (a)			Exposure Hedged		Fair Value, Net - Asset (Liability)		Effect of a 10% Adverse Movement in Foreign Currency Exchange Rates (a)			Hedged		(Liability)		Exchange Rates (a)		Hedged		(Liability)		Exchange Rates (a)

Net investment hedges (b)	£	40	$	13	$	(6	)	£	68	$	34	$	(10	)	£	35	$	7	$	(5)	£	40	$	13	$	(6)
Economic hedges (c)		48		2		(4	)									89		4		(10)		48		2		(4)

(a)

Effects of adverse movements decrease assets or increase liabilities, as applicable, which could result in an asset becoming a liability.

(b)

To protect the value of a portion of its net investment in WPD, PPL executed forward contracts to sell British pounds sterling. The ~~settlement dates of these~~ contracts ~~range from March~~outstanding at December 31, 2010 ~~through June~~were settled in January 2011.

(c)

To economically hedge the translation of ~~2010~~ expected income denominated in British pounds sterling to U.S. dollars, PPL entered into a combination of average rate forwards and average rate options to sell British pounds sterling. The forwards and options outstanding at December 31, 2010 have termination dates ranging from January ~~2010~~2011 through ~~June 2010.~~December 2011.

NDT Funds - Securities Price Risk

In connection with certain NRC requirements, PPL Susquehanna maintains trust funds to fund certain costs of decommissioning the Susquehanna nuclear station. At December 31, ~~2009,~~2010, these funds were invested primarily in domestic equity securities and fixed-rate, fixed-income securities and are reflected at fair value on PPL's Balance Sheet. The mix of securities is designed to provide returns sufficient to fund Susquehanna's decommissioning and to compensate for inflationary increases in decommissioning costs. However, the equity securities included in the trusts are exposed to price fluctuation in equity markets, and the values of fixed-rate, fixed-income securities are exposed to changes in interest rates. PPL actively monitors the investment performance and periodically reviews asset ~~allocation~~alloc ation in accordance with its nuclear decommissioning trust policy statement. At December 31, ~~2009,~~2010, a hypothetical 10% increase in interest rates and a 10% decrease in equity prices would have resulted in an estimated ~~$40~~$45 million reduction in the fair value of the trust assets, compared with ~~$27~~$40 million at December 31, ~~2008.~~2009. See Notes 1718 and 2123 to the Financial Statements for additional information regarding the NDT funds.

Defined Benefit Plans - Securities Price Risk

See "Application of Critical Accounting Policies - Defined Benefits" for additional information regarding the effect of securities price risk on plan assets.

Credit Risk

Credit risk is the risk that PPL would incur a loss as a result of nonperformance by counterparties of their contractual obligations. PPL maintains credit policies and procedures with respect to counterparty credit (including requirements that counterparties maintain specified credit ratings) and requires other assurances in the form of credit support or collateral in certain circumstances in order to limit counterparty credit risk. However, PPL has concentrations of suppliers and customers among electric utilities, financial institutions and other energy marketing and trading companies. These concentrations may impact PPL's overall exposure to credit risk, positively or negatively, as counterparties may be similarly affected by changes in economic, regulatory or other conditions.

PPL includes the effect of credit risk on its fair value measurements to reflect the probability that a counterparty will default when contracts are out of the money (from the counterparty's standpoint). In this case, PPL would have to sell into a lower-priced market or purchase from a higher-priced market. When necessary, PPL records an allowance for doubtful accounts to reflect the probability that a counterparty will not pay for deliveries PPL has made but not yet billed, which are reflected in "Unbilled revenues" on the Balance Sheets. PPL also has established a reserve with respect to certain sales to the California ISO for which PPL has not yet been paid, which is reflected in accounts receivable on the Balance Sheets. See Note 1415 to the Financial Statements for additional information.

In 2007, the PUC approved PPL Electric's post-rate cap plan to procure default electricity supply for retail customers who do not choose an alternative competitive supplier in 2010. ~~From 2007 through 2009,~~Pursuant to this plan, PPL Electric ~~conducted six competitive solicitations to purchase electricity generation~~had contracted for all of the electric supply for ~~these customers.~~

~~In October 2009, PPL Electric purchased 2010 supply for fixed-price default service to large commercial and large industrial~~ customers who ~~elect to take that service. In November 2009, PPL Electric purchased supply to provide hourly default~~elected this service ~~to large commercial and industrial customers~~ in 2010.

In June 2009, the PUC approved PPL Electric's procurement plan for the period January 2011 through May 2013. ~~The first two~~Through 2010, PPL Electric has conducted six of its 14 planned competitive ~~solicitations occurred in 2009.~~solicitations.

Under the standard Supply Master Agreement (the Agreement) for the ~~bid~~competitive solicitation process, PPL Electric requires all suppliers to post collateral if their credit exposure exceeds an established credit limit. In the event a supplier defaults on its obligation, PPL Electric would be required to seek replacement power in the market. All incremental costs incurred by PPL Electric would be recoverable from customers in future rates. At December 31, ~~2009,~~2010, all of the successful bidders under all of the solicitations had an investment grade credit rating from S&P, and were not required to post collateral under the Agreement. There is no instance under the Agreement in which PPL Electric is required to post collateral to its suppliers.

See "Overview" in this Item 7 and Notes ~~14,~~ 15, 1716, 18 and 1819 to the Financial Statements for additional information on the competitive solicitations, the Agreement, credit concentration and credit risk.

Foreign Currency Translation

At December 31, 2010, the British pound sterling had weakened in relation to the U.S. dollar compared with the prior year end. Changes in these exchange rates resulted in a foreign currency translation loss of $63 million for 2010, which primarily reflected a $180 million reduction to PP&E offset by a reduction of $117 million to net liabilities. At December 31, 2009, the British pound sterling had strengthened in relation to the U.S. dollar as compared with the prior year end. Changes in these exchange rates resulted in a foreign currency translation gain of $106 million for 2009, which primarily reflected a $225 million increase in PP&E offset by an increase of $119 million to net liabilities. At December 31, 2008, the British pound sterling had weakened in relation to the U.S. do llar compared with the prior year end. Changes in these exchange rates resulted in a foreign currency translation loss of $520 million for 2008, which primarily reflected a $1.1 billion reduction to PP&E offset by a reduction of $580 million to net liabilities.

Related Party Transactions

PPL is not aware of any material ownership interests or operating responsibility by senior management of PPL, PPL Energy Supply or PPL Electric in outside partnerships, including leasing transactions with variable interest entities, or other entities doing business with PPL.

~~For~~ See Note 16 to the Financial Statements for additional information on related party ~~transactions, see Note 15 to the Financial Statements.~~transactions.

Acquisitions, Development and Divestitures

~~PPL is~~See Note 10 to the Financial Statements for information on the acquisition of LKE.

With limited exceptions LKE took care, custody and control of TC2 on January 22, 2011, and has dispatched the unit to meet customer demand since that date. LG&E and KU and the contractor agreed to a further amendment of the construction agreement whereby the contractor will complete certain actions relating to identifying and completing any necessary modifications to allow operation of TC2 on all fuels in accordance with initial specifications prior to certain dates, and amending the provisions relating to liquidated damages. LKE cannot currently ~~planning~~estimate the ultimate outcome of these matters. In addition, incremental capacity increases of ~~239~~247 MW are currently planned, primarily at ~~its~~ existing generating facilities. See "Item 2. ~~Properties - Supply Segment"~~Properties" for additional information.

~~PPL~~Development projects are continuously ~~reexamines development projects~~reexamined based on market conditions and other factors to determine whether to proceed with the projects, sell, cancel or expand them, execute tolling agreements or pursue other options.

See Notes 8 and 9 to the Financial Statements for additional information on the more significant activities.

Environmental Matters

See "Item 1. Business - Environmental Matters" and Note 1415 to the Financial Statements for a discussion of environmental matters.

Competition

See "Item 1. Business - Competition" under each of PPL's reportable segments and "Item 1A. Risk Factors" for a discussion of competitive factors affecting PPL.

New Accounting Guidance

See ~~Notes~~Note 1 ~~and 22~~ to the Financial Statements for a discussion of new accounting guidance ~~adopted and pending adoption.~~adopted.

Application of Critical Accounting Policies

~~PPL's financial~~Financial condition and results of operations are impacted by the methods, assumptions and estimates used in the application of critical accounting policies. The following accounting policies are particularly important to the financial condition or results of operations, ~~of PPL,~~ and require estimates or other judgments of matters inherently uncertain. Changes in the estimates or other judgments included within these accounting policies could result in a significant change to the information presented in the Financial Statements (these accounting policies are also discussed in Note 1 to the Financial Statements). PPL's senior management has reviewed these critical accounting policies, the following disclosures regarding their application and the estimates and assumptions regarding them, with ~~its~~PPL's Audit Committee. ~~In addition, PPL's senior management has reviewed the following disclosures regarding the application of these critical accounting policies with the Audit Committee.~~

Effective January 1, 2009, PPL and its subsidiaries fully applied accounting guidance that provides a framework for measuring fair value. The fair value measurement concepts provided by this guidance are used within its financial statements where applicable. See Notes 1 and 17 to the Financial Statements for additional information regarding fair value measurements.

1) Price Risk Management

See "Price Risk Management" in Note 1 to the Financial Statements as well as "Risk Management - Energy Marketing & Trading and Other" ~~above and Note 18 to the Financial Statements.~~above.

2) Defined Benefits

PPL and certain of its subsidiaries sponsor various defined benefit pension and other postretirement plans applicable to the majority of the employees of PPL and its subsidiaries. PPL and certain of its subsidiaries record an asset or liability to recognize the funded status of all defined benefit plans with an offsetting entry to OCI or regulatory assets and liabilities for ~~PPL Electric.~~amounts that are expected to be recovered through regulated customer rates. Consequently, the funded status of all defined benefit plans is fully recognized on the Balance Sheets. See Note 1213 to the Financial Statements for additional information about the plans and the accounting for defined benefits.

PPL makes certain assumptions regarding the valuation of benefit obligations and the performance of plan assets. When accounting for defined benefits, delayed recognition in earnings of differences between actual results and expected or estimated results is a guiding principle. Annual net periodic defined benefit costs are recorded in current earnings based on estimated results. Any differences between actual and estimated results are recorded in OCI or regulatory assets and liabilities for ~~PPL Electric.~~amounts that are expected to be recovered through regulated customer rates. These amounts in AOCI or regulatory assets and liabilities are amortized to income over future periods. The delayed recognition allows for a smoothed recognition of costs over the working lives of the employees who benefit under the plans. The primary assumptions are:

Discount Rate - The discount rate is used in calculating the present value of benefits, which is based on projections of benefit payments to be made in the future. The objective in selecting the discount rate is to measure the single amount that, if invested at the measurement date in a portfolio of high-quality debt instruments, would provide the necessary future cash flows to pay the accumulated benefits when due.

·	Expected Return on Plan Assets - Management projects the long-term rates of return on plan assets based on historical performance, future expectations and periodic portfolio rebalancing among the diversified asset classes. These projected returns reduce the net benefit costs PPL records currently.

·	Rate of Compensation Increase - Management projects employees' annual pay increases, which are used to project employees' pension benefits at retirement.

·	Health Care Cost Trend Rate - Management projects the expected increases in the cost of health care.

In selecting a discount rate for its U.S. defined benefit plans, PPL starts with an analysis of the expected benefit payment stream for its plans. This information is first matched against a spot-rate yield curve. A portfolio of ~~526~~604 Aa-graded non-callable (or callable with make-whole provisions) bonds, with a total amount outstanding in excess of ~~$541~~$667 billion, serves as the base from which those with the lowest and highest yields are eliminated to develop the ultimate yield curve. The results of this analysis are considered together with other economic data and movements in various bond indices to determine the discount rate assumption. At December 31, ~~2009,~~2010, PPL decreased the discount rate for its U.S. pension plans from ~~6.50%~~6.00% to ~~6.00%~~5.42% as a result of this assessment and decreased the ~~discount~~discou nt rate for its other postretirement benefit plans from ~~6.45%~~5.81% to ~~5.81%~~5.14%.

A similar process is used to select the discount rate for the U.K. pension plans, which uses an iBoxx British pounds sterling denominated corporate bond index as its base. At December 31, ~~2009, PPL decreased~~2010, the discount rate for the U.K. pension plans was decreased from ~~7.47%~~5.55% to ~~5.55%~~5.54% as a result of this assessment.

The expected long-term rates of return for PPL's U.S. defined benefit pension and other postretirement benefit plans have been developed using a best-estimate of expected returns, volatilities and correlations for each asset class. PPL management corroborates these rates with expected long-term rates of return calculated by its independent actuary, who uses a building block approach that begins with a risk-free rate of return with factors being added such as inflation, duration, credit spreads and equity risk. Each plan's specific asset allocation is also considered in developing a reasonable return assumption.

At December 31, ~~2009,~~2010, PPL's expected return on plan assets ~~remained at~~decreased from 8.00% to 7.25% for its U.S. pension plans and ~~remained at~~decreased from 7.00% to 6.56% for its other postretirement benefit plans. The expected long-term rates of return for PPL's U.K. pension plans have been developed by ~~WPD~~PPL management with assistance from an independent actuary using a best-estimate of expected returns, volatilities and correlations for each asset class. For the U.K. plans, PPL's expected return on plan assets ~~remained at 7.90%~~decreased from 7.91% to 7.86% at December 31, ~~2009.~~2010.

In selecting ~~a rate~~rates of compensation increase, PPL considers past experience in light of movements in inflation rates. At December 31, ~~2009,~~2010, PPL's rate of compensation increase ~~remained at~~changed from 4.75% to 4.88% for its U.S. pension plans and 4.75% to 4.90% for its other postretirement benefit plans. For the U.K. plans, PPL's rate of compensation increase remained at 4.00% at December 31, ~~2009.~~2010.

In selecting health care cost trend rates, PPL considers past performance and forecasts of health care costs. At December 31, ~~2009,~~2010, PPL's health care cost trend rates were ~~8.00%~~9.00% for ~~2010,~~2011, gradually declining to 5.50% for ~~2016.~~2019.

A variance in the assumptions listed above could have a significant impact on accrued defined benefit liabilities or assets, reported annual net periodic defined benefit costs and OCI or regulatory assets and liabilities for LG&E, KU and PPL Electric. While the charts below reflect either an increase or decrease in each assumption, the inverse of this change would impact the accrued defined benefit liabilities or assets, reported annual net periodic defined benefit costs and OCI or regulatory assets and liabilities for LG&E, KU and PPL Electric by a similar amount in the opposite direction. The sensitivities below reflect an evaluation of the change based solely on a change in that assumption and does not include income tax effects.

At December 31, ~~2009, PPL had recorded the following~~2010, defined benefit plan ~~liabilities:~~liabilities were as follows.

Pension liabilities $ 1,290
Other postretirement benefit liabilities 197

Pension liabilities		$	1,505
Other postretirement benefit liabilities			307

The following chart reflects the sensitivities in the December 31, ~~2009~~2010 Balance Sheet associated with a change in certain assumptions based on PPL's primary defined benefit plans.

										Increase (Decrease)
												Impact on				Impact on
	Increase (Decrease)									Change in		defined benefit		Impact on		regulatory
Actuarial assumption	Change in assumption		Impact on defined benefit liabilities		Impact on OCI			Impact on regulatory assets		assumption		liabilities		OCI		assets

Discount Rate		(0.25)%	$	194	$	(163	)	$	31		(0.25)%	$	256	$	(188)	$	68
Rate of Compensation Increase		0.25%		26		(21	)		5		0.25%		43		(32)		11
Health Care Cost Trend Rate (a)		1.0%		12		(8	)		4		1.00%		14		(8)		6

(a)

Only impacts other postretirement benefits.

In ~~2009,~~2010, PPL recognized net periodic defined benefit costs charged to operating expense of ~~$70~~$102 million. This amount represents a ~~$14~~$32 million increase from ~~2008.~~2009. This increase in expense was primarily attributable to ~~actual asset losses in 2008. As a result, the expected return on assets in 2009 was lower and~~ amortization of ~~gain/loss was impacted.~~actuarial losses of the WPD pension plans in the U.K.

The following chart reflects the sensitivities in the ~~2009~~2010 Statement of Income (excluding income tax effects) associated with a change in certain assumptions based on PPL's primary defined benefit plans.

Actuarial assumption	Change in assumption		Impact on defined benefit costs		Change in assumption		Impact on defined benefit costs

Discount Rate		(0.25)%	$	7	(0.25)%	$	14
Expected Return on Plan Assets		(0.25)%		12	(0.25)%		12
Rate of Compensation Increase		0.25%		3	0.25%		6
Health Care Cost Trend Rate (a)		1.0%		2	1.00%		2

(a)

Only impacts other postretirement benefits.

3)	Asset Impairment

~~PPL performs impairment~~Impairment analyses are performed for long-lived assets that are subject to depreciation or amortization whenever events or changes in circumstances indicate that a long-lived asset's carrying value may not be recoverable. For these long-lived assets ~~to be~~classified as held and used, such events or changes in circumstances are:

·	a significant decrease in the market price of an asset;

·	a significant adverse change in the manner in which an asset is being used or in its physical condition;

·	a significant adverse change in legal factors or in the business climate;

·	an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of an asset;

·	a current-period operating or cash flow loss combined with a history of losses or a forecast that demonstrates continuing losses; or

·	a current expectation that, more likely than not, an asset will be sold or otherwise disposed of before the end of its previously estimated useful life.

For a long-lived asset ~~to be~~classified as held and used, an impairment is recognized when the carrying amount of the asset is not recoverable and exceeds its fair value. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the asset is impaired, an impairment loss is recorded to adjust the asset's carrying value to its estimated fair value. Management must make significant judgments to estimate future cash flows, including the useful lives of long-lived assets, the fair value of the assets and management's intent to use the assets. ~~PPL considers alternate~~Alternate courses of action are considered to recover the carrying value of a long-lived asset, and ~~uses~~ estimated cash flows from the "most likely" alternative are used to assess impairment whenever one alternative is clearly the most likely outcome. If no alternative is clearly the most likely, then a probability-weighted approach is used taking into consideration estimated cash flows from the alternatives. For assets tested for impairment as of the balance sheet date, the estimates of future cash flows used in that test consider the likelihood of possible outcomes that existed at the balance sheet date, including the assessment of the likelihood of a future sale of the assets. That assessment is not revised based on events that occur after the balance sheet date. Changes in assumptions and estimates could result in significantly different results than those identified and recorded in the financial statements.

For a long-lived asset classified as held for sale, an impairment exists when the carrying amount of the asset (disposal group) exceeds its fair value less cost to sell. If the asset (disposal group) is impaired, an impairment loss is recorded to adjust ~~its~~the carrying amount to its fair value less cost to sell. A gain is recognized for any subsequent increase in fair value less cost to sell, but not in excess of the cumulative impairment previously recognized.

For determining fair value, quoted market prices in active markets are the best evidence of fair value. However, when market prices are unavailable, PPL considers all valuation techniques appropriate inunder the circumstances and for which market participant inputs can be obtained. ~~PPL has generally used~~Generally discounted cash flows are used to estimate fair value, which incorporates market participant inputs when available. Discounted cash flows are calculated by estimating future cash flow streams and applying appropriate discount rates to determine the present value of the cash flow streams.

In ~~2009, PPL recorded~~2010, impairments of certain long-lived ~~assets.~~assets were recorded. See Note 1718 to the Financial Statements for a discussion of impairments related to certain sulfur dioxide emission allowances and ~~the Long Island~~certain non-core generation ~~business.~~facilities.

~~PPL tests goodwill~~Goodwill is tested for impairment at the reporting unit level. ~~PPL has~~Reporting units have been determined ~~its reporting units~~ to be at or one level below ~~its~~ operating segments. ~~PPL performs a~~A goodwill impairment test is performed annually or more frequently if events or changes in circumstances indicate that the carrying value of the reporting unit may be greater than the unit's fair value. Additionally, goodwill is tested for impairment after a portion of goodwill has been allocated to a business to be disposed of.

Goodwill is tested for impairment using a two-step approach. The first step of the goodwill impairment test compares the estimated fair value of a reporting unit with its carrying amount, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired. If the carrying amount exceeds the estimated fair value of the reporting unit, the second step is performed to measure the amount of impairment loss, if any.

The second step requires a calculation of the implied fair value of goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill in a business combination. That is, the estimated fair value of a reporting unit is allocated to all of the assets and liabilities of that unit as if the reporting unit had been acquired in a business combination and the estimated fair value of the reporting unit was the price paid to acquire the reporting unit. The excess of the estimated fair value of a reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill. The implied fair value of the reporting unit's goodwill is then compared with the carrying amount of that goodwill. If the carrying amount exceeds the ~~implied~~impl ied fair value, an impairment loss is recognized in an amount equal to that excess. The loss recognized cannot exceed the carrying amount of the reporting unit's goodwill.

In ~~2009, PPL~~2010, no goodwill was ~~not~~ required to ~~impair any goodwill.~~be impaired. Management ~~primarily~~ used both discounted cash flows and market multiples, which required significant assumptions, to estimate the fair value of each reporting unit. AFor the discounted cash flows approach, a decrease in the forecasted cash flows of 10%, or an increase ofin the discount rate by 25 basis points, would not have resulted in an impairment of goodwill. For the market multiples approach, which is based on either current or forward trading multiples of comparable companies or precedent transactions, a 10% decrease in the multiples would not have resulted in an impairment of goodwill.

~~Additionally, in~~In 2010 and 2009, ~~PPL wrote off~~$5 million and $3 million of goodwill allocated to discontinued ~~operations.~~operations was written off.

4)	Loss Accruals

~~PPL accrues losses~~Losses are accrued for the estimated impacts of various conditions, situations or circumstances involving uncertain or contingent future outcomes. For loss contingencies, the loss must be accrued if (1) information is available that indicates it is probable that a loss has been incurred, given the likelihood of the uncertain future events, and (2) the amount of the loss can be reasonably estimated. Accounting guidance defines "probable" as cases in which "the future event or events are likely to occur." ~~PPL does not record the~~The accrual of contingencies that might result in gains is not recorded unless recovery is assured. ~~PPL continuously assesses potential~~Potential loss contingencies for environmental remediation, litigation claims, regulatory penalties and other ~~events.~~events are continuously assessed.

The accounting aspects of estimated loss accruals include (1) the initial identification and recording of the loss, (2) the determination of triggering events for reducing a recorded loss accrual, and (3) the ongoing assessment as to whether a recorded loss accrual is sufficient. All three of these aspects require significant judgment by ~~PPL's~~ management. ~~PPL uses its internal~~Internal expertise and outside experts (such as lawyers and engineers), are used, as necessary, to help estimate the probability that a loss has been incurred and the amount (or range) of the loss.

~~No new~~In 2010, a significant ~~loss accruals were recorded in 2009. In 2008, significant judgment was required by PPL's management~~adjustment to ~~perform an assessment of~~ the contingency accrual related to the Montana hydroelectric ~~litigation.~~

~~In June 2008, PPL's management assessed the loss exposure related to the Montana hydroelectric~~streambed litigation given the June 2008 decision by the Montana First Judicial District Court (District Court). The District Court awarded compensation of approximately $34 million for the years 2000 through 2006, and approximately $6 million for 2007 as rent for the use of the State of Montana's streambeds by PPL Montana's hydroelectric facilities. The District Court also deferred the determination of compensation for 2008 and subsequent years to the Montana State Land Board (Land Board). In October 2008, PPL Montana filed an appeal of the decision to the Montana Supreme Court and a stay of judgment, including a stay of the Land Board's authority to assess compensation against PPL Montana for 2008 and future periods. Oral agreement of the case was ~~held before the Montana Supreme Court in September 2009.~~

As part of the preparation of its 2009 financial statements, PPL's management reassessed the loss exposure for the Montana hydroelectric litigation. PPL's management concluded, based on its assessment and after consultations with its trial counsel, that it has meritorious arguments on appeal for the years 2000 through 2006. PPL assessed the likelihood of a loss for these years as reasonably possible. However, PPL Montana has not recorded a loss accrual for these years, as the likelihood of a loss was not deemed probable.

For 2007 and subsequent years, PPL's management believes that while it also has meritorious arguments, it is probable that its hydroelectric projects will be subject to annual estimated compensation ranging from $3 million to $6 million. Given that there was no single amount within that range more likely than any other, PPL Montana accrued $3 million for each of the years 2007 through 2009 for a total of $9 million.recorded. See Note 1415 to the Financial Statements for additional ~~information on this contingency.~~information.

~~PPL has identified certain~~Certain other events have been identified that could give rise to a loss, but that do not meet the conditions for accrual. Such events are disclosed, but not recorded, when it is "reasonably possible" that a loss has been incurred. See Note 1415 to the Financial Statements for disclosure of other potential loss contingencies that have not met the criteria for accrual.

When an estimated loss is accrued, ~~PPL identifies, where applicable,~~ the triggering events for subsequently reducing the loss ~~accrual.~~accrual are identified, where applicable. The triggering events generally occur when the contingency has been resolved and the actual loss is ~~incurred,~~paid or written off, or when the risk of loss has diminished or been eliminated. The following are some of the triggering events that provide for the reduction of certain recorded loss accruals:

·	Allowances for uncollectible accounts are reduced when accounts are written off after prescribed collection procedures have been exhausted, a better estimate of the allowance is determined or underlying amounts are ultimately collected.

·	Environmental and other litigation contingencies are reduced when the contingency is resolved and ~~PPL makes~~ actual payments are made, a better estimate of the loss is determined or the loss is no longer considered probable.

~~PPL reviews its loss~~Loss accruals are reviewed on a regular basis to assure that the recorded potential loss exposures are appropriate. This involves ongoing communication and analyses with internal and external legal counsel, engineers, operation management and other parties.

5)	Asset Retirement Obligations

PPL is required to recognize a liability for legal obligations associated with the retirement of long-lived assets. The initial obligation ~~should be~~is measured at its estimated fair value. A conditional ARO must be recognized when incurred if the fair value of the ARO can be reasonably estimated. An equivalent amount ~~should be~~is recorded as an increase in the value of the capitalized asset and allocated to expense over the useful life of the asset. Until the obligation is settled, the liability ~~should be~~is increased, through the recognition of accretion expense in the income statement, for changes in the obligation due to the passage of time. ~~A conditional~~In the case of LG&E and KU, estimated costs of removal for all assets are recovered in rates as a component of depreciation. Since costs of removal are coll ected in rates prior to payment of such costs, the accrual for these costs of removal is classified as a regulatory liability. The regulatory liability is relieved as costs are incurred. The depreciation and accretion expense related to an ARO ~~must be recognized when incurred if~~is recorded as a regulatory asset. See Note 21 to the ~~fair value~~Financial Statements for further discussion of ~~the ARO can be reasonably estimated.~~AROs.

In determining AROs, management must make significant judgments and estimates to calculate fair value. Fair value is developed using an expected present value technique based on assumptions of market participants that considers estimated retirement costs in current period dollars that are inflated to the anticipated retirement date and then discounted back to the date the ARO was incurred. Changes in assumptions and estimates included within the calculations of the fair value of AROs could result in significantly different results than those identified and recorded in the financial statements. Estimated ARO costs and settlement dates, which affect the carrying value of ~~various AROs~~the ARO and the related ~~assets,~~capitalized asset, are reviewed periodically to ensure that any material changes are incorporated into the latest ~~estimate~~e stimate of the ~~obligations.~~ARO. Any change to the capitalized asset, positive or negative, is amortized over the remaining life of the associated long-lived asset. See Note 21 to the Financial Statements for a discussion of the remeasurement of the ARO for the decommissioning of the Susquehanna nuclear units in the third quarter of 2010, which resulted in a $103 million reduction in the ARO primarily due to a decrease in estimated inflation rates.

At December 31, ~~2009, PPL had~~2010, AROs totaling ~~$426~~$448 million were recorded on the Balance Sheet, of which ~~$10~~$13 million is included in "Other current liabilities." Of the total amount, ~~$348~~$270 million, or ~~82%~~60%, relates to ~~PPL's~~the nuclear decommissioning ARO. The most significant assumptions surrounding AROs are the forecasted retirement costs, the discount rates and the inflation rates. A variance in ~~the forecasted retirement costs, the discount rates or the inflation rates~~any of these inputs could have a significant impact on the ARO liabilities.

The following ~~chart~~table reflects the sensitivities related to ~~PPL's~~the nuclear decommissioning ARO liability ~~as of December 31, 2009,~~ associated with a change in these assumptions ~~at the time~~as of ~~initial recognition.~~December 31, 2010. There is no significant change to the annual depreciation expense of the ARO asset or the annual accretion expense of the ARO liability as a result of changing the assumptions. The sensitivities below reflect an evaluation of the change based solely on a change in that assumption.

	~~Change in~~ ~~Assumption~~	~~Impact on~~ ~~ARO Liability~~

~~Retirement Cost~~	~~10%/(10)%~~	~~$32/$(32)~~
~~Discount Rate~~	~~0.25%/(0.25)%~~	~~$(31)/$34~~
~~Inflation Rate~~	~~0.25%/(0.25)%~~	~~$41/$(37)~~

	Change in Assumption	Impact on ARO Liability

Retirement Cost	10%	$27
Discount Rate	(0.25)%	$25
Inflation Rate	0.25%	$26

6)	~~Income Tax Uncertainties~~

6) Income Taxes

Significant management judgment is required in developing ~~PPL's~~the provision for income taxes, primarily due to the uncertainty related to tax positions taken or expected to be taken in tax returns and the determination of deferred tax assets, liabilities and valuation allowances.

Significant management judgment is required to determine the amount of benefit recognized related to an uncertain tax position. ~~PPL evaluates its tax~~Tax positions are evaluated following a two-step process. The first step requires an entity to determine whether, based on the technical merits supporting a particular tax position, it is more likely than not (greater than a 50% chance) that the tax position will be sustained. This determination assumes that the relevant taxing authority will examine the tax position and is aware of all the relevant facts surrounding the tax position. The second step requires an entity to recognize in the financial statements the benefit of a tax position that meets the more-likely-than-not recognition criterion. The benefit recognized is measured at the largest amount of ~~benefit~~ben efit that has a likelihood of realization, upon settlement, that exceeds 50%. ~~PPL's management~~Management considers a number of factors in assessing the benefit to be recognized, including negotiation of a settlement.

On a quarterly basis, ~~PPL reassesses its~~ uncertain tax positions are reassessed by considering information known at the reporting date. Based on management's assessment of new information, ~~PPL~~a tax benefit may subsequently ~~recognize a tax benefit~~be recognized for a previously unrecognized tax position, ~~de-recognize~~ a previously recognized tax position may be de-recognized, or ~~re-measure~~ the benefit of a previously recognized tax ~~position.~~position may be remeasured. The amounts ultimately paid upon resolution of issues raised by taxing authorities may differ materially from the amounts accrued and may materially impact ~~PPL's~~the financial statements in the future.

At December 31, 2010, it was reasonably possible that during the next 12 months the total amount of unrecognized tax benefits could increase by as much as $28 million or decrease by up to $226 million. This change could result from subsequent recognition, derecognition and/or changes in the measurement of uncertain tax positions related to the creditability of foreign taxes, the timing and utilization of foreign tax credits and the related impact on alternative minimum tax and other credits, the timing and/or valuation of certain deductions, intercompany transactions and unitary filing groups. The events that could cause these changes are direct settlements with taxing authorities, litigation, legal or administrative guidance by relevant taxing authorities and the lapse of an applicable statute of limitation.

The balance sheet classification of unrecognized tax benefits and the need for valuation allowances to reduce deferred tax assets also require significant management judgment. ~~PPL classifies unrecognized~~Unrecognized tax benefits are classified as current to the extent management expects to settle an uncertain tax position by payment or receipt of cash within one year of the reporting date. Valuation allowances are initially recorded and reevaluated each reporting period by assessing the likelihood of the ultimate realization of a deferred tax asset. Management considers a number of factors in assessing the realization of a deferred tax asset, including the reversal of temporary differences, future taxable income and ongoing prudent and feasible tax planning strategies. Any tax planning strategy utilized in this assessment must meet the recognition and measurement criteria utilized ~~by PPL~~ to account for an uncertain tax ~~positions.~~position. Management also considers the uncertainty posed by political risk (e.g. the potential for legislative extension of generation rate caps) and the effect of this uncertainty on the various factors that management takes into account in evaluating the need for valuation allowances. The amount of deferred tax assets ultimately realized may differ materially from the estimates utilized in the computation of valuation allowances and may materially impact the financial statements in the future. See Note 5 to the Financial Statements for income tax disclosures, including the ~~required disclosures.~~release of $72 million of valuation allowances associated with state net operating loss carryforwards in 2010.

At December 31, 2009, it was reasonably possible that during the next 12 months the total amount of unrecognized tax benefits could increase by as much as $34 million or decrease by up to $179 million for PPL. This change could result from subsequent recognition, derecognition and/or changes in the measurement of uncertain tax positions related to the creditability of foreign taxes, the timing7) Regulatory Assets and utilization of foreign tax credits and the related impact on alternative minimum tax and other credits, the timing and/or valuation of certain deductions, intercompany transactions and unitary filing groups. The events that could cause these changes are direct settlements with taxing authorities, litigation, legal or administrative guidance by relevant taxing authorities and the lapse of an applicable statute of limitation.Liabilities

7)	~~Regulatory Assets~~

Certain of PPL's ~~domestic electricity delivery business is~~subsidiaries are subject to cost-based ~~rate-regulation.~~rate regulation. As a result, ~~PPL is required to reflect~~ the effects of regulatory actions are required to be reflected in ~~its~~the financial statements. ~~PPL records assets~~Assets and liabilities are recorded that result from the regulated ratemaking process that may not be recorded under GAAP for non-regulated entities. Regulatory assets generally represent incurred costs that have been deferred because such costs are probable of future recovery in regulated customer rates. Regulatory liabilities generally represent obligations to regulated customers for previous collections of costs that are expected to be refunded to customers in the future, or in certain cases, regulatory liabilities are recorded based on the understanding with the regulator that current rates are being set to recover c osts that are expected to be incurred in the future, and the regulated entity is accountable for any amounts charged pursuant to such rates and not yet expended for the intended purpose.

Management continually assesses whether the regulatory assets are probable of future recovery by considering factors such as changes in the applicable regulatory and political environments, the ability to recover costs through regulated rates, recent rate orders to other regulated entities, and the status of any pending or potential deregulation legislation. Based on this continual assessment, management believes the existing regulatory assets are probable of recovery. This assessment reflects the current political and regulatory climate at the state and federal levels, and is subject to change in the future. If future recovery of costs ceases to be probable, then asset write-offs would be required to be recognized in operating income. Additionally, the regulatory agencies can provide ~~flexibility~~flexibilit y in the manner and timing of the depreciation of PP&E and amortization of regulatory assets.

At December 31, ~~2009~~2010 and ~~2008,~~2009, PPL had regulatory assets of ~~$531 million~~$1.2 billion and ~~$763~~$542 million. All ~~of PPL's~~ regulatory assets are either currently being recovered under specific rate orders, or represent amounts that ~~will~~are expected to be recovered in future rates or benefit future periods based upon established regulatory practices. At December 31, 2010 and 2009, PPL had regulatory liabilities of $1.1 billion and $84 million. The significant increase in regulatory assets and liabilities was primarily due to the acquisition of LKE in November 2010.

See "Business Combinations – Purchase Price Allocation" below for discussion of regulatory assets established by purchase accounting. See Note 3 to the Financial Statements for additional information on regulatory assets and liabilities.

8) Business Combinations – Purchase Price Allocation

On November 1, 2010 (acquisition date), PPL completed the acquisition of all of the limited liability company interests of LKE. In accordance with accounting guidance on business combinations, the identifiable assets acquired and the liabilities assumed were measured at fair value at the acquisition date. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The excess of the purchase price over the estimated fair value of the identifiable net assets was recorded as goodwill.

The determination and allocation of fair value to the identifiable assets acquired and liabilities assumed was based on various assumptions and valuation methodologies requiring considerable management judgment, including estimates based on key assumptions of the acquisition, and historical and current market data. The most significant variables in these valuations were the discount rates, the number of years on which to base cash flow projections, as well as the assumptions and estimates used to determine cash inflows and outflows. Although the assumptions were reasonable based on information available at the date of acquisition, actual results may differ from the forecasted amounts and the difference could be material.

For purposes of measuring the fair value of the majority of PP&E and regulatory assets acquired and regulatory liabilities assumed, PPL determined that fair value was equal to net book value at the acquisition date, because LKE's operations are conducted in a regulated environment and the regulatory commissions allow for earning a rate of return on and recovery of the book value of a majority of the regulated asset bases at rates determined to be fair and reasonable. As there is no current prospect for deregulation in LKE's operating territory, it is expected that these operations will remain in a regulated environment for the foreseeable future; therefore, management has concluded that the use of these assets in the regulatory environment represents their highest and best use and a market participant would measure the fair value of these assets using the regulatory rate of return as the discount rate, thus resulting in fair value equal to book value.

The fair value of intangible assets and liabilities (e.g. contracts that have favorable or unfavorable terms relative to market), including coal contracts and power purchase agreements, as well as emission allowances, have been reflected on the balance sheet with offsetting regulatory assets or liabilities. Prior to the acquisition, LKE recovered in customer rates the cost of coal contracts, power purchases and emission allowances and this rate treatment will continue after the acquisition. As a result, management believes the regulatory assets and liabilities created to offset the fair value adjustments meet the recognition criteria established by existing accounting guidance and eliminate any rate making impact of the fair value adjustments. LKE's customer rates will continue to reflect these items (e.g. coal, purchased power, emission allowances) at their original contracted prices.

PPL also considered whether a separate fair value should be assigned to LKE's rights to operate within its various electric and natural gas distribution service territories but concluded that these rights only provided the opportunity to earn a regulated return and barriers to market entry, which in management's judgment is not considered a separately identifiable intangible asset under applicable accounting guidance; rather, it is considered going-concern value, or goodwill.

Goodwill related to the LKE acquisition of $996 million was recorded at LG&E and KU. For purposes of goodwill impairment testing, the goodwill must be assigned to the reporting units that are expected to benefit from the acquisition. Both the Kentucky Regulated and the Supply segments are expected to benefit and the assignment of goodwill was $662 million to the Kentucky Regulated segment and $334 million to the Supply segment. The goodwill at the Kentucky Regulated segment reflects the expected going-concern element of LKE's existing business. This going-concern element reflects the expected continued growth of a rate-regulated business located in a defined service area with a constructive regulatory environment, the ability of LKE to leverage its assembled workforce to take advantage of th ose growth opportunities and the attractiveness of stable, growing cash flows. Although no other assets or liabilities from the acquisition were assigned to the Supply segment, the Supply segment obtained a synergistic benefit attributed to the overall de-risking of the PPL portfolio, which enhanced PPL Energy Supply's credit profile, thereby increasing the value of the Supply segment. This increase in value resulted in the assignment of goodwill to the Supply segment.

See Note 10 to the Financial Statements for additional information regarding the acquisition.

Other Information

PPL's Audit Committee has approved the independent auditor to provide audit and audit-related services and other services permitted by Sarbanes-Oxley and SEC rules. The audit and audit-related services include services in connection with statutory and regulatory filings, reviews of offering documents and registration statements, and internal control reviews.

PPL ENERGY SUPPLY, LLC AND SUBSIDIARIES

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

The information provided in this Item 7 should be read in conjunction with PPL Energy Supply's Consolidated Financial Statements and the accompanying Notes. Terms and abbreviations are explained in the glossary. Dollars are in millions unless otherwise noted.

PPL Energy Supply is an energy company with headquarters in Allentown, Pennsylvania. ~~Refer to "Item 1. Business - Background" for descriptions of its reportable segments, which are Supply and International Delivery.~~ Through its subsidiaries, PPL Energy Supply is primarily engaged in the generation and marketing of electricity in two key markets - the northeastern and ~~western~~northwestern U.S. - and, through 2010, in the delivery of electricity in the U.K. PPL Energy Supply's overall strategy is to achieve disciplined growth in energy supply margins while limiting volatility in both cash flows and earnings and to achieve stable, long-term growth in its regulated international electricity delivery business through efficient operations and strong customer and regulatory relations. More specifically, PPL Energy Supply's strategy for its competitive electricity generation and marketing business is to match energy supply with load, or customer ~~demand,~~dema nd, under contracts of varying lengths with creditworthy counterparties to capture profits while effectively managing exposure to energy and fuel price volatility, counterparty credit risk and operational risk. PPL Energy Supply's strategy for its ~~U.K.~~regulated international electricity delivery business is to own and operate this business at the most efficient cost while maintaining high quality customer service and reliability.

In January 2011, PPL Energy Supply ~~faces several risks~~distributed its 100% membership interest in PPL Global to its parent, PPL Energy Funding, to better align PPL's organizational structure with the manner in which it manages its businesses and reports segment information in its ~~supply~~consolidated financial statements. See Note 24 for additional information. Certain information for periods subsequent to 2010 has been adjusted to eliminate amounts related to PPL Global.

To manage financing costs and access to credit markets, a key objective for PPL Energy Supply's business ~~principally electricity and capacity wholesale price risk, fuel supply and price risk, electricity and fuel basis risk, power plant performance, evolving regulatory frameworks and counterparty~~is to maintain a strong credit ~~risk.~~profile. PPL Energy Supply ~~attempts to manage these risks through various means. For instance, PPL Energy Supply operates a portfolio of generation assets that is diversified as to geography, fuel source, cost~~continually focuses on maintaining an appropriate capital structure and operating characteristics. PPL Energy Supply expects to expand its generation capacity over the next several years through power uprates at certain of its existing power plants, and is continually evaluating the potential construction of new plants and the potential acquisition of existing plants or businesses. PPL Energy Supply is and will continue to remain focused on the operating efficiency and availability of its existing and any newly constructed or acquired power plants.

liquidity position. In addition, PPL Energy Supply has executed and continues to pursue contracts of varying lengths for energy sales and fuel supply, while using other means to mitigate risks associated with adverse changes in the difference, or margin, between the cost to produce electricity and the price at which PPL Energy Supply sells it. PPL Energy Supply's future profitability will be affected by prevailing market conditions and whether PPL Energy Supply decides to, or is able to, continue to enter into long-term or intermediate-term power sales and fuel purchase agreements or renew its existing agreements. Currently, PPL Energy Supply's commitments for energy sales are satisfied through its own generation assets and supply purchased from third parties. PPL Energy Supply markets and trades around its physical portfolio of generating assets through integrated generation, marketing and trading functions.

PPL Energy Supply has adopted financial and operational risk management programs that, among other things, are designed to monitor and manage its exposure to earnings and cash flow volatility related to changes in energy and fuel prices, interest rates, foreign currency exchange rates, counterparty credit quality and the operating performance of its generating units.

The principal challenge that PPL Energy Supply faces in its international electricity delivery business is to maintain high quality customer service and reliability in a cost-effective manner. PPL Energy Supply's international electricity delivery business is rate-regulated. Accordingly, the business is subject to regulatory risk with respect to the costs that may not be recovered and investment returns that may not be collected through customer rates.

PPL Energy Supply faces additional financial risks in conducting U.K. operations, such as fluctuations in foreign currency exchange rates and the effect these rates have on the conversion of U.K. earnings and cash flows to U.S. dollars. PPL Energy Supply attempts to manage these financial risks through its risk management programs.

In order to manage financing costs and access to credit markets, a key objective for PPL Energy Supply's business as a whole is to maintain a strong credit profile. PPL Energy Supply continually focuses on maintaining an appropriate capital structure and liquidity position.

See "Item 1A. Risk Factors" for more information concerning these and other material risks PPL Energy Supply faces in its businesses.

~~In May 2009, PPL Generation signed a definitive agreement~~Refer to ~~sell its Long Island generation business and related tolling agreements and expects the sale to close on or about February 26, 2010. In November 2009, PPL Maine completed the sale~~"Item 1. Business - Background" for descriptions of ~~the majority of its hydroelectric generation business. These businesses are included in the Supply segment. In 2007,~~ PPL Energy ~~Supply sold its regulated electricity delivery businesses in Latin America,~~Supply's reportable segments, which are International Regulated (formerly International Delivery) and Supply. In 2010, there were ~~included in~~no changes to these segments other than renaming the International ~~Delivery~~Regulated segment. ~~See Note 9 to the Financial Statements for additional information.~~

~~The purpose of "Management's~~"Management's Discussion and Analysis of Financial Condition and Results of Operations" ~~is to provide~~provides information concerning PPL Energy Supply's performance in implementing the strategies and managing the risks and challenges mentioned above. Specifically:

·	"Results of Operations" provides an overview of PPL Energy Supply's operating results in 2010, 2009 ~~2008~~ and ~~2007,~~2008, including a review of earnings, with details of results by reportable segment. It also provides a brief outlook for ~~2010.~~2011.

"Financial Condition - Liquidity and Capital Resources" provides an analysis of PPL Energy Supply's liquidity position and credit profile, including its sources of cash (including bank credit facilities and sources of operating cash flow) and uses of cash (including contractual obligations and capital expenditure requirements) and the key risks and uncertainties that impact PPL Energy Supply's past and future liquidity position and financial condition. This subsection also includes ~~a listing and discussion of~~rating agency actions on PPL Energy Supply's ~~current~~ credit ratings.

·	"Financial Condition - Risk Management - Energy Marketing & Trading and Other" provides an explanation of PPL Energy Supply's risk management programs relating to market risk and credit risk.

·	"Application of Critical Accounting Policies" provides an overview of the accounting policies that are particularly important to the results of operations and financial condition of PPL Energy Supply and that require its management to make significant estimates, assumptions and other judgments.

~~The information provided in this Item 7 should be read in conjunction~~See "Item 1. Business - Background - Segment Information - Pennsylvania Regulated Segment" for a discussion of the Customer Choice Act.

When comparing 2010 with 2009, certain line items on PPL Energy Supply's ~~Consolidated Financial Statements and the accompanying Notes.~~

~~Terms and abbreviations are explained in the glossary. Dollars are in millions unless otherwise noted.~~

~~Customer Choice - End of Transition Period~~

In 1996, the Customer Choice Act was enacted to restructure Pennsylvania's electric utility industry in order to create retail access to a competitive market for generation of electricity. The Customer Choice Act required each Pennsylvania electric utility, to file a restructuring plan to "unbundle" its rates into separate generation, transmission and distribution components and to permit its customers to directly access alternate suppliers of electricity. Under the Customer Choice Act, regulated utilitiesfinancial statements were ~~required to act as a PLR. As part of a settlement approved~~impacted by the PUC, PPL EnergyPlus and PPL Electric, a PPL EnergyPlus affiliate, entered into full requirements energy supply agreements at predetermined "capped" rates through 2009. In addition, the PUC authorized recovery of approximately $2.97 billion of competitive transition or "stranded" costs (generation-related costs that might not otherwise be recovered in a competitive market) from customers during an 11-year transition period. For PPL Electric, this transition period ended on December 31, 2009.

~~With~~ the expiration of the ~~long-term power purchase agreements between~~full-requirement energy supply contracts. Overall, the expiration of generation rate caps had a significant positive impact on PPL ~~Electric~~Energy Supply's results of operations, financial condition and cash flows during 2010.

The primary impact of the expiration of generation rate caps and this contract is reflected in PPL ~~EnergyPlus,~~Energy Supply's unregulated gross energy margins. See "Statement of Income Analysis" for an explanation of this non-GAAP financial measure. In 2010, PPL ~~EnergyPlus now has multiple options as to how,~~Energy Supply sold the majority of its generation supply under various wholesale and ~~to whom, it sells~~retail contracts at prevailing market rates at the ~~electricity~~time the contracts were executed. In 2009, the majority of generation produced by PPL Energy Supply's generation ~~plants. These sales are based on prevailing market rates, as compared~~plants was sold to pre-determined capped rates under the expired supply agreements with PPL Electric. PPL EnergyPlus has entered into various wholesale and retail contracts to sell this power and at this time has hedged almost 100% of expected 2010 baseload generation output. The expiration of the long-term supply agreements with PPL Electric also provides PPL Energy Supply the ability to adjust its exposure to fluctuations in demand that existed with supplying PPL Electric's PLR load. Entry of new generation suppliers into the Pennsylvania marketplace provides PPL Energy Supply the ability to provide generation supply to additional wholesale customers. Overall, these changes and the resulting level of hedged electricity prices are expected to have a positive impact on the financial condition, operating results and cash flows of PPL Energy Supply.

~~Market Events~~

~~In 2008, conditions~~See "Regulatory Issues - Enactment of Financial Reform Legislation" in the financial markets became disruptive to the processes of managing credit risk, responding to liquidity needs, measuring derivatives and other financial instruments at fair value, and managing market risk. Bank credit capacity was reduced and the cost of renewing or establishing new credit facilities increased, thereby introducing uncertainties as to PPL Energy Supply's ability to enter into long-term energy commitments or reliably estimate the longer-term cost and availability of credit. In general, bank credit capacity has increased from the significantly constrained levels of 2008 and early 2009. In addition, the cost of renewing or establishing new credit facilities has improved when compared with the 2008 and early 2009 periods.

~~Commodity Price Risk~~

The contraction in wholesale energy market liquidity and accompanying decline in wholesale energy prices due to conditions in the financial and commodity markets significantly impacted PPL Energy Supply's earnings during the second half of 2008 and the first half of 2009. See "Statement of Income Analysis - Domestic Gross Energy Margins - Domestic Gross Energy Margins By Region"Note 15 for ~~further discussion.~~

~~Credit Risk~~

Credit risk is the risk that PPL Energy Supply would incur a loss as a result of nonperformance by counterparties of their contractual obligations. PPL Energy Supply maintains credit policies and procedures to limit counterparty credit risk. Conditions in the financial and commodity markets have generally increased PPL Energy Supply's exposure to credit risk. See Notes 15, 17 and 18 to the Financial Statements, and "Risk Management - Energy Marketing & Trading and Other - Credit Risk" for more information on ~~credit risk.~~the Dodd-Frank Act.

~~Liquidity Risk~~

PPL Energy Supply expects to continue to have access to adequate sources of liquidity through operating cash flows, cash and cash equivalents, credit facilities and, from time to time, the issuance of capital market securities. PPL Energy Supply's ability to access capital markets may be impacted by conditions in the overall financial and capital markets, as well as conditions specific to the utility sector. See "Financial Condition - Liquidity and Capital Resources" for an expanded discussion of PPL Energy Supply's liquidity position and a discussion of its forecasted sources of cash.

~~Valuations in Inactive Markets~~

Conditions in the financial markets have generally made it difficult to determine the fair value of certain assets and liabilities in inactive markets. Management has reviewed the activity in the energy and financial markets in which PPL Energy Supply transacts, concluding that all of these markets were active at December 31, 2009, with the exception of the market for auction rate securities. See Notes 17 and 21 to the Financial Statements and "Financial Condition - Liquidity and Capital Resources - - Auction Rate Securities" for a discussion of these investments.

~~Securities Price Risk~~

Declines in the market price of debt and equity securities result in unrealized losses that reduce the asset values of PPL Energy Supply's investments in its defined benefit plans and NDT funds. Both the defined benefit plans and the NDT funds earned positive returns in the second half of 2009, thereby recovering a portion of the negative returns incurred in 2008 and the first quarter of 2009. PPL Energy Supply actively monitors the performance of the investments held in its defined benefit plans and NDT funds and periodically reviews the funds' investment allocations. See "Financial Condition - Risk Management - Energy Marketing & Trading and Other - NDT Funds - Securities Price Risk" for additional information on securities price risk.

PPL Energy Supply's subsidiaries sponsor various defined benefit plans and participate in and are allocated costs from defined benefit plans sponsored by PPL. Determination of the funded status of defined benefit plans, contribution requirements and net periodic defined benefit costs for future years are subject to changes in various assumptions, in addition to the actual performance of the assets in the plans. See "Application of Critical Accounting Policies - Defined Benefits" for a discussion of the assumptions and sensitivities regarding those assumptions.

~~The Economic Stimulus Package~~

Results of Operations

~~PPL Energy Supply presents tables~~Tables analyzing changes in amounts between periods within "Segment Results" and "Statement of Income Analysis" are presented on a constant U.K. foreign currency exchange rate basis, where applicable, in order to isolate the impact of the change in the exchange rate on the item being explained. Results computed on a constant U.K. foreign currency exchange rate basis are calculated by translating current year results at the prior year weighted-average foreign currency exchange rate.

~~Earnings~~

~~Net income attributable to PPL Energy Supply was:~~

2009 2008 2007

$ 246 $ 768 $ 1,205

Earnings

	2010		2009		2008

Net Income Attributable to PPL Energy Supply	$	861	$	246	$	768

The changes in ~~net income attributable~~Net Income Attributable to PPL Energy Supply from year to year were, in part, due to several special items that management considers significant. Details of these special items are provided within the review of each segment's earnings.

The year-to-year changes in significant earnings components, including ~~domestic~~unregulated gross energy margins by region and significant income statement line items, are explained in the "Statement of Income Analysis."

PPL Energy Supply's earnings beyond 2009 are subject to various risks and uncertainties. See "Forward-Looking Information," "Item 1A. Risk Factors," the rest of this Item 7 and Note 14 to the Financial Statements for a discussion of the risks, uncertainties and factors that may impact PPL Energy Supply's future earnings.

Segment Results

Net ~~income attributable~~Income Attributable to PPL Energy Supply by segment was:

	2009		2008		2007			2010		2009		2008

International Regulated							International Regulated	$	261	$	243	$	290��
Supply	$	3	$	478	$	595	Supply		600		3		478
International Delivery		243		290		610
Total	$	246	$	768	$	1,205	Total	$	861	$	246	$	768

International Regulated Segment

The International Regulated segment primarily includes the electric distribution operations of WPD. See Note 9 to the Financial Statements for additional information on the sale of PPL's Latin American businesses in 2007. The International Regulated segment results in 2009 and 2008 reflect the classification of its Latin American businesses as Discontinued Operations.

International Regulated segment Net Income Attributable to PPL Energy Supply was:

		2010		2009		2008

Utility revenues		$	727	$	684	$	824
Energy-related businesses			34		32		33
	Total operating revenues		761		716		857
Other operation and maintenance			182		140		186
Depreciation			117		115		134
Taxes, other than income			52		57		66
Energy-related businesses			17		16		14
	Total operating expenses		368		328		400
Other Income (Expense) - net			3		(11)		17
Interest Expense			135		87		144
Income Tax Expense					20		45
Income (Loss) from Discontinued Operations					(27)		5
	Net Income Attributable to PPL Energy Supply	$	261	$	243	$	290

The after-tax changes in Net Income Attributable to PPL Energy Supply between these periods were due to the following factors.

		2010 vs. 2009		2009 vs. 2008
U.K.
	Utility revenues	$	30	$	10
	Other operation and maintenance		(34)		16
	Other income (expense) - net		1		(7)
	Depreciation		(2)		(4)
	Interest expense		(36)		28
	Income taxes		13		24
	Foreign currency exchange rates		6		(69)
	Other		5		(3)
Discontinued operations, excluding special item (Note 9)					(5)
U.S. income taxes			(32)		1
Other			7		(10)
Special items			60		(28)
Total		$	18	$	(47)

·	U.K. utility revenues increased in 2010 compared with 2009, primarily due to price increases in April 2010 and 2009, partially offset by lower regulatory recovery due to a revised estimate of network electricity losses. U.K. utility revenues increased in 2009 compared with 2008, due to higher regulatory recovery primarily due to a revised estimate of network electricity losses and higher prices.

·	U.K. other operation and maintenance increased in 2010 compared with 2009, primarily due to higher pension expense resulting from an increase in amortization of actuarial losses. U.K. other operation and maintenance decreased in 2009 compared with 2008, primarily due to lower pension cost resulting from an increase in discount rates and lower inflation rates.

·	U.K. interest expense increased in 2010 compared with 2009, primarily due to higher inflation rates on index-linked Senior Unsecured Notes and interest expense related to the March 2010 debt issuance. U.K. interest expense decreased in 2009 compared with 2008, primarily due to lower inflation rates on index-linked Senior Unsecured Notes and lower debt balances.

·	U.K. income taxes decreased in 2010 compared with 2009, primarily due to realized capital losses that offset a gain relating to a business activity sold in 1999, partially offset by favorable settlements of uncertain tax positions in 2009. U.K. income taxes decreased in 2009 compared with 2008, primarily due to HMRC's determination related to the valuation of a business activity sold in 1999 and to the deductibility of foreign currency exchange losses, partially offset by the settlement of uncertain tax positions and a change in the tax law in 2008.

·	Changes in foreign currency exchange rates positively impacted U.K. earnings for 2010 compared with 2009, and negatively impacted U.K. earnings for 2009 compared with 2008. The weighted-average exchange rates for the British pound sterling were approximately $1.56 in 2010, $1.53 in 2009 and $1.91 in 2008.

·	U.S. income taxes increased in 2010 compared with 2009, primarily due to changes in the taxable amount of planned U.K. cash repatriations.

The following after-tax amounts, which management considers special items, also impacted the International Regulated segment's earnings.

		2010		2009		2008

Foreign currency-related economic hedges (a)		$	1	$	1
Sales of assets:
	Latin American businesses (Note 9)				(27)
Asset impairments					(1)
Workforce reduction (Note 13)					(2)	$	(1)
Other:
	Change in U.K. tax rate (Note 5)		18
	U.S. Tax Court ruling (b)		12
Total		$	31	$	(29)	$	(1)

(a)	Represents unrealized gains on contracts that economically hedge anticipated earnings denominated in British pounds sterling.

(b)	Represents the net tax benefit recorded as a result of the U.S. Tax Court ruling that the U.K. Windfall Profits Tax is creditable for U.S. tax purposes, excluding the reversal of accrued interest. See Notes 5 and 15 to the Financial Statements for additional information.

2011 Outlook

Supply Segment

The Supply segment primarily consists of the ~~domestic~~ energy marketing and trading activities, as well as the competitive generation and development operations of PPL Energy Supply. In ~~December~~September 2010, certain PPL Energy Supply subsidiaries signed definitive agreements to sell their entire ownership interests in certain non-core generation facilities. The sale is expected to close in the first quarter of 2011, subject to the receipt of necessary regulatory approvals and third-party consents. The operating results of these facilities have been classified as Discontinued Operations. In 2010 and 2009, PPL ~~Maine sold its 8.33% ownership interest in Wyman Unit 4. In November 2009, PPL Maine~~Energy Supply subsidiaries also completed the sale of the majority of its hydroelectric generation business. In May 2009, PPL Generation signed a definitive agreement to sell its Long Island generation business and expects the sale to close on or about February 26, 2010. In August 2007, PPL Energy Supply completed the sale of its domestic telecommunication operations. See Notes 8 and 9 to the Financial Statements for additional information.

The Supply segment results reflect the classification of the Long Island generation business, the majority of the Maine hydroelectric generation business, and the 8.33% ownership interest in Wyman Unit 4,several businesses, which have been classified as Discontinued Operations. See Note 9 to the Financial Statements for additional ~~information.~~informa tion.

Supply segment ~~net income attributable~~Net Income Attributable to PPL Energy Supply was:

	2009			2008		2007				2010		2009		2008

Energy revenues (a)	$	5,037		$	5,200	$	3,389	Energy revenues (a)		$	4,764	$	4,930	$	5,050
Energy-related businesses		379			478		723	Energy-related businesses			364		379		478
Total operating revenues		5,416			5,678		4,112
									Total operating revenues		5,128		5,309		5,528
Fuel and energy purchases (a)		3,679			3,215		1,575	Fuel and energy purchases (a)			2,449		3,657		3,178
Other operation and maintenance		927			884		753	Other operation and maintenance			979		921		876
Depreciation		210			180		152	Depreciation			236		195		165
Taxes, other than income		29			20		31	Taxes, other than income			47		29		20
Energy-related businesses		372			464		740	Energy-related businesses			356		372		464
Total operating expenses		5,217			4,763		3,251
Other Income - net (b)		48			45		83
									Total operating expenses		4,067		5,174		4,703
Other Income (Expense) - net (b)								Other Income (Expense) - net (b)			32		46		43
Other-Than-Temporary Impairments		18			36		3	Other-Than-Temporary Impairments			3		18		36
Interest Expense ~~(c)~~		185			169		106			208		176		162
Income Taxes		27			290		249	Income Taxes			262		3		256
Income (Loss) from Discontinued Operations		(13	)		15		12	Income (Loss) from Discontinued Operations			(19)		20		66
Net Income		4			480		598	Net Income			601		4		480
Net Income Attributable to Noncontrolling Interests		1			2		3
Net Income Attributable to PPL Energy Supply	$	3		$	478	$	595
Net Income Attributable to Noncontrolling Interests (Note 22)								Net Income Attributable to Noncontrolling Interests (Note 22)			1		1		2
									Net Income Attributable to PPL Energy Supply	$	600	$	3	$	478

(a)

Includes impact from energy-related economic activity. See "Commodity Price Risk (Non-trading) - Economic Activity" in Note 1819 to the Financial Statements for additional information.

(b)		Includes interest income from affiliates.
~~(c)~~		~~Includes interest expense with affiliate.~~

The after-tax changes in ~~net income attributable~~Net Income Attributable to PPL Energy Supply between these periods were due to the following factors.

2009 vs. 2008 2008 vs. 2007

Eastern U.S. non-trading margins $ (3 ) $ (62 )
Western U.S. non-trading margins 20 5
Net energy trading margins 81 (95 )
Energy-related businesses (4 ) (4 )
Other operation and maintenance (32 ) 12
Depreciation (18 ) (16 )
Taxes, other than income (5 ) 6
Other income - net (a) (4 ) (21 )
Interest expense (b) (9 ) (38 )
Income taxes (24 ) (61 )
Discontinued operations (Note 9) (9 ) 3
Other 1 2
Special items (469 ) 152
$ (475 ) $ (117 )

~~(a)~~		~~Includes interest income from affiliates.~~
~~(b)~~		~~Includes interest expense with affiliate.~~

	2010 vs. 2009		2009 vs. 2008

Eastern U.S. non-trading margins	$	607	$	(3)
Western U.S. non-trading margins		9		20
Net energy trading margins		(9)		81
Other operation and maintenance		(26)		(33)
Depreciation		(24)		(18)
Income taxes and other		81		(44)
Discontinued operations, excluding special items (Note 9)		13		(9)
Special items		(54)		(469)
Total	$	597	$	(475)

·	See ~~"Domestic~~"Unregulated Gross Energy Margins" in the "Statement of Income Analysis" section for an explanation of non-trading margins and net energy trading margins.

Other operation and maintenance increased in 2009 compared with 2008, primarily due to increased payroll-related costs, higher contractor-related costs and other costs at ~~PPL Energy Supply's~~ generation plants.

·	Depreciation increased in 2010 compared with 2009, primarily due to the Brunner Island environmental equipment that was placed in service in 2009 and early 2010.


·	Depreciation ~~expense~~ increased in 2009 compared with 2008, primarily due to the scrubbers at Brunner Island and Montour and ~~the~~ portions of the Susquehanna uprate projects that were placed in service in 2008 and 2009.

·	~~Depreciation expense increased~~Income taxes decreased in ~~2008~~2010 compared with ~~2007, primarily due to the Montour scrubbers and the Susquehanna uprate project that were placed in service in 2008.~~

·	~~Other income - net decreased in 2008 compared with 2007,~~2009, primarily due to a ~~decrease~~release of valuation allowances related to deferred tax assets for Pennsylvania net operating loss carryforwards, investment tax credits at Holtwood and Rainbow, a release of tax reserves in ~~earnings on nuclear plant decommissioning trust investments~~2010, and ~~lower gains on sales of real estate.~~

·	~~Interest expense increased in 2008 compared with 2007, primarily due to increased interest on long-term debt resulting~~a tax benefit from ~~new issuances.~~

·	the manufacturing deduction. Income taxes increased in 2009 compared with 2008, in part due to lower domestic manufacturing deductions in 2009. ~~Income taxes increased in 2008 compared with 2007, primarily due to the loss of synfuel tax credits as the projects ceased operation at the end of 2007.~~

·	Special items decreased in 2009 compared with 2008, primarily due to a $476 million after-tax change in energy-related economic activity. The change is primarily the result of certain power and gas cash flow hedges failing hedge effectiveness testing in the third and fourth quarters of 2008, as well as the first quarter of 2009. Hedge accounting is not permitted for the quarter in which this occurs and, accordingly, the entire change in fair value for the periods that failed was recorded to the income statement. However, these transactions were not dedesignated as hedges, as prospective regression analysis demonstrated that these hedges are expected to be highly effective over their term. For 2008, an after-tax gain of $298 million was recognized in earnings as a result of these hedge failures. During the second, third and fourth quarters of 2009, fewer power and gas cash flow hedges failed hedge effectiveness testing; therefore, a portion of the previously recognized unrealized gains recorded in the second half of 2008 and the first quarter of 2009 associated with these hedges were reversed. For 2009, after-tax losses of $215 million were recognized in earnings.

The following after-tax amounts, which management considers special items, also impacted the Supply segment's earnings.

		2010		2009		2008

Adjusted energy-related economic activity, net (a)		$	(121)	$	(225)	$	251
Sales of assets:
	Maine hydroelectric generation business (Note 9)		15		22
	Sundance indemnification		1
	Long Island generation business (b)				(33)
	Interest in Wyman Unit 4 (Note 9)				(4)
Impairments:
	Impacts from emission allowances (c)		(10)		(19)		(25)
	Adjustments - NDT investments (d)						(17)
	Other asset impairments (e)				(4)		(15)
Workforce reduction (Note 13)					(6)		(1)
LKE acquisition-related costs:
	Monetization of certain full-requirement sales contracts (f)		(125)
	Anticipated sale of certain non-core generation facilities (g)		(64)
	Reduction of credit facility (Note 7)		(6)
Other:
	Montana hydroelectric litigation (Note 15)		(34)		(3)
	Health Care Reform - tax impact (Note 13)		(5)
	Montana basin seepage litigation (Note 15)		2				(5)
	Change in tax accounting method related to repairs (Note 5)				(21)
	Synfuel tax adjustment (Note 15)						(13)
	Off-site remediation of ash basin leak (Note 15)						1
Total		$	(347)	$	(293)	$	176

(a)	See "Reconciliation of Economic Activity" below.

(b)	Consists primarily of the initial impairment charge recorded in June 2009 when this business was classified as held for sale. See Note 9 to the Financial Statements for additional ~~information on the anticipated sale.~~information.

~~(b)~~(c)

2010 and 2009 ~~primarily consists~~include impairments of ~~a pre-tax charge of $37 million related to~~ sulfur dioxide emission allowances. 2009 also includes a pre-tax gain of $4 million related to the settlement of a dispute regarding the sale of certain annual nitrogen oxide allowance put options. See Note 1718 to the Financial Statements for additional information.

2008 consists of charges related to annual nitrogen oxide allowances and put options. See Note 1418 to the Financial Statements for additional information.

~~(c)~~(d)

Represents other-than-temporary impairment charges on securities, including reversals of previous impairments when securities previously impaired were sold.

(e)	2008 primarily consists of a pre-tax charge of $22 million related to ~~the cancellation of~~ the Holtwood hydroelectric expansion project. See Note 8 to the Financial Statements for additional information.
~~(d)~~		~~Represents other-than-temporary impairment charges on securities, including reversals of previous impairments when previously impaired securities were sold.~~
~~(e)~~		~~See "Other Operation and Maintenance" for more information on the $23 million pre-tax impairment recorded in 2007.~~

(f)	See "Components of Monetization of Certain Full-Requirement Sales Contracts" below.

(g)

~~In 2003, PPL Wallingford~~Consists primarily of an impairment charge recorded when these facilities were classified as held for sale, and ~~PPL EnergyPlus sought from~~allocated goodwill that was written off. See Note 9 to the FERC cost-based payments based upon the RMR status of four units at the Wallingford, Connecticut generating facility. In 2007, as a result of a settlement agreement, PPL Energy Supply recognized $55 million of revenue and $4 million of interest income.Financial Statements for additional information.

Reconciliation of Economic Activity

			2010		2009		2008
Operating Revenues
		Unregulated retail electric and gas	$	1	$	6	$	5
		Wholesale energy marketing		(805)		(229)		1,056
Operating Expenses
		Fuel		29		49		(79)
		Energy Purchases		286		(155)		(553)
		Energy-related economic activity (a)		(489)		(329)		429
		Option premiums (b)		32		(54)
Adjusted energy-related economic activity				(457)		(383)		429
Less: Unrealized economic activity associated with the monetization of certain
	full-requirement sales contracts (c)			(251)
Adjusted energy-related economic activity, net, pre-tax			$	(206)	$	(383)	$	429

Adjusted energy-related economic activity, net, after-tax			$	(121)	$	(225)	$	251

(a)	The components of this item are from the table within "Commodity Price Risk (Non-trading) - Economic Activity" in Note 19 to the Financial Statements.

(b)	Adjustment for the net deferral and amortization of option premiums over the delivery period of the item that was hedged or upon realization. After-tax amount for 2010 was $19 million and for 2009 was $31 million.

(c)	See "Components of Monetization of Certain Full-Requirement Sales Contracts" below.

Components of Monetization of Certain Full-Requirement Sales Contracts

The following table provides the components of the "Monetization of Certain Full-Requirement Sales Contracts" special item.

	2010

Full-requirement sales contracts monetized (a)	$	(68)
Economic activity related to the full-requirement sales contracts monetized		(146)
Monetization of certain full-requirement sales contracts, pre-tax (b)	$	(214)

Monetization of certain full-requirement sales contracts, after-tax	$	(125)

(a)	See "Commodity Price Risk (Non-trading) – Monetization of Certain Full-Requirement Sales Contracts" in Note 19 to the Financial Statements for additional information.

(b)

2011 Outlook

Excluding special items, ~~PPL Energy Supply projects higher~~lower earnings are projected from ~~its~~the Supply segment in ~~2010~~2011 compared with ~~2009, due to growth in energy margins. The forecast for growth in~~2010 as a result of lower energy margins ~~is based on hedged power~~driven by lower energy and ~~fuel prices as well as established~~ capacity prices in ~~PJM. These positive factors are expected to be partially offset by~~the East, higher ~~depreciation, financing~~average fuel costs, and higher operation and maintenance ~~expenses.~~expense.

~~International Delivery Segment~~

~~The International Delivery segment consists primarily~~Earnings beyond 2010 are subject to various risks and uncertainties. See "Forward-Looking Information," "Item 1. Business," "Item 1A. Risk Factors," the rest of the electricity distribution operations in the U.K. In 2007, PPL Energy Supply completed the sale of its Latin American businesses. In 2008, the International Delivery segment recognized income tax benefitsthis Item 7 and miscellaneous expenses in Discontinued Operations in connection with the dissolution of certain Latin American holding companies. In 2009, the International Delivery segment recognized $24 million of income tax expense in Discontinued Operations related to a correction of the calculation of tax bases of the Latin American businesses sold in 2007. See Note 915 to the Financial Statements for ~~additional information.~~

~~The International Delivery segment results reflect the classification of its Latin American businesses as Discontinued Operations.~~

~~International Delivery segment net income attributable to PPL Energy Supply was:~~

2009 2008 2007

Utility revenues $ 684 $ 824 $ 863
Energy-related businesses 32 33 37
Total operating revenues 716 857 900
Other operation and maintenance 140 186 252
Depreciation 115 134 147
Taxes, other than income 57 66 67
Energy-related businesses 16 14 17
Total operating expenses 328 400 483
Other Income - net (11 ) 17 26
Interest Expense 87 144 183
Income Taxes 20 45 (43 )
Income (Loss) from Discontinued Operations (27 ) 5 313
Net Income 243 290 616
Net Income Attributable to Noncontrolling Interests 6
Net Income Attributable to PPL Energy Supply $ 243 $ 290 $ 610

~~The after-tax changes in net income attributable to PPL Energy Supply between these periods were due to the following factors.~~

2009 vs. 2008 2008 vs. 2007
U.K.
Delivery margins $ 17 $ 12
Other operating expenses 7 22
Other income – net (4 ) (7 )
Depreciation (4 ) 4
Interest expense 28 5
Income taxes 24 24
Foreign currency exchange rates (69 ) (14 )
Gain on transfer of equity investment (5 )
Other (4 ) (3 )
Discontinued Operations (Note 9) (5 ) (49 )
U.S. interest expense 17
U.S. income taxes 1 (32 )
Gain (loss) on economic hedges (Note 15) (12 ) 10
Other 2 6
Special items (28 ) (310 )
$ (47 ) $ (320 )

·	~~Lower U.K. other operating expenses in 2008 compared with 2007, were primarily due to lower compensation and lower pension costs.~~

·	~~Lower U.K. interest expense in 2009 compared with 2008, was primarily due to lower inflation rates on U.K. Index-linked Senior Unsecured Notes and lower debt balances.~~

·	Lower U.K. income taxes in 2009 compared with 2008, were primarily due to HMRC's determination related to the valuation of a business activity sold in 1999 and to the deductibility of foreign currency exchange losses, partially offset by the items in 2008 mentioned below. Lower U.K. income taxes in 2008 compared with 2007, were primarily due to HMRC's determination related to deductibility of imputed interest on a loan from Hyder and a change in tax law that included the phase-out of tax depreciation on industrial buildings over a four-year period.

·	Changes in foreign currency exchange rates negatively impacted U.K. earnings for both periods. The weighted-average exchange rates for the British pound sterling were approximately $1.53 in 2009, $1.91 in 2008 and $2.00 in 2007.

·	~~Higher U.S. income taxes in 2008 compared with 2007, was primarily due to the change in a U.S. income tax reserve resulting from the lapse in 2007 of an applicable statute of limitations.~~

~~The following after-tax amounts, which management considers special items, also impacted the International Delivery segment's earnings.~~

~~2010 Outlook~~

~~Excluding special items, PPL Energy Supply projects lower earnings from its International Delivery segment in 2010 compared with 2009, as~~ a result of higher income taxes, higher operation and maintenance expenses and higher financing costs. These negative factors are expected to be partially offset by higher electricity delivery margins and a more favorable currency exchange rate.

In December 2009, Ofgem completed its rate review for the five-year period from April 1, 2010 through March 31, 2015. Ofgem allowed WPD an average increase in total revenues, before inflationary adjustments, of 6.9% in eachdiscussion of the ~~five years. The revenue increase includes reimbursement to electricity distributors for higher operating~~risks, uncertainties and capital costs to be incurred. Also, Ofgem set the weighted average cost of capital at 4.7%, which includes pre-tax debt and post-tax equity costs and excludes adjustments for inflation, for all distribution companies. This is a 0.8% decrease from the previous regulatory period. Additionally, Ofgem has established strong incentive mechanisms to provide companies significant opportunities to enhance overall returns by improving network efficiency, reliability or customer service.factors that may impact future earnings.

Statement of Income Analysis --

~~Domestic~~Unregulated Gross Energy Margins

Non-GAAP Financial Measure

The following discussion includes financial information prepared in accordance with GAAP, as well as a non-GAAP financial measure, ~~"Domestic~~"Unregulated Gross Energy Margins." ~~The presentation of "Domestic~~"Unregulated Gross Energy Margins" is ~~intended to supplement the investor's understanding~~a single financial performance measure of PPL Energy Supply's ~~domestic~~competitive energy non-trading and trading ~~activities~~activities. In calculating this measure, the Supply segment's energy revenues are offset by ~~combining applicable income statement line items~~the cost of fuel and energy purchases, and adjusted for other related ~~adjustments~~items. This performance measure is relevant to ~~calculate~~PPL Energy Supply due to the volatility in the individual revenue and expense lines on the Statements of Income that comprise "Unregulated Gross Energy Margins." This volatility stems from a ~~single financial measure.~~number of factors, including the required netting of certain transactions with ISOs and signific ant swings in unrealized gains and losses. Such factors could result in gains or losses being recorded in either "Wholesale energy marketing" or "Energy purchases" on the Statements of Income. In addition, PPL Energy Supply excludes from "Unregulated Gross Energy Margins" energy-related economic activity, which includes the changes in fair value of positions used to economically hedge a portion of the economic value of PPL Energy Supply's competitive generation assets, full-requirement and retail activities. This economic value is subject to changes in fair value due to market price volatility of the input and output commodities (e.g., fuel and power) prior to the delivery period that was hedged. Also included in this energy-related economic activity is the ineffective portion of qualifying cash flow hedges, net losses on the monetization of certain full-requirement sales contracts and premium amortization associated with options. This economic activity is deferred, with the exception of the net losses on the full-requirement sales contracts that were monetized, and included in unregulated gross energy margins over the delivery period that was hedged or upon realization. PPL Energy Supply believes that ~~"Domestic~~"Unregulated Gross Energy Margins" ~~are useful~~provides another criterion to make investment decisions. This performance measure is used, in conjunction with other information, internally by senior management and ~~meaningful to investors because they provide them with~~ the ~~results~~Board of Directors of PPL ~~Energy Supply's domestic~~to manage its competitive energy non-trading and trading ~~activities as another criterion in making their investment decisions. PPL Energy Supply's~~activities. PPL's management also uses ~~"Domestic~~"Unregulated Gross Energy Margins" in measuring certain PPL corporate performance goals used in determining variable compensation. ~~Other companies may use different measures to present the results of their non-trading and trading activities. Additionally, "Domestic Gross Energy Margins" are~~

This measure is not intended to replace "Operating Income," which is determined in accordance with GAAP, as an indicator of overall operating performance. Other companies may use different measures to analyze and to report on the results of their operations. The following table ~~provides a reconciliation between~~reconciles "Operating Income" ~~and "Domestic~~to "Unregulated Gross Energy Margins" as defined by PPL Energy Supply.

2009 2008 2007

Operating Income (a) $ 587 $ 1,372 $ 1,278
Adjustments:
Utility (a) (684 ) (824 ) (863 )
Energy-related businesses, net (b) (23 ) (33 ) (3 )
Other operation and maintenance (a) 1,067 1,070 1,005
Depreciation (a) 325 314 299
Taxes, other than income (a) 86 86 98
Revenue adjustments (c) 293 (1,032 ) 223
Expense adjustments (c) 80 611 (213 )
Domestic gross energy margins $ 1,731 $ 1,564 $ 1,824

		2010		2009		2008

Operating Income (a)		$	1,454	$	523	$	1,282
Adjustments:
	Utility (a)		(727)		(684)		(824)
	Energy-related businesses, net (b)		(25)		(23)		(33)
	Other operation and maintenance (a)		1,161		1,061		1,062
	Depreciation (a)		353		310		299
	Taxes, other than income (a)		99		86		86
	Revenue adjustments (c)		600		411		(868)
	Expense adjustments (c)		(145)		47		560
Unregulated gross energy margins		$	2,770	$	1,731	$	1,564

(a)

As reported on the Statements of Income.

(b)

Amount represents the net of "Energy-related businesses" revenue and expense as reported on the Statements of Income.

(c)

The components of these adjustments are detailed in the ~~tables~~table below.

The following ~~tables provide~~table provides the income statement line items and other adjustments that comprise ~~domestic~~unregulated gross energy margins.

2009 2008 Change
Revenue
Wholesale energy marketing (a) $ 3,062 $ 3,344 $ (282 )
Wholesale energy marketing to affiliate (a) 1,806 1,826 (20 )
Unregulated retail electric and gas (a) 152 151 1
Net energy trading margins (a) 17 (121 ) 138
Revenue adjustments (b)
Miscellaneous wholesale energy marketing to affiliate (12 ) (14 ) 2
Impact from energy-related economic activity (c) 274 (1,061 ) 1,335
Gains from sale of emission allowances (d) 2 6 (4 )
Revenues from Supply segment discontinued operations (e) 29 37 (8 )
Total revenue adjustments 293 (1,032 ) 1,325
5,330 4,168 1,162
Expense
Fuel (a) 931 1,084 (153 )
Energy purchases (a) 2,678 2,023 655
Energy purchases from affiliate (a) 70 108 (38 )
Expense adjustments (b)
Impact from energy-related economic activity (c) (109 ) (632 ) 523
Other 29 21 8
Total expense adjustments (80 ) (611 ) 531
3,599 2,604 995
Domestic gross energy margins $ 1,731 $ 1,564 $ 167

2008 2007 Change
Revenue
Wholesale energy marketing (a) $ 3,344 $ 1,436 $ 1,908
Wholesale energy marketing to affiliate (a) 1,826 1,810 16
Unregulated retail electric and gas (a) 151 102 49
Net energy trading margins (a) (121 ) 41 (162 )
Revenue adjustments (b)
Miscellaneous wholesale energy marketing to affiliate (14 ) (15 ) 1
Impact from energy-related economic activity (c) (1,061 ) 145 (1,206 )
Gains from sale of emission allowances (d) 6 109 (103 )
RMR revenues (52 ) 52
Revenues from Supply segment discontinued operations (e) 37 36 1
Total revenue adjustments (1,032 ) 223 (1,255 )
4,168 3,612 556
Expense
Fuel (a) 1,084 890 194
Energy purchases (a) 2,023 529 1,494
Energy purchases from affiliate (a) 108 156 (48 )
Expense adjustments (b)
Impact from energy-related economic activity (c) (632 ) 200 (832 )
Other 21 13 8
Total expense adjustments (611 ) 213 (824 )
2,604 1,788 816
Domestic gross energy margins $ 1,564 $ 1,824 $ (260 )

				2010		2009		Change		2009		2008		Change
Revenue
	Wholesale energy marketing (a)			$	4,027	$	2,955	$	1,072	$	2,955	$	3,194	$	(239)
	Wholesale energy marketing to affiliate (a)				320		1,806		(1,486)		1,806		1,826		(20)
	Unregulated retail electric and gas (a)				415		152		263		152		151		1
	Net energy trading margins (a)				2		17		(15)		17		(121)		138
	Revenue adjustments (b)
		Exclude impact from energy-related
			economic activity (c)		483		274		209		274		(1,061)		1,335
		Include gains from sale of emission allowances/RECs (d)					2		(2)		2		6		(4)
		Include revenue from Supply segment
			discontinued operations (e)		117		135		(18)		135		187		(52)
	Total revenue adjustments				600		411		189		411		(868)		1,279
					5,364		5,341		23		5,341		4,182		1,159
Expense
	Fuel (a)				1,096		920		176		920		1,057		(137)
	Energy purchases (a)				1,350		2,667		(1,317)		2,667		2,013		654
	Energy purchases from affiliate (a)				3		70		(67)		70		108		(38)
	Expense adjustments (b)
		Exclude impact from energy-related
			economic activity (f)		63		(109)		172		(109)		(632)		523
		Include expenses from Supply segment
			discontinued operations (g)		33		22		11		22		37		(15)
		Include ancillary charges (d)			24		19		5		19		15		4
		Include gross receipts tax (h)			15				15
		Other			10		21		(11)		21		20		1
	Total expense adjustments				145		(47)		192		(47)		(560)		513
					2,594		3,610		(1,016)		3,610		2,618		992
		Unregulated gross energy margins		$	2,770	$	1,731	$	1,039	$	1,731	$	1,564	$	167

(a)

As reported on the Statements of Income.

(b)

(c)

See "Commodity Price Risk (Non-trading) – Economic Activity" in Note 1819 to the Financial Statements for additional ~~information regarding economic activity.~~information. In addition, 2010 and 2009 includes a pre-tax gain of $28 million and a loss of $51 million related to the amortization of option premiums, and in 2010 a realized gain of $293 million related to the monetization of certain full-requirement sales contracts. These amounts are reflected in "Wholesale energy marketing – Realized" on the Statement of Income.

(d)

Included in "Other operation and maintenance" on the Statements of Income.

(e)

(f)

See "Commodity Price Risk (Non-trading) – Economic Activity" in Note 19 to the Financial Statements for additional information. In addition, 2010 and 2009 include a pre-tax gain of $4 million and a loss of $3 million related to the amortization of option premiums, and in 2010 a realized loss of $256 million related to the monetization of certain full-requirement sales contracts. These amounts are reflected in "Energy purchases – Realized" on the Statement of Income.

(g)	Represents fuel costs and energy purchases associated with the anticipated sale of certain non-core generation facilities that are classified as discontinued operations. See Note 9 to the Financial Statements for additional information.

(h)	Included in "Taxes, other than income" on the Statement of Income.

~~Domestic~~Unregulated Gross Energy Margins By Region

~~Domestic~~Unregulated gross energy margins are generated through ~~PPL Energy Supply's~~ non-trading and trading activities. ~~PPL Energy Supply manages its~~The non-trading energy business is managed on a geographic basis that is aligned with its generation assets.

2009 2008 Change
Non-trading
Eastern U.S. $ 1,391 $ 1,396 $ (5 )
Western U.S. 323 289 34
Net energy trading 17 (121 ) 138
Domestic gross energy margins $ 1,731 $ 1,564 $ 167

2008 2007 Change
Non-trading
Eastern U.S. $ 1,396 $ 1,502 $ (106 )
Western U.S. 289 281 8
Net energy trading (121 ) 41 (162 )
Domestic gross energy margins $ 1,564 $ 1,824 $ (260 )

		2010		2009		Change		2009		2008		Change
Non-trading:
	Eastern U.S.	$	2,429	$	1,391	$	1,038	$	1,391	$	1,396	$	(5)
	Western U.S.		339		323		16		323		289		34
Net energy trading			2		17		(15)		17		(121)		138
Unregulated gross energy margins		$	2,770	$	1,731	$	1,039	$	1,731	$	1,564	$	167

Eastern U.S.

Eastern U.S. non-trading margins were lower in 2009 compared with ~~2008. This decrease was~~2008, primarily due to lower margins on full-requirement sales contracts resulting from mild weather, decreased demand, and customer migration. Also contributing to the decrease were higher average baseload generation fuel costs, ~~of 7%,~~ primarily due to higher coal prices. Partially offsetting these lower margins were net gains resulting from the settlement of economic positions associated with rebalancing ~~PPL Energy Supply's~~ portfolios to better align them with current strategies, higher capacity revenue, higher baseload generation output due to unplanned major outages in 2008, and ~~a 2.2%~~an increase in the ~~PLR sales prices in accordance with the PUC Final Order.~~

Western U.S.

Net Energy Trading

PPL Energy Supply enters into energy contracts to take advantage of market opportunities. As a result, PPL Energy Supply may at times create a net open position in its portfolio that could result in significant losses if prices do not move in the manner or direction anticipated. However, these trading activities are subject to risk management program limits that are designed to protect PPL Energy Supply from undue financial loss. The margins from these trading activities are reflected in the Statements of Income as "NetNet energy trading ~~margins." These physical~~margins decreased in 2010 compared with 2009, consisting of lower trading margins related to power and ~~financial contracts cover~~gas, partially offset by higher trading ~~activity associated with electricity, emission allowances, uranium, FTRs, natural gas, and oil.~~margins related to FTRs.

Net energy trading margins decreased by $162 million in 2008 compared with 2007. This decrease consists of $135 million of lower unrealized margins and $27 million of lower realized margins, both driven by significant decreases in power and gas prices in the second half of 2008.

Utility Revenues

The changes in utility revenues were attributable to:

	2009 vs. 2008			2008 vs. 2007			2010 vs. 2009		2009 vs. 2008

U.K. electric delivery revenue							$	41	$	14
U.K. foreign currency exchange rates	$	(154	)	$	(42	)		2		(154)
U.K. electric delivery revenue		14			3
	$	(140	)	$	(39	)
Total							$	43	$	(140)

~~Higher~~ U.K. electric delivery revenues ~~for~~increased in 2010 compared with 2009, primarily due to price increases in April 2010 and 2009, partially offset by lower regulatory recovery due to a revised estimate of network electricity losses.

U.K. electric delivery revenues increased in 2009 compared with 2008, ~~excluding foreign currency exchange rate impacts, were~~ primarily due to ~~an increase~~price increases in ~~prices effective~~ April 1,2009 and 2008, increased regulatory recovery due to a revised estimate of network electricity losses, and favorable changes in customer mix. These increases were partially offset by lower volumes due to unfavorable economic conditions, including industrial customers scaling back on production and a decrease in engineering and metering services performed for third parties.

~~Energy-related~~Energy-Related Businesses

~~Energy-related businesses contributed $10 million less to operating income in 2009 compared with 2008. The decrease was primarily attributable to:~~

·	The changes in contributions from ~~domestic energy services-related~~energy-related businesses ~~decreasing by $6 million, primarily~~were due to:

	2010 vs. 2009		2009 vs. 2008

Domestic mechanical business (a)	$	(8)	$	(6)
WPD (b)		2		(4)
Other		8
Total	$	2	$	(10)

(a)	Primarily attributable to a decline in construction activity caused by the slowdown in the ~~economy; and~~economy.

·(b)	Changes in contributions from U.K. energy-related businesses ~~decreasing by $4 million,~~were primarily due to increases in remote metering business activity in 2010 and decreases related to changes in foreign currency exchange ~~rates.~~rates in 2009.

~~Energy-related businesses contributed $30 million more to operating income in 2008 compared with 2007. The increase was primarily attributable to:~~

·	~~a $39 million impairment in 2007 of domestic telecommunication operations that were sold in 2007; and~~
·	~~an $11 million increase in contributions from domestic energy services-related businesses mainly due to increased construction activity; partially offset by~~
·	$11 million of lower pre-tax contributions from synfuel projects. This reflects a $77 million net gain recorded in 2007 on options purchased to hedge the risk associated with the phase-out of synthetic fuel tax credits. This decrease was partially offset by $66 million less in operating losses from synfuel projects as the projects ceased operation at the end of 2007; and
·	~~$5 million less in contributions from the domestic telecommunication operations sold in 2007.~~

See Note 8 to the Financial Statements for additional information on the sale of domestic telecommunication assets. See Note 14 to the Financial Statements for additional information on the shutdown of the synfuel facilities in 2007.

Other Operation and Maintenance

The changes in other operation and maintenance expenses were due to:

2009 vs. 2008 2008 vs. 2007

U.K. foreign currency exchange rates $ (24 ) $ (8 )
Impairment of cancelled generation expansion project in 2008 (Note 8) (22 ) 22
Defined benefit costs - U.K. (Note 12) (16 ) (28 )
WPD recoverable engineering services (9 ) (17 )
Impairment and other charges - emission allowances (Notes 14 and 17) (9 ) 42
Montana basin seepage litigation (Note 14) (8 ) 8
Uncollectible accounts (8 ) 4
Trademark royalty fees from a PPL subsidiary (Note 15) (7 ) 9
WPD meter operator expenses (7 ) (6 )
Payroll-related costs 24 (6 )
Allocation of corporate service costs 16 (21 )
WPD distribution costs 15 7
Domestic and international workforce reductions (Note 12) 13 (10 )
Contractor-related expenses 11 (7 )
Defined benefit costs - U.S. (Note 12) 11 (3 )
Montana hydroelectric litigation (Note 14) 8 1
Other costs at fossil/hydroelectric stations 7 1
Other nuclear related expenses 7 (10 )
Lower gains on sales of emission allowances 4 103
Impairment of transmission rights (a) (23 )
Other - Domestic (4 ) 10
Other - U.K. (5 ) (3 )
$ (3 ) $ 65

	2010 vs. 2009		2009 vs. 2008

Montana hydroelectric litigation (Note 15)	$	48	$	8
Defined benefit costs - U.K. (Note 13)		32		(16)
Other costs at Susquehanna nuclear plant		23		14
Outage costs at Susquehanna nuclear plant		8
Uncollectible accounts		3		(8)
Other costs at fossil/hydroelectric plants		2		17
Outage costs at eastern fossil/hydroelectric plants				23
Impacts from emission allowances (a)		(16)		(9)
Workforce reductions (Note 13)		(13)		13
Allocation of certain corporate support group costs		(5)		16
Defined benefit costs - U.S. (Note 13)		(2)		11
U.K. foreign currency exchange rates		(1)		(24)
Impairment of cancelled generation expansion project in 2008 (Note 8)				(22)
Montana basin seepage litigation (Note 15)				(8)
Trademark royalty fees from a PPL subsidiary (Note 16)				(7)
Other - Domestic		7		(3)
Other - U.K.		14		(6)
Total	$	100	$	(1)

(a)

~~In 2007, Maine Electric Power Company (MEPCO), ISO New England and other New England transmission owners submitted a filing~~For the period 2010 compared to 2009, $21 million relates to lower impairment charges of sulfur dioxide emission allowances. See Note 18 to the ~~FERC seeking to roll~~Financial Statements for additional information. Partially offsetting the ~~revenue requirement~~decrease was a $5 million increase in the charge for the settlement of a dispute regarding the ~~MEPCO transmission facilities into the regional transmission rates in New England and to change~~sale of certain rules concerning the use of the transmission line for energy and capacity. PPL Energy Supply protested this proposal and recorded an impairment of the transmission rights based on their estimated fair value.annual nitrogen oxide allowance put options.

Depreciation

The ~~increases~~changes in depreciation expense were due to:

	2009 vs. 2008			2008 vs. 2007			2010 vs. 2009		2009 vs. 2008

Additions to PP&E (a)	$	40		$	37		$	43	$	40
U.K. foreign currency exchange rates		(25	)		(7	)				(25)
Extension of useful lives of certain WPD network assets in mid-2007 (Note 1)					(13	)
Other		(4	)		(2	)				(4)
	$	11		$	15
Total							$	43	$	11

(a)

Taxes, Other Than Income

The changes in taxes, other than income were due to:

2009 vs. 2008 2008 vs. 2007

Domestic property tax expense (a) $ 10 $ (7 )
U.K. foreign currency exchange rates (12 ) (3 )
Other 2 (2 )
$ $ (12 )

	2010 vs. 2009		2009 vs. 2008

Pennsylvania gross receipts tax (a)	$	15
Domestic property tax expense (b)		1	$	10
U.K. foreign currency exchange rates				(12)
Other (c)		(3)		2
	$	13	$

(a)	The increase in 2010 compared with 2009 was primarily due to an increase in retail electricity sales by PPL EnergyPlus. This tax is included in "Unregulated Gross Energy Margins" above.

(b)	The ~~change~~increase in ~~both periods~~2009 compared with 2008 was primarily due to a $7 million property tax credit recorded by PPL Montana in 2008.

(c)	The decrease in 2010 compared with 2009 primarily relates to lower WPD real estate tax expense due to reductions in tax rates.

Other Income (Expense) - net

See Note 1617 to the Financial Statements for ~~details of other income.~~details.

Other-Than-Temporary Impairments

~~Other-than-temporary impairments increased by $33 million in 2008 compared with 2007, primarily due to negative investment returns caused by the downturn in the financial markets in 2008.~~

Interest Income from Affiliates

Interest income from affiliates increased by $7 million in 2010 compared with 2009, primarily due to loans to LKE subsidiaries, which have been fully repaid as of December 31, 2010.

Interest income from affiliates decreased by $12 million in 2009 compared with 2008, ~~and decreased by $15 million in 2008 compared with 2007. The decrease in 2009 was~~ primarily due to the decline in the average balance outstanding ~~and the floating interest rate on the collateral deposit related to the PLR contract. The decrease in 2008 was the result of reduced average balances outstanding on notes receivable from affiliates~~ and the floating interest rate on the collateral deposit related to the PLR contract.

Interest Expense

The changes in interest expense ~~which includes "Interest Expense with Affiliate,"~~ were due to:

	2009 vs. 2008			2008 vs. 2007				2010 vs. 2009		2009 vs. 2008

Interest on WPD debt issuance (Note 7)							Interest on WPD debt issuance (Note 7)	$	25
Inflation adjustment on U.K. Index-linked Senior Unsecured Notes	$	(29	)	$	6		Inflation adjustment on U.K. Index-linked Senior Unsecured Notes		23	$	(29)
Capitalized interest							Capitalized interest		12		12
Amortization of debt issuance costs							Amortization of debt issuance costs		12		6
Montana hydroelectric litigation (Note 15)							Montana hydroelectric litigation (Note 15)		10
Hedging activities							Hedging activities		3		(3)
U.K. foreign currency exchange rates		(17	)		(8	)	U.K. foreign currency exchange rates		(3)		(17)
Long-term debt interest expense		(13	)		21
Hedging activities		(3	)		(4	)
Capitalized interest		12			(1	)
Other long-term debt interest expense							Other long-term debt interest expense		(1)		(15)
Short-term debt interest expense		6			8		Short-term debt interest expense		(1)		6
Amortization of debt issuance costs		6			5
Other		(3	)		(3	)	Other				(3)
	$	(41	)	$	24
Total							Total	$	80	$	(43)

Income Taxes

The changes in income taxes were due to:

2009 vs. 2008 2008 vs. 2007

Lower pre-tax book income $ (300 ) $ (6 )
Tax on foreign earnings (a) (43 ) (3 )
Synthetic fuel and other tax credits (b) (17 ) 72
Tax reserve adjustments (a) (c) (d) (2 ) 44
Tax return adjustments (d) 44 (16 )
Domestic manufacturing deduction 13 (2 )
U.K. Finance Act adjustments (e) 8 46
Other 9 (6 )
$ (288 ) $ 129

~~(a)~~		~~During 2009, WPD recorded a $46 million foreign tax benefit (and a full tax reserve reflected in "Tax reserve adjustments") related to losses generated by restructuring.~~
~~(b)~~		The Section 29/45K synthetic fuel tax credits expired at the end of 2007. During 2008, PPL recorded a $13 million adjustment to its estimated 2007 fuel tax credits as a result of the IRS publishing the final 2007 inflation-adjusted credit in April 2008.
~~(c)~~		During 2007, PPL Energy Supply recorded a $35 million benefit as a result of the expiration of applicable statutes of limitations. The expiration of applicable statues of limitations resulted in an $8 million benefit in 2008. Additionally, PPL Energy Supply recorded tax benefits of $27 million in 2009 for the settlement of a tax dispute and foreign currency exchange losses.
~~(d)~~		During 2009, PPL Energy Supply received consent from the IRS to change its method of accounting for certain expenditures for tax purposes. PPL Energy Supply deducted the resulting IRC Sec. 481 adjustment on its 2008 tax return and recorded a $21 million adjustment to federal and state income tax expense, which results from the reduction of federal income tax benefits, related to the domestic manufacturing deduction and a reduction of certain state tax benefits related to state net operating losses. ~~During 2008, WPD recorded tax benefits of approximately $17 million from tax return adjustments that were fully reserved.~~
~~(e)~~		The U.K.'s Finance Act of 2008, enacted in July 2008, included a phase-out of tax depreciation on certain buildings. As a result, WPD recorded an $8 million deferred tax benefit during 2008 related to the reduction in its deferred tax liabilities. The U.K.'s Finance Act of 2007, enacted in July 2007, included a reduction in the U.K.'s statutory income tax rate. Effective April 1, 2008, the statutory income tax rate was reduced from 30% to 28%. As a result, WPD recorded a $54 million deferred tax benefit during 2007 related to the reduction in its deferred tax liabilities.

	2010 vs. 2009		2009 vs. 2008

Higher (lower) pre-tax book income	$	350	$	(288)
State valuation allowance adjustments		(52)
Federal income tax credits		(10)		(17)
Domestic manufacturing deduction		(8)		13
Federal and state tax reserve adjustments		(46)		(14)
Federal and state tax return adjustments		(21)		27
U.S. income tax on foreign earnings net of foreign tax credit		50		5
U.K. Finance Act adjustments		(18)		8
U.K. capital loss benefit				(46)
Foreign tax reserve adjustments		(17)		12
Foreign tax return adjustments				17
Health Care Reform		5
Other		6		5
	$	239	$	(278)

See Note 5 to the Financial Statements for additional information on income taxes.

Discontinued Operations

See Note 9 to the Financial Statements for information related ~~to:~~

·	~~the anticipated sale of the Long Island generation business;~~
·	~~the sale of the majority of the Maine hydroelectric generation business in 2009;~~
·	~~the sale of the 8.33% interest in Wyman Unit 4 in 2009; and~~
·	~~the sale of the Latin American businesses in 2007 and the substantial dissolution of the remaining holding companies in 2008.~~

to various 2010 and 2009 sales, including the anticipated sale of certain non-core generation facilities expected to occur in the first quarter of 2011.

Financial Condition

Liquidity and Capital Resources

PPL Energy Supply expects to continue to have adequate liquidity available through operating cash flows, cash and cash equivalents and its credit facilities. Additionally, subject to market conditions, PPL Energy Supply currently plans to access debt capital markets in ~~2010.~~2011.

PPL Energy Supply's cash flows from operations and access to cost-effective bank and capital markets are subject to risks and uncertainties including, but not limited to:

·	changes in market prices for electricity;

·	changes in commodity prices that may increase the cost of producing power or decrease the amount PPL Energy Supply receives from selling power;

·	operational and credit risks associated with selling and marketing products in the wholesale power markets;

·	potential ineffectiveness of the trading, marketing and risk management policy and programs used to mitigate PPL Energy Supply's risk exposure to adverse electricity and fuel prices, interest rates ~~foreign currency exchange rates~~ and counterparty credit;
·	~~unusual or extreme weather that may damage PPL Energy Supply's international distribution facilities or affect energy sales to customers;~~

·	reliance on transmission and distribution facilities that PPL Energy Supply does not own or control to deliver its electricity and natural gas;

·	unavailability of generating units (due to unscheduled or longer-than-anticipated generation outages, weather and natural disasters) and the resulting loss of revenues and additional costs of replacement electricity;
·	~~the ability to recover and the timeliness and adequacy of recovery of costs associated with international electricity delivery businesses;~~

·	costs of compliance with existing and new environmental laws and with new security and safety requirements for nuclear facilities;

·	any adverse outcome of legal proceedings and investigations with respect to PPL Energy Supply's current and past business activities;

·	deterioration in the financial markets that could make obtaining new sources of bank and capital markets funding more difficult and more costly; and

·	a downgrade in PPL Energy Supply's or its rated subsidiaries' credit ratings that could adversely affect their ability to access capital and increase the cost of credit facilities and any new debt.

See "Item 1A. Risk Factors" for further discussion of risks and uncertainties affecting PPL Energy Supply's cash flows.

At December 31, PPL Energy Supply had the following:

	2009		2008		2007		2010		2009		2008

Cash and cash equivalents	$	245	$	464	$	355	$	661	$	245	$	464
Short-term investments (a) (b)				150		102
Short-term investments (a)												150
	$	245	$	614	$	457	$	661	$	245	$	614
Short-term debt	$	639	$	584	$	51	$	531	$	639	$	584

(a)		2008 amount represents tax-exempt bonds issued by the PEDFA in December 2008 on behalf of PPL Energy Supply and purchased by a subsidiary of PPL Energy Supply upon issuance. Such bonds were refunded in April 2009. See Note 7 to the Financial Statements for further discussion.
~~(b)~~		~~Includes $10 million of auction rate securities at December 31, 2007. See below for a discussion of auction rate securities.~~

The changes in PPL Energy Supply's cash and cash equivalents position resulted from:

2009 2008 2007

Net Cash Provided by Operating Activities $ 1,413 $ 1,039 $ 1,094
Net Cash Used in Investing Activities (551 ) (1,696 ) (305 )
Net Cash Provided by (Used in) Financing Activities (1,081 ) 779 (963 )
Effect of Exchange Rates on Cash and Cash Equivalents (13 ) 5
Net Increase (Decrease) in Cash and Cash Equivalents $ (219 ) $ 109 $ (169 )

~~Auction Rate Securities~~

PPL Energy Supply held auction rate securities with an aggregate par value of $20 million and $24 million at December 31, 2009 and 2008. Historically, an active market existed for such investments, and the auctions provided an opportunity for investors either to hold an investment at a periodically reset interest rate or to sell the investment at its par value for immediate liquidity. In early 2008, investor concerns about credit and liquidity in the financial markets, generally, as well as investor concerns over specific insurers that guarantee the credit of certain of the underlying securities, created uncertainty in the auction rate securities market and these securities generally failed to be remarketed through their established auction process. The auctions continue to fail and the resulting illiquidity continues to impact PPL Energy Supply's investment in auction rate securities.

At December 31, 2008, PPL Energy Supply estimated that the fair value of its auction rate securities was $19 million, which is reflected in "Other investments" on the Balance Sheet and represented a temporary decline of $5 million from par value.

In 2009, PPL Energy Supply liquidated $4 million of auction rate securities at par. At December 31, 2009, PPL Energy Supply estimated that the fair value of its auction rate securities was equal to par value, which was $20 million and is reflected in "Other investments" on the Balance Sheet. PPL Energy Supply reversed the previously recorded temporary impairment.

Because PPL Energy Supply intends and has the ability to hold these auction rate securities until they can be liquidated at par value, PPL Energy Supply believes that it does not have significant exposure to realize losses on these securities. Based upon the evaluation of available information, PPL Energy Supply believes these investments continue to be of high credit quality. Additionally, PPL Energy Supply does not anticipate having to sell these securities to fund operations. See Notes 17 and 21 to the Financial Statements for further discussion of auction rate securities.

	2010		2009		2008

Net cash provided by operating activities	$	1,840	$	1,413	$	1,039
Net cash used in investing activities		(825)		(551)		(1,696)
Net cash provided by (used in) financing activities		(612)		(1,081)		779
Effect of exchange rates on cash and cash equivalents		13				(13)
Net Increase (Decrease) in Cash and Cash Equivalents	$	416	$	(219)	$	109

Operating Activities

Net cash provided by operating activities increased by 30%, or $427 million, in 2010 compared with 2009. The expiration of the long-term power purchase agreements between PPL Electric and PPL EnergyPlus at the end of 2009 enabled PPL EnergyPlus to sell power at higher market prices and had a positive impact on net income, and specifically on "unregulated gross energy margins" which increased over $600 million, after-tax, in 2010 compared with 2009, and therefore, was the primary driver to the above increase. The positive impact of additional earnings was partially offset by a reduction in the amount of counterparty collateral received and by additional defined benefit plan contributions. In addition, changes in working capital in 2010 compared with 2009 offset the $300 million impact of cash collateral rec eived from PPL Electric in 2009 as discussed below.

Net cash provided by operating activities increased by 36%, or $374 million, in 2009 compared with 2008, primarily as a result of the return of $300 million in cash collateral from PPL Electric related to the long-term PLR energy supply agreements (which expired at the end of 2009); cash collateral received from counterparties; and the benefit of lower income tax payments due to the change in method of accounting for certain expenditures for tax purposes. These increases were partially offset by a decrease in accounts payable and the unfavorable impact of foreign currency exchange rates in 2009 compared with 2008.

Net cash provided by operating activities decreased by 5%, or $55 million, in 2008 compared with 2007, primarily as a result of increased expenditures for fuel, primarily due to higher coal prices, lower realized net energy trading margins, driven by significant decreases in power and gas prices, higher interest paid, primarily due to higher debt levels in 2008, and cash flows provided by Latin America's operations in 2007 but not 2008, due to the sale of the Latin American businesses in 2007. The decreases to cash provided by operating activities resulting from these items were partially offset by higher revenues, due primarily to the hedged sale of generation in the wholesale market, increased sales volumes to PPL Electric under the PLR contracts to support the PLR load and a 1.4% increase in PLR sales prices, as well as less U.S. income tax payments, primarily as a result of a refund received in 2008, and operating losses incurred in 2007 in connection with synfuel projects that ceased operation at the end of 2007.

A significant portion of PPL Energy Supply's operating cash flows is derived from its Supply segment baseload generation business activities. PPL Energy Supply employs a formal hedging program for its baseload generation fleet, the primary objective of which is to provide a reasonable level of near-term cash flow and earnings certainty ~~over the next three years,~~ while preserving upside potential ifof power ~~prices increase~~price increases over the medium term. See Note 1819 to the Financial Statements for further discussion. ~~Based on~~Despite its ~~generation portfolio contracting~~hedging practices, ~~(including related fuel purchases and commitments),~~ PPL Energy Supply expects ~~to achieve relatively stable cash flows related to baseload generation during the next three years, although,~~its future cash flows ~~from operating activities are expected~~ to be more influenced ~~more~~ by commodity prices than during the past ~~nine~~ years when long-term supply contracts were in place between PPL EnergyPlus and PPL Electric. ~~As discussed in "Item 1. Business,"~~In the near-term, PPL Energy Supply ~~estimates that, on average, approximately 94%~~expects its Supply segment operating cash flows to decline as a result of ~~its total expected annual generation output (which includes baseload and other generation) for 2010 is committed under power sales contracts.~~lower commodity prices. In addition, in January 2011, PPL Energy Supply ~~has~~distributed its 100% membership interest in PPL Global to its parent, PPL Energy Funding to better align PPL's organizational structure with the manner in which it manages its businesses and reports segment information in its consolidated financial statements. See Note 24 to the Financial Statements for additional information. As a result, PPL Energy Supply's cash from operating activities will also ~~entered into commitments of varying quantities and terms for the years 2011 and beyond.~~decline in future periods, as compared with prior periods.

PPL Energy Supply's contracts for the sale and purchase of electricity and fuel often require cash collateral or other credit enhancements, or reductions or terminations of a portion of the entire contract through cash settlement, in the event of a downgrade of PPL Energy Supply's or its subsidiary's credit ratings or adverse changes in market prices. For example, in addition to limiting its trading ability, if PPL Energy Supply's or its subsidiary's ratings were lowered to below "investment grade" and there was a 10% adverse movement in energy prices, PPL Energy Supply estimates that, based on its December 31, ~~2009~~2010 positions, it would have had to post additional collateral of approximately ~~$291~~$348 million ~~compared~~ with ~~$815 million at December 31, 2008.~~respect to electricity and fuel contracts. PPL Energy Supply has in place risk management programs that ~~are~~a re designed to monitor and manage its exposure to volatility of cash flows related to changes in energy and fuel prices, interest rates, foreign currency exchange rates, counterparty credit quality and the operating performance of its generating units.

Investing Activities

The primary use of cash in investing activities is capital expenditures. See "Forecasted Uses of Cash" for detail regarding capital expenditures in ~~2009~~2010 and projected expenditures for the years 2011 through 2015.

Net cash used in investing activities increased 50%, or $274 million in 2010 ~~through 2012.~~compared with 2009, primarily as a result of a decrease of $154 million from proceeds from the sale of other investments, a change of $135 million from restricted cash and cash equivalents, and an increase of $102 million in capital expenditures. The increase in cash used in investing activities from the above items was partially offset by the change in proceeds received from the sale of businesses, which are discussed in Note 9 to the Financial Statements and a change of $28 million in other investing activities. PPL Energy Supply received proceeds of $81 million from the sale of the majority of the Maine hydroelectric generation business in 2009, compared to proceeds of $162 million received in 2010 from the sales of the Long Island genera tion business and the remaining Maine hydroelectric generation business assets.

Net cash used in investing activities decreased 68%, or $1.1 billion in 2009 compared with 2008, primarily as a result of a change of $371 million from restricted cash and cash equivalents, a change of $249 million from purchases and sales of other investments, a change of $244 million from purchases and sales of intangible assets, a decrease of $207 million in capital expenditures and $81 million of proceeds received in 2009 from the sale of the majority of the Maine hydroelectric generation business. See Note 1 to the Financial Statements for a discussion of restricted cash and cash equivalents and Note 7 to the Financial Statements for a discussion of the purchase and sale by a subsidiary of PPL Energy Supply of Exempt Facilities Revenue Bonds issued by the PEDFA on behalf of PPL Energy Supply and Note 9 to the ~~Financial~~Financia l Statements for a discussion of the sale of the majority of the Maine hydroelectric generation business.

Net cash used in investing activities increased 456%, or $1.4 billion, in 2008 compared with 2007, as PPL Energy Supply received aggregate proceeds of $898 million from the sale of its Latin American businesses and telecommunication operations in 2007, which are discussed in Notes 8 and 9 to the Financial Statements. Additionally, there was a change of $329 million from purchases and sales of other investments, a change of $352 million from purchases and sales of intangible assets, and an increase of $42 million in the amount of cash and cash equivalents that became restricted. The increase in cash used in investing activities from the above items was partially offset by a decrease of $217 million in capital expenditures.

Financing Activities

Net cash used in financing activities was $612 million in 2010 compared with $1.1 billion in 2009 ~~compared with $779 million of~~and net cash provided by financing activities ~~in 2008 and net cash used in financing activities~~ of ~~$963~~$779 million in ~~2007.~~2008. The change from 2009 to 2010 primarily reflects more long-term debt issuances, increased contributions from and distributions to Member, and less short-term borrowings in 2010. The change from 2008 to 2009 primarily reflects no issuances of long-term debt in 2009, reduced contributions from Member, increased distributions to Member and less short-term borrowings in 2009.

In 2010, cash used in financing activities primarily consisted of $4.7 billion in distributions to Member, partially offset by $3.6 billion in contributions from Member and net debt issuances of $509 million. The ~~change from 2007 to 2008 primarily reflects increased issuances and lower retirements of long-term debt, reduced~~ distributions to and contributions from Member during 2010 primarily relate to the funds received by PPL in June 2010 from the issuance of common stock and ~~increased short-term borrowings~~Equity Units. These funds were invested by a subsidiary of PPL Energy Supply until they were returned to its Member in ~~2008.~~October 2010 to be available to partially fund the acquisition of LKE and pay certain acquisition-related fees and expenses.

In 2009, cash used in financing activities primarily consisted of $943 million in distributions to Member and net debt retirements of $177 million, partially offset by $50 million in contributions from Member.

In 2008, cash provided by financing activities primarily consisted of net debt issuances of $1.1 billion and $421 million in contributions from Member, partially offset by $750 million in distributions to Member. In 2007, cash used in financing activities primarily consisted of net debt retirements of $180 million and $1.5 billion of distributions to Member, partially offset by $700 million in contributions from Member.

See "Forecasted Sources of Cash" for a discussion of PPL Energy Supply's plans to issue debt securities, as well as a discussion of credit facility capacity available to PPL Energy Supply. Also see "Forecasted Uses of Cash" for information regarding maturities of PPL Energy Supply's long-term debt.

PPL Energy Supply's debt financing activity in ~~2009~~2010 was:

Issuances Retirements

PPL Energy Supply Senior Unsecured Notes (a) $ (220 )
WPD short-term debt (net change) $ 43
Total $ 43 $ (220 )
Net decrease $ (177 )

		Issuances (a)		Retirements

WPD Senior Unsecured Notes		$	597
Other long-term debt			5
PPL Energy Supply short-term debt (net change)			65
WPD short-term debt (net change)				$	(158)
	Total	$	667	$	(158)
Net increase		$	509

(a)

~~In March 2009, PPL Energy Supply paid $220 million, plus accrued interest, to complete tender offers to purchase up to $250 million aggregate principal amount~~Issuances are net of ~~certain~~pricing discounts, where applicable and exclude the impact of its outstanding senior notes in order to reduce future interest expense. Under the Economic Stimulus Package, PPL will be permitted to defer recognition of income related to the extinguishment of these notes for tax purposes. No amounts will be included in taxable income for the first five years. Beginning in 2014, income related to the extinguishment of these notes will be included in taxable income ratably over five years.debt issuance costs.

See Note 7 to the Financial Statements for more detailed information regarding PPL Energy Supply's financing activities in ~~2009.~~2010.

Forecasted Sources of Cash

PPL Energy Supply expects to continue to have significant sources of cash available in the near term, including various credit facilities, operating leases and contributions from Member. Additionally, PPL Energy Supply expects to have access to debt capital markets and currently plans to issue up to ~~$300 million and £400~~$500 million in long-term debt securities in ~~2010,~~2011, subject to market conditions.

Credit Facilities

At December 31, ~~2009,~~2010, PPL Energy Supply's total committed borrowing capacity under credit facilities and the use of this borrowing capacity were:

														Letters of
										Committed				Credit		Unused
	Committed Capacity		Borrowed		Letters of Credit Issued (a)		Unused Capacity			Capacity		Borrowed		Issued (a)		Capacity

PPL Energy Supply Domestic Credit Facilities (b)	$	4,125	$	285	$	662	$	3,178	PPL Energy Supply Domestic Credit Facilities (b)	$	3,500	$	350	$	185	$	2,965

WPDH Limited Credit Facility (c)	₤	150	₤	132		n/a	₤	18	WPDH Limited Credit Facility (c)	₤	150	₤	115		n/a	₤	35
WPD (South West) Credit Facilities (d)		214		60	₤	3		151
Total WPD Credit Facilities (e)	₤	364	₤	192	₤	3	₤	169
WPD (South West) Credit Facility (d)									WPD (South West) Credit Facility (d)		210				n/a		210
									Total WPD Credit Facilities (e)	₤	360	₤	115		n/a	₤	245

(a)		The borrower under each of these facilities has a reimbursement obligation to the extent any letters of credit are drawn upon.

(b)


		These credit facilities contain a financial covenant requiring debt to total capitalization not to ~~not~~ exceed 65%. At December 31, ~~2009~~2010 and ~~2008,~~2009, PPL Energy Supply's consolidated debt to total capitalization percentages, as calculated in accordance with its credit facilities, were ~~46%~~44% and ~~44%~~46%. The credit facilities also contain standard representations and warranties that must be made for PPL Energy Supply to borrow under them.


		The commitments under PPL Energy Supply's domestic credit facilities are provided by a diverse bank group, with no one bank and its affiliates providing an aggregate commitment of more than ~~16%~~14% of the total committed capacity.

		The committed capacity expires as follows: ~~$600 million in 2010,~~ $300 million in 2011, $200 million in 2013 and ~~$3.2~~$3.0 billion in ~~2012. PPL Energy Supply intends to renew or replace the two credit facilities that expire in 2010 in order to maintain its current total committed capacity level.~~2014.

(c)		Borrowings under WPDH Limited's credit facility bear interest at LIBOR-based rates plus a spread, depending upon the company's public ~~debt~~long-term credit rating.

		This credit facility contains financial covenants that require WPDH Limited to maintain an interest coverage ratio of not less than 3.0 times consolidated earnings before income taxes, depreciation and amortization and a RAB that exceeds total net debt by the higher of an amount equal to 15% of total net debt or £150 million, in each case as calculated in accordance with the credit facility. At December 31, ~~2009~~2010 and ~~2008,~~2009, WPDH Limited's interest coverage ratios, as calculated in accordance with its credit facility, were ~~4.3~~3.5 and ~~4.6.~~4.3. At December 31, ~~2009~~2010 and ~~2008,~~2009, WPDH Limited's RAB, as calculated in accordance with the credit facility, exceeded its total net debt by £364 million, or 27%, and £325 million, or 25%~~, and £385 million, or 31%~~.

(d)		Borrowings under WPD (South West) ~~has two~~'s credit facilities: one under which it can make cash borrowings and another under which it has the capability to cause the lender to issue up to approximately £4 million of letters of credit. Borrowingsfacility bear interest at LIBOR-based rates plus a margin.

		~~The~~ This credit facility ~~under which it can make cash borrowings~~ contains financial covenants that require WPD (South West) to maintain an interest coverage ratio of not less than 3.0 times consolidated earnings before income taxes, depreciation and amortization and total net debt not in excess of 85% of RAB, in each case as calculated in accordance with the credit facility. At December 31, 2010 and 2009, WPD (South West)'s interest coverage ~~ratio,~~ratios, as calculated in accordance with its credit facility, ~~was~~were 3.6 and 5.3. At December 31, 2010 and 2009, WPD (South West)'s total net debt, as calculated in accordance with the credit facility, was 75% and 67% of RAB.

(e)		The commitments under WPD's credit facilities are provided by eight banks, with no one bank providing more than 25% of the total committed capacity.

		The committed capacity ~~of WPD's credit~~under the facilities expires as follows: ~~£4 million in 2010,~~ £210 million in 2012 and £150 million in 2013. ~~WPD (South West) intends to renew its letter of credit facility that expires in 2010 in order for WPD to maintain its current total committed capacity level.~~


		At December 31, ~~2009,~~2010, the unused capacity of WPD's credit facilities was approximately ~~$276~~$381 million.

In January 2011, PPL Energy Supply distributed its 100% membership interest in PPL Global to its parent, PPL Energy Funding. See Note 24 to the Financial Statements for additional information.

In addition to the financial covenants noted in the table above, the credit agreements governing the credit facilities contain various other covenants. Failure to comply with the covenants after applicable grace periods could result in acceleration of repayment of borrowings and/or termination of the agreements. PPL Energy Supply monitors compliance with the covenants on a regular basis. At December 31, ~~2009,~~2010, PPL Energy Supply was in material compliance with these covenants. At this time, PPL Energy Supply believes that these covenants and other borrowing conditions will not limit access to these funding sources.

See Note 7 to the Financial Statements for further discussion of ~~PPL Energy Supply's credit facilities.~~

~~Commercial Paper~~

As discussed below under "Credit Ratings," S&P lowered its rating on PPL Energy Supply's commercial paper to A-3 from A-2 in January 2009. Since PPL Energy Supply did not plan to issue any commercial paper during 2009 and there was essentially no liquidity in commercial paper markets for paper with an A-3 rating, PPL Energy Supply closed its $500 million commercial paper program in January 2009 and requested that Moody's, S&P and Fitch each withdraw their ratings on its commercial paper program, which each rating agency subsequently did.

PPL Energy Supply may reopen its commercial paper program in the future, depending on market conditions and credit ratings, to provide an additional financing source to fund its short-term liquidity needs, if and when necessary. Any future commercial paper issuances would be supported by PPL Energy Supply's credit facilities.

Operating Leases

PPL Energy Supply and its subsidiaries also have available funding sources that are provided through operating leases. PPL Energy Supply's subsidiaries lease office space, land, buildings and certain equipment. These leasing structures provide PPL Energy Supply additional operating and financing flexibility. The operating leases contain covenants that are typical for these agreements, such as maintaining insurance, maintaining corporate existence and timely payment of rent and other fees.

PPL Energy Supply, through its subsidiary PPL Montana, leases a 50% interest in Colstrip Units 1 and 2 and a 30% interest in Unit 3, under four 36-year, non-cancelable operating leases. These operating leases are not recorded on PPL Energy Supply's Balance Sheets. The leases place certain restrictions on PPL Montana's ability to incur additional debt, sell assets and declare dividends. At this time, PPL Energy Supply believes that these restrictions will not limit access to these funding sources or cause acceleration or termination of the leases. ~~See Note 7 to the Financial Statements for a discussion of other dividend restrictions related to WPD.~~

See Note 1011 to the Financial Statements for further discussion of the operating leases.

Long-Term Debt Securities and Contributions from Member

Subject to market conditions, PPL Energy Supply currently plans to issue up to ~~$300 million and £400~~$500 million in long-term debt securities in ~~2010.~~2011. PPL Energy Supply expects to use the proceeds from ~~these issuances for the repayment of short-term~~this issuance primarily to refund PPL Energy Supply's 2011 debt ~~to fund capital expenditures, and for general corporate purposes.~~maturity.

From time to time, as determined by its Board of Directors, PPL Energy Supply's Member, PPL Energy Funding, makes capital contributions to PPL Energy Supply. PPL Energy Supply uses these contributions for general corporate purposes.

Forecasted Uses of Cash

In addition to expenditures required for normal operating activities, such as purchased power, payroll, fuel and taxes, PPL Energy Supply currently expects to incur future cash outflows for capital expenditures, various contractual obligations, distributions to its Member and possibly the purchase or redemption of a portion of its debt securities.

Capital Expenditures

The table below shows PPL Energy Supply's actual spending for the year ~~2009~~2010 and current capital expenditure projections for the years ~~2010~~2011 through ~~2012.~~2015. (Amounts related to PPL Global have been excluded for periods subsequent to 2010. See Note 24 to the Financial Statements for additional information.)

Actual Projected
2009 2010 2011 2012
Construction expenditures (a) (b)
Generating facilities $ 361 $ 671 $ 673 $ 507
Transmission and distribution facilities 247 320 358 385
Environmental 178 63 19 99
Other 11 31 33 31
Total Construction Expenditures 797 1,085 1,083 1,022
Nuclear fuel 140 151 173 171
Total Capital Expenditures $ 937 $ 1,236 $ 1,256 $ 1,193

			Actual		Projected
			2010		2011		2012		2013		2014		2015
Construction expenditures (a) (b)
	Generating facilities		$	550	$	625	$	513	$	398	$	202	$	366
	Distribution facilities and other - WPD			286
	Environmental			40		48		53		99		147		64
	Other			21		31		32		32		29		23
		Total Construction Expenditures		897		704		598		529		378		453
Nuclear fuel				138		152		159		161		158		160
Total Capital Expenditures			$	1,035	$	856	$	757	$	690	$	536	$	613

(a)

Construction expenditures include capitalized interest, which is expected to be approximately ~~$156~~$203 million for the years ~~2010~~2011 through ~~2012.~~2015.

(b)

Includes expenditures for certain intangible assets.

PPL Energy Supply's capital expenditure projections for the years ~~2010~~2011 through ~~2012~~2015 total approximately ~~$3.7~~$3.5 billion. Capital expenditure plans are revised periodically to reflect changes in operational, market and regulatory conditions. This table includes projected costs related to the planned ~~239~~247 MW of incremental capacity increases. See Note 8 to the Financial Statements for information regarding the significant development projects.

PPL Energy Supply plans to fund its capital expenditures in ~~2010~~2011 with cash on hand and cash from ~~operations, contributions from Member and proceeds from the issuance of debt securities.~~operations.

Contractual Obligations

PPL Energy Supply has assumed various financial obligations and commitments in the ordinary course of conducting its business. At December 31, ~~2009,~~2010, the estimated contractual cash obligations of PPL Energy Supply were: (Amounts related to PPL Global have been excluded for periods subsequent to 2010. See Note 24 to the Financial Statements for additional information.)

	Total		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years			Total		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years

Long-term Debt (a)	$	4,992			$	500	$	1,037	$	3,455	Long-term Debt (a)	$	3,272	$	500	$	737	$	600	$	1,435
Interest on Long-term Debt (b)		4,497	$	291		558		477		3,171	Interest on Long-term Debt (b)		1,862		204		343		222		1,093
Operating Leases(c)		968		108		216		223		421		828		105		213		204		306
Purchase Obligations ~~(c)~~(d)		5,896		1,459		1,680		867		1,890		4,908		1,197		1,554		754		1,403
Other Long-term Liabilities Reflected on the Balance Sheet under GAAP (d) (e)		80		62		18
Total Contractual Cash Obligations	$	16,433	$	1,920	$	2,972	$	2,604	$	8,937	Total Contractual Cash Obligations	$	10,870	$	2,006	$	2,847	$	1,780	$	4,237

(a)

Reflects principal maturities only based on ~~legal~~stated maturity ~~dates.~~dates, except for PPL Energy Supply's 5.70% Reset Put Securities (REPS). See Note 7 to the Financial Statements for a discussion of the remarketing feature related to ~~PPL Energy Supply's 5.70% REset Put Securities,~~the REPS, as well as discussion of variable-rate remarketable bonds issued ~~by the PEDFA~~ on behalf of PPL Energy Supply. PPL Energy Supply does not have any significant capital lease obligations.

(b)

Assumes interest payments through ~~maturity.~~stated maturity, except for the REPS, for which interest is reflected to the put date. The payments herein are subject to change, as payments for debt that is or becomes variable-rate debt have been ~~estimated and payments denominated in British pounds sterling have been translated to U.S. dollars at a current foreign currency exchange rate.~~estimated.

(c)	See Note 11 to the Financial Statements for additional information.

(d)	The payments reflected herein are subject to change, as certain purchase obligations included are estimates based on projected obligated quantities and/or projected pricing under the contracts. Purchase orders made in the ordinary course of business are excluded from the amounts presented. The payments also include obligations related to nuclear fuel and the installation of the scrubbers, which are also reflected in the Capital Expenditures table presented above.
~~(d)~~		The amounts reflected represent WPD's contractual deficit pension funding requirements arising from an actuarial valuation performed in March 2007. The U.K. electricity regulator currently allows a recovery of a substantial portion of the contributions relating to the plan deficit; however, WPD cannot be certain that this will continue beyond the current and next review periods, which extend to March 31, 2015. Based on the current funded status of PPL Energy Supply's U.S. qualified pension plans, no cash contributions are required. See Note 12 to the Financial Statements for a discussion of expected contributions.
~~(e)~~		~~At December 31, 2009, total unrecognized tax benefits of $124~~

At December 31, 2010, total unrecognized tax benefits of $183 million were excluded from this table as PPL Energy Supply cannot reasonably estimate the amount and period of future payments. See Note 5 to the Financial Statements for additional information.

Distributions to Member

From time to time, as determined by its Board of Managers, PPL Energy Supply makes return of capital distributions to its Member.

Purchase or Redemption of Debt Securities

PPL Energy Supply will continue to evaluate purchasing or redeeming outstanding debt securities and may decide to take action depending upon prevailing market conditions and available cash.

Credit Ratings

Moody's, S&P and Fitch periodically review the credit ratings on the debt securities of PPL Energy Supply and its subsidiaries. Based on their respective independent reviews, the rating agencies may make certain ratings revisions or ratings affirmations.

A credit rating reflects an assessment by the rating agency of the creditworthiness associated with an issuer and particular securities that it issues. The credit ratings of PPL Energy Supply and its subsidiaries are based on information provided by PPL Energy Supply and other sources. The ratings of Moody's, S&P and Fitch are not a recommendation to buy, sell or hold any securities of PPL Energy Supply or its subsidiaries. Such ratings may be subject to revisions or withdrawal by the agencies at any time and should be evaluated independently of each other and any other rating that may be assigned to the securities. A downgrade in PPL Energy Supply's or its subsidiaries' credit ratings could result in higher borrowing costs and reduced access to capital markets.

~~The following table summarizes~~In prior periodic reports, PPL Energy Supply described its then-current debt ratings in connection with, and to facilitate, an understanding of its liquidity position. As a result of the passage of the Dodd-Frank Act and the attendant uncertainties relating to the extent to which issuers of non-asset backed securities may disclose credit ratings without being required to obtain rating agency consent to the inclusion of such disclosure, or incorporation by reference of such disclosure, in a registrant's registration statement or section 10(a) prospectus, PPL Energy Supply is limiting its credit rating disclosure to a description of the actions taken by the rating agencies with respect to PPL Energy Supply's ratings, but without stating what ratings have been assigned to PPL Energy Supply or its subsidiaries, or their securities. The ratings assigned by the rating agencies to PPL Energy Supply and its ~~rated~~ subsidiaries ~~at December 31, 2009:~~and their respective securities may be found, without charge, on each of the respective ratings agencies' websites, which ratings together with all other information contained on such rating agency websites is, hereby, explicitly not incorporated by reference in this report.

The rating agencies took the following actions related to PPL Energy Supply and its subsidiaries in 2010.

Moody's

Following PPL's then-announced agreement to acquire LKE, Moody's affirmed its senior unsecured notes credit rating and outlook for PPL Energy Supply in April 2010.

In August 2010, Moody's affirmed all of PPL Energy Supply's ratings.

S&P

Following PPL's then-announced agreement to acquire LKE, S&P took the following actions in April 2010:

·	Revised the outlook of PPL Energy Supply;

·	~~Moody's~~Revised the outlook of WPDH Limited, WPD (South Wales) and WPD (South West); and

·		~~S&P~~		~~Fitch~~ ~~(a)~~
Affirmed its credit ratings for PPL Energy Supply, ~~(b)~~
	~~Issuer Rating~~				~~BBB~~	~~BBB~~
	~~Senior Unsecured Notes~~		~~Baa2~~		~~BBB~~	~~BBB~~
	~~Outlook~~		~~STABLE~~		~~Negative~~	~~STABLE~~

~~PPL Montana~~
	~~Pass-Through Certificates~~		~~Baa3~~		~~BBB-~~	~~BBB~~
	~~Outlook~~		~~STABLE~~		~~STABLE~~

WPDH Limited,
	~~Issuer Rating~~		~~Baa3~~		~~BBB-~~	~~BBB-~~
	~~Senior Unsecured Debt~~		~~Baa3~~		~~BBB-~~	~~BBB~~
	~~Short-term Debt~~				~~A-3~~
	~~Outlook~~		~~STABLE~~		~~Negative~~	~~POSITIVE~~

~~WPD LLP~~
	~~Issuer Rating~~					~~BBB~~
	~~Outlook~~					~~POSITIVE~~

WPD (South Wales)
	~~Issuer Rating~~				~~BBB+~~	~~BBB+~~
	~~Senior Unsecured Debt~~		~~Baa1~~		~~BBB+~~	A-
	~~Short-term Debt~~				~~A-2~~	F2
	~~Outlook~~		~~STABLE~~		~~Negative~~	~~POSITIVE~~

and WPD (South West)
	~~Issuer Rating~~		~~Baa1~~		~~BBB+~~	~~BBB+~~
	~~Senior Unsecured Debt~~		~~Baa1~~		~~BBB+~~	A-
	~~Short-term Debt~~		~~P-2~~		~~A-2~~	F2
	~~Outlook~~		~~STABLE~~		~~Negative~~	~~POSITIVE~~.

