Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
FORM 10-Q
[X]☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended September 30, 2017March 31, 2022
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)Pennsylvania
Two North Ninth Street
Allentown, PA 18101-1179
(610) 774-5151
23-2758192
1-905
PPL Electric Utilities Corporation
(Exact name of Registrant as specified in its charter)
(Pennsylvania)Pennsylvania
Two North Ninth Street
Allentown, PA 18101-1179
(610) 774-5151
23-0959590
333-173665
LG&E and KU Energy LLC
(Exact name of Registrant as specified in its charter)
(Kentucky)
220 West Main Street
Louisville, KY 40202-1377
(502) 627-2000
20-0523163
1-2893
Louisville Gas and Electric Company
(Exact name of Registrant as specified in its charter)
(Kentucky)Kentucky
220 West Main Street
Louisville, KY 40202-1377
(502) 627-2000
61-0264150
1-3464
Kentucky Utilities Company
(Exact name of Registrant as specified in its charter)
(Kentucky and Virginia)
One Quality Street
Lexington, KY 40507-1462
(502) 627-2000
61-0247570




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Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol:Name of each exchange on which registered
Common Stock of PPL CorporationPPLNew York Stock Exchange
Junior Subordinated Notes of PPL Capital Funding, Inc.
2007 Series A due 2067PPL/67New York Stock Exchange

Indicate by check mark whether the 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 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
☒		No☐
PPL Electric Utilities Corporation
Yes X   
No
☒		No☐
LG&E and KU Energy LLC
Yes  X   
No
Louisville Gas and Electric Company
Yes X  
No
☒		No☐
Kentucky Utilities Company
Yes X   
No
☒		No☐
 
Indicate by check mark whether the 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 were required to submit and post such files). 
PPL Corporation
Yes X   
No
☒		No☐
PPL Electric Utilities Corporation
Yes X   
No
☒		No☐
LG&E and KU Energy LLC
Yes  X   
No
Louisville Gas and Electric Company
Yes X   
No
☒		No☐
Kentucky Utilities Company
Yes X   
No
☒		No☐
 
Indicate by check mark whether the registrants are large accelerated filers, accelerated filers, non-accelerated filers, smaller reporting companies or emerging growth companies. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated

filer
Accelerated

filer
Non-accelerated

filer
Smaller reporting

company
Emerging growth company
PPL Corporation[ X ]☒[     ]☐[     ]☐[     ]☐[     ]☐
PPL Electric Utilities Corporation[     ]☐[     ]☐[ X ]☒[     ]☐[     ]☐
LG&E and KU Energy LLC[     ][     ][ X ][     ][     ]
Louisville Gas and Electric Company[     ]☐[     ]☐[ X ]☒[     ]☐[     ]☐
Kentucky Utilities Company[     ]☐[     ]☐[ X ]☒[     ]☐[     ]☐


If emerging growth companies, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
PPL Corporation[     ]☐
PPL Electric Utilities Corporation[     ]☐
LG&E and KU Energy LLC[     ]
Louisville Gas and Electric Company[     ]☐
Kentucky Utilities Company[     ]☐
 
Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).
PPL Corporation
Yes
No  X   
☐		No☒
PPL Electric Utilities Corporation
Yes
No  X   
☐		No☒
LG&E and KU Energy LLC
Yes
No  X   
Louisville Gas and Electric Company
Yes
No  X   
☐		No☒
Kentucky Utilities Company
Yes
No  X   
☐		No☒
 



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Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

PPL Corporation    Common stock, $0.01 par value, 735,903,010 shares outstanding at April 29, 2022.
PPL Electric Utilities Corporation    Common stock, no par value, 66,368,056 shares outstanding and all held by PPL Energy Holdings LLC, a wholly-owned, indirect subsidiary of PPL Corporation, at April 29, 2022.
PPL CorporationCommon stock, $0.01 par value, 688,464,316 shares outstanding at October 25, 2017.
PPL Electric Utilities CorporationCommon stock, no par value, 66,368,056 shares outstanding and all held by PPL Corporation at October 25, 2017.
LG&E and KU Energy LLCPPL Corporation directly holds all of the membership interests in LG&E and KU Energy LLC.
Louisville Gas and Electric CompanyCommon stock, no par value, 21,294,223 shares outstanding and all held by LG&E and KU Energy LLC at October 25, 2017.
Kentucky Utilities CompanyCommon stock, no par value, 37,817,878 shares outstanding and all held by LG&E and KU Energy LLC at October 25, 2017.

Louisville Gas and Electric Company    Common stock, no par value, 21,294,223 shares outstanding and all held by LG&E and KU Energy LLC, a wholly-owned, indirect subsidiary of PPL Corporation, at April 29, 2022.
Kentucky Utilities Company    Common stock, no par value, 37,817,878 shares outstanding and all held by LG&E and KU Energy LLC, a wholly-owned, indirect subsidiary of PPL Corporation, at April 29, 2022.

This document is available free of charge at the Investors section of PPL Corporation's website at www.pplweb.com. However, other information on this website does not constitute a part of this Form 10-Q.



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PPL CORPORATION
PPL ELECTRIC UTILITIES CORPORATION
LG&E AND KU ENERGY LLC
LOUISVILLE GAS AND ELECTRIC COMPANY
KENTUCKY UTILITIES COMPANY
 
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2017MARCH 31, 2022
 
Table of Contents
 
This combined Form 10-Q is separately filed by the following Registrants in their individual capacity: PPL Corporation, PPL Electric Utilities Corporation, LG&E and KU Energy LLC, Louisville Gas and Electric Company and Kentucky Utilities Company. Information contained herein relating to any individual Registrant is filed by such Registrant solely on its own behalf, and no Registrant makes any representation as to information relating to any other Registrant, except that information under "Forward-Looking Information" relating to subsidiaries of PPL Corporation is also attributed to PPL Corporation and information relating to the subsidiaries of LG&E and KU Energy LLC is also attributed to LG&E and KU Energy LLC.Corporation.
 
Unless otherwise specified, references in this Report, individually, to PPL Corporation, PPL Electric Utilities Corporation, LG&E and KU Energy LLC, Louisville Gas and Electric Company and Kentucky Utilities Company are references to such entities directly or to one or more of their subsidiaries, as the case may be, the financial results of which subsidiaries are consolidated into such RegistrantsRegistrants' financial statements in accordance with GAAP. This presentation has been applied where identification of particular subsidiaries is not material to the matter being disclosed, and to conform narrative disclosures to the presentation of financial information on a consolidated basis.
Page
i
1
PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements
PPL Corporation and Subsidiaries
3
4
5
6
8
PPL Electric Utilities Corporation and Subsidiaries
10
11
12
14
LG&E and KU Energy LLC and Subsidiaries
Condensed Consolidated Statements of Income
15
Condensed Consolidated Statements of Comprehensive Income
16
Condensed Consolidated Statements of Cash Flows
17
Condensed Consolidated Balance Sheets
18
Condensed Consolidated Statements of Equity
20
Louisville Gas and Electric Company
2216
2317
2418
2620
Kentucky Utilities Company
2822
2923
3024
3226



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Combined Notes to Condensed Financial Statements (Unaudited)
27
3327
2.   Summary of Significant Accounting Policies
33
3428
28
3431
3632
3733
4036
4337
39
4539
5445
5546
5546
5748
14. Goodwill and Other Intangible Assets
65
6554
6655
17. New Accounting Guidance Pending Adoption
67
Item 2.  Combined Management's Discussion and Analysis of Financial Condition and Results of Operations
7056
7056
7258
7358
7459
7560
8768
90
Louisville Gas and Electric Company - Statement of Income Analysis Earnings and Margins
9269
9570
9771
9771
10376
Foreign Currency Translation
105
10577
10577
10678
10678
10679
10780
10780
PART II.  OTHER INFORMATION
10780
10780
81
10781
10782
11083
COMPUTATIONS OF RATIO OF EARNINGS TO FIXED CHARGES
CERTIFICATES OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATES OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



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GLOSSARY OF TERMS AND ABBREVIATIONS
 
PPL Corporation and its subsidiaries
 
KU - Kentucky Utilities Company, a public utility subsidiary of LKE engaged in the regulated generation, transmission, distribution and sale of electricity, primarily in Kentucky.
 
LG&E - Louisville Gas and Electric Company, a public utility subsidiary of LKE engaged in the regulated generation, transmission, distribution and sale of electricity and the distribution and sale of natural gas in Kentucky.
 
LKE - LG&E and KU Energy LLC, a subsidiary of PPL and the parent of LG&E, KU and other subsidiaries.
 
LKS - LG&E and KU Services Company, a subsidiary of LKE that provides administrative, management, and support services primarily to LG&E and KU, as well as to LKE and its other subsidiaries.
 
PPL - PPL Corporation, the parent holding company of PPL Electric, PPL Energy Funding, PPL Capital Funding, LKE and other subsidiaries.
 
PPL Capital Funding - PPL Capital Funding, Inc., a financing subsidiary of PPL that provides financing for the operations of PPL and certain subsidiaries. Debt issued by PPL Capital Funding is fully and unconditionally guaranteed as to payment by PPL.
 
PPL Electric - PPL Electric Utilities Corporation, a public utility subsidiary of PPL engaged in the regulated transmission and distribution of electricity in its Pennsylvania service area and that provides electricity supply to its retail customers in this area as a PLR.
 
PPL Energy Funding - PPL Energy Funding Corporation, a subsidiary of PPL and the parent holding company of PPL Global and other subsidiaries.
 
PPL EU ServicesEnergy Holdings - PPL EU Services Corporation,Energy Holdings, LLC, a subsidiary of PPL that provides administrative, management and support services primarily tothe parent holding company of PPL Electric.Energy Funding, LKE, PPL Electric, PPL Services and other subsidiaries.
 
PPL Global - PPL Global, LLC, a subsidiary of PPL Energy Funding that, prior to the sale of the U.K. utility business on June 14, 2021, primarily through its subsidiaries, ownsowned and operatesoperated WPD, PPL's regulated electricity distribution businesses in the U.K. PPL Global was not included in the sale of the U.K. utility business on June 14, 2021.

PPL Rhode Island Holdings - PPL Rhode Island Holdings, LLC, a subsidiary of PPL Energy Holdings formed for the purpose of acquiring Narragansett Electric to which certain interests of PPL Energy Holdings in the Narragansett SPA were assigned.

PPL Services - PPL Services Corporation, a subsidiary of PPL that provides administrative, management and support services to PPL and its subsidiaries.

PPL WPD Limited - an indirectPPL WPD Limited, a U.K. subsidiary of PPL Global, which carries a liability for a closed defined benefit pension plan and a receivable from WPD plc. Following a reorganization in October 2015,Global. Prior to the sale of the U.K. utility business on June 14, 2021, PPL WPD Limited is nowwas an indirect parent to WPD plc having previously been a sister company.
WPD - refers toWPD. PPL WPD Limited and its subsidiaries.was not included in the sale of the U.K. utility business on June 14, 2021.

WPD (East Midlands)Safari Energy - Western Power Distribution (East Midlands) plc,Safari Energy, LLC, a British regional electricity distribution utility company.
WPD plc - Western Power Distribution plc, a direct U.K. subsidiary of PPL WPD Limited. Its principal indirectly owned subsidiaries are WPD (East Midlands), WPD (South Wales), WPD (South West) and WPD (West Midlands).that provides solar energy solutions for commercial customers in the U.S.

WPD Midlands - refers to WPD (East Midlands) and WPD (West Midlands), collectively.
WPD (South Wales) - Western Power Distribution (South Wales) plc, a British regional electricity distribution utility company.
WPD (South West) - Western Power Distribution (South West) plc, a British regional electricity distribution utility company.
WPD (West Midlands) - Western Power Distribution (West Midlands) plc, a British regional electricity distribution utility company.

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WKE - Western Kentucky Energy Corp., a subsidiary of LKE that leased certain non-utility generating plants in western Kentucky until July 2009.
Other terms and abbreviations

£ - British pound sterling.

20162021 Form 10-K - Annual Report to the SEC on Form 10-K for the year ended December 31, 2016.2021.

Act 11 - Act 11 of 2012 that became effective onin April 16, 2012. The Pennsylvania legislation authorizesauthorized the PUC to approve two specific ratemaking mechanisms: the use of a fully projected future test year in base rate proceedings and, subject to certain conditions, a DSIC.

Act 129 - Act 129 of 2008 that became effective in October 2008. The law amended the Pennsylvania Public Utility Code and created an energy efficiency and conservation program and smart metering technology requirements, adopted new PLR electricity supply procurement rules, provided remedies for market misconduct and changed the Alternative Energy Portfolio Standard.Standard (AEPS).


Act 129 Smart Meter program - PPL Electric's system wide meter replacement program that installs wireless digital meters that provide secure communication between PPL Electric and the meter as well as all related infrastructure.

Advanced Metering SystemAdjusted Gross Margins - metersa non-GAAP financial measure of performance used in "Item 2. Combined Management's Discussion and meter reading systems that provide two-way communication capabilities,Analysis of Financial Condition and Results of Operations" (MD&A).

AFUDC - allowance for funds used during construction. The cost of equity and debt funds used to finance construction projects of regulated businesses, which communicate usage and other relevant data to LG&E and KU at regular intervals, and are also able to receive information from LG&E and KU, suchis capitalized as software upgrades and requests to provide meter readings in real time.part of construction costs.


AOCI - accumulated other comprehensive income or loss.


ARO - asset retirement obligation.

ATM ProgramCCR(s) - PPL's at-the-market common stock offering program.
BSER - Best System of Emission Reduction. The degree of emission reduction the EPA determines has been adequately demonstrated when taking into account the cost of achieving such reduction and any non-air quality health and environmental impact and energy requirements. 

CCR(s) - Coal Combustion Residual(s)coal combustion residual(s). CCRs include fly ash, bottom ash and sulfur dioxide scrubber wastes.

Clean Air Act - federal legislation enacted to address certain environmental issues related to air emissions, including acid rain, ozone and toxic air emissions.
 
Clean Water ActCOVID-19 - federal legislation enacted to address certain environmental issues relating to water quality including effluent discharges, cooling water intake, and dredge and fill activities.

CPCN - Certificate of Public Convenience and Necessity. Authority grantedthe disease caused by the KPSC pursuant to Kentucky Revised Statute 278.020 to provide utility service to or for the public or the construction of certain plant, equipment, property or facility for furnishing of utility service to the public.novel coronavirus identified in 2019 that caused a global pandemic.

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.


Depreciation not normalizedDSIC - the flow-through income tax impact related to the state regulatory treatment of depreciation-related timing differences.

Distribution Automation - advanced grid intelligence enabling LG&E and KU to perform remote monitoring and control, circuit segmentation and "self-healing" of select distribution system circuits, improving grid reliability and efficiency.

DNO - Distribution Network Operator in the U.K.
DRIP - PPL Amended and Restated Dividend Reinvestment and Direct Stock Purchase Plan.

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DSIC - the Distribution System Improvement Charge authorizedCharge. Authorized under Act 11, which is an alternative ratemaking mechanism providing more-timely cost recovery of qualifying distribution system capital expenditures.

DSM- Demand Side Management. Pursuant to Kentucky Revised Statute 278.285, the KPSC may determine the reasonableness of DSM programs proposed by any utility under its jurisdiction. DSM programs consist of energy efficiency programs intended to reduce peak demand and delay the investment in additional power plant construction, provide customers with tools and information regarding their energy usage and support energy efficiency.

Earnings from Ongoing Operations- Aa non-GAAP financial measure of earnings adjusted for the impact of special items and used in "Item 2. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" (MD&A).


ECR - Environmental Cost Recovery. Pursuant to Kentucky Revised Statute 278.183, Kentucky electric utilities are entitled to the current recovery of costs of complying with the Clean Air Act, as amended, and those federal, state or local environmental requirements that apply to coal combustion wastes and byproducts from the production of energy from coal.


ELG(s)- Effluent Limitation Guidelines, regulations promulgated by the EPA.

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


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EPS - Earningsearnings per share.

FERC - Federal Energy Regulatory Commission, the U.S. federal agency that regulates, among other things, interstate transmission and wholesale sales of electricity, hydroelectric power projects and related matters.
 
GAAP - Generally Accepted Accounting Principles in the U.S.
 
GBP -British pound sterling.

GHG(s) -greenhouse gas(es).

GLT - Gas Line Tracker.gas line tracker. The KPSC approved mechanism for LG&E's recovery of costs associated with gas transmission lines, gas service lines, gas risers, leak mitigation, and gas main replacements.


IBEW - International Brotherhood of Electrical Workers.

IRS - Internal Revenue Service, a U.S. government agency.
 
KPSC - Kentucky Public Service Commission, the state agency that has jurisdiction over the regulation of rates and service of utilities in Kentucky.


LCIDA - Lehigh County Industrial Development Authority.

LIBOR - London Interbank Offered Rate.


Margins - A non-GAAP financial measure of performance used in "Item 2. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" (MD&A).

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

MW - megawatt, one thousand kilowatts.

NAAQS - National Ambient Air Quality Standards periodically adopted pursuant to the Clean Air Act.

Narragansett Electric - The Narragansett Electric Company, an entity that serves electric and natural gas customers in Rhode Island. In March 2021, PPL and its subsidiary, PPL Energy Holdings announced a pending acquisition of Narragansett Electric.

NERC - North American Electric Reliability Corporation.

NGCC - Natural gas-fired combined-cycle generating plant.

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NPNS - the normal purchases and normal sales exception as permitted by derivative accounting rules. Derivatives that qualify for this exception may receive accrual accounting treatment.


OCI - other comprehensive income or loss.
 
OfgemOVEC - 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 indirectlyLG&E owns an 8.13%a 5.63% interest (consists of LG&E's 5.63% and KU'sKU owns a 2.50% interests),interest, which is accounted for as a cost-method investment.are recorded at cost. OVEC owns and operates two coal-fired power plants, the Kyger Creek plant in Ohio and the Clifty Creek plant in Indiana, with combined summer rating capacities of 2,120 MW.


Performance Unit - A stock-based compensation award that represents a variable number of shares of PPL common stock that a recipient may receive based on PPL's attainment of total shareowner return over a three-year performance period as compared to companies in the Philadelphia Stock Exchange Utility Index.

PLR - Provider of Last Resort, the role of PPL Electric in providing default electricity supply within its delivery area to retail customers who have not chosen to select an alternative electricity supplier under the Customer Choice Act.
 
PP&E - property, plant and equipment.

PPL EnergyPlus - prior to the June 1, 2015 spinoff, PPL Energy Supply, LLC, PPL EnergyPlus, LLC, a subsidiary of PPL Energy Supply that marketed and traded wholesale and retail electricity and gas and supplied energy and energy services in competitive markets.

PPL Energy Supply - prior to the June 1, 2015 spinoff, PPL Energy Supply, LLC, a subsidiary of PPL Energy Funding and the indirect parent company of PPL Montana, LLC.

PPL EU Services - PPL EU Services Corporation, a former subsidiary of PPL that, prior to it being merged into PPL Services on December 31, 2021, provided administrative, management and support services primarily to PPL Electric.

PPL Montana - prior to the June 1, 2015 spinoff of PPL Energy Supply, PPL Montana, LLC, an indirect subsidiary of PPL Energy Supply that generated electricity for wholesale sales in Montana and the Pacific Northwest.

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PPL WPD Investments Limited – PPL WPD Investments Limited, which was, prior to the sale of the U.K. utility business on June 14, 2021, a subsidiary of PPL WPD Limited and parent to WPD plc. PPL WPD Investments Limited was included in the sale of the U.K. utility business on June 14, 2021.
PUC - Pennsylvania Public Utility Commission, the state agency that regulates certain ratemaking, services, accounting and operations of Pennsylvania utilities.

RAV - regulatory asset value. This term, used within the U.K. regulatory environment, is also commonly known as RAB or regulatory asset base. RAV is based on historical investment costs at time of privatization, plus subsequent allowed additions less annual regulatory depreciation, and represents the value on which DNOs earn a return in accordance with the regulatory cost of capital. RAV is indexed to Retail Price Index (RPI) in order to allow for the effects of inflation. RAV additions are based on a percentage of annual total expenditures that have a long-term benefit to WPD (similar to capital projects for the U.S. regulated businesses that are generally included in rate base).
RCRA - Resource Conservation and Recovery Act of 1976.

Registrant(s) - refers to the Registrants named on the cover of this Report (each a "Registrant" and collectively, the "Registrants").
 
Regulation S-X - SEC regulation governing the form and content of and requirements for financial statements required to be filed pursuant to the federal securities laws.
 
RFCRiverstone - ReliabilityFirst Corporation, oneRiverstone Holdings LLC, a Delaware limited liability company and, as of eight regional entities with delegated authority from NERC that work to safeguard the reliabilityDecember 6, 2016, ultimate parent company of the bulkentities that own the competitive power systems throughout North America.generation business contributed to Talen Energy.
 
RIIO - Ofgem's framework for setting U.K. regulated gas and electric utility price controls which stands for "Revenues = Incentive + Innovation + Outputs." RIIO-1 refers to the first generation of price controls under the RIIO framework. RIIO-ED1 refers to the RIIO regulatory price control applicable to the operators of U.K. electricity distribution networks, the duration of which is April 2015 through March 2023. RIIO-2 refers to the second generation of price controls under the RIIO framework. RIIO-ED2 refers to the second regulatory price control applicable to the operators of U.K. electricity distribution networks, which will begin in April 2023.

RPI - Retail Price Index, is a measure of inflation in the United Kingdom published monthly by the Office for National Statistics.
SCRs - selective catalytic reduction, a pollution control process for the removal of nitrogen oxide from exhaust gas.

S&P - S&P Global Ratings, 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.


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Scrubber - an air pollution control device that can remove particulates and/or gases (primarily sulfur dioxide) from exhaust gases.
 
SEC - the U.S. Securities and Exchange Commission, a U.S. government agency primarily responsible to protect investors and maintain the integrity of the securities markets.
 
SERC - SERC Reliability Corporation, one of eight regional entities with delegated authority from NERC that work to safeguard the reliability of the bulk power systems throughout North America.
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 has the potential to strengthen network reliability.

S&P - S&P Global Ratings, a credit rating agency.
 
Superfund - federal environmental statute that addresses remediation of contaminated sites; states also have similar statutes.
 
Talen Energy- Talen Energy Corporation, the Delaware corporation formed to be the publicly traded company and owner of the competitive generation assets of PPL Energy Supply and certain affiliates of Riverstone, which as of December 6, 2016, became wholly owned by Riverstone.

Talen EnergyMarketing- Talen Energy Marketing, LLC, the successor name of PPL EnergyPlus after the spinoff of PPL Energy Supply that marketed and traded wholesale and retail electricity and gas, and supplied energy and energy services in competitive markets, after the June 1, 2015 spinoff of PPL Energy Supply.

TCJA - Tax Cuts and Jobs Act. Comprehensive U.S. federal tax legislation enacted on December 22, 2017.

Treasury Stock Method - a method applied to calculate diluted EPS that assumes any proceeds that could be obtained upon exercise of options and warrants (and their equivalents) would be used to purchase common stock at the average market price during the relevant period.


U.K. Finance Acts utility business – PPL WPD Investments Limited and its subsidiaries, including, notably, WPD plc and the four distribution network operators, which substantially represented PPL's U.K. Regulated segment. The U.K. utility business was sold on June 14, 2021.

VEBA- refersVoluntary Employee Beneficiary Association. A tax-exempt trust under the Internal Revenue Code Section 501(c)(9) used by employers to U.K. Finance Act of 2015fund and 2016, enacted in November 2015pay eligible medical, life and September 2016 respectively, which collectively reduced the U.K. statutory corporate income tax rate from 20% to 19%, effective April 1, 2017 and from 19% to 17%, effective April 1, 2020.similar benefits.


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


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WPD - Prior to the sale of the U.K. utility business on June 14, 2021, refers to PPL WPD Limited Investments and its subsidiaries. WPD was included in the sale of the U.K. utility business on June 14, 2021.

WPD plc - Western Power Distribution plc, prior to the sale of the U.K. utility business, a U.K. indirect subsidiary of PPL WPD Limited. Its principal indirectly owned subsidiaries are WPD (East Midlands), WPD (South Wales), WPD (South West) and WPD (West Midlands). WPD plc was included in the sale of the U.K. utility business on June 14, 2021.