~~(a)~~		~~All Issuer Ratings for Fitch are "Issuer Default Ratings."~~
~~(b)~~		Excludes Exempt Facilities Revenue Bonds issued by the PEDFA on behalf of PPL Energy Supply, which are each currently supported by a letter of credit and are rated on the basis of the credit enhancement.

In January 2009, S&P completed a review of PPL Energy Supply, upon which it revised its outlook to negative from stable and affirmed its BBB issuer rating. As a result of the negative outlook, S&P lowered PPL Energy Supply's commercial paper rating to A-3 from A-2. S&P stated in its press release that the ~~revision in~~change to the outlook for PPL Energy Supply ~~was based primarily on lower than expected cash flows~~considers the greater regulated mix that will result from PPL acquiring LKE, resulting in a pro forma "strong" consolidated business risk profile for ~~2008 combined with concerns over further pressure on financial metrics in 2009.~~

~~At the request of PPL Energy Supply, in the first quarter of 2009, Moody's,~~PPL. S&P ~~and Fitch, each withdrew their commercial paper rating for PPL Energy Supply.~~

In February 2009, S&P revised its outlook to negative from stable for each of WPDH Limited, WPD LLP, WPD (South Wales) and WPD (South West) and affirmed the issuer and short-term debt ratings of each of the entities. S&Palso stated ~~in its press release~~ that the revision in the outlook for WPD is a reflection of the change to PPL's outlook ~~to negative from stable~~ and is not a result of any change in WPD's stand-alone credit profile.

In ~~May 2009, Moody's completed a review~~October 2010, S&P took the following actions:

·	Revised the outlook of PPL Energy Supply;

·	Raised the issuer rating of PPL Energy Supply; and

·	Raised the senior unsecured debt rating of PPL Energy Supply.

In November 2010, S&P affirmed its credit rating and revised the outlook for PPL Montana's Pass Through Certificates due 2020.

Fitch

Following PPL's then-announced agreement to acquire LKE, Fitch affirmed its credit ratings and outlook for PPL Energy Supply ~~and~~in April 2010.

In May 2010, Fitch affirmed ~~the Baa2 senior unsecured~~its rating and ~~stable~~issued an outlook offor PPL ~~Energy Supply.~~

~~At WPD's request, in September 2009, S&P withdrew its ratings for WPD LLP, since it did not have any securities outstanding.~~Montana's Pass Through Certificates due 2020.

In October ~~2009,~~2010, Fitch ~~completed a review~~affirmed its credit ratings for and revised the outlook of ~~PPL Energy Supply. As a result of that review, Fitch lowered the rating of PPL Energy Supply's senior unsecured notes to BBB from BBB+~~WPDH Limited, WPD (South Wales) and affirmed all other ratings of PPL Energy Supply. Fitch stated in its press release that the change in the rating of PPL Energy Supply's senior unsecured notes aligns such rating with the BBB Issuer Default Rating in a manner that is consistent with the approach Fitch applies to other competitive generators and also recognizes a lower valuation of PPL Energy Supply's power assets based on current and forward wholesale power prices. The rating also reflects Fitch's forecast of lower than previously expected improvement in PPL Energy Supply's earnings and cash flow in 2010 and 2011.WPD (South West).

Ratings Triggers

PPL Energy Supply has various derivative and non-derivative contracts, including contracts for the sale and purchase of electricity and fuel, commodity transportation and storage, tolling agreements, and interest rate and foreign currency instruments, which contain provisions requiring PPL Energy Supply to post additional collateral, or permit the counterparty to terminate the contract, if PPL Energy Supply's credit rating were to fall below investment grade. See Note 1819 to the Financial Statements for a discussion of "Credit Risk-Related Contingent Features," including a discussion of the potential additional collateral that would have been required for derivative contracts in a net liability position at December 31, ~~2009.~~2010. At December 31, ~~2009,~~2010, if PPL Energy Supply's credit rating had been below investment grade, PPL Energy Supply would have been required to prepay or post an additional ~~$298~~$347 million of collateral to counterparties for both derivative and non-derivative commodity and commodity-related contracts used in its generation, marketing and trading operations and interest rate and foreign currency contracts.

Guarantees for Subsidiaries

~~At times,~~ PPL Energy Supply ~~provides~~ guarantees ~~for~~certain consolidated affiliate financing arrangements tothat enable certain ~~transactions for its consolidated affiliates.~~transactions. Some of the guarantees contain financial and other covenants that, if not met, would limit or restrict the consolidated affiliates' access to funds under these financing arrangements, require early maturity of such arrangements or limit the consolidated affiliates' ability to enter into certain transactions. At this time, PPL Energy Supply believes that these covenants will not limit access to relevant funding sources. See Note 1415 to the Financial Statements for additional information about guarantees.

Off-Balance Sheet Arrangements

PPL Energy Supply has entered into certain agreements that may contingently require payment to a guaranteed or indemnified party. See Note 1415 to the Financial Statements for a discussion of these agreements.

Risk Management - Energy Marketing & Trading and Other

Market Risk

See Notes 1, ~~17,~~18, and 1819 to the Financial Statements for information about PPL Energy Supply's risk management objectives, valuation techniques and accounting designations.

Commodity Price Risk (Non-trading)

PPL Energy Supply segregates its non-trading activities into two categories: hedge activity and economic activity. Transactions that are accounted for as hedge activity qualify for hedge accounting treatment. The economic activity category includes transactions that address a specific risk, but were not eligible for hedge accounting or for which hedge accounting was not elected. This activity includes the changes in fair value of positions used to hedge a portion of the economic value of PPL Energy Supply's generation assets, ~~load-following~~full-requirement sales contracts and retail activities. This economic activity is subject to changes in fair value due to market price volatility of the input and output commodities (e.g., fuel and power). Although they do not receive hedge accounting treatment, these transactions are considered non-trading activity. (See Note 19 to the Financial Statements for additional information on hedge and economic activity). The net fair value of economic positions at December 31, ~~2009~~2010 and ~~2008~~2009 was a net liability of ~~$77~~$389 million and ~~$52~~$77 million. ~~See Note 18 for additional information on economic activity.~~

To hedge the impact of market price volatility on PPL Energy Supply's energy-related assets, liabilities and other contractual arrangements, PPL ~~EnergyPlus~~Energy Supply sells and purchases physical energy at the wholesale level under FERC market-based tariffs throughout the U.S. and enters into financial exchange-traded and over-the-counter contracts. PPL Energy Supply's non-trading commodity derivative contracts mature at various times through 2017.

Within PPL's non-trading portfolio, the decision to enter into energy contracts is influenced by the expected value of PPL Energy Supply's generation. In determining the number of MWhs that are available to be sold forward, PPL Energy Supply first reduces the potential output by the amount of unavailable generation due to planned maintenance on a particular unit. The potential output is further reduced by the amount of MWhs that historically is not produced by a plant due to such factors as equipment breakage. Finally, the potential output of certain plants (such as peaking units) is reduced if their higher cost of production will not allow them to economically run during all hours.

PPL Energy Supply's non-trading portfolio also includes full requirements energy contracts. The net obligation to serve these contracts changes minute-by-minute. Anticipated usage patterns and energy peaks are affected by expected load changes, regional economic drivers, customer shopping or migration and seasonal weather patterns. PPL Energy Supply analyzes historical on-peak and off-peak usage patterns, expected load changes, regional economic drivers, and weather patterns, among other factors, to determine monthly levels of electricity that best fits usage patterns to minimize earnings exposure. To satisfy its full requirements obligations, PPL Energy Supply generally enters into contracts to purchase unbundled products of electricity, capacity, RECs and other ancillary products. To a lesser extent, PPL Energy Supply reserves a portion of its generation for full requirements contracts that is expected to be the best match with anticipated usage patterns and energy peaks.

The following ~~chart~~table sets forth the net fair value of PPL Energy Supply's non-trading commodity derivative contracts. See Notes 1718 and 1819 to the Financial Statements for additional information.

	Gains (Losses)					Gains (Losses)
	2009		2008			2010		2009

Fair value of contracts outstanding at the beginning of the period	$	402	$	(305	)	$	1,280	$	402
Contracts realized or otherwise settled during the period		189		(49	)		(490)		189
Fair value of new contracts entered into during the period		143		101			(5)		143
Changes in fair value attributable to changes in valuation techniques (a)				158			(23)
Other changes in fair value		546		497			196		546
Fair value of contracts outstanding at the end of the period	$	1,280	$	402		$	958	$	1,280

(a)

Amount represents the reduction of valuation reserves related to capacity and FTR contracts upon the adoption of fair value accounting guidance.

The following table segregates the net fair value of PPL Energy Supply's non-trading commodity derivative contracts at December 31, ~~2009~~2010 based on whether the fair value was determined by prices quoted in active markets for identical instruments or other more subjective means.

													Net Asset (Liability)
													Maturity						Maturity
	Net Asset (Liability)												Less Than		Maturity		Maturity		in Excess		Total Fair
	Maturity Less Than 1 Year			Maturity 1-3 Years		Maturity 4-5 Years		Maturity in Excess of 5 Years		Total Fair Value			1 Year		1-3 Years		4-5 Years		of 5 Years		Value
Source of Fair Value												Source of Fair Value
Prices quoted in active markets for identical instruments
Prices based on significant other observable inputs	$	363		$	736	$	73			$	1,172	Prices based on significant other observable inputs	$	362	$	592	$	8			$	962
Prices based on significant unobservable inputs		(1	)		13		30	$	66		108	Prices based on significant unobservable inputs		3		(29)		(4)	$	26		(4)
Fair value of contracts outstanding at the end of the period	$	362		$	749	$	103	$	66	$	1,280	Fair value of contracts outstanding at the end of the period	$	365	$	563	$	4	$	26	$	958

PPL Energy Supply sells electricity, capacity and related services and buys fuel on a forward basis to hedge the value of energy from its generation assets. If PPL Energy Supply were unable to deliver firm capacity and energy or to accept the delivery of fuel under its agreements, under certain circumstances it could be required to pay liquidating damages. These damages would be based on the difference between the market price and the contract price of the commodity. Depending on price changes in the wholesale energy markets, such damages could be significant. Extreme weather conditions, unplanned power plant outages, transmission disruptions, nonperformance by counterparties (or their own counterparties) with which it has energy contracts and other factors could affect PPL Energy Supply's ~~ability~~abili ty to meet its obligations, or cause significant increases in the market price of replacement energy. Although PPL Energy Supply attempts to mitigate these risks, there can be no assurance that it will be able to fully meet its firm obligations, that it will not be required to pay damages for failure to perform, or that it will not experience counterparty nonperformance in the future.

Commodity Price Risk (Trading)

PPL Energy Supply's trading contracts mature at various times through 2015. The following table sets forth changes in the net fair value of PPL Energy Supply's trading commodity derivative contracts. See Notes 1718 and 1819 to the Financial Statements for additional information.

~~(a)~~

In the fourth quarter of 2008, PPL Energy Supply refined its valuation approach for FTR and PJM basis positions, consistent with PPL Energy Supply's practice of pricing other less active trading points, resulting in changes in valuation techniques.

	Gains (Losses)
	2010		2009

Fair value of contracts outstanding at the beginning of the period	$	(6)	$	(75)
Contracts realized or otherwise settled during the period		(12)		2
Fair value of new contracts entered into during the period		39		31
Other changes in fair value		(17)		36
Fair value of contracts outstanding at the end of the period	$	4	$	(6)

PPL Energy Supply will reverse unrealized gains of approximately $1$2 million over the next three months as the transactions are realized.

The following table segregates the net fair value of PPL Energy Supply's trading commodity derivative contracts at December 31, ~~2009~~2010 based on whether the fair value was determined by prices quoted in active markets for identical instruments or other more subjective means.

															Net Asset (Liability)
															Maturity						Maturity
	Net Asset (Liability)														Less Than		Maturity		Maturity		in Excess	Total Fair
	Maturity Less Than 1 Year			Maturity 1-3 Years			Maturity 4-5 Years		Maturity in Excess of 5 Years		Total Fair Value				1 Year		1-3 Years		4-5 Years		of 5 Years	Value
Source of Fair Value														Source of Fair Value
Prices quoted in active markets for identical instruments	$	1									$	1
Prices based on significant other observable inputs		(4	)	$	(5	)	$	2	$	1		(6	)	Prices based on significant other observable inputs	$	(1)	$	2	$	3		$	4
Prices based on significant unobservable inputs		(1	)									(1	)
Fair value of contracts outstanding at the end of the period	$	(4	)	$	(5	)	$	2	$	1	$	(6	)	Fair value of contracts outstanding at the end of the period	$	(1)	$	2	$	3		$	4

VaR Models

PPL Energy Supply utilizes a VaR model to measure commodity price risk in domestic gross energy margins for its non-trading and trading portfolios. VaR is a statistical model that attempts to estimate the value of potential loss over a given holding period under normal market conditions at a given confidence level. PPL Energy Supply calculates VaR using a Monte Carlo simulation technique based on a five-day holding period at a 95% confidence level. Given the company's conservative hedging program, PPL's non-trading ~~VAR~~VaR exposure is expected to be limited in the short term. At December 31, ~~2009~~2010 and December 31, ~~2008,~~2009, the VaR for PPL Energy Supply's portfolios using ~~end-of-quarter~~end-of-month results for the period was as follows.

Trading VaR Non-Trading VaR
2009 2008 2009 2008

95% Confidence Level, Five-Day Holding Period
Period End $ 3 $ 3 $ 8 $ 10
Average for the Period 4 10 9 14
High 8 22 11 20
Low 1 3 8 9

		Trading VaR				Non-Trading VaR
		2010		2009		2010		2009
95% Confidence Level, Five-Day Holding Period
	Period End	$	1	$	3	$	5	$	8
	Average for the Period		4		4		7		9
	High		9		8		12		11
	Low		1		1		4		8

The trading portfolio includes all speculative positions, regardless of the delivery period. All positions not considered speculative are considered non-trading. PPL Energy Supply's non-trading portfolio includes PPL Energy Supply's entire portfolio, including generation, with delivery periods through the next 12 months. Both the trading and non-trading VaR computations exclude FTRs due to the absence of reliable spot and forward markets. The fair value of the non-trading and trading FTR positions was insignificant at December 31, ~~2009 was an unrealized loss of $3 million and consisted of the following.~~

2010 2011

Trading (a)
Non-trading $ (2 ) $ (1 )
Total $ (2 ) $ (1 )

~~(a)~~

~~The amount of trading FTR positions was less than $1 million at December 31, 2009.~~

2010.

Interest Rate Risk

PPL Energy Supply and its subsidiaries have issued debt to finance their operations, which exposes them to interest rate risk. ~~Both~~ PPL and PPL Energy Supply ~~manage the interest rate risk of PPL Energy Supply by using~~utilize various financial derivative instruments to adjust the mix of fixed and floating interest rates in ~~its~~PPL Energy Supply's debt portfolio, adjust the duration of its debt portfolio and lock in benchmark interest rates in anticipation of future financing, when appropriate. Risk limits under the risk management program are designed to balance risk exposure to volatility in interest expense and changes in the fair value of PPL Energy Supply's debt portfolio due to changes in the absolute level of interest rates.

At December 31, 2010 and 2009, PPL Energy Supply's potential annual exposure to increased interest expense, based on a 10% increase in interest rates, was not ~~significant, compared with $2 million at December 31, 2008.~~significant.

PPL Energy Supply is also exposed to changes in the fair value of its domestic and international debt portfolios. PPL Energy Supply estimated that a 10% decrease in interest rates at December 31, ~~2009~~2010 would increase the fair value of its debt portfolio by ~~$187~~$198 million, compared with ~~$234~~$187 million at December 31, ~~2008.~~2009.

~~At December 31,~~ PPL Energy Supply had the following interest rate hedges ~~outstanding.~~outstanding at:

2009 2008

Exposure
Hedged
Fair Value, Net - Asset (Liability) (a)
Effect of a 10%
Adverse Movement
in Rates (b)

Exposure
Hedged
Fair Value, Net - Asset (Liability) (a)
Effect of a 10%
Adverse Movement
in Rates (b)
Cash flow hedges
Interest rate swaps (c)
Cross-currency swaps (d) $ 302 $ 8 $ (41 ) $ 302 $ 54 $ (8 )
Fair value hedges
Interest rate swaps (e) 50 3

December 31, 2010

December 31, 2009

Effect of a

10% Adverse

Exposure

Fair Value,

Movement

Exposure

Fair Value,

Movement

Hedged

Net - Asset (a)

in Rates (b)

Hedged

Net - Asset (a)

in Rates (b)

Cash flow hedges

Interest rate swaps (c)

Cross-currency swaps (d)

302

(18)

302

(41)

Fair value hedges

Interest rate swaps (e)

(a)

Includes accrued interest, if applicable.

(b)

Effects of adverse movements decrease assets or increase liabilities, as applicable, which could result in an asset becoming a liability.

(c)

PPL and PPL Energy Supply utilize various risk management instruments to reduce PPL Energy Supply's exposure to the expected future cash flow variability of PPL Energy Supply's debt instruments. These risks include exposure to adverse interest rate movements for outstanding variable rate debt and for future anticipated financing. While PPL Energy Supply is exposed to changes in the fair value of these instruments, any changes in the fair value of these instruments are recorded in equity and then reclassified into earnings in the same period during which the item being hedged affects earnings. Sensitivities represent a 10% adverse movement in interest rates.

(d)

WPDH Limited uses cross-currency swaps to hedge the interest payments and principal of its U.S. dollar-denominated senior notes with maturity dates ranging from December 2017 to December 2028. While PPL Energy Supply is exposed to changes in the fair value of these instruments, any change in the fair value of these instruments is recorded in equity and reclassified into earnings in the same period during which the item being hedged affects earnings. Sensitivities represent a 10% adverse movement in both interest rates and foreign currency exchange rates.

(e)

PPL and PPL Energy Supply utilize various risk management instruments to adjust the mix of fixed and floating interest rates in PPL Energy Supply's debt portfolio. The change in fair value of these instruments, as well as the offsetting change in the value of the hedged exposure of the debt, is reflected in earnings. ~~Sensitivity represents~~Sensitivities represent a 10% adverse movement in interest rates.

Foreign Currency Risk

PPL Energy Supply is exposed to foreign currency risk, primarily through investments in U.K. affiliates. In addition, PPL Energy Supply's domestic operations may make purchases of equipment in currencies other than U.S. dollars. See Note 1 to the Financial Statements for additional information regarding foreign currency translation.

PPL and PPL Energy Supply have adopted a foreign currency risk management program designed to hedge certain foreign currency exposures, including firm commitments, recognized assets or liabilities, anticipated transactions and net investments. In addition, PPL ~~and PPL~~ Energy Supply ~~enter~~enters into financial instruments to protect against foreign currency translation risk of expected earnings.

~~At December 31,~~ PPL Energy Supply had the following foreign currency hedges ~~outstanding.~~outstanding at:

															December 31, 2010						December 31, 2009
																			Effect of a 10%						Effect of a 10%
																	Fair Value,		Adverse Movement				Fair Value,		Adverse Movement
	2009							2008							Exposure		Net - Asset		in Foreign Currency		Exposure		Net - Asset		in Foreign Currency
	Exposure Hedged		Fair Value, Net - Asset (Liability)		Effect of a 10% Adverse Movement in Foreign Currency Exchange Rates (a)			Exposure Hedged		Fair Value, Net - Asset (Liability)		Effect of a 10% Adverse Movement in Foreign Currency Exchange Rates (a)			Hedged		(Liability)		Exchange Rates (a)		Hedged		(Liability)		Exchange Rates (a)

Net investment hedges (b)	£	40	$	13	$	(6	)	£	68	$	34	$	(10	)	£	35	$	7	$	(5)	£	40	$	13	$	(6)
Economic hedges (c)		48		2		(4	)									89		4		(10)		48		2		(4)

(a)

Effects of adverse movements decrease assets or increase liabilities, as applicable, which could result in an asset becoming a liability.

(b)

To protect the value of a portion of PPL Energy Supply's net investment in WPD, PPL executed forward contracts to sell British pounds sterling. The ~~settlement dates of these~~ contracts ~~range from March~~outstanding at December 31, 2010 ~~through June~~were settled in January 2011.

(c)

NDT Funds - Securities Price Risk

In connection with certain NRC requirements, PPL Susquehanna maintains trust funds to fund certain costs of decommissioning the Susquehanna nuclear station. At December 31, ~~2009,~~2010, these funds were invested primarily in domestic equity securities and fixed-rate, fixed-income securities and are reflected at fair value on PPL Energy Supply's Balance Sheet. The mix of securities is designed to provide returns sufficient to fund Susquehanna's decommissioning and to compensate for inflationary increases in decommissioning costs. However, the equity securities included in the trusts are exposed to price fluctuation in equity markets, and the values of fixed-rate, fixed-income securities are exposed to changes in interest rates. PPL actively monitors the investment performance and periodically ~~reviews~~revie ws asset allocation in accordance with its nuclear decommissioning trust policy statement. At December 31, ~~2009,~~2010, a hypothetical 10% increase in interest rates and a 10% decrease in equity prices would have resulted in an estimated ~~$40~~$45 million reduction in the fair value of the trust assets, compared with ~~$27~~$40 million at December 31, ~~2008.~~2009. See Notes 1718 and 2123 to the Financial Statements for additional information regarding the NDT funds.

Defined Benefit Plans - Securities Price Risk

See "Application of Critical Accounting Policies - Defined Benefits" for additional information regarding the effect of securities price risk on plan assets.

Credit Risk

Credit risk is the risk that PPL Energy Supply would incur a loss as a result of nonperformance by counterparties of their contractual obligations. PPL Energy Supply maintains credit policies and procedures with respect to counterparty credit (including requirements that counterparties maintain specified credit ratings) and requires other assurances in the form of credit support or collateral in certain circumstances in order to limit counterparty credit risk. However, PPL Energy Supply has concentrations of suppliers and customers among electric utilities, financial institutions and other energy marketing and trading companies. These concentrations may impact PPL Energy Supply's overall exposure to credit risk, positively or negatively, as counterparties may be similarly affected by changes in economic, ~~regulatory~~r egulatory or other conditions.

PPL Energy Supply includes the effect of credit risk on its fair value measurements to reflect the probability that a counterparty will default when contracts are out of the money (from the counterparty's standpoint). In this case, PPL Energy Supply would have to sell into a lower-priced market or purchase from a higher-priced market. When necessary, PPL Energy Supply records an allowance for doubtful accounts to reflect the probability that a counterparty will not pay for deliveries PPL Energy Supply has made but not yet billed, which are reflected in "Unbilled revenues" on the Balance Sheets. PPL Energy Supply also has established a reserve with respect to certain sales to the California ISO for which PPL Energy Supply has not yet been paid, which is reflected in accounts receivable on the Balance ~~Sheets.~~Sheets . See Note 1415 to the Financial Statements for additional information.

See "Overview" in this Item 7 and Notes ~~15, 17~~16, 18 and 1819 to the Financial Statements for additional information on credit concentration and credit risk.

Foreign Currency Translation

Related Party Transactions

PPL Energy Supply is not aware of any material ownership interests or operating responsibility by senior management of PPL Energy Supply in outside partnerships, including leasing transactions with variable interest entities, or other entities doing business with PPL Energy Supply.

~~For~~ See Note 16 to the Financial Statements for additional information on related party ~~transactions, see Note 15 to the Financial Statements.~~transactions.

Acquisitions, Development and Divestitures

~~PPL Energy Supply is currently planning incremental~~Incremental capacity increases of ~~239~~247 MW are currently planned, primarily at ~~its~~ existing generating facilities. See "Item ~~2.Properties~~2. Properties - Supply Segment" for additional information.

~~PPL Energy Supply~~Development projects are continuously ~~reexamines development projects~~reexamined based on market conditions and other factors to determine whether to proceed with the projects, sell, cancel or expand them, execute tolling agreements or pursue other options.

See Notes 8 and 9 to the Financial Statements for additional information on the more significant activities.

Environmental Matters

See "Item 1. Business - Environmental Matters" and Note 1415 to the Financial Statements for a discussion of environmental matters.

Competition

See "Item 1. Business - Competition" under the ~~Supply~~International Regulated and ~~International Delivery~~Supply segments and "Item 1A. Risk Factors" for a discussion of competitive factors affecting PPL Energy Supply.

New Accounting Guidance

See ~~Notes~~Note 1 ~~and 22~~ to the Financial Statements for a discussion of new accounting guidance ~~adopted and pending adoption.~~adopted.

Application of Critical Accounting Policies

~~PPL Energy Supply's financial~~Financial condition and results of operations are impacted by the methods, assumptions and estimates used in the application of critical accounting policies. The following accounting policies are particularly important to the financial condition or results of operations, ~~of PPL Energy Supply,~~ and require estimates or other judgments of matters inherently uncertain. Changes in the estimates or other judgments included within these accounting policies could result in a significant change to the information presented in the Financial Statements (these accounting policies are also discussed in Note 1 to the Financial Statements). PPL's senior management has reviewed these critical accounting policies, the following disclosures regarding their application and the estimates and assumptions regarding them, with ~~its~~PPL's Audit Committee. ~~In addition, PPL's senior management has reviewed the following disclosures regarding the application of these critical accounting policies with the Audit Committee.~~

Effective January 1, 2009, PPL Energy Supply fully applied accounting guidance that provides a framework for measuring fair value. The fair value measurement concepts provided by this guidance are used within its financial statements where applicable. See Notes 1 and 17 to the Financial Statements for additional information regarding fair value measurements.

1) Price Risk Management

See "Price Risk Management" in Note 1 to the Financial Statements as well as "Risk Management - Energy Marketing & Trading and Other" ~~above and Note 18 to the Financial Statements.~~above.

2) Defined Benefits

PPL Energy Supply subsidiaries sponsor various defined benefit pension and other postretirement plans and participate in and are allocated a significant portion of the liability and net periodic defined benefit costs of plans sponsored by PPL Services based on participation in those plans. PPL Energy Supply subsidiaries record an asset or liability to recognize the funded status of all defined benefit plans with an offsetting entry to OCI. Consequently, the funded status of all defined benefit plans is fully recognized on the Balance Sheets. See Note 1213 to the Financial Statements for additional information about the plans and the accounting for defined benefits.

PPL Services and PPL Energy Supply make certain assumptions regarding the valuation of benefit obligations and the performance of plan assets. When accounting for defined benefits, delayed recognition in earnings of differences between actual results and expected or estimated results is a guiding principle. Annual net periodic defined benefit costs are recorded in current earnings based on estimated results. Any differences between actual and estimated results are recorded in OCI. These amounts in AOCI are amortized to income over future periods. The delayed recognition allows for a smoothed recognition of costs over the working lives of the employees who benefit under the plans. The primary assumptions are:

·	Expected Return on Plan Assets - Management projects the long-term rates of return on plan assets based on historical performance, future expectations and periodic portfolio rebalancing among the diversified asset classes. These projected returns reduce the net benefit costs PPL ~~Energy Supply~~ records currently.

·	Rate of Compensation Increase - Management projects employees' annual pay increases, which are used to project employees' pension benefits at retirement.

·	Health Care Cost Trend Rate - Management projects the expected increases in the cost of health care.

In selecting a discount rate for its U.S. defined benefit plans, PPL Services and PPL Energy Supply start with an analysis of the expected benefit payment stream for ~~its~~their plans. This information is first matched against a spot-rate yield curve. A portfolio of ~~526~~604 Aa-graded non-callable (or callable with make-whole provisions) bonds, with a total amount outstanding in excess of ~~$541~~$667 billion, serves as the base from which those with the lowest and highest yields are eliminated to develop the ultimate yield curve. The results of this analysis are considered together with other economic data and movements in various bond indices to determine the discount rate assumption. At December 31, ~~2009,~~2010, PPL Services and PPL Energy Supply decreased the discount rate for their U.S. pension plans from ~~6.50%~~6.00% to ~~6.00%~~5.41% and 5.47%, respectively, as a result of this assessment. PPL Services decreased the discount rate for its other postretirement benefit plans from ~~6.45%~~5.81% to ~~5.81%~~5.16% and PPL Energy Supply decreased the discount rate for its other postretirement benefit plans from ~~6.37%~~5.55% to ~~5.55%~~4.95%.

A similar process is used to select the discount rate for the U.K. pension plans, which uses an iBoxx British pounds sterling denominated corporate bond index as its base. At December 31, ~~2009, PPL and PPL Energy Supply decreased~~2010, the discount rate for the U.K. pension plans was decreased from ~~7.47%~~5.55% to ~~5.55%~~5.54% as a result of this assessment.

The expected long-term rates of return for PPL Services and PPL Energy Supply's U.S. defined benefit pension and other postretirement benefit plans have been developed using a best-estimate of expected returns, volatilities and correlations for each asset class. PPL management corroborates these rates with expected long-term rates of return calculated by its independent actuary, who uses a building block approach that begins with a risk-free rate of return with factors being added such as inflation, duration, credit spreads and equity risk. Each plan's specific asset allocation is also considered in developing a reasonable return assumption.

At December 31, ~~2009, PPL's~~2010, PPL Services' expected return on plan assets ~~remained at~~decreased from 8.00% to 7.25% for its U.S. pension plans and ~~remained at~~decreased from 7.00% to 6.45% for PPL's other postretirement benefit plans. ~~PPL Energy Supply's expected return on plan assets increased from 7.78% to 8.00% as a result of the settlement of the PA Mines, LLC Retirement plan, which historically earned a lower rate of return.~~ The expected long-term rates of return for PPL and PPL Energy Supply's U.K. pension plans have been developed by ~~WPD~~PPL management with assistance from an independent actuary using a best-estimate of expected returns, volatilities and correlations for each asset class. For the U.K. plans, PPL and PPL Energy Supply's expected return on plan assets ~~remained at 7.90%~~decreased from 7.91% to 7.86% at December 31, ~~2009.~~2010.

In selecting a rate of compensation increase, PPL Energy Supply considers past experience in light of movements in inflation rates. At December 31, ~~2009,~~2010, PPL Services and PPL Energy Supply's rate of compensation increase remained at 4.75% for their U.S. plans. For the U.K. plans, PPL and PPL Energy Supply's rate of compensation increase remained at 4.00% at December 31, ~~2009.~~2010.

In selecting health care cost trend rates, PPL Services and PPL Energy Supply consider past performance and forecasts of health care costs. At December 31, ~~2009,~~2010, PPL Services' and PPL Energy Supply's health care cost trend rates were ~~8.00%~~9.00% for ~~2010,~~2011, gradually declining to 5.50% for ~~2016.~~2019.

A variance in the assumptions listed above could have a significant impact on accrued defined benefit liabilities or assets, reported annual net periodic defined benefit costs and OCI. While the charts below reflect either an increase or decrease in each assumption, the inverse of this change would impact the accrued defined benefit liabilities or assets, reported annual net periodic defined benefit costs and OCI by a similar amount in the opposite direction. The sensitivities below reflect an evaluation of the change based solely on a change in that assumption and does not include income tax effects.

At December 31, ~~2009, PPL Energy Supply had recorded the following~~2010, defined benefit plan ~~liabilities:~~liabilities were as follows.

Pension liabilities $ 884
Other postretirement benefit liabilities 91

Pension liabilities		$	619
Other postretirement benefit liabilities			73

The following chart reflects the sensitivities in the December 31, ~~2009~~2010 Balance Sheet associated with a change in certain assumptions based on ~~PPL's~~PPL Services' and PPL Energy Supply's primary defined benefit plans.

								Increase (Decrease)
	Increase (Decrease)							Change in		Impact on defined
Actuarial assumption	Change in assumption		Impact on defined benefit liabilities		Impact on OCI			assumption		benefit liabilities		Impact on OCI

Discount Rate		(0.25)%	$	146	$	(146	)	(0.25)%	$	149	$	(149)
Rate of Compensation Increase		0.25%		18		(18	)	0.25%		23		(23)
Health Care Cost Trend Rate (a)		1.0%		5		(5	)	1.00%		1		(1)

(a)

Only impacts other postretirement benefits.

In ~~2009,~~2010, PPL Energy Supply was allocated and recognized net periodic defined benefit costs charged to operating expense of ~~$23~~$52 million. This amount represents a $1$29 million increase from ~~2008.~~2009. This increase in expense was primarily attributable to amortization of actuarial losses of the WPD pension plans in the U.K.

Actuarial assumption	Change in assumption		Impact on defined benefit costs		Change in assumption		Impact on defined benefit costs

Discount Rate		(0.25)%	$	6	(0.25)%	$	12
Expected Return on Plan Assets		(0.25)%		9	(0.25)%		9
Rate of Compensation Increase		0.25%		2	0.25%		4
Health Care Cost Trend Rate (a)		1.0%		1	1.00%		1

(a)

Only impacts other postretirement benefits.

3)	Asset Impairment

~~PPL Energy Supply performs impairment~~Impairment analyses are performed for long-lived assets that are subject to depreciation or amortization whenever events or changes in circumstances indicate that a long-lived asset's carrying value may not be recoverable. For these long-lived assets ~~to be~~classified as held and used, such events or changes in circumstances are:

·	a significant decrease in the market price of an asset;

·	a significant adverse change in the manner in which an asset is being used or in its physical condition;

·	a significant adverse change in legal factors or in the business climate;

·	an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of an asset;

·	a current-period operating or cash flow loss combined with a history of losses or a forecast that demonstrates continuing losses; or

·	a current expectation that, more likely than not, an asset will be sold or otherwise disposed of before the end of its previously estimated useful life.

For a long-lived asset ~~to be~~classified as held and used, an impairment is recognized when the carrying amount of the asset is not recoverable and exceeds its fair value. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the asset is impaired, an impairment loss is recorded to adjust the asset's carrying value to its estimated fair value. Management must make significant judgments to estimate future cash flows, including the useful lives of long-lived assets, the fair value of the assets and management's intent to use the assets. ~~PPL Energy Supply considers alternate~~Alternate courses of action are considered to recover the carrying value of a long-lived asset, and ~~uses~~ estimated cash flows from the "most likely" alternative are used to assess impairment whenever one alternative is clearly the most likely outcome. If no alternative is clearly the most likely, then a probability-weighted approach is used taking into consideration estimated cash flows from the alternatives. For assets tested for impairment as of the balance sheet date, the estimates of future cash flows used in that test consider the likelihood of possible outcomes that existed at the balance sheet date, including the assessment of the likelihood of a future sale of the assets. That assessment is not revised based on events that occur after the balance sheet date. Changes in assumptions and estimates could result in significantly different results than those identified and recorded in the financial statements.

For determining fair value, quoted market prices in active markets are the best evidence of fair value. However, when market prices are unavailable, PPL ~~Energy Supply~~ considers all valuation techniques appropriate inunder the circumstances and for which market participant inputs can be obtained. ~~PPL Energy Supply has generally used~~Generally discounted cash flows are used to estimate fair value, which incorporates market participant inputs when available. Discounted cash flows are calculated by estimating future cash flow streams and applying appropriate discount rates to determine the present value of the cash flow streams.

In ~~2009, PPL Energy Supply recorded~~2010, impairments of certain long-lived ~~assets.~~assets were recorded. See Note 1718 to the Financial Statements for a discussion of impairments related to certain sulfur dioxide emission allowances and ~~the Long Island~~certain non-core generation ~~business.~~facilities.

~~PPL Energy Supply tests goodwill~~Goodwill is tested for impairment at the reporting unit level. ~~PPL Energy Supply has~~Reporting units have been determined ~~its reporting units~~ to be at or one level below ~~its~~ operating segments. ~~PPL Energy Supply performs a~~A goodwill impairment test is performed annually or more frequently if events or changes in circumstances indicate that the carrying value of the reporting unit may be greater than the unit's fair value. Additionally, goodwill is tested for impairment after a portion of goodwill has been allocated to a business to be disposed of.

In ~~2009, PPL Energy Supply~~2010, no goodwill was ~~not~~ required to ~~impair any goodwill.~~be impaired. Management ~~primarily~~ used both discounted cash flows and market multiples, which required significant assumptions, to estimate the fair value of each reporting unit. AFor the discounted cash flows approach, a decrease in the forecasted cash flows of 10%, or an increase ofin the discount rate by 25 basis points, would not have resulted in an impairment of goodwill. For the market multiples approach, which is based on either current or forward trading multiples of comparable companies or precedent transactions, a 10% decrease in the multiples would not have resulted in an impairment of goodwill.

~~Additionally, in~~In 2010 and 2009, ~~PPL Energy Supply wrote off~~$5 million and $3 million of goodwill allocated to discontinued ~~operations.~~operations was written off.

4) Loss Accruals

~~PPL Energy Supply accrues losses~~Losses are accrued for the estimated impacts of various conditions, situations or circumstances involving uncertain or contingent future outcomes. For loss contingencies, the loss must be accrued if (1) information is available that indicates it is probable that a loss has been incurred, given the likelihood of the uncertain future events, and (2) the amount of the loss can be reasonably estimated. Accounting guidance defines "probable" as cases in which "the future event or events are likely to occur." ~~PPL Energy Supply does not record the~~The accrual of contingencies that might result in gains is not recorded unless recovery is assured. ~~PPL Energy Supply continuously assesses potential~~Potential loss contingencies for environmental remediation, litigation claims, regulatory penalties and other ~~events.~~events are continuously assessed.

The accounting aspects of estimated loss accruals include (1) the initial identification and recording of the loss, (2) the determination of triggering events for reducing a recorded loss accrual, and (3) the ongoing assessment as to whether a recorded loss accrual is sufficient. All three of these aspects require significant judgment by ~~PPL Energy Supply's~~ management. ~~PPL Energy Supply uses its internal~~Internal expertise and outside experts (such as lawyers and engineers), are used, as necessary, to help estimate the probability that a loss has been incurred and the amount (or range) of the loss.

~~No new~~In 2010, a significant ~~loss accruals were recorded in 2009. In 2008, significant judgment was required by PPL Energy Supply's management~~adjustment to ~~perform an assessment of~~ the contingency accrual related to the Montana hydroelectric ~~litigation.~~

As part of the preparation of its 2009 financial statements, PPL Energy Supply's management reassessed the loss exposure for the Montana hydroelectric litigation. PPL's management concluded, based on its assessment and after consultations with its trial counsel, that it has meritorious arguments on appeal for the years 2000 through 2006. PPL assessed the likelihood of a loss for these years as reasonably possible. However, PPL Montana has not recorded a loss accrual for these years, as the likelihood of a loss was not deemed probable.

~~PPL Energy Supply has identified certain~~Certain other events have been identified that could give rise to a loss, but that do not meet the conditions for accrual. Such events are disclosed, but not recorded, when it is "reasonably possible" that a loss has been incurred. See Note 1415 to the Financial Statements for disclosure of other potential loss contingencies that have not met the criteria for accrual.

When an estimated loss is accrued, ~~PPL Energy Supply identifies, where applicable,~~ the triggering events for subsequently reducing the loss ~~accrual.~~accrual are identified, where applicable. The triggering events generally occur when the contingency has been resolved and the actual loss is ~~incurred,~~paid or written off, or when the risk of loss has diminished or been eliminated. The following are some of the triggering events that provide for the reduction of certain recorded loss accruals:

·	Allowances for uncollectible accounts are reduced when accounts are written off after prescribed collection procedures have been exhausted, a better estimate of the allowance is determined or underlying amounts are ultimately collected.

·	Environmental and other litigation contingencies are reduced when the contingency is resolved and ~~PPL Energy Supply makes~~ actual payments are made, a better estimate of the loss is determined or the loss is no longer considered probable.

~~PPL Energy Supply reviews its loss~~Loss accruals are reviewed on a regular basis to assure that the recorded potential loss exposures are appropriate. This involves ongoing communication and analyses with internal and external legal counsel, engineers, operation management and other parties.

5) Asset Retirement Obligations

PPL Energy Supply is required to recognize a liability for legal obligations associated with the retirement of long-lived assets. The initial obligation should be measured at its estimated fair value. A conditional ARO must be recognized when incurred if the fair value of the ARO can be reasonably estimated. An equivalent amount should be recorded as an increase in the value of the capitalized asset and allocated to expense over the useful life of the asset. Until the obligation is settled, the liability ~~should be~~is increased, through the recognition of accretion expense in the income statement, for changes in the obligation due to the passage of time. ~~A conditional ARO must be recognized when incurred if~~See Note 21 to the ~~fair value~~Financial Statements for further discussion of ~~the ARO can be reasonably estimated.~~AROs.

At December 31, ~~2009, PPL Energy Supply had~~2010, AROs totaling ~~$426~~$345 million were recorded on the Balance Sheet, of which ~~$10~~$13 million is included in "Other current liabilities." Of the total amount, ~~$348~~$270 million, or ~~82%~~78%, relates to ~~PPL Energy Supply's~~the nuclear decommissioning ARO. The most significant assumptions surrounding AROs are the forecasted retirement costs, the discount rates and the inflation rates. A variance in ~~the forecasted retirement costs, the discount rates or the inflation rates~~any of these inputs could have a significant impact on the ARO liabilities.

The following ~~chart~~table reflects the sensitivities related to ~~PPL Energy Supply's~~the nuclear decommissioning ARO liability ~~as of December 31, 2009,~~ associated with a change in these assumptions ~~at the time~~as of ~~initial recognition.~~December 31, 2010. There is no significant change to the annual depreciation expense of the ARO asset or the annual accretion expense of the ARO liability as a result of changing the assumptions. The sensitivities below reflect an evaluation of the change based solely on a change in that assumption.

	~~Change in Assumption~~	~~Impact on ARO Liability~~

~~Retirement Cost~~	~~10%/(10)%~~	~~$32/$(32)~~
~~Discount Rate~~	~~0.25%/(0.25)%~~	~~$(31)/$34~~
~~Inflation Rate~~	~~0.25%/(0.25)%~~	~~$41/$(37)~~

	Change in Assumption	Impact on ARO Liability

Retirement Cost	10%	$27
Discount Rate	(0.25)%	$25
Inflation Rate	0.25%	$26

6) Income ~~Tax Uncertainties~~Taxes

Significant management judgment is required in developing ~~PPL Energy Supply's~~the provision for income taxes, primarily due to the uncertainty related to tax positions taken or expected to be taken in tax returns and the determination of deferred tax assets, liabilities and valuation allowances.

Significant management judgment is required to determine the amount of benefit recognized related to an uncertain tax position. ~~PPL Energy Supply evaluates its tax~~Tax positions are evaluated following a two-step process. The first step requires an entity to determine whether, based on the technical merits supporting a particular tax position, it is more likely than not (greater than a 50% chance) that the tax position will be sustained. This determination assumes that the relevant taxing authority will examine the tax position and is aware of all the relevant facts surrounding the tax position. The second step requires an entity to recognize in the financial statements the benefit of a tax position that meets the more-likely-than-not recognition criterion. The benefit recognized is measured at the largest amount of ~~benefit~~ben efit that has a likelihood of realization, upon settlement, that exceeds 50%. ~~PPL Energy Supply's management~~Management considers a number of factors in assessing the benefit to be recognized, including negotiation of a settlement.

On a quarterly basis, ~~PPL Energy Supply reassesses its~~ uncertain tax positions are reassessed by considering information known at the reporting date. Based on management's assessment of new information, ~~PPL Energy Supply~~a tax benefit may subsequently ~~recognize a tax benefit~~be recognized for a previously unrecognized tax position, ~~de-recognize~~ a previously recognized tax position may be de-recognized, or ~~re-measure~~ the benefit of a previously recognized tax ~~position.~~position may be remeasured. The amounts ultimately paid upon resolution of issues raised by taxing authorities may differ materially from the amounts accrued and may materially impact ~~PPL Energy Supply's~~the financial statements in the future.

At December 31, 2010, it was reasonably possible that during the next 12 months the total amount of unrecognized tax benefits could increase by as much as $1 million or decrease by up to $181 million. This change could result from subsequent recognition, derecognition and/or changes in the measurement of uncertain tax positions related to the creditability of foreign taxes, the timing and utilization of foreign tax credits and the related impact on alternative minimum tax and other credits, the timing and/or valuation of certain deductions, intercompany transactions and unitary filing groups. The events that could cause these changes are direct settlements with taxing authorities, litigation, legal or administrative guidance by relevant taxing authorities and the lapse of an applicable statute of limitation.

The balance sheet classification of unrecognized tax benefits and the need for valuation allowances to reduce deferred tax assets also require significant management judgment. ~~PPL Energy Supply classifies unrecognized~~Unrecognized tax benefits are classified as current to the extent management expects to settle an uncertain tax position by payment or receipt of cash within one year of the reporting date. Valuation allowances are initially recorded and reevaluated each reporting period by assessing the likelihood of the ultimate realization of a deferred tax asset. Management considers a number of factors in assessing the realization of a deferred tax asset, including the reversal of temporary differences, future taxable income and ongoing prudent and feasible tax planning strategies. Any tax planning strategy utilized in this assessment must meet the recognition and measurement criteria utilized ~~by PPL Energy Supply~~ to account for an uncertain tax ~~positions.~~position. Management also considers the uncertainty posed by political risk (e.g. the potential for legislative extension of generation rate caps) and the effect of this uncertainty on the various factors that management takes into account in evaluating the need for valuation allowances. The amount of deferred tax assets ultimately realized may differ materially from the estimates utilized in the computation of valuation allowances and may materially impact the financial statements in the future. See Note 5 to the Financial Statements for income tax disclosures, including the ~~required disclosures.~~

~~At December 31, 2009, it was reasonably possible that during the next 12 months the total amount~~release of ~~unrecognized tax benefits could increase by as much as $11~~$52 million ~~or decrease by up to $123 million for PPL Energy Supply. This change could result from subsequent recognition, derecognition and/or changes~~of valuation allowances associated with state net operating loss carryforwards in the measurement of uncertain tax positions related to the creditability of foreign taxes, the timing and utilization of foreign tax credits and the related impact on alternative minimum tax and other credits, the timing and/or valuation of certain deductions, intercompany transactions and unitary filing groups. The events that could cause these changes are direct settlements with taxing authorities, litigation, legal or administrative guidance by relevant taxing authorities and the lapse of an applicable statute of limitation.

2010.

Other Information

PPL ELECTRIC UTILITIES CORPORATION AND SUBSIDIARIES

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

The information provided in this Item 7 should be read in conjunction with PPL Electric's Consolidated Financial Statements and the accompanying Notes. Terms and abbreviations are explained in the glossary. Dollars are in millions unless otherwise noted.

PPL Electric is an electricity delivery service provider in eastern and central Pennsylvania with headquarters in Allentown, Pennsylvania. Refer to "Item 1. Business - Background" for a description of its business. PPL Electric's strategy and principal challenge is to own and operate its electricity delivery business at the most efficient cost while maintaining high quality customer service and reliability.

Because PPL Electric's electricity delivery business is ~~rate-regulated. Accordingly, this business~~rate-regulated, it is subject to regulatory risk with respect to costs that may be recovered and investment returns that may be collected through customer rates. ~~See "Customer Choice - End of Transition Period" below for information on additional risks PPL Electric may face.~~

~~In order to~~To manage financing costs and access to credit markets, a key objective for PPL Electric's business ~~as a whole~~ is to maintain a strong credit profile. PPL Electric continually focuses on maintaining an appropriate capital structure and liquidity position.

See "Item 1A. Risk Factors" for more information concerning these and other material risks PPL Electric faces in its business.

~~The purpose of "Management's~~"Management's Discussion and Analysis of Financial Condition and Results of Operations" ~~is to provide~~provides information concerning PPL Electric's performance in implementing the strategies and managing the risks and challenges mentioned above. Specifically:

·	"Results of Operations" provides an overview of PPL Electric's operating results in 2010, 2009 ~~2008~~ and ~~2007,~~2008, including a review of earnings. It also provides a brief outlook for ~~2010.~~2011.

"Financial Condition - Liquidity and Capital Resources" provides an analysis of PPL Electric's liquidity position and credit profile, including its sources of cash (including bank credit facilities and sources of operating cash flow) and uses of cash (including contractual obligations and capital expenditure requirements) and the key risks and uncertainties that impact PPL Electric's past and future liquidity position and financial condition. This subsection also includes ~~a listing and discussion of~~rating agency actions on PPL Electric's ~~current~~ credit ratings.

·	"Financial Condition - Risk Management" provides an explanation of PPL Electric's risk management programs relating to market risk and credit risk.

·	"Application of Critical Accounting Policies" provides an overview of the accounting policies that are particularly important to the results of operations and financial condition of PPL Electric and that require its management to make significant estimates, assumptions and other judgments.

~~The information provided in this Item 7 should be read in conjunction with~~See "Item 1. Business - Background - Segment Information - Pennsylvania Regulated Segment" for a discussion of PPL Electric's ~~Consolidated Financial Statements and the accompanying Notes.~~

~~Terms and abbreviations are explained in the glossary. Dollars are in millions unless otherwise noted.~~

~~Customer Choice – End of Transition Period~~

In 1996, the Customer Choice Act was enacted to restructure Pennsylvania's electric utility industry in order to create retail access to a competitive market for generation of electricity. The Customer Choice Act required each Pennsylvania electric utility, includingPLR obligations, PPL Electric, to file a restructuring plan to "unbundle" its rates into separate generation, transmission and distribution components and to permit its customers to directly access alternate suppliers of electricity. Under the Customer Choice Act, PPL Electric was required to act as a PLR. As part of a settlement approved by the PUC and in connection with the restructuring plan PPL Electric filed under the Customer Choice Act, PPL Electric agreedElectric's agreement to provide electricity as a PLR at ~~predetermined~~ "capped" rates through ~~2009. In addition,~~ the ~~PUC authorized recovery~~end of approximately $2.97 billion of competitive transition or "stranded" costs (generation-related costs that might not otherwise be recovered in a competitive market) from customers during an 11-year transition period. For PPL Electric, this transition period ended on December 31,2009, and plans for default electricity supply procurement after 2009.

~~As a result of the PUC settlement order and the PLR obligation, PPL Electric, through~~When comparing 2010 with 2009, generally bore the risk that it would not be able to obtain adequate energy supply at the "capped" rates it could charge to its customers who did not select an alternate electricity supplier. To mitigate this risk, PPL Electric entered into full requirements energy supply agreements with PPL EnergyPlus, a PPL Electric affiliate. Under these agreements, through 2009, PPL EnergyPlus suppliedcertain line items on PPL Electric's ~~entire PLR load at predetermined prices equal~~financial statements were impacted by the Customer Choice Act, Act 129 and other related issues. The expiration of generation rate caps, the resulting competitive solicitations for power supply, the migration of customers to alternative suppliers, the ~~capped generation rates that PPL Electric was authorized to charge its customers.~~

~~Related to~~Customer Choice Act and Act 129 had minimal impact on Pennsylvania gross delivery margins, as approved recovery mechanisms allow for cost recovery of associated expenses, including the cost of energy provided as a PLR. However, PPL Electric's ~~transition period, the following has occurred or will occur:~~

·	~~In August 1999, CTC of $2.4 billion were converted to intangible transition costs when they were securitized~~2010 Pennsylvania gross delivery margins were negatively impacted by the issuance of transition bonds. The intangible transition costs were amortized over the life of the transition bonds, through December 2008, in accordance with an amortization schedule filed with the PUC. These transition bonds matured in tranches, with the final tranche being repaid in December 2008.

·	During the transition period, PPL Electric was authorized by the PUC to bill its customers $130 million for a portion of the costs associated with decommissioning of PPL's Susquehanna nuclear plant. Under the power supply agreements between PPL Electric and PPL EnergyPlus, these revenues were passed on to PPL EnergyPlus. Similarly, these revenues were passed on to PPL Susquehanna under a power supply agreement between PPL EnergyPlus and PPL Susquehanna and invested in the NDT funds. Effective January 1, 2010, these ratepayer billings have ceased.

·	In December 2009, PPL Electric filed with the PUC a final reconciliation of CTC and ITC recoveries during the transition period. At December 31, 2009, PPL Electric has recorded a net regulatory liability of $33 million related to these recoveries. The net overcollection will be reflected in customer rates in 2010.

·	~~At December 31, 2009, PPL Electric's long-term power purchase agreements with PPL EnergyPlus (effective since 2000 and 2002) expired.~~

·	To mitigate 2010 rate increases, PPL Electric implemented two programs in 2008 and 2009 that allowed customers to make prepayments toward their 2010 and 2011 electric bills or to defer any 2010 electric bill increases exceeding 25%. Any deferred amounts are to be repaid by 2012. At December 31, 2009, PPL Electric has recorded a liability of $36 million for these programs.

·	Effective January 1, 2010, PPL Electric's rates for generation supply as a PLR are no longer capped and the cost of electric generation is based on a competitive solicitation process. During 2007 through 2009, PPL Electric procured through PUC-approved solicitation procedures, the electric generation supply it will need in 2010 for customers who do not choose an alternative supplier. The prices in these contracts will result in an average residential customer paying approximately 30% higher rates, as compared to the previously-capped rates on delivered electricity. PPL Electric is currently procuring the PLR supply it will need for the January 2011 through May 2013 period. The results of all procurements continue to require the approval of the PUC.

·	For those customers who choose to procure generation supply from alternative providers, PPL Electric will provide services for these alternative generation suppliers to bill usage charges, among other duties. As required by a PUC-approved plan, PPL Electric will be purchasing certain receivables from alternative suppliers at a discount.

~~Prior to~~ the expiration of ~~the generation rate caps, customers' interest~~CTC recovery in ~~purchasing generation supply from other providers was limited because in recent years, the long-term supply agreement between~~December 2009. PPL Electric and PPL EnergyPlus provided a below-market cost of generation supply for these customers. As a result, a limited amount of "shopping" occurred. In 2010, several alternative suppliers have offeredcontinues to ~~provide generation supply in PPL Electric's service territory. When its customers purchase supply from these alternative suppliers or from PPL Electric as PLR,~~remain the ~~purchase of such supply has no significant impact on the operating results of PPL Electric. The cost to purchase PLR supply is passed directly by PPL Electric to its customers without markup.~~ For those customers who receive their supply from an alternative supplier, PPL Electric may act as billing agent or the alternative supplier may bill for their supply directly, and in either case, PPL Electric does not record revenues or expenses related to this supply. ~~PPL Electric remains the distribution~~delivery provider for all ~~the~~ customers in its service territory and ~~charges~~charge a regulated rate for the ~~service~~se rvice of delivering ~~that~~ electricity.

See ~~Note 14 to the Financial Statements~~"Statement of Income Analysis - Pennsylvania Gross Delivery Margins" for additional ~~information on Pennsylvania legislative and other regulatory activities.~~information.

~~Market Events~~

In 2008, conditions in the financial markets became disruptive to the processes of managing credit risk, responding to liquidity needs, measuring financial instruments at fair value, and managing market price risk. Bank credit capacity was reduced and the cost of renewing or establishing new credit facilities increased, thereby introducing uncertainties as to PPL Electric's ability to reliably estimate the longer-term cost and availability of credit. In general, bank credit capacity has increased from the significantly constrained levels of 2008 and early 2009. In addition, the cost of renewing or establishing new credit facilities has improved when compared with the 2008 and early 2009 periods.

~~Credit Risk~~

Credit risk is the risk that PPL Electric would incur a loss as a result of nonperformance by counterparties of their contractual obligations. PPL Electric maintains credit policies and procedures to limit counterparty credit risk. Conditions in the financial and commodity markets have generally increased PPL Electric's exposure to credit risk. See Notes 15, 17 and 18 to the Financial Statements, and "Risk Management - Credit Risk" for more information on credit risk.

~~Liquidity Risk~~

PPL Electric expects to continue to have access to adequate sources of liquidity through operating cash flows, cash and cash equivalents, credit facilities and, from time to time, the issuance of capital market securities. PPL Electric's ability to access capital markets may be impacted by conditions in the overall financial and capital markets, as well as conditions specific to the utility sector. See "Financial Condition - Liquidity and Capital Resources" for an expanded discussion of PPL Electric's liquidity position and a discussion of its forecasted sources of cash.

~~Securities Price Risk~~

PPL Electric participates in and is allocated costs from defined benefit plans sponsored by PPL. Declines in the market price of debt and equity securities result in unrealized losses that reduce the asset values of PPL's defined benefit plans. PPL's defined benefit plans earned positive returns in the second half of 2009, thereby recovering a portion of the negative returns incurred in 2008 and the first quarter of 2009.

Results of Operations

Earnings

	2010		2009		2008
Net Income Available to PPL Corporation	$	115	$	124	$	158

The ~~Economic Stimulus Package~~

~~The Economic Stimulus Package was intended~~after-tax changes in Net Income Available to stimulate the U.S. economy through federal tax relief, expansion of unemployment benefits and other social stimulus provisions, domestic spending for education, health care and infrastructure, including the energy sector. A portion of the benefits included in the Economic Stimulus Package are offered in the form of loan fee reductions, expanded loan guarantees and secondary market incentives.

Funds from the Economic Stimulus Package have been allocated to various federal agencies, such as the DOE, and provided to state agencies through block grants. The DOE has made awards of the funds for smart grid and efficiency-related programs. In addition, in July 2009, PPL ~~Electric proposed~~Corporation between these periods were due to the DOE that the agency provide funding for one-half of a $38 million smart grid project. The project would use smart grid technology to strengthen reliability, save energy and improve electric service for 60,000 Harrisburg, Pennsylvania area customers. It would also provide benefits beyond the Harrisburg region, helping to speed power restoration across PPL Electric's 29-county service territory. In October 2009, PPL Electric received notification that its grant proposal had been selected by the DOE for award negotiations. PPL Electric cannot predict the outcome of these award negotiations.

~~Results of Operations~~

~~Earnings~~

~~Income available to PPL was:~~

2009 2008 2007

$ 124 $ 158 $ 145

~~The changes in income available to PPL from year to year were, in part, attributable to~~following factors, including several special items that management considers significant. Details of these special items are provided below.

~~The after-tax changes in income available to PPL between these periods were due to the following factors.~~

	2009 vs. 2008			2008 vs. 2007			2010 vs. 2009		2009 vs. 2008

Delivery revenues (net of CTC/ITC amortization, interest expense on transition bonds and ancillary charges)	$	(16	)	$	32
Pennsylvania gross delivery margins							$	2	$	(18)
Other operation and maintenance		3			(8	)		(29)		3
Other income - net (a)		(2	)		(10	)
Interest expense		(12	)		1			11		(12)
Other		2			(3	)
Income taxes and other								(2)		2
Special items		(9	)		1			9		(9)
	$	(34	)	$	13		$	(9)	$	(34)

~~(a)~~·

~~Includes interest income from affiliate.~~See "Pennsylvania Gross Delivery Margins by Component" in the "Statement of Income Analysis" section for an explanation of margins generated by the regulated electric delivery operations.

·	Delivery revenues decreased in 2009 compared with 2008, primarily due to unfavorable economic conditions, including industrial customers scaling back on production and the unfavorable impact of weather on sales volumes. See "Revenue Recognition" in Note 1 to the Financial Statements for information on a true-up of FERC formula-based transmission revenues. ~~Delivery revenues increased in 2008 compared with 2007, primarily due to a base rate increase effective January 1, 2008 and normal load growth.~~

·	Other operation and maintenance ~~expenses~~ increased in ~~2008~~2010 compared with ~~2007,~~2009, primarily due to ~~insurance recovery of storm costs in 2007,~~ higher ~~vegetation management~~payroll-related costs and higher ~~regulatory asset amortization.~~contractor costs related to vegetation management.

~~Other income - net~~Interest expense decreased in ~~2008~~2010 compared with ~~2007,~~2009, primarily due to ~~a decrease in interest income from affiliate resulting from a decrease in the average balance outstanding on a note receivable from an affiliate and a~~ lower average ~~floating~~debt balances in 2010 compared with 2009 and the interest ~~rate.~~related to the over-recovery of recoverable transition costs.


·	Interest expense increased in 2009 compared with 2008, primarily due to $400 million of debt issuances in October 2008 that prefunded a portion of August 2009 debt maturities.

The following after-tax amounts, which management considers special items, also impacted earnings.

2009 2008 2007

Impairments $ (1 )
Workforce reduction (a) (5 ) $ (1 )
Other
Change in tax accounting method related to repairs (Note 5) (3 )
Total $ (9 ) $ (1 )

~~(a)~~		~~See Note 12 to the Financial Statements for additional information~~	2009

Asset impairments			$	(1)
Workforce reduction (Note 13)				(5)
Other:
	Change in tax accounting method related to ~~the 2009 workforce reduction.~~repairs (Note 5)			(3)
Total			$	(9)

~~PPL Electric's~~2011 Outlook

Excluding special items, higher earnings are projected in 2011 compared with 2010, due to higher distribution revenues resulting from an approved distribution base rate increase effective January 1, 2011.

See "Item 1. Business - Segment Information - Pennsylvania Regulated Segment" for additional information on the 2010 ~~Outlook~~

Excluding special items, PPL Electric projects lower earnings in 2010 compared with 2009, as a net result of lower distribution revenues, primarily due to continued slow economic growth and weak customer demand; higher operation and maintenance expenses; offset by lower financing costs.

~~In late March 2010, PPL Electric expects to file a request with the PUC seeking an increase in its distribution rates beginning in January 2011.~~
rate case.

~~See Note 14 to the Financial Statements for a discussion of items that could impact future earnings, including Pennsylvania legislative and other regulatory activities.~~

Statement of Income Analysis --

~~Operating Revenues~~Pennsylvania Gross Delivery Margins

~~Retail Electric~~Non-GAAP Financial Measure

The ~~changes~~following discussion includes financial information prepared in accordance with GAAP, as well as a non-GAAP financial measure, "Pennsylvania Gross Delivery Margins." "Pennsylvania Gross Delivery Margins" is a single financial performance measure of PPL Electric's Pennsylvania regulated electric delivery operations, which includes transmission and distribution activities, including PLR supply. In calculating this measure, Pennsylvania regulated utility revenues and expenses associated with approved recovery mechanisms, including energy provided as a PLR, are offset. These mechanisms allow for full cost recovery of certain expenses; therefore, certain expenses and revenues offset with minimal impact on earnings. As a result, this measure represents the net revenues from ~~retail~~PPL Electric's Pennsylv ania regulated electric ~~operations were attributable to:~~delivery operations. This performance measure is used, in conjunction with other information, internally by senior management and PPL's Board of Directors to manage its Pennsylvania regulated electric delivery operations. PPL Electric believes that "Pennsylvania Gross Delivery Margins" provides another criterion to make investment decisions.

2009 vs. 2008 2008 vs. 2007

Delivery $ (60 ) $ 17
PLR (20 ) 19
Other 9 3
$ (71 ) $ 39
This measure is not intended to replace "Operating Income," which is determined in accordance with GAAP, as an indicator of overall operating performance. Other companies may use different measures to analyze and to report on the results of their operations. The following table reconciles "Operating Income" to "Pennsylvania Gross Delivery Margins" as defined by PPL Electric.

		2010		2009		2008

Operating Income (a)		$	284	$	329	$	375
Adjustments:
	Other operation and maintenance (a)		502		417		410
	Depreciation (a)		136		128		131
	Taxes, other than income (a)		138		194		203
	Expense adjustments (b)		(205)		(216)		(236)
Pennsylvania gross delivery margins		$	855	$	852	$	883

(a)	As reported on the Statements of Income.

(b)	The components of these adjustments are detailed in the table below.

The following table provides the income statement line items and other adjustments that comprise Pennsylvania gross delivery margins.

			2010		2009		Change		2009		2008		Change
Revenue
	Retail electric (a)		$	2,448	$	3,218	$	(770)	$	3,218	$	3,290	$	(72)
	Wholesale electric to affiliate (a)			7		74		(67)		74		111		(37)
				2,455		3,292		(837)		3,292		3,401		(109)
Expense
	Energy purchases (a)			1,075		114		961		114		163		(49)
	Energy purchases from affiliate (a)			320		1,806		(1,486)		1,806		1,826		(20)
	Amortization of recoverable transition costs (a)					304		(304)		304		293		11
	Expense adjustments (b)
		Include gross receipts tax (c)		129		186		(57)		186		198		(12)
		Include Act 129 (d)		54				54
		Other		22		30		(8)		30		38		(8)
	Total expense adjustments			205		216		(11)		216		236		(20)
				1,600		2,440		(840)		2,440		2,518		(78)
Pennsylvania gross delivery margins			$	855	$	852	$	3	$	852	$	883	$	(31)

(a)		As reported on the Statements of Income.
(b)		To include/exclude the impact of any revenues and expenses consistent with the way management reviews Pennsylvania gross delivery margins internally.
(c)		Included in "Taxes, other than income" on the Statements of Income.
(d)		Included in "Other operation and maintenance" on the Statement of Income.

Pennsylvania Gross Delivery Margins by Component

Pennsylvania gross delivery margins are generated through domestic regulated electric distribution activities, including PLR supply, and transmission activities.

	2010		2009		Change		2009		2008		Change
Distribution	$	679	$	702	$	(23)	$	702	$	731	$	(29)
Transmission		176		150		26		150		152		(2)
Pennsylvania gross delivery margins	$	855	$	852	$	3	$	852	$	883	$	(31)

Distribution

The decrease in ~~retail electric revenues~~2010 compared with 2009 was primarily due to margins realized in 2009 related to the collection of CTC, which ended in December 2009, partially offset by favorable recovery mechanisms for certain energy related costs.

The decrease in 2009 compared with 2008 was primarily due to lower CTC/ITC margins in 2009, ITC collections ended in 2008. Lower margins were also attributable to unfavorable economic conditions, including industrial customers scaling back on production. In addition, weather had an unfavorable impact on sales ~~volumes. These decreases were partially~~volumes, offset by favorable price increases. ~~See "Revenue Recognition" in Note 1 to the Financial Statements for information on a true-up of FERC formula-based transmission revenues.~~

Transmission

The increase in ~~PLR revenue for 2008~~2010 compared with ~~2007 was attributable to normal load growth, as well as a favorable price increase. The increase in delivery revenue for the same period~~2009 was primarily due to aincreased investment in rate base, ~~rate~~an increase ~~effective January 1, 2008, and normal load growth. These increases were partially offset by~~in the ~~unfavorable impact~~cost of ~~weather on residential and commercial sales in 2008.~~

~~Wholesale Electric to Affiliate~~

PPL Electric has a contract to sell to PPL EnergyPlus the electricity that PPL Electric purchases under contracts with NUGs. The decrease of $38 million in wholesale electric to affiliate in 2009 compared with 2008 was primarilycapital due to ~~the expiration of NUG contracts~~an increase in ~~2008 and 2009. The final NUG contract will expire in 2014.~~

~~The decrease of $48 million in wholesale electric to affiliate in 2008 compared with 2007 was primarily due to the expiration of a NUG contract at the end of 2007~~equity and the ~~expiration~~recovery of ~~two NUG contracts during 2008. The decrease was partially offset by higher prices on certain NUG contracts.~~

~~Energy Purchases~~

Energy purchases decreased by $49 million for 2009 compared with 2008, primarily due to the expiration of NUG contracts in 2008 and 2009, as well as lower ancillary charges, which are primarily the result of lower pricing. The final NUG contract will expire in 2014.

Energy purchases decreased by $43 million for 2008 compared with 2007, primarily due to the expiration of a NUG contract at the end of 2007 and two NUG contracts in 2008, partially offset by higher prices on certain NUG contracts.

~~Energy Purchases from Affiliate~~

Energy purchases from affiliate decreased by $20 million in 2009 compared with 2008. The decrease was attributable to unfavorable weather and the impact of economic conditions, primarily on industrial customers' load, partially offset by higher prices for energy purchased under the power supply contracts with PPL EnergyPlus that support the PLR load.

Energy purchases from affiliate increased by $16 million in 2008 compared with 2007. The increase was primarily due to higher prices for energy purchased under the power supply contracts with PPL EnergyPlus that support the PLR load, as well as higher PLR load.additional costs through FERC formula-based rates.

Other Operation and Maintenance

The ~~increases~~changes in other operation and maintenance ~~expense~~expenses were due to:

	2009 vs. 2008			2008 vs. 2007			2010 vs. 2009		2009 vs. 2008

Workforce reduction (Note 12)	$	9
Act 129 costs incurred (a)							$	54
Vegetation management costs (b)								13	$	(5)
Payroll-related costs								13		3
Contractor-related expenses								7		(2)
Allocation of certain corporate support group costs								6
PUC-reportable storm costs, net of insurance recovery								5		(8)
Uncollectible accounts		7		$	1			3		7
Customer education programs								3		(2)
Ancillary charges (c)								(11)		1
Workforce reduction (Note 13)								(9)		9
Employee benefits		5			(6	)		(4)		5
Insurance recovery of storm costs		3			5
Payroll-related costs		3			(3	)
Regulatory asset amortization					4
PUC-reportable storm costs		(11	)		(4	)
Vegetation management costs		(5	)		5
Contractor-related expenses		(2	)		1
Customer education programs		(2	)
Other					5			5		(1)
	$	7		$	8
Total							$	85	$	7

~~Amortization of Recoverable Transition Costs~~

(a)

Relates to costs associated with a PUC-approved energy efficiency and conservation plan. These costs are recovered in customer rates. See "Regulatory Issues - Pennsylvania Activities" in Note 15 to the Financial Statements for additional information on this plan. These costs are included in "Pennsylvania Gross Delivery Margins" above.

(b)

Amortization of recoverable transition costs increased by $11 million in 2009 compared with 2008 and decreased by $17 million in 2008 compared with 2007. The amortization of recoverable transition costs was based on a PUC amortization schedule, adjusted for ITC and CTC recoveries in customer rates and related expenses. Since the amortization substantially matches the revenue recorded based on recovery in customer rates, there is minimal impact on earnings. At the end of 2009, PPL Electric's recoverable transition costs have been fully amortized.

(c)

Prior to 2010, these charges were assessed to load serving entities (LSE), and PPL Electric was considered the LSE. In 2010, PPL Electric was not billed directly for these charges. The individual PLR generation suppliers incurred these costs and billed PPL Electric as part of the bundled price of PLR supply. Such costs are reflected in energy purchases.

Taxes, Other Than Income

Taxes, other than income decreased by $56 million in 2010 compared with 2009. The decrease was primarily due to lower Pennsylvania gross receipts tax expense due to a decrease in electricity revenue as customers chose alternate suppliers in 2010.

Taxes, other than income decreased by $9 million in 2009 compared with 2008. The decrease was primarily due to a $12 million decrease in Pennsylvania gross receipts tax expense, which reflects a decrease in the tax rate in 2009. ~~Gross receipts tax is passed through to customers.~~

Depreciation

~~Taxes, other than income~~Depreciation increased by $3$8 million in ~~2008~~2010 compared with ~~2007. The increase was~~2009, primarily due to ~~a $6 million increase in Pennsylvania gross receipts tax expense, which reflects an increase in the tax rate in 2008.~~PP&E additions.

Other Income (Expense) - net

See Note 1617 to the Financial Statements for ~~details of other income.~~details.

Interest Income from Affiliate

Interest income from affiliate decreased by $5 million in 2009 compared with ~~2008, and decreased by $10 million in 2008 compared with 2007. These decreases were~~2008. This decrease was the result of a reduced average balance outstanding on a note receivable from an affiliate and a lower average rate on this note due to ~~the~~a floating interest rate.

~~Interest Expense~~Financing Costs

The changes in ~~interest expense,~~financing costs, which includes "Interest Expense" ~~and~~, "Interest Expense with ~~Affiliate,~~Affiliate" and "Distributions on Preferred Securities," were due to:

	2009 vs. 2008			2008 vs. 2007			2010 vs. 2009		2009 vs. 2008

Long-term debt interest expense (a)	$	24		$	7		$	(16)	$	24
Repayment of transition bonds		(13	)		(22	)				(13)
Interest on PLR contract collateral (Note 15)		(8	)		(7	)
Interest on PLR contract collateral (Note 16)								(2)		(8)
Distributions on preferred securities								2
Recoverable transition costs								(3)		3
Other		4			(2	)		2		1
	$	7		$	(24	)
Total							$	(17)	$	7

(a)

The ~~increases were~~decrease in 2010 compared with 2009 was primarily due to long-term debt retirements in the third quarter of 2009. The increase in 2009 compared with 2008 was primarily due to $400 million of debt issuances in October 2008 that prefunded a portion of August 2009 debt maturities.

Income Taxes

The changes in income taxes were due to:

2009 vs. 2008 2008 vs. 2007

Higher (lower) pre-tax book income $ (19 ) $ 16
Tax return adjustments (a) (2 ) 7
Tax reserve adjustments (2 ) (1 )
Other (3 )
$ (23 ) $ 19

~~(a)~~

During 2009, PPL Electric received consent from the IRS to change its method of accounting for certain expenditures for tax purposes. PPL deducted the resulting IRC Sec. 481 adjustment on its 2008 tax return and recorded a $3 million adjustment to federal and state income tax expense which results from the reversal of prior years' state income tax benefits related to regulated depreciation.

	2010 vs. 2009		2009 vs. 2008

Lower pre-tax book income	$	(13)	$	(19)
Federal and state tax reserve adjustments		(5)		(2)
Federal and state tax return adjustments		(5)		(2)
Other		1
	$	(22)	$	(23)

See Note 5 to the Financial Statements for additional information on income taxes.

Financial Condition

Liquidity and Capital Resources

PPL Electric continues to focus on maintaining a strong credit profile and liquidity position. PPL Electric expects to continue to have adequate liquidity available through operating cash flows, cash and cash equivalents and its credit facilities. Additionally, PPL Electric currently ~~does not plan~~plans to access ~~commercial paper markets or~~ debt ~~and equity~~ capital markets in ~~2010.~~2011, subject to market conditions.

PPL Electric's cash flows from operations and access to cost-effective bank and capital markets are subject to risks and uncertainties including, but not limited to:

·	unusual or extreme weather that may damage PPL Electric's transmission and distribution facilities or affect energy sales to customers;

·	the ability to recover and the timeliness and adequacy of recovery of costs associated with regulated utility businesses;

·	any adverse outcome of legal proceedings and investigations with respect to PPL Electric's current and past business activities;

·	deterioration in the financial markets that could make obtaining new sources of bank and capital markets funding more difficult and more costly; and

·	a downgrade in PPL Electric's credit ratings that could adversely affect its ability to access capital and increase the cost of credit facilities and any new debt.

See "Item 1A. Risk Factors" for further discussion of risks and uncertainties affecting PPL Electric's cash flows.

At December 31, PPL Electric had the following:

	2009		2008		2007		2010		2009		2008

Cash and cash equivalents	$	485	$	483	$	33	$	204	$	485	$	483
Short-term debt			$	95	$	41					$	95

The changes in PPL Electric's cash and cash equivalents position resulted from:

2009 2008 2007

Net Cash Provided by Operating Activities $ 294 $ 648 $ 568
Net Cash Provided by (Used in) Investing Activities 6 (226 ) (239 )
Net Cash Provided by (Used in) Financing Activities (298 ) 28 (446 )
Net Increase (Decrease) in Cash and Cash Equivalents $ 2 $ 450 $ (117 )

	2010		2009		2008

Net cash provided by operating activities	$	212	$	294	$	648
Net cash provided by (used in) investing activities		(403)		6		(226)
Net cash provided by (used in) financing activities		(90)		(298)		28
Net Increase (Decrease) in Cash and Cash Equivalents	$	(281)	$	2	$	450

Operating Activities

Net cash provided by operating activities decreased by 28%, or $82 million, in 2010 compared with 2009. The expiration of the generation rate caps at the end of 2009 had little impact on net income, while increased transmission revenue was almost completely offset by decreased distribution revenue. However, higher tree trimming and payroll costs and additional defined benefit plan contributions were the primary drivers to the decrease in cash provided by operating activities. Also impacting the 2010 operating cash flows was the elimination of the CTC charge of approximately $300 million that was received in 2009. This amount offsets the benefit of not paying the $300 million in cash collateral to PPL Energy Supply, as discussed below.

Net cash provided by operating activities decreased by 55%, or $354 million, in 2009 compared with 2008, primarily as a result of the repayment by PPL Electric of $300 million in cash collateral related to the long-term PLR energy supply agreements with PPL Energy Supply, which expired at the end of 2009. The decrease also reflects the impact of lower delivery revenues and higher payments of interest and income taxes.

Net cash provided by operating activities increased by 14%, or $80 million, in 2008 compared with 2007, primarily as a result of increased revenues, which was due primarily to a base rate increase effective January 1, 2008 and normal load growth, as well as less interest incurred on long-term debt, as a result of the repayment of transition bonds during 2007 and 2008. The increases to cash provided by operating activities resulting from these items were partially offset by increased energy purchases, primarily as a result of higher prices for energy purchased from PPL EnergyPlus under the PLR contracts and higher PLR load, as well as an insurance recovery of storm costs in 2007.

PPL Electric expects ~~be able to achieve relatively stable~~an increase in cash flows from operations ~~through~~in the support of (i) contracts it has entered into to procure the 2010 and a portion of 2011 PLR electricity supply it expects to need for residential, small commercial and small industrial customers who do not choose an alternative supplier and (ii) purchasing receivablesnear-term from ~~alternative suppliers for those customers who purchase generation from other suppliers. See Note 14 to the Financial Statements for information~~its $77.5 million, or 1.6%, rate increase that became effective on the energy purchase contracts and "Customer Choice - End of Transition Period" in "Overview" in this Item 7 for a discussion of the ability of customers to purchase generation supply from other providers and PPL Electric's purchase of the related receivables.

January 1, 2011.

Investing Activities

Net cash used in investing activities was $403 million in 2010 ~~through 2012.~~compared with cash provided by investing activities of $6 million in 2009. The change from 2009 to 2010 primarily reflects an increase of $113 million in capital expenditures in 2010 and the receipt of $300 million from an affiliate as repayment of a demand loan in 2009.

Net cash provided by investing activities was $6 million in 2009 compared with cash used in investing activities of $226 million in 2008. The change from 2008 to 2009 primarily reflects the receipt of $300 million from an affiliate as repayment of a demand loan.

Financing Activities

Net cash used in ~~investing~~financing activities ~~remained relatively stable~~was $90 million in ~~2008~~2010 compared with ~~2007, but there were significant changes in certain components. In 2008, there was a net decrease of $69~~$298 million in ~~restricted cash~~2009. The change from 2009 to 2010 primarily reflects no debt activity, decreased contributions from and ~~cash equivalents~~common stock dividends paid to PPL, and the redemption of preferred stock in 2010. PPL Electric had net debt retirements of $392 million in 2009 compared with no activity in 2010, received $345 million less of contributions from PPL in 2010 compared to ~~a net increase~~2009, paid $203 million less of ~~$8 million~~common stock dividends to PPL in ~~2007. Capital expenditures decreased $18 million in 2008~~2010 compared ~~with 2007. In 2008, PPL Electric loaned $23~~to 2009, and paid $54 million to ~~an affiliate compared with receiving $23 million~~redeem preferred stock in 2007 from an affiliate as partial repayment of a demand loan. Additionally, PPL Electric received net proceeds of $25 million from purchases and sales of investments in 2007 compared with none in 2008.

~~Financing Activities~~2010.

Net cash used in financing activities was $298 million in 2009 compared with net cash provided by financing activities of $28 million in 2008. The change from 2008 to 2009 primarily reflects less issuances and increased retirements of long-term debt, contributions received from PPL, increased common stock dividends to PPL and the repayment of short-term borrowings in 2009. PPL Electric had net debt retirements of $392 million in 2009 compared with net debt issuances of $148 million in 2008, received $400 million of contributions from PPL in 2009 and paid $176 million more of common stock dividends to PPL in 2009 compared to 2008.

Net cash provided by financing activities was $28 million in 2008 compared with net cash used in financing activities of $446 million in 2007. The change from 2007 to 2008 primarily reflects increased issuances and less retirements of long-term debt, less common stock dividends to PPL and increased short-term borrowings in 2008. PPL Electric had net debt issuances of $148 million in 2008 compared to net debt retirements of $306 million in 2007, and it paid $21 million less of common stock dividends to PPL in 2008 compared to 2007.

See "Forecasted Sources of Cash" for a discussion of PPL Electric's plans to issue debt and equity securities, as well as a discussion of credit facility capacity available to PPL Electric. Also see "Forecasted Uses of Cash" for a discussion of PPL Electric's plans to pay dividends on its common and preferred securities, as well as maturities of PPL Electric's long-term debt.

~~PPL Electric's debt financing activity in 2009 was:~~

Issuance Retirements

Senior Secured Bonds (a) $ 298 $ (586 )
Variable Rate Pollution Control Facilities Note (9 )
Short-term debt (95 )
Total $ 298 $ (690 )
Net decrease $ (392 )

~~(a)~~

~~Issuance is net of pricing discount. Retirements exclude a $9 million premium paid in connection with the December 2009 redemption of PPL Electric's 4.30% Senior Secured Bonds due 2013.~~

~~See Note 7 to the Financial Statements for more detailed information regarding PPL Electric's financing activities in 2009.~~

Forecasted Sources of Cash

PPL Electric expects to continue to have significant sources of cash available in the near term, including various credit facilities and a commercial paper program. PPL Electric currently ~~does not plan~~plans to ~~access commercial paper markets or~~issue up to $250 million in long-term debt ~~and equity capital markets~~securities in ~~2010, but may decide to do so,~~2011, subject to market ~~conditions, to enhance its liquidity.~~conditions.

Credit Facilities

At December 31, ~~2009,~~2010, PPL Electric's total committed borrowing capacity under its credit facilities and the use of this borrowing capacity were:

Committed Capacity Borrowed Letters of Credit Issued (d)
Unused Capacity

5-year Syndicated Credit Facility (a) $ 190 $ 6 $ 184
Asset-backed Credit Facility (b) 150 150
Total PPL Electric Credit Facilities (c) $ 340 $ 6 $ 334

				Letters of
	Committed			Credit		Unused
	Capacity		Borrowed	Issued (a)		Capacity

Syndicated Credit Facility (b)	$	200		$	13	$	187
Asset-backed Credit Facility (c)		150			n/a		150
Total PPL Electric Credit Facilities (d)	$	350		$	13	$	337

(a)	PPL Electric has a reimbursement obligation to the extent any letters of credit are drawn upon.

(b)

Borrowings under PPL Electric's syndicated credit facility generally bear interest at LIBOR-based rates plus a spread, depending upon the company's senior secured long-term debt rating. PPL Electric also has the capability to request the lenders to issue up to $200 million of letters of credit under this facility, which issuances reduce available borrowing capacity. Subject to certain conditions, PPL Electric may request that the facility's capacity be increased by up to $100 million.

This syndicated credit facility contains a financial covenant requiring debt to total capitalization not to exceed 70%. At December 31, 2010, PPL Electric's consolidated debt to total capitalization percentages, as calculated in accordance with its credit facility, was 43%. The syndicated credit facility also contains standard representations and warranties that must be made for PPL Electric to borrow under it.

The commitments under ~~this~~the credit facility are provided by a diverse bank group, with no one bank and its affiliates providing an aggregate commitment of more than ~~18%~~6% of the total committed capacity.


		Borrowings under this credit facility generally bear interest at LIBOR-based rates plus a spread, depending upon the company's public debt rating. PPL Electric also has the capability to request the lenders to issue up to $190 million of letters of credit under this facility, which issuances reduce available borrowing capacity. Under certain conditions, PPL Electric may request that the facility's capacity be increased by up to $100 million.

		This credit facility contains a financial covenant requiring debt to total capitalization to not exceed 70%. At December 31, 2009 and 2008, PPL Electric's consolidated debt to total capitalization percentages, as calculated in accordance with its credit facility, were 44% and 53%. This credit facility also contains standard representations and warranties that must be made for PPL Electric to borrow under it.

~~(b)~~	(c)	This credit facility relates to an asset-backed commercial paper program through which PPL Electric obtains financing by selling and contributing its eligible accounts receivable and unbilled revenues to a special purpose, wholly owned subsidiary on an ongoing basis. The subsidiary pledges these assets to secure loans of up to an aggregate of $150 million from a commercial paper conduit sponsored by a financial institution. At December 31, ~~2009,~~2010, based on accounts receivable and unbilled revenue pledged, $150 million was available for borrowing.


~~(c)~~	(d)	The committed capacity expires as follows: $150 million in ~~2010~~2011 and ~~$190~~$200 million in ~~2012.~~2014. PPL Electric intends to renew its existing $150 million asset-backed credit facility in ~~2010~~2011 in order to maintain its current total committed capacity level.

~~(d)~~		~~PPL Electric has a reimbursement obligation to the extent any letters of credit are drawn upon.~~

In addition to the financial covenant noted in the table above, the credit agreements governing the credit facilities contain various other covenants. Failure to comply with the covenants after applicable grace periods could result in acceleration of repayment of borrowings and/or termination of the agreements. PPL Electric monitors compliance with the covenants on a regular basis. At December 31, ~~2009,~~2010, PPL Electric was in material compliance with these covenants. At this time, PPL Electric believes that these covenants and other borrowing conditions will not limit access to these funding sources.

See Note 7 to the Financial Statements for further discussion of PPL Electric's credit facilities.

Commercial Paper

PPL Electric maintains a commercial paper program for up to $200 million to provide an additional financing source to fund its short-term liquidity needs, if and when necessary. Commercial paper issuances are currently supported by PPL Electric's ~~five-year~~$200 million syndicated credit facility, which expires in December 2014, based on available capacity.

As noted below under "Credit Ratings," commercial paper for PPL Electric is rated P-2, A-2 and F2 by Moody's, S&P and Fitch. Market conditions to issue commercial paper with these ratings have strengthened significantly since 2008, when the downturn in the financial markets created extremely limited liquidity resulting in high borrowing rates. PPL Electric did not issue any commercial paper during ~~2009.~~2010. Based on its current cash position and anticipated cash flows, PPL Electric currently does not plan to issue any commercial paper during ~~2010,~~2011, but it may do so from time to time, subject to market conditions, to facilitate short-term cash flow needs.

Contributions from PPL

From time to time PPL may make capital contributions to PPL Electric. PPL Electric may use these contributions for general corporate purposes.

Long-Term Debt and Equity Securities

Subject to market conditions, PPL Electric currently ~~does not plan~~plans to issue ~~any~~up to $250 million in long-term debt ~~or equity~~ securities in ~~2010.~~2011. PPL Electric expects to use the proceeds from the issuance of long-term debt securities primarily to fund capital expenditures and for general corporate purposes.

The Economic Stimulus Package

Forecasted Uses of Cash

In addition to expenditures required for normal operating activities, such as purchased power, payroll, and taxes, PPL Electric currently expects to incur future cash outflows for capital expenditures, various contractual obligations, payment of dividends on its common and preferred securities and possibly the purchase or redemption of a portion of its debt securities.

Capital Expenditures

The table below shows PPL Electric's actual spending for the year ~~2009~~2010 and current capital expenditure projections for the years ~~2010~~2011 through ~~2012.~~2015.

Actual Projected
2009 2010 2011 2012
Construction expenditures (a) (b)
Transmission and distribution facilities $ 264 $ 542 $ 739 $ 605
Other 34 47 38 39
Total Capital Expenditures $ 298 $ 589 $ 777 $ 644

		Actual		Projected
		2010		2011		2012		2013		2014		2015
Construction expenditures (a) (b)
	Transmission and distribution facilities	$	368	$	401	$	576	$	841	$	795	$	641
	Other		43		51		53		27		26		26
	Total Capital Expenditures	$	411	$	452	$	629	$	868	$	821	$	667

(a)

Construction expenditures include AFUDC, which is expected to be approximately ~~$34~~$79 million for the years ~~2010~~2011 through ~~2012.~~2015.

(b)

Includes expenditures for intangible assets.

PPL Electric's capital expenditure projections for the years ~~2010~~2011 through ~~2012~~2015 total approximately ~~$2.0~~$3.4 billion. Capital expenditure plans are revised periodically to reflect changes in operational, market and regulatory conditions. The table includes projected costs for the asset optimization program focused on the replacement of aging transmission and distribution assets, and the PJM-approved regional transmission line expansion project. See Note 8 to the Financial Statements for additional information.

PPL Electric plans to fund its capital expenditures in ~~2010~~2011 with cash on hand, ~~and~~ cash from ~~operations.~~operations and proceeds from the issuance of debt securities.

Contractual Obligations

PPL Electric has assumed various financial obligations and commitments in the ordinary course of conducting its business. At December 31, ~~2009,~~2010, the estimated contractual cash obligations of PPL Electric were:

	Total		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years				Total		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years

Long-term Debt (a)	$	1,474					$	410	$	1,064	Long-term Debt (a)		$	1,474			$	400	$	110	$	964
Interest on Long-term Debt (b)		1,454	$	89	$	173		147		1,045	Interest on Long-term Debt (b)			1,369	$	88		177		119		985
Purchase Obligations (c)		3,142		2,599		537		6			Purchase Obligations (c)			1,480		937		383		160
Other Long-term Liabilities Reflected on the Balance Sheets under GAAP (d)
Total Contractual Cash Obligations	$	6,070	$	2,688	$	710	$	563	$	2,109
Total Contractual Cash											Total Contractual Cash
												Obligations	$	4,323	$	1,025	$	960	$	389	$	1,949

(a)

Reflects principal maturities only based on ~~legal~~stated maturity dates. ~~See Note 7 to the Financial Statements for a discussion of variable-rate remarketable bonds issued by the PEDFA on behalf of PPL Electric.~~ PPL Electric does not have any capital or operating lease obligations.

(b)

Assumes interest payments through stated maturity. ~~The payments herein are subject to change, as payments for variable-rate debt have been estimated.~~

(c)		The payments reflected herein are subject to change, as the purchase obligation reflected is an estimate based on projected obligated quantities and projected pricing under the contract. Purchase orders made in the ordinary course of business are excluded from the amounts presented.
~~(d)~~		~~At December 31, 2009, total unrecognized tax benefits of $74~~

At December 31, 2010, total unrecognized tax benefits of $62 million were excluded from this table as PPL Electric cannot reasonably estimate the amount and period of future payments. See Note 5 to the Financial Statements for additional information.

Dividends

From time to time, as determined by its Board of Directors, PPL Electric pays dividends on its common stock to its parent, PPL.

As discussed in Note 7 to the Financial Statements, PPL Electric may not pay dividends on its common stock, except in certain circumstances, unless full dividends have been paid on the 6.25% Series Preference Stock for the then-current dividend period. PPL Electric does not, at this time, expect that such limitation would significantly impact its ability to declare dividends.

PPL Electric expects to continue to pay quarterly dividends on its outstanding preferred securities, if and as declared by its Board of Directors.

Purchase or Redemption of Debt Securities

PPL Electric will continue to evaluate purchasing or redeeming outstanding debt securities and may decide to take action depending upon prevailing market conditions and available cash.

Credit Ratings

Moody's, S&P and Fitch periodically review the credit ratings on the debt and preferred securities of PPL Electric. Based on their respective independent reviews, the rating agencies may make certain ratings revisions or ratings affirmations.

A credit rating reflects an assessment by the rating agency of the creditworthiness associated with an issuer and particular securities that it issues. The credit ratings of PPL Electric are based on information provided by PPL Electric and other sources. The ratings of Moody's, S&P and Fitch are not a recommendation to buy, sell or hold any securities of PPL Electric. Such ratings may be subject to revisions or withdrawal by the agencies at any time and should be evaluated independently of each other and any other rating that may be assigned to the securities. A downgrade in PPL Electric's credit ratings could result in higher borrowing costs and reduced access to capital markets.

~~The following table summarizes~~In prior periodic reports, PPL Electric described its then-current debt ratings in connection with, and to facilitate, an understanding of its liquidity position. As a result of the passage of the Dodd-Frank Act and the attendant uncertainties relating to the extent to which issuers of non-asset backed securities may disclose credit ratings without being required to obtain rating agency consent to the inclusion of such disclosure, or incorporation by reference of such disclosure, in a registrant's registration statement or section 10(a) prospectus, PPL Electric ~~at December 31, 2009:~~is limiting its credit rating disclosure to a description of the actions taken by the rating agencies with respect to PPL Electric's ratings, but without stating what ratings have been assigned to PPL Electric or its securities. The ratings assigned by the rat ing agencies to PPL Electric and its respective securities may be found, without charge, on each of the respective ratings agencies' websites, which ratings together with all other information contained on such rating agency websites is, hereby, explicitly not incorporated by reference in this report.

The rating agencies took the following actions related to PPL Electric in 2010.

Moody's

In April 2010, Moody's took the following actions:

·	Revised the outlook for PPL Electric;

·	~~Moody's~~Lowered the rating of PPL Electric's preferred securities;

·	Lowered the issuer rating of PPL Electric; and

·	~~S&P~~		~~Fitch~~ ~~(a)~~
Affirmed the senior secured rating and commercial paper rating of PPL ~~Electric~~ ~~(b)~~
~~Senior Unsecured/Issuer Rating~~		~~Baa1~~		A-	~~BBB~~
~~First Mortgage Bonds/Senior Secured Bonds~~		A3		A-	A-
~~Commercial Paper~~		~~P-2~~		~~A-2~~	F2
~~Preferred Stock~~		~~Baa3~~		~~BBB~~	~~BBB~~
~~Preference Stock~~		~~Baa3~~		~~BBB~~	~~BBB~~
~~Outlook~~		~~Negative~~		~~Negative~~	~~STABLE~~Electric.

~~(a)~~		~~Issuer Rating for Fitch is an "Issuer Default Rating."~~
~~(b)~~		Excludes Pollution Control Revenue Bonds issued by the LCIDA and the PEDFA on behalf of PPL Electric, of which the LCIDA bonds are insured and may be rated on the basis of relevant factors, including the insurer's ratings.

In January 2009, S&P completed a review of PPL Electric, upon which it revised its outlook to negative from stable and affirmed the A- issuer rating of PPL Electric. S&P stated in its press release that the revision in its outlook reflects the linkage with PPL, whose outlook was also revised to negative from stable, along with their expectation that PPL Electric's financial metrics could weaken beginning in 2010.

~~In May 2009, Moody's completed a review of PPL Electric. As a result of that review, Moody's revised its outlook for PPL Electric to negative from stable.~~ Moody's stated in its press release that the revision in the ~~outlook~~rating for PPL Electric, ~~reflects Moody's expectation that PPL Electric's~~while reflective of PPL's then-announced agreement to acquire LKE, is driven more by weakening financial metrics ~~will deteriorate beyond 2009~~ and ~~considers~~ the ~~potential~~outlooks that had been in place for ~~additional pressure on cash flows.~~PPL and PPL Electric for the past year.

S&P

In April 2010, S&P affirmed its credit rating for PPL Electric following PPL's then-announced agreement to acquire LKE.

In October ~~2009, Fitch completed a review of~~2010, S&P affirmed its credit ratings for PPL Electric ~~upon which it affirmed all ratings of~~and revised the outlook on PPL Electric.

Fitch

In January 2010, as a result of implementing its ~~recently~~ revised guidelines for rating preferred stock and hybrid securities, Fitch lowered the ratings of PPL Electric's preferred stock and preference ~~stock to BBB- from BBB.~~stock. Fitch stated in its press release that the new guidelines, which apply to instruments issued by companies in all sectors, typically resulted in downgrades of one notch for many instruments that provide for the ability to defer interest or dividend payments. Fitch stated that it has no reason to believe that such deferral will be activated.

In April 2010, Fitch affirmed its credit ratings and outlook for PPL Electric following PPL's then-announced agreement to acquire LKE.

Off-Balance Sheet Arrangements

PPL Electric has entered into certain agreements that may contingently require payment to a guaranteed or indemnified party. See Note 1415 to the Financial Statements for a discussion of these agreements.

Risk Management

Market Risk

Commodity Price and Volumetric Risk - PLR Contracts

PPL Electric is exposed to market price and volumetric risks from its obligation as PLR. The PUC has ~~an obligation to act as~~approved a ~~PLR. This role has the potential to expose~~cost recovery mechanism that allows PPL Electric to ~~electric generation~~pass through to customers the cost associated with fulfilling its PLR obligation. This cost recovery mechanism substantially eliminates PPL Electric's exposure to market price ~~and volumetric~~ risk. ~~Through 2009,~~ PPL Electric ~~and PPL EnergyPlus had power~~also mitigates its exposure to volumetric risk by entering into full requirement energy supply agreements under which PPL EnergyPlus sold PPL Electric (under a predetermined pricing arrangement) energy and capacity to fulfill this PLR obligation. As a result, PPL Electric had shifted these risks to PPL EnergyPlus. Forcontracts for its ~~2010~~customers. These supply contracts transfer the volumetric risk associated with the PLR obligation ~~PPL Electric has entered into power purchase agreements with several counterparties, which include fixed prices that shift these risks~~ to the counterparties. PPL Electric is in the process of procuring such supply for the period January 2011 through May 2013. In the event a supplier defaults on its obligation, PPL Electric would be required to seek replacement power in the market. All incremental costs incurred by PPL Electric would be recoverable from customers in future rates. See "Overview" in this Item 7 and Note 14 to the Financial Statements for information on the PUC-approved procurement plan and other ongoing Pennsylvania regulatory and legislative activities.energy suppliers.

Interest Rate Risk

PPL Electric has issued debt to finance its operations, which exposes it to interest rate risk. PPL ~~Electric's~~Electric had no potential annual exposure to increased interest expense, based on a 10% increase in interest rates, at December 31, 2010. Such amount was not significant at December 31, ~~2009 and 2008.~~2009. PPL Electric estimated that a 10% decrease in interest rates at December 31, ~~2009~~2010 would increase the fair value of its debt portfolio by ~~$69~~$66 million, compared with ~~$50~~$69 million at December 31, ~~2008.~~
2009.

Credit Risk

Credit risk is the risk that PPL Electric would incur a loss as a result of nonperformance by counterparties of their contractual obligations. PPL Electric requires that counterparties maintain specified credit ratings and requires other assurances in the form of credit support or collateral in certain circumstances in order to limit counterparty credit risk. However, PPL Electric has concentrations of suppliers, financial institutions and customers. These concentrations may impact PPL Electric's overall exposure to credit risk, positively or negatively, as counterparties may be similarly affected by changes in economic, regulatory or other conditions.

See "Overview" in this Item 7 and Notes ~~14,~~ 15, 1716, 18 and 1819 to the Financial Statements for additional information on the competitive solicitations, the Agreement, ~~and~~ credit concentration and credit risk.

Related Party Transactions

PPL Electric is not aware of any material ownership interests or operating responsibility by senior management of PPL Electric in outside partnerships, including leasing transactions with variable interest entities, or other entities doing business with PPL Electric.

~~For~~ See Note 16 to the Financial Statements for additional information on related party ~~transactions, see Note 15 to the Financial Statements.~~
transactions.

Environmental Matters

See "Item 1. Business - Environmental Matters" and Note 1415 to the Financial Statements for a discussion of environmental matters.

Competition

See "Item 1. Business - Segment Information - Pennsylvania ~~Delivery~~Regulated Segment - Competition" ~~and "Item 1A. Risk Factors"~~ for a discussion of competitive factors affecting PPL Electric.

New Accounting Guidance

See ~~Notes~~Note 1 ~~and 22~~ to the Financial Statements for a discussion of new accounting guidance ~~adopted and pending adoption.~~adopted.

Application of Critical Accounting Policies

~~PPL Electric's financial~~Financial condition and results of operations are impacted by the methods, assumptions and estimates used in the application of critical accounting policies. The following accounting policies are particularly important to the financial condition or results of operations, ~~of PPL Electric,~~ and require estimates or other judgments of matters inherently uncertain. Changes in the estimates or other judgments included within these accounting policies could result in a significant change to the information presented in the Financial Statements (these accounting policies are also discussed in Note 1 to the Financial Statements). PPL's senior management has reviewed these critical accounting policies, the following disclosures regarding their application and the estimates and assumptions regarding them, with ~~its~~PPL's Audit Committee. ~~In addition, PPL's senior management has reviewed the following disclosures regarding the application of these critical accounting policies with the Audit Committee.~~

Effective January 1, 2009, PPL Electric fully applied accounting guidance that provides a framework for measuring fair value. The fair value measurement concepts provided by this guidance are used within its financial statements where applicable. See Notes 1 and 17 to the Financial Statements for additional information regarding fair value measurements.

1) Defined Benefits

PPL Electric participates in and is allocated a significant portion of the liability and net periodic defined benefit pension and other postretirement costs of plans sponsored by PPL Services based on participation in those plans. PPL Electric records an asset or liability to recognize the funded status of all defined benefit plans with an offsetting entry to regulatory assets. Consequently, the funded status of all defined benefit plans is fully recognized on the Balance Sheets. See Note 1213 to the Financial Statements for additional information about the plans and the accounting for defined benefits.

PPL Services makes certain assumptions regarding the valuation of benefit obligations and the performance of plan assets. When accounting for defined benefits, delayed recognition in earnings of differences between actual results and expected or estimated results is a guiding principle. Annual net periodic defined benefit costs are recorded in current earnings based on estimated results. Any differences between actual and estimated results are recorded in regulatory assets. The amount in regulatory assets is amortized to income over future periods. The delayed recognition allows for a smoothed recognition of costs over the working lives of the employees who benefit under the plans. The primary assumptions are:

·	Expected Return on Plan Assets - Management projects the long-term rates of return on plan assets based on historical performance, future expectations and periodic portfolio rebalancing among the diversified asset classes. These projected returns reduce the net benefit costs PPL ~~Electric~~ records currently.

·	Rate of Compensation Increase - Management projects employees' annual pay increases, which are used to project employees' pension benefits at retirement.

·	Health Care Cost Trend Rate - Management projects the expected increases in the cost of health care.

In selecting a discount rate for its U.S. defined benefit plans, PPL Services starts with an analysis of the expected benefit payment stream for its plans. This information is first matched against a spot-rate yield curve. A portfolio of ~~526~~604 Aa-graded non-callable (or callable with make-whole provisions) bonds, with a total amount outstanding in excess of ~~$541~~$667 billion, serves as the base from which those with the lowest and highest yields are eliminated to develop the ultimate yield curve. The results of this analysis are considered together with other economic data and movements in various bond indices to determine the discount rate assumption. At December 31, ~~2009,~~2010, PPL Services decreased the discount rate for its U.S. pension plans from ~~6.50%~~6.00% to ~~6.00%~~5.41% as a result of this assessment and ~~decreased~~de creased the discount rate for its other postretirement benefit plans from ~~6.45%~~5.81% to ~~5.81%~~5.16%.

The expected long-term rates of return for ~~PPL's~~PPL Services' U.S. defined benefit pension and other postretirement benefits have been developed using a best-estimate of expected returns, volatilities and correlations for each asset class. PPL management corroborates these rates with expected long-term rates of return calculated by its independent actuary, who uses a building block approach that begins with a risk-free rate of return with factors being added such as inflation, duration, credit spreads and equity risk. Each plan's specific asset allocation is also considered in developing a reasonable return assumption. At December 31, ~~2009, PPL's~~2010, PPL Services' expected return on plan assets ~~remained at~~decreased from 8.00% to 7.25% for its U.S. pension ~~plans~~plan and ~~remained at~~decreased from 7.00% to 6.45% for its other postretirement ~~benefit plans.~~bene fit plan.

In selecting a rate of compensation increase, PPL Services considers past experience in light of movements in inflation rates. At December 31, ~~2009, PPL's~~2010, PPL Services' rate of compensation increase remained at 4.75% for its U.S. ~~plans.~~plan.

In selecting health care cost trend rates for ~~PPL's~~PPL Services' other postretirement benefit plans, PPL Services considers past performance and forecasts of health care costs. At December 31, ~~2009, PPL's~~2010, PPL Services' health care cost trend rates were ~~8.00%~~9.00% for ~~2010,~~2011, gradually declining to 5.50% for ~~2016.~~2019.

A variance in the assumptions listed above could have a significant impact on the accrued defined benefit liabilities or assets, reported annual net periodic defined benefit costs and the regulatory assets allocated to PPL Electric. While the charts below reflect either an increase or decrease in each assumption, the inverse of this change would impact the accrued defined benefit liabilities or assets, reported annual net periodic defined benefit costs and regulatory assets by a similar amount in the opposite direction. The sensitivities below reflect an evaluation of the change based solely on a change in that assumption and does not include income tax effects.

At December 31, ~~2009, PPL Electric had recorded the following~~2010, defined benefit plan ~~liabilities:~~liabilities were as follows.

Pension liabilities $ 245
Other postretirement benefit liabilities 73

Pension liabilities		$	259
Other postretirement benefit liabilities			57

~~The following chart reflects the sensitivities in the December 31, 2009 Balance Sheet associated with a change in certain assumptions based on PPL's primary defined benefit plans.~~

							Increase (Decrease)
	Increase (Decrease)						Change in		Impact on defined		Impact on
Actuarial assumption	Change in assumption		Impact on defined benefit liabilities		Impact on regulatory assets		assumption		benefit liabilities		regulatory assets

Discount Rate		(0.25)%	$	31	$	31	(0.25)%	$	35	$	35
Rate of Compensation Increase		0.25%		5		5	0.25%		6		6
Health Care Cost Trend Rate (a)		1.0%		5		5	1.00%		1		1

(a)

Only impacts other postretirement benefits.

In ~~2009,~~2010, PPL Electric was allocated net periodic defined benefit costs charged to operating expense of ~~$24~~$20 million. This amount represents a $6$4 million ~~increase~~decrease compared with the charge recognized during ~~2008.~~2009.

The following chart reflects the sensitivities in the 2009 Statement of Income (excluding income tax effects) associated with a change in certain assumptions based on PPL's primary defined benefit plans.

Actuarial assumption	Change in assumption		Impact on defined benefit costs		Change in assumption		Impact on defined benefit costs

Discount Rate		(0.25)%	$	1	(0.25)%	$	1
Expected Return on Plan Assets		(0.25)%		2	(0.25)%		2
Rate of Compensation Increase		0.25%		1	0.25%		1
Health Care Cost Trend Rate (a)		1.0%		1	1.00%		1

(a)

Only impacts other postretirement benefits.

2) Loss Accruals

~~PPL Electric accrues losses~~Losses are accrued for the estimated impacts of various conditions, situations or circumstances involving uncertain or contingent future outcomes. For loss contingencies, the loss must be accrued if (1) information is available that indicates it is probable that a loss has been incurred, given the likelihood of the uncertain future events, and (2) the amount of the loss can be reasonably estimated. Accounting guidance defines "probable" as cases in which "the future event or events are likely to occur." ~~PPL Electric does not record the~~The accrual of contingencies that might result in gains is not recorded unless recovery is assured. ~~PPL Electric continuously assesses potential~~Potential loss contingencies for environmental remediation, litigation claims, regulatory penalties and other ~~events.~~events are continuously assessed.

The accounting aspects of estimated loss accruals include (1) the initial identification and recording of the loss, (2) the determination of triggering events for reducing a recorded loss accrual, and (3) the ongoing assessment as to whether a recorded loss accrual is sufficient. All three of these aspects require significant judgment by ~~PPL Electric's~~ management. ~~PPL Electric uses its internal~~Internal expertise and outside experts (such as lawyers and engineers), are used, as necessary, to help estimate the probability that a loss has been incurred and the amount (or range) of the loss.

No new significant loss accruals were recorded in ~~2009.~~2010.

~~PPL Electric has identified certain~~Certain other events have been identified that could give rise to a loss, but that do not meet the conditions for accrual. Such events are disclosed, but not recorded, when it is "reasonably possible" that a loss has been incurred. See Note 1415 to the Financial Statements for disclosure of other potential loss contingencies that have not met the criteria for accrual.

When an estimated loss is accrued, ~~PPL Electric identifies, where applicable,~~ the triggering events for subsequently reducing the loss ~~accrual.~~accrual are identified, where applicable. The triggering events generally occur when the contingency has been resolved and the actual loss is ~~incurred,~~paid or written off, or when the risk of loss has diminished or been eliminated. The following are some of the triggering events that provide for the reduction of certain recorded loss accruals:

·	Allowances for uncollectible accounts are reduced when accounts are written off after prescribed collection procedures have been exhausted, a better estimate of the allowance is determined or underlying amounts are ultimately collected.

·	Environmental and other litigation contingencies are reduced when the contingency is resolved and ~~PPL Electric makes~~ actual payments are made, a better estimate of the loss is determined or the loss is no longer considered probable.

~~PPL Electric reviews its loss~~Loss accruals are reviewed on a regular basis to assure that the recorded potential loss exposures are appropriate. This involves ongoing communication and analyses with internal and external legal counsel, engineers, operation management and other parties.

3) Income ~~Tax Uncertainties~~Taxes

Significant management judgment is required in developing ~~PPL Electric's~~the provision for income taxes, primarily due to the uncertainty related to tax positions taken or expected to be taken in tax returns and the determination of deferred tax assets, liabilities and valuation allowances.

Significant management judgment is required to determine the amount of benefit recognized related to an uncertain tax position. ~~PPL Electric evaluates its tax~~Tax positions are evaluated following a two-step process. The first step requires an entity to determine whether, based on the technical merits supporting a particular tax position, it is more likely than not (greater than a 50% chance) that the tax position will be sustained. This determination assumes that the relevant taxing authority will examine the tax position and is aware of all the relevant facts surrounding the tax position. The second step requires an entity to recognize in the financial statements the benefit of a tax position that meets the more-likely-than-not recognition criterion. The benefit recognized is measured at the largest amount of ~~benefit~~ben efit that has a likelihood of realization, upon settlement, that exceeds 50%. ~~PPL Electric's management~~Management considers a number of factors in assessing the benefit to be recognized, including negotiation of a settlement.

On a quarterly basis, ~~PPL Electric reassesses its~~ uncertain tax positions are reassessed by considering information known at the reporting date. Based on management's assessment of new information, ~~PPL Electric~~a tax benefit may subsequently ~~recognize a tax benefit~~be recognized for a previously unrecognized tax position, ~~de-recognize~~ a previously recognized tax position may be de-recognized, or ~~re-measure~~ the benefit of a previously recognized tax ~~position.~~position may be remeasured. The amounts ultimately paid upon resolution of issues raised by taxing authorities may differ materially from the amounts accrued and may materially impact ~~PPL Electric's~~the financial statements in the future.

At December 31, 2010, it was reasonably possible that during the next 12 months the total amount of unrecognized tax benefits could increase by as much as $28 million or decrease by up to $42 million. This change could result from the timing and/or valuation of certain deductions, intercompany transactions and unitary filing groups. The events that could cause these changes are direct settlements with taxing authorities, litigation, legal or administrative guidance by relevant taxing authorities and the lapse of an applicable statute of limitation.

At December 31, 2009, it was reasonably possible that during the next 12 months the total amount of unrecognized tax benefits could increase by as much as $23 million or decrease by up to $22 million for PPL Electric. This change could result from the timing and/or valuation of certain deductions, intercompany transactions and unitary filing groups. The events that could cause these changes are direct settlements with taxing authorities, litigation, legal or administrative guidance by relevant taxing authorities and the lapse of an applicable statute of limitation.

4) Regulatory Assets and Liabilities

PPL Electric's electricity delivery business is subject to cost-based ~~rate-regulation.~~rate regulation. As a result, ~~PPL Electric is required to reflect~~ the effects of regulatory actions are required to be reflected in ~~its~~the financial statements. ~~PPL Electric records assets~~Assets and liabilities are recorded that result from the regulated ratemaking process that may not be recorded under GAAP for non-regulated entities. Regulatory assets generally represent incurred costs that have been deferred because such costs are probable of future recovery in regulated customer rates. Regulatory liabilities generally represent obligations to regulated customers for previous collections of costs that are expected to be refunded to customers in the future. In certain cases, regulatory liabilities are recorded based on the understanding with the regulator that current rates are being set to recover costs that are expected to be incurred in the future, and the regulated entity is accountable for any amounts charged pursuant to such rates and not yet expended for the intended purpose.

At December 31, ~~2009~~2010 and ~~2008,~~2009, PPL Electric had regulatory assets of ~~$531~~$620 million and ~~$763~~$542 million. All ~~of PPL Electric's~~ regulatory assets are either currently being recovered under specific rate orders, or represent amounts that ~~will~~are expected to be recovered in future rates or benefit future periods based upon established regulatory practices. At December 31, 2010 and 2009, PPL Electric had regulatory liabilities of $32 million and $84 million.

See Note 3 to the Financial Statements for additional information on regulatory assets and liabilities.

Other Information

See "Item 14. Principal Accounting Fees and Services" for more information.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

PPL Corporation, PPL Energy Supply, LLC and PPL Electric Utilities Corporation

Reference is made to "Risk Management - Energy Marketing & Trading and Other" for PPL and PPL Energy Supply and "Risk Management" for PPL Electric in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations."

(THIS PAGE LEFT BLANK INTENTIONALLY.)

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareowners of PPL Corporation

We have audited the accompanying consolidated balance sheets of PPL Corporation and subsidiaries as of December 31, ~~2009~~2010 and ~~2008,~~2009, and the related consolidated statements of income, equity, comprehensive income, and cash flows for each of the three years in the period ended December 31, ~~2009.~~2010. Our audits also included the financial statement schedule listed in the index at Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We did not audit the financial statements of LG&E and KU Energy LLC (LKE), a wholly-owned subsidiary, which statements reflect total assets of $10,719 million as of December 31, 2010, and total revenues of $493 million for the period November 1, 2010 (date of acquisition) to December 31, 2010. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for LKE, is based solely on the report of the other auditors.

In our opinion, based on our audits and, for 2010, the report of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of PPL Corporation and subsidiaries at December 31, ~~2009~~2010 and ~~2008,~~2009, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, ~~2009,~~2010, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), PPL Corporation's internal control over financial reporting as of December 31, ~~2009,~~2010, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, ~~2010~~2011 expressed an unqualified opinion thereon.

~~/s/~~/s/ Ernst & Young LLP

Philadelphia, Pennsylvania

February 25, ~~2010~~2011

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareowners of PPL Corporation

We have audited PPL Corporation's internal control over financial reporting as of December 31, ~~2009,~~2010, based on criteria established in Internal ~~Control—Integrated~~Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). PPL Corporation's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in Management's Report on Internal Control over Financial Reporting at Item 9A. Our responsibility is to express an opinion on the ~~company's~~Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As set forth in Item 9A, Management's Report on Internal Control over Financial Reporting, management's assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of LG&E and KU Energy LLC (LKE), which is included in the 2010 consolidated financial statements of the Company and constituted 32.6% and 47.3% of total assets and net assets, respectively, as of December 31, 2010 and 5.8% and 5.0% of revenues and net income, respectively, for the year then ended. Our audit of internal control over financial reporting of PPL Corporation and subsidiaries also did not include an evaluation of the internal control over financial reporting of LKE.

In our opinion, PPL Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2009,~~2010, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of PPL Corporation and subsidiaries as of December 31, ~~2009~~2010 and ~~2008,~~2009, and the related consolidated statements of income, equity, comprehensive income, and cash flows for each of the three years in the period ended December 31, ~~2009~~2010 and our report dated February 25, ~~2010~~2011 expressed an unqualified opinion thereon.

~~/s/~~/s/ Ernst & Young LLP

Philadelphia, Pennsylvania

February 25, 2011

Report of Independent Registered Public Accounting Firm

To the Member of LG&E and KU Energy LLC

In our opinion, the consolidated balance sheet and the related consolidated statements of income, retained earnings, comprehensive income, cash flows and capitalization present fairly, in all material respects, the financial position of LG&E and KU Energy LLC and its subsidiaries at December 31, 2010 and the results of their operations and their cash flows for the period from November 1, 2010 to December 31, 2010 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the LG&E and KU Energy LLC's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards of the Public Company Accounti ng Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As discussed in Note 2 to the consolidated financial statements, on November 1, 2010, PPL Corporation completed its acquisition of LG&E and KU Energy LLC and its subsidiaries. The push-down basis of accounting was used at the acquisition date.

/s/ PricewaterhouseCoopers LLP

Louisville, Kentucky

February 25, 2011

Report of Independent Registered Public Accounting Firm

To the Board of Managers and Sole Member of PPL Energy Supply, LLC

We have audited the accompanying consolidated balance sheets of PPL Energy Supply, LLC and subsidiaries as of December 31, ~~2009~~2010 and ~~2008,~~2009, and the related consolidated statements of income, equity, comprehensive income, and cash flows for each of the three years in the period ended December 31, ~~2009.~~2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting ~~the~~th e amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of PPL Energy Supply, LLC and subsidiaries at December 31, ~~2009~~2010 and ~~2008,~~2009, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, ~~2009,~~2010, in conformity with U.S. generally accepted accounting principles.

~~/s/~~/s/ Ernst & Young LLP

Philadelphia, Pennsylvania

February 25, ~~2010~~2011

Report of Independent Registered Public Accounting Firm

To the Board of Directors and ~~Shareowner~~Shareowners of PPL Electric Utilities Corporation

We have audited the accompanying consolidated balance sheets of PPL Electric Utilities Corporation and subsidiaries as of December 31, ~~2009~~2010 and ~~2008,~~2009, and the related consolidated statements of income, shareowners' equity, and cash flows for each of the three years in the period ended December 31, ~~2009.~~2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of PPL Electric Utilities Corporation and subsidiaries at December 31, ~~2009~~2010 and ~~2008,~~2009, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, ~~2009,~~2010, in conformity with U.S. generally accepted accounting principles.

~~/s/~~/s/ Ernst & Young LLP

Philadelphia, Pennsylvania

February 25, ~~2010~~2011

~~INDEX TO ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA~~
			~~Page~~
~~FINANCIAL STATEMENTS~~
	~~PPL Corporation~~
		~~Consolidated Statements of Income for the years ended December 31, 2009, 2008 and 2007~~	94
		~~Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007~~	95
		~~Consolidated Balance Sheets at December 31, 2009 and 2008~~	96
		~~Consolidated Statements of Equity for the years ended December 31, 2009, 2008 and 2007~~	98
		~~Consolidated Statements of Comprehensive Income for the years ended December 31, 2009, 2008 and 2007~~	99
	~~PPL Energy Supply, LLC~~
		~~Consolidated Statements of Income for the years ended December 31, 2009, 2008 and 2007~~	~~100~~
		~~Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007~~	~~101~~
		~~Consolidated Balance Sheets at December 31, 2009 and 2008~~	~~102~~
		~~Consolidated Statements of Equity for the years ended December 31, 2009, 2008 and 2007~~	~~104~~
		~~Consolidated Statements of Comprehensive Income for the years ended December 31, 2009, 2008 and 2007~~	~~105~~
	~~PPL Electric Utilities Corporation~~
		~~Consolidated Statements of Income for the years ended December 31, 2009, 2008 and 2007~~	~~106~~
		~~Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007~~	~~107~~
		~~Consolidated Balance Sheets at December 31, 2009 and 2008~~	~~108~~
		~~Consolidated Statements of Shareowners' Equity for the years ended December 31, 2009, 2008 and 2007~~	~~110~~

~~COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
	~~1. Summary of Significant Accounting Policies~~		~~111~~
	~~2. Segment and Related Information~~		~~123~~
	~~3. Variable Interest Entities~~		~~125~~
	~~4. Earnings Per Share~~		~~125~~
	~~5. Income and Other Taxes~~		~~126~~
	~~6. Preferred Securities~~		~~131~~
	~~7. Financing Activities~~		~~132~~
	~~8. Acquisitions, Development and Divestitures~~		~~138~~
	~~9. Discontinued Operations~~		~~139~~
	~~10. Leases~~		~~142~~
	~~11. Stock-Based Compensation~~		~~143~~
	~~12. Retirement and Postemployment Benefits~~		~~146~~
	~~13. Jointly Owned Facilities~~		~~156~~
	~~14. Commitments and Contingencies~~		~~156~~
	~~15. Related Party Transactions~~		~~170~~
	~~16. Other Income - net~~		~~171~~
	~~17. Fair Value Measurements and Credit Concentrations~~		~~172~~
	~~18. Derivative Instruments and Hedging Activities~~		~~177~~
	~~19. Goodwill and Other Intangible Assets~~		~~185~~
	~~20. Asset Retirement Obligations~~		~~187~~
	~~21. Available-for-Sale Securities~~		~~188~~
	~~22. New Accounting Guidance Pending Adoption~~		~~190~~

~~SUPPLEMENTARY DATA~~
	~~Quarterly Financial, Common Stock Price and Dividend Data - PPL Corporation~~		~~192~~
	~~Quarterly Financial Data - PPL Energy Supply, LLC~~		~~193~~
	~~Quarterly Financial Data - PPL Electric Utilities Corporation~~		~~194~~

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31,
PPL Corporation and Subsidiaries
(Millions of Dollars, except share data)

					2010		2009		2008
Operating Revenues
	Utility				$	3,668	$	3,902	$	4,114
	Unregulated retail electric and gas					415		152		151
	Wholesale energy marketing
		Realized				4,832		3,184		2,138
		Unrealized economic activity (Note 19)				(805)		(229)		1,056
	Net energy trading margins					2		17		(121)
	Energy-related businesses					409		423		519
	Total Operating Revenues					8,521		7,449		7,857

Operating Expenses
	Operation
		Fuel				1,235		920		1,057
		Energy purchases
			Realized			2,773		2,625		1,624
			Unrealized economic activity (Note 19)			(286)		155		553
		Other operation and maintenance		��		1,756		1,418		1,414
		Amortization of recoverable transition costs						304		293
	Depreciation					556		455		444
	Taxes, other than income					238		280		288
	Energy-related businesses					383		396		481
	Total Operating Expenses					6,655		6,553		6,154

Operating Income						1,866		896		1,703

Other Income (Expense) - net						(31)		47		53

Other-Than-Temporary Impairments						3		18		36

Interest Expense						593		387		447

Income from Continuing Operations Before Income Taxes						1,239		538		1,273

Income Taxes						263		105		396

Income from Continuing Operations After Income Taxes						976		433		877

Income (Loss) from Discontinued Operations (net of income taxes)						(17)		(7)		73

Net Income						959		426		950

Net Income Attributable to Noncontrolling Interests						21		19		20

Net Income Attributable to PPL Corporation					$	938	$	407	$	930

Amounts Attributable to PPL Corporation:
	Income from Continuing Operations After Income Taxes				$	955	$	414	$	857
	Income (Loss) from Discontinued Operations (net of income taxes)					(17)		(7)		73
	Net Income				$	938	$	407	$	930

Earnings Per Share of Common Stock:
	Income from Continuing Operations After Income Taxes Available to PPL
	Corporation Common Shareowners:
		Basic			$	2.21	$	1.10	$	2.28
		Diluted			$	2.20	$	1.10	$	2.28
	Net Income Available to PPL Corporation Common Shareowners:
		Basic			$	2.17	$	1.08	$	2.48
		Diluted			$	2.17	$	1.08	$	2.47

Dividends Declared Per Share of Common Stock					$	1.40	$	1.38	$	1.34

Weighted-Average Shares of Common Stock Outstanding (in thousands)
		Basic				431,345		376,082		373,626
		Diluted				431,569		376,406		374,901

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31,
PPL Corporation and Subsidiaries
(Millions of Dollars, except share data)
2009 2008 2007
Operating Revenues
Utility $ 3,902 $ 4,114 $ 4,114
Unregulated retail electric and gas 152 151 102
Wholesale energy marketing
Realized 3,291 2,288 1,581
Unrealized economic activity (Note 18) (229 ) 1,056 (145 )
Net energy trading margins 17 (121 ) 41
Energy-related businesses 423 519 769
Total Operating Revenues 7,556 8,007 6,462

Operating Expenses
Operation
Fuel 931 1,084 890
Energy purchases
Realized 2,636 1,634 918
Unrealized economic activity (Note 18) 155 553 (182 )
Other operation and maintenance 1,424 1,423 1,365
Amortization of recoverable transition costs 304 293 310
Depreciation (Note 1) 469 458 442
Taxes, other than income (Note 5) 280 288 298
Energy-related businesses (Note 8) 396 481 762
Total Operating Expenses 6,595 6,214 4,803

Operating Income 961 1,793 1,659

Other Income - net (Note 16) 49 55 97

Other-Than-Temporary Impairments 18 36 3

Interest Expense 396 455 472

Income from Continuing Operations Before Income Taxes 596 1,357 1,281

Income Taxes (Note 5) 130 430 259

Income from Continuing Operations After Income Taxes 466 927 1,022

Income (Loss) from Discontinued Operations (net of income taxes) (Note 9) (40 ) 23 293

Net Income 426 950 1,315

Net Income Attributable to Noncontrolling Interests 19 20 27

Net Income Attributable to PPL Corporation $ 407 $ 930 $ 1,288

Amounts Attributable to PPL Corporation:
Income from Continuing Operations After Income Taxes $ 447 $ 907 $ 1,001
Income (Loss) from Discontinued Operations (net of income taxes) (40 ) 23 287
Net Income $ 407 $ 930 $ 1,288

Earnings Per Share of Common Stock:
Income from Continuing Operations After Income Taxes Available to PPL Corporation Common Shareowners:
Basic $ 1.18 $ 2.42 $ 2.62
Diluted $ 1.18 $ 2.41 $ 2.60
Net Income Available to PPL Corporation Common Shareowners:
Basic $ 1.08 $ 2.48 $ 3.37
Diluted $ 1.08 $ 2.47 $ 3.34

Dividends Declared Per Share of Common Stock $ 1.38 $ 1.34 $ 1.22

Weighted-Average Shares of Common Stock Outstanding (in thousands)

Basic 376,082 373,626 380,563
Diluted 376,406 374,901 383,492

~~The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.~~

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
PPL Corporation and Subsidiaries
(Millions of Dollars)
				2010		2009		2008
Cash Flows from Operating Activities
	Net income			$	959	$	426	$	950
	Adjustments to reconcile net income to net cash provided by operating activities
		Pre-tax gain from the sale of the Maine hydroelectric generation business			(25)		(38)
		Depreciation			567		471		461
		Amortization			213		389		383
		Defined benefit plans - expense			102		70		20
		Defined benefit plans - funding			(396)		(185)		(120)
		Deferred income taxes and investment tax credits			241		104		43
		Impairment of assets			120		127		105
		Unrealized (gains) losses on derivatives, and other hedging activities			542		329		(279)
		Provision for Montana hydroelectric litigation			66		8
		Other			57		13		65
	Change in current assets and current liabilities
		Accounts receivable			(100)		76		118
		Accounts payable			216		(150)		85
		Unbilled revenue			(100)		2		(85)
		Prepayments			(318)		(17)		67
		Counterparty collateral			(18)		334		1
		Price risk management assets and liabilities			(24)		(231)		(77)
		Other			(12)		92		(118)
	Other operating activities
		Other assets			(45)		12		21
		Other liabilities			(12)		20		(51)
			Net cash provided by operating activities		2,033		1,852		1,589
Cash Flows from Investing Activities
	Expenditures for property, plant and equipment				(1,597)		(1,225)		(1,418)
	Proceeds from the sale of the Long Island generation business				124
	Proceeds from the sale of the Maine hydroelectric generation business				38		81
	Proceeds from the sale of the gas and propane businesses								303
	Acquisition of LKE, net of cash acquired				(6,812)
	Expenditures for intangible assets				(92)		(88)		(332)
	Purchases of nuclear plant decommissioning trust investments				(128)		(227)		(224)
	Proceeds from the sale of nuclear plant decommissioning trust investments				114		201		197
	Purchases of other investments								(290)
	Proceeds from the sale of other investments						154		195
	Net (increase) decrease in restricted cash and cash equivalents				85		218		(71)
	Other investing activities				39		6		13
			Net cash used in investing activities		(8,229)		(880)		(1,627)
Cash Flows from Financing Activities
	Issuance of long-term debt				4,642		298		1,338
	Retirement of long-term debt				(20)		(1,016)		(671)
	Repurchase of common stock								(38)
	Issuance of equity, net of issuance costs				2,441		60		19
	Payment of common stock dividends				(566)		(517)		(491)
	Redemption of preferred stock of a subsidiary				(54)
	Debt issuance and credit facility costs				(175)		(21)		(10)
	Net increase (decrease) in short-term debt (Note 7)				70		(52)		588
	Other financing activities				(31)		(23)		(14)
			Net cash provided by (used in) financing activities		6,307		(1,271)		721
Effect of Exchange Rates on Cash and Cash Equivalents					13				(13)
Net Increase (Decrease) in Cash and Cash Equivalents					124		(299)		670
Cash and Cash Equivalents at Beginning of Period					801		1,100		430
Cash and Cash Equivalents at End of Period				$	925	$	801	$	1,100

Supplemental Disclosures of Cash Flow Information
	Cash paid during the period for:
		Interest - net of amount capitalized		$	458	$	460	$	423
		Income taxes - net		$	313	$	16	$	300

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
PPL Corporation and Subsidiaries
(Millions of Dollars)
2009 2008 2007
Cash Flows from Operating Activities
Net income $ 426 $ 950 $ 1,315
Adjustments to reconcile net income to net cash provided by operating activities
Pre-tax gain from the sale of the Latin American businesses (400 )
Pre-tax gain from the sale of the majority of Maine hydroelectric generation business (38 )
Depreciation 471 461 458
Amortization of recoverable transition costs and other 389 383 433
Defined benefits (115 ) (100 ) (39 )
Impairment of assets 127 105 124
Gain on the sale of emission allowances (2 ) (6 ) (109 )
Deferred income taxes and investment tax credits 104 43 42
Unrealized (gains) losses on derivatives, and other hedging activities 329 (279 ) (22 )
Other 23 71 38
Change in current assets and current liabilities
Accounts receivable 76 118 (186 )
Accounts payable (150 ) 85 119
Unbilled revenues 2 (85 ) (99 )
Fuel, materials and supplies (21 ) (35 ) 25
Counterparty collateral 334 1 12
Price risk management assets and liabilities (231 ) (77 ) (45 )
Other 96 (16 ) (4 )
Other operating activities
Other assets 12 21 (12 )
Other liabilities 20 (51 ) (79 )

Net cash provided by operating activities 1,852 1,589 1,571

Cash Flows from Investing Activities
Expenditures for property, plant and equipment (1,225 ) (1,418 ) (1,657 )
Proceeds from the sale of the majority of Maine hydroelectric generation business 81
Proceeds from the sale of the gas and propane businesses 303
Proceeds from the sale of the Latin American businesses 851
Proceeds from the sale of the telecommunication operations 47
Expenditures for intangible assets (88 ) (332 ) (65 )
Proceeds from the sale of intangible assets 16 19 111
Purchases of nuclear plant decommissioning trust investments (227 ) (224 ) (190 )
Proceeds from the sale of nuclear plant decommissioning trust investments 201 197 175
Purchases of other investments (290 ) (601 )
Proceeds from the sale of other investments 154 195 860
Net (increase) decrease in restricted cash and cash equivalents 218 (71 ) (125 )
Other investing activities (10 ) (6 ) (20 )

Net cash used in investing activities (880 ) (1,627 ) (614 )

Cash Flows from Financing Activities
Issuance of long-term debt 298 1,338 985
Retirement of long-term debt (1,016 ) (671 ) (1,216 )
Repurchase of common stock (38 ) (712 )
Issuance of common stock 60 19 32
Payment of common stock dividends (517 ) (491 ) (459 )
Net increase (decrease) in short-term debt (52 ) 588 61
Other financing activities (44 ) (24 ) (17 )

Net cash provided by (used in) financing activities (1,271 ) 721 (1,326 )

Effect of Exchange Rates on Cash and Cash Equivalents (13 ) 5

Net Increase (Decrease) in Cash and Cash Equivalents (299 ) 670 (364 )
Cash and Cash Equivalents at Beginning of Period 1,100 430 794
Cash and Cash Equivalents at End of Period $ 801 $ 1,100 $ 430

Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest - net of amount capitalized $ 460 $ 423 $ 389
Income taxes - net $ 16 $ 300 $ 376

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED BALANCE SHEETS AT DECEMBER 31,
PPL Corporation and Subsidiaries
(Millions of Dollars, shares in thousands)
2009 2008
Assets

Current Assets
Cash and cash equivalents $ 801 $ 1,100
Short-term investments 150
Restricted cash and cash equivalents 105 320
Accounts receivable (less reserve: 2009, $37; 2008, $36)
Customer 409 456
Other 59 77
Unbilled revenues 600 599
Fuel, materials and supplies (Note 1) 357 337
Prepayments 102 84
Price risk management assets (Notes 17 and 18) 2,157 1,224
Other intangibles (Note 19) 25 17
Assets held for sale (Note 9) 127
Other current assets 10 19
Total Current Assets 4,752 4,383

Investments
Nuclear plant decommissioning trust funds (Notes 17 and 21) 548 446
Other investments 65 76
Total Investments 613 522

Property, Plant and Equipment (Note 1)
Electric plant
Transmission and distribution 8,686 8,046
Generation 10,493 9,588
General 899 840
Electric plant in service 20,078 18,474
Construction work in progress 567 1,131
Nuclear fuel 506 428
Electric plant 21,151 20,033
Gas and oil plant 68 68
Other property 166 156
Property, plant and equipment, gross 21,385 20,257
Less: accumulated depreciation 8,211 7,882
Property, Plant and Equipment, net 13,174 12,375

Regulatory and Other Noncurrent Assets
Regulatory assets (Note 1) 531 763
Goodwill (Note 19) 806 763
Other intangibles (Note 19) 615 637
Price risk management assets (Notes 17 and 18) 1,274 1,392
Other noncurrent assets 400 570
Total Regulatory and Other Noncurrent Assets 3,626 4,125

Total Assets $ 22,165 $ 21,405

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED BALANCE SHEETS AT DECEMBER 31,
PPL Corporation and Subsidiaries
(Millions of Dollars, shares in thousands)
2009 2008
Liabilities and Equity

Current Liabilities
Short-term debt (Note 7) $ 639 $ 679
Long-term debt 696
Accounts payable 619 766
Taxes 92 77
Interest 113 130
Dividends 135 131
Price risk management liabilities (Notes 17 and 18) 1,502 1,324
Counterparty collateral 356 22
Other current liabilities 726 499
Total Current Liabilities 4,182 4,324

Long-term Debt (Note 7) 7,143 7,142

Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes and investment tax credits (Note 5) 2,153 1,761
Price risk management liabilities (Notes 17 and 18) 582 836
Accrued pension obligations (Note 12) 1,283 899
Asset retirement obligations (Note 20) 416 370
Other deferred credits and noncurrent liabilities 591 677
Total Deferred Credits and Other Noncurrent Liabilities 5,025 4,543

Commitments and Contingent Liabilities (Note 14)

Equity
PPL Corporation Shareowners' Common Equity
Common stock - $0.01 par value (a) 4 4
Capital in excess of par value 2,280 2,196
Earnings reinvested 3,749 3,862
Accumulated other comprehensive loss (Note 1) (537 ) (985 )
Total PPL Corporation Shareowners' Common Equity 5,496 5,077
Noncontrolling Interests (Notes 3 and 6) 319 319
Total Equity 5,815 5,396

Total Liabilities and Equity $ 22,165 $ 21,405

CONSOLIDATED BALANCE SHEETS AT DECEMBER 31,
PPL Corporation and Subsidiaries
(Millions of Dollars, shares in thousands)
			2010		2009
Assets

Current Assets
	Cash and cash equivalents		$	925	$	801
	Short-term investments			163
	Restricted cash and cash equivalents			28		105
	Accounts receivable (less reserve: 2010, $55; 2009, $37)
		Customer		652		409
		Other		90		59
	Unbilled revenues			789		594
	Fuel, materials and supplies			643		357
	Prepayments			435		102
	Price risk management assets			1,918		2,157
	Other intangibles			70		25
	Assets held for sale			374		127
	Regulatory assets			85		11
	Other current assets			16		5
	Total Current Assets			6,188		4,752

Investments
	Nuclear plant decommissioning trust funds			618		548
	Other investments			75		65
	Total Investments			693		613

Property, Plant and Equipment
	Regulated utility plant - electric and gas			15,994		9,430
	Less: accumulated depreciation - regulated utility plant			3,002		2,828
		Regulated utility plant - electric and gas, net		12,992		6,602
	Non-regulated property, plant and equipment
		Generation		10,165		10,493
		Nuclear fuel		578		506
		Other		403		389
	Less: accumulated depreciation - non-regulated property, plant and equipment			5,440		5,383
		Non-regulated property, plant and equipment, net		5,706		6,005
	Construction work in progress			2,160		567
	Property, Plant and Equipment, net (a)			20,858		13,174
Other Noncurrent Assets
	Regulatory assets			1,145		531
	Goodwill			1,761		806
	Other intangibles (a)			966		615
	Price risk management assets			655		1,274
	Other noncurrent assets			571		400
	Total Other Noncurrent Assets			5,098		3,626

Total Assets			$	32,837	$	22,165

(a)	At December 31, 2010 and December 31, 2009, includes $424 million of PP&E, consisting primarily of "Generation," including leasehold improvements, and $11 million of "Other intangibles" from the consolidation of a VIE. See Note 22 for additional information.

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED BALANCE SHEETS AT DECEMBER 31,
PPL Corporation and Subsidiaries
(Millions of Dollars, shares in thousands)
			2010		2009
Liabilities and Equity

Current Liabilities
	Short-term debt		$	694	$	639
	Long-term debt			502
	Accounts payable			1,028		619
	Taxes			134		92
	Interest			166		112
	Dividends			174		135
	Price risk management liabilities			1,144		1,502
	Counterparty collateral			338		356
	Regulatory liabilities			109		74
	Other current liabilities			925		653
	Total Current Liabilities			5,214		4,182

Long-term Debt				12,161		7,143

Deferred Credits and Other Noncurrent Liabilities
	Deferred income taxes			2,563		2,115
	Investment tax credits			237		38
	Price risk management liabilities			470		582
	Accrued pension obligations			1,496		1,283
	Asset retirement obligations			435		416
	Regulatory liabilities			1,031		10
	Other deferred credits and noncurrent liabilities			752		581
	Total Deferred Credits and Other Noncurrent Liabilities			6,984		5,025

Commitments and Contingent Liabilities (Note 15)

Equity
	PPL Corporation Shareowners' Common Equity
		Common stock - $0.01 par value (a)		5		4
		Capital in excess of par value		4,602		2,280
		Earnings reinvested		4,082		3,749
		Accumulated other comprehensive loss		(479)		(537)
		Total PPL Corporation Shareowners' Common Equity		8,210		5,496
	Noncontrolling Interests			268		319
	Total Equity			8,478		5,815

Total Liabilities and Equity			$	32,837	$	22,165

(a)	780,000 shares authorized; ~~377,183 shares~~483,391 and ~~374,581~~377,183 shares issued and outstanding at December 31, ~~2009~~2010 and ~~2008.~~

~~The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.~~December 31, 2009.

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED STATEMENTS OF EQUITY	CONSOLIDATED STATEMENTS OF EQUITY																				CONSOLIDATED STATEMENTS OF EQUITY
PPL Corporation and Subsidiaries																																			(Millions of Dollars)
		PPL Corporation Shareowners
		Common stock shares outstanding (a)		Common stock		Capital in excess of par value			Earnings reinvested			Accumulated other comprehensive loss			Non-controlling interests			Total				PPL Corporation Shareowners
																						Common
December 31, 2006 (b)		385,039		$	4	$	2,823		$	2,613		$	(318	)	$	361		$	5,483
Common stock issued (c)		3,177					48												48
Common stock repurchased (d)		(14,945	)				(712	)											(712	)
																						stock								Accumulated
																						shares				Capital in				other		Non-
																						outstanding		Common		excess of par		Earnings		comprehensive		controlling
																						(a)		stock		value		reinvested		loss		interests		Total

December 31, 2007																					December 31, 2007	373,271	$	4	$	2,185	$	3,435	$	(68)	$	320	$	5,876
Common stock issued (b)																					Common stock issued (b)	2,158				29								29
Common stock repurchased (c)																					Common stock repurchased (c)	(848)				(38)								(38)
Stock-based compensation							26												26		Stock-based compensation					20								20
Net income										1,288						27			1,315		Net income							930				20		950
Dividends, dividend equivalents and distributions (e)										(466	)					(25	)		(491	)
Dividends, dividend equivalents,																					Dividends, dividend equivalents,
redemptions and distributions (d)																					redemptions and distributions (d)							(503)				(20)		(523)
Divestitures																(35	)		(35	)	Divestitures											(1)		(1)
Acquisitions																(8	)		(8	)
Other comprehensive income													250						250
December 31, 2007		373,271		$	4	$	2,185		$	3,435		$	(68	)	$	320		$	5,876
Other comprehensive loss																					Other comprehensive loss									(917)				(917)
December 31, 2008																					December 31, 2008	374,581	$	4	$	2,196	$	3,862	$	(985)	$	319	$	5,396

Common stock issued (c)		2,158				$	29											$	29
Common stock repurchased (d)		(848	)				(38	)											(38	)
Stock-based compensation							20												20
Net income									$	930					$	20			950
Dividends, dividend equivalents and distributions (e)										(503	)					(20	)		(523	)
Divestitures																(1	)		(1	)
Other comprehensive income												$	(917	)					(917	)
December 31, 2008 (f)		374,581		$	4	$	2,196		$	3,862		$	(985	)	$	319		$	5,396

Common stock issued (c)		2,649				$	83											$	83

Common stock issued (b)																					Common stock issued (b)	2,649			$	83							$	83
Common stock repurchased		(47	)				(1	)											(1	)	Common stock repurchased	(47)				(1)								(1)
Stock-based compensation							2												2		Stock-based compensation					2								2
Net income									$	407					$	19			426		Net income						$	407			$	19		426
Dividends, dividend equivalents and distributions (e)										(521	)					(19	)		(540	)
Dividends, dividend equivalents,																					Dividends, dividend equivalents,
redemptions and distributions (d)																					redemptions and distributions (d)							(521)				(19)		(540)
Other comprehensive income												$	449						449		Other comprehensive income								$	449				449
Cumulative effect adjustment (g)										1			(1	)
Cumulative effect adjustment (e)																					Cumulative effect adjustment (e)							1		(1)
December 31, 2009 (f)		377,183		$	4	$	2,280		$	3,749		$	(537	)	$	319		$	5,815		December 31, 2009 (f)	377,183	$	4	$	2,280	$	3,749	$	(537)	$	319	$	5,815


Common stock issued (b)																					Common stock issued (b)	106,208	$	1	$	2,490							$	2,491
Purchase Contracts (g)																					Purchase Contracts (g)					(176)								(176)
Stock-based compensation																					Stock-based compensation					8								8
Net income																					Net income						$	938			$	21		959
Dividends, dividend equivalents,																					Dividends, dividend equivalents,
redemptions and distributions (d)																					redemptions and distributions (d)							(605)				(72)		(677)
Other comprehensive income																					Other comprehensive income								$	58				58
December 31, 2010 (f)																					December 31, 2010 (f)	483,391	$	5	$	4,602	$	4,082	$	(479)	$	268	$	8,478

(a)

Shares in thousands. Each share entitles the holder to one vote on any question presented to any shareowners' meeting.

(b)

~~"Capital in excess~~2010 includes the June 2010 issuance of ~~par value" and "Earnings reinvested" have been adjusted by $13~~103.5 million ~~to reflect the adoption~~shares of ~~new accounting guidance.~~common stock. See ~~"New Accounting Guidance Adopted - Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" in~~ Note 17 for additional information. Each year includes shares of common stock issued through various stock and incentive compensation plans.

(c)		2009 includes common stock shares issued through the ICP, ICPKE, DRIP, ESOP and DDCP. 2008 and 2007 include common stock shares issued through the ICP, ICPKE, DDCP and the 2-5/8% Convertible Senior Notes, net of forfeitures. "Capital in excess of par value" for 2009 includes $7 million for a company contribution to the ESOP.
~~(d)~~		In 2007, PPL's Board of Directors authorized the repurchase by PPL of up to $750 million of its common stock. During 2007, PPL repurchased 14,929,892 shares of PPL common stock for $712 million. During 2008, PPL repurchased 802,816 shares of PPL common stock for $38 ~~million.~~million under a repurchase plan that was authorized by PPL's Board of Directors in June 2007.

~~(e)~~

(d)

"Earnings reinvested" includes dividends and dividend equivalents on PPL Corporation common stock and restricted stock units. "Noncontrolling interests" includes dividends, redemptions and distributions to noncontrolling ~~interests.~~interests, which for 2010 includes $54 million paid to redeem PPL Electric's preferred stock. The amount paid to redeem the preferred stock includes a $3 million premium.

(e)	Recorded in connection with the adoption of accounting guidance related to the recognition and presentation of other-than-temporary impairments.

(f)

See "General - Comprehensive Income" in Note 1 for disclosure of balances of each component of AOCI.

(g)	Includes $157 million for the Purchase Contracts and $19 million of related fees and expenses, net of tax. See Note 7 for additional information.

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31,
PPL Corporation and Subsidiaries
(Millions of Dollars)

			2010		2009		2008

Net income			$	959	$	426	$	950

Other comprehensive income (loss):
Amounts arising during the period - gains (losses), net of tax (expense) benefit:
	Foreign currency translation adjustments, net of tax of ($1), $4, ($11)			(59)		101		(500)
	Available-for-sale securities, net of tax of ($31), ($50), $55			29		49		(50)
	Qualifying derivatives, net of tax of ($148), ($356), ($120)			219		492		240
	Equity investees' other comprehensive income (loss), net of tax of $0, $0, $0					1		(3)
	Defined benefit plans:
		Prior service costs, net of tax of ($14), ($1), $0		17		1
		Net actuarial loss, net of tax of $50, $147, $294		(80)		(340)		(577)
		Transition obligation, net of tax of ($4), $0, $0		8
Reclassifications to net income - (gains) losses, net of tax expense (benefit):
	Available-for-sale securities, net of tax of $3, $3, ($2)			(5)		(4)		2
	Qualifying derivatives, net of tax of $84, ($92), $17			(126)		131		(69)
	Defined benefit plans:
		Prior service costs, net of tax of ($7), ($8), ($9)		12		13		18
		Net actuarial loss, net of tax of ($14), ($4), ($11)		41		4		20
		Transition obligation, net of tax of ($1), ($1), ($1)		2		1		2
Total other comprehensive income (loss) attributable to PPL Corporation				58		449		(917)

Comprehensive income				1,017		875		33
	Comprehensive income attributable to noncontrolling interests			21		19		20

Comprehensive income attributable to PPL Corporation			$	996	$	856	$	13

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31,
PPL Energy Supply, LLC and Subsidiaries
(Millions of Dollars)

				2010		2009		2008
Operating Revenues
	Wholesale energy marketing
		Realized		$	4,832	$	3,184	$	2,138
		Unrealized economic activity (Note 19)			(805)		(229)		1,056
	Wholesale energy marketing to affiliate				320		1,806		1,826
	Utility				727		684		824
	Unregulated retail electric and gas				415		152		151
	Net energy trading margins				2		17		(121)
	Energy-related businesses				398		411		511
	Total Operating Revenues				5,889		6,025		6,385

Operating Expenses
	Operation
		Fuel			1,096		920		1,057
		Energy purchases
			Realized		1,636		2,512		1,460
			Unrealized economic activity (Note 19)		(286)		155		553
		Energy purchases from affiliate			3		70		108
		Other operation and maintenance			1,161		1,061		1,062
	Depreciation				353		310		299
	Taxes, other than income				99		86		86
	Energy-related businesses				373		388		478
	Total Operating Expenses				4,435		5,502		5,103

Operating Income					1,454		523		1,282

Other Income (Expense) - net					26		33		46

Other-Than-Temporary Impairments					3		18		36

Interest Income from Affiliates					9		2		14

Interest Expense					343		263		306

Income from Continuing Operations Before Income Taxes					1,143		277		1,000

Income Taxes					262		23		301

Income from Continuing Operations After Income Taxes					881		254		699

Income (Loss) from Discontinued Operations (net of income taxes)					(19)		(7)		71

Net Income					862		247		770

Net Income Attributable to Noncontrolling Interests					1		1		2

Net Income Attributable to PPL Energy Supply				$	861	$	246	$	768

Amounts Attributable to PPL Energy Supply:
	Income from Continuing Operations After Income Taxes			$	880	$	253	$	697
	Income (Loss) from Discontinued Operations (net of income taxes)				(19)		(7)		71
	Net Income			$	861	$	246	$	768

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
PPL Energy Supply, LLC and Subsidiaries
(Millions of Dollars)
				2010		2009		2008
Cash Flows from Operating Activities
	Net income			$	862	$	247	$	770
	Adjustments to reconcile net income to net cash provided by operating activities
		Pre-tax gain from the sale of the Maine hydroelectric generation business			(25)		(38)
		Depreciation			365		327		317
		Amortization			160		75		66
		Defined benefit plans - expense			52		23		6
		Defined benefit plans - funding			(302)		(136)		(103)
		Deferred income taxes and investment tax credits			(31)		141		165
		Impairment of assets			120		123		93
		Unrealized (gains) losses on derivatives, and other hedging activities			536		330		(285)
		Provision for Montana hydroelectric litigation			66		8
		Other			41		14		63
	Change in current assets and current liabilities
		Accounts receivable			(18)		77		141
		Accounts payable			20		(178)		72
		Unbilled revenue			(88)		9		(89)
		Collateral on PLR energy supply from affiliate					300
		Taxes			87		(16)		(65)
		Counterparty collateral			(18)		334		1
		Price risk management assets and liabilities			(27)		(223)		(88)
		Other			35		7		18
	Other operating activities
		Other assets			(71)		15		15
		Other liabilities			76		(26)		(58)
			Net cash provided by operating activities		1,840		1,413		1,039
Cash Flows from Investing Activities
	Expenditures for property, plant and equipment				(1,009)		(907)		(1,114)
	Proceeds from the sale of the Long Island generation business				124
	Proceeds from the sale of the Maine hydroelectric generation business				38		81
	Expenditures for intangible assets				(82)		(78)		(325)
	Purchases of nuclear plant decommissioning trust investments				(128)		(227)		(224)
	Proceeds from the sale of nuclear plant decommissioning trust investments				114		201		197
	Purchases of other investments								(197)
	Proceeds from the sale of other investments						154		102
	Repayment of long-term notes receivable from affiliates				(1,816)
	Issuance of long-term notes receivable to affiliates				1,816
	Net (increase) decrease in restricted cash and cash equivalents				84		219		(152)
	Other investing activities				34		6		17
			Net cash used in investing activities		(825)		(551)		(1,696)
Cash Flows from Financing Activities
	Issuance of long-term debt				602				849
	Retirement of long-term debt						(220)		(266)
	Contributions from Member				3,625		50		421
	Distributions to Member				(4,692)		(943)		(750)
	Net increase (decrease) in short-term debt (Note 7)				(93)		43		534
	Other financing activities				(54)		(11)		(9)
			Net cash provided by (used in) financing activities		(612)		(1,081)		779
Effect of Exchange Rates on Cash and Cash Equivalents					13				(13)
Net Increase (Decrease) in Cash and Cash Equivalents					416		(219)		109
	Cash and Cash Equivalents at Beginning of Period				245		464		355
	Cash and Cash Equivalents at End of Period			$	661	$	245	$	464

Supplemental Disclosures of Cash Flow Information
	Cash paid (received) during the period for:
			Interest - net of amount capitalized	$	275	$	274	$	271
			Income taxes - net	$	278	$	(91)	$	149

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED BALANCE SHEETS AT DECEMBER 31,
PPL Energy Supply, LLC and Subsidiaries
(Millions of Dollars)
			2010		2009
Assets

Current Assets
	Cash and cash equivalents		$	661	$	245
	Restricted cash and cash equivalents			19		99
	Accounts receivable (less reserve: 2010, $20; 2009, $21)
		Customer		225		168
		Other		24		31
	Unbilled revenues			486		402
	Accounts receivable from affiliates			124		165
	Fuel, materials and supplies			297		325
	Prepayments			89		56
	Price risk management assets			1,907		2,147
	Other intangibles			11		25
	Assets held for sale			374		127
	Other current assets			11		1
	Total Current Assets			4,228		3,791

Investments
	Nuclear plant decommissioning trust funds			618		548
	Other investments			37		58
	Total Investments			655		606

Property, Plant and Equipment
	Regulated utility plant - electric and gas			4,269		4,234
	Less: accumulated depreciation - regulated utility plant			888		823
		Regulated utility plant - electric and gas, net		3,381		3,411
	Non-regulated property, plant and equipment
		Generation		10,169		10,493
		Nuclear fuel		578		506
		Other		314		307
	Less: accumulated depreciation - non-regulated property, plant and equipment			5,401		5,346
		Non-regulated property, plant and equipment, net		5,660		5,960
	Construction work in progress			594		422
	Property, Plant and Equipment, net (a)			9,635		9,793

Other Noncurrent Assets
	Goodwill			765		806
	Other intangibles (a)			464		477
	Price risk management assets			651		1,234
	Other noncurrent assets			398		317
	Total Other Noncurrent Assets			2,278		2,834

Total Assets			$	16,796	$	17,024

(a)	At December 31, 2010 and December 31, 2009, includes $424 million of PP&E, consisting primarily of "Generation," including leasehold improvements, and $11 million of "Other intangibles" from the consolidation of a VIE. See Note 22 for additional information.

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED BALANCE SHEETS AT DECEMBER 31,
PPL Energy Supply, LLC and Subsidiaries
(Millions of Dollars)
			2010		2009
Liabilities and Equity

Current Liabilities
	Short-term debt	$	531	$	639
	Long-term debt		500
	Accounts payable		592		537
	Accounts payable to affiliates		43		51
	Taxes		119		33
	Interest		110		86
	Price risk management liabilities		1,112		1,502
	Counterparty collateral		338		356
	Other current liabilities		624		481
	Total Current Liabilities		3,969		3,685

Long-term Debt			5,089		5,031

Deferred Credits and Other Noncurrent Liabilities
	Deferred income taxes		1,548		1,481
	Investment tax credits		81		30
	Price risk management liabilities		438		582
	Accrued pension obligations		619		883
	Asset retirement obligations		332		416
	Other deferred credits and noncurrent liabilities		211		330
	Total Deferred Credits and Other Noncurrent Liabilities		3,229		3,722

Commitments and Contingent Liabilities (Note 15)

Equity
	Member's equity		4,491		4,568
	Noncontrolling interests		18		18
	Total Equity		4,509		4,586

Total Liabilities and Equity		$	16,796	$	17,024

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED STATEMENTS OF EQUITY
PPL Energy Supply, LLC and Subsidiaries
(Millions of Dollars)

			Non-
	Member's		controlling
	equity		interests		Total

December 31, 2007	$	5,205	$	19	$	5,224
Net income		768		2		770
Other comprehensive loss		(850)				(850)
Contributions from member		421				421
Distributions		(750)		(2)		(752)
Divestitures				(1)		(1)
December 31, 2008	$	4,794	$	18	$	4,812

Net income	$	246	$	1	$	247
Other comprehensive income		421				421
Contributions from member		50				50
Distributions		(943)		(1)		(944)
December 31, 2009 (a)	$	4,568	$	18	$	4,586

Net income	$	861	$	1	$	862
Other comprehensive income		129				129
Contributions from member		3,625				3,625
Distributions		(4,692)		(1)		(4,693)
December 31, 2010 (a)	$	4,491	$	18	$	4,509

(a)	See ~~"New Accounting Guidance Adopted - Recognition and Presentation of Other-Than-Temporary Impairments"~~"General – Comprehensive Income" in Note 1 ~~regarding this cumulative effect adjustment.~~for disclosure of balances of each component of AOCI.

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31,
PPL Energy Supply, LLC and Subsidiaries
(Millions of Dollars)

			2010		2009		2008

Net income			$	862	$	247	$	770

Other comprehensive income (loss):
Amounts arising during the period - gains (losses), net of tax (expense) benefit:
	Foreign currency translation adjustments, net of tax of ($1), $4, ($11)			(59)		101		(500)
	Available-for-sale securities, net of tax of ($31), ($50), $55			29		49		(50)
	Qualifying derivatives, net of tax of ($207), ($330), ($125)			305		454		249
	Equity investee's other comprehensive income (loss), net of tax of $0, $0, $0					1		(3)
	Defined benefit plans:
		Prior service costs, net of tax of ($8), $0, $0		12		1		(1)
		Net actuarial loss, net of tax of $36, $136, $243		(63)		(326)		(500)
		Transition obligation, net of tax of ($3), $0, $0		6
Reclassifications to net income - (gains) losses, net of tax expense (benefit):
	Available-for-sale securities, net of tax of $3, $3, ($2)			(5)		(4)		2
	Qualifying derivatives, net of tax of $99, ($91), $19			(145)		131		(73)
	Defined benefit plans:
		Prior service costs, net of tax of ($5), ($6), ($5)		9		9		12
		Net actuarial loss, net of tax of ($14), ($3), ($5)		39		4		12
		Transition obligation, net of tax of ($1), ($1), ($1)		1		1		2
Total other comprehensive income (loss) attributable to PPL Energy Supply				129		421		(850)

Comprehensive income (loss)				991		668		(80)
	Comprehensive income attributable to noncontrolling interests			1		1		2

Comprehensive income (loss) attributable to PPL Energy Supply			$	990	$	667	$	(82)

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31,
PPL Electric Utilities Corporation and Subsidiaries
(Millions of Dollars)

			2010		2009		2008
Operating Revenues
	Retail electric		$	2,448	$	3,218	$	3,290
	Retail and wholesale electric to affiliate			7		74		111
	Total Operating Revenues			2,455		3,292		3,401

Operating Expenses
	Operation
		Energy purchases		1,075		114		163
		Energy purchases from affiliate		320		1,806		1,826
		Other operation and maintenance		502		417		410
		Amortization of recoverable transition costs				304		293
	Depreciation			136		128		131
	Taxes, other than income			138		194		203
	Total Operating Expenses			2,171		2,963		3,026

Operating Income				284		329		375

Other Income (Expense) - net				5		6		5

Interest Income from Affiliate				2		4		9

Interest Expense				99		116		101

Interest Expense with Affiliate						2		10

Income Before Income Taxes				192		221		278

Income Taxes				57		79		102

Net Income				135		142		176

Distributions on Preferred Securities				20		18		18

Net Income Available to PPL Corporation			$	115	$	124	$	158

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
PPL Electric Utilities Corporation and Subsidiaries
(Millions of Dollars)
				2010		2009		2008
Cash Flows from Operating Activities
	Net income			$	135	$	142	$	176
	Adjustments to reconcile net income to net cash provided by operating activities
		Depreciation			136		128		131
		Amortization			(23)		324		313
		Defined benefit plans - expense			20		24		6
		Defined benefit plans - funding			(55)		(28)		(9)
		Deferred income taxes and investment tax credits			198		(22)		1
		Other			4				6
	Change in current assets and current liabilities
		Accounts receivable			(32)		1		(22)
		Accounts payable			31		(9)		(1)
		Unbilled revenue			58		(3)		3
		Prepayments			(112)		(17)		9
		Regulatory assets and liabilities			(85)		31		(6)
		Taxes			(38)		(4)		21
		Collateral on PLR energy supply from affiliate					(300)
		Other			(32)		26		9
	Other operating activities
		Other assets			5		(3)		23
		Other liabilities			2		4		(12)
			Net cash provided by operating activities		212		294		648

Cash Flows from Investing Activities
	Expenditures for property, plant and equipment				(401)		(288)		(268)
	Expenditures for intangible assets				(10)		(10)		(7)
	Purchases of investments								(90)
	Proceeds from the sale of investments								90
	Net (increase) decrease in notes receivable from affiliate						300		(23)
	Net decrease in restricted cash and cash equivalents						1		69
	Other investing activities				8		3		3
			Net cash provided by (used in) investing activities		(403)		6		(226)

Cash Flows from Financing Activities
	Issuance of long-term debt						298		489
	Retirement of long-term debt						(595)		(395)
	Contributions from PPL				55		400
	Redemption of preferred stock				(54)
	Payment of common stock dividends to PPL				(71)		(274)		(98)
	Net increase (decrease) in short-term debt						(95)		54
	Dividends on preferred securities				(17)		(18)		(18)
	Other financing activities				(3)		(14)		(4)
			Net cash provided by (used in) financing activities		(90)		(298)		28

Net Increase (Decrease) in Cash and Cash Equivalents					(281)		2		450
Cash and Cash Equivalents at Beginning of Period					485		483		33
Cash and Cash Equivalents at End of Period				$	204	$	485	$	483

Supplemental Disclosures of Cash Flow Information
	Cash paid (received) during the period for:
			Interest - net of amount capitalized	$	87	$	116	$	88
			Income taxes - net	$	(33)	$	106	$	59

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED BALANCE SHEETS AT DECEMBER 31,
PPL Electric Utilities Corporation and Subsidiaries
(Millions of Dollars, shares in thousands)
			2010		2009
Assets

Current Assets
	Cash and cash equivalents		$	204	$	485
	Restricted cash and cash equivalents			2		1
	Accounts receivable (less reserve: 2010, $17; 2009, $16)
		Customer		268		240
		Other		24		19
	Unbilled revenues			134		192
	Materials and supplies			47		33
	Accounts receivable from affiliates			8		7
	Prepayments			136		24
	Regulatory assets			63		11
	Other current assets			2		24
	Total Current Assets			888		1,036

Property, Plant and Equipment
	Regulated utility plant - electric			5,494		5,197
	Less: accumulated depreciation - regulated utility plant - electric			2,088		2,008
	Other			2		2
	Construction work in progress			177		118
	Property, Plant and Equipment, net			3,585		3,309

Other Noncurrent Assets
	Regulatory assets			557		531
	Intangibles			147		139
	Other noncurrent assets			76		77
	Total Other Noncurrent Assets			780		747

Total Assets			$	5,253	$	5,092

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED BALANCE SHEETS AT DECEMBER 31,
PPL Electric Utilities Corporation and Subsidiaries
(Millions of Dollars, shares in thousands)
		2010		2009
Liabilities and Equity

Current Liabilities
	Accounts payable		221		53
	Accounts payable to affiliates		73		186
	Taxes		23		61
	Interest		17		17
	Regulatory liabilities		18		74
	Customer rate mitigation prepayments		12		36
	Other current liabilities		114		91
	Total Current Liabilities		478		518

Long-term Debt			1,472		1,472

Deferred Credits and Other Noncurrent Liabilities
	Deferred income taxes		932		761
	Investment tax credits		7		8
	Accrued pension obligations		259		245
	Regulatory liabilities		14		10
	Other deferred credits and noncurrent liabilities		147		182
	Total Deferred Credits and Other Noncurrent Liabilities		1,359		1,206

Commitments and Contingent Liabilities (Note 15)

Shareowners' Equity
	Preferred securities		250		301
	Common stock - no par value (a)		364		364
	Additional paid-in capital		879		824
	Earnings reinvested		451		407
	Total Equity		1,944		1,896

Total Liabilities and Equity		$	5,253	$	5,092

(a)	170,000 shares authorized; 66,368 shares issued and outstanding at December 31, 2010 and December 31, 2009.

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY
PPL Electric Utilities Corporation and Subsidiaries
(Millions of Dollars)

	Common
	stock
	shares					Additional
	outstanding	Preferred		Common		paid-in		Earnings
	(a)	securities		stock		capital		reinvested		Total

December 31, 2007	66,368	$	301	$	364	$	424	$	497	$	1,586
Net income (b)									176		176
Cash dividends declared on preferred securities									(18)		(18)
Cash dividends declared on common stock									(98)		(98)
December 31, 2008	66,368	$	301	$	364	$	424	$	557	$	1,646

Net income (b)								$	142	$	142
Capital contributions from PPL						$	400				400
Cash dividends declared on preferred securities									(18)		(18)
Cash dividends declared on common stock									(274)		(274)
December 31, 2009	66,368	$	301	$	364	$	824	$	407	$	1,896

Net income (b)								$	135	$	135
Redemption of preferred stock (c)		$	(51)						(3)		(54)
Capital contributions from PPL						$	55				55
Cash dividends declared on preferred securities									(17)		(17)
Cash dividends declared on common stock									(71)		(71)
December 31, 2010	66,368	$	250	$	364	$	879	$	451	$	1,944

(a)	Shares in thousands. All common shares of PPL Electric stock are owned by PPL.

(b)	PPL Electric's net income approximates comprehensive income.

(c)	PPL Electric redeemed all five series of its outstanding preferred stock. See Note 6 for additional information.

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31,
PPL Corporation and Subsidiaries
(Millions of Dollars)
2009 2008 2007

Net income $ 426 $ 950 $ 1,315
Other comprehensive income (loss):
Amounts arising during the period - gains (losses), net of tax (expense) benefit:
Foreign currency translation adjustments, net of tax of $4, $(11), $7 101 (500 ) 29
Available-for-sale securities, net of tax of $(44), $55, $(8) 41 (50 ) 11
Qualifying derivatives, net of tax of $(356), $(120), $131 492 240 (190 )
Equity investee's other comprehensive income (loss) 1 (3 )
Defined benefit plans:
Prior service costs, net of tax of $(1), $0 1 2
Net actuarial gain (loss), net of tax of $147, $294, $(104) (340 ) (577 ) 233
Reclassifications to net income - (gains) losses, net of tax expense (benefit):
Foreign currency translation adjustments, net of tax of $(8) 64
Available-for-sale securities, net of tax of $(3), $(2), $2 4 2 (3 )
Qualifying derivatives, net of tax of $(92), $17, $(26) 131 (69 ) 49
Defined benefit plans:
Prior service costs, net of tax of $(8), $(9), $6 13 18 14
Net actuarial loss, net of tax of $(4), $(11), $(19) 4 20 40
Transition obligation, net of tax of $(1), $(1), $(1) 1 2 1
Total other comprehensive income (loss) attributable to PPL Corporation 449 (917 ) 250
Comprehensive income 875 33 1,565
Comprehensive income attributable to noncontrolling interests 19 20 27
Comprehensive income attributable to PPL Corporation $ 856 $ 13 $ 1,538

~~The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.~~

CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31,
PPL Energy Supply, LLC and Subsidiaries
(Millions of Dollars)
2009 2008 2007
Operating Revenues
Wholesale energy marketing
Realized $ 3,291 $ 2,288 $ 1,581
Unrealized economic activity (Note 18) (229 ) 1,056 (145 )
Wholesale energy marketing to affiliate (Note 15) 1,806 1,826 1,810
Utility 684 824 863
Unregulated retail electric and gas 152 151 102
Net energy trading margins 17 (121 ) 41
Energy-related businesses 411 511 760
Total Operating Revenues 6,132 6,535 5,012

Operating Expenses
Operation
Fuel 931 1,084 890
Energy purchases
Realized 2,523 1,470 711
Unrealized economic activity (Note 18) 155 553 (182 )
Energy purchases from affiliate (Note 15) 70 108 156
Other operation and maintenance 1,067 1,070 1,005
Depreciation (Note 1) 325 314 299
Taxes, other than income (Note 5) 86 86 98
Energy-related businesses (Note 8) 388 478 757
Total Operating Expenses 5,545 5,163 3,734

Operating Income 587 1,372 1,278

Other Income - net (Note 16) 35 48 80

Other-Than-Temporary Impairments 18 36 3

Interest Income from Affiliates (Note 15) 2 14 29

Interest Expense 272 313 289

Income from Continuing Operations Before Income Taxes 334 1,085 1,095

Income Taxes (Note 5) 47 335 206

Income from Continuing Operations After Income Taxes 287 750 889

Income (Loss) from Discontinued Operations (net of income taxes) (Note 9) (40 ) 20 325

Net Income 247 770 1,214

Net Income Attributable to Noncontrolling Interests 1 2 9

Net Income Attributable to PPL Energy Supply $ 246 $ 768 $ 1,205

Amounts Attributable to PPL Energy Supply:
Income from Continuing Operations After Income Taxes $ 286 $ 748 $ 886
Income (Loss) from Discontinued Operations (net of income taxes) (40 ) 20 319
Net Income $ 246 $ 768 $ 1,205

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
PPL Energy Supply, LLC and Subsidiaries
(Millions of Dollars)
2009 2008 2007
Cash Flows from Operating Activities
Net income $ 247 $ 770 $ 1,214
Adjustments to reconcile net income to net cash provided by operating activities
Pre-tax gain from the sale of the Latin American businesses (400 )
Pre-tax gain from the sale of the majority of Maine hydroelectric generation business (38 )
Depreciation 327 317 309
Amortization of energy commitments and other 75 66 104
Defined benefits (113 ) (97 ) (34 )
Impairment of assets 123 93 102
Gain on the sale of emission allowances (2 ) (6 ) (109 )
Deferred income taxes and investment tax credits 141 165 112
Unrealized (gains) losses on derivatives, and other hedging activities 330 (285 ) (27 )
Other 24 69 39
Change in current assets and current liabilities
Accounts receivable 77 141 (217 )
Accounts payable (178 ) 72 104
Collateral on PLR energy supply from affiliate 300
Unbilled revenues 9 (89 ) (69 )
Fuels, materials and supplies (25 ) (26 ) 29
Counterparty collateral 334 1 12
Price risk management assets and liabilities (223 ) (88 ) (50 )
Other 16 (21 ) 67
Other operating activities
Other assets 15 15 (6 )
Other liabilities (26 ) (58 ) (86 )

Net cash provided by operating activities 1,413 1,039 1,094

Cash Flows from Investing Activities
Expenditures for property, plant and equipment (907 ) (1,114 ) (1,331 )
Proceeds from the sale of the majority of Maine hydroelectric generation business 81
Proceeds from the sale of the Latin American businesses 851
Proceeds from the sale of the telecommunication operations 47
Expenditures for intangible assets (78 ) (325 ) (65 )
Proceeds from the sale of intangible assets 16 19 111
Purchases of nuclear plant decommissioning trust investments (227 ) (224 ) (190 )
Proceeds from the sale of nuclear plant decommissioning trust investments 201 197 175
Purchases of other investments (197 ) (561 )
Proceeds from the sale of other investments 154 102 795
Net (increase) decrease in restricted cash and cash equivalents 219 (152 ) (110 )
Other investing activities (10 ) (2 ) (27 )

Net cash used in investing activities (551 ) (1,696 ) (305 )

Cash Flows from Financing Activities
Issuance of long-term debt 849 136
Retirement of long-term debt (220 ) (266 ) (378 )
Contributions from Member 50 421 700
Distributions to Member (943 ) (750 ) (1,471 )
Net increase in short-term debt 43 534 62
Other financing activities (11 ) (9 ) (12 )

Net cash provided by (used in) financing activities (1,081 ) 779 (963 )

Effect of Exchange Rates on Cash and Cash Equivalents (13 ) 5

Net Increase (Decrease) in Cash and Cash Equivalents (219 ) 109 (169 )
Cash and Cash Equivalents at Beginning of Period 464 355 524
Cash and Cash Equivalents at End of Period $ 245 $ 464 $ 355

Supplemental Disclosures of Cash Flow Information
Cash paid (received) during the period for:
Interest - net of amount capitalized $ 274 $ 271 $ 228
Income taxes - net $ (91 ) $ 149 $ 196

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED BALANCE SHEETS AT DECEMBER 31,
PPL Energy Supply, LLC and Subsidiaries
(Millions of Dollars)
2009 2008
Assets

Current Assets
Cash and cash equivalents $ 245 $ 464
Short-term investments 150
Restricted cash and cash equivalents 99 315
Accounts receivable (less reserve: 2009, $21; 2008, $21)
Customer 168 220
Other 31 66
Unbilled revenues 402 408
Accounts receivable from affiliates 165 159
Collateral on PLR energy supply to affiliate (Note 15) 300
Fuel, materials and supplies (Note 1) 325 301
Prepayments 56 71
Price risk management assets (Notes 17 and 18) 2,147 1,221
Other intangibles (Note 19) 25 17
Assets held for sale (Note 9) 127
Other current assets 1 6
Total Current Assets 3,791 3,698

Investments
Nuclear plant decommissioning trust funds (Notes 17 and 21) 548 446
Other investments 58 68
Total Investments 606 514

Property, Plant and Equipment (Note 1)
Electric plant
Transmission and distribution 4,024 3,540
Generation 10,493 9,588
General 285 286
Electric plant in service 14,802 13,414
Construction work in progress 422 1,031
Nuclear fuel 506 428
Electric plant 15,730 14,873
Gas and oil plant 68 68
Other property 164 154
Property, plant and equipment, gross 15,962 15,095
Less: accumulated depreciation 6,169 5,935
Property, Plant and Equipment, net 9,793 9,160

Other Noncurrent Assets
Goodwill (Note 19) 806 763
Other intangibles (Note 19) 477 507
Price risk management assets (Notes 17 and 18) 1,234 1,346
Other noncurrent assets 317 481
Total Other Noncurrent Assets 2,834 3,097

Total Assets $ 17,024 $ 16,469

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED BALANCE SHEETS AT DECEMBER 31,
PPL Energy Supply, LLC and Subsidiaries
(Millions of Dollars)
2009 2008
Liabilities and Equity

Current Liabilities
Short-term debt (Note 7) $ 639 $ 584
Accounts payable 537 684
Accounts payable to affiliates 51 62
Taxes 33 31
Interest 86 88
Deferred revenue on PLR energy supply to affiliate 12
Price risk management liabilities (Notes 17 and 18) 1,502 1,313
Counterparty collateral 356 22
Other current liabilities 481 371
Total Current Liabilities 3,685 3,167

Long-term Debt (Note 7) 5,031 5,196

Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes and investment tax credits (Note 5) 1,511 1,118
Price risk management liabilities (Notes 17 and 18) 582 836
Accrued pension obligations (Note 12) 883 556
Asset retirement obligations (Note 20) 416 370
Other deferred credits and noncurrent liabilities 330 414
Total Deferred Credits and Other Noncurrent Liabilities 3,722 3,294

Commitments and Contingent Liabilities (Note 14)

Equity
Member's equity 4,568 4,794
Noncontrolling interests 18 18
Total Equity 4,586 4,812

Total Liabilities and Equity $ 17,024 $ 16,469

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED STATEMENTS OF EQUITY
PPL Energy Supply, LLC and Subsidiaries
(Millions of Dollars)
Member's equity Non-controlling interests Total

December 31, 2006 $ 4,534 $ 60 $ 4,594
Net income 1,205 9 1,214
Other comprehensive income 240 240
Cumulative effect adjustment (a) (1 ) (1 )
Contributions from member 700 700
Distributions (1,471 ) (7 ) (1,478 )
Divestitures (35 ) (35 )
Acquisitions (8 ) (8 )
Other (2 ) (2 )
December 31, 2007 $ 5,205 $ 19 $ 5,224

Net income $ 768 $ 2 $ 770
Other comprehensive loss (850 ) (850 )
Contributions from member 421 421
Distributions (750 ) (2 ) (752 )
Divestitures (1 ) (1 )
December 31, 2008 (b) $ 4,794 $ 18 $ 4,812

Net income $ 246 $ 1 $ 247
Other comprehensive income 421 421
Contributions from member 50 50
Distributions (943 ) (1 ) (944 )
December 31, 2009 (b) $ 4,568 $ 18 $ 4,586

~~(a)~~		~~Relates to the adoption of accounting guidance regarding uncertain tax positions.~~
~~(b)~~		~~See "General - Comprehensive Income" in Note 1 for disclosure of balances of each component of AOCI.~~

~~The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.~~

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31,
PPL Energy Supply, LLC and Subsidiaries
(Millions of Dollars)
2009 2008 2007

Net income $ 247 $ 770 $ 1,214
Other comprehensive income (loss):
Amounts arising during the period - gains (losses), net of tax (expense) benefit:
Foreign currency translation adjustments, net of tax of $4, $(11), $7 101 (500 ) 29
Available-for-sale securities, net of tax of $(44), $55, $(8) 41 (50 ) 11
Qualifying derivatives, net of tax of $(330), $(125), $124 454 249 (182 )
Equity investee's other comprehensive income (loss) 1 (3 )
Defined benefit plans:
Prior service costs 1 (1 ) 2
Net actuarial gain (loss), net of tax of $136, 243, $(98) (326 ) (500 ) 222
Reclassifications to net income - (gains) losses, net of tax expense (benefit):
Foreign currency translation adjustments, net of tax of $(8) 64
Available-for-sale securities, net of tax of $(3), $(2), $2 4 2 (3 )
Qualifying derivatives, net of tax of $(91), $19, $(22) 131 (73 ) 46
Defined benefit plans:
Prior service costs, net of tax of $(6), $(5), $3 9 12 10
Net actuarial loss, net of tax of $(3), $(5), $(18) 4 12 40
Transition obligation, net of tax of $(1), $(1), $(1) 1 2 1
Total other comprehensive income (loss) attributable to PPL Energy Supply 421 (850 ) 240
Comprehensive income (loss) 668 (80 ) 1,454
Comprehensive income attributable to noncontrolling interests 1 2 9
Comprehensive income (loss) attributable to PPL Energy Supply $ 667 $ (82 ) $ 1,445

~~The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements~~

CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31,
PPL Electric Utilities Corporation and Subsidiaries
(Millions of Dollars)
2009 2008 2007
Operating Revenues
Retail electric $ 3,222 $ 3,293 $ 3,254
Wholesale electric to affiliate (Note 15) 70 108 156
Total Operating Revenues 3,292 3,401 3,410

Operating Expenses
Operation
Energy purchases 114 163 206
Energy purchases from affiliate (Note 15) 1,806 1,826 1,810
Other operation and maintenance 417 410 402
Amortization of recoverable transition costs 304 293 310
Depreciation (Note 1) 128 131 132
Taxes, other than income (Note 5) 194 203 200
Total Operating Expenses 2,963 3,026 3,060

Operating Income 329 375 350

Other Income - net (Note 16) 6 5 12

Interest Income from Affiliate (Note 15) 4 9 19

Interest Expense 116 101 118

Interest Expense with Affiliate (Note 15) 2 10 17

Income Before Income Taxes 221 278 246

Income Taxes (Note 5) 79 102 83

Net Income 142 176 163

Dividends on Preferred Securities (Notes 6 and 7) 18 18 18

Income Available to PPL $ 124 $ 158 $ 145

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
PPL Electric Utilities Corporation and Subsidiaries
(Millions of Dollars)
2009 2008 2007
Cash Flows from Operating Activities
Net income $ 142 $ 176 $ 163
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation 128 131 132
Amortization of recoverable transition costs and other 324 313 326
Deferred income taxes and investment tax credits (22 ) 1 17
Other (4 ) 3 5
Change in current assets and current liabilities
Accounts receivable 1 (22 ) (5 )
Accounts payable (9 ) (1 ) 26
Prepayments (17 ) 9 (13 )
Collateral on PLR energy supply from affiliate (300 )
Other 50 27 (84 )
Other operating activities
Other assets (3 ) 23 19
Other liabilities 4 (12 ) (18 )
Net cash provided by operating activities 294 648 568

Cash Flows from Investing Activities
Expenditures for property, plant and equipment (288 ) (268 ) (286 )
Expenditures for intangible assets (10 ) (7 )
Purchases of investments (90 ) (32 )
Proceeds from the sale of investments 90 57
Net (increase) decrease in notes receivable from affiliate 300 (23 ) 23
Net (increase) decrease in restricted cash and cash equivalents 1 69 (8 )
Other investing activities 3 3 7
Net cash provided by (used in) investing activities 6 (226 ) (239 )

Cash Flows from Financing Activities
Issuance of long-term debt 298 489 250
Retirement of long-term debt (595 ) (395 ) (555 )
Contribution from PPL 400
Payment of common stock dividends to PPL (274 ) (98 ) (119 )
Payment of dividends on preferred securities (18 ) (18 ) (18 )
Net increase (decrease) in short-term debt (95 ) 54 (1 )
Other financing activities (14 ) (4 ) (3 )
Net cash provided by (used in) financing activities (298 ) 28 (446 )

Net Increase (Decrease) in Cash and Cash Equivalents 2 450 (117 )
Cash and Cash Equivalents at Beginning of Period 483 33 150
Cash and Cash Equivalents at End of Period $ 485 $ 483 $ 33

Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest - net of amount capitalized $ 116 $ 88 $ 110
Income taxes - net $ 106 $ 59 $ 87

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED BALANCE SHEETS AT DECEMBER 31,
PPL Electric Utilities Corporation and Subsidiaries
(Millions of Dollars, shares in thousands)
2009 2008
Assets

Current Assets
Cash and cash equivalents $ 485 $ 483
Restricted cash and cash equivalents 1 1
Accounts receivable (less reserve: 2009, $16; 2008, $14)
Customer 240 233
Other 19 11
Unbilled revenues 198 190
Materials and supplies 33 37
Accounts receivable from affiliates 7 8
Note receivable from affiliate (Note 15) 300
Prepayments 24 7
Prepayment on PLR energy supply from affiliate 12
Other current assets 29 13
Total Current Assets 1,036 1,295

Property, Plant and Equipment (Note 1)
Electric plant
Transmission and distribution 4,662 4,506
General 535 489
Electric plant in service 5,197 4,995
Construction work in progress 118 79
Electric plant 5,315 5,074
Other property 2 2
Property, plant and equipment, gross 5,317 5,076
Less: accumulated depreciation 2,008 1,924
Property, Plant and Equipment, net 3,309 3,152

Regulatory and Other Noncurrent Assets
Recoverable transition costs (Note 1) 281
Intangibles (Note 19) 139 130
Taxes recoverable through future rates (Note 1) 253 250
Recoverable costs of defined benefit plans (Note 1) 229 192
Other regulatory and noncurrent assets 126 116
Total Regulatory and Other Noncurrent Assets 747 969

Total Assets $ 5,092 $ 5,416

The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.

CONSOLIDATED BALANCE SHEETS AT DECEMBER 31,
PPL Electric Utilities Corporation and Subsidiaries
(Millions of Dollars, shares in thousands)
2009 2008
Liabilities and Equity

Current Liabilities
Short-term debt (Note 7) $ 95
Long-term debt 495
Accounts payable $ 53 57
Accounts payable to affiliates 186 186
Taxes 61 65
Collateral on PLR energy supply from affiliate (Note 15) 300
Overcollected transmission costs 39
Customer rate mitigation prepayments 36 5
Overcollected transition costs 33
Other current liabilities 110 119
Total Current Liabilities 518 1,322

Long-term Debt (Note 7) 1,472 1,274

Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes and investment tax credits (Note 5) 769 767
Accrued pension obligations (Note 12) 245 209
Other deferred credits and noncurrent liabilities 192 198
Total Deferred Credits and Other Noncurrent Liabilities 1,206 1,174

Commitments and Contingent Liabilities (Note 14)

Shareowners' Equity
Preferred securities (Note 6) 301 301
Common stock - no par value (a) 364 364
Additional paid-in capital 824 424
Earnings reinvested 407 557
Total Shareowners' Equity 1,896 1,646

Total Liabilities and Equity $ 5,092 $ 5,416

~~(a)~~		~~170,000 shares authorized; 66,368 shares issued and outstanding at December 31, 2009 and 2008.~~

~~The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.~~

CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY
PPL Electric Utilities Corporation and Subsidiaries
(Millions of Dollars, shares in thousands)
Common stock shares outstanding (a) Preferred securities Common stock Additional paid-in capital Earnings reinvested Total

December 31, 2006 66,368 $ 301 $ 364 $ 424 $ 470 $ 1,559
Net income (b) 163 163
Cumulative effect adjustment (c) 1 1
Cash dividends declared on preferred securities (18 ) (18 )
Cash dividends declared on common stock (119 ) (119 )
December 31, 2007 66,368 $ 301 $ 364 $ 424 $ 497 $ 1,586

Net income (b) $ 176 $ 176
Cash dividends declared on preferred securities (18 ) (18 )
Cash dividends declared on common stock (98 ) (98 )
December 31, 2008 66,368 $ 301 $ 364 $ 424 $ 557 $ 1,646

Net income (b) $ 142 $ 142
Capital contribution from PPL $ 400 400
Cash dividends declared on preferred securities (18 ) (18 )
Cash dividends declared on common stock (274 ) (274 )
December 31, 2009 66,368 $ 301 $ 364 $ 824 $ 407 $ 1,896

~~(a)~~		~~All common shares of PPL Electric stock are owned by PPL.~~
~~(b)~~		~~PPL Electric's net income approximates comprehensive income.~~
~~(c)~~		~~Relates to the adoption of accounting guidance regarding uncertain tax positions.~~

~~The accompanying Notes to Consolidated Financial Statements are an integral part of the financial statements.~~

COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	1. Summary of Significant Accounting Policies

General

Terms and abbreviations are explained in the glossary. Dollars are in millions, except per share data, unless otherwise noted.

Business and Consolidation

(PPL)

PPL is an energy and utility holding company that, through its subsidiaries, is primarily engaged in: 1) the regulated generation, transmission and distribution of electricity and the regulated distribution of natural gas, primarily in Kentucky; 2) the regulated distribution of electricity in the U.K.; 3) the regulated transmission and distribution of electricity in Pennsylvania; and 4) the competitive generation and marketing of electricity in portions of the northeastern and ~~western~~northwestern U.S. ~~and in the delivery of electricity in Pennsylvania and the U.K.~~ Headquartered in Allentown, PA, PPL's principal ~~direct~~ subsidiaries are LKE, PPL Energy ~~Funding, PPL Electric, PPL Services~~Supply and PPL ~~Capital Funding.~~Electric.

On November 1, 2010, PPL acquired all of the limited liability company interests of E.ON U.S. LLC from a wholly owned subsidiary of E.ON AG. Upon completion of the acquisition, E.ON U.S. LLC was renamed LG&E and KU Energy LLC (LKE). LKE is engaged in cost-based regulated utility operations through its subsidiaries, KU and LG&E. The acquisition of LKE substantially reapportions the mix of PPL's regulated and competitive businesses by increasing the regulated portion of its business, strengthens PPL's credit profile and enhances rate-regulated growth opportunities as the regulated businesses make investments to improve infrastructure and customer reliability. The increase in regulated assets provides earnings stability through regulated returns and the ability to recover costs of capital i nvestments, in contrast to the competitive supply business where earnings and cash flows are subject to market conditions. LKE's operating results for the two months ended December 31, 2010 are included in PPL's results of operations with no comparable amounts for 2009. LKE's net assets acquired and obligations assumed at the acquisition date were recorded at fair value and are included in PPL's balance sheet at December 31, 2010. See Note 10 for additional information on the acquisition of LKE.

(~~PPL and~~ PPL Energy Supply)

PPL Energy Funding is the parent of PPL Energy ~~Supply, which serves as the holding company for PPL's principal unregulated subsidiaries.~~Supply. On January 31, 2011, PPL Energy Supply isdistributed its membership interest in PPL Global, representing 100% of the ~~parent~~outstanding membership interests of PPL ~~Generation,~~Global, to PPL ~~EnergyPlus~~Energy Supply's parent, PPL Energy Funding, to better align PPL's organizational structure with the manner in which it manages its businesses and reports segment information in its consolidated financial statements. The distribution was made based on the book value of the assets and liabilities of PPL Global with financial effect as of January 1, 2011. PPL Global owns and operates WPD's electricity distribution businesses in the U.K. See Note 24 for additional information related to the distribution. Notes to PPL Energy Supply's Financial Statements may include PP L Global information for years subsequent to 2010.

(PPL and PPL ~~Global.~~Energy Supply)

PPL Generation owns and operates a portfolio of competitive domestic power generating assets. These power plants are primarily located in Pennsylvania ~~Montana, Illinois, Connecticut~~ and ~~New York~~Montana and use well-diversified fuel sources including coal, uranium, natural gas, oil and water. PPL EnergyPlus sells electricity produced by PPL Generation subsidiaries, participates in wholesale market load-following auctions, and markets various energy products and commodities such as: capacity, transmission, FTRs, coal, natural gas, oil, uranium, emission allowances, RECs and other commodities in competitive wholesale and ~~deregulated~~competitive retail markets, primarily in the northeastern and ~~western~~northwestern U.S.

In ~~May 2009,~~2010, PPL ~~Generation signed a definitive agreement to sell~~Energy Supply completed the sale of its Long Island generation business and related tolling ~~agreements. In the fourth quarter of 2009, PPL Maine completed the sales of the majority of its hydroelectric generation business~~agreements and its ~~8.33% ownership interest~~remaining three hydroelectric facilities in ~~Wyman Unit 4.~~

Maine. See Note 9 for additional information on ~~both the anticipated and completed~~these sales.

~~PPL Global owns and operates WPD's electricity delivery businesses in the U.K. In 2007, PPL Global completed the sale of its Latin American businesses.~~

It is the policy of PPL and PPL Energy Supply to consolidate foreign subsidiaries on a one-month lag. Material intervening events, such as debt issuances and retirements, acquisitions or divestitures that occur in the lag period are recognized in the current Financial Statements. Events that are significant but not material are disclosed.

The consolidated financial statements of PPL and PPL Energy Supply include their share of undivided interests in jointly owned facilities, as well as their share of the related operating costs of those facilities. See Note 13 for additional information.

(PPL and PPL Electric)

PPL Electric is a cost-based rate-regulated subsidiary of PPL. PPL Electric's principal business is the transmission and distribution of electricity to serve retail customers in its franchised territory in eastern and central Pennsylvania and the supply of electricity to retail customers in that territory as a PLR.

(PPL, PPL Energy Supply and PPL Electric)

The consolidated financial statements of PPL, PPL Energy Supply and PPL Electric include each company's own accounts as well as the accounts of all entities in which the company has a controlling financial interest. ~~Consolidation generally has been applied to subsidiaries in~~Entities for which ~~PPL, PPL Energy Supply and PPL Electric have~~ a ~~majority voting interest. However, the voting~~controlling financial interest ~~approach~~ is not ~~effective in identifying controlling financial interests in entities that are not controllable~~demonstrated through voting interests ~~or in which the equity investors do not bear the residual economic risks. These types of entities~~ are ~~referred to as variable interest entities.~~evaluated based on accounting guidance for VIEs. PPL, PPL Energy Supply and PPL Electric consolidate a ~~variable interest entity~~VIE when they are determined to behave a controlling interest in the VIE, and thus are the primary beneficiary of the entity. ~~The primary beneficiary~~See "New Accounting Guidance Adopted - Consolidation of a variable interest entity is the party that absorbs a majority of the entity's expected losses, receives a majority of its expected residual returns, or both, as a result of holding variable interests. See Note 3Variable Interest Entities" within this note for additional information and Note 22 for information regarding ~~variable interest entities.~~a significant consolidated VIE. Investments in entities in which a company has the ability to ~~exercise~~ex ercise significant influence but does not have a controlling financial interest are accounted for under the equity method. All other investments are carried at cost or fair value. All significant intercompany transactions have been eliminated. Any noncontrolling interests are reflected in the consolidated financial statements.

PPL and PPL Energy Supply consolidate foreign subsidiaries on a one-month lag. Material intervening events, such as debt issuances and retirements, acquisitions or divestitures that occur in the lag period are recognized in the current period financial statements. Events that are significant but not material are disclosed.

The consolidated financial statements of PPL and PPL Energy Supply include their share of any undivided interests in jointly owned facilities, as well as their share of the related operating costs of those facilities. See Note 14 for additional information.

Regulation

(PPL and PPL Electric)

~~The~~LG&E, KU and PPL Electric are cost-based rate-regulated ~~utility operations of PPL~~utilities for which rates are set by regulators to enable LG&E, KU and PPL Electric to recover the costs of providing electric or gas service, as applicable, and to provide a reasonable return to shareholders. Rates are generally established based on a test period as adjusted to exclude unusual or nonrecurring items. As a result, the financial statements are subject to the accounting for certain types of regulation as prescribed by GAAP and reflect the effects of regulatory ~~actions in their financial statements. The regulatory~~actions. Regulatory assets ~~below~~ are ~~included in "Regulatory and Other Noncurrent Assets" on~~recognized for the ~~Balance Sheets~~effect of ~~PPL and PPL Electric at December 31 and are probable of~~transactions or events where future recovery of underlying costs is probable in regulated customer rates.

2009 2008

Recoverable transition costs (a) $ 281
Taxes recoverable through future rates $ 253 250
Recoverable costs of defined benefit plans 229 192
Unamortized loss on reacquired debt 33 26
Costs associated with severe ice storms - January 2005 9 11
Other 7 3
$ 531 $ 763

~~(a)~~

~~A return on these assets is included in regulated rates.~~

The ~~recoverable transition costs are the result~~effect of ~~the PUC Final Order, which allowed PPL Electric~~such accounting is to begin amortizing its competitive transition (or stranded) costs of $2.97 billion, over an 11-year transition period effective January 1, 1999. In August 1999, competitive transition costs of $2.4 billion were converted to intangible transition costs when they were securitized by the issuance of transition bonds. The intangible transition costs were amortized over the life of the transition bonds, through December 2008, in accordance with an amortization schedule filed with the PUC. The assets of PPL Transition Bond Company, including the intangible transition property, were not available to creditors of PPLdefer certain or ~~PPL Electric. The remaining competitive transition costs were also amortized based on an amortization schedule previously filed with the PUC, adjusted for those competitive transition~~qualifying costs that ~~were converted~~would otherwise c urrently be charged to ~~intangible transition costs. These costs were fully amortized in 2009.~~

~~Taxes recoverable through future rates represent the portion of future income taxes that will be recovered through future rates based upon established~~expense. Likewise, regulatory ~~practices. Accordingly, this regulatory asset is~~liabilities are recognized when the offsetting deferred tax liability is recognized. For general-purpose financial reporting, this regulatory asset and the deferred tax liability are not offset; rather, each is displayed separately. Because this regulatory asset does not represent cash tax expenditures already incurred by PPL, this regulatory asset is not earning a current return. This regulatory asset isfor obligations expected to be ~~recovered over the period that the underlying book-tax timing differences reverse and the actual cash taxes are incurred.~~

~~Recoverable costs of defined benefit plans represent the portion of unrecognized transition obligation, prior service cost, and net actuarial loss that will be recovered~~returned through future regulated customer rates or be consumed in the business operations for the effect of transactions or events that would otherwise currently be reflected as income, or in certain cases, regulatory liabilities are recorded based ~~upon established regulatory practices. These regulatory assets are adjusted at least annually or whenever~~on the ~~funded status~~understanding with the regulator that current rates include recovery of PPL's defined benefit plans is remeasured. These regulatory assets for PPL and PPL Electric do not represent cash expenditures already incurred; consequently, these assets are not earning a current return.

2009 2008

Transition obligation $ 10 $ 10
Prior service cost 55 69
Net actuarial loss 164 113
Recoverable costs of defined benefit plans $ 229 $ 192

~~Of these~~ costs ~~$15 million for PPL and PPL Electric~~that are expected to be ~~amortized into net periodic defined benefit costs~~incurred in ~~2010. All costs will be amortized over~~ the ~~average service lives of plan participants.~~

~~Unamortized loss on reacquired debt represents losses on long-term debt reacquired or redeemed that have been deferred~~future, and ~~will be amortized and recovered through 2029.~~

~~In December 2007,~~ the ~~PUC approved recovery of $12 million of costs associated with severe ice storms that occurred in January 2005. Monthly amortization began in January 2008 and will continue through August 2015.~~

regulated entity is accountable for any amounts charged pursuant to such rates but not yet expended for the intended purpose. The ~~remainder of the~~accounting for regulatory assets ~~included in "Other" will be recovered through 2013.~~

~~PPL~~ and ~~PPL Electric had~~liabilities is based on specific ratemaking decisions or precedent for each transaction or event as prescribed by the ~~following~~FERC or the applicable state regulatory ~~liabilities at December 31, 2009. No significant~~commissions. See Note 3 for additional details regarding regulatory ~~liabilities existed at December 31, 2008.~~

2009

Overcollected transition costs $ 33
PURTA tax refund 10
$ 43

~~The overcollected transition costs will be refunded to customers in 2010~~assets and ~~are reflected on the Balance Sheet in "Other current liabilities" for PPL and in "Overcollected transition costs" for PPL Electric.~~

In December 2009, PPL Electric reached a settlement with the Pennsylvania Department of Revenue related to the appeal of its 1997 PURTA tax assessments that resulted in a $10 million reduction in PURTA tax. The $10 million is expected to be refunded to customers in 2011 and is reflected in "Other deferred credits and noncurrent liabilities" on PPL's and PPL Electric's Balance Sheet.liabilities.

(PPL and PPL Energy Supply)

WPD operates under distribution licenses granted by and price controls set by Ofgem. The price control formula that governs WPD's allowed revenue is designed to provide economic incentives to minimize operating, capital and financing costs. The price control formula is normally determined every five years. Ofgem completed a review in December ~~2009.~~2009 that became effective April 1, 2010 and will continue through March 31, 2015.

WPD is not subject to accounting for the effects of certain types of regulation as prescribed by GAAP.

Accounting Records (PPL and PPL Electric)

The system of accounts for LG&E, KU and PPL Electric is maintained in accordance with the Uniform System of Accounts prescribed by the FERC and adopted by the ~~PUC.~~applicable state regulatory commissions.

Use of Estimates (PPL, PPL Energy Supply and PPL Electric)

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Loss Accruals (PPL, PPL Energy Supply and PPL Electric)

Potential losses are accrued when (1) information is available that indicates it is "probable" that a loss has been incurred, given the likelihood of the uncertain future events and (2) the amount of the loss can be reasonably estimated. Accounting guidance defines "probable" as cases in which "the future event or events are likely to occur." PPL and its subsidiaries continuously assess potential loss contingencies for environmental remediation, litigation claims, regulatory penalties and other events. PPL and its subsidiaries discount loss accruals for environmental remediation when appropriate.

PPL and its subsidiaries do not record the accrual of contingencies that might result in gains, unless recovery is assured.

Changes in Classification (PPL, PPL Energy Supply and PPL Electric)

The classification of certain amounts in the ~~2008~~2009 and ~~2007~~2008 financial statements have been changed to conform to the current presentation. The changes in classification did not affect "Net Income Attributable to PPL Corporation" or "PPL Corporation Shareowners' Common Equity," "Net Income Attributable to PPL Energy Supply" or PPL Energy Supply's "Member's equity" or ~~"Income~~"Net Income Available to ~~PPL"~~PPL Corporation" or PPL Electric's "Shareowners' ~~Equity".~~Equity."

The classification on the Statements of Cash Flows has not been changed for the classification of amounts to Discontinued Operations.

Comprehensive Income (PPL and PPL Energy Supply)

Comprehensive income, which includes net income and OCI, consists of changes in equity from transactions not related to shareowners. Comprehensive income is shown on PPL's and PPL Energy Supply's Statements of Comprehensive Income.

AOCI, which is presented on the Balance Sheets of PPL and included in Member's Equity on the Balance Sheets of PPL Energy Supply, consisted of these after-tax ~~amounts~~gains (losses) at December 31.

2009 2008
PPL
Foreign currency translation adjustments $ (136 ) $ (237 )
Unrealized gains on available-for-sale securities 62 18
Net unrealized gains (losses) on qualifying derivatives 602 (21 )
Equity investee's AOCI (2 ) (3 )
Defined benefit plans:
Prior service cost (61 ) (75 )
Actuarial loss (993 ) (657 )
Transition obligation (9 ) (10 )
$ (537 ) $ (985 )

										2010		2009
PPL							PPL
Foreign currency translation adjustments							Foreign currency translation adjustments		$	(195)	$	(136)
Unrealized gains on available-for-sale securities							Unrealized gains on available-for-sale securities			86		62
Net unrealized gains on qualifying derivatives							Net unrealized gains on qualifying derivatives			695		602
Equity investees' AOCI							Equity investees' AOCI			(2)		(2)
Defined benefit plans:							Defined benefit plans:
								Prior service cost		(32)		(61)
								Actuarial loss		(1,032)		(993)
								Transition asset (obligation)		1		(9)
									$	(479)	$	(537)

PPL Energy Supply							PPL Energy Supply
Foreign currency translation adjustments	$	(136	)	$	(237	)	Foreign currency translation adjustments		$	(195)	$	(136)
Unrealized gains on available-for-sale securities		62			18		Unrealized gains on available-for-sale securities			86		62
Net unrealized gains (losses) on qualifying derivatives		573			(12	)
Net unrealized gains on qualifying derivatives							Net unrealized gains on qualifying derivatives			732		573
Equity investee's AOCI		(2	)		(3	)	Equity investee's AOCI			(2)		(2)
Defined benefit plans:							Defined benefit plans:
Prior service cost		(44	)		(54	)
Actuarial loss		(930	)		(608	)
Transition obligation		(7	)		(8	)
	$	(484	)	$	(904	)		Prior service cost		(23)		(44)
								Actuarial loss		(953)		(930)
								Transition obligation				(7)
									$	(355)	$	(484)

Earnings Per Share (PPL)

EPS is computed using the two-class method, which is an earnings allocation method for computing EPS that treats a participating security as having rights to earnings that would otherwise have been available to common shareowners. Share-based payment awards that provide recipients a non-forfeitable right to dividends or dividend equivalents are considered participating securities.

Basic EPS is computed by dividing income available to PPL common shareowners by the weighted-average number of common shares outstanding during the period. Diluted EPS is computed by dividing income available to PPL common shareowners by the weighted-average number of shares outstanding that are increased for additional shares that would be outstanding if potentially dilutive non-participating securities were converted to common shares. In 2009, these securities consisted of stock options and performance units granted under the incentive compensation plans. In 2008, these securities consisted of stock options, performance units and PPL Energy Supply's 2-5/8% Convertible Senior Notes. In 2007, these securities consisted of stock options and PPL Energy Supply's 2-5/8% Convertible Senior Notes.

Price Risk Management

(PPL and PPL Energy Supply)

PPL and PPL Energy Supply enter into energy and energy-related contracts to hedge the variability of expected cash flows associated with their generating units and marketing activities, as well as for trading purposes. PPL and PPL Energy Supply enter into interest rate ~~derivative~~ contracts to hedge their exposure to changes in the fair value of their debt instruments and to hedge their exposure to variability in expected cash flows associated with existing debt instruments or forecasted issuances of debt. PPL and PPL Energy Supply also enter into foreign currency ~~derivative~~exchange contracts to hedge foreign currency exposures related to firm commitments, recognized assets or liabilities, forecasted transactions, net investments and foreign earnings translation.

Certain of PPL and PPL Energy ~~Supply have~~Supply's energy and energy-related contracts ~~that~~ meet the definition of a ~~derivative.~~derivative, while others do not meet the definition of a derivative because they lack a notional amount or a net settlement provision. In cases where there is no net settlement provision, PPL periodically reviews these contracts to assess whether a market mechanism has evolved which could facilitate net settlement. Certain derivative energy contracts have been excluded from the requirements of derivative accounting treatment because they meet the definition of a NPNS. These contracts are accounted for using accrual accounting. All other contracts that have been classified as derivative contracts are reflected on the balance sheet at their fair value. These contracts are recorded as "Price risk ~~management~~manag ement assets" and "Price risk management liabilities" on the Balance Sheets. ~~Short-term derivative~~Derivative positions that deliver within a year are included in "Current Assets" and "Current Liabilities." PPL ~~records long-term derivative positions in "Regulatory and Other Noncurrent Assets" and "Deferred Credits and Other Noncurrent Liabilities"~~ and PPL Energy Supply ~~records long-term~~record derivative positions that deliver beyond a year in "Other Noncurrent Assets" and "Deferred Credits and Other Noncurrent Liabilities." OnEvery trade is entered into the risk management system with an assigned strategy and accounting classification. Processes exist that allow for subsequent review and validation of the trade information. These strategies are discussed in more detail in Note 19. PPL's accounting department provides the traders and the risk management department with guidelines on appropriate accounting classifications for various trade types and strategies. Some examples of these guidelines include, but are not limited to:

·	Physical coal, limestone, uranium, electric transmission, gas transportation, gas storage and renewable energy credit contracts are not derivatives due to the lack of net settlement provisions.

·	Only contracts where physical delivery is deemed probable throughout the entire term of the contract can qualify for the NPNS exception.

·	Physical transactions that permit cash settlement and financial transactions do not qualify for NPNS because physical delivery cannot be asserted; however, these transactions can receive cash flow hedge treatment if they lock in the future cash flows for energy-related commodities.

·	Certain purchased option contracts or net purchased option collars may receive hedge accounting treatment. Those that are not eligible are marked to fair value through earnings.

·	Derivative transactions that do not qualify for NPNS or hedge accounting treatment are marked to fair value through earnings.

A similar process is also followed by PPL's treasury department as it relates to interest rate and foreign currency derivatives. The following accounting guidelines are provided to the treasury department staff:

·	Transactions to lock in an interest rate prior to a debt issuance can be designated as cash flow hedges.

·	Transactions entered into to hedge fluctuations in the fair value of existing debt can be designated as fair value hedges.

·	Transactions entered into to hedge the value of a net investment of foreign operations can be designated as net investment hedges.

Derivative transactions that do not qualify for hedge accounting treatment are marked to fair value through earnings or through regulatory assets/liabilites if approved by the appropriate regulatory body. These transactions generally include hedges of earnings translation risk associated with subsidiaries that report their financial statements in a currency other than the U.S. dollar. As such, these transactions reduce earnings volatility due solely to changes in foreign currency exchange rates.

Therefore, on the date the derivative contract is executed, PPL may designate the derivative as NPNS, a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment ~~("fair~~(fair value ~~hedge")~~hedge), a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability ~~("cash~~(cash flow ~~hedge")~~hedge), a foreign currency fair value or cash flow hedge ~~("foreign~~(foreign currency ~~hedge")~~hedge) or a hedge of a net investment in a foreign operation ~~("net~~(net investment ~~hedge")~~hedge). Other derivatives may be linked to certain risk management strategies, but hedge accounting treatment is not permitted or elected. Finally, some derivatives have been entered into for proprietary trading purposes. As such, similar derivatives may receive different accounting treatment, depending o n the intended use of such derivative instrument.

Changes in the fair value of derivatives are recorded in either OCI or in current-period ~~earnings.~~ earnings, except that LG&E records the change in fair value of its interest rate swap contracts as a regulatory asset or liability since such costs are either currently being recovered in customer rates or are probable of future recovery.

Cash inflows and outflows related to derivative instruments are included as a component of operating, investing or financing activities on the Statements of Cash Flows, depending on the underlying nature of the hedged items.

PPL and its subsidiaries have elected not to offset net derivative positions in the financial statements. Accordingly, PPL and its subsidiaries do not offset such derivative positions against the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) under master netting arrangements.

Gains and losses associated with non-trading bilateral sales of electricity at major market delivery points are netted with purchases that offset the sales at those same delivery points. A major market delivery point is any delivery point with liquid pricing available.

PPL and PPL Energy Supply reflect their net realized and unrealized gains and losses associated with all derivatives that are held for trading purposes in the "Net energy trading margins" line on the Statements of Income.

See ~~Note~~Notes 18 and 19 for additional information on derivatives.

(PPL and PPL Electric)

To meet its obligation as a PLR to its customers, PPL Electric has entered into contracts that meet the definition of a derivative. These contracts have been excluded from the requirements of derivative accounting treatment because they meet the definition of a NPNS and are accounted for using accrual accounting. See Notes 1718 and 1819 for additional information.

Revenue

Utility Revenue

(PPL)

The Statements of Income "Utility" line item contains ~~revenues~~rate-regulated revenue from ~~domestic and U.K. rate-regulated delivery operations.~~the following:

			2010		2009		2008

Domestic electric revenue (a)		$	2,856	$	3,218	$	3,290
U.K. electric revenue (b)			727		684		824
Domestic natural gas revenue (c)			85
	Total	$	3,668	$	3,902	$	4,114

(a)	Represents revenue from the regulated generation, transmission and/or distribution of electricity in Pennsylvania, Kentucky, Virginia and Tennessee, including regulated wholesale revenue.

(b)	Represents electric revenue from the operation of WPD's distribution networks.

(c)	Represents revenue from the distribution and sale of natural gas in Kentucky.

(PPL Energy Supply)

The Statements of Income "Utility" line item contains ~~revenues~~electric revenue from the ~~U.K. rate-regulated delivery operations.~~operation of WPD's distribution network.

(PPL Electric)

Since most of PPL Electric's operations are regulated, it is not meaningful to use a "Utility" caption. Therefore, ~~the revenues of~~ PPL ~~Electric are~~Electric's revenue is presented according to specific types of revenue.

Revenue Recognition

(PPL, PPL Energy Supply and PPL Electric)

Operating revenues, except for "Energy-related businesses," are recorded based on energy deliveries through the end of the calendar month. Unbilled retail revenues result because customers' meters are read and bills are rendered throughout the month, rather than all being read at the end of the month. Unbilled revenues for a month are calculated by multiplying an estimate of unbilled kWh by the estimated average cents per kWh. Unbilled wholesale energy revenues are recorded at month-end to reflect estimated amounts until actual dollars and MWhs are confirmed and invoiced. At that time, unbilled revenue is reversed and actual revenue is recorded.

PPL Energy Supply records energy marketing activity in the period when the energy is delivered. Generally, the wholesale sales and purchases that qualify as derivative instruments held for non-trading purposes are reported gross on the Statements of Income within "Wholesale energy marketing" and "Energy purchases." Additionally, the bilateral sales and purchases that are designated as speculative trading activities and qualify as derivative instruments for accounting purposes are reported net on the Statements of Income within "Net energy trading margins." Spot market activity that balances PPL Energy Supply's physical trading positions is included on the Statements of Income in "Net energy trading margins."

Certain PPL subsidiaries participate in RTOs, primarily in ~~PJM, but also in the surrounding regions of New York (NYISO), New England (ISO-NE) and the Midwest (MISO).~~PJM. In PJM, PPL EnergyPlus is a marketer, a load-serving entity to its customers who have selected it as a supplier and a seller for PPL's generation subsidiaries. PPL Electric is a transmission owner and PLR in PJM. In ISO-NE, PPL EnergyPlus is a marketer, a load-serving entity, and a seller for PPL's New England generating assets. In the NYISO and MISO regions, PPL EnergyPlus acts as a marketer. PPL Electric does not participate in ISO-NE, NYISO or MISO. A function of interchange accounting is to match participants' MWh entitlements (generation plus scheduled bilateral purchases) against their MWh obligations (load plus scheduled bilateral sales) during every hour of every day. If the net result during any given hour is an entitlement, the participant is credited with a spot-market sale to the ISO at the respective market price for that hour; if the net result is an obligation, the participant is charged with a spot-market purchase from the ISO at the respective market ~~price~~pric e for that hour. ISO purchases and sales are not allocated to individual customers. PPL records the hourly net sales and purchases in its financial statements as wholesale energy marketing and energy purchases.

"Energy-related businesses" revenue includes ~~revenues~~revenue from the mechanical contracting and engineering subsidiaries, as well as WPD's telecommunications and property subsidiaries. The mechanical contracting and engineering subsidiaries record ~~revenues~~revenue from construction contracts on the percentage-of-completion method of accounting, measured by the actual cost incurred to date as a percentage of the estimated total cost for each contract. Accordingly, costs and estimated earnings in excess of billings on uncompleted contracts are recorded ~~as a current asset~~within "Unbilled revenues" on the Balance Sheets, and billings in excess of costs and estimated earnings on uncompleted contracts are recorded ~~as a~~within "Other current ~~liability~~liabilities" on the Balance Sheets. The amount of costs in excess of billings was $5$9 million and ~~$10~~$5 million at December 31, ~~2009~~2010 and ~~2008,~~2009, and the amount of billings in excess of costs was ~~$69~~$70 million and ~~$80~~$69 million at December 31, ~~2009~~2010 and ~~2008.~~2009.

Accounts Receivable

(PPL, PPL Energy Supply and PPL ~~Energy Supply)~~

~~During 2007, PPL recognized $55 million of revenue related to a settlement agreement for cost-based payments based upon the RMR status of units at its Wallingford, Connecticut generating facility.~~Electric)

(Accounts receivable are reported in the Balance Sheets at the gross outstanding amount adjusted for an allowance for doubtful accounts. For PPL, ~~and PPL Electric~~)see Note 10 for information related to the acquisition of LKE. The initial accounts receivable acquired in the transaction were recorded at fair value on November 1, 2010.

~~Beginning November 1, 2008,~~ PPL Electric's transmission revenues were billed in accordance with a FERC tariff that utilizes a formula-based rate recovery mechanism. The tariff allows for recovery of actual transmission costs incurred, a return on transmission plant placed in service andcustomers may elect to procure generation supply from an incentive return, including a return on construction work in progress, on the Susquehanna-Roseland transmission line project. The tariff utilizes estimated costs for the current year billing to customers and requires a true-up to adjust for actual costs in the subsequent year's rate. In August 2009, the FERC approved this formula-based rate recovery mechanism.alternative supplier. As a result of a PUC-approved purchase of accounts receivable program, beginning in the ~~annual update~~first quarter of ~~the rate is now implemented automatically without requiring specific approval by the FERC before going into effect.~~2010, PPL Electric ~~accrues or defers revenues applicable to any estimated true-up of this formula-based rate. At December 31, 2009~~has purchased certain accounts receivable from alternative suppliers at a ~~net asset of $5 million was accrued,~~nominal discount, which ~~will be reflected in future billings.~~

~~In 2009,~~reflects a provision for uncollectible accounts. Additionally, PPL Electric ~~recorded~~receives a ~~$3 million pre-tax true-up ($2 million after-tax) related to~~nominal fee for administering the ~~2008 portion of the FERC formula-based transmission revenues.~~program. The ~~true-up, reflected~~alternative suppliers (including PPL EnergyPlus) have no continuing involvement or interest in the ~~Pennsylvania Delivery segment for~~purchased accounts receivable. The purchased accounts receivable are initially recorded at fair value using a market approach based on the purchase price paid and are classified as Level 2 in the fair value hierarchy. The purchased accounts recei vable have substantially the same risk profile and payment terms as PPL ~~is not considered by management as material to the financial statements of~~Electric's other customer accounts receivable. During 2010, PPL and PPL Electric ~~for the years 2009 and 2008.~~purchased $607 million of accounts receivable from third parties. During 2010, PPL Electric purchased $212 million of accounts receivable from PPL EnergyPlus.

PPL Electric is charged transmission related costs by PJM applicable to PLR customers. PPL Electric passes these costs on to customers through an estimated transmission service charge and records a true-up to adjust for actual cost. Any over- or undercollections from customers are refunded or collected through a transmission service charge adjustment. At December 31, 2009, a liability of $39 million was accrued on the Balance Sheet in "Other current liabilities" for PPL and as "Overcollected transmission costs" for PPL Electric.

Allowance for Doubtful Accounts

(PPL, PPL Energy Supply and PPL Electric)

~~Accounts receivable are reported in the Balance Sheets at the gross outstanding amount adjusted for an allowance for doubtful accounts.~~

Accounts receivable collectability is evaluated using a combination of factors, including past due status based on contractual terms. Reserve balances are analyzed to assess the reasonableness of the balances in comparison to the actual accounts receivable balances and write-offs. Adjustments are made to reserve balances based on the results of analysis, the aging of receivables, and historical and industry trends.

Additional specific reserves for uncollectible accounts receivable, such as bankruptcies, are recorded on a case-by-case basis after having been researched and reviewed by management. The nature of the item, trends in write-offs, the age of the receivable, counterparty creditworthiness and economic conditions are considered as a basis for determining the adequacy of the reserve for uncollectible account balances.

Accounts receivable are charged-off in the period in which the receivable is deemed uncollectible. Recoveries of accounts receivable previously charged-off are recorded when it is known they will be received.

The changes in the allowance for doubtful accounts, including unbilled revenues, were:

				Additions										Additions
		Balance at Beginning of Period		Charged to Income		Charged to Other Accounts	Deductions (a)		Balance at End of Period			Balance at Beginning of Period		Charged to Income			Charged to Other Accounts (a)			Deductions (b)		Balance at End of Period
PPL(c)	PPL(c)										PPL(c)
2010												$	37	$	42	(d)		7	(d)	$	31	$	55	(d)
2009		$	40	$	30		$	33	$	37			40		30						33		37
2008			40		29			29		40			40		29						29		40
2007			52		31			43		40

PPL Energy Supply(c)	PPL Energy Supply(c)										PPL Energy Supply(c)
2010												$	21	$	1					$	2	$	20
2009		$	26	$	1		$	6	$	21			26		1						6		21
2008			22		5			1		26			22		5						1		26
2007			31					9		22

PPL Electric	PPL Electric
2010												$	16	$	30					$	29	$	17
2009		$	14	$	29		$	27	$	16			14		29						27		16
2008			18		24			28		14			18		24						28		14
2007			19		29			30		18

(a)	Primarily related to a reserve against a receivable recorded for liquidated damages associated with the construction of Unit 2 of the Trimble County generation facility, and thus the provision was recorded as an adjustment to construction work in progress.

(b)	Primarily related to uncollectible accounts written off.

(c)	See Note 15 for information on allowance for doubtful accounts related to California ISO sales.

~~(PPL and PPL Energy Supply)~~

The California ISO reserves of $17 million accounted for 46% and 47% of the total allowance for doubtful accounts of PPL and 81% of the total allowance of PPL Energy Supply at December 31, 2009 and 2008. See Note 14 for additional information.

(d)	Includes amounts associated with two months of LKE activity. See Note 10 for additional information related to the acquisition of LKE.

Cash (PPL, PPL Energy Supply and PPL Electric)

Cash Equivalents

All highly liquid debt instruments purchased with original maturities of three months or less are considered to be cash equivalents.

Restricted Cash and Cash Equivalents

Bank deposits and other cash equivalents that are restricted by agreement or that have been clearly designated for a specific purpose are classified as restricted cash and cash equivalents. The change in restricted cash and cash equivalents is reported as an investing activity on the Statements of Cash Flows. On the Balance Sheets, the current portion of restricted cash and cash equivalents is shown as "Restricted cash and cash equivalents" while the noncurrent portion is included in "Other noncurrent ~~assets"~~assets." See Note 18 for total restricted cash. For PPL, the December 31, 2010 balance of restricted cash and cash equivalents included $19 million of cash collateral posted to counterparties related to interest rate swap contracts, $14 million of margin deposits posted to counterpa rties in connection with trading activities, $6 million of funds required by law to be held by WPD's captive insurance company to meet claims and $13 million of funds deposited with a trustee to defease PPL Electric's 1945 First Mortgage Bonds, as discussed in Note 7. For PPL Energy Supply, the December 31, 2010 balance included $11 million of margin deposits posted to counterparties in connection with trading activities and ~~in "Other regulatory and noncurrent assets" for PPL Electric.~~$6 million of funds required by law to be held by WPD's captive insurance company to meet claims. For PPL and PPL Energy Supply, the December 31, 2009 balance ~~of restricted cash and cash equivalents~~ consisted primarily of margin deposits posted by counterparties to PPL Energy Supply in connection with trading ~~activities and the December 31, 2008 balance consisted primarily of margin deposits posted by PPL Energy Supply to counterparties in connection with trading~~ activities. For PPL Electric, the December 31, ~~2009~~2010 and ~~2008~~December 31, 2009 balances of restricted cash and cash equivalents, including the noncurrent portion, consisted primarily of funds deposited with a trustee to defease ~~the~~PPL Electric's 1945 First Mortgage ~~Bonds. See~~Bonds, as di scussed in Note ~~17 for the amounts recorded at December 31, 2009 and 2008.~~7.

Fair Value Measurements (PPL, PPL Energy Supply and PPL Electric)

PPL and its subsidiaries value certain financial and nonfinancial assets and liabilities at fair value. Generally, the most significant fair value measurements relate to price risk management assets and liabilities, investments in securities including investments in the NDT funds and defined benefit plans, and cash and cash equivalents. PPL and its subsidiaries use, as appropriate, a market approach (generally, data from market transactions), an income approach (generally, present value techniques and option-pricing models), and/or a cost approach (generally, replacement cost) to measure the fair value of an asset or liability. These valuation approaches incorporate inputs such as observable, independent market data and/or unobservable data that management believes are predicated on the assumptions market participants would use to price an asset or liability. These inputs may incorporate, as applicable, certain risks such as nonperformance risk, which includes credit risk.

PPL and its subsidiaries prioritize fair value measurements for disclosure by grouping them into one of three levels in the fair value hierarchy. The highest priority is given to measurements using Level 1 inputs. The appropriate level assigned to a fair value measurement is based on the lowest level input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are as follows:

·	Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date. Active markets are those in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

·	Level 2 - inputs other than quoted prices included within Level 1 that are either directly or indirectly observable for substantially the full term of the asset or liability.

·	Level 3 - unobservable inputs that management believes are predicated on the assumptions market participants would use to measure the asset or liability at fair value.

Assessing the significance of a particular input requires judgment that considers factors specific to the asset or liability. As such, PPL and its subsidiaries' assessment of the significance of a particular input may affect how the assets and liabilities are classified within the fair value hierarchy. PPL and its subsidiaries recognize transfers between levels at end-of-reporting-period values. See Notes 1713, 18, and 1819 for additional information on fair value measurements.

Investments (PPL, PPL Energy Supply and PPL Electric)

Generally, the original maturity date of an investment and management's ability to sell an investment prior to its original maturity determine the classification of investments as either short-term or long-term. Investments that would otherwise be classified as short-term, but are restricted as to withdrawal or use for other than current operations or are clearly designated for expenditure in the acquisition or construction of noncurrent assets or for the liquidation of long-term debts, are classified as long-term.

Short-term Investments

Short-term investments generally include certain deposits as well as securities that are considered highly liquid or provide for periodic reset of interest rates. ~~Short-term investments have~~Investments with original maturities greater than three months and less than a year, as well as investments with original maturities of greater than a year that management has the ability and intent to sell within a year, are included in "Short-term investments" on the Balance ~~Sheets~~Sheet of PPL and ~~PPL Energy Supply and~~ in "Current ~~Assets-Other"~~Assets - Other" on the Balance ~~Sheets~~Sheet of PPL Electric.

Investments in Debt and Equity Securities

Investments in debt securities are classified as held-to-maturity and measured at amortized cost when there is an intent and ability to hold the securities to maturity. Debt and equity securities that are acquired and held principally for the purpose of selling them in the near-term are classified as trading. Trading securities are generally held to capitalize on fluctuations in their value. All other investments in debt and equity securities are classified as available-for-sale. Both trading and available-for-sale securities are carried at fair value. The specific identification method is used to calculate realized gains and losses on debt and equity securities. Any unrealized gains and losses on trading securities are included in earnings. Through March 31, ~~2009,~~200 9, unrealized gains and losses on all available-for-sale securities were reported, net of tax, in OCI or recognized in earnings when the decline in fair value below amortized cost was determined to be an other-than-temporary impairment.

~~As described in "Recognition and Presentation of Other-Than-Temporary Impairments" within "New~~ Accounting ~~Guidance Adopted," new accounting~~ guidance effective April 1, 2009 has modified the criteria for determining whether a decline in fair value of a debt security is other than temporary and whether the other-than-temporary impairment is recognized in earnings or reported in OCI. Beginning April 1, 2009, when a debt security is in an unrealized loss position:

·	if there is an intent to sell the security or a requirement to sell the security before recovery, the other-than-temporary impairment is recognized currently in earnings; or

if there is no intent to sell the security or requirement to sell the security before recovery, the portion of the other-than-temporary impairment that is considered a credit loss is recognized currently in earnings and the remainder of the other-than-temporary impairment is reported in OCI, net of tax; or

·	if there is no intent to sell the security or requirement to sell the security before recovery and there is no credit loss, the unrealized loss is reported in OCI, net of tax.

Equity securities were not impacted by this ~~new~~ accounting guidance; therefore, unrealized gains and losses on available-for-sale equity securities continue to be reported, net of tax, in OCI. Earnings continue to be charged when an equity security's decline in fair value below amortized cost is determined to be an other-than-temporary impairment. See Notes 1718 and 2123 for additional information on investments in debt and equity securities.

Long-Lived and Intangible Assets

Property, Plant and Equipment

(PPL, PPL Energy Supply and PPL Electric)

PP&E is recorded at original cost, unless impaired. The original cost for PP&E acquired in the LKE acquisition is its fair value on November 1, 2010, which approximated net book value as of the acquisition date. See Note 10 for additional information on the acquisition of LKE. If impaired, the asset is written down to fair value at that time, which becomes the new cost basis of the asset. Original cost includes material, labor, contractor costs, certain overheads and financing costs, where applicable. The cost of repairs and minor replacements are charged to expense as incurred. PPL records costs associated with planned major maintenance projects in the period in which the costs are incurred. No costs are accrued in advance of the period in which the work is ~~performed.~~performed for PPL Energy Supply or PPL Electric. PPL, through its subsidiaries LG&E and KU, accrues costs of removal net of estimated salvage value through depreciation which is included in the calculation of customer rates over the assets' depreciable lives in accordance with regulatory practices. Cost of removal amounts accrued through depreciation rates are accumulated as a regulatory liability until the removal costs are incurred. See Note 3 for additional information.

(PPL and PPL Electric)

AFUDC is capitalized as part of the construction costs for cost based rate regulated ~~projects.~~projects for which a return on such costs is recovered after the project is placed in service. The debt component of AFUDC is credited to "Interest Expense" and the equity component is credited to "Other Income (Expense) - net" on the Statements of Income.

(PPL and PPL Energy Supply)

Nuclear fuel-related costs, including fuel, conversion, enrichment, fabrication and assemblies, are capitalized as PP&E. Such costs are amortized over the period the fuel is spent using the unit-of-production method and included in "Fuel" on the Statements of Income.

~~PPL's unregulated entities~~PPL and PPL Energy Supply capitalize interest costs as part of construction costs for ~~non-regulated projects.~~projects not subjected to cost-based rate regulation.

The following capitalized interest was excluded from "Interest Expense" on the Statements of Income.

	PPL		PPL Energy Supply				PPL
					PPL		Energy Supply

2010					$	30	$	33
2009	$	44	$	45		44		45
2008		57		56		57		56
2007		54		54

(PPL, PPL Energy Supply and PPL Electric)

Included in PP&E on the balance sheet are capitalized costs of software projects that were developed or obtained for internal use. These capitalized costs are amortized ratably over the expected lives of the projects when they become operational, generally not to exceed five years. Following are capitalized software costs and the accumulated amortization.

	December 31, 2009				December 31, 2008				December 31, 2010				December 31, 2009
	Carrying Amount		Accumulated Amortization		Carrying Amount		Accumulated Amortization		Gross				Gross
									Carrying		Accumulated		Carrying		Accumulated
PPL	$	97	$	52	$	62	$	39
									Amount		Amortization		Amount		Amortization

PPL (a)									$	213	$	70	$	97	$	52
PPL Energy Supply		24		19		24		18		30		20		24		19
PPL Electric		37		15		17		10		54		24		37		15

(a)	The December 31, 2010 gross carrying amount includes $84 million from the acquisition of LKE.

Amortization expense of capitalized software costs was as follows:

	PPL		PPL Energy Supply		PPL Electric				PPL
							PPL		Energy Supply		PPL Electric

2010							$	21	$	3	$	9
2009	$	13	$	2	$	5		13		2		5
2008		8		2		3		8		2		3
2007		10		2		4

The amortization of capitalized software is included in "Depreciation" on the Statements of Income.

Depreciation (PPL, PPL Energy Supply and PPL Electric)

Depreciation is computed over the estimated useful lives of property using various methods including the straight-line, composite and group methods. When a component of PP&E is retired that was depreciated under the composite or group method, the original cost is charged to accumulated depreciation. When all or a significant portion of an operating unit that was depreciated under the composite or group method is retired or sold, the property and the related accumulated depreciation account is reduced and any gain or loss is included in income, unless otherwise required by regulators.

In 2007, WPD reviewed the useful lives of its distribution network assets. Effective April 1, 2007, after considering information from Ofgem and other internal and external surveys, the weighted average useful lives were extended to 54 years from 40 years. The effect of this change in useful lives for 2007 was to increase income from continuing operations after income taxes attributable to PPL/PPL Energy Supply and net income attributable to PPL/PPL Energy Supply, as a result of lower depreciation, by $13 million (or $0.03 per share, basic and diluted, for PPL).

Following are the weighted-average rates of depreciation at December 31.

2009
PPL PPL Energy Supply PPL Electric

Generation 2.48% 2.48%
Transmission and distribution 2.17% 2.33% 2.04%
General 7.32% 10.19% 4.00%

2008
PPL PPL Energy Supply PPL Electric

Generation 2.39% 2.39%
Transmission and distribution 2.58% 3.07% 2.20%
General 8.09% 11.6% 4.33%

~~The annual provisions for depreciation have been computed principally in accordance with the following ranges, in years, of assets lives.~~

	2010						2009
			PPL						PPL
			Energy		PPL				Energy		PPL
	PPL		Supply		Electric		PPL		Supply		Electric

Regulated utility plant (a)		3.27		2.31		2.27		2.24		2.24		2.24
Non-regulated PP&E - Generation		2.76		2.76				2.48		2.48

(a)

~~PPL~~

For PPL, ~~Energy Supply~~

the 2010 weighted-average depreciation rate was impacted by the acquisition of LKE. In accordance with purchase accounting guidelines, the original cost for PP&E acquired in the LKE acquisition is its fair value on November 1, 2010, which approximated net book value as of the acquisition date. This resulting lower original cost basis of LKE's PP&E was used in the calculation of the weighted-average depreciation rate for PPL ~~Electric~~

~~Generation~~

~~40-50~~

~~Transmission and distribution~~

~~5-70~~

~~5-60~~

~~15-70~~

~~General~~

~~3-60~~

~~5-55~~

for 2010. Therefore, the consolidation of LKE results in a significantly higher weighted-average rate compared to PPL's historical rates. Excluding LKE, PPL's 2010 weighted-average depreciation rate was 2.28%.

Goodwill and Other Intangible Assets (PPL, PPL Energy Supply and PPL Electric)

Goodwill represents the excess of the purchase price paid over the ~~estimated~~ fair value of the identifiable net assets acquired ~~and liabilities assumed~~ in the acquisition of a business. ~~PPL's reporting units are significant businesses that have discrete financial information and the operating results are regularly reviewed by segment management.~~

Other acquired intangible assets are initially measured based on their fair value. Intangibles that have finite useful lives are amortized over their useful lives based upon the pattern in which the economic benefits of the intangible assets are consumed or otherwise used. Costs incurred to renew or extend terms of licenses are capitalized as intangible assets.

When determining the useful life of an intangible asset, including intangible assets that are renewed or extended, PPL and its subsidiaries ~~consider:~~consider the expected use of the asset; the expected useful life of other assets to which the useful life of the intangible asset may relate; legal, regulatory, or contractual provisions that may limit the useful life; the company's historical experience as evidence of its ability to support renewal or extension; the effects of obsolescence, demand, competition, and other economic factors; and the level of maintenance expenditures required to obtain the expected future cash flows from the asset.

PPL and its subsidiaries account for emission allowances as intangible assets. Since the economic benefits of emission allowances are not diminished until they are consumed, emission allowances are not amortized; rather, they are expensed when consumed. Such expense is included in "Fuel" on the Statements of Income. Gains and losses on the sale of emission allowances are included in "Other operation and maintenance" on the Statements of Income. In addition, "vintage year" swaps are accounted for as nonmonetary transactions that are required to be measured at fair value. Certain emission allowances are expected to be sold rather than consumed. These emission allowances are tested for impairment when events or changes in circumstances, such as a decline in market prices, indicate that their carrying value might be impaired.

PPL and its subsidiaries also account for RECs as intangible assets, and the associated costs are not expensed until the credits are consumed. Such expense is included in "Energy purchases" on the Statements of Income. Gains and losses on the sale of RECs are included in "Other ~~operating~~operation and maintenance" on the Statements of Income.

See Note 1920 for additional information on goodwill and other intangible assets.

Asset Impairment (PPL, PPL Energy Supply and PPL Electric)

PPL and its subsidiaries review long-lived assets that are subject to depreciation or amortization, including finite-lived intangibles, for impairment when events or circumstances indicate carrying amounts may not be recoverable.

For a long-lived asset ~~to be~~classified as held and used, an impairment exists when the carrying amount exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the asset is impaired, an impairment loss is recorded to adjust the asset's carrying amount to its fair value. Certain emission allowances are expected to be sold rather than consumed. These emission allowances are tested for impairment when events or changes in circumstances, such as a decline in market prices, indicate that their carrying value might be impaired. See ~~Notes 8 and 17~~Note 18 for a discussion of impairment charges recorded associated with long-lived assets ~~to be~~classified as held and used.

For a long-lived asset classified as held for sale, an impairment exists when the carrying amount of the asset (disposal group) exceeds its fair value less cost to sell. If the asset (disposal group) is impaired, an impairment loss is recorded to adjust the carrying amount of the asset (disposal group) to its fair value less cost to sell. See Notes 9 and 1718 for a discussion of impairment charges recorded associated with long-lived assets classified as held for sale.

Goodwill is reviewed for impairment, at the reporting unit level, annually or more frequently when events or circumstances indicate that the carrying amount of a reporting unit may be greater than the unit's fair value. Additionally, goodwill must be tested for impairment after a portion of goodwill has been allocated to a business to be disposed of. PPL's reporting units are significant businesses that have discrete financial information, and the operating results are regularly reviewed by segment management. PPL's reporting units are at or one level below its operating segments. If the carrying amount of the reporting unit, including goodwill, exceeds its fair value, the implied fair value of goodwill must be calculated. The implied fair value of goodwill is determined in the same ~~manner~~m anner as the amount of goodwill in a business combination. That is, the fair value of a reporting unit is allocated to all assets and liabilities of that unit as if the reporting unit had been acquired in a business combination. The excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill. If the implied fair value of goodwill is less than the carrying amount, an impairment loss is recognized for an amount equal to that difference.

The goodwill recognized as a result of the acquisition of LKE, although entirely recorded at LG&E and KU, was assigned to the reporting units expected to benefit from the acquisition, which are the new Kentucky Regulated segment and the Supply segment. See Note 10 for additional information regarding the acquisition.

Asset Retirement Obligations

(PPL, PPL Energy Supply and PPL Electric)

PPL and its subsidiaries recognize various legal obligations associated with the retirement of long-lived assets as liabilities in the financial statements. Initially, this obligation is measured at fair value. An equivalent amount is recorded as an increase in the value of the capitalized asset and allocated to expense over the useful life of the asset. Until the obligation is settled, the liability is increased, through the recognition of accretion expense inclassified within "Other operation and maintenance" on the ~~income statement,~~Statements of Income, for changes in the obligation due to the passage of time.

Estimated ARO costs and settlement dates, which affect the carrying value of ~~various AROs~~the ARO and the related ~~assets,~~capitalized asset, are reviewed periodically to ensure that any material changes are incorporated into the latest estimate of the ~~obligations.~~

ARO. Any change to the capitalized asset, positive or negative, is amortized over the remaining life of the associated long-lived asset. See Note 2021 for additional information on AROs and a discussion of ~~accounting~~the remeasurement in the third quarter of 2010 of the ARO for ~~AROs.~~the decommissioning of the Susquehanna nuclear units.

(PPL)

The accretion and depreciation, related to an ARO, recorded by LG&E and KU is offset with a regulatory asset, such that there is no income statement impact. The regulatory asset is relieved when the ARO is settled.

Compensation and Benefits

Defined Benefits (PPL, PPL Energy Supply and PPL Electric)

PPL and certain of its subsidiaries sponsor various defined benefit pension and other postretirement plans. An asset or liability is recorded to recognize the funded status of all defined benefit plans with an offsetting entry to OCI or to regulatory assets or liabilities for LG&E, KU and PPL Electric. Consequently, the funded status of all defined benefit plans is fully recognized on the Balance Sheets.

The expected return on plan assets is determined based on a market-related value of plan assets, which is calculated by rolling forward the prior year market-related value with contributions, disbursements and long-term expected return on investments. One-fifth of the difference between the actual value and the expected value is added (or subtracted if negative) to the expected value to determine the new market-related value.

PPL uses an accelerated amortization method for the recognition of gains and losses for its pension plans. Under the accelerated method, gains and losses in excess of 10% but less than 30% of the greater of the plan's projected benefit obligation or the market-related value of plan assets are amortized on a straight-line basis over the estimated average future service period of plan participants. Gains and losses in excess of 30% of the plan's projected benefit obligation are amortized on a straight-line basis over a period equal to one-half of the average future service period of the plan participants.

See Note 1213 for a discussion of defined benefits.

Stock-Based Compensation

(PPL, PPL Energy Supply and PPL Electric)

PPL grants stock options, restricted stock, restricted stock units and performance units to certain employees, and stock units and restricted stock units to directors, under several stock-based compensation plans. PPL grants most of its stock-based awards in the first quarter of each year. PPL and its subsidiaries recognize compensation expense for stock-based awards based on the fair value method. Stock options with graded vesting (i.e., that vest in installments) are valued as a single award. PPL grants stock options with an exercise price that is not less than the fair value of PPL's common stock on the date of grant. See Note 1112 for a discussion of stock-based compensation. All awards are recorded as equity or a liability on the Balance Sheets. Stock-based ~~compensation~~co mpensation is included in "Other operation and maintenance" ~~expense~~ on the Statements of Income.

(PPL Energy Supply and PPL Electric)

PPL Energy Supply's and PPL Electric's stock-based compensation expense includes an allocation of PPL Services' expense.

Other

Debt Issuance Costs

Debt issuance costs are deferred and amortized over the term of the related debt using the interest method or another method, generally straight-line, if the results obtained are not materially different than those that would result from the interest method.

Income Taxes

(PPL, PPL Energy Supply and PPL Electric)

PPL and its domestic subsidiaries file a consolidated U.S. federal income tax return.

Significant management judgment is required in developing PPL and its subsidiaries' provision for income taxes, primarily due to the uncertainty related to tax positions taken or expected to be taken in tax returns and the determination of deferred tax assets, liabilities and valuation allowances.

Significant management judgment is required to determine the amount of benefit to be recognized in relation to an uncertain tax position. PPL and its subsidiaries evaluate tax positions following a two-step process. The first step requires an entity to determine whether, based on the technical merits supporting a particular tax position, it is more likely than not (greater than a 50% chance) that the tax position will be sustained. This determination assumes that the relevant taxing authority will examine the tax position and is aware of all the relevant facts surrounding the tax position. The second step requires an entity to recognize in the financial statements the benefit of a tax position that meets the more-likely-than-not recognition criterion. The benefit recognized is ~~measured~~measure d at the largest amount of benefit that has a likelihood of realization, upon settlement, that exceeds 50%. The amounts ultimately paid upon resolution of issues raised by taxing authorities may differ materially from the amounts accrued and may materially impact the financial statements of PPL and its subsidiaries in the future.

Deferred income taxes reflect the net future tax effects of temporary differences between the carrying amounts of assets and liabilities for accounting purposes and their basis for income tax purposes, as well as the tax effects of net operating losses and tax credit carryforwards.

PPL and its subsidiaries record valuation allowances to reduce deferred tax assets to the amounts that are more likely than not to be realized. PPL and its subsidiaries consider the reversal of temporary differences, future taxable income and ongoing prudent and feasible tax planning strategies in initially recording and subsequently reevaluating the need for valuation allowances. If PPL and its subsidiaries determine that they are able to realize deferred tax assets in the future in excess of recorded net deferred tax assets, adjustments to the valuation allowances increase income by reducing tax expense in the period that such determination is made. Likewise, if PPL and its subsidiaries determine that they are not able to realize all or part of net deferred tax assets in the future, adjustments to the ~~valuation~~va luation allowances would decrease income by increasing tax expense in the period that such determination is made.

PPL ~~Energy Supply~~ and ~~PPL Electric~~its subsidiaries defer investment tax credits when the credits are utilized and ~~are amortizing~~amortize the deferred amounts over the average lives of the related assets.

PPL and its subsidiaries recognize interest and penalties in "Income Taxes" on their Statements of Income.

See Note 5 for additional discussion regarding income taxes.

(PPL Energy Supply and PPL Electric)

The income tax provision for PPL Energy Supply and PPL Electric is calculated in accordance with an intercompany tax sharing policy which provides that taxable income be calculated as if PPL Energy Supply, PPL Electric and any domestic subsidiaries each filed a separate consolidated return. Tax benefits are not shared between companies. A tax benefit inures only to the entity that gave rise to said benefit. The effect of PPL filing a consolidated tax return is taken into account in the settlement of current taxes and the recognition of deferred taxes. PPL Energy Supply's intercompany tax payable was $26 million at December 31, 2010 and the intercompany tax receivable was $21 million ~~and $15 million~~ at December 31, ~~2009 and 2008.~~2009. PPL Electric's intercompany tax receivable was ~~$19~~$74 million and ~~$15 million~~$19 mill ion at December 31, ~~2009~~2010 and ~~2008.~~2009.

(PPL and PPL Electric)

The provision for PPL and PPL Electric's deferred income taxes for regulated assets is based upon the ratemaking principles reflected in rates established by the ~~PUC and the FERC.~~regulators. The difference in the provision for deferred income taxes for regulated assets and the amount that otherwise would be recorded under GAAP is deferred and included on the Balance Sheet in ~~taxes recoverable through future rates in~~noncurrent "Regulatory assets" or "Regulatory liabilities" for PPL and ~~in "Taxes recoverable through future rates" for~~ PPL Electric.

Taxes, Other Than Income (PPL, PPL Energy Supply and PPL Electric)

PPL and its subsidiaries present sales taxes in "Accounts Payable" and value-added taxes in "Taxes" on their Balance Sheets. These taxes are not reflected on the Statements of Income. See Note 5 for details on taxes included in "Taxes, other than income" on the Statements of Income.

Leases

(PPL, PPL Energy Supply and PPL Electric)

PPL and its subsidiaries evaluate whether arrangements entered into contain leases for accounting purposes.

(PPL and PPL Energy Supply)

See Note 1011 for a discussion of arrangements under which PPL and PPL Energy Supply are lessees for accounting purposes.

PPL EnergyPlus ~~has~~ entered into several arrangements whereby PPL EnergyPlus iswas considered the lessor for accounting purposes. See Note 109 for additional information ~~on these leases and Note 9 for information~~ regarding the ~~anticipated~~2010 sale of the Long Island generation business ~~which includes certain~~and the leases that were transferred to the purchaser upon completion of ~~these leases.~~the sale.

Fuel, Materials and Supplies

(PPL, PPL Energy Supply and PPL Electric)

Fuel, natural gas stored underground and materials and supplies are valued at the lower of cost or market using the average cost method.

(PPL and PPL Energy Supply)

"Fuel, materials and ~~supplies~~supplies" on the Balance Sheets consisted of the following at December ~~31:~~31.

	PPL				PPL Energy Supply					PPL				PPL Energy Supply
	2009		2008		2009		2008			2010		2009		2010		2009

Fuel	$	151	$	140	$	151	$	140	Fuel	$	260	$	137	$	97	$	137
Natural gas stored underground (a)									Natural gas stored underground (a)		81		14		21		14
Materials and supplies		206		197		174		161	Materials and supplies		302		206		179		174
	$	357	$	337	$	325	$	301		$	643	$	357	$	297	$	325

(a) The majority of natural gas stored underground is available for resale.									(a) The majority of natural gas stored underground is available for resale.

Guarantees (PPL, PPL Energy Supply and PPL Electric)

Generally, the initial measurement of a guarantee liability is the fair value of the guarantee at its inception. However, there are certain guarantees excluded from the scope of accounting guidance and other guarantees that are not subject to the initial recognition and measurement provisions of accounting guidance. See Note 1415 for further discussion of recorded and unrecorded guarantees.

Treasury Stock ~~(PPL~~(PPL and PPL Electric)

PPL and PPL Electric restore all shares of common stock acquired to authorized but unissued shares of common stock upon acquisition.

Foreign Currency Translation and Transactions (PPL and PPL Energy Supply)

Assets and liabilities of international subsidiaries, where the local currency is the functional currency, are translated at the exchange rates on the date of consolidation and related revenues and expenses are translated at average exchange rates prevailing during the year. See "Business and Consolidation" above for a discussion regarding the use of a lag period. Adjustments resulting from translation are recorded in AOCI. The effect of translation is removed from AOCI upon the sale or substantial liquidation of the international subsidiary that gave rise to the translation adjustment. The local currency is the functional currency for PPL's U.K. operating company.

At December 31, 2009, the British pound sterling had strengthened in relation to the U.S. dollar as compared with the prior year end. Changes in exchange rates resulted in a foreign currency translation gain of $106 million for 2009, which primarily reflected a $225 million increase in PP&E offset by an increase of $119 million to other net liabilities. At December 31, 2008, the British pound sterling had weakened in relation to the U.S. dollar compared with the prior year end. Changes in these exchange rates resulted in a foreign currency translation loss of $520 million for 2008, which primarily reflected a $1.1 billion reduction to PP&E offset by a reduction of $580 million to other net liabilities. Changes in exchange rates resulted in a foreign currency translation gain of $65 million for 2007, which primarily reflected a $173 million increase in PP&E offset by an increase of $108 million to other net liabilities.

Gains or losses relating to foreign currency transactions are recognized ~~currently~~ in ~~income. The net~~"Other Income (Expense) - net" on the Statements of Income. Net transaction losses were insignificant in 2010, 2009 and ~~2007, and $2 million in~~ 2008.

New Accounting Guidance Adopted (PPL, PPL Energy Supply and PPL Electric)

Accounting for ~~Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)~~Transfers of Financial Assets

Effective January 1, ~~2009,~~2010, PPL and its subsidiaries ~~retrospectively~~ adopted accounting guidance ~~that requires an issuer~~issued to ~~separately account~~revise the accounting for ~~the liability and equity components~~transfers of convertible debt instruments that may be settled in cash (or other assets) upon conversion in a manner that reflects the issuer's nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. The discount that results from separating the liability and equity components will be amortized over the life of the debt and recognized as interest expense.financial assets. This guidance:

·	eliminates the concept of a qualifying special-purpose entity (QSPE); therefore, QSPEs will be subject to consolidation guidance;

·	changes the requirements for the derecognition of financial assets;

·	establishes new criteria for reporting the transfer of a portion of a financial asset as a sale;

·	requires transferors to initially recognize, at fair value, assets obtained and liabilities incurred as a result of a transfer accounted for as a sale; and

·	requires enhanced disclosures to improve the transparency around transfers of financial assets and a transferor's continuing involvement.

This guidance ~~was applicable~~is applied prospectively to ~~PPL Energy Supply's 2-5/8% Convertible Senior Notes due 2023 (Convertible Senior Notes), which upon conversion~~new transfers of financial assets. Disclosures are required ~~cash settlement of the principal amount and permitted settlement of any conversion premium in cash or PPL common stock. During 2008,~~for all of the Convertible Senior Notes were either converted at the election of the holders or redeemed at par as a result of PPL Energy Supply calling the notes for redemption. This guidance required only retrospective application with regard to the Convertible Senior Notes, as none of these notes were outstanding attransfers, including those entered into before the effective date. The retrospective application impacted PPL in periods prior to 2006. As such, PPL reduced the opening balance of "Earnings reinvested" by $13 million with a corresponding increase to "Capital in excess of par value."

~~Business Combinations~~The adoption did not have a material impact on PPL and its subsidiaries' financial statements. See Note 7 for information on PPL Electric's participation in an asset-backed commercial paper program and "Accounts Receivable" above for information on PPL Electric's purchase of accounts receivable from alternative suppliers, which are within the scope of this guidance.

Consolidation of Variable Interest Entities

Effective January 1, ~~2009,~~2010, PPL and its subsidiaries adopted accounting guidance issued to replace the quantitative-based risks and rewards calculation for determining which entity, if any, has a controlling financial interest in a VIE and is the primary beneficiary. The primary beneficiary must consolidate the VIE. This guidance:

prescribes a qualitative approach focused on identifying which entity has the power to direct the activities of a VIE that most significantly impact the VIE's economic performance and the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE;

·	requires ongoing assessments of whether an entity is the primary beneficiary of a VIE;

·	requires enhanced disclosures to improve the transparency of an entity's involvement in a VIE;

·	requires that all previous consolidation conclusions be reconsidered; and

·	requires that QSPEs be evaluated for consolidation (resulting from the elimination of the QSPE concept in the guidance addressing accounting for transfers of financial assets).

The adoption did not have a material impact on PPL and its subsidiaries' financial statements. See PPL and PPL Energy Supply's Balance Sheets and Note 22 for enhanced VIE disclosures.

Improving Disclosures about Fair Value Measurements

Effective January 1, 2010, PPL and its subsidiaries prospectively adopted accounting guidance issued to improve disclosures about fair value measurements. This guidance:

·	requires disclosures be provided for each class of assets and liabilities, with class determined on the basis of the nature and risks of the assets and liabilities;

·	clarifies that a description of valuation techniques and inputs used to measure fair value is required for Level 2 and 3 recurring and nonrecurring fair value measurements; and

·	for recurring fair value measurements, requires separate disclosure of significant transfers into and out of levels and the reasons for those transfers.

This guidance makes corresponding amendments to employers' disclosures about pensions and other postretirement benefits.

The adoption did not have a material impact on PPL and its subsidiaries' financial statements. The enhanced disclosures are presented in Notes 13 and 18.

Subsequent Measurement - Cash Flow Hedges

Effective April 1, 2010, PPL and its subsidiaries prospectively adopted accounting guidance that ~~changes~~was issued to clarify how an entity should reflect the subsequent measurement of cash flow hedges in AOCI if, during a prior period, hedge accounting ~~and reporting for business combinations occurring after its adoption. In addition, this guidance requires entities to recognize changes in unrecognized tax benefits acquired~~was not permitted. This situation may arise if an entity's retrospective assessment of hedge effectiveness indicated that the hedging relationship had not been highly effective in a ~~business combination, including business combinations~~period, but the prospective assessment of hedge effectiveness showed an expectation that ~~occurred prior to January 1, 2009,~~the hedging relationship would be highly effective in ~~income tax expense rather than in goodwill.~~ the future; therefore, the hedging relationship continued even though hedge accounting was not permitted for a certain period. This guidance:

·	requires that the cumulative gain or loss on the derivative that is used to determine the maximum amount of gain or loss that may be reflected in AOCI exclude the gains or losses that occurred during the period when hedge accounting was not permitted; and

·	requires that the cumulative change in the expected future cash flows on the hedged transaction exclude the changes related to the period when hedge accounting was not applied.

The ~~January 1, 2009~~ adoption did not have a significant impact on PPL and its subsidiaries; however, the impact in future periods could be material. See "Commodity Price Risk (Non-trading)" in Note 19 for additional information.

In the first quarter of 2009, PPL and PPL Energy Supply recorded an income tax benefit of $14 million as a result of settling an income tax dispute. Prior to the adoption of this guidance, $7 million of this income tax benefit would have been recorded as a reduction to goodwill.

~~Noncontrolling Interests in Consolidated Financial Statements~~Pro Forma Disclosures for Business Combinations

Effective ~~January 1, 2009,~~December 31, 2010, PPL and its subsidiaries adopted accounting guidance that was issued to improve the relevancy, comparability, and transparency of the financial information an entity provides when it has a noncontrolling interest in a subsidiary and when it changes its ownership interest in a subsidiary. This guidance:

·	requires ownership interests in subsidiaries held by parties other than the parent to be presented in the consolidated statement of financial position within equity, but separate from the parent's equity;
·	~~requires the amount of consolidated net income attributable to the parent and to the noncontrolling interest to be presented on the face of the consolidated statement of income;~~
·	~~addresses the accounting for changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary and for the deconsolidation of a subsidiary; and~~
·	~~requires enhanced disclosures relating to noncontrolling interests.~~

~~PPL and its subsidiaries adopted this guidance~~ prospectively ~~except for the presentation and disclosure requirements, which required retrospective application.~~

At December 31, 2009 and 2008, PPL reflected PPL Electric's preferred securities of $301 million within "Noncontrolling Interests" on the Balance Sheets. In addition, at December 31, 2009 and 2008, PPL and PPL Energy Supply reflected previously recorded minority interests of $18 million within "Noncontrolling Interests" on the Balance Sheets.

~~Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities~~

~~Effective January 1, 2009, PPL and its subsidiaries retrospectively~~ adopted accounting guidance that requires ~~unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents to be considered participating securities and to be included in the computation~~disclosure of ~~EPS under the two-class method. The two-class method treats share-based payment awards that pay nonforfeitable dividends as a separate class of stock~~supplementary pro forma information for ~~purposes of computing EPS.~~business combinations. Under this guidance, an entity must:

·	present the pro forma disclosures as if the business combination occurred at the beginning of the prior annual period; and

·	disclose the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the pro forma revenue and earnings.

The adoption did not have a material impact on PPL and its ~~subsidiaries. As a result~~subsidiaries' financial statements. Pro forma information reflecting the acquisition of ~~its application, PPL's restricted stock, restricted stock units, and stock units granted to directors are now considered participating securities; therefore, PPL~~LKE is required to compute EPS under the two-class method. For the years ended December 31, 2008, the retrospective application caused PPL's basic EPS for income from continuing operations after income taxes available to PPL Corporation common shareholders to decrease by $0.01 and basic EPS for net income available to PPL Corporation common shareowners to decrease by $0.01. For the year ended December 31, 2007, the retrospective application caused PPL's basic EPS for income from continuing operations after income taxes available to PPL Corporation common shareholders to decrease by $0.01 and basic EPS for net income available to PPL Corporation common shareowners to decrease by $0.02. Additionally, PPL's diluted EPS for net income available to PPL Corporation common shareowners decreased by $0.01 for the year ended December 31, 2007. Seepresented in Note ~~4 for additional information.~~

~~Disclosures about Derivative Instruments and Hedging Activities~~10.

Effective January 1, 2009, PPL and its subsidiaries prospectively adopted accounting guidance that applies to all derivative instruments, including bifurcated derivative instruments and nonderivative instruments that are designated and qualify as hedging instruments, as well as related hedged items. This guidance requires an entity to expand disclosures to provide greater transparency about:

·	~~how and why it uses derivative instruments;~~
·	~~how derivative instruments and related hedged items are accounted for; and~~
·	~~how derivative instruments and related hedged items affect its financial position, results of operations and cash flows.~~

The guidance was issued to provide greater transparency by enhancing existing disclosures; therefore, the adoption did not have a material impact on PPL and its subsidiaries' financial statements. The enhanced disclosures are presented in Note 18.

~~Fair Value Measurements~~

Effective January 1, 2008, PPL and its subsidiaries adopted accounting guidance that provides a framework for measuring fair value, but elected to defer, until 2009, applying this guidance to nonfinancial assets and nonfinancial liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis. Effective January 1, 2009, PPL and its subsidiaries fully applied this guidance to fair value measurement concepts used within their financial statements where applicable.

~~Issuer's Accounting for Liabilities Measured at Fair Value with a Third-Party Credit Enhancement~~

Effective January 1, 2009, PPL and its subsidiaries prospectively adopted accounting guidance that applies to liabilities issued with an inseparable third-party credit enhancement when the liability is measured or disclosed at fair value on a recurring basis. This guidance indicates that an issuer shall disclose the existence of a third-party credit enhancement, and the fair value measurement of the liability shall not include the effect of this third-party credit enhancement.

The initial adoption did not have a material impact on PPL and its subsidiaries' financial statements, as this guidance only impacts the fair value disclosure of certain credit-enhanced debt instruments. See "Financial Instruments Not Recorded at Fair Value" within Note 17 for these disclosures.

~~Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly~~

~~Effective April 1, 2009, PPL and its subsidiaries prospectively adopted accounting guidance that:~~

·	~~provides additional direction for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased;~~
·	~~includes guidance on identifying circumstances that indicate a transaction is not orderly; and~~
·	emphasizes that the objective of a fair value measurement remains the same; that is, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions.

~~Comparative disclosures are required only for periods ending after initial adoption. The adoption did not have a material impact on PPL and its subsidiaries' financial statements.~~

~~Recognition and Presentation of Other-Than-Temporary Impairments~~

Effective April 1, 2009, PPL and its subsidiaries retrospectively adopted accounting guidance that modified the requirement that an entity have the intent and ability to hold an impaired debt security to recovery in order to conclude an impairment was temporary. Under this guidance, an impairment of a debt security is other than temporary if (1) an entity has the intent to sell the security, (2) it is more likely than not that an entity will be required to sell the security before recovery, or (3) an entity does not expect to recover the entire amortized cost basis of the security, referred to as a credit loss.

In addition, this guidance changes the recording of an other-than-temporary impairment on a debt security if the reason for the other-than-temporary impairment is the recognition of a credit loss. In this situation, the other-than-temporary impairment will be separated into the credit loss component, which is recognized in earnings, and the remainder of the other-than-temporary impairment, which is recorded in OCI.

For a debt security held at the beginning of the period of adoption for which an other-than-temporary impairment was previously recognized, if an entity does not intend to sell the debt security and it is not more likely than not that the entity will be required to sell the debt security before recovery of its amortized cost basis, the cumulative effect of applying this guidance was recognized as an adjustment to the opening balance of retained earnings with a corresponding adjustment to AOCI.

This guidance affects the accounting for PPL's and PPL Energy Supply's investments in debt securities in the NDT funds. Prior to its application, PPL and PPL Energy Supply were unable to demonstrate the ability to hold an impaired debt security in the NDT funds until recovery; therefore, an unrealized loss on a debt security always represented an other-than-temporary impairment that required a current period charge to earnings. Based on the application of this guidance, certain unrealized losses on investments in debt securities are no longer considered other-than-temporary impairments and will be recorded to OCI.

Related SEC guidance was also amended to no longer apply to debt securities. As a result of the adoption, PPL and PPL Energy Supply recorded an immaterial cumulative effect adjustment to the opening balance of retained earnings with a corresponding reduction to AOCI.

~~The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles~~

~~Beginning with the period ended September 30, 2009, PPL and its subsidiaries adopted accounting guidance that establishes the FASB Accounting Standards Codification~~TM (ASC) as the primary source of authoritative GAAP, other than guidance issued by the SEC. This guidance eliminates the previous GAAP hierarchy of accounting and reporting guidance and replaces it with two levels of literature: authoritative and non-authoritative, and organizes GAAP pronouncements in a consistent manner by accounting topic. The adoption did not impact PPL and its subsidiaries' results of operations, cash flows or financial positions since the ASC did not change existing GAAP.

~~Employers' Disclosures about Pensions and Other Postretirement Benefits~~

Effective December 31, 2009, PPL and its subsidiaries prospectively adopted accounting guidance that requires an employer to enhance its disclosures about plan assets of defined benefit plans to provide users of financial statements with an understanding of:

·	~~how investment allocation decisions are made, including the factors that are pertinent to an understanding of investment policies and strategies;~~
·	~~the major classes of plan assets;~~
·	~~the inputs and valuation techniques used to measure the fair value of plan assets;~~
·	~~the effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets for the period; and~~
·	~~significant concentrations of risk within plan assets.~~

This guidance was issued to provide greater transparency within disclosures; therefore, the adoption did not have a material impact on PPL and its subsidiaries' financial statements. The enhanced disclosures are presented in Note 12.

~~New Accounting Guidance Pending Adoption~~

~~See Note 22 for a discussion of new accounting guidance pending adoption.~~

2.	Segment and Related Information

(PPL and PPL Energy Supply)

~~PPL's reportable~~PPL completed the acquisition of LKE on November 1, 2010. See Note 10 for additional information. Following the November 1, 2010 acquisition of LKE, PPL is organized into four segments: Kentucky Regulated, International Regulated (formerly International Delivery), Pennsylvania Regulated (formerly Pennsylvania Delivery) and Supply. There were no changes to the segments ~~are~~other than renaming certain segments, adding a Kentucky Regulated segment and allocating interest expense related to the Equity Units to the Kentucky Regulated segment ($21 million of which was included in the Supply segment prior to the November 1, 2010 acquisition).

For PPL, the Kentucky Regulated segment consists primarily of LKE's regulated electric generation, transmission and distribution operations, primarily in Kentucky and includes the allocation of interest expense from the Equity Units issued in June 2010 to fund the acquisition. This segment also includes LKE's regulated distribution and sale of natural gas in Kentucky.

The International ~~Delivery and Pennsylvania Delivery. The Supply~~Regulated segment primarily consists of the domestic energy marketing and trading activities, as well as the generation and development operations of PPL Energy Supply. In 2009 and 2007, PPL Energy Supply sold or agreed to sell certain Supply segment businesses. See Notes 8 and 9 for additional information.

~~The International Delivery segment consists primarily of the electricity~~regulated electric distribution operations in the U.K. In 2007, PPL completed the sale of its Latin American businesses. In 2008, the International Delivery segment recognized income tax benefits and miscellaneous expenses in Discontinued Operations in connection with the dissolution of certain Latin American holding companies. In 2009, the International ~~Delivery~~Regulated segment recognized $24 million of income tax expense in Discontinued Operations related to a correction of the calculation of tax bases of the Latin American businesses sold in 2007. In 2008, the International Regulated segment recognized income tax benefits and miscellaneous expenses in Discontinued Operations in connection with the dissolution of certain Latin American holding companies. See Note 9 for additional information.

The Pennsylvania ~~Delivery~~Regulated segment includes the regulated electric delivery operations of PPL Electric. This segment also included the regulated gas delivery operations of PPL Gas Utilities prior to its sale in October 2008. See Note 9 for additional ~~information.~~information on the sale of PPL Gas Utilities.

The ~~operating~~Supply segment primarily consists of the domestic energy marketing and trading activities, as well as the competitive generation operations of PPL Energy Supply. In 2010 and 2009, PPL Energy Supply sold or signed agreements to sell certain Supply segment facilities and businesses. See Note 9 for additional information.

"Unallocated Costs" represent one-time LKE acquisition-related costs including advisory, accounting and legal fees, certain internal costs and Bridge Facility costs. See Note 7 for additional information about the Bridge Facility.

The results of ~~the Long Island generation business, the majority of the Maine hydroelectric generation business, the Latin American businesses~~several facilities and ~~the natural gas distribution and propane~~ businesses have been classified as Discontinued Operations on the Statements of Income. See Note 9 for additional information on these discontinued operations. Therefore, with the exception of net income attributable to PPL/PPL Energy Supply, the operating results from these facilities and businesses have been excluded from the income statement data tables below.

PPL Energy Supply's reportable segments are ~~Supply~~International Regulated and Supply. In 2010, there were no significant changes to these segments. While the International ~~Delivery. The International Delivery~~Regulated segment at ~~the~~ PPL Energy Supply ~~level~~ is consistent with the International ~~Delivery~~Regulated segment at ~~the~~ PPL, ~~level. The Supply segment information reported at the PPL Energy Supply level will not agree with~~ the Supply segment information reported atby PPL Energy Supply does not equal the Supply segment information reported by PPL ~~level~~ because additional Supply segment functions exist at ~~PPL that are outside of PPL Energy Supply. Furthermore,~~PPL. Further, certain income items, including PLR revenue and certain interest income with affiliates, exist at ~~the~~ PPL Energy Supply ~~level~~ but are eliminated in consolidation ~~at the PPL level.~~by PPL. Finally, certain expense items are fully allocated to the segments ~~at the~~by PPL ~~level~~ only.

~~Segments~~Segment costs include direct charges, as well as an allocation of indirect corporate service costs, from PPL Services. These service costs include functions such as financial, legal, human resources and information services. See Note 1516 for additional information.