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Forward-looking Information
 
Statements contained in this Form 10-Q concerning expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are other than statements of historical fact are "forward-looking statements" within the meaning of the federal securities laws. Although the Registrants 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 each Registrant's 20162021 Form 10-K and in "Item 2. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10-Q, the following are among the important factors that could cause actual results to differ materially and adversely from the forward-looking statements:
 
•strategic acquisitions, dispositions, or similar transactions, including the pending acquisition of Narragansett Electric, and our ability to consummate these business transactions or realize expected benefits from them;
•the COVID-19 pandemic and its impact on economic conditions, financial markets and supply chains;
•other pandemic health events or other catastrophic events such as fires, earthquakes, explosions, floods, droughts, tornadoes, hurricanes and other extreme weather-related events (including events potentially caused or exacerbated by climate change);
•the outcome of rate cases or other cost recovery or revenue filings;proceedings;
changes in U.S.•the direct or U.K. tax lawsindirect effects on PPL or regulations;
effectsits subsidiaries or business systems of cyber-based intrusionsintrusion or natural disasters, threatened or actual terrorism, war or other hostilities;the threat of cyberattacks;
•significant decreases in demand for electricity in the U.S.;electricity;
•expansion of alternative and distributed sources of electricity generation and storage;
changes in foreign currency exchange rates for British pound sterling and the related impact on unrealized gains and losses on PPL's foreign currency economic hedges;
•the effectiveness of our risk management programs, including foreign currency and interest rate hedging;
non-achievement by WPD of performance targets set by Ofgem;
the effect of changes in RPI on WPD's revenues and index linked debt;
the March 29, 2017 notification by the U.K. to the European Council of the European Union of the U.K.'s intent to withdraw from the European Union and any actions in response thereto;
•defaults by counterparties or suppliers for energy, capacity, coal, natural gas or key commodities, goods or services;
•capital market conditions, including the availability of capital, credit or credit,insurance, changes in interest rates and certain economic indices, and decisions regarding capital structure;
•a material decline in the market value of PPL's equity;
•significant decreases in the fair value of debt and equity securities and itstheir impact on the value of assets in defined benefit plans, and the potentialrelated cash funding requirements if the fair value of those assets declines;
•interest rates and their effect on pension and retiree medical liabilities, ARO liabilities, and interest payable on certain debt securities;securities, and the general economy;
•volatility in or the impact of other changes in financial markets, commodity prices and economic conditions;conditions, including inflation;
•the potential impact of any unrecorded commitments and liabilities if any, of the Registrants and their subsidiaries;
•new accounting requirements or new interpretations or applications of existing requirements;
•changes in the corporate credit ratings or securities analyst rankings of the Registrants and credit ratings;their securities;
•any requirement to record impairment charges pursuant to GAAP with respect to any of our significant investments;
•laws or regulations to reduce emissions of GHGs or the physical effects of climate change;
•continuing ability to access fuel supply for LG&E and KU, as well as the ability to recover fuel costs and environmental expenditures in a timely manner at LG&E and KU and natural gas supply costs at LG&E;
•weather and other conditions affecting generation, transmission and distribution operations, operating costs and customer energy use;
•war, armed conflicts, terrorist attacks, or similar disruptive events, including the war in Ukraine;
•changes in political, regulatory or economic conditions in states, regions or countries where the Registrants or their subsidiaries conduct business;
•receipt of necessary governmental permits and approvals;
new•changes in state or federal tax law or regulations;
•changes in state, federal or foreign legislation or regulatory developments;
•the impact of any state, federal or foreign investigations applicable to the Registrants and their subsidiaries and the energy industry;
•our ability to attract and retain qualified employees;
•the effect of any business or industry restructuring;
•development of new projects, markets and technologies;
•performance of new ventures;
business dispositions or acquisitions and our ability to realize expected benefits from such business transactions;
•collective labor bargaining negotiations; and
•the outcome of litigation againstinvolving the Registrants and their subsidiaries.


1
Any such forward-looking statements should be considered in light of suchthese important factors and in conjunction with other documents of the Registrants on file with the SEC.

Table of Contents



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 the Registrants 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 the Registrants undertake no obligation to update the information contained in suchthe statement to reflect subsequent developments or information.



2

PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, except share data)

 Three Months Ended March 31,
 20222021
Operating Revenues$1,782 $1,498 
Operating Expenses
Operation
Fuel212 177 
Energy purchases352 220 
Other operation and maintenance433 367 
Depreciation271 267 
Taxes, other than income60 52 
Total Operating Expenses1,328 1,083 
Operating Income454 415 
Other Income (Expense) - net (Note 12)— — 
Interest Expense107 153 
Income from Continuing Operations Before Income Taxes347 262 
Income Taxes74 59 
Income from Continuing Operations After Income Taxes273 203 
Loss from Discontinued Operations (net of income taxes) (Note 8)— (2,043)
Net Income (Loss)$273 $(1,840)
Earnings Per Share of Common Stock:
    Basic and Diluted
Income from Continuing Operations After Income Taxes$0.37 $0.26 
Loss from Discontinued Operations (net of income taxes)— (2.65)
Net Income (Loss) Available to PPL Common Shareowners$0.37 $(2.39)
Weighted-Average Shares of Common Stock Outstanding
(in thousands)
  
Basic735,503 769,159 
Diluted736,184 770,710 
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Operating Revenues$1,845
 $1,889
 $5,521
 $5,685
        
Operating Expenses       
Operation       
Fuel202
 227
 576
 607
Energy purchases143
 151
 494
 531
Other operation and maintenance397
 417
 1,217
 1,292
Depreciation257
 232
 745
 692
Taxes, other than income69
 76
 214
 229
Total Operating Expenses1,068
 1,103
 3,246
 3,351
        
Operating Income777
 786
 2,275
 2,334
        
Other Income (Expense) - net(76) 49
 (235) 284
        
Interest Expense230
 223
 669
 671
        
Income Before Income Taxes471
 612
 1,371
 1,947
        
Income Taxes116
 139
 321
 510
        
Net Income$355
 $473
 $1,050
 $1,437
        
Earnings Per Share of Common Stock: 
Net Income Available to PPL Common Shareowners:       
Basic$0.52
 $0.70
 $1.53
 $2.12
Diluted$0.51
 $0.69
 $1.53
 $2.11
        
Dividends Declared Per Share of Common Stock$0.3950
 $0.38
 $1.185
 $1.14
        
Weighted-Average Shares of Common Stock Outstanding
(in thousands)
       
Basic686,563
 678,114
 683,783
 676,905
Diluted688,746
 680,348
 686,081
 679,969
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

3

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Net income$355
 $473
 $1,050
 $1,437
        
Other comprehensive income (loss): 
  
    
Amounts arising during the period - gains (losses), net of tax (expense) benefit: 
  
    
Foreign currency translation adjustments, net of tax of $0, ($2), ($1), ($4)(12) (641) 195
 (837)
Qualifying derivatives, net of tax of $0, ($16), $7, ($9)1
 62
 (29) 57
Defined benefit plans: 
 

    
Net actuarial gain (loss), net of tax of $2, $4, $9, $3(3) (6) (14) (4)
Reclassifications from AOCI - (gains) losses, net of tax expense (benefit): 
  
    
Qualifying derivatives, net of tax of $1, $17, ($6), $15—
 (69) 24
 (62)
Equity investees' other comprehensive (income) loss, net of tax of $0, $0, $0, $0—
 —
 1
 (1)
Defined benefit plans: 
  
    
Prior service costs, net of tax of ($1), ($1), ($1), ($1)—
 —
 1
 1
Net actuarial (gain) loss, net of tax of ($10), ($10), ($28), ($27)34
 31
 97
 94
Total other comprehensive income (loss)20
 (623) 275
 (752)
        
Comprehensive income (loss)$375
 $(150) $1,325
 $685
 Three Months Ended March 31,
 20222021
Net income (loss)$273 $(1,840)
Other comprehensive income (loss):
Amounts arising during the period - gains (losses), net of tax (expense) benefit:
Foreign currency translation adjustments, net of tax of $0, ($80)— 303 
Qualifying derivatives, net of tax of $0, $16— (30)
Equity investees' other comprehensive income (loss), net of tax of $0, $01 — 
Defined benefit plans:
Prior service costs, net of tax of $0, $0(1)— 
Reclassifications from AOCI - (gains) losses, net of tax expense (benefit):
Qualifying derivatives, net of tax of $0, ($14)1 25 
Defined benefit plans:
Prior service costs, net of tax of $0, $01 — 
Net actuarial (gain) loss, net of tax of ($1), ($22)3 40 
Total other comprehensive income (loss)5 338 
Comprehensive income (loss)$278 $(1,502)
 
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.



4

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
Nine Months Ended September 30,Three Months Ended March 31,
2017 2016 20222021
Cash Flows from Operating Activities 
  
Cash Flows from Operating Activities  
Net income$1,050
 $1,437
Net income (loss)Net income (loss)$273 $(1,840)
Loss from discontinued operations (net of income taxes)Loss from discontinued operations (net of income taxes)— 2,043 
Income from continuing operations (net of income taxes)Income from continuing operations (net of income taxes)273 203 
Adjustments to reconcile net income to net cash provided by operating activities 
  
Adjustments to reconcile net income to net cash provided by operating activities  
Depreciation745
 692
Depreciation271 267 
Amortization72
 54
Amortization7 11 
Defined benefit plans - expense (income)(69) (29)
Deferred income taxes and investment tax credits284
 436
Deferred income taxes and investment tax credits39 50 
Unrealized (gains) losses on derivatives, and other hedging activities194
 107
Stock-based compensation expense30
 23
Stock-based compensation expense11 6 
Other(8) (12)Other(4)(1)
Change in current assets and current liabilities 
  
Change in current assets and current liabilities  
Accounts receivable25
 (29)Accounts receivable(38)(60)
Accounts payable(93) (40)Accounts payable4 (42)
Unbilled revenues81
 32
Unbilled revenues28 76 
Fuel, materials and supplies35
 8
Fuel, materials and supplies42 41 
Prepayments(37) (34)Prepayments(75)(76)
Taxes payable6
 40
Taxes payable(4)(25)
Regulatory assets and liabilities, net(3) (32)Regulatory assets and liabilities, net(41)29 
Accrued interest49
 32
Accrued interest57 69 
Other current liabilities(53) (48)
Other5
 (5)Other(53)(76)
Other operating activities   Other operating activities
Defined benefit plans - funding(558) (345)Defined benefit plans - funding(3)(33)
Other assets4
 18
Other assets(18)(74)
Other liabilities(5) (75)Other liabilities6 31 
Net cash provided by operating activities - continuing operationsNet cash provided by operating activities - continuing operations502 396 
Net cash provided by operating activities - discontinued operationsNet cash provided by operating activities - discontinued operations— 267 
Net cash provided by operating activities1,754
 2,230
Net cash provided by operating activities502 663 
Cash Flows from Investing Activities 
  
Cash Flows from Investing Activities  
Expenditures for property, plant and equipment(2,152) (2,073)Expenditures for property, plant and equipment(427)(471)
Expenditures for intangible assets(25) (23)
Other investing activities13
 30
Other investing activities— (1)
Net cash used in investing activities(2,164) (2,066)
Net cash provided by (used in) investing activities - continuing operationsNet cash provided by (used in) investing activities - continuing operations(427)(472)
Net cash provided by (used in) investing activities - discontinued operationsNet cash provided by (used in) investing activities - discontinued operations— (263)
Net cash provided by (used in) investing activitiesNet cash provided by (used in) investing activities(427)(735)
Cash Flows from Financing Activities 
  
Cash Flows from Financing Activities  
Issuance of long-term debt1,088
 1,241
Retirement of long-term debt(60) (905)
Settlement of cross-currency swaps—
 46
Issuance of common stock275
 133
Payment of common stock dividends(800) (772)Payment of common stock dividends(306)(320)
Retirement of term loanRetirement of term loan— (300)
Retirement of commercial paperRetirement of commercial paper— (73)
Net increase (decrease) in short-term debt269
 (268)Net increase (decrease) in short-term debt916 752 
Other financing activities(34) (33)Other financing activities(7)(4)
Net cash provided by (used in) financing activities - continuing operationsNet cash provided by (used in) financing activities - continuing operations603 55 
Net cash provided by (used in) financing activities - discontinued operationsNet cash provided by (used in) financing activities - discontinued operations— (126)
Net cash provided by (used in) financing activities738
 (558)Net cash provided by (used in) financing activities603 (71)
Effect of Exchange Rates on Cash and Cash Equivalents7
 (26)
Net Increase (Decrease) in Cash and Cash Equivalents335
 (420)
Cash and Cash Equivalents at Beginning of Period341
 836
Cash and Cash Equivalents at End of Period$676
 $416
   
Effect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash included in Discontinued OperationsEffect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash included in Discontinued Operations— 8 
Net (Increase) Decrease in Cash, Cash Equivalents and Restricted Cash included in Discontinued OperationsNet (Increase) Decrease in Cash, Cash Equivalents and Restricted Cash included in Discontinued Operations— 114 
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted CashNet Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash678 (21)
Cash, Cash Equivalents and Restricted Cash at Beginning of PeriodCash, Cash Equivalents and Restricted Cash at Beginning of Period3,572 443 
Cash, Cash Equivalents and Restricted Cash at End of PeriodCash, Cash Equivalents and Restricted Cash at End of Period$4,250 $422 
Supplemental Disclosures of Cash Flow Information   Supplemental Disclosures of Cash Flow Information
Significant non-cash transactions:   Significant non-cash transactions:
Accrued expenditures for property, plant and equipment at September 30,$373
 $293
Accrued expenditures for intangible assets at September 30,$60
 $104
Accrued expenditures for property, plant and equipment at March 31,Accrued expenditures for property, plant and equipment at March 31,$236 $229 


The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

5
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CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, shares in thousands)

September 30,
2017		 December 31,
2016		 March 31,
2022		December 31,
2021
Assets 
  
Assets  
   
Current Assets 
  
Current Assets  
Cash and cash equivalents$676
 $341
Cash and cash equivalents$4,249 $3,571 
Accounts receivable (less reserve: 2017, $52; 2016, $54) 
  
Accounts receivable (less reserve: 2022, $66; 2021, $65)Accounts receivable (less reserve: 2022, $66; 2021, $65)  
Customer617
 666
Customer625 583 
Other96
 46
Other44 58 
Unbilled revenues405
 480
Unbilled revenues (less reserve: 2022, $2; 2021, $2)Unbilled revenues (less reserve: 2022, $2; 2021, $2)279 307 
Fuel, materials and supplies323
 356
Fuel, materials and supplies280 322 
Prepayments101
 63
Prepayments135 60 
Price risk management assets57
 63
Other current assets56
 52
Other current assets101 106 
Total Current Assets2,331
 2,067
Total Current Assets5,713 5,007 
   
Property, Plant and Equipment 
  
Property, Plant and Equipment  
Regulated utility plant36,678
 34,674
Regulated utility plant30,679 30,477 
Less: accumulated depreciation - regulated utility plant6,624
 6,013
Less: accumulated depreciation - regulated utility plant6,599 6,488 
Regulated utility plant, net30,054
 28,661
Regulated utility plant, net24,080 23,989 
Non-regulated property, plant and equipment422
 413
Non-regulated property, plant and equipment278 266 
Less: accumulated depreciation - non-regulated property, plant and equipment154
 134
Less: accumulated depreciation - non-regulated property, plant and equipment41 41 
Non-regulated property, plant and equipment, net268
 279
Non-regulated property, plant and equipment, net237 225 
Construction work in progress1,494
 1,134
Construction work in progress1,328 1,256 
Property, Plant and Equipment, net31,816
 30,074
Property, Plant and Equipment, net25,645 25,470 
   
Other Noncurrent Assets 
  
Other Noncurrent Assets  
Regulatory assets1,869
 1,918
Regulatory assets1,219 1,236 
Goodwill3,134
 3,060
Goodwill716 716 
Other intangibles666
 700
Other intangibles340 343 
Pension benefit asset532
 9
Price risk management assets267
 336
Other noncurrent assets143
 151
Other noncurrent assets (less reserve for accounts receivable: 2022, $2; 2021 $2)Other noncurrent assets (less reserve for accounts receivable: 2022, $2; 2021 $2)474 451 
Total Other Noncurrent Assets6,611
 6,174
Total Other Noncurrent Assets2,749 2,746 
   
Total Assets$40,758
 $38,315
Total Assets$34,107 $33,223 
 
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.



6
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CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, shares in thousands)

September 30,
2017		 December 31,
2016		 March 31,
2022		December 31,
2021
Liabilities and Equity 
  
Liabilities and Equity  
   
Current Liabilities 
  
Current Liabilities  
Short-term debt$1,211
 $923
Short-term debt$985 $69 
Long-term debt due within one year448
 518
Long-term debt due within one year474 474 
Accounts payable838
 820
Accounts payable686 679 
Taxes110
 101
Taxes92 96 
Interest322
 270
Interest138 81 
Dividends272
 259
Dividends147 305 
Customer deposits291
 276
Regulatory liabilities87
 101
Regulatory liabilities122 182 
Other current liabilities570
 569
Other current liabilities389 437 
Total Current Liabilities4,149
 3,837
Total Current Liabilities3,033 2,323 
   
Long-term Debt19,110
 17,808
Long-term Debt10,668 10,666 
   
Deferred Credits and Other Noncurrent Liabilities 
  
Deferred Credits and Other Noncurrent Liabilities  
Deferred income taxes4,224
 3,889
Deferred income taxes3,211 3,151 
Investment tax credits130
 132
Investment tax credits124 119 
Accrued pension obligations796
 1,001
Accrued pension obligations183 183 
Asset retirement obligations312
 428
Asset retirement obligations151 157 
Regulatory liabilities873
 899
Regulatory liabilities2,417 2,422 
Other deferred credits and noncurrent liabilities472
 422
Other deferred credits and noncurrent liabilities455 479 
Total Deferred Credits and Other Noncurrent Liabilities6,807
 6,771
Total Deferred Credits and Other Noncurrent Liabilities6,541 6,511 
   
Commitments and Contingent Liabilities (Notes 6 and 9)

 

Commitments and Contingent Liabilities (Notes 6 and 10)Commitments and Contingent Liabilities (Notes 6 and 10)00
   
Equity 
  
Equity  
Common stock - $0.01 par value (a)7
 7
Common stock - $0.01 par value (a)8 8 
Additional paid-in capital10,122
 9,841
Additional paid-in capital12,299 12,303 
Treasury stockTreasury stock(987)(1,003)
Earnings reinvested4,066
 3,829
Earnings reinvested2,697 2,572 
Accumulated other comprehensive loss(3,503) (3,778)Accumulated other comprehensive loss(152)(157)
Total Equity10,692
 9,899
Total Equity13,865 13,723 
   
Total Liabilities and Equity$40,758
 $38,315
Total Liabilities and Equity$34,107 $33,223 
 
(a)1,560,000 shares authorized; 688,133 and 679,731 shares issued and outstanding at September 30, 2017 and December 31, 2016.

(a)1,560,000 shares authorized, 770,013 shares issued and 735,765 shares outstanding at March 31, 2022. 1,560,000 shares authorized, 769,890 shares issued and 735,112 shares outstanding at December 31, 2021.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.



7
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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
Common
stock
shares
outstanding (a)		Common
stock		Additional
paid-in
capital		Treasury stockEarnings
reinvested		Accumulated
other
comprehensive
loss		Total
December 31, 2021735,112 $8 12,303 $(1,003)$2,572 $(157)$13,723 
Common stock issued123 4 4 
Treasury stock issued530 16 16 
Stock-based compensation(8)(8)
Net income (loss)273 273 
Dividends and dividend equivalents (b)(148)(148)
Other comprehensive income (loss)5 5 
March 31, 2022735,765 $8 $12,299 $(987)$2,697 $(152)$13,865 
December 31, 2020768,907 $8 12,270 $— $5,315 $(4,220)$13,373 
Common stock issued520  16   16 
Stock-based compensation  (13)  (13)
Net income (loss)  (1,840) (1,840)
Dividends and dividend equivalents (b)  (320) (320)
Other comprehensive income (loss)   338 338 
March 31, 2021769,427 $8 $12,273 $— $3,155 $(3,882)$11,554 


(a)Shares in thousands. Each share entitles the holder to 1 vote on any question presented at any shareowners' meeting.
 Common
stock
shares
outstanding (a)		 
Common
stock
 Additional
paid-in
capital		 Earnings
reinvested		 
Accumulated
other
comprehensive
loss
 Total
December 31, 2016679,731
 $7
 $9,841
 $3,829
 $(3,778) $9,899
Common stock issued8,402
 

 303
     303
Stock-based compensation    (22)     (22)
Net income      1,050
   1,050
Dividends and dividend equivalents      (813)   (813)
Other comprehensive income (loss)        275
 275
September 30, 2017688,133
 $7
 $10,122
 $4,066
 $(3,503) $10,692
            
December 31, 2015673,857
 $7
 $9,687
 $2,953
 $(2,728) $9,919
Common stock issued5,411
  
 168
  
  
 168
Stock-based compensation 
  
 (31)  
  
 (31)
Net income 
  
  
 1,437
  
 1,437
Dividends and dividend equivalents 
  
  
 (773)  
 (773)
Other comprehensive income (loss) 
  
  
  
 (752) (752)
Adoption of stock-based compensation guidance cumulative effect adjustment      7
   7
September 30, 2016679,268
 $7
 $9,824
 $3,624
 $(3,480) $9,975
            
(b)Dividends declared per share of common stock were $0.200 and $0.415 for the three months ended March 31, 2022 and March 31, 2021.
(a)Shares in thousands. Each share entitles the holder to one vote on any question presented at any shareowners' meeting.


The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.


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9
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)

Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended March 31,
2017 2016 2017 2016 20222021
Operating Revenues$547
 $539
 $1,620
 $1,619
Operating Revenues$775 $605 
       
Operating Expenses 
  
    Operating Expenses
Operation 
  
    Operation
Energy purchases121
 129
 374
 414
Energy purchases256 149 
Other operation and maintenance133
 144
 435
 431
Other operation and maintenance160 128 
Depreciation77
 64
 228
 185
Depreciation98 108 
Taxes, other than income27
 26
 79
 79
Taxes, other than income37 32 
Total Operating Expenses358
 363
 1,116
 1,109
Total Operating Expenses551 417 
       
Operating Income189
 176
 504
 510
Operating Income224 188 
       
Other Income (Expense) - net4
 4
 8
 12
Other Income (Expense) - net (Note 12)Other Income (Expense) - net (Note 12)6 5 
       
Interest Income from Affiliate2
 —
 3
 —
Interest Income from Affiliate2 — 
       
Interest Expense36
 32
 105
 97
Interest Expense39 43 
       
Income Before Income Taxes159
 148
 410
 425
Income Before Income Taxes193 150 
       
Income Taxes64
 58
 159
 162
Income Taxes50 37 
       
Net Income (a)$95
 $90
 $251
 $263
Net Income (a)$143 $113 
 
(a)Net income equals comprehensive income.

(a)Net income equals comprehensive income.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.


10
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
 Three Months Ended March 31,
 20222021
Cash Flows from Operating Activities  
Net income$143 $113 
Adjustments to reconcile net income to net cash provided by operating activities  
Depreciation98 108 
Amortization3 6 
Defined benefit plans - expense (income)(6)(3)
Deferred income taxes and investment tax credits41 13 
Other(4)(4)
Change in current assets and current liabilities  
Accounts receivable(52)(37)
Accounts payable20 (9)
Unbilled revenues14 37 
Prepayments(72)(78)
Regulatory assets and liabilities, net(43)39 
Taxes payable(15)(7)
Other2 (7)
Other operating activities  
Defined benefit plans - funding— (21)
Other assets(2)(27)
Other liabilities(5)(2)
Net cash provided by operating activities122 121 
Cash Flows from Investing Activities  
Expenditures for property, plant and equipment(188)(223)
Notes receivable from affiliates203 — 
Other investing activities— 1 
Net cash provided by (used in) investing activities15 (222)
Cash Flows from Financing Activities  
Return of capital to parent(40)— 
Payment of common stock dividends to parent(72)(115)
Net increase in short-term debt— 205 
Net cash provided by (used in) financing activities(112)90 
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash25 (11)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period21 40 
Cash, Cash Equivalents and Restricted Cash at End of Period$46 $29 
Supplemental Disclosure of Cash Flow Information
Significant non-cash transactions:
Accrued expenditures for property, plant and equipment at March 31,$153 $143 
 Nine Months Ended September 30,
 2017 2016
Cash Flows from Operating Activities 
  
Net income$251
 $263
Adjustments to reconcile net income to net cash provided by operating activities 
  
Depreciation228
 185
Amortization25
 19
Defined benefit plans - expense10
 9
Deferred income taxes and investment tax credits129
 151
Other(8) (14)
Change in current assets and current liabilities 
  
Accounts receivable7
 (6)
Accounts payable(38) (1)
Unbilled revenues30
 10
Prepayments(31) 29
Regulatory assets and liabilities, net—
 (41)
Taxes payable10
 (6)
Other(9) (13)
Other operating activities 
  
Defined benefit plans - funding(24) —
Other assets(2) 15
Other liabilities(3) (5)
Net cash provided by operating activities575
 595
    
Cash Flows from Investing Activities 
  
Expenditures for property, plant and equipment(851) (739)
Expenditures for intangible assets(7) (3)
Net increase in notes receivable from affiliate(2) —
Other investing activities2
 2
Net cash used in investing activities(858) (740)
    
Cash Flows from Financing Activities 
  
Issuance of long-term debt470
 224
Retirement of long-term debt—
 (224)
Contributions from parent575
 200
Payment of common stock dividends to parent(231) (193)
Net increase (decrease) in short-term debt(295) 130
Other financing activities(6) (3)
Net cash provided by financing activities513
 134
    
Net Increase (Decrease) in Cash and Cash Equivalents230
 (11)
Cash and Cash Equivalents at Beginning of Period13
 47
Cash and Cash Equivalents at End of Period$243
 $36
    
Supplemental Disclosure of Cash Flow Information   
Significant non-cash transactions:   
Accrued expenditures for property, plant and equipment at September 30,$190
 $166


The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

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CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, shares in thousands)

September 30,
2017		 December 31,
2016		 March 31,
2022		December 31,
2021
Assets 
  
Assets  
   
Current Assets 
  
Current Assets  
Cash and cash equivalents$243
 $13
Cash and cash equivalents$46 $21 
Accounts receivable (less reserve: 2017, $25; 2016, $28) 
  
Accounts receivable (less reserve: 2022, $33; 2021, $31)Accounts receivable (less reserve: 2022, $33; 2021, $31)  
Customer275
 272
Customer333 305 
Other10
 21
Other27 22 
Accounts receivable from affiliates1
 —
Accounts receivable from affiliates9 11 
Notes receivable from affiliate2
 —
Notes receivable from affiliate296 499 
Unbilled revenues84
 114
Unbilled revenues (less reserve: 2022, $1; 2021, $2)Unbilled revenues (less reserve: 2022, $1; 2021, $2)115 129 
Materials and supplies31
 32
Materials and supplies64 61 
Prepayments40
 9
Prepayments85 13 
Regulatory assets14
 19
Regulatory assets13 22 
Other current assets11
 8
Other current assets28 21 
Total Current Assets711
 488
Total Current Assets1,016 1,104 
   
Property, Plant and Equipment 
  
Property, Plant and Equipment  
Regulated utility plant10,449
 9,654
Regulated utility plant14,177 14,082 
Less: accumulated depreciation - regulated utility plant2,880
 2,714
Less: accumulated depreciation - regulated utility plant3,396 3,386 
Regulated utility plant, net7,569
 6,940
Regulated utility plant, net10,781 10,696 
Construction work in progress699
 641
Construction work in progress641 581 
Property, Plant and Equipment, net8,268
 7,581
Property, Plant and Equipment, net11,422 11,277 
   
Other Noncurrent Assets 
  
Other Noncurrent Assets  
Regulatory assets1,073
 1,094
Regulatory assets475 488 
Intangibles256
 251
Intangibles270 270 
Other noncurrent assets15
 12
Pension benefit assetPension benefit asset67 50 
Other noncurrent assets (less reserve for accounts receivable: 2022, $2; 2021, $2)Other noncurrent assets (less reserve for accounts receivable: 2022, $2; 2021, $2)124 113 
Total Other Noncurrent Assets1,344
 1,357
Total Other Noncurrent Assets936 921 
   
Total Assets$10,323
 $9,426
Total Assets$13,374 $13,302 
 
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

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CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, shares in thousands)

September 30,
2017		 December 31,
2016		 March 31,
2022		December 31,
2021
Liabilities and Equity 
  
Liabilities and Equity  
   
Current Liabilities 
  
Current Liabilities  
Short-term debt$—
 $295
Long-term debt due within one year—
 224
Long-term debt due within one year$474 $474 
Accounts payable397
 367
Accounts payable411 367 
Accounts payable to affiliates38
 42
Accounts payable to affiliates82 56 
Taxes22
 12
Taxes16 31 
Interest38
 34
Interest45 35 
Regulatory liabilities72
 83
Regulatory liabilities101 153 
Other current liabilities90
 101
Other current liabilities108 108 
Total Current Liabilities657
 1,158
Total Current Liabilities1,237 1,224 
   
Long-term Debt3,298
 2,607
Long-term Debt4,011 4,010 
   
Deferred Credits and Other Noncurrent Liabilities 
  
Deferred Credits and Other Noncurrent Liabilities  
Deferred income taxes2,036
 1,899
Deferred income taxes1,716 1,668 
Accrued pension obligations257
 281
Regulatory liabilitiesRegulatory liabilities555 559 
Other deferred credits and noncurrent liabilities89
 90
Other deferred credits and noncurrent liabilities88 105 
Total Deferred Credits and Other Noncurrent Liabilities2,382
 2,270
Total Deferred Credits and Other Noncurrent Liabilities2,359 2,332 
   
Commitments and Contingent Liabilities (Notes 6 and 9)

 

Commitments and Contingent Liabilities (Notes 6 and 10)Commitments and Contingent Liabilities (Notes 6 and 10)00
   
Equity 
  
Equity  
Common stock - no par value (a)364
 364
Common stock - no par value (a)364 364 
Additional paid-in capital2,729
 2,154
Additional paid-in capital4,214 4,254 
Earnings reinvested893
 873
Earnings reinvested1,189 1,118 
Total Equity3,986
 3,391
Total Equity5,767 5,736 
   
Total Liabilities and Equity$10,323
 $9,426
Total Liabilities and Equity$13,374 $13,302 
 
(a)170,000 shares authorized; 66,368 shares issued and outstanding at September 30, 2017 and December 31, 2016.

(a)170,000 shares authorized; 66,368 shares issued and outstanding at March 31, 2022 and December 31, 2021.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.



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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)

 
Common
stock
shares
outstanding
(a)
 
Common
stock
 
Additional
paid-in
capital
 
Earnings
reinvested
 Total
December 31, 201666,368
 $364
 $2,154
 $873
 $3,391
Net income

 

 

 251
 251
Capital contributions from PPL

 

 575
 

 575
Dividends declared on common stock

 

 

 (231) (231)
September 30, 201766,368
 $364
 $2,729
 $893
 $3,986
          
December 31, 201566,368
 $364
 $1,934
 $821
 $3,119
Net income

 

 

 263
 263
Capital contributions from PPL

 

 200
 

 200
Dividends declared on common stock

 

 

 (193) (193)
September 30, 201666,368
 $364
 $2,134
 $891
 $3,389
 Common
stock
shares
outstanding
(a)		Common
stock		Additional
paid-in
capital		Earnings
reinvested		Total
December 31, 202166,368 $364 $4,254 $1,118 $5,736 
Net income143 143 
Return of capital to parent(40)(40)
Dividends declared on common stock(72)(72)
March 31, 202266,368 $364 $4,214 $1,189 $5,767 
December 31, 202066,368 $364 $3,753 $1,007 $5,124 
Net income113 113 
Dividends declared on common stock(115)(115)
March 31, 202166,368 $364 $3,753 $1,005 $5,122 
 
(a)Shares in thousands. All common shares of PPL Electric stock are owned by PPL.

(a)Shares in thousands. All common shares of PPL Electric stock are owned by PPL Energy Holdings.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
LG&ELouisville Gas and KU Energy LLC and SubsidiariesElectric Company
(Unaudited)
(Millions of Dollars)

Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended March 31,
2017 2016 2017 2016 20222021
Operating Revenues$818
 $835
 $2,350
 $2,382
Operating Revenues
Retail and wholesaleRetail and wholesale$481 $421 
Electric revenue from affiliateElectric revenue from affiliate12 7 
Total Operating RevenuesTotal Operating Revenues493 428 
       
Operating Expenses 
  
  
  
Operating Expenses  
Operation 
  
  
  
Operation  
Fuel202
 227
 576
 607
Fuel81 67 
Energy purchases22
 24
 120
 118
Energy purchases91 66 
Energy purchases from affiliateEnergy purchases from affiliate2 5 
Other operation and maintenance199
 197
 598
 603
Other operation and maintenance100 96 
Depreciation114
 102
 324
 301
Depreciation74 66 
Taxes, other than income17
 16
 49
 46
Taxes, other than income12 11 
Total Operating Expenses554
 566
 1,667
 1,675
Total Operating Expenses360 311 
       
Operating Income264
 269
 683
 707
Operating Income133 117 
       
Other Income (Expense) - net1
 (3) (5) (9)Other Income (Expense) - net(1)(2)
       
Interest Expense49
 50
 148
 147
Interest Expense20 21 
       
Interest Expense with Affiliate5
 4
 13
 12
       
Income Before Income Taxes211
 212
 517
 539
Income Before Income Taxes112 94 
       
Income Taxes79
 79
 195
 202
Income Taxes19 19 
       
Net Income$132
 $133
 $322
 $337
Net Income (a)Net Income (a)$93 $75 
 
(a)Net income equals comprehensive income.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.



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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMECASH FLOWS
LG&ELouisville Gas and KU Energy LLC and SubsidiariesElectric Company
(Unaudited)
(Millions of Dollars)


Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Net income$132
 $133
 $322
 $337
        
Other comprehensive income (loss):       
Amounts arising during the period - gains (losses), net of tax (expense) benefit:       
Defined benefit plans:       
Net actuarial gain (loss), net of tax of $0, $0, $7, ($1)(1) —
 (12) 1
Reclassifications from AOCI - (gains) losses, net of tax expense (benefit):       
Equity investees' other comprehensive (income) loss, net of tax of $0, $0, $0, $0—
 —
 1
 (1)
Defined benefit plans:       
Prior service costs, net of tax of ($1), ($1), ($1), ($1)—
 —
 1
 1
Net actuarial loss, net of tax of $0, $0, ($2), ($1)1
 1
 3
 3
Total other comprehensive income (loss)—
 1
 (7) 4
        
Comprehensive income$132
 $134
 $315
 $341

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.


Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
LG&E and KU Energy LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)
 Nine Months Ended September 30,
 2017 2016
Cash Flows from Operating Activities 
  
Net income$322
 $337
Adjustments to reconcile net income to net cash provided by operating activities 
  
Depreciation324
 301
Amortization19
 21
Defined benefit plans - expense19
 20
Deferred income taxes and investment tax credits173
 212
Other1
 —
Change in current assets and current liabilities 
  
Accounts receivable18
 (43)
Accounts payable(30) 7
Accounts payable to affiliates3
 4
Unbilled revenues19
 6
Fuel, materials and supplies34
 7
Taxes payable13
 —
Accrued interest41
 42
Other(1) (4)
Other operating activities 
  
Defined benefit plans - funding(32) (82)
Expenditures for asset retirement obligations(22) (15)
Other assets5
 1
Other liabilities14
 2
Net cash provided by operating activities920
 816
Cash Flows from Investing Activities 
  
Expenditures for property, plant and equipment(579) (600)
Other investing activities4
 1
Net cash used in investing activities(575) (599)
Cash Flows from Financing Activities 
  
Net increase (decrease) in notes payable with affiliate(4) 84
Issuance of long-term debt60
 221
Retirement of long-term debt(60) (221)
Net increase (decrease) in short-term debt5
 (130)
Debt issuance and credit facility costs(3) (3)
Distributions to member(316) (224)
Contributions from member—
 37
Net cash used in financing activities(318) (236)
Net Increase (Decrease) in Cash and Cash Equivalents27
 (19)
Cash and Cash Equivalents at Beginning of Period13
 30
Cash and Cash Equivalents at End of Period$40
 $11
    
Supplemental Disclosure of Cash Flow Information   
Significant non-cash transactions:   
Accrued expenditures for property, plant and equipment at September 30,$142
 $86

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

Table of Contents

CONDENSED CONSOLIDATED BALANCE SHEETS
LG&E and KU Energy LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)

 September 30,
2017		 December 31,
2016
Assets 
  
    
Current Assets 
  
Cash and cash equivalents$40
 $13
Accounts receivable (less reserve: 2017, $25; 2016, $24) 
  
Customer215
 235
Other43
 17
Accounts receivable from affiliates1
 —
Unbilled revenues151
 170
Fuel, materials and supplies264
 297
Prepayments27
 24
Regulatory assets20
 20
Other current assets8
 4
Total Current Assets769
 780
    
Property, Plant and Equipment 
  
Regulated utility plant12,906
 12,746
Less: accumulated depreciation - regulated utility plant1,685
 1,465
Regulated utility plant, net11,221
 11,281
Construction work in progress574
 317
Property, Plant and Equipment, net11,795
 11,598
    
Other Noncurrent Assets 
  
Regulatory assets796
 824
Goodwill996
 996
Other intangibles88
 95
Other noncurrent assets71
 78
Total Other Noncurrent Assets1,951
 1,993
    
Total Assets$14,515
 $14,371
 Three Months Ended March 31,
 20222021
Cash Flows from Operating Activities  
Net income$93 $75 
Adjustments to reconcile net income to net cash provided by operating activities  
Depreciation74 66 
Amortization(1)2 
Defined benefit plans - expense— 1 
Deferred income taxes and investment tax credits(4)(1)
Other1 — 
Change in current assets and current liabilities  
Accounts receivable4 (1)
Accounts receivable from affiliates2 (3)
Accounts payable(1)8 
Accounts payable to affiliates(10)(5)
Unbilled revenues10 19 
Fuel, materials and supplies42 28 
Regulatory assets and liabilities, net5 (10)
Taxes payable— 4 
Accrued interest17 18 
Other(6)(17)
Other operating activities  
Defined benefit plans - funding— (1)
Expenditures for asset retirement obligations(6)(6)
Other assets(1)— 
Other liabilities(1)4 
Net cash provided by operating activities218 181 
Cash Flows from Investing Activities  
Expenditures for property, plant and equipment(99)(111)
Net increase in notes receivable with affiliates(4)— 
Net cash used in investing activities(103)(111)
Cash Flows from Financing Activities  
Net decrease in notes payable to affiliates(324)— 
Net increase in short-term debt284 31 
Retirement of commercial paper— (41)
Payment of common stock dividends to parent(75)(60)
Net cash used in financing activities(115)(70)
Net Increase (Decrease) in Cash and Cash Equivalents— — 
Cash and Cash Equivalents at Beginning of Period9 7 
Cash and Cash Equivalents at End of Period$9 $7 
Supplemental Disclosure of Cash Flow Information
Significant non-cash transactions:
Accrued expenditures for property, plant and equipment at March 31,$30 $46 
 
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

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CONDENSED CONSOLIDATED BALANCE SHEETS
LG&E and KU Energy LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)
 September 30,
2017		 December 31,
2016
Liabilities and Equity 
  
    
Current Liabilities 
  
Short-term debt$190
 $185
Long-term debt due within one year98
 194
Notes payable with affiliate159
 163
Accounts payable283
 251
Accounts payable to affiliates8
 6
Customer deposits57
 56
Taxes52
 39
Price risk management liabilities5
 4
Regulatory liabilities15
 18
Interest73
 32
Asset retirement obligations94
 60
Other current liabilities125
 119
Total Current Liabilities1,159
 1,127
    
Long-term Debt   
    
Long-term debt4,570
 4,471
Long-term debt to affiliate400
 400
Total Long-term Debt4,970
 4,871
    
Deferred Credits and Other Noncurrent Liabilities 
  
Deferred income taxes1,909
 1,735
Investment tax credits130
 132
Accrued pension obligations345
 350
Asset retirement obligations261
 373
Regulatory liabilities873
 899
Price risk management liabilities24
 27
Other deferred credits and noncurrent liabilities178
 190
Total Deferred Credits and Other Noncurrent Liabilities3,720
 3,706
    
Commitments and Contingent Liabilities (Notes 6 and 9)

 

    
Member's Equity4,666
 4,667
    
Total Liabilities and Equity$14,515
 $14,371
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.


Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
LG&E and KU Energy LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)

 
Member's
Equity
December 31, 2016$4,667
Net income322
Distributions to member(316)
Other comprehensive income(7)
September 30, 2017$4,666
  
December 31, 2015$4,517
Net income337
Contributions from member37
Distributions to member(224)
Other comprehensive income4
September 30, 2016$4,671
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

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CONDENSED STATEMENTS OF INCOME
Louisville Gas and Electric Company
(Unaudited)
(Millions of Dollars)

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Operating Revenues       
Retail and wholesale$361
 $366
 $1,055
 $1,058
Electric revenue from affiliate2
 2
 23
 19
Total Operating Revenues363
 368
 1,078
 1,077
        
Operating Expenses       
Operation       
Fuel76
 86
 225
 233
Energy purchases18
 19
 107
 104
Energy purchases from affiliate3
 5
 8
 10
Other operation and maintenance89
 85
 262
 264
Depreciation47
 43
 136
 126
Taxes, other than income8
 9
 25
 24
Total Operating Expenses241
 247
 763
 761
        
Operating Income122
 121
 315
 316
        
Other Income (Expense) - net(1) (1) (2) (6)
        
Interest Expense17
 18
 53
 53
        
Income Before Income Taxes104
 102
 260
 257
        
Income Taxes39
 39
 99
 98
        
Net Income (a)$65
 $63
 $161
 $159
(a)Net income equals comprehensive income.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.


Table of Contents

CONDENSED STATEMENTS OF CASH FLOWS
Louisville Gas and Electric Company
(Unaudited)
(Millions of Dollars)

 Nine Months Ended September 30,
 2017 2016
Cash Flows from Operating Activities 
  
Net income$161
 $159
Adjustments to reconcile net income to net cash provided by operating activities 
  
Depreciation136
 126
Amortization11
 10
Defined benefit plans - expense5
 6
Deferred income taxes and investment tax credits96
 117
Change in current assets and current liabilities 
  
Accounts receivable12
 (17)
Accounts receivable from affiliates6
 (11)
Accounts payable(12) 24
Accounts payable to affiliates(10) (6)
Unbilled revenues11
 10
Fuel, materials and supplies6
 11
Taxes payable(15) —
Accrued interest12
 13
Other6
 1
Other operating activities 
  
Defined benefit plans - funding(3) (45)
Expenditures for asset retirement obligations(13) (11)
Other assets5
 (3)
Other liabilities4
 (1)
Net cash provided by operating activities418
 383
Cash Flows from Investing Activities 
  
Expenditures for property, plant and equipment(293) (343)
Net cash used in investing activities(293) (343)
Cash Flows from Financing Activities 
  
Net increase in notes payable with affiliates10
 —
Issuance of long-term debt60
 125
Retirement of long-term debt(60) (125)
Net increase (decrease) in short-term debt21
 (14)
Debt issuance and credit facility costs(2) (1)
Payment of common stock dividends to parent(150) (87)
Contributions from parent—
 47
Net cash used in financing activities(121) (55)
Net Increase (Decrease) in Cash and Cash Equivalents4
 (15)
Cash and Cash Equivalents at Beginning of Period5
 19
Cash and Cash Equivalents at End of Period$9
 $4
    
Supplemental Disclosure of Cash Flow Information   
Significant non-cash transactions:   
Accrued expenditures for property, plant and equipment at September 30,$83
 $46
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

Table of Contents

CONDENSED BALANCE SHEETS
Louisville Gas and Electric Company
(Unaudited)
(Millions of Dollars, shares in thousands)

September 30,
2017		 December 31,
2016		 March 31,
2022		December 31,
2021
Assets 
  
Assets  
   
Current Assets 
  
Current Assets  
Cash and cash equivalents$9
 $5
Cash and cash equivalents$9 $9 
Accounts receivable (less reserve: 2017, $1; 2016, $2) 
  
Accounts receivable (less reserve: 2022, $3; 2021, $3)Accounts receivable (less reserve: 2022, $3; 2021, $3)  
Customer96
 109
Customer133 130 
Other14
 11
Other12 25 
Unbilled revenues (less reserve: 2022, $0; 2021, $0)Unbilled revenues (less reserve: 2022, $0; 2021, $0)70 80 
Accounts receivable from affiliates22
 28
Accounts receivable from affiliates29 31 
Unbilled revenues64
 75
Notes receivable from affiliatesNotes receivable from affiliates4 — 
Fuel, materials and supplies137
 143
Fuel, materials and supplies95 137 
Prepayments15
 12
Prepayments14 14 
Regulatory assets11
 9
Regulatory assets31 33 
Other current assets2
 1
Other current assets— 2 
Total Current Assets370
 393
Total Current Assets397 461 
   
Property, Plant and Equipment 
  
Property, Plant and Equipment  
Regulated utility plant5,447
 5,357
Regulated utility plant7,245 7,192 
Less: accumulated depreciation - regulated utility plant575
 498
Less: accumulated depreciation - regulated utility plant1,208 1,172 
Regulated utility plant, net4,872
 4,859
Regulated utility plant, net6,037 6,020 
Construction work in progress279
 133
Construction work in progress226 242 
Property, Plant and Equipment, net5,151
 4,992
Property, Plant and Equipment, net6,263 6,262 
   
Other Noncurrent Assets 
  
Other Noncurrent Assets  
Regulatory assets413
 450
Regulatory assets329 337 
Goodwill389
 389
Goodwill389 389 
Other intangibles54
 59
Other intangibles28 30 
Other noncurrent assets13
 17
Other noncurrent assets118 113 
Total Other Noncurrent Assets869
 915
Total Other Noncurrent Assets864 869 
   
Total Assets$6,390
 $6,300
Total Assets$7,524 $7,592 
 
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

18
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CONDENSED BALANCE SHEETS
Louisville Gas and Electric Company
(Unaudited)
(Millions of Dollars, shares in thousands)

September 30,
2017		 December 31,
2016		 March 31,
2022		December 31,
2021
Liabilities and Equity 
  
Liabilities and Equity  
   
Current Liabilities 
  
Current Liabilities  
Short-term debt$190
 $169
Short-term debt$353 $69 
Long-term debt due within one year98
 194
Notes payable with affiliate10
 —
Notes payable to affiliatesNotes payable to affiliates— 324 
Accounts payable166
 148
Accounts payable127 163 
Accounts payable to affiliates17
 26
Accounts payable to affiliates21 31 
Customer deposits27
 27
Customer deposits32 32 
Taxes25
 40
Taxes34 34 
Price risk management liabilities5
 4
Price risk management liabilities1 1 
Regulatory liabilities5
 5
Regulatory liabilities14 21 
Interest23
 11
Interest32 15 
Asset retirement obligations33
 41
Asset retirement obligations10 10 
Other current liabilities46
 36
Other current liabilities30 37 
Total Current Liabilities645
 701
Total Current Liabilities654 737 
   
Long-term Debt1,521
 1,423
Long-term Debt2,006 2,006 
   
Deferred Credits and Other Noncurrent Liabilities 
  
Deferred Credits and Other Noncurrent Liabilities  
Deferred income taxes1,073
 974
Deferred income taxes756 751 
Investment tax credits36
 36
Investment tax credits32 32 
Accrued pension obligations47
 53
Price risk management liabilitiesPrice risk management liabilities13 17 
Asset retirement obligations85
 104
Asset retirement obligations69 74 
Regulatory liabilities388
 419
Regulatory liabilities820 818 
Price risk management liabilities24
 27
Other deferred credits and noncurrent liabilities84
 87
Other deferred credits and noncurrent liabilities77 78 
Total Deferred Credits and Other Noncurrent Liabilities1,737
 1,700
Total Deferred Credits and Other Noncurrent Liabilities1,767 1,770 
   
Commitments and Contingent Liabilities (Notes 6 and 9)

 

Commitments and Contingent Liabilities (Notes 6 and 10)Commitments and Contingent Liabilities (Notes 6 and 10)00
   
Stockholder's Equity 
  
Stockholder's Equity  
Common stock - no par value (a)424
 424
Common stock - no par value (a)424 424 
Additional paid-in capital1,682
 1,682
Additional paid-in capital1,997 1,997 
Earnings reinvested381
 370
Earnings reinvested676 658 
Total Equity2,487
 2,476
Total Equity3,097 3,079 
   
Total Liabilities and Equity$6,390
 $6,300
Total Liabilities and Equity$7,524 $7,592 
 
(a)75,000 shares authorized; 21,294 shares issued and outstanding at September 30, 2017 and December 31, 2016.

(a)75,000 shares authorized; 21,294 shares issued and outstanding at March 31, 2022 and December 31, 2021.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.



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CONDENSED STATEMENTS OF EQUITY
Louisville Gas and Electric Company
(Unaudited)
(Millions of Dollars)

 
Common
stock
shares
outstanding
(a)
 
Common
stock
 Additional
paid-in
capital		 Earnings
reinvested		 Total
December 31, 201621,294
 $424
 $1,682
 $370
 $2,476
Net income

 

 

 161
 161
Cash dividends declared on common stock

 

 

 (150) (150)
September 30, 201721,294
 $424
 $1,682
 $381
 $2,487
          
December 31, 201521,294
 $424
 $1,611
 $295
 $2,330
Net income

 

 

 159
 159
Capital contributions from LKE

 

 47
 

 47
Cash dividends declared on common stock

 

 

 (87) (87)
September 30, 201621,294
 $424
 $1,658
 $367
 $2,449
 Common
stock
shares
outstanding
(a)		Common
stock		Additional
paid-in
capital		Earnings
reinvested		Total
December 31, 202121,294 $424 $1,997 $658 $3,079 
Net income93 93 
Cash dividends declared on common stock(75)(75)
March 31, 202221,294 $424 $1,997 $676 $3,097 
December 31, 202021,294 $424 $1,923 $601 $2,948 
Net income75 75 
Cash dividends declared on common stock(60)(60)
March 31, 202121,294 $424 $1,923 $616 $2,963 
 
(a)Shares in thousands. All common shares of LG&E stock are owned by LKE.

(a)Shares in thousands. All common shares of LG&E stock are owned by LKE.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.



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CONDENSED STATEMENTS OF INCOME
Kentucky Utilities Company
(Unaudited)
(Millions of Dollars)

Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended March 31,
2017 2016 2017 2016 20222021
Operating Revenues       Operating Revenues
Retail and wholesale$457
 $469
 $1,295
 $1,324
Retail and wholesale$523 $464 
Electric revenue from affiliate3
 5
 8
 10
Electric revenue from affiliate2 5 
Total Operating Revenues460
 474
 1,303
 1,334
Total Operating Revenues525 469 
       
Operating Expenses       Operating Expenses  
Operation       Operation  
Fuel126
 141
 351
 374
Fuel131 110 
Energy purchases4
 5
 13
 14
Energy purchases5 5 
Energy purchases from affiliate2
 2
 23
 19
Energy purchases from affiliate12 7 
Other operation and maintenance104
 107
 313
 320
Other operation and maintenance113 115 
Depreciation67
 59
 188
 175
Depreciation95 89 
Taxes, other than income9
 7
 24
 22
Taxes, other than income11 10 
Total Operating Expenses312
 321
 912
 924
Total Operating Expenses367 336 
       
Operating Income148
 153
 391
 410
Operating Income158 133 
       
Other Income (Expense) - net—
 (3) (3) (4)Other Income (Expense) - net— 1 
       
Interest Expense24
 24
 72
 71
Interest Expense27 27 
       
Income Before Income Taxes124
 126
 316
 335
Income Before Income Taxes131 107 
       
Income Taxes47
 48
 120
 128
Income Taxes24 21 
       
Net Income (a)$77
 $78
 $196
 $207
Net Income (a)$107 $86 
 
(a)Net income approximates comprehensive income.

(a)Net income equals comprehensive income.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.