Financial data for the segments are:

PPL PPL Energy Supply
2009 2008 2007 2009 2008 2007
Income Statement Data
Revenues from external customers
Supply (a) $ 3,618 $ 3,857 $ 2,308 $ 5,416 $ 5,678 $ 4,112
International Delivery 716 857 900 716 857 900
Pennsylvania Delivery 3,222 3,293 3,254
7,556 8,007 6,462 6,132 6,535 5,012
Intersegment revenues (b)
Supply 1,806 1,826 1,810
Pennsylvania Delivery 70 108 156

Depreciation
Supply 226 193 163 210 180 152
International Delivery 115 134 147 115 134 147
Pennsylvania Delivery 128 131 132
469 458 442 325 314 299
Amortization - recoverable transition costs and other
Supply 90 66 106 88 51 94
International Delivery (13 ) 15 10 (13 ) 15 10
Pennsylvania Delivery 312 302 317
389 383 433 75 66 104
Unrealized (gains) losses on derivatives and other hedging activities
Supply 329 (279 ) (22 ) 330 (285 ) (27 )

Interest income (c)
Supply 2 7 11 7 27 55
International Delivery 1 10 22 1 10 22
Pennsylvania Delivery 11 16 28
14 33 61 8 37 77
Interest Expense (d)
Supply 191 200 154 185 169 106
International Delivery 87 144 183 87 144 183
Pennsylvania Delivery 118 111 135
396 455 472 272 313 289

Income from Continuing Operations Before Income Taxes
Supply 85 749 780 44 755 835
International Delivery 290 330 260 290 330 260
Pennsylvania Delivery 221 278 241
596 1,357 1,281 334 1,085 1,095
Income Taxes
Supply 31 283 221 27 290 249
International Delivery 20 45 (43 ) 20 45 (43 )
Pennsylvania Delivery 79 102 81
130 430 259 47 335 206
Deferred income taxes and investment tax credits
Supply 138 112 6 152 193 120
International Delivery 12 1 (38 ) 12 1 (38 )
Pennsylvania Delivery (23 ) 1 18
127 114 (14 ) 164 194 82
Net Income Attributable to PPL/PPL Energy Supply
Supply (a) (e) 40 479 568 3 478 595
International Delivery (f) 243 290 610 243 290 610
Pennsylvania Delivery (g) 124 161 110
$ 407 $ 930 $ 1,288 $ 246 $ 768 $ 1,205
Cash Flow Data
Expenditures for long-lived assets
Supply $ 723 $ 1,142 $ 1,043 $ 694 $ 1,117 $ 1,019
International Delivery 240 267 340 240 267 340
Pennsylvania Delivery 298 286 302
$ 1,261 $ 1,695 $ 1,685 $ 934 $ 1,384 $ 1,359

					PPL						PPL Energy Supply
					2010		2009		2008		2010		2009		2008
Income Statement Data
Revenues from external customers by
	product
		Kentucky Regulated
			Electric		$	408
			Natural Gas			85
				Total		493
		International Regulated
			Electric			727	$	684	$	824	$	727	$	684	$	824
			Energy-related businesses			34		32		33		34		32		33
				Total		761		716		857		761		716		857
		Pennsylvania Regulated
			Electric			2,448		3,218		3,290
		Supply
			Electric and Gas (a) (b)			4,444		3,124		3,224		4,764		4,930		5,050
			Energy-related businesses			375		391		486		364		379		478
				Total		4,819		3,515		3,710		5,128		5,309		5,528
Total						8,521		7,449		7,857		5,889		6,025		6,385

Intersegment electric revenues (c)
		Pennsylvania Regulated				7		74		111
		Supply				320		1,806		1,826

Depreciation
		Kentucky Regulated				49
		International Regulated				117		115		134		117		115		134
		Pennsylvania Regulated				136		128		131
		Supply				254		212		179		236		195		165
Total						556		455		444		353		310		299

Amortization
		International Regulated				13		(13)		15		13		(13)		15
		Pennsylvania Regulated				(22)		312		302
		Supply				148		90		66		147		88		51
		Unallocated costs				74
Total						213		389		383		160		75		66

Unrealized (gains) losses on derivatives
	and other hedging activities (a)
		Kentucky Regulated				1
		Supply				541		329		(279)		536		330		(285)
Total						542		329		(279)		536		330		(285)

Interest income (d)
		International Regulated				2		1		10		2		1		10
		Pennsylvania Regulated				4		11		16
		Supply				2		2		7		12		7		27
Total						8		14		33		14		8		37

Interest Expense (e)
		Kentucky Regulated				55
		International Regulated				135		87		144		135		87		144
		Pennsylvania Regulated				99		118		111
		Supply				224		182		192		208		176		162
		Unallocated costs				80
Total						593		387		447		343		263		306

Income from Continuing
	Operations Before Income Taxes
		Kentucky Regulated				40
		International Regulated				261		290		330		261		290		330
		Pennsylvania Regulated				192		221		278
		Supply				860		27		665		882		(13)		670
		Unallocated costs				(114)
Total						1,239		538		1,273		1,143		277		1,000

Income Taxes (f)
		Kentucky Regulated				16
		International Regulated						20		45				20		45
		Pennsylvania Regulated				57		79		102
		Supply				228		6		249		262		3		256
		Unallocated costs				(38)
Total						263		105		396		262		23		301

Deferred income taxes and investment
	tax credits
		Kentucky Regulated				51
		International Regulated				17		12		1		17		12		1
		Pennsylvania Regulated				198		(23)		1
		Supply				(15)		133		108		(25)		147		190
Total						251		122		110		(8)		159		191

Net Income Attributable to
	PPL/PPL Energy Supply
		Kentucky Regulated (g)				26
		International Regulated (g)				261		243		290		261		243		290
		Pennsylvania Regulated (g)				115		124		161
		Supply (g)				612		40		479		600		3		478
		Unallocated Costs				(76)
Total					$	938	$	407	$	930	$	861	$	246	$	768

Cash Flow Data
Expenditures for long-lived assets
		Kentucky Regulated			$	152
		International Regulated				281	$	240	$	267	$	281	$	240	$	267
		Pennsylvania Regulated				411		298		286
		Supply				795		723		1,142		760		694		1,117
Total					$	1,639	$	1,261	$	1,695	$	1,041	$	934	$	1,384

PPL PPL Energy Supply
As of December 31, As of December 31,
2009 2008 2009 2008
Balance Sheet Data
Total assets
Supply $ 12,766 $ 11,993 $ 12,508 $ 12,270
International Delivery 4,516 4,199 4,516 4,199
Pennsylvania Delivery 4,883 5,213
$ 22,165 $ 21,405 $ 17,024 $ 16,469

PPL PPL Energy Supply
2009 2008 2007 2009 2008 2007
Geographic Data
Revenues from external customers
U.S. $ 6,840 $ 7,150 $ 5,562 $ 5,416 $ 5,678 $ 4,112
U.K. 716 857 900 716 857 900
$ 7,556 $ 8,007 $ 6,462 $ 6,132 $ 6,535 $ 5,012

		PPL					PPL Energy Supply
		As of December 31,					As of December 31,
		2010			2009		2010		2009
Balance Sheet Data
Total Assets
	Kentucky Regulated	$	10,318	(h)
	International Regulated		4,800		$	4,516	$	4,800	$	4,516
	Pennsylvania Regulated		5,189			4,883
	Supply		12,530	(h)		12,766		11,996		12,508
Total		$	32,837		$	22,165	$	16,796	$	17,024

			PPL						PPL Energy Supply
			2010		2009		2008		2010		2009		2008
Geographic Data
Revenues from external
	customers
		U.S.	$	7,760	$	6,733	$	7,000	$	5,128	$	5,309	$	5,528
		U.K.		761		716		857		761		716		857
Total			$	8,521	$	7,449	$	7,857	$	5,889	$	6,025	$	6,385

PPL PPL Energy Supply
As of December 31, As of December 31,
2009 2008 2009 2008
Long-Lived Assets
U.S. $ 10,181 $ 9,762 $ 6,676 $ 6,433
U.K. 3,517 3,167 3,517 3,167
$ 13,698 $ 12,929 $ 10,193 $ 9,600

		PPL				PPL Energy Supply
		As of December 31,				As of December 31,
		2010		2009		2010		2009
Long-Lived Assets
	U.S.	$	18,228	$	10,181	$	6,519	$	6,676
	U.K.		3,505		3,517		3,505		3,517
Total		$	21,733	$	13,698	$	10,024	$	10,193

(a)

Includes unrealized gains and losses from economic activity. See Note 1819 for additional information.

(b)	Gas was combined with Electric because it was not significant.

(c)	See "PLR Contracts" and "NUG Purchases" in Note 1516 for a discussion of the basis of accounting between reportable segments.

~~(c)~~

(d)

Includes interest income from affiliate(s).

~~(d)~~	(e)	Includes interest expense with affiliate.
~~(e)~~		Includes the results of Discontinued Operations of the Long Island generation business and the majority of the Maine hydroelectric generation business. Also includes the loss on the sale of PPL Energy Supply's interest in Wyman Unit 4. See Note 9 for additional information.

(f)

~~Includes the results of Discontinued Operations of the Latin American businesses. See Note 9 for additional information.~~Represents both current and deferred income taxes

(g)

Includes ~~the results of~~ Discontinued ~~Operations of the natural gas and propane businesses.~~Operations. See Note 9 for additional information.

(h)	The PPL asset balances at December 31, 2010 for the Kentucky Regulated and Supply segments include the assignment of goodwill recorded as a result of the acquisition of LKE. See Note 10 for additional information.

3.	~~Variable Interest Entities~~(PPL Electric) PPL Electric operates under one reportable segment, the regulated electric delivery operations in Pennsylvania. 3. Regulatory Assets and Liabilities

(PPL and PPL ~~Energy Supply)~~Electric)

~~In December 2001,~~As discussed in Note 1, PPL and PPL Electric reflect the effects of regulatory actions in the financial statements for their cost-based rate-regulated utility operations as summarized below. Regulatory assets and liabilities are classified as current if, upon initial recognition, the entire amount related to that item will be recovered or refunded within a subsidiary of PPL Energy Supply entered into a $455 million operating lease arrangement, as lessee, for the development, construction and operation of a gas-fired combined-cycle generation facility located in Lower Mt. Bethel Township, Northampton County, Pennsylvania. This generation facility has a total capacity (winter rating) of 624 MW at December 31, 2009. The owner/lessor of this generation facility, LMB Funding, LP, was created to own/lease the facility and incur the related financing costs. The initial lease term commenced on the date of commercial operation, which occurred in May 2004, and ends in December 2013. Under a residual value guarantee, if the generation facility is sold at the endyear of the ~~lease term and~~balance sheet date. As such, the ~~cash proceeds from the sale~~primary items classified as current are less than the original acquisition cost, the subsidiary of PPL Energy Supply is obligated to pay up to 70.52% of the original acquisition cost. This residual value guarantee protects the other variable interest holders from losses related to ~~their investments. LMB Funding, LP cannot extend~~rate mechanisms that periodically adjust to account for over- or ~~cancel~~under-collections.

For PPL, LG&E's and KU's Kentucky base rates are calculated based on a return on capitalization (common equity, long-term debt and notes payable) including certain adjustments to exclude non-regulated investments and environmental compliance costs recovered separately through the ~~lease or sell the facility without the prior consent of the PPL Energy Supply subsidiary.~~ environmental cost recovery (ECR) mechanism. As such, regulatory assets are generally earning a return.

As a result ~~LMB Funding, LP was determined~~of purchase accounting, certain fair value amounts, reflecting contracts that have favorable or unfavorable terms relative to bemarket, were recorded on the balance sheet with an offsetting regulatory asset or liability. Prior to the acquisition, LKE recovered in customer rates the cost of coal contracts, power purchases and emission allowances and this rate treatment will continue after the acquisition. As a ~~variable interest entity~~result, management believes the regulatory assets and liabilities created to offset the ~~subsidiary~~fair value amounts meet the recognition criteria established by existing accounting guidance and eliminate any rate making impact of ~~PPL Energy Supply was considered~~ the ~~primary beneficiary that consolidates this variable interest entity.~~fair value adjustments. LKE's customer rates will continue to reflect these items (e.g. coal, purchased power, emission allowances) at their original contracted prices.

~~The lease financing, which includes $437 million~~For PPL, KU's Virginia base rates are calculated based on a return on rate base (net utility plant less deferred taxes and miscellaneous deductions). All regulatory assets and liabilities are excluded from the return on rate base utilized in the calculation of ~~"Long-term Debt"~~Virginia base rates.

PPL Electric's distribution base rates are calculated based on a return on rate base (net utility plant less deferred taxes and ~~$18 million~~miscellaneous additions and deductions). PPL Electric's transmission revenues are billed in accordance with a FERC tariff that allows for recovery of ~~"Noncontrolling Interests," at December 31, 2009,~~transmission costs incurred, a return on transmission-related plant and an automatic annual update. See "Transmission Formula Rate" below for additional information on this tariff. All regulatory assets and liabilities are excluded from distribution and transmission return on investment calculations; therefore, generally no return is secured by, among other things, the generation facility. The debt matures at the end of the lease. At December 31, 2009 and 2008, the facility, which was included in "Property, Plant and Equipment" and "Other intangibles"earned on ~~the Balance Sheets, had a carrying value of $435 million and $441 million, net of accumulated depreciation and amortization of $48 million and $51 million.~~PPL Electric's regulatory assets.

		PPL				PPL Electric
		2010		2009		2010		2009

Current Regulatory Assets:
	Generation supply charge	$	45			$	45
	Universal service rider		10	$	6		10	$	6
	Transmission formula rate		8		5		8		5
	Environmental cost recovery (a)		5
	Coal contracts (a) (b)		5
	Other (a)		12
Total current regulatory assets		$	85	$	11	$	63	$	11

Noncurrent Regulatory Assets:
	Defined benefit plans (a)	$	592	$	229	$	262	$	229
	Taxes recoverable through future rates		254		253		254		253
	Storm costs (a)		129		9		7		9
	Unamortized loss on reacquired debt (a)		61		33		27		33
	Interest rate swaps (a)		43
	Coal contracts (a) (b)		22
	Other (a)		44		7		7		7
Total noncurrent regulatory assets		$	1,145	$	531	$	557	$	531

Current Regulatory Liabilities:
	Coal contracts (a) (b)	$	46
	Environmental cost recovery (a)		12
	Emission allowances (a) (b)		11
	PURTA tax		10			$	10
	Demand side management (a)		10
	Gas supply clause (a)		9
	Transmission service charge		8	$	41		8	$	41
	Competitive transition costs				33				33
	Other (a)		3
Total current regulatory liabilities		$	109	$	74	$	18	$	74

Noncurrent Regulatory Liabilities:
	Accumulated cost of removal of utility plant (a)	$	623
	Coal contracts (a) (b)		213
	Power purchase agreement - OVEC (a) (b)		124
	Net deferred tax assets (a)		40
	Act 129 compliance rider		14			$	14
	Defined benefit plans (a)		10
	PURTA tax			$	10			$	10
	Other (a)		7
Total noncurrent regulatory liabilities		$	1,031	$	10	$	14	$	10

4. (a)

The differences between PPL's and PPL Electric's balances are due to the consolidation of LG&E and KU.

(b)	~~Earnings Per Share~~These regulatory assets and liabilities were recorded as offsets to certain intangible assets and liabilities recorded at fair value from the acquisition of LKE. See Note 10 for information on the acquisition and Note 20 for information on intangible assets.

(PPL)

Environmental Cost Recovery

Kentucky law permits LG&E and KU to recover the costs of complying with the Federal Clean Air Act, and those federal, state or local environmental requirements which apply to coal combustion wastes and by-products from facilities utilized for production of energy from coal, including a return of operating expenses and a return of and on capital invested. The regulatory asset or liability represents the amount that has been over- or under-recovered due to timing or adjustments to the mechanism.

Coal Contracts

As a result of purchase accounting associated with the acquisition of LKE, the fair value of LKE's coal contracts was recorded on the balance sheet. An offsetting regulatory asset was recorded for those contracts with unfavorable terms relative to market. An offsetting regulatory liability was recorded for those contracts that had favorable terms relative to market. These regulatory assets and liabilities are being amortized over the same terms as the related contracts, which expire through 2016.

Interest Rate Swaps

Since realized amounts associated with LG&E's interest rate swaps, including a terminated swap contract, are recoverable through rates based on an order from the KPSC, LG&E's unrealized gains and losses are recorded as a regulatory asset or liability until they are realized as interest expense. Interest expense from existing swaps is realized and recovered over the terms of the associated debt, which matures through 2033. Interest expense related to the terminated swap contract is recovered over the remaining life of the debt as of the date of the termination, which extends through 2035.

Emission Allowances

As a result of purchase accounting associated with the acquisition of LKE, LKE's emission allowances were recorded at fair value on the balance sheet with an offsetting regulatory liability. This regulatory liability is being amortized as the emission allowances are consumed, which is expected to occur through 2040.

Demand Side Management (DSM)

DSM consists of energy efficiency programs which are intended to reduce peak demand and delay the investment in additional power plant construction, provide customers with tools and information to become better managers of their energy usage and prepare for potential future legislation governing energy efficiency. The rates of LG&E and KU contain a DSM provision which includes a rate mechanism that provides for concurrent recovery of DSM costs and provides an incentive for implementing DSM programs. The provision allows LG&E and KU to recover revenues from lost sales associated with the DSM programs up to the earlier of three years or implementation of new base rates which reflect that load reduction.

Gas Supply Clause

LG&E's natural gas rates contain a gas supply clause, whereby increases or decreases in the cost of natural gas supply are reflected in LG&E's rates, subject to approval by the KPSC. The gas supply clause procedure prescribed by the KPSC provides for quarterly rate adjustments to reflect the expected cost of natural gas supply in that quarter. In addition, the gas supply clause contains a mechanism whereby any over- or under-recoveries of natural gas supply cost from prior quarters are refunded to or recovered from customers through the adjustment factor determined for subsequent quarters.

Power Purchase Agreement

As a result of purchase accounting associated with the acquisition of LKE, the fair value of the OVEC power purchase agreement was recorded on the balance sheet with an offsetting regulatory liability. This regulatory liability is being amortized over the same terms as the related contract, which will expire in March 2026.

Fuel Adjustment Clause (FAC)

LG&E's and KU's retail electric rates contain an FAC, whereby increases and decreases in the cost of fuel for electric generation are reflected in the rates charged to retail electric customers. The FAC allows LG&E and KU to adjust billed amounts for the difference between the fuel cost component of base rates and the actual fuel cost, including transportation costs. The balance at December 31, 2010 was insignificant.

KU also employs an FAC mechanism for Virginia customers using an average fuel cost factor based primarily on projected fuel costs. The Virginia levelized fuel factor allows fuel recovery based on projected fuel costs for the coming year plus an adjustment for any over- or under-recovery of fuel expenses from the prior year.

The KPSC requires public hearings at six-month intervals to examine past fuel adjustments and at two-year intervals to review past operations of the fuel clause and transfer of the then current fuel adjustment charge or credit to the base charges. In August 2010, the KPSC initiated a six-month review of LG&E's and KU's FAC mechanism for the billing period ended April 2010. An Order was received in December 2010 approving the charges and credits billed during the period.

The Mine Safety and Health Administration enacted Emergency Temporary Standards regulations in 2006 and has since issued additional regulations as the result of the passage of the Mine Improvement and New Emergency Response Act of 2006. At the state level, Kentucky and other states from which coal is supplied to LG&E and KU have passed mine safety legislation. This legislation requires all underground coal mines to implement new safety measures and install new safety equipment. Under the terms of the majority of the long-term coal contracts that LG&E and KU have in place, provisions allow for price adjustments for compliance costs resulting from new or amended laws or regulations. LG&E's and KU's coal suppliers regularly submit price adjustments related to these compliance costs. 0; LG&E and KU employ an external consultant to review all relevant mine safety compliance cost claims for validity and reasonableness. Depending upon the terms of the contracts and commercial practice, LG&E and KU may delay payment of the adjustments or pay certain adjustments subject to refund. At appropriate times in the review, payment or refund processes, LG&E and KU adjust the values or amounts of inventory, accounts receivable or accounts payable relating to coal matters. In general, LG&E and KU expect to recover these coal-related cost adjustments through the FAC.

(PPL and PPL Electric)

Generation Supply Charge (GSC)

The GSC is a recovery mechanism which provides PPL Electric recovery for costs incurred to provide generation supply to PLR customers who receive basic generation supply service. The recovery includes an energy charge, capacity charge and an administrative charge. In addition, the GSC contains a reconciliation mechanism whereby any over-or under-recovery from prior quarters is to be refunded to or recovered from customers through the adjustment factor determined for the subsequent quarter.

Universal Service Rider (USR)

PPL Electric's distribution rates include a recovery of applicable costs associated with the universal service programs provided to PPL Electric's residential customers. Universal service programs include low-income programs, such as OnTrack and Winter Relief Assistance Program (WRAP). OnTrack is a special payment program for low-income households within the federal poverty level who are payment-troubled. This program is funded by residential customers and administered by community-based organizations. Customers who participate in OnTrack receive assistance in the form of reduced payment arrangements, protection against shutoff of electric service and referrals to other community programs and services. The WRAP program reduces electric bills and improves living comfort for low-income customers by providing services such as weatherization measures and energy education services. The USR is applied to distribution charges for each customer who receives distribution service under PPL Electric's residential service rate schedules. The USR contains a reconciliation mechanism whereby any over-or under-recovery from the current year is refunded to or recovered from customers through the adjustment factor determined for the subsequent year.

Transmission Formula Rate

Transmission rates are regulated by the FERC. Beginning November 1, 2008, PPL Electric's transmission revenues are billed in accordance with a FERC-approved PJM open access transmission tariff that utilizes a formula-based rate recovery mechanism. The tariff allows for recovery of actual transmission costs incurred, a return on transmission plant placed in service and an incentive return, including a return on construction work in progress, on the Susquehanna-Roseland transmission line project. The tariff utilizes estimated costs for the current year billing to customers and requires a true-up to adjust for actual costs in the subsequent year's rate. In August 2009, the FERC approved this formula-based rate recovery mechanism. As a result, the annual update of the rate is now implemen ted automatically without requiring specific approval by the FERC before going into effect. PPL Electric accrues or defers revenues applicable to any estimated true-up of this formula-based rate.

In 2009, PPL Electric recorded a $3 million pre-tax true-up ($2 million after-tax) related to the 2008 portion of the FERC formula-based transmission revenues. The true-up, reflected in the Pennsylvania Regulated segment for PPL, is not considered by management as material to the financial statements of PPL and PPL Electric for the years 2009 and 2008. See Note 15 for additional information on the FERC transmission rates.

Defined Benefit Plans

Recoverable costs of defined benefit plans represent the portion of unrecognized transition obligation, prior service cost and net actuarial losses that will be recovered through future rates based upon established regulatory practices. These regulatory assets are adjusted at least annually or whenever the funded status of PPL's defined benefit plans is re-measured.

	PPL				PPL Electric
	2010		2009		2010		2009

Transition obligation	$	2	$	10			$	10
Prior service cost		68		57	$	32		57
Net actuarial loss		522		162		230		162
Recoverable costs of defined benefit plans	$	592	$	229	$	262	$	229

Of these costs, $40 million for PPL and $9 million for PPL Electric are expected to be amortized into net periodic defined benefit costs in 2011. All costs will be amortized over the average service lives of plan participants.

Taxes Recoverable through Future Rates and Regulatory Liability associated with Net Deferred Tax Assets

Taxes recoverable through future rates represent the portion of future income taxes that will be recovered through future rates based upon established regulatory practices. Accordingly, this regulatory asset is recognized when the offsetting deferred tax liability is recognized. ��For general-purpose financial reporting, this regulatory asset and the deferred tax liability are not offset; rather, each is displayed separately. This regulatory asset is expected to be recovered over the period that the underlying book-tax timing differences reverse and the actual cash taxes are incurred.

The regulatory liability associated with net deferred tax assets represents the future revenue impact from the reversal of deferred income taxes required primarily for unamortized investment tax credits. This regulatory liability is recognized when the offsetting deferred tax asset is recognized. For general-purpose financial reporting, this regulatory liability and the deferred tax asset are not offset; rather, each is displayed separately.

Storm Costs

For PPL, in September 2009, the KPSC approved deferral of $101 million of costs associated with a severe ice storm that occurred in January 2009 and a wind storm that occurred in February 2009. Additionally, in December 2008, the KPSC approved deferral of $26 million of costs associated with high winds from the remnants of Hurricane Ike in September 2008. These costs are being amortized over a ten-year period ending July 2020.

For PPL Electric, in 2007, the PUC approved recovery of $12 million of costs associated with severe ice storms that occurred in January 2005. Amortization began in January 2008 and will continue through August 2015.

Unamortized Loss on Reacquired Debt

Unamortized loss on reacquired debt represents losses on long-term debt reacquired or redeemed that have been deferred and will be amortized and recovered over either the original life of the extinguished debt or the life of the replacement debt (in the case of refinancing). Such costs are being amortized through 2036 for PPL and through 2029 for PPL Electric.

Accumulated Costs of Removal

For PPL, LG&E and KU accrue for costs of removal through depreciation expense with an offsetting credit to a regulatory liability. The regulatory liability is relieved as costs are incurred. See Note 1 for additional information.

PPL Electric does not accrue for costs of removal. When costs of removal are incurred, PPL Electric records the deferral of costs as a reduction to accumulated depreciation. Such deferral is included in rates and amortized over the subsequent 5-year period.

PURTA Tax

In December 2009, PPL Electric reached a settlement with the Pennsylvania Department of Revenue related to the appeal of its 1997 PURTA tax assessments that resulted in a reduction in PURTA tax. The regulatory liability is being refunded to customers in 2011 pursuant to PUC regulations.

Transmission Service Charge (TSC)

PPL Electric is charged transmission-related costs by PJM applicable to PLR customers. PPL Electric passes these costs on to customers who receive basic generation supply service through the PUC-approved TSC recovery mechanism. The TSC contains a reconciliation mechanism whereby any over- or under-recovery from customers is either refunded to or collected from customers through a transmission service charge adjustment the subsequent year.

Competitive Transition Costs

Competitive transition costs were billed to customers as a result of PUC orders, which allowed PPL Electric to recover its competitive transition (or stranded) costs over a transition period ending December 31, 2009. These costs were over-collected at the end of 2009 and were refunded to customers in 2010.

Act 129 Compliance Rider

In compliance with Pennsylvania's Act 129 of 2008 and implementing regulations, PPL Electric filed its energy efficiency and conservation plan in July 2009. The plan was approved by PUC Order in October 2009. The Order allows PPL Electric to recover the maximum $250 million cost of the program ratably over the life of the plan, from January 1, 2010 through May 31, 2013. The plan includes programs intended to reduce electricity consumption. The recoverable costs include direct and indirect charges, including design and development costs, general and administrative costs and applicable state evaluator costs. The rates are applied to customers who receive distribution service through the Act 129 Compliance Rider. The actual program costs are reconcilable, and any over- or unde r-recovery from customers will be refunded or collected at the end of the program. See Note 15 for additional information on Act 129.

Smart Meter Rider

In compliance with Pennsylvania's Act 129 of 2008 and implementing regulations, PPL Electric filed its Smart Meter Plan in 2009. The plan was approved by a PUC Order in June 2010. In August 2010, PPL Electric filed its revised Smart Meter Plan reflecting modification identified by the PUC its Order. In December 2010, the PUC issued a Secretarial Letter approving PPL Electric's Smart Meter Rider which is designed to recover Smart Meter program costs plus a return on Smart Meter investments. The Smart Meter Rider is effective January 1, 2011 and contains a reconciliation mechanism whereby any over- or under-recovery from customers is either refunded to or collected from customers in the subsequent year.

4. Earnings Per Share

(PPL)

Basic and diluted EPS, ~~computations~~computed using the two-class method, and reconciliations of the amounts of income and shares ~~(in thousands)~~ of common stock (in thousands) used in the ~~calculations~~calculation are:

	2009			2008		2007				2010		2009		2008
Income (Numerator)								Income (Numerator)
Income from continuing operations after income taxes attributable to PPL	$	447		$	907	$	1,001	Income from continuing operations after income taxes attributable to PPL		$	955	$	414	$	857
Less amounts allocated to participating securities		2			5		5	Less amounts allocated to participating securities			4		2		4
Income from continuing operations after income taxes available to PPL common shareowners	$	445		$	902	$	996	Income from continuing operations after income taxes available to PPL common shareowners		$	951	$	412	$	853

Income (loss) from discontinued operations (net of income taxes) attributable to PPL	$	(40	)	$	23	$	287
Less amounts allocated to participating securities							1
Income (loss) from discontinued operations (net of income taxes) available to PPL common shareowners	$	(40	)	$	23	$	286
Income (loss) from discontinued operations (net of income taxes) available to PPL								Income (loss) from discontinued operations (net of income taxes) available to PPL		$	(17)	$	(7)	$	73

Net income attributable to PPL	$	407		$	930	$	1,288	Net income attributable to PPL		$	938	$	407	$	930
Less amounts allocated to participating securities		2			5		6	Less amounts allocated to participating securities			4		2		4
Net income available to PPL common shareowners	$	405		$	925	$	1,282	Net income available to PPL common shareowners		$	934	$	405	$	926

Shares of Common Stock (Denominator)								Shares of Common Stock (Denominator)
Weighted-average shares - Basic EPS		376,082			373,626		380,563	Weighted-average shares - Basic EPS			431,345		376,082		373,626
Add incremental non-participating securities:								Add incremental non-participating securities:
Stock options and performance units		324			836		1,328
Convertible Senior Notes					439		1,601
									Stock options and performance units		224		324		836
									Convertible Senior Notes						439
Weighted-average shares - Diluted EPS		376,406			374,901		383,492	Weighted-average shares - Diluted EPS			431,569		376,406		374,901

Basic EPS								Basic EPS
Available to PPL common shareowners:								Available to PPL common shareowners:
Income from continuing operations after income taxes	$	1.18		$	2.42	$	2.62
Income (loss) from discontinued operations (net of income taxes)		(0.10	)		0.06		0.75
Net Income	$	1.08		$	2.48	$	3.37
									Income from continuing operations after income taxes	$	2.21	$	1.10	$	2.28
									Income (loss) from discontinued operations (net of income taxes)		(0.04)		(0.02)		0.20
								Net Income		$	2.17	$	1.08	$	2.48

Diluted EPS								Diluted EPS
Available to PPL common shareowners:								Available to PPL common shareowners:
Income from continuing operations after income taxes	$	1.18		$	2.41	$	2.60
Income (loss) from discontinued operations (net of income taxes)		(0.10	)		0.06		0.74
Net Income	$	1.08		$	2.47	$	3.34
									Income from continuing operations after income taxes	$	2.20	$	1.10	$	2.28
									Income (loss) from discontinued operations (net of income taxes)		(0.03)		(0.02)		0.19
								Net Income		$	2.17	$	1.08	$	2.47

While they were outstanding, PPL Energy Supply's 2-5/8% Convertible Senior Notes due 2023 (Convertible Senior Notes), which were issued in May 2003, could be converted into shares of PPL common stock under certain circumstances, including if during a fiscal quarter the market price of PPL's common stock exceeded $29.83 per share over a certain period during the preceding fiscal quarter or if PPL Energy Supply called the debt.

During 2008, all then-outstanding Convertible Senior Notes were either converted at the election of the holders or redeemed at par by PPL Energy Supply.

The terms of the Convertible Senior Notes required cash settlement of the principal amount and permitted settlement of any conversion premium in cash or PPL common stock. Based upon the conversion rate of 40.2212 shares per $1,000 principal amount of notes (or $24.8625 per share), the Convertible Senior Notes had a dilutive impact when the average market price of PPL common stock equaled or exceeded $24.87.

During ~~2009,~~2010, PPL issued ~~559,744~~312,107 shares of common stock related to the exercise of stock options, vesting of restricted stock and restricted stock units and conversion of stock units granted to directors under its stock-based compensation plans. In addition, PPL issued ~~235,013~~234,211 and ~~1,854,559~~2,162,012 shares of common stock related to its ESOP and its DRIP. See Note 1112 for a discussion of PPL's stock-based compensation plans.

In June 2010, PPL issued 103.5 million shares of common stock and 23 million Equity Units pursuant to concurrent registered underwritten offerings. See Note 7 for additional information. Subject to antidilution adjustments, the maximum number of shares that could potentially be issued to settle the Purchase Contracts related to the Equity Units is 61,136,300 shares, including 47,915,900 shares that could be issued under standard provisions of the Purchase Contracts and 13,220,400 shares that could be issued under make-whole provisions in the event of early settlement upon a Fundamental Change.

The Purchase Contracts will be dilutive only if the average VWAP of PPL's common stock for a certain period exceeds $28.80. Because the average VWAP has not exceeded $28.80 since issuance, the Purchase Contracts were excluded from the diluted EPS calculation.

The following stock options to purchase PPL common stock and performance units were excluded infrom the ~~periods'~~ computations of diluted EPS because the effect would have been antidilutive.

(Thousands of Shares) 2009 2008 2007

Stock options and performance units 2,395 606

(Shares in thousands)	2010		2009		2008

Stock options		4,936		2,394		604
Performance units		45		1		2

5.	5. Income and Other Taxes

(PPL)

"Income from Continuing Operations Before Income Taxes" included the following components:

	2009		2008		2007				2010		2009		2008

Domestic income	$	306	$	1,027	$	1,021	Domestic income		$	978	$	248	$	943
Foreign income		290		330		260	Foreign income			261		290		330
	$	596	$	1,357	$	1,281		Total	$	1,239	$	538	$	1,273

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for accounting purposes and their basis for income tax purposes and the tax effects of net operating loss and tax credit carryforwards. The provision for PPL's deferred income taxes for regulated assets is based upon the ratemaking principles of the applicable jurisdiction. See Notes 1 and 3 for additional information.

Net deferred tax assets have been recognized based on management's estimates of future taxable income for the U.S. and certain foreign jurisdictions in which PPL's operations have historically been profitable.

Significant components of PPL's deferred income tax assets and liabilities from continuing operations were as follows:

2009 2008
Deferred Tax Assets
Deferred investment tax credits $ 16 $ 20
NUG contracts and buybacks 6 22
Regulatory liabilities 28
Accrued pension costs 265 241
State loss carryforwards 184 159
Federal tax credit carryforwards 23 23
Foreign capital loss carryforwards 144 126
Foreign - pensions 168 87
Foreign - other 6 9
Contributions in aid of construction 98 79
Domestic - other 189 192
Valuation allowances (312 ) (285 )
815 673

Deferred Tax Liabilities
Plant - net 1,855 1,467
Recoverable transition costs 116
Taxes recoverable through future rates 104 103
Unrealized gains on qualifying derivatives 437 72
Foreign investments 5 6
Reacquired debt costs 14 12
Foreign - plant 546 519
Foreign - other 35 67
Domestic - other 67 55
3,063 2,417
Net deferred tax liability $ 2,248 $ 1,744

			2010		2009
Deferred Tax Assets
	Deferred investment tax credits		$	45	$	16
	Regulatory obligations			205		28
	Accrued pension costs			208		265
	Accrued litigation costs			31		5
	Federal loss carryforwards			314
	State loss carryforwards			269		184
	Federal tax credit carryforwards			169		23
	Foreign capital loss carryforwards			377		144
	Foreign - pensions			87		168
	Foreign - other			8		6
	Contributions in aid of construction			152		98
	Domestic - other			219		190
	Valuation allowances			(464)		(312)
		Total deferred tax assets		1,620		815

Deferred Tax Liabilities
	Plant - net			3,010		1,855
	Taxes recoverable through future rates			105		104
	Unrealized gain on qualifying derivatives			298		437
	Other regulatory assets			213
	Regulatory undercollections			22
	Reacquired debt costs			25		14
	Foreign - plant			526		546
	Foreign - other			36		35
	Domestic - other			95		72
		Total deferred tax liabilities		4,330		3,063
Net deferred tax liability			$	2,710	$	2,248

PPL had ~~federal foreign~~the following loss and tax credit carryforwards that expire by 2019 of $23 million at December 31, 2009 and 2008. PPL also had state net operating loss carryforwards that expire between 2010 and 2029 of $2.8 billion and $2.5 billion at December 31, 2009 and 2008. Valuation allowances have been established for the amount that, more likely than not, will not be realized.carryforwards.

PPL Global had no foreign net operating loss carryforwards at December 31, 2009 and 2008. PPL Global had foreign capital loss carryforwards of $514 million and $451 million at December 31, 2009 and 2008. All of these losses have an indefinite carryforward period.

		2010		2009		Expiration

Loss carryforwards
	Federal net operating losses (a)	$	799			2029
	Federal capital losses (a)		155			2011-2014
	State net operating losses (b)		4,168	$	2,835	2011-2030
	State capital losses (b)		181			2011-2014
	Foreign capital losses		1,395		514	Indefinite

Credit carryforwards
	Federal investment tax credit (a)		125			2025-2028
	Federal AMT credit (a)		20			Indefinite
	Federal foreign tax credit (c)				23
	Federal - other (a)		24			2016-2030

(a) Loss and credit carryforwards associated with the acquisition of LKE.
(b) State net operating loss and state capital loss carryforwards associated with the acquisition of LKE are $1,039 and $163.
(c) Fully utilized during 2010.

Valuation allowances have been established for the amount that, more likely than not, will not be realized. Of the total valuation allowances related to foreign capital loss carryforwards, $63 million was previously allocable to goodwill; however, upon adoption of new business combination guidance, effective January 1, 2009, all changes in valuation allowances associated with business combinations are now recognized in tax expense rather than in goodwill. See Note 1 for additional information.

The changes in deferred tax valuation allowances ~~were~~:were:

Additions
Balance at Beginning of Period Charged to Income Charged to Other Accounts Deductions Balance at End of Period

2009 $ 285 $ 24 $ 17 (a) $ 14 (b) $ 312
2008 (c) 323 9 47 (a) 285
2007 (c) 352 2 31 (d) 323

			Additions
	Balance at				Charged to						Balance
	Beginning		Charged		Other						at End
	of Period		to Income		Accounts			Deductions			of Period

2010	$	312	$	221	$	6	(a)	$	75	(b)	$	464
2009		285		24		17	(c)		14	(d)		312
2008		323		9					47	(c)		285

(a)	A valuation allowance was recorded against certain deferred tax assets as a result of the 2010 acquisition of LKE. See Note 10 for additional information on the acquisition.

(b)

Resulting from the projected revenue increase in connection with the expiration of the Pennsylvania generation rate caps in 2010, the valuation allowance related to state net operating loss carryforwards over the remaining carryforward period was reduced by $72 million (or $0.17 per share, basic and diluted).

(c)	Related to the change in foreign net operating loss carryforwards, including the change in foreign currency exchange rates.

~~(b)~~(d)		~~Resulting~~Primarily from the projected revenue increase in connection with the expiration of the Pennsylvania generation rate caps in 2010, the valuation allowance related to a portion of state net operating loss carryforwards was reduced by $13 million.
~~(c)~~		Pennsylvania state legislation, enacted in 2007 and 2009, increased the net operating loss limitation. As a result, the deferred tax asset (and related valuation allowance) associated with certain of its Pennsylvania net operating loss carryforwards for all periods presented were increased to reflect the higher limitation. There was no impact on the net deferred tax asset position as a result of the legislation and related adjustments.
~~(d)~~		~~Primarily related to the change in domestic net operating loss carryforwards.~~

PPL Global does not pay or record U.S. income taxes on the undistributed earnings of WPD as management has determined that the earnings are permanently reinvested. Historically, dividends paid by WPD have been distributions of the current year's earnings. WPD's long-term working capital forecasts and capital expenditure projections for the foreseeable future require reinvestment of WPD's undistributed earnings and WPD would have to issue debt or access credit facilities to fund any distributions in excess of current earnings. Additionally, U.S. long-term working capital forecasts and capital expenditure projections for the foreseeable future do not require or anticipate WPD distributing any more than future earnings to its parent in the U.S. The cumulative undistributed earnings are included in "Earnings reinvested" on the Balance Sheets. The amounts considered permanently reinvested at December 31, 2009 and 2008 were $622 million and $1.2 billion. If the earnings are remitted as dividends, PPL Global may be subject to additional U.S. taxes, net of allowable foreign tax credits. It is not practicable to estimate the amount of additional taxes that might be payable on these foreign earnings.

Details of the components of income tax expense, a reconciliation of federal income taxes derived from statutory tax rates applied to "Income from Continuing Operations Before Income Taxes" to income taxes for reporting purposes, and details of "Taxes, other than income" were:

2009 2008 2007
Income Tax Expense
Current - Federal $ (59 ) $ 237 $ 181
Current - State 21 9 9
Current - Foreign 41 70 83
3 316 273
Deferred - Federal 135 72 32
Deferred - State (a) (10 ) 43 20
Deferred - Foreign (b) 16 13 (52 )
141 128
Investment tax credit, net - Federal (14 ) (14 ) (14 )
Total income tax expense from continuing operations (c) $ 130 $ 430 $ 259

Total income tax expense - Federal $ 62 $ 295 $ 199
Total income tax expense - State 11 52 29
Total income tax expense - Foreign 57 83 31
Total income tax expense from continuing operations (c) $ 130 $ 430 $ 259

~~(a)~~		~~Includes a $13 million reduction to state deferred tax expense related to the reversal of deferred tax valuation allowances. See "Reconciliation of Income Tax Expense" for additional information.~~
~~(b)~~		~~Includes a $54 million deferred tax benefit recorded in 2007 related to the U.K. tax rate reduction effective April 1, 2008. See "Reconciliation of Income Tax Expense" for additional information.~~
~~(c)~~		Excludes current and deferred federal, state and foreign tax expense (benefit) recorded to Discontinued Operations of $21 million in 2009 and $154 million in 2007. Excludes realized tax benefits related to stock-based compensation, recorded as an increase to capital in excess of par value of $1 million in 2009, $7 million in 2008 and $25 million in 2007. Also, excludes federal, state, and foreign tax expense (benefit) recorded to OCI of $358 million in 2009, $(212) million in 2008 and $20 million in 2007.

2009 2008 2007
Reconciliation of Income Tax Expense
Federal income tax on Income from Continuing Operations Before Income Taxes at statutory tax rate - 35% $ 209 $ 475 $ 448
Increase (decrease) due to:
State income taxes (a) (b) 40 47 29
State net operating loss valuation allowance (c) (13 )
Amortization of investment tax credits (10 ) (10 ) (10 )
Difference related to income recognition of foreign affiliates (net of foreign income taxes) (d) (93 ) (48 ) (39 )
Enactment of the U.K.'s Finance Act 2008 and 2007 (e) (8 ) (54 )
Change in federal tax reserves (a) 6 10 (27 )
Change in foreign tax reserves (a) (d) 17 5
Stranded cost securitization (a) (6 ) (7 ) (7 )
Federal income tax return adjustments (b) (10 ) (6 ) (8 )
Foreign income tax return adjustments (b) (17 ) (2 )
Federal income tax credits (b) (2 ) 15 (57 )
Domestic manufacturing deduction (3 ) (17 ) (15 )
Other (5 ) (9 ) 1
(79 ) (45 ) (189 )
Total income tax expense $ 130 $ 430 $ 259
Effective income tax rate 21.8% 31.7% 20.2%

(a) Changes in income tax reserves impacted the following components of income tax expense, which are presented in the "Reconciliation of Income Tax Expense" table.
2009 2008 2007

Change in foreign tax reserves $ 17 $ 5
Change in federal tax reserves (f) 6 10 $ (27 )
Stranded cost securitization (6 ) (7 ) (7 )
State income taxes (f) (5 ) 3 1
$ 12 $ 11 $ (33 )

(b) Adjustments from filing prior year tax returns impacted the following components of income tax expense, which are presented in the "Reconciliation of Income Tax Expense" table.
2009 2008 2007

State income taxes (f) $ 31 $ 4 $ (1 )
Federal income tax return adjustments (f) (10 ) (6 ) (8 )
Foreign income tax return adjustments (17 ) (2 )
Federal income tax credits (g) 16
$ 21 $ (3 ) $ (11 )

(c) Pennsylvania H.B. 1531, enacted in October 2009, increased the net operating loss limitation to 20% of taxable income for tax years beginning in 2010. In conjunction with the projected revenue increase related to the expiration of the generation rate caps in 2010, PPL recorded a $13 million reduction to state deferred income tax expense related to the reversal of deferred tax valuation allowances for a portion of its Pennsylvania net operating losses.

(d) Income tax (benefits) related to foreign income, which are presented in the "Reconciliation of Income Tax Expense" table.
2009 2008 2007

Losses generated through restructuring and fully reserved (reflected in "Change in foreign tax reserves") $ (46 )
Impact of lower U.K. income tax rates (23 ) $ (22 ) $ (16 )
U.S. income tax on foreign earnings - net of foreign tax credit (16 ) (21 ) (14 )
Other (8 ) (5 ) (9 )
$ (93 ) $ (48 ) $ (39 )

(e) The U.K.'s Finance Act 2008, enacted in July 2008, included a phase-out of tax depreciation on certain buildings.  As a result, PPL recorded an $8 million deferred tax benefit during 2008 related to the reduction in its deferred tax liabilities.

The U.K.'s Finance Act of 2007, enacted in July 2007, included a reduction in the U.K.'s statutory income tax rate.  Effective April 1, 2008, the statutory income tax rate was reduced from 30% to 28%.  As a result, PPL recorded a $54 million deferred tax benefit during 2007 related to the reduction in its deferred tax liabilities.

(f) During 2009, PPL received consent from the IRS to change its method of accounting for certain expenditures for tax purposes.  PPL deducted the resulting IRC Sec. 481 adjustment on its 2008 federal income tax return and recorded a $24 million adjustment to federal and state income tax expense resulting from the reduction of federal income tax benefits related to the domestic manufacturing deduction and reduction of certain state tax benefits related to state net operating losses and regulated depreciation.  The $24 million of income tax expense consisted of $29 million expense reflected in "State income taxes," offset by $4 million benefit reflected in "Federal income tax return adjustments" and a $1 million benefit reflected in "Change in federal tax reserves."

(g) During March 2008, PPL Energy Supply recorded a $13 million expense to adjust the amount of synthetic fuel tax credits recorded during 2007.  See Note 14 for additional information.

2009 2008 2007
Taxes, other than income
State gross receipts $ 187 $ 199 $ 193
State utility realty 5 4 5
State capital stock 6 5 8
Property - foreign 57 66 67
Domestic property and other 25 14 25
$ 280 $ 288 $ 298

~~See Note 1 for information on a settlement related to PURTA tax that will be returned to PPL Electric customers.~~

For tax years 2000 through 2007, PPL Montana protested certain property tax assessments by the Montana Department of Revenue on its generation facilities. The tax liabilities in dispute for 2000 through 2007, which had been paid and expensed by PPL Montana, totaled $45 million. In January 2008, both parties reached a settlement for all years outstanding. The settlement resulted in PPL Montana receiving a refund of taxes paid and interest totaling $8 million. This settlement was recorded in 2008, of which $7 million was reflected in "Taxes, other than income" and $1 million was reflected in "Other Income - net" on the Statement of Income.

~~(PPL Energy Supply)~~

~~"Income from Continuing Operations Before Income Taxes" included the following components:~~

2009 2008 2007

Domestic income $ 44 $ 755 $ 835
Foreign income 290 330 260
$ 334 $ 1,085 $ 1,095

Net deferred tax assets have been recognized based on management's estimates of future taxable income for U.S. and certain foreign jurisdictions in which PPL's operations have historically been profitable.

~~Significant components of PPL Energy Supply's deferred income tax assets and liabilities from continuing operations were as follows:~~

2009 2008
Deferred Tax Assets
Deferred investment tax credits $ 12 $ 16
NUG contracts and buybacks 6 22
Accrued pension costs 149 135
Federal tax credit carryforwards 23 23
Foreign capital loss carryforwards 144 126
Foreign - pensions 168 87
Foreign - other 6 9
Other domestic 100 98
Valuation allowances (144 ) (127 )
464 389

Deferred Tax Liabilities
Plant - net 1,046 796
Unrealized gain on qualifying derivatives 417 81
Foreign investments 5 6
Foreign - plant 546 519
Foreign - other 35 67
Other domestic 41 33
2,090 1,502
Net deferred tax liability $ 1,626 $ 1,113

PPL Energy Supply had federal foreign tax credit carryforwards that expire by 2019 of $23 million at December 31, 2009 and 2008. PPL Energy Supply also had state net operating loss carryforwards that expire between 2010 and 2029 of $9 million at December 31, 2009 and 2008. Valuation allowances have been established for the amount that, more likely than not, will not be realized.

PPL Global had no foreign net operating loss carryforwards at December 31, 2009 and December 31, 2008. PPL Global had foreign capital loss carryforwards of $514 million and $451 million at December 31, 2009 and 2008. All of these losses have an indefinite carryforward period. Valuation allowances have been established for the amount that, more likely than not, will not be realized. Of the total valuation allowances related to foreign capital loss carryforwards, $63 million was allocable to goodwill; however, upon adoption of new business combination guidance, effective January 1, 2009, all changes in valuation allowances associated with business combinations will be recognized in tax expense rather than in goodwill. See Note 1 for additional information.

~~Changes in deferred tax valuation allowances were~~:

Additions
Balance at Beginning of Period Charged to Income Charged to Other Accounts Deductions Balance at End of Period

2009 $ 127 $ 17 (a) $ 144
2008 174 $ 47 (a) 127
2007 178 $ 2 6 174

~~(a)~~

~~Primarily related to the change in foreign net operating loss carryforwards including the change in foreign currency exchange rates.~~

PPL Global does not pay or record U.S. income taxes on the undistributed earnings of WPD, as management has determined that the earnings are permanently reinvested. Historically, dividends paid by WPD have been distributions of the current year's earnings. WPD's long-term working capital forecasts and capital expenditure projections for the foreseeable future require reinvestment of WPD's undistributed earnings, and WPD would have to issue debt or access credit facilities to fund any distributions in excess of current earnings. Additionally, U.S. long-term working capital forecasts and capital expenditure projections for the foreseeable future do not require or anticipate WPD distributing any more than future earnings to its parent in the U.S. The cumulative undistributed earnings are included ~~in "Members Equity"~~i n "Earnings Reinvested" on the Balance Sheets. The amounts considered permanently reinvested at December 31, 2010 and 2009 ~~and 2008~~ were ~~$622~~$837 million and ~~$1.2 billion.~~$622 million. If the earnings are remitted as dividends, PPL Global may be subject to additional U.S. taxes, net of allowable foreign tax credits. It is not practicable to estimate the amount of additional taxes that might be payable on these foreign earnings.

2009 2008 2007
Income Tax Expense
Current - Federal $ (155 ) $ 61 $ 13
Current - State (3 ) 10 28
Current - Foreign 41 70 83
(117 ) 141 124
Deferred - Federal 128 144 121
Deferred - State 32 49 25
Deferred - Foreign (a) 16 13 (52 )
176 206 94
Investment tax credit, net - Federal (12 ) (12 ) (12 )
Total income tax expense from continuing operations (b) $ 47 $ 335 $ 206

Total income tax expense - Federal $ (39 ) $ 193 $ 122
Total income tax expense - State 29 59 53
Total income tax expense - Foreign 57 83 31
Total income tax expense from continuing operations (b) $ 47 $ 335 $ 206

			2010		2009		2008
Income Tax Expense (Benefit)
	Current - Federal		$	(51)	$	(72)	$	214
	Current - State			43		14		2
	Current - Foreign			20		41		70
		Total Current Expense (Benefit)		12		(17)		286
	Deferred - Federal			364		130		69
	Deferred - State			(99)		(10)		42
	Deferred - Foreign			(9)		16		13
		Total Deferred Expense		256		136		124
	Investment tax credit, net - Federal			(5)		(14)		(14)
		Total income tax expense from continuing operations (a)	$	263	$	105	$	396

	Total income tax expense - Federal		$	308	$	44	$	269
	Total income tax expense - State			(56)		4		44
	Total income tax expense - Foreign			11		57		83
		Total income tax expense from continuing operations (a)	$	263	$	105	$	396

(a)		~~Includes a $54 million deferred tax benefit recorded in 2007 related to the U.K. tax rate reduction effective April 1, 2008. See "Reconciliation of Income Tax Expense" for additional information.~~
~~(b)~~		Excludes current and deferred federal, state and foreign tax expense (benefit) recorded to Discontinued Operations of ~~$22~~$(6) million in 2010, $46 million in 2009 and $34 million in 2008. Excludes realized tax benefits related to stock-based compensation, recorded as an increase to capital in excess of par value of an insignificant amount in 2010, $1 million in ~~2008~~2009 and ~~$121~~$7 million in ~~2007.~~2008. Excludes tax benefits related to the issuance costs of the Purchase Contracts recorded as an increase to capital in excess of par value in the amount of $10 million in 2010. Also, excludes federal, state, and foreign tax expense (benefit) recorded to OCI of ~~$338~~$83 million in 2010, $358 million in 2009 ~~$(168)~~and $(212) million in ~~2008 and $19 million in 2007.~~2008.

2009 2008 2007
Reconciliation of Income Tax Expense
Federal income tax on Income from Continuing Operations Before Income Taxes at statutory tax rate - 35% $ 117 $ 380 $ 383
Increase (decrease) due to:
State income taxes (a) (b) 27 40 36
Amortization of investment tax credits (8 ) (8 ) (8 )
Difference related to income recognition of foreign affiliates (net of foreign income taxes) (c) (93 ) (48 ) (39 )
Enactment of the U.K.'s Finance Act 2008 and 2007 (d) (8 ) (54 )
Change in federal tax reserves (a) 11 (28 )
Change in foreign tax reserves (a) (c) 17 5
Federal income tax return adjustments (b) (7 ) (11 ) (10 )
Foreign income tax return adjustments (b) (17 ) (2 )
Federal income tax credits (b) (2 ) 15 (57 )
Domestic manufacturing deduction (3 ) (17 ) (15 )
Other (1 ) (7 )
(70 ) (45 ) (177 )
Total income tax expense $ 47 $ 335 $ 206
Effective income tax rate 14.1% 30.9% 18.8%

			2010		2009		2008
Reconciliation of Income Tax Expense
	Federal income tax on Income from
	Continuing Operations Before Income Taxes at statutory tax rate - 35%		$	434	$	188	$	446
Increase (decrease) due to:
	State income taxes, net of federal income tax benefit			36		10		35
	State valuation allowance adjustments (a)			(65)		(13)
	Impact of lower U.K. income tax rates			(20)		(23)		(22)
	U.S. income tax on foreign earnings - net of foreign tax credit (b)			34		(16)		(21)
	Change in federal and state tax reserves (c)			(60)		(5)		6
	Change in foreign tax reserves (d)					17		5
	Federal and state income tax return adjustments (e)			(3)		21		(2)
	Foreign income tax return adjustments							(17)
	Domestic manufacturing deduction (e) (f)			(11)		(3)		(17)
	Health Care Reform (g)			8
	Foreign losses resulting from restructuring (d)			(46)		(46)
	Enactment of the U.K.'s Finance Acts 2010 and 2008 (h)			(18)				(8)
	Federal income tax credits (i)			(12)		(2)		15
	Other			(14)		(23)		(24)
		Total decrease		(171)		(83)		(50)
Total income tax expense from continuing operations			$	263	$	105	$	396
Effective income tax rate				21.2%		19.5%		31.1%

(a) Changes in income tax reserves impacted the following components of income tax expense, which are presented in the "Reconciliation of Income Tax Expense" table.
2009 2008 2007

Change in foreign tax reserves $ 17 $ 5
State income taxes (3 )
Change in federal tax reserves 11 $ (28 )
$ 14 $ 16 $ (28 )

(b) Adjustments from filing prior year tax returns impacted the following components of income tax expense, which are presented in the "Reconciliation of Income Tax Expense" table.
2009 2008 2007

State income taxes (e) $ 25 $ 2 $ 2

Federal income tax return
adjustments (e)
(7 ) (11 ) (10 )
Foreign income tax return adjustments (17 ) (2 )
Federal income tax credits (f) 16
$ 18 $ (10 ) $ (10 )

(c) Income tax (benefits) related to foreign income, which are presented in the "Reconciliation of Income Tax Expense" table.
2009 2008 2007

Losses generated through restructuring and fully reserved (reflected in "Change in foreign tax reserves") $ (46 )
Impact of lower U.K. income tax rates (23 ) $ (22 ) $ (16 )
U.S. income tax on foreign earnings - net of foreign tax credit (16 ) (21 ) (14 )
Other (8 ) (5 ) (9 )
$ (93 ) $ (48 ) $ (39 )

(d) The U.K.'s Finance Act 2008, enacted in July 2008, included a phase-out of tax depreciation on certain buildings.  As a result, PPL Energy Supply recorded an $8 million deferred tax benefit during 2008 related to the reduction in its deferred tax liabilities.

The U.K.'s Finance Act of 2007, enacted in July 2007, included a reduction in the U.K.'s statutory income tax rate.  Effective April 1, 2008, the statutory income tax rate was reduced from 30% to 28%.  As a result, PPL recorded a $54 million deferred tax benefit during 2007 related to the reduction in its deferred tax liabilities.

(e) During 2009, PPL Energy Supply received consent from the IRS to change its method of accounting for certain expenditures for tax purposes.  PPL Energy Supply deducted the resulting IRC Sec. 481 adjustment on its 2008 federal income tax return and recorded a $21 million reduction in federal income tax benefits related to the domestic manufacturing deduction and certain state tax benefits related to state net operating losses.  The $21 million income tax expense consisted of $24 million expense reflected in "State income taxes," offset by $2 million benefit reflected in "Federal income tax return adjustments" and a $1 million benefit reflected in "Change in federal tax reserves."

(f) During March 2008, PPL Energy Supply recorded a $13 million expense to adjust the amount of synthetic fuel tax credits recorded during 2007.  See Note 14 for additional information.

(a)

Pennsylvania H.B. 1531, enacted in October 2009, increased the net operating loss limitation to 20% of taxable income for tax years beginning in 2010. During 2009, based on the projected revenue increase due to the expiration of the Pennsylvania generation rate caps in 2010, PPL recorded a $13 million state deferred income tax benefit related to the reversal of deferred tax valuation allowances for a portion of its Pennsylvania net operating losses. During 2010, PPL recorded an additional $72 million state deferred income tax benefit related to the reversal of deferred tax valuation allowances related to the future projections of taxable income over the remaining carryforward period of the net operating losses.

(b)	During 2010, PPL recorded additional U.S. income tax expense resulting from increased taxable dividends and certain restructuring of U.K. entities. The increased taxable dividends allowed PPL to fully utilize its foreign tax credit carryforward in 2010.

(c)

In 1997, the U.K. imposed a Windfall Profits Tax on privatized utilities, including WPD. In September 2010, the U.S. Tax Court ruled in PPL's favor in a pending dispute with the IRS, concluding that the U.K. Windfall Profits Tax is a creditable tax for U.S. tax purposes. As a result and with the finalization of other issues, PPL recorded a $42 million tax benefit to federal and state income tax reserves and related deferred income taxes during 2010. In January 2011, the IRS appealed the U.S. Tax Court's decision to the U.S. Court of Appeals for the Third Circuit. See Note 15 for additional information.

2009 2008 2007
Taxes, other than income
State capital stock $ 3 $ 3 $ 5
Property - foreign 57 66 67
Domestic property and other 26 17 26
$ 86 $ 86 $ 98
In July 2010, the U.S. Tax Court ruled in PPL's favor in a pending dispute with the IRS, concluding that street lighting assets are depreciable for tax purposes over seven years. As a result, PPL recorded a $7 million tax benefit to federal and state income tax reserves and related deferred income taxes. See Note 15 for information on the January 2011 IRS appeal, which at this time does not appear to include the street lighting decision.

During 2010, 2009 and 2008 PPL recorded a $7 million, $6 million and $7 million tax benefit to federal and state income tax reserves related to stranded cost securitization.

(d)	During 2010, PPL recorded a $46 million foreign tax benefit in conjunction with losses resulting from restructuring in the U.K. These losses offset tax on a deferred gain from a prior year sale of WPD's supply business.

During 2009, PPL recorded a $46 million foreign tax benefit and a related $46 million tax reserve related to losses resulting from restructuring in the U.K. Additionally, PPL recorded a $29 million foreign tax benefit related to the resolution of a tax dispute and foreign currency exchange losses.

(e)

During 2009, PPL received consent from the IRS to change its method of accounting for certain expenditures for tax purposes. PPL deducted the resulting IRC Sec. 481 adjustment on its 2008 federal income tax return and recorded a $24 million adjustment to federal and state income tax expense resulting from the reduction in federal income tax benefits related to the domestic manufacturing deduction and certain state tax benefits related to state net operating losses and regulated depreciation.

(f)

During 2010, PPL recorded an increase in tax benefits related to domestic manufacturing deductions due to an increase in domestic taxable income resulting from the expiration of Pennsylvania generation rate caps in 2010. In December 2010, Congress enacted legislation allowing for 100% bonus depreciation on qualified property. The increased tax depreciation deduction related to bonus depreciation significantly reduced the tax benefits related to domestic manufacturing deductions during 2010.

(g)

Beginning in 2013, provisions within Health Care Reform eliminated the tax deductibility of retiree health care costs to the extent of federal subsidies received by plan sponsors that provide retiree prescription drug benefits equivalent to Medicare Part D Coverage. As a result, PPL recorded deferred income tax expense during 2010. See Note 13 for additional information.

(h)	The U.K.'s Finance Act of 2010, enacted in July 2010, included a reduction in the U.K. statutory income tax rate. Effective April 1, 2011, the statutory income tax rate will be reduced from 28% to 27%. As a result, PPL reduced its net deferred tax liabilities and recognized a deferred tax benefit.

The U.K.'s Finance Act of 2008, enacted in July 2008, included a phase-out of tax depreciation on certain buildings. As a result, PPL reduced its net deferred tax liabilities and recognized a deferred tax benefit.

(i)	During 2010, PPL recorded a deferred tax benefit related to investment tax credits on progress expenditures related to hydroelectric plant expansions. See Note 8 for additional information.

During 2008, PPL recorded a $13 million expense to adjust the amount of synthetic fuel tax credits recorded during 2007. See Note 15 for additional information.

		2010		2009		2008
Taxes, other than income
	State gross receipts	$	145	$	187	$	199
	State utility realty		5		5		4
	State capital stock		6		6		5
	Foreign property		52		57		66
	Domestic property and other		30		25		14
	Total	$	238	$	280	$	288

See Note 3 for information on a settlement related to PURTA tax that will be returned to PPL Electric customers.

(PPL Energy Supply)

"Income (loss) from Continuing Operations Before Income Taxes" included the following components:

		2010		2009		2008

Domestic income (loss)		$	882	$	(13)	$	670
Foreign income			261		290		330
	Total	$	1,143	$	277	$	1,000

Significant components of PPL Energy Supply's deferred income tax assets and liabilities from continuing operations were as follows:

			2010		2009
Deferred Tax Assets
	Deferred investment tax credits		$	33	$	12
	Accrued pension costs			100		149
	Accrued litigation costs			31		4
	Federal tax credit carryforwards					23
	State loss carryforwards			111		111
	Foreign capital loss carryforwards			377		144
	Foreign - pensions			87		168
	Foreign - other			8		6
	Domestic - other			84		102
	Valuation allowances			(408)		(255)
		Total deferred tax assets		423		464

Deferred Tax Liabilities
	Plant - net			1,246		1,046
	Unrealized gain on qualifying derivatives			326		417
	Foreign - plant			526		546
	Foreign - other			36		35
	Domestic - other			52��		46
		Total deferred tax liabilities		2,186		2,090
Net deferred tax liability			$	1,763	$	1,626

PPL Energy Supply had a federal foreign tax credit carryforward of $23 million at December 31, 2009 that was fully utilized during 2010. PPL Energy Supply also had state net operating loss carryforwards that expire between 2011 and 2030 of $1.7 billion at December 31, 2010 and 2009. Valuation allowances have been established for the amount that, more likely than not, will not be realized.

PPL Global had foreign capital loss carryforwards of $1.4 billion and $514 million at December 31, 2010 and 2009. All of these losses have an indefinite carryforward period. Valuation allowances have been established for the amount that, more likely than not, will not be realized.

Changes in deferred tax valuation allowances were:

			Additions
	Balance at				Charged to						Balance
	Beginning		Charged		Other						at End
	of Period		to Income		Accounts			Deductions			of Period

2010	$	255	$	205				$	52	(a)	$	408
2009 (c)		226		12	$	17	(b)					255
2008 (c)		259		14					47	(b)		226

(a)	Resulting from the projected revenue increase in connection with the expiration of the Pennsylvania generation rate caps in 2010, the valuation allowance related to state net operating loss carryforwards over the remaining carryforward period was reduced by $52 million.

(b)	Primarily related to the change in foreign net operating loss carryforwards including the change in foreign currency exchange rates.

(c)

Pennsylvania state legislation, enacted in 2007 and 2009, increased the net operating loss limitation. As a result, the deferred tax asset (and related valuation allowance) associated with certain of its Pennsylvania net operating loss carryforwards for all periods presented were increased to reflect the higher limitation. There was no impact on the net deferred tax asset position as a result of the legislation and related adjustments.

PPL Global does not pay or record U.S. income taxes on the undistributed earnings of WPD, as management has determined that the earnings are permanently reinvested. Historically, dividends paid by WPD have been distributions of the current year's earnings. WPD's long-term working capital forecasts and capital expenditure projections for the foreseeable future require reinvestment of WPD's undistributed earnings, and WPD would have to issue debt or access credit facilities to fund any distributions in excess of current earnings. Additionally, U.S. long-term working capital forecasts and capital expenditure projections for the foreseeable future do not require or anticipate WPD distributing any more than future earnings to its parent in the U.S. The cumulative undistributed earnings are included i n "Members Equity" on the Balance Sheets. The amounts considered permanently reinvested at December 31, 2010 and 2009 were $837 million and $622 million. If the earnings are remitted as dividends, PPL Global may be subject to additional U.S. taxes, net of allowable foreign tax credits. It is not practicable to estimate the amount of additional taxes that might be payable on these foreign earnings.

			2010		2009		2008
Income Tax Expense (Benefit)
	Current - Federal		$	174	$	(168)	$	37
	Current - State			76		(9)		3
	Current - Foreign			20		41		70
		Total Current Expense (Benefit)		270		(136)		110
	Deferred - Federal			92		124		141
	Deferred - State			(89)		31		49
	Deferred - Foreign			(9)		16		13
		Total Deferred Expense (Benefit)		(6)		171		203
	Investment tax credit, net - federal			(2)		(12)		(12)
		Total income tax expense from continuing operations (a)	$	262	$	23	$	301

	Total income tax expense - Federal		$	264	$	(56)	$	166
	Total income tax expense - State			(13)		22		52
	Total income tax expense - Foreign			11		57		83
		Total income tax expense from continuing operations (a)	$	262	$	23	$	301

(a)

Excludes current and deferred federal, state and foreign tax expense (benefit) recorded to Discontinued Operations of $(6) million in 2010, $46 million in 2009 and $36 million in 2008. Also, excludes federal, state and foreign tax expense (benefit) recorded to OCI of $132 million in 2010, $338 million in 2009 and $(168) million in 2008.

			2010		2009		2008
Reconciliation of Income Tax Expense
	Federal income tax on Income from
	Continuing Operations Before Income Taxes at statutory tax rate - 35%		$	400	$	97	$	350
Increase (decrease) due to:
	State income taxes, net of federal income tax benefit			40		1		34
	State valuation allowance adjustments (a)			(52)
	Impact of lower U.K. income tax rates			(20)		(23)		(22)
	U.S. income tax on foreign earnings - net of foreign tax credit (b)			34		(16)		(21)
	Change in federal and state tax reserves (c)			(49)		(3)		11
	Change in foreign tax reserves (d)					17		5
	Domestic manufacturing deduction (e) (f)			(11)		(3)		(17)
	Federal and state income tax return adjustments (f)			(3)		18		(9)
	Foreign income tax return adjustments							(17)
	Health Care Reform (g)			5
	Foreign losses resulting from restructuring (d)			(46)		(46)
	Enactment of the U.K.'s Finance Acts 2010 and 2008 (h)			(18)				(8)
	Federal income tax credits (i)			(12)		(2)		15
	Other			(6)		(17)		(20)
		Total decrease		(138)		(74)		(49)
Total income tax expense from continuing operations			$	262	$	23	$	301
Effective income tax rate				22.9%		8.3%		30.1%

(a)

Pennsylvania H.B. 1531, enacted in October 2009, increased the net operating loss limitation to 20% of taxable income for tax years beginning in 2010. Based on the projected revenue increase related to the expiration of the Pennsylvania generation rate caps, PPL Energy Supply recorded a $52 million state deferred income tax benefit related to the reversal of deferred tax valuation allowances over the remaining carryforward period of the net operating losses.

(b)	During 2010, PPL Energy Supply recorded additional U.S. income tax expense resulting from increased taxable dividends and certain restructuring of U.K. entities. The increased taxable dividends allowed PPL Energy Supply to fully utilize its foreign tax credit carryforward in 2010.

(c)

In 1997, the U.K. imposed a Windfall Profits Tax on privatized utilities, including WPD. In September 2010, the U.S. Tax Court ruled in PPL Energy Supply's favor in a pending dispute with the IRS, concluding that the U.K. Windfall Profits Tax is a creditable tax for U.S. tax purposes. As a result and with the finalization of other issues, PPL Energy Supply recorded a $42 million tax benefit to federal and state income tax reserves and related deferred income taxes during 2010. In January 2011, the IRS appealed the U.S. Tax Court's decision to the U.S. Court of Appeals for the Third Circuit. See Note 15 for additional information.

(d)	During 2010, PPL Energy Supply recorded a $46 million foreign tax benefit in conjunction with losses resulting from restructuring in the U.K. These losses offset tax on a deferred gain from a prior year sale of WPD's supply business.

During 2009, PPL Energy Supply recorded a $46 million foreign tax benefit and a related $46 million tax reserve related to losses resulting from restructuring in the U.K. Additionally, PPL Energy Supply recorded a $29 million foreign tax benefit related to the resolution of a tax dispute and foreign currency exchange losses.

(e)

During 2010, PPL Energy Supply recorded an increase in tax benefits related to domestic manufacturing deductions due to an increase in domestic taxable income resulting from the expiration of Pennsylvania generation rate caps in 2010. In December 2010, Congress enacted legislation allowing for 100% bonus depreciation on qualified property. The increased tax depreciation deduction related to bonus depreciation significantly reduced the tax benefits related to domestic manufacturing deductions during 2010.

(f)

During 2009, PPL Energy Supply received consent from the IRS to change its method of accounting for certain expenditures for tax purposes. PPL Energy Supply deducted the resulting IRC Sec. 481 adjustment on its 2008 federal income tax return and recorded a $21 million adjustment to federal and state income tax expense resulting from the reduction in federal income tax benefits related to the domestic manufacturing deduction and certain state tax benefits related to state net operating losses.

(g)

Beginning in 2013, provisions within Health Care Reform eliminated the tax deductibility of retiree health care costs to the extent of federal subsidies received by plan sponsors that provide retiree prescription drug benefits equivalent to Medicare Part D Coverage. As a result, PPL Energy Supply recorded deferred income tax expense during 2010. See Note 13 for additional information.

(h)

The U.K.'s Finance Act of 2010, enacted in July 2010, included a reduction in the U.K. statutory income tax rate. Effective April 1, 2011, the statutory income tax rate will be reduced from 28% to 27%. As a result, PPL Energy Supply reduced its net deferred tax liabilities and recognized a deferred tax benefit.

The U.K.'s Finance Act 2008, enacted in July 2008, included a phase-out of tax depreciation on certain buildings. As a result, PPL Energy Supply reduced its net deferred tax liabilities and recognized a deferred tax benefit.

(i)	During 2010, PPL Energy Supply recorded a deferred tax benefit related to investment tax credits on progress expenditures related to hydroelectric plant expansions. See Note 8 for additional information.

During 2008, PPL Energy Supply recorded a $13 million expense to adjust the amount of synthetic fuel tax credits recorded during 2007. See Note 15 for additional information.

			2010		2009		2008
Taxes, other than income
	State gross receipts		$	15
	State capital stock			4	$	3	$	3
	Foreign property			52		57		66
	Domestic property and other			28		26		17
		Total	$	99	$	86	$	86

(PPL Electric)

The provision for PPL Electric's deferred income taxes for regulated assets is based upon the ratemaking principles reflected in rates established by the PUC and the FERC. The difference in the provision for deferred income taxes for regulated assets and the amount that otherwise would be recorded under GAAP is deferred and included in ~~"Taxes recoverable through future rates"~~"Regulatory assets" on the Balance Sheets.

~~The tax effects~~Significant components of ~~significant temporary differences comprising~~ PPL Electric's ~~net~~ deferred income tax ~~liability~~assets and liabilities were as follows:

2009 2008
Deferred Tax Assets
Deferred investment tax credits $ 3 $ 4
Accrued pension costs 36 37
Contributions in aid of construction 99 79
Regulatory liabilities 28
Other 39 43
205 163

Deferred Tax Liabilities
Electric utility plant - net 802 667
Recoverable transition costs 116
Taxes recoverable through future rates 105 104
Reacquired debt costs 14 11
Other 23 20
944 918
Net deferred tax liability $ 739 $ 755

			2010		2009
Deferred Tax Assets
	Deferred investment tax credits		$	3	$	3
	Accrued pension costs					36
	Contributions in aid of construction			103		99
	Regulatory obligations			4		28
	State loss carryforwards			11
	Other			24		39
		Total deferred tax assets		145		205

Deferred Tax Liabilities
	Electric utility plant - net			934		802
	Taxes recoverable through future rates			105		105
	Reacquired debt costs			12		14
	Regulatory receivables			22
	Other			19		23
		Total deferred tax liabilities		1,092		944
Net deferred tax liability			$	947	$	739

PPL Electric has a state net operating loss carryforward that expires in 2030 of $176 million at December 31, 2010.

Details of the components of income tax expense, a reconciliation of federal income taxes derived from statutory tax rates applied to "Income Before Income Taxes" to income taxes for reporting purposes, and details of "Taxes, other than income" were:

2009 2008 2007
Income Tax Expense
Current - Federal $ 80 $ 93 $ 72
Current - State 22 8 (7 )
102 101 65
Deferred - Federal (4 ) 10 24
Deferred - State (17 ) (7 ) (4 )
(21 ) 3 20
Investment tax credit, net - Federal (2 ) (2 ) (2 )
Total income tax expense $ 79 $ 102 $ 83

Total income tax expense - Federal $ 74 $ 101 $ 94
Total income tax expense - State 5 1 (11 )
Total income tax expense $ 79 $ 102 $ 83

Reconciliation of Income Tax Expense
Federal income tax on Income Before Income Taxes at statutory tax rate - 35% $ 77 $ 97 $ 86
Increase (decrease) due to:
State income taxes (a) (b) 15 13 2
Amortization of investment tax credit (2 ) (2 ) (2 )
Stranded cost securitization (a) (6 ) (7 ) (7 )
Other (a) (b) (5 ) 1 4
2 5 (3 )
Total income tax expense $ 79 $ 102 $ 83
Effective income tax rate 35.7% 36.7% 33.7%

			2010		2009		2008
Income Tax Expense (Benefit)
	Current - Federal		$	(127)	$	80	$	93
	Current - State			(14)		22		8
		Total Current Expense		(141)		102		101
	Deferred - Federal			190		(4)		10
	Deferred - State			10		(17)		(7)
		Total Deferred Expense		200		(21)		3
	Investment tax credit, net - Federal			(2)		(2)		(2)
		Total income tax expense	$	57	$	79	$	102

	Total income tax expense - Federal		$	61	$	74	$	101
	Total income tax expense - State			(4)		5		1
		Total income tax expense	$	57	$	79	$	102

(a) Changes in income tax reserves impacted the following components of income tax expense, which are presented in the "Reconciliation of Income Tax Expense" table.
2009 2008 2007

Stranded cost securitization $ (6 ) $ (7 ) $ (7 )
State income taxes 2 1
Other (1 ) 2
$ (7 ) $ (5 ) $ (4 )

(b) Adjustments from filing prior year tax returns impacted the following components of income tax expense, which are presented in the "Reconciliation of Income Tax Expense" table.
2009 2008 2007

State income taxes (c) $ 5 $ 2 $ (4 )
Other (c) (1 ) 4 3
$ 4 $ 6 $ (1 )

(c) During 2009, PPL Electric received consent from the IRS to change its method of accounting for certain expenditures for tax purposes. PPL Electric deducted the resulting IRC Sec. 481 amount on its 2008 federal income tax return and recorded a $3 million adjustment to federal and state income tax expense resulting from the reversal of prior years' state income tax benefits related to regulated depreciation. The $3 million income tax expense consisted of $5 million expense reflected in "State income taxes" offset by a $2 million federal benefit reflected in "Other".

			2010		2009		2008
Reconciliation of Income Taxes
	Federal income tax on Income Before Income Taxes at statutory tax rate - 35%		$	67	$	77	$	97
Increase (decrease) due to:
	State income taxes, net of federal income tax benefit			9		10		9
	Amortization of investment tax credit			(2)		(2)		(2)
	Change in federal and state tax reserves (a)			(12)		(7)		(5)
	Federal and state income tax return adjustments (b)			(1)		4		6
	Depreciation not normalized			(3)		(1)		(1)
	Other			(1)		(2)		(2)
		Total increase (decrease)		(10)		2		5
Total income tax espense			$	57	$	79	$	102
Effective income tax rate				29.7%		35.7%		36.7%

2009 2008 2007
Taxes, other than income
State gross receipts $ 187 $ 199 $ 193
State utility realty 5 4 5
State capital stock 2 2 3
Property and other (2 ) (1 )
$ 194 $ 203 $ 200

(a)

In July 2010, the U.S. Tax Court ruled in PPL Electric's favor in a pending dispute with the IRS, concluding that street lighting assets are depreciable for tax purposes over seven years. As a result, PPL Electric recorded a $7 million tax benefit to federal and state income tax reserves and related deferred income taxes. See Note 15 for information on the January 2011 IRS appeal, which at this time does not appear to include the street lighting decision.

During 2010, 2009 and 2008 PPL Electric recorded a $7 million, $6 million and $7 million tax benefit to federal and state income tax reserves related to stranded cost securitization.

(b)

During 2009, PPL Electric received consent from the IRS to change its method of accounting for certain expenditures for tax purposes. PPL Electric deducted the resulting IRC Sec. 481 amount on its 2008 federal income tax return and recorded a $3 million adjustment to federal and state income tax expense resulting from the reversal of prior years' state income tax benefits related to regulated depreciation.

			2010		2009		2008
Taxes, other than income
	State gross receipts		$	130	$	187	$	199
	State utility realty			5		5		4
	State capital stock			2		2		2
	Property and other			1				(2)
		Total	$	138	$	194	$	203��

See Note 13 for information on a settlement related to PURTA tax that will be returned to PPL Electric customers.

(PPL, PPL Energy Supply and PPL Electric)

On February 24, 2011, the Pennsylvania Department of Revenue issued interpretive guidance on the treatment of bonus depreciation for Pennsylvania tax purposes. Corporation Tax Bulletin 2011-01 indicates that Pennsylvania will allow 100% bonus depreciation for qualifying assets in the same year bonus depreciation is allowed for Federal tax purposes. PPL is still evaluating the impact of this guidance and, while not yet quantified, its impact could be material.

Unrecognized Tax Benefits (PPL, PPL Energy Supply and PPL Electric)

Changes to unrecognized tax benefits were as follows:

2009 2008
PPL
Beginning of period $ 202 $ 204
Additions based on tax positions of prior years 36 38
Reduction based on tax positions of prior years (11 ) (13 )
Additions based on tax positions related to the current year 50 12
Settlements (55 ) (12 )
Lapse of applicable statutes of limitations (8 ) (8 )
Effects of foreign currency translation (2 ) (19 )
End of period $ 212 $ 202

PPL Energy Supply
Beginning of period $ 119 $ 130
Additions based on tax positions of prior years 17 21
Reduction based on tax positions of prior years (5 ) (10 )
Additions based on tax positions related to the current year 50 9
Settlements (55 ) (12 )
Lapse of applicable statutes of limitations
Effects of foreign currency translation (2 ) (19 )
End of period $ 124 $ 119

PPL Electric
Beginning of period $ 77 $ 68
Additions based on tax positions of prior years 11 17
Reduction based on tax positions of prior years (6 ) (3 )
Additions based on tax positions related to the current year 3
Lapse of applicable statutes of limitations (8 ) (8 )
End of period $ 74 $ 77

		2010		2009
PPL
	Beginning of period	$	212	$	202
	Additions based on tax positions of prior years		68		36
	Reduction based on tax positions of prior years		(50)		(11)
	Additions based on tax positions related to the current year		43		50
	Reductions based on tax positions related to the current year		(2)
	Settlements		(17)		(55)
	Lapse of applicable statutes of limitations		(8)		(8)
	Acquisition of LKE		3
	Effects of foreign currency translation		2		(2)
	End of period	$	251	$	212

PPL Energy Supply
	Beginning of period	$	124	$	119
	Additions based on tax positions of prior years		65		17
	Reduction based on tax positions of prior years		(47)		(5)
	Additions based on tax positions related to the current year		43		50
	Reductions based on tax positions related to the current year		(3)
	Settlements		(1)		(55)
	Effects of foreign currency translation		2		(2)
	End of period	$	183	$	124

PPL Electric
	Beginning of period	$	74	$	77
	Additions based on tax positions of prior years		3		11
	Reduction based on tax positions of prior years		(5)		(6)
	Reductions based on tax positions related to the current year		(2)
	Lapse of applicable statutes of limitations		(8)		(8)
	End of period	$	62	$	74

At December 31, ~~2009,~~2010, it was reasonably possible that during the next 12 months the total amount of unrecognized tax benefits could increase by as much as ~~$34~~$28 million or decrease by up to ~~$179~~$226 million for PPL, increase by as much as ~~$11~~$1 million or decrease by up to ~~$123~~$181 million for PPL Energy Supply and increase by as much as ~~$23~~$28 million or decrease by up to ~~$22~~$42 million for PPL Electric. These changes could result from subsequent recognition, derecognition and/or changes in the measurement of uncertain tax positions related to the creditability of foreign taxes, the timing and utilization of foreign tax credits and the related impact on alternative minimum tax and other credits, the timing and/or valuation of certain deductions, intercompany transactions and unitary filing groups. The events that could cause ~~these~~thes e changes are direct settlements with taxing authorities, litigation, legal or administrative guidance by relevant taxing authorities and the lapse of an applicable statute of limitation.

At December 31, 2010, the total unrecognized tax benefits and related indirect effects that, if recognized, would decrease the effective tax rate were:

	2009		2008		2010		2009

PPL	$	119	$	129	$	183	$	119
PPL Energy Supply		95		103		167		95
PPL Electric		15		21		13		15

At December 31, 2010, PPL, PPL Energy Supply and PPL Electric had a receivable for interest related to tax positions of $7 million, $8 million and $3 million. At December 31, 2009, PPL, PPL Energy Supply and PPL Electric had ~~accrued~~a payable for interest related to tax positions of $36 million, $27 million and $5 million. ~~At December 31, 2008, PPL, PPL Energy Supply and PPL Electric had accrued interest of $35 million, $28 million and $7 million.~~

~~PPL and its subsidiaries recognize interest and penalties in "Income Taxes" on their Statements of Income.~~ The following ~~expenses (benefits) were~~interest expense (benefit) was recognized ~~at December 31:~~in income taxes for the years:

	2009			2008		2007			2010		2009		2008

PPL	$	1		$	4	$	(1	)	$	(39)	$	1	$	4
PPL Energy Supply		(1	)		2		(4	)		(30)		(1)		2
PPL Electric		(2	)		2		3			(8)		(2)		2

The amounts recognized during 2010, 2009 ~~2008~~ and ~~2007~~2008 for PPL, PPL Energy Supply and PPL Electric were primarily the result of litigation, settlements with taxing authorities, additional interest accrued or reversed related to tax positions of prior years and the lapse of applicable statutes of limitations, with respect to certain issues.

PPL or its subsidiaries file tax returns in five major tax jurisdictions. The income tax provision for PPL Energy Supply and PPL ~~Electric's U.S. federal and state tax provision are~~Electric is calculated in accordance with an intercompany tax sharing policy ~~with PPL,~~ which provides that ~~their~~ taxable income be calculated as if PPL Energy Supply, ~~and its domestic subsidiaries and~~ PPL Electric and ~~its~~any domestic subsidiaries each filed a separate consolidated return. See Note 1 for additional information regarding PPL's tax ~~return.~~sharing policy. Based on this tax sharing ~~policy,~~agreement, PPL Energy Supply or its subsidiaries indirectly or directly file tax returns in five major tax jurisdictions and PPL Electric or its subsidiaries indirectly or directly file tax returns in two major tax jurisdictions. With few exceptions, at December 31, ~~2009,~~2010, these jurisdictions, as well as the tax years that are no ~~longer~~long er subject to examination, were as follows:

		PPL ~~and~~
	PPL	Energy Supply	PPL Electric


U.S. (federal)	1997 and prior	1997 and prior	1997 and prior
Pennsylvania (state)	2004 and prior	2004 and prior	2004 and prior
Kentucky (state)	2005 and prior
Montana (state)	2005 and prior	2005 and prior
U.K. (foreign)	~~2006~~2008 and prior
~~Chile (foreign)~~	~~2006~~2008 and prior

6.	~~Preferred Securities~~

6. Preferred Securities

Preferred Stock

(PPL)

PPL is authorized to issue up to 10 million shares of preferred stock. No PPL preferred stock was issued or outstanding in 2010, 2009, ~~2008~~ or ~~2007.~~2008.

(PPL ~~and PPL Electric)~~

~~Details of PPL Electric's~~classifies preferred securities ~~(with no stated maturity date and no sinking fund requirements), which are reflected~~of a subsidiary as "Noncontrolling Interests" on ~~PPL's~~the Balance ~~Sheets in "Noncontrolling Interests," as of December 31, 2009 and 2008, were:~~

Amount
Issued and Outstanding
Shares
Shares Authorized Optional Redemption Price Per Share at 12/31/09

4-1/2% Preferred Stock (a) $ 25 247,524 629,936 $ 110.00

Series Preferred Stock (a)
3.35% 2 20,605 103.50
4.40% 12 117,676 102.00
4.60% 3 28,614 103.00
6.75% 9 90,770 101.35

Total Series Preferred Stock 26 257,665 10,000,000

6.25% Series Preference Stock (a) (b) 250 2,500,000 10,000,000 (c)

Total Preferred Securities $ 301 3,005,189

~~(a)~~		~~In 2009, 2008 and 2007, there were no changes in the number of shares of Preferred Stock or Preference Stock outstanding.~~
~~(b)~~		These shares were issued to a bank that acts as depositary in connection with the 2006 sale of 10 million depositary shares, each representing a quarter interest in a share of PPL Electric's 6.25% Series Preference Stock (Preference Shares).
~~(c)~~		~~Redeemable by PPL Electric on or after April 6, 2011, for $100 per share (equivalent to $25 per depositary share).~~

Sheets. Dividend requirements of $17 million for 2010 and $18 million for 2009 and 2008 were included in "Net Income Attributable to Noncontrolling Interests" on ~~PPL's~~the Statements of ~~Income for 2009, 2008 and 2007.~~Income.

~~Preferred Stock~~(PPL Electric)

~~The involuntary liquidation price~~PPL Electric is authorized to issue up to 629,936 shares of ~~the preferred stock is $100 per share. The optional voluntary liquidation price is the optional redemption price per share in effect, except for the~~ 4-1/2% Preferred Stock and ~~the 6.75% Series~~10 million shares of series preferred stock. There were 247,524 shares of 4-1/2% Preferred Stock ~~for which such price is $100 per share (plus, in each case, any unpaid dividends in arrears).~~(amounting to $25 million) and an aggregate of 257,665 shares of four series of preferred stock (amounting to $26 million) issued and outstanding at December 31, 2009 and 2008.

~~Dividends on the preferred stock are cumulative. Preferred stock ranks senior to~~In April 2010, PPL ~~Electric's common stock and~~Electric redeemed all five series of its ~~Preference Shares.~~

~~Holders of the~~ outstanding preferred stock, with a par value in the aggregate of $51 million, for $54 million including accumulated dividends. The redeemed shares are ~~entitled~~no longer outstanding and represent only the right to ~~one vote per share~~receive the applicable redemption price, to the extent the shares have not yet been presented for payment. The premium of $3 million is included in "Distributions on ~~matters~~Preferred Securities" on ~~which~~the Statement of Income.

Preference Stock (PPL Electric)

There were 10 million shares of Preference Stock authorized and 2.5 million shares of PPL Electric's ~~shareowners~~6.25% Series Preference Stock (Preference Shares) issued and outstanding in 2010, 2009 and 2008. The Preference Shares are entitled to vote. However, if dividends on any preferred stock are in arrears in an amount equal to or greater than the annual dividend rate, the holders of the preferred stock are entitled to electheld by a ~~majority of the Board of Directors of PPL Electric.~~

~~Preference Stock~~

~~Holders of the~~bank that acts as depositary for 10 million depositary shares, each of which represents a quarter interest in a share of Preference ~~Shares,~~Shares. Holders of the depositary shares are entitled to all proportional rights and preferences of the Preference Shares, including dividend, voting, redemption and liquidation rights, exercised through the bank acting as a depositary. The Preference Shares rank senior to PPL Electric's common ~~stock and junior to its preferred~~ stock; they have no voting rights, except as provided by law, and they have a liquidation preference of $100 per ~~share.~~share (equivalent to $25 per depositary sh are). The Preference Shares, which have no stated maturity date and no sinking fund requirements, are redeemable by PPL Electric on or after April 6, 2011 for $100 per share (equivalent to $25 per depositary share).

Dividends on the Preference Shares will be paid when, as and if declared by the Board of Directors at a fixed annual rate of 6.25%, or $1.5625 per depositary share per year, and are not cumulative. PPL Electric may not pay dividends on, or redeem, purchase or make a liquidation payment with respect to any of its common stock, except in certain circumstances, unless full dividends on the Preference Shares have been paid for the then-current dividend period.

7.	7. Financing Activities

Credit Arrangements and Short-term Debt

(PPL, PPL Energy Supply and PPL ~~Energy Supply)~~Electric)

PPL, PPL Energy Supply ~~maintains~~and PPL Electric maintain credit facilities ~~in order~~ to enhance liquidity and provide credit support, and as a backstop to ~~its~~ commercial paper ~~program,~~programs, when necessary. ~~PPL Energy Supply had the~~The following credit facilities were in place at:

December 31, 2009 December 31, 2008

Expiration
Date
Capacity Borrowed (a) Letters of Credit Issued Unused Capacity Borrowed (a) Letters of Credit Issued

PPL Energy Supply Domestic Credit Facilities (b)
364-day Bilateral Credit Facility (c) Mar-10 $ 200 n/a $ 4 $ 196 n/a $ 96
364-day Syndicated Credit Facility (d) Sept-10 400 400
5-year Structured Credit Facility (e) Mar-11 300 n/a 285 15 n/a 269
5-year Syndicated Credit Facility (f) June-12 3,225 $ 285 373 2,567 285 255
Total PPL Energy Supply Domestic Credit Facilities $ 4,125 $ 285 $ 662 $ 3,178 285 $ 620

WPD Credit Facilities
WPDH Limited 5-year Syndicated Credit Facility (g) Jan-13 £ 150 £ 132 n/a £ 18 £ 121 n/a
WPD (South West) 3-year Syndicated Credit Facility (h) July-12 210 60 n/a 150 37 n/a
WPD (South West) Uncommitted Credit Facilities (i) 65 21 n/a 44 8 n/a
WPD (South West) Letter of Credit Facility Mar-10 4 n/a £ 3 1 n/a £ 4
Total WPD Credit Facilities (j) £ 429 £ 213 £ 3 £ 213 £ 166 £ 4

				December 31, 2010										December 31, 2009
										Letters of						Letters of
				Expiration				Borrowed		Credit		Unused		Borrowed		Credit
				Date		Capacity		(a)		Issued		Capacity		(a)		Issued
PPL
LG&E and KU Credit Facilities
	LG&E Syndicated Credit Facility (b) (c)				Dec. 2014	$	400	$	163			$	237		n/a		n/a
	KU Syndicated Credit Facility (b)				Dec. 2014		400			$	198		202		n/a		n/a
			Total LG&E and KU Credit Facilities			$	800	$	163	$	198	$	439		n/a		n/a

PPL and PPL Energy Supply
Domestic Credit Facilities
	Syndicated Credit Facility (d)				Dec. 2014	$	3,000	$	350			$	2,650		n/a		n/a
	3-year Bilateral Credit Facility (e)				Mar. 2013		200		n/a	$	24		176		n/a	$	4
	5-year Structured Credit Facility (f)				Mar. 2011		300		n/a		161		139		n/a		285
	5-year Syndicated Credit Facility (g)						n/a		n/a		n/a		n/a	$	285		373
	364-day Syndicated Credit Facility (h)						n/a		n/a		n/a		n/a
			Total Domestic Credit Facilities			$	3,500	$	350	$	185	$	2,965	$	285	$	662

WPD Credit Facilities
	WPDH Limited 5-year Syndicated
		Credit Facility (i)			Jan. 2013	£	150	£	115		n/a	£	35	£	132		n/a
	WPD (South West) 3-year Syndicated
		Credit Facility (j)			July 2012		210				n/a		210		60		n/a
	Uncommitted Credit Facilities (k)						63			£	3		60		21	£	3
			Total WPD Credit Facilities (l)			£	423	£	115	£	3	£	305	£	213	£	3

PPL and PPL Electric
	Syndicated Credit Facility (m)				Dec. 2014	$	200			$	13	$	187		n/a		n/a
	Asset-backed Credit Facility (n)				July 2011		150				n/a		150				n/a
	5-year Syndicated Credit Facility (o)						n/a		n/a		n/a		n/a			$	6
			Total PPL Electric Credit Facilities			$	350			$	13	$	337			$	6

(a)		Amounts borrowed are recorded as "Short-term debt" on the Balance Sheets.

(b)

~~These~~LG&E and KU each entered into a $400 million syndicated credit facility upon closing of the acquisition of LKE on November 1, 2010. Under the facilities, LG&E and KU each have the ability to make cash borrowings and to request the lenders to issue letters of credit. Borrowings generally bear interest at LIBOR-based rates plus a spread, depending upon the respective company's senior unsecured long-term debt rating. Each company also pays customary commitment and letter of credit issuance fees under its respective facility. The new credit facilities each contain a financial covenant requiring the respective borrower's debt to total capitalization not to exceed 70%, as calculated in accordance with the credit facilities, and other customary covenants. Additionally, subject to certain conditions, LG&E and KU may each request that its respective facility' s capacity be increased by up to $100 million. An aggregate of $9 million of fees were incurred in 2010 in connection with establishing these facilities. Such fees were deferred and are being amortized through December 2014.

(c)	The borrowing outstanding at December 31, 2010 bears interest at 2.27%. Such borrowing was repaid in January 2011 with proceeds received from the remarketing of certain tax-exempt bonds that were held by LG&E at December 31, 2010, as discussed below in "Long-term Debt and Equity Securities."

(d)

In October 2010, PPL Energy Supply entered into a new $4 billion syndicated credit facility to replace its $400 million 364-day Syndicated Credit Facility, which expired in September 2010, and the $3.2 billion 5-year Syndicated Credit Facility. PPL Energy Supply subsequently reduced the capacity of the facility to $3 billion effective December 2010. Under this facility, PPL Energy Supply has the ability to make cash borrowings and to request the lenders to issue letters of credit. Borrowings generally bear interest at LIBOR-based rates plus a spread, depending upon the company's senior unsecured long-term debt rating. PPL Energy Supply also pays customary commitment and letter of credit issuance fees under this facility. Similar to the facilities that were replaced, the new credit facility contains a financial covenant requiring PPL Energy Supply's debt to total capitalization to not exceed 65%., as calculated in accordance with the facility, and other customary covenants. Additionally subject to certain conditions, PPL Energy Supply may request that the facility's capacity be increased by up to $500 million.


~~(c)~~		In October 2010, PPL Energy Supply borrowed $3.2 billion under this facility in order to enable a subsidiary to make loans to certain affiliates to provide interim financing of amounts required by PPL to partially fund PPL's acquisition of LKE. Such borrowing bore interest at 2.26% and was refinanced by PPL primarily through the issuance of long-term debt by LG&E and KU Energy LLC, LG&E and KU, and the use of internal funds. This borrowing and related repayments are included in "Net increase (decrease) in short-term debt" on the Statement of Cash Flows. See "Long-term Debt and Equity Securities" below for a discussion of these debt issuances and the use of proceeds to repay affiliate loans.

PPL Energy Supply incurred an aggregate of $41 million of fees in 2010 in connection with establishing the new facility. Such fees were initially deferred and amortized through December 2014. In connection with the reduction in the capacity to $3 billion in December 2010, PPL Energy Supply wrote off $10 million, $6 million after tax, of deferred fees, which is reflected in "Interest Expense" in the Statement of Income.

The borrowings outstanding at December 31, 2010 bear interest at 2.27%.

(e)	In March ~~2009,~~2010, PPL Energy Supply's 364-day bilateral credit facility was amended. The amendment included extending the expiration date ~~from March 2009~~ to March ~~2010~~2013, thereby making it a three-year facility, and ~~reducing~~setting related commitment and utilization fees based on the ~~capacity from $300 million to $200 million.~~company's senior unsecured long-term debt rating. Under this facility, PPL Energy Supply can request the bank to issue letters of credit but cannot make cash borrowings.

~~(d)~~		~~In September 2009,~~ This credit facility contains a financial covenant requiring PPL Energy Supply's ~~364-day syndicated~~debt to total capitalization not to exceed 65%, as calculated in accordance with the credit facility, ~~was amended~~ and restated. The amendment included extending the expiration date from September 2009 to September 2010, increasing the capacity from $385 million to $400 million and limiting the amount of letters of credit that may be issued. Under this facility, PPL Energy Supply has the ability to make cash borrowings and to request the lenders to issue up to $200 million of letters of credit. Borrowings generally bear interest at LIBOR-based rates plus a spread, depending upon the company's public debt rating.other customary covenants.


~~(e)~~	(f)	Under this facility, PPL Energy Supply has the ability to request the lenders to issue letters of credit but cannot make cash borrowings. PPL Energy Supply's obligations under this facility are supported by a $300 million letter of credit issued on PPL Energy Supply's behalf under a separate, but related, $300 million five-year credit agreement, also expiring in March 2011. This credit facility contains a financial covenant requiring PPL Energy Supply's debt to total capitalization not to exceed 65%, as calculated in accordance with the credit facility, and other customary covenants.

(g)
~~(f)~~		This $3.2 billion facility was terminated in October 2010 and was replaced with a new syndicated credit facility as discussed above. Under this facility, which had an expiration date of June 2012, PPL Energy Supply ~~has~~had the ability to make cash borrowings and to request the lenders to issue letters of credit. Borrowings generally ~~bear~~bore interest at LIBOR-based rates plus a spread, depending upon the company's ~~public~~senior unsecured long-term debt rating. The interest rate on the ~~borrowings~~borrowing outstanding ~~was 0.73% and 2.70%~~ at December 31, 2009 ~~and 2008.~~was 0.73%.

(h)

This $400 million facility expired in September 2010. Under ~~certain conditions,~~this facility, PPL Energy Supply ~~may elect~~had the ability to ~~have~~make cash borrowings and to request the principal balance of the loans outstanding on the final expiration date of the facility continue as non-revolving term loans for a period of one year from that final expiration date. Also, under certain conditions, PPL Energy Supply may request that the facility's capacity be increased bylenders to issue up to ~~$500 million.~~$200 million of letters of credit.

(i)
~~(g)~~		Under this facility, WPDH Limited has the ability to make cash borrowings but cannot request the lenders to issue letters of credit. ~~Borrowings~~WPDH Limited pays customary commitment fees under this facility, and borrowings bear interest at LIBOR-based rates plus a spread, depending on the company's ~~public debt~~long-term credit rating. The cash ~~borrowings~~borrowing outstanding at December 31, 2010 was a USD-denominated borrowing of $181 million, which equated to £115 million at the time of borrowing and bears interest at approximately 0.94%. The interest rates at December 31, 2009 were ~~comprised of~~approximately 1.55% on a USD-denominated borrowing of $181 million, which equated to £107 million at the time of borrowing, and ~~bears interest at approximately 1.55%, and GBP-denominated borrowings in an aggregate of £25 million, which bear interest at~~ a weighted-average rate of approximately 1.53%~~. The interest rates at December 31, 2008 were 3.73% on USD-denominated borrowings and 3.11%~~ on GBP-denominated ~~borrowings.~~borrowings aggregating £25 million.

This credit facility contains financial covenants that require WPDH Limited to maintain an interest coverage ratio of not less than 3.0 times consolidated earnings before income taxes, depreciation and amortization and a RAB that exceeds total net debt by the higher of an amount equal to 15% of total net debt or £150 million, in each case as calculated in accordance with the credit facility.

(j)
~~(h)~~		In July 2009, WPD (South West) terminated its £150 million five-year syndicated credit facility, which was to expire in October 2009, and replaced it with a new £210 million three-year syndicated credit facility expiring in July 2012. Under ~~the new~~this facility, WPD (South West) has the ability to make cash borrowings but cannot request the lenders to issue letters of credit. WPD (South West) pays customary commitment fees under this facility, and borrowings bear interest at LIBOR-based rates plus a margin. The ~~new~~weighted-average interest rate on the borrowings outstanding at December 31, 2009 was approximately 3.02%.

The facility contains financial covenants that require WPD (South West) to maintain an interest coverage ratio of not less than 3.0 times consolidated earnings before income taxes, depreciation and amortization and total net debt not in excess of 85% of its RAB, in each case calculated in accordance with the credit facility.


		Borrowings under this facility bear interest at LIBOR-based rates plus a margin. The borrowings outstanding at December 31, 2009 bear interest at a weighted-average rate of approximately 3.02%. The interest rate at December 31, 2008 on the borrowings outstanding under the previous facility was approximately 3.01%.

~~(i)~~	(k)	The weighted-average interest rate on the borrowings outstanding under these facilities ~~was 1.22% and 2.77%~~ at December 31, 2009 ~~and 2008.~~was 1.22%.


~~(j)~~	(l)	The total amount borrowed under WPD's credit facilities equated to ~~approximately $354~~$181 million and ~~$299~~approximately $354 million at December 31, ~~2009~~2010 and ~~2008.~~2009. At December 31, ~~2009,~~2010, the unused capacity of the WPD credit facilities was approximately ~~$349~~$475 million.

During 2008, PPL Energy Supply maintained a commercial paper program for up to $500 million, under which commercial paper issuances were supported by its credit facilities, to provide an additional financing source to fund its short-term liquidity needs, if and when necessary. PPL Energy Supply had no commercial paper outstanding at December 31, 2008. In January 2009, PPL Energy Supply closed its commercial paper program.

~~(PPL and PPL Electric)~~

PPL Electric maintains credit facilities in order to enhance liquidity and provide credit support, and as a backstop to its commercial paper program. PPL Electric had the following credit facilities in place at:

December 31, 2009 December 31, 2008
Expiration Date Capacity Borrowed (a) Letters of Credit Issued Unused Capacity Borrowed (a) Letters of Credit Issued

5-year Syndicated Credit Facility (b) May-12 $ 190 $ 6 $ 184 $ 95 $ 1
Asset-backed Credit Facility (c) Jul-10 150 150
Total PPL Electric Credit Facilities $ 340 $ 6 $ 334 $ 95 $ 1

~~(a)~~(m)		~~Amounts borrowed are recorded as "Short-term debt" on the Balance Sheets.~~

~~(b)~~		In December 2010, PPL Electric entered into a new $200 million syndicated credit facility to replace its $190 million 5-year Syndicated Credit Facility. Under this facility, PPL Electric has the ability to make cash borrowings and to request the lenders to issue letters of credit. Borrowings generally bear interest at LIBOR-based rates plus a spread, depending upon the company's ~~public~~senior secured long-term debt rating. The ~~interest rate on~~new credit facility contains a financial covenant requiring PPL Electric's debt to total capitalization not to exceed 70%, as calculated in accordance with the ~~borrowings outstanding at December 31, 2008 was 2.44%. Under certain conditions,~~credit facility, and other customary covenants. PPL Electric ~~may elect~~also pays customary commitment and letter of credit issuance fees under this facility. Additionally, subject to have the principal balance of the loans outstanding on the final expiration date of the facility continue as non-revolving term loans for a period of one year from that final expiration date. Also, under certain conditions, PPL Electric may request that the facility's capacity be increased by up to $100 million. &# 160;An aggregate of $2 million of fees were incurred in 2010 in connection with establishing this facility. Such fees were deferred and are being amortized through December 2014.


		~~This credit facility contains a financial covenant requiring debt to total capitalization to not exceed 70%.~~

~~(c)~~	(n)	PPL Electric participates in an asset-backed commercial paper program through which PPL Electric obtains financing by selling and contributing its eligible accounts receivable and unbilled revenue to a special purpose, wholly owned subsidiary on an ongoing basis. The subsidiary has pledged these assets to secure loans from a commercial paper conduit sponsored by a financial institution. In July ~~2009,~~2010, PPL Electric and the subsidiary extended the expiration date of the credit agreement to July ~~2010.~~2011. The ~~subsidiary's~~subsidiary pays customary commitment fees under this facility, and borrowing costs ~~under the credit facility~~ vary based on the commercial paper conduit's actual cost to issue commercial paper that supports the debt. Borrowings under this program are subject to customary conditions precedent. PPL Electric uses the proceeds under the credit facility for general corporate purposes.


		At December 31, 2010 and 2009, ~~and 2008, $223~~$248 million and ~~$76~~$223 million of accounts receivable and ~~$192~~$133 million and ~~$170~~$192 million of unbilled revenue were pledged by the subsidiary under the credit agreement related to PPL Electric's and the subsidiary's participation in the asset-backed commercial paper program. Based on the accounts receivable and unbilled revenue pledged, $150 million was available for borrowing at December 31, ~~2009.~~2010. PPL Electric's sale to its subsidiary of the accounts receivable and unbilled revenue is an absolute sale of the assets, and PPL Electric does not retain an interest in these assets. However, for financial reporting purposes, the subsidiary's financial results are consolidated in PPL Electric's financial statements. PPL Electric performs certain record-keeping and cash collection functions with respect to the assets in return for a servicing fee from the subsidiary.

(o)

This $190 million facility was terminated in December 2010 and was replaced with a new syndicated credit facility as discussed above. Under this facility, which had an expiration date of May 2012, PPL Electric had the ability to make cash borrowings and to request the lenders to issue letters of credit.

(PPL and PPL Energy Supply)

In May 2010, PPL Energy Supply entered into a $500 million Facility Agreement expiring June 2017, whereby PPL Energy Supply has the ability to request up to $500 million of committed letter of credit capacity at fees to be agreed upon at the time of each request, based on certain market conditions. As of December 31, 2010, PPL Energy Supply has not requested any capacity for the issuance of letters of credit under this arrangement.

In November 2010, PPL Energy Supply, PPL EnergyPlus, PPL Montour and PPL Brunner Island entered into an $800 million secured energy marketing and trading facility, whereby PPL EnergyPlus will receive credit to be applied to satisfy collateral posting obligations related to its energy marketing and trading activities with counterparties participating in the facility. The credit amount is guaranteed by PPL Energy Supply, PPL Montour and PPL Brunner Island. Amounts guaranteed by PPL Montour and PPL Brunner Island are secured by mortgages on the generating facilities owned by PPL Montour and PPL Brunner Island, which had an aggregate carrying value of $2.6 billion at December 31, 2010. The facility expires in November 2015, but is subject to automatic one-year renewals under certain conditions. Ther e were no secured obligations under this facility at December 31, 2010.

(PPL and PPL Electric)

PPL Electric maintains a commercial paper program for up to $200 million to provide an additional financing source to fund its short-term liquidity needs, if and when necessary. Commercial paper issuances are currently supported by PPL Electric's ~~five-year syndicated credit facility that~~Syndicated Credit Facility, which expires in ~~May 2012~~December 2014, based on available capacity. PPL Electric had no commercial paper outstanding at December 31, ~~2009~~2010 and ~~2008.~~
2009.

~~Long-term Debt~~Bridge Facility

2009 (a) 2008
U.S. PPL PPL Energy Supply PPL Electric PPL PPL Energy Supply PPL Electric

4.33% - 7.0% Senior Unsecured Notes, due 2009-2047 (b) $ 2,700 (c) $ 2,600 $ 3,151 $ 2,850
Junior Subordinated Notes, due 2067 (d) 500 500
8.05% - 8.30% Senior Secured Notes, due 2013 (e) 437 437 437 437
7.375% 1945 First Mortgage Bonds, due 2014 (f) 10 $ 10 10 $ 10
4.30% - 7.125% Senior Secured Bonds, due 2009-2039 (g) 1,150 1,150 1,436 1,436
4.70% - 4.75% Senior Secured Bonds (Pollution Control Series), due 2027-2029 (h)(i) 224 224 224 224
Variable Rate Senior Secured Bonds (Pollution Control Series), due 2023 (h)(j) 90 90 90 90
Variable Rate Exempt Facilities Notes, due 2037-2038 (k) 231 231 231 231
Variable Rate Pollution Control Facilities Note, due 2027 (l) 9 9
5,342 3,268 1,474 6,088 3,518 1,769

U.K.
4.80436% - 9.25% Senior Unsecured Notes, due 2017-2037 (m) 1,327 1,327 1,261 1,261
1.541% Index-linked Senior Unsecured Notes, due 2053-2056 (n) 397 397 377 377
1,724 1,724 1,638 1,638
7,066 4,992 1,474 7,726 5,156 1,769
Fair value adjustments from hedging activities 44 3 80 5
Fair value adjustments from purchase accounting (o) 35 35 35 35
Unamortized premium 9 9 10 10
Unamortized discount (11 ) (8 ) (2 ) (13 ) (10 )
7,143 5,031 1,472 7,838 5,196 1,769
Less amount due within one year (696 ) (495 )
Total Long-term Debt $ 7,143 $ 5,031 $ 1,472 $ 7,142 $ 5,196 $ 1,274
(PPL)

Concurrently, and in connection with entering into the agreement to acquire LKE, PPL entered into a commitment letter with certain lenders pursuant to which, subject to the conditions set forth therein, the lenders committed to provide PPL with 364-day unsecured bridge financing of up to $6.5 billion, the proceeds of which, if drawn upon, were required to be used at closing of the acquisition (i) to fund the consideration for the acquisition and (ii) to pay certain fees and expenses in connection with the acquisition. In June 2010, the commitment of such lenders for the bridge financing was syndicated to a group of banks, including the lenders under the commitment letter. Upon the syndication of the commitment, PPL Capital Funding, as borrower, and PPL, as guarantor, entered into a $6.5 billion Bridge Facility.

The Bridge Facility was terminated on November 1, 2010 upon closing of the acquisition of LKE. In 2010, PPL incurred $80 million of fees in connection with the Bridge Facility, which is reflected in "Interest Expense" on the Statement of Income. No borrowings were made under the Bridge Facility.

Long-term Debt and Equity Securities

(PPL, PPL Energy Supply and PPL Electric)

				2010 (a)								2009
								PPL Energy						PPL Energy
				PPL				Supply		PPL Electric		PPL		Supply		PPL Electric
U.S.
	Senior Unsecured Notes (b)			$	3,574	(c)	(d)	$	2,600			$	2,700	$	2,600
Junior Subordinated Notes, due
	2018-2067 (e)				1,630								500
8.05% - 8.30% Senior Secured Notes,
	due 2013 (f)				437				437				437		437
7.375% 1945 First Mortgage Bonds,
	due 2014 (g)				10					$	10		10			$	10
	Senior Secured/First Mortgage Bonds (h)				3,185	(d)					1,150		1,150				1,150
4.00% - 4.75% Senior Secured Bonds
	(Pollution Control Series), due
	2023-2029 (i) (j)				314						314		314				314
First Mortgage Bonds (Collateral
	Series), due 2023-2037 (k)				925
Exempt Facilities Notes, due 2037-2038 (l)					231				231				231		231
Other (m)					7				5
		Total U.S. Long-term Debt			10,313				3,273		1,474		5,342		3,268		1,474

U.K.
4.80436% - 9.25% Senior Unsecured
	Notes, due 2017-2040 (n)				1,897				1,897				1,327		1,327
1.541% Index-linked Senior Unsecured
	Notes, due 2053-2056 (o)				394				394				397		397
		Total U.K. Long-term Debt			2,291				2,291				1,724		1,724
			Total Long-term Debt Before Adjustments		12,604				5,564		1,474		7,066		4,992		1,474
Fair value adjustments from hedging
	activities				50				1				44		3
Fair value adjustments from purchase
	accounting (p)				38	(q)			30				35		35
Unamortized premium					7				7				9		9
Unamortized discount					(36)				(13)		(2)		(11)		(8)		(2)
			Total Long-Term Debt		12,663				5,589		1,472		7,143		5,031		1,472
Less current portion of Long-term Debt					502				500
Total Long-term Debt, noncurrent				$	12,161			$	5,089	$	1,472	$	7,143	$	5,031	$	1,472

(a)

Aggregate maturities of long-term debt are:

PPL - ~~2010, $0;~~ 2011, ~~$500;~~$502; 2012, $0; 2013, $1,137; 2014, $310; 2015, $1,300; and ~~$5,119~~$9,355 thereafter.

PPL Energy Supply - ~~2010, $0;~~ 2011, $500; 2012, $0; 2013, $737; 2014, $300; 2015, $300; and ~~$3,455~~$3,727 thereafter.

PPL Electric - ~~2010,~~ 2011, ~~and~~$0; 2012, $0; 2013, $400; 2014, $10; 2015, $100; and ~~$1,064~~$964 thereafter.

	None of the debt securities outstanding have sinking fund requirements.

(b)

PPL - interest rates range from 2.125% to 7.00%, and maturities range from 2011 to 2047.

PPL Energy Supply - interest rates range from 5.40% to 7.00%, and maturities range from 2011 to 2046.

Includes $300 million of 5.70% REset Put Securities due 2035 (REPSSM). The REPS bear interest at a rate of 5.70% per annum to, but excluding, October 15, 2015 (Remarketing Date). The REPS are required to be put by existing holders on the Remarketing Date either for (a) purchase and remarketing by a designated remarketing dealer or (b) repurchase by PPL Energy Supply. Therefore, the REPS are reflected as a 2015 maturity for PPL and PPL Energy Supply in (a) above. If the remarketing dealer elects to purchase the REPS for remarketing, it will purchase the REPS at 100% of the principal amount, and the REPS will bear interest on and after the Remarketing Date at a new fixed rate per annum determined in the remarketing. PPL ~~Energy~~E nergy Supply has the right to terminate the remarketing process. If the remarketing is terminated at the option of PPL Energy Supply or under certain other circumstances, including the occurrence of an event of default by PPL Energy Supply under the related indenture or a failed remarketing for certain specified reasons, PPL Energy Supply will be required to pay the remarketing dealer a settlement amount as calculated in accordance with the related remarketing agreement.


		Also includes $250 million of notes that may be redeemed at par beginning in July 2011.

		In March 2009, PPL Energy Supply completed tender offers to purchase up to $250 million aggregate principal amount of certain of its outstanding senior notes in order to reduce future interest expense. Pursuant to the offers, PPL Energy Supply purchased approximately $100 million aggregate principal amount of its 6.00% Senior Notes due 2036 for $77 million, plus accrued interest, and approximately $150 million aggregate principal amount of its 6.20% Senior Notes due 2016 for $143 million, plus accrued interest. In connection with the extinguishment of these notes, PPL and PPL Energy Supply recorded a net gain of $25 million, which is reflected in "Other Income - net" on the Statement of Income for 2009. PPL recorded an additional net gain of $4 million in "Other Income - net" on the Statement of Income as a result of reclassifying gains and losses on related cash flow hedges from AOCI into earnings.

(c)

Includes ~~$100~~$99 million of notes that may be redeemed at par beginning in July 2012.

(d)

In November 2010, LG&E and KU Energy LLC issued $875 million aggregate principal amount of senior unsecured notes in two series: $400 million of 2.125% Senior Notes due 2015 and $475 million of 3.750% Senior Notes due 2020. LG&E and KU Energy LLC received proceeds of $864 million, net of discounts and underwriting fees, from the issuance of the notes.

Also in November 2010, LG&E issued $535 million aggregate principal amount of its first mortgage bonds in two series: $250 million of 1.625% First Mortgage Bonds due 2015 and $285 million of 5.125% First Mortgage Bonds due 2040. LG&E received proceeds of $527 million, net of discounts and underwriting fees, from the issuance of the bonds. LG&E's first mortgage bonds are secured by the lien of the LG&E 2010 Mortgage Indenture, which creates a lien, subject to certain exceptions and exclusions, on substantially all of LG&E's real and tangible personal property located in Kentucky and used or to be used in connection with the generation, transmission and distribution of electricity and the storage and distribution of natural gas. The aggregate carrying value of the property subject to the lien was $2.5 billion at December 31, 2010.

Also in November 2010, KU issued $1.5 billion aggregate principal amount of its first mortgage bonds in three series: $250 million of 1.625% First Mortgage Bonds due 2015; $500 million of 3.250% First Mortgage Bonds due 2020 and $750 million of 5.125% First Mortgage Bonds due 2040. KU received proceeds of $1.48 billion, net of discounts and underwriting fees, from the issuance of the bonds. KU's first mortgage bonds are secured by the lien of the KU 2010 Mortgage Indenture, which creates a lien, subject to certain exceptions and exclusions, on substantially all of KU's real and tangible personal property located in Kentucky and used or to be used in connection with the generation, transmission and distribution of electricity. The aggregate carrying value of the property subject to the lien was $4.0 billion at December 31, 2010.

Approximately $2.6 billion of the net proceeds from the LG&E and KU Energy LLC, LG&E and KU debt issuances, together with approximately $163 million of borrowings by LG&E under its syndicated credit facility, were applied to repay borrowings by these entities from a subsidiary of PPL Energy Supply, which borrowings were incurred to permit each of LG&E and KU Energy LLC, LG&E and KU to repay certain indebtedness owed to affiliates of E.ON AG upon the closing of PPL's acquisition of LKE. In ~~March 2009,~~addition, LG&E and KU Energy LLC used net proceeds of its offering to make a $100 million return of capital to PPL.

The LG&E and KU Energy LLC senior notes and LG&E and KU first mortgage bonds were issued in private offerings to qualified institutional buyers and other transactions not subject to registration requirements under the Securities Act of 1933. In connection with the issuances, each entity entered into a registration rights agreement with representatives of the initial purchasers of applicable notes or bonds, pursuant to which each issuer agreed to file, by mid-May 2011, a registration statement to exchange such notes or bonds for securities containing substantially identical terms (except for certain transfer restrictions), or in certain cases to file, by mid-May 2011, a registration statement covering resales of such notes or bonds. Each issuer also agreed, under its registration rights agreement, to (i) use its commercially reasonable efforts to cause the registration statement to be de clared effective under the Security Act by mid-August 2011 and (ii) upon effectiveness of the registration statement, take certain actions to promptly exchange the notes or bonds or, in the case of a registration statement covering resales of notes or bonds, keep the registration statement effective until no later than mid-November 2011. Pursuant to each registration rights agreement, the issuer may be required to pay liquidated damages if it does not meet certain requirements under its registration rights agreement. Liquidated damages will generally accrue with respect to the principal amount of the subject securities at a rate of 0.25% per annum for the first 90 days from and including the date on which a default specified under the applicable registration rights agreement occurs, and increase by an additional 0.25% per annum thereafter, provided that the liquidated damages rate shall not at any time exceed 0.50% per annum. Liquidated damages will cease to accrue, with resp ect to the subject securities, when all registration defaults under the applicable registration rights agreement have been cured, or, if earlier, upon the redemption by the issuer or maturity of the notes or bonds.

(e)	In October 2010, PPL Capital Funding ~~retired the entire $201~~repurchased $20 million of its ~~4.33% Notes Exchange~~2007 Series A ~~upon maturity.~~

~~(d)~~		Junior Subordinated Notes due 2067, for $19 million, plus accrued interest. At December 31, 2010, $480 million of such notes remain outstanding. The notes bear interest at 6.70% into March 2017, at which time the notes will bear interest at three-month LIBOR plus 2.665%, reset quarterly, until maturity. Interest payments may be deferred, from time to time, on one or more occasions for up to ten consecutive years. The notes may be redeemed at par beginning in March 2017. In

2010 includes $1.15 billion of 4.625% Junior Subordinated Notes due 2018 that were issued in connection with ~~the~~PPL's issuance of ~~the notes, PPL and PPL Capital Funding entered into a Replacement Capital Covenant,~~Equity Units in which PPL and PPL Capital Funding agreed for the benefit of holders of a designated series of unsecured long-term indebtedness of PPL or PPL Capital Funding ranking senior to the notes that (i) PPL Capital Funding will not redeem or purchase the notes, or otherwise satisfy, discharge or defease the principal amountJune 2010. See discussion of the notes and (ii) neither PPL nor any of its other subsidiaries will purchase the notes before the end of March 2037, except, subject to certain limitations, to the extent that the applicable redemption or repurchase price or principal amount defeased does not exceed a specified amount of proceeds from the sale of qualifying replacement capital securities during the 180-day period prior to the date of that redemption, repurchase or defeasance. The designated series of covered debt benefiting from the Replacement Capital Covenant at December 31, 2009 and 2008 was PPL Capital Funding's 6.85% Senior Notes due 2047.Equity Units below for further information on such notes.


~~(e)~~	(f)	Represents lease financing consolidated through a ~~variable interest entity.~~VIE. See Note 322 for additional information.

(g)
~~(f)~~		The 1945 First Mortgage Bonds were issued under, and secured by, the lien of the 1945 First Mortgage Bond Indenture. In December 2008, PPL Electric completed an in-substance defeasance of the 1945 First Mortgage Bonds by depositing sufficient funds with the trustee solely to satisfy the principal and remaining interest obligations on the bonds when due. The amount of funds on deposit with the trustee was $13 million at December 31, 2010 and $14 million at December 31, 2009, ~~and $15 million at December 31, 2008,~~ and is recorded as restricted cash, primarily in other noncurrent assets on the Balance Sheets.

Also in December 2008, PPL Electric discharged the lien under the 1945 First Mortgage Bond Indenture, which covered substantially all electric distribution plant and certain transmission plant owned by PPL Electric.

(h)
~~(g)~~		PPL - interest rates range from 1.625% to 7.125%, and maturities range from 2013 to 2040. PPL Electric - interest rates range from 4.95% to 7.125%, and maturities range from 2013 to 2039. The senior secured and first mortgage bonds issued by PPL Electric are secured by the lien of the PPL Electric 2001 ~~Senior Secured Bond~~Mortgage Indenture, which covers substantially all electric distribution plant and certain transmission plant owned by PPL Electric.

		~~In May 2009, PPL Electric issued $300 million of 6.25% First Mortgage Bonds due 2039 (6.25% Bonds).~~ The 6.25% Bonds may be redeemed any time prior to maturity at PPL Electric's option at make-whole redemption prices. PPL Electric received proceeds of $296 million, net of a discount and underwriting fees, from the issuance of the 6.25% Bonds. Approximately $86 million of the proceeds were used in August 2009 to partially fund the repayment at maturity of $486 million aggregate principal amountcarrying value of PPL Electric's ~~Senior Secured Bonds, 6-1/4% Series. The balance of such repayment~~property, plant and equipment was funded from the issuance in October 2008 of $400 million of 7.125% Senior Secured Bonds due 2013. The balance of the proceeds from the issuance of the 6.25% Bonds was used for general corporate purposes, including capital expenditures.

		In December 2009, PPL Electric Utilities redeemed the entire $100 million aggregate principal amount of its 4.30% Senior Secured Bonds due 2013. PPL Electric paid a premium of $9 million in connection with the redemption. The total loss on the redemption of approximately ~~$10 million pre-tax, which includes unamortized fees~~$3.6 billion and ~~discounts, is reflected in "Regulatory assets" and "Other regulatory and noncurrent assets" on the Balance Sheets of PPL and PPL Electric~~$3.3 billion at December 31, ~~2009 as an unamortized loss on reacquired debt~~2010 and will be amortized through the original maturity of the debt. Additionally, PPL recorded a net gain of approximately $4 million pre-tax in "Other Income - net" on the Statement of Income as a result of reclassifying gains and losses on related cash flow and fair value hedges from AOCI and Long-term Debt into earnings.2009.


~~(h)~~	(i)	PPL Electric issued a series of its senior secured bonds to secure its obligations to make payments with respect to each series of Pollution Control Bonds that were issued by the LCIDA and the PEDFA on behalf of PPL Electric. These senior secured bonds were issued in the same principal amount, contain payment and redemption provisions that correspond to and bear the same interest rate as such Pollution Control Bonds. These senior secured bonds were issued under ~~the~~PPL Electric's 2001 ~~Senior Secured Bond~~Mortgage Indenture and are secured as noted in ~~(g)~~(h) above.

~~(i)~~		~~The senior secured~~ $224 million of such bonds may be redeemed at par beginning in 2015.

(j)

The related Pollution Control Bonds ~~are~~issued by the PEDFA on behalf of PPL Electric in an aggregate principal amount of $90 million were structured as variable-rate remarketable ~~bonds.~~bonds, whereby PPL Electric ~~may~~could convert the interest rate mode on the bonds from time to time to a commercial paper rate, daily rate, weekly rate or a term rate of at least one year. The bonds are subject to mandatory purchase under certain circumstances, including upon conversion to a different interest rate mode. To the extent that a purchase is required prior to the maturity date, PPL Electric has the ability and intent to refinance the bonds on a long-term basis. At December 31, 2009 and 2008, thePollution Control Bonds were remarketed in September 2010. The bonds were in a term rate mode ~~and bear~~bearing interest at 4.85% until October 2010. Effective October 2010, ~~at which time~~the term rate on the bonds ~~will~~was set at 4.00% through maturity. PPL Electric may direct the PEDFA to redeem the bonds, in whole or in part, at par beginning in October 2020. The bonds are subject to mandatory redemption upon a determination that the interest on the bonds would be ~~remarketed based upon~~included in the holders' gross income for federal tax purposes.

(k)	In October 2010, LG&E and KU each issued a series of its first mortgage bonds to the respective trustees of tax-exempt revenue bonds to secure its respective obligations to make payments with respect to each series of bonds. The first mortgage bonds were issued in the same principal amount, contain payment and redemption provisions that correspond to and bear the same interest rate as such tax-exempt revenue bonds. These first mortgage bonds were issued under the LG&E 2010 Mortgage Indenture and the KU 2010 Mortgage Indenture and are secured as noted in (d) above. The related tax-exempt revenue bonds were issued by various governmental entities, principally counties in Kentucky, on behalf of LG&E and KU. The related revenue bond documents allow LG&E and KU to convert the interest rate mode ~~elected by PPL Electric.~~

~~(k)~~		~~The PEDFA~~on the bonds from time to time to a commercial paper rate, daily rat e, weekly rate, term rate of at least one year or, in some cases, an auction rate. At December 31, 2010, an aggregate of $183 million of tax-exempt revenue bonds issued ~~Exempt Facilities Revenue Bonds~~ on behalf of LG&E and KU were in a term rate mode and had a weighted average interest rate of approximately 5.31%. The remaining $742 million were in either a commercial paper rate, daily rate, weekly rate or auction rate mode and had a weighted average interest rate of approximately 0.45% at December 31, 2010.

Several series of the tax-exempt revenue bonds are insured by monoline bond insurers whose ratings were reduced due to exposures relating to insurance of sub-prime mortgages. Of the bonds outstanding, $231 million are in the form of insured auction rate securities, wherein interest rates are reset either weekly or every 35 days via an auction process. Beginning in late 2007, the interest rates on these insured bonds began to increase due to investor concerns about the creditworthiness of the bond insurers. During 2008, interest rates increased, and LG&E and KU experienced failed auctions when there were insufficient bids for the bonds. When a failed auction occurs, the interest rate is set pursuant to a formula stipulated in the indenture. Since the date of acquisition of LKE by PPL, ~~Energy Supply~~the average rate on LG&E's and KU's auction rate bonds in total was 0.4 9%. As noted above, the instruments governing these auction rate bonds permit LG&E and KU to convert the bonds to other interest rate modes.

Certain variable rate tax-exempt revenue bonds totaling $511 million (including the $163 million discussed below) at December ~~2007 (Series 2007 Bonds)~~31, 2010, are subject to tender for purchase by LG&E and KU at the option of the holder and to mandatory tender for purchase by LG&E and KU upon the occurrence of certain events. At December ~~2008 (Series 2008 Bonds). In connection with the issuances~~31, 2010, LG&E held $163 million of such bonds, ~~PPL Energy Supply entered into loan agreements with~~which were issued on its behalf by Louisville/Jefferson County, Kentucky and are reflected as "Short-term investments" on the ~~PEDFA pursuant~~Balance Sheet. In January 2011, the entire $163 million of bonds were remarketed to which the PEDFA loaned to PPL Energy Supply the proceeds of the bonds on payment terms that correspond to those of the bonds. PPL Investment Corp. acted as initial purchaser of the Series 2008 Bonds upon issuance. At December 31, 2008, the Series 2007 Bonds and the Series 2008 Bonds boreunaffiliated investors in a term rate mode, bearing interest at ~~3.20%~~1.90% into 2012. The proceeds from the remarketing were used to repay the borrowing under LG&E's syndicated credit facility, which is discussed above in "Credit Arrangements and ~~5.50%.~~Short-term Debt."

(l)
		In April 2009, the PEDFA issued $231 million aggregate principal amount of Exempt Facilities Revenue Refunding Bonds, Series 2009A and 2009B due 2038 and Series 2009C due 2037 (PPL Energy Supply, LLC Project), on behalf of PPL Energy Supply. The Series 2009A bonds, in an aggregate principal amount of $100 million, and the Series 2009B bonds, in an aggregate principal amount of $50 million, were issued by the PEDFA in order to refund $150 million aggregate principal amount of Exempt Facilities Revenue Bonds, Series 2008A and 2008B (PPL Energy Supply, LLC Project) due 2038 that were issued by the PEDFA in December 2008 on behalf of PPL Energy Supply, and for which PPL Investment Corp. acted as initial purchaser. The Series 2009C bonds, in an aggregate principal amount of $81 million, were issued in order to refund $81 million aggregate principal amount of Exempt Facilities Revenue Bonds, Series ~~2007~~2 007 (PPL Energy Supply, LLC Project) due 2037 that were issued by the PEDFA in December 2007 on behalf of PPL Energy Supply. Among other things, the completed refundings were able to take advantage of provisions in the Economic Stimulus Package that eliminated the application of the AMT to interest payable on the refinanced indebtedness. The refundings of the bonds were effected by the ultimate distribution of $231 million by the PEDFA to the bond holders, including PPL Investment Corp. As a result of the refundings of the bonds, PPL Investment Corp. received proceeds of $150 million, which is reflected as a cash flow from investing activities on the Statement of Cash Flows for PPL and PPL Energy Supply in 2009.

Similar to the Series 2007 Bonds and the Series 2008 Bonds, the Series 2009A, 2009B and 2009C bonds are structured as variable-rate remarketable bonds. PPL Energy Supply may convert the interest rate mode on the bonds from time to time to a commercial paper rate, daily rate, weekly rate or a term rate of at least one year. The bonds are subject to mandatory purchase under certain circumstances, including upon conversion to a different interest rate mode, and are subject to mandatory redemption upon a determination that the interest on the bonds would be included in the holders' gross income for federal tax purposes. To the extent that a purchase is required prior to the maturity date, PPL Energy Supply has the ability and intent to refinance the bonds on a long-term basis. The Series 2009A bonds bore interest at an initial rate of 0.90% through June 30, 2009. The Series 2009B bonds bore interest at an initial rate of 1.25% through September 30, 2009. The Series 2009C bonds were in a weekly interest rate mode through December 9, 2009.

PPL Energy Supply elected to change the interest rate mode on the Series 2009A and Series 2009B bonds to a commercial paper rate mode upon expiration of the initial rate period for each series. The Series 2009A bonds were converted to a commercial paper rate mode in July 2009 and currently bear interest at 0.62% through August 31, 2010. The Series 2009B bonds were converted to a commercial paper rate mode in October 2009 and currently bear interest at 0.50% through March 31, 2010. At the end of each commercial paper rate period, the bonds will be remarketed based upon an interest rate mode elected by PPL Energy Supply.