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CONDENSED STATEMENTS OF CASH FLOWS
Kentucky Utilities Company
(Unaudited)
(Millions of Dollars)

 Nine Months Ended September 30,
 2017 2016
Cash Flows from Operating Activities 
  
Net income$196
 $207
Adjustments to reconcile net income to net cash provided by operating activities 
  
Depreciation188
 175
Amortization7
 10
Defined benefit plans - expense3
 4
Deferred income taxes and investment tax credits116
 122
Other—
 (1)
Change in current assets and current liabilities 
  
Accounts receivable6
 (24)
Accounts receivable from affiliates(1) —
Accounts payable(6) (11)
Accounts payable to affiliates(16) 2
Unbilled revenues8
 (4)
Fuel, materials and supplies28
 (4)
Taxes payable(21) —
Accrued interest22
 22
Other(6) 2
Other operating activities 
  
Defined benefit plans - funding(22) (19)
Expenditures for asset retirement obligations(9) (4)
Other assets—
 (4)
Other liabilities8
 (4)
Net cash provided by operating activities501
 469
Cash Flows from Investing Activities 
  
Expenditures for property, plant and equipment(283) (255)
Net increase in notes receivable with affiliates(10) —
Other investing activities4
 1
Net cash used in investing activities(289) (254)
Cash Flows from Financing Activities 
  
Issuance of long-term debt—
 96
Retirement of long-term debt—
 (96)
Net decrease in short-term debt(16) (41)
Debt issuance and credit facility costs(1) (1)
Payment of common stock dividends to parent(171) (197)
Contributions from parent—
 20
Net cash used in financing activities(188) (219)
Net Increase (Decrease) in Cash and Cash Equivalents24
 (4)
Cash and Cash Equivalents at Beginning of Period7
 11
Cash and Cash Equivalents at End of Period$31
 $7
    
Supplemental Disclosure of Cash Flow Information   
Significant non-cash transactions:   
Accrued expenditures for property, plant and equipment at September 30,$58
 $40
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

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CONDENSED BALANCE SHEETS
Kentucky Utilities Company
(Unaudited)
(Millions of Dollars, shares in thousands)

 September 30,
2017		 December 31,
2016
Assets 
  
    
Current Assets 
  
Cash and cash equivalents$31
 $7
Accounts receivable (less reserve: 2017, $1; 2016, $2) 
  
Customer119
 126
Other28
 5
Accounts receivable from affiliates1
 —
Notes receivable from affiliate10
 —
Unbilled revenues87
 95
Fuel, materials and supplies127
 154
Prepayments14
 12
Regulatory assets9
 11
Other current assets6
 3
Total Current Assets432
 413
    
Property, Plant and Equipment 
  
Regulated utility plant7,452
 7,382
Less: accumulated depreciation - regulated utility plant1,110
 965
Regulated utility plant, net6,342
 6,417
Construction work in progress293
 181
Property, Plant and Equipment, net6,635
 6,598
    
Other Noncurrent Assets 
  
Regulatory assets383
 374
Goodwill607
 607
Other intangibles34
 36
Other noncurrent assets55
 57
Total Other Noncurrent Assets1,079
 1,074
    
Total Assets$8,146
 $8,085
 Three Months Ended March 31,
 20222021
Cash Flows from Operating Activities  
Net income$107 $86 
Adjustments to reconcile net income to net cash provided by operating activities  
Depreciation95 89 
Amortization4 2 
Defined benefit plans - expense(1)— 
Deferred income taxes and investment tax credits(3)(2)
Other2 — 
Change in current assets and current liabilities  
Accounts receivable(6)2 
Accounts receivable from affiliates— 1 
Accounts payable— (7)
Accounts payable to affiliates(12)2 
Unbilled revenues4 20 
Fuel, materials and supplies3 15 
Regulatory assets and liabilities, net(3)— 
Taxes payable20 13 
Accrued interest26 25 
Other(5)(17)
Other operating activities  
Expenditures for asset retirement obligations(6)(9)
Other assets(6)— 
Other liabilities— 4 
Net cash provided by operating activities219 224 
Cash Flows from Investing Activities  
Expenditures for property, plant and equipment(129)(127)
Net cash used in investing activities(129)(127)
Cash Flows from Financing Activities  
Net decrease in notes payable to affiliates(290)— 
Net increase (decrease) in short-term debt285 (23)
Retirement of commercial paper— (32)
Payment of common stock dividends to parent(90)(56)
Net cash used in financing activities(95)(111)
Net Decrease in Cash and Cash Equivalents(5)(14)
Cash and Cash Equivalents at Beginning of Period13 22 
Cash and Cash Equivalents at End of Period$8 $8 
Supplemental Disclosure of Cash Flow Information
Significant non-cash transactions:
Accrued expenditures for property, plant and equipment at March 31,$49 $40 
 
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

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CONDENSED BALANCE SHEETS
Kentucky Utilities Company
(Unaudited)
(Millions of Dollars, shares in thousands)

 September 30,
2017		 December 31,
2016
Liabilities and Equity 
  
    
Current Liabilities 
  
Short-term debt$—
 $16
Accounts payable105
 78
Accounts payable to affiliates42
 56
Customer deposits30
 29
Taxes24
 45
Regulatory liabilities10
 13
Interest38
 16
Asset retirement obligations61
 19
Other current liabilities35
 36
Total Current Liabilities345
 308
    
Long-term Debt2,328
 2,327
    
Deferred Credits and Other Noncurrent Liabilities 
  
Deferred income taxes1,289
 1,170
Investment tax credits94
 96
Accrued pension obligations37
 62
Asset retirement obligations176
 269
Regulatory liabilities485
 480
Other deferred credits and noncurrent liabilities43
 50
Total Deferred Credits and Other Noncurrent Liabilities2,124
 2,127
    
Commitments and Contingent Liabilities (Notes 6 and 9)

 

    
Stockholder's Equity 
  
Common stock - no par value (a)308
 308
Additional paid-in capital2,616
 2,616
Accumulated other comprehensive loss—
 (1)
Earnings reinvested425
 400
Total Equity3,349
 3,323
    
Total Liabilities and Equity$8,146
 $8,085
 March 31,
2022		December 31,
2021
Assets  
Current Assets  
Cash and cash equivalents$8 $13 
Accounts receivable (less reserve: 2022, $2; 2021, $3)  
Customer154 144 
Other6 12 
Unbilled revenues (less reserve: 2022, $0; 2021, $0)87 91 
Fuel, materials and supplies121 124 
Prepayments15 15 
Regulatory assets14 9 
Other current assets— 2 
Total Current Assets405 410 
Property, Plant and Equipment  
Regulated utility plant9,272 9,219 
Less: accumulated depreciation - regulated utility plant1,995 1,929 
Regulated utility plant, net7,277 7,290 
Construction work in progress409 378 
Property, Plant and Equipment, net7,686 7,668 
Other Noncurrent Assets  
Regulatory assets415 411 
Goodwill607 607 
Other intangibles22 23 
Other noncurrent assets158 153 
Total Other Noncurrent Assets1,202 1,194 
Total Assets$9,293 $9,272 
 
(a)80,000 shares authorized; 37,818 shares issued and outstanding at September 30, 2017 and December 31, 2016.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.


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CONDENSED STATEMENTS OF EQUITYBALANCE SHEETS
Kentucky Utilities Company
(Unaudited)
(Millions of Dollars)Dollars, shares in thousands)

 Common
stock
shares
outstanding
(a)		 
Common
stock
 Additional
paid-in
capital		 Earnings
reinvested		 
Accumulated
other
comprehensive
loss
 Total
December 31, 201637,818
 $308
 $2,616
 $400
 $(1) $3,323
Net income

 

 

 196
 

 196
Cash dividends declared on common stock

 

 

 (171) 

 (171)
Other comprehensive income

 

 

 

 1
 1
September 30, 201737,818
 $308
 $2,616
 $425
 $—
 $3,349
            
December 31, 201537,818
 $308
 $2,596
 $383
 $—
 $3,287
Capital contributions from LKE

   20
 

 

 20
Net income

 

 

 207
 

 207
Cash dividends declared on common stock

 

 

 (197) 

 (197)
Other comprehensive income (loss)

 

 

 

 (1) (1)
September 30, 201637,818
 $308
 $2,616
 $393
 $(1) $3,316
 March 31,
2022		December 31,
2021
Liabilities and Equity  
Current Liabilities  
Short-term debt$285 $— 
Notes payable to affiliates4 294 
Accounts payable91 108 
Accounts payable to affiliates52 64 
Customer deposits33 32 
Taxes39 19 
Regulatory liabilities7 8 
Interest44 18 
Asset retirement obligations20 22 
Other current liabilities42 47 
Total Current Liabilities617 612 
Long-term Debt2,619 2,618 
Deferred Credits and Other Noncurrent Liabilities  
Deferred income taxes870 865 
Investment tax credits86 87 
Asset retirement obligations82 83 
Regulatory liabilities1,042 1,045 
Other deferred credits and noncurrent liabilities32 34 
Total Deferred Credits and Other Noncurrent Liabilities2,112 2,114 
Commitments and Contingent Liabilities (Notes 6 and 10)00
Stockholder's Equity  
Common stock - no par value (a)308 308 
Additional paid-in capital2,957 2,957 
Earnings reinvested680 663 
Total Equity3,945 3,928 
Total Liabilities and Equity$9,293 $9,272 
 
(a)Shares in thousands. All common shares of KU stock are owned by LKE.

(a)80,000 shares authorized; 37,818 shares issued and outstanding at March 31, 2022 and December 31, 2021.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.



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CONDENSED STATEMENTS OF EQUITY
Kentucky Utilities Company
(Unaudited)
(Millions of Dollars)
 Common
stock
shares
outstanding
(a)		Common
stock		Additional
paid-in
capital		Earnings
reinvested		Total
December 31, 202137,818 $308 $2,957 $663 $3,928 
Net income107 107 
Cash dividends declared on common stock(90)(90)
March 31, 202237,818 $308 $2,957 $680 $3,945 
December 31, 202037,818 $308 $2,857 $617 $3,782 
Net income86 86 
Cash dividends declared on common stock(56)(56)
March 31, 202137,818 $308 $2,857 $647 $3,812 
(a)Shares in thousands. All common shares of KU stock are owned by LKE.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.


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Combined Notes to Condensed Financial Statements (Unaudited)

Index to Combined Notes to Condensed Financial Statements

The notes to the condensed financial statements that follow are a combined presentation. The following list indicates the Registrants to which the notes apply:
Registrant
PPLPPL ElectricLG&EKU
1. Interim Financial Statementsxxxx
2. Segment and Related Informationxxxx
3. Revenue from Contracts with Customersxxxx
4. Earnings Per Sharex
5. Income Taxesxxxx
6. Utility Rate Regulationxxxx
7. Financing Activitiesxxxx
8. Acquisitions, Development and Divestituresx
9. Defined Benefitsxxxx
10. Commitments and Contingenciesxxxx
11. Related Party Transactionsxxx
12. Other Income (Expense) - netxx
13. Fair Value Measurementsxxxx
14. Derivative Instruments and Hedging Activitiesxxxx
15. Asset Retirement Obligationsxxx
16. Accumulated Other Comprehensive Income (Loss)x

1. Interim Financial Statements
 
(All Registrants)
 
Capitalized terms and abbreviations appearing in the unaudited combined notes to condensed financial statements are defined in the glossary. Dollars are in millions, except per share data, unless otherwise noted. The specific Registrant to which disclosures are applicable is identified in parenthetical headings in italics above the applicable disclosure or within the applicable disclosure for each Registrants'Registrant's related activities and disclosures. Within combined disclosures, amounts are disclosed for any Registrant when significant.
 
The accompanying unaudited condensed financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all of the information and footnote disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation in accordance with GAAP are reflected in the condensed financial statements. All adjustments are of a normal recurring nature, except as otherwise disclosed. Each Registrant's Balance Sheet at December 31, 20162021 is derived from that Registrant's 20162021 audited Balance Sheet. The financial statements and notes thereto should be read in conjunction with the financial statements and notes contained in each Registrant's 20162021 Form 10-K. The results of operations for the three and nine months ended September 30, 2017March 31, 2022 are not necessarily indicative of the results to be expected for the full year ending December 31, 20172022 or other future periods, because results for interim periods can be disproportionately influenced by various factors, developments and seasonal variations.


(PPL)

On March 17, 2021, PPL WPD Limited entered into a share purchase agreement to sell PPL's U.K. utility business, which prior to its sale substantially represented PPL's U.K. Regulated segment, to a subsidiary of National Grid plc. The sale was completed on June 14, 2021. The results of operations of the U.K. utility business are classified as Discontinued Operations on PPL's Statements of Income for the three months ended March 31, 2021. PPL has elected to separately report the cash flows of
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continuing and discontinued operations on the Statements of Cash Flows for the three months ended March 31, 2021. Unless otherwise noted, the notes to these financial statements exclude amounts related to discontinued operations. See Note 8 for additional information.

2. SummarySegment and Related Information

(PPL)

See Note 2 in PPL's 2021 Form 10-K for a discussion of Significant Accounting Policiesreportable segments and related information.

Income Statement data for the segments and reconciliation to PPL's consolidated results for the periods ended March 31 are as follows:
 Three Months
 20222021
Operating Revenues from external customers  
Kentucky Regulated$1,004 $885 
Pennsylvania Regulated775 605 
Corporate and Other3 8 
Total$1,782 $1,498 
Net Income (Loss)  
Kentucky Regulated$179 $146 
Pennsylvania Regulated143 113 
Corporate and Other(49)(56)
Discontinued Operations (a)— (2,043)
Total$273 $(1,840)

(a)See Note 8 for additional information on the sale of the U.K. utility business.

The following provides Balance Sheet data for the segments and reconciliation to PPL's consolidated Balance Sheets as of:
March 31,
2022		December 31,
2021
Assets  
Kentucky Regulated$16,317 $16,360 
Pennsylvania Regulated13,374 13,336 
Corporate and Other (a)4,416 3,527 
Total$34,107 $33,223 

(a)Primarily consists of unallocated items, including cash, PP&E, goodwill, the elimination of inter-segment transactions as well as the assets of Safari Energy.

(PPL Electric, LG&E and KU)

PPL Electric has two operating segments, distribution and transmission, which are aggregated into a single reportable segment. LG&E and KU are individually single operating and reportable segments.

3. Revenue from Contracts with Customers

(All Registrants)

See Note 3 in the Registrants' 2021 Form 10-K for a discussion of the principal activities from which the Registrants and PPL’s segments generate their revenues.

The following tables reconcile "Operating Revenues" included in each Registrant's Statement of Income with revenues generated from contracts with customers for the periods ended March 31.
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2022 Three Months
PPLPPL ElectricLG&EKU
Operating Revenues (a)$1,782 $775 $493 $525 
   Revenues derived from:
Alternative revenue programs (b)(27)(36)6 3 
Other (c)(7)(4)(2)(1)
Revenues from Contracts with Customers$1,748 $735 $497 $527 
2021 Three Months
PPLPPL ElectricLG&EKU
Operating Revenues (a)$1,498 $605 $428 $469 
   Revenues derived from:
Alternative revenue programs (b)24 22 — 2 
Other (c)(6)— (3)(3)
Revenues from Contracts with Customers$1,516 $627 $425 $468 

(a)PPL Electric represents revenues from external customers reported by the Pennsylvania Regulated segment and LG&E and KU, net of intercompany power sales and transmission revenues, represent revenues from external customers reported by the Kentucky Regulated segment. See Note 2 for additional information.
(b)Alternative revenue programs include the transmission formula rate for PPL Electric, the ECR and DSM programs for LG&E and KU, the GLT program and gas supply clause incentive mechanism for LG&E, and the generation formula rate for KU. This line item shows the over/under collection of these rate mechanisms with over-collections of revenue shown as positive amounts in the table above and under-collections shown as negative amounts. For PPL Electric, the three months ended March 31, 2022, includes $44 million related to the amortization of the regulatory liability recorded in 2021 for a reduction in the transmission formula rate return on equity that is reflected in rates in 2022. The three months ended March 31, 2021, included a $27 million revenue reduction recorded as a result of the challenge to the transmission formula rate return on equity. See Note 6 for additional information.
(c)Represents additional revenues outside the scope of revenues from contracts with customers, such as lease and other miscellaneous revenues.

The following tables show revenues from contracts with customers disaggregated by customer class for the periods ended March 31.
2022 Three Months
ResidentialCommercialIndustrialOther (a)Wholesale - municipalityWholesale - other (b)TransmissionRevenues from Contracts with Customers
PPL
PA Regulated$453 $108 $15 $12 $— $— $147 $735 
KY Regulated478 270 154 83 6 19 — 1,010 
Corp and Other— — — 3 — — — 3 
Total PPL$931 $378 $169 $98 $6 $19 $147 $1,748 
PPL Electric$453 $108 $15 $12 $— $— $147 $735 
LG&E$246 $146 $45 $39 $— $21 $— $497 
KU$232 $124 $109 $44 $6 $12 $— $527 
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2021 Three Months
ResidentialCommercialIndustrialOther (a)Wholesale - municipalityWholesale - other (b)TransmissionRevenues from Contracts with Customers
PPL
PA Regulated$361 $82 $12 $12 $— $— $160 $627 
KY Regulated413 231 140 71 6 20 — 881 
Corp and Other— — — 8 — — — 8 
Total PPL$774 $313 $152 $91 $6 $20 $160 $1,516 
PPL Electric$361 $82 $12 $12 $— $— $160 $627 
LG&E$205 $121 $46 $34 $— $19 $— $425 
KU$208 $110 $94 $37 $6 $13 $— $468 

(a)Primarily includes revenues from pole attachments, street lighting, other public authorities and other non-core businesses.
(b)Includes wholesale power and transmission revenues. LG&E and KU amounts include intercompany power sales and transmission revenues, which are eliminated upon consolidation at the Kentucky Regulated segment.

As discussed in Note 2 in PPL's 2021 Form 10-K, PPL segments its business by geographic location. Revenues from external customers for each segment/geographic location are reconciled to revenues from contracts with customers in the footnotes to the tables above.

Contract receivables from customers are primarily included in "Accounts receivable - Customer", "Unbilled revenues", and "Other noncurrent assets" on the Balance Sheets.

The following table shows the accounts receivable and unbilled revenues balances that were impaired for the periods ended March 31.
Three Months
20222021
PPL$7 $2 
PPL Electric5 1 
LG&E1 — 
KU1 1 

The following table shows the balances and certain activity of contract liabilities resulting from contracts with customers.
PPLPPL ElectricLG&EKU
Contract liabilities at December 31, 2021$42 $25 $6 $6 
Contract liabilities at March 31, 202233 17 4 5 
Revenue recognized during the three months ended March 31, 2022 that was included in the contract liability balance at December 31, 202122 10 6 6 
Contract liabilities at December 31, 2020$40 $23 $5 $6 
Contract liabilities at March 31, 202133 16 5 5 
Revenue recognized during the three months ended March 31, 2021 that was included in the contract liability balance at December 31, 202021 9 5 6 

Contract liabilities result from recording contractual billings in advance for customer attachments to the Registrants' infrastructure and payments received in excess of revenues earned to date. Advanced billings for customer attachments are generally recognized as revenue ratably over the quarterly billing period. Payments received in excess of revenues earned to date are recognized as revenue as services are delivered in subsequent periods.

At March 31, 2022, PPL had $46 million of performance obligations attributable to Corporate and Other that have not been satisfied. Of this amount, PPL expects to recognize approximately $30 million within the next 12 months.

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4. Earnings Per Share
 
(PPL)
Basic EPS is computed by dividing income available to PPL common shareowners by the weighted-average number of common shares outstanding during the applicable period. Diluted EPS is computed by dividing income available to PPL common shareowners by the weighted-average number of common shares outstanding, increased by incremental shares that would be outstanding if potentially dilutive share-based payment awards were converted to common shares as calculated using the Two-Class Method or Treasury Stock Method.
Reconciliations of the amounts of income and shares of PPL common stock (in thousands) for the periods ended March 31 used in the EPS calculation are:
 Three Months
 20222021
Income (Numerator)  
Income from continuing operations after income taxes available to PPL common shareowners - Basic and Diluted$273 $203 
Loss from discontinued operations (net of income taxes) available to PPL common shareowners - Basic and Diluted$— $(2,043)
Net income (loss) available to PPL common shareowners - Basic and Diluted$273 $(1,840)
Shares of Common Stock (Denominator)  
Weighted-average shares - Basic EPS735,503 769,159 
Add: Dilutive share-based payment awards681 1,551 
Weighted-average shares - Diluted EPS736,184 770,710 
Basic and Diluted EPS  
Available to PPL common shareowners:
Income from continuing operations after income taxes$0.37 $0.26 
Loss from discontinued operations (net of income taxes)— (2.65)
Net Income (Loss) available to PPL common shareowners$0.37 $(2.39)

For the periods ended March 31, PPL issued common stock related to stock-based compensation plans as follows (in thousands):
 Three Months
 20222021
Stock-based compensation plans124 520 

See Note 7 for common stock repurchased under an authorized share repurchase program.

For the periods ended March 31, the following shares (in thousands) were excluded from the computations of diluted EPS because the effect would have been antidilutive.
 Three Months
20222021
Stock-based compensation awards154 233 
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5. Income Taxes

Reconciliations of income tax expense (benefit) for the periods ended March 31 are as follows.
(PPL)
Three Months
20222021
Federal income tax on Income from Continuing Operations Before Income Taxes at statutory tax rate - 21%$73 $55 
Increase (decrease) due to:  
State income taxes, net of federal income tax benefit21 12 
Valuation allowance adjustments3 8 
Amortization of investment tax credit including deferred taxes on basis adjustment(3)(1)
Depreciation and other items not normalized(3)(2)
Amortization of excess deferred federal and state income taxes(18)(12)
Other1 (1)
Total increase (decrease)1 4 
Total income tax expense (benefit)$74 $59 

(PPL Electric)  
 Three Months
 20222021
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%$41 $32 
Increase (decrease) due to:  
State income taxes, net of federal income tax benefit16 12 
Depreciation and other items not normalized(3)(2)
Amortization of excess deferred federal income taxes(3)(3)
Other(1)(2)
Total increase (decrease)9 5 
Total income tax expense (benefit)$50 $37 

(LG&E)  
 Three Months
 20222021
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%$24 $20 
Increase (decrease) due to:  
State income taxes, net of federal income tax benefit4 4 
Amortization of excess deferred federal and state income taxes(7)(3)
Other(2)(2)
Total increase (decrease)(5)(1)
Total income tax expense (benefit)$19 $19 

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(KU)  
 Three Months
 20222021
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%$28 $22 
Increase (decrease) due to:  
State income taxes, net of federal income tax benefit5 4 
Amortization of excess deferred federal and state income taxes(6)(4)
Other(3)(1)
Total increase (decrease)(4)(1)
Total income tax expense (benefit)$24 $21 

6. Utility Rate Regulation

(All Registrants)

The following table provides information about the regulatory assets and liabilities of cost-based rate-regulated utility operations.
PPLPPL Electric
March 31,
2022		December 31,
2021		March 31,
2022		December 31,
2021
Current Regulatory Assets:    
Gas supply clause$22 $21 $— $— 
Smart meter rider7 11 7 11 
Fuel adjustment clause15 11 — — 
Other14 21 6 11 
Total current regulatory assets (a)$58 $64 $13 $22 
Noncurrent Regulatory Assets:    
Defined benefit plans$509 $523 $248 $256 
Plant outage costs51 54 — — 
Storm costs12 11 — — 
Unamortized loss on debt23 24 3 4 
Interest rate swaps14 18 — — 
Terminated interest rate swaps68 70 — — 
Accumulated cost of removal of utility plant224 228 224 228 
AROs302 302 — — 
Other16 6 — — 
Total noncurrent regulatory assets$1,219 $1,236 $475 $488 
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PPLPPL Electric
March 31,
2022		December 31,
2021		March 31,
2022		December 31,
2021
Current Regulatory Liabilities:    
Generation supply charge$9 $10 $9 $10 
Transmission service charge23 21 23 21 
Universal service rider4 17 4 17 
TCJA customer refund19 22 19 22 
Act 129 compliance rider15 10 15 10 
Transmission formula rate return on equity (b)30 73 30 73 
Economic relief billing credit13 27 — — 
Other9 2 1 — 
Total current regulatory liabilities$122 $182 $101 $153 
Noncurrent Regulatory Liabilities:    
Accumulated cost of removal of utility plant$647 $639 $— $— 
Power purchase agreement - OVEC33 35 — — 
Net deferred taxes1,574 1,591 523 531 
Defined benefit plans101 95 32 28 
Terminated interest rate swaps62 62 — — 
Total noncurrent regulatory liabilities$2,417 $2,422 $555 $559 

 LG&EKU
March 31,
2022		December 31,
2021		March 31,
2022		December 31,
2021
Current Regulatory Assets:    
Gas supply clause$22 $21 $— $— 
Gas line tracker— 3 — — 
Generation formula rate— — 1 2 
Fuel adjustment clause4 4 11 7 
Other5 5 2 — 
Total current regulatory assets$31 $33 $14 $9 
Noncurrent Regulatory Assets:    
Defined benefit plans$160 $164 $101 $103 
Storm costs8 8 4 3 
Unamortized loss on debt12 12 8 8 
Interest rate swaps14 18 — — 
Terminated interest rate swaps40 41 28 29 
AROs75 75 227 227 
Plant outage costs14 15 37 39 
Other6 4 10 2 
Total noncurrent regulatory assets$329 $337 $415 $411 

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LG&EKU
March 31,
2022		December 31,
2021		March 31,
2022		December 31,
2021
Current Regulatory Liabilities:    
Demand side management$— $— $3 $— 
Gas line tracker3 — — — 
Economic relief billing credit10 21 3 6 
Other1 — 1 2 
Total current regulatory liabilities$14 $21 $7 $8 
Noncurrent Regulatory Liabilities:    
Accumulated cost of removal of utility plant$268 $262 $379 $377 
Power purchase agreement - OVEC23 24 10 11 
Net deferred taxes487 491 564 569 
Defined benefit plans11 10 58 57 
Terminated interest rate swaps31 31 31 31 
Total noncurrent regulatory liabilities$820 $818 $1,042 $1,045 
(a)For PPL, these amounts are included in "Other current assets" on the Balance Sheets.
(b)See “Regulatory Matters - Federal Matters - PPL Electric Transmission Formula Rate Return on Equity” below for additional information.

Regulatory Matters

Federal Matters

PPL Electric Transmission Formula Rate Return on Equity (PPL and PPL Electric)

In May 2020, PP&L Industrial Customer Alliance (PPLICA) filed a complaint with the FERC alleging that PPL Electric’s base return on equity (ROE) used to determine PPL Electric’s formula transmission rate was unjust and unreasonable. In August 2021, PPL Electric entered into a settlement agreement (the Settlement) with PPLICA and all other parties, including intervenors. The following accounting policy disclosures represent updateskey aspects of the Settlement include changes to NotePPL Electric’s base ROE, changes to the equity component of PPL Electric’s capital structure, allowing modification of the current rate year to a calendar year and allowing modification of the current formula rate based on a historic test year to a projected test year. The settlement was approved by the FERC in November 2021. The interim rates reflecting the agreed-to-base ROE in the Settlement were effective December 1, 2021.

In the first quarter of 2021, PPL and PPL Electric recorded a revenue reduction on the Statement of Income of $19 million after-tax representing an estimate of the revenue subject to refund from the date of the complaint through March 31, 2021. Of this amount, $13 million related to 2020.

As of December 31, 2021, PPL and PPL Electric had a regulatory liability on the Balance Sheet of $73 million, which represents revenue subject to refund based on the difference between charges that were calculated using the ROE in each indicated Registrant's 2016 Form 10-Keffect at the time and shouldcharges calculated using the revised ROE provided for in the Settlement, plus interest at the FERC interest rate. During the three months ended March 31, 2022, $44 million of revenue was refunded to customers. The remaining balance will be readrefunded to customers through May 31, 2022.