PPL Energy Supply converted the interest rate mode on the Series 2009C bonds from a weekly interest rate mode to a commercial paper rate mode in December 2009. The bonds currently bear interest at 0.62% through August 31, 2010, at which time the bonds will be remarketed based upon an interest rate mode elected by PPL Energy Supply.

In connection with the issuance of each series of bonds by the PEDFA in 2009, PPL Energy Supply entered into separate loan agreements with the PEDFA pursuant to which the PEDFA loaned to PPL Energy Supply the proceeds of the Series 2009A, Series 2009B and Series 2009C bonds on payment terms that correspond to those of the bonds. PPL Energy Supply issued separate promissory notes to the PEDFA to evidence its obligations under each of the loan agreements. These loan agreements and promissory notes replaced those associated with the refunded 2007 and 2008 PEDFA bonds in a non-cash transaction that is excluded from the Statement of Cash Flows in 2009.

~~Separate letters of credit were issued under~~

Similar to the Series 2007 Bonds and the Series 2008 Bonds, the Series 2009A, 2009B and 2009C bonds are structured as variable-rate remarketable bonds. PPL Energy ~~Supply's $3.2 billion five-year syndicated credit facility~~Supply may convert the interest rate mode on the bonds from time to time to a commercial paper rate, daily rate, weekly rate or a term rate of at least one year. The bonds are subject to mandatory purchase by PPL Energy Supply under certain circumstances, including upon conversion to a different interest rate mode, and are subject to mandatory redemption upon a determination that the ~~trustee~~interest on the bonds would be included in ~~support~~the holders' gross income for federal tax purposes. The Series 2009A bonds bore interest at an initial rate of 0.90% through June 30, 2009. The Series 2009B bonds bore interest at an initial rate of 1.25% through September 30, 2009. The Series 2009C bonds were in a weekly int erest rate mode through December 9, 2009.

At December 31, 2009, each series of ~~bonds.~~bonds was in a commercial paper rate mode. The ~~letters~~weighted average rate was 0.59%.

The interest rate mode on all three series of ~~credit permit the trustee~~bonds was converted from a commercial paper rate to ~~draw amounts to pay principal~~a term rate of ~~and interest on, and the purchase price of, the Series 2009A, Series 2009B and Series 2009C bonds when due.~~ 3.00% for five years, effective in September 2010.

(m)	PPL - 6.00% - 7.471% notes due 2011 - 2020. PPL Energy Supply ~~is required to reimburse any draws on the letters of credit within one business day of such draw.~~- 6.00% notes due 2020.

(n)
~~(l)~~		In June 2009, PPL Electric repaid its $9 million obligation under a Variable Rate Pollution Control Facilities Note in connection with the early redemption in full of the underlying pollution control revenue bonds that wereMarch 2010, WPD (South Wales) and WPD (South West) each issued ~~by the Indiana County Industrial Development Authority and due in June 2027.~~

~~(m)~~		~~Although financial information of foreign subsidiaries is recorded on a one-month lag, WPD's December 2008 retirement of $225~~£200 million of ~~senior notes is reflected in~~5.75% Notes due 2040 (Notes). The combined debt issuance of £400 million equated to $603 million at the ~~2008 Financial Statements and its December 2007 retirement~~time of ~~$175 million of senior notes is reflected in the 2007 Financial Statements due to the materiality of these retirements.~~

		~~Includes £225 million~~issuance ($~~369~~623 million at December 31, ~~2009~~2010), of which WPD received proceeds of £394 million, which equated to $593 million, net of discounts and ~~$345~~underwriting fees. The proceeds have been, or will be, used for general corporate purposes, including repayment of short-term debt, prepayment of certain pension contributions and funding of capital expenditures. See Note 13 for further discussion of pension contributions. Includes £225 million ($350 million at December 31, ~~2008)~~2010 and $369 million at December 31, 2009) of notes that may be redeemed, in total but not in part, on December 21, 2026, at the greater of the principal value or a value determined by reference to the gross redemption yield on a nominated U.K. Government bond. ~~Additionally, the £225~~ Also includes £1.0 billion ($1.6 billion) at December 31, 2010 and £625 million ($1.0 billion) at December 31, 2009 of ~~such~~ notes that may be put by the holders back to the issuer for redemption if the long-term credit ratings assigned to the ~~notes~~Notes by Moody's, S&P or Fitch are withdrawn by any of the rating agencies or reduced to a non-investment grade rating of Ba1 or BB+ in connection with a restructuring event. A restructuring event includes the loss of, or a material adverse change to, the distribution license under which ~~the issuer operates.~~WPD (South Wales) and WPD (South West) operate.


		Change from ~~2008~~2009 to ~~2009~~2010 includes ~~an increase~~a decrease of ~~$66~~$53 million resulting from movements in foreign currency exchange rates.


~~(n)~~	(o)	The principal amount of these notes is adjusted on a semi-annual basis based on changes in a specified index, as detailed in the terms of the related indentures. The adjustment to the principal amount from ~~2008~~2009 to ~~2009~~2010 was ~~a decrease~~an increase of approximately £3£11 million ($617 million) and is offset by a ~~$26~~$20 million ~~increase~~decrease resulting from movements in foreign currency exchange rates.


		These notes may be redeemed, in total by series, on December 1, 2026, at the greater of the adjusted principal value and a make-whole value determined by reference to the gross real yield on a nominated U.K. government bond. Additionally, these notes may be put by the holders back to the issuer for redemption if the long-term credit ratings assigned to the notes by Moody's, S&P or Fitch are withdrawn by any of the rating agencies or reduced to a non-investment grade rating of Ba1 or BB+ in connection with a restructuring event. A restructuring event includes the loss of, or a material adverse change to, the distribution license under which the issuer operates.

(p)
~~(o)~~		~~Represents~~Reflects adjustments made to record WPD's long-term debt at fair value at the time of acquisition of the controlling interest in WPD in 2002.

(q)	Reflects adjustments made to record LG&E's and KU's long-term debt at fair value at the time of acquisition of LKE in 2010.

(PPL)

In June 2010, PPL issued 103.5 million shares of its common stock at a public offering price of $24.00 per share, for a total of $2.484 billion. Proceeds from the issuance were $2.409 billion, net of the $75 million underwriting discount. PPL also issued 23 million Equity Units at a stated amount per unit of $50.00 for a total of $1.150 billion. Proceeds from the issuance were $1.116 billion, net of the $34 million underwriting discount. PPL invested the net proceeds in U.S. government obligations, bank deposits and other highly rated investments until needed to partially fund the acquisition of LKE and pay certain acquisition-related fees and expenses.

Each Equity Unit consists of a Purchase Contract and, initially, a 5.0% undivided beneficial ownership interest in $1,000 principal amount of PPL Capital Funding 4.625% Junior Subordinated Notes due 2018 (2018 Notes).

Each Purchase Contract obligates the holder to purchase, and PPL to sell, for $50.00 a variable number of shares of PPL common stock determined by the average VWAP of PPL's common stock for the 20-trading day period ending on the third trading day prior to July 1, 2013, subject to antidilution adjustments and an early settlement upon a Fundamental Change as follows:

·	if the average VWAP equals or exceeds $28.80, then 1.7361 shares (a minimum of 39,930,300 shares);

·	if the average VWAP is less than $28.80 but greater than $24.00, a number of shares of common stock having a value, based on the average VWAP, equal to $50.00; and

·	if the average VWAP is less than or equal to $24.00, then 2.0833 shares (a maximum of 47,915,900 shares).

If holders elect to settle the Purchase Contract prior to July 1, 2013, they will receive 1.7361 shares of PPL common stock, subject to antidilution adjustments and an early settlement upon a Fundamental Change.

A holder's ownership interest in the 2018 Notes is pledged to PPL to secure the holder's obligation under the related Purchase Contract. If a holder of a Purchase Contract chooses at any time to no longer be a holder of the 2018 Notes, such holder's obligation under the Purchase Contract must be secured by a U.S. Treasury security.

Each Purchase Contract also requires PPL to make quarterly contract adjustment payments at a rate of 4.875% per year on the $50.00 stated amount of the Equity Unit. PPL has the option to defer these contract adjustment payments until the Purchase Contract settlement date. Deferred contract adjustment payments will accrue additional contract adjustment payments at the rate of 9.5% per year until paid. Until any deferred contract adjustment payments have been paid, PPL may not declare or pay any dividends or distributions on, or redeem, purchase or acquire or make a liquidation payment with respect to, any of its capital stock, subject to certain exceptions.

The 2018 Notes are fully and unconditionally guaranteed by PPL as to payment of principal and interest. The 2018 Notes initially bear interest at 4.625% and are not subject to redemption prior to July 2015. Beginning July 2015, PPL Capital Funding may, at its option, redeem the 2018 Notes, in whole but not in part, at any time, at par plus accrued and unpaid interest. The 2018 Notes are expected to be remarketed in 2013 in two tranches, such that neither tranche will have an aggregate principal amount of less than the lesser of $300 million and 50% of the aggregate principal amount of the 2018 Notes to be remarketed. One tranche will mature on or about the third anniversary of the settlement of the remarketing, and the other tranche will mature on or about the fifth anniversary of such settlemen t. The 2018 Notes will be remarketed as subordinated, unsecured obligations of PPL Capital Funding, as PPL Capital Funding notified the trustee in September 2010 of its irrevocable election to maintain the subordination provisions of the notes and related guarantees in a remarketing. Upon a successful remarketing, the interest rate on the 2018 Notes may be reset and the maturity of the tranches may be modified as necessary. In connection with a remarketing, PPL Capital Funding may elect, with respect to each tranche, to extend or eliminate the early redemption date and/or calculate interest on the notes of a tranche on a fixed or floating rate basis. If the remarketing fails, holders of the 2018 Notes will have the right to put their notes to PPL Capital Funding on July 1, 2013 for an amount equal to the principal amount plus accrued interest.

Prior to July 2013, PPL Capital Funding may elect at one or more times to defer interest payments on the 2018 Notes for one or more consecutive interest periods until the earlier of the third anniversary of the interest payment due date and July 2015. Deferred interest payments will accrue additional interest at a rate equal to the interest rate then applicable to the 2018 Notes. Until any deferred interest payments have been paid, PPL may not, subject to certain exceptions, (i) declare or pay any dividends or distributions on, or redeem, purchase or acquire or make a liquidation payment with respect to, any of its capital stock, (ii) make any payment of principal of, or interest or premium, if any, on, or repay, purchase or redeem any of its debt securities that upon its liquidation ranks equal with, or junior in in terest to, the subordinated guarantee of the 2018 Notes by PPL as of the date of issuance and (iii) make any payments regarding any guarantee by PPL of securities of any of its subsidiaries (other than PPL Capital Funding) if the guarantee ranks equal with, or junior in interest to, the 2018 Notes as of the date of their issuance.

In the financial statements, the proceeds from the sale of the Equity Units were allocated to the 2018 Notes and the Purchase Contracts, including the obligation to make contract adjustment payments, based on the underlying fair value of each instrument at the time of issuance. As a result, the 2018 Notes were recorded at $1.150 billion, which approximated fair value, as long-term debt. At the time of issuance, the present value of the contract adjustment payments of $157 million was recorded to other liabilities, representing the obligation to make contract adjustment payments, with an offsetting reduction to capital in excess of par value for the issuance of the Purchase Contracts, which approximated the fair value of each. The liability is being accreted through interest expense over the three-year term of the Purchase Contracts. The initial valuation of the contract adjustment payments is considered a non-cash transaction that is excluded from the Statement of Cash Flows in 2010. Costs to issue the Equity Units were primarily allocated on a relative cost basis, resulting in $29 million being recorded to capital in excess of par value and $7 million being recorded to other noncurrent assets. See Note 4 for EPS considerations related to the Purchase Contracts.

Legal Separateness

(PPL, PPL Energy Supply and PPL Electric)

In 2001, PPL Electric completed a strategic initiative to confirm its legal separation from PPL and PPL's other affiliated companies. This initiative was designed to enable PPL Electric to substantially reduce its exposure to volatility in energy prices and supply risks through 2009 and to reduce its business and financial risk profile by, among other things, limiting its business activities to the transmission and distribution of electricity and businesses related to or arising out of the electric transmission and distribution businesses. In connection with this initiative, PPL Electric:

·	obtained long-term electric supply contracts to meet its PLR obligations (with its affiliate PPL EnergyPlus) through 2009, as further described in Note 1516 under "PLR Contracts" (also see Note 1415 under "Energy Purchase Commitments" for information on current PLR supply procurement procedures);

·	agreed to limit its businesses to electric transmission and distribution and related activities;

·	adopted amendments to its Articles of Incorporation and Bylaws containing corporate governance and operating provisions designed to clarify and reinforce its legal and corporate separateness from PPL and its other affiliated companies; and

appointed an independent director to its Board of Directors and required the unanimous approval of the Board of Directors, including the consent of the independent director, to amendments to these corporate governance and operating provisions or to the commencement of any insolvency proceedings, including any filing of a voluntary petition in bankruptcy or other similar actions.

In addition, in connection with the issuance of certain series of bonds, PPL Electric entered into a compliance administration agreement with an independent compliance administrator to review, on a semi-annual basis, its compliance with the corporate governance and operating requirements contained in its Articles of Incorporation and Bylaws. Such series of bonds are no longer outstanding and the compliance administration agreement has terminated, but PPL Electric continues to comply with the corporate separateness provisions in its Articles of Incorporation and Bylaws.

The enhancements to PPL Electric's legal separation from its affiliates are intended to minimize the risk that a court would order PPL Electric's assets and liabilities to be substantively consolidated with those of PPL or another affiliate of PPL in the event that PPL or another PPL affiliate were to become a debtor in a bankruptcy case. Based on these various measures, PPL Electric was able to issue and maintain a higher level of debt and use it to replace higher cost equity, thereby maintaining a lower total cost of capital. Nevertheless, if PPL or another PPL affiliate were to become a debtor in a bankruptcy case, there can be no assurance that a court would not order PPL Electric's assets and liabilities to be consolidated with those of PPL or such other PPL affiliate.

The subsidiaries of PPL are separate legal entities. PPL's subsidiaries are not liable for the debts of PPL. Accordingly, creditors of PPL may not satisfy their debts from the assets of the subsidiaries absent a specific contractual undertaking by a subsidiary to pay PPL's creditors or as required by applicable law or regulation. Similarly, absent a specific contractual undertaking or as required by applicable law or regulation, PPL is not liable for the debts of its subsidiaries. Accordingly, creditors of PPL's subsidiaries may not satisfy their debts from the assets of PPL absent a specific contractual undertaking by PPL to pay the creditors of its subsidiaries or as required by applicable law or regulation.

Similarly, the subsidiaries of PPL Energy Supply and PPL Electric are separate legal entities. These subsidiaries are not liable for the debts of PPL Energy Supply and PPL Electric. Accordingly, creditors of PPL Energy Supply and PPL Electric may not satisfy their debts from the assets of their subsidiaries absent a specific contractual undertaking by a subsidiary to pay the creditors or as required by applicable law or regulation. In addition, absent a specific contractual undertaking or as required by applicable law or regulation, PPL Energy Supply and PPL Electric are not liable for the debts of their subsidiaries. Accordingly, creditors of these subsidiaries may not satisfy their debts from the assets of PPL Energy Supply or PPL Electric absent a specific contractual undertaking by that ~~parent~~pare nt to pay the creditors of its subsidiaries or as required by applicable law or regulation.

~~Common Stock Repurchase Program~~ ~~(PPL)~~

In June 2007, PPL's Board of Directors authorized the repurchase by PPL of up to $750 million of its common stock. A total of 15,732,708 shares were repurchased for $750 million, excluding related fees, under the plan during 2008 and 2007. These purchases were primarily recorded as a reduction to "Capital in excess of par value" on the Balance Sheet.

Distributions, Capital Contributions and Related Restrictions

(PPL)

In February ~~2009,~~2010, PPL announced an increase to its quarterly common stock dividend, effective April 1, ~~2009,~~2010, to ~~34.5~~35.0 cents per share (equivalent to ~~$1.38~~$1.40 per annum). Future dividends, declared at the discretion of the Board of Directors, will be dependent upon future earnings, cash flows, financial and legal requirements and other factors.

Neither PPL Capital Funding nor PPL may declare or pay any cash dividend or distribution on its capital stock during any period in which PPL Capital Funding defers interest payments on its 2007 Series A Junior Subordinated Notes due 2067. Additionally, as discussed above in "Long-term Debt and Equity Securities," subject to certain exceptions, PPL may not declare or pay any dividend or distribution on its capital stock until any deferred interest payments on its 4.625% Junior Subordinated Notes due 2018 have been paid and deferred contract adjustment payments on PPL's Purchase Contracts have been paid. At December 31, ~~2009,~~2010, no ~~interest~~ payments were ~~deferred.~~deferred on either series of junior subordinated notes or the Purchase Contracts.

PPL relies on dividends or loans from its subsidiaries to fund PPL's dividends to its common shareholders. The net assets of certain PPL subsidiaries are subject to legal restrictions. LG&E, KU and PPL Electric are subject to Section 305(a) of the Federal Power Act, which makes it unlawful for a public utility to make or pay a dividend from any funds "properly included in capital account." The meaning of this limitation has never been clarified under the Federal Power Act. LG&E, KU and PPL Electric believe, however, that this statutory restriction, as applied to their circumstances, would not be construed or applied by the FERC to prohibit the payment from retained earnings of dividends that are not excessive and are for lawful and legitimate business purposes. Also, under Vir ginia law, KU is prohibited from making loans to affiliates without the prior approval of the VSCC. There are no comparable statutes under Kentucky law applicable to LG&E and KU, or under Pennsylvania law applicable to PPL Electric. However, Orders from the KPSC require LG&E or KU to obtain prior regulatory consent or approval before loaning funds to PPL. At December 31, 2010, the net restricted assets of LG&E and KU were approximately $4.4 billion.

(PPL and PPL Energy Supply)

The PPL Montana Colstrip lease places certain restrictions on PPL Montana's ability to declare dividends. At this time, PPL believes that these covenants will not limit PPL's or PPL Energy Supply's ability to operate as desired and will not affect their ability to meet any of their cash obligations. WPD subsidiaries also have financing arrangements that limit their ability to pay dividends. However, PPL does not, at this time, expect that any of such limitations would significantly impact PPL's or PPL Energy Supply's ability to meet their cash obligations.

(PPL Energy Supply)

~~During 2009,~~In 2010, PPL Energy Supply distributed ~~$943 million~~$4.7 billion to its parent company, PPL Energy Funding, and received cash ~~capital~~ contributions of ~~$50 million.~~$3.6 billion. The cash contributions received from its parent related primarily to the funds received by PPL in June 2010 from the issuance of common stock and Equity Units. These funds were invested by a subsidiary of PPL Energy Supply until they were returned to PPL Energy Funding in October 2010 to be available to partially fund PPL's acquisition of LKE and pay certain acquisition-related fees and expenses.

(PPL and PPL Electric)

As discussed in Note 6, PPL Electric may not pay dividends on its common stock, except in certain circumstances, unless full dividends have been paid on the Preference Shares for the then-current dividend period. The quarterly dividend rate for PPL Electric's Preference Shares is $1.5625 per share. PPL Electric has declared and paid dividends on its outstanding Preference Shares since issuance. Dividends on the Preference Shares are not cumulative and future dividends, declared at the discretion of PPL Electric's Board of Directors, will be dependent upon future earnings, cash flows, financial and legal requirements and other factors.

(PPL Electric)

During 2010, PPL Electric paid common stock dividends of $71 million to PPL and received cash contributions of $55 million.

PPL Electric is subject to Section 305(a) of the Federal Power Act, which makes it unlawful for a public utility to make or pay a dividend from any funds "properly included in capital account." The meaning of this limitation has never been clarified under the Federal Power Act. PPL Electric believes, however, that this statutory restriction, as applied to its circumstances, would not be construed or applied by the FERC to prohibit the payment from retained earnings of dividends that are not excessive and are for lawful and legitimate business purposes.

~~(PPL Electric)~~

~~During 2009, PPL Electric paid common stock dividends of $274 million to PPL, and received cash capital contributions of $400 million.~~

8.	8. Acquisitions, Development and Divestitures

(PPL, PPL Energy Supply and PPL Electric)

PPL and its subsidiaries continuously evaluate strategic options and, from time to time, ~~PPL and its subsidiaries~~ negotiate with third parties regarding acquisitions and dispositions of businesses and assets, joint ventures and development projects, which may or may not result in consummated transactions. Any ~~such~~resulting transactions may impact future financial results. See Note 9 for information on anticipated and completed sales of businesses that were presented as discontinued operations by PPL and PPL Energy ~~Supply.~~Supply and Note 10 for information on PPL's acquisition of LKE.

Domestic

~~License Renewals(PPL and PPL Energy Supply)~~Development

~~PPL Susquehanna operates Units 1~~(PPL)

In 2006, LKE entered into a construction contract related to the Trimble County Unit 2 (TC2) project, a coal-fired generating plant with capacity of 760 MW, of which the LG&E and ~~2 pursuant to NRC operating licenses. In November 2009,~~KU share is 75% or 570 MW. The contract is a turnkey agreement for the ~~NRC approved PPL Susquehanna's application for 20-year license renewals for each~~design, engineering, procurement, construction, commissioning, testing and delivery of the ~~Susquehanna units, extending~~project, according to designated specifications, terms and conditions. LKE's share of the ~~expiration date~~expected capital cost of the TC2 project is $860 million. With limited exceptions LKE took care, custody and control of TC2 on January 22, 2011, and has dispatched the unit to ~~2042~~meet customer demand since that date. LG&E and KU and the contractor agreed to a further amendment of the construc tion agreement whereby the contractor will complete certain actions relating to identifying and completing any necessary modifications to allow operation of TC2 on all fuels in accordance with initial specifications prior to certain dates, and amending the provisions relating to liquidated damages. LKE cannot currently estimate the ultimate outcome of these matters. See Notes 14 and 15 for Unit 1 and to 2044 for Unit 2. At December 31, 2009 and 2008, $17 million and $15 million of license renewal costs were capitalized and are included in noncurrent "Other intangibles" on the Balance Sheets.

~~Development~~additional information.

(PPL and PPL Energy Supply)

In 2007, PPL requested FERC approval to expand the capacity of its Holtwood hydroelectric ~~plant by 125 MW.~~plant. In 2008, PPL withdrew the application due to then-prevailing economic conditions, including the high cost of capital and projected future energy prices. As a result, the Supply segment recorded an impairment of $22 million ($13 million after tax), which is included in "Other operation and maintenance" on the Statements of Income.

In ~~April~~ 2009, PPL filed a new application with the FERC to expand capacity at its Holtwood hydroelectric plant, ~~by 125 MW, and in October 2009~~which the FERC ~~granted the approval.~~approved. PPL reconsidered this project in light of the availability of tax incentives and potential federal loan guarantees for renewable projects contained in the Economic Stimulus Package. ~~In approving this application, the FERC extended the operating license for the Holtwood plant to August 2030.~~ The expansion project has an expected capital cost ofo f approximately $434 million. ~~Site preparation began in~~Construction continues on the ~~fourth quarter of 2009 and construction began in the first quarter of 2010,~~project, with commercial operations scheduled to begin in 2013. ~~A PPL subsidiary has applied to the DOE for a federal loan guarantee for the project.~~ At December 31, 2010, expected remaining expenditures are $304 million.

In ~~March~~ 2009, PPL Montana received FERC approval for its request to redevelop the Rainbow hydroelectric facility ~~near~~at Great Falls, Montana ~~for total plant~~to increase capacity ~~of approximately 60 MW (an increase of~~by 28 ~~MW).~~MW. The ~~expected~~ redevelopment ~~project~~project's expected cost is ~~$230~~$212 million. Construction ~~began in October 2009,~~continues on the project, with commercial operations scheduled to begin in 2012. A At December 31, 2010, expected remaining expenditures are $100 million.

PPL ~~subsidiary has applied to the DOE~~believes that it is qualified for ~~a federal loan guarantee~~either investment tax credits or Treasury grants for the ~~project.~~hydroelectric plant expansion projects at the Holtwood and Rainbow facilities. PPL has recognized investment tax credits and is evaluating whether to seek Treasury grants in lieu of the credits. During 2010, PPL recorded deferred investment tax credits of $52 million related to tax years 2010 and 2009. PPL anticipates recognizing an additional $90 million in tax credits for tax years 2011 and 2012. These credits reduce PPL's tax liability and will be amortized over the life of the related assets.

In 2008, PPL Susquehanna received NRC approval for its request to increase the generation capacity of the Susquehanna nuclear plant. The project is being completed in phases over several years. PPL Susquehanna's share of the total expected capacity increase is ~~159 MW, of which PPL Susquehanna's 90% ownership share is 143~~currently estimated to be 195 MW. The ~~first uprate for~~final phase of the Unit 1 ~~was 50 MW and~~uprate was completed in ~~2008.~~2010 and yielded 55 MW for PPL Susquehanna. The ~~second uprate for~~final Unit ~~1 is scheduled to be completed in 2010. The first uprate for Unit~~ 2 ~~was 50 MW and was completed in 2009, and the second~~ uprate is scheduled for 2011 and is projected to ~~be completed in 2011. The remaining increase is 59~~yield an additional 50 MW ~~of which~~for PPL ~~Susquehanna's share is 53 MW.~~ Susquehanna. At December 31, 2010, PPL Susquehanna's share of ~~the~~ expected ~~capital cost for the total uprate of 143 MW~~remaining expenditures is ~~$345~~$15 million.

In ~~October~~ 2008, a PPL Energy Supply subsidiary submitted a COLA to the NRC for the proposed Bell Bend nuclear generating unit (Bell Bend) to be built adjacent to ~~PPL's~~the Susquehanna plant. ~~The~~Also in 2008, the COLA was formally docketed and accepted for review by the ~~NRC in December 2008. The NRC is now reviewing the COLA. In May 2009,~~NRC. PPL continues to respond to questions from the NRC ~~published its official~~regarding technical and site specific information provided in the initial COLA and subsequent amendments. PPL does not expect to complete the COLA review ~~schedule that culminates~~process with ~~issuance of Bell Bend's final safety evaluation report in 2012, after which public hearings will be held before Bell Bend's license can be issued.~~the NRC prior to 2013.

In 2008, a PPL Energy Supply subsidiary submitted Parts I and II of an application for a federal loan guarantee for Bell Bend to the DOE. In ~~June~~ 2009, the DOE announced that it was working to finalize loan guarantees related to four projects, ~~none of which was~~not including Bell Bend. ~~None~~Eight of the ten applicants who submitted Part II applications ~~has been formally eliminated by~~remain active in the ~~DOE;~~DOE program; however, the DOE has stated that the $18.5 billion currently appropriated to support new nuclear projects would not likely be enough for more than ~~four~~three projects. AThe PPL Energy Supply subsidiary submits quarterly application updates for Bell Bend to the DOE to remain active in the loan guarantee application ~~process and plans to continue to do so in 2010.~~process.

The President's proposed budget for fiscal year 2011 includes an additional $36 billion of loan guarantees for nuclear projects. If this increased loan guarantee authorization is approved, PPL believes that Bell Bend could be a candidate for a share of such additional guarantees. However, PPL has made no decision to proceed with construction of Bell Bend and expects that such decision will not be made for several years given the anticipated lengthy NRC license approval process. Additionally, PPL has announced that it does not expect to proceed with construction absent favorable economics, a joint arrangement with other interested parties and a federal loan guarantee or other acceptable financing. PPL and its subsidiaries are currently authorized by PPL's Board of Directors to spend up to ~~$111~~$144 million on the COLA and other ~~permits~~permitting costs (including land costs) necessary for construction. At December 31, 2010 and 2009, ~~and 2008, $77~~$109 million and ~~$58~~$77 million of costs associated with the licensing application were capitalized and are included ~~in noncurrent "Other intangibles"~~ on the Balance Sheets asin noncurrent "Other intangibles. " PPL believes it is probable that these costs are ultimately recoverable following NRC approval byof the ~~NRC~~COLA either through construction of the new nuclear unit, transfer of the COLA rights to a joint venture, or sale of the COLA rights to another party.

(PPL and PPL Electric)

In ~~June~~ 2007, ~~the~~ PJM directed the construction of a new 150-mile, 500-kilovolt transmission line between the Susquehanna substation in Pennsylvania and the Roseland substation in New Jersey that it identified as essential to long-term reliability of the ~~mid-Atlantic~~Mid-Atlantic electricity grid. ~~The~~ PJM determined that the line is needed to prevent potential overloads that could occur ~~in the next decade~~as early as 2012 on several existing transmission lines in the interconnected PJM system. ~~The~~ PJM has directed PPL Electric to construct the portion of the Susquehanna-Roseland line in Pennsylvania and has directed Public Service Electric & Gas Company to construct the portion of the line in New Jersey, in each case by June 1, 2012. PPL Electric's estimated share of the project costs ~~at December 31, 2009 was $510~~is approximately $500 million.

This project is pending certain regulatory approvals. PPL Electric has identified the approximately 100-mile route for the Pennsylvania portion of the line. In February 2010, the PUC and the New Jersey Board of Public Utilities approved the project. Several parties appealed the PUC decision to the Commonwealth Court of Pennsylvania, and certain of those appeals are pending before the court. PPL Electric cannot predict the ultimate outcome or timing of these proceedings.

In addition, both companies are working with the National Park Service to obtain any approvals that may be required to route the line through the Delaware Water Gap National Recreation Area. The National Park Service has stated that its review will not be completed until 2012. PPL Electric cannot predict the ultimate outcome or timing of the National Park Service approval. ~~However,~~

PPL Electric ~~currently~~ anticipates the delays in the approval process ~~which~~ will ~~affect~~delay the ~~PJM-directed~~ in-service date ~~and projected costs of the line.~~to 2014 or later. PPL Electric also cannot predict what action, if any, ~~the~~ PJM might take in the event of a delay to its scheduled in-service date for the new line.
PJM continues to reaffirm the need for this project.

~~(PPL and PPL Energy Supply)~~

~~Sale of Telecommunication Operations~~

In the first quarter of 2007, PPL completed a review of strategic options for the transport operations of its domestic telecommunications subsidiary, which offered fiber optic capacity to other telecommunications companies and enterprise customers. The operating results of this subsidiary were included in the Supply segment. Due to significant capital requirements for the telecommunication operations and competing capital needs in PPL's core electricity supply and delivery businesses, PPL decided to market these operations. The transport operations did not meet the criteria for discontinued operations on the Statement of Income because there were not separate and distinguishable cash flows, among other factors. In August 2007, PPL sold its telecommunication operations.

In connection with the sale, in 2007 PPL and PPL Energy Supply recorded impairments of $39 million ($23 million after tax) of the telecommunication assets based on their estimated fair value. The impairments are included in "Energy-related businesses" expenses on the Statement of Income. PPL realized net proceeds of $47 million from the sale.

~~Acquisition of a Long-term Tolling Agreement~~

In 2008, PPL EnergyPlus acquired the rights to an existing long-term tolling agreement associated with the capacity and energy of Ironwood. The tolling agreement extends through 2021 and is considered to contain an operating lease for accounting purposes. As a result of this agreement, PPL EnergyPlus recognized an intangible asset. See Note 10 for additional information on the lease.

9.	9. Discontinued Operations

(PPL and PPL Energy Supply)

Anticipated Sale of ~~Long Island~~Certain Non-core Generation ~~Business~~Facilities

As part of the LKE acquisition financing strategy, management explored the sale of certain non-core assets. As a result of ~~management's ongoing strategic review of PPL's non-core asset portfolio,~~this process, in ~~May 2009,~~September 2010 certain PPL ~~Generation~~Energy Supply subsidiaries signed a definitive ~~agreement~~agreements to sell ~~its Long Island~~their ownership interests in certain non-core generation ~~business, which is~~facilities, included in the Supply segment, for approximately ~~$135~~$381 million in ~~cash, adjusted for working capital at~~cash. The transaction includes the ~~sale date~~natural gas-fired facilities in Wallingford, Connecticut and ~~subject to reduction monthly, effective September 1, 2009. The Long Island Power Authority has contracted with~~University Park, Illinois and a PPL Energy Supply ~~subsidiaries to purchase all of this business' capacity~~subsidiary's share in Safe Harbor Water Power Corporation, which owns a hydroelectric facility in Conestoga, Pennsylvania and ~~ancillary services~~which is accounted for as part of tolling agreements that expire in 2017 and 2018. Each agreement is considered to contain a lease for accounting purposes. These tolling agreements will be transferred to the purchaser upon completion of the sale.an equity investment.

~~The Long Island~~These non-core generation ~~business~~facilities met the held for sale criteria in the ~~second~~third quarter of ~~2009.~~2010. As a result, ~~net~~ assets ~~held for sale~~ with a carrying amount of ~~$189~~$473 million were written down to their estimated fair value (less cost to sell) of ~~$137~~$377 million at September 30, 2010, resulting in a pre-tax impairment charge of $96 million ($58 million after tax). In addition, $5 million ($4 million after tax) of allocated goodwill was written off in the third quarter of 2010. During the fourth quarter of 2010, additional tax expense of $2 million was recorded. These charges are included in "Income (Loss) from Discontinued Operations (net of income taxes)" on the 2010 Statements of Income. The sale is expected to close in the first quarter of 2011, subject to the receipt of necessary regulatory approv als and third-party consents.

Following are the components of Discontinued Operations in the Statements of Income.

	2010		2009		2008

Operating revenues	$	113	$	106	$	150
Operating expenses (a)		156		42		60
Operating income (loss)		(43)		64		90
Other income (expense) - net		2		2		2
Interest expense (b)		11		9		7
Income (loss) before income taxes		(52)		57		85
Income tax expense (benefit)		(18)		24		35
Income (Loss) from Discontinued Operations	$	(34)	$	33	$	50

(a)	2010 includes the impairments to the carrying value of the generation facilities being sold and the write-off of allocated goodwill.

(b)	Represents allocated interest expense based upon debt attributable to the generation facilities being sold.

The major classes of assets reported as held for sale on the Balance Sheet at December 31, 2010 were $357 million of PP&E and a $13 million equity method investment (corresponding amounts at December 31, 2009 were $461 million of PP&E and a $13 million equity method investment, which have not been reclassified on the Balance Sheet as of that date).

Sale of Long Island Generation Business

In February 2010, a PPL Energy Supply subsidiary completed the sale of the Long Island generation business, which was included in the Supply segment. The definitive sales agreement, which was executed in May 2009, included provisions that reduced the $135 million purchase price monthly, commencing September 1, 2009. After adjusting for these price-reduction provisions, proceeds from the sale approximated $124 million.

In the second quarter of 2009, the Long Island generation business met the held for sale criteria. As a result, at June 30, 2009, net assets held for sale were written down to their estimated fair value less cost to sell, resulting in a pre-tax impairment charge of $52 million ($34 million after tax). At both September 30 and December 31, 2009, the estimated fair value (less cost to sell) was remeasured and additional impairments totaling $10 million ($3 million after tax) were recorded. In addition, $2 million ($1 million after tax) of goodwill allocated to this business was written off in 2009. PPL Energy Supply recorded a loss on the sale of $3 million during the first quarter of 2010 due to the price-reduction provisions. The ~~impairment charges~~losses recognized in the third and fourth quarters of 2009 ~~had no significant~~and the first quarter of 2010 did not significantly impact on earnings, as such amounts were substantially offset by tolling revenues from the Long Island generation ~~assets.~~assets during the same periods. These ~~charges~~amounts are included in "Income (Loss) from Discontinued Operations (net of income taxes)" on the ~~2009 Statement~~Statements of Income. ~~Closing~~

The tolling agreements related to these plants were transferred to the new owner upon completion of the ~~sale is expected to occur on or about February 26, 2010.~~ ~~After adjusting for the delayed closing provisions, proceeds will approximate $125 million, excluding working capital.~~sale.

Following are the components of Discontinued Operations in the Statements of Income.

	2009			2008		2007		2010		2009		2008

Operating revenues	$	24		$	26	$	28	$	4	$	24	$	26
Operating expenses (a)		73			8		8		4		73		8
Operating income (loss)		(49	)		18		20				(49)		18
Interest expense (b)		4			3		2				4		3
Income (loss) before income taxes		(53	)		15		18				(53)		15
Income taxes		(20	)		5		8
Income tax expense (benefit)											(20)		5
Income (Loss) from Discontinued Operations	$	(33	)	$	10	$	10	$		$	(33)	$	10

(a)

~~2009~~2010 includes ~~impairments to~~ the ~~carrying value~~loss on the sale of the business. 2009 includes impairment charges.

(b)

Represents allocated interest expense based upon debt attributable to PPL's Long Island generation business.

~~The major classes~~Upon completion of ~~assets reported as held for~~the sale, ~~on the Balance Sheet at December 31, 2009 were~~ $41 million of PP&E and an $86 million net investment in a direct-financing lease, ~~(corresponding amounts~~which had been classified as held for sale at December 31, ~~2008,~~2009, were ~~$88 million of PP&E and a $104 million net investment in a direct-financing lease, which have not been reclassified on~~removed from the Balance ~~Sheet as of that date).~~Sheet.

Sale of Maine Hydroelectric Generation Facilities

Sale of the Remaining Maine Hydroelectric Generation Business

In December 2010, a PPL Energy Supply subsidiary completed the sale of its remaining three hydroelectric facilities in Maine, which were included in the Supply segment, for $24 million. As a result of the sale, PPL Energy Supply recorded a gain of $11 million ($7 million after tax), reflected in "Income (Loss) from Discontinued Operations (net of income taxes)" on the 2010 Statement of Income. Upon completion of the sale, assets totaling $13 million, primarily PP&E, were removed from the Balance Sheet.

Sale of the Majority of Maine Hydroelectric Generation Business

In ~~2004,~~2009, a PPL ~~Maine entered into an agreement with a coalition~~Energy Supply subsidiary completed the sale of government agencies and private groups to sell three of its hydroelectric facilities in Maine. Under the agreement, a non-profit organization designated by the coalition received a five-year option to purchase the hydroelectric facilities for $25 million and, if the option was exercised, PPL Maine would receive rights to increase energy output at its other Maine hydroelectric facilities. The coalition announced plans to remove or bypass the subject facilities to restore runs of Atlantic salmon and other migratory fish to the Penobscot River. In June 2008, the coalition notified PPL Maine of its intent to exercise the purchase option. The agreement requires updates to its representations and warranties, and is subject to approvals by the FERC and other regulatory agencies. In November 2008, PPL Maine and the coalition requested the FERC, the U.S. Army Corps of Engineers and the Maine DEP to approve the transfer of ownership of the three facilities. Certain of these required approvals have been obtained, but PPL cannot predict whether or when all of them will be obtained. As a result, these three Maine hydroelectric facilities did not meet the held for sale criteria at December 31, 2009.

~~In July 2009, indirectly related to the above potential sale and as a result of management's ongoing strategic review of PPL's non-core asset portfolio, PPL Maine signed a definitive agreement to sell~~ the majority of its Maine hydroelectric generation business, which was included in the Supply ~~segment. PPL completed this sale in November 2009~~segment, for $81 million in cash, adjusted for working capital. The assets sold in this transaction included five hydroelectric facilities and ~~PPL's~~a 50% equity interest in a sixth hydroelectric facility, which had been accounted for as an equity investment, ~~as well as the~~together with rights to increase energy output at these facilities ifupon completion of the ~~potential~~ sale of the PPL Energy Supply subsidiary's three other hydroelectric facilities ~~(discussed~~in Maine (see "Sale of the Remaining Maine Hydroelectric Generation Business" above) ~~is completed. PPL's interest in these six facilities represented a total of 30 MW of electric generating capacity.~~. As a result of ~~this~~the sale of the majority of the Maine hydroelectric generation business, PPL Energy Supply recorded a gain of $38 million ($22 million after tax), reflected in "Income (Loss) from Discontinued Operations (net of income taxes)" on the 2009 Statement of Income. ~~In addition, upon~~Additionally, in December 2010, the PPL Energy Supply subsidiary received $14 million in contingent consideration, which was tied to its completion of the sale of the three other hydroelectric facilities noted ~~above,~~above. PPL ~~will receive~~Energy Supply accordingly recorded a gain of $14 million ($8 million after tax), reflected in ~~contingent consideration and record an associated additional after-tax gain~~"Income (Loss) from Discontinued Operations (net of ~~between $7 and $9 million.~~income taxes)" on the Statement of Income.

Following are the components of Discontinued Operations in the Statements of Income.

	2009			2008		2007		2010		2009		2008

Operating revenues	$	5		$	11	$	8			$	5	$	11
Operating expenses (a)		(34	)		3		4	$	(25)		(34)		3
Operating income		39			8		4		25		39		8
Other income-net		3			2		2
Other income (expense) - net											3		2
Interest expense (b)		1			1						1		1
Income before income taxes		41			9		6		25		41		9
Income taxes		17			4		4
Income tax expense									10		17		4
Income from Discontinued Operations	$	24		$	5	$	2	$	15	$	24	$	5

(a)

~~2009 includes~~Includes the ~~gain~~gains recorded on the ~~sale.~~sales.

(b)

Represents allocated interest expense based upon debt attributable to the Maine hydroelectric generation ~~business.~~business sold.

~~Upon completion of the sale, $23 million of PP&E, an $18 million equity method investment and $1 million of allocated goodwill were removed from the Balance Sheet.~~

Sale of Interest in Wyman Unit 4

As a result of management's ongoing strategic review of ~~PPL's~~PPL Energy Supply's non-core asset portfolio, in ~~December~~ 2009, a PPL ~~Maine~~Energy Supply subsidiary sold its 8.33% ownership interest in the ~~610 MW~~ Wyman Unit 4 generating station, an oil-fired plant located in Yarmouth, Maine. ~~PPL's~~PPL Energy Supply's interest in the plant was included in the Supply segment. In connection with the sale, PPL Energy Supply recorded a loss of $6 million ($4 million after tax). This charge is included in "Income (Loss) from Discontinued Operations (net of income taxes)" on the 2009 Statement of Income. ~~PPL's share of the results of operations for the years 2007 - 2009 was insignificant.~~

Sale of Latin American Businesses

In ~~March~~ 2007, PPL Energy Supply completed ~~a review~~the sale of ~~strategic options for its Latin American businesses and announced its intention to sell~~ its regulated electricity delivery businesses in Chile, El Salvador and Bolivia, which were included in the International ~~Delivery~~Regulated segment.

In April 2007, PPL agreed to sell its Bolivian businesses. As a result, in 2007, PPL recorded impairments totaling $37 million ($20 million after tax) to reflect the estimated fair value of the businesses at the date of the agreement. This sale was completed in July 2007. In May 2007, PPL completed the sale of its El Salvadoran business for $180 million in cash. PPL recorded a gain of $94 million ($89 million after tax) as a result of the sale. In November 2007, PPL completed the sale of its Chilean business for $660 million in cash and recorded a related gain of $306 million ($197 million after tax).

In 2008, PPL Global recognized income tax benefits and miscellaneous expenses in Discontinued Operations in connection with the dissolution of certain Latin American holding companies. This process was substantially completed in 2008.

In 2009, PPL Energy Supply identified a correction to the previously computed tax bases of the Latin American businesses. The most significant adjustment related to the sale of the El Salvadoran business and was largely due to returns of capital in certain prior years that had not been reflected in the calculated tax basis. As a result, PPL ~~and PPL~~ Energy Supply recorded $24 million of additional income tax expense in 2009, which is reflected on the Statement of Income in "Income (Loss) from Discontinued Operations (net of income taxes)." The additional expense is not considered by management to be material to the 2009 financial ~~statements of PPL and PPL Energy Supply for the years ended 2007 and 2009.~~statements.

Following are the components of Discontinued Operations in the Statements of Income.

2009 2008 2007

Operating revenues $ 529
Operating expenses (a) $ 2 497
Operating income (loss) (2 ) 32
Other income - net (1 ) 15
Interest expense (b) 25
Income (Loss) before income taxes (3 ) 22
Income taxes (c) $ 27 (8 ) (5 )
Gain on sale of businesses (net of tax expense of $114 million) 286
Income (Loss) from Discontinued Operations (27 ) 5 313
Income from Discontinued Operations Attributable to Noncontrolling Interests 6
Income (Loss) from Discontinued Operations Attributable to PPL/PPL Energy Supply $ (27 ) $ 5 $ 307

	2009		2008

Operating expenses			$	2
Operating loss				(2)
Other income (expense) - net				(1)
Loss before income taxes				(3)
Income tax expense (benefit) (a)	$	27		(8)
Income (Loss) from Discontinued Operations	$	(27)	$	5

(a)		2007 includes the impairments to the carrying value of the Bolivian businesses. Also included are fees associated with the divestiture of the Latin American businesses of $12 million ($7 million after tax).
~~(b)~~		~~2007 includes $5 million of allocated interest expense based on the discontinued operation's share of the net assets of PPL Energy Supply.~~
~~(c)~~		2009 includes the $24 million income tax adjustment referred to above. 2008 includes $6 million from the recognition of a previously unrecognized tax benefit associated with a prior year tax position. 2007 includes U.S. deferred tax charges of $7 million. As a result of PPL's decision to sell its Latin American businesses, it no longer qualified for the permanently reinvested exception to recording deferred taxes.

(PPL)

WKE

Prior to its November 1, 2010 acquisition by PPL, WKE had a 25-year lease for and operated nine generating facilities of Big Rivers Electric Corporation, a power-generating cooperative in western Kentucky, and a tenth facility owned by the City of Henderson, Kentucky. In 2007, WKE entered into an agreement to terminate the lease, which closed in 2009, prior to PPL acquiring LKE. As part of the lease termination, WKE was obligated to pay a former customer, an aluminum smelter, an aluminum production payment in lieu of a lump-sum cash consent payment, as well as the difference between the electricity prices charged by WKE under the previous long-term sales contract and the electricity prices charged by the aluminum smelter's current electricity supplier. This obligation was partially mitigated by the opportu nity to make off-system sales, when economic, for the contractual demand not used by the aluminum smelter. In addition, the total amount of the obligation to this smelter was limited to $82 million. Any amount paid by WKE over the limit has been recorded as an interest-bearing receivable and is required to be repaid (plus interest) only if certain conditions occur by 2028. Such exposure expired in January 2011. In addition, because the former customer posted a letter of credit supporting payment to its current electricity supplier, WKE reversed a portion of the liability associated with its guarantee of payment by the former customer. Also, WKE had an obligation to another aluminum smelter, also a former customer, to make an escrow payment of approximately $4 million, which was included in the liability at December 31, 2010, and was paid in January 2011. The income statement impacts are included in the Kentucky Regulated segment and are reflected in "Income (Loss) from Discontinued Operations (net of income taxes)" on the Statements of Income. See Note 15 for additional information related to the termination of the lease. The results of operations for 2010 were insignificant.

Sale of Gas and Propane Businesses

In ~~July~~ 2007, PPL completed a review of strategic options for its natural gas distribution and propane businesses and announced its intention to sell these businesses, which were included in the Pennsylvania ~~Delivery~~Regulated segment. ~~Based on~~PPL completed the expectation that the natural gas distribution and propane assets would be sold and an assessment of prevailing market conditions, an impairment charge of $22 million and an associated income tax benefit of $1 million were recordedsale in ~~2007.~~

~~In March~~October 2008 ~~PPL signed a definitive agreement to sell these businesses~~ for $268 million in cash, adjusted for working capital at the sale date, pursuant to a stock purchase agreement. ~~PPL completed the sale in October 2008.~~ Sale proceeds of $303 million, including estimated working capital, were contributed to PPL Energy Supply through its parent, PPL Energy Funding. In 2008, PPL recorded impairment and other charges related to the sale totaling $10 million ($6 million after tax). Also in 2008, PPL Gas Utilities paid a $3 million ($2 million after tax) premium to prepay the entire $10 million aggregate principal of its 8.70% Senior Notes due ~~December~~Decemb er 2022. In ~~the first quarter of~~ 2009, PPL recognized an insignificant charge in Discontinued Operations in connection with the settlement of the working capital adjustment.

Following are the components in Discontinued Operations in the Statements of Income.

2008 2007

Operating revenues $ 162 $ 218
Operating expenses (a) 154 211
Operating income 8 7
Other income - net (3 )
Interest expense (b) 4 6
Income before income taxes 1 1
Income taxes (c) (2 ) 33
Income (Loss) from Discontinued Operations $ 3 $ (32 )

	2008

Operating revenues	$	162
Operating expenses (a)		154
Operating income		8
Other income (expense) - net		(3)
Interest expense (b)		4
Income before income taxes		1
Income tax benefit		(2)
Income from Discontinued Operations	$	3

(a)

~~2008 and 2007 include~~Includes impairment and other charges related to the ~~sale of $10 million and $22 million.~~sale.

(b)

~~2008 and 2007 include~~Includes $3 ~~million and $5~~ million of allocated interest expense based upon debt attributable to PPL's natural gas distribution and propane businesses.

10. Acquisition of E.ON U.S. LLC

(PPL)

On November 1, 2010 (acquisition date), PPL completed the acquisition of all of the limited liability company interests of E.ON U.S. LLC from a wholly owned subsidiary of E.ON AG. Upon completion of the acquisition, E.ON U.S. LLC was renamed LG&E and KU Energy LLC. LG&E and KU Energy LLC is a holding company with regulated utility operations conducted through its subsidiaries, LG&E and KU. The acquisition substantially reapportions the mix of PPL's regulated and competitive businesses by increasing the regulated portion of its business, strengthens PPL's credit profile and enhances rate-regulated growth opportunities as the regulated businesses make investments to improve infrastructure and customer reliability.

The fair value of the consideration paid for E.ON U.S. LLC was as follows.

~~(c)~~Aggregate enterprise consideration	~~As a result~~$	7,614
Less: fair value of ~~classifying the natural gas distribution~~assumed long-term debt outstanding, net		772
Total cash consideration paid		6,842
Less: funds made available to E.ON U.S. LLC to repay pre-acquisition affiliate indebtedness		4,349
Cash consideration paid for E.ON U.S. LLC equity interests	$	2,493

The $6.842 billion total cash consideration paid, including repayment of affiliate indebtedness, was funded by PPL's June 2010 issuance of $3.634 billion of common stock and Equity Units that provided net proceeds totaling $3.525 billion, net of underwriting discounts, $3.2 billion of borrowings under an existing credit facility in October 2010, $249 million of proceeds from the monetization of certain full-requirement sales contracts in July 2010 and cash on hand. See Note 7 for additional information on the issuance of common stock and Equity Units and the October 2010 borrowing under PPL Energy Supply's syndicated credit facility that provided interim financing to partially fund the acquisition. See Note 19 for additional information on the monetization of certain full-requirement sales contracts.

The allocation of the purchase price to the fair value of assets acquired and liabilities assumed is as follows.

Cash	$	30
Accounts receivable (a)		175
Current assets		764
Investments		31
PP&E		7,469
Other intangibles (current and ~~propane businesses as Discontinued Operations in 2007,~~ noncurrent)		427
Regulatory and other noncurrent assets		689
Current liabilities, excluding current portion of long-term debt (b)		(516)
PPL ~~recorded a deferred income tax charge of $23 million related to its book/tax basis difference in the investment in these assets.~~affiliate indebtedness		(4,349)
Long-term debt (current and noncurrent) (b)		(934)
Other noncurrent liabilities (b)		(2,289)
Net identifiable assets acquired		1,497
Goodwill		996
Net assets acquired	$	2,493

~~10.~~ (a)

~~Leases~~

The gross contractual amount of the accounts receivable acquired was $186 million. PPL expects $11 million to be uncollectible; however, credit risk is mitigated since uncollectible accounts are a component of customer rates.

(b)	Represents non-cash activity excluded from the Statement of Cash Flows in 2010.

Goodwill related to the LKE acquisition of $996 million was recorded at LG&E and KU. For purposes of goodwill impairment testing, the goodwill was assigned to the reportable segments expected to benefit from the acquisition. Both the Kentucky Regulated and the Supply segments are expected to benefit and the assignment of goodwill was $662 million to the Kentucky Regulated segment and $334 million to the Supply segment. The goodwill at the Kentucky Regulated segment reflects the value paid for the expected continued growth of a rate-regulated business located in a defined service area with a constructive regulatory environment, the ability of LKE to leverage its assembled workforce to take advantage of those growth opportunities and the attractiveness of stable, growing cash flows. Although no other assets or liabil ities from the acquisition were assigned to the Supply segment, the Supply segment obtained a synergistic benefit attributed to the overall de-risking of the PPL portfolio, which enhanced PPL Energy Supply's credit profile, thereby increasing the value of the Supply segment. This increase in value resulted in the assignment of goodwill to the Supply segment. None of the goodwill recognized is expected to be included in regulated customer rates or deductible for income tax purposes. As such, no deferred taxes were recorded related to goodwill.

See Note 9 and the "Guarantees and Other Assurances" section of Note 15 for additional information on certain indemnifications provided by LKE, the most significant of which relates to the discontinued operations of WKE.

The actual LKE operating revenues and net income attributable to PPL included in PPL's Statement of Income for the year ended December 31, 2010, and PPL's unaudited pro forma 2010 and 2009 operating revenues and net income attributable to PPL, including LKE, as if the acquisition had occurred January 1, 2009, are as follows.

			Net Income
			(Loss)
	Operating		Attributable
	Revenues		to PPL

Actual from November 1, 2010 – December 31, 2010	$	493	$	47
Pro forma for 2010 (unaudited)		10,761		1,273
Pro forma for 2009 (unaudited)		9,950		(881)	(a)

(a) Includes a $1.493 billion goodwill impairment charge recorded by E.ON U.S. LLC in December 2009, prior to the acquisition by PPL.

The pro forma financial information presented above has been derived from the historical consolidated financial statements of PPL and LKE. Adjustments included in the pro forma financial information include: (a) a pre-tax adjustment in 2010 of $165 million for non-recurring acquisition-related costs including the Bridge Facility in support of the acquisition, losses incurred in connection with the termination of interest rate swaps, and other third-party transaction costs; (b) a net decrease in interest expense from the repayment of affiliate indebtedness to subsidiaries of E.ON AG, and replacement with interest expense related to the November 2010 issuance of debt by LG&E and KU Energy LLC, LG&E and KU (the Kentucky Entities); and (c) the income tax effect of the pro forma adjustments, which was calculated using an est imated post-acquisition composite statutory income tax rate of 39%. In addition, losses from discontinued operations (net of income taxes) of PPL and LKE of $18 million and $227 million in 2010 and 2009 were excluded from the pro forma amounts above.

The pro forma financial information has been presented for illustrative purposes only and is not necessarily indicative of the results of operations that would have been achieved had the acquisition been completed on the dates indicated, or the future consolidated results of operations of PPL.

During 2010, PPL incurred third-party acquisition-related costs of $31 million, including advisory, accounting and legal fees, which were recorded in "Other Income (Expense) - net" on the 2010 Statement of Income. In addition, Bridge Facility costs of $80 million were recorded in "Interest Expense" on the 2010 Statement of Income. See Note 7 for a discussion of costs incurred related to PPL's June 2010 issuance of common stock and Equity Units.

In November 2010, LKE issued $2.9 billion of debt, of which $100 million was used to return capital to PPL. See Note 7 for additional information.

(PPL and PPL Energy Supply)

The majority of the net proceeds from the November 2010 debt issuances of LKE, discussed above, together with a borrowing by LG&E under its available credit facilities were applied to repay borrowings from a PPL Energy Supply subsidiary. Such borrowings were incurred to permit LKE to repay certain indebtedness owed to affiliates of E.ON AG upon the closing of the acquisition. In November 2010, PPL Energy Supply used the above-referenced amounts received from LKE, together with other cash on hand, to repay approximately $3.0 billion of its October 2010 borrowing under existing credit facilities. See Note 7 for additional information.

To ensure adequate funds were available for the acquisition, in July 2010, PPL Energy Supply monetized certain full-requirement sales contracts that resulted in cash proceeds of $249 million. See "Commodity Price Risk (Non-trading) - Monetization of Certain Full-Requirement Sales Contracts" in Note 19 for additional information. Additionally, PPL Energy Supply expects to receive proceeds in the first quarter of 2011 from the sale of certain non-core generation facilities, which will be used to repay the short-term borrowings drawn on existing credit facilities. See "Anticipated Sale of Certain Non-Core Generation Facilities" in Note 9 for additional information.

As a result of the monetization of these full-requirement sales contracts, coupled with the expected net proceeds from the anticipated sale of these non-core generation facilities, debt that had been planned to be issued by PPL Energy Supply in late 2010 was no longer needed. Therefore, hedge accounting associated with interest rate swaps entered into by PPL in anticipation of a debt issuance by PPL Energy Supply was discontinued. Net losses of $(29) million, or $(19) million after tax, were reclassified from AOCI to "Other Income (Expense) - net" on PPL's 2010 Statement of Income.

11. Leases

Lessee Transactions

(PPL)

E.W. Brown Combustion Turbines

LG&E and KU are participants in a sale-leaseback transaction involving two combustion turbines at the E.W. Brown generating station. In December 1999, after selling their interests in the combustion turbines, LG&E and KU entered into an 18-year lease of the turbines. At the same time, LG&E and KU provided funds to fully defease the lease and executed an irrevocable notice to exercise an early purchase option contained in the lease after 15.5 years, which will occur in 2014. The financial statement treatment of this transaction is the same as if LG&E and KU had retained their ownership interest. Since the lease was defeased, there are no remaining minimum lease payments and all related PP&E is reflected on the Balance Sheet at December 31, 2010. At December 0;31, 2010, the Balance Sheet included assets of $104 million, which are reflected in "Regulated utility plant – electric and gas, net." For 2010, the related accumulated depreciation and depreciation expense are insignificant.

Upon a default under the lease, LG&E and KU are obligated to pay to the lessor their share of certain amounts. Primary events of default include loss or destruction of the combustion turbines, failure to insure or maintain the combustion turbines and unwinding of the transaction due to governmental actions. No events of default currently exist with respect to the lease. Upon any termination of the lease, whether by default or expiration of its term, title to the combustion turbines reverts to LG&E and KU. The maximum aggregate amount that could be required to be paid at December 31, 2010 is $7 million.

(PPL and PPL Energy Supply)

Tolling Agreement

In 2008, PPL EnergyPlus acquired the rights to an existing long-term tolling agreement for the capacity and energy of Ironwood. Under the agreement, PPL EnergyPlus has control over the plant's dispatch into the electricity grid and will supply the natural gas necessary to operate the plant. The tolling agreement extends through 2021 and is considered to contain an operating lease for accounting purposes. The fixed payments under the tolling agreement are subject to adjustment based upon changes to the facility capacity rating, which may occur up to twice per year. Certain costs within the tolling agreement, primarily non-lease costs, are subject to escalation.

Colstrip Generating Plant

In July 2000, PPL Montana sold its interest in the Colstrip generating plants to owner lessors who are leasing a 50% interest in Colstrip Units 1 and 2 and a 30% interest in Unit 3 back to PPL Montana under four 36-year non-cancelable leases. This transaction is accounted for as a sale-leaseback and classified as an operating lease. These leases provide two renewal options based on the economic useful life of the generation assets. PPL Montana currently amortizes material leasehold improvements over no more than the remaining life of the original leases. PPL Montana is required to pay all expenses associated with the operations of the generation units. The leases place certain restrictions on PPL Montana's ability to incur additional debt, sell assets and declare dividends and require PPL Montana to maintain certain financial ratios related to cash flow and net worth. There are no residual value guarantees in these leases. However, upon an event of default or an event of loss, PPL Montana could be required to pay a termination value of amounts sufficient to allow the lessor to repay amounts owing on the lessor notes and make the lessor whole for its equity investment and anticipated return on investment. The events of default include payment defaults, breaches of representations or covenants, acceleration of other indebtedness of PPL Montana, change in control of PPL Montana and certain bankruptcy events. The termination value was estimated to be ~~$734~~$763 million at December 31, ~~2009.~~2010.

Kerr Dam

At December 31, ~~2009,~~2010, PPL Montana continued to participate in a lease arrangement with the Confederated Salish and Kootenai Tribes of the Flathead Reservation. Under a joint operating license, issued by the FERC to Montana Power in 1985, and subsequently to PPL Montana as a result of the purchase of Kerr Dam from Montana Power, PPL Montana is responsible to make payments to the tribes, for the use of their property. This agreement, subject to escalation based upon inflation, extends until the end of the license term in 2035. Between 2015 and 2025, the tribes have the option to purchase, hold and operate the project, which would result in the termination of this leasing arrangement.

Other Leases

PPL and its subsidiaries have entered into various agreements for the lease of office space, vehicles, land and other equipment.

Rent - Operating Leases

Rent expense for PPL's operating leases was $90 million, $86 million and $73 million in 2010, 2009 and 2008. Rent expense for PPL Energy Supply's operating leases was $87 million, $86 million and $73 million in 2010, 2009 and ~~$54 million in 2009, 2008 and 2007.~~2008.

Total future minimum rental payments for all operating leases are estimated to be:

2010	$	108
						PPL
				PPL		Energy Supply

2011		109		$	122	$	108
2012		107			117		106
2013		112			120		110
2014		111			117		109
2015					101		96
Thereafter		421			314		310
	$	968	(a)
Total (a)				$	891	$	839

(a)

Includes $9$21 million in aggregate of future minimum lease payments related to the ~~Long Island generation business.~~Wallingford property lease. See Note 9 for additional information on the anticipated sale of this ~~business.~~generation facility.

~~Lessor Transactions~~

A PPL Energy Supply subsidiary is the lessor, for accounting purposes, of each of the Shoreham and Edgewood plants (collectively with related tolling agreements, the Long Island generation business). In May 2009, PPL Generation signed a definitive agreement to sell the Long Island generation business. The tolling agreements related to these plants, accounted for as containing leases, will be transferred to the purchaser upon completion of the sale. See Note 9 for additional information.

~~Direct Financing Lease~~

The lease related to the Shoreham plant is classified as a direct-financing lease. Rental income received during 2009 and 2007 was $14 million and $13 million in 2008. Total future minimum lease payments are estimated at $16 million for each of the years from 2010 through 2014. Substantially all of these lease payments are no longer expected to be received subsequent to the anticipated sale of the Long Island generation business.

~~Operating Lease~~

The lease related to the Edgewood plant is classified as an operating lease. At December 31, 2009, total minimum future rentals under this lease were estimated to be $25 million, including $3 million per year for 2010 through 2014. These minimum future rentals are no longer expected to be received subsequent to the anticipated sale of the Long Island generation business.

~~11.~~

12. Stock-Based Compensation

(PPL, PPL Energy Supply and PPL Electric)

Under the PPL Incentive Compensation Plan (ICP) and the Incentive Compensation Plan for Key Employees (ICPKE) (together, the Plans), restricted shares of PPL common stock, restricted stock units, performance units and stock options may be granted to officers and other key employees of PPL, PPL Energy Supply, PPL Electric and other affiliated companies. Awards under the Plans are made by the Compensation, Governance and Nominating Committee (CGNC) of the PPL Board of Directors, in the case of the ICP, and by the PPL Corporate Leadership Council (CLC), in the case of the ICPKE.

The ICP limits the total number of awards that may be granted under it after April 23, 1999 to ~~15,769,430 awards, or 5% of the total shares of PPL common stock that were outstanding at April 23, 1999.~~15,769,431. The ICPKE limits the total number of awards that may be granted under it after April 25, 2003 to 16,573,608 awards, or 5% of the total shares of PPL common stock that were outstanding at January 1, 2003, reduced by outstanding awards of 2,373,812, for which PPL common stock was not yet issued as of April 25, 2003, resulting in a limit of 14,199,796. In addition, each Plan limits the number of shares available for awards in any calendar year to 2% of the outstanding common stock of PPL on the first day of such calendar year. The maximum number of options that can be awarded under each Plan to any single eligible employee in any calendar year is three million shares. Any portion of these options that has not been granted may be carried over and used in any subsequent year. If any award lapses, is forfeited or the rights of the participant terminate, the shares of PPL common stock underlying such an award are again available for grant. Shares delivered under the Plans may be in the form of authorized and unissued PPL common stock, common stock held in treasury by PPL or PPL common stock purchased on the open market (including private purchases) in accordance with applicable securities laws.

Restricted Stock and Restricted Stock Units

Restricted shares of PPL common stock are outstanding shares with full voting and dividend rights. Restricted stock awards are granted as a retention award for select key executives and vest when the recipient reaches a certain age or meets service or other criteria set forth in the executive's restricted stock award agreement. The shares are subject to forfeiture or accelerated payout under Plan provisions for termination, retirement, disability and death of employees. Restricted shares vest fully if control of PPL changes, as defined by the ~~plans.~~Plans.

The Plans allow for the grant of restricted stock units. Restricted stock units are awards based on the fair ~~market~~ value of PPL common stock. Actual PPL common shares will be issued upon completion of a vesting period, generally three years. The fair value of restricted stock units granted is recognized over the service period or through the date at which the employee reaches retirement eligibility. The fair value of restricted stock units granted to retirement-eligible employees is recognized immediately upon the date of grant. Recipients of restricted stock units may also be granted the right to receive dividend equivalents through the end of the restriction period or until the award is forfeited. Restricted stock units are subject to forfeiture or accelerated payout under the Plan provisions for termination, retirement, disability and death of employees. Restricted stock units vest fully if control of PPL changes, as defined by the Plans.

Restricted stock and restricted stock unit activity for ~~2009~~2010 was:

Restricted Shares/Units Weighted-Average Grant Date Fair Value
PPL
Nonvested, beginning of period 1,656,830 $ 36.56
Granted 528,580 29.07
Vested (743,968 ) 30.23
Forfeited (33,400 ) 39.79
Nonvested, end of period 1,408,042 36.97

PPL Energy Supply
Nonvested, beginning of period 788,010 $ 35.07
Granted 228,000 28.49
Vested (416,548 ) 28.41
Forfeited (22,050 ) 41.16
Nonvested, end of period 577,412 37.04

								Weighted-
								Average
							Restricted	Grant Date Fair
							Shares/Units	Value Per Share
PPL					PPL
Nonvested, beginning of period					Nonvested, beginning of period		1,408,042	$	36.97
						Granted	745,430		28.93
						Vested	(471,640)		32.63
						Forfeited	(18,710)		32.59
Nonvested, end of period					Nonvested, end of period		1,663,122		31.22

PPL Energy Supply					PPL Energy Supply
Nonvested, beginning of period					Nonvested, beginning of period		577,412	$	37.04
						Granted	225,880		29.49
						Vested	(213,405)		32.96
						Forfeited	(9,470)		34.29
Nonvested, end of period					Nonvested, end of period		580,417		31.33

PPL Electric					PPL Electric
Nonvested, beginning of period	123,390		$	39.28	Nonvested, beginning of period		154,220	$	36.05
Granted	81,230			29.49
Vested	(49,660	)		33.44
Forfeited	(740	)		42.94
						Granted	65,320		29.40
						Vested	(46,635)		35.16
						Forfeited	(3,580)		29.75
Nonvested, end of period	154,220			36.05	Nonvested, end of period		169,325		31.20

Substantially all restricted stock and restricted stock unit awards are expected to vest.

The weighted-average grant date fair value of restricted stock and restricted stock units granted during 2009 was $29.07 for PPL, $28.49 for PPL Energy Supply and $29.49 for PPL Electric. The weighted-average grant date fair value of restricted stock and restricted stock units granted during 2008 was $46.22 for PPL, $46.03 for PPL Energy Supply and $45.92 for PPL Electric.

~~The weighted-average grant date fair value of restricted stock and restricted stock units granted during 2007 was $37.10 for PPL, $37.88 for PPL Energy Supply and $37.95 for PPL Electric.~~

At December 31, ~~2009,~~2010, unrecognized compensation ~~cost~~expense related to nonvested awards was:

Restricted Stock/Units Unrecognized Compensation Cost
Weighted-Average
Period for Recognition

PPL $ 11 2.8 years
PPL Energy Supply 5 1.7 years
PPL Electric 2 4.6 years

	Restricted
	Stock/Units		Weighted-
	Unrecognized		Average
	Compensation		Period for
	Expense		Recognition

PPL	$	14		2.4 years
PPL Energy Supply		4		1.7 years
PPL Electric		2		3.8 years

The total fair value of restricted ~~shares/~~stock/units vesting for the years ended December 31 was:

	Year Ended December 31,
	2009		2008		2007			2010		2009		2008

PPL	$	22	$	25	$	32	PPL	$	15	$	22	$	25
PPL Energy Supply		12		13		8	PPL Energy Supply		7		12		13
PPL Electric		2		2		4	PPL Electric		2		2		2

Performance Units

~~PPL began granting performance units in 2008.~~ Performance units are intended to encourage and award future performance. Performance units represent a target number of shares (Target Award) of PPL's common stock that the ~~officer~~recipient would receive upon PPL's attainment of the applicable performance goal. Performance is determined based on total shareowner return during a three-year performance period. At the end of the period, payout is determined by comparing PPL's performance to the total shareowner return of the companies included in an ~~Index Group,~~index group, in this case the S&P Electric Utilities Index. Awards are payable on a graduated basis within the following ranges: if PPL's performance is at or above the 85th percentile of the ~~Index Group,~~index group, the award is paid at 200% of the Target Award; at the 50th percentile of the ~~Index Group,~~index group, the award is paid at 100% of the Target Award; at the 40th percentile of the ~~Index Group,~~index group, the award is paid at 50% of the Target Award; and below the 40th percentile, no award is payable. Dividends payable during the performance cycle accumulate and ~~will be~~are converted into additional performance units and are payable in shares of PPL common stock upon completion of the performance period based on the determination of the CGNC of whether the performance goals have been achieved. Under the Plan provisions, performance units are subject to forfeiture upon termination of employment except for retirement, disability or death of an employee, in which case the total performance units remain outstanding and eligible for vesting through the conclusion of the performance period. The fair value of performance units granted is recognized over the three-year performance period. Performance units vest on a pro rata basis if control of PPL changes, as defined by the Plan.

Performance unit activity for ~~2009~~2010 was:

										Weighted-
										Average Grant
								Performance		Date Fair Value
	Performance Units			Weighted-Average Grant Date Fair Value				Units		Per Share
PPL						PPL
Nonvested, beginning of period		66,785		$	48.94	Nonvested, beginning of period			166,464	$	43.23
Granted		106,587			39.76
Forfeited		(6,908	)		45.06
							Granted		121,246		34.06
							Forfeited		(1,670)		33.82
Nonvested, end of period		166,464			43.23	Nonvested, end of period			286,040		39.40

PPL Energy Supply						PPL Energy Supply
Nonvested, beginning of period		22,583		$	48.58	Nonvested, beginning of period			46,427	$	42.39
Granted		27,451			38.18
Forfeited		(3,607	)		49.04
							Granted		33,107		34.16
							Forfeited		(1,670)		33.82
Nonvested, end of period		46,427			42.39	Nonvested, end of period			77,864		39.08

PPL Electric						PPL Electric
Nonvested, beginning of period		3,732		$	48.57	Nonvested, beginning of period			11,635	$	42.71
Granted		7,903			39.95
							Granted		10,596		33.54
Nonvested, end of period		11,635			42.71	Nonvested, end of period			22,231		38.34

~~Substantially all~~The weighted-average grant date fair value of performance ~~unit awards are expected to vest.~~

units granted during 2009 was $39.76 for PPL, $38.18 for PPL Energy Supply and $39.95 for PPL Electric. The weighted-average grant date fair value of performance units granted during 2008 was $48.97 for PPL, $48.69 for PPL Energy Supply and $48.57 for PPL Electric.

At December 31, ~~2009,~~2010, unrecognized compensation ~~cost~~expense related to nonvested awards was:

Performance Units Unrecognized Compensation Cost Weighted-Average Period for Recognition

PPL $ 4 1.8 years
PPL Energy Supply 1 1.8 years

	Performance
	Units		Weighted-
	Unrecognized		Average
	Compensation		Period for
	Expense		Recognition

PPL	$	4		1.7 years
PPL Energy Supply		1		1.7 years

At December 31, ~~2009,~~2010, PPL Electric's unrecognized compensation ~~cost~~expense was insignificant and the weighted-average period for recognition was ~~1.9~~1.7 years.

The ~~estimated~~ fair value of each performance unit granted was ~~calculated~~estimated using a Monte Carlo pricing model that considers ~~historical~~stock beta, a risk-free interest rate, expected stock volatility and expected life. The stock beta was calculated comparing the risk of the individual securities to the average risk of the companies in the index group. The risk-free interest rate reflects the yield on a 3-year Treasury bond. Volatility over the expected term of three years is calculated using daily stock price observations for PPL and all companies in the ~~Index Group. Volatility over the expected term of the performance units~~index group and is evaluated with consideration given to prior periods that may need to be excluded based on events not likely to recur that had impacted PPL and companies in the ~~Index Group.~~index group.

The weighted-average assumptions used in the model were:

	2009	2008		2010	2009	2008

Risk-free interest rate	1.11%	2.30%	Risk-free interest rate	1.41%	1.11%	2.30%
Expected stock volatility	31.30%	20.70%	Expected stock volatility	34.70%	31.30%	20.70%
Expected life	3 years	3 years	Expected life	3 years	3 years	3 years

Stock Options

Under the Plans, stock options may ~~also~~ be granted with an option exercise price per share not less than the fair ~~market~~ value of PPL's common stock on the date of grant. The options are exercisable in installments beginning one year after the date of grant, assuming the individual is still employed by PPL or a subsidiary. Options outstanding at December 31, ~~2009,~~2010, become exercisable in equal installments over a three-year service period from the date of grant. The CGNC and CLC have discretion to accelerate the exercisability of the options, except that the exercisability of an option issued under the ICP may not be accelerated unless the individual remains employed by PPL or a subsidiary for one year from the date of grant. All options expire no later than ten years from the grant date. The options become exercisable immediately if control of PPL changes, as defined by the Plans. The fair value of options granted is recognized over the service period or through the date at which the employee reaches retirement eligibility using the straight-line method. The fair value of options granted to retirement-eligible employees is recognized immediately upon the date of grant.

Stock option activity for ~~2009~~2010 was:

Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Total Intrinsic Value
PPL
Outstanding at beginning of period 4,027,371 $ 32.56
Granted 1,053,320 31.86
Exercised (137,840 ) 22.15
Forfeited (340,810 ) 34.12
Outstanding at end of period 4,602,041 32.59 6.8 $ 11
Options exercisable at end of period 2,968,551 30.73 5.8 11

														Weighted-
												Weighted		Average
												Average		Remaining		Aggregate
										Number		Exercise		Contractual		Total Intrinsic
										of Options		Price Per Share		Term		Value
PPL								PPL
Outstanding at beginning of period								Outstanding at beginning of period			4,602,041	$	32.59
									Granted		1,017,600		31.03
									Forfeited		(15,660)		31.17
Outstanding at end of period								Outstanding at end of period			5,603,981		32.31		6.4	$	2
Options exercisable at end of period								Options exercisable at end of period			3,770,172		32.00		5.3		2

PPL Energy Supply								PPL Energy Supply
Outstanding at beginning of period	1,434,356		$	32.05				Outstanding at beginning of period			1,408,936	$	32.05
Granted	262,770			31.83
Exercised	(46,900	)		19.56
Forfeited	(241,290	)		34.20
									Granted		267,750		31.17
									Forfeited		(15,660)		31.17
Outstanding at end of period	1,408,936			32.05	6.3	$	4	Outstanding at end of period			1,661,026		31.92		6.1	$	1
Options exercisable at end of period	1,022,909			32.84	6.2		4	Options exercisable at end of period			1,213,487		31.56		5.2		1

PPL Electric								PPL Electric
Outstanding at beginning of period	146,120		$	36.09				Outstanding at beginning of period			225,670	$	34.72
Granted	79,550			32.22
									Granted		91,480		30.58
Outstanding at end of period	225,670			34.72	7.1			Outstanding at end of period			317,150		33.53		7.0
Options exercisable at end of period	100,388			29.05	5.4			Options exercisable at end of period			166,361		34.52		5.5

No stock options were exercised in 2010. Substantially all stock option awards are expected to vest.

The ~~estimated~~ fair value of each option granted ~~was calculated~~is estimated using a Black-Scholes option-pricing model. PPL uses a risk-free interest rate, expected option life, historical volatility and ~~exercise behavior~~dividend yield to value its stock options. The risk-free interest rate reflects the yield for a U.S. Treasury Strip available on the date of grant with constant rate maturity approximating the option's expected life. Expected life is calculated based on historical exercise behavior. Volatility over the expected term of the options is evaluated with consideration given to prior periods that may need to be excluded based on events not likely to recur that had impacted PPL's volatility in those prior periods. Management's expectations for future volatility, considering potential changes to PPL's business model ~~and~~a nd other economic conditions, are also reviewed in addition to the historical data to determine the final volatility assumption. The ~~weighted-average~~dividend yield is based on several factors, including PPL's most recent dividend payment, as of the grant date and the forecasted stock price through 2012. The assumptions used in the model were:

	2009	2008	2007		2010		2009		2008

Risk-free interest rate	2.07%	2.95%	4.85%	Risk-free interest rate		2.52%		2.07%		2.95%
Expected option life	5.25 years	5.41 years	6.00 years	Expected option life		5.43 years		5.25 years		5.41 years
Expected stock volatility	26.06%	20.85%	21.61%	Expected stock volatility		28.57%		26.06%		20.85%
Dividend yield	3.48%	3.10%	3.31%	Dividend yield		5.61%		3.48%		3.10%

The weighted-average grant date fair ~~values~~value of options granted ~~were:~~was:

	2009		2008		2007			2010		2009		2008

PPL		5.55		7.61		7.08	PPL	$	4.70	$	5.55	$	7.61
PPL Energy Supply		5.55		7.62		7.08	PPL Energy Supply		4.73		5.55		7.62
PPL Electric		5.65		7.60		7.08	PPL Electric		4.62		5.65		7.60

The total intrinsic value of stock options exercised for the years ended December 31 was:

	Year Ended December 31,
	2009		2008		2007			2009		2008

PPL	$	2	$	20	$	54	PPL	$	2	$	20
PPL Energy Supply		1		7		13	PPL Energy Supply		1		7
PPL Electric				2		3	PPL Electric				2

At December 31, ~~2009,~~2010, unrecognized compensation ~~cost~~expense related to stock options was:

Unrecognized Compensation Cost
Weighted-Average
Period for Recognition

PPL $ 3 1.8 years
PPL Energy Supply 1 1.9 years

			Weighted-
	Unrecognized		Average
	Compensation		Period for
	Expense		Recognition

PPL	$	2		1.5 years
PPL Energy Supply		1		1.6 years

At December 31, ~~2009,~~2010, PPL Electric's unrecognized compensation ~~cost~~expense was insignificant and the weighted-average period for recognition was ~~1.9~~1.6 years.

~~PPL received cash from stock option exercises during 2009 of $3 million.~~Compensation Expense

Compensation ~~Costs~~

~~Compensation costs~~expense for restricted stock, restricted stock units, performance units and stock options accounted for as equity awards ~~were~~was as follows:

	2009		2008		2007			2010		2009		2008

PPL (a)	$	23	$	28	$	26	PPL (a)	$	26	$	23	$	28
PPL Energy Supply (b)		17		22		21	PPL Energy Supply (b)		20		17		22
PPL Electric (c)		5		6		5	PPL Electric (c)		6		5		6

(a)		~~Net~~Income tax benefits of ~~an income tax benefit of $9 million,~~ $11 ~~million and $10 million.~~
~~(b)~~		~~Net of an income tax benefit of $7~~ million, $9 million and $11 million.

(b)	Income tax benefits of $8 million, $7 million and $9 million.

(c)

~~Net~~Income tax benefits of ~~an income tax benefit of~~$3 million, $2 million ~~for each year.~~and $2 million.

The income tax benefit PPL realized from stock-based ~~arrangements~~awards vested or exercised for ~~2009~~2010 was insignificant.

Directors Stock Units (PPL)

Under the Directors Deferred Compensation Plan, a mandatory amount of the cash retainers of the members of the Board of Directors who are not employees of PPL is deferred into stock units. Such deferred stock units represent the number of shares of PPL's common stock to which the board members are entitled after they cease serving as a member of the Board of Directors. Board members are entitled to defer any or all of their fees and cash retainers that are not part of the mandatory deferral into stock units. The stock unit accounts of each board member are increased based on dividends paid or other distributions on PPL's common stock. There were ~~406,584~~424,170 such stock units outstanding at December 31, ~~2009,~~2010, which were accounted for as liabilities with changes in fair value recognized currently in earnings based on PPL's common stock price at the end of each reporting period.

Compensation Costs (Credits)
2009 2008 2007

PPL (a) $ 2 $ (4 ) $ 5

~~(a)~~

~~Net of income tax benefit (expense) of $1 million, $(2) million and $2 million.~~

Compensation expense in 2010 was insignificant. Compensation expense in 2009 was $2 million, net of income tax benefit of $1 million. Compensation credits in 2008 were $4 million, net of income tax expense of $2 million. Awards paid ~~during~~in 2010, 2009 ~~2008~~ and ~~2007~~2008 were insignificant.

Stock Appreciation Rights (PPL and PPL Energy Supply)

WPD uses stock appreciation rights to compensate senior management employees. Stock appreciation rights are granted with a reference price to PPL's common stock at the date of grant. These awards vest over a three-year period and have a 10-year term, during which time employees are entitled to receive a cash payment of any appreciation in the price of PPL's common stock over the grant date fair value. At December 31, ~~2009,~~2010, there were ~~416,891~~526,821 stock appreciation rights outstanding, which ~~are~~were accounted for as liabilities with changes in fair value recognized currently in earnings based on ~~updated~~ Black-Scholes option valuation calculations.

Compensation ~~costs~~expense and awards paid related to stock appreciation rights were insignificant in 2010, 2009 were insignificant. Compensation credits in 2008 were $2 million, with related income tax expense of $1 million. Compensation costs for 2007 were $5 million, with related income tax benefits of $2 million.and 2008.

~~There were no awards exercised and paid in 2009. Awards paid in 2008 and 2007 were each $2 million.~~

~~12.~~

13. Retirement and Postemployment Benefits

(PPL, PPL Energy Supply and PPL Electric)

Defined Benefits

PPL and certain of its subsidiaries sponsor various defined benefit plans.

The majority of PPL's domestic employees are eligible for pension benefits under non-contributory defined benefit pension plans with benefits based on length of service and final average pay, as defined by the plans. Certain employees may also be eligible for pension enhancements in the form of special termination benefits under PPL's separation plan. See "Separation Benefits" below for additional information regarding PPL's separation plan.

The defined benefit pension plans of LG&E and KU Energy LLC were closed to new employees hired after December 31, 2005. Employees hired after December 31, 2005 receive additional company contributions above the standard matching contributions to their savings plans.

Employees of PPL Montana are eligible for pension benefits under a cash balance pension plan and employees of certain of PPL's mechanical contracting companies are eligible for benefits under ~~multi-employer~~multiemployer plans sponsored by various unions. ~~The~~Effective April 1, 2010, WPD's principal pension plan was closed to most new employees, ~~of WPD~~except for those meeting specific grandfathered participation rights. New employees not eligible to participate in the plan are ~~eligible for pension~~offered benefits under a defined ~~benefit pension plan with benefits based on length of service and final average pay.~~contribution plan.

PPL and certain of its subsidiaries also provide supplemental retirement benefits to executives and other key management employees through unfunded nonqualified retirement plans.

The majority of employees of PPL's domestic subsidiaries will become eligible for certain health care and life insurance benefits upon retirement through contributory plans. Postretirement benefits under the PPL Retiree Health Plan are paid from funded VEBA trusts ~~sponsored by PPL Services~~ and a 401(h) ~~account~~accounts established within the PPL Services ~~pension master trust by~~Corporation Master Trust and the ~~respective companies.~~LG&E and KU Energy LLC Pension Plan Trusts. Postretirement benefits under the PPL Montana Retiree Health Plan are paid from company assets. WPD does not sponsor any postretirement benefit plans other than pensions.

The following disclosures distinguish between the domestic (U.S.) and WPD (U.K.) pension plans.

Pension Benefits
U.S. U.K. Other Postretirement Benefits
2009 2008 2007 2009 2008 2007 2009 2008 2007
PPL
Net periodic defined benefit costs:
Service cost $ 60 $ 62 $ 63 $ 9 $ 16 $ 24 $ 6 $ 8 $ 8
Interest cost 145 140 132 156 188 170 29 33 31
Expected return on plan assets (169 ) (180 ) (175 ) (189 ) (231 ) (227 ) (18 ) (21 ) (21 )
Amortization of:
Transition (asset) obligation (5 ) (4 ) (4 ) 9 9 9
Prior service cost 19 20 19 4 5 5 9 9 9
Actuarial (gain) loss 3 (9 ) 2 2 18 55 2 5 6
Net periodic defined benefit costs (credits) prior to settlement charges and termination benefits 53 29 37 (18 ) (4 ) 27 37 43 42
Settlement charges (a) 2 3
Termination benefits (b) 9 6 3
Net periodic defined benefit costs (credits) $ 64 $ 29 $ 46 $ (18 ) $ (4 ) $ 30 $ 37 $ 43 $ 42

Other Changes in Plan Assets and Benefit Obligations Recognized in OCI and regulatory assets - Gross
Settlements $ (2 ) $ (3 )
Current year net (gain) loss 102 $ 635 (137 ) $ 403 $ 476 $ (254 ) $ 32 $ (31 ) $ (4 )
Current year prior service cost (credit) 1 9 (4 ) (2 ) 5
Amortization of:
Transition asset (obligation) 5 4 4 (9 ) (9 ) (9 )
Prior service cost (19 ) (22 ) (19 ) (4 ) (5 ) (5 ) (8 ) (9 ) (9 )
Actuarial loss (3 ) (1 ) (2 ) (2 ) (18 ) (55 ) (2 ) (9 ) (6 )
Total recognized in OCI and regulatory assets (c) (d) 84 616 (148 ) 397 453 (314 ) 9 (60 ) (23 )

Total recognized in net periodic benefit costs, OCI and regulatory assets (d) $ 148 $ 645 $ (102 ) $ 379 $ 449 $ (284 ) $ 46 $ (17 ) $ 19

(a) Includes the settlement of the pension plan of PPL's former mining subsidiary, PA Mines, LLC in 2009 and a non-qualified plan settlement in 2007.
(b) The $9 million U.S. cost of termination benefits in 2009 was related to a 2009 cost reduction initiative. The $6 million U.S. and $3 million U.K. costs of termination benefits for 2007 were related primarily to the elimination of positions at PPL's Martins Creek plant due to the shutdown of two coal-fired units in September 2007, and the closing of WPD's meter test station.
(c) For PPL's U.S. pension and other post-retirement benefits the amounts recognized in OCI and regulatory assets are as follows:
U.S. Pension Benefits Other Postretirement Benefits
2009 2008 2007 2009 2008 2007

OCI $ 51 $ 395 $ (87 ) $ 6 $ (38 ) $ (7 )
Regulatory assets 33 221 (61 ) 3 (22 ) (16 )
Total recognized in OCI and regulatory assets $ 84 $ 616 $ (148 ) $ 9 $ (60 ) $ (23 )

(d) WPD is not subject to accounting for the effects of certain types of regulation as prescribed by GAAP. As a result, WPD does not record regulatory assets.

~~The estimated amounts to be amortized from AOCI and regulatory assets into net periodic benefit costs in 2010 are as follows:~~

Pension Benefits
U.S. U.K. Other Postretirement Benefits

Transition obligation $ 9
Prior service cost $ 19 $ 4 7
Actuarial loss 3 52 5
Total $ 22 $ 56 $ 21

Amortization from Balance Sheet:
AOCI $ 15 $ 56 $ 13
Regulatory assets 7 8
Total $ 22 $ 56 $ 21

Pension Benefits
U.S. U.K. Other Postretirement Benefits
2009 2008 2007 2009 2008 2007 2009 2008 2007
PPL Energy Supply
Net periodic defined benefit costs:
Service cost $ 4 $ 4 $ 4 $ 9 $ 16 $ 24 $ 1 $ 1 $ 1
Interest cost 6 6 6 156 188 170 1 1 1
Expected return on plan assets (6 ) (8 ) (8 ) (189 ) (231 ) (227 )
Amortization of:
Prior service cost 4 5 5
Actuarial loss 2 2 18 55
Net periodic pension and postretirement costs (credits) prior to settlement charges and termination benefits 6 2 2 (18 ) (4 ) 27 2 2 2
Settlement charges (a) 2
Termination benefits (b) 3
Net periodic defined benefit costs (credits) $ 8 $ 2 $ 2 $ (18 ) $ (4 ) $ 30 $ 2 $ 2 $ 2

Other Changes in Plan Assets and Benefit Obligations Recognized in OCI
Settlements $ (2 )
Current year net (gain) loss 4 $ 27 $ (7 ) $ 403 $ 476 $ (254 ) $ (1 )
Current year prior service credit (1 )
Amortization of:
Prior service cost (4 ) (5 ) (5 )
Actuarial loss (2 ) (2 ) (18 ) (55 )
Total recognized in OCI 27 (7 ) 397 453 (314 ) (2 )

Total recognized in net periodic benefit cost and OCI $ 8 $ 29 $ (5 ) $ 379 $ 449 $ (284 ) $ 2 $ $ 2

			Pension Benefits
			U.S.						U.K.						Other Postretirement Benefits
			2010		2009		2008		2010		2009		2008		2010		2009		2008
PPL
Net periodic defined benefit costs
	(credits):
Service cost			$	64	$	60	$	62	$	17	$	9	$	16	$	8	$	6	$	8
Interest cost				159		145		140		151		156		188		28		29		33
Expected return on plan assets				(184)		(169)		(180)		(202)		(189)		(231)		(20)		(18)		(21)
Amortization of:
		Transition (asset) obligation				(5)		(4)								5		9		9
		Prior service cost		21		19		20		4		4		5		4		9		9
		Actuarial (gain) loss		8		3		(9)		48		2		18		6		2		5
Net periodic defined benefit costs
	(credits) prior to settlement
	charges and termination benefits			68		53		29		18		(18)		(4)		31		37		43
Settlement charges (a)						2
Termination benefits (b)						9
Net periodic defined benefit costs
	(credits)		$	68	$	64	$	29	$	18	$	(18)	$	(4)	$	31	$	37	$	43

Other Changes in Plan Assets
	and Benefit Obligations
	Recognized in OCI and
	Regulatory Assets/Liabilities -
	Gross:
Settlements					$	(2)
Current year net (gain) loss			$	142		102	$	635	$	17	$	403	$	476	$	20	$	32	$	(31)
Current year prior service cost
	(credit)					1										(71)		(4)		(2)
Amortization of:
		Transition asset				5		4								(5)		(9)		(9)
		Prior service cost		(21)		(19)		(22)		(4)		(4)		(5)		(4)		(8)		(9)
		Actuarial (loss)		(7)		(3)		(1)		(48)		(2)		(18)		(6)		(2)		(9)
Acquisition of regulatory assets/
	liabilities:
		Transition obligation														4
		Prior service cost		31												6
		Actuarial (gain) loss		303												(2)
Total recognized in OCI and
	regulatory assets/liabilities (c) (d)			448		84		616		(35)		397		453		(58)		9		(60)

Total recognized in net periodic
	benefit costs, OCI and regulatory
	assets/liabilities (d)		$	516	$	148	$	645	$	(17)	$	379	$	449	$	(27)	$	46	$	(17)

(a)

Includes the settlement of the pension plan of PPL's former mining subsidiary, PA Mines, LLC in 2009.

(b)	Related to a 2009 cost reduction initiative.

(c)	~~The $3 million U.K. cost~~For PPL's U.S. pension and other postretirement benefits, the amounts recognized in OCI and regulatory assets/liabilities are as follows:

		U.S. Pension Benefits							Other Postretirement Benefits
			2010		2009		2008		2010		2009		2008

OCI		$	84	$	51	$	395	$	(40)	$	6	$	(38)
Regulatory assets/liabilities			364		33		221		(18)		3		(22)
Total recognized in OCI and
	regulatory assets/liabilities	$	448	$	84	$	616	$	(58)	$	9	$	(60)

(d)

WPD is not subject to accounting for the effects of ~~termination benefits for 2007 was related to the closing~~certain types of regulation as prescribed by GAAP. As a result, WPD ~~meter test station. In addition, severance of $2 million was also recorded for a total charge of $5 million ($4 million after tax).~~does not record regulatory assets/liabilities.

~~Prior service~~The estimated amounts to be amortized from AOCI and regulatory assets/liabilities into net periodic benefit costs ~~for~~in 2011 are as follows:

					Other
	Pension Benefits				Postretirement
	U.S.		U.K.		Benefits

Transition obligation					$	2
Prior service cost	$	25	$	4		(1)
Actuarial loss		27		56		6
Total	$	52	$	60	$	7

Amortization from Balance Sheet:
AOCI	$	17	$	60	$	2
Regulatory assets/liabilities		35				5
Total	$	52	$	60	$	7

			Pension Benefits
			U.S.						U.K.						Other Postretirement Benefits
			2010		2009		2008		2010		2009		2008		2010		2009		2008
PPL Energy Supply
Net periodic defined benefit costs
(credits):
Service cost			$	4	$	4	$	4	$	17	$	9	$	16	$	1	$	1	$	1
Interest cost				7		6		6		151		156		188		1		1		1
Expected return on plan assets				(7)		(6)		(8)		(202)		(189)		(231)
Amortization of:
		Prior service cost								4		4		5
		Actuarial loss		2		2				48		2		18
Net periodic defined benefit costs
	(credits) prior to settlement charges			6		6		2		18		(18)		(4)		2		2		2
Settlement charges (a)						2
Net periodic defined benefit costs
	(credits)		$	6	$	8	$	2	$	18	$	(18)	$	(4)	$	2	$	2	$	2

Other Changes in Plan Assets
	and Benefit Obligations
	Recognized in OCI:
Settlements					$	(2)
Current year net (gain) loss			$	4		4	$	27	$	17	$	403	$	476					$	(1)
Current year prior service credit																				(1)
Amortization of:
		Prior service cost								(4)		(4)		(5)
		Actuarial loss		(2)		(2)				(48)		(2)		(18)
Total recognized in OCI				2				27		(35)		397		453						(2)

Total recognized in net periodic
	benefit costs and OCI		$	8	$	8	$	29	$	(17)	$	379	$	449	$	2	$	2	$

(a)	Includes the settlement of the pension plan of PPL Energy Supply's former mining subsidiary, PA Mines, LLC in 2009.

Actuarial loss of $2 million related to PPL Energy Supply's U.S. pension plan is expected to be amortized from AOCI into net periodic benefit costs in 2011.

For PPL Energy Supply, prior service costs of $4 million and actuarial loss of ~~$52~~$56 million related to the U.K. pension plans are expected to be amortized from AOCI into net periodic benefit costs in ~~2010.~~
2011.

Net periodic defined benefit costs (credits) charged to operating expense, excluding amounts charged to construction and other non-expense accounts were:

	Pension Benefits																				Pension Benefits
	U.S.						U.K.								Other Postretirement Benefits						U.S.						U.K.						Other Postretirement Benefits
	2009		2008		2007		2009			2008			2007		2009		2008		2007		2010		2009		2008		2010		2009		2008		2010		2009		2008

PPL	$	56	$	24	$	40	$	(17	)	$	(4	)	$	27	$	31	$	36	$	35	$	59	$	56	$	24	$	16	$	(17)	$	(4)	$	27	$	31	$	36
PPL Energy Supply (a)		26		10		19		(17	)		(4	)		27		14		16		16		24		26		10		16		(17)		(4)		12		14		16
PPL Electric (b)		14		5		7										10		13		10		12		14		5								8		10		13

(a)

~~In addition to~~Includes costs for the specific plans it sponsors ~~PPL Energy Supply~~ and ~~its subsidiaries are also~~the following allocated costs of defined benefit plans sponsored by PPL Services, ~~included in the total cost above,~~ based on ~~their~~PPL Energy Supply's participation in those ~~plans.~~plans, which management believes are reasonable.

	Pension Benefits							Other Postretirement Benefits
		2010		2009		2008		2010		2009		2008

PPL Energy Supply	$	19	$	18	$	8	$	10	$	13	$	15

(b)

PPL Electric does not directly sponsor any defined benefit plans. PPL Electric was allocated these costs of defined benefit plans sponsored by PPL Services, based on its participation in those ~~plans.~~plans, which management believes are reasonable.

The following weighted-average assumptions were used in the valuation of the benefit obligations at December 31.

Pension Benefits
U.S. U.K. Other Postretirement Benefits
2009 2008 2007 2009 2008 2007 2009 2008 2007
PPL
Discount rate 6.00% 6.50% 6.39% 5.55% 7.47% 6.37% 5.81% 6.45% 6.26%
Rate of compensation increase 4.75% 4.75% 4.75% 4.00% 4.00% 4.25% 4.75% 4.75% 4.75%

PPL Energy Supply
Discount rate 6.00% 6.50% 6.39% 5.55% 7.47% 6.37% 5.55% 6.37% 6.13%
Rate of compensation increase 4.75% 4.75% 4.75% 4.00% 4.00% 4.25% 4.75% 4.75% 4.75%

		Pension Benefits
		U.S.						U.K.						Other Postretirement Benefits
		2010		2009		2008		2010		2009		2008		2010		2009		2008
PPL
	Discount rate		5.42%		6.00%		6.50%		5.54%		5.55%		7.47%		5.14%		5.81%		6.45%
	Rate of compensation increase		4.88%		4.75%		4.75%		4.00%		4.00%		4.00%		4.90%		4.75%		4.75%

PPL Energy supply
	Discount rate		5.47%		6.00%		6.50%		5.54%		5.55%		7.47%		4.95%		5.55%		6.37%
	Rate of compensation increase		4.75%		4.75%		4.75%		4.00%		4.00%		4.00%		4.75%		4.75%		4.75%

The following weighted-average assumptions were used to determine the net periodic benefit costs for the year ended December 31.

Pension Benefits
U.S. U.K. Other Postretirement Benefits
2009 2008 2007 2009 2008 2007 2009 2008 2007
PPL
Discount rate 6.50% 6.39% 5.94% 7.47% 6.37% 5.17% 6.45% 6.26% 5.88%
Rate of compensation increase 4.75% 4.75% 4.75% 4.00% 4.25% 4.00% 4.75% 4.75% 4.75%
Expected return on plan assets (a) 8.00% 8.25% 8.50% 7.90% 7.90% 8.09% 7.00% 7.80% 7.75%

PPL Energy Supply
Discount rate 6.50% 6.39% 5.94% 7.47% 6.37% 5.17% 6.37% 6.13% 5.79%
Rate of compensation increase 4.75% 4.75% 4.75% 4.00% 4.25% 4.00% 4.75% 4.75% 4.75%
Expected return on plan assets (a) 7.78% 8.04% 8.27% 7.90% 7.90% 8.09% N/A N/A N/A

		Pension Benefits
		U.S.						U.K.						Other Postretirement Benefits
		2010		2009		2008		2010		2009		2008		2010		2009		2008
PPL
	Discount rate		5.96%		6.50%		6.39%		5.59%		7.47%		6.37%		5.47%		6.45%		6.26%
	Rate of compensation increase		4.79%		4.75%		4.75%		4.00%		4.00%		4.25%		4.78%		4.75%		4.75%
	Expected return on plan assets (a)		7.96%		8.00%		8.25%		7.91%		7.90%		7.90%		6.90%		7.00%		7.80%

PPL Energy supply
	Discount rate		6.00%		6.50%		6.39%		5.59%		7.47%		6.37%		5.55%		6.37%		6.13%
	Rate of compensation increase		4.75%		4.75%		4.75%		4.00%		4.00%		4.25%		4.75%		4.75%		4.75%
	Expected return on plan assets (a)		8.00%		7.78%		8.04%		7.91%		7.90%		7.90%		N/A		N/A		N/A

(a)

The expected long-term rates of return for PPL and PPL Energy Supply's U.S. pension and other postretirement benefits have been developed using a best-estimate of expected returns, volatilities and correlations for each asset class. The best estimates are based on historical performance, future expectations and periodic portfolio rebalancing among the diversified asset classes. PPL management corroborates these rates with expected long-term rates of return calculated by its independent actuary, who uses a building block approach that begins with a risk-free rate of return with factors being added such as inflation, duration, credit spreads and equity risk. Each plan's specific asset allocation is also considered in developing a reasonable return assumption.

The expected long-term rates of return for PPL and PPL Energy Supply's U.K. pension plans have been developed by ~~WPD~~PPL management with assistance from an independent actuary using a ~~best-estimate~~best estimate of expected returns, volatilities and correlations for each asset class. The best estimates are based on historical performance, future expectations and periodic portfolio rebalancing among the diversified asset classes.

Assumed Health Care Cost Trend Rates at December 31,
2009 2008 2007
PPL and PPL Energy Supply
Health care cost trend rate assumed for next year
  - obligations 8.0% 8.4% 9.0%
  - cost 8.4% 9.0% 9.0%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
  - obligations 5.5% 5.5% 5.5%
  - cost 5.5% 5.5% 5.5%
Year that the rate reaches the ultimate trend rate
  - obligations 2016 2014 2014
  - cost 2014 2014 2012

			Assumed Health Care Cost
			Trend Rates at December 31,
			2010		2009		2008
PPL and PPL Energy Supply
	Health care cost trend rate assumed for next year
		- obligations		9.0%		8.0%		8.4%
		- cost		8.0%		8.4%		9.0%
	Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
		- obligations		5.5%		5.5%		5.5%
		- cost		5.5%		5.5%		5.5%
	Year that the rate reaches the ultimate trend rate
		- obligations		2019		2016		2014
		- cost		2016		2014		2014

A one percentage point change in the assumed health care costs trend rate assumption would have had the following effects on the other postretirement benefit plans in ~~2009.~~2010.

	One Percentage Point					One Percentage Point
	Increase		Decrease			Increase		Decrease
PPL
Effect on service cost and interest cost components	$	1	$	(1	)
Effect on accumulated postretirement benefit obligation		14		(12	)	$	9	$	(8)

The effects on PPL Energy Supply's other postretirement benefit plans would not have been significant.

(PPL)

The funded status of the PPL plans was as follows.

Pension Benefits
U.S. U.K. Other Postretirement Benefits
2009 2008 2009 2008 2009 2008
Change in Benefit Obligation
Benefit Obligation, beginning of period $ 2,231 $ 2,189 $ 2,152 $ 3,295 $ 451 $ 541
Service cost 60 62 9 15 6 8
Interest cost 145 140 156 188 29 33
Participant contributions 5 7 6 8
Plan amendments 1 (4 ) (2 )
Actuarial (gain) loss 125 (13 ) 611 (411 ) 43 (94 )
Termination benefits 9
Actual expenses paid (1 ) (1 )
Gross benefits paid (104 ) (95 ) (189 ) (180 ) (36 ) (36 )
Settlements (b) (6 )
Federal subsidy 3 2
Currency conversion 189 (762 )
Divestiture (a) (51 ) (9 )
Benefit Obligation, end of period 2,460 2,231 2,933 2,152 498 451

Change in Plan Assets
Plan assets at fair value, beginning of period 1,637 2,212 1,842 3,388 267 291
Actual return on plan assets 192 (469 ) 427 (770 ) 28 (42 )
Employer contributions 54 29 95 92 33 38
Participant contributions 5 7 6 12
Actual expenses paid (1 ) (1 )
Gross benefits paid (104 ) (95 ) (189 ) (179 ) (33 ) (32 )
Settlements (a) (6 )
Currency conversion 151 (696 )
Divestiture (b) (39 )
Plan assets at fair value, end of period 1,772 1,637 2,331 1,842 301 267

Funded Status, end of period $ (688 ) $ (594 ) $ (602 ) $ (310 ) $ (197 ) $ (184 )

Amounts recognized in the Balance Sheets consist of:
Current liability $ (7 ) $ (5 ) $ (1 ) $ (1 )
Noncurrent liability (681 ) (589 ) $ (602 ) $ (310 ) (196 ) (183 )
Net amount recognized, end of period $ (688 ) $ (594 ) $ (602 ) $ (310 ) $ (197 ) $ (184 )

Amounts recognized in AOCI and regulatory assets (pre-tax) consist of: (c)
Transition (asset) obligation $ (4 ) $ 26 $ 35
Prior service cost $ 120 139 $ 13 $ 16 31 43
Net actuarial loss 398 300 1,126 726 101 70
Total $ 518 $ 435 $ 1,139 $ 742 $ 158 $ 148

Total accumulated benefit obligation for defined benefit pension plans $ 2,237 $ 1,999 $ 2,806 $ 2,058

			Pension Benefits
			U.S.				U.K.				Other Postretirement Benefits
			2010		2009		2010		2009		2010		2009
Change in Benefit Obligation
Benefit Obligation, beginning of period			$	2,460	$	2,231	$	2,933	$	2,152	$	498	$	451
		Service cost		64		60		17		9		8		6
		Interest cost		159		145		151		156		28		29
		Participant contributions						6		5		7		6
		Plan amendments				1						(71)		(4)
		Actuarial loss		222		125		37		611		32		43
		Termination benefits				9
		Actual expenses paid		(2)		(1)
		Gross benefits paid		(127)		(104)		(152)		(189)		(44)		(36)
		Settlements (a)				(6)
		Federal subsidy										3		3
		Currency conversion						(151)		189
		Acquisition (b)		1,231								206
Benefit Obligation, end of period				4,007		2,460		2,841		2,933		667		498

Change in Plan Assets
Plan assets at fair value, beginning of period				1,772		1,637		2,331		1,842		301		267
		Actual return on plan assets		263		192		228		427		33		28
		Employer contributions		148		54		231		95		17		33
		Participant contributions						6		5		7		6
		Actual expenses paid		(2)		(1)
		Gross benefits paid		(127)		(104)		(152)		(189)		(40)		(33)
		Settlements (a)				(6)
		Currency conversion						(120)		151
		Acquisition (b)		765								42
Plan assets at fair value, end of period				2,819		1,772		2,524		2,331		360		301

Funded Status, end of period			$	(1,188)	$	(688)	$	(317)	$	(602)	$	(307)	$	(197)

Amounts recognized in the Balance
	Sheets consist of:
		Current liability	$	(10)	$	(7)					$	(2)	$	(1)
		Noncurrent liability		(1,178)		(681)	$	(317)	$	(602)		(305)		(196)
Net amount recognized, end of period			$	(1,188)	$	(688)	$	(317)	$	(602)	$	(307)	$	(197)

Amounts recognized in AOCI and
	regulatory assets/liabilities (pre-tax)
	consist of: (c)
Transition obligation											$	4	$	26
Prior service cost (credit)			$	131	$	120	$	7	$	13		(16)		31
Net actuarial loss				836		398		1,097		1,126		112		101
Total (d)			$	967	$	518	$	1,104	$	1,139	$	100	$	158

Total accumulated benefit obligation
	for defined benefit pension plans		$	3,564	$	2,237	$	2,646	$	2,806

(a) Includes the settlement of the pension plan of PPL's former mining subsidiary, PA Mines LLC in 2009.
(b) Includes the pension and postretirement medical plans related to the gas and propane businesses that were sold in 2008. See Note 9 for additional information.
(c) For PPL's U.S. pension and other post-retirement benefits, the amounts recognized in AOCI and regulatory assets are as follows:
U.S. Pension Benefits Other Postretirement Benefits
2009 2008 2009 2008

AOCI $ 346 $ 295 $ 95 $ 89
Regulatory assets 172 140 63 59
Total $ 518 $ 435 $ 158 $ 148

(a)	Includes the settlement of the pension plan of PPL's former mining subsidiary, PA Mines LLC, in 2009.

(b)	Includes the pension and other postretirement medical plans of LKE, which were acquired in 2010. See Note 10 for additional information.

(c)	For PPL's U.S. pension and other post-retirement benefits, the amounts recognized in AOCI and regulatory assets/liabilities are as follows:

	U.S. Pension Benefits				Other Postretirement Benefits
	2010		2009		2010		2009

AOCI	$	431	$	346	$	53	$	95
Regulatory assets/liabilities		536		172		47		63
Total	$	967	$	518	$	100	$	158

(d) WPD is not subject to accounting for the effects of certain types of regulation as prescribed by GAAP. As a result, WPD does not record regulatory assets/liabilities.

All of PPL's pension plans had projected and accumulated benefit obligations in excess of plan assets at December 31, ~~2009~~2010 and ~~2008.~~2009. All of PPL's other postretirement benefit plans had accumulated postretirement benefit obligations in excess of plan assets at December 31, ~~2009~~2010 and ~~2008.~~2009.

(PPL Energy Supply)

The funded status of the PPL Energy Supply plans was as follows.

Pension Benefits
U.S. U.K. Other Postretirement Benefits
2009 2008 2009 2008 2009 2008
Change in Benefit Obligation
Benefit Obligation, beginning of period $ 95 $ 89 $ 2,152 $ 3,295 $ 15 $ 16
Service cost 4 4 9 15 1 1
Interest cost 6 6 156 188 1 1
Participant contributions 5 7
Plan amendments (1 )
Actuarial (gain) loss 7 (2 ) 611 (411 ) (1 )
Settlements (a) (6 )
Gross benefits paid (2 ) (2 ) (189 ) (180 ) (1 )
Currency conversion 189 (762 )
Benefit Obligation, end of period 104 95 2,933 2,152 17 15

Change in Plan Assets
Plan assets at fair value, beginning of period 78 100 1,842 3,388
Actual return on plan assets 9 (20 ) 427 (770 )
Employer contributions 9 95 92 1
Participant contributions 5 7
Gross benefits paid (3 ) (2 ) (189 ) (179 ) (1 )
Settlements (a) (6 )
Currency conversion 151 (696 )
Plan assets at fair value, end of period 87 78 2,331 1,842

Funded Status, end of period $ (17 ) $ (17 ) $ (602 ) $ (310 ) $ (17 ) $ (15 )

Amounts recognized in the Balance Sheets consist of:
Current liability $ (1 ) $ (1 )
Noncurrent liability $ (17 ) $ (17 ) $ (602 ) $ (310 ) (16 ) (14 )
Net amount recognized, end of period $ (17 ) $ (17 ) $ (602 ) $ (310 ) $ (17 ) $ (15 )

Amounts recognized in AOCI (pre-tax) consist of:
Prior service cost (credit) $ 2 $ 2 $ 13 $ 16 $ (1 ) $ (1 )
Net actuarial loss 30 30 1,126 726 4 4
Total $ 32 $ 32 $ 1,139 $ 742 $ 3 $ 3

Total accumulated benefit obligation for defined benefit pension plans $ 104 $ 95 $ 2,806 $ 2,058

			Pension Benefits
			U.S.				U.K.				Other Postretirement Benefits
			2010		2009		2010		2009		2010		2009
Change in Benefit Obligation
Benefit Obligation, beginning of period			$	104	$	95	$	2,933	$	2,152	$	17	$	15
		Service cost		4		4		17		9		1		1
		Interest cost		7		6		151		156		1		1
		Participant contributions						6		5
		Actuarial loss		9		7		37		611
		Settlements (a)				(6)
		Gross benefits paid		(3)		(2)		(152)		(189)		(1)
		Currency conversion						(151)		189
Benefit Obligation, end of period				121		104		2,841		2,933		18		17

Change in Plan Assets
Plan assets at fair value, beginning of
	period			87		78		2,331		1,842
		Actual return on plan assets		12		9		228		427
		Employer contributions		10		9		231		95		1
		Participant contributions						6		5
		Gross benefits paid		(3)		(3)		(152)		(189)		(1)
		Settlements (a)				(6)
		Currency conversion						(120)		151
Plan assets at fair value, end of period				106		87		2,524		2,331

Funded Status, end of period			$	(15)	$	(17)	$	(317)	$	(602)	$	(18)	$	(17)

Amounts recognized in the Balance
	Sheets consist of:
		Current liability									$	(1)	$	(1)
		Noncurrent liability	$	(15)	$	(17)	$	(317)	$	(602)		(17)		(16)
Net amount recognized, end of period			$	(15)	$	(17)	$	(317)	$	(602)	$	(18)	$	(17)

Amounts recognized in AOCI
	(pre-tax) consist of:
Prior service cost (credit)			$	1	$	2	$	7	$	13	$	(1)	$	(1)
Net actuarial loss				33		30		1,097		1,126		4		4
Total			$	34	$	32	$	1,104	$	1,139	$	3	$	3

Total accumulated benefit obligation
	for defined benefit pension plans		$	121	$	104	$	2,646	$	2,806

(a)

Includes the settlement of the pension plan of PPL Energy Supply's former mining subsidiary, PA Mines LLC in 2009.

All of PPL Energy Supply's pension plans had projected and accumulated benefit obligations in excess of plan assets at December 31, ~~2009~~2010 and ~~2008.~~2009. All of PPL Energy Supply's other postretirement benefit plans had accumulated postretirement benefit obligations in excess of plan assets at December 31, ~~2009~~2010 and ~~2008.~~2009.

In addition to the plans it sponsors, PPL Energy Supply and its subsidiaries are allocated a portion of the funded status and costs of the defined benefit plans sponsored by PPL Services based on their participation in those ~~plans.~~plans, which management believes are reasonable. The actuarial determined obligations of current active employees are used as a basis to allocate total plan activity, including active and retiree costs and obligations. PPL Energy Supply's allocated share of the funded status of the pension plans resulted in a liability of ~~$265~~$287 million and ~~$229~~$265 million at December 31, ~~2009~~2010 and ~~2008.~~2009. PPL Energy Supply's allocated share of other postretirement benefits was a liability of ~~$74~~$55 million and ~~$69~~$74 million at December 31, ~~2009~~2010 and ~~2008.~~2009.

PPL Energy Supply's subsidiaries engaged in the mechanical contracting business make contributions to various multi-employer pension and health and welfare plans, depending on an employee's status. Contributions were $49 million in 2010, $54 million in 2009 and $61 million in ~~both 2008 and 2007.~~2008.

(PPL Electric)

Although PPL Electric does not directly sponsor any defined benefit plans, it is allocated a portion of the funded status and costs of plans sponsored by PPL Services based on its participation in those ~~plans.~~plans, which management believes are reasonable. The actuarial determined obligations of current active employees are used as a basis to allocate total plan activity, including active and retiree costs and obligations. PPL Electric's allocated share of the funded status of the pension plans resulted in a liability of ~~$245~~$259 million and ~~$209~~$245 million at December 31, ~~2009~~2010 and ~~2008.~~2009. PPL Electric's allocated share of other postretirement benefits was a liability of ~~$73~~$57 million and ~~$69~~$73 million at December 31, ~~2009~~2010 and ~~2008.~~

2009.

(PPL and PPL Electric)

PPL Electric maintains a liability for the cost of health care of retired miners of former subsidiaries that had been engaged in coal mining, as required by the Coal Industry Retiree Health Benefit Act of 1992. ~~However, total obligations~~At December 31, 2010, the liability was $3 million. The liability is the net of ~~$59~~$63 million ~~are~~of estimated future benefit payments offset by $28 million of assets in a retired miners VEBA ~~fund~~trust and an additional $32 million of excess assets available in a Black Lung Trust ~~assets.~~that can be used to fund the health care benefits of retired miners.

Plan Assets - U.S. Pension Plans

PPL Services Corporation Master Trust (PPL and PPL Energy Supply)

~~PPL~~PPL's primary legacy pension plan and PPL Energy Supply's U.S. pension ~~plans~~plan are invested in ~~a master trust~~the PPL Services Corporation Master Trust that also includes a 401(h) account that is restricted for certain other postretirement benefit obligations. The investment strategy for the master trust is to achieve a risk-adjusted return on a mix of assets that, in combination with PPL's funding policy and tolerance for return volatility, will ensure that sufficient assets are available to provide long-term growth and liquidity for benefit payments. The master trust benefits from a wide diversification of asset types, investment fund strategies and external investment fund managers, and therefore has no significant concentration of risk.

The investment policies of the ~~U.S. pension plans~~PPL Services Corporation Master Trust outline allowable investments and define the responsibilities of the internal pension administrative committee and the external investment managers. The only prohibited investments are investments in debt or equity securities issued by PPL and its subsidiaries or PPL's pension plan consultant. Derivative instruments may be utilized as a cost-effective means to mitigate risk and match the duration of investments to projected obligations. The investment policies are reviewed ~~and approved~~ annually by PPL's Board of Directors.

Target allocation ranges have been developed based on input from external consultants with a goal of limiting funded status volatility. The assets in the ~~U.S. pension plans~~PPL Services Corporation Master Trust are rebalanced as necessary to maintain the target asset allocation ranges. The asset allocation for the master trust and the target allocation, by asset class, at December 31 are detailed below.

Asset Class Percentage of plan assets Target Range Target Asset Allocation
2009 2008 2009 2009
Equity securities
U.S. 31% 37% 18-32% 25%
International 19% 15% 10-24% 17%
Debt securities and derivatives 38% 41% 31-45% 38%
Alternative investments 8% 5% 8-22% 15%
Cash and cash equivalents 4% 2% 0-12% 5%
Total 100% 100% 100%

									Target Asset
			Percentage of trust assets				Target Range		Allocation
Asset Class			2010		2009		2010		2010
	Equity securities
		U.S.		27%		31%		14 - 28%		21%
		International		16%		19%		9 - 23%		16%
	Debt securities and derivatives			47%		38%		43 - 57%		50%
	Alternative investments			9%		8%		4 - 18%		11%
	Cash and cash equivalents			1%		4%		0 - 9%		2%
	Total			100%		100%				100%

~~U.S. equity securities include investments in large-cap~~LG&E and small-cap companies. International equity securities include investments in developed markets and emerging markets. The investments in U.S. and international equity securities include investments in individual securities and investments in commingled funds. Investments in debt securities include U.S. Treasuries, U.S. government agencies, residential mortgage-backed securities, asset-backed securities, investment-grade corporate bonds, high-yield corporate bonds, municipal bonds and international debt securities. Alternative investments include investments in real estate, private equity funds and hedge fund of funds that follow several different strategies. Derivative instruments are utilized as a cost-effective means to mitigate risk and match the duration of investments to projected obligations.KU Energy LLC Pension Trusts(PPL)

~~(PPL)~~The plans sponsored by LKE are invested in Pension Trusts that also include a 401(h) account that is restricted for certain other postretirement benefit obligations. The investment strategy is to preserve the capital of the Pension Trusts and maximize investment earnings in excess of inflation with acceptable levels of volatility. The return objective is to exceed the benchmark return for the policy index comprised of the following: Russell 3000 Index, the MSCI-EAFE Index, Barclays Capital Aggregate and Barclays Capital U.S. Long Government Credit Bond Index in proportions equal to the targeted asset allocation.

Performance is evaluated on a long-term horizon of three to five years. The assets of the Pension Trusts are broadly diversified within different asset classes and therefore have no significant concentration of risk.

Target allocation ranges have been developed based on input from external consultants. The asset allocation for the Pension Trusts and the target allocation, by asset class, at December 31 are detailed below.

			Percentage
			of plan assets		Target Range
Asset Class			2010		2010
	Equity securities
		U.S.		56%		45 - 75%
	Debt securities (a)			37%		30 - 50%
	Other			7%		0 - 10%
	Total			100%

(a) Includes commingled debt funds

(PPL and PPL Energy Supply)

PPL Montana, a subsidiary of PPL Energy Supply, has a pension plan whose assets are solely invested in the PPL Services Corporation Master Trust, which is fully disclosed by PPL (below). The fair value of this plan's assets of $106 million at December 31, 2010 represents a 5% undivided interest in each asset and liability of this master trust, including each asset whose fair value measurement was determined using significant unobservable inputs (Level 3).

The fair value of net assets in the U.S. pension ~~plans~~plan trusts by asset class and level within the fair value hierarchy was:

December 31, 2009
Fair Value Measurements Using
Total Level 1 Level 2 Level 3

Cash and cash equivalents $ 90 $ 90
Equity securities:
U.S.:
Large-cap (a) 511 361 $ 150
Small-cap (b) 84 84
International:
Developed markets (c) 327 205 122
Emerging markets (d) 71 9 62
Debt securities:
U.S.:
U.S. Treasury 212 212
U.S. government agency 6 6
Residential mortgage-backed (e) 50 48 $ 2
Asset-backed (f) 9 9
Investment-grade corporate (g) 191 189 2
High-yield corporate (h) 92 84 8
Other
International (i) 5 5
Alternative investments:
Real estate (j) 65 65
Private equity (k) 6 6
Hedge fund of funds (l) 64 64
Derivatives:
Foreign currency forward contracts (m) 1 1
To-be-announced (TBA) debt securities (n) 10 10
Interest rate swaps (4 ) (4 )
Receivables (o) 15 8 7
Payables (p) (22 ) (22 )
Total master trust assets 1,783 947 808 28
401(h) account restricted for other postretirement benefit obligations (11 ) (6 ) (5 )
Fair value - U.S. pension plans $ 1,772 $ 941 $ 803 $ 28

~~(a)~~		~~Represents actively and passively managed investments that are measured against various U.S. equity indices.~~
~~(b)~~		~~Represents actively managed investments in small-cap growth companies that are measured against the Russell 2000 Growth Index.~~
~~(c)~~		~~Represents actively managed investments that are measured against the MSCI EAFE Index.~~
~~(d)~~		~~Represents actively managed investments that are measured against the MSCI Emerging Markets Index.~~
~~(e)~~		~~Represents investments in securities issued by U.S. agencies and securitized by residential mortgages.~~
~~(f)~~		~~Represents investments securitized by auto loans, credit cards and other pooled loans.~~
~~(g)~~		~~Represents investments in investment grade bonds issued by U.S. companies across several industries.~~
~~(h)~~		~~Represents investments in non-investment grade bonds issued by U.S. companies across several industries.~~
~~(i)~~		~~Represents investments in debt securities issued by foreign governments and corporations.~~
~~(j)~~		Represents an investment in a real estate fund through a partnership that invests in core U.S. real estate properties diversified geographically and across major property types (e.g., office, industrial, retail, etc). The manager is focused on properties with high occupancy rates with quality tenants. This results in a focus on high income and stable cash flows with appreciation being a secondary factor. Core real estate generally has a lower degree of leverage when compared to more speculative real estate investing strategies.
~~(k)~~		~~Represents investments through partnerships in multiple early-state venture capital funds and private equity fund of funds that use diverse investment strategies.~~
~~(l)~~		~~Represents investments in hedge fund of funds that follow a number of different investment strategies to create a well-diversified portfolio.~~
~~(m)~~		~~Represents contracts utilized to mitigate foreign currency risk associated with anticipated foreign denominated cash receipts and payments.~~
~~(n)~~		~~Represents commitments to purchase debt securities. Used as a cost effective means of managing the duration of assets in the trust.~~
~~(o)~~		~~Represents interest and dividends earned but not received (Level 2) as well as investments sold but not yet settled (Level 1).~~
~~(p)~~		~~Represents costs incurred but not yet paid (Level 2) and investments purchased but not yet settled (Level 1).~~

				December 31, 2010								December 31, 2009
						Fair Value Measurements Using								Fair Value Measurements Using
				Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
PPL Services Corporation Master Trust
Cash and cash equivalents				$	87	$	87					$	72	$	72
Equity securities:
		U.S.:
			Large-cap		494		373	$	121				465		361	$	104
			Small-cap		34		34						84		84
		International:
			Developed markets		224		2		222				330		208		122
			Emerging markets		117		117						7		7
Debt securities:
		U.S.:
			U.S. Treasury		296		296						212		212
			U.S. government sponsored agency		7				7				6				6
			Residential mortgage-backed securities		39				39				50				48	$	2
			Asset-backed securities		8				8				9				9
			Investment-grade corporate		357				357				233				231		2
			High-yield corporate		101				95	$	6		92				84		8
			Municipality		4				4				1				1
		International:
			Developed markets		4				4				5				5
			Emerging markets		109				109				64				64
Alternative investments:
		Real estate			76				76				65				65
		Private equity			10						10		6						6
		Hedge fund of funds			95				95				64				64
Derivatives:
		TBA debt securities			31						31		10						10
		Interest rate swaps			(4)				(4)				(4)				(4)
Receivables					24		13		11				63		26		37
Payables					(54)		(51)		(3)				(51)		(22)		(29)
Total PPL Services Corporation Master Trust assets					2,059		871		1,141		47		1,783		948		807		28
401(h) account restricted for other
	postretirement benefit obligations				(18)		(8)		(10)				(11)		(6)		(5)
Fair value - PPL Services Corporation Master
	Trust pension assets				2,041		863		1,131		47		1,772		942		802		28

(PPL)

LG&E and KU Energy LLC Pension Trusts
Cash and cash equivalents					6		6
Equity securities:
		U.S.:
			Large-cap		293				293
			Small/Mid-cap		67				67
			Commingled debt		307				307
		International developed markets			105				105
Insurance contracts					47						47
Total LG&E and KU Energy LLC
	Pension Trusts' assets				825		6		772		47
401(h) account restricted for other
	postretirement benefit obligations				(47)				(47)
Fair value - LG&E and KU Energy LLC
	Pension Trusts' pension assets				778		6		725		47

Fair value - total U.S. pension plans				$	2,819	$	869	$	1,856	$	94	$	1,772	$	942	$	802	$	28

A reconciliation of ~~master~~U.S. pension trust assets classified as Level 3 at December 31, 2010 is as follows.

					Residential		Investment -
					mortgage		grade		High-yield
					backed		corporate		corporate		Private		TBA debt		Insurance
					securities		debt		debt		equity		securities		contracts		Total

Balance at beginning of period					$	2	$	2	$	8	$	6	$	10			$	28
	Actual return on plan assets
			Relating to assets still held
				at the reporting date		(1)		(2)		1		(1)						(3)
			Relating to assets sold
				during the period						1								1
	Acquisition of LKE														$	46		46
	Purchases, sales and
		settlements				(1)				(4)		5		21		1		22
Balance at end of period					$		$		$	6	$	10	$	31	$	47	$	94

A reconciliation of U.S. pension trust assets classified as Level 3 at December 31, 2009 is as follows.

Residential mortgage backed securities Investment-grade corporate debt High-yield corporate debt Private equity TBA Debt Securities Total

Balance at beginning of period $ 4 $ 3 $ 4 $ 5 $ 51 $ 67
Actual return on plan assets
Relating to assets still held at the reporting date (1 ) 1 1 1
Relating to assets sold during the period 1 (1 ) (2 ) (1 ) (3 )
Purchases, sales and settlements (2 ) (1 ) 4 3 (41 ) (37 )
Transfers into and/or (out of) Level 3
Balance at end of period $ 2 $ 2 $ 8 $ 6 $ 10 $ 28

				Residential		Investment -
				mortgage		grade		High-yield
				backed		corporate		corporate		Private		TBA Debt
				securities		debt		debt		equity		Securities		Total

Balance at beginning of period				$	4	$	3	$	4	$	5	$	51	$	67
	Actual return on plan assets
		Relating to assets still held at the
			reporting date		(1)				1				1		1
		Relating to assets sold during the period			1				(1)		(2)		(1)		(3)
	Purchases, sales and settlements				(2)		(1)		4		3		(41)		(37)
Balance at end of period				$	2	$	2	$	8	$	6	$	10	$	28

(PPL and PPL Energy Supply)

The fair value measurements of cash and cash equivalents are based on the amounts on deposit.

The market approach is used to measure fair value of equity securities. The fair value measurements of equity securities (excluding commingled funds), which are generally classified as Level 1, are based on quoted prices in active markets. ~~The fair value measurements of~~These securities represent actively and passively managed investments that are managed against various U.S. equity indices.

Investments in commingled funds ~~which~~ are classified as Level 2 and categorized as equity ~~securities,~~securities. The fair value measurements are based on firm quotes of net asset values per share, which are not considered obtained from a quoted ~~prices~~price in an active ~~markets.~~ market. For the PPL Services Corporation Master Trust, these securities represent investments that are measured against the Russell 1000 Growth Index, the Russell 3000 Index and the MSCI EAFE Index. For the LG&E and KU Energy LLC Pension Trusts, these securities represent passively and actively managed investments in equity funds managed against the S&P 500 Index, the Russell 2500 Growth & Value Indexes and the MSCI EAFE Index.

The fair value measurements of debt securities are generally based on evaluated prices that reflect observable market information, such as actual trade information for identical securities or for similar securities, adjusted for observable differences. Debt securities are generally measured using a market approach, including the use of matrix pricing. Common inputs include reported trades; broker/dealer bid/ask prices, benchmark securities and credit valuation adjustments. When ~~this information is not available,~~necessary, the fair value of debt securities is measured using ~~present value techniques,~~the income approach, which ~~incorporate other~~incorporates similar observable inputs ~~including interest rates for~~as well as benchmark yields, credit valuation adjustments, reference data from market research publications, monthly payment data, collateral performance and new issue data. For the PPL Services Corporation Master Trust, these securities represent investments in securities issued by U.S. Treasury and U.S. government sponsored agencies; investments securitized by residential mortgages, auto loans, credit cards and other pooled loans; investments in investment grade and non-investment grade bonds issued by U.S. companies across several industries; investments in debt securities ~~with credit ratings~~issued by foreign governments and ~~terms to maturity similar to~~corporations as well as commingled fund investments that are measured against the JP Morgan EMBI Global Diversified Index and the Barclays Long A or Better Index. For the LG&E and KU pension trusts, debt securities within comingled trusts are managed against the Barclays Aggregated Bond Index and the Barclays U.S. Government/Credit Long Index. The debt securities held by the PPL Services Corporation Master Trust at December 31, 2010 have a weighted-average coupon of 4.25% and a weighted-average duration of 16 years.

Investments in real estate represent an investment in a partnership whose purpose is to manage investments in core U.S. real estate properties diversified geographically and across major property types (e.g., office, industrial, retail, etc.). The manager is focused on properties with high occupancy rates with quality tenants. This results in a focus on high income and stable cash flows with appreciation being ~~measured. When these inputs are not observable,~~a secondary factor. Core real estate generally has a lower degree of leverage when compared to more speculative real estate investing strategies. The partnership has limitations on the amounts that may be redeemed based on available cash to fund redemptions. Additionally, the general partner may decline to accept redemptions when necessary to avoid adverse consequences for the p artnership, including legal and tax implications, among others. The fair value of the investment is based upon a partnership unit value.

Investments in private equity represent interests in partnerships in multiple early-state venture capital funds and private equity fund of funds that use a number of diverse investment strategies. Three of the partnerships have limited lives of ten years, while the fourth has a life of 15 years, after which liquidating distributions will be received. Prior to the end of each partnership's life, the investment can not be redeemed with the partnership; however, the interest may be sold to other parties, subject to the general partner's approval. The PPL Services Corporation Master Trust has unfunded commitments of $90 million that may be required during the lives of the partnerships. Fair value is based on an ownership interest in partners' capital to which a proportionate share of net assets is a ttributed.

Investments in hedge fund of funds represent investments in two hedge fund of funds each with a different investment objective. Hedge funds seek a return utilizing a number of diverse investment strategies. The strategies, when combined aim to reduce volatility and risk while attempting to deliver positive returns under all market conditions. Major investment strategies for both hedge fund of funds include long/short equity, market neutral, distressed debt, ~~securities~~and relative value. Generally, shares may be redeemed on 90 days prior written notice. Both funds are subject to short term lockups and have limitations on the amount that may be withdrawn based on a percentage of the total net asset value of the fund, among other restrictions. All withdrawals are subject to the general partner's approval. One fund's fair value has been estimated using the net asset value per share and the other fund's fair value is ~~classified as Level 3.~~ based on an ownership interest in partners' capital to which a proportionate share of net assets is attributed.