FERC Transmission Rate Filing (PPL, LG&E and KU)

In 2018, LG&E and KU applied to the FERC requesting elimination of certain on-going credits to a sub-set of transmission customers relating to the 1998 merger of LG&E's and KU's parent entities and the 2006 withdrawal of LG&E and KU from the Midcontinent Independent System Operator, Inc. (MISO), a regional transmission operator and energy market. The application sought termination of LG&E's and KU's commitment to provide certain Kentucky municipalities mitigation for certain horizontal market power concerns arising out of the 1998 LG&E and KU merger and 2006 MISO withdrawal. The amounts at issue are generally waivers or credits granted to a limited number of Kentucky municipalities for either certain LG&E and KU or MISO transmission charges incurred for transmission service received. In 2019, the FERC granted LG&E's and KU's request to remove the ongoing credits, conditioned upon the implementation by LG&E and KU of a transition mechanism for certain existing power supply arrangements, which was subsequently filed, modified, and approved by the FERC in conjunction2020 and 2021. In 2020, LG&E and KU and other parties filed appeals with those disclosures.the D.C. Circuit Court of Appeals regarding FERC's orders on the
35
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elimination of the mitigation and required transition mechanism. Oral arguments in the appellate proceeding occurred on February 14, 2022. LG&E and KU cannot predict the outcome of the respective appellate and FERC proceedings. LG&E and KU currently receive recovery of the waivers and credits provided through other rate mechanisms and such rate recovery would be anticipated to be adjusted in future rate proceedings consistent with potential changes or terminations of the waivers and credits, as such become effective.

Other

Purchase of Receivables Program (PPL and PPL Electric)

In accordance with a PUC-approved purchase of accounts receivable program, PPL Electric purchases certain accounts receivable from alternative electricity suppliers at a discount, which reflects a provision for uncollectible accounts. The alternative electricity suppliers have no continuing involvement or interest in the purchased accounts receivable. Accounts receivable that are acquired are initially recorded at fair value on the date of acquisition. During the three and nine months ended September 30, 2017,March 31, 2022 and 2021, PPL Electric purchased $324$348 million and $968$324 million of accounts receivable from alternative energy suppliers. During the three and nine months ended September 30, 2016, PPL Electric purchased $365 million and $1.0 billion of accounts receivable from alternative electricity suppliers.



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3. Segment and Related Information
(PPL)
See Note 2 in PPL's 2016 Form 10-K for a discussion of reportable segments and related information.

Income Statement data for the segments and reconciliation to PPL's consolidated results for the periods ended September 30 are as follows:
 Three Months Nine Months
 2017 2016 2017 2016
Income Statement Data       
Revenues from external customers       
U.K. Regulated$477
 $515
 $1,547
 $1,673
Kentucky Regulated818
 835
 2,350
 2,382
Pennsylvania Regulated547
 539
 1,620
 1,619
Corporate and Other3
 —
 4
 11
Total$1,845
 $1,889
 $5,521
 $5,685
        
Net Income 
  
  
  
U.K. Regulated (a)$126
 $281
 $560
 $915
Kentucky Regulated125
 126
 299
 314
Pennsylvania Regulated95
 91
 251
 263
Corporate and Other9
 (25) (60) (55)
Total$355
 $473
 $1,050
 $1,437

(a)Includes unrealized gains and losses from hedging foreign-currency related economic activity. See Note 13 for additional information.

The following provides Balance Sheet data for the segments and reconciliation to PPL's consolidated results as of:
 September 30,
2017		 December 31,
2016
Balance Sheet Data 
  
Assets 
  
U.K. Regulated (a)$16,052
 $14,537
Kentucky Regulated14,181
 14,037
Pennsylvania Regulated10,323
 9,426
Corporate and Other (b)202
 315
Total$40,758
 $38,315
(a)Includes $11.7 billion and $10.8 billion of net PP&E as of September 30, 2017 and December 31, 2016. WPD is not subject to accounting for the effects of certain types of regulation as prescribed by GAAP.
(b)Primarily consists of unallocated items, including cash, PP&E and the elimination of inter-segment transactions.

(PPL Electric, LKE, LG&E and KU)
PPL Electric has two operating segments that are aggregated into a single reportable segment. LKE, LG&E and KU are individually single operating and reportable segments.

4. Earnings Per Share
(PPL)
Basic EPS is computed by dividing income available to PPL common shareowners by the weighted-average number of common shares outstanding during the applicable period. Diluted EPS is computed by dividing income available to PPL common shareowners by the weighted-average number of common shares outstanding, increased by incremental shares that would be outstanding if potentially dilutive non-participating securities were converted to common shares as calculated using the Treasury Stock Method. Incremental non-participating securities that have a dilutive impact are detailed in the table below.

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Reconciliations of the amounts of income and shares of PPL common stock (in thousands) for the periods ended September 30 used in the EPS calculation are:
 Three Months Nine Months
 2017 2016 2017 2016
Income (Numerator) 
  
  
  
Net income$355
 $473
 $1,050
 $1,437
Less amounts allocated to participating securities1
 1
 2
 4
Net income available to PPL common shareowners - Basic and Diluted$354
 $472
 $1,048
 $1,433
        
Shares of Common Stock (Denominator) 
  
  
  
Weighted-average shares - Basic EPS686,563
 678,114
 683,783
 676,905
Add incremental non-participating securities: 
  
  
  
Share-based payment awards2,183
 2,234
 2,298
 3,064
Weighted-average shares - Diluted EPS688,746
 680,348
 686,081
 679,969
        
Basic EPS 
  
  
  
Net Income available to PPL common shareowners$0.52
 $0.70
 $1.53
 $2.12
        
Diluted EPS 
  
  
  
Net Income available to PPL common shareowners$0.51
 $0.69
 $1.53
 $2.11
For the periods ended September 30, PPL issued common stock related to stock-based compensation plans and the DRIP as follows (in thousands):
 Three Months Nine Months
 2017 2016 2017 2016
Stock-based compensation plans (a)256
 248
 1,707
 3,168
DRIP355
 761
 1,169
 1,533
(a)Includes stock options exercised, vesting of performance units, vesting of restricted stock and restricted stock units and conversion of stock units granted to directors.

See Note 7 for additional information on common stock issued under the ATM Program.

For the periods ended September 30, the following shares (in thousands) were excluded from the computations of diluted EPS because the effect would have been antidilutive.
 Three Months Nine Months
 2017 2016 2017 2016
Stock options696
 696
 696
 696
Performance units—
 316
 —
 210

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5. Income Taxes
Reconciliations of income taxes for the periods ended September 30 are as follows.
(PPL)
 Three Months Nine Months
 2017 2016 2017 2016
Federal income tax on Income Before Income Taxes at statutory tax rate - 35%$165
 $214
 $480
 $681
Increase (decrease) due to: 
  
  
  
State income taxes, net of federal income tax benefit14
 13
 37
 37
Valuation allowance adjustments4
 4
 9
 13
Impact of lower U.K. income tax rates(45) (37) (133) (136)
U.S. income tax on foreign earnings - net of foreign tax credit (a)(8) (1) (24) (3)
Impact of the U.K. Finance Acts (b)(3) (42) (12) (42)
Depreciation not normalized(2) —
 (7) (6)
Interest benefit on U.K. financing entities(4) (4) (12) (13)
Stock-based compensation—
 (1) (7) (12)
Other(5) (7) (10) (9)
Total increase (decrease)(49) (75) (159) (171)
Total income taxes$116
 $139
 $321
 $510

(a)Lower income taxes primarily due to the tax benefit of accelerated pension contributions made in the first quarter of 2017. The related tax benefit is recognized over the annual period as a result of utilizing an estimated annual effective tax rate.
(b)The U.K. Finance Act 2016, enacted in September 2016, reduces the U.K. statutory income tax rate effective April 1, 2020 from 18% to 17%. As a result, PPL reduced its net deferred tax liabilities and recognized a deferred tax benefit during the three and nine months ended September 30, 2016.
(PPL Electric)       
 Three Months Nine Months
 2017 2016 2017 2016
Federal income tax on Income Before Income Taxes at statutory tax rate - 35%$56
 $52
 $144
 $149
Increase (decrease) due to: 
  
  
  
State income taxes, net of federal income tax benefit9
 9
 26
 27
Depreciation not normalized(1) (2) (5) (5)
Stock-based compensation—
 —
 (5) (7)
Other—
 (1) (1) (2)
Total increase (decrease)8
 6
 15
 13
Total income taxes$64
 $58
 $159
 $162
(LKE)         
 Three Months Nine Months
 2017 2016 2017 2016
Federal income tax on Income Before Income Taxes at statutory tax rate - 35%$74
 $74
 $181
 $189
Increase (decrease) due to: 
  
  
  
State income taxes, net of federal income tax benefit8
 8
 19
 20
Amortization of investment tax credit(1) (1) (2) (2)
Stock-based compensation—
 (1) (1) (2)
Other(2) (1) (2) (3)
Total increase (decrease)5
 5
 14
 13
Total income taxes$79
 $79
 $195
 $202

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(LG&E)       
 Three Months Nine Months
 2017 2016 2017 2016
Federal income tax on Income Before Income Taxes at statutory tax rate - 35%$36
 $36
 $91
 $90
Increase (decrease) due to: 
  
  
  
State income taxes, net of federal income tax benefit4
 4
 10
 10
Other(1) (1) (2) (2)
Total increase (decrease)3
 3
 8
 8
Total income taxes$39
 $39
 $99
 $98
(KU)       
 Three Months Nine Months
 2017 2016 2017 2016
Federal income tax on Income Before Income Taxes at statutory tax rate - 35%$43
 $44
 $111
 $117
Increase (decrease) due to: 
  
  
  
State income taxes, net of federal income tax benefit5
 5
 11
 12
Other(1) (1) (2) (1)
Total increase (decrease)4
 4
 9
 11
Total income taxes$47
 $48
 $120
 $128

6. Utility Rate Regulation
(All Registrants)
The following table provides information about the regulatory assets and liabilities of cost-based rate-regulated utility operations.
 PPL PPL Electric
 September 30,
2017		 December 31,
2016		 September 30,
2017		 December 31,
2016
Current Regulatory Assets:       
Environmental cost recovery$4
 $6
 $—
 $—
      Generation formula rate8
 11
 —
 —
Transmission service charge—
 7
 —
 7
Gas supply clause6
 3
 —
 —
Smart meter rider12
 6
 12
 6
Storm costs1
 5
 1
 5
Other3
 1
 1
 1
Total current regulatory assets (a)$34
 $39
 $14
 $19
        
Noncurrent Regulatory Assets:       
Defined benefit plans$908
 $947
 $530
 $549
Taxes recoverable through future rates347
 340
 347
 340
Storm costs37
 57
 —
 9
Unamortized loss on debt55
 61
 30
 36
Interest rate swaps29
 31
 —
 —
Terminated interest rate swaps93
 98
 —
 —
Accumulated cost of removal of utility plant166
 159
 166
 159
AROs224
 211
 —
 —
Other10
 14
 —
 1
Total noncurrent regulatory assets$1,869
 $1,918
 $1,073
 $1,094

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 PPL PPL Electric
 September 30,
2017		 December 31,
2016		 September 30,
2017		 December 31,
2016
Current Regulatory Liabilities:       
Generation supply charge$29
 $23
 $29
 $23
Transmission service charge6
 —
 6
 —
Universal service rider19
 14
 19
 14
Transmission formula rate4
 15
 4
 15
Fuel adjustment clause11
 11
 —
 —
Act 129 compliance rider7
 17
 7
 17
Storm damage expense7
 13
 7
 13
Other4
 8
 —
 1
Total current regulatory liabilities$87
 $101
 $72
 $83
        
Noncurrent Regulatory Liabilities:       
Accumulated cost of removal of utility plant$678
 $700
 $—
 $—
Power purchase agreement - OVEC (b)69
 75
 —
 —
Net deferred tax assets21
 23
 —
 —
Defined benefit plans27
 23
 —
 —
Terminated interest rate swaps74
 78
 —
 —
Other4
 —
 —
 —
Total noncurrent regulatory liabilities$873
 $899
 $—
 $—
 LKE LG&E KU
 September 30,
2017		 December 31,
2016		 September 30,
2017		 December 31,
2016		 September 30,
2017		 December 31,
2016
Current Regulatory Assets:           
Environmental cost recovery$4
 $6
 $4
 $6
 $—
 $—
      Generation formula rate8
 11
 —
 —
 8
 11
Gas supply clause6
 3
 6
 3
 —
 —
Other2
 —
 1
 —
 1
 —
Total current regulatory assets$20
 $20
 $11
 $9
 $9
 $11
            
Noncurrent Regulatory Assets:           
Defined benefit plans$378
 $398
 $235
 $246
 $143
 $152
Storm costs37
 48
 20
 26
 17
 22
Unamortized loss on debt25
 25
 16
 16
 9
 9
Interest rate swaps29
 31
 29
 31
 —
 —
Terminated interest rate swaps93
 98
 54
 57
 39
 41
AROs224
 211
 57
 70
 167
 141
Plant retirement costs2
 4
 —
 —
 2
 4
Other8
 9
 2
 4
 6
 5
Total noncurrent regulatory assets$796
 $824
 $413
 $450
 $383
 $374

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 LKE LG&E KU
 September 30,
2017		 December 31,
2016		 September 30,
2017		 December 31,
2016		 September 30,
2017		 December 31,
2016
Current Regulatory Liabilities:           
Demand side management$—
 $3
 $—
 $2
 $—
 $1
Fuel adjustment clause11
 11
 3
 2
 8
 9
Other4
 4
 2
 1
 2
 3
Total current regulatory liabilities$15
 $18
 $5
 $5
 $10
 $13
            
Noncurrent Regulatory Liabilities:           
Accumulated cost of removal
of utility plant
$678
 $700
 $281
 $305
 $397
 $395
Power purchase agreement - OVEC (b)69
 75
 48
 52
 21
 23
Net deferred tax assets21
 23
 21
 23
 —
 —
Defined benefit plans27
 23
 —
 —
 27
 23
Terminated interest rate swaps74
 78
 37
 39
 37
 39
Other4
 —
 1
 —
 3
 —
Total noncurrent regulatory liabilities$873
 $899
 $388
 $419
 $485
 $480
(a)For PPL, these amounts are included in "Other current assets" on the Balance Sheets.
(b)This liability was recorded as an offset to an intangible asset that was recorded at fair value upon the acquisition of LKE by PPL.

Regulatory Matters
Kentucky Activities
(PPL, LKE, LG&E and KU)

Rate Case Proceedings

In November 2016, LG&E and KU filed requests with the KPSC for increases in annual base electricity and gas rates. LG&E's and KU's applications included requests for CPCNs for implementing an Advanced Metering System program and a Distribution Automation program.

On April 19, 2017 and May 1, 2017, LG&E and KU, along with all intervening parties to the proceeding, filed with the KPSC, stipulation and recommendation agreements (stipulations) resolving all issues with the parties. Among other things, the proposed stipulations provided for increases in annual revenue requirements associated with KU base electricity rates of $55 million, LG&E base electricity rates of $59 million and LG&E base gas rates of $8 million, reflecting a return on equity of 9.75%, the withdrawal of LG&E's and KU's request for a CPCN for the Advanced Metering System and other changes to the revenue requirements, which dealt primarily with the timing of cost recovery, including depreciation rates.

On June 22, 2017, the KPSC issued orders approving, with certain modifications, the proposed stipulations filed in April and May 2017. On June 29, 2017, the KPSC issued further orders correcting certain revenue requirement and rate calculations and making other technical corrections to the June 22, 2017 orders. The combined KPSC orders modified the stipulations to provide for increases in annual revenue requirements associated with KU base electricity rates of $52 million, LG&E base electricity rates of $57 million and LG&E base gas rates of $7 million, and incorporate an authorized return on equity of 9.7%. Consistent with the stipulations, the orders approved LG&E's and KU's request for implementing a Distribution Automation program and withdrawal of a request for a CPCN for the Advanced Metering System program. The orders also approved new depreciation rates for LG&E and KU that will result in higher depreciation of approximately $15 million ($4 million for LG&E and $11 million for KU) in 2017, exclusive of net additions to PP&E. The orders result in a base electricity rate increase of 3.2% at KU and base electricity and gas rate increases of 5.2% and 2.1% at LG&E. The new base rates and all elements of the orders became effective July 1, 2017. On June 23, 2017, the KPSC also issued orders establishing an authorized return on equity of 9.7% for all of LG&E's and KU's existing approved ECR plans and projects, replacing the prior authorized return on equity levels of 9.8% for CCR projects and 10% for all other ECR approved projects, effective with bills issued in August 2017. The impact of the new authorized return for ECR projects is not expected to be significant in 2017.

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Gas Franchise(LKE and LG&E)
LG&E’s gas franchise agreement for the Louisville/Jefferson County service area expired in March 2016. In August 2016, LG&E and Louisville/Jefferson County entered into a revised franchise agreement with a 5-year term (with renewal options). The franchise fee may be modified at Louisville/Jefferson County's election upon 60 days' notice. However, any franchise fee is capped at 3% of gross receipts for natural gas service within the franchise area. The agreement further provides that if the KPSC determines that the franchise fee should be recovered from LG&E's customers, the franchise fee will revert to zero. In August 2016, LG&E filed an application in a KPSC proceeding to review and rule upon the recoverability of the franchise fee.

In August 2016, Louisville/Jefferson County submitted a motion to dismiss the proceeding filed by LG&E and, in November 2016, filed an amended complaint against LG&E relating to these issues. LG&E submitted KPSC filings to respond to, request dismissal of and consolidate certain claims or aspects of the proceedings. In January 2017, the KPSC issued an order denying Louisville/Jefferson County's motion to dismiss, consolidating the matter with LG&E's filed application and establishing a procedural schedule for the case. On September 28, 2017, oral arguments were heard by the KPSC and a final order is expected in 2017. Until the KPSC issues a final order in this proceeding, LG&E cannot predict the ultimate outcome of this matter but does not anticipate that it will have a material effect on its financial condition or results of operation. LG&E continues to provide gas service to customers in this franchise area at existing rates, but without collecting or remitting a franchise fee.

7. Financing Activities


Credit Arrangements and Short-term Debt


(All Registrants)


The Registrants maintain credit facilities to enhance liquidity, provide credit support and provideact as a backstop to commercial paper programs. For reporting purposes, on a consolidated basis, PPL's arrangements listed below include the credit facilities and commercial paper programs of PPL Electric, LKE, LG&E and KU also apply to PPL and the credit facilities and commercial paper programs of LG&E and KU also apply to LKE.KU. The amounts listed in the borrowed column below are recorded as "Short-term debt" on the Balance Sheets. The following credit facilities were in place at:
 March 31, 2022December 31, 2021
 Expiration
Date		CapacityBorrowedLetters of
Credit
and
Commercial
Paper
Issued		Unused
Capacity		BorrowedLetters of
Credit
and
Commercial
Paper
Issued
PPL       
PPL Capital Funding       
Syndicated Credit FacilityDec. 2026$1,250 $— $347 $903 $— $— 
Bilateral Credit FacilityMar. 2023100 — — 100 — — 
Bilateral Credit FacilityMar. 2023100 — 15 85 — 15 
Total PPL Capital Funding Credit Facilities$1,450 $— $362 $1,088 $— $15 
PPL Electric       
Syndicated Credit FacilityDec. 2026$650 $— $1 $649 $— $1 
LG&E      
Syndicated Credit FacilityDec. 2026$500 $— $353 $147 $— $69 
KU       
Syndicated Credit FacilityDec. 2026$400 $— $285 $115 $— $— 
 September 30, 2017 December 31, 2016
 
Expiration
Date
 Capacity Borrowed 
Letters of
Credit
and
Commercial
Paper
Issued
 
Unused
Capacity
 Borrowed 
Letters of
Credit
and
Commercial
Paper
Issued
PPL   
  
  
  
  
  
U.K.   
  
  
  
  
  
WPD plc   
  
  
  
  
  
Syndicated Credit Facility (a)Jan. 2022 £210
 £155
 £—
 £54
 £160
 £—
Term Loan Facility (b)Dec. 2017 230
 230
 —
 —
 —
 —
WPD (South West)   
  
  
  
  
  
Syndicated Credit Facility (c)July 2021 245
 —
 —
 245
 110
 —
WPD (East Midlands)   
  
  
  
  
  
Syndicated Credit Facility (d)July 2021 300
 116
 —
 184
 9
 —
WPD (West Midlands)   
  
  
  
  
  
Syndicated Credit FacilityJuly 2021 300
 —
 —
 300
 —
 —
Uncommitted Credit Facilities (e)  100
 70
 4
 26
 60
 4
Total U.K. Credit Facilities (f)  £1,385
 £571
 £4
 £809
 £339
 £4

(PPL)

In March 2022, PPL Capital Funding amended and restated its two existing $50 million bilateral credit facilities to extend the termination dates from March 9, 2022 to March 6, 2023 and to increase the borrowing capacity under each facility to $100 million.


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 September 30, 2017 December 31, 2016
 
Expiration
Date
 Capacity Borrowed 
Letters of
Credit
and
Commercial
Paper
Issued
 
Unused
Capacity
 Borrowed 
Letters of
Credit
and
Commercial
Paper
Issued
U.S.             
PPL Capital Funding             
Syndicated Credit FacilityJan. 2022 $950
 $—
 $285
 $665
 $—
 $20
Syndicated Credit FacilityNov. 2018 300
 —
 —
 300
 —
 —
Bilateral Credit FacilityMar. 2018 150
 —
 18
 132
 —
 17
Total PPL Capital Funding Credit Facilities  $1,400
 $—
 $303
 $1,097
 $—
 $37
              
PPL Electric   
  
  
  
  
  
Syndicated Credit FacilityJan. 2022 $650
 $—
 $1
 $649
 $—
 $296
              
LKE   
  
  
  
  
  
Syndicated Credit FacilityOct. 2018 $75
 $—
 $—
 $75
 $—
 $—
              
LG&E   
  
  
  
  
  
Syndicated Credit FacilityJan. 2022 $500
 $—
 $190
 $310
 $—
 $169
              
KU   
  
  
  
  
  
Syndicated Credit FacilityJan. 2022 $400
 $—
 $—
 $400
 $—
 $16
Letter of Credit FacilityOct. 2020 198
 —
 198
 —
 —
 198
Total KU Credit Facilities  $598
 $—
 $198
 $400
 $—
 $214
(a)The amounts borrowed at September 30, 2017 and December 31, 2016 were USD-denominated borrowings of $200 million for both periods, which bore interest at 2.06% and 1.43%. The unused capacity reflects the amount borrowed in GBP of £156 million as of the date borrowed.
(b)The amount borrowed at September 30, 2017 was a GBP-denominated borrowing which equated to $296 million and bore interest at 1.50%.
(c)The amount borrowed at December 31, 2016 was a GBP-denominated borrowing which equated to $137 million and bore interest at 0.66%.
(d)
The amounts borrowed at September 30, 2017 and December 31, 2016 were GBP-denominated borrowings which equated to $150 millionand $11 million and bore interest at 0.65% and 0.66%.
(e)The amounts borrowed at September 30, 2017 and December 31, 2016 were GBP-denominated borrowings which equated to $90 million and $75 million and bore interest at 1.29% and 1.26%.
(f)At September 30, 2017, the unused capacity under the U.K. credit facilities was $1.0 billion.

(PPL, LKE and LG&E)

In October 2017, LG&E entered into a $200 million term loan credit facility expiring in 2019. On October 26, 2017, LG&E borrowed $100 million under this facility bearing interest of 1.74%. The proceeds will be used to repay short-term debt and for general corporate purposes.

(All Registrants)


PPL Capital Funding, PPL Electric, LG&E and KU maintain commercial paper programs to provide an additional financing source to fund short-term liquidity needs, as necessary.needs. Commercial paper issuances, included in "Short-term debt" on the Balance Sheets, are supported by the respective Registrant's Syndicated Credit Facility.credit facilities. The following commercial paper programs were in place at:

 March 31, 2022December 31, 2021
Weighted -
Average
Interest Rate		CapacityCommercial
Paper
Issuances		Unused
Capacity		Weighted -
Average
Interest Rate		Commercial
Paper
Issuances
PPL Capital Funding0.84%$1,350 $347 $1,003 $— 
PPL Electric
650 — 650 — 
LG&E0.72%425 353 72 0.31%69 
KU0.78%350 285 65 — 
Total $2,775 $985 $1,790  $69 
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 September 30, 2017 December 31, 2016
 
Weighted -
Average
Interest Rate
 Capacity 
Commercial
Paper
Issuances
 
Unused
Capacity
 
Weighted -
Average
Interest Rate
 
Commercial
Paper
Issuances
PPL Capital Funding1.41% $1,000
 $285
 $715
 1.10% $20
PPL Electric
 650
 —
 650
 1.05% 295
LG&E1.38% 350
 190
 160
 0.94% 169
KU
 350
 —
 350
 0.87% 16
Total  $2,350
 $475
 $1,875
   $500


(PPL Electric, LKE, LG&E, and KU)


See Note 1011 for discussion of intercompany borrowings.

Long-term Debt


(PPL)


In March 2017, WPD (South Wales) issued £50 million of 0.01% Index-linked Senior Notes due 2029. WPD (South Wales) received proceeds of £53 million, which equated to $64 million at the time of issuance, net of fees and including a premium. The principal amount of the notes is adjusted based on changes in a specified index, as detailed in the terms of the related indenture. The proceeds were used for general corporate purposes.Equity Securities


In September 2017, PPL Capital Funding issued $500 million of 4.00% Senior Notes due 2047. PPL Capital Funding received proceeds of $490 million, net of a discount and underwriting fees, which were used to repay short-term debt obligations and for general corporate purposes.Share Repurchase

(PPL and PPL Electric)

In May 2017, PPL Electric issued $475 million of 3.95% First Mortgage Bonds due 2047. PPL Electric received proceeds of $466 million, net of a discount and underwriting fees, which were used to repay short-term debt incurred primarily for capital expenditures.


In August 2017, the LCIDA remarketed $108 million2021, PPL's Board of Pollution Control Revenue Refunding Bonds (PPL Electric Utilities Corporation Project), Series 2016B due 2027 previously issued on behalfDirectors authorized share repurchases of up to $3 billion of PPL Electric. The bonds were remarketed at a long-term rate and will bear interest at 1.80% through their mandatory purchase date of August 15, 2022.

common shares. In September 2017, the LCIDA remarketed $116 million of Pollution Control Revenue Refunding Bonds (PPL Electric Utilities Corporation Project), Series 2016A due 2029 previously issued on behalf2021, PPL repurchased approximately $1 billion of PPL Electric.common shares. There were no share repurchases during the three months ended March 31, 2022. The bonds were remarketed at a long-term rateactual additional amounts to be repurchased pursuant to this authority will depend on various factors, including PPL’s share price, market conditions, and will bear interest at 1.80% through their mandatorythe determination of other uses for the proceeds from the sale of the U.K. utility business, including for incremental capital expenditures. PPL may purchase date of September 1, 2022.

(PPL, LKE and LG&E)

In April 2017, the Louisville/Jefferson County Metro Government of Kentucky remarketed $128 million of Pollution Control Revenue Bonds, 2003 Series A (Louisville Gas and Electric Company Project) due 2033 previously issuedshares on behalf of LG&E. The bonds were remarketed at a long-term rate and will bear interest at 1.50% through their mandatory purchase date of April 1, 2019.

In June 2017, the County of Trimble, Kentucky issued $60 million of Environmental Facilities Revenue Refunding Bonds, 2017 Series A (Louisville Gas and Electric Company Project) due 2033 on behalf of LG&E. The bonds were issued bearing interest at a rate of 3.75% through their maturity and areeach trading day subject to an optional redemption on or after June 1, 2027. The proceedsmarket conditions and principles of the bonds were used to redeem $60 million of Environmental Facilities Revenue Refunding Bonds, 2007 Series A (Louisville Gas and Electric Company Project) due 2033 previously issued by the County of Trimble, Kentucky on behalf of LG&E.best execution.


In June 2017, the Louisville/Jefferson County Metro Government of Kentucky remarketed $31 million of Environmental Facilities Revenue Refunding Bonds, 2007 Series A (Louisville Gas and Electric Company Project) due 2033 previously issuedDividends

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on behalf of LG&E. The bonds were remarketed at a long-term rate and will bear interest at 1.25% through their mandatory purchase date of June 3, 2019.

In June 2017, the Louisville/Jefferson County Metro Government of Kentucky remarketed $35 million of Environmental Facilities Revenue Refunding Bonds, 2007 Series B (Louisville Gas and Electric Company Project) due 2033 previously issued on behalf of LG&E. The bonds were remarketed at a long-term rate and will bear interest at 1.25% through their mandatory purchase date of June 3, 2019.

(PPL)

ATM Program


In February 2015, PPL entered into two separate equity distribution agreements, pursuant to which PPL may sell, from time to time, up to an aggregate of $500 million of its common stock. For the periods ended September 30, PPL issued the following:
 Three Months Nine Months
 2017 2016 2017 2016
Number of shares (in thousands)2,049
 710
 5,526
 710
Average share price$39.04
 $35.23
 $38.49
 $35.23
Net Proceeds$79
 $25
 $211
 $25

Distributions

In August 2017,2022, PPL declared a quarterly common stock dividend, payable October 2, 2017,April 1, 2022, of 39.520.0 cents per share (equivalent to $1.58 per annum). Future dividends, declared at the discretionshare.

8. Acquisitions, Development and Divestitures

(PPL)

Discontinued Operations

Sale of the BoardU.K. Utility Business

On June 14, 2021, PPL WPD Limited completed the sale of Directors,PPL's utility business to National Grid Holdings One plc (National Grid U.K.), a subsidiary of National Grid plc. The transaction resulted in cash proceeds of $10.7 billion inclusive of foreign currency hedges executed by PPL. PPL received net proceeds, after taxes and fees, of $10.4 billion. PPL WPD Limited agreed to indemnify National Grid U.K. for certain tax related matters. See Note 10 for additional information. PPL has not had and will depend upon future earnings, cash flows, financialnot have any significant involvement with the U.K. utility business since completion of the sale.

Summarized Results of Discontinued Operations

The operations of the U.K. utility business are included in "Loss from Discontinued Operations (net of income taxes)" on the Statement of Income for the period ended March 31, 2021 as follows:
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Three Months
Operating Revenues$634 
Operating Expenses252 
Other Income (Expense) - net66 
Interest Expense (a)93 
Income before income taxes355 
Loss on sale(1,647)
Income taxes751 
Loss from Discontinued Operations (net of income taxes)$(2,043)

(a)No interest from corporate level debt was allocated to discontinued operations.

Acquisitions

Share Purchase Agreement to Acquire Narragansett Electric

On March 17, 2021, PPL and legal requirementsits subsidiary, PPL Energy Holdings, entered into a share purchase agreement (Narragansett SPA) with National Grid USA (National Grid U.S.), a subsidiary of National Grid plc to acquire 100% of the outstanding shares of common stock of Narragansett Electric for approximately $3.8 billion in cash. On May 3, 2021, an Assignment and Assumption Agreement was entered into by PPL, PPL Energy Holdings, PPL Rhode Island Holdings and National Grid U.S. whereby certain interests of PPL Energy Holdings in the Narragansett SPA were assigned to and assumed by PPL Rhode Island Holdings. Pursuant to that Assignment and Assumption Agreement, PPL Rhode Island Holdings became the purchasing entity under the Narragansett SPA. The acquisition is expected to be funded with proceeds from the sale of the U.K. utility business. PPL has agreed to guarantee all obligations of PPL Energy Holdings and PPL Rhode Island Holdings under the Narragansett SPA and the related Assignment and Assumption Agreement.

The closing of the acquisition is subject to the receipt of certain U.S. regulatory approvals or waivers, including, among others, authorizations or waivers from the Rhode Island Division of Public Utilities and Carriers (RIDPU), the Massachusetts Department of Public Utilities (MDPU), the Federal Communications Commission (FCC), and the FERC, as well as review under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other factors.customary conditions to closing, including the execution and delivery of certain related transaction documents.


•The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (HSR) with respect to the acquisition, expired on June 2, 2021. The HSR approval expires on June 2, 2022.
8.•On July 14, 2021, the FCC consented to the Transfer of Control Application for the transfer of control of certain communications licenses held by Narragansett Electric from National Grid U.S. to PPL. The FCC consent was originally set to expire on January 17, 2022, but has been extended for 180 days and is currently set to expire on July 16, 2022.
•On September 23, 2021, the FERC issued an order authorizing, as consistent with the public interest, the disposition of jurisdictional facilities that will result in PPL Rhode Island Holdings, LLC, acquiring 100% of the outstanding shares of common stock of Narragansett Electric.
•On July 16, 2021, the MDPU granted a waiver of jurisdiction with respect to the acquisition, finding that the acquisition would not adversely impact Massachusetts ratepayers. On March 3, 2022, the Massachusetts Supreme Judicial Court (SJC) issued a stay of the waiver order. On March 25, 2022, National Grid and the Massachusetts Attorney General filed with the SJC a Joint Stipulation of Voluntary Dismissal of Appeal and Motion to Lift the Court's March 3, 2022 Order of Stay, and on March 29, 2022, the SJC issued an order dismissing the appeal with prejudice and vacating the stay that it had previously entered.
•On February 23, 2022, the RIDPU issued an order authorizing the disposition of jurisdictional facilities that will result in PPL Rhode Island acquiring 100% of the outstanding shares of common stock of Narragansett Electric. The Rhode Island Attorney General subsequently appealed the RIDPU order approving the transaction to the Rhode Island Superior Court and requested a stay of the RIDPU order pending resolution of the appeal. On April 1, 2022, the Rhode Island Superior Court granted a stay of the RIDPU order, and oral arguments on the appeal were held on April 26, 2022. Favorable resolution of the appeals process in Rhode Island is the final pending approval needed to close the transaction.

PPL Energy Holdings and PPL Rhode Island Holdings and National Grid U.S. have each made customary representations, warranties and covenants in the Narragansett SPA, including, among others, customary indemnification provisions and covenants by National Grid U.S. to conduct the Narragansett Electric business in the ordinary course between the execution of
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the Narragansett SPA and the closing of the acquisition. The consummation of the transaction is not subject to a financing condition.

In connection with the acquisition, National Grid U.S. and one or more of its subsidiaries and Narragansett Electric will enter into a transition services agreement, pursuant to which National Grid U.S. and/or one or more of its affiliates will agree to provide certain transition services to Narragansett Electric and its affiliates to facilitate the operation of Narragansett Electric following the consummation of the acquisition and the transition of operations to PPL, as agreed upon in the Narragansett SPA.

9. Defined Benefits


(PPL, LKE and LG&E)(PPL)


Certain net periodic defined benefit costs are applied to accounts that are further distributed among capital, expense, regulatory assets and regulatory assets,liabilities, including certain costs allocated to applicable subsidiaries for plans sponsored by PPL Services and LKE. Following are the net periodic defined benefit costs (credits) of the plans sponsored by PPL and its subsidiaries LKE and LG&E for the periods ended September 30:March 31:
Pension Benefits
 Three Months
 20222021
PPL
Service cost$12 $13 
Interest cost32 32 
Expected return on plan assets(64)(61)
Amortization of:
Prior service cost2 2 
Actuarial loss12 25 
Net periodic defined benefit costs (credits)$(6)$11 
 Pension Benefits
 Three Months Nine Months
 U.S. U.K. U.S. U.K.
 2017 2016 2017 2016 2017 2016 2017 2016
PPL               
Service cost$17
 $16
 $20
 $17
 $49
 $49
 $57
 $53
Interest cost42
 44
 45
 58
 126
 131
 132
 182
Expected return on plan assets(58) (57) (130) (124) (173) (171) (382) (389)
Amortization of:               
Prior service cost2
 2
 —
 —
 7
 6
 —
 —
Actuarial loss18
 12
 36
 34
 52
 37
 107
 107
Net periodic defined benefit costs (credits) before settlements and special termination benefits21
 17
 (29) (15) 61
 52
 (86) (47)
Settlements (a)7
 3
 —
 —
 7
 3
 —
 —
Special termination benefits (b)—
 —
 —
 —
 1
 —
 —
 —
Net periodic defined benefit costs (credits)$28
 $20
 $(29) $(15) $69
 $55
 $(86) $(47)


 Other Postretirement Benefits
 Three Months
 20222021
PPL
Service cost$1 $2 
Interest cost4 4 
Expected return on plan assets(6)(5)
Net periodic defined benefit costs (credits)$(1)$1 


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(All Registrants)


(a)2017 includes settlement charges of $5 million from the LG&E qualified pension plan and $2 million from the PPL non-qualified pension plan and 2016 includes a settlement charge of $3 million from the PPL non-qualified pension plan. These settlements resulted from lump sum payments that exceeded service cost and interest
The non-service cost components of net periodic pension cost for the year.
(b)Enhanced pension benefits offered to certain PPL Electric bargaining unit employees under a one-time voluntary retirement window offered as part of the new five year IBEW contract ratified in March 2017.
 Pension Benefits
 Three Months Nine Months
 2017 2016 2017 2016
LKE       
Service cost$6
 $6
 $18
 $18
Interest cost17
 18
 51
 53
Expected return on plan assets(23) (23) (69) (68)
Amortization of:       
Prior service cost2
 2
 6
 6
Actuarial loss (a)8
 5
 23
 15
Net periodic defined benefit costs before settlements10
 8
 29
 24
Settlements (b)5
 —
 5
 —
Net periodic defined benefit costs$15
 $8
 $34
 $24
        
LG&E       
Service cost$—
 $—
 $1
 $1
Interest cost3
 4
 9
 11
Expected return on plan assets(5) (5) (16) (15)
Amortization of:       
Prior service cost1
 1
 3
 3
Actuarial loss (a)3
 2
 7
 5
Net periodic defined benefit costs before settlements2
 2
 4
 5
Settlements (b)5
 —
 5
 —
Net periodic defined benefit costs$7
 $2
 $9
 $5

(a)
As a result of treatment approved by the KPSC, the difference between actuarial loss calculated in accordance with LKE's accounting policy and actuarial loss calculated using a 15-year amortization period was $3 million and $8 million for the three and nine months ended September 30, 2017 and $4 million for the nine months ended September 30, 2016. The difference between actuarial loss calculated in accordance with LG&E's accounting policy and actuarial loss calculated using a 15-year amortization period was $1 million and $3 million for the three and nine months ended September 30, 2017 and $1 million for the three months ended September 30, 2016. These differences are recorded as regulatory assets.
(b)Due to the amount of lump sum payment distributions from the LG&E qualified pension plan, a settlement charge of $5 million was incurred. In accordance with existing regulatory accounting treatment, LG&E has maintained the settlement charge in regulatory assets. The amount will be amortized in accordance with existing regulatory practice.
 Other Postretirement Benefits
 Three Months Nine Months
 2017 2016 2017 2016
PPL       
Service cost$2
 $2
 $6
 $6
Interest cost5
 6
 17
 19
Expected return on plan assets(6) (6) (17) (17)
Amortization of prior service cost—
 —
 (1) —
Amortization of actuarial loss1
 1
 1
 1
Net periodic defined benefit costs$2
 $3
 $6
 $9
        

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 Other Postretirement Benefits
 Three Months Nine Months
 2017 2016 2017 2016
LKE       
Service cost$1
 $1
 $3
 $3
Interest cost2
 2
 6
 7
Expected return on plan assets(2) (2) (5) (5)
Amortization of prior service cost1
 1
 1
 2
Net periodic defined benefit costs$2
 $2
 $5
 $7

(PPL Electric, LG&E and KU)

In addition to the specific plan it sponsors, LG&E is allocated costs of defined benefit plans sponsored by LKE. PPL Electric and KU do not directly sponsor any defined benefit plans. PPL Electric is allocated costs of defined benefit plans sponsored by PPL Services and KU is allocated costs of defined benefit plans sponsored by LKE. LG&E and KU are also allocated costs of defined benefit plans from LKS for defined benefit plans sponsored by LKE. See Note 10 for more information on costs allocated to LG&E and KU from LKS. These allocations are based on participation in those plans, which management believes are reasonable. For the periods ended September 30, PPL Services allocated the following net periodic defined benefit costs to PPL Electric,(credits) (interest cost, expected return on plan assets, amortization of prior service cost and LKE allocatedamortization of actuarial gain and loss) are presented in "Other Income (Expense) - net" on the following net periodic defined benefit costs to LG&E and KU:Statements of Income. See Note 12 for additional information.

 Three Months Nine Months
 2017 2016 2017 2016
PPL Electric$6
 $6
 $19
 $17
LG&E3
 2
 8
 7
KU2
 2
 7
 8

Expected Cash Flows - U.K. Pension Plans

(PPL)

For the nine months ended September 30, 2017, WPD contributed $485 million to its U.K. pension plans. These contributions fund all of 2017 contributions and a portion of 2018 contributions. WPD does not expect to make additional contributions in 2017.

9.10. Commitments and Contingencies

Legal Matters

(All Registrants)

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, unless otherwise noted.

WKE Indemnification(
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Talen Litigation(PPL)

Background

In September 2013, one of PPL's former subsidiaries, PPL Montana entered into an agreement to sell its hydroelectric generating facilities. In June 2014, PPL and LKE)
See footnote (e)PPL Energy Supply, the parent company of PPL Montana, entered into various definitive agreements with affiliates of Riverstone to spin off PPL Energy Supply and ultimately combine it with Riverstone's competitive power generation businesses to form a stand-alone company named Talen Energy. In November 2014, after executing the spinoff agreements but prior to the tableclosing of the spinoff transaction, PPL Montana closed the sale of its hydroelectric generating facilities. Subsequently, on June 1, 2015, the spinoff of PPL Energy Supply was completed. Following the spinoff transaction, PPL had no continuing ownership interest in "Guaranteesor control of PPL Energy Supply. In connection with the spinoff transaction, PPL Montana became Talen Montana, LLC (Talen Montana), a subsidiary of Talen Energy. Talen Energy Marketing also became a subsidiary of Talen Energy as a result of the June 2015 spinoff of PPL Energy Supply. Talen Energy has owned and Other Assurances" below for informationoperated both Talen Montana and Talen Energy Marketing since the spinoff. At the time of the spinoff, affiliates of Riverstone acquired a 35% ownership interest in Talen Energy. Riverstone subsequently acquired the remaining interests in Talen Energy in a take private transaction in December 2016.

Talen Montana Retirement Plan and Talen Energy Marketing, LLC, Individually and on an LKE indemnity relating to its former WKE lease, including related legal proceedings.Behalf of All Others Similarly Situated v. PPL Corporation et al.

Cane Run Environmental Claims(PPL, LKEOn October 29, 2018, Talen Montana Retirement Plan and LG&E)
In December 2013, six residents,Talen Energy Marketing filed a putative class action complaint on behalf of themselvescurrent and others similarly situated,contingent creditors of Talen Montana who allegedly suffered harm or allegedly will suffer reasonably foreseeable harm as a result of a November 2014 distribution of proceeds from the sale of then-PPL Montana's hydroelectric generating facilities. The action was filed a class action complaint against LG&E and PPL in the U.S.Sixteenth Judicial District of the State of Montana, Rosebud County, against PPL and certain of its affiliates and current and former officers and directors (Talen Putative Class Action). Plaintiff asserts claims for, among other things, fraudulent transfer, both actual and constructive; recovery against subsequent transferees; civil conspiracy; aiding and abetting tortious conduct; and unjust enrichment.Plaintiff is seeking avoidance of the purportedly fraudulent transfer, unspecified damages, including punitive damages, the imposition of a constructive trust, and other relief. In December 2018, PPL removed the Talen Putative Class Action from the Sixteenth Judicial District of the State of Montana to the United States District Court for the Western District of Kentucky alleging violationsMontana, Billings Division (MT Federal Court). In January 2019, the plaintiff moved to remand the Talen Putative Class Action back to state court, and dismissed without prejudice all current and former PPL Corporation directors from the case. In September 2019, the MT Federal Court granted plaintiff's motion to remand the case back to state court. Although, the PPL defendants petitioned the Ninth Circuit Court of Appeals to grant an appeal of the Clean Air Actremand decision, in November 2019, the Ninth Circuit Court of Appeals denied that request and RCRA. In addition, these plaintiffs assert common law claims of nuisance, trespass and negligence. These plaintiffs seek injunctive relief and civil penalties, plus costs and attorney fees, forin December 2019, Talen Montana Retirement Plan filed a Second Amended Complaint in the alleged statutory violations. Under the common law claims, these plaintiffs seek monetary compensation and punitive damages for property damage and diminished property values

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for a class consisting of residents within four milesSixteenth Judicial District of the Cane Run plant.State of Montana, Rosebud County, which removed Talen Energy Marketing as a plaintiff. In their individual capacities, these plaintiffs sought compensation for alleged adverse health effects. In response toJanuary 2020, PPL defendants filed a motion to dismiss the Second Amended Complaint or, in the alternative, to stay the proceedings pending the resolution of the below mentioned Delaware Action. The Court held a hearing on June 24, 2020 regarding the motions. On September 11, 2020, the Court granted PPL defendants' alternative Motion for a Stay of the proceedings.

PPL Corporation et al. vs. Riverstone Holdings LLC, Talen Energy Corporation et al.

On November 30, 2018, PPL, certain PPL affiliates, and certain current and former officers and directors (PPL plaintiffs) filed a complaint in the Court of Chancery of the State of Delaware seeking various forms of relief against Riverstone, Talen Energy and certain of their affiliates (Delaware Action), in response to and as part of the defense strategy for an action filed by Talen Montana, LLC (the Talen Direct Action, since dismissed) and the Talen Putative Class Action described above (together, the Montana Actions) originally filed in Montana state court in October 2018. In the complaint, the PPL plaintiffs ask the Delaware Court of Chancery for declaratory and LG&E,injunctive relief. This includes a declaratory judgment that, under the separation agreement governing the spinoff of PPL Energy Supply, all related claims that arise must be heard in July 2014,Delaware; that the court dismissedstatute of limitations in Delaware and the plaintiffs' RCRAspinoff agreement bar these claims at this time; that PPL is not liable for the claims in either the Talen Direct Action or the Talen Putative Class Action as PPL Montana was solvent at all relevant times; and that the separation agreement requires that Talen Energy indemnify PPL for all but one Clean Air Act claim, but declinedlosses arising from the debts of Talen Montana, among other things. PPL's complaint also seeks damages against Riverstone for interfering with the separation agreement and against Riverstone affiliates for breach of the implied covenant of good faith and fair dealing. The complaint was subsequently amended on January 11, 2019 and March 20, 2019, to include, among other things, claims related to indemnification with respect to the Montana Actions, request a declaration that the Montana Actions are time-barred under the spinoff agreements, and allege additional facts to support the tortious interference claim. In April 2019, the defendants filed motions to dismiss the common law tort claims.amended complaint. In November 2016, plaintiffs filed an amended complaint removingJuly 2019, the personal injury claimsCourt heard oral arguments from the parties regarding the motions to dismiss, and removing certain previously named plaintiffs. In February 2017, in October 2019,
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the DistrictDelaware Court of Chancery issued an order dismissingopinion sustaining all of the PPL asplaintiffs' claims except for the claim for breach of implied covenant of good faith and fair dealing. As a defendantresult of the dismissal of the Talen Direct Action in December 2019, in January 2020, Talen Energy filed a new motion to dismiss five of the remaining eight claims in the amended complaint. The Court heard oral argument on Talen's motion to dismiss on May 28, 2020, and dismissingon June 22, 2020, issued an opinion denying the final federal claim against LG&E under the Clean Air Act,motion in its entirety. Discovery is proceeding, and directed the parties have filed certain motions and cross-motions for summary judgment, which are not yet scheduled for hearing.

In January 2022, Vice-Chancellor Joseph R. Slights III, the judge assigned to submit briefs regarding whetherthis litigation, announced his retirement. Thereafter, this case was removed from the court shouldtrial schedule and is awaiting the assignment of a new judge. The new judge will likely rule on the motions and cross-motions for summary judgment.

With respect to each of the Talen-related matters described above, PPL believes that the 2014 distribution of proceeds was made in compliance with all applicable laws and that PPL Montana was solvent at all relevant times. Additionally, the agreements entered into in connection with the spinoff, which PPL and affiliates of Talen Energy and Riverstone negotiated and executed prior to the 2014 distribution, directly address the treatment of the proceeds from the sale of PPL Montana's hydroelectric generating facilities; in those agreements, Talen Energy and Riverstone definitively agreed that PPL was entitled to retain the proceeds.

PPL believes that it has meritorious defenses to the claims made in the Talen Putative Class Action and intends to continue to exercise supplemental jurisdiction regardingvigorously defend against this action. The Talen Putative Class Action was stayed at an early stage of litigation. While the remaining state law-only claims. On April 13, 2017, the District Court issued an order declining to exercise supplemental jurisdiction and dismissing the case in its entirety, subject to certain federal appeals or state court re-filing rights of the parties. On June 16, 2017, the plaintiffs filed a class action complaint in Jefferson Circuit Court, Kentucky, against LG&E regarding the state law nuisance, negligence and trespass tort claims. The plaintiffs seek compensatory and punitive damages for alleged property damage due to purported plant emissions on behalf of a class of residents within one to three miles of the plant.Delaware Action is progressing, at this time PPL LKE and LG&E cannot predict the outcome of this matter. LG&E retired one coal-fired unit ateither of these matters or estimate the Cane Run plant in March 2015 andrange of possible losses, if any, that PPL might incur as a result of the remaining two coal-fired units at the plant in June 2015.claims, although they could be material.

E.W. Brown Environmental ClaimsAssessment(PPL LKE and KU)

On July 12, 2017, the Kentucky Waterways Alliance and the Sierra Club filed a citizen suit complaint against KU in the U.S. District Court for the Eastern District of Kentucky alleging dischargesis undertaking extensive remedial measures at the E.W. Brown plant in violationincluding closure of the Clean Water Actformer ash pond, implementation of a groundwater remedial action plan and the plant’s water discharge permitperformance of a corrective action plan including aquatic study of adjacent surface waters and alleging contamination that may present an imminentrisk assessment. The aquatic study and substantial endangerment in violation of the RCRA. The plaintiffs’ suit relatesrisk assessment are being undertaken pursuant to prior notices of intent to file a citizen suit submitted in October and November 2015 and October 2016. These plaintiffs seek injunctive relief ordering KU to take all actions necessary to comply with the Clean Water Act violations, including ceasing the discharges in question, abating effects associated with prior discharges and eliminating the alleged imminent and substantial endangerment. These plaintiffs also seek assessment of civil penalties and an award of litigation costs and attorney fees. PPL, LKE and KU cannot predict the outcome of this matter or the potential impact on the operations of the E.W. Brown plant, including increased capital or operating costs, if any. 

(PPL, LKE, LG&E and KU)

Trimble County Water Discharge Permit
In May 2010, the Kentucky Waterways Alliance and other environmental groups filed a petition2017 agreed Order with the Kentucky Energy and Environment Cabinet (KEEC) challenging. KU conducted sampling of Herrington Lake in 2017 and 2018. In June 2019, KU submitted to the Kentucky Pollutant Discharge Elimination System permit issued in April 2010, which covers waterKEEC the required aquatic study and risk assessment, conducted by an independent third-party consultant, finding that discharges from the Trimble County plant. In November 2010, the KEEC issued a final order upholding the permit, which was subsequently appealed by the environmental groups. In September 2013, the Franklin Circuit Court reversed the KEEC order upholding the permit and remanded the permit to the agency for further proceedings. LG&E and the KEEC appealed the order to the Kentucky Court of Appeals. In July 2015, the Court of Appeals upheld the lower court ruling. LG&E and the KEEC moved for discretionary review by the Kentucky Supreme Court. In February 2016, the Kentucky Supreme Court issued an order granting discretionary review and oral arguments were held in September 2016. On April 27, 2017, the Kentucky Supreme Court issued an order reversing the decision of the appellate court and upholding the permit issued to LG&E by the KEEC.