The fair value measurements of derivative instruments utilize various inputs that include quoted prices for similar contracts or market-corroborated inputs. In certain instances, ~~when observable market prices are not available,~~ these instruments may be valued using models, ~~with market observable inputs~~ including ~~forward prices~~standard option valuation models and standard industry models. These securities represent investments in To-be-announced debt securities and interest ~~rates, among others.~~rate swaps. To-be-announced debt securities are commitments to purchase debt securities and are used as a cost effective means of managing the duration of assets in the trust. These commitments are valued by reviewing the issuing agency, program and coupon. Interest rate swaps are valued based on the swap details such as: swap curves, notional amount, index and term of index, reset frequency and payer/recei ver credit ratings.

~~The U.S. pension plans hold alternative~~Receivables/payables classified as Level 1 represent investments ~~including investments in real estate, private equity~~sold/purchased but not yet settled. Receivables/payables classified as Level 2 represent interest and ~~hedge fund of funds.~~dividends earned but not yet received and costs incurred but not yet paid.

·	Real estate - Represents an investment in a partnership whose purpose is to manage investments in U.S. real estate. The partnership has limitations on the amounts that may be redeemed based on available cash to fund redemptions. Additionally, the general partner may decline to accept redemptions when necessary to avoid adverse consequences for the partnership, including legal and tax implications, among others. The fair value of the investment is based upon a partnership unit value.
·	Private equity - Represents interests in partnerships that invest across industries using a number of diverse investment strategies. Two of the partnerships have limited lives of ten years, while the third has a life of 15 years, after which the master trust will receive liquidating distributions. Prior to the end of each partnership's life, the master trust's investment can not be redeemed with the partnership; however, the interest may be sold to other parties, subject to the general partner's approval. The master trust has unfunded commitments of $56 million that may be required during the lives of the partnerships. Fair value is based on an ownership interest in partners' capital to which a proportionate share of net assets is attributed.
·	Hedge fund of funds - Represents investments in two hedge fund of funds each with a different investment objective. Generally, shares may be redeemed on 90 days prior written notice. Both funds are subject to short term lockups and have limitations on the amount that may be withdrawn based on a percentage of the total net asset value of the fund, among other restrictions. All withdrawals are subject to the general partner's approval. Major investment strategies for both hedge fund of funds include long/short equity, market neutral, distressed debt, and relative value. One fund's fair value has been estimated using the net asset value per share and the other fund's fair value is based on an ownership interest in partners' capital to which a proportionate share of net assets is attributed.

~~(PPL~~Insurance contracts, classified as Level 3, are held by the LG&E and KU Energy ~~Supply)~~

~~PPL Montana, a subsidiary of PPL Energy Supply, has a pension plan whose assets are solely invested~~LLC Pension Trusts and represent an investment in ~~the master trust, which is fully disclosed by PPL (above).~~an immediate participation guaranteed group annuity contract. The fair value ~~of this plan's assets of $87 million at December 31, 2009~~is based on contract value, which represents ~~a 4.9% undivided~~cost plus interest ~~in each asset~~income less distributions for benefit payments and ~~liability of PPL's master trust, including each asset whose fair value measurement was determined using significant unobservable inputs (Level 3).~~administrative expenses.

Plan Assets - U.S. Other Postretirement Benefit Plans (PPL)

PPL's investment strategy with respect to its other postretirement benefit obligations is to fund VEBA trusts and a 401(h) ~~account~~accounts with voluntary contributions and to invest in a tax efficient manner. Excluding the 401(h) ~~account~~accounts included in the ~~master trust,~~PPL Services Corporation Master Trust and LG&E and KU Energy LLC Pension Trusts, discussed in ~~the~~Plan Assets - U.S. Pensions Plans ~~section~~ above, PPL's other postretirement benefit plans are invested in a mix of assets for long-term growth with an objective of earning returns that provide liquidity as required for benefit payments. These plans benefit from diversification of asset types, investment fund strategies and investment fund managers, and therefore, have no significant concentration of risk. The only prohibited investments are investments in debt or equity ~~securities~~securi ties issued by PPL and its subsidiaries. Equity securities include investments in domestic large-cap commingled funds. Securities issued by commingled funds that invest entirely in debt securities are traded as equity units, but treated by PPL as debt securities for asset allocation and target allocation purposes. Securities issued by commingled money market funds that invest entirely in money market securities are traded as equity units, but treated by PPL as cash and cash equivalents for asset allocation and target allocation purposes. The asset allocation for the VEBA trusts and the target allocation, by asset class, at December 31, are detailed below.

Asset Class Percentage of plan assets Permitted Range Target Asset Allocation
2009 2008 2009 2009

U.S. equity securities 54% 43% 45-65% 55%
Debt securities (a) 37% 45% 30-50% 40%
Cash and cash equivalents (b) 9% 12% 0-15% 5%
Total 100% 100% 100%

						Permitted		Target Asset
		Percentage of plan assets				Range		Allocation
Asset Class		2010		2009		2010		2010

U. S. Equity securities			55%		54%		45 - 65%		55%
Debt securities (a)			39%		37%		30 - 50%		40%
Cash and cash equivalents (b)			6%		9%		0 - 15%		5%
	Total		100%		100%				100%

(a)

Includes commingled debt funds and debt securities.

(b)

Includes commingled money market fund.

The fair value of assets in the U.S. other postretirement benefit plans by asset class and level within the fair value hierarchy was:

December 31, 2009
Fair Value Measurements Using
Total Level 1 Level 2 Level 3

U.S. equity securities:
Large-cap (a) $ 156 $ 156
Commingled debt (b) 61 61
Commingled money market funds 26 26
Debt securities:
Municipalities (c) 46 46
Receivables (d) 1 1
Total VEBA trust assets 290 290
401(h) account assets in master trust 11 $ 6 5
Fair value - U.S. other postretirement benefit plans $ 301 $ 6 $ 295

			December 31, 2010							December 31, 2009
					Fair Value Measurement Using							Fair Value Measurement Using
			Total		Level 1		Level 2		Level 3	Total		Level 1		Level 2		Level 3
U.S. Equity securities:
		Large-cap	$	163			$	163		$	156			$	156
		Commingled debt		69				69			61				61
		Commingled money market funds		18				18			26				26
Debt securities:
		Municipalities		44				44			46				46
Receivables				1				1			1				1
Total VEBA trust assets				295				295			290				290
401(h) account assets				65	$	8		57			11	$	6		5
Fair value - U.S. other postretirement
	benefit plans		$	360	$	8	$	352		$	301	$	6	$	295

~~(a)~~		~~Represents investments in passively managed equity index funds that that are measured against the S&P 500 Index.~~
~~(b)~~		~~Represents investments in passively managed commingled funds invested in obligations of the U.S. Treasury.~~
~~(c)~~		~~Represents investments in a diverse mix of tax-exempt municipal securities.~~
~~(d)~~		~~Represents~~Investments in large-cap equity securities represent investments in a passively managed equity index fund that invests in securities and a combination of other collective funds that together track the performance of the S&P 500 Index. Redemptions can be made daily on this fund. Investments in commingled debt securities represent investments in a fund that invests in a diversified portfolio of investment grade money market instruments including, but not limited to, commercial paper, notes, repurchase agreements and other evidences of indebtedness with a maturity date not exceeding 13 months from date of purchase. Redemptions can be made weekly on this fund. Investments in commingled money market funds represent investments in a fund that invests in securities and a combination of other collective funds that together are designed to track the performance of the Barclays Capital Long-term Treasury Index, as well as a fund that invests primarily in a diversified portfolio of investment grade money market instruments, including, but not limited to, commercial paper, notes, repurchase agreements and other evidences of indebtedness with a maturity not exceeding 13 months from the date of purchase. The primary objective of the fund is a high level of current income consistent with stability of principal and liquidity. Redemptions can be made daily on each of these funds. Investments in municipalities represent investments in a diverse mix of tax-exempt municipal securities. Receivables represent interest and dividends earned but not received as well as investments sold but not yet settled.

~~The fair value measurements of the domestic other postretirement benefit plan assets are based on the same inputs and measurement techniques used to measure the U.S. pension assets described above.~~

Plan Assets - U.K. Pension Plans (PPL and PPL Energy Supply)

The overall investment strategy of WPD's pension plans is developed by each plan's independent trustees in its Statement of Investment Principles in compliance with the U.K. Pensions Act of 1995 and other U.K. legislation. The trustees' primary focus is to ensure that assets are sufficient to meet members' benefits as they fall due with a longer term objective to reduce investment risk. The investment strategy is intended to maximize investment returns while not incurring excessive volatility in the funding position. WPD's plans are invested in a wide diversification of asset types, fund strategies and fund managers and therefore have no significant concentration of risk. ~~Equity securities primarily include investments in U.K. and other international large and mid-cap companies.~~ Commingled funds that consist entirely of debt securities are traded as equity units, but treated by WPD as debt securities for asset allocation and target allocation purposes. These include investments in U.K. corporate bonds and U.K. gilts. ~~Debt securities include corporate bonds of companies from diversified U.K. industries. The only alternative investment is an investment in a real estate fund.~~

The asset allocation and target allocation at December 31 of WPD's pension plans are detailed below.

Asset Class Percentage of plan assets Target Asset Allocation
2009 2008 2009
Equity securities:
U.K. companies 22% 25% 18%
European companies (excluding the U.K.) 13% 11% 12%
Asian-Pacific companies 10% 10% 10%
North American companies 6% 7% 9%
Emerging markets companies 5% 1% 5%
Currency 2% 2% 2%
Global Tactical Asset Allocation 1% 1% 3%
Debt securities (a) 35% 37% 33%
Alternative investments and cash 6% 6% 8%
Total 100% 100% 100%

							Target Asset
			Percentage of plan assets				Allocation
Asset Class			2010		2009		2010

	Cash and cash equivalents			2%
	Equity securities
		U.K. companies		18%		22%		16%
		European companies (excluding the U.K.)		11%		13%		10%
		Asian-Pacific companies		11%		10%		10%
		North American companies		6%		6%		4%
		Emerging markets companies		5%		5%		5%
		Currency		2%		2%		6%
		Global Tactical Asset Allocation		1%		1%		2%
	Debt securities (a)			38%		35%		39%
	Alternative investments			6%		6%		8%
		Total		100%		100%		100%

(a)

Includes commingled debt funds.

The fair value of assets in the U.K. pension plans by asset class and level within the fair value hierarchy was:

December 31, 2009
Fair Value Measurements Using
Total Level 1 Level 2 Level 3

Cash and cash equivalents $ 5 $ 5
Equity securities:
U.K. companies (a) 501 $ 501
European companies (excluding the U.K.) (b) 290 290
Asian-Pacific companies (c) 242 242
North American companies (d) 149 149
Emerging markets companies (e) 110 110
Currency (f) 42 42
Global Tactical Asset Allocation (g) 30 30
Commingled debt:
U.K. corporate bonds 308 308
U.K. gilts 24 24
U.K. index-linked gilts 489 489
Alternative investments:
Real estate (h) 141 141
Fair value - international pension plans $ 2,331 $ 5 $ 2,326

			December 31, 2010							December 31, 2009
					Fair Value Measurement Using							Fair Value Measurement Using
			Total		Level 1		Level 2		Level 3	Total		Level 1		Level 2		Level 3

Cash and cash equivalents			$	46	$	46				$	5	$	5
Equity securities:
	U.K. companies			455			$	455			501			$	501
	European companies (excluding the U.K.)			273				273			290				290
	Asian-Pacific companies			279				279			242				242
	North American companies			162				162			149				149
	Emerging markets companies			127				127			110				110
	Currency			51				51			42				42
	Global Tactical Asset Allocation			23				23			30				30
	Commingled debt:
		U.K. corporate bonds		321				321			308				308
		U.K. gilts									24				24
		U.K. index-linked gilts		629				629			489				489
Alternative investments:
	Real estate			158				158			141				141
Fair value - international pension plans			$	2,524	$	46	$	2,478		$	2,331	$	5	$	2,326

~~(a)~~		~~Represents passively managed equity index funds that are measured against the FTSE All Share Index.~~
~~(b)~~		~~Represents passively managed equity index funds that are measured against the FTSE Europe ex UK Index.~~
~~(c)~~		~~Represents an actively managed equity index fund that aims to outperform 50% FTSE Asia Pacific ex-Japan Index and 50% FTSE Japan Index.~~
~~(d)~~		~~Represents passively managed equity index funds that are measured against the FTSE North America Index.~~
~~(e)~~		~~Represents passively managed equity index funds that are measured against the MSCI Emerging Markets Index.~~
~~(f)~~		~~Represents investments in unitized passive and actively traded currency funds.~~
~~(g)~~		The Global Tactical Asset Allocation investment strategy attempts to benefit from short-term market inefficiencies by taking positions in worldwide markets with the objective to profit from relative movements across those markets.
~~(h)~~		~~Represents investments in a unitized fund that owns and manages U.K. industrial and commercial real estate with a strategy of earning current rental income and achieving capital growth.~~

Except for investments in real estate, the fair value measurements of WPD's pension plan assets are based on the same inputs and measurement techniques used to measure the U.S. pension plan assets described above.

Investments in U.K equity securities represent passively managed equity index funds that are measured against the FTSE All Share Index. Investments in European equity securities represent passively managed equity index funds that are measured against the FTSE Europe ex UK Index. Investments in Asian-Pacific equity securities represent passively managed equity index funds that aim to outperform 50% FTSE Asia Pacific ex-Japan Index and 50% FTSE Japan Index. Investments in North American equity securities represent passively managed index funds that are measured against the FTSE North America Index. Investments in emerging market equity securities represent passively managed equity index funds that are measured against the MSCI Emerging Markets Index. Investments in currency equity secur ities represent investments in unitized passive and actively traded currency funds. The Global Tactical Asset Allocation strategy attempts to benefit from short-term market inefficiencies by taking positions in worldwide markets with the objective to profit from relative movements across those markets.

Debt securities include investment grade corporate bonds of companies from diversified U.K. industries.

Investments in real estate represent holdings in a U.K. unitized fund ~~whose~~that owns and manages U.K. industrial and commercial real estate with a strategy of earning current rental income and achieving capital growth. The fair value measurement of the fund is based upon a net asset value per ~~share. The fund's net asset value~~share, which is based on the value of underlying properties that are independently appraised in accordance with Royal Institution of Chartered Surveyors valuation standards at least annually with quarterly valuation updates based on recent sales of similar properties, leasing levels, property operations and/or market conditions. The fund may be subject to redemption restrictions in the unlikely event of a large forced sale in order to ensure other unit holders are not disadvantaged.

Expected Cash Flows - U.S. Defined Benefit Plans (PPL)

~~There are no cash contributions required for~~ PPL's ~~primary~~ U.S. ~~pension plan because contribution requirements could be satisfied by applying~~defined benefit plans have the option to utilize available prior year credit ~~balances.~~balances to meet current and future contribution requirements. However, PPL contributed ~~$120~~$432 million to its ~~primary~~ U.S. pension plan in January ~~2010~~2011 and will contribute an additional $33 million to ensure future compliance with minimum funding requirements.

PPL sponsors various non-qualified supplemental pension plans for which no assets are segregated from corporate assets. PPL expects to make approximately $4$5 million of benefit payments under these plans in ~~2010.~~2011.

PPL is not required to make contributions to its other postretirement benefit plans but has historically funded these plans in amounts equal to the postretirement benefit costs recognized. Continuation of this past practice would cause PPL to contribute ~~$34~~$38 million to its other postretirement benefit plans in ~~2010.~~2011.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid and the following federal subsidy payments are expected to be received by the separate plan trusts.

			Other Postretirement						Other Postretirement
	Pension		Benefit Payment		Expected Federal Subsidy						Expected
									Benefit		Federal
2010	$	115	$	42	$	3
								Pension	Payment		Subsidy

2011		123		47		3	$	178	$	51	$	1
2012		131		50		3		185		54		1
2013		145		55		4		200		57		1
2014		148		60		4		204		61		1
2015 - 2019		897		359		28
2015								217		64		1
2016 - 2020								1,308		354		4

(PPL Energy Supply)

~~There are no contributions expected or required for the~~The PPL Montana pension ~~plan.~~plan has the option to utilize available prior year credit balances to meet current and future contribution requirements. However, PPL Montana contributed $10 million to the plan in January 2011 and will contribute an additional $5 million to ensure future compliance with minimum funding requirements.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid by the separate plan trusts.

	Pension		Other Postretirement				Other
					Pension		Postretirement
2010	$	2	$	1

2011		3		2	$	3	$	2
2012		4		2		4		2
2013		4		2		4		2
2014		5		2		5		2
2015 - 2019		36		13
2015						6		3
2016 - 2020						41		14

Expected Cash Flows - U.K. Pension Plans (PPL and PPL Energy Supply)

The pension plans of WPD are subject to formal actuarial valuations every three years, which are used to determine funding requirements. Future contributions were evaluated in accordance with the latest valuation performed as of March 31, ~~2007,~~2010, in respect of WPD's principal pension scheme, to determine contribution requirements for ~~2009~~2011 and forward. WPD expects to make contributions of approximately ~~$62~~$15 million in ~~2010.~~2011. WPD is currently permitted to recover in rates approximately ~~65%~~76% of its deficit funding requirements for its primary pension plan. ~~This recovery rate will increase to 76% effective April 1, 2010.~~

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid by the separate plan trusts.

	Pension		Pension

2010	$	161
2011		165	$	156
2012		170		158
2013		174		161
2014		179		164
2015 - 2019		974
2015				169
2016 - 2020				895

(PPL, PPL Energy Supply and PPL Electric)

Savings Plans

Substantially all employees of PPL's domestic subsidiaries are eligible to participate in deferred savings plans (401(k)s). Employer contributions to the plans approximated the following.

2009 2008 2007

PPL $ 17 $ 17 $ 16
PPL Energy Supply 10 9 9
PPL Electric 4 4 4

	2010		2009		2008

PPL	$	23	$	17	$	17
PPL Energy Supply		10		10		9
PPL Electric		4		4		4

The increase for PPL in 2010 is the result of PPL's acquisition of LKE and the employer contributions related to the employees of that company and its subsidiaries under their existing plans.

Employee Stock Ownership Plan

PPL sponsors a non-leveraged ESOP in which substantially all domestic employees, excluding those of PPL Montana, LKE and the mechanical contractors, are enrolled on the first day of the month following eligible employee status. Dividends paid on ESOP shares are treated as ordinary dividends by PPL. Under existing income tax laws, PPL is permitted to deduct the amount of those dividends for income tax purposes and to contribute the resulting tax savings (dividend-based contribution) to the ESOP.

The dividend-based contribution is used to buy shares of PPL's common stock and is expressly conditioned upon the deductibility of the contribution for federal income tax purposes. Contributions to the ESOP are allocated to eligible participants' accounts as of the end of each year, based 75% on shares held in existing participants' accounts and 25% on the eligible participants' compensation.

Compensation expense for ESOP contributions was $8 million in 2010 and 2009 and $7 million in ~~2008 and 2007.~~2008. These amounts were offset by the dividend-based contribution tax savings and had no impact on PPL's earnings.

PPL shares within the ESOP ~~shares~~ outstanding at December 31, ~~2009,~~2010 were ~~7,691,540~~7,753,007 or 2% of total common shares outstanding, and are included in all EPS calculations.

~~Postemployment Benefits~~

Certain PPL subsidiaries provide health and life insurance benefits to disabled employees and income benefits to eligible spouses of deceased employees. Postemployment benefits charged to operating expenses were not significant for 2009, 2008 and 2007.

Separation Benefits

Certain PPL subsidiaries provide separation benefits to eligible employees. These benefits may be provided in the case of separations due to performance issues, loss of job related qualifications or organizational changes. Certain employees separated are eligible for cash severance payments, outplacement services, accelerated stock award vesting, continuation of group health and welfare coverage, and enhanced pension and postretirement medical benefits. The type and amount of benefits provided is based upon age, years of service and the nature of the separation. Separation benefits are recorded when such amounts are probable and estimable.

In February 2009, PPL announced workforce reductions that resulted in the elimination of approximately 200 management and staff positions across PPL's domestic operations, or approximately 6% of PPL's non-union, domestic workforce. The charges noted below consisted primarily of enhanced pension and severance benefits under PPL's Pension Plan and Separation Policy and were recorded to "Other operation and maintenance" ~~expense~~ on the Statement of Income.

As a result of the workforce reductions, PPL recorded a charge of $22 million ($13 million after tax) in 2009.

PPL Energy Supply eliminated approximately 50 management and staff positions and recorded a charge of $13 million ($8 million after tax) in 2009. Included in this charge was $8 million ($4 million after tax) of allocated costs associated with the elimination of employees of PPL Services.

PPL Electric eliminated approximately 50 management and staff positions and recorded a charge of $9 million ($5 million after tax) in 2009. Included in this charge was $3 million ($1 million after tax) of allocated costs associated with the elimination of employees of PPL Services.

Separation benefits were not significant in 2010 and 2008.

~~Separation benefits recorded~~Health Care Reform

In March 2010, Health Care Reform was signed into law. Many provisions of Health Care Reform do not take effect for an extended period of time, and most will require the publication of implementing regulations and/or issuance of program guidelines.

Beginning in ~~2007 were related~~2013, provisions within Health Care Reform eliminate the tax deductibility of retiree health care costs to the ~~elimination~~extent of ~~positions at PPL's Martins Creek plant due~~federal subsidies received by plan sponsors that provide retiree prescription drug benefits equivalent to the shutdown of two coal-fired units and the closing of WPD's meter test station. Total costs recorded were $13 million ($9 million after tax). These costs included $4 million of cash severance payments and enhanced pension benefits provided to domestic employees of $6 million and $3 million provided to WPD employees. See "Defined Benefits" above for more information.Medicare Part D Coverage. As a result, in 2010:

~~13.~~ ·	PPL decreased deferred tax assets by $13 million, increased regulatory assets by $9 million, increased deferred tax liabilities by $4 million and recorded income tax expense of $8 million;
·	PPL Energy Supply decreased deferred tax assets by $5 million and recorded income tax expense of $5 million; and
·	PPL Electric decreased deferred tax assets by $5 million, increased regulatory assets by $9 million and increased deferred tax liabilities by $4 million.

Other provisions within Health Care Reform that apply to PPL and its subsidiaries include:

·	an excise tax, beginning in 2018, imposed on high-cost plans providing health coverage that exceeds certain thresholds;
·	a requirement to extend dependent coverage up to age 26; and
·	broadening the eligibility requirements under the Federal Black Lung Act.

PPL and its subsidiaries have evaluated the provisions of Health Care Reform and have included the applicable provision in the valuation of those benefit plans that are impacted. The inclusion of the various provision of Health Care Reform did not have a material impact on the financial statements. PPL and its subsidiaries will continue to monitor the potential impact of any changes to the existing provisions and implementation guidance related to Health Care Reform on their benefit programs.

14. Jointly Owned Facilities

(PPL and PPL Energy Supply)

At December 31, ~~2009~~2010 and ~~2008,~~2009, subsidiaries of PPL and PPL Energy Supply owned interests in the facilities listed below. The Balance Sheets of PPL and PPL Energy Supply include the amounts noted in the following table.

Ownership Interest Electric Plant Other Property Accumulated Depreciation Construction Work in Progress
December 31, 2009
PPL Generation
Generating Stations
Susquehanna 90.00% $ 4,571 $ 3,475 $ 108
Conemaugh 16.25% 206 99 9
Keystone 12.34% 199 61 4
Merrill Creek Reservoir 8.37% $ 22 15

December 31, 2008
PPL Generation
Generating Stations
Susquehanna 90.00% $ 4,513 $ 3,472 $ 111
Conemaugh 16.25% 206 93 1
Keystone 12.34% 105 58 64
Wyman Unit 4 (a) 8.33% 15 7
Merrill Creek Reservoir 8.37% $ 22 14

		December 31, 2010
									Construction
		Ownership			Other		Accumulated		Work
		Interest	Electric Plant		Property		Depreciation		in Progress
PPL
Generating Stations
	Susquehanna	90.00%	$	4,553			$	3,487	$	79
	Conemaugh	16.25%		213				106		11
	Keystone	12.34%		196				60		2
	Trimble County-Units 1 & 2 (a)	75.00%		352				10		907
Merrill Creek Reservoir		8.37%			$	22		15

PPL Energy Supply
Generating Stations
	Susquehanna	90.00%	$	4,553			$	3,487	$	79
	Conemaugh	16.25%		213				106		11
	Keystone	12.34%		196				60		2
Merrill Creek Reservoir		8.37%			$	22		15

		December 31, 2009
									Construction
		Ownership			Other		Accumulated		Work
		Interest	Electric Plant		Property		Depreciation		in Progress
PPL and PPL Energy Supply
Generating Stations
	Susquehanna	90.00%	$	4,571			$	3,475	$	108
	Conemaugh	16.25%		206				99		9
	Keystone	12.34%		199				61		4
Merrill Creek Reservoir		8.37%			$	22		15

(a)

The interest in these Units was recognized as a result of the 2010 acquisition of LKE. See Note 910 for additional information ~~regarding~~on the ~~December 2009 sale of this interest.~~acquisition, and Note 8 for additional information on Trimble County Unit 2.

In addition to the interests mentioned above, PPL Montana had a 50% leasehold interest in Colstrip Units 1 and 2 and a 30% leasehold interest in Colstrip Unit 3 under operating leases. See Note 1011 for additional information. At December 31, ~~2009~~2010 and ~~2008,~~2009, NorthWestern owned a 30% leasehold interest in Colstrip Unit 4. PPL Montana and NorthWestern have a sharing agreement to govern each party's responsibilities regarding the operation of Colstrip Units 3 and 4, and each party is responsible for 15% of the respective operating and construction costs, regardless of whether a particular cost is specified to Colstrip Unit 3 or 4.

Each ~~PPL Generation~~ subsidiary owning these interests provides its own funding for its share of the facility. Each receives a portion of the total output of the generating stations equal to its percentage ownership. The share of fuel and other operating costs associated with the stations is included in the corresponding operating expenses on the Statements of Income.

~~14.~~

15. Commitments and Contingencies

Energy Purchases, Energy Sales and Other Commitments

Energy Purchase Commitments

(PPL)

LKE enters into purchase contracts to supply the coal and natural gas requirements for generation facilities and LG&E's gas supply operations. The coal contracts extend through 2016 and the natural gas contracts extend through 2012. LKE also enters into contracts for the transportation of natural gas, which expire through 2018.

LKE indirectly holds an 8.13% interest in OVEC, which is accounted for as a cost method investment. OVEC owns and operates two coal-fired power plants. LKE is contractually entitled to 8.13% of OVEC's output, approximately 194 MW of generation capacity. Pursuant to the OVEC power purchase agreement, which expires in 2026, LKE may be conditionally responsible for its pro-rata share of certain obligations of OVEC under defined circumstances. These contingent liabilities may include unpaid OVEC indebtedness as well as shortfall amounts in certain excess decommissioning costs and postretirement benefits other than pension. LKE's contingent potential proportionate share of OVEC's outstanding debt was approximately $113 million at December 31, 2010.

(PPL and PPL Energy Supply)

PPL ~~and PPL~~ Energy Supply ~~enter~~enters into long-term purchase contracts to supply the fuel requirements for generation facilities. These contracts include commitments to purchase coal, emission allowances, limestone, natural gas, oil and nuclear fuel. These long-term contracts extend through 2019, ~~excluding~~with the exception of a limestone contract that extends through 2030. PPL ~~and PPL~~ Energy Supply also ~~enter~~enters into long-term contracts for the storage and transportation of natural gas. The long-term natural gas storage contracts extend through 2015, and the long-term natural gas transportation contracts extend through 2032. Additionally, PPL ~~and PPL~~ Energy Supply ~~have~~has entered into long-term contracts to purchase power that extend through 2017, ~~excluding~~with the exception of long-term power purchase agreements for the full output ofo f two wind farms that extend through 2027.

As part of the purchase of generation assets from Montana Power, PPL Montana assumed a power purchase and power sales agreement, which ~~expires~~expired at December 31, 2010. In accordance with purchase accounting guidelines, PPL Montana recorded a liability of $58 million as the fair value of the agreement at the acquisition date. The liability iswas being reduced over the term of the agreement as an adjustment to "Energy purchases" on the Statements of Income. At December 31, 2009, the $11 million unamortized balance of this liability was included in "Other current liabilities" on the Balance ~~Sheet. At December 31, 2008, the unamortized balance of this liability~~Sheets and was ~~$24 million, of which $13 million was included~~fully amortized in ~~"Other current liabilities" and $11 million was included in "Other deferred credits and noncurrent liabilities" on the Balance Sheet.~~

In 1998, PPL Electric recorded an $879 million loss accrual for above-market contracts with NUGs, due to deregulation of its generation business. Effective January 1999, PPL Electric began reducing this liability as an offset to "Energy purchases" on the Statements of Income. This reduction is based on the estimated timing of the purchases from the NUGs and projected market prices for this generation. The final NUG contract expires in 2014. In connection with PPL's corporate realignment in 2000, the remaining balance of this liability was transferred to PPL EnergyPlus. At December 31, 2009, the unamortized balance of this liability was $4 million, of which $1 million was included in "Other current liabilities" and $3 million was included in "Other deferred credits and noncurrent liabilities" on the Balance Sheet. At December 31, 2008, the unamortized balance of this liability was $29 million, of which $25 million was included in "Other current liabilities" and $4 million was included in "Other deferred credits and noncurrent liabilities" on the Balance Sheet.2010.

In 2008, PPL EnergyPlus acquired the rights to an existing long-term tolling agreement associated with the capacity and energy of Ironwood. Under the agreement, PPL EnergyPlus has control over the plant's dispatch into the electricity grid and supplies the natural gas necessary to operate the plant. The tolling agreement extends through 2021. See Note 1011 for additional information.

(PPL and PPL Electric)

From 2007 through October 2009, PPL Electric conducted six competitive solicitations to purchase electricity generation supply in 2010 for customers who do not choose an alternative supplier. Average generation supply prices (per MWh) for all six solicitations, including Pennsylvania gross receipts tax and an adjustment for line losses, were $99.48 for residential customers and $100.52 for small commercial and small industrial customers.

In October 2009, PPL Electric purchased 2010 supply for fixed-price default service to large commercial and large industrial customers who elect to take that service. In November 2009, PPL Electric purchased supply to provide hourly default service to large commercial and industrial customers in 2010.

~~In June~~ 2009, the PUC approved PPL Electric's procurement plan ~~to purchase its PLR electricity supply~~ for the period January 2011 through May 2013. ~~In August and October 2009,~~Through 2010, PPL Electric has conducted ~~the first two~~six of its 14 planned competitive solicitations. ~~A third solicitation was conducted in January 2010.~~ The solicitations include a mix of long-term and short-term purchases ranging from five months to five years to fulfill PPL Electric's obligation to provide for customer supply ~~including contracts for load-following, spot, block and alternative energy credits.~~as a PLR.

(PPL Energy Supply and PPL Electric)

See Note 1516 for information on the power supply agreements between PPL EnergyPlus and PPL Electric.

Energy Sales Commitments

(PPL and PPL Energy Supply)

In connection with its marketing activities or hedging strategy for its power plants, PPL Energy Supply has entered into long-term power sales contracts that extend through ~~2023,~~2024, excluding a long-term retail sales ~~agreement~~agreements for the full output from a solar ~~generator~~generators that ~~extends~~extend through ~~2034. All long-term contracts were executed at prices approximating market prices at the time of execution.~~2036.

(PPL Energy Supply and PPL Electric)

See Note 1516 for information on the power supply agreements between PPL EnergyPlus and PPL Electric.

PPL Montana Hydroelectric License Commitments (PPL and PPL Energy Supply)

PPL Montana owns and operates 11 hydroelectric facilities and one storage reservoir licensed by the FERC under long-term licenses pursuant to the Federal Power Act. Pursuant to Section 8(e) of the Federal Power Act, the FERC approved the transfer from Montana Power to PPL Montana of all pertinent licenses ~~and any amendments~~ in connection with the Montana Asset Purchase Agreement.

The Kerr Dam Project license (50-year term) was jointly issued by the FERC to Montana Power and the Confederated Salish and Kootenai Tribes of the Flathead Reservation in 1985, and requires PPL Montana ~~Power~~(as successor licensee to Montana Power) to hold and operate the project for at least 30 years (to 2015). Between 2015 and 2025, the tribes have the option to purchase, hold and operate the project for the remainder of the license term, which expires in 2035. PPL Montana cannot predict if and when this option will be exercised. The license also requires ~~Montana Power and~~ PPL Montana ~~as successor to Montana Power,~~ to continue to implement a plan to mitigate the impact of the Kerr Dam on fish, wildlife and their habitats. Under this arrangement, PPL Montana has a remaining commitment to spend ~~$12~~$10 million between ~~2010~~2011 and 2015, in addition to the ~~annual~~a nnual rent it pays to the tribes. ~~Between 2015 and 2025, the tribes have the option to purchase, hold and operate the project for the remainder of the license term, which expires in 2035.~~

PPL Montana entered into two Memoranda of Understanding (MOUs) with state, federal and private entities related to the issuance in 2000 of the FERC renewal license for the nine dams ~~for~~comprising the Missouri-Madison project. The MOUs are periodically updated and renewed and require PPL Montana to implement plans to mitigate the impact of its projects on fish, wildlife and their habitats, and to increase recreational opportunities. The MOUs were created to maximize collaboration between the parties and enhance the possibility to receive matching funds from relevant federal agencies. Under these arrangements, PPL Montana has a remaining commitment to spend ~~$36~~$34 million between ~~2010~~2011 and 2040.

Legal Matters

(PPL, PPL Energy Supply and PPL Electric)

PPL and its subsidiaries are involved in legal proceedings, claims and litigation in the ordinary course of business. PPL and its subsidiaries cannot predict the outcome of such matters, or whether such matters may result in material ~~liabilities.~~liabilities, unless otherwise noted.

(PPL)

Trimble County Unit 2 Construction

In June 2006, LKE entered into a construction contract regarding the TC2 project. The contract is generally in the form of a turnkey agreement for the design, engineering, procurement, construction, commissioning, testing and delivery of the project, according to designated specifications, terms and conditions. The contract price and its components are subject to a number of potential adjustments which may serve to increase or decrease the ultimate construction price. During 2009 and 2010, LKE received several contractual notices from the TC2 construction contractor asserting historical force majeure and excusable event claims for a number of adjustments to the contract price, construction schedule, commercial operations date, liquidated damages or other relevant provisions. In September 2010, L KE and the construction contractor agreed to a settlement to resolve the force majeure and excusable event claims occurring through July 2010, under the TC2 construction contract, which settlement provided for a limited, negotiated extension of the contractual commercial operations date and/or relief from liquidated damage calculations. With limited exceptions LKE took care, custody and control of TC2 on January 22, 2011, and has dispatched the unit to meet customer demand since that date. LG&E and KU and the contractor agreed to a further amendment of the construction agreement whereby the contractor will complete certain actions relating to identifying and completing any necessary modifications to allow operation of TC2 on all fuels in accordance with initial specifications prior to certain dates, and amending the provisions relating to liquidated damages. LKE cannot currently estimate the ultimate outcome of these matters.

Trimble County Unit 2 Transmission

LG&E's and KU's Certificate of Public Convenience and Necessity (CCN) and condemnation rights relating to a transmission line associated with the TC2 construction have been challenged by certain property owners in Hardin County, Kentucky. Certain proceedings relating to CCN challenges and federal historic preservation permit requirements have concluded with outcomes in LG&E's and KU's favor.

With respect to the remaining issues in dispute, during 2008, KU obtained various successful rulings at the Hardin County Circuit Court confirming its condemnation rights. In August 2008, several landowners appealed such rulings to the Kentucky Court of Appeals. In May 2010, the Kentucky Court of Appeals issued an Order affirming the Hardin Circuit Court's finding that KU had the right to condemn easements on the properties. In May 2010, the landowners filed a petition for reconsideration with the Court of Appeals. In July 2010, the Court of Appeals denied that petition. In August 2010, the landowners filed for discretionary review of that denial by the Kentucky Supreme Court.

Consistent with the regulatory authorizations and relevant legal proceedings, LG&E and KU have completed construction activities on transmission line segments. During 2010, LG&E and KU placed into operation permanent sections of the transmission line. PPL cannot predict the outcome of remaining issues related to this matter.

Montana Hydroelectric Litigation (PPL and PPL Energy Supply)

~~Montana Power Shareholders' Litigation~~

In August 2001, a purported class-action lawsuit was filed by a group of Montana Power shareholders against Montana Power, the directors of Montana Power, certain advisors and consultants of Montana Power, and PPL Montana. The plaintiffs allege, among other things, that Montana Power failed to obtain shareholder approval for the sale of Montana Power's generation assets to PPL Montana in 1999, and that the sale was null and void. Among the remedies sought by the plaintiffs is the establishment of a "resulting and/or constructive trust" on both the generation assets and all profits earned by PPL Montana from the generation assets, plus interest on the amounts subject to the trust. This lawsuit is pending in the U.S. District Court of Montana, Butte Division. Settlement discussions resumed in June 2009. A proposed settlement of this lawsuit has been reached under which plaintiffs will receive approximately $115 million. Under the proposed settlement, PPL Montana is not required to pay any portion of this settlement amount. The proposed settlement was filed with the judge in November 2009 and is pending court approval. PPL and PPL Energy Supply cannot predict the outcome of this matter.

~~Montana Hydroelectric Litigation~~

In November 2004, PPL Montana, Avista Corporation (Avista) and PacifiCorp commenced an action for declaratory judgment in Montana First Judicial District Court seeking a determination that no lease payments or other compensation for their hydroelectric facilities' use and occupancy of ~~streambeds~~riverbeds in Montana can be collected by the State of Montana. This ~~request was brought following the~~lawsuit followed dismissal on jurisdictional grounds of ~~the State of Montana's~~an earlier federal lawsuit seeking such ~~payments or~~ compensation in the U.S. District Court of ~~Montana, Missoula Division. The State's~~Montana. Initially brought by two individuals, for whom the State was later substituted, the federal lawsuit ~~was founded on allegations~~alleged that the beds of Montana's navigable rivers became state-owned trust property upon Montana's admission to statehood, and that the use of them ~~for placement of dam structures, affiliated structures and reservoirs~~ should, under a 1931 regulatory scheme enacted after all but one of the ~~dams~~hydr oelectric facilities in question were constructed, trigger lease payments for use of land beneath. In July 2006, the Montana state court approved a stipulation by the State of Montana that it iswas not seeking ~~lease payments or other~~ compensation ~~from PPL Montana~~ for the period prior to PPL Montana's December 1999 acquisition of the hydroelectric facilities.

~~In June and October~~Following a number of adverse trial court rulings, in 2007 Pacificorp and Avista ~~respectively,~~each entered into settlement agreements with the State of Montana providing, in pertinent part, that each company would make prospective lease payments ~~of $50,000 and $4 million per year~~ for use of the State's navigable ~~streambed (adjusted annually for inflation and subject~~riverbeds (subject to ~~other~~certain future adjustments)~~. Under these settlement agreements, the future annual payments resolved~~, resolving the State's claims for ~~both~~ past and future compensation.

~~In the~~Following an October 2007 trial of this matter on damages, in June 2008, the Montana District Court awarded the State ~~of Montana asserted that PPL Montana should make a prospective lease payment for use of the State's streambeds of $6 million per year (adjusted annually for inflation) and a~~ retroactive compensation ~~payment~~of approximately $35 million for the 2000-2006 period ~~(including interest) of $41 million. PPL Montana vigorously contested both such assertions.~~

~~In June 2008, the District Court issued a decision awarding compensation of approximately $34 million for prior years~~ and approximately $6 million for 2007 compensation. Those amounts continue to accrue interest at 10 percent per year. The Montana District Court also deferred ~~the~~ determination of compensation for 2008 and future years to the Montana State Land Board.

~~PPL Montana believes that the District Court's decision and a number of its pretrial rulings are erroneous.~~ In October 2008, PPL Montana ~~filed an appeal of~~appealed the decision to the Montana Supreme Court, ~~and~~requesting a stay of judgment ~~including~~and a stay of the Land Board's authority to assess compensation for 2008 and future periods. ~~Oral argument of the case was held before~~

In 2009, PPL Montana adjusted its previously recorded accrual by $8 million, $5 million after tax. Of this total, $5 million, $3 million after tax, related to prior periods. In March 2010, the Montana Supreme Court substantially affirmed the June 2008 Montana District Court decision. As a result, in ~~September 2009. For~~the first quarter of 2010, PPL Montana recorded a pre-tax charge of $56 million ($34 million after tax or $0.08 per share, basic and diluted, for PPL), representing estimated rental compensation for the first quarter of 2010 and prior years, including interest. Rental compensation was estimated for periods subsequent to 2007, although such estimated amounts may differ from amounts ultimately determined by the Montana State Land Board. The portion of the pre-tax charge that related to prior years totaled $54 million ($32 million after tax). The pre-tax charge recorded on the Statement of Income was $49 million in "Other operation and ~~subsequent~~maintenance" and $7 million in "Interest Expense." PPL Montana continues to accrue interest expense for the prior years ~~PPL's management believes it is probable that its hydroelectric projects will be subject to annual estimated compensation ranging from $3 million to $6 million.~~and rent expense for the current year. PPL Montana's total loss accrual at December 31, ~~2009~~2010 was ~~$9 million,~~$75 million.

In August 2010, PPL Montana filed a petition for a writ of ~~which $8 million ($5 million after tax~~certiorari with the U.S. Supreme Court requesting the Court's review of this matter. Several amicus briefs have been filed supporting PPL Montana's petition, including, among others, a combined brief by the Edison Electric Institute and National Hydropower Association. In October 2010, the State of Montana and PPL Montana filed respective reply briefs. In November 2010, the Supreme Court requested the U.S. Solicitor General to provide its views on behalf of the federal government whether the Court should grant or ~~$0.01 per share) was recorded~~deny PPL Montana's petition. It is not known when that brief might be filed in ~~2009.~~2011 or what the position of the Solicitor General will be. The stay of the judgment granted during the proceedings before the Montana Sup reme Court has been extended by agreement with the State of Montana, to cover the anticipated period of the proceeding before the U.S. Supreme Court. PPL ~~Montana~~ cannot predict the outcome of this matter.

PJM/MISO Billing Dispute

(PPL, PPL Energy Supply and PPL Electric)

In ~~September~~ 2009, PJM reported that it had discovered a modeling error in the market-to-market power flow calculations between PJM and the ~~Midwest ISO (MISO).~~MISO. The error was a result of incorrect modeling of certain generation resources that have an impact on power flows across the PJM/MISO border. ~~PJM's preliminary estimate of the magnitude of the error is approximately $77 million. To date, the MISO does not agree with PJM's estimate.~~ Informal settlement discussions on this issue ~~have commenced.~~terminated in March 2010. Also in March 2010, MISO filed two complaints with the FERC concerning the modeling error and related matters with a demand for $130 million of principal plus interest. In April 2010, PJM filed answers to the complaints and filed a related complaint against MISO. In its answers and complaint, PJM denies that any compensation is due to MISO and seeks recovery in excess of $25 million from MISO for alleged violations by MISO regarding market-to- market power flow calculations. PPL participates in markets in both ~~the MISO~~PJM and ~~PJM.~~MISO. The amount and timing of any ~~payment~~payments by PJM to ~~the~~ MISO or by MISO to PJM relating to ~~this~~these modeling ~~error~~errors is uncertain, as is the method by which PJM or ~~the~~ MISO would allocate any such ~~payment~~payments to PJM and ~~the~~ MISO participants. In June 2010, the FERC ordered the complaints to be consolidated and set for settlement discussions, followed by hearings if the discussions are unsuccessful. In January 2011, the parties to this dispute filed a settlement with the FERC under which no compensation would be paid to either PJM or MISO and providing for certain improvements in how the calculations are administered going forward. The settlement requires FERC approval. PPL cannot predict the outcome of this ~~matter; however, the impact on PPL subsidiaries is not expected to be material.~~matter.

Regulatory Issues

Enactment of Financial Reform Legislation(PPL and PPL Energy Supply)

In July 2010, the Dodd-Frank Act was signed into law. Of particular relevance to PPL and PPL Energy Supply, the Dodd-Frank Act includes provisions that require most over-the-counter derivative transactions to be executed through an exchange and to be centrally cleared. The Dodd-Frank Act, however, provides an exemption from mandatory clearing and exchange trading requirements for over-the-counter derivative transactions used to hedge or mitigate commercial risk. Although the phrase "to hedge or mitigate commercial risk" is not defined in the Dodd-Frank Act, recent rules proposed by the Commodity Futures Trading Commission set forth an inclusive, multi-pronged definition for the phrase. Based on this proposed definition and other requirements in the proposed rule, it is anticipated that transacti ons utilized by PPL and PPL Energy Supply should qualify if they are not entered into for speculative purposes. The Dodd-Frank Act also provides that the Commodity Futures Trading Commission may impose collateral and margin requirements for over-the-counter derivative transactions, including those that are used to hedge commercial risk. However, during drafting of the Dodd-Frank Act, certain members of Congress adopted report language and issued a public letter stating that it was not their intention to impose margin and collateral requirements on counterparties that utilize these transactions to hedge commercial risk. Final rules on major provisions in the Dodd-Frank Act, including imposition of collateral and margin requirements, will be established through rulemakings and, in most cases, will not take effect until at least 12 months after the date of enactment. PPL and PPL Energy Supply may be required to post additional collateral if they are subject to margin requirements as ultimately adopted in the implementing regulations of the Dodd-Frank Act. PPL and PPL Energy Supply will continue to evaluate the provisions of the Dodd-Frank Act and monitor developments related to its implementation. At this time, PPL and PPL Energy Supply cannot predict the impact that the new law or its implementing regulations will have on their business or operations, or the markets in which they transact business.

(PPL)

Utility Competition in Virginia

The Commonwealth of Virginia passed the Virginia Electric Utility Restructuring Act in 1999. This act gave customers the ability to choose their electric supplier and capped electric rates through December 2010. KU subsequently received a legislative exemption from the customer choice requirements of this law. In April 2007, however, the Virginia General Assembly amended the Virginia Electric Utility Restructuring Act, terminating the competitive market and commencing re-regulation of utility rates. The new act ended the cap on rates at the end of 2008. Pursuant to this legislation, the VSCC adopted regulations revising the rules governing utility rate increase applications. As of January 2009, a hybrid model of regulation is being applied in Virginia, under which utility r ates are reviewed every two years. KU's exemption from the requirements of the Virginia Electric Utility Restructuring Act, however, discharges KU from the requirements of the new hybrid model of regulation. In lieu of submitting an annual information filing, KU has the option of requesting a change in base rates to recover prudently incurred costs by filing a traditional base rate case. KU is also subject to other utility regulations in Virginia, including, but not limited to, the recovery of prudently incurred fuel costs through an annual fuel factor charge and the submission of integrated resource plans.

Kentucky Activities

Home Energy Assistance Program

During September 2007, the KPSC approved a five-year Home Energy Assistance program effective in October 2007. The program was scheduled to terminate in September 2012, and is funded through a $0.15 per month meter charge. This program was extended through September 2015 in the KPSC Order approving PPL's acquisition of LKE.

Gas Customer Choice Study

In April 2010, the KPSC commenced a proceeding to investigate natural gas retail competition programs, their regulatory, financial and operational aspects and potential benefits, if any, of such programs to Kentucky consumers. A number of entities, including LG&E, are parties to the proceeding. In December 2010, the KPSC issued an Order in the proceeding declining to endorse gas competition at the retail level, noting the existence of a number of transition or oversight costs and an uncertain level of economic benefits in such programs. With respect to existing gas transportation programs available to large commercial or industrial users, the Order indicates that the KPSC will review utilities' current tariff structures, user thresholds and other terms and conditions of such programs, as part of such c ompanies' next regular gas rate cases.

Integrated Resource Planning

Integrated resource planning ("IRP") regulations in Kentucky require major utilities to make triennial IRP filings with the KPSC. In April 2008, LG&E and KU filed their 2008 joint IRP with the KPSC. The IRP provides historical and projected demand, resource and financial data, and other operating performance and system information. The KPSC issued a staff report and Order closing this proceeding in December 2009. Pursuant to the VSCC's December 2008 Order, KU filed its IRP in July 2009. The filing consisted of the 2008 Joint IRP filed by LG&E and KU with the KPSC along with additional data. The VSCC issued an Order in August 2010 finding the IRP was reasonable and in the public interest. LG&E and KU anticipate filing a joint IRP with the KPSC in April 2011.

Green Energy Riders

In February 2007, LG&E and KU filed a Joint Application and Testimony for Proposed Green Energy Riders. In May 2007, a KPSC Order was issued authorizing LG&E and KU to establish Small and Large Green Energy Riders, allowing customers to contribute funds to be used for the purchase of renewable energy credits. During November 2009, LG&E and KU filed an application to both continue and modify the existing Green Energy Programs. In February 2010, the KPSC approved the application, as filed.

Other

In February 2006, the KPSC initiated an administrative proceeding to consider the requirements of the federal Energy Policy Act of 2005 (Energy Act), Subtitle E Section 1252, Smart Metering, which concerns time-based metering and demand response, and Section 1254, Interconnections. The Energy Act requires each state regulatory authority to conduct a formal investigation and issue a decision on whether or not it is appropriate to implement certain Section 1252 standards within eighteen months after the enactment of the Energy Act and to commence consideration of Section 1254 standards within a year after the enactment of the Energy Act. Following a public hearing with all Kentucky jurisdictional electric utilities, in December 2006, the KPSC issued an Order in this proceeding indicating that the 2005 Energy Act Sectio n 1252 and Section 1254 standards should not be adopted. However, all the KPSC jurisdictional utilities are required to file real-time pricing pilot programs for their large commercial and industrial customers. LG&E and KU developed real-time pricing pilots for large industrial and commercial customers and filed the details of the plan with the KPSC in April 2007. In February 2008, the KPSC issued an Order approving the real-time pricing pilot programs proposed by LG&E and KU for implementation for their large commercial and industrial customers. The tariff was filed in October 2008, with an effective date of December 1, 2008. LG&E and KU file annual reports on the program within 90 days of each plan year-end for the three-year pilot period.

Pursuant to a LG&E 2004 rate case settlement agreement, and as referred to in the Energy Act Administrative Order, LG&E made its responsive pricing and smart metering pilot program filing, which addresses real-time pricing for residential and general service customers, in March 2007. In July 2007, the KPSC approved the application as filed for a small number of residential customers and a sampling of other customers, and authorized LG&E to establish the responsive pricing and smart metering pilot program, recovery of non-specific customer costs through the DSM billing mechanism and the filing of annual reports by April 1, 2009, 2010 and 2011. LG&E must also file an evaluation of the program by July 1, 2011.

Pennsylvania Activities (PPL and PPL Electric)

Certain Pennsylvania legislators proposed legislation in 2009 to extend PLR generation rate caps or otherwise limit cost recovery through rates for Pennsylvania utilities beyond their transition periods, which in PPL Electric's case was December 31, 2009. PPL and PPL Electric previously expressed strong concern regarding the adverse consequences of such legislation on customer service, system reliability, adequate future generation supply and PPL Electric's financial viability. As generation rate caps are set to expire for three other Pennsylvania electric delivery companies at the end of 2010, it is possible that a debate on rate caps, rate mitigation and the creation of a state power authority may resume in 2010. PPL and PPL Electric believe the enactment of legislation extending PPL Electric rate caps would be a violation of federal law and the U.S. Constitution.

For several years, PPL and PPL Electric worked with Pennsylvania legislators, regulators and others to develop programs to help customers transition to market rates after 2009, including rate mitigation, educational and energy conservation programs. Two plans were proposed and approved by the PUC. Under the first plan, residential and small commercial customers could elect to pay additional amounts with their electric bills from mid-2008 through 2009, with such additional amounts, plus accrued interest of 6%, applied to their 2010 and 2011 electric bills. Approximately 123,000 customers enrolled in the program, and at December 31, 2009, PPL Electric has recorded a liability of $36 million related to this activity. Under the second plan, eligible residential and eligible small-business customers could elect to defer payment of any increase greater than 25% in their 2010 electric bills. Deferred amounts, plus 6% interest, will be paid by customers over a one- or two-year period, depending on their electricity use. All deferrals will be paid by the end of 2012.

Act 129 became effective in October 2008. The law creates an energy efficiency and conservation program and smart metering technology requirements, adopts new PLR electricity supply procurement rules, provides remedies for market misconduct, and makes changes to the existing Alternative Energy Portfolio Standard. ~~The law also~~ requires electric utilities to meet specified goals for reduction in customer electricity usage and peak demand by specified dates. Utilities not meeting the requirements of Act 129 are subject to significant penalties.

Under Act 129, Electric Distribution Companies (EDCs) must develop and file an energy efficiency and conservation plan (EE&C Plan) with the PUC and contract with a conservation service ~~provider~~providers to implement all or a portion of the EE&C Plan. Act 129 requires EDCs to cause reduced electricity consumption of 1% by 2011 and 3% by 2013, and reduced peak demand of 4.5% by 2013. EDCs will be able to recover the costs (capped at 2% of the EDC's 2006 revenue) of implementing their EE&C Plans. In October 2009, the PUC approved PPL Electric's EE&C Plan. The plan includes 14 programs, all of which are voluntary for customers. The plan includes a proposed rate mechanism for recovery of all costs incurred by PPL Electric to implement the plan. In September 2010, PPL Elect ric filed its Program Year 1 Annual Report and Process Evaluation Report. PPL Electric also filed a petition requesting permission to modify two components of its EE&C Plan. Various responses were filed to that petition which the PUC has assigned to two Administrative Law Judges for hearings and a recommended decision. In December 2010, the Administrative Law Judges issued a recommended decision approving PPL Electric's request. Parties have filed exceptions and reply exceptions to the recommended decision. The PUC issued its final order in January 2011, approving the changes proposed by PPL Electric and directing PPL Electric to re-file its plan to reflect all changes made since it was initially approved.

Act 129 also requires installation of smart meters for new construction, upon the request of consumers at their cost, or on a depreciation schedule not exceeding 15 years. Under Act 129, EDCs will be able to recover the costs of providing smart metering technology. In August 2009, PPL Electric filed its proposed smart meter technology procurement and installation plan with the PUC. All of PPL Electric's metered customers currently have smart meters installed at their service locations, and PPL Electric's current advanced metering technology generally satisfies the requirements of Act 129 and does not need to be replaced. In June 2010, the PUC entered its order approving PPL Electric's smart meter plan ~~proposes~~with several modifications. In compliance with the order, in the third quarter of 20 10, PPL Electric submitted a revised plan with a cost estimate of $38 million to ~~study, test~~be incurred over a five-year period, beginning in 2009, and ~~pilot applications~~filed a rider to ~~enhance and expand~~recover these costs beginning January 1, 2011. In December 2010, the PUC approved PPL Electric's rate rider to recover the costs of its smart meter capabilities. PPL Electric estimates these studies will cost approximately $62 million over the next five years. PPL Electric has proposed a rate mechanism for recovery of these costs. An Administrative Law Judge has issued a recommended decision generally approving PPL Electric's plan, but PPL Electric cannot predict whether the plan will be approved.program.

Act 129 also requires the ~~default service provider~~Default Service Provider (DSP) to provide electric generation supply service to customers pursuant to a PUC-approved competitive procurement plan through auctions, requests for proposal and bilateral contracts at the sole discretion of the DSP. Act 129 requires a mix of spot market purchases, short-term contracts and long-term contracts (4 to 20 years, with long-term contracts limited to up to 25% of the load unless otherwise approved by the PUC). The DSP will be able to recover the costs associated with a competitive procurement plan.

Under Act 129, the DSP competitive procurement plan must ensure adequate and reliable service "at least cost to customers" over time. Act 129 grants the PUC authority to extend long-term power contracts up to 20 years, if necessary, to achieve the "least cost" standard. The PUC has approved PPL Electric's procurement plan for the period January 1, 2011 through May 31, 2013, and PPL Electric has begun purchasing under that plan. In December 2010, the PUC approved PPL Electric's rate rider to recover the costs of providing default service.

New Jersey Capacity Legislation(PPL, PPL Energy Supply and PPL Electric)

In January 2011, New Jersey enacted a law that intervenes in the wholesale capacity market exclusively regulated by the FERC: S. No. 2381, 214th Leg. (N.J. 2011) (the Act). To create incentives for the development of new, in-state electric generation facilities, the Act implements a "long-term capacity agreement pilot program" (LCAPP). The Act requires New Jersey utilities to pay a guaranteed fixed price for wholesale capacity, imposed by the New Jersey Board of Public Utilities (BPU), to certain new generators participating in PJM, with the ultimate costs of that guarantee to be borne by New Jersey ratepayers. PPL believes the intent and effect of the LCAPP is to encourage the construction of new generation in New Jersey even when, under the FERC-approved PJM economic model, such new generation would not be economic. The Act could depress capacity prices in PJM in the short term, impacting PPL Energy Supply's revenues, and harm the long-term ability of the PJM capacity market to incent necessary generation investment throughout PJM. In February 2011, the PJM Power Providers Group (P3), an organization in which PPL is a member, filed a complaint before the FERC seeking changes in PJM's capacity market rules designed to ensure that subsidized generation, such as may result from the implementation of the LCAPP, will not be able to set capacity prices artificially low as a result of their exercise of buyer market power. PPL cannot predict the outcome of this proceeding.

Also in February 2011, PPL, with several other generating companies and utilities, filed a complaint in Federal Court in New Jersey challenging the Act on the grounds that the Act violates well-established principles under the Supremacy Clause and the Commerce Clause of the United States Constitution. In this action, the Plaintiffs request declaratory and injunctive relief barring implementation of the Act by the Commissioners of the BPU. PPL cannot predict the outcome of this proceeding.

FERC ~~Transmission~~Formula Rates (PPL and PPL Electric)

In August 2008, PPL Electric asked the FERC to change the method for calculating its transmission rates to formula-based rates to support continued investment in its transmission system. Under formula-based rates, a fixed earnings level is set for the utility, and the utility annually adjusts its transmission rates, subject to FERC review, to reflect cost changes. The process offers an opportunity for public input. The proposed rate design prevents over-recovery or under-recovery of the actual costs of providing transmission delivery service. This request would not affect generation charges or distribution rates. PPL Electric requested that the proposed rate take effect November 1, 2008.

In October 2008, the FERC accepted the proposed rate for filing, effective November 1, 2008, subject to refund, and set the matter for hearing, but held the hearings in abeyance to establish settlement judge procedures. In May 2009, a settlement was reached by all interested parties which, among other things, reduced PPL Electric's return on equity to approximately 11.70%. PPL Electric was granted approval to implement the formula-based rate as established in the settlement, effective June 1, 2009. In August 2009, the FERC approved the settlement. See Note 13 for information on a true-up of these revenues.

In May 2010, PPL Electric initiated the 2010 Annual Update of its formula rate. In November 2010, a group of municipal customers taking transmission service in PPL Electric's zone filed a preliminary challenge to the update, and in December, they filed a formal challenge. In January 2011, PPL Electric filed a motion to dismiss a number of the challenges and submitted responses to all of the challenges. PPL Electric cannot predict the outcome of this proceeding which remains pending before the FERC.

In September 2008, KU filed an application with the FERC for increases in electric base rates applicable to wholesale power sales contracts or interchange agreements involving, collectively, 12 Kentucky municipalities. The application requested a shift from an all-in stated unit charge rate to an unbundled formula rate, including an annual adjustment mechanism. In May 2009, the FERC issued an Order approving a settlement among the parties in the case, incorporating increases of approximately 3% from prior rates and a return on equity of 11%. In May 2010, KU submitted to the FERC the proposed current annual adjustment to the formula rate. This updated rate became effective on July 1, 2010, subject to certain review procedures by the wholesale requirements customers and the FERC, including potenti al refunds in the case of disallowed costs or charges.

By mutual agreement, the parties' settlement of the 2008 application left outstanding the issue of whether KU must allocate the municipal customers a portion of renewable resources that it may be required to procure on behalf of its retail ratepayers. An Order was issued by the FERC in July 2010, indicating that KU is not required to allocate a portion of any renewable resources to the 12 municipalities, thus resolving the remaining issue.

California ISO and Western U.S. Markets (PPL and PPL Energy Supply)

Through its subsidiaries, PPL made $18 million of sales to the California ISO during the period October 2000 through June 2001, $17 million of which has not been paid to PPL subsidiaries. ~~Given the myriad~~Also, as previously reported, there has been further litigation about additional claims of electricity supply problems faced by California electric utilities and the California ISO, PPL cannot predict whether or when it will receive payment. At December 31, 2009, PPL continues to be fully reserved for non-payment for these sales.

Regulatory proceedings arising out of the California electricity supply controversy have been filed at the FERC. The FERC has determined that all sellers of energy into markets operated by the California ISO and the California Power Exchange, including PPL Montana, should be subject to refund liability for the period beginning October 2, 2000 through June 20, 2001, but the FERC has not yet ruled on the exact amounts that the sellers, including PPL Montana, would be required to refund. In decisions in September 2004 and August 2006, the U.S. Court of Appeals for the Ninth Circuit held that the FERC had the additional legal authority to order refunds for periods prior to October ~~2, 2000,~~2000. In January 2011, PPL and ~~ordered~~ the "California Parties" (collectively, three California utility companies, the California Public Utility Commission and certain California state authorities) filed a settlement under which PPL would receive approximately $2 million of its $17 million claim, together with interest. The FERC must approve the settlement. At December 31, 2010, PPL has reserved all of the non-payment exposure related to determine whether or not it would be appropriate to grant such additional refunds. In February 2008, the FERC initiated proceedings to determine whether it would be appropriate to grant additional refunds. ~~In November 2009, the FERC issued an order scheduling evidentiary hearings in 2010 on such refunds but has suspended certain of~~ these ~~proceedings and instituted settlement procedures.~~sales.

In June 2003, the FERC took several actions as a result of ~~a number of~~several related ~~investigations.~~investigations beyond the California ISO litigation. The FERC terminated proceedings to consider whether to order refunds for spot market bilateral sales made in the Pacific Northwest, including sales made by PPL Montana, during the period December 2000 through June 2001. In August 2007, the U.S. Court of Appeals for the Ninth Circuit reversed the FERC's decision and ordered the FERC to consider additional evidence. The FERC also commenced additional investigations relating to "gaming" and bidding practices during 2000 and 2001, but neither PPL EnergyPlus nor PPL Montana believes it is a subject of these investigations.

In February 2004, the Montana Public Service Commission initiated a limited investigation of the Montana retail electricity market for the years 2000 and 2001, focusing on how that market was affected by transactions involving the possible manipulation of the electricity grid in the western U.S. The investigation includes all public utilities and licensed electricity suppliers in Montana, including PPL Montana, as well as other entities that may possess relevant information. In June 2004, the Montana Attorney General served PPL Montana and more than 20 other companies with subpoenas requesting documents, and PPL Montana has provided responsive documents to the Montana Attorney General.

~~While~~Although PPL and its subsidiaries believe that they have not engaged in any improper trading or marketing practices affecting the ~~California and~~ western markets, PPL cannot predict the outcome of the above-described investigations, lawsuits and proceedings or whether any PPL subsidiaries will be the ~~target~~subject of any additional governmental investigations or named in other lawsuits or refund proceedings.

PJM RPM Litigation (PPL, PPL Energy Supply and PPL Electric)

In May 2008, a group of state public utility commissions, state consumer advocates, municipal entities and electric cooperatives, industrial end-use customers and a single electric distribution company (collectively, the RPM Buyers) filed a complaint before the FERC objecting to the prices for capacity under the PJM Reliability Pricing Model (RPM) that were set in the 2008-09, 2009-10 and 2010-11 RPM base residual auctions. The RPM Buyers requested that the FERC reset the rates paid to generators for capacity in those periods to a significantly lower level. Thus, the complaint requests that generators be paid less for those periods through refunds and/or prospective changes in rates. The relief requested in the complaint, if granted, could have a material effect on PPL, PPL Energy Supply and PPL Electric.& #160; PJM, PPL and numerous other parties have responded to the complaint, strongly opposing the relief sought by the RPM Buyers. In September 2008, the FERC entered an order denying the complaint. In August 2009, the RPM Buyers appealed the FERC's decision to the U.S. Court of Appeals for the Fourth Circuit, and the appeal was subsequently transferred to the U.S. Court of Appeals for the District of Columbia Circuit. In February 2011, the U.S. Court of Appeals for the District of Columbia Circuit issued on order denying the appeal. PPL cannot predict the outcome of this proceeding.

In December 2008, ~~the~~ PJM submitted amendments to certain provisions governing its RPM capacity market. The amendments were intended to permit the compensation available to suppliers that provide capacity, ~~like~~including PPL Energy Supply, to increase. ~~The~~ PJM sought approval of the amendments in time for them to be implemented for the May 2009 capacity auction (for service in June 2012 through May 2013). Numerous parties, including PPL, protested ~~the~~ PJM's filing. Certain of the protesting parties proposed changes to the capacity market auction that would result in a reduction in compensation to capacity suppliers. The changes proposed by ~~the~~ PJM and by other parties in response to ~~the~~ PJM proposals could significantly affect the compensation available to suppliers of capacity participating in future RPM ~~auctions.~~auc tions. In March 2009, the FERC entered an order approving in part and disapproving in part the changes proposed by ~~the~~ PJM. In August 2009, the FERC issued an order granting rehearing in part, denying rehearing in part and clarifying its March 2009 order. ~~PPL cannot predict the outcome of this proceeding.~~ No request for rehearing or appeal of the August 2009 order ~~has been~~was timely filed. In October 2010, the August 2009 Order became final and will not have a material impact on PPL, PPL Energy Supply or PPL Electric. As a result, the remaining issues in this matter are those referred to in the paragraph above.

FERC Market-Based Rate Authority

(PPL)

In July 2006, the FERC issued an Order in LG&E's and KU's market-based rate proceedings accepting their further proposal to address certain market power issues the FERC had claimed would arise upon an exit from the MISO. In particular, LG&E and KU received permission to sell power at market-based rates at the interface of control areas in which it may be deemed to have market power, subject to a restriction that such power not be intentionally re-sold back into such control areas. However, restrictions exist on sales by LG&E and KU of power at market-based rates in the LG&E/KU and Big Rivers Electric Corporation control areas. In June 2007, the FERC issued Order No. 697 implementing certain reforms to market-based rate regulations, including restrictions similar to those previously in place for LG&E's and KU's power sales at control area interfaces. In December 2008, the FERC issued Order No. 697-B potentially placing additional restrictions on certain power sales involving areas where market power is deemed to exist. As a condition of receiving and retaining market-based rate authority, LG&E and KU must comply with applicable affiliate restrictions set forth in the FERC regulation.

In June 2009, the FERC issued Order No. 697-C which generally clarified certain interpretations relating to power sales and purchases at control area interfaces or into control areas involving market power. In July 2009, the FERC issued an order approving LG&E's and KU's September 2008 tri-annual application for updated market-based rate authority. During July 2009, affiliates of LG&E and KU completed a transaction terminating certain prior generation and power marketing activities in the Big Rivers Electric Corporation control area, which termination should ultimately allow a filing to request a determination that LG&E and KU are no longer deemed to have market power in such control area.

LG&E and KU conduct certain of their wholesale power sales activities in accordance with existing market-based rate authority principles and interpretations. Future FERC proceedings relating to Orders 697 or market-based rate authority could alter the amount of sales made at market-based versus cost-based rates.

(PPL and PPL Energy Supply)

In December 1998, the FERC authorized PPL EnergyPlus to make wholesale sales of electric power and related products at market-based rates. In that order, the FERC directed PPL EnergyPlus to file an updated market analysis within three years after the order, and every three years thereafter. Since then, periodic market-based rate filings with the FERC have been made by PPL EnergyPlus, PPL Electric, PPL Montana and most of PPL Generation's subsidiaries. These filings consisted of a ~~Western~~Northwest market-based rate filing for PPL Montana and ~~an Eastern~~a Northeast market-based rate filing for most of the other PPL subsidiaries in PJM's region. In December 2010, PPL filed its market-based rate update for the ~~PJM~~Eastern region. ~~The next filings will be due later in 2010.~~In January 2011, PPL filed the market-based rate update for the Western region.

Currently, a seller granted market-based rate authority by the FERC may enter into power contracts during an authorized time period. If the FERC determines that the market is not workably competitive or that the seller possesses market power or is not charging "just and reasonable" rates, it may institute prospective action, but any contracts entered into pursuant to the FERC's market-based rate authority remain in effect and are generally subject to a high standard of review before the FERC can order changes. Recent court decisions by the U.S. Court of Appeals for the Ninth Circuit have raised issues that may make it more difficult for the FERC to continue its program of promoting wholesale electricity competition through market-based rate authority. These court decisions permit retroactive refunds and a lower standard of review by the FERC for changing power contracts, and could have the effect of requiring the FERC in advance to review most, if not all, power contracts. In June 2008, the U.S. Supreme Court reversed one of the decisions of the U.S. Court of Appeals for the Ninth Circuit, thereby upholding the higher standard of review for modifying contracts. The FERC has not yet taken action in response to these ~~recent~~ court decisions. At this time, PPL cannot predict the impact of these court decisions on the FERC's future market-based rate authority program or on PPL's business.

~~IRS Synthetic Fuels Tax Credits~~MISO Revenue Sufficiency Guarantee (PPL)

In August 2010, the FERC issued Orders accepting most facets of several MISO Revenue Sufficiency Guarantee ("RSG") compliance filings. The FERC ordered the MISO to issue refunds for RSG charges that were imposed by the MISO on the assumption that there were rate mismatches for the period beginning November 2007 through the present. There is no financial statement impact to LG&E and KU from this Order, as the MISO had anticipated that the FERC would require these refunds and had preemptively included them in resettlements paid in 2009. The FERC denied the MISO's proposal to exempt certain resources from RSG charges, effective prospectively. The FERC accepted portions and rejected portions of the MISO's proposed RSG rate Redesign Proposal, which will be effective when certain software is ready for implementation subject to further compliance filings. The impact of the Redesign Proposal on LG&E and KU cannot be estimated at this time.

In August 2009, the FERC determined that the MISO had failed to demonstrate that its proposed exemptions to real-time RSG charges were just and reasonable. In November 2009, the MISO made a compliance filing incorporating the rulings of the FERC orders and a related task-force, with a primary open issue being whether certain of the tariff changes are applied prospectively only or retroactively to approximately January 2009. The conclusion of the RSG matter, including the retroactivity decision, may result in refunds to LG&E and KU. PPL cannot presently predict the outcome of this matter.

(PPL and PPL Energy Supply)

IRS Synthetic Fuels Tax Credits

PPL, through its subsidiaries, had interests in two synthetic fuel production facilities: the Somerset facility, located in Pennsylvania, and the Tyrone facility, located in Kentucky. PPL received tax credits pursuant to Section 29/45K of the Internal Revenue Code based on the sale of synthetic fuel from these facilities. The Section 29/45K tax credit program expired at the end of 2007, and production of synthetic fuel at these facilities and all other synthetic fuel operations ceased as of December 31, 2007. The facilities were dismantled and retired in 2008.

In April 2008, the IRS published the domestic first purchase price (DFPP) for 2007 indicating that the DFPP reference price increased above PPL's estimated price levels for 2007 and the inflation-adjusted phase-out range decreased from PPL's estimate for 2007. Therefore, PPL recorded an expense of $13 million ($0.04 per share, basic and diluted, for PPL) in 2008, to "Income Taxes" on the Statement of Income to account for this difference.

(PPL, PPL Energy Supply and PPL Electric)

IRS Tax Litigation

In January 2011, the IRS appealed, to the U.S. Court of Appeals for the Third Circuit, the U.S. Tax Court's decision that the 1997 U.K. Windfall Profits Tax (WPT) is a creditable tax for U.S. Federal income tax purposes. In its decision, the Tax Court ruled on two issues: (1) the 1997 U.K. WPT imposed on all U.K. privatized utilities, including PPL's U.K. subsidiary, was creditable against the Company's U.S. income taxes; and (2) PPL Electric's street lighting assets could be depreciated for tax purposes over seven years as permitted for "property without a class life" instead of the 20-year depreciation recovery period argued by the IRS. While not certain, it appears that the IRS has recommended not to prosecute an appeal of the street lighting decision. PPL filed its tax returns for 1997 and all int ervening years on the basis that the WPT was creditable and that the appropriate tax depreciable life for its street lighting assets was seven years. Therefore, the cash benefit resulting from these items has already been realized. Prior to the Tax Court decision, the Company had accrued a tax reserve equivalent to the full amount of the tax and interest exposure for these two items. See Note 5 for additional information on the release of tax reserves based on this favorable Tax Court decision. PPL cannot predict the outcome of this matter.

Energy Policy Act of 2005 - Reliability Standards (PPL, PPL Energy Supply and PPL Electric)

~~In August 2005, the Energy Policy Act of 2005 (the 2005 Energy Act) became law. The 2005 Energy Act substantially affects the regulation of energy companies, amends federal energy laws~~NERC is responsible for establishing and ~~provides the FERC with new oversight responsibilities. Among the important changes in this law is the appointment of the NERC to establish and enforce~~enforcing mandatory reliability standards (Reliability Standards) regarding the bulk power system. The FERC oversees this process and independently enforces the Reliability Standards.

The Reliability Standards have the force and effect of law and apply to certain users of the bulk power electricity system, including electric utility companies, generators and marketers. The FERC has indicated it intends to enforce vigorously the Reliability Standards using, among other means, civil penalty authority. Under the Federal Power Act, the FERC may assess civil penalties of up to $1 million per day, per violation, for certain violations. The first group of Reliability Standards approved by the FERC became effective in June 2007.

Since 2007, LG&E, KU, PPL Electric and certain subsidiaries of PPL Energy Supply have self-reported ~~to the RFC~~ potential violations of certain applicable reliability requirements and submitted accompanying mitigation ~~plans, the resolutions~~plans. The resolution of ~~which~~certain of these potential violation reports ~~are~~is pending. In April 2010, a PPL Electric settlement with the RFC resolving four self-reported potential violations became final. PPL Electric agreed to pay a settlement amount of $290,000 and, among other things, to engage in additional vegetation clearing at a cost of approximately $7 million over the next three years. The settlement amount was paid in May 2010. Any ~~RFC~~regional reliability entity determination concerning the resolution of ~~violations~~v iolations of the Reliability Standards remains subject to the approval of the NERC and the FERC. PPL ~~Electric has reached agreement with the RFC concerning some, but not all, of the reliability matters reported by it to the RFC. PPL Electric~~ and ~~PPL Energy Supply~~its subsidiaries cannot predict the outcome of these matters.

In the course of implementing its program to ensure compliance with the Reliability Standards by those PPL affiliates subject to the standards, certain other instances of potential non-compliance ~~will continue to~~may be identified from time to time. PPL cannot predict the fines or penalties that may be imposed.

~~U.K. Overhead Electricity Networks~~(PPL and PPL Energy Supply)

U.K. Overhead Electricity Networks

In 2002, for safety reasons, the U.K. Government issued guidance that low voltage overhead electricity networks within three meters horizontal clearance of a building should either be insulated or relocated. This imposed a retroactive requirement on existing assets that were built with lower clearances. In 2008, ~~following extensive discussion,~~ the U.K. Government determined that the U.K. electricity network should comply with the guidance issued. WPD estimates that the cost of compliance will be ~~approximately $93~~$87 million. The projected expenditures over the next five years have been allowed to be recovered through rates, and it is expected that expenditures beyond this ~~five year~~five-year period will also be recovered through rates. The U.K. Government has determined that WPD (South Wales) should comply by 2015 and WPD (South West) by ~~2018.~~2018 .

~~In January 2009, to~~To improve network reliability, in 2009, the U.K. Government enforced a regulation requiring network operators to implement a risk-based program over 25 years to clear trees within falling distance of key high-voltage overhead lines. WPD estimates that the cost of compliance will be ~~approximately $107~~$100 million over the 25-year period. The projected expenditures over the next five years have been allowed to be recovered through rates, and it is expected that expenditures beyond this ~~five year~~five-year period will also be recovered through rates.

Environmental Matters - Domestic

(PPL, PPL Energy Supply and PPL Electric)

Due to the environmental issues discussed below or other environmental matters, PPL subsidiaries may be required to modify, curtail, replace or cease operating certain facilities or operations to comply with statutes, regulations and other requirements of regulatory bodies or courts. ~~In this regard, PPL subsidiaries also may incur capital expenditures or operating expenses in amounts which are not now determinable, but could be significant.~~

~~Air~~(PPL and PPL Energy Supply)

Air

To comply with air related requirements described below, PPL's forecast for capital expenditures reflects a best estimate projection of expenditures that may be required within the next five years. Such projections are a combined $2.1 billion for LG&E and KU and $400 million for PPL Energy Supply. Actual costs may be significantly lower or higher depending on the final requirements. Environmental compliance costs incurred by LG&E and KU are subject to recovery through a rate recovery mechanism. See Note 3 for additional information.

The Clean Air Act addresses, among other things, emissions causing acid deposition, installation of best available control technologies for new or substantially modified sources, attainment of ~~federal~~national ambient air quality standards, toxic air emissions and visibility standards in the U.S. Amendments to the Clean Air Act requiring additional emission reductions are likely to continue to be proposed in the U.S. Congress. The Clean Air Act allows states to develop more stringent regulations and in some instances, as discussed below, Kentucky, Pennsylvania and Montana have done so.

Clean Air ~~Interstate~~Transport Rule ~~(CAIR)~~(formerly CAIR)

~~Citing its authority under the~~The EPA has proposed a new Clean Air ~~Act, in 1997,~~Transport Rule (Transport Rule) to replace the ~~EPA developed new standards for ambient levels of ozone and fine particulates in~~EPA's previous rule called CAIR, which was struck down by the U.S. To facilitate attainment of these standards, the EPA promulgated CAIR for 28 midwestern and eastern states, including Pennsylvania, to reduce sulfur dioxide emissions by about 50% by 2010 and to extend the current seasonal program for reduction in nitrogen oxides emissions to a year-round program starting in 2009. Starting in 2015, CAIR requires further reductions in the CAIR region, in sulfur dioxide of 30% from 2010 levels, and nitrogen oxides during the ozone season of approximately 17% from 2009 levels. CAIR allows these reductions to be achieved through cap-and-trade programs.

~~In July 2008, the United States~~ Court of Appeals for the ~~D.C.~~District of Columbia Circuit (the ~~U.S. Circuit~~ Court) ~~issued a ruling that invalidated~~. CAIR subsequently was effectively reinstated by the Court pending finalization of the Transport Rule. The final Transport Rule is expected in ~~its entirety, including its cap-and-trade program.~~2011.

AsCAIR and the new Transport Rule are meant to facilitate attainment of ambient air quality standards for ozone and fine particulates by requiring reductions in sulfur dioxide and nitrogen oxides. The Transport Rule would establish a ~~result of this decision, in 2008, PPL determined~~new sulfur dioxide emission allowance cap and trade program that ~~all~~is completely independent of the ~~annual~~current Acid Rain Program, and a new nitrogen oxide emission allowance cap and trade program. The EPA is seeking comment on several different approaches that would allow varying degrees of trading, but all trading would be more restrictive than under the previous CAIR rule. The first phase of the Transport Rule that would cap sulfur dioxide and nitrogen oxide emissions would become effective in 2012. The second phase, lowering the sulfur dioxide cap, would become effective in 2014.

PPL's preliminary review of the allocations proposed by the EPA in the Transport Rule indicates that, starting in 2012, greater reductions in sulfur dioxide would likely be required for PPL than were required under CAIR starting in 2015, because the number of allowances allocated to PPL will be lower than what was allocated to PPL under CAIR and the more restrictive trading under the Transport Rule reduces compliance flexibility. PPL may look at more aggressive operation of existing scrubbers, fuel switching and/or dual fuel capability. All of these options could impose significant costs. The EPA has developed alternative proposals for allowance allocations which may reduce the impact.

With respect to nitrogen oxide, the Transport Rule proposes a slightly higher amount of allowances for PPL's Pennsylvania plants but a lower amount for PPL's Kentucky plants compared to those allocated under CAIR. However, due to the more restrictive trading program, the purchase of nitrogen oxide allowances ~~purchased by~~may not be a reliable compliance option. Therefore, other compliance options, such as the installation of additional SCRs or SNCRs at one or more PPL EnergyPlus pursuant to CAIR were no longer required, had no value and, therefore, recorded a pre-tax impairment charge of $33 million ($20 million after tax). Further, PPL EnergyPlus recorded in the third quarter 2008 an additional charge and corresponding reserve of $12 million pre-tax ($7 million after tax) related to its sale of certain annual nitrogen oxide allowance put options. These charges, recorded in PPL and PPL Energy Supply's Supply segment,units, are ~~included in "Other operation and maintenance" expense on the Statement of Income. The U.S. Circuit Court's decision did not impact PPL EnergyPlus' seasonal nitrogen oxide allowances.~~being evaluated.

In ~~December 2008, the U.S. Circuit Court remanded CAIR~~addition to the EPA without vacating the cap-and-trade program, effectively reinstating, at least temporarily, CAIR and its requirements for annual-reduction of nitrogen oxides beginning in 2009 and for further reduction in sulfur dioxide by requiring the surrender of two acid rain allowances for every ton of sulfur dioxide emitted beginning in 2010. As a result of this December 2008 ruling and associated delivery of allowances under other option contracts that were not in dispute, the reserve recorded in the third quarter of 2008 of $12 million pre-tax ($7 million after-tax) related to certain annual nitrogen oxide allowance put options was revised in the fourth quarter of 2008 to $9 million pre-tax ($5 million after tax).

~~See Note 17 for information on impairments recorded in 2009 related to sulfur dioxide emission allowances.~~

To continue meeting the sulfur dioxide reduction requirements under the acid rain provisions of the Clean Air Act, and the reductions required by CAIR (remanded by the U.S. Circuit Court, but currently in place), PPL installed and is operating scrubbers at its Montour and Brunner Island plants. In addition, with respect to compliance with annual and ozone season nitrogen oxide reduction requirements, PPL utilizes SCRs and combustion controls at Montour Units 1 and 2, and combustion controls at Brunner Island Units 1, 2 and 3. Additional emission allowances, when needed, are purchased in the open market.

The ultimate disposition of CAIR's cap-and-trade program and the value of annual nitrogen oxide allowances, as well as sulfur dioxide allowances, remain uncertain. If the EPA revises CAIR to require more stringent emission reductions or revises CAIR to eliminate or limit the regional cap-and-trade program, the costs of compliance are not now determinable, but could be significant.

~~Further~~ reductions in sulfur dioxide and nitrogen oxide ~~emissions, beyond those~~ required ~~by CAIR, could be required~~for PPL's Pennsylvania and Kentucky plants due to the Transport Rule, PPL's plants may face further reductions in sulfur dioxide and nitrogen oxide emissions as a result of more stringent national ambient air quality standards for ozone, nitrogen oxide, sulfur dioxide or fine particulates. The EPA has recently finalized a new one-hour standard for sulfur dioxide, and ~~fine particulates.~~ states are required to identify areas that meet those standards and areas that are in non-attainment. For non-attainment areas, states are required to develop plans by 2014 to bring those areas into attainment by 2017. For areas in attainment or unclassifiable, states are required to develop maintenance plans by mid-2013 that demonstrate continued attainment. 0;If additional reductions were to be required, the costs ~~are not now determinable, but~~to PPL could be significant.

Mercury and other Hazardous Air Pollutants

Citing its authority under the Clean Air Act, in ~~May~~ 2005, the EPA issued the Clean Air Act Mercury Regulations (CAMR) affecting coal-fired power plants. ~~These regulations establish~~Since CAMR was overturned in a ~~cap-and-trade program to take effect in two phases, with the first phase to begin in January 2010, and the second, more stringent, phase to begin in January 2018. Because of a February~~ 2008 ~~decision by the~~ U.S. Circuit Court ~~of Appeals overturning CAMR,~~decision, the EPA is now proceeding to develop standards imposing MACT for mercury emissions and other hazardous air pollutants from electric generating units. Under a recent ~~proposed~~approved settlement, the EPA is ~~planning~~required to issue final MACT standards by November ~~2011.~~2011 and compliance is statutorily required three years later. In order to develop these standards, the EPA ~~is collecting~~has collected information from ~~coal-and-oil-fired~~coal- and oil-fired electric utility steam generating units. ~~The costs of complying with the final MACT standards are not now determinable, but could be significant.~~

Pennsylvania adopted mercury emission standards more stringent than CAMR. However, PPL challenged those rules under the provisions of the Pennsylvania Air Pollution Control Act in light of the federal court decision overturning CAMR, and in December 2009, the Pennsylvania Supreme Court declared the Pennsylvania mercury rules invalid and unenforceable.

In 2006, Montana finalized its mercury emission rules that require, by 2010, every coal-fired generating plant in Montana to achieve reductions more stringent than CAMR's 2018 requirements. PPL has installed chemical injection systems to meet these requirements.

Regional Haze and Visibility

The Clean Air Visibility Rule was issued by the EPA in June 2005 to address regional haze or regionally-impaired visibility caused by multiple sources over a wide area. The rule requires Best Available Retrofit Technology (BART) for certain electric generating units. Under the BART rule, PPL submitted to the Pennsylvania DEP its analyses of the visibility impacts of particulate matter emissions from Martins Creek Units 3 and 4, Brunner Island Units 2 and 3 and Montour Units 1 and 2. No analysis was submitted for sulfur dioxide or nitrogen oxides, because the EPA determined that meeting the requirements for CAIR also meets the BART requirements for those pollutants. Although the EPA has not yet expressly stated that a similar approach will be taken under the Transport Rule, the EPA has not reques ted any further studies. PPL's analyses have shown that because PPL had already upgraded its particulate emissions controls at Montour Units 1 and 2 and Brunner Island Units 2 and 3, further controls are not justified as there would be little corresponding visibility improvement. PPL has not received comments from the Pennsylvania DEP on these submissions.

Also under the BART rule, PPL submitted to the EPA its analyses of the visibility impacts of sulfur dioxide, nitrogen oxides and particulate matter emissions for Colstrip Units 1 and 2 and Corette. PPL's analyses concluded that further reductions are not needed. The EPA responded to PPL's reports for Colstrip and Corette and requested further information and analysis. PPL completed further analysis and submitted addendums to its initial reports for Colstrip and Corette. In February 2009, PPL received an information request for additional data related to the Colstrip generating ~~station non-BART affected~~plant non-BART-affected emission sources. PPL responded to this request in March 2009. PPL has not received comments from the EPA on these submissions.

In November 2010, PPL Montana received a request from EPA Region 8, under EPA's Reasonable Further Progress goals of the Regional Haze Rules to provide further analysis with respect to Colstrip Units 3 and 4. Colstrip's Units 3 and 4 are not BART eligible units and are already well controlled. PPL completed a high level analysis of various control options to reduce emissions of sulfur dioxide, and particulate matter and submitted that analysis to EPA in January 2011. The analysis shows that these units are well controlled that any incremental reductions would not be cost effective and that further analysis would not be warranted. PPL also concluded that further analysis for nitrogen oxides was not justifiable as these units installed controls under a Consent Decree in which the EPA had previousl y agreed that, when implemented, would satisfy the requirements for installing BART for nitrogen oxides.

PPL cannot predict whether any additional reductions will be required in Pennsylvania or Montana. If additional reductions are required, the costs ~~are not now determinable, but~~ could be ~~significant.~~significant depending on what is required.

LG&E and KU also submitted analyses of the visibility impacts of its Kentucky BART-eligible sources to the Kentucky Division for Air Quality (KDAQ). Only LG&E's Mill Creek plant was determined to have a significant regional haze impact. The KDAQ has submitted a regional haze state implementation plan (SIP) to the EPA which requires the Mill Creek plant to reduce its sulfuric acid mist emissions from Units 3 and 4. After approval of the Kentucky SIP by EPA and revision of the Mill Creek plant's Title V air permit, sorbent injection controls will be installed at the plant to reduce sulfuric acid mist emissions.

New Source Review (NSR)

The EPA has reinitiated its NSR enforcement efforts. This initiative targets ~~older,~~ coal-fired power plants. The EPA has asserted that modification toof these plants has increased their emissions, and consequently they are subject to more stringent NSR requirements under the Clean Air Act. In April 2009, PPL received EPA information requests for its Montour and Brunner Island plants. ~~PPL has met with the EPA and exchanged information regarding this matter.~~ The requests are similar to those that PPL received several years ago for its Colstrip, Corette and Martins Creek plants. ~~PPL's response to~~PPL and the ~~request for Montour and Brunner Island is currently on hold pending further discussions with the EPA. PPL cannot predict the outcome of~~EPA have exchanged certain information regarding this matter.

In January 2009, PPL and other companies that own or operate the Keystone plant in Pennsylvania received a notice of violation from the EPA alleging that certain projects were undertaken without proper NSR ~~compliance.~~comp liance. PPL cannot predict the outcome of this matter.

In addition, in August 2007, LG&E and KU received information requests for their Mill Creek, Trimble County, and Ghent plants, but have received no further communications from the EPA since providing their responses. PPL cannot predict the outcome of these matters.

In March 2009, KU received a notice of violation alleging that flue gas desulfurization and SCR controls were installed at the Ghent plant without proper NSR compliance. In December 2009, the EPA issued an information request seeking additional information on this matter. KU has exchanged settlement proposals and other information with the EPA regarding imposition of additional permit limits and emission controls and anticipates continued settlement negotiations. In addition, any settlement or future litigation could potentially encompass a September 2007 notice of violation alleging opacity violations at the plant. Depending on the provisions of a final settlement or the results of litigation, if any, resolution of this matter could involve significant increased operating and capital expenditures. &# 160;PPL is currently unable to predict the final outcome of this matter.

KU has entered a consent decree, approved by the federal district court in March 2009, which resolved notices of violation issued by the EPA which alleged NSR and state air permit violations at the Brown plant. The consent decree includes provisions for the surrender of excess ozone season nitrogen oxide allowances estimated at 650 allowances annually for eight years; installation of flue gas desulfurization systems (sulfur dioxide removal systems, or scrubbers), by December 31, 2010; installation of an SCR by December 31, 2012 and compliance with specified emission limits and operational restrictions. KU is currently implementing compliance measures as required by the consent decree.

If PPL subsidiaries are found to have violated NSR regulations, PPL would, among other things, be required to meet permit limits reflecting Best Available Control Technology (BACT) for the emissions of any pollutant found to have significantly increased due to a major plant modification. The costs to meet such limits, including installation of technology at certain units, could be significant.

States and environmental groups also have initiated enforcement actions and litigation alleging violations of the NSR regulations by coal-fired plants, and PPL is unable to predict whether such actions will be brought against any of PPL's plants.

If PPL is found to have violated NSR regulations, PPL would, among other things, be required to install best available control technology for any pollutant found to have significantly increased due to a major plant modification. The costs to install and operate such technology are not now determinable, but could be significant.

Pursuant to the 2007 U.S. Supreme Court decision on global climate change, as discussed below, the EPA ~~is expected to~~has announced that it will regulate carbon dioxide emissions from new or modified stationary sources under its NSR regulations beginning January 2011. The NSR regulations require major new or modified sources of regulated pollutants to receive pre-construction and operation permits with limits that prevent the significant deterioration of air pollution in ~~2010. Such regulation would subject~~areas that are in attainment of the ambient air quality standards for these pollutants. In May 2010, the EPA published a final rule establishing thresholds for regulating GHG emissions from major new or modified sources. Combined carbon dioxide emissions ~~to NSR regulations. As a result, in October 2009, the EPA published its proposal to require large industrial facilities that annually emit at least 25,000 tons of greenhouse gases, including~~or carbon dioxide ~~to obtain construction and operating permits covering significant increases in these~~equivalent emissions ~~if the facility undergoes any~~of 100,000 tons or more per year will classify a source as maj or for permitting applicability purposes. The threshold for a major modification of a major source is an increase of carbon dioxide or ~~during initial construction.~~carbon dioxide equivalent emissions of 75,000 tons per year. If the modifications result in emissions increases exceeding ~~certain thresholds, which the EPA has not yet established,~~75,000 tons per year, the plant will need to conduct an analysis of best available control technology for GHG and ~~possibly implement,~~meet limits based on best available control technology. To date, the EPA has not provided final guidance on what constitutes best available control technology for GHG emissions, but has indicated in draft guidance that it may consider efficiency projects and other options as possible best available control technology for carbon dioxide ~~emissions. To date,~~emissions from power plants. In addition, in December 2010, the EPA ~~has not provided official guidance, but has indicated~~announced that it ~~may look at efficiency projects as possible Best Available Control Technology for carbon dioxide emissions.~~intends to promulgate New Source Performance Standards addressing GHG emissions from new and existing power plants, with a proposed rule anticipated in July 2011 and a final rule in Ma y 2012. The implications of these developments, including the outcome of any litigation challenging the regulation, are ~~uncertain and any associated costs are not now determinable, but could be significant.~~uncertain.

Opacity

(PPL and PPL Energy Supply)

From time to time, ~~environmental concerns are raised with respect to visible opacity of~~ emissions from ~~our~~PPL's power ~~plants.~~plants may cause opacity issues, which may raise environmental concerns. PPL addresses these issues on a ~~case by case~~case-by-case basis. If it is determined that actions must be taken to address ~~visible~~ opacity issues, such actions could result in costs that are not now determinable, but could be significant.

Trimble County Unit 2 Air Permit

The Sierra Club and other environmental groups petitioned the Kentucky Environmental and Public Protection Cabinet to overturn the air permit issued for the TC2 baseload generating unit, but the agency upheld the permit in an order issued in September 2007. In response to subsequent petitions by environmental groups, the EPA ordered certain non-material changes to the permit which were incorporated into a final revised permit issued by the KDAQ in January 2010. In March 2010, the environmental groups petitioned the EPA to object to the revised state permit. Until the EPA issues a final ruling on the pending petition and all available appeals have been exhausted, PPL cannot predict the final outcome of this matter.

(PPL and PPL Energy Supply)

Global Climate Change

There is concern nationally and internationally about global climate change and the possible contribution of ~~greenhouse gas~~GHG emissions including, most significantly, carbon dioxide from the combustion of fossil fuels. This has resulted in increased demands for carbon dioxide emission reductions byfrom investors, environmental organizations, government agencies and the international community. These demands and concerns have led to ~~increased~~ federal legislative proposals, actions at regional, state and local levels, ~~as well as~~ litigation relating to ~~greenhouse gas emissions. Of particular note,~~GHG emissions and the EPA regulations on GHGs.

Greenhouse Gas Legislation

Climate change legislation was being considered by Congress last year, but debate on such legislation has been halted given other competing legislative priorities and the November 2010 elections. The timing and elements of any future legislation addressing GHG emission reductions are uncertain and may depend on the 2011 Congressional agenda. At the state level, the 2010 elections have also reduced the likelihood of GHG legislation in the near term.

Greenhouse Gas Regulations and Tort Litigation

As a result of the April 2007 ~~the~~ U.S. Supreme Court ~~held~~decision that the EPA has the authority to regulate ~~greenhouse gas~~GHG emissions from new motor vehicles under the Clean Air ~~Act. More recently,~~Act, in ~~September 2009,~~April 2010, the EPA and the U.S. ~~Court~~Department of Appeals for the Second Circuit reversed a federal district court's decision and ruled that several states and public interest groups, as well as the City of New York, could sue five electric utility companies under federal common law for allegedly causing a public nuisance as a result of their emissions of greenhouse gases. Additional litigation in federal and state courts over these issues is continuing.

~~As a result of the 2007 Supreme Court's decision, in 2008, the EPA~~Transportation issued an "Advance Notice of Proposed Rulemaking," proposing alternative approaches to regulate carbon dioxide emissions. The EPA is moving forward with regulation of greenhouse gas emissions under the Clean Air Act. In 2009, the EPA also issued a rule, effective January 1, 2010, requiring economy-wide reporting of greenhouse gas emissions and in December 2009, issued a final endangerment finding that greenhouse gases contribute to air pollution and may endanger public health or welfare. The EPA's proposednew light-duty vehicle emissions standards ~~are expected to be finalized by March 31, 2010, leading to~~that will apply beginning with 2012 model year vehicles. The EPA has also clarified that this standard triggers regulation of ~~greenhouse gas~~GHG emissions from stationary sources under the ~~New Source Review~~NSR and Title V operating permit provisions of the Clean Air ~~Act. Accordingly, unless Congress acts sooner, it appears likely~~Act starting in 2011. This means that ~~greenhouse gas~~any new sources or major modifications to existing sources causing a net significant emissions ~~will~~increase requires BACT permit limits for GHGs. The EPA recently proposed guidance for conducting a BACT analysis for projects that trigger such a review. In ad dition, New Source Performance Standards for new and existing power plants are expected to be ~~regulated by the EPA.~~

~~In June 2009, the U.S. House of Representatives passed H.R. 2454, the American Clean Energy~~proposed in July 2011 and ~~Security Act of 2009. A key element affecting PPL includes a declining cap on carbon emissions beginning~~finalized in 2012, which requires a three percent reduction in greenhouse gas emissions (below 2005 levels) by 2012, increasing to 83% by 2050. The legislation also would require that electric utilities meet a mandatory 20% renewable energy supply and energy efficiency requirement by 2020. In September 2009, S. 1733, the Clean Energy, Jobs and American Power Act, a comprehensive climate change bill, was introduced in the U.S. Senate. The Senate Committee on Environment and Public Works approved S.1733 in November 2009. Debate on climate legislation continues in Congress; however, given other competing legislative priorities, the timing and elements of any future legislation addressing greenhouse gas emission reductions and renewable energy requirements are uncertain.

Renewable electricity standards are currently included in a separate Senate bill, S.1462, the American Clean Energy Leadership Act of 2009, which passed in the Senate Energy Committee in June 2009. Under this bill, electric utilities would be required by 2021 to meet a 15% standard through renewable sources of energy and energy efficiency.May 2012. See NSR discussion above.

At the regional level, ten northeastern states signed a Memorandum of Understanding (MOU) agreeing to establish a ~~greenhouse gas~~GHG emission cap-and-trade program, called the Regional Greenhouse Gas Initiative (RGGI). The program commenced in January 2009 and calls for ~~stabilization of~~stabilizing carbon dioxide emissions, at base levels established in 2005, from electric power plants with capacity greater than 25 MW. The MOU also provides for a 10% reduction in carbon dioxide emissions from base levels by 2019.

Pennsylvania has not stated an intention to join RGGI, but has enacted the Pennsylvania Climate Change Act of 2008 (PCCA). The PCCA established a Climate Change Advisory Committee to advise the DEP on the development of a Climate Change Action Plan. In December 2009, the Advisory Committee finalized its Climate Change Action Report which identifies specific actions that could result in reducing ~~greenhouse gas~~GHG emissions by 30% by 2020. Some of the proposed actions, such as a mandatory 5% efficiency improvement at power plants, could be technically unachievable. To date, there have been no regulatory or legislative actions taken to implement the recommendations of the report. In addition, legislation has been introduced ~~in the Pennsylvania House of Representatives~~and amendments filed to several bills that would, if enacted, significantly ~~increase~~in crease renewable and solar supply requirements. It is highly unlikely that this legislation will achieve passage in the 2011 legislative session.

~~In the~~Eleven Western ~~U.S., 11~~ states, including Montana and certain Canadian provinces, are members of the Western Climate Initiative (WCI). The WCI has established a goal of reducing carbon dioxide emissions 15% below 2005 levels by 2020 and is currently developing ~~greenhouse gas~~GHG emission allocations, offsets, and reporting recommendations.

In November 2008, the Governor of Kentucky issued a comprehensive energy plan including non-binding targets aimed at promoting improved energy efficiency, development of alternative energy, development of carbon capture and sequestration projects, and other actions to reduce GHG emissions. In December 2009, the Kentucky Climate Action Plan Council was established to develop an action plan addressing potential GHG reductions and related measures. A final plan is expected in early 2011. The impact of any such plan is not now determinable. It is highly unlikely that legislation requiring mandatory GHG reductions will be adopted in Kentucky in 2011.

A number of lawsuits have been filed asserting common law claims including nuisance, trespass and negligence against various companies with GHG emitting facilities, and the law remains unsettled on these claims. In September 2009, the U.S. Court of Appeals for the Second Circuit in the case of AEP v. Connecticut reversed a federal district court's decision and ruled that several states and public interest groups, as well as the City of New York, could sue five electric utility companies under federal common law for allegedly causing a public nuisance as a result of their emissions of GHGs. In December 2010, the U.S. Supreme Court announced that it will review this decision. In Comer v. Murphy Oil, the U.S. Court of Appeals for the Fifth Circuit recently declined to overturn a district court ruling that pla intiffs did not have standing to pursue common law claims against companies that emit GHGs. The complaint in the Comer case named the previous indirect parent of LG&E and KU as a defendant based upon emissions from the Kentucky plants. In January 2011, the Supreme Court denied a pending petition for review which has effectively brought the case to an end. Notwithstanding, additional litigation in federal and state courts over these issues is continuing.

PPL ~~has conducted an inventory of its carbon dioxide emissions and is continuing~~continues to evaluate options for reducing, avoiding, off-setting or sequestering its carbon dioxide emissions. In ~~2009,~~2010, PPL's power plants ~~emitted in excess of approximately 25 million tons of carbon dioxide~~ (based on PPL's equity share of these assets). emitted approximately 37 million tons of carbon dioxide (including 6 million tons of emissions from the LKE plants after their acquisition on November 1, 2010) compared to 29 million tons in 2009.

Renewable Energy Legislation

There has been interest in renewable energy legislation at both the state and federal levels. At the federal level, House and Senate bills proposed last year would have imposed mandatory renewable energy supply and energy efficiency requirements in the 15% to 20% range by approximately 2020. At this time, PPL does not expect similar legislation to progress at the federal or state levels (beyond what is otherwise already required in Pennsylvania) in the near term.

PPL ~~understands~~believes there are financial, regulatory and logistical uncertainties related to ~~greenhouse gas~~GHG reductions and the implementation of renewable energy mandates. These will need to be resolved before the impact of such requirements on PPL can be meaningfully estimated. Such uncertainties, among others, include the need to provide back-up supply to augment intermittent renewable generation, potential generation oversupply that could result from such renewable generation and back-up, impacts to ~~the PJM~~PJM's capacity market and the need for substantial changes to transmission and distribution systems to accommodate renewable ~~energy; which~~energy. These uncertainties are not directly addressed by the proposed legislation. PPL cannot predict at this time the effect on its future competitive position, results of operation, cash ~~flows~~fl ows and financial position, of any ~~greenhouse gas emission,~~GHG emissions, renewable energy mandate or other global climate change requirements that may be adopted, although the costs to implement and comply with any such requirements could be significant.

Water/Waste ~~(PPL~~(PPL and PPL Energy Supply)

Coal Combustion Residuals (CCRs)

In June 2010, the EPA proposed two approaches to regulating the disposal and management of coal combustion residuals under the Resource Conservation and Recovery Act (RCRA). CCRs include fly ash, bottom ash and scrubber wastes. In the one approach, the EPA would regulate CCRs as a hazardous waste under Subtitle C of RCRA. This approach would have very significant impacts on any coal-fired plant, and would require plants to retrofit their operations to comply with full hazardous waste requirements from the generation of CCRs and associated waste waters through transportation and disposal. This would also have a negative impact on the beneficial use of CCRs and could eliminate the current markets. The second approach would regulate CCRs as a solid waste under Subtitle D of RCRA. &# 160;This approach would only affect disposal and most significantly affect any wet disposal operations. Under this approach, many of the current markets for beneficial uses would not be affected. Currently, PPL expects that several of its plants in Kentucky and Montana could be significantly impacted by the requirements of Subtitle D of RCRA, as these plants are using surface impoundments for management and disposal of CCRs.

The EPA has issued information requests on CCR management practices at numerous plants throughout the power industry as it considers whether or not to regulate CCRs as hazardous waste. PPL has provided information on CCR management practices at most of its plants in response to the EPA's requests. In addition, the EPA has conducted follow-up inspections to evaluate the structural stability of CCR management facilities at several PPL plants and PPL has implemented certain actions in response to recommendations from these inspections.

In June 2009, the EPA's Office of Enforcement and Compliance Assurance issued a much broader information request to Colstrip and 18 other non-affiliated plants, seeking information under the RCRA, the Clean Water Act and the Emergency Planning and Community Right-to-Know Act. PPL responded to the EPA's broader information request. Although the EPA's enforcement office issued the request, the EPA has not necessarily concluded that the plants are in violation of any EPA requirements. The EPA conducted a multi-media inspection at Colstrip in August 2009 and issued a report in December 2010 stating that the EPA did not identify any violations of the applicable compliance standards for the Colstrip facility.

PPL cannot predict at this time the final requirements of the EPA's CCR regulations and what impact, if any, they would have on PPL's facilities, but the costs to PPL could be significant.

Martins Creek Fly Ash Release

In 2005, there was a release of approximately 100 million gallons of water containing fly ash from a disposal basin at the Martins Creek plant used in connection with the operation of the plant's two 150 MW coal-fired generating ~~units at the plant.~~units. This resulted in ash being deposited onto adjacent roadways and fields, and into a nearby creek and the Delaware River. ~~The leak was stopped, and~~ PPL determined that the release was caused by a failure in the disposal basin's discharge structure. PPL conducted extensive clean-up and completed studies, in conjunction with a group of natural resource trustees and the Delaware River Basin Commission, evaluating the effects of the release on the river's sediment, water quality and ecosystem.

The Pennsylvania DEP filed a complaint in Pennsylvania Commonwealth Court against PPL Martins Creek and PPL Generation, alleging violations of various state laws and regulations and seeking penalties and injunctive relief. PPL and the Pennsylvania DEP have settled this matter. The settlement ~~required a payment of $1.5 million in penalties and reimbursement of the DEP's costs. PPL made this payment in the second quarter of 2008. The settlement~~ also ~~requires~~required PPL to submit a report on the completed studies of possible natural resource damages. PPL subsequently submitted the assessment report to the Pennsylvania and New Jersey regulatory agencies ~~in 2007~~ and has continued discussing potential natural resource damages and mitigation options with the agencies.

Through December 31, ~~2009,~~2010, PPL Energy Supply has spent $28 million for remediation and related costs and an immaterial remediation liability remained. PPL and PPL Energy Supply cannot be certain of the outcome of the natural resource damage assessment or the associated costs, the outcome of any lawsuit that may be brought by citizens or businesses or the exact nature of any other regulatory or other legal actions that may be initiated against PPL, PPL Energy Supply or their subsidiaries as a result of the disposal basin release.

Basin Seepage -– Pennsylvania and Kentucky

Seepages have been detected at active and retired wastewater basins at various PPL ~~plants, including the Montour and Brunner Island generating facilities.~~plants. PPL has completed ~~an assessment~~or is completing assessments of ~~some of the~~ seepages at ~~the Montour and Brunner Island~~various facilities and is working with ~~the Pennsylvania DEP~~agencies to implement abatement measures for those ~~seepages. PPL continues to assess other~~ seepages, ~~at the Brunner Island facility. PPL currently plans to spend up to $64 million to upgrade and/or replace certain wastewater facilities in response to the seepages and for other facility changes.~~where required. The potential ~~additional~~ cost to address ~~the~~ identified seepages or other seepages at ~~all of PPL's Pennsylvania~~PPL plants is not now determinable, but could be significant.

Basin Seepage - Montana

In May 2003, approximately 50 plaintiffs brought an action against PPL Montana and the other owners of the Colstrip plant alleging property damage from seepage from the freshwater and wastewater ponds at Colstrip. In July 2008, the plaintiffs and the owner-defendants remaining after dismissal of NorthWestern, due to its bankruptcy, executed a settlement agreement. PPL Montana's share of the settlement was approximately $8 ~~million.~~million ($5 million after tax). In 2008, PPL Montana recorded an insignificant reserve for its share of potential additional settlements with three property owners living near the original plaintiffs but who were not parties to the lawsuit. In the fourth quarter of 2009, PPL Montana settled with two of these property owners. PPL Montana may incur additional costs related to the potential claims, including additional groundwater investigations and any related remedial measures, which are not now determinable, but could be significant.owners for an insignificant amount.

In 2007, six plaintiffs filed a separate lawsuit in the Montana Sixteenth Judicial District Court against the Colstrip plant owners asserting similar property damage claims as were asserted by the plaintiffs in the May 2003 complaint. A tentative settlement agreement was reached in July 2010. The ~~lawsuit~~settlement is ~~in its initial stages of discovery~~not yet final, and investigation, and PPL Montana is unable to predict the outcome of these proceedings. PPL Montana has undertaken certain groundwater investigations and remediation at the Colstrip plant to address groundwater contamination allegedmay not be honored by the plaintiffs, ~~as well as other groundwater contamination at the plant.~~but PPL ~~Montana may incur further costs based on the outcome of this lawsuit and its additional groundwater investigations and any related remedial measures, which are~~Montana's share is not ~~now determinable, but could~~expected to be significant.

Other Issues

In 2006, the EPA significantly decreased to 10 parts per billion (ppb), the drinking water ~~standard~~standards related to arsenic. In Pennsylvania, Montana and ~~Montana,~~Kentucky, this arsenic standard has been incorporated into the states' water quality standards and could result in more stringent limits ~~to PPL's~~in NPDES permits for its Pennsylvania, Montana and ~~Montana~~Kentucky plants. Recently, the EPA developed a draft risk assessment offor arsenic that increases the cancer risk exposure by more than 20 times, which would lower the current standard from 10 ppb to 0.1 ppb. If the lower standard ~~became~~becomes effective, ~~very expensive~~costly treatment would be required to attempt to meet the standard and, at this time, there is no assurance that it could be achieved.

The EPA is reassessing its polychlorinated biphenyls (PCB) regulations under the Toxics Substance Control Act, which currently allow certain PCB articles to remain in use. In April 2010, the EPA issued an Advanced Notice of Proposed Rulemaking for changes to these regulations. This rulemaking could lead to a phase-out of all PCB-containing equipment. PPL cannot predict at this time the outcome of these proposed EPA regulations and what impact, if any, they would have on PPL's facilities, but the costs to PPL could be significant.

The EPA finalized requirements in 2004 for new or modified cooling water intake structures. These requirements affect where generating facilities are built, establish intake design standards and could lead to requirements for cooling towers at new and modified power plants. Another rule, finalized in 2004, that addressed existing structures was withdrawn following a 2007 decision by the U.S. Court of Appeals for the Second Circuit. In 2008, however, the U.S. Supreme Court ruled that the EPA has discretion to use cost-benefit analysis in determining the best technology available for minimizing adverse environmental impact. The EPA is developing a new rule which is expected to be finalized in 2012. How the cost-benefit analysis will be employed, if incorporated, as well as other issues raised by the Second Circuit Court decision (not reviewed by the U.S. Supreme Court) and actions the states may take on their own could result in stricter standards for existing structures that could impose significant costs on PPL ~~subsidiaries.~~plants.

In October 2009, the EPA released its Final Detailed Study of the Steam Electric Power Generating effluent limitations guidelines and standards. ~~Draft~~Final regulations ~~that would include revisions to the effluent limitations guidelines~~ are expected to be ~~published~~effective in ~~September 2011, with final regulations to be effective September~~ 2013. PPL expects the revised guidelines and standards to be more stringent than the current standards, which could result in more stringent discharge permit limits.

PPL has signed a ~~consent order~~Consent Order and Agreement (COA) with the Pennsylvania DEP under which it ~~will~~agreed, under certain conditions, to take further actions to minimize the possibility of fish kills at its Brunner Island plant. Fish are attracted to warm water in the power plant discharge ~~channels,~~channel, especially during cold weather. ~~In the past, fish kills have occurred at Brunner Island when debris~~Debris at intake pumps ~~resulted~~can result in a unit trip or reduction in load, causing a sudden change in water ~~temperature in the discharge channel when fish were present. In 2008, PPL paid a nominal penalty to the DEP for fish kills at Brunner Island that occurred in 2008 and 2007.~~

temperature. PPL has committed to construct a barrier to prevent debris from entering the river water intake ~~area. PPL expects to construct the debris barrier in 2010~~area, pending receipt of regulatory permits, at a cost of approximately $4 million.

PPL has also ~~committed to investigate~~investigated alternatives to exclude fish from the discharge ~~area.~~channel and submitted three alternatives to the DEP. According to the COA, once the cooling towers at Brunner Island became operational, PPL ~~will need to~~must implement one of these fish exclusion alternatives if a fish kill occurs ~~after~~in the discharge channel due to thermal impacts from the plant. Following start-up of the cooling towers ~~become operational at Brunner Island~~ in ~~2010.~~ April 2010, several hundred dead fish were found in the cooling tower intake basket although there were no sudden changes in water temperature. In the third quarter of 2010, PPL discussed this matter with the DEP and both agreed that this condition was not one anticipated by the COA, thereby concluding it did not trigger a need to implement a fish exclusion project. At this time, no fish exclusion project is planned.

~~The EPA is considering establishing regulations under~~In May 2010, the ~~Resource Conservation and Recovery Act (RCRA) that could impact the disposal and management of coal combustion products (CCPs), including ash and scrubber wastes~~Kentucky Waterways Alliance and other ~~by-products. Following the large ash release at a Tennessee Valley Authority site in Tennessee in December 2008 and subsequent widespread media coverage, the EPA, under pressure from certain~~ environmental groups filed a petition with the Kentucky Energy and ~~legislators, has committed to proposing CCP regulations. Draft regulations are expected~~Environment Cabinet challenging the Kentucky Pollutant Discharge Elimination System permit issued in ~~2010. The EPA has been seeking information~~April 2010, which covers water discharges from the ~~power industry~~Trimble County station. In November 2010, the Cabinet issued a final order upholding the permit. In December 2010, the environmental groups appealed the order to Trimble Circuit Court. Until such time as it considers whether or not to regulate CCPs as hazardous waste, and PPL has responded to the EPA's requests. The EPA conducted a follow-up inspection of PPL Montana's Colstrip plant and PPL's Martins Creek plant.all available appeals are exhausted, PPL is ~~implementing certain actions in response~~unable to recommendations from these inspections. In June 2009, the EPA's Office of Enforcement and Compliance Assurance issued a much broader information request to Colstrip and 18 other non-affiliated plants, seeking information under the RCRA, the Clean Water Act and the Emergency Planning and Community Right-to-Know Act. PPL responded to the EPA's broader information request. Although the EPA's enforcement office issued the request, the EPA has not necessarily concluded that the plants are in violation of any EPA requirements. The EPA conducted a multi-media inspection at Colstrip in August 2009 and has not yet issued a report from that inspection. PPL cannot predict ~~at this time~~ the outcome or impact of ~~these matters or the requirements of the EPA's regulations and what impact, if any, they would have on PPL's facilities, but the costs to PPL could be significant.~~this matter.

Superfund and Other Remediation

(PPL, PPL Energy Supply and PPL Electric)

PPL ~~Electric~~ is a potentially responsible party at several sites listed by the EPA under the federal Superfund program, including the Columbia Gas Plant Site, the Metal Bank site and the Ward Transformer site. Clean-up actions have been or are being undertaken at all of these sites, the costs of which have not been significant to PPL. However, should the EPA require different or additional measures in the future, or should PPL's share of costs at multi-party sites increase significantly more than currently expected, the costs to PPL could be significant.

PPL ~~Electric~~is remediating or has ~~been remediating~~completed the remediation of several sites that were not ~~being~~ addressed under ~~another~~a regulatory program such as Superfund, but for which PPL ~~Electric~~ may be liable for remediation. These include a number of former coal gas manufacturing facilities in Pennsylvania and Kentucky previously owned or operated or currently owned by predecessors or affiliates of PPL. There are additional sites, formerly owned or operated by ~~a predecessor~~PPL predecessors or affiliates, for which PPL lacks information on current site conditions and is therefore unable to ~~PPL Electric.~~predict what, if any, potential liability it may have.

Depending on the outcome of investigations at sites where investigations have not begun or ~~have not~~ been completed or developments at sites for which PPL currently lacks information, the costs of remediation and other liabilities could be substantial. PPL and its subsidiaries also could incur other non-remediation costs at sites included in ~~the~~current consent orders or other contaminated sites, the costs of which are not now determinable but could be significant.

The EPA is evaluating the risks associated with polycyclic aromatic hydrocarbons and naphthalene, a chemical ~~by-product~~by-products of coal gas manufacturing. As a result of the EPA's evaluation, individual states may establish stricter standards for water quality and soil cleanup. This could require several PPL subsidiaries to take more extensive assessment and remedial actions at former coal gas manufacturing facilities. The costs to PPL of complying with any such requirements are not now determinable, but could be significant.

~~(PPL and PPL Energy Supply)~~

Under the Pennsylvania Clean Streams Law, subsidiaries of PPL Generation are obligated to remediate acid mine drainage at former mine sites and may be required to take additional steps to prevent potential acid mine drainage at previously capped refuse piles. One PPL Generation subsidiary is pumping mine water at two mine sites and treating water at one of these sites. Another PPL Generation subsidiary has installed a passive wetlands treatment system at a third site. At December 31, ~~2009,~~2010, PPL Energy Supply had accrued a discounted liability of ~~$24~~$25 million to cover the costs of pumping and treating groundwater at the two mine sites for 50 years and for operating and maintaining passive wetlands treatment at the third site. PPL Energy Supply discounted this liability based on risk-free rates at the time of the mine closures. The ~~weighted average~~weighted-average rate used was ~~8.04%~~8.16%. Expected undiscounted payments are estimated at $2 million for 2011, $1 million ~~for~~ each of the years from ~~2010~~2012 through 2014, $2 million for 2015, and ~~$144~~$137 million for work after ~~2014.~~2015.

(From time to time, PPL ~~PPL Energy Supply~~undertakes remedial action in response to spills or other releases at various on-site and ~~PPL Electric)~~off-site locations, negotiates with the EPA and state and local agencies regarding actions necessary for compliance with applicable requirements, negotiates with property owners and other third parties alleging impacts from PPL's operations, and undertakes similar actions necessary to resolve environmental matters which arise in the course of normal operations. Based on analyses to date, resolution of these general environmental matters is not expected to have a material adverse impact on PPL's operations.

Future cleanup or remediation work at sites currently under review, or at sites not currently identified, may result in material additional operating costs for PPL subsidiaries that cannot be estimated at this time.

Electric and Magnetic Fields (PPL, PPL Energy Supply and PPL Electric)

Concerns have been expressed by some members of the public regarding potential health effects of power frequency EMFs, which are emitted by all devices carrying electricity, including electric transmission and distribution lines and substation equipment. Government officials in the U.S. and the U.K. have reviewed this issue. The U.S. National Institute of Environmental Health Sciences concluded in 2002 that, for most health outcomes, there is no evidence that EMFs cause adverse effects. The agency further noted that there is some epidemiological evidence of an association with childhood leukemia, but that the evidence is difficult to interpret without supporting laboratory evidence. The U.K. National Radiological Protection Board (part of the U.K. Health Protection Agency) concluded in 2004 that , while the research on EMFs does not provide a basis to find that EMFs cause any illness, there is a basis to consider precautionary measures beyond existing exposure guidelines. ~~In April 2007, the~~The Stakeholder Group on Extremely Low Frequency EMF, set up by the U.K. Government, has issued ~~its interim assessment which describes a number of~~two reports, one in April 2007 and one in June 2010, describing options for reducing public exposure to ~~EMFs.~~EMF. The U.K. Government responded to ~~this assessment~~the first report in ~~October~~ 2009, agreeing to some of the proposals, including a proposed voluntary code to optimally phase 132 kilovolt overhead lines to reduce public exposure to EMF where it is cost effective to do so. The U.K. Government is currently considering the second report which concentrates on EMF exposure from distribution systems. PPL and its subsidiaries believe the current efforts to determine whether EMFs cause adverse health effects should continue and are taking steps to reduce EMFs, where practical, in the design of new transmission and ~~distribution~~distri bution facilities. PPL and its subsidiaries are unable to predict what effect, if any, the EMF issue might have on their operations and facilities either in the U.S. or the U.K., and the associated cost, or what, if any, liabilities they might incur related to the EMF issue.

Environmental Matters - WPD (PPL and PPL Energy Supply)

WPD's distribution businesses are subject to environmental regulatory and statutory requirements. PPL believes that WPD has taken and continues to take measures to comply with the applicable laws and governmental regulations for the protection of the environment.

The U.K. ~~government~~Government has implemented a project to ~~determine~~alleviate the impact of flooding on the U.K. utility infrastructure, including major electricity substations. WPD has agreed with the Ofgem to spend ~~$28~~$27 million on flood prevention, which will be recovered through rates during the ~~5-year~~five-year period commencing April 2010. WPD is currently liaising on site-specific proposals with local offices of a U.K. Government agency.

U.K. legislation has been passed that imposes a duty on certain companies, including WPD, to report on climate change adaptation. ~~It is expected that the~~The first ~~"Direction to Report" will be issued early~~information request was received by WPD in March 2010, with reports due for submission atby June 2011. WPD has worked with other U.K. electricity network operators to undertake research with the ~~end of the year.~~internationally recognized U.K. Met Office and to report using common agreed methodology.

There are no other material legal or administrative proceedings pending against or related to WPD with respect to environmental matters. See ~~"Environmental Matters - Domestic - Superfund and Other Remediation - Electric~~"Electric and Magnetic ~~Fields"~~Fields," above, for a discussion of EMFs.

Other

~~Labor Unions(PPL, PPL Energy Supply and PPL Electric)~~

~~At December 31, 2009, the breakdown of the total workforce that is represented by unions was:~~

Number of Employees Percent of Total Workforce

PPL 6,840 65%
PPL Energy Supply 4,850 69%
PPL Electric 1,570 72%

~~In May 2010, PPL's bargaining agreement with its largest IBEW local expires. The agreement covers the following:~~

Number of Employees Percent of Total Workforce

PPL 3,200 31%
PPL Energy Supply 1,210 17%
PPL Electric 1,570 72%

~~Negotiations commenced in February 2010. PPL cannot predict the outcome of the collective labor bargaining negotiations.~~

Nuclear Insurance (PPL and PPL Energy Supply)

PPL Susquehanna is a member of certain insurance programs that provide coverage for property damage to members' nuclear generating ~~stations.~~plants. Facilities at the Susquehanna ~~station~~plant are insured against property damage losses up to $2.75 billion under these programs. PPL Susquehanna is also a member of an insurance program that provides insurance coverage for the cost of replacement power during prolonged outages of nuclear units caused by certain specified conditions.

Under the property and replacement power insurance programs, PPL Susquehanna could be assessed retroactive premiums in the event of the insurers' adverse loss experience. At December 31, ~~2009,~~2010, this maximum assessment was ~~$37~~$40 million.

In the event of a nuclear incident at the Susquehanna ~~station,~~plant, PPL Susquehanna's public liability for claims resulting from such incident would be limited to $12.6 billion under provisions of The Price-Anderson Act Amendments under the Energy Policy Act of 2005. PPL Susquehanna is protected against this liability by a combination of commercial insurance and an industry assessment program.

In the event of a nuclear incident at any of the reactors covered by The Price-Anderson Act Amendments under the Energy Policy Act of 2005, PPL Susquehanna could be assessed up to $235 million per incident, payable at $35 million per year.

At December 31, ~~2009,~~2010, the property, replacement power and nuclear incident insurers maintained an A.M. Best financial strength rating of A ("Excellent").

Guarantees and Other Assurances

(PPL, PPL Energy Supply and PPL Electric)

In the normal course of business, PPL, PPL Energy Supply and PPL Electric enter into agreements that provide financial performance assurance to third parties on behalf of certain subsidiaries. Such agreements include, for example, guarantees, stand-by letters of credit issued by financial institutions and surety bonds issued by insurance companies. These agreements are entered into primarily to support or enhance the creditworthiness attributed to a subsidiary on a stand-alone basis or to facilitate the commercial activities in which these subsidiaries enter.

(PPL)

PPL fully and unconditionally guarantees all of the debt securities of PPL Capital Funding.

(PPL, PPL Energy Supply and PPL Electric)

The table below details guarantees provided as of December 31, ~~2009.~~2010. The total recorded liability at December 31, ~~2009~~2010 was $14 million and ~~2008~~at December 31, 2009 was $3 ~~million and $4~~ million. Other than as noted in the ~~description~~descriptions for "WPD guarantee of pension and other obligations of unconsolidated entities," the probability of expected payment/performance under each of these guarantees is remote.

Exposure at

December 31,

Expiration

Exposure at December 31,

2009 (a)

Expiration

Date

Description

2010 (a)

Date

PPL

Indemnifications for sale of PPL Gas Utilities

300

PPL has provided indemnification to the purchaser of PPL Gas Utilities and Penn Fuel Propane, LLC for damages arising out of any breach of the representations, warranties and covenants under the related transaction agreement and for damages arising out of certain other matters, including certain pre-closing unknown environmental liabilities relating to former manufactured gas plant properties or off-site disposal sites, if any, outside of Pennsylvania. The indemnification provisions for most representations and warranties, including tax and environmental matters, are capped at 15% of the purchase price ($45 million), in the aggregate, and are triggered (i) only if the individual claim exceeds $50,000, and (ii) only if, and only to the extent that, in the aggregate, total claims exceed 1.5% of the purchase price ($4.5 million). The indemnification provisions for most representations and warranties expired on September 30, 2009 without any claims having been made. Certain representations and warranties, including those having to do with transaction authorization and title, survive indefinitely, are capped at the purchase price and are not subject to the above threshold or deductible. The indemnification provision for the tax matters representations survives for the duration of the applicable statute of limitations, and the indemnification provision for the environmental matters representations survives for a period of three years after the transaction closing. The indemnification relating to unknown environmental liabilities for manufactured gas plants and disposal sites outside of Pennsylvania could survive more than three years, but only with respect to applicable property or sites identified by the purchaser prior to the third anniversary of the transaction closing. The indemnification for covenants survives until the applicable covenant is performed and is not subject to any cap.

Indemnifications for sale of PPL Gas Utilities

300

(c)

Indemnifications of LKE

300

(d)

2021 to 2023

PPL Energy Supply (b)

Letters of credit issued on behalf of affiliates

2010 to 2011

Standby letter of credit arrangements under PPL Energy Supply's credit facilities for the purposes of protecting various third parties against nonperformance by PPL. This is not a guarantee by PPL on a consolidated basis.

Letters of credit issued on behalf of affiliates

(e)

2011 to 2012

Retroactive premiums under nuclear insurance programs

PPL Susquehanna is contingently obligated to pay this amount related to potential retroactive premiums that could be assessed under its nuclear insurance programs. See "Nuclear Insurance" for additional information.

Retrospective premiums under nuclear insurance programs

(f)

Nuclear claims under The Price-Anderson Act Amendments under The Energy Policy Act of 2005

235

This is the maximum amount PPL Susquehanna could be assessed for each incident at any of the nuclear reactors covered by this Act. See "Nuclear Insurance" for additional information.

Nuclear claims under The Price-Anderson Act Amendments under The Energy Policy Act of 2005

235

(g)

Indemnifications for entities in liquidation and sales of assets

186

2010 to 2012

PPL Energy Supply's maximum exposure with respect to certain indemnifications and the expiration of the indemnifications cannot be estimated because, in the case of certain indemnification provisions, the maximum potential liability is not capped by the transaction documents and the expiration date is based on the applicable statute of limitations. The exposure and expiration dates noted are only for those cases in which the agreements provide for specific limits.

In connection with the liquidation of wholly owned subsidiaries that have been deconsolidated upon turning the entities over to the liquidators, certain affiliates of PPL Global have agreed to indemnify the liquidators, directors and/or the entities themselves for any liabilities or expenses arising during the liquidation process, including liabilities and expenses of the entities placed into liquidation. In some cases, the indemnifications are limited to a maximum amount that is based on distributions made from the subsidiary to its parent either prior or subsequent to being placed into liquidation. In other cases, the maximum amount of the indemnifications is not explicitly stated in the agreements. The indemnifications generally expire two to seven years subsequent to the date of dissolution of the entities. The exposure noted only includes those cases in which the agreements provide for a specific limit on the amount of the indemnification, and the expiration date was based on an estimate of the dissolution date of the entities. In 2009, $212 million of previously disclosed exposure expired.

Indemnifications for entities in liquidation and sales of assets

515

(h)

2012 to 2017

In connection with their sales of various businesses, WPD and its affiliates have provided the purchasers with indemnifications that are standard for such transactions, including indemnifications for certain pre-existing liabilities and environmental and tax matters. In addition, in connection with certain of these sales, WPD and its affiliates have agreed to continue their obligations under existing third-party guarantees, either for a set period of time following the transactions or upon the condition that the purchasers make reasonable efforts to terminate the guarantees. Finally, WPD and its affiliates remain secondarily responsible for lease payments under certain leases that they have assigned to third parties.

A subsidiary of PPL Energy Supply has agreed to provide indemnification to the purchaser of the six Maine hydroelectric facilities for damages arising out of any breach of the representations, warranties and covenants under the related transaction agreement and for damages arising out of certain other matters, including liabilities of the PPL Energy Supply subsidiary relating to the pre-closing ownership or operation of those hydroelectric facilities or relating to other assets of the PPL Energy Supply subsidiary that were not included in that sale. The indemnification obligations are subject to certain customary limitations, including thresholds for allowable claims, caps on aggregate liability, and time limitations for claims arising out of breaches of representations and warranties.

PPL Energy Supply has provided indemnification to the purchaser of a generating facility for losses arising out of any breach of the representations, warranties and covenants under the related transaction documents and for losses arising with respect to liabilities not specifically assumed by the purchaser, including certain pre-closing environmental and tort liabilities. The indemnification other than for pre-closing environmental and tort liabilities is triggered only if the purchaser's losses reach $1 million in the aggregate, capped at 50% of the purchase price (or $95 million), and either expired in May 2007 or will expire pursuant to applicable statutes of limitations. The indemnification provision for unknown environmental and tort liabilities related to periods prior to PPL Energy Supply's ownership of the real property on which the facility is located is capped at $4 million in the aggregate and survives for a maximum period of five years after the transaction closing.

Indemnification to operators of jointly owned facilities

In December 2007, a subsidiary of PPL Energy Supply executed revised owners agreements for two jointly owned facilities, the Keystone and Conemaugh generating stations. The agreements require that in the event of any default by an owner, the other owners fund contributions for the operation of the generating stations, based upon their ownership percentages. The maximum obligation among all owners, for each station, is currently $20 million. The non-defaulting owners, who make up the defaulting owner's obligations, are entitled to the generation entitlement of the defaulting owner, based upon their ownership percentage. The agreements do not have an expiration date.

Indemnification to operators of jointly owned facilities

(i)

WPD guarantee of pension and other obligations of unconsolidated entities

2017

As a result of the privatization of the utility industry in the U.K., certain electric associations' roles and responsibilities were discontinued or modified. As a result, certain obligations, primarily pension-related, associated with these organizations have been guaranteed by the participating members. Costs are allocated to the members based on predetermined percentages as outlined in specific agreements. However, if a member becomes insolvent, costs can be reallocated to and are guaranteed by the remaining members. At December 31, 2009, WPD has recorded an estimated discounted liability based on its current allocated percentage of the total expected costs for which the expected payment/performance is probable. Neither the expiration date nor the maximum amount of potential payments for certain obligations is explicitly stated in the related agreements. Therefore, they have been estimated based on the types of obligations.

WPD guarantee of pension and other obligations of unconsolidated entities

(j)

2015

Tax indemnification related to unconsolidated WPD affiliates

2012

Two WPD unconsolidated affiliates were refinanced during 2005. Under the terms of the refinancing, WPD has indemnified the lender against certain tax and other liabilities.

Tax indemnification related to unconsolidated WPD affiliates

(k)

2012

Guarantee of a portion of an unconsolidated entity's debt

2018

Reflects principal payments only.

Guarantee of a portion of an unconsolidated entity's debt

(l)

2018

(a)

Represents the estimated maximum potential amount of future payments that could be required to be made under the guarantee.

(b)

Other than the letters of credit, all guarantees of PPL Energy Supply, on a consolidated basis, also apply to PPL on a consolidated basis. Neither PPL nor PPL Energy Supply is liable for obligations under guarantees provided by WPD, as the beneficiaries of the guarantees do not have recourse to such entities.