Trimble County Landfill

Various state and federal permits and regulatory approvals are required in order to construct a landfill at the Trimble CountyE.W. Brown plant to be used for disposal of CCRs. In October 2016, the Kentucky Division of Water issued a water quality certification and in February 2017, the Kentucky Division of Waste Management issued a “special waste” landfill permit. In March 2017, the Sierra Club and a resident adjacent to the plant filed administrative challenges to the landfill permit which were subsequently dismissed by agreed order entered in August 2017. In June 2017, the U.S. Army Corps of Engineers issued a dredge and fill permit, the final approval required for construction of the landfill. PPL, LKE, LG&E and KU believe that all permits and regulatory approvals issued for the project comply with applicable state and federal laws.
Regulatory Issues(All Registrants)
See Note 6 for information on regulatory matters related to utility rate regulation.


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Electricity - Reliability Standards
The NERC is responsible for establishing and enforcing mandatory reliability standards (Reliability Standards) regarding the bulk electric system in North America. 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 electric system, including electric utility companies, generators and marketers. Under the Federal Power Act, the FERC may assess civil penalties for certain violations.
PPL Electric, LG&E and KU monitor their compliance with the Reliability Standards and self-report or self-log potential violations of applicable reliability requirements whenever identified, and submit accompanying mitigation plans, as required. The resolution of a small number of potential violations is pending. Penalties incurred to date have not been significant. Any Regional Reliability Entity (including RFC or SERC) determination concerning the resolution of violations of the Reliability Standards remains subject to the approval of the NERC and the FERC.
In the course of implementing their programs to ensure compliance with the Reliability Standards by those PPL affiliates subject to the standards, certain other instances of potential non-compliance may be identified from time to time. The Registrants cannot predict the outcome of these matters, and cannot estimate a range of reasonably possible losses, if any.
Environmental Matters
(All Registrants)
Due to the environmental issues discussed below or other environmental matters, it may be necessary for the Registrants to modify, curtail, replace or cease operation of certain facilities or performance of certain operations to comply with statutes, regulations and other requirements of regulatory bodies or courts. In addition, legal challenges to new environmental permits or rules add to the uncertainty of estimating the future cost of these permits and rules. Finally, the regulatory reviews specified in the President's March 2017 Executive Order (the March 2017 Executive Order) promoting energy independence and economic growth could result in future regulatory changes and additional uncertainty.

WPD's distribution businesses are subject to certain statutory and regulatory environmental requirements. It may be necessary for WPD to incur significant compliance costs, which costs may be recoverable through rates subject to the approval of Ofgem. PPL believes that WPD has taken and continues to take measures to comply with all applicable environmental laws and regulations.
LG&E and KU are entitled to recover, through the ECR mechanism, certain costs of complying with the Clean Air Act, as amended, and those federal, state or local environmental requirements applicable to coal combustion wastes and by-products from facilities that generate electricity from coal in accordance with approved compliance plans. Costs not covered by the ECR mechanism for LG&E and KU and all such costs for PPL Electric are subject to rate recovery before the companies' respective state regulatory authorities, or the FERC, if applicable. Because neither WPD nor PPL Electric ownshad any generating plants, their exposure to related environmental compliance costs is reduced. PPL, PPL Electric, LKE, LG&E and KU can provide no assurances as to the ultimate outcome of future environmental or rate proceedings before regulatory authorities.

Air

(PPL, LKE, LG&E and KU)

NAAQS
The Clean Air Act, which regulates air pollutants from mobile and stationary sources in the United States, has a significant impact on Herrington Lake and that the operation of fossil fuel plants. Among other things, the Clean Air Act requires the EPA periodically to review and establish concentration levelswater in the ambient airlake is safe for six pollutantsrecreational use and meets safe drinking water standards. On May 31, 2021, the KEEC approved the report and released a response to protect public healthcomments. On August 6, 2021, KU submitted a Supplemental Remedial Alternatives Analysis (SRAA) report to the KEEC that outlines proposed additional fish, water, and welfare. The six pollutants are carbon monoxide, lead, nitrogen dioxide, ozone (contributedsediment testing. On February 18, 2022 the KEEC provided approval to by nitrogen oxide emissions), particulate matter and sulfur dioxide. The established concentration levels for these six pollutants are known as NAAQS. Under the Clean Air Act, the EPA is requiredKU to reassess the NAAQS on a five-year schedule.
Federal environmental regulations of these six pollutants require states to adopt implementation plans, known as state implementation plans, which detail how the state will attain the standards that are mandated by the relevant law or regulation.

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Each state identifies the areas within its boundaries that meet the NAAQS (attainment areas) and those that do not (non-attainment areas), and must develop a state implementation plan both to bring non-attainment areas into complianceproceed with the NAAQS and to maintain good air quality in attainment areas. In addition, for attainment of ozone and fine particulates standards, statesproposed sampling, which commenced in the eastern portionspring of the country, including Kentucky, are subject to a regional program developed by the EPA known as the Cross-State 2022.

Air Pollution Rule. The NAAQS, future revisions to the NAAQS(PPL and state implementation plans, or future revisions to regional programs, may require installation of additional pollution controls, the costs of which PPL, LKE, LG&E and KU believe are subject to cost recovery.&E)


Although PPL, LKE, LG&E and KU do not anticipate significant costs to comply with these programs, changes in market or operating conditions could result in different costs than anticipated.
Ozone
The EPA issued the current ozone standard in October 2015. Under the Clean Air Act, the states and the EPA are required to determine (based on ambient air monitoring data) those areas that meet the standard and those that are in non-attainment. The EPA was scheduled to designate areas as being in attainment or nonattainment of the current ozone standard by no later than October 2017 which was to be followed by further regulatory proceedings identifying compliance measures and deadlines. However, the current implementation and compliance schedule is uncertain because the EPA failed to make nonattainment demonstrations by the applicable deadline. In addition, some industry groups have requested the EPA to defer implementation of the 2015 ozone standard, but the EPA has not yet acted on this request. While implementation of the 2015 ozone standard could potentially require the addition of SCRs at some LG&E and KU generating units, PPL, LKE, LG&E and KU are currently unable to determine what the compliance measures and deadlines may ultimately be with respect to the new standard.

States are also obligated to address interstate transport issues associated with ozone standards through the establishment of "good neighbor" state implementation plans for those states that are found to contribute significantly to another state's non-attainment. As a result of a partial consent decree addressing claims regarding federal implementation, the EPA and several states, including Kentucky, are evaluating the need for further nitrogen oxide reductions from fossil-fueled plants to address interstate impacts. While PPL, LKE, LG&E and KU are unable to predict the outcome of ongoing and future evaluations by the EPA and the states, such evaluations could potentially result in requirements for nitrogen oxide reductions beyond those currently required under the Cross State Air Pollution Rule.

Sulfur Dioxide
In 2010, the EPA issued the current NAAQS for sulfur dioxide and required states to identify areas that meet those standards and areas that are in "non-attainment". In July 2013, the EPA finalized non-attainment designations for parts of the country, including part of Jefferson County in Kentucky. Attainment must be achieved by 2018. As a result of scrubber replacements completed by LG&E at the Mill Creek plant in 2016, all Jefferson County monitors now indicate compliance with the sulfur dioxide standards. Additionally, LG&E accepted a new sulfur dioxide emission limit to ensure continuing compliance with the NAAQS. PPL, LKE, LG&E and KU do not anticipate any further measures to achieve compliance with the new sulfur dioxide standards.

Climate Change
There is continuing world-wide attention focused on issues related to climate change. In June 2016, President Obama announced that the United States, Canada and Mexico established the North American Climate, Clean Energy, and Environment Partnership Plan, which specifies actions to promote clean energy, address climate change and protect the environment. The plan includes a goal to provide 50% of the energy used in North America from clean energy sources by 2025. The plan does not impose any nation-specific requirements.

In December 2015, 195 nations, including the U.S., signed the Paris Agreement on Climate, which establishes a comprehensive framework for the reduction of GHG emissions from both developed and developing nations. Although the agreement does not establish binding reduction requirements, it requires each nation to prepare, communicate, and maintain GHG reduction commitments. Reductions can be achieved in a variety of ways, including energy conservation, power plant efficiency improvements, reduced utilization of coal-fired generation or replacing coal-fired generation with natural gas or renewable generation. Based on the EPA's Clean Power Plan described below, the U.S. committed to an initial reduction target of 26% to 28% below 2005 levels by 2025. However, on June 1, 2017, President Trump announced a plan to withdraw from the Paris Agreement and undertake negotiations to reenter the current agreement or enter a new agreement on terms more favorable to the U.S. Under the terms of the Paris Agreement, any U.S. withdrawal would not be complete until November 2020.

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Additionally, in March 2017, the President issued an Executive Order (the March 2017 Executive Order) directing the EPA to review proposed and final rules relating to GHG reductions for consistency with certain policy directives and suspend, revise, or rescind those rules as appropriate. The March 2017 Executive Order also directs rescission of specified guidance, directives, and prior Presidential actions regarding climate change. PPL, LKE, LG&E and KU cannot predict the outcome of such regulatory actions or the impact, if any, on plant operations, rate treatment or future capital or operating needs.

The U.K. has enacted binding carbon reduction requirements that are applicable to WPD. Under the U.K. law, WPD must purchase carbon allowances to offset emissions associated with WPD's operations. The cost of these allowances is not significant and is included in WPD's current operating expenses.
The EPA's Rules under Section 111 of the Clean Air Act, including the EPA's Clean Power Plan
As further described below, in 2015 the EPA finalized rules imposing GHG emission standards for both new and existing power plants. The EPA has also issued a proposed federal implementation plan that would apply to any states that fail to submit an acceptable state implementation plan under these rules.

The future of these rules is uncertain. The EPA's authority to promulgate these regulations under Section 111 of the Clean Air Act has been challenged in the D.C. Circuit Court by several states, industry groups and individual companies, including LKE. The D.C. Circuit has temporarily held the litigation in abeyance in light of the EPA's ongoing review of the Clean Power Plan. In February 2016, the U.S. Supreme Court stayed the rule for existing plants (the Clean Power Plan) pending the D.C. Circuit Court's review and subsequent review by the U.S. Supreme Court if a writ of certiorari is filed and granted. In addition, the President's March 2017 Executive Order requires the EPA to review the rules for new plants and existing power plants and suspend, revise or rescind them as appropriate. In October 2017, the EPA proposed to rescind the rule and may seek comment on a possible replacement rule.
The EPA's rule for new power plants imposes separate emission standards for coal and natural gas units based on the application of different technologies. The coal standard is based on the application of partial carbon capture and sequestration technology, but because this technology is not presently commercially viable, the rule effectively precludes the construction of new coal-fired plants. The standard for NGCC power plants is the same as what the EPA proposed in 2012 and is not continuously achievable under all operating modes, such as frequent start-ups and shutdowns. The preclusion of new coal-fired plants could have a significant industry-wide impact.
The EPA's rule for existing power plants, referred to as the Clean Power Plan, was published in the Federal Register in October 2015. The Clean Power Plan contains state-specific rate-based and mass-based reduction goals and guidelines for the development, submission and implementation of state implementation plans to achieve the state goals. State-specific goals were calculated from 2012 data by applying the EPA's broad interpretation and definition of the BSER, resulting in the most stringent targets to be met in 2030, with interim targets to be met beginning in 2022. The EPA believes it has offered some flexibility to the states as to how their compliance plans can be crafted, including the option to use a rate-based approach (limit emissions per megawatt hour) or a mass-based approach (limit total tons of emissions per year), and the option to demonstrate compliance through emissions trading and multi-state collaborations. Under the rate-based approach, Kentucky would need to make a 41% reduction from its 2012 emissions rate and under a mass-based approach it would need to make a 36% reduction. These reductions are significantly greater than initially proposed and present significant challenges to the state. If the Clean Power Plan ultimately remains in place in its current form, and Kentucky fails to develop an approvable implementation plan by the applicable deadline, the EPA may impose a federal implementation plan that could be more stringent than what the state plan might provide. Depending on the provisions of the Kentucky implementation plan, LG&E and KU may need to modify their current portfolio of generating assets during the next decade and/or participate in an allowance trading program.
LG&E and KU are monitoring developments at the state and federal level. PPL, LKE, LG&E and KU cannot predict the outcome of the pending litigation, any changes in regulations, interpretations, or litigation positions that may be implemented by the U.S. presidential administration or the potential impact, if any, on plant operations, or future capital or operating costs. PPL, LKE, LG&E and KU believe that the costs, which could be significant, would be subject to cost recovery.
In April 2014, the Kentucky General Assembly passed legislation limiting the measures that the Kentucky Energy and Environment Cabinet may consider in setting performance standards to comply with the EPA's regulations governing GHG emissions from existing sources, if enacted. The legislation provides that such state GHG performance standards will be based on emission reductions, efficiency measures and other improvements available at each power plant, rather than renewable energy, end-use energy efficiency, fuel switching and re-dispatch. These statutory restrictions may make it more difficult for Kentucky to achieve the GHG reduction levels that the EPA has established for Kentucky, if enacted.

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Sulfuric Acid Mist Emissions(PPL, LKE and LG&E)


In June 2016, the EPA issued a notice of violation under the Clean Air Act alleging that LG&E violated applicable rules relating to sulfuric acid mist emissions at its Mill Creek plant. The notice alleges failure to install proper controls, failure to operate the facility consistent with good air pollution control practice and causing emissions exceeding applicable requirements or constituting a nuisance or endangerment. LG&E believes it has complied with applicable regulations during the relevant time period. Discussions betweenOn July 31, 2020, the U.S. Department of Justice and Louisville Metro Air Pollution Control District filed a complaint in the U.S. District Court for the Western District of Kentucky alleging violations specified in the EPA notice of violation and seeking civil penalties and injunctive relief. In October 2020, LG&E are ongoing. PPL, LKEfiled a motion to dismiss the complaint. In December 2020, the U.S. Department of Justice and the Louisville Metro Air Pollution Control District filed an amended complaint. In February 2021, LG&E are unablefiled a renewed motion to predictdismiss regarding the outcomeamended complaint. In September 2021, the parties reached a tentative agreement providing for dismissal of this matter or the potentialcourt action, the payment by LG&E of a penalty amount and performance of a supplemental environmental project (SEP). On February 23, 2022 the court entered a Consent Decree approving the agreed penalty and SEP. The agreed penalty and SEP do not have a significant impact on LG&E's operations or financial condition.

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Water/Waste

(PPL, LKE, LG&E and KU)

CCRsELGs

In April 2015, the EPA published itsfinalized ELGs for wastewater discharge permits for new and existing steam electricity generating facilities. These guidelines require deployment of additional control technologies providing physical, chemical and biological treatment and mandate operational changes including "no discharge" requirements for certain wastewaters. The implementation date for individual generating stations was to be determined by the states on a case-by-case basis according to criteria provided by the EPA. Legal challenges to the final rule regulating CCRs. were consolidated before the U.S. Court of Appeals for the Fifth Circuit. In April 2017, the EPA announced that it would grant petitions for reconsideration of the rule. In September 2017, the EPA issued a rule to postpone the compliance date for certain requirements. On October 13, 2020, the EPA published final revisions to its best available technology standards for certain wastewaters and potential extensions to compliance dates (the Reconsideration Rule). The rule is expected to be implemented by the states or applicable permitting authorities in the course of their normal permitting activities. LG&E and KU are currently implementing responsive compliance strategies and schedules. Certain aspects of these compliance plans and estimates relate to developments in state water quality standards, which are separate from the ELG rule or its implementation. Certain costs are included in the Registrants' capital plans and expected to be recovered from customers through rate recovery mechanisms, but additional costs and recovery will depend on further regulatory developments at the state level. In August 2021, the EPA published a notice of rulemaking initiative announcing that it will propose revisions to the Reconsideration Rule and determine "whether more stringent limitations and standards are appropriate." Compliance with the Reconsideration Rule is required during the pendency of the rulemaking process.

CCRs

In 2015, the EPA issued a final rule governing management of CCRs which include fly ash, bottom ash and sulfur dioxide scrubber wastes. The rule became effective in October 2015. ItCCR Rule imposes extensive new requirements for certain CCR impoundments and landfills, including public notifications, location restrictions, design and operating standards, groundwater monitoring and corrective action requirements, and closure and post-closure care requirements, on CCR impoundments and landfills that are located on active power plants inspecifies restrictions relating to the United States and not closed. Under the rule, CCRs are regulated as non-hazardous under Subtitle D of RCRA and beneficial use of CCRs is allowed, with some restrictions. The rule's requirementsCCRs. In July 2018, the EPA issued a final rule extending the deadline for covered CCRclosure of certain impoundments and landfills include implementation of groundwater monitoring and commencement or completion of closure activities generally between three and ten years from certain triggering events. The rule requires posting of compliance documentation on a publicly accessible website. Industry groups, environmental groups, individual companies and others have filed legal challenges to the final rule, which are pending beforeadopting other substantive changes. In August 2018, the D.C. Circuit Court of Appeals.

Recently enacted federal legislation has authorized the EPA to approve equally protective state programs that would operate in lieuAppeals vacated and remanded portions of the CCR Rule. In December 2019, the EPA addressed the deficiencies identified by the court and proposed amendments to change the closure deadline. In August 2020, the EPA published a final rule extending the deadline to initiate closure to April 11, 2021, while providing for certain extensions. The EPA is conducting ongoing rulemaking actions regarding various other amendments to the rule. Certain ongoing legal challenges to various provisions of the CCR Rule have been held in abeyance pending review by the EPA pursuant to the President's executive order. PPL, LG&E, and KU are monitoring the EPA’s ongoing efforts to refine and implement the regulatory program under the CCR Rule. In January 2022, the EPA issued several proposed regulatory determinations, facility notifications and public announcements which indicate increased scrutiny by the EPA to determine the adequacy of measures taken by facility owners and operators to achieve closure of CCR surface impoundments and landfills. In particular, the agency indicated that it will focus on certain practices that it views as posing a threat of continuing groundwater contamination. Future guidance, regulatory determinations, rulemakings and other developments could potentially require revisions to current LG&E and KU compliance plans including additional monitoring and remediation at surface impoundments and landfills, the cost of which could be substantial. PPL, LG&E and KU are unable to predict the outcome of the ongoing litigation, rulemaking, and regulatory determinations or potential impacts on current LG&E and KU compliance plans. The Registrants are currently finalizing closure plans and schedules.

In January 2017, Kentucky issued a new state rule relating to CCR management, effective May 2017, aimed at reflecting the requirements of the federal CCR rule. In May 2017,As a resident adjacent to LG&E's and KU's Trimbleresult of a subsequent legal challenge, in January 2018, the Franklin County, plant filed a lawsuit in state court againstKentucky Circuit Court issued an opinion invalidating certain procedural elements of the Kentucky Energy and Environmental Cabinet and LG&E seeking to invalidate the new rule. PPL, LKE, LG&E and KU cannot predict the outcome of the litigation, but anticipate continued operationpresently operate their facilities under continuing permits authorized under the former program inand do not currently anticipate material impacts as a result of the event that the new rule is struck down.judicial ruling. Associated costs are expected to be subject to rate recovery.

LG&E and KU have received KPSC approval for a compliance plan providing for construction of additional landfill capacity at the E.W. Brown station, closure of impoundments at the Mill Creek, Trimble County, E.W. Brown, and Ghent stations, and construction of process water management facilities at those plants. In addition to the foregoing measures required for compliance with the federal CCR rule, requirements, KU also received KPSC approval for its plans to close impoundments at the retired Green River, Pineville and Tyrone plants to comply with applicable state law requirements. See Note 6 inlaw. LG&E and KU have completed planned closure measures at most of the Registrants' 2016 Form 10-K for additional information.subject impoundments and have commenced post closure groundwater monitoring as required at those facilities. LG&E and KU generally expect to complete all impoundment closures within five years of commencement, although a longer period may be required to complete closure of some facilities. Associated costs are expected to be subject to rate recovery.
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In connection with the final CCR rule, LG&E and KU recorded adjustments to existing AROs duringbeginning in 2015 2016 and 2017.continue to record adjustments as required. See Note 15 below and Note 19 in the Registrants' 2016 Form 10-K for additional information. Further changes to AROs, current capital plans or operating costs may be required as estimates are refined based on closure developments, groundwater monitoring results, and regulatory or legal proceedings. Costs relating to this rule are expected to be subject to rate recovery.

Clean Water ActSuperfund and Other Remediation(All Registrants)
 
Regulations under the federal Clean Water Act dictate permitting and mitigation requirements for facilities and construction projects in the United States. Many of those requirements relate to power plant operations, including requirements related to the treatment of pollutants in effluents prior to discharge, the temperature of effluent discharges and the location, design and construction of cooling water intake structures at generating facilities, standards intended to protect aquatic organisms that become trapped at or pulled through cooling water intake structures at generating facilities. The requirements could impose significant costs for LG&E and KU, which are subject to rate recovery.

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ELGs
In September 2015, the EPA released its final ELGs for wastewater discharge permits for new and existing steam electric generating facilities. The rule provides strict technology-based discharge limitations for control of pollutants in scrubber wastewater, fly ash and bottom ash transport water, mercury control wastewater, gasification wastewater and combustion residual leachate. The new guidelines require deployment of additional control technologies providing physical, chemical and biological treatment of wastewaters. The guidelines also mandate operational changes including "no discharge" requirements for fly ash and bottom ash transport waters and mercury control wastewaters. The implementation date for individual generating stations will be determined by the states on a case-by-case basis according to criteria provided by the EPA. Industry groups, environmental groups, individual companies and others have filed legal challenges to the final rule, which have been consolidated before the U.S. Court of Appeals for the Fifth Circuit. In April 2017, the EPA announced that it would grant petitions for reconsideration of the rule. In September 2017, the EPA published in the Federal Register a proposed rule that would postpone the compliance date for requirements relating to bottom ash transport waters and scrubber wastewaters discharge limits. The EPA expects to complete its reconsideration of best available technology standards by the fall of 2020. Upon completion of the ongoing regulatory proceedings, the rule will be implemented by the states in the course of their normal permitting activities.PPL Electric, LG&E and KU are developing compliance strategiespotentially responsible for investigating and schedules.remediating contamination under the federal Superfund program and similar state programs. Actions are under way at certain sites including former coal gas manufacturing plants in Pennsylvania and Kentucky previously owned or operated by, or currently owned by predecessors or affiliates of, PPL LKE,Electric, LG&E and KU are unable to predict the outcome of the EPA's pending reconsideration of the rule or fully estimate compliance costs or timing. Additionally, certain aspects of these compliance plans and estimates relate to developments in state water quality standards, which are separate from the ELG rule or its implementation. Costs to comply with ELGs or other discharge limits, which are expected to be significant, are subject to rate recovery.

Seepages and Groundwater Infiltration

Seepages or groundwater infiltration have been detected at active and retired wastewater basins and landfills at various LG&E and KU plants. LG&E and KU have completed, or are completing, assessments of seepages or groundwater infiltration at various facilities and have completed, or are working with agencies to implement, further testing, monitoring or abatement measures, where applicable. A range of reasonably possible costs cannot currently be estimated. Depending on the circumstances in each case, certain costs, which may be subject to rate recovery, could be significant.

(All Registrants)
Other Issues
In June 2016, the "Frank Lautenberg Chemical Safety Act" took effect as an amendment to the Toxic Substance Control Act (TSCA). The Act made no changes to the pre-existing TSCA rules as it pertains to polychlorinated biphenyls (PCB). The EPA continues to reassess its PCB regulations as part of the 2010 Advanced Notice of Proposed Rulemaking (ANPRM). The EPA's ANPRM rulemaking is to occur in two phases. Only the second part of the rule, currently scheduled for November 2017, is applicable to PPL operations. This part of the rule relates to the use of PCBs in electrical equipment and natural gas pipelines, as well as continued use of PCB-contaminated porous surfaces. Although the first rulemaking will not directly affect the Registrants' operations, it may indicate certain approaches or principles to occur in the later rulemaking which may affect Registrants' facilities in the United States, including phase-out of some or all equipment containing PCBs. Should such a phase-out be required, the costs, which are subject to rate recovery, could be significant.
Superfund and Other Remediation
KU. PPL Electric is potentially responsible for a share of theclean-up costs at severalcertain sites listed by the EPA under the federal Superfund program, including the Columbia Gas Plant site and the Brodhead site. Clean-upCleanup actions have been or are being undertaken at all of these sites as requested by governmental agencies, the costs of which have not been and are not expected to be significant to PPL Electric.
 
PPL Electric, LG&E and KU are investigating, responding to agency inquiries, remediating, or have completed the remediationAs of several sites that were not addressed under a regulatory program such as Superfund, but for which PPL Electric, LG&E and KU may be liable for remediation. These include a number of former coal gas manufacturing plants in Pennsylvania and Kentucky previously owned or operated or currently owned by predecessors or affiliates of PPL Electric, LG&E and KU. To date, the costs of these sites have not been significant.
There are additional sites, formerly owned or operated by PPL Electric, LG&E and KU predecessors or affiliates. PPL Electric, LG&E and KU lack sufficient information on such additional sites and are therefore unable to estimate any potential liability they may have or a range of reasonably possible losses, if any, related to these matters.

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At September 30, 2017March 31, 2022 and December 31, 2016,2021, PPL Electric had a recorded liability of $11 million and $10 million representing its best estimate of the probable loss incurred to remediate the sites notedidentified above. Depending on the outcome of investigations at identified sites where investigations have not begun or been completed, or developments at sites for which information is incomplete, additional costs of remediation could be incurred;incurred. PPL Electric, LG&E and KU lack sufficient information about such additional sites to estimate any potential liability or range of reasonably possible losses, if any, related to these sites. Such costs, however, such costs are not currently expected to be significant.

The EPA is evaluating the risks associated with polycyclic aromatic hydrocarbons and naphthalene, chemical 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. Thiscleanup, that could require several PPL subsidiaries to take more extensive assessment and remedial actions at former coal gas manufacturing plants. PPL, PPL Electric, LKE, LG&E and KUThe Registrants cannot reasonably estimate a range of reasonably possible losses, if any, related to these matters.

From timeRegulatory Issues

(All Registrants)

See Note 6 for information on regulatory matters related to time, PPL's subsidiariesutility rate regulation.