(c)

PPL has provided indemnification to the purchaser of PPL Gas Utilities and Penn Fuel Propane, LLC for damages arising out of any breach of the representations, warranties and covenants under the related transaction agreement and for damages arising out of certain other matters, including certain pre-closing unknown environmental liabilities relating to former manufactured gas plant properties or off-site disposal sites, if any, outside of Pennsylvania. The indemnification provisions for most representations and warranties, including tax and environmental matters, are capped at $45 million, in the aggregate, and are triggered (i) only if the individual claim exceeds $50,000, and (ii) only if, and only to the extent that, in the aggregate, total claims exceed $4.5 million. The indemnification provisions for most representations and warranties expired on September 30, 2009 without any claims havin g been made. Certain representations and warranties, including those having to do with transaction authorization and title, survive indefinitely, are capped at the purchase price and are not subject to the above threshold or deductible. The indemnification provision for the tax matters representations survives for the duration of the applicable statute of limitations, and the indemnification provision for the environmental matters representations survives for a period of three years after the transaction closing. The indemnification relating to unknown environmental liabilities for manufactured gas plants and disposal sites outside of Pennsylvania could survive more than three years, but only with respect to applicable property or sites identified by the purchaser prior to the third anniversary of the transaction closing. The indemnification for covenants survives until the applicable covenant is performed and is not subject to any cap.

(d)

LKE provides certain indemnifications, the most significant of which relate to the termination of the WKE lease in July 2009. These guarantees cover the due and punctual payment, performance and discharge by each party of its respective present and future obligations. The most comprehensive of these guarantees is the LKE guarantee covering operational, regulatory and environmental commitments and indemnifications made by WKE under the WKE Transaction Termination Agreement. This guarantee has a term of 12 years ending July 2021, and a cumulative maximum exposure of $200 million. Certain items such as non-excluded government fines and penalties fall outside the cumulative cap. Another guarantee with a maximum exposure of $100 million covering other indemnifications expires in 2023. LKE is not aware of claims made by any party at this time, although one matter is currently in arbitration, the outcome of which cannot be predicted at this time. See Note 9 for additional information. Additionally, LKE has indemnified various third parties related to historical obligations for other divested subsidiaries and affiliates, including certain indemnifications of current officers with respect to its former Argentine businesses, for which LKE has received a cross-indemnity from a third party. The indemnifications vary by entity and the maximum amount limits range from being capped at the sale price to no specified maximum; however, LKE is not aware of formal claims made by any party at this time. LKE could be required to perform on these indemnifications in the event of covered losses or liabilities being claimed by an indemnified party. No additional material loss is anticipated by reason of such indemnification.

(e)	Standby letter of credit arrangements under PPL Energy Supply's credit facilities for the purposes of protecting various third parties against nonperformance by PPL. This is not a guarantee by PPL on a consolidated basis.

(f)	PPL Susquehanna is contingently obligated to pay this amount related to potential retrospective premiums that could be assessed under its nuclear insurance programs. See "Nuclear Insurance," above, for additional information.

(g)	This is the maximum amount PPL Susquehanna could be assessed for each incident at any of the nuclear reactors covered by this Act. See "Nuclear Insurance," above for additional information.

(h)

In connection with the liquidation of wholly owned subsidiaries that have been deconsolidated upon turning the entities over to the liquidators, certain affiliates of PPL Global have agreed to indemnify the liquidators, directors and/or the entities themselves for any liabilities or expenses arising during the liquidation process, including liabilities and expenses of the entities placed into liquidation. In some cases, the indemnifications are limited to a maximum amount that is based on distributions made from the subsidiary to its parent either prior or subsequent to being placed into liquidation. In other cases, the maximum amount of the indemnifications is not explicitly stated in the agreements. The indemnifications generally expire two to seven years subsequent to the date of dissolution of the entities. The exposure noted only includes those cases in which the agre ements provide for a specific limit on the amount of the indemnification, and the expiration date was based on an estimate of the dissolution date of the entities.

A subsidiary of PPL Energy Supply has agreed to provide indemnification to the purchaser of the Long Island generation business for damages arising out of any breach of the representations, warranties and covenants under the related transaction agreement and for damages arising out of certain other matters, including liabilities relating to certain renewable energy facilities which were previously owned by one of the PPL subsidiaries sold in the transaction but which were unrelated to the Long Island generation business. The indemnification provisions are subject to certain customary limitations, including thresholds for allowable claims, caps on aggregate liability, and time limitations for claims arising out of breaches of most representations and warranties.

A subsidiary of PPL Energy Supply has agreed to provide indemnifications to the purchasers of the Maine hydroelectric facilities for damages arising out of any breach of the representations, warranties and covenants under the respective transaction agreements and for damages arising out of certain other matters, including liabilities of the PPL Energy Supply subsidiary relating to the pre-closing ownership or operation of those hydroelectric facilities. The indemnification obligations are subject to certain customary limitations, including thresholds for allowable claims, caps on aggregate liability, and time limitations for claims arising out of breaches of representations and warranties.

(i)

(j)

As a result of the privatization of the utility industry in the U.K., certain electric associations' roles and responsibilities were discontinued or modified. As a result, certain obligations, primarily pension-related, associated with these organizations have been guaranteed by the participating members. Costs are allocated to the members based on predetermined percentages as outlined in specific agreements. However, if a member becomes insolvent, costs can be reallocated to and are guaranteed by the remaining members. At December 31, 2010, WPD has recorded an estimated discounted liability based on its current allocated percentage of the total expected costs for which the expected payment/performance is probable. Neither the expiration date nor the maximum amount of potential payments for certain obligations is explicitly stated in the related agreements. Therefore, they have been estimated based on the types of obligations.

(k)	Two WPD unconsolidated affiliates were refinanced during 2005. Under the terms of the refinancing, WPD has indemnified the lender against certain tax and other liabilities.

(l)	Reflects principal payments only.

PPL, PPL Energy Supply and PPL Electric and their subsidiaries provide other miscellaneous guarantees through contracts entered into in the normal course of business. These guarantees are primarily in the form of indemnification or warranties related to services or equipment and vary in duration. The amounts of these guarantees often are not explicitly stated, and the overall maximum amount of the obligation under such guarantees cannot be reasonably estimated. Historically, PPL, PPL Energy Supply and PPL Electric and their subsidiaries have not made any significant payments with respect to these types of guarantees and the probability of payment/performance under these guarantees is remote.

PPL, on behalf of itself and certain of its subsidiaries, maintains insurance that covers liability assumed under contract for bodily injury and property damage. The coverage requires a $4 million deductible per occurrence and provides maximum aggregate coverage of ~~$150~~$200 million. This insurance may be applicable to obligations under certain of these contractual arrangements.

~~15.~~

~~Related Party Transactions~~

~~Affiliate Trust(PPL and PPL Energy Supply)~~16. Related Party Transactions

In February 2007, WPD LLP redeemed all of the 8.23% Subordinated Debentures maturing in February 2027 that were held by SIUK Capital Trust I. Upon redemption, WPD LLP paid a premium of 4.115%, or approximately $3 million, on the principal amount of $85 million of subordinated debentures. Payment of $29 million was also made to settle related cross-currency swaps and is included on the Statement of Cash Flows as a component of "Retirement of long-term debt." Interest expense on this obligation was $2 million for 2007. The redemption resulted in a recorded loss of $2 million during 2007. This interest expense and loss are both reflected in "Interest Expense" for PPL and PPL Energy Supply on the Statement of Income.

~~PLR Contracts~~(PPL Energy Supply and PPL Electric)

PLR Contracts

PPL Electric had power purchase ~~agreements~~contracts with PPL EnergyPlus ~~effective July 2000 and January 2002, under~~in which PPL EnergyPlus supplied PPL Electric's entire PLR load. These contracts expired on December 31, 2009. Under these contracts, PPL EnergyPlus provided electricity at the predetermined capped prices that PPL Electric was authorized to charge its PLR customers. These purchases totaled $1.8 billion in 2009 and 2008 ~~and 2007. These purchases include nuclear decommissioning recovery and amortization of an up-front contract payment and~~which are included in the Statements of Income as "Wholesale energy marketing to affiliate" by PPL Energy Supply, and as "Energy purchases from affiliate" by PPL Electric. These purchases included nuclear decommissioning recovery and amortization of an up-front contract payment.

Under one of the PLR contracts, PPL Electric was required to make performance assurance deposits with PPL EnergyPlus when the market price of electricity was less than the contract price by more than its contract collateral threshold. Conversely, PPL EnergyPlus was required to make performance assurance deposits with PPL Electric when the market price of electricity was greater than the contract price by more than its contract collateral threshold. ~~At December 31, 2008, PPL Energy Supply was required to provide PPL Electric with performance assurance of $300 million.~~ PPL Electric paid interest equal to ~~the~~ one-month LIBOR plus 0.5% on ~~this~~the deposit, which is included in "Interest Expense with Affiliate" on the Statements of Income. PPL Energy Supply recorded the receipt of the interest as affiliated interest income, which is included in "Interest Income from Affiliates" on the Statements of Income. Interest related to ~~the~~t he required deposits was $2 million ~~$10 million~~ and ~~$17~~$10 million for 2009 ~~2008~~ and ~~2007.~~2008.

PPL Electric ~~has~~ held competitive solicitations in prior years for PLR generation supply for 2010 and beyond. PPL EnergyPlus has been awarded a portion of this supply. These purchases totaled $320 million in 2010, and ~~2011. PPL EnergyPlus was one of the successful bidders~~are included in the ~~first competitive solicitation process~~Statements of Income as "Wholesale energy marketing to affiliate" by PPL Energy Supply, and ~~has entered into an agreement with~~as "Energy purchases from affiliate" by PPL ~~Electric to supply up to 671 MW~~Electric.

See Note 1 for additional information regarding PPL Electric's purchases of ~~total peak load in 2010, at an average price of $91.42 per MWh.~~accounts receivable from PPL EnergyPlus.

Under the standard Supply Master Agreement for the ~~bid~~competitive solicitation process, PPL Electric requires all suppliers to post collateral once credit exposures exceed defined credit limits. In no instance is PPL Electric required to post collateral to suppliers under these supply contracts. ~~With respect with its agreement with PPL Electric,~~ PPL EnergyPlus is required to post collateral with PPL Electric: (a) when the market price of electricity to be delivered by PPL EnergyPlus exceeds the contract price for the forecasted quantity of electricity to be delivered and (b) when this market price exposure exceeds a contractual credit limit. Based on the current credit rating of PPL Energy Supply, as guarantor, this credit limit is $35 million.

PPL Energy Supply has credit exposure to PPL Electric under ~~certain~~these energy supply contracts. See Note 1718 for additional information on this credit exposure.

NUG Purchases~~(PPL Energy Supply and PPL Electric)~~

PPL Electric has a reciprocal contract with PPL EnergyPlus to sell electricity purchased under contracts with NUGs. PPL Electric purchases electricity from the NUGs at contractual rates and then sells the electricity at the same price to PPL EnergyPlus. These purchases totaled $3 million in 2010, $70 million in 2009 and $108 million in ~~2008 and $156 million in 2007.~~2008. These amounts are included in the Statements of Income as "Wholesale electric to affiliate" by PPL Electric, and as "Energy purchases from affiliate" by PPL Energy Supply. Most of the NUG contracts have expired, with the final NUG contract to expire in 2014.

Allocations of Corporate Service Costs~~(PPL Energy Supply and PPL Electric)~~

PPL Services provides corporate functions such as financial, legal, human resources and information technology services. PPL Services charges the respective PPL subsidiaries for the cost of such services when they can be specifically identified. The cost of these services that is not directly charged to PPL subsidiaries is allocated to certain ~~of the~~ subsidiaries based on an average of the subsidiaries' relative invested capital, operation and maintenance expenses, and number of employees. PPL Services allocated the following amounts, which PPL management believes are reasonable, to PPL Energy Supply and PPL Electric, including amounts applied to accounts that are further distributed between capital and expense.

	2009 (a)		2008		2007			2010		2009 (a)		2008

PPL Energy Supply	$	214	$	209	$	230	$	232	$	214	$	209
PPL Electric		121		116		112		134		121		116

(a)

Excludes allocated costs associated with the February 2009 workforce reduction. See Note 1213 for additional information.

Intercompany Borrowings

(PPL Energy Supply)

A PPL Energy Supply subsidiary ~~has an $800 million~~holds revolving demand ~~note to an affiliate.~~notes from certain affiliates. There ~~was~~were no ~~balance~~balances outstanding at December 31, ~~2009~~2010 and ~~2008.~~2009. In ~~2009,~~2010, the interest ~~was due monthly at a rate~~rates were equal to 1-month LIBOR plus 1% and 1-month LIBOR plus 3.50%. Interest earned on ~~this note~~these notes is included in "Interest Income from Affiliates" on the Statements of Income. In addition, in November 2010, this subsidiary held term notes with certain LKE subsidiaries. These notes were subsequently repaid and therefore no balances were outstanding at December 31, 2010. Interest on these notes was due monthly at interest rates between 4.24% and 7.04%. While balances were outstanding, interest earned ~~was~~on all these affiliate note receivables were $9 million, insignificant and $4 ~~million~~mil lion for 2010, 2009 and ~~$12 million for 2008 and 2007. Interest was not significant for 2009.~~2008.

(PPL Electric)

A PPL Electric subsidiary ~~has a $300 million~~holds revolving demand ~~note to~~notes from an affiliate. There ~~was~~were no outstanding ~~balance~~balances at December 31, ~~2009~~2010 and ~~a $300 million balance outstanding at December 31, 2008. The~~2009. In 2010, the interest ~~rate was~~rates were equal to ~~3-month~~1-month LIBOR plus 3.50% and 3-month LIBOR plus ~~1.00% at December 31, 2009 and 2008. This note is shown on the Balance Sheet as "Note receivable from affiliate."~~3.50%. Interest earned on ~~the note~~these notes is included in "Interest Income from Affiliate" on the Statements of Income, and was $2 million, $4 million and $9 million for 2010, 2009 and ~~$19 million for 2009, 2008 and 2007.~~2008.

~~Intercompany Derivatives~~(PPL Energy Supply)

Intercompany Derivatives

In 2010, 2009 and 2008, ~~and 2007,~~a subsidiary of PPL Energy Supply entered into a combination of average rate forwards and average rate options with PPL to sell British pounds sterling. These hedging instruments have terms identical to average rate forwards and average rate options entered into by PPL with third parties to protect the translation of expected income denominated in British pounds sterling to U.S. dollars. Gains and losses, both realized and unrealized, on these types of hedging instruments are included in "Other Income -(Expense) - net" on the ~~Statements~~Statement of Income. PPL Energy Supply recorded a net gain of $3 million during 2010, a net loss of $9 million during 2009 and a net gain of $9 million during 2008 ~~and a net loss of $4 million during 2007~~ related to average rate forwards and average rate options. Contracts outstanding at Dec ember 31, 2010 hedged a total exposure of £89 million related to the translation of expected income in 2011. Contracts outstanding at December 31, 2009 ~~hedge~~hedged a total exposure of £48 million related to the translation of expected income ~~for~~in 2010. The fair value of these positions, ~~was a net asset of $2 million, which is~~primarily reflected in "Current Assets - Price risk management assets" on the Balance ~~Sheet. No similar hedging instruments were outstanding~~Sheet, was a net asset of $4 million and $2 million at December 31, ~~2008.~~2010 and 2009.

In 2007, PPL Energy Supply entered into forward contracts with PPL to sell Chilean pesos. These hedging instruments had terms identical to forward sales contracts entered into by PPL with third parties to protect the valueA subsidiary of its net investment in Emel, as well as a portion of the proceeds in excess of its net investment expected from the then-anticipated sale of Emel. These contracts were terminated in 2007 in connection with the sale of Emel. For 2007, PPL Energy Supply's Statement of Income reflects losses of $7 million in "Other income - net" and $23 million in Discontinued Operations related to these contracts.

PPL Energy Supply is also party to forward contracts with PPL to sell British pounds sterling to protect the value of a portion of its net investment in WPD. These hedging instruments have terms identical to forward sales contracts entered into by PPL with third parties. The total ~~notional~~ amount of the contracts outstanding at December 31, 2010 and 2009 was £35 million and ~~2008 was~~ £40 million ~~(approximately~~($62 million and $78 ~~million based on contracted rates) and £68 million (approximately $134~~ million based on contracted rates). The fair value of these positions at December 31, 2010 was an asset of ~~$13~~$7 million, ~~and $34 million at December 31, 2009 and 2008,~~ which is included in "Current Assets - Price risk management assets," with an offsetting after-tax amount included in the foreign currency translation adjustment component of AOCI on the Balance ~~Sheets. Additionally,~~Sheet. The fair value of these positions at December 31 , 2009 was an asset of $13 million, of which $8 million ~~and $16 million were~~was included in "Current Assets - Price risk management assets" ~~on the Balance Sheets at December 31, 2009 and 2008~~ and $5 million ~~and $18 million were~~was included in "Other Noncurrent Assets - Price risk management ~~assets"~~assets," with an offsetting after-tax amount included in the foreign currency translation adjustment component of AOCI on the Balance ~~Sheets at December 31, 2009 and 2008.~~Sheet.

Trademark Royalties~~(PPL Energy Supply)~~

A PPL subsidiary owns PPL trademarks and bills certain affiliates for their use. PPL Energy Supply was allocated $40 million of license fees in 2010 and 2009 and $48 million in ~~2008 and $39 million in 2007.~~2008. These allocations are primarily included in "Other operation and maintenance" on the Statements of Income.

~~Transmission~~ (PPL, PPL Energy Supply and PPL Electric)

Transmission

PPL Energy Supply owns no domestic transmission or distribution facilities, other than facilities to interconnect its generation with the electric transmission system. Therefore, PPL EnergyPlus and other PPL Generation subsidiaries must pay PJM, the operator of the transmission system, to deliver the energy these subsidiaries supply to retail and wholesale customers in PPL Electric's franchised territory in eastern and central Pennsylvania. PJM in turn pays PPL Electric for the use of its transmission system. PPL eliminates the impact of these revenues and expenses on its Statements of Income.

Other~~(PPL, PPL Energy Supply and PPL Electric)~~

See ~~Note~~Notes 1 and 5 for discussions regarding the intercompany tax sharing policy and intercompany allocations of stock-based compensation expense. See Note 7 for a discussion regarding capital transactions between PPL and its affiliates. See Note 1213 for discussions regarding intercompany allocations of defined benefits.

~~16.~~

17. Other Income (Expense) - net

(PPL, PPL Energy Supply and PPL Electric)

The breakdown of "Other Income (Expense) - net" was:

2009 2008 2007
PPL

Other Income
Gains related to the extinguishment of notes (Note 7) $ 29
Earnings on securities in the NDT funds 20 $ 10 $ 16
Interest income 14 33 61
Mine remediation liability adjustment 11 (2 )
Hyder liquidation distributions 3 6
Gain (loss) on sales of PP&E (1 ) 12
Miscellaneous - Domestic 11 7 12
Miscellaneous - International 1 1 9
Total 75 64 114
Other Deductions
Economic foreign currency hedges 9 (9 ) 8
Charitable contributions 6 5 6
Miscellaneous - Domestic 7 7
Miscellaneous - International 4 6 3
Other Income - net $ 49 $ 55 $ 97

PPL Energy Supply

Other Income
Gains related to the extinguishment of notes (Note 7) $ 25
Earnings on securities in the NDT funds 20 $ 10 $ 16
Interest income 6 23 48
Mine remediation liability adjustment 11 (2 )
Hyder liquidation distributions 3 6
Gain (loss) on sales of PP&E 1 8
Miscellaneous - Domestic 5 6 8
Miscellaneous - International 1 1 9
Total 57 55 93
Other Deductions
Economic foreign currency hedges 9 (9 ) 8
Miscellaneous - Domestic 9 10 2
Miscellaneous - International 4 6 3
Other Income - net $ 35 $ 48 $ 80

PPL Electric

Other Income
Interest income $ 8 $ 7 $ 9
Gain on sales of PP&E 4
Miscellaneous 1
Total 8 7 14
Other Deductions 2 2 2
Other Income - net $ 6 $ 5 $ 12

			PPL						PPL Energy Supply						PPL Electric
			2010		2009		2008		2010		2009		2008		2010		2009		2008
Other Income
	Gains related to the
		extinguishment of notes (a)			$	29					$	25
	Earnings on securities in NDT funds		$	20		20	$	10	$	20		20	$	10
	Interest income			8		14		33		6		6		23	$	2	$	8	$	7
	AFUDC			5		1		1								5		1		1
	Mine remediation liability adjustment							11						11
	Miscellaneous - Domestic			5		9		5		4		3		5		1
	Miscellaneous - International			1		1		4		1		1		4
	Total Other Income			39		74		64		31		55		53		8		9		8
Other Expense
	Economic foreign currency
		exchange contracts		(3)		9		(9)		(3)		9		(9)
	Charitable contributions			4		6		5		1
	Cash flow hedges (b)			29
	LKE acquisition costs (Note 10)			31
	Miscellaneous - Domestic			7		8		9		5		9		10		3		3		3
	Miscellaneous - International			2		4		6		2		4		6
	Total Other Expense			70		27		11		5		22		7		3		3		3
Other Income (Expense) - net			$	(31)	$	47	$	53	$	26	$	33	$	46	$	5	$	6	$	5

~~17.~~ (a)

~~Fair Value Measurements~~In 2009, PPL Energy Supply completed tender offers to purchase up to $250 million aggregate principal amount of certain of its outstanding senior notes for $220 million, resulting in a $25 million net gain. PPL recorded an additional net gain of $4 million as a result of reclassifying gains and ~~Credit Concentrations~~

losses on related cash flow hedges from AOCI into earnings.

(b)

As a result of the expected net proceeds from the sale of certain non-core generation facilities, coupled with the monetization of full-requirement sales contracts, debt that had been planned to be issued by PPL Energy Supply was no longer needed. As a result, hedge accounting associated with interest rate swaps entered into by PPL in anticipation of a debt issuance by PPL Energy Supply was discontinued. Associated net losses were reclassified from AOCI into earnings.

18. Fair Value Measurements and Credit Concentration

(PPL, PPL Energy Supply and PPL Electric)

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). ~~Fair~~PPL and its subsidiaries use, as appropriate, a market approach (generally, data from market transactions), an income approach (generally, present value ~~guidance establishes~~techniques and option-pricing models), and/or a ~~fair value hierarchy that prioritizes the inputs used~~cost approach (generally, replacement cost) to measure ~~fair value into three broad levels. See Note 1 for additional information on fair value measurements. See Note 12 for more information regarding~~ the fair value ~~and related~~of an asset or liability. These valuation ~~techniques for retirement and postretirement benefit plan assets.~~approaches incorporate inputs such as observable, independent market data and/or unobservable data that management believes are predicated on the assumptions market participants would use to price an asset or liability. These inputs may incorporate, as applicable, certain risks such as nonperformance risk, which includes credit risk.

Recurring Fair Value Measurements

The assets and liabilities measured at fair value were:

December 31, 2009 December 31, 2008
Fair Value Measurements Using Fair Value Measurements Using
Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
PPL
Assets
Cash and cash equivalents $ 801 $ 801 $ 1,100 $ 1,100
Short-term investments - municipal debt securities 150 150
Restricted cash and cash equivalents 129 129 347 347
Price risk management assets:
Energy commodities 3,354 3 $ 3,234 $ 117 2,460 19 $ 2,143 $ 298
Interest rate/foreign currency exchange 77 77 156 152 4
3,431 3 3,311 117 2,616 19 2,295 302
NDT funds:
Cash and cash equivalents 7 7 4 4
Equity securities:
U.S. large-cap 259 176 83 182 116 66
U.S. mid/small-cap 101 75 26 69 50 19
Debt securities:
U.S. Treasury 74 74 77 77
U.S. government agency 9 9 14 14
Municipality 65 65 61 61
Investment-grade corporate 29 29 33 33
Residential mortgage-backed securities 1 1 2 2
Other 1 1
Receivables/payables, net 3 3 3 3
548 332 216 446 247 199
Auction rate securities 25 25 24 24
$ 4,934 $ 1,265 $ 3,527 $ 142 $ 4,683 $ 1,863 $ 2,494 $ 326

Liabilities
Price risk management liabilities:
Energy commodities $ 2,080 $ 2 $ 2,068 $ 10 $ 2,133 $ 15 $ 2,008 $ 110
Interest rate/foreign currency exchange 4 4 27 27
$ 2,084 $ 2 $ 2,072 $ 10 $ 2,160 $ 15 $ 2,035 $ 110

				December 31, 2010								December 31, 2009
				Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
PPL
Assets
	Cash and cash equivalents			$	925	$	925					$	801	$	801
	Short-term investments - municipal debt
		securities			163		163
	Restricted cash and cash equivalents (a)				66		66						129		129
	Price risk management assets:
		Energy commodities			2,503			$	2,452	$	51		3,354		3	$	3,234	$	117
		Interest rate swaps			15				15				50				50
		Foreign currency exchange contracts			11				11				15				15
		Cross-currency swaps			44				44				12				12
	Total price risk management assets				2,573				2,522		51		3,431		3		3,311		117
	NDT funds:
		Cash and cash equivalents			10		10						7		7
		Equity securities:
			U.S. large-cap		303		207		96				259		176		83
			U.S. mid/small-cap		119		89		30				101		75		26
		Debt securities:
			U.S. Treasury		75		75						74		74
			U.S. government sponsored agency		7				7				9				9
			Municipality		69				69				65				65
			Investment-grade corporate		33				33				29				29
			Residential mortgage-backed securities										1				1
			Other		1				1
		Receivables (payables), net			1		(1)		2				3				3
	Total NDT funds				618		380		238				548		332		216
	Auction rate securities (b)				25						25		25						25
Total assets				$	4,370	$	1,534	$	2,760	$	76	$	4,934	$	1,265	$	3,527	$	142

Liabilities
	Price risk management liabilities:
		Energy commodities		$	1,552			$	1,498	$	54	$	2,080	$	2	$	2,068	$	10
		Interest rate swaps			53				53
		Cross-currency swaps			9				9				4				4
	Total price risk management liabilities			$	1,614			$	1,560	$	54	$	2,084	$	2	$	2,072	$	10

PPL Energy Supply
Assets
	Cash and cash equivalents			$	661	$	661					$	245	$	245
	Restricted cash and cash equivalents (a)				26		26						111		111
	Price risk management assets:
		Energy commodities			2,503			$	2,452	$	51		3,354		3	$	3,234	$	117
		Foreign currency exchange contracts			11				11				15				15
		Cross-currency swaps			44				44				12				12
	Total price risk management assets				2,558				2,507		51		3,381		3		3,261		117
	NDT funds:
		Cash and cash equivalents			10		10						7		7
		Equity securities:
			U.S. large-cap		303		207		96				259		176		83
			U.S. mid/small-cap		119		89		30				101		75		26
		Debt securities:
			U.S. Treasury		75		75						74		74
			U.S. government sponsored agency		7				7				9				9
			Municipality		69				69				65				65
			Investment-grade corporate		33				33				29				29
			Residential mortgage-backed securities										1				1
			Other		1				1
		Receivables (payables), net			1		(1)		2				3				3
	Total NDT funds				618		380		238				548		332		216
	Auction rate securities (b)				20						20		20						20
Total assets				$	3,883	$	1,067	$	2,745	$	71	$	4,305	$	691	$	3,477	$	137

Liabilities
	Price risk management liabilities:
		Energy commodities		$	1,541			$	1,487	$	54	$	2,080	$	2	$	2,068	$	10
		Cross-currency swaps			9				9				4				4
	Total price risk management liabilities			$	1,550			$	1,496	$	54	$	2,084	$	2	$	2,072	$	10

PPL Electric
Assets
	Cash and cash equivalents			$	204	$	204					$	485	$	485
	Restricted cash and cash equivalents (a)				14		14						14		14
Total assets				$	218	$	218					$	499	$	499

PPL Energy Supply
Assets
Cash and cash equivalents $ 245 $ 245 $ 464 $ 464
Short-term investments - municipal debt securities 150 150
Restricted cash and cash equivalents 111 111 328 328
Price risk management assets:
Energy commodities 3,354 3 $ 3,234 $ 117 2,460 19 $ 2,143 $ 298
Interest rate/foreign currency exchange 27 27 107 103 4
3,381 3 3,261 117 2,567 19 2,246 302
NDT funds:
Cash and cash equivalents 7 7 4 4
Equity securities:
U.S. large-cap 259 176 83 182 116 66
U.S. mid/small-cap 101 75 26 69 50 19
Debt securities:
U.S. Treasury 74 74 77 77
U.S. government agency 9 9 14 14
Municipality 65 65 61 61
Investment-grade corporate 29 29 33 33
Residential mortgage-backed securities 1 1 2 2
Other 1 1
Receivables/payables, net 3 3 3 3
548 332 216 446 247 199
Auction rate securities 20 20 19 19
$ 4,305 $ 691 $ 3,477 $ 137 $ 3,974 $ 1,208 $ 2,445 $ 321

Liabilities ��
Price risk management liabilities:
Energy commodities $ 2,080 $ 2 $ 2,068 $ 10 $ 2,133 $ 15 $ 2,008 $ 110
Interest rate/foreign currency exchange 4 4 16 16
$ 2,084 $ 2 $ 2,072 $ 10 $ 2,149 $ 15 $ 2,024 $ 110

PPL Electric
Assets
Cash and cash equivalents $ 485 $ 485 $ 483 $ 483
Restricted cash and cash equivalents 14 14 15 15
$ 499 $ 499 $ 498 $ 498

(a)	Current portion is included in "Restricted cash and cash equivalents" and long-term portion is included in "Other noncurrent assets" on the Balance Sheets.

(b)	Included in "Other investments" on the Balance Sheets.

A reconciliation of net assets and liabilities classified as Level 3 is as follows.

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
December 31, 2009 December 31, 2008
Energy Commodities, net Interest Rate/ Foreign Currency Exchange Auction Rate Securities Total Energy Commodities, net Interest Rate/ Foreign Currency Exchange Auction Rate Securities Total
PPL
Balance at beginning of period $ 188 $ 4 $ 24 $ 216 $ 134 $ 134
Total realized/unrealized gains (losses)
Included in earnings (136 ) (136 ) 2 2
Included in OCI 18 (28 ) 5 (5 ) 11 $ (5 ) 6
Purchases, sales, issuances and settlements, net 104 (4 ) 100 2 (11 ) (9 )
Transfers (out of) and/or into Level 3 (67 ) 24 (43 ) 39 $ 4 40 83
Balance at end of period $ 107 $ $ 25 $ 132 $ 188 $ 4 $ 24 $ 216

PPL Energy Supply
Balance at beginning of period $ 188 $ 4 $ 19 $ 211 $ 134 $ 134
Total realized/unrealized gains (losses)
Included in earnings (136 ) (136 ) 2 2
Included in OCI 18 (28 ) 5 (5 ) 11 $ (5 ) 6
Purchases, sales, issuances and settlements, net 104 (4 ) 100 2 (11 ) (9 )
Transfers (out of) and/or into Level 3 (67 ) 24 (43 ) 39 $ 4 35 78
Balance at end of period $ 107 $ $ 20 $ 127 $ 188 $ 4 $ 19 $ 211

			Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
			December 31, 2010						December 31, 2009
			Energy		Auction				Energy		Auction
			Commodities,		Rate				Commodities,		Rate
			net		Securities		Total		net		Securities		Total
PPL
Balance at beginning of period			$	107	$	25	$	132	$	188	$	24	$	212
	Total realized/unrealized gains (losses)
		Included in earnings		(137)				(137)		(136)				(136)
		Included in OCI (a)		11				11		18		5		23
	Purchases, sales, issuances and settlements, net			(16)				(16)		104		(4)		100
	Transfers into Level 3 (b)			(15)				(15)		(67)				(67)
	Transfers out of Level 3			47				47
Balance at end of period			$	(3)	$	25	$	22	$	107	$	25	$	132

PPL Energy Supply
Balance at beginning of period			$	107	$	20	$	127	$	188	$	19	$	207
	Total realized/unrealized gains (losses)
		Included in earnings		(137)				(137)		(136)				(136)
		Included in OCI (a)		11				11		18		5		23
	Purchases, sales, issuances and settlements, net			(16)				(16)		104		(4)		100
	Transfers into Level 3 (b)			(15)				(15)		(67)				(67)
	Transfers out of Level 3			47				47
Balance at end of period			$	(3)	$	20	$	17	$	107	$	20	$	127

(a)	Included in "Qualifying derivatives" and "Available-for-sale securities" on the Statements of Comprehensive Income.

(b)	Transfers into and out of Level 3 are presented on a net basis in 2009. Accounting guidance effective January 1, 2010 requires transfers into and out of Level 3 be presented on a gross basis. See Note 1 for additional information.

Net gains and losses on assets and liabilities classified as Level 3 and included in earnings are reported in the Statements of Income as follows.

																				December 31, 2010
																				Energy Commodities, net
	December 31, 2009										December 31, 2008									Unregulated		Wholesale
	Energy Commodities, net										Energy Commodities, net									Retail Electric		Energy		Energy
	Wholesale Energy Marketing		Net Energy Trading Margins			Energy Purchases			Unregulated Retail Electric and Gas		Net Energy Trading Margins			Energy Purchases			Unregulated Retail Electric and Gas			and Gas		Marketing		Purchases
PPL and PPL Energy Supply																			PPL and PPL Energy Supply
Total gains (losses) included in earnings for the period	$	22	$	(16	)	$	(155	)	$	13	$	(1	)	$	(3	)	$	6	Total gains (losses) included in earnings for the period	$	11	$	14	$	(162)
Change in unrealized gains (losses) relating to positions still held at the reporting date		12		1			(83	)		8		1			(3	)		5
Change in unrealized gains (losses) relating to positions still held at the																			Change in unrealized gains (losses) relating to positions still held at the
																			reporting date		4		6		(119)

		December 31, 2009
		Energy Commodities, net
		Unregulated		Wholesale		Net Energy
		Retail Electric		Energy		Trading		Energy
		and Gas		Marketing		Margins		Purchases
PPL and PPL Energy Supply
Total gains (losses) included in earnings for the period		$	13	$	22	$	(16)	$	(155)
Change in unrealized gains (losses) relating to positions still held at the
	reporting date		8		12		1		(83)

Cash and Cash Equivalents, Short-term Investments, and Restricted Cash and Cash Equivalents

(PPL, PPL Energy Supply and PPL Electric)

The fair value measurements of cash and cash equivalents and restricted cash and cash equivalents isare based on the amount on deposit.

(PPL)

The fair value measurements of short-term investments are based on quoted prices.

(PPL and PPL Energy Supply)

Price Risk Management Assets/Liabilities - Energy Commodities

~~The only energy~~Energy commodity contracts ~~classified as Level 1~~ are generally valued using the income approach, except for exchange-traded derivative gas and oil ~~contracts.~~contracts, which are valued using the market approach and are classified as Level 1. When observable inputs are used to measure all or most of the value of a contract, the contract is classified as Level 2. Over-the-counter (OTC) contracts are valued ~~by traders~~ using quotes obtained from an exchange, binding and non-binding broker quotes, prices posted by ISOs or published tariff rates. ~~PPL's risk management group~~Furthermore, PPL obtains independent quotes from the market to validate the forward price curves. OTC contracts include forwards, swaps, options and structured deals for electricity, gas, oil, and/or emission allowances and may be offset with similar positions in exchange-traded markets. To the extent possible, fair value measurements utilize various inputs that include quoted prices for similar contracts or market-corroborated inputs. In certain instances, these instruments may be valued using models, including standard option valuation models and standard industry models. For example, the fair value of a structured deal that delivers power to an illiquid delivery point may be measured by valuing the nearest liquid trading point plus the value of the basis between the two points. The basis input may be from market quotes, FTR prices, or historical prices.

When unobservable inputs are significant to the fair value measurement, a contract is classified as Level 3. Additionally, Level 2 and Level 3 fair value measurements include adjustments for credit risk based on PPL's own creditworthiness (for net liabilities) and its counterparties' creditworthiness (for net assets). PPL's credit department assesses all reasonably available market information and uses probabilities of default to calculate the credit adjustment. PPL assumes that observable market prices include sufficient adjustments for liquidity and modeling risks, but for Level 3 fair value measurements, PPL also assesses the need for additional adjustments for liquidity or modeling risks. The contracts classified as Level 3 represent contracts for which the delivery dates are beyond the dates for which independent prices are available or for certain power basis positions, which PPL generally values using historical settlement prices to project forward prices.

In certain instances, PPL transfers energy commodity contracts between Level 2 and Level 3. The primary reasons for the transfers during 2010 and 2009 were changes in the availability of market information and changes in the significance of the unobservable portion of the contract. As the delivery period of a contract becomes closer, market information may become available. When this occurs, the model's unobservable inputs are replaced with observable market information.

Price Risk Management Assets/Liabilities - Interest ~~Rate/~~Rate Swaps/Foreign Currency Exchange Contracts/Cross-Currency Swaps

To manage ~~its~~their interest rate and foreign currency exchange risk, PPL and PPL Energy Supply generally use interest rate contracts such as forward-starting swaps, floating-to-fixed swaps and fixed-to-floating ~~swaps;~~swaps, foreign currency exchange contracts such as forwards and ~~options;~~options, and cross-currency swaps that contain characteristics of both interest rate and foreign currency exchange contracts. PPL and PPL Energy Supply use an income approach to measure the fair value of these contracts, utilizing ~~both~~readily observable inputs, such as forward interest rates (e.g., LIBOR and government security rates) and forward foreign currency exchange rates (e.g., GBP and Euro), as well as inputs that may not be observable, such as credit valuation adjustments. In certain cases, PPL and PPL Energy Supply cannot practicably obtain ~~market~~mar ket information to value credit risk and therefore rely on their own models. These models use projected probabilities of default based on historical observances. When the credit valuation adjustment is significant to the overall valuation, the contracts are classified as

Level 3.

NDT Funds

The fair value measurements of cash and cash equivalents are based on the amount on deposit.

PPL and PPL Energy Supply generally use the market approach to measure the fair value of ~~the~~equity securities held in the NDT funds. The fair value measurements of cash and cash equivalents are based on the amount on deposit. The fair value measurements of equity securities are based on quoted prices in active markets. The fair value measurements of commingled equity index funds are based on firm quotes of net asset values per share, which are not obtained from a quoted price in an active market. Equity securities are classified as Level 1 and are comprised of securities that are representative of the Wilshire 5000 index, which is invested in approximately 70% large-cap stocks and 30% mid/small-cap stocks. Investments in commingled equity funds are classified as Level 2 and represent securities that track the S&P 500 index and the Wilshire 4500 index. The fair value measurements of debt

·	The fair value measurements of equity securities classified as Level 1 are based on quoted prices in active markets and are comprised of securities that are representative of the Wilshire 5000 index, which is invested in approximately 70% large-cap stocks and 30% mid/small-cap stocks.

·	Investments in commingled equity funds are classified as Level 2 and represent securities that track the S&P 500 index and the Wilshire 4500 index. These fair value measurements are based on firm quotes of net asset values per share, which are not obtained from a quoted price in an active market.

Debt securities are generally ~~based on evaluated~~measured using a market approach, including the use of matrix pricing. Common inputs include reported trades, broker/dealer bid/ask prices, ~~that reflect observable market information, such as actual trade information for identical~~benchmark securities ~~or for similar securities, adjusted for observable differences.~~and credit valuation adjustments. When ~~this information is not available,~~necessary, the fair value of debt securities is measured using ~~present value techniques,~~the income approach, which ~~incorporate other~~incorporates similar observable inputs ~~including interest rates for~~as well as benchmark yields, credit valuation adjustments, reference data from market research publications, monthly payment data, collateral performance and new issue data. The debt securities ~~with credit ratings and terms to maturity similar to the debt securities being measured.~~

~~PPL and PPL Energy Supply recorded impairments of $18 million in 2009, $36 million in 2008 and $3 million in 2007 for certain securities invested in~~held by the NDT ~~funds. These impairments are reflected on the Statements~~funds at December 31, 2010 have a weighted-average coupon of ~~Income in "Other-Than-Temporary Impairments."~~4.59% and a weighted-average duration of five years.

Auction Rate Securities

Prior to early 2008, auction rate securities had normally been remarketed on a short-term basis with auction dates commonly set at seven-day, 28-day, 35-day or 49-day intervals. Historically, an active market existed for such investments, and the auctions provided an opportunity for investors either to hold an investment at a periodically reset interest rate or to sell the investment at its par value for immediate liquidity. In early 2008, investor concerns about credit and liquidity in the financial markets, generally, as well as investor concerns over specific insurers that guarantee the credit of certain of the underlying securities, created uncertainty in the auction rate securities market and these securities generally failed to be remarketed through their established auction process. These auction failures and the resulting illiquidity continue to impact PPL's and PPL Energy Supply's auction rate securities. Despite failed auctions in 2008 and 2009, PPL and PPL Energy Supply continued to earn interest on these investments at contractually prescribed interest rates.

PPL and PPL Energy Supply estimates the fair value of auction rate securities based on the following criteria: (i) the underlying structure and credit quality of each security; (ii) the present value of future estimated interest and principal payments discounted using interest rates for bonds with a credit rating and remaining term to maturity similar to the stated maturity of the auction rate securities; and (iii) consideration of the impact of auction failures or redemption at par. The estimated fair value of these securities could change significantly based on future market conditions.

PPL's and PPL Energy Supply's auction rate securities ~~are recorded in "Other investments" on the Balance Sheets. Based upon the evaluation of available information, PPL and PPL Energy Supply believe these investments, which~~ include Federal Family Education Loan Program guaranteed student loan revenue bonds, as well as various municipal bond ~~issues, continue to be~~issues. At December 31, 2010, contractual maturities for these auction rate securities were a weighted average of ~~high credit quality.~~approximately 25 years. PPL and PPL Energy Supply do not have significant exposure to realize losses on these ~~securities. However,~~securities; however, auction rate securities are classified as Level 3 because failed auctions limit the amount of observable market data that is available for measuring the fair value of these securities.

~~At December 31, 2008, the par value of auction rate securities totaled $29 million for PPL and $24 million for PPL Energy Supply. At December 31, 2008, the~~The fair value of auction rate securities ~~was~~is estimated using an income approach with inputs for the underlying structure and credit quality of each security; the present value of future interest payments, estimated based on forward rates of the SIFMA Index, and principal payments discounted using interest rates for bonds with a credit rating and remaining term to ~~be $24 million for PPL and $19 million for PPL Energy Supply~~maturity similar to the stated maturity of the auction rate securities; and the ~~$5 million temporary declines from par value were recorded to OCI.~~

~~In 2009, PPL and PPL Energy Supply liquidated $4 million of securities at par. At December 31, 2009, the fair value~~impact of auction rate securities was estimated to be equal to par value, which was $25 million for PPL and $20 million for PPL Energy Supply, and the contractual maturities for these securities was a weighted average of approximately 26 years. PPL and PPL Energy Supply reversed $5 million of previously recorded temporary impairments by crediting OCI.failures or redemption at par.

Nonrecurring Fair Value Measurements(PPL and PPL Energy Supply)

Fair Value Measurements Using
Total Level 2 Level 3 Loss
Sulfur dioxide emission allowances (a):
March 31, 2009 $ 15 $ 15 $ (30 )
December 31, 2009 13 13 (7 )
Long Island generation business (b):
June 30, 2009 138 $ 138 (52 )
September 30, 2009 133 133 (5 )
December 31, 2009 128 128 (5 )
The following nonrecurring fair value measurements occurred during the reporting periods, resulting in asset impairments.

		Carrying		Fair Value Measurements Using
		Amount (a)		Level 2		Level 3		Loss (b)
Sulfur dioxide emission allowances (c):
	December 31, 2010	$	2			$	1	$	1
	September 30, 2010		6				2		4
	June 30, 2010		11				3		8
	March 31, 2010		13				10		3
	December 31, 2009		20				13		7
	March 31, 2009		45				15		30

Certain non-core generation facilities:
	September 30, 2010		473	$	381				96

Long Island generation business:
	December 31, 2009		132		128				5
	September 30, 2009		137		133				5
	June 30, 2009		189		138				52

(a)	Represents carrying value before fair value measurement.

(b)

Losses on sulfur dioxide emission allowances were recorded in the Supply segment and included in "Other operation and maintenance" on the Statements of Income. Losses on certain non-core generation facilities and the Long Island generation business were recorded in the Supply segment and included in "Income (Loss) from Discontinued Operations (net of income taxes)" on the Statements of Income.

(c)	Current and long-term sulfur dioxide emission allowances are included in "Other intangibles" in their respective areas on the Balance ~~Sheet.~~
~~(b)~~		~~Assets of the Long Island generation business disposal group are included in "Assets held for sale" on the Balance Sheet.~~Sheets.

Sulfur Dioxide Emission Allowances

Due to ~~a significant decline~~declines in market prices ~~at March 31,~~in 2010 and 2009, PPL Energy Supply assessed the recoverability of sulfur dioxide emission allowances not expected to be consumed. As a result, emission allowances with a carrying amount of $45 million were written down to their estimated fair value of $15 million, resulting in an impairment charge of $30 million being recorded during the first quarter of 2009. Due to a further decline in market prices and the reassessment of the quantity of emission allowances not expected to be consumed at December 31, 2009, PPL Energy Supply evaluated the recoverability of those allowances. As a result, emission allowances with a carrying amount of $20 million were written down to their estimated fair value of $13 million, resulting in an impairment charge of $7 million being recorded during the fourth quarter of 2009. These charges, recorded in the Supply segment for PPL and PPL Energy Supply, are included in "Other operation and maintenance" on the Statement of Income.

When available, observable market prices were used to value the sulfur dioxide emission allowances. When observable market prices were not available, fair value was modeled using prices from observable transactions and appropriate discount rates. The modeled values were significant to the overall fair value measurement.

Certain Non-Core Generation Facilities

Certain non-core generation facilities met the held for sale criteria at September 30, 2010. As a result, net assets held for sale were written down to their estimated fair value less cost to sell. The fair value in the table above excludes $4 million of estimated costs to sell and was based on the negotiated sales price (achieved through an active auction process). See Note 9 for additional information on the anticipated sale.

Long Island Generation Business

The Long Island generation business met the held for sale criteria ~~in the second quarter of~~at June 30, 2009. As a result, net assets held for sale ~~with a carrying amount of $189 million~~ were written down to their estimated fair value ~~(less~~less cost to ~~sell) of $137 million at June 30, 2009. At both September 30 and December 31, 2009, the~~sell. The fair value (less cost to sell) was remeasured and additional impairments totaling $10 million were recorded. In addition, $2 million of goodwill allocated to this business was written off in 2009. See Note 9 for additional information on the anticipated sale.

~~The fair values~~ in the table above ~~exclude~~excludes $1 million of estimated costs to sell and ~~were~~was based on the negotiated sales price (achieved through an active auction process) ~~adjusted~~. See Note 9 for additional information on the completed sale.

Nitrogen Oxide Allowances

In July 2008, the United States Court of Appeals for the D.C. Circuit issued a ruling that invalidated the CAIR in its entirety, including its cap-and-trade program. As a result of this decision, in 2008, PPL determined that all of the annual nitrogen oxide allowances purchased by PPL EnergyPlus pursuant to the CAIR were no longer required, had no value and, therefore, recorded a pre-tax impairment charge of $33 million ($20 million after tax). Further, in 2008, PPL EnergyPlus recorded an additional ~~anticipated cash flows from operations prior~~charge and corresponding reserve of $9 million pre-tax ($5 million after tax) related to its sale of certain annual nitrogen oxide allowance put options. These charges, recorded in PPL and ~~following~~PPL Energy Supply's Supply segment, are included in "Other operation and maintenance" expense on the ~~anticipated sale date. The sales price is consistent with and corroborated by fair values modeled internally using inputs obtained from third parties and appropriate discount rates.~~Stateme nt of Income.

F~~Financial~~inancial Instruments Not Recorded at Fair Value

(PPL, PPL Energy Supply and PPL Electric)

NPNS

PPL and PPL Energy Supply enter into full-requirement sales contracts, power purchase agreements and certain retail energy and physical capacity ~~contracts. These~~ contracts that range in maturity through 2023 and qualify for NPNS. PPL Electric ~~has~~ also ~~entered~~enters into contracts that qualify for NPNS. See "Energy Purchase Commitments" ~~within~~in Note 1415 for information about PPL Electric's competitive solicitations. All of these contracts are accounted for using accrual accounting; therefore, there were no amounts recorded on the Balance Sheets at December 31, ~~2009~~2010 and ~~2008.~~2009. The estimated fair value of these contracts, calculated using similar inputs and valuation techniques as those described above within "Price Risk Management Assets/Liabilities - Energy Commodities," was:

							Net Asset (Liability)
	Net Asset (Liability)						December 31,		December 31,
	December 31, 2009			December 31, 2008			2010		2009

PPL	$	122		$	136		$	229	$	122
PPL Energy Supply		334			239			240		334
PPL Electric		(216	)		(103	)		(8)		(216)

Other

~~Financial instruments for which~~The carrying amounts of contract adjustment payments related to the ~~carrying amount~~Purchase Contract component of the Equity Units and long-term debt on the Balance Sheets and ~~the~~their estimated fair value ~~(based on quoted market prices for the securities where available and estimates based on current rates where quoted market prices are not available) are different,~~ are set forth below. The fair value of these instruments was estimated using an income approach by discounting future cash flows at estimated current cost of funding rates. The effect of third-party credit enhancements is not included in the fair value measurement.

		December 31, 2010				December 31, 2009
		Carrying				Carrying
		Amount		Fair Value		Amount		Fair Value
PPL
	Contract adjustment payments (a)	$	146	$	148
	Long-term debt		12,663		12,868	$	7,143	$	7,280
PPL Energy Supply
	Long-term debt		5,589		5,919		5,031		5,180
PPL Electric
	Long-term debt		1,472		1,578		1,472		1,567

(a)	Reflected in current and long-term other liabilities on the balance sheet. See Note 7 for additional information.

(PPL and PPL Energy Supply)

The carrying value of ~~"Collateral on PLR energy supply to/from affiliate" at December 31, 2008 and~~ "Short-term debt" at December 31, ~~2009~~2010 and ~~2008~~2009 on the Balance Sheets represented or approximated fair value due to the liquid nature of the instruments or variable interest rates associated with the financial instruments.

December 31, 2009 (a) December 31, 2008
Carrying Amount Fair Value Carrying Amount Fair Value
PPL
Long-term debt $ 7,143 $ 7,280 $ 7,838 $ 6,785
PPL Energy Supply
Long-term debt 5,031 5,180 5,196 4,507
PPL Electric
Long-term debt 1,472 1,567 1,769 1,682

~~(a)~~

The effect of third-party credit enhancements is not included in the fair value measurement. See "New Accounting Guidance Adopted - Issuer's Accounting for Liabilities Measured at Fair Value with a Third-Party Credit Enhancement" within Note 1 for additional information.

Credit Concentration Associated with Financial Instruments

(PPL, PPL Energy Supply and PPL Electric)

PPL and its subsidiaries enter into contracts with many entities for the purchase and sale of energy. Many of these contracts are considered a normal part of doing business and, as such, the fair value of these contracts is not reflected in the financial statements. However, the fair value of these contracts is considered when committing to new business from a credit perspective. See Note 1819 for information on credit policies used by PPL and its subsidiaries to manage credit risk, including master netting arrangements and collateral requirements.

(PPL)

At December 31, ~~2009,~~2010, PPL had credit exposure of ~~$3.6~~$2.8 billion to energy trading partners, excluding the effects of netting arrangements and collateral. As a result of netting arrangements and collateral, PPL's credit exposure was reduced to ~~$1.2 billion.~~$749 million. One of the counterparties accounted for ~~23%~~12% of this exposure, and ~~no other individual~~the next highest counterparty accounted for ~~more than 13%~~11% of the exposure. Ten counterparties accounted for ~~$926~~$445 million, or ~~74%~~59%, of the net exposure. Nine of these counterparties had an investment grade credit rating from S&P and accounted for ~~97%~~89% of the top ten ~~counterparty exposures.~~exposure. The remaining counterparty has not been rated by S&P, but is current on its obligations.

(PPL Energy Supply)

At December 31, ~~2009,~~2010, PPL Energy Supply had credit exposure of ~~$3.6~~$2.8 billion to energy trading partners, excluding exposure from related parties and the effects of netting arrangements and collateral. As a result of netting arrangements and collateral, this credit exposure was reduced to ~~$1.2 billion.~~$749 million. One of the counterparties accounted for ~~23%~~12% of this exposure, and ~~no other individual~~the next highest counterparty accounted for ~~more than 13%~~11% of the exposure. Ten counterparties accounted for ~~$926~~$445 million, or ~~74%~~59%, of the net exposure. Nine of these counterparties had an investment grade credit rating from S&P and accounted for ~~97%~~89% of the top ten ~~counterparty exposures.~~exposure. The remaining counterparty has not been rated by S&P, but is current on its obligations.

At December 31, ~~2009,~~2010, PPL Energy Supply's credit exposure under certain energy supply contracts to PPL Electric was ~~$203 million, excluding the effects of netting arrangements. As a result of netting~~$42 million. Netting arrangements had an insignificant change on this credit ~~exposure was unchanged.~~exposure.

(PPL Electric)

At December 31, ~~2009,~~2010, PPL Electric had no credit exposure under energy supply contracts (including its supply contracts with its affiliate PPL EnergyPlus). ~~All counterparties had an investment grade credit rating from S&P.~~

~~18.~~

19. Derivative Instruments and Hedging Activities

Risk Management Objectives (PPL, PPL Energy Supply and PPL Electric)

PPL has a risk management policy approved by the Board of Directors to manage market risk and counterparty credit risk. The RMC, comprised of senior management and chaired by the Chief Risk Officer, oversees the risk management function. Key risk control activities designed to ensure compliance with the risk policy and detailed programs include, but are not limited to, credit review and approval, validation of transactions and market prices, verification of risk and transaction limits, VaR analyses, portfolio stress tests, gross margin at risk analyses, sensitivity analyses, and daily portfolio reporting, including open positions, determinations of fair value, and other risk management metrics. PPL completed its acquisition of LKE in November 2010. 60;Due to the timing of the acquisition, PPL is evaluating changes to processes, including risk management, as part of its ongoing integration activities. LKE continues to operate under its existing policies, which have been reviewed by PPL and have been deemed adequate to minimize risk until this evaluation and integration process is complete.

Market risk is the potential loss PPL and its subsidiaries may incur as a result of price changes associated with a particular financial or commodity instrument.

PPL and PPL Energy Supply are exposed to market risk from:

commodity price, basis and volumetric risks for energy and energy-related products associated with the sale of electricity from its generating assets and other electricity marketing activities (including full-requirement sales contracts) and the purchase of fuel and fuel-related commodities for generating assets, as well as for proprietary trading activities;

·	interest rate and price risk associated with debt used to finance operations, as well as debt and equity securities in NDT funds and defined benefit plans; and

·	foreign currency exchange rate risk associated with investments in U.K. affiliates, as well as purchases of equipment in currencies other than U.S. dollars.

PPL and PPL Energy Supply utilize forward contracts, futures contracts, options, swaps and structured deals such as tolling agreements as part of the risk management strategy to minimize unanticipated fluctuations in earnings caused by changes in commodity prices, volumes of full-requirement sales contracts, basis prices, interest rates and foreign currency exchange rates. All derivatives are recognized on the balance sheet at their fair value, unless they qualify for NPNS.

PPL and PPL Electric are exposed to market price and volumetric risks from PPL Electric's obligation as PLR. The PUC has approved a cost recovery mechanism that allows PPL Electric to pass through to customers the cost associated with fulfilling its PLR obligation. This cost recovery mechanism substantially eliminates PPL Electric's exposure to market price risk. PPL Electric also mitigates its ~~customers. It has mitigated that~~exposure to volumetric risk ~~with the fixed-price PLR agreement with PPL EnergyPlus, which expired at the end of 2009, and~~ by entering into full-requirement supply agreements for its ~~customers for 2010 and 2011.~~customers. These supply agreements transfer the volumetric risk associated with the PLR obligation to the energy suppliers.

Credit risk is the potential loss PPL and its subsidiaries may incur due to a counterparty's non-performance, including defaults on payments and energy commodity deliveries.

PPL is exposed to credit risk from interest rate derivatives with financial institutions.

PPL and PPL Energy Supply are exposed to credit risk ~~from:~~

·	~~commodity derivatives with its energy trading partners, which include other energy companies, fuel suppliers, and financial institutions;~~
·	~~interest rate derivatives with financial institutions; and~~
·	from commodity derivatives with their energy trading partners, which include other energy companies, fuel suppliers and financial institutions and from foreign currency derivatives with financial institutions.

PPL and PPL Electric are exposed to credit risk from PPL Electric's supply agreements for its ~~customers for 2010 and 2011.~~PLR obligation.

The majority of ~~the~~PPL's, PPL Energy Supply's and PPL Electric's credit risk stems from PPL ~~Energy Supply's and PPL Electric's~~subsidiaries' commodity derivatives for multi-year contracts for energy sales and purchases. If ~~the~~PPL Energy Supply's counterparties fail to perform their obligations under such contracts and PPL ~~and its subsidiaries~~Energy Supply could not replace the sales or purchases at the same prices as those under the defaulted contracts, PPL Energy Supply would incur financial losses. Those losses would be recognized immediately or through lower revenues or higher costs in future years, depending on the accounting treatment for the defaulted contracts. In the event an LG&E, KU or PPL Electric supplier defaults on its obligation, those entities would be required to seek replacement power in the market. In general, incremental costs incu rred by these entities would be recoverable from customers in future rates.

PPL and its subsidiaries have credit policies to manage their credit risk, including the use of an established credit approval process, daily monitoring of counterparty positions, and the use of master netting agreements. These agreements generally include credit mitigation provisions, such as margin, prepayment or collateral requirements. PPL and its subsidiaries may request the additional credit assurance, in certain circumstances, in the event that the counterparties' credit ratings fall below investment grade or their exposures exceed an established credit limit. See Note 1718 for credit concentration associated with financial instruments.

PPL's and PPL Energy Supply's obligation to return counterparty cash collateral under master netting arrangements was ~~$355~~$338 million and ~~$22~~$355 million at December 31, ~~2009~~2010 and ~~2008.~~December 31, 2009.

PPL Electric had no obligation to return cash collateral ~~to PPL Energy Supply~~ under master netting arrangements at December 31, ~~2009~~2010 and ~~an obligation of $300 million at~~ December 31, ~~2008. See Note 15 for additional information.~~2009.

~~At December 31, 2009,~~ PPL, PPL Energy Supply and PPL Electric had not posted any cash collateral under master netting ~~arrangements. At~~arrangements at December 31, ~~2008, PPL~~2010 and ~~PPL Electric had not posted any cash collateral under master netting arrangements and PPL Energy Supply only had posted the $300 million noted above.~~December 31, 2009.

~~Commodity Price Risk (Non-trading)~~ (PPL and PPL Energy Supply)

Commodity Price Risk (Non-trading)

Commodity price and basis risks are among PPL's and PPL Energy Supply's most significant risks due to the level of investment that PPL and PPL Energy Supply maintain in their generation assets, as well as the extent of their marketing and proprietary trading activities. Several factors influence price levels and volatilities. These factors include, but are not limited to, seasonal changes in demand, weather conditions, available generating assets within regions, ~~transportation~~transportation/transmission availability and reliability within and between regions, market liquidity, and the nature and extent of current and potential federal and state regulations.

To hedge the impact of market price fluctuations on PPL's and PPL Energy Supply's energy-related assets, liabilities and other contractual arrangements discussed above, PPL EnergyPlus sells and purchases physical energy at the wholesale level under FERC market-based tariffs throughout the U.S. and enters into financial exchange-traded and over-the-counter contracts. Certain contracts qualify for NPNS or are non-derivatives and are therefore not reflected in the financial statements until delivery. See Note 17 for additional information on NPNS. PPL and PPL Energy Supply segregate their remaining non-trading activities into two categories: cash flow hedge activity and economic activity.

~~Cash Flow Hedges~~

PPL and PPL Energy Supply enter into financial and physical derivative contracts, including forwards, futures, swaps and options, to hedge the price risk associated with electricity, gas, oil and other commodities. ~~Many~~Certain contracts qualify for NPNS or are non-derivatives and are therefore not reflected in the financial statements until delivery. See Note 18 for additional information on NPNS. PPL and PPL Energy Supply segregate their remaining non-trading activities into two categories: cash flow hedge activity and economic activity.

Monetization of Certain Full-Requirement Sales Contracts

In July 2010, in order to raise additional cash for the LKE acquisition, PPL Energy Supply monetized certain full-requirement sales contracts that resulted in cash proceeds of $249 million and triggered certain accounting:

A portion of these sales contracts had previously been accounted for as NPNS and received accrual accounting treatment. PPL Energy Supply could no longer assert that it was probable that any contracts with these counterparties would result in physical delivery. Therefore, the fair value of the NPNS contracts of $160 million was recorded on the Balance Sheet in "Price risk management assets," with a corresponding gain of $144 million recorded to "Wholesale energy marketing - Realized" on the Statement of Income, and $16 million recorded to "Wholesale energy marketing - Unrealized economic activity," related to full-requirement sales contracts that have not been monetized.

The related purchases to supply these sales contracts were accounted for as cash flow hedges, with the effective portion of the change in fair value being recorded in AOCI and the ineffective portion recorded in "Energy purchases - Unrealized economic activity." The corresponding cash flow hedges were dedesignated and all amounts previously recorded in AOCI were reclassified to earnings. This resulted in a pre-tax reclassification of $(173) million of losses from AOCI into "Energy purchases - Unrealized economic activity" on the Statement of Income. An additional charge of $(39) million was also recorded in "Wholesale energy marketing - Unrealized economic activity" on the Statement of Income to reflect the fair value of the sales contracts previously accounted for as economic activity.

·	The net result of these transactions, excluding the full-requirement sales contracts that have not been monetized, was a loss of $(68) million, or $(40) million after tax.

The proceeds of $249 million from these monetizations are reflected in the Statement of Cash Flows as a component of "Net cash provided by operating activities."

Cash Flow Hedges

Many derivative contracts have qualified for hedge ~~accounting. Contracts~~accounting so that the effective portion of a derivative's gain or loss is deferred in AOCI and reclassified into earnings when the forecasted transaction occurs. The cash flow hedges that existed at December 31, ~~2009~~2010 range in maturity through ~~2014.~~2015. At December 31, ~~2009,~~2010, the accumulated net unrealized after-tax gains ~~on qualifying derivatives~~ that are expected to be reclassified into earnings during the next 12 months were ~~$233~~$300 million for ~~both~~ PPL and PPL Energy Supply. Cash flow hedges are discontinued if it is no longer probable that the original forecasted transaction will occur by the end of the originally specified time periods and any amounts previously recorded in AOCI are reclassified tointo earnings. For 2010, such reclassifications were after-tax losses of $(89) million, primarily due to the monetization of certain full-requirement sales contracts, for which the associated hedges are no longer required, as discussed above. For 2009 ~~2008~~ and ~~2007,~~2008, such reclassifications were an after-tax gain of $9 million and an after-tax loss of ~~$8 million and an insignificant amount.~~$(8) million.

For 2010, 2009 ~~2008~~ and ~~2007,~~2008, hedge ineffectiveness associated with energy derivatives was, ~~after tax,~~after-tax, a loss of ~~$174~~$(30) million, a gain of ~~$310~~$41 million and a ~~loss~~gain of $3$12 million. ~~Certain power and gas~~

In addition, when cash flow ~~hedges failed~~hedge positions fail hedge effectiveness testing, ~~in the third and fourth quarters of 2008, as well as the first quarter of 2009. Hedge~~hedge accounting is not permitted ~~for~~in the quarter in which this occurs and, accordingly, the entire change in fair value for the periods that failed ~~was~~is recorded to the income statement. Certain power and gas cash flow hedge positions failed effectiveness testing during 2008 and the first quarter of 2009. However, these ~~transactions~~positions were not dedesignated as hedges, as prospective regression analysis demonstrated that these hedges ~~are~~were expected to be highly effective over their term. For 2008, an after-tax gain of $298 million was recognized in earnings as a result of these hedge failures. During ~~the second, third and fourth quarters of~~ 2009, fewer power and gas cash flow hedges failed hedge effectiveness testing; therefore, a portion of the previously recognized ~~unrealized~~u nrealized gains recorded in ~~the second half of~~ 2008 ~~and the first quarter of 2009~~ associated with these hedges were reversed. For 2009, after-tax losses of ~~$215~~$(215) million were recognized in earnings as a result of these reversals.
During the first quarter of 2010, after-tax losses of $(82) million were recognized in earnings as a result of these reversals continuing. Effective April 1, 2010, clarifying accounting guidance was issued that precludes the reversal of previously recognized gains/losses resulting from hedge failures. By the end of the first quarter of 2010, all previously recorded hedge ineffectiveness gains resulting from hedge failures were reversed, thus the new accounting guidance did not have a significant impact at adoption on April 1, 2010. See Note 1 for more information on this accounting change.

Economic Activity

~~PPL Energy Supply also uses~~Certain derivative contracts to economically hedge the ~~impact of market~~ price ~~fluctuations on its energy-related assets, liabilities~~and volumetric risk associated with electricity, gas, oil and other ~~contractual arrangements that~~commodities but do not receive hedge accounting treatment. PPL Energy Supply refers to these transactions as economic activity. The economic activity category includes energy derivative transactions that have previously qualified or could potentially qualify for hedge accounting; however, these transactions have either been disqualified from hedge accounting or management has not elected to designate them as accounting hedges. This activity includes the changes in fair value of positions used toThese derivatives hedge a portion of the economic value of PPL and PPL Energy Supply's generation assets ~~load-following~~and full-requirement and retail ~~activities. This economic activity is~~contracts, which are subject to changes in fair value due to market price volatility ~~of the input~~ and ~~output commodities (e.g., fuel and power). These contracts range in maturity through 2017.~~volume expectations. Additionally, ~~premium amortization of $53 million associated with options classified as~~ economic activity ~~and~~includes the ineffective portion of qualifying cash flow hedges, including the entire change in fair value ~~for~~of certain cash flow hedges that failed retrospective effectiveness testing ~~during the current period as discussed in the preceding~~(see "Cash Flow Hedges" ~~section, are also included~~above). The derivative contracts in ~~economic activity.~~this category that existed at December 31, 2010 range in maturity through 2017.

Examples of ~~transactions represented in this category~~economic activity include certain purchase contracts used to supply full-requirement sales contracts; FTRs or basis swaps used to hedge basis risk associated with the sale of generation or supplying full-requirement sales contracts; spark spreads (sale of electricity with the simultaneous purchase of fuel); retail gas activities; and fuel oil swaps used to hedge price escalation clauses in coal transportation and other fuel-related contracts. PPL Energy Supply also uses options, which include the sale of call options and the purchase of put options tied to a particular generating unit. Since ~~PPL Energy Supply owns~~ the physical generating capacity ~~its~~is owned, the price exposure is limited to the cost of the particular generating unit and does not expose PPL Energy Supply to uncovered market price risk. PPL Energy Supply also purchases call options or sells put options to create a net purchase position to cover an overall short position in ~~its~~the non-trading portfolio.

Unrealized activity associated with monetizing certain full-requirement sales contracts was also included in economic activity during 2010.

The unrealized gains (losses) for ~~this~~economic activity are ~~reflected in the Statements of Income~~ as follows.

Gains (Losses)
2009 2008 2007
Operating Revenues
Unregulated retail electric and gas $ 6 $ 5
Wholesale energy marketing (280 ) 1,056 $ (145 )
Operating Expenses
Fuel 49 (79 ) 15
Energy purchases (158 ) (553 ) 185

		PPL						PPL Energy Supply
		2010		2009		2008		2010		2009		2008

Operating Revenues
	Utility	$	(2)
	Unregulated retail electric and gas		1	$	6	$	5	$	1	$	6	$	5
	Wholesale energy marketing		(805)		(229)		1,056		(805)		(229)		1,056
Operating Expenses
	Fuel		29		49		(79)		29		49		(79)
	Energy purchases		286		(155)		(553)		286		(155)		(553)

The net gains (losses) recorded in "Wholesale energy marketing" resulted primarily from certain full-requirement sales contracts infor which PPL Energy Supply did not elect NPNS, ~~and~~ from hedge ineffectiveness, including hedges that failed effectiveness testing, as discussed in ~~the~~ "Cash Flow Hedges" ~~section above.~~above, and from the monetization of certain full-requirement sales contracts. The net gains (losses) recorded in "Energy purchases" resulted primarily from certain purchase contracts to supply the full-requirement sales contracts noted above for which PPL Energy Supply did not elect hedge treatment, ~~and~~ from hedge ineffectiveness, including hedges that failed effectiveness ~~testing.~~testing, and from purchase contracts that no longer hedge the full-requirement sales contracts that have been monetized as discussed above in "Monetization of Certain Full-Req uirement Sales Contracts."

Commodity Price Risk (Trading)~~(PPL and PPL Energy Supply)~~

PPL Energy Supply also executes energy contracts to take advantage of market opportunities. As a result, PPL Energy Supply may at times create a net open position in its portfolio that could result in significant losses if prices do not move in the manner or direction anticipated. PPL Energy Supply's trading activity is shown in "Net energy trading margins" on the Statements of Income.

Commodity Volumetric Activity~~(PPL and PPL Energy Supply)~~

PPL Energy Supply currently employs four primary strategies to maximize the value of its wholesale energy portfolio. As further discussed below, these strategies include the sales of baseload generation, optimization of intermediate and peaking generation, marketing activities, and proprietary trading activities. The tables within this section present the volumes of PPL Energy Supply's derivative activity, excluding those that qualify for NPNS, unless otherwise noted.

Sales of Baseload Generation

PPL Energy Supply has a formal hedging program for its competitive baseload generation fleet, which includes ~~7,370~~7,408 MW of nuclear, coal and hydro generating capacity. The objective of this program is to provide a reasonable level of near-term cash flow and earnings certainty ~~for the next three years~~ while preserving upside potential of power price increases over the medium ~~term; however, in certain instances, PPL Energy Supply will sell power and purchase fuel beyond this three-year period.~~term. PPL Energy Supply sells its expected generation output on a forward basis using both derivative and non-derivative instruments. Both are included in the following tables.

The following table presents the expected sales, in GWh, of baseload generation based on current forecasted assumptions for ~~2010-2014.~~2011-2013. These expected sales could be impacted by several factors, including plant availability.

2010 2011 2012 2013 2014
52,114 52,087 56,130 55,184 55,504

2011 (a)		2012 (a)		2013 (a)
51,435		54,675		54,364

(a)	Excludes expected sales from the Safe Harbor hydroelectric facility that has been classified as held for sale. See Note 9 for additional information.

The following table presents the percentage of expected baseload generation sales shown above that has been sold forward under fixed-price contracts and the related percentage of fuel that has been purchased or committed at December 31, ~~2009.~~2010.

	Derivative		Total Power		Fuel Purchases (c)					Derivative	Total Power	Fuel Purchases (d)
Year	Sales (a)		Sales (b)		Coal		Nuclear		Year	Sales (a) (b)	Sales (c)	Coal	Nuclear

2010		91%		99%		99%		100%
2011		80%		88%		89%		100%	2011	91%	99%	99%	100%
2012		48%		55%		70%		100%	2012	58%	68%	96%	100%
2013		6%		13%		57%		100%	2013	7%	15%	87%	100%
2014		1%		5%		51%		100%

(a)

Excludes non-derivative contracts and contracts that qualify for NPNS. Volumes for option contracts factor in the probability of an option being exercised and may be less than the notional amount of the option. ~~Percentages are based on fixed-price contracts only.~~

(b)	Volumes for derivative sales contracts that deliver between 2014 and 2015 are 1,180 GWh.

(c)	Amount represents derivative and non-derivative contracts. Volumes for option contracts factor in the probability of an option being exercised and may be less than the notional amount of the option. ~~Percentages are based on fixed-price contracts only.~~

~~(c)~~

(d)

Coal and nuclear contracts receive accrual accounting treatment, as they are not derivative contracts. Percentages are based on both fixed- and variable-priced contracts.

In addition to the fuel purchases above, PPL Energy Supply attempts to economically hedge the fuel price risk that is within its fuel-related contracts and coal transportation contracts, which are tied to changes in crude oil or diesel prices. The following table presents the volumes (in thousands of barrels) of derivative contracts used in support of this strategy at December 31, ~~2009.~~2010.

Contract Type 2010 2011 2012

Oil Swaps 420 408 180

Contract Type		2011	2012	2013

	Oil Swaps	6,822	6,167	300

Optimization of Intermediate and Peaking Generation

In addition to its competitive baseload generation activities, PPL Energy Supply attempts to optimize the overall value of its competitive intermediate and peaking fleet, which includes ~~4,349~~4,321 MW of gas and oil-fired generation. ~~PPL Energy Supply uses both option and non-option contracts to support this strategy.~~ The following table presents the volumes of derivative contracts used in support of this strategy at December 31, ~~2009.~~2010.

	~~Units~~		~~2010~~
~~Net Power Sales:~~
~~Options (a)~~		~~GWh~~		~~507~~
~~Non-option contracts (b)~~		~~GWh~~		~~1,156~~

~~Net Fuel Sales:~~
~~Non-option contracts (c)~~		~~Barrels~~		~~145,000~~

~~Net Power/Fuel Purchases:~~
~~Non-option contracts~~		~~Bcf~~		~~9.3~~

		Units	2011	2012

Net Power Sales:
	Options (a)	GWh	(69)
	Non-option contracts (b)	GWh	(1,969)	(408)

Net Fuel Purchases:
	Non-option contracts	Bcf	15.9	2.7

(a)

Volumes for option contracts factor in the probability of an option being exercised and may be less than the notional amount of the option.

(b)		Included in these volumes are exercised option contracts that converted to non-option derivative contracts.
~~(c)~~		~~Represents the forward sale of physical oil inventory with a January 2010 delivery.~~

Marketing Activities

PPL Energy Supply's marketing portfolio is comprised of full-requirement sales contracts and their related supply contracts, retail gas and electricity sales contracts and other marketing activities. The full-requirement sales contracts and their related supply contracts make up a significant component of the marketing portfolio. The obligations under the full-requirement sales contracts include supplying a bundled product of energy, capacity, RECs, and other ancillary products. The full-requirement sales contracts PPL Energy Supply is awarded do not provide for specific levels of load, and actual load could vary significantly from forecasted amounts. PPL Energy Supply uses a variety of strategies to hedge its full-requirement sales contracts, including purchasing energy at a liquid trading hub or directly at the load delivery zone, purchasing capacity and RECs in the market and supplying the energy, capacity and RECs with its generation. RECs are not derivatives and are excluded from the table below. The following table presents the volumes of (sales)/purchase contracts, excluding FTRs, basis and capacity contracts, used in support of these activities at December 31, ~~2009.~~2010.

Units 2010 2011 2012 2013 2014 - 2019

Energy sales contracts (a) GWh (32,866 ) (14,693 ) (4,364 ) (2,233 ) (10,122 )
Related energy supply contracts
Energy purchases GWh 28,919 12,353 2,207 92
Volumetric hedges (b) GWh 170 218 48
Volumetric hedges (b) Bcf (0.6 )
Generation Supply GWh 3,327 2,240 2,232 2,135 10,122

		Units	2011	2012	2013

Energy sales contracts (a) (b)		GWh	(15,613)	(8,387)	(3,057)
Related energy supply contracts (b)
	Energy purchases	GWh	9,042	3,974	186
	Volumetric hedges (c)	GWh	419	(16)
	Generation supply	GWh	2,909	3,589	2,848
Retail gas sales contracts		Bcf	(5.7)	(5.3)	(0.1)
Retail gas purchase contracts		Bcf	5.7	5.2	0.1

(a)

~~The~~Includes NPNS and contracts that are not derivative, which are the majority of PPL Energy Supply's full-requirement sales contracts and receive accrual ~~accounting as they qualify for NPNS or are not derivative contracts.~~accounting. Also included in these volumes are the sales from PPL EnergyPlus to PPL Electric to supply PPL Electric's ~~2010~~ PLR load obligation.

(b)	Net volumes for derivative contracts, excluding contracts that qualify for NPNS that deliver between 2014 and 2015 are insignificant.

(c)

PPL Energy Supply uses power and gas options, swaps and futures to hedge the volumetric risk associated with full-requirement sales contracts since the demand for power varies hourly. Volumes for option contracts factor in the probability of an option being exercised and may be less than the notional amount of the option.

As noted above, PPL Energy Supply's marketing activities also include its retail gas portfolios. PPL Energy Supply has sold a total of 8.2 Bcf of gas to retail customers through 2012, all of which has been hedged with gas purchases.

FTRs and Other Basis Positions

PPL Energy Supply buys and sells FTRs and other basis positions to mitigate the basis risk between delivery points related to the sales of its generation, the supply of its full-requirement sales contracts and retail contracts, as well as for proprietary trading purposes. The following table presents the volumes of derivative FTR and basis (sales)/purchase contracts at December 31, ~~2009.~~2010.

Commodity Units 2010 2011 2012

FTRs GWh 38,309 406
Power Basis Positions GWh (19,086 ) (861 )
Gas Basis Positions Bcf 3.2 0.1 (0.3 )

Commodity		Units	2011	2012	2013

	FTRs	GWh	23,283	47
	Power Basis Positions	GWh	(7,481)	(230)	(216)
	Gas Basis Positions (a)	Bcf	14.9	3.2

(a)	Net volumes that deliver in 2014 are insignificant.

Capacity Positions

PPL Energy Supply buys and sells capacity related to the sales of its generation and the supply of its full-requirement sales contracts, as well as for proprietary trading purposes. The following table presents the volumes of derivative capacity (sales)/purchase contracts ~~(in MW-months)~~ at December 31, ~~2009.~~2010.

2010 2011 2012 2013 2014 - 2023 (a)
(90,960 ) (49,193 ) (11,894 ) 1,626 2,720

Commodity		Units	2011	2012	2013

	Capacity (a)	MW-months	(6,634)	(177)	(1,005)

(a)

~~2,972 MW-months~~Net volumes that deliver ~~in the~~between 2014 toand 2016 ~~period.~~are 647 MW-months.

Proprietary Trading Activity

At December 31, ~~2009,~~2010, PPL Energy Supply's proprietary trading positions, excluding ~~FTRs,~~FTR, basis and capacity ~~contracts,~~contract activity that has already been included in the tables above, were not significant.

Sales of Excess Regulated Generation(PPL)

PPL manages the price risk of its expected excess regulated generation capacity using market-traded forward contracts. At December 31, 2010, PPL's net volume of electricity based financial derivatives outstanding to hedge excess regulated generation was 998 GWh for LKE.

Interest Rate Risk (PPL and PPL Energy Supply)

PPL and its subsidiaries have issued debt to finance ~~its~~their operations, which ~~results in an exposure~~exposes them to interest rate risk. PPL and its subsidiaries utilize various financial derivative instruments to adjust the mix of fixed and floating interest rates in ~~its~~their debt portfolio, adjust the duration of ~~its~~their debt portfolio and lock in benchmark interest rates in anticipation of future financing, when appropriate. Risk limits under the risk management program are designed to balance risk exposure to volatility in interest expense and changes in the fair value of PPL's and its subsidiaries' debt portfolio due to changes in benchmark interest rates.

Cash Flow Hedges

Interest rate risks include exposure to adverse interest rate movements for outstanding variable rate debt and for future anticipated financings. PPL and PPL Energy Supply may enter into financial interest rate swap contracts that qualify as cash flow hedges to hedge floating interest rate risk associated with both existing and anticipated debt issuances. For PPL, these interest rate swap contracts range in maturity through 2041 and had a notional value of ~~$425~~$500 million at December 31, ~~2009.~~2010. For 2010, hedge ineffectiveness associated with these derivatives resulted in a net after-tax loss of $(9) million. For 2009 ~~2008~~ and ~~2007,~~2008, hedge ineffectiveness associated with these derivatives was not significant. No contracts were outstanding at PPL Energy Supply at December 31, ~~2009.~~2010.

In anticipation of debt issuances that occurred in March 2010, WPD (South West) and WPD (South Wales) entered into forward starting interest rate swaps to hedge the change in benchmark interest rates up through the date of the debt issuances. See Note 7 for information on the debt issued. For 2010, WPD (South Wales) recorded hedge ineffectiveness of $3 million in "Interest Expense" on the Statement of Income related to the forward-starting interest rate swaps.

At December 31, 2010, WPDH Limited holds a net notional position in cross-currency swaps totaling $302 million to hedge the interest payments and principal of its U.S. dollar-denominated senior notes with maturity dates ranging from December 2017 to December 2028. For 2010, 2009 ~~2008~~ and ~~2007,~~2008, no amounts were recorded related to hedge ineffectiveness.

Cash flow hedges are discontinued if it is no longer probable that the original forecasted transaction will occur by the end of the originally specified time periods and any amounts previously recorded in AOCI are reclassified to earnings. As a result of the expected net proceeds from the anticipated sale of certain non-core generation facilities, coupled with the monetization of certain full-requirement sales contracts, debt that had been planned to be issued by PPL Energy Supply in 2010 was no longer needed. As a result, hedge accounting associated with interest rate swaps entered into by PPL in anticipation of a debt issuance by PPL Energy Supply was discontinued.PPL reclassified a net after-tax loss of $(19) million in 2010 and a net after-tax gain of $1 million in ~~2009 and a net after-tax loss of $3 million in 2007.~~2009. PPL had no such reclassifications in 2008. PPL Energy Supply had no such reclassifications in 2010, 2009 ~~2008~~ and ~~2007.~~2008.

At December 31, ~~2009,~~2010, the accumulated net unrealized after-tax losses on qualifying derivatives that are expected to be reclassified into earnings during the next 12 months were $1$(7) million for PPL and insignificant for PPL Energy Supply. Amounts are reclassified as the hedged interest payments are made.

Economic Activity

LG&E has entered into interest rate swap contracts that economically hedge interest payments on variable debt. As discussed in Note 3, realized gains and losses from the swaps are recoverable through regulated rates. Therefore, the change in fair value of these derivatives is included in regulatory assets and liabilities. Realized gains and losses are recognized in "Interest Expense" on the Statements of Income when the hedged transaction occurs. At December 31, 2010, LG&E held contracts with a notional amount of $179 million that range in maturity through 2033.

Fair Value Hedges

PPL and PPL Energy Supply are exposed to changes in the fair value of their domestic and international debt portfolios. To manage this risk, PPL and PPL Energy Supply may enter into financial contracts to hedge fluctuations in the fair value of existing debt issuances due to changes in benchmark interest rates. At December 31, ~~2009,~~2010, PPL held contracts that range in maturity through 2047 and had a notional value of ~~$750~~$349 million. PPL Energy Supply did not hold any such contracts at December 31, ~~2009.~~2010. PPL and PPL Energy Supply did not recognize any gains or losses resulting from the ineffective portion of fair value hedges or from a portion of the hedging instrument being excluded from the assessment of hedge effectiveness for 2010, 2009 ~~2008~~ and ~~2007.~~2008. Additionally, PPL recognized ~~a net~~n et after-tax ~~gain~~gains of $4 million from hedges of debt ~~issuances~~ that no longer qualified as fair value hedges for 2009, while the amounts were not significant for ~~2008~~2010 and ~~2007.~~2008. PPL Energy Supply did not recognize any gains or losses resulting from hedges of debt issuances that no longer qualified as fair value hedges for 2010, 2009 ~~2008~~ and ~~2007.~~2008.

Foreign Currency Risk (PPL and PPL Energy Supply)

PPL and PPL Energy Supply are exposed to foreign currency risk, primarily through investments in U.K. affiliates. In addition, PPL's and PPL Energy Supply's domestic operations may make purchases of equipment in currencies other than U.S. dollars.

PPL and PPL Energy Supply have adopted a foreign currency risk management program designed to hedge certain foreign currency exposures, including firm commitments, recognized assets or liabilities, anticipated transactions and net investments. In addition, PPL and PPL Energy Supply enter into financial instruments to protect against foreign currency translation risk of expected earnings.

Cash Flow Hedges

PPL and PPL Energy Supply may enter into foreign currency derivatives associated with foreign currency-denominated debt and the exchange rate associated with firm commitments denominated in foreign currencies; however, at December 31, ~~2009,~~2010, there were no existing contracts of this nature. Amounts previously classified in AOCI are reclassified as the hedged interest payments are made and as the related equipment is depreciated.

Cash flow hedges are discontinued if it is no longer probable that the original forecasted transaction will occur by the end of the originally specified time periods and any amounts previously recorded in AOCI are reclassified to earnings. There were no such reclassifications during 2010, 2009 ~~2008~~ and ~~2007.~~2008.

Fair Value Hedges

PPL and PPL Energy Supply enter into foreign currency forward contracts to hedge the exchange rates associated with firm commitments denominated in foreign currencies; however, at December 31, ~~2009,~~2010, there were no existing contracts of this nature. PPL and PPL Energy Supply did not recognize any gains or losses resulting from the ineffective portion of fair value hedges or from a portion of the hedging instrument being excluded from the assessment of hedge effectiveness for 2010, 2009 ~~2008~~ and ~~2007.~~2008. Additionally, PPL and PPL Energy Supply did not recognize any gains or losses resulting from hedges of firm commitments that no longer qualified as fair value hedges for 2010, 2009 ~~2008~~ and ~~2007.~~2008.

Net Investment Hedges

PPL and PPL Energy Supply may enter into foreign currency contracts to protect the value of a portion of their net investment in WPD. The total notional amount of the contracts outstanding at December 31, ~~2009~~2010 was ~~£40~~£35 million (approximately ~~$78~~$62 million based on contracted rates). ~~The settlement dates~~These contracts were settled in January 2011. At December 31, 2010, the fair value of these ~~contracts range from March 2010 through June 2011.~~positions was a net asset of $7 million. At December 31, 2009, the fair value of these positions was a net asset of $13 million. For 2010, 2009 ~~2008~~ and ~~2007,~~2008, PPL and PPL Energy Supply recognized after tax net investment hedge gains of $4 million, after-tax losses of $5$(5) million and after-tax gains of $20 ~~million and $2~~ million in the foreign currency translation adjustment component of ~~OCI.~~AOCI. At ~~December~~Decemb er 31, ~~2009,~~2010, PPL and PPL Energy Supply had ~~$11~~$15 million of accumulated net investment hedge gains, after tax, that were included in the foreign currency translation adjustment component of AOCI compared with ~~$16~~$11 million of gains, after tax, at December 31, ~~2008.~~2009. See Note 1516 for additional information.

Economic Activity

PPL and PPL Energy Supply may enter into foreign currency contracts as an economic hedge of anticipated earnings denominated in British pounds sterling. At December 31, ~~2009,~~2010, the total exposure hedged was ~~£48~~£89 million and the net fair value of these positions was a net asset of $2$4 million. These contracts had termination dates ranging from January ~~2010~~2011 to ~~June 2010. No~~December 2011. The net fair value of similar hedging instruments ~~were~~ outstanding at December 31, ~~2008.~~2009 was a net asset of $2 million. Gains and losses, both realized and unrealized, on these contracts are included in "Other Income (Expense) - net" on the Statements of Income. For 2010, PPL and PPL Energy Supply recorded net gains of $3 million. For 2009 and 2008, PPL and PPL Energy Supply recorded net losses of ~~$9 million. For 2008~~$( 9) million and ~~2007, PPL and PPL Energy Supply recorded~~ net gains of $9 ~~million and net losses of $4~~ million related to similar average rate forwards and average rate options. See Note 1516 for additional information.

Accounting and Reporting

(PPL, PPL Energy Supply and PPL Electric)

All derivative instruments are recorded at fair value on the balance sheet as an asset or liability (unless they qualify for ~~NPNS), and changes~~NPNS; See Note 18 for additional information). Changes in the derivatives' fair value are recognized currently in earnings unless specific hedge accounting criteria are met. However, the change in fair value of LG&E's interest rate swaps is recognized in a regulatory asset. See Note 173 for additional information.

See Note 1 for additional information on ~~NPNS.~~accounting policies related to derivative instruments.

PPL and its subsidiaries have elected not to offset net derivative positions in the financial statements. Accordingly, PPL and its subsidiaries do not offset such derivative positions against the fair value of amounts (or amounts that approximate fair value) recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) under master netting arrangements.(PPL)

The circumstances and intent existing at the time that derivative contracts are entered into are used to determine their accounting designation, which is subsequently verified by an independent internal group on a daily basis. The following summarizes the guidelines that have been provided to the marketers who are responsible for contract designation for derivative energy contracts.

·	~~Any wholesale and retail contracts to sell electricity and the related capacity that do not meet the definition of a derivative receive accrual accounting.~~

·	~~Physical electricity-only transactions can receive cash flow hedge treatment if all of the qualifications are met.~~

·	Physical capacity-only transactions to sell excess capacity from PPL's and PPL Energy Supply's generation qualify for NPNS. The forward value of these transactions is not recorded in the financial statements and has no earnings impact until delivery.

·	~~Any physical energy sale or purchase not intended to hedge an economic exposure is considered speculative, with unrealized gains or losses recorded immediately through earnings.~~

·	Financial transactions that can be settled in cash do not qualify for NPNS because they do not require physical delivery. These transactions can receive cash flow hedge treatment if they lock in the cash flows PPL and PPL Energy Supply will receive or pay for energy expected to be sold or purchased in the spot market.

·	PPL and PPL Energy Supply purchase FTRs for both proprietary trading activities and hedging purposes. FTRs, although economically effective as electricity basis hedges, do not currently qualify for hedge accounting treatment. Unrealized and realized gains and losses from FTRs that were entered into for trading purposes are recorded in "Net energy trading margins" on the Statements of Income. Unrealized and realized gains and losses from FTRs that were entered into for hedging purposes are recorded in "Energy purchases" on the Statements of Income.

·	Physical and financial transactions for gas and oil to meet fuel and retail requirements can receive cash flow hedge treatment if they lock in the price PPL and PPL Energy Supply will pay and meet the definition of a derivative.

·	~~Certain option contracts may receive hedge accounting treatment. Those that are not eligible are marked to fair value through earnings.~~

Unrealized gains or losses on cash flow hedges are recorded in OCI, excluding ineffectiveness that is recognized immediately in earnings. These unrealized gains and losses become realized when the contracts settle and are recognized in earnings when the hedged transactions occur.

~~The following is a summary of certain guidelines that have been provided to PPL's Finance Department, which is responsible for contract designation for interest rate and foreign currency derivatives.~~

·	Transactions to lock in an interest rate prior to a debt issuance can be designated as cash flow hedges. Any unrealized gains or losses on transactions receiving cash flow hedge treatment are recorded in OCI and are amortized as a component of interest expense when the hedged transactions occur.

·	Transactions entered into to hedge fluctuations in the fair value of existing debt can be designated as fair value hedges. To the extent that the change in the fair value of the derivative offsets the change in the fair value of the existing debt, there is no earnings impact, as both changes are reflected in interest expense. Realized gains and losses over the life of the hedge are reflected in interest expense.

·	Transactions entered into to hedge the value of a net investment of foreign operations can be designated as net investment hedges. To the extent that the derivatives are highly effective at hedging the value of the net investment, gains and losses are recorded in the foreign currency translation adjustment component of OCI and will not be recorded in earnings until the investment is substantially liquidated.

·	Derivative transactions that do not qualify for hedge accounting treatment are marked to fair value through earnings. These transactions generally include hedges of earnings translation risk associated with subsidiaries that report their financial statements in a currency other than the U.S. dollar. As such, these transactions eliminate earnings volatility due solely to changes in foreign currency exchange rates.

~~(PPL and PPL Energy Supply)~~

The following tables present the fair value and location of derivative instruments recorded on the Balance ~~Sheets at December 31, 2009.~~
Sheets.

PPL PPL Energy Supply
Derivatives designated as hedging instruments Derivatives not designated as hedging instruments (a) Derivatives designated as hedging instruments Derivatives not designated as hedging instruments (a)
Assets Liabilities Assets Liabilities Assets Liabilities Assets Liabilities
Current:
Price Risk Management Assets/Liabilities (b)
Interest rate swaps $ 10
Cross-currency swaps contracts 1 $ 4 $ 1 $ 4
Foreign currency exchange contracts 8 $ 2 8 $ 2
Commodity contracts 741 219 1,395 $ 1,279 741 219 1,395 $ 1,279
760 223 1,397 1,279 750 223 1,397 1,279
Noncurrent:
Price Risk Management Assets/Liabilities (b)
Interest rate swaps 40
Cross-currency swaps contracts 11 11
Foreign currency exchange contracts 5 5
Commodity contracts 578 118 640 464 578 118 640 464
634 118 640 464 594 118 640 464

Total derivatives $ 1,394 $ 341 $ 2,037 $ 1,743 $ 1,344 $ 341 $ 2,037 $ 1,743

						December 31, 2010								December 31, 2009
						Derivatives designated as				Derivatives not designated				Derivatives designated as				Derivatives not designated
						hedging instruments				as hedging instruments (a)				hedging instruments				as hedging instruments (a)
						Assets		Liabilities		Assets		Liabilities		Assets		Liabilities		Assets		Liabilities
Current:
	Price Risk Management
		Assets/Liabilities (b):
			Interest rate swaps			$	11	$	19			$	2	$	10
			Cross-currency swaps				7		9						1	$	4
			Foreign currency
				exchange contracts			7			$	4				8			$	2
			Commodity contracts				878		19		1,011		1,095		741		219		1,395	$	1,279
					Total current		903		47		1,015		1,097		760		223		1,397		1,279
Noncurrent:
	Price Risk Management
		Assets/Liabilities (b):
			Interest rate swaps				4						32		40
			Cross-currency swaps				37								11
			Foreign currency
				exchange contracts											5
			Commodity contracts				169		7		445		431		578		118		640		464
					Total noncurrent		210		7		445		463		634		118		640		464
Total derivatives						$	1,113	$	54	$	1,460	$	1,560	$	1,394	$	341	$	2,037	$	1,743

(a)

$~~375~~326 million and $375 million of net gains associated with derivatives that were no longer designated as hedging instruments are recorded in AOCI at December 31, 2010 and 2009.

(b)

Represents the location on the ~~balance sheet.~~Balance Sheet.

The after-tax balances of accumulated net gains (losses) (excluding net investment hedges) in AOCI ~~were:~~were $695 million, $602 million and $(21) million at December 31, 2010, 2009 and 2008.

2009 2008 2007

PPL $ 602 $ (21 ) $ (192 )
PPL Energy Supply 573 (12 ) (188 )

~~(PPL)~~

The following tables present the pre-tax effect of derivative instruments recognized in income, OCI or ~~OCI in 2009.~~

Derivatives in Fair Value Hedging Relationships Hedged Items in Fair Value Hedging Relationships Location of Gains (Losses) Recognized in Income Gain (Loss) Recognized in Income on Derivative
Gain (Loss) Recognized in
Income on Related Item

Interest rate swaps Fixed rate debt Interest expense $ 12 $ 29
Other income-net 7

regulatory assets.

Derivative Relationships Derivative Gain (Loss) Recognized in OCI (Effective Portion) Location of Gains (Losses) Recognized in Income Gain (Loss) Reclassified from AOCI into Income (Effective Portion) Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Cash Flow Hedges:
Interest rate swaps $ 64 Interest expense $ (2 )
Other income - net 1
Cross-currency swaps (45 ) Interest expense 2
Other income - net (20 )
Commodity contracts 829 Wholesale energy marketing 358 $ (296 )
Fuel (20 ) 2
Energy purchases (544 ) (7 )
Other operation and maintenance 1
Depreciation 1
$ 848 $ (223 ) $ (301 )
Net Investment Hedges:
Foreign currency exchange contracts $ (9 )

Derivatives in	Hedged Items in	Location of Gain	Gain (Loss) Recognized				Gain (Loss) Recognized
Fair Value Hedging	Fair Value Hedging	(Loss) Recognized	in Income on Derivative				in Income on Related Item
Relationships	Relationships	in Income	2010		2009		2010		2009

Interest rate swaps	Fixed rate debt	Interest expense	$	48	$	12	$	(6)	$	29
		Other Income - net								7

											2010				2009
													Gain (Loss)				Gain (Loss)
													Recognized				Recognized
													in Income				in Income
													on Derivative		Gain (Loss)		on Derivative
											Gain (Loss)		(Ineffective		Reclassified		(Ineffective
											Reclassified		Portion and		from AOCI		Portion and
					Derivative Gain				Location of		from AOCI		Amount		into		Amount
					(Loss) Recognized in				Gain (Loss)		into Income		Excluded from		Income		Excluded from
			Derivative		OCI (Effective Portion)				Recognized		(Effective		Effectiveness		(Effective		Effectiveness
			Relationships		2010		2009		in Income		Portion)		Testing)		Portion)		Testing)
Cash Flow Hedges:
	Interest rate swaps			$	(145)	$	64	Interest expense		$	(4)	$	(17)	$	(2)
								Other income
									(expense) - net		(30)				1
	Cross-currency							Interest expense			2				2
		swaps			25		(45)	Other income
									(expense) - net		16				(20)
	Commodity							Wholesale energy
		contracts			487		829		marketing		680		(201)		358	$	(296)
								Fuel			2				(20)		2
								Depreciation			2				1
								Energy purchases			(458)		3		(544)		(7)
								Other O&M							1
Total				$	367	$	848			$	210	$	(215)	$	(223)	$	(301)
Net Investment
	Hedges:
		Foreign exchange
			contracts	$	5	$	(9)

Derivatives Not Designated as Hedging Instruments: Location of Gains (Losses) Recognized in Income on Derivatives 2009

Foreign currency exchange contracts Other income - net $ (9 )
Commodity contracts Unregulated retail electric and gas 13
Wholesale energy marketing 588
Net energy trading margins (a)
Fuel 12
Energy purchases (808 )
$ (204 )

Derivatives Not Designated as	Location of Gain (Loss) Recognized in
Hedging Instruments:	Income on Derivatives		2010		2009

Foreign exchange contracts	Other income (expense) - net	$	3	$	(9)
Commodity contracts	Utility		(2)
	Unregulated retail electric and gas		11		13
	Wholesale energy marketing		(70)		588
	Net energy trading margins (a)		1
	Fuel		12		12
	Energy purchases		(405)		(808)
	Total	$	(450)	$	(204)

Derivatives Not Designated as	Location of Gain (Loss) Recognized as
Hedging Instruments:	Regulatory Liabilities/Assets		2010		2009

Interest rate swaps	Regulatory asset	$	(11)
		$	(11)

(a)

Differs from ~~statement~~the Statement of ~~income~~Income due to intra-month transactions that PPL defines as spot activity, which is not accounted for as a derivative.

(PPL Energy Supply)

The following tables present the fair value and location of derivative instruments recorded on the Balance Sheets.

						December 31, 2010								December 31, 2009
						Derivatives designated as				Derivatives not designated				Derivatives designated as				Derivatives not designated
						hedging instruments				as hedging instruments (a)				hedging instruments				hedging instruments (a)
						Assets		Liabilities		Assets		Liabilities		Assets		Liabilities		Assets		Liabilities
Current:
	Price Risk Management
		Assets/Liabilities (b):
			Cross-currency swaps			$	7	$	9					$	1	$	4
			Foreign currency
				exchange contracts			7			$	4				8			$	2
			Commodity contracts				878		19		1,011	$	1,084		741		219		1,395	$	1,279
					Total current		892		28		1,015		1,084		750		223		1,397		1,279
Noncurrent:
	Price Risk Management
		Assets/Liabilities (b):
			Cross-currency swaps				37								11
			Foreign currency
				exchange contracts											5
			Commodity contracts				169		7		445		431		578		118		640		464
					Total noncurrent		206		7		445		431		594		118		640		464
Total derivatives						$	1,098	$	35	$	1,460	$	1,515	$	1,344	$	341	$	2,037	$	1,743

(a)	$326 million and $375 million of net gains associated with derivatives that were no longer designated as hedging instruments are recorded in AOCI at December 31, 2010 and 2009.

(b)	Represents the location on the balance sheet.

The after-tax balances of accumulated net gains (losses) (excluding net investment hedges) in AOCI were $733 million, $573 million and $(12) million at December 31, 2010, 2009 and 2008.

The following tables present the pre-tax effect of derivative instruments recognized in income or ~~OCI in 2009.~~OCI.

Derivatives in Fair Value Hedging Relationships

Hedged Items in Fair Value Hedging Relationships

Location of Gains (Losses) Recognized in Income

Gain (Loss) Recognized in Income on Derivative

Gain (Loss) Recognized in

Income on Related Item

Derivatives in

Hedged Items in

Location of Gain

Gain (Loss) Recognized

Fair Value Hedging

(Loss) Recognized

in Income on Derivative

in Income on Related Item

Relationships

in Income

2010

2009

2010

2009

Interest rate swaps

Fixed rate debt

Interest expense

Fixed rate debt

Interest expense

Derivative Relationships Derivative Gain (Loss) Recognized in OCI (Effective Portion) Location of Gains (Losses) Recognized in Income Gain (Loss) Reclassified from AOCI into Income (Effective Portion) Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Cash Flow Hedges:
Interest rate swaps Interest expense
Other income - net
Cross-currency swaps $ (45 ) Interest expense $ 2
Other income - net (20 )
Commodity contracts 829 Wholesale energy marketing 358 $ (296 )
Fuel (20 ) 2
Energy purchases (544 ) (7 )
Other operation and maintenance 1
Depreciation 1
$ 784 $ (222 ) $ (301 )
Net Investment Hedges:
Foreign currency exchange contracts $ (9 )

											2010				2009
													Gain (Loss)				Gain (Loss)
													Recognized				Recognized
													in Income				in Income
													on Derivative				on Derivative
											Gain (Loss)		(Ineffective		Gain (Loss)		(Ineffective
											Reclassified		Portion and		Reclassified		Portion and
					Derivative Gain			Location of			from AOCI		Amount		from AOCI		Amount
					(Loss) Recognized in			Gains (Losses)			into Income		Excluded from		into Income		Excluded from
			Derivative		OCI (Effective Portion)			Recognized			(Effective		Effectiveness		(Effective		Effectiveness
			Relationships		2010		2009	in Income			Portion)		Testing)		Portion)		Testing)
Cash Flow Hedges:
		Cross-currency						Interest expense		$	2			$	2
			swaps	$	25	$	(45)	Other income
									(expense) - net		16				(20)
		Commodity						Wholesale energy
			contracts		487		829		marketing		680	$	(201)		358	$	(296)
								Fuel			2				(20)		2
								Depreciation			2				1
								Energy purchases			(458)		3		(544)		(7)
								Other O&M							1
		Interest rate						Interest expense					(3)
			swaps
Total				$	512	$	784			$	244	$	(201)	$	(222)	$	(301)
Net Investment
	Hedges:
		Foreign exchange
			contracts	$	5	$	(9)

Derivatives Not Designated as	Location of Gain (Loss) Recognized in
Hedging Instruments:	Income on Derivatives		2010		2009

Foreign exchange contracts	Other income (expense) - net	$	3	$	(9)
Commodity contracts	Unregulated retail electric and gas		11		13
	Wholesale energy marketing		(70)		588
	Net energy trading margins (a)		1
	Fuel		12		12
	Energy purchases		(405)		(808)
	Total	$	(448)	$	(204)

(a)

Differs from ~~statement~~the Statement of ~~income~~Income due to intra-month transactions that PPL Energy Supply defines as spot activity, which is not accounted for as a derivative.

Credit Risk-Related Contingent Features (PPL and PPL Energy Supply)

Certain of PPL's and PPL Energy Supply's derivative contracts contain credit contingent provisions which would permit the counterparties with which PPL or PPL Energy Supply is in a net liability position to require the transfer of additional collateral upon a decrease in ~~PPL's or~~the credit ratings of PPL, PPL Energy ~~Supply's credit rating.~~Supply or certain of their subsidiaries. Most of these provisions would require PPL or PPL Energy Supply to transfer additional collateral or permit the counterparty to terminate the contract if ~~PPL's or PPL Energy Supply's~~the applicable credit rating were to fall below investment grade. Some of these provisions also would allow the counterparty to require additional collateral upon each decrease in the credit rating at levels that remain above investment grade. In either case, if ~~PPL's or PPL Energy Supply's~~the applicable credit rating were to fall below ~~investment~~i nvestment grade (i.e., below BBB- for S&P or Fitch, or Baa3 for Moody's), and assuming no assignment to an investment grade affiliate were allowed, most of these credit contingent provisions require either immediate payment of the net liability as a termination payment or immediate and ongoing full collateralization by PPL or PPL Energy Supply on derivative instruments in net liability positions.

Additionally, certain of PPL's and PPL Energy Supply's derivative contracts contain credit contingent provisions that require PPL or PPL Energy Supply to provide "adequate assurance" of performance if the other party has reasonable grounds for insecurity regarding PPL's or PPL Energy Supply's performance of its obligation under the contract. A counterparty demanding adequate assurance could require a transfer of additional collateral or other security, including letters of credit, cash and guarantees from a creditworthy entity. This would typically involve negotiations among the parties. However, amounts disclosed below represent assumed immediate payment or immediate and ongoing full collateralization for derivative instruments in net liability positions with "adequate assurance" provisions.

To determine net liability positions, PPL and PPL Energy Supply use the fair value of each ~~agreement.~~contract. The aggregate fair value of all derivative instruments with the credit contingent provisions described above that were in a net liability position at December 31, ~~2009~~2010 was ~~$197~~$121 million for ~~both~~PPL and $78 million for PPL Energy Supply, of which PPL and PPL Energy Supply ~~of which both~~ had posted collateral of ~~$163~~$37 million and $18 million in the normal course of business. At December 31, ~~2009,~~2010, if the credit contingent provisions underlying these derivative instruments were triggered due to a credit downgrade below investment grade, PPL and PPL Energy Supply would have been required to prepay or post an additional ~~$131~~collateral of $186 million ~~of collateral~~and $171 million to their ~~counterparties.~~
counterparties including net receivables and payables already recor ded on the balance sheet.

~~19.~~

20. Goodwill and Other Intangible Assets

Goodwill (PPL and PPL Energy Supply)

The changes in the carrying amount of goodwill by segment were:

Supply International Delivery Total
2009 2008 2009 2008 2009 2008

Balance at beginning of period (a) $ 94 $ 94 $ 669 $ 897 $ 763 $ 991
Allocation to discontinued operations (b) (3 ) (3 )
Effect of foreign currency exchange rates 46 (228 ) 46 (228 )
Balance at end of period $ 91 $ 94 $ 715 $ 669 $ 806 $ 763

		Kentucky Regulated			International Regulated				Supply				Total
		2010		2009	2010		2009		2010		2009		2010		2009
PPL
Balance at beginning of period (a)					$	715	$	669	$	91	$	94	$	806	$	763
	Goodwill recognized during the period (b)	$	662							334				996
	Allocation to discontinued operations (c)									(5)		(3)		(5)		(3)
	Effect of foreign currency exchange rates					(36)		46						(36)		46
Balance at end of period (a)		$	662		$	679	$	715	$	420	$	91	$	1,761	$	806

					International Regulated				Supply				Total
					2010		2009		2010		2009		2010		2009
PPL Energy Supply
Balance at beginning of period (a)					$	715	$	669	$	91	$	94	$	806	$	763
	Allocation to discontinued operations (c)									(5)		(3)		(5)		(3)
	Effect of foreign currency exchange rates					(36)		46						(36)		46
Balance at end of period (a)					$	679	$	715	$	86	$	91	$	765	$	806

(a)

There were no accumulated impairment losses ~~related to goodwill recorded at January 1, 2008.~~recorded.

(b)	Recognized as a result of the 2010 acquisition of LKE. See Note 10 for additional information.

(c)	~~Allocated~~2010 represents goodwill allocated to certain non-core generation facilities and written off. 2009 represents goodwill allocated to the Long Island and the majority of the Maine hydroelectric generation businesses and written off.

Other Intangibles

(PPL)

The gross carrying amount and the accumulated amortization of other intangible assets were:

December 31, 2009 December 31, 2008
Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization
Subject to amortization:
Land and transmission rights $ 272 $ 114 $ 244 $ 110
Emission allowances/RECs (a) (b) 56 88
Lease arrangement and other (c) 375 41 372 23
Not subject to amortization due to indefinite life:
Land and transmission rights 16 16
Easements 76 67
$ 795 $ 155 $ 787 $ 133

		December 31, 2010					December 31, 2009
		Gross					Gross
		Carrying			Accumulated		Carrying		Accumulated
		Amount			Amortization		Amount		Amortization
Subject to amortization:
	Contracts	$	597	(a)	$	49	$	203	$	23
	Land and transmission rights		256	(b)		110		272		114
	Emission allowances/RECs (c) (d)		37	(e)				56
	Licenses and other (f)		242			30		172		18
Total subject to amortization			1,132	(g)		189		703		155

Not subject to amortization due to indefinite life:
	Land and transmission rights		16					16
	Easements		77					76
Total not subject to amortization due to indefinite life			93					92
Total		$	1,225		$	189	$	795	$	155

(a)

Includes $394 million, which represents the fair value of contracts with terms favorable to market recognized as a result of the 2010 acquisition of LKE. The weighted-average amortization period of these contracts was five years at the acquisition date. An offsetting regulatory liability was recorded related to these contracts, which will be amortized over the same weighted average amortization period as the intangible assets, eliminating any income statement impact. See Note 3 for additional information.

(b)	Includes $14 million, which represents the fair value of land and transmission rights recognized as a result of the 2010 acquisition of LKE. The weighted-average amortization period of these rights was 14 years at the acquisition date.

(c)

Removed from the Balance Sheets and expensed when consumed or sold. Consumption expense was $47 million, $32 million, and $25 million in 2010, 2009 and ~~$108 million in 2009, 2008, and 2007.~~2008. Consumption expense is estimated at ~~$26 million for 2010, $8~~$24 million for 2011, $2$4 million for 2012 and $1$2 million for 2013 ~~and 2014.~~through 2015.

~~(b)~~

(d)

During 2010 and 2009, PPL recorded $17 million and $37 million of impairment charges. See Note 1718 for additional information.

~~(c)~~(e)

Includes $16 million, which represents the fair value of emission allowances recognized as a result of the 2010 acquisition of LKE. The weighted-average consumption period of these emission allowances was three years at the acquisition date. An offsetting regulatory liability was recorded related to these emission allowances, which will be amortized over the same weighted-average consumption period as the emission allowances, eliminating any income statement impact. See Note 3 for additional information.

(f)	"Other" includes costs for the development of licenses, the most significant of which is the COLA. Amortization of these costs begins when the related asset is placed in service. See Note 8 for additional information on the COLA.

(g)	Includes $424 million of intangible assets resulting from the 2010 acquisition of LKE. See Note 10 for additional information regarding the acquisition.

Current intangible assets and long-term intangible assets are included in "Other intangibles" in their respective areas on the Balance Sheets.

Amortization expense, excluding consumption of emission allowances/RECs, was $24 million, $22 million and $13 million in 2010, 2009 and ~~$7 million in 2009,~~ 2008, ~~and 2007,~~ and is estimated to be $24 million for 2011, and $23 million per year for ~~2010~~2012 through ~~2014.~~2015.

(PPL Energy Supply)

The gross carrying amount and the accumulated amortization of other intangible assets were:

December 31, 2009 December 31, 2008
Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization
Subject to amortization:
Land and transmission rights $ 59 $ 23 $ 42 $ 22
Emission allowances/RECs (a) (b) 56 88
Lease arrangement and other (c) 375 41 372 23
Not subject to amortization due to indefinite life:
Easements 76 67
$ 566 $ 64 $ 569 $ 45

		December 31, 2010				December 31, 2009
		Gross				Gross
		Carrying		Accumulated		Carrying		Accumulated
		Amount		Amortization		Amount		Amortization
Subject to amortization:
	Contracts	$	203	$	38	$	203	$	23
	Land and transmission rights		19		16		59		23
	Emission allowances/RECs (a) (b)		20				56
	Licenses and other (c)		239		29		172		18
Total subject to amortization			481		83		490		64

Not subject to amortization due to indefinite life:
	Easements		77				76
Total		$	558	$	83	$	566	$	64

(a)

Removed from the Balance Sheets and expensed when consumed or sold. Consumption expense was $46 million, $32 million, and $25 million in 2010, 2009, and ~~$108 million in 2009, 2008, and 2007.~~2008. Consumption expense is estimated at ~~$26 million for 2010, $8~~$13 million for 2011, $2$3 million for 2012 and $1$2 million for 2013 ~~and 2014.~~through 2015.

(b)

During 2010 and 2009, PPL Energy Supply recorded $16 million and $37 million of impairment charges. See Note 1718 for additional information.

(c)

"Other" includes costs for the development of licenses, the most significant of which is the COLA. Amortization of these costs begins when the related asset is placed in service. See Note 8 for additional information on the COLA.

Current intangible assets and long-term intangible assets are presented as "Other intangibles" in their respective areas on the Balance Sheets.

Amortization expense, excluding consumption of emission allowances/RECs, was $20 million, $19 million and $10 million in 2010, 2009 and ~~$4 million in 2009,~~ 2008, ~~and 2007,~~ and is estimated to be $20 million per year for ~~2010~~2011 through ~~2014.~~2015.

(PPL Electric)

The gross carrying amount and the accumulated amortization of other intangible assets were:

										December 31, 2010				December 31, 2009
	December 31, 2009				December 31, 2008					Gross				Gross
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization			Carrying		Accumulated		Carrying		Accumulated
										Amount		Amortization		Amount		Amortization
Subject to amortization:									Subject to amortization:
Land and transmission rights	$	214	$	91	$	203	$	89
									Land and transmission rights	$	222	$	93	$	214	$	91
									Licenses and other		3		1
Total subject to amortization									Total subject to amortization		225		94		214		91

Not subject to amortization due to indefinite life:									Not subject to amortization due to indefinite life:
Land and transmission rights		16				16
	$	230	$	91	$	219	$	89	Land and transmission rights		16				16
Total									Total	$	241	$	94	$	230	$	91

Intangible assets are shown as "Intangibles" on the Balance Sheets.

Amortization expense was $3 million for 2010, 2009 and 2008, ~~and $2 million for 2007,~~ and is estimated to be $3 million per year for ~~2010~~2011 and 2012, and $2 million per year for 2013 through ~~2014.~~2015.

(PPL, PPL Energy Supply and PPL Electric)

~~The annual provisions for amortization have been computed principally in accordance with the following weighted-average asset lives (in years):~~

			~~Weighted-Average Life~~

~~Land and transmission rights~~			67
~~Emission allowances/RECs (a)~~
~~Lease arrangement and other~~			21

~~(a)~~

~~Expensed when consumed or sold.~~

Following are the weighted-average rates of amortization at December 31.

2009 2008

Land and transmission rights 1.23% 1.28%
Emission allowances/RECs (a)
Lease arrangement and other 6.09% 6.10%

	PPL					PPL Energy Supply				PPL Electric
	2010			2009		2010		2009		2010		2009

Contracts		20.24%	(a)		7.41%		7.41%		7.41%
Land and transmission rights		1.40%			1.23%						1.40%		1.23%
Emission allowances/RECs (b)
Licenses and other		4.16%			4.07%		4.16%		4.07%

(a)

For PPL, the 2010 weighted-average amortization rate was impacted by the acquisition of LKE. The intangible assets associated with contracts recorded in purchase accounting are being amortized over a significantly shorter life as compared to PPL's preexisting intangible assets associated with contracts, resulting in a significantly higher weighted-average amortization rate compared to PPL's historical rates. Excluding LKE, PPL's 2010 weighted-average amortization rate was 7.41%.

(b)	Expensed when consumed or sold.

(PPL and PPL Energy Supply)

In November 2009, ~~the~~ NRC approved PPL Susquehanna's application for 20-year license renewals for each of the Susquehanna nuclear units. Costs of $17 million were capitalized related to these license renewals. The weighted-average period prior to the next PPL Susquehanna license renewal is 3433 years.

21. Asset Retirement Obligations

(PPL)

The fair value of LG&E's and KU's liabilities were recorded in the financial statements as of the acquisition date to reflect various legal obligations associated with the retirement of long-lived assets, primarily related to the retirement of assets associated with its generating units and natural gas wells. See Note 810 for additional ~~information.~~information on the acquisition.

~~20.~~

~~Asset Retirement Obligations~~

As described in Notes 1 and 3, the accretion recorded by LG&E and KU is offset with a regulatory asset, such that there is no income statement impact.

(PPL and PPL Energy Supply)

PPL and PPL Energy Supply ~~recognized, as~~have recorded liabilities in the financial statements to reflect various legal obligations associated with the retirement of long-lived assets, the largest of which relates to the decommissioning of the Susquehanna plant. Other AROs recorded relate to ~~significant interim retirements at the Susquehanna plant and~~ various environmental requirements for coal piles, ash basins and other waste basin retirements.

PPL and PPL Energy Supply have recorded several conditional AROs, the most significant of which related to the removal and disposal of asbestos-containing material.

In addition to the AROs that were recorded for asbestos-containing material, PPL and PPL Energy Supply identified other asbestos-related obligations, but were unable to reasonably estimate their fair values. These retirement obligations could not be reasonably estimated due to indeterminable settlement dates. The generation plants, where significant amounts of asbestos-containing material are located, have been well maintainedPPL and large capital and environmental investments are being made at these plants. During the previous five years, the useful lives of the plants had been reviewed and in most cases significantly extended. Due to these circumstances, PPL Energy Supply management ~~was~~were unable to reasonably estimate a settlement date or range of settlement dates for the remediation of all of the asbestos-containing material at certain of the generation plants. If economic events or other circumstances change that enable PPL and PPL Energy Supply to reasonably estimate the fair value of these retirement obligations, they will be recorded at that time.

Other conditional AROs that were recorded related to treated wood poles, gas-filled switchgear and fluid-filled cables. These obligations, required by U.K. law, had an insignificant impact on the financial statements.

PPL and PPL Energy Supply also identified legal retirement obligations associated with the retirement of a reservoir and certain transmission assets that could not be reasonably estimated due to indeterminable settlement dates.

~~Current AROs are~~The most significant ARO recorded by PPL and PPL Energy Supply relates to the decommissioning of the Susquehanna nuclear plant. In the third quarter of 2010, PPL Susquehanna completed a site-specific study to update the estimated cost to dismantle and decommission each Susquehanna nuclear unit immediately following final shutdown. This estimate included decommissioning the radiological portions of the station and the cost of removal of non-radiological structures and materials. Based on this study, which used a methodology consistent with the prior site-specific study done in ~~"Other current liabilities"~~2002, the decommissioning ARO liability and ~~long-term AROs are~~the associated long-lived asset were reduced by $103 million. The primary factor for this decline was the lower estimated inflation rate assumption used in the 2010 ARO calculatio n.

The accrued nuclear decommissioning obligation was $270 million and $348 million at December 31, 2010 and 2009, and is included in "Asset retirement obligations" on the Balance Sheets. The fair value of investments that are legally restricted for the decommissioning of the Susquehanna nuclear plant was $618 million and $548 million at December 31, 2010 and 2009, and is included in "Nuclear plant decommissioning trust funds" on the Balance Sheets. See Notes 18 and 23 for additional information on the nuclear decommissioning trust funds.

The changes in the carrying amounts of AROs were:

2009 2008

ARO at beginning of period $ 389 $ 376
Accretion expense 31 29
New obligations incurred 9 12
Change in estimated cash flow or settlement date 16 (4 )
Change in foreign currency exchange rates (2 )
Obligations settled (19 ) (22 )
ARO at end of period $ 426 $ 389

		PPL				PPL Energy Supply
		2010		2009		2010		2009

ARO at beginning of period		$	426	$	389	$	426	$	389
	Accretion expense		32		31		31		31
	Obligations assumed in acquisition of LKE		103
	New obligations incurred		4		9		4		9
	Changes in estimated cash flow or settlement date		(100)		16		(100)		16
	Obligations settled		(17)		(19)		(16)		(19)
ARO at end of period		$	448	$	426	$	345	$	426

~~Changes in~~In addition to periodically updating the nuclear decommissioning ARO as described above, changes to other ARO costs and settlement dates, which affect the carrying value of various AROs, are reviewed periodically to ensure that any material changes are incorporated into the latest estimates of the obligation. In 2010, PPL Energy Supply revised cost estimates at several plants, the most significant being the Susquehanna nuclear plant discussed above and the ash basins at Montour and Martins Creek. In 2009, PPL Energy Supply revised cost estimates for several AROs and recognized additional asbestos liabilities at several plants, the most significant being the asbestos AROs at the Montour plant. In 2008, PPL Energy Supply revised estimated settlement dates and cost estimates for remediating several AROs, the most significant being the ash basins at the Montour and Brunner Island plants. In addition, PPL Energy Supply recognized additional liabilities for asbestos-containing material at several plants. The effect of these new and revised liabilities was to increase the ARO liability and related plant balances by $7 million in 2010 and $25 million in ~~2009~~2009. The 2010 and ~~$8 million in 2008. The~~ 2009 ~~and 2008~~ income statement impact of these changes was insignificant.

The ~~most significant ARO recorded by PPL and PPL Energy Supply relates to the decommissioning~~classification of the Susquehanna nuclear plant. The expected cost to decommission the Susquehanna plant is based on a 2002 site-specific study that estimated the cost to dismantle and decommission each unit immediately following final shutdown. PPL Susquehanna's 90% share of the total estimated cost of decommissioning the Susquehanna plant was approximately $936 million measured in 2002 dollars. This estimate includes decommissioning the radiological portions of the station and the cost of removal of non-radiological structures and materials. In 2010, PPL Energy Supply plans to perform a site-specific study to estimate the cost to decommission each unit. The impact of this study on the recorded ARO is not now determinable, but could be significant.

~~The accrued nuclear decommissioning obligation was $348 million and $322 million at December 31, 2009 and 2008, and is included in "Asset retirement obligations"~~AROs on the Balance ~~Sheets. The fair value of investments that are legally restricted for the decommissioning of the Susquehanna nuclear plant~~Sheets was $548 million and $446 million at December 31, 2009 and 2008, and is included in "Nuclear plant decommissioning trust funds" on the Balance Sheets. See Notes 17 and 21 for additional information on the nuclear decommissioning trust funds. Accretion expense, associated with the obligation, was $26 million in 2009, $24 million in 2008 and $22 million in 2007, and is included in "Other operation and maintenance" on the Statements of Income.as follows.

		PPL				PPL Energy Supply
		2010		2009		2010		2009

Current portion (a)		$	13	$	10	$	13	$	10
Long-term portion (b)			435		416		332		416
	Total	$	448	$	426	$	345	$	426

(a)	Included in "Other current liabilities."

(b)	Included in "Asset retirement obligations."

(PPL and PPL Electric)

PPL Electric has identified legal retirement obligations for the retirement of certain transmission assets that could not be reasonably estimated due to indeterminable settlement dates. These assets are located on rights-of-way that allow the grantor to require PPL Electric to relocate or remove the assets. Since this option is at the discretion of the grantor of the right-of-way, PPL Electric is unable to determine when these events may occur.

~~21.~~

~~Available-for-Sale Securities~~22. Variable Interest Entities

(PPL and PPL Energy Supply)

In December 2001, a subsidiary of PPL Energy Supply entered into a $455 million operating lease arrangement, as lessee, for the development, construction and operation of a gas-fired combined-cycle generation facility located in Lower Mt. Bethel Township, Northampton County, Pennsylvania. The owner/lessor of this generation facility, LMB Funding, LP, was created to own/lease the facility and incur the related financing costs. The initial lease term commenced on the date of commercial operation, which occurred in May 2004, and ends in December 2013. Under a residual value guarantee, if the generation facility is sold at the end of the lease term and the cash proceeds from the sale are less than the original acquisition cost, the subsidiary of PPL Energy Supply is obligated to pay up to 70.52% of the origina l acquisition cost. This residual value guarantee protects the other variable interest holders from losses related to their investments. LMB Funding, LP cannot extend or cancel the lease or sell the facility without the prior consent of the PPL Energy Supply subsidiary. As a result, LMB Funding, LP was determined to be a VIE and the subsidiary of PPL Energy Supply was considered the primary beneficiary that consolidates this VIE.

The lease financing, which includes $437 million of "Long-term Debt" and $18 million of "Noncontrolling Interests" at December 31, 2010 and December 31, 2009, is secured by, among other things, the generation facility, the carrying amount of which is disclosed on the Balance Sheets. The debt matures at the end of the initial lease term. As a result of the consolidation, PPL Energy Supply has recorded interest expense in lieu of rent expense. For 2010, 2009 and 2008, additional depreciation on the generation facility of $16 million, $11 million and $11 million was recorded.

23. Available-for-Sale Securities

(PPL and PPL ~~Electric)~~Energy Supply)

PPL and its subsidiaries classify ~~auction rate securities,~~ certain short-term investments, ~~and~~ securities held by the NDT funds and auction rate securities as available-for-sale. Available-for-sale securities are carried on the balance sheet at fair value. Unrealized gains and losses on these securities are reported, net of tax, in OCI or are recognized currently in earnings when a decline in fair value is determined to be other-than-temporary.

~~(PPL~~ The specific identification method is used to calculate realized gains and ~~PPL Energy Supply)~~losses.

The following table shows the amortized cost of available-for-sale securities and the gross unrealized gains ~~and losses~~ recorded in ~~AOCI at December 31.~~AOCI. See Note 1718 for information regarding the fair value of these securities.

2009 2008
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Amortized Cost Gross Unrealized Gains
Gross Unrealized Losses (a)
PPL
Short-term investments – municipal debt securities $ 150
NDT funds:
Cash and cash equivalents $ 7 4
Equity securities:
U.S. large-cap 170 $ 89 160 $ 22
U.S. mid/small-cap 65 36 60 9
Debt securities:
U.S. Treasury 72 2 67 10
U.S. government agency 9 13 1
Municipality 63 2 59 2
Investment-grade corporate 28 1 31 2
Residential mortgage-backed securities 1 2
Other 1
Receivables/Payables, net 3 3
418 130 400 46
Auction rate securities 25 29 $ (5 )
Total PPL $ 443 $ 130 $ 579 $ 46 $ (5 )

PPL Energy Supply
Short-term investments – municipal debt securities $ 150
NDT funds:
Cash and cash equivalents $ 7 4
Equity securities:
U.S. large-cap 170 $ 89 160 $ 22
U.S. mid/small-cap 65 36 60 9
Debt securities:
U.S. Treasury 72 2 67 10
U.S. government agency 9 13 1
Municipality 63 2 59 2
Investment-grade corporate 28 1 31 2
Residential mortgage-backed securities 1 2
Other 1
Receivables/Payables, net 3 3
418 130 400 46
Auction rate securities 20 24 $ (5 )
Total PPL Energy Supply $ 438 $ 130 $ 574 $ 46 $ (5 )

				2010				2009
						Gross				Gross
				Amortized		Unrealized		Amortized		Unrealized
				Cost		Gains		Cost		Gains
PPL
	Short-term investments - municipal debt securities			$	163
	NDT funds:
		Cash and cash equivalents			10			$	7
		Equity securities:
			U.S. large-cap		180	$	123		170	$	89
			U.S. mid/small-cap		67		52		65		36
		Debt securities:
			U.S. Treasury		71		4		72		2
			U.S. government sponsored agency		6		1		9
			Municipality		69				63		2
			Investment-grade corporate		31		2		28		1
			Residential mortgage-backed securities						1
			Other		1
		Receivables/payables, net			1				3
		Total NDT funds			436		182		418		130
	Auction rate securities				25				25
	Total			$	624	$	182	$	443	$	130

PPL Energy Supply
	NDT funds:
		Cash and cash equivalents		$	10			$	7
		Equity securities:
			U.S. large-cap		180	$	123		170	$	89
			U.S. mid/small-cap		67		52		65		36
		Debt securities:
			U.S. Treasury		71		4		72		2
			U.S. government sponsored agency		6		1		9
			Municipality		69				63		2
			Investment-grade corporate		31		2		28		1
			Residential mortgage-backed securities						1
			Other		1
		Receivables/payables, net			1				3
		Total NDT funds			436		182		418		130
	Auction rate securities				20				20
	Total			$	456	$	182	$	438	$	130

~~(a)~~

Prior to the April 1, 2009 adoption of accounting guidance addressing other-than-temporary impairments, there were no unrealized losses recorded in AOCI on debt securities in the NDT funds. See "New Accounting Guidance Adopted - Recognition and Presentation of Other-Than-Temporary Impairments" in Note 1 for additional information.

There were no securities with ~~gross unrealized~~credit losses ~~not recognized in earnings~~ at December 31, ~~2009. At December 31, 2008, the fair value of PPL's~~2010 and PPL Energy Supply's auction rate securities in an unrealized loss position for less than 12 months was $21 million and $19 million. The gross unrealized losses on these securities were $5 million for PPL and PPL Energy Supply.
2009.

The following table shows the scheduled maturity dates of debt securities held at December 31, ~~2009.~~2010.

Maturity
Less Than
1 Year

Maturity
1-5 Years

Maturity
5-10 Years

Maturity
in Excess
of 10 Years
Total
PPL
Amortized Cost $ 7 $ 79 $ 49 $ 63 $ 198
Fair Value 7 81 51 64 203

PPL Energy Supply
Amortized Cost $ 7 $ 79 $ 49 $ 58 $ 193
Fair Value 7 81 51 59 198

	Maturity		Maturity		Maturity		Maturity
	Less Than		1-5		5-10		in Excess
	1 Year		Years		Years		of 10 Years		Total
PPL
Amortized cost	$	14	$	61	$	60	$	231	$	366
Fair value		14		63		63		233		373

PPL Energy Supply
Amortized cost	$	14	$	61	$	60	$	63	$	198
Fair value		14		63		63		65		205

The following table shows proceeds from and realized gains ~~(losses)~~and losses on sales of available-for-sale securities.

	2009			2008			2007
											2010		2009		2008
PPL										PPL
Proceeds from sales of NDT securities (a)	$	201		$	197		$	175		Proceeds from sales of NDT securities (a)	$	114	$	201	$	197
Other proceeds from sales		154			126			648		Other proceeds from sales				154		126
Gross realized gains (b)		27			19			15		Gross realized gains (b)		13		27		19
Gross realized losses (b)		(20	)		(23	)		(10	)	Gross realized losses (b)		(5)		(20)		(23)

PPL Energy Supply										PPL Energy Supply
Proceeds from sales of NDT securities (a)	$	201		$	197		$	175		Proceeds from sales of NDT securities (a)	$	114	$	201	$	197
Other proceeds from sales		154			33			584		Other proceeds from sales				154		33
Gross realized gains (b)		27			19			15		Gross realized gains (b)		13		27		19
Gross realized losses (b)		(20	)		(23	)		(10	)	Gross realized losses (b)		(5)		(20)		(23)

(a)

These proceeds, along with deposits of amounts collected from customers, are used to pay income taxes and fees related to managing the trust. Remaining proceeds are reinvested in the trust. Collections from customers ended in December 2009.

(b)

Excludes the impact of other-than-temporary impairment charges recognized in the Statements of Income.

Short-term Investments

(PPL)

As discussed in Note 7, at December 31, 2010, LG&E held $163 million aggregate principal amount of tax-exempt revenue bonds issued by Louisville/Jefferson County, Kentucky on behalf of LG&E that were purchased from the remarketing agent in 2008. At December 31, 2010, these investments were reflected in "Short-term investments" on the Balance Sheet. In January 2011, LG&E received $163 million for its investments in these bonds when they were remarketed to unaffiliated investors. No realized or unrealized gains (losses) were recorded on these securities, as the difference between carrying value and fair value was insignificant.

(PPL and PPL Energy Supply)

In December 2008, the PEDFA issued $150 million aggregate principal amount of Exempt Facilities Revenue Bonds, Series 2008A and 2008B due 2038 (Series 2008 Bonds) on behalf of PPL Energy Supply. PPL Investment Corp. acted as the initial purchaser of the Series 2008 Bonds upon issuance. In April 2009, PPL Investment Corp. received $150 million for its investment in the Series 2008 bonds when they were refunded by the PEDFA. See "Long-term Debt and Equity Securities" in Note 7 for more information on the refundings. No realized or unrealized gains (losses) were recorded on these securities, as the difference between carrying value and fair value was insignificant.

(PPL and PPL Electric)

In October 2008, the PEDFA issued $90 million aggregate principal amount of Pollution Control Revenue Refunding Bonds, Series 2008 (PPL Electric Utilities Corporation Project) due 2023 (PPL Electric Series 2008 Bonds) on behalf of PPL Electric. PPL Electric acted as the initial purchaser of the PPL Electric Series 2008 Bonds upon issuance. PPL Electric remarketed the PPL Electric Series 2008 Bonds to unaffiliated investors in November 2008. No realized or unrealized gains (losses) were recorded in 2008 related to these securities, as the difference between carrying value and fair value was insignificant.

NDT Funds

(PPL and PPL Energy Supply)

Beginning in January 1999 and ending in December 2009, in accordance with the PUC Final Order, approximately $130 million of decommissioning costs were recovered from PPL Electric's customers through the CTC over the 11-year life of the CTC rather than the remaining life of the Susquehanna nuclear plant. The recovery included a return on unamortized decommissioning costs. Under the power supply agreements between PPL Electric and PPL EnergyPlus, these revenues were passed on to PPL EnergyPlus. Similarly, these revenues were passed on to PPL Susquehanna under a power supply agreement between PPL EnergyPlus and PPL Susquehanna.

Amounts collected from PPL Electric's customers for decommissioning, less applicable taxes, ~~are~~were deposited in external trust funds for investment and can only be used for future decommissioning costs. To the extent that the actual costs for decommissioning exceed the amounts in the nuclear decommissioning trust funds, PPL Susquehanna would be obligated to fund 90% of the shortfall.

When the fair value of a security is less than amortized cost, PPL and PPL Energy Supply must make certain assertions to avoid recording an other-than-temporary impairment that requires a current period charge to earnings. The NRC requires that nuclear decommissioning trusts be managed by independent investment managers, with discretion to buy and sell securities in the trusts. As a result, PPL and PPL Energy Supply have been unable to demonstrate the ability to hold an impaired security until it recovers its value; therefore, unrealized losses on debt securities through March 31, 2009 and unrealized losses on equity securities for all periods presented, represented other-than-temporary impairments that required a current period charge to earnings. PPL and PPL Energy Supply recorded impairments for certain securities invested in the NDT funds of $3 million, $18 million and $36 million for 2010, 2009 and 2008. These impairments are reflected on the Statements of Income in "Other-Than-Temporary Impairments."

~~As described in "New Accounting Guidance Adopted - Recognition and Presentation of Other-Than-Temporary Impairments" in Note 1, effective~~Effective April 1, 2009, when PPL and PPL Energy Supply intend to sell a debt security or more likely than not will be required to sell a debt security before recovery, then the other-than-temporary impairment recognized in earnings will equal the entire difference between the security's amortized cost basis and its fair value. However, if there is no intent to sell a debt security and it is not more likely than not that they will be required to sell the security before recovery, but the security has suffered a credit loss, the other-than-temporary impairment will be separated into the credit loss component, which is recognized in earnings, and the remainder of the other-than-temporary impairment, which is recorded in OCI. Temporary impairments of debt securities and unrealized gains on both debt and equity ~~securities~~securitie s are recorded to OCI. There were no credit losses on debt securities held in the NDT funds at December 31, 2010 or December 31, 2009.

~~Auction Rate Securities~~

At December 31, 2009 and 2008, auction rate securities were recorded in "Other investments" on the Balance Sheets. Historically, the fair value of auction rate securities approximated their par value due to the frequent resetting of the interest rates through the auction process. The auctions for these outstanding securities failed in 2008 and 2009. Based upon the evaluation of available information, PPL and PPL Energy Supply believe these investments continue to be of high credit quality and they do not have significant exposure to realize losses on these securities. PPL and PPL Energy Supply continue to earn interest on these investments at contractually prescribed interest rates. PPL and PPL Energy Supply have no current plans to sell these securities until they can be liquidated at par value and do not anticipate having to sell these securities in order to fund operations or for any other purpose. As such, the decline in fair value noted below was deemed temporary due to general market conditions.

At December 31, 2008, the estimated fair value of the auction rate securities was $5 million lower than par value for PPL and PPL Energy Supply. In 2008, unrealized losses of $5 million for both PPL and PPL Energy Supply were recorded to OCI. During 2009, PPL Energy Supply liquidated $4 million of these securities at par. At December 31, 2009, the estimated fair value was determined to approximate par value. As such, PPL and PPL Energy Supply reversed $5 million of previously recorded temporary impairments. See Note 17 for additional information on these securities, including fair value.

~~Short-term Investments~~24. Subsequent Events

(~~PPL and~~ PPL Energy Supply)

~~In December 2008,~~On January 31, 2011, PPL Energy Supply distributed its membership interest in PPL Global, representing 100% of the ~~PEDFA issued $150 million aggregate principal amount of Exempt Facilities Revenue Bonds, Series 2008A and 2008B due 2038 (Series 2008 Bonds) on behalf~~outstanding membership interests of PPL Global, to PPL Energy ~~Supply.~~Supply's parent, PPL ~~Investment Corp. acted as~~Energy Funding. The distribution was made based on the ~~initial purchaser~~book value of the ~~Series 2008 Bonds upon issuance. At December 31, 2008,~~assets and liabilities of PPL Global with financial effect as of January 1, 2011. The purpose of the distribution is to better align PPL's organizational structure with the manner in which it manages these ~~investments were~~businesses and reports segment information in its consolidated financial statements.

The distribution, and related presentation as discontinued operations, will be reflected in ~~"Short-term investments"~~PPL Energy Supply's March 31, 2011 Quarterly Report to the SEC on Form 10-Q. Following the ~~Balance Sheet. In April 2009,~~distribution, PPL ~~Investment Corp. received $150 million for~~Energy Supply retained its ~~investment~~core business, the generation and marketing of power, primarily in the ~~Series 2008 bonds when they were refunded by~~northeastern and northwestern power markets of the PEDFA. See "Long-term Debt" in Note 7 for more information on the refundings. No realized or unrealized gains (losses) were recorded on these securities, as the difference between carrying value and fair value was insignificant.U.S.

(The unaudited pro forma 2010 and 2009 operating revenues and income (loss) from continuing operations after income taxes attributable to PPL ~~and~~Energy Supply, excluding PPL ~~Electric)~~Global, as if the distribution had occurred January 1, 2009, are as follows.

			Income (Loss)
			from Continuing
			Operations After
			Income Taxes
			Attributable to
	Operating Revenues		PPL Energy Supply

Pro forma for 2010 (unaudited)	$	5,128	$	595
Pro forma for 2009 (unaudited)		5,309		(17)

~~22.~~

~~New Accounting Guidance Pending Adoption~~

~~(PPL,~~The pro forma financial information presented above was derived from the historical consolidated financial statements of PPL Energy Supply and PPL ~~Electric)~~Global. There were no significant pro forma adjustments.

~~Accounting for Transfers of Financial Assets~~

~~Effective January 1,~~The unaudited pro forma December 31, 2010 balance sheet amounts, excluding PPL ~~and its subsidiaries will adopt accounting guidance that was issued to revise~~Global, as if the ~~accounting for transfers of financial assets. This guidance:~~distribution had occurred December 31, 2010, are as follows.

·Current Assets	~~eliminates the concept of a qualifying special-purpose entity (QSPE); therefore, QSPEs will be subject to consolidation guidance;~~	$	3,736
·Investments	~~changes the requirements for the derecognition of financial assets;~~		655
·PPE, net	~~establishes new criteria for reporting the transfer of a portion of a financial asset as a sale;~~		6,133
·Other Noncurrent Assets	~~requires transferors to initially recognize, at fair value, assets obtained and liabilities incurred as a result of a transfer accounted for as a sale; and~~		1,442
·Total Assets	~~requires enhanced disclosures to improve the transparency around transfers of financial assets~~	$	11,966

Current Liabilities		$	3,489
Long-term Debt			2,776
Deferred Credits and ~~a transferor's continuing involvement.~~Other Noncurrent Liabilities			2,480
Equity			3,221
Total Liabilities and Equity		$	11,966

~~Early adoption is prohibited. This guidance will be applied prospectively to new transfers of~~The pro forma financial ~~assets. Disclosures will be required~~information has been presented for all transfers, including those entered into before the effective date. Comparative disclosures are encouraged, but not required, for periods in which these disclosures were not previously required. The January 1, 2010 adoptionillustrative purposes only and is not ~~expected to~~necessarily indicative of the results of operations that would have ~~a significant impact~~been achieved had the distribution been completed on the dates indicated, or the future consolidated results of operations or financial position of PPL ~~and its subsidiaries; however, the impact in future periods could be material.~~Energy Supply.

SCHEDULE I - PPL CORPORATION
CONDENSED UNCONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31,
(Millions of Dollars)

			2010		2009		2008

Operating Revenues			$		$		$

Operating Expenses
Other operation and maintenance				4				5
Total Operating Expenses				4				5

Operating Loss				(4)				(5)

Other Income - net
	Equity in earnings of subsidiaries			1,038		378		929
	Other income (expense)			(60)		3
		Total		978		381		929

Interest Expense - net				80		(39)		(7)

Income Before Income Taxes				894		420		931

Income Tax Expense (Benefit)				(44)		13		1

Net Income Attributable to PPL Corporation			$	938	$	407	$	930

		The accompanying Notes to Condensed Unconsolidated Financial Statements are an integral part of the financial statements.

SCHEDULE I - PPL CORPORATION
CONDENSED UNCONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
(Millions of Dollars)

			2010		2009		2008

Cash Flows from Operating Activities
Net cash provided by (used in) operating activities			$	713	$	995	$	200

Cash Flows from Investing Activities
	Capital contributions to equity investees			(2,709)		(642)		(120)
	Proceeds from the sale of an equity investee							303
	Acquisition of LKE			(6,842)
Net cash (used in) investing activities				(9,551)		(642)		183

Cash Flows from Financing Activities
	Issuance of equity, net of issuance costs			2,441		60		19
	Return of capital from equity investees			150		100		120
	Net increase (decrease) in short-term debt with affiliates			6,826		5
	Payment of common stock dividends			(566)		(517)		(491)
	Repurchase of common stock							(38)
	Other			(13)		(1)		7
Net cash provided by (used in) financing activities				8,838		(353)		(383)

Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Period
Cash and Cash Equivalents at End of Period			$		$		$


Supplemental Disclosures of Cash Flow Information:
Cash Dividends Received from Equity Investees			$	507	$	717	$	493
Non-cash transactions:
	Reduction in "Short-term debt with affiliates" and "Affiliated companies
		at equity"	$	2,784
	Present value of contract adjustment payments			157

The accompanying Notes to Condensed Unconsolidated Financial Statements are an integral part of the financial statements.

~~Consolidation of Variable Interest Entities~~

SCHEDULE I - PPL CORPORATION
CONDENSED UNCONSOLIDATED BALANCE SHEETS AT DECEMBER 31,
(Millions of Dollars)

			2010		2009
Assets

Current Assets
	Accounts Receivable
		Other	$	6	$	7
		Affiliates		29		28
	Prepayments			121		5
	Deferred income taxes			11
	Price risk management assets			15		11
	Total Current Assets			182		51

Investments
	Affiliated companies at equity			13,406		6,086

Other Noncurrent Assets				32		46
Total Assets			$	13,620	$	6,183


Liabilities and Equity

Current Liabilities
	Short-term debt with affiliates		$	4,062	$	20
	Accounts payable with affiliates			958		471
	Dividends			170		132
	Other current liabilities			85		8
	Total Current Liabilities			5,275		631


Deferred Credits and Other Noncurrent Liabilities				135		56

Equity
	PPL Corporation Shareowners' Common Equity
		Common stock - $0.01 par value		5		4
		Capital in excess of par value		4,602		2,280
		Earnings reinvested		4,082		3,749
		Accumulated other comprehensive loss		(479)		(537)
		Total PPL Corporation Shareowners' Common Equity		8,210		5,496

Total Liabilities and Equity			$	13,620	$	6,183

		The accompanying Notes to Condensed Unconsolidated Financial Statements are an integral part of the financial statements.

~~Effective January 1, 2010,~~Schedule I - PPL ~~and its subsidiaries will adopt accounting guidance that was issued~~Corporation

Notes to replace the quantitative-based risks and rewards calculation for determining which entity, if any, has a controlling financial interest in a variable interest entity (VIE) and is the primary beneficiary. The primary beneficiary must consolidate the VIE. This guidance:Condensed Unconsolidated Financial Statements

·1.	~~prescribes a qualitative approach focused on identifying which entity has the power to direct the activities~~Basis of a VIE that most significantly impact the VIE's economic performance and the obligation to absorb losses of or the right to receive benefits from the VIE that could potentially be significant to the VIE;
·	~~requires ongoing assessments of whether an entity is the primary beneficiary of a VIE;~~
·	~~requires enhanced disclosures to improve the transparency of an entity's involvement in a VIE;~~
·	~~requires that all previous consolidation conclusions be reconsidered; and~~
·	~~requires that QSPEs be evaluated for consolidation (resulting from the elimination of the QSPE concept in the guidance addressing accounting for transfers of financial assets).~~

If the initial application results in consolidation of a VIE, the assets, liabilities and noncontrolling interests of the VIE will be measured at their carrying amounts as if this guidance had been applied from the point in time the entity became the primary beneficiary of the VIE (unless the fair value option is elected). Any difference between the net amounts required to be recognized and the amount of any previously recognized interest will be reflected as a cumulative-effect adjustment to retained earnings. If initial application results in deconsolidation of a VIE, any retained interest in the VIE will be measured at its carrying value as if this guidance had been applied from the inception of the VIE.

Early adoption is prohibited. Comparative disclosures are not required for periods in which these disclosures were not previously required. PPL and its subsidiaries are assessing the potential impact of adoption to the financial statements. The January 1, 2010 adoption is not expected to have a significant impact on PPL and its subsidiaries; however, the impact in future periods could be material.

~~Improving Disclosures about Fair Value Measurements~~

~~Effective January 1, 2010, PPL and its subsidiaries will prospectively adopt accounting guidance that was issued to improve disclosures about fair value measurements. This guidance:~~

·	~~requires disclosures be provided for each class of assets and liabilities, with class determined on the basis of the nature and risks of the assets and liabilities;~~
·	~~for recurring fair value measurements, requires disclosure of significant transfers between Levels 1 and 2 and transfers into and out of Level 3 and the reasons for those transfers; and~~
·	~~clarifies that a description of valuation techniques and inputs used to measure fair value is required for Level 2 and Level 3 recurring and nonrecurring fair value measurements.~~

~~Effective January 1, 2011, PPL and its subsidiaries will adopt provisions of this guidance that require Level 3 activity of purchases, sales, issuances and settlements be provided on a gross basis.~~

~~This guidance makes corresponding amendments to employers' disclosures about pensions and other postretirement benefits.~~

Early adoption is permitted. Comparative disclosures are required only for periods ending after initial adoption. PPL and its subsidiaries are assessing the potential impact of adoption. The adoption could have a significant impact on required disclosures.

~~Subsequent Measurement - Cash Flow Hedges~~

Effective April 1, 2010, PPL and its subsidiaries will prospectively adopt accounting guidance that was issued to clarify how an entity should reflect the subsequent measurement of cash flow hedges in AOCI if, during a prior period, hedge accounting was not permitted. This situation may arise if an entity's retrospective assessment of hedge effectiveness indicated that the hedging relationship had not been highly effective in a period, but the prospective assessment of hedge effectiveness showed an expectation that the hedging relationship would be highly effective in the future; therefore, the hedging relationship continued even though hedge accounting was not permitted for a certain period. This guidance:

·	requires that the cumulative gain or loss on the derivative that is used to determine the maximum amount of gain or loss that may be reflected in AOCI exclude the gains or losses that occurred during the period when hedge accounting was not permitted; and
·	~~requires that the cumulative change in the expected future cash flows on the hedged transaction exclude the changes related to the period when hedge accounting was not applied.~~Presentation

PPL Corporation (PPL) is a holding company and conducts substantially all of its business operations through its subsidiaries. These condensed financial statements and related footnotes have been prepared in accordance with Reg. §210.12-04 of Regulation S-X. These statements should be read in conjunction with the consolidated financial statements and notes thereto of PPL.

PPL indirectly or directly owns all of the ownership interests of its significant subsidiaries. PPL does not own the preferred securities of PPL Electric Utilities Corporation. PPL relies on dividends or loans from its subsidiaries to fund PPL's dividends to its common shareholders and to meet its other cash requirements.

2.	Commitments and Contingencies

See Note 15 to PPL’s consolidated financial statements for commitments and contingencies of its subsidiaries.

Guarantees and Other Assurances

PPL has provided indemnification to the purchaser of PPL Gas Utilities and Penn Fuel Propane, LLC for damages arising out of any breach of the representations, warranties and covenants under the related transaction agreement and for damages arising out of certain other matters, including certain pre-closing unknown environmental liabilities relating to former manufactured gas plant properties or off-site disposal sites, if any, outside of Pennsylvania. The estimated maximum potential amount of future payments that could be required to be made under the indemnifications at December 31, 2010 was $300 million. The indemnification provisions for most representations and warranties, including tax and environmental matters, are ~~assessing~~capped at $45 million, in the ~~potential impact~~aggregate, and are triggered (i) only if the individual claim exce eds $50,000, and (ii) only if, and only to the extent that, in the aggregate, total claims exceed $4.5 million. The indemnification provisions for most representations and warranties expired on September 30, 2009 without any claims having been made. Certain representations and warranties, including those having to do with transaction authorization and title, survive indefinitely, are capped at the purchase price and are not subject to the above threshold or deductible. The indemnification provision for the tax matters representations survives for the duration of ~~adoption.~~the applicable statute of limitations, and the indemnification provision for the environmental matters representations survives for a period of three years after the transaction closing. The ~~potential impact~~indemnification relating to unknown environmental liabilities for manufactured gas plants and disposal sites outside of ~~adoption~~Pennsylvania could survive more than three years, but only with respect to applicable property or s ites identified by the purchaser prior to the third anniversary of the transaction closing. The indemnification for covenants survives until the applicable covenant is performed and is not ~~yet determinable but could be material.~~subject to any cap.

QUARTERLY FINANCIAL, COMMON STOCK PRICE AND DIVIDEND DATA (Unaudited)
PPL Corporation and Subsidiaries
(Millions of Dollars, except per share data)
For the Quarters Ended (a)
March 31 June 30 Sept. 30 Dec. 31
2009
Operating revenues as previously reported $ 2,359
Reclassification of discontinued operations (b) (8 )
Operating revenues 2,351 $ 1,673 $ 1,805 $ 1,727
Operating income as previously reported 417
Reclassification of discontinued operations (b) (5 )
Operating income 412 104 181 264
Income from continuing operations after income taxes as previously reported 246
Reclassification of discontinued operations (b) (3 )
Income from continuing operations after income taxes 243 29 50 144
Income (loss) from discontinued operations as previously reported
Reclassification of discontinued operations (b) 3
Income (loss) from discontinued operations 3 (32 ) (24 ) 13
Net income (loss) 246 (3 ) 26 157
Net income attributable to PPL 241 (7 ) 20 153
Income from continuing operations after income taxes available to PPL common shareowners: (c)
Basic EPS 0.64 0.07 0.12 0.37
Diluted EPS 0.64 0.07 0.12 0.37
Net income available to PPL common shareowners: (c)
Basic EPS 0.64 (0.02 ) 0.05 0.40
Diluted EPS 0.64 (0.02 ) 0.05 0.40
Dividends declared per share of common stock (d) 0.345 0.345 0.345 0.345
Price per common share:
High $ 33.54 $ 34.42 $ 34.21 $ 33.05
Low 24.25 27.40 28.27 28.82

2008
Operating revenues $ 1,516 $ 1,014 $ 2,971 $ 2,506
Operating income 473 385 384 551
Income from continuing operations after income taxes 247 189 210 281
Income (loss) from discontinued operations 18 6 (2 ) 1
Net income 265 195 208 282
Net income attributable to PPL 260 190 203 277
Income from continuing operations after income taxes available to PPL common shareowners: (c)
Basic EPS 0.64 0.49 0.54 0.73
Diluted EPS 0.64 0.49 0.54 0.73
Net income available to PPL common shareowners: (c)
Basic EPS 0.69 0.50 0.54 0.74
Diluted EPS 0.69 0.50 0.54 0.74
Dividends declared per share of common stock (d) 0.335 0.335 0.335 0.335
Price per common share:
High $ 55.23 $ 54.00 $ 53.78 $ 37.88
Low 44.72 46.04 34.95 26.84

QUARTERLY FINANCIAL, COMMON STOCK PRICE AND DIVIDEND DATA (Unaudited)
PPL Corporation and Subsidiaries
(Millions of Dollars, except per share data)
			For the Quarters Ended (a)
				March 31		June 30		Sept. 30		Dec. 31
2010
Operating revenues as previously reported			$	3,033	$	1,503
		Reclassification of discontinued operations (b)		(27)		(30)
		Operating revenues		3,006		1,473	$	2,179	$	1,863
Operating income as previously reported				492		238
		Reclassification of discontinued operations (b)		(16)		(12)
		Operating income		476		226		522		642
Income from continuing operations after income taxes as
	previously reported			255		92
		Reclassification of discontinued operations (b)		(8)		(7)
		Income from continuing operations after income taxes		247		85		306		338
Income (loss) from discontinued operations as previously reported
		Reclassification of discontinued operations (b)		8		7
		Income (loss) from discontinued operations		8		7		(53)		21
Net income				255		92		253		359
Net income attributable to PPL Corporation				250		85		248		355
Income from continuing operations after income taxes available to
	PPL Corporation common shareowners: (c)
		Basic EPS		0.66		0.22		0.62		0.69
		Diluted EPS		0.66		0.22		0.62		0.69
Net income available to PPL Corporation common shareowners: (c)
		Basic EPS		0.66		0.22		0.51		0.73
		Diluted EPS		0.66		0.22		0.51		0.73
Dividends declared per share of common stock (d)				0.350		0.350		0.350		0.350
Price per common share:
		High	$	32.77	$	28.80	$	28.00	$	28.14
		Low		27.47		23.75		24.83		25.13

2009
Operating revenues as previously reported			$	2,344	$	1,671
		Reclassification of discontinued operations (b)		(30)		(28)
		Operating revenues		2,314		1,643	$	1,782	$	1,710
Operating income as previously reported				412		104
		Reclassification of discontinued operations (b)		(21)		(18)
		Operating income		391		86		171		248
Income from continuing operations after income taxes as
	previously reported			243		29
		Reclassification of discontinued operations (b)		(11)		(8)
		Income from continuing operations after income taxes		232		21		51		129
Income (loss) from discontinued operations as previously reported				3		(32)
		Reclassification of discontinued operations (b)		11		8
		Income (loss) from discontinued operations		14		(24)		(25)		28
Net income (loss)				246		(3)		26		157
Net income (loss) attributable to PPL Corporation				241		(7)		20		153
Income from continuing operations after income taxes available to
	PPL Corporation common shareowners: (c)
		Basic EPS		0.63		0.07		0.12		0.37
		Diluted EPS		0.63		0.07		0.12		0.37
Net income (loss) available to PPL Corporation common
	shareowners: (c)
		Basic EPS		0.64		(0.02)		0.05		0.40
		Diluted EPS		0.64		(0.02)		0.05		0.40
Dividends declared per share of common stock (d)				0.345		0.345		0.345		0.345
Price per common share:
		High	$	33.54	$	34.42	$	34.21	$	33.05
		Low		24.25		27.40		28.27		28.82

(a)

Quarterly results can vary depending on, among other things, weather and the forward pricing of power. In addition, earnings in ~~2009~~2010 and ~~2008~~2009 were affected by special items. Accordingly, comparisons among quarters of a year may not be indicative of overall trends and changes in operations. These special items include $24 million of tax expense recorded in the third quarter of 2009 for the correction to the previously computed tax bases of the Latin American businesses that were sold in 2007. See Note 9 to the Financial Statements for additional information.

(b)

In 2010, certain PPL Energy Supply subsidiaries signed definitive agreements to sell their entire interests in certain non-core generation facilities. In 2009, PPL Generation signed a definitive agreement to sell its Long Island generation business and PPL Maine sold the majority of its hydroelectric generation business. See Note 9 to the Financial Statements for additional information on these transactions and other completed sales.

(c)

The sum of the quarterly amounts may not equal annual earnings per share due to changes in the number of common shares outstanding during the year or rounding.

(d)

PPL has paid quarterly cash dividends on its common stock in every year since 1946. Future dividends, declared at the discretion of the Board of Directors, will be dependent upon future earnings, cash flows, financial requirements and other factors.

QUARTERLY FINANCIAL DATA (Unaudited)
PPL Energy Supply, LLC and Subsidiaries
(Millions of Dollars)
For the Quarters Ended (a)
March 31 June 30 Sept. 30 Dec. 31
2009
Operating revenues as previously reported $ 1,964
Reclassification of discontinued operations (b) (8 )
Operating revenues 1,956 $ 1,356 $ 1,456 $ 1,364
Operating income as previously reported 300
Reclassification of discontinued operations (b) (5 )
Operating income 295 34 91 167
Income from continuing operations after income taxes as previously reported 191
Reclassification of discontinued operations (b) (3 )
Income from continuing operations after income taxes 188 1 9 89
Income (loss) from discontinued operations as previously reported
Reclassification of discontinued operations (b) 3
Income (loss) from discontinued operations 3 (32 ) (24 ) 13
Net income (loss) 191 (31 ) (15 ) 102
Net income (loss) attributable to PPL Energy Supply 191 (31 ) (16 ) 102

2008
Operating revenues $ 1,124 $ 670 $ 2,610 $ 2,131
Operating income 357 300 274 441
Income from continuing operations after income taxes 195 153 158 244
Income (loss) from discontinued operations 9 5 3 3
Net income 204 158 161 247
Net income attributable to PPL Energy Supply 204 157 161 246

QUARTERLY FINANCIAL DATA (Unaudited)
PPL Energy Supply, LLC and Subsidiaries
(Millions of Dollars)
			For the Quarters Ended (a)
				March 31		June 30		Sept. 30		Dec. 31
2010
Operating revenues as previously reported			$	2,334	$	1,043
		Reclassification of discontinued operations (b)		(27)		(30)
		Operating revenues		2,307		1,013	$	1,680	$	889
Operating income as previously reported				391		179
		Reclassification of discontinued operations (b)		(16)		(12)
		Operating income		375		167		435		477
Income from continuing operations after income taxes as
	previously reported			200		86
		Reclassification of discontinued operations (b)		(8)		(8)
		Income from continuing operations after income taxes		192		78		320		291
Income (loss) from discontinued operations as previously reported
		Reclassification of discontinued operations (b)		8		8
		Income (loss) from discontinued operations		8		8		(54)		19
Net income				200		86		266		310
Net income attributable to PPL Energy Supply				200		86		265		310

2009
Operating revenues as previously reported			$	1,949	$	1,354
		Reclassification of discontinued operations (b)		(30)		(28)
		Operating revenues		1,919		1,326	$	1,433	$	1,347
Operating income as previously reported				295		34
		Reclassification of discontinued operations (b)		(21)		(19)
		Operating income		274		15		82		152
Income from continuing operations after income taxes as
	previously reported			188		1
		Reclassification of discontinued operations (b)		(11)		(8)
		Income from continuing operations after income taxes		177		(7)		13		71
Income (loss) from discontinued operations as previously reported				3		(32)
		Reclassification of discontinued operations (b)	��	11		8
		Income (loss) from discontinued operations		14		(24)		(28)		31
Net income (loss)				191		(31)		(15)		102
Net income (loss) attributable to PPL Energy Supply				191		(31)		(16)		102

(a)

Quarterly results can vary depending on, among other things, weather and the forward pricing of power. In addition, earnings in ~~2009~~2010 and ~~2008~~2009 were affected by special items. Accordingly, comparisons among quarters of a year may not be indicative of overall trends and changes in operations. These special items include $24 million of tax expense recorded in the third quarter of 2009 by for the correction to the previously computed tax bases of the Latin American businesses that were sold in 2007. See Note 9 to the Financial Statements for additional information.

(b)

QUARTERLY FINANCIAL DATA (Unaudited)
PPL Electric Utilities Corporation and Subsidiaries
(Millions of Dollars)
For the Quarters Ended (a)
March 31 June 30 Sept. 30 Dec. 31
2009 (b)
Operating revenues $ 910 $ 747 $ 809 $ 826
Operating income 106 61 78 84
Net income 54 21 32 35
Income available to PPL 49 17 27 31

2008
Operating revenues $ 908 $ 800 $ 842 $ 851
Operating income 111 78 87 99
Net income 56 36 41 43
Income available to PPL 51 32 36 39

~~(a)~~		PPL Electric's business is seasonal in nature, with peak sales periods generally occurring in the winter and summer months. In addition, earnings in 2009 were affected by special items. Accordingly, comparisons among quarters of a year may not be indicative of overall trends and changes in operations.
~~(b)~~		During the second quarter of 2009, PPL Electric recorded an $8 million reduction to operating revenues and a $5 million reduction to net income and income available to PPL as a result of a true-up for the FERC formula-based transmission revenues for 2008 and the first quarter of 2009.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE

PPL Corporation, PPL Energy Supply, LLC and PPL Electric Utilities Corporation

None.

ITEM 9A. CONTROLS AND PROCEDURES

(a)		Evaluation of disclosure controls and procedures.

PPL Corporation, PPL Energy Supply, LLC and PPL Electric Utilities Corporation

~~(a)~~		~~Evaluation of disclosure controls and procedures.~~

		The registrants' principal executive officers and principal financial officers, based on their evaluation of the registrants' disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) have concluded that, as of December 31, ~~2009,~~2010, the registrants' disclosure controls and procedures are effective to ensure that material information relating to the registrants and their consolidated subsidiaries is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms, particularly during the period for which this annual report has been prepared. The aforementioned principal officers have concluded that the disclosure controls and procedures are also effective to ensure that information required to be disclosed in reports filed under the Exchange Act is accumulated and communicated to management, including the principal executive and principal financial officers, to allow for timely decisions regarding required disclosure.

PPL Corporation

		PPL acquired LKE on November 1, 2010. These companies are included in our 2010 financial statements as of the date of the acquisition and accounted for 5.0% of net income and 32.6% and 47.3% of consolidated total assets and net assets, respectively, of PPL Corporation for the year ended December 31, 2010. Because of the size and complexity of these companies as well as the timing of the acquisition, the internal controls over financial reporting of LKE were excluded from a formal evaluation of effectiveness of PPL Corporation's disclosure controls and procedures. PPL is evaluating changes to processes, information technology systems and other components of internal controls over financial reporting as part of its ongoing integration activities.

(b)		Changes in internal control over financial reporting.

PPL Corporation

		~~The registrants'~~Except for the LKE acquisition discussed above, PPL's principal executive officer and principal financial officer have concluded that there were no other changes in the registrant's internal control over financial reporting during the registrant's fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.

PPL Energy Supply, LLC and PPL Electric Utilities Corporation

		PPL Energy Supply and PPL Electric's principal executive officers and principal financial officers have concluded that there were no changes in the registrants' internal control over financial reporting during the registrants' fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrants' internal control over financial reporting.

Management's Report on Internal Control over Financial Reporting

PPL Corporation

		PPL's management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). PPL's internal control over financial reporting is a process designed to provide reasonable assurance to PPL's management and Board of Directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in "Internal Control - Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in "Internal Control - Integrated Framework," our management concluded that our internal control over financial reporting was effective as of December 31, ~~2009.~~2010. The effectiveness of our internal control over financial reporting has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report contained on page ~~90.~~111. In accordance with SEC rules, management excluded LKE from its evaluation of internal controls over financial reporting due to the size and complexity of the acquired companies as well as the timing of the acquisition. LKE accounted for 5.0% of net income and 32.6% and 47.3% of consolidated total assets and net assets, respectively, of PPL Corporation for the year ended December 31, 2010. As discussed above, PPL Corporation is evaluating changes to processes, information technology systems and other components of internal controls over financial reporting as part of its ongoing integration activities.

~~ITEM 9A(T). CONTROLS AND PROCEDURES~~

PPL Energy Supply, LLC and PPL Electric Utilities Corporation


		Management of PPL's non-accelerated filer companies, PPL Energy Supply and PPL Electric, is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). PPL's internal control over financial reporting is a process designed to provide reasonable assurance to PPL's management and Board of Directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Under the supervision and with the participation of our management, including our principal executive officers and principal financial officers, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in "Internal Control - Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in "Internal Control - Integrated Framework," our management concluded that our internal control over financial reporting was effective as of December 31, ~~2009.~~2010. This annual report does not include an attestation report of Ernst & Young LLP, the companies' independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the companies' registered public accounting firm pursuant to ~~temporary~~ rules of the Securities and Exchange Commission that permit the companies to provide only management's report in this annual report.

ITEM 9B. OTHER INFORMATION

PPL Corporation, PPL Energy Supply, LLC and PPL Electric Utilities Corporation

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

PPL Corporation

Additional information for this item will be set forth in the sections entitled "Nominees for Directors," ~~"Directors Continuing in Office,"~~ "Board Committees - Audit Committee" and "Section 16(a) Beneficial Ownership Reporting Compliance" in PPL's ~~2010~~2011 Notice of Annual Meeting and Proxy Statement, which will be filed with the SEC not later than 120 days after December 31, ~~2009,~~2010, and which information is incorporated herein by reference. There have been no changes to the procedures by which shareowners may recommend nominees to PPL's board of directors since the filing with the SEC of PPL's ~~2009~~2010 Notice of Annual Meeting and Proxy Statement. Information required by this item concerning the executive officers of PPL is set forth at the end of Part I of this report.

PPL has adopted a code of ethics entitled "Standards of Conduct and Integrity" that applies to all directors, managers, trustees, officers (including the principal executive officers, principal financial officers and principal accounting officers (each, a "principal officer")), employees and agents of PPL and PPL's subsidiaries for which it has operating control (including PPL Energy Supply and PPL Electric). The "Standards of Conduct and Integrity" are posted on PPL's Internet ~~Web site:~~website: www.pplweb.com/about/corporate+governance. A description of any amendment to the "Standards of Conduct and Integrity" (other than a technical, administrative or other non-substantive amendment) will be posted on PPL's Internet ~~Web site~~website within four business days following the date of the amendment. In addition, if a waiver constituting a material departure from a provision of the "Standards of Conduct and Integrity" is granted to one of the principal officers, a description of the nature of the waiver, the name of the person to whom the waiver was granted and the date of the waiver will be posted on PPL's Internet ~~Web site~~website within four business days following the date of the waiver.

PPL also has adopted its "Guidelines for Corporate Governance," which address, among other things, director qualification standards and director and board committee responsibilities. These guidelines, and the charters of each of the committees of PPL's board of directors, are posted on PPL's Internet ~~Web site:~~website: www.pplweb.com/about/corporate+governance.

PPL Energy Supply, LLC and PPL Electric Utilities Corporation

Item 10 is omitted as PPL Energy Supply ~~meets~~and PPL Electric meet the conditions set forth in General Instruction (I)(1)(a) and (b) of Form 10-K.

EXECUTIVE OFFICERS OF THE REGISTRANTS

Officers of PPL, PPL Energy Supply and PPL Electric ~~Utilities Corporation~~

~~Additional information~~are elected annually by their Boards of Directors (or Board of Managers for ~~this item will be set forth in~~PPL Energy Supply) to serve at the ~~sections entitled "Nominees for Directors," "Board Committees," and "Section 16(a) Beneficial Ownership Reporting Compliance" in PPL Electric's 2010 Notice of Annual~~ ~~Meeting and Information Statement, which will be filed with the SEC not later than 120 days after December 31, 2009, and which information is incorporated herein by reference.~~ PPL Electric's parent, PPL, has adopted a code of ethics entitled "Standards of Conduct and Integrity," which applies to all directors, managers, officers (including the principal executive officers, principal financial officers and principal accounting officers), employees and agents of PPL Electric and its subsidiaries. The full textpleasure of the ~~"Standards~~respective Boards. There are no family relationships among any of ~~Conduct and Integrity" is posted in the Corporate Governance section of PPL's Internet Web site:~~ ~~www.pplweb.com/about/corporate+governance~~. ~~Information required by this item concerning~~ the executive officers, ~~of PPL Electric~~nor is ~~set forth at~~there any arrangement or understanding between any executive officer and any other person pursuant to which the ~~end of Part I of this report.~~officer was selected.

Listed below are the executive officers at December 31, 2010.

PPL Corporation

Name	Age	Positions Held During the Past Five Years	Dates

James H. Miller	62	Chairman, President and Chief Executive Officer	October 2006 - present
		President	June 2006 - September 2006
		President and Chief Operating Officer	August 2005 - June 2006

William H. Spence	53	Executive Vice President and Chief Operating Officer	June 2006 - present
		President-PPL Generation	June 2008 - present
		Senior Vice President-Pepco Holdings, Inc.	August 2002 - June 2006
		Senior Vice President-Conectiv Holdings	September 2000 - June 2006

Paul A. Farr	43	Executive Vice President and Chief Financial Officer	April 2007 - present
		Senior Vice President-Financial	January 2006 - March 2007
		Senior Vice President-Financial and Controller	August 2005 - January 2006

Robert J. Grey	60	Senior Vice President, General Counsel and Secretary	March 1996 - present

David G. DeCampli (a)	53	President-PPL Electric	April 2007 - present
		Senior Vice President-Transmission and Distribution Engineering and Operations-PPL Electric	December 2006 - April 2007
		Vice President-Asset Investment Strategy and Development-Exelon Energy Delivery-Exelon Corporation	April 2004 - December 2006

Robert D. Gabbard (a)	51	President-PPL EnergyPlus	June 2008 - present
		Senior Vice President-Trading-PPL EnergyPlus	June 2008 - June 2008
		Senior Vice President Merchant Trading Operations-Conectiv Energy	June 2005 - May 2008

Rick L. Klingensmith (a)	50	President-PPL Global	August 2004 - present

Victor A. Staffieri (a) (b)	55	Chairman, President and Chief Executive Officer-LKE	May 2001 - present

James E. Abel	59	Senior Vice President-Finance and Treasurer	August 2010 - present
		Vice President-Finance and Treasurer	June 1999 - August 2010

J. Matt Simmons, Jr. (a) (c)	45	Vice President-Risk Management and Chief Risk Officer	September 2009 - present
		Vice President and Controller	January 2006 - March 2010
		Vice President-Finance and Controller-Duke Energy Americas	October 2003 - January 2006

Vincent Sorgi (d)	39	Vice President and Controller	March 2010 - present
		Controller-Supply Accounting	June 2008 - March 2010
		Controller-PPL EnergyPlus	April 2007 - June 2008
		Financial Director-Supply-PPL Generation	April 2006 - April 2007
		Director of Business Operations-PSEG Fossil, LLC	March 2004 - March 2006

(a)		Designated an executive officer of PPL by virtue of their respective positions at a PPL subsidiary.
(b)		Victor A. Staffieri was designated an executive officer of PPL following the acquisition of LKE on November 1, 2010.
(c)		On March 28, 2010, J. Matt Simmons, Jr. resigned as Vice President and Controller.
(d)		On March 29, 2010, Vincent Sorgi was elected as Vice President and Controller.

ITEM 11. EXECUTIVE COMPENSATION

PPL Corporation

Information for this item will be set forth in the sections entitled "Compensation of Directors," "Compensation Committee Interlocks and Insider Participation" and "Executive Compensation" in PPL's ~~2010~~2011 Notice of Annual Meeting and Proxy Statement, which will be filed with the SEC not later than 120 days after December 31, ~~2009,~~2010, and which information is incorporated herein by reference.

PPL Energy Supply, LLC and PPL Electric Utilities Corporation

Item 11 is omitted as PPL Energy Supply ~~meets~~and PPL Electric meet the conditions set forth in General ~~Instruction~~Instructions (I)(1)(a) and (b) of Form 10-K.

~~PPL Electric Utilities Corporation~~

Information for this item will be set forth in the sections entitled "Compensation of Directors" and "Executive Compensation" in PPL Electric's 2010 Notice of Annual Meeting and Information Statement, which will be filed with the SEC not later than 120 days after December 31, 2009, and which information is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

AND RELATED STOCKHOLDER MATTERS

PPL Corporation

Information for this item will be set forth in the section entitled "Stock Ownership" in PPL's ~~2010~~2011 Notice of Annual Meeting and Proxy Statement, which will be filed with the SEC not later than 120 days after December 31, ~~2009,~~2010, and which information is incorporated herein by reference. In addition, provided below in tabular format is information as of December 31, ~~2009,~~2010, with respect to compensation plans (including individual compensation arrangements) under which equity securities of PPL are authorized for issuance.

~~Equity Compensation Plan Information~~

	~~Number of securities to be issued upon exercise of outstanding options, warrants and rights~~ ~~(3)~~	~~Weighted-average exercise price of outstanding options, warrants and rights~~ ~~(3)~~	~~Number of securities remaining available for future issuance under equity compensation plans~~ ~~(4)~~
~~Equity compensation plans approved by security holders~~ ~~(1)~~	~~2,778,235 - ICP~~ ~~1,823,806~~ ~~- ICPKE~~ ~~4,602,041 - Total~~	~~$33.03 - ICP~~ ~~$31.92 - ICPKE~~ ~~$32.59 - Combined~~	~~3,458,171 - ICP~~ ~~9,840,240 - ICPKE~~ ~~14,578,022~~ ~~- DDCP~~ ~~27,876,433 - Total~~

~~Equity compensation plans not approved by security holders~~ ~~(2)~~

Equity Compensation Plan Information

	Number of securities to be				Number of securities
	issued upon exercise of		Weighted-average exercise		remaining available for future
	outstanding options, warrants		price of outstanding options,		issuance under equity
	and rights (3)		warrants and rights (3)		compensation plans (4)
Equity compensation					2,484,121	- ICP
plans approved by	3,394,915	- ICP	$ 32.67	- ICP	9,025,897	- ICPKE
security holders (1)	2,209,066	- ICPKE	$ 31.77	- ICPKE	14,518,081	- DDCP
	5,603,981	- Total	$ 32.31	- Combined	26,028,099	- Total

Equity compensation
plans not approved by
security holders (2)

(1)		Includes (a) the Amended and Restated Incentive Compensation Plan (ICP), under which stock options, restricted stock, restricted stock units, performance units, dividend equivalents and other stock-based awards may be awarded to executive officers of PPL; (b) the Amended and Restated Incentive Compensation Plan for Key Employees (ICPKE), under which stock options, restricted stock, restricted stock units, performance units, dividend equivalents and other stock-based awards may be awarded to non-executive key employees of PPL and its subsidiaries; and (c) the Directors Deferred Compensation Plan (DDCP), under which stock units may be awarded to directors of PPL. See Note 1112 to the financial statements for additional information.

(2)		All of PPL's current compensation plans under which equity securities of PPL are authorized for issuance have been approved by PPL's shareowners.


(3)		Relates to common stock issuable upon the exercise of stock options awarded under the ICP and ICPKE as of December 31, ~~2009.~~2010. In addition, as of December 31, ~~2009,~~2010, the following other securities had been awarded and are outstanding under the ICP, ICPKE and DDCP: 45,400 shares of restricted stock, ~~416,840~~511,190 restricted stock units and ~~101,139~~173,774 performance units under the ICP; 24,600 shares of restricted stock, ~~921,202~~1,081,932 restricted stock units and ~~65,324~~112,266 performance units under the ICPKE; and ~~406,584~~424,170 stock units under the DDCP.

(4)		Based upon the following aggregate award limitations under the ICP, ICPKE and DDCP: (a) under the ICP, ~~15,769,430~~15,769,431 awards (i.e., 5% of the total PPL common stock outstanding as of April 23, 1999) granted after April 23, 1999; (b) under the ICPKE, 16,573,608 awards (i.e., 5% of the total PPL common stock outstanding as of January 1, 2003) granted after April 25, 2003, reduced by outstanding awards for which common stock was not yet issued as of such date of 2,373,812 resulting in a limit of 14,199,796; and (c) under the DDCP, 15,052,856 securities. In addition, each of the ICP and ICPKE includes an annual award limitation of 2% of total PPL common stock outstanding as of January 1 of each year.

PPL Energy Supply, LLC and PPL Electric Utilities Corporation

Item 12 is omitted as PPL Energy Supply ~~meets~~and PPL Electric meet the conditions set forth in General ~~Instruction~~Instructions (I)(1)(a) and (b) of Form 10-K.

~~PPL Electric Utilities Corporation~~

Information for this item will be set forth in the section entitled "Stock Ownership" in PPL Electric's 2010 Notice of Annual Meeting and Information Statement, which will be filed with the SEC not later than 120 days after December 31, 2009, and which information is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

PPL Corporation

Information for this item will be set forth in the sections entitled "Transactions with Related Persons" and "Independence of Directors" in PPL's ~~2010~~2011 Notice of Annual Meeting and Proxy Statement, which will be filed with the SEC not later than 120 days after December 31, ~~2009,~~2010, and is incorporated herein by reference.

PPL Energy Supply, LLC and PPL Electric Utilities Corporation

Item 13 is omitted as PPL Energy Supply ~~meets~~and PPL Electric meet the conditions set forth in General ~~Instruction~~Instructions (I)(1)(a) and (b) of Form 10-K.

~~PPL Electric Utilities Corporation~~

Information for this item will be set forth in the sections entitled "Transactions with Related Persons" and "Nominations" in PPL Electric's 2010 Notice of Annual Meeting and Information Statement, which will be filed with the SEC not later than 120 days after December 31, 2009, and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

PPL Corporation

Information for this item will be set forth in the section entitled "Fees to Independent Auditor for ~~2009~~2010 and ~~2008"~~2009" in PPL's ~~2010~~2011 Notice of Annual Meeting and Proxy Statement, which will be filed with the SEC not later than 120 days after December 31, ~~2009,~~2010, and which information is incorporated herein by reference.

PPL Energy Supply, LLC

The following table presents an allocation of fees billed, including expenses, by Ernst & Young LLP (EY) to PPL for the fiscal years ended December 31, ~~2009~~2010 and ~~2008,~~2009, for professional services rendered for the audit of PPL Energy Supply's annual financial statements and for fees billed for other services rendered by EY.

	2009		2008		2010		2009
	(in thousands)				(in thousands)

Audit fees (a)	$	2,621	$	3,031	$	2,526	$	2,769
Audit-related fees (b)		31		111		16		31
Tax fees (c)						375
All other fees (d)		8		64		118		8

(a)		Includes estimated fees for audit of annual financial statements and review of financial statements included in PPL Energy Supply's Quarterly Reports on Form 10-Q and for services in connection with statutory and regulatory filings or engagements, including comfort letters and consents for financings and filings made with the SEC.

(b)		Fees for ~~due diligence work,~~performance of specific agreed-upon procedures and a review of eXtensible Business Reporting Language tags assigned to financial statement line ~~items and for consultation to ensure appropriate accounting and reporting in connection with various business and financing transactions.~~items.

(c)		~~The independent auditor did not provide~~Includes fees for tax ~~services~~advice in connection with the funding of the Western Power Utilities Pension Scheme, review and consultation related to PPL's recognition of tax benefits resulting from favorable U.S. Court decisions, consultation and analysis related to non-income tax process improvements initiated by PPL ~~Energy Supply or any of its affiliates.~~and review, consultation and analysis related to investment tax credits and related capital expenditures on certain hydro-electric plant upgrades.

(d)		Fees related to access to an EY online accounting research tool and an ~~audit of grant applications relating to network connections, consultation with outside counsel regarding U.K. GAAP and miscellaneous regulatory consulting services.~~International Financial Reporting Standards diagnostic readiness assessment.

Approval of Fees The Audit Committee of PPL has procedures for pre-approving audit and non-audit services to be provided by the independent auditor. These procedures are designed to ensure the continued independence of the independent auditor. More specifically, the use of the independent auditor to perform either audit or non-audit services is prohibited unless specifically approved in advance by the Audit Committee of PPL. As a result of this approval process, the Audit Committee of PPL has established specific categories of services and authorization levels. All services outside of the specified categories and all amounts exceeding the authorization levels are reviewed by the Chair of the Audit Committee of PPL, who serves as the Committee designee to review and approve audit and non-audit related services during the year. A listing of the approved audit and non-audit services is reviewed with the full Audit Committee of PPL no later than its next meeting.

The Audit Committee of PPL approved 100% of the ~~2009~~2010 and ~~2008~~2009 services provided by EY.

PPL Electric Utilities Corporation

~~Information~~The following table presents an allocation of fees billed, including expenses, by EY to PPL for ~~this item will be set forth in~~ the ~~section entitled "Fees to Independent Auditor~~fiscal years ended December 31, 2010 and 2009, for ~~2009 and 2008" in~~professional services rendered for the audit of PPL Electric's ~~2010 Notice~~annual financial statements and for fees billed for other services rendered by EY.

	2010		2009
	(in thousands)

Audit fees (a)	$	791	$	865
Audit-related fees (b)		21		18
Tax fees (c)		58
All other fees (d)		42		3

(a)		Includes estimated fees for audit of annual financial statements and review of financial statements included in PPL Electric's Quarterly Reports on Form 10-Q and for services in connection with statutory and regulatory filings or engagements, including comfort letters and consents for financings and filings made with the SEC.

(b)		Fees for performance of specific agreed-upon procedures and a review of eXtensible Business Reporting Language tags assigned to financial statement line items.

(c)		Fees for consultation and analysis related to non-income tax process improvements initiated by PPL and review and consultation related to PPL's recognition of tax benefits resulting from favorable U.S. Court decisions.

(d)		Fees related to access to an EY online accounting research tool and an International Financial Reporting Standards diagnostic readiness assessment.

Approval of ~~Annual Meeting~~Fees The Audit Committee of PPL has procedures for pre-approving audit and ~~Information Statement, which will~~non-audit services to be ~~filed~~provided by the independent auditor. These procedures are designed to ensure the continued independence of the independent auditor. More specifically, the use of the independent auditor to perform either audit or non-audit services is prohibited unless specifically approved in advance by the Audit Committee of PPL. As a result of this approval process, the Audit Committee of PPL has pre-approved specific categories of services and authorization levels. All services outside of the specified categories and all amounts exceeding the authorized levels are reviewed a nd pre-approved by the Chair of the Audit Committee of PPL, who serves as the Committee designee to review and pre-approve audit and non-audit related services during the year. A listing of the approved audit and non-audit services is reviewed with the ~~SEC not~~full Audit Committee of PPL no later than ~~120 days after December 31,~~its next meeting.

The Audit Committee of PPL approved 100% of the 2010 and 2009 ~~and which information is incorporated herein~~services provided by ~~reference.~~EY.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

PPL Corporation, PPL Energy Supply, LLC and PPL Electric Utilities Corporation

(a) The following documents are filed as part of this report:

	1.	Financial Statements - Refer to the ~~"Index to Item 8. Financial Statements and Supplementary Data"~~"Table of Contents" for an index of the financial statements included in this report.

	2.	Supplementary Data and Supplemental Financial Statement Schedule - included in response to Item 8.

		Schedule I - PPL Corporation Condensed Unconsolidated Financial Statements.

		All ~~supplemental financial statement~~other schedules are omitted because of the absence of the conditions under which they are required or because the required information is included in the financial statements or notes thereto.

	3.	Exhibits

		See Exhibit Index immediately following the signature pages.

SHAREOWNER AND INVESTOR INFORMATION

Annual Meetings: The ~~2010~~2011 annual meeting of shareowners of PPL will be held on Wednesday, May ~~19, 2010,~~18, 2011, at the ~~Holiday Inn~~Zoellner Arts Center, on the campus of Lehigh University in ~~Fogelsville,~~Bethlehem, Pennsylvania, in Lehigh County. ~~The 2010 meeting for PPL Electric will be held on Thursday, May 20, 2010, at the offices of the company at Two North Ninth Street, Allentown, Pennsylvania.~~

Proxy and Information Statement Material: A proxy statement ~~or information statement,~~ and notice of PPL's ~~and PPL Electric's~~ annual ~~meetings are~~meeting is mailed to all shareowners of record as of February ~~26, 2010.~~28, 2011.

PPL Annual Report: The report is published and mailed in the beginning of April to all shareowners of record. The latest annual report can be accessed at www.pplweb.com. If you have more than one account, or if there is more than one investor in your household, you may call the PPL Shareowner Information Line to request that only one annual report be delivered to your address. Please provide account numbers for all duplicate mailings.

Dividends: Subject to the declaration of dividends on PPL common stock by the PPL Board of Directors or its Executive Committee and PPL Electric ~~preferred stock and~~ preference stock by the PPL Electric Board of Directors, dividends are paid on the first business day of April, July, October and January. The ~~2010~~2011 record dates for dividends are expected to be March 10, June 10, September ~~10,~~9, and December ~~10.~~9.

Direct Deposit of Dividends: Shareowners may choose to have their dividend checks deposited directly into their checking or savings account.

PPL Shareowner Information Line (1-800-345-3085): Shareowners can get detailed corporate and financial information 24 hours a day using the PPL Shareowner Information Line. They can hear timely recorded messages about earnings, dividends and other company news releases; request information by fax; and request printed materials in the mail. Other PPL publications, such as the annual and quarterly reports to the Securities and Exchange Commission (Forms 10-K and 10-Q), will be mailed upon request, or write to:

Manager - PPL Investor Services

Two North Ninth Street (GENTW13)

Allentown, PA 18101

FAX: 610-774-5106

Via email: invserv@pplweb.com

PPL's ~~Web Site~~Website (www.pplweb.com): Shareowners can access PPL Securities and Exchange Commission filings, corporate governance materials, news releases, stock quotes and historical performance. Visitors to our ~~Web site~~website can provide their email address and indicate their desire to receive future earnings or news releases automatically.

Shareowner Inquiries:

PPL Shareowner Services

Wells Fargo Bank, N.A.

161 North Concord Exchange

South St. Paul, MN 55075-1139

Toll Free: 1-800-345-3085

Outside U.S.: 651-453-2129

FAX: 651-450-4085

www.wellsfargo.com/shareownerservices

Online Account Access: Registered shareowners can access account information by visiting www.shareowneronline.com.

Dividend Reinvestment ~~Plan:~~and Direct Stock Purchase Plan (Plan): PPL offers its existing shareholders, employees and new investors the opportunity to acquire shares of PPL common stock through its Plan. Shareowners may choose to have dividends on their PPL common stock fully or ~~PPL Electric preferred and preference stock~~partially reinvested in PPL common stock ~~instead~~or can receive full payment of ~~receiving the dividend~~cash dividends by ~~check.~~check or EFT. Participants in ~~PPL's Dividend Reinvestment~~the Plan may choose to have their common stock certificates deposited into their Plan account.

Direct Registration System: PPL ~~and PPL Electric participate~~participates in the Direct Registration System (DRS). Shareowners may choose to have their common ~~or preferred~~ stock certificates deposited into the DRS.

Listed Securities:

New York Stock Exchange

PPL Corporation:

Common Stock (Code: PPL)

Corporate Units (Code: PPLPRU)

PPL Energy Supply, LLC:

7.0% Senior Unsecured Notes due 2046

~~(Code:~~ (Code: PLS)

~~PPL Electric Utilities Corporation:~~

~~4-1/2% Preferred Stock~~

~~(Code: PPLPRB)~~

~~4.40% Series Preferred Stock~~

~~(Code: PPLPRA)~~

PPL Capital Funding, Inc.:

2007 Series A Junior Subordinated Notes due 2067

~~(Code:~~ (Code: PPL/67)

6.85% Senior Notes due 2047 (Code: PLV)

~~(Code: PLV)~~

Fiscal Agents:

Stock Transfer Agent and Registrar;

Dividend Reinvestment Plan Agent

Wells Fargo Bank, N.A.

Shareowner Services

161 North Concord Exchange

South St. Paul, MN 55075-1139

Toll Free: 1-800-345-3085

Outside U.S.: 651-453-2129

Dividend Disbursing Office

PPL Investor Services

Two North Ninth Street (GENTW13)

Allentown, PA 18101

FAX: 610-774-5106

Via email: invserv@pplweb.com

Or call the PPL Shareowner Information Line

Toll Free: 1-800-345-3085

1945 Mortgage Bond Trustee,

Transfer and Bond Interest Paying Agent

Deutsche Bank Trust Company Americas

648 Grassmere Park Road

Nashville, TN 37211

Toll Free: 1-800-735-7777

FAX: 615-835-2727

Indenture Trustee

The Bank of New York Mellon

101 Barclay Street

New York, NY 10286

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PPL Corporation

(Registrant)

By /s/ James H. Miller
James H. Miller -
Chairman, President and
Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.



		TITLE

By /s/ James H. Miller		Principal Executive Officer and Director
James H. Miller -
Chairman, President and
Chief Executive Officer


By /s/ Paul A. Farr		Principal Financial Officer
Paul A. Farr -
Executive Vice President and
Chief Financial Officer


By /s/ ~~J. Matt Simmons, Jr.~~Vincent Sorgi		Principal Accounting Officer
~~J. Matt Simmons, Jr.~~Vincent Sorgi -
Vice President and Controller



Directors:

Frederick M. Bernthal	Stuart ~~Heydt~~E. Graham
John W. Conway	~~Craig A. Rogerson~~Stuart Heydt
E. Allen Deaver	~~W. Keith Smith~~Craig A. Rogerson
~~Louise K. Goeser~~Steven G. Elliott	Natica von Althann
~~Stuart E. Graham~~Louise K. Goeser	Keith H. Williamson

By /s/ James H. Miller
James H. Miller, Attorney-in-fact	Date: February 25, ~~2010~~2011

SIGNATURES

PPL Energy Supply, LLC

(Registrant)

By /s/ James H. Miller
James H. Miller -
President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

				TITLE

By /s/ James H. Miller				Principal Executive Officer and Manager
James H. Miller -
President

By /s/ Paul A. Farr				Principal Financial Officer and Manager
Paul A. Farr -
Executive Vice President

By /s/ ~~J. Matt Simmons, Jr.~~Vincent Sorgi				Principal Accounting Officer
~~J. Matt Simmons, Jr.~~Vincent Sorgi -
Vice President and Controller

Managers:

/s/ Robert J. Grey
Robert J. Grey

/s/ William H. Spence
William H. Spence

/s/ James E. Abel
James E. Abel







Date: February 25, ~~2010~~2011

SIGNATURES

PPL Electric Utilities Corporation

(Registrant)

By /s/ David G. DeCampli
David G. DeCampli -
President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

				TITLE

By /s/ David G. DeCampli				Principal Executive Officer and Director
David G. DeCampli -
President

By /s/ ~~J. Matt Simmons, Jr.~~Vincent Sorgi				Principal Financial Officer and
~~J. Matt Simmons, Jr.~~Vincent Sorgi -				Principal Accounting Officer
Vice President and Controller


Directors:

/s/ James H. Miller		/s/ William H. Spence
James H. Miller		William H. Spence

/s/ Paul A. Farr		/s/ Dean A. Christiansen
Paul A. Farr		Dean A. Christiansen

/s/ Robert J. Grey
Robert J. Grey








Date: February 25, ~~2010~~2011

EXHIBIT INDEX

The following Exhibits indicated by an asterisk preceding the Exhibit number are filed herewith. The balance of the Exhibits ~~have~~has heretofore been filed with the Commission and pursuant to Rule 12(b)-32 are incorporated herein by reference. Exhibits indicated by a [_] are filed or listed pursuant to Item 601(b)(10)(iii) of Regulation S-K.


3(a)	-	Amended and Restated Articles of Incorporation of PPL Corporation effective May 21, 2008 (Exhibit 3(i) to PPL Corporation Form 8-K Report (File No. 1-11459) dated May 21, 2008)

3(b)	-	Amended and Restated Articles of Incorporation of PPL Electric Utilities Corporation (Exhibit 3(a) to PPL Electric Utilities Corporation Form 10-Q Report (File No. 1-905) for the quarter ended March 31, 2006)

3(c)	-	Certificate of Formation of PPL Energy Supply, LLC (Exhibit 3.1 to PPL Energy Supply, LLC Form S-4 (Registration Statement No. 333-74794))

3(d)	-	Amended and Restated Bylaws of PPL Corporation, effective May ~~21, 2008~~19, 2010 (Exhibit ~~3.(ii)~~99.1 to PPL Corporation Form 8-K Report (File No. 1-11459) dated May ~~21, 2008)~~24, 2010)

3(e)	-	Bylaws of PPL Electric Utilities Corporation, as amended and restated effective March 30, 2006 (Exhibit 3.2 to PPL Electric Utilities Corporation Form 8-K Report (File No. 1-905) dated March 30, 2006)

3(f)	-	Limited Liability Company Agreement of PPL Energy Supply, LLC, dated March 20, 2001 (Exhibit 3.2 to PPL Energy Supply, LLC Form S-4 (Registration Statement No. 333-74794))

4(a)	-	Pollution Control Facilities Loan Agreement, dated as of May 1, 1973, between PPL Electric Utilities Corporation and the Lehigh County Industrial Development Authority (Exhibit 5(z) to Registration Statement No. 2-60834)

4(b)-1	-	Amended and Restated Employee Stock Ownership Plan, dated January 12, 2007 (Exhibit 4(a) to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2006)

~~4(a)~~4(b)-2	-	Amendment No. 1 to said Amended and Restated Employee Stock Ownership Plan, dated July 2, 2007 (Exhibit 4(a) to PPL Corporation Form 10-Q Report (File No. 1-11459) for the quarter ended September 30, 2007)

~~4(a)~~4(b)-3	-	Amendment No. 2 to said Amended and Restated Employee Stock Ownership Plan, dated December 13, 2007 (Exhibit 4(a)-3 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2007)

~~4(a)~~4(b)-4	-	Amendment No. 3 to said Amended and Restated Employee Stock Ownership Plan, dated August 19, 2009 (Exhibit 4(a) to PPL Corporation Form 10-Q Report (File No. 1-11459) for quarter ended September 30, 2009)

*4(a)4(b)-5	-	Amendment No. 4 to said Amended and Restated Employee Stock Ownership Plan, dated December 2, 2009 (Exhibit 4(a) -5 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2009)

*4(b)-6	-	Amendment No. 5 to said Amended and Restated Employee Stock Ownership Plan, dated November 17, 2010

4(c)	-	Trust Deed constituting £150 million 9 ¼ percent Bonds due 2020, dated November 9, 1995, between South Wales Electric plc and Bankers Trustee Company Limited (Exhibit 4(k) to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2004)

~~4(c)~~4(d)-1	-	Indenture, dated as of November 1, 1997, among PPL Corporation, PPL Capital Funding, Inc. and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as Trustee (Exhibit 4.1 to PPL Corporation Form 8-K Report (File No. 1-11459) dated November 12, 1997)

~~4(c)~~4(d)-2	-	Supplement, dated as of May 18, 2004, to said Indenture (Exhibit 4.7 to Registration Statement Nos. 333-116478, 333-116478-01 and 333-116478-02)

~~4(c)~~4(d)-3	-	Supplement, dated as of July 1, 2007, to said Indenture (Exhibit 4(b) to PPL Corporation Form 8-K Report (File No. 1-11459) dated July 16, 2007)

~~4(d)~~4(e)	-	Indenture, dated as of March 16, 2001, among WPD Holdings UK, Bankers Trust Company, as Trustee, Principal Paying Agent, and Transfer Agent and Deutsche Bank Luxembourg, S.A., as Paying and Transfer Agent (Exhibit 4(g) to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2009)

4(f)-1	-	Indenture, dated as of August 1, 2001, by PPL Electric Utilities Corporation and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as Trustee (Exhibit 4.1 to PPL Electric Utilities Corporation Form 8-K Report (File No. 1-905) dated August 21, 2001)

~~4(d)~~4(f)-2	-	Supplement, dated as of February 1, 2005, to said Indenture (Exhibit 4(g)-5 to PPL Electric Utilities Corporation Form 10-K Report (File No. 1-905) for the year ended December 31, 2004)

~~4(d)~~4(f)-3	-	Supplement, dated as of May 1, 2005, to said Indenture (Exhibit 4(b) to PPL Electric Utilities Corporation Form 10-Q Report (File No. 1-905) for the quarter ended June 30, 2005)

~~4(d)~~4(f)-4	-	Supplement, dated as of December 1, 2005, to said Indenture (Exhibit 4(a) to PPL Electric Utilities Corporation Form 8-K Report (File No. 1-905) dated December 22, 2005)

~~4(d)~~4(f)-5	-	Supplement, dated as of August 1, 2007, to said Indenture (Exhibit 4(b) to PPL Electric Utilities Corporation Form 8-K Report (File No. 1-905) dated August 14, 2007)

~~4(d)~~4(f)-6	-	Supplement, dated as of October 1, 2008, to said Indenture (Exhibit 4(b) to PPL Electric Utilities Corporation Form 8-K Report (File No. 1-905) dated October 20, 2008)

~~4(d)~~4(f)-7	-	Supplement, dated as of October 1, 2008, to said Indenture (Exhibit 4(c) to PPL Electric Utilities Corporation Form 8-K Report (File No. 1-905) dated October 31, 2008)

~~4(d)~~4(f)-8	-	Supplement, dated as of May 1, 2009, to said Indenture (Exhibit 4(b) to PPL Electric Utilities Corporation Form 8-K Report (File No. 1-905) dated May 22, 2009)

~~4(e)~~4(g)-1	-	Indenture, dated as of October 1, 2001, by PPL Energy Supply, LLC and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as Trustee (Exhibit 4.1 to PPL Energy Supply, LLC Form S-4 (Registration Statement No. 333-74794))

~~4(e)~~4(g)-2	-	Supplement, dated as of October 1, 2001, to said Indenture (Exhibit 4.2 to PPL Energy Supply, LLC Form S-4 (Registration Statement No. 333-74794))

~~4(e)-3~~	4(g)-	~~Registration Rights Agreement, dated October 19, 2001, between PPL Energy Supply, LLC and the Initial Purchasers (Exhibit 4.5 to PPL Energy Supply, LLC Form S-4 (Registration Statement No. 333-74794))~~

~~4(e)-4~~ 3	-	Supplement, dated as of August 15, 2004, to said Indenture (Exhibit 4(h)-4 to PPL Energy Supply, LLC Form 10-K Report (File No. 333-74794) for the year ended December 31, 2004)

~~4(e)-5~~4(g)-4	-	Supplement, dated as of October 15, 2005, to said Indenture (Exhibit 4(a) to PPL Energy Supply, LLC Form 8-K Report (File No. 333-74794) dated October 28, 2005)

~~4(e)-6~~4(g)-5	-	Form of Note for PPL Energy Supply, LLC's $300 million aggregate principal amount of 5.70% REset Put Securities due 2035 (REPSSM) (Exhibit 4(b) to PPL Energy Supply, LLC Form 8-K Report (File No. 333-74794) dated October 28, 2005)

~~4(e)-7~~4(g)-6	-	Supplement, dated as of May 1, 2006, to said Indenture (Exhibit 4(a) to PPL Energy Supply, LLC Form 10-Q Report (File No. 333-74794) for the quarter ended June 30, 2006)

~~4(e)-8~~4(g)-7	-	Supplement, dated as of July 1, 2006, to said Indenture (Exhibit 4(b) to PPL Energy Supply, LLC Form 10-Q Report (File No. 333-74794) for the quarter ended June 30, 2006)

~~4(e)-9~~4(g)-8	-	Supplement, dated as of July 1, 2006, to said Indenture (Exhibit 4(c) to PPL Energy Supply, LLC Form 10-Q Report (File No. 333-74794) for the quarter ended June 30, 2006)

~~4(e)-10~~4(g)-9	-	Supplement, dated as of December 1, 2006, to said Indenture (Exhibit 4(f)-10 to PPL Energy Supply, LLC Form 10-K Report (File No. 333-74794) for the year ended December 31, 2006)

~~4(e)-11~~4(g)-10	-	Supplement, dated as of December 1, 2007, to said Indenture (Exhibit 4(b) to PPL Energy Supply, LLC Form 8-K Report (File No. 333-74794) dated December 18, 2007)

~~4(e)-12~~4(g)-11	-	Supplement, dated as of March 1, 2008, to said Indenture (Exhibit 4(b) to PPL Energy Supply, LLC Form 8-K Report (File No. 333-74794) dated March 14, 2008)

~~4(e)-13~~4(g)-12	-	Supplement, dated as of July 1, 2008, to said Indenture (Exhibit 4(b) to PPL Energy Supply, LLC Form 8-K Report (File No. 1-32944) dated July 21, 2008)

~~4(f)~~4(h)-1	-	Trust Deed constituting £200 million 5.875 percent Bonds due 2027, dated March 25, 2003, between Western Power Distribution (South West) plc and J.P. Morgan Corporate Trustee Services Limited (Exhibit 4(o)-1 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2004)

~~4(f)~~4(h)-2	-	Supplement, dated May 27, 2003, to said Trust Deed, constituting £50 million 5.875 percent Bonds due 2027 (Exhibit 4(o)-2 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2004)

*4(g) 4(i)-1	-	~~Indenture,~~Pollution Control Facilities Loan Agreement, dated as of ~~March 16, 2001, among WPD Holdings UK, Bankers Trust Company, as Trustee, Principal Paying Agent,~~February 1, 2005, between PPL Electric Utilities Corporation and ~~Transfer Agent and Deutsche Bank Luxembourg, S.A., as Paying and Transfer Agent~~the Lehigh County Industrial Development Authority (Exhibit 10(ff) to PPL Electric Utilities Corporation Form 10-K Report (File No. 1-905) for the year ended December 31, 2004)

~~4(h)~~4(i)-2	-	Pollution Control Facilities Loan Agreement, dated as of May 1, 2005, between PPL Electric Utilities Corporation and the Lehigh County Industrial Development Authority (Exhibit 10(a) to PPL Electric Utilities Corporation Form 10-Q Report (File No. 1-905) for the quarter ended June 30, 2005)

4(i)-3	-	Pollution Control Facilities Loan Agreement, dated as of October 1, 2008, between Pennsylvania Economic Development Financing Authority and PPL Electric Utilities Corporation (Exhibit 4(a) to PPL Electric Utilities Corporation Form 8-K Report (File No. 1-905) dated October 31, 2008)

4(j)	-	Trust Deed constituting £105 million 1.541 percent Index-Linked Notes due 2053, dated December 1, 2006, between Western Power Distribution (South West) plc and HSBC Trustee (CI) Limited (Exhibit 4(i) to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2006)

~~4(i)~~4(k)	-	Trust Deed constituting £120 million 1.541 percent Index-Linked Notes due 2056, dated December 1, 2006, between Western Power Distribution (South West) plc and HSBC Trustee (CI) Limited (Exhibit 4(j) to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2006)

~~4(j)~~4(l)	-	Trust Deed constituting £225 million 4.80436 percent Notes due 2037, dated December 21, 2006, between Western Power Distribution (South Wales) plc and HSBC Trustee (CI) Limited (Exhibit 4(k) to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2006)

~~4(k)~~4(m)-1	-	Subordinated Indenture, dated as of March 1, 2007, between PPL Capital Funding, Inc., PPL Corporation and The Bank of New York, as Trustee (Exhibit 4(a) to PPL Corporation Form 8-K Report (File No. 1-11459) dated March 20, 2007)

~~4(k)~~4(m)-2	-	Supplement, dated as of March 1, 2007, to said Subordinated Indenture (Exhibit 4(b) to PPL Corporation Form 8-K Report (File No. 1-11459) dated March 20, 2007)

~~4(l)~~4(m)-3	-	Supplement, dated as of June 28, 2010, to said Subordinated Indenture (Exhibit 4.3 to PPL Corporation Form 8-K Report (File No. 1-11459) dated June 28, 2010)

4(n)-1	-	Series 2009A Exempt Facilities Loan Agreement, dated as of April 1, 2009, between PPL Energy Supply, LLC and Pennsylvania Economic Development Financing Authority (Exhibit 4(a) to PPL Energy Supply, LLC Form 8-K Report (File No. 1-32944) dated April 9, 2009)

~~4(l)~~4(n)-2	-	Series 2009B Exempt Facilities Loan Agreement, dated as of April 1, 2009, between PPL Energy Supply, LLC and Pennsylvania Economic Development Financing Authority (Exhibit 4(b) to PPL Energy Supply, LLC Form 8-K Report (File No. 1-32944) dated April 9, 2009)

~~4(l)~~4(n)-3	-	Series 2009C Exempt Facilities Loan Agreement, dated as of April 1, 2009, between PPL Energy Supply, LLC and Pennsylvania Economic Development Financing Authority (Exhibit 4(c) to PPL Energy Supply, LLC Form 8-K Report (File No. 1-32944) dated April 9, 2009)

~~10(a)~~4(o)	-	~~$150 Million Credit~~Trust Deed constituting £200 million 5.75 percent Notes due 2040, dated March 23, 2010, between Western Power Distribution (South Wales) plc and ~~Reimbursement Agreement, dated as of April 25, 2001, among PPL Montana, LLC and the banks named therein~~HSBC Corporate Trustee Company (UK) Limited (Exhibit ~~10(d)~~4(a) to PPL ~~Montana, LLC~~Corporation Form 10-Q Report (File No. ~~333-50350)~~1-11459) for the quarter ended ~~June 30, 2001)~~March 31, 2010)

~~10(b)~~4(p)	-	Trust Deed constituting £200 million 5.75 percent Notes due 2040, dated March 23, 2010, between Western Power Distribution (South West) plc and HSBC Corporate Trustee Company (UK) Limited (Exhibit 4(b) to PPL Corporation Form 10-Q Report (File No. 1-11459) for the quarter ended March 31, 2010)

*4(q)-1	-	Indenture, dated as of October 1, 2010, between Kentucky Utilities Company and The Bank of New York Mellon, as Trustee

*4(q)-2	-	Supplemental Indenture No. 1, dated as of October 15, 2010, to said Indenture

*4(q)-3	-	Supplemental Indenture No. 2, dated as of November 1, 2010, to said Indenture

*4(r)-1	-	Indenture, dated as of October 1, 2010, between Louisville Gas and Electric Company and The Bank of New York Mellon, as Trustee

*4(r)-2	-	Supplemental Indenture No. 1, dated as of October 15, 2010, to said Indenture

*4(r)-3	-	Supplemental Indenture No. 2, dated as of November 1, 2010, to said Indenture

*4(s)-1	-	Indenture, dated as of November 1, 2010, between LG&E and KU Energy LLC and The Bank of New York Mellon, as Trustee

*4(s)-2	-	Supplemental Indenture No. 1, dated as of November 1, 2010, to said Indenture

*4(t)	-	Registration Rights Agreement, dated November 12, 2010, between LG&E and KU Energy LLC and the Initial Purchasers

*4(u)	-	Registration Rights Agreement, dated November 16, 2010, between Louisville Gas and Electric Company and the Initial Purchasers

*4(v)	-	Registration Rights Agreement, dated November 16, 2010, between Kentucky Utilities Company and the Initial Purchasers

*4(w)-1	-	2002 Series A Carroll County Loan Agreement, dated February 1, 2002, by and between Kentucky Utilities Company, and County of Carroll, Kentucky

*4(w)-2	-	Amendment No. 1 dated as of September 1, 2010 to said Loan Agreement by and between Kentucky Utilities Company, and County of Carroll, Kentucky

*4(x)-1	-	2002 Series B Carroll County Loan Agreement, dated February 1, 2002, by and between Kentucky Utilities Company, and County of Carroll, Kentucky

*4(x)-2	-	Amendment No. 1 dated as of September 1, 2010, to said Loan Agreement by and between Kentucky Utilities Company, and County of Carroll, Kentucky

*4(y)-1	-	2002 Series C Carroll County Loan Agreement, dated July 1, 2002, by and between Kentucky Utilities Company, and County of Carroll, Kentucky

*4(y)-2	-	Amendment No. 1 dated as of September 1, 2010, to said Loan Agreement by and between Kentucky Utilities Company, and County of Carroll, Kentucky

*4(z)-1	-	2004 Series A Carroll County Loan Agreement, dated October 1, 2004 and amended and restated as of September 1, 2008, by and between Kentucky Utilities Company, and County of Carroll, Kentucky

*4(z)-2	-	Amendment No. 1 dated as of September 1, 2010, to said Loan Agreement by and between Kentucky Utilities Company, and County of Carroll, Kentucky

*4(aa)-1	-	2006 Series B Carroll County Loan Agreement, dated October 1, 2006 and amended and restated September 1, 2008, by and between Kentucky Utilities Company, and County of Carroll, Kentucky

*4(aa)-2	-	Amendment No. 1 dated as of September 1, 2010, to said Loan Agreement by and between Kentucky Utilities Company, and County of Carroll, Kentucky

*4(bb)-1	-	2007 Series A Carroll County Loan Agreement, dated March 1, 2007, by and between Kentucky Utilities Company and County of Carroll, Kentucky

*4(bb)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Kentucky Utilities Company, and County of Carroll, Kentucky

*4(cc)-1	-	2008 Series A Carroll County Loan Agreement, dated August 1, 2008 by and between Kentucky Utilities Company, and County of Carroll, Kentucky

*4(cc)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Kentucky Utilities Company, and County of Carroll, Kentucky

*4(dd)-1	-	2000 Series A Mercer County Loan Agreement, dated May 1, 2000 and amended and restated as of September 1, 2008, by and between Kentucky Utilities Company, and County of Mercer, Kentucky

*4(dd)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Kentucky Utilities Company, and County of Mercer, Kentucky

*4(ee)-1	-	2002 Series A Mercer County Loan Agreement, dated February 1, 2002, by and between Kentucky Utilities Company, and County of Mercer, Kentucky

*4(ee)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Kentucky Utilities Company, and County of Mercer, Kentucky

*4(ff)-1	-	2002 Series A Muhlenberg County Loan Agreement, dated February 1, 2002, by and between Kentucky Utilities Company, and County of Muhlenberg, Kentucky

*4(ff)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Kentucky Utilities Company, and County of Muhlenberg, Kentucky

*4(gg)-1	-	2007 Series A Trimble County Loan Agreement, dated March 1, 2007, by and between Kentucky Utilities Company, and County of Trimble, Kentucky

*4(gg)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Kentucky Utilities Company, and County of Trimble, Kentucky

*4(hh)-1	-	2000 Series A Louisville/Jefferson County Metro Government Loan Agreement, dated May 1, 2000 and amended and restated as of September 1, 2008, by and between Louisville Gas and Electric Company, and Louisville/Jefferson County Metro Government, Kentucky

*4(hh)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Louisville Gas and Electric Company, and Louisville/Jefferson County Metro Government, Kentucky

*4(ii)-1	-	2001 Series A Jefferson County Loan Agreement, dated July 1, 2001, by and between Louisville Gas and Electric Company, and Jefferson County, Kentucky

*4(ii)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Louisville Gas and Electric Company, and Jefferson County, Kentucky

*4(jj)-1	-	2001 Series A Jefferson County Loan Agreement, dated November 1, 2001, by and between Louisville Gas and Electric Company, and Jefferson County, Kentucky

*4(jj)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Louisville Gas and Electric Company, and Jefferson County, Kentucky

*4(kk)-1	-	2001 Series B Jefferson County Loan Agreement, dated November 1, 2001, by and between Louisville Gas and Electric Company, and Jefferson County, Kentucky

*4(kk)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Louisville Gas and Electric Company, and Jefferson County, Kentucky

*4(ll)-1	-	2003 Series A Louisville/Jefferson County Metro Government Loan Agreement, dated October 1, 2003, by and between Louisville Gas and Electric Company and Louisville/Jefferson County Metro Government, Kentucky

*4(ll)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Louisville Gas and Electric Company, and Louisville/Jefferson County Metro Government, Kentucky

*4(mm)-1	-	2005 Series A Louisville/Jefferson County Metro Government Loan Agreement, dated February 1, 2005 and amended and restated as of September 1, 2008, by and between Louisville Gas and Electric Company, and Louisville/Jefferson County Metro Government, Kentucky

*4(mm)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Louisville Gas and Electric Company, and Louisville/Jefferson County Metro Government, Kentucky

*4(nn)-1	-	2007 Series A Louisville/Jefferson County Metro Government Loan Agreement, dated as of March 1, 2007 and amended and restated as of September 1, 2008, by and between Louisville Gas and Electric Company, and Louisville/Jefferson County Metro Government, Kentucky

*4(nn)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Louisville Gas and Electric Company, and Louisville/Jefferson County Metro Government, Kentucky

*4(oo)	-	2007 Series B Louisville/Jefferson County Metro Government Amended and Restated Loan Agreement, dated November 1, 2010, by and between Louisville Gas and Electric Company and Louisville/Jefferson County Metro Government, Kentucky

*4(pp)-1	-	2000 Series A Trimble County Loan Agreement, dated August 1, 2000, by and between Louisville Gas and Electric Company, and County of Trimble, Kentucky

*4(pp)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Louisville Gas and Electric Company, and County of Trimble, Kentucky

*4(qq)-1	-	2001 Series A Trimble County Loan Agreement, dated November 1, 2001, by and between Louisville Gas and Electric Company, and County of Trimble, Kentucky

*4(qq)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Louisville Gas and Electric Company, and the County of Trimble, Kentucky

*4(rr)-1	-	2001 Series B Trimble County Loan Agreement, dated November 1, 2001, by and between Louisville Gas and Electric Company, and County of Trimble, Kentucky

*4(rr)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Louisville Gas and Electric Company, and County of Trimble, Kentucky

*4(ss)-1	-	2002 Series A Trimble County Loan Agreement, dated July 1, 2002, by and between Louisville Gas and Electric Company, and County of Trimble, Kentucky

*4(ss)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Louisville Gas and Electric Company, and County of Trimble, Kentucky

*4(tt)-1	-	2007 Series A Trimble County Loan Agreement, dated March 1, 2007, by and between Louisville Gas and Electric Company, and County of Trimble, Kentucky

*4(tt)-2	-	Amendment No. 1 dated September 1, 2010, to said Loan Agreement by and between Louisville Gas and Electric Company, and County of Trimble, Kentucky

10(a)	-	Generation Supply Agreement, dated as of June 20, 2001, between PPL Electric Utilities Corporation and PPL EnergyPlus, LLC (Exhibit 10.5 to PPL Energy Supply, LLC Form S-4 (Registration Statement No. 333-74794))

~~10(c)~~10(b)-1	-	Master Power Purchase and Sale Agreement, dated as of October 15, 2001, between NorthWestern Energy Division (successor in interest to The Montana Power Company) and PPL Montana, LLC (Exhibit 10(g) to PPL Montana, LLC Form 10-K Report (File No. 333-50350) for the year ended December 31, 2001)

~~10(c)~~10(b)-2	-	Confirmation Letter dated July 5, 2006, between PPL Montana, LLC and NorthWestern Corporation (PPL Corporation and PPL Energy Supply, LLC Form 8-K Reports (File Nos. 1-11459 and 333-74794) dated July 6, 2006)

~~10(d)~~10(c)	-	Guaranty, dated as of December 21, 2001, from PPL Energy Supply, LLC in favor of LMB Funding, Limited Partnership (Exhibit 10(j) to PPL Energy Supply, LLC Form 10-K Report (File No. 333-74794) for the year ended December 31, 2001)

~~10(e)~~10(d)-1	-	Agreement for Lease, dated as of December 21, 2001, between LMB Funding, Limited Partnership and Lower Mt. Bethel Energy, LLC (Exhibit 10(m) to PPL Energy Supply, LLC Form 10-K Report (File No. 333-74794) for the year ended December 31, 2003)

~~10(e)~~10(d)-2	-	Amendment No. 1 to Agreement for Lease, dated as of September 16, 2002, between LMB Funding, Limited Partnership and Lower Mt. Bethel Energy, LLC (Exhibit 10(m)-1 to PPL Energy Supply, LLC Form 10-K Report (File No. 333-74794) for the year ended December 31, 2003)

~~10(f)~~10(e)-1	-	Lease Agreement, dated as of December 21, 2001, between LMB Funding, Limited Partnership and Lower Mt. Bethel Energy, LLC (Exhibit 10(n) to PPL Energy Supply, LLC Form 10-K Report (File No. 333-74794) for the year ended December 31, 2003)

~~10(f)~~10(e)-2	-	Amendment No. 1 to Lease Agreement, dated as of September 16, 2002, between LMB Funding, Limited Partnership and Lower Mt. Bethel Energy, LLC (Exhibit 10(n)-1 to PPL Energy Supply, LLC Form 10-K Report (File No. 333-74794) for the year ended December 31, 2003)

~~10(g)~~	-	Pollution Control Facilities Loan Agreement, dated as of May 1, 1973, between PPL Electric Utilities Corporation and the Lehigh County Industrial Development Authority (Exhibit 5(z) to Registration Statement No. 2-60834)

~~10(h)~~10(f)	-	Facility Lease Agreement (BA 1/2) between PPL Montana, LLC and Montana OL3, LLC (Exhibit 4.7a to PPL Montana, LLC Form S-4 (Registration Statement No. 333-50350))

~~10(i)~~10(g)	-	Facility Lease Agreement (BA 3) between PPL Montana, LLC and Montana OL4, LLC (Exhibit 4.8a to PPL Montana, LLC Form S-4 (Registration Statement No. 333-50350))

~~10(j)~~10(h)	-	Services Agreement, dated as of July 1, 2000, among PPL Corporation, PPL Energy Funding Corporation and its direct and indirect subsidiaries in various tiers, PPL Capital Funding, Inc., PPL Gas Utilities Corporation, PPL Services Corporation and CEP Commerce, LLC (Exhibit 10.20 to PPL Energy Supply, LLC Form S-4 (Registration Statement No. 333-74794))

~~10(k)~~10(i)-1	-	Asset Purchase Agreement, dated as of June 1, 2004, by and between PPL Sundance Energy, LLC, as Seller, and Arizona Public Service Company, as Purchaser (Exhibit 10(a) to PPL Corporation and PPL Energy Supply, LLC Form 10-Q Reports (File Nos. 1-11459 and 333-74794) for the quarter ended June 30, 2004)

~~10(k)~~10(i)-2	-	Amendment No. 1, dated December 14, 2004, to said Asset Purchase Agreement (Exhibit 99.1 to PPL Corporation and PPL Energy Supply, LLC Form 8-K Reports (File Nos. 1-11459 and 333-74794) dated December 15, 2004)

~~10(l)~~10(j)-1	-	Receivables Sale Agreement, dated as of August 1, 2004, between PPL Electric Utilities Corporation, as Originator, and PPL Receivables Corporation, as Buyer (Exhibit 10(d) to PPL Electric Utilities Corporation Form 10-Q Report (File No. 1-905) for the quarter ended June 30, 2004)

~~10(l)~~10(j)-2	-	Amendment No. 1 to Receivables Sale Agreement, dated as of August 5, 2008, between PPL Electric Utilities Corporation, as Originator, and PPL Receivables Corporation, as Buyer (Exhibit 10(b) to PPL Electric Utilities Corporation Form 8-K Report (File No. 1-905) dated August 6, 2008)

~~10(l)~~10(j)-3	-	Credit and Security Agreement, dated as of August 5, 2008, among PPL Receivables Corporation, PPL Electric Utilities Corporation, Victory Receivables Corporation, the Liquidity Banks from time to time party thereto and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch (Exhibit 10(a) to PPL Electric Utilities Corporation Form 8-K Report (File No. 1-905) dated August 6, 2008)

~~10(1)~~10(j)-4	-	Amendment No. 1 to said Credit and Security Agreement, dated as of July 28, 2009, among PPL Receivables Corporation, as Borrower, PPL Electric Utilities Corporation, as Servicer, Victory Receivables Corporation, as a Lender, and The Bank of Tokyo-Mitsubishi UFJ, Ltd, New York Branch, as Liquidity Bank and as Agent (Exhibit 10(a) to PPL Electric Utilities Corporation Form 10-Q Report (File No. 1-905) for the quarter ended September 30, 2009)

~~10(1)~~10(j)-5	-	~~Amended~~Amendment No. 2 to said Credit and ~~Restated Fee Letter,~~Security Agreement, dated as of July ~~28, 2009,~~27, 2010, among PPL Receivables Corporation, as Borrower, PPL Electric Utilities Corporation, as Servicer, Victory Receivables Corporation, as a Lender and The Bank of ~~Tokyo-Mitsubishi~~Tokyo – Mitsubishi UFJ, ~~Ltd,~~Ltd., New York Branch, as Liquidity Bank and as Agent (Exhibit ~~10(b)~~10(g) to PPL Electric Utilities Corporation Form 10-Q Report (File No. 1-905) for the quarter ended ~~September~~June 30, ~~2009)~~2010)

~~10(m)~~ *10(j)-6	-	Amendment No. 3 to said Credit and Security Agreement, dated as of December 23, 2010, among PPL Receivables Corporation, as Borrower, PPL Electric Utilities Corporation, as Servicer, Victory Receivables Corporation, as a Lender and The Bank of Tokyo - Mitsubishi UFJ, Ltd., New York Branch, as Liquidity Bank and as Agent

10(k)	-	$300 Million Demand Loan Agreement, dated as of August 20, 2004, among CEP Lending, Inc. and PPL Energy Funding Corporation (Exhibit 10(dd) to PPL Electric Utilities Corporation Form 10-K Report (File No. 1-905) for the year ended December 31, 2004)

~~10(n)~~10(l)-1	-	Reimbursement Agreement, dated as of March 31, 2005, among PPL Energy Supply, LLC, The Bank of Nova Scotia, as Issuer and Administrative Agent, and the Lenders party thereto from time to time (Exhibit 10(a) to PPL Energy Supply, LLC Form 10-Q Report (File No. 333-74794) for the quarter ended March 31, 2005)

~~10(n)~~10(l)-2	-	First Amendment to said Reimbursement Agreement, dated as of June 16, 2005 (Exhibit 10(b) to PPL Energy Supply, LLC Form 10-Q Report (File No. 333-74794) for the quarter ended June 30, 2005)

~~10(n)~~10(l)-3	-	Second Amendment to said Reimbursement Agreement, dated as of September 1, 2005 (Exhibit 10(a) to PPL Energy Supply, LLC Form 10-Q Report (File No. 333-74794) for the quarter ended September 30, 2005)

~~10(n)~~10(l)-4	-	Third Amendment to said Reimbursement Agreement, dated as of March 30, 2006 (Exhibit 10(a) to PPL Energy Supply, LLC Form 8-K Report (File No. 333-74794) dated April 5, 2006)

~~10(n)~~10(l)-5	-	Fourth Amendment to said Reimbursement Agreement, dated as of April 12, 2006 (Exhibit 10(b) to PPL Energy Supply, LLC Form 10-Q Report (File No. 333-74794) for the quarter ended September 30, 2006)

~~10(n)~~10(l)-6	-	Fifth Amendment to said Reimbursement Agreement, dated as of November 1, 2006 (Exhibit 10(q)-6 to PPL Energy Supply, LLC Form 10-K Report (File No. 333-74794) for the year ended December 31, 2006)

~~10(n)~~10(l)-7	-	Sixth Amendment to said Reimbursement Agreement, dated as of March 29, 2007 (Exhibit 10(q)-7 to PPL Energy Supply, LLC Form 10-K Report (File No. 333-74794) for the year ended December 31, 2007)

~~10(n)~~10(l)-8	-	Seventh Amendment to said Reimbursement Agreement, dated as of March 1, 2008 (Exhibit 10(a) to PPL Energy Supply, LLC Form 10-Q Report (File No. 333-74794) for the quarter ended March 31, 2008)

~~10(n)~~10(l)-9	-	Eighth Amendment to said Reimbursement Agreement, dated as of March 30, 2009 (Exhibit 10(a) to PPL Energy Supply, LLC Form 10-Q Report (File No. 1-32944) for the quarter ended March 31, 2009)

~~10(o)~~10(l)-10	-	Ninth Amendment to said Reimbursement Agreement, dated as of March 31, 2010 (Exhibit 99.1 to PPL Energy Supply, LLC Form 8-K Report (File No. 1-32944) dated April 6, 2010)

10(m)-1	-	$300 Million Five-Year Letter of Credit and Revolving Credit Agreement, dated as of December 15, 2005, among PPL Energy Supply, LLC and the banks named therein (Exhibit 10(b) to PPL Energy Supply, LLC Form 8-K Report (File No. 333-74794) dated December 21, 2005)

~~10(o)~~10(m)-2	-	First Amendment to said Letter of Credit and Revolving Credit Agreement, dated as of December 29, 2006 (Exhibit 10(t)-2 to PPL Energy Supply, LLC Form 10-K Report (File No. 333-74794) for the year ended December 31, 2006)

~~10(p)~~10(n)-1	-	$300 Million Five-Year Letter of Credit and Reimbursement Agreement, dated as of December 15, 2005, among PPL Energy Supply and the banks named therein (Exhibit 10(c) to PPL Energy Supply, LLC Form 8-K Report (File No. 333-74794) dated December 21, 2005)

~~10(p)~~10(n)-2	-	First Amendment to said Letter of Credit and Reimbursement Agreement, dated as of December 29, 2006 (Exhibit 10(u)-2 to PPL Energy Supply, LLC Form 10-K Report (File No. 333-74794) for the year ended December 31, 2006)

~~10(q)~~10(o)	-	$~~400 million Amended and Restated 364-Day~~200,000,000 Revolving Credit Agreement, dated as of ~~September 8, 2009,~~December 31, 2010, among PPL Electric Utilities Corporation, the Lenders party thereto and Wells Fargo Bank, National Association, as Administrative Agent, Swingline Lender and Issuing Lender (Exhibit 10.1 to PPL Electric Utilities Corporation Form 8-K Report (File No. 1-905) dated January 6, 2011)

10(p)-1	-	$4,000,000,000 Revolving Credit Agreement, dated as of October 19, 2010, among PPL Energy Supply, LLC, the Lenders party thereto and ~~the banks named therein~~Wells Fargo Bank, National Association, as Administrative Agent, Swingline Lender and Issuing Lender (Exhibit ~~10(a)~~10.1 to PPL Energy Supply, LLC Form 8-K Report (File No. 1-32944) dated ~~September 11, 2009)~~October 21, 2010)

~~10(r)-1~~ *10(p)-2	-	~~$200 million Third Amended and Restated Five-Year~~Notice of Reduction to said Revolving Credit Agreement, dated November 17, 2010, effective as of ~~May 4, 2007, among PPL Electric Utilities Corporation and the banks named therein (Exhibit 10(b) to PPL Electric Utilities Corporation Form 8-K Report (File No. 1-905) dated May 9, 2007)~~December 1, 2010.

~~10(r)-2~~	-	First Amendment to Third Amended and Restated Credit Agreement, dated as of December 3, 2008, by and among PPL Electric Utilities Corporation, certain of the lenders party to the Third Amended and Restated Credit Agreement dated as of May 4, 2007 and Wachovia Bank, National Association, as administrative agent (Exhibit 99.2 to PPL Electric Utilities Corporation Form 8-K Report (File No. 1-905) December 4, 2008)

~~10(s)-1~~	-	$3.4 billion Second Amended and Restated Five-Year Credit Agreement, dated as of May 4, 2007, among PPL Energy Supply, LLC and the banks named therein (Exhibit 10(a) to PPL Energy Supply, LLC Form 8-K Report (File No. 333-74794) dated May 9, 2007)

~~10(s)-2~~	-	First Amendment to Second Amended and Restated Credit Agreement, dated as of December 3, 2008, by and among PPL Energy Supply, LLC, certain of the lenders party to the Second Amended and Restated Credit Agreement dated as of May 4, 2007 and Wachovia Bank, National Association, as administrative agent (Exhibit 99.1 to PPL Energy Supply, LLC Form 8-K Report (File No. 1-32944) dated December 4, 2008)

~~10(t)~~10(q)	-	£150 million Credit Agreement, dated as of January 24, 2007, among Western Power Distribution Holdings Limited and the banks named therein (Exhibit 10(y) to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2006)

~~10(u)-1~~	-	Pollution Control Facilities Loan Agreement, dated as of February 1, 2005, between PPL Electric Utilities Corporation and the Lehigh County Industrial Development Authority (Exhibit 10(ff) to PPL Electric Utilities Corporation Form 10-K Report (File No. 1-905) for the year ended December 31, 2004)

~~10(u)-2~~	-	Pollution Control Facilities Loan Agreement, dated as of May 1, 2005, between PPL Electric Utilities Corporation and the Lehigh County Industrial Development Authority (Exhibit 10(a) to PPL Electric Utilities Corporation Form 10-Q Report (File No. 1-905) for the quarter ended June 30, 2005)

~~10(u)-3~~	-	Pollution Control Facilities Loan Agreement, dated as of October 1, 2008, between Pennsylvania Economic Development Financing Authority and PPL Electric Utilities Corporation (Exhibit 4(a) to PPL Electric Utilities Corporation Form 8-K Report (File No. 1-905) dated October 31, 2008)

~~10(v)~~10(r)	-	£210 million Multicurrency Revolving Facility Agreement, dated July 7, 2009, between Western Power Distribution (South West) plc and HSBC Bank plc, Lloyds TSB Bank plc and Clydesdale Bank plc (Exhibit 10(c) to PPL Corporation Form 10-Q Report (File No. 1-11459) for the quarter ended June 30, 2009)

10(s)	-	Purchase and Sale Agreement, dated as of April 28, 2010, by and between E.ON US Investments Corp., PPL Corporation and E.ON AG (Exhibit No. 99.1 to PPL Corporation Form 8-K Report (File No. 1-11459) dated April 28, 2010)

10(t)	-	$500 million Facility Agreement, dated as of May 14, 2010, among PPL Energy Supply, LLC, as Borrower, and Morgan Stanley Bank, as Issuer (Exhibit 10(b) to PPL Energy Supply, LLC Form 10-Q Report (File No. 1-32944) for the quarter ended June 30, 2010)

10(u)	-	Purchase and Sale Agreement, dated as of September 9, 2010, by and between PPL Holtwood, LLC and LSP Safe Harbor Holdings, LLC (Exhibit 10.1 to PPL Corporation Form 8-K Report (File No. 1-11459) dated September 13, 2010)

10(v)	-	Purchase and Sale Agreement, dated as of September 9, 2010, by and between PPL Generation, LLC and Harbor Gen Holdings, LLC (Exhibit 10.2 to PPL Corporation Form 8-K Report (File No. 1-11459) dated September 13, 2010)

*10(w)	-	Open-End Mortgage, Security Agreement and Fixture Filing from PPL Montour, LLC to Wilmington Trust FSB, as Collateral Agent, dated as of October 26, 2010

*10(x)	-	Open-End Mortgage, Security Agreement and Fixture Filing from PPL Brunner Island, LLC to Wilmington Trust FSB, as Collateral Agent, dated as of October 26, 2010

*10(y)	-	Guaranty of PPL Montour, LLC and PPL Brunner Island, LLC, dated as of November 3, 2010, in favor of Wilmington Trust FSB, as Collateral Agent, for itself as Beneficiary and for the Secured Counterparties described therein

10(z)	-	$400,000,000 Revolving Credit Agreement, dated as of November 1, 2010, among Kentucky Utilities Company, the Lenders party thereto and Wells Fargo Bank, National Association, as Administrative Agent, Swingline Lender and Issuing Lender (Exhibit 10.1 to PPL Corporation Form 8-K Report (File No. 1-11459) dated November 1, 2010)

10(aa)	-	$400,000,000 Revolving Credit Agreement, dated as of November 1, 2010, among Louisville Gas and Electric Company, the Lenders party thereto and Wells Fargo Bank, National Association, as Administrative Agent, Swingline Lender and Issuing Lender (Exhibit 10.2 to PPL Corporation Form 8-K Report (File No. 1-11459) dated November 1, 2010)

[_]~~10(w)~~10(bb)-1	-	Amended and Restated Directors Deferred Compensation Plan, dated June 12, 2000 (Exhibit 10(h) to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2000)

[_]~~10(w)~~10(bb)-2	-	Amendment No. 1 to said Amended and Restated Directors Deferred Compensation Plan, dated December 18, 2002 (Exhibit 10(m)-1 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2002)

[_]~~10(w)~~10(bb)-3	-	Amendment No. 2 to said Amended and Restated Directors Deferred Compensation Plan, dated December 4, 2003 (Exhibit 10(q)-2 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2003)

[_]~~10(w)~~10(bb)-4	-	Amendment No. 3 to said Amended and Restated Directors Deferred Compensation Plan, dated as of January 1, 2005 (Exhibit 10(cc)-4 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2005)

[_]~~10(w)~~10(bb)-5	-	Amendment No. 4 to said Amended and Restated Directors Deferred Compensation Plan, dated as of May 1, 2008 (Exhibit 10(x)-5 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2008)

[_]~~10(x)~~10(bb)-6	-	Amendment No. 5 to said Amended and Restated Directors Deferred Compensation Plan, dated May 28, 2010 (Exhibit 10(a) to PPL Corporation Form 10-Q Report (File No. 1-11459) for the quarter ended June 30, 2010)

[_]10(cc)-1	-	Trust Agreement, dated as of April 1, 2001, between PPL Corporation and Wachovia Bank, N.A. (as successor to First Union National Bank), as Trustee

[_]~~10(x)~~10(cc)-2	-	Trust Agreement, dated as of March 20, 2007, between PPL Corporation and Wachovia Bank, N.A., as Trustee (Exhibit 10(c) to PPL Corporation Form 10-Q Report (File No. 1-1149) for the quarter ended March 31, 2007)

[_]~~10(x)~~10(cc)-3	-	Trust Agreement, dated as of March 20, 2007, between PPL Corporation and Wachovia Bank, N.A., as Trustee (Exhibit 10(d) to PPL Corporation Form 10-Q Report (File No. 1-11459) for the quarter ended March 31, 2007)

[_]~~10(x)~~10(cc)-4	-	Trust Agreement, dated as of March 20, 2007, between PPL Corporation and Wachovia Bank, N.A., as Trustee (Exhibit 10(e) to PPL Corporation Form 10-Q Report (File No. 1-11459) for the quarter ended March 31, 2007)

[_]~~10(y)~~10(dd)-1	-	Amended and Restated Officers Deferred Compensation Plan, dated December 8, 2003 (Exhibit 10(r) to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2003)

[_]~~10(y)~~10(dd)-2	-	Amendment No. 1 to said Amended and Restated Officers Deferred Compensation Plan, dated as of January 1, 2005 (Exhibit 10(ee)-1 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2005)

[_]~~10(y)~~10(dd)-3	-	Amendment No. 2 to said Amended and Restated Officers Deferred Compensation Plan, dated as of January 22, 2007 (Exhibit 10(bb)-3 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2006)

[_]~~10(y)~~10(dd)-4	-	Amendment No. 3 to said Amended and Restated Officers Deferred Compensation Plan, dated as of June 1, 2008 (Exhibit 10(z)-4 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2008)

[_]~~10(z)~~10(ee)-1	-	Amended and Restated Supplemental Executive Retirement Plan, dated December 8, 2003 (Exhibit 10(s) to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2003)

[_]~~10(z)~~10(ee)-2	-	Amendment No. 1 to said Supplemental Executive Retirement Plan, dated December 16, 2004 (Exhibit 99.1 to PPL Corporation Form 8-K Report (File No. 1-11459) dated December 17, 2004)

[_]~~10(z)~~10(ee)-3	-	Amendment No. 2 to said Supplemental Executive Retirement Plan, dated as of January 1, 2005 (Exhibit 10(ff)-3 to PPL Corporation Form 10-K Report (File 1-11459) for the year ended December 31, 2005)

[_]~~10(z)~~10(ee)-4	-	Amendment No. 3 to said Supplemental Executive Retirement Plan, dated as of January 22, 2007 (Exhibit 10(cc)-4 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2006)

[_]~~10(z)~~10(ee)-5	-	Amendment No. 4 to said Supplement Executive Retirement Plan, dated as of December 9, 2008 (Exhibit 10(aa)-5 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2008)

[_]~~10(aa)~~10(ff)-1	-	Incentive Compensation Plan, amended and restated effective January 1, 2003 (Exhibit 10(p) to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2002)

[_]~~10(aa)~~10(ff)-2	-	Amendment No. 1 to said Incentive Compensation Plan, dated as of January 1, 2005 (Exhibit 10(gg)-2 to PPL Corporation Form 10-K Report (File 1-11459) for the year ended December 31, 2005)

[_]~~10(aa)~~10(ff)-3	-	Amendment No. 2 to said Incentive Compensation Plan, dated as of January 26, 2007 (Exhibit 10(dd)-3 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2006)

[_]~~10(aa)~~10(ff)-4	-	Amendment No. 3 to said Incentive Compensation Plan, dated as of March 21, 2007 (Exhibit 10(f) to PPL Corporation Form 10-Q Report (File No. 1-11459) for the quarter ended March 31, 2007)

[_]~~10(aa)~~10(ff)-5	-	Amendment No. 4 to said Incentive Compensation Plan, effective December 1, 2007 (Exhibit 10(a) to PPL Corporation Form 10-Q Report (File No. 1-11459) for the quarter ended September, 30, 2008)

[_]~~10(aa)~~10(ff)-6	-	Amendment No. 5 to said Incentive Compensation Plan, dated as of December 16, 2008 (Exhibit 10(bb)-6 to PPL Corporation Form 10-K Report (File 1-11459) for the year ended December 31, 2008)

[_]~~10(aa)~~10(ff)-7	-	Form of Stock Option Agreement for stock option awards under the Incentive Compensation Plan (Exhibit 10(a) to PPL Corporation Form 8-K Report (File No. 1-11459) dated February 1, 2006)

[_]~~10(aa)~~10(ff)-8	-	Form of Restricted Stock Unit Agreement for restricted stock unit awards under the Incentive Compensation Plan (Exhibit 10(b) to PPL Corporation Form 8-K Report (File No. 1-11459) dated February 1, 2006)

[_]~~10(aa)~~10(ff)-9	-	Form of Restricted Stock Unit Agreement for restricted stock unit awards under the Incentive Compensation Plan pursuant to PPL Corporation Cash Incentive Premium Exchange Program (Exhibit 10(c) to PPL Corporation Form 8-K Report (File No. 1-11459) dated February 1, 2006)

[_]~~10(bb)~~10(gg)-1	-	Incentive Compensation Plan for Key Employees, amended and restated effective January 1, 2003 (Schedule B to Proxy Statement of PPL Corporation, dated March 17, 2003)

[_]~~10(bb)~~10(gg)-2	-	Amendment No. 1 to said Incentive Compensation Plan for Key Employees, dated as of January 1, 2005 (Exhibit (hh)-1 to PPL Corporation Form 10-K Report (File 1-11459) for the year ended December 31, 2005

[_]~~10(bb)~~10(gg)-3	-	Amendment No. 2 to said Incentive Compensation Plan for Key Employees, dated as of January 26, 2007 (Exhibit 10(ee)-3 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2006)

[_]~~10(bb)~~10(gg)-4	-	Amendment No. 3 to said Incentive Compensation Plan for Key Employees, dated as of March 21, 2007 (Exhibit 10(q) to PPL Corporation Form 10-Q Report (File No. 1-11459) for the quarter ended March 31, 2007)

[_]~~10(bb)~~10(gg)-5	-	Amendment No. 4 to said Incentive Compensation Plan for Key Employees, dated as of December 15, 2008 (Exhibit 10(cc)-5 to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2008)

[_]~~10(cc)~~10(hh)	-	Short-term Incentive Plan (Schedule A to Proxy Statement of PPL Corporation, dated March 20, 2006)

[_]~~10(dd)~~10(ii)	-	Agreement dated January 15, 2003 between PPL Corporation and Mr. Miller regarding Supplemental Pension Benefits (Exhibit 10(u) to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2002)

[_]~~10(ee)~~10(jj)	-	Employment letter dated December 19, 2005 between PPL Services Corporation and Jerry Matthews Simmons, Jr. (Exhibit 10(jj) to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2006)

[_]~~10(ff)~~10(kk)	-	Employment letter dated May 31, 2006 between PPL Services Corporation and William H. Spence (Exhibit 10(pp) to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2006)

[_]~~10(gg)~~10(ll)	-	Employment letter dated August 29, 2006, between PPL Services Corporation and David G. DeCampli (Exhibit 10(qq) to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2006)

[_]~~10(hh)~~10(mm)	-	Amendments to certain compensation programs and arrangements for Named Executive Officers of PPL Corporation and PPL Electric Utilities Corporation and compensation arrangement changes for non-employee Directors of PPL Corporation (PPL Corporation and PPL Electric Utilities Corporation Form 8-K Reports (File Nos. 1-11459 and 1-905) dated November 1, 2006)

[_]~~10(ii)~~10(nn)	-	Form of Retention Agreement entered into between PPL Corporation and Messrs. Champagne, Farr, Miller and Shriver (Exhibit 10(h) to PPL Corporation Form 10-Q Report (File No. 1-11459) for the quarter ended March 31, 2007)

[_]~~10(jj)~~10(oo)-1	-	Form of Severance Agreement entered into between PPL Corporation and the Named Executive Officers (Exhibit 10(i) to PPL Corporation Form 10-Q Report (File No. 1-11459) for the quarter ended March 31, 2007)

[_]~~10(jj)~~10(oo)-2	-	Amendment to said Severance Agreement (Exhibit 10(a) to PPL Corporation Form 10-Q Report (File No. 1-11459) for the quarter ended June 30, 2009)

[_]~~10(kk)~~10(pp)	-	Form of Performance Unit Agreement entered into between PPL Corporation and the Named Executive Officers (Exhibit 10(ss) to PPL Corporation Form 10-K Report (File No. 1-11459) for the year ended December 31, 2007)

[_]~~10(ll)~~	-	~~2009 compensation matters regarding PPL Corporation Named Executive Officers (PPL Corporation Form 8-K Report (File No. 1-11459) dated January 28, 2009)~~

~~[_]10(mm)~~	-	~~2009 compensation matters regarding PPL Electric Utilities Corporation Named Executive Officers (PPL Electric Utilities Corporation Form 8-K Report (File No. 1-905) dated January 28, 2009)~~

~~[_]10(nn)~~	-	Establishment of 2009 annual performance goals and business criteria for incentive awards to PPL Corporation Named Executive Officers (PPL Corporation Form 8-K Report (File No. 1-11459) dated April 1, 2009)

~~[_]10(oo)~~	-	Establishment of 2009 annual performance goals and business criteria for incentive awards to PPL Electric Utilities Corporation Named Executive Officers (PPL Electric Utilities Corporation Form 8-K Report (File No. 1-905) dated April 1, 2009)

~~[_]10(pp)~~10(qq)	-	Employment letter dated May 22, 2009, between PPL Services Corporation and Gregory W. Dudkin (Exhibit 10(b) to PPL Corporation Form 10-Q Report (File No. 1-11459) for the quarter ended June 30, 2009)

*[_]10(rr)	-	Retention Agreement, effective as of December 1, 2010, entered into between PPL Corporation and Victor A. Staffieri

*[_]10(ss)	-	Amended and Restated Employment and Severance Agreement, dated as of October 29, 2010, between E.ON U.S. LLC and Victor A. Staffieri

*12(a)	-	PPL Corporation and Subsidiaries Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends

*12(b)	-	PPL Energy Supply, LLC and Subsidiaries Computation of Ratio of Earnings to Fixed Charges

*12(c)	-	PPL Electric Utilities Corporation and Subsidiaries Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends

*~~21(a)~~21	-	Subsidiaries of PPL ~~Corporation~~

*21(b)	-	~~Subsidiaries of PPL Electric Utilities~~ Corporation

*23(a)	-	Consent of Ernst & Young LLP - PPL Corporation

*23(b)	-	Consent of Ernst & Young LLP - PPL Energy Supply, LLC

*23(c)	-	Consent of Ernst & Young LLP - PPL Electric Utilities Corporation

*23(d)	-	Consent of PricewaterhouseCoopers LLP - PPL Corporation

*24	-	Power of Attorney

*31(a)	-	Certificate of PPL's principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

*31(b)	-	Certificate of PPL's principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

*31(c)	-	Certificate of PPL Energy Supply's principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

*31(d)	-	Certificate of PPL Energy Supply's principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

*31(e)	-	Certificate of PPL Electric's principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

*31(f)	-	Certificate of PPL Electric's principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

*32(a)	-	Certificate of PPL's principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*32(b)	-	Certificate of PPL's principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*32(c)	-	Certificate of PPL Energy Supply's principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*32(d)	-	Certificate of PPL Energy Supply's principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*32(e)	-	Certificate of PPL Electric's principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*32(f)	-	Certificate of PPL Electric's principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*99(a)	-	Examples of Wholesale Energy, Fuel and Emission Allowance Price Fluctuations - ~~2005~~2006 through ~~2009~~2010

**101.INS	-	XBRL Instance Document for PPL Corporation

**101.SCH	-	XBRL Taxonomy Extension Schema for PPL Corporation

**101.CAL	-	XBRL Taxonomy Extension Calculation Linkbase for PPL Corporation

**101.DEF	-	XBRL Taxonomy Extension Definition Linkbase for PPL Corporation

**101.LAB	-	XBRL Taxonomy Extension Label Linkbase for PPL Corporation

**101.PRE	-	XBRL Taxonomy Extension Presentation Linkbase for PPL Corporation

** - XBRL information will be considered to be furnished, not filed, for the first two years of a company's submission of XBRL information.

Plant	Total MW Capacity (a)	% Ownership	PPL Energy Supply's Ownership or Lease Interest in MW		Primary Fuel

Pennsylvania
Susquehanna	2,451	90.00	2,206		Nuclear
Montour	1,530	100.00	1,530		Coal
Brunner Island	1,476	100.00	1,476	(b)	Coal
Martins Creek	1,672	100.00	1,672		Natural Gas/Oil
Keystone	1,718	12.34	212		Coal
Conemaugh	1,718	16.25	279		Coal
Ironwood (c)	759	100.00	759		Natural Gas
Lower Mt. Bethel	624	100.00	624		Natural Gas
Combustion turbines	465	100.00	465		Natural Gas/Oil
Safe Harbor Water Power Corp.	421	33.33	140		Hydro
Hydroelectric	172	100.00	172		Hydro
Other (c) (d)	48	100.00	48		Various
	13,054		9,583
Montana
Colstrip Units 1 & 2	614	50.00	307		Coal
Colstrip Unit 3	740	30.00	222		Coal
Corette	153	100.00	153		Coal
Hydroelectric	604	100.00	604		Hydro
	2,111		1,286

Illinois
University Park	585	100.00	585		Natural Gas

Connecticut
Wallingford	244	100.00	244		Natural Gas

New York
Shoreham and Edgewood	159	100.00		(e)	Natural Gas/Oil

Maine
Hydroelectric	12	100.00	12		Hydro

New Jersey
Other	11	100.00	5	(f)	Landfill Gas/Solar

Vermont
Moretown	3	100.00	3		Landfill Gas

New Hampshire
Colebrook	1	100.00	1		Landfill Gas

Total System Capacity	16,180		11,719

Project	Primary Fuel	Total MW Capacity (a)	PPL Energy Supply Ownership or Lease Interest in MW		Expected In-Service Date (b)

Pennsylvania
Holtwood (c)	Hydro	125	125	(100%)	2013
Susquehanna (d)	Nuclear	59	53	(90%)	2010 - 2011
Martins Creek (e)	Natural Gas/Oil	30	30	(100%)	2011
Chrin Landfill	Landfill Gas	3	3	(100%)	2011
Montana
Great Falls (f)	Hydro	28	28	(100%)	2012
Total		245	239

	(a)	(b)	(c)	(d)
Period	Total Number of Shares (or Units) Purchased (1)	Average Price Paid per Share (or Unit)	Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (2)
October 1 to October 31, 2009				$57,495
November 1 to November 30, 2009	14,124	$29.44		$57,495
December 1 to December 31, 2009				$57,495
Total	14,124	$29.44		$57,495

ITEM 6. SELECTED FINANCIAL AND OPERATING DATA

PPL Corporation (a)(b)		2009		2008		2007		2006		2005
Income Items - millions
Operating revenues	$	7,556	$	8,007	$	6,462	$	6,096	$	5,498
Operating income		961		1,793		1,659		1,485		1,242
Income from continuing operations after income taxes attributable to PPL		447		907		1,001		825		666
Net income attributable to PPL		407		930		1,288		865		669
Balance Sheet Items - millions (c)
Total assets		22,165		21,405		19,972		19,747		17,926
Short-term debt		639		679		92		42		214
Long-term debt (d)		7,143		7,838		7,568		7,746		7,081
Long-term debt with affiliate trusts								89		89
Noncontrolling interests		319		319		320		361		107
Common equity		5,496		5,077		5,556		5,122		4,418
Total capitalization (d)		13,597		13,913		13,536		13,360		11,909
Capital lease obligations								10		11
Financial Ratios
Return on average common equity - %		7.48		16.88		24.47		17.81		15.44
Ratio of earnings to fixed charges - total enterprise basis (e)		2.0		3.2		2.9		2.8		2.3
Common Stock Data
Number of shares outstanding - Basic - thousands
Year-end		377,183		374,581		373,271		385,039		380,145
Average		376,082		373,626		380,563		380,754		379,132
Income from continuing operations after income taxes available to PPL common shareowners - Basic EPS	$	1.18	$	2.42	$	2.62	$	2.16	$	1.75
Income from continuing operations after income taxes available to PPL common shareowners - Diluted EPS	$	1.18	$	2.41	$	2.60	$	2.13	$	1.74
Net income available to PPL common shareowners - Basic EPS	$	1.08	$	2.48	$	3.37	$	2.26	$	1.76
Net income available to PPL common shareowners - Diluted EPS	$	1.08	$	2.47	$	3.34	$	2.24	$	1.74
Dividends declared per share of common stock	$	1.38	$	1.34	$	1.22	$	1.10	$	0.96
Book value per share (c)	$	14.57	$	13.55	$	14.88	$	13.30	$	11.62
Market price per share (c)	$	32.31	$	30.69	$	52.09	$	35.84	$	29.40
Dividend payout ratio - % (f)		128		54		37		49		55
Dividend yield - % (g)		4.27		4.37		2.34		3.07		3.27
Price earnings ratio (f) (g)		29.92		12.43		15.60		16.00		16.90
Sales Data - millions of kWh
Domestic - Electric energy supplied - retail		38,912		40,374		40,074		38,810		39,413
Domestic - Electric energy supplied - wholesale (h)		38,988		42,712		33,515		30,427		31,530
Domestic - Electric energy delivered		36,717		38,058		37,950		36,683		37,358
International - Electric energy delivered (i)		26,358		27,724		31,652		33,352		33,146

ITEM 6. SELECTED FINANCIAL AND OPERATING DATA

PPL Electric Utilities Corporation (a)(b)		2009		2008		2007		2006		2005
Income Items - millions
Operating revenues	$	3,292	$	3,401	$	3,410	$	3,259	$	3,163
Operating income		329		375		350		418		377
Net income		142		176		163		194		147
Income available to PPL		124		158		145		180		145
Balance Sheet Items - millions (c)
Total assets		5,092		5,416		4,986		5,315		5,537
Short-term debt				95		41		42		42
Long-term debt		1,472		1,769		1,674		1,978		2,411
Shareowners' equity		1,896		1,646		1,586		1,559		1,375
Total capital provided by investors		3,368		3,510		3,301		3,579		3,828
Financial Ratios
Return on average common equity - %		9.08		12.00		11.35		14.33		11.20
Ratio of earnings to fixed charges (d)		2.8		3.4		2.7		2.9		2.1
Ratio of earnings to combined fixed charges and preferred stock dividends (e)		2.3		2.7		2.3		2.5		2.1
Sales Data
Customers (thousands) (c)		1,398		1,394		1,387		1,377		1,365
Electric energy delivered - millions of kWh
Residential		14,256		14,419		14,411		13,714		14,218
Commercial		13,837		13,942		13,801		13,174		13,196
Industrial		8,435		9,508		9,547		9,638		9,777
Other		189		189		191		157		167

Total electric energy delivered		36,717		38,058		37,950		36,683		37,358

Electric energy supplied as a PLR - millions of kWh		36,695		38,043		37,919		36,577		36,917

Pension liabilities		$	1,290
Other postretirement benefit liabilities			197

	2009 vs. 2008			2008 vs. 2007

Domestic property tax expense (a)	$	10		$	(7	)
U.K. foreign currency exchange rates		(12	)		(3	)
Other		2			(2	)
	$			$	(12	)

	Issuances		Retirements

PPL Energy Supply Senior Unsecured Notes (a)			$	(220	)
WPD short-term debt (net change)	$	43
Total	$	43	$	(220	)
Net decrease			$	(177	)

	2009 vs. 2008			2008 vs. 2007

Delivery	$	(60	)	$	17
PLR		(20	)		19
Other		9			3
	$	(71	)	$	39

	Issuance		Retirements

Senior Secured Bonds (a)	$	298	$	(586	)
Variable Rate Pollution Control Facilities Note				(9	)
Short-term debt				(95	)
Total	$	298	$	(690	)
Net decrease			$	(392	)

	Committed Capacity		Borrowed	Letters of Credit Issued (d)		Unused Capacity

5-year Syndicated Credit Facility (a)	$	190		$	6	$	184
Asset-backed Credit Facility (b)		150					150
Total PPL Electric Credit Facilities (c)	$	340		$	6	$	334

	2009		2008

Recoverable transition costs (a)			$	281
Taxes recoverable through future rates	$	253		250
Recoverable costs of defined benefit plans		229		192
Unamortized loss on reacquired debt		33		26
Costs associated with severe ice storms - January 2005		9		11
Other		7		3
	$	531	$	763

(Thousands of Shares)	2009		2008		2007

Stock options and performance units		2,395		606

(a)	Changes in income tax reserves impacted the following components of income tax expense, which are presented in the "Reconciliation of Income Tax Expense" table.
		2009			2008			2007

	Change in foreign tax reserves	$	17		$	5
	Change in federal tax reserves (f)		6			10		$	(27	)
	Stranded cost securitization		(6	)		(7	)		(7	)
	State income taxes (f)		(5	)		3			1
		$	12		$	11		$	(33	)

(b)	Adjustments from filing prior year tax returns impacted the following components of income tax expense, which are presented in the "Reconciliation of Income Tax Expense" table.
		2009			2008			2007

	State income taxes (f)	$	31		$	4		$	(1	)
	Federal income tax return adjustments (f)		(10	)		(6	)		(8	)
	Foreign income tax return adjustments					(17	)		(2	)
	Federal income tax credits (g)					16
		$	21		$	(3	)	$	(11	)

(c)	Pennsylvania H.B. 1531, enacted in October 2009, increased the net operating loss limitation to 20% of taxable income for tax years beginning in 2010. In conjunction with the projected revenue increase related to the expiration of the generation rate caps in 2010, PPL recorded a $13 million reduction to state deferred income tax expense related to the reversal of deferred tax valuation allowances for a portion of its Pennsylvania net operating losses.

(d)	Income tax (benefits) related to foreign income, which are presented in the "Reconciliation of Income Tax Expense" table.
		2009			2008			2007

	Losses generated through restructuring and fully reserved (reflected in "Change in foreign tax reserves")	$	(46	)
	Impact of lower U.K. income tax rates		(23	)	$	(22	)	$	(16	)
	U.S. income tax on foreign earnings - net of foreign tax credit		(16	)		(21	)		(14	)
	Other		(8	)		(5	)		(9	)
		$	(93	)	$	(48	)	$	(39	)

(e)	The U.K.'s Finance Act 2008, enacted in July 2008, included a phase-out of tax depreciation on certain buildings. As a result, PPL recorded an $8 million deferred tax benefit during 2008 related to the reduction in its deferred tax liabilities.

	The U.K.'s Finance Act of 2007, enacted in July 2007, included a reduction in the U.K.'s statutory income tax rate. Effective April 1, 2008, the statutory income tax rate was reduced from 30% to 28%. As a result, PPL recorded a $54 million deferred tax benefit during 2007 related to the reduction in its deferred tax liabilities.

(f)	During 2009, PPL received consent from the IRS to change its method of accounting for certain expenditures for tax purposes. PPL deducted the resulting IRC Sec. 481 adjustment on its 2008 federal income tax return and recorded a $24 million adjustment to federal and state income tax expense resulting from the reduction of federal income tax benefits related to the domestic manufacturing deduction and reduction of certain state tax benefits related to state net operating losses and regulated depreciation. The $24 million of income tax expense consisted of $29 million expense reflected in "State income taxes," offset by $4 million benefit reflected in "Federal income tax return adjustments" and a $1 million benefit reflected in "Change in federal tax reserves."

(g)	During March 2008, PPL Energy Supply recorded a $13 million expense to adjust the amount of synthetic fuel tax credits recorded during 2007. See Note 14 for additional information.

	Amount		Issued and Outstanding Shares	Shares Authorized	Optional Redemption Price Per Share at 12/31/09

4-1/2% Preferred Stock (a)	$	25	247,524	629,936	$	110.00

Series Preferred Stock (a)
3.35%		2	20,605			103.50
4.40%		12	117,676			102.00
4.60%		3	28,614			103.00
6.75%		9	90,770			101.35

Total Series Preferred Stock		26	257,665	10,000,000

6.25% Series Preference Stock (a) (b)		250	2,500,000	10,000,000		(c)

Total Preferred Securities	$	301	3,005,189

			December 31, 2009								December 31, 2008
	Expiration Date		Capacity		Borrowed (a)		Letters of Credit Issued		Unused Capacity		Borrowed (a)		Letters of Credit Issued

PPL Energy Supply Domestic Credit Facilities (b)
364-day Bilateral Credit Facility (c)		Mar-10	$	200		n/a	$	4	$	196		n/a	$	96
364-day Syndicated Credit Facility (d)		Sept-10		400						400
5-year Structured Credit Facility (e)		Mar-11		300		n/a		285		15		n/a		269
5-year Syndicated Credit Facility (f)		June-12		3,225	$	285		373		2,567		285		255
Total PPL Energy Supply Domestic Credit Facilities			$	4,125	$	285	$	662	$	3,178		285	$	620

WPD Credit Facilities
WPDH Limited 5-year Syndicated Credit Facility (g)		Jan-13	£	150	£	132		n/a	£	18	£	121		n/a
WPD (South West) 3-year Syndicated Credit Facility (h)		July-12		210		60		n/a		150		37		n/a
WPD (South West) Uncommitted Credit Facilities (i)				65		21		n/a		44		8		n/a
WPD (South West) Letter of Credit Facility		Mar-10		4		n/a	£	3		1		n/a	£	4
Total WPD Credit Facilities (j)			£	429	£	213	£	3	£	213	£	166	£	4

			December 31, 2009							December 31, 2008
	Expiration Date		Capacity		Borrowed (a)	Letters of Credit Issued		Unused Capacity		Borrowed (a)		Letters of Credit Issued

5-year Syndicated Credit Facility (b)		May-12	$	190		$	6	$	184	$	95	$	1
Asset-backed Credit Facility (c)		Jul-10		150					150
Total PPL Electric Credit Facilities			$	340		$	6	$	334	$	95	$	1

	Restricted Shares/Units			Weighted-Average Grant Date Fair Value
PPL
Nonvested, beginning of period		1,656,830		$	36.56
Granted		528,580			29.07
Vested		(743,968	)		30.23
Forfeited		(33,400	)		39.79
Nonvested, end of period		1,408,042			36.97

PPL Energy Supply
Nonvested, beginning of period		788,010		$	35.07
Granted		228,000			28.49
Vested		(416,548	)		28.41
Forfeited		(22,050	)		41.16
Nonvested, end of period		577,412			37.04

	Restricted Stock/Units Unrecognized Compensation Cost		Weighted-Average Period for Recognition

PPL	$	11		2.8 years
PPL Energy Supply		5		1.7 years
PPL Electric		2		4.6 years

	Performance Units Unrecognized Compensation Cost		Weighted-Average Period for Recognition

PPL	$	4		1.8 years
PPL Energy Supply		1		1.8 years

	Number of Options			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Total Intrinsic Value
PPL
Outstanding at beginning of period		4,027,371		$	32.56
Granted		1,053,320			31.86
Exercised		(137,840	)		22.15
Forfeited		(340,810	)		34.12
Outstanding at end of period		4,602,041			32.59		6.8	$	11
Options exercisable at end of period		2,968,551			30.73		5.8		11

	Unrecognized Compensation Cost		Weighted-Average Period for Recognition

PPL	$	3		1.8 years
PPL Energy Supply		1		1.9 years

(a)	Includes the settlement of the pension plan of PPL's former mining subsidiary, PA Mines, LLC in 2009 and a non-qualified plan settlement in 2007.
(b)	The $9 million U.S. cost of termination benefits in 2009 was related to a 2009 cost reduction initiative. The $6 million U.S. and $3 million U.K. costs of termination benefits for 2007 were related primarily to the elimination of positions at PPL's Martins Creek plant due to the shutdown of two coal-fired units in September 2007, and the closing of WPD's meter test station.
(c)	For PPL's U.S. pension and other post-retirement benefits the amounts recognized in OCI and regulatory assets are as follows:
		U.S. Pension Benefits							Other Postretirement Benefits
		2009		2008		2007			2009		2008			2007

	OCI	$	51	$	395	$	(87	)	$	6	$	(38	)	$	(7	)
	Regulatory assets		33		221		(61	)		3		(22	)		(16	)
	Total recognized in OCI and regulatory assets	$	84	$	616	$	(148	)	$	9	$	(60	)	$	(23	)

(d)	WPD is not subject to accounting for the effects of certain types of regulation as prescribed by GAAP. As a result, WPD does not record regulatory assets.

(a)	Includes the settlement of the pension plan of PPL's former mining subsidiary, PA Mines LLC in 2009.
(b)	Includes the pension and postretirement medical plans related to the gas and propane businesses that were sold in 2008. See Note 9 for additional information.
(c)	For PPL's U.S. pension and other post-retirement benefits, the amounts recognized in AOCI and regulatory assets are as follows:
		U.S. Pension Benefits				Other Postretirement Benefits
		2009		2008		2009		2008

	AOCI	$	346	$	295	$	95	$	89
	Regulatory assets		172		140		63		59
	Total	$	518	$	435	$	158	$	148

	Residential mortgage backed securities			Investment-grade corporate debt			High-yield corporate debt			Private equity			TBA Debt Securities			Total

Balance at beginning of period	$	4		$	3		$	4		$	5		$	51		$	67
Actual return on plan assets
Relating to assets still held at the reporting date		(1	)					1						1			1
Relating to assets sold during the period		1						(1	)		(2	)		(1	)		(3	)
Purchases, sales and settlements		(2	)		(1	)		4			3			(41	)		(37	)
Transfers into and/or (out of) Level 3
Balance at end of period	$	2		$	2		$	8		$	6		$	10		$	28

Asset Class	Percentage of plan assets		Permitted Range	Target Asset Allocation
	2009	2008	2009	2009

U.S. equity securities	54%	43%	45-65%	55%
Debt securities (a)	37%	45%	30-50%	40%
Cash and cash equivalents (b)	9%	12%	0-15%	5%
Total	100%	100%		100%

	Ownership Interest	Electric Plant		Other Property		Accumulated Depreciation		Construction Work in Progress
December 31, 2009
PPL Generation
Generating Stations
Susquehanna	90.00%	$	4,571			$	3,475	$	108
Conemaugh	16.25%		206				99		9
Keystone	12.34%		199				61		4
Merrill Creek Reservoir	8.37%			$	22		15

December 31, 2008
PPL Generation
Generating Stations
Susquehanna	90.00%	$	4,513			$	3,472	$	111
Conemaugh	16.25%		206				93		1
Keystone	12.34%		105				58		64
Wyman Unit 4 (a)	8.33%		15				7
Merrill Creek Reservoir	8.37%			$	22		14

	Number of Employees		Percent of Total Workforce

PPL		6,840		65%
PPL Energy Supply		4,850		69%
PPL Electric		1,570		72%

	Number of Employees		Percent of Total Workforce

PPL		3,200		31%
PPL Energy Supply		1,210		17%
PPL Electric		1,570		72%

Energy-related economic activity, net (a)

Discontinued operations (Note 9)