Electricity - Reliability Standards

The NERC is responsible for establishing and enforcing mandatory reliability standards (Reliability Standards) regarding the bulk electric system in North America. The FERC oversees this process and independently enforces the United States undertake testing, monitoring or remedial action in responseReliability Standards.

The Reliability Standards have the force and effect of law and apply to noticescertain users of violations, spills or other releases at various on-sitethe bulk electric system, including electric utility companies, generators and off-site locations, negotiate withmarketers. Under the EPA and state and local agencies regarding actions necessaryFederal Power Act, the FERC may assess civil penalties for compliance with applicable requirements, negotiate with property owners and other third parties alleging impacts from PPL's operations and undertake similar actions necessary to resolve environmental matters that arise in the course of normal operations. Based on analyses to date, resolution of these environmental matters is not expected to have a significant adverse impact on the operations of certain violations.

PPL Electric, LG&E and KU.KU monitor their compliance with the Reliability Standards and self-report or self-log potential violations of applicable reliability requirements whenever identified, and submit accompanying mitigation plans, as required. The resolution of a small number of potential violations is pending. Penalties incurred to date have not been significant. Any Regional Reliability Entity determination concerning the resolution of violations of the Reliability Standards remains subject to the approval of the NERC and the FERC.

Future cleanup or remediation work at sites under review, or at sites not yet identified, may result in significant additional costs forIn the course of implementing their programs to ensure compliance with the Reliability Standards by those PPL PPL Electric, LKE, LG&E and KU. Insurance policies maintained by LKE, LG&E and KUaffiliates subject to the standards, certain other instances of potential non-compliance may be identified from time to time. The Registrants cannot predict the outcome of these matters, and an estimate or range of possible losses cannot be determined.

Gas - Security Directives(PPL and LG&E)

In May and July of 2021, the Department of Homeland Security’s (DHS) Transportation Security Administration (TSA) released two security directives applicable to certain notified owners and operators of natural gas pipeline facilities (including local distribution companies) that TSA has determined to be critical. The first security directive required notified owners/operators to implement cybersecurity incident reporting to the costs or other obligations relatedDHS, designate a cybersecurity coordinator, and perform a gap assessment of
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current entity cybersecurity practices against certain voluntary TSA security guidelines and report relevant results and proposed mitigation to these matters butapplicable DHS agencies. The second security directive required notified entities to implement a significant number of specified cyber security controls and processes. LG&E does not believe the amount of insurance coverage or reimbursement cannot be estimated or assured.

Other

Labor Union Agreements

(PPL and PPL Electric)

In March 2017, members of the IBEW ratified a new five-year labor agreement with PPL. The contract covers nearly 1,400 employees and was effective May 22, 2017. The terms of the new labor agreement are not expected tosecurity directives will have a significant impact on theLG&E’s operations or financial results of PPL or PPL Electric.condition.


(LKE and KU)Other


In August 2017, KU and the United Steelworkers of America ratified a three-year labor agreement through August 2020. The agreement covers approximately 53 employees. The terms of the new labor agreement are not expected to have a significant impact on the financial results of LKE or KU.

Guarantees and Other Assurances
 
(All Registrants)


In the normal course of business, the Registrants 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 engage.
 
(PPL)
 
PPL fully and unconditionally guarantees all of the debt securities and loan obligations of PPL Capital Funding.
 

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(All Registrants)
 
The table below details guarantees provided as of September 30, 2017.March 31, 2022. "Exposure" represents the estimated maximum potential amount of future payments that could be required to be made under the guarantee. The probability of expected payment/performance under each of these guarantees is remote except for "WPD guarantee of pension and other obligations of unconsolidated entities" and "Indemnification of lease termination and other divestitures." The total recorded liability at September 30, 2017 was $21 million for PPL and $16 million for LKE. The total recorded liability at December 31, 2016 was $22 million for PPL and $17 million for LKE. See footnote (e) below for information regarding a settlement in principle for certain LKE indemnifications.remote. For reporting purposes, on a consolidated basis, allthe guarantees of PPL Electric, LKE,include the guarantees of its subsidiary Registrants.
Exposure at March 31, 2022Expiration
Date
PPL  
Indemnifications related to certain tax liabilities related to the sale of the U.K. utility business£50 (a)2028
LG&E and KU   
LG&E and KU obligation of shortfall related to OVEC(b) 

(a)PPL WPD Limited entered into a Tax Deed dated June 9, 2021 in which it agreed to a tax indemnity regarding certain potential tax liabilities of the entities sold with respect to periods prior to the completion of the sale, subject to customary exclusions and limitations. Because National Grid Holdings One plc, the buyer, agreed to purchase indemnity insurance, the amount of the cap on the indemnity for these liabilities is £1, except with respect to certain surrenders of tax losses, for which the amount of the cap on the indemnity is £50 million.
(b)Pursuant to the OVEC power purchase contract, LG&E and KU also applyare obligated to PPL,pay for their share of OVEC's excess debt service, post-retirement and all guaranteesdecommissioning costs, as well as any shortfall from amounts included within a demand charge designed and expected to cover these costs over the term of the contract. PPL's proportionate share of OVEC's outstanding debt was $91 million at March 31, 2022, consisting of LG&E&E's share of $63 million and KU also apply to LKE.KU's share of $28 million. The maximum exposure and the expiration date of these potential obligations are not presently determinable. See "Energy Purchase Commitments" in Note 14 in PPL's, LG&E's and KU's 2021 Form 10-K for additional information on the OVEC power purchase contract.
 Exposure at
September 30, 2017		 Expiration
Date
PPL    
Indemnifications related to the WPD Midlands acquisition (a)  
WPD indemnifications for entities in liquidation and sales of assets$10
(b) 2019
WPD guarantee of pension and other obligations of unconsolidated entities95
(c)  
     
PPL Electric    
Guarantee of inventory value17
(d) 2018
     
LKE    
Indemnification of lease termination and other divestitures301
(e) 2021 - 2023
     
LG&E and KU    
LG&E and KU guarantee of shortfall related to OVEC (f)  

(a)Indemnifications related to certain liabilities, including a specific unresolved tax issue and those relating to properties and assets owned by the seller that were transferred to WPD Midlands in connection with the acquisition. A cross indemnity has been received from the seller on the tax issue. The maximum exposure and expiration of these indemnifications cannot be estimated because the maximum potential liability is not capped and the expiration date is not specified in the transaction documents.
(b)Indemnification to the liquidators and certain others for existing liabilities or expenses or liabilities arising during the liquidation process. The indemnifications are limited to distributions made from the subsidiary to its parent either prior or subsequent to liquidation or are 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 where the agreements provide for specific limits.
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 or 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. Additionally, WPD and its affiliates remain secondarily responsible for lease payments under certain leases that they have assigned to third parties.
(c)Relates to certain obligations of discontinued or modified electric associations that were guaranteed at the time of privatization by the participating members. Costs are allocated to the members and can be reallocated if an existing member becomes insolvent. At September 30, 2017, WPD has recorded an estimated discounted liability 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, and as a result, the exposure has been estimated.
(d)A third party logistics firm provides inventory procurement and fulfillment services. The logistics firm has title to the inventory, however, upon termination of the contracts, PPL Electric has guaranteed to purchase any remaining inventory that has not been used or sold.
(e)LKE provides certain indemnifications covering the due and punctual payment, performance and discharge by each party of its respective obligations. The most comprehensive of these guarantees is the LKE guarantee covering operational, regulatory and environmental commitments and indemnifications made by WKE under a 2009 Transaction Termination Agreement. This guarantee has a term of 12 years ending July 2021, and a maximum exposure of $200 million, exclusive of certain items such as government fines and penalties that may exceed the maximum. Another WKE-related LKE guarantee covers other indemnifications related to the purchase price of excess power, has a term expiring in 2023, and a maximum exposure of $100 million. In May 2012, LKE's indemnitee received an unfavorable arbitration panel's decision interpreting this matter. In October 2014, LKE's indemnitee filed a motion for discretionary review with the Kentucky Supreme Court seeking to overturn the arbitration decision, and such motion was denied by the court in September 2015. In September 2015, the counterparty issued a demand letter to LKE's indemnitee. In February 2016, the counterparty filed a complaint in Henderson, Kentucky Circuit Court, seeking an award of damages in the matter. The proceeding is currently in the discovery phase. LKE does not believe appropriate contractual, legal or commercial grounds exist for the claim made. LKE believes its indemnifications in the WKE matter remain subject to various uncertainties, including additional legal and contractual developments, as well as future prices, availability and demand for the subject excess power. Although the parties have conducted certain settlement discussions and reached a settlement in principle to resolve all claims for an aggregate amount within LKE's recorded liability, the ultimate outcomes of the WKE termination-related indemnifications cannot be predicted at this time. Additionally, LKE has indemnified various third parties related to historical obligations for other divested subsidiaries and affiliates. The indemnifications vary by entity and the maximum exposures range from being capped at the sale price to no specified maximum. LKE could be required to perform on these indemnifications in the event of covered losses or liabilities being claimed by an indemnified party. LKE cannot predict the ultimate outcomes of the various indemnification scenarios, but does not expect such outcomes to result in significant losses above the amounts recorded.

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(f)Pursuant to the OVEC power purchase contract, LG&E and KU are obligated to pay for their share of OVEC's excess debt service, post-retirement and decommissioning costs, as well as any shortfall from amounts included within a demand charge designed and expected to cover these costs over the term of the contract. LKE's proportionate share of OVEC's outstanding debt was $118 million at September 30, 2017, consisting of LG&E's share of $82 million and KU's share of $36 million. The maximum exposure and the expiration date of these potential obligations are not presently determinable. See "Energy Purchase Commitments" in Note 13 in PPL's, LKE's, LG&E's and KU's 2016 Form 10-K for additional information on the OVEC power purchase contract. In connection with recent credit market related developments at OVEC or certain of its sponsors, such parties, including LG&E and KU, are analyzing certain potential additional credit support actions to preserve OVEC's access to credit markets or mitigate risks or adverse impacts relating thereto, including increased interest costs. The ultimate outcome of these matters, including any potential impact on LG&E's and KU's obligations relating to OVEC debt under the power purchase contract cannot be predicted.


The Registrants 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, no significant payments have been made with respect to these types of guarantees and the probability of payment/performance under these guarantees is generally 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 provides maximum aggregate coverage of $225 million. This insurance may be applicable to obligations under certain of these contractual arrangements.

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11. Related Party Transactions


Support Costs(PPL Electric, LKE, LG&E and KU)


PPL Services, PPL EU Services and LKS provide and, prior to its merger into PPL Services on December 31, 2021, PPL Electric, LKE,EU Services provided the Registrants, their respective subsidiaries including LG&E and KU, and each other as applicable, with administrative, management and support services. For all serviceservices companies, the costs of thesedirectly assignable and attributable services are charged to the respective recipients as direct support costs. General costs that cannot be directly attributed to a specific entity are allocated and charged to the respective recipients as indirect support costs. PPL Services and PPL EU Services use a three-factor methodology that includes the applicable recipients' invested capital, operation and maintenance expenses and number of employees to allocate indirect costs. PPL Services may also use a ratio of overall direct and indirect costs or a weighted average cost ratio. LKS bases its indirect allocations on the subsidiaries' number of employees, total assets, revenues, number of customers and/or other statistical information. PPL Services, LKS and PPL EU Services and LKS charged the following amounts for the periods ended September 30,March 31, including amounts applied to accounts that are further distributed between capital and expense on the books of the recipients, based on methods that are believed to be reasonable.
 Three Months
 20222021
PPL Electric from PPL Services
$61 $10 
PPL Electric from PPL EU Services— 50 
LG&E from LKS39 42 
KU from LKS44 44 
 Three Months Nine Months
 2017 2016 2017 2016
PPL Electric from PPL Services$43
 $33
 $138
 $98
LKE from PPL Services4
 4
 15
 13
PPL Electric from PPL EU Services15
 17
 48
 50
LG&E from LKS38
 40
 120
 128
KU from LKS43
 46
 134
 151


In addition to the charges for services noted above, LKS makes payments on behalf of LG&E and KU for fuel purchases and other costs for products or services provided by third parties. LG&E and KU also provide services to each other and to LKS. Billings between LG&E and KU relate to labor and overhead costsoverheads associated with union and hourly employees performing work for the other company, charges related to jointly ownedjointly-owned generating units and other miscellaneous charges. Tax settlements between LKEPPL and LG&E and KU are reimbursed through LKS.


Intercompany Borrowings


(PPL Electric)


PPL Energy Funding maintains a $400$1,200 million revolving line of credit with a PPL Electric subsidiary. At September 30, 2017, $2March 31, 2022 and December 31, 2021, PPL Energy Funding had borrowings outstanding in the amount of $296 million was outstanding and $499 million. These balances are reflected in "Notes receivable from affiliate" on the PPL Electric Balance Sheet. No balance was outstanding at December 31, 2016.Sheets. The interest rates on borrowings are equal to one-month LIBOR plus a spread. The interest rateInterest income is reflected in "Interest Income from Affiliate" on the outstanding borrowing at September 30, 2017 was 2.98%.PPL Electric Income Statements.



(LG&E and KU)
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(LKE)

LKE maintains a $225 million revolving line of credit with a PPL Energy Funding subsidiary whereby LKE can borrow funds on a short-term basis at market-based rates. The interest rates on borrowings are equal to one-month LIBOR plus a spread. At September 30, 2017 and December 31, 2016, $159 million and $163 million were outstanding and reflected in "Notes payable with affiliate" on the Balance Sheets. The interest rates on the outstanding borrowing at September 30, 2017 and December 31, 2016 were 2.73% and 2.12%.

LKE maintains a $400 million ten-year note with a PPL affiliate with an interest rate of 3.5%. At September 30, 2017 and December 31, 2016, the note was reflected in "Long-term debt to affiliate" on the Balance Sheets.

(LG&E)

LG&E participates in an intercompany money pool agreement whereby LKE and/or KU make available to LG&E funds up to $500 millionthe difference between LG&E's FERC borrowing limit and LG&E's commercial paper limit at an interest rate based on the lower of a market index of commercial paper issues.issues and two additional rate options based on LIBOR. LG&E's money pool borrowing limit is $325 million. At September 30, 2017, $10 million wasDecember 31, 2021, LG&E had borrowings outstanding and wasfrom KU and/or LKE in the amount of $324 million. This balance is reflected in "Notes payable with affiliate"to affiliates" on the LG&E Balance Sheet. NoSheets. NaN balances were outstanding at DecemberMarch 31, 2016. The interest rate on the outstanding borrowings at September 30, 2017 was 1.46%. Interest expense incurred on the money pool agreement with KU was not significant for the three and nine months ended September 30, 2017.2022.

(KU)


KU participates in an intercompany money pool agreement whereby LKE and/or LG&E make available to KU funds up to $500 millionthe difference between KU's FERC borrowing limit and KU's commercial paper limit at an interest rate based on the lower of a market index of commercial paper issues.issues and two additional rate options based on LIBOR. KU's money pool borrowing limit is $300 million. At September 30, 2017,March 31, 2022 and December 31, 2021, KU had noborrowings outstanding from LG&E and/or LKE in the amount of $4 million and $294 million. These balances are reflected in "Notes payable balance outstanding, but hadto affiliates" on the KU Balance Sheets.

VEBA Funds Receivable (PPL Electric)

In 2018, PPL received a $10 millionfavorable private letter ruling from the IRS permitting a transfer of excess funds from the PPL Bargaining Unit Retiree Health Plan VEBA to a new subaccount within the VEBA, to be used to pay medical claims of active
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bargaining unit employees. Based on PPL Electric's participation in PPL’s Other Postretirement Benefit plan, PPL Electric was allocated a portion of the excess funds from PPL Services. These funds have been recorded as an intercompany receivable on PPL Electric's Balance Sheets. The receivable balance outstanding,decreases as PPL Electric pays incurred medical claims and is reimbursed by PPL Services. The intercompany receivable balance associated with these funds was $8 million as of March 31, 2022, which was reflected in "Notes"Accounts receivable from affiliate"affiliates" on the PPL Electric Balance Sheet. No balances were outstanding atSheets. The intercompany receivable balance associated with these funds was $11 million as of December 31, 2016. The interest rate2021, the majority of which was reflected in "Accounts receivable from affiliates" on the outstanding receivable at September, 30, 2017 was 1.46%. Interest income incurred on the money pool agreement with LG&E was not significant for the three and nine months ended September 30, 2017.

Other(PPL Electric LG&E and KU)Balance Sheets.


See Note 8 for discussions regarding intercompany allocations associated with defined benefits.

11.12. Other Income (Expense) - net

(PPL)

"OtherThe details of "Other Income (Expense) - net" for the three and nine monthsperiods ended September 30, 2017 and 2016 consisted primarilyMarch 31, were:
 Three Months
20222021
Other Income  
Defined benefit plans - non-service credits (Note 9)$10 $4 
AFUDC - equity component4 4 
Total Other Income14 8 
Other Expense  
Charitable contributions1 1 
Miscellaneous13 7 
Total Other Expense14 8 
Other Income (Expense) - net$— $— 

(PPL Electric)

The details of gains (losses) on foreign currency contracts to economically hedge PPL's translation risk related to its GBP denominated earnings in"Other Income (Expense) - net" for the U.K. See Note 13 for additional information on these derivatives.periods ended March 31, were:

 Three Months
20222021
Other Income
Defined benefit plans - non-service credits (Note 9)$4 $2 
Interest Income1 — 
AFUDC - equity component4 4 
Total Other Income9 6 
Other Expense
Charitable contributions1 1 
Miscellaneous2 — 
Total Other Expense3 1 
Other Income (Expense) - net$6 $5 

0
12.13. Fair Value Measurements
 
(All Registrants)
 
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). 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) are used to measure the fair value of an asset or liability, as appropriate. 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. The fair value of a group of financial assets and liabilities is measured on a net basis. Transfers between levels are recognized at end-of-reporting-period values. During the three and nine months ended September 30, 2017 and 2016, there were no transfers between Level 1 and Level 2. See Note 1 in each Registrant's 20162021 Form 10-K for information on the levels in the fair value hierarchy.
 
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Recurring Fair Value Measurements


The assets and liabilities measured at fair value were:

 March 31, 2022December 31, 2021
 TotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
PPL        
Assets        
Cash and cash equivalents$4,249 $4,249 $— $— $3,571 $3,571 $— $— 
Restricted cash and cash equivalents (a)1 1 — — 1 1 — — 
Total Cash, Cash Equivalents and Restricted Cash (b)4,250 4,250 — — 3,572 3,572 — — 
Special use funds (a):
Money market fund1 1 — — 2 2 — — 
Commingled debt fund measured at NAV (c)20 — — — 22 — — — 
Commingled equity fund measured at NAV (c)19 — — — 21 — — — 
Total special use funds40 1 — — 45 2 — — 
Total assets$4,290 $4,251 $— $— $3,617 $3,574 $— $— 
Liabilities        
Price risk management liabilities (d):        
Interest rate swaps$14 $— $14 $— $18 $— $18 $— 
Total price risk management liabilities$14 $— $14 $— $18 $— $18 $— 
PPL Electric        
Assets        
Cash and cash equivalents$46 $46 $— $— $21 $21 $— $— 
Total assets$46 $46 $— $— $21 $21 $— $— 
LG&E      
Assets      
Cash and cash equivalents$9 $9 $— $— $9 $9 $— $— 
Total assets$9 $9 $— $— $9 $9 $— $— 
Liabilities      
Price risk management liabilities:      
Interest rate swaps$14 $— $14 $— $18 $— $18 $— 
Total price risk management liabilities$14 $— $14 $— $18 $— $18 $— 
KU        
Assets        
Cash and cash equivalents$8 $8 $— $— $13 $13 $— $— 
Total assets$8 $8 $— $— $13 $13 $— $— 

(a)Included in "Other current assets" on the Balance Sheets.
(b)Total Cash, Cash Equivalents and Restricted Cash provides a reconciliation of these items reported within the Balance Sheets to the sum shown on the Statements of Cash Flows.
(c)In accordance with accounting guidance, certain investments that are measured at fair value using net asset value per share (NAV), or its equivalent, have not been classified in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Balance Sheets.
(d)Current portion is included in "Other current liabilities" and noncurrent portion is included in "Other deferred credits and noncurrent liabilities" on the Balance Sheets.

Special Use Funds

(PPL)

The special use funds are investments restricted for paying active union employee medical costs. In 2018, PPL received a favorable private letter ruling from the IRS permitting a transfer of excess funds from the PPL Bargaining Unit Retiree Health
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Plan VEBA to a new subaccount within the VEBA to be used to pay medical claims of active bargaining unit employees. The funds are invested primarily in commingled debt and equity funds measured at NAV and are classified as investments in equity securities. Changes in the fair value of the funds are recorded to the Statements of Income.

 September 30, 2017 December 31, 2016
 Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
PPL 
  
  
  
  
  
  
  
Assets               
Cash and cash equivalents$676
 $676
 $—
 $—
 $341
 $341
 $—
 $—
Restricted cash and cash equivalents (a)24
 24
 —
 —
 26
 26
 —
 —
Price risk management assets (b): 
  
 

 

  
  
  
  
Foreign currency contracts164
 —
 164
 —
 211
 —
 211
 —
Cross-currency swaps160
 —
 160
 —
 188
 —
 188
 —
Total price risk management assets324
 —
 324
 —
 399
 —
 399
 —
Total assets$1,024
 $700
 $324
 $—
 $766
 $367
 $399
 $—
                
Liabilities 
  
  
  
  
  
  
  
Price risk management liabilities (b): 
  
  
  
  
  
  
  
Interest rate swaps$31
 $—
 $31
 $—
 $31
 $—
 $31
 $—
Foreign currency contracts167
 —
 167
 —
 27
 —
 27
 —
Total price risk management liabilities$198
 $—
 $198
 $—
 $58
 $—
 $58
 $—
                
PPL Electric 
  
  
  
  
  
  
  
Assets 
  
  
  
  
  
  
  
Cash and cash equivalents$243
 $243
 $—
 $—
 $13
 $13
 $—
 $—
Restricted cash and cash equivalents (a)2
 2
 —
 —
 2
 2
 —
 —
Total assets$245
 $245
 $—
 $—
 $15
 $15
 $—
 $—
                
LKE 
  
  
  
  
  
    
Assets               
Cash and cash equivalents       $40
 $40
 $—
 $—
 $13
 $13
 $—
 $—
Cash collateral posted to counterparties (c)1
 1
 —
 —
 3
 3
 —
 —
Total assets$41
 $41
 $—
 $—
 $16
 $16
 $—
 $—
                
Liabilities 
  
  
  
  
  
    
Price risk management liabilities: 
  
  
  
  
  
    
Interest rate swaps$29
 $—
 $29
 $—
 $31
 $—
 $31
 $—
Total price risk management liabilities$29
 $—
 $29
 $—
 $31
 $—
 $31
 $—
                
LG&E 
  
  
  
  
  
    
Assets 
  
  
  
  
  
    
Cash and cash equivalents$9
 $9
 $—
 $—
 $5
 $5
 $—
 $—
Cash collateral posted to counterparties (c)1
 1
 —
 —
 3
 3
 —
 —
Total assets$10
 $10
 $—
 $—
 $8
 $8
 $—
 $—
                
Liabilities 
  
  
  
  
  
    
Price risk management liabilities: 
  
  
  
  
  
    
Interest rate swaps$29
 $—
 $29
 $—
 $31
 $—
 $31
 $—
Total price risk management liabilities$29
 $—
 $29
 $—
 $31
 $—
 $31
 $—
                

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 September 30, 2017 December 31, 2016
 Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
KU               
Assets               
Cash and cash equivalents$31
 $31
 $—
 $—
 $7
 $7
 $—
 $—
Total assets$31
 $31
 $—
 $—
 $7
 $7
 $—
 $—

(a)Current portion is included in "Other current assets" and long-term portion is included in "Other noncurrent assets" on the Balance Sheets.
(b)Current portion is included in "Price risk management assets" and "Other current liabilities" and noncurrent portion is included in "Price risk management assets" and "Other deferred credits and noncurrent liabilities" on the Balance Sheets.
(c)Included in "Other noncurrent assets" on the Balance Sheets. Represents cash collateral posted to offset the exposure with counterparties related to certain interest rate swaps under master netting arrangements that are not offset.

Price Risk Management Assets/Liabilities - Interest Rate Swaps/Foreign Currency Contracts/Cross-Currency Swaps


(PPL, LKE, LG&E and KU)
 
To manage interest rate risk, PPL, LKE, LG&E and KU use interest rate contracts such as forward-starting swaps, floating-to-fixed swaps and fixed-to-floating swaps. To manage foreign currency risk, PPL uses foreign currency contracts such as forwards, options and cross-currency swaps that contain characteristics of both interest rate and foreign currency contracts. An income approach is used to measure the fair value of these contracts, utilizing readily observable inputs, such as forward interest rates (e.g., LIBOR and government security rates) and forward foreign currency exchange rates (e.g., GBP), as well as inputs that may not be observable, such as credit valuation adjustments. In certain cases, market information cannot practicably be obtained to value credit risk and therefore internal models are relied upon. These models use projected probabilities of default and estimated recovery rates based on historical observances. When the credit valuation adjustment is significant to the overall valuation, the contracts are classified as Level 3.


Financial Instruments Not Recorded at Fair Value(All Registrants)
 
The carrying amounts of long-term debt on the Balance Sheets and their estimated fair values are set forth below. The fair values were estimated using an income approach by discounting future cash flows at estimated current cost of funding rates, which incorporate the credit risk of the Registrants. Long-term debt is classified as Level 2. The effect of third-party credit enhancements is not included in the fair value measurement.
 March 31, 2022December 31, 2021
Carrying
Amount (a)		Fair ValueCarrying
Amount (a)		Fair Value
PPL$11,142 $11,720 $11,140 $12,955 
PPL Electric4,485 4,789 4,484 5,272 
LG&E2,006 2,131 2,006 2,363 
KU2,619 2,779 2,618 3,120 
 September 30, 2017 December 31, 2016
 Carrying
Amount (a)		 Fair Value Carrying
Amount (a)		 Fair Value
PPL$19,558
 $23,357
 $18,326
 $21,355
PPL Electric3,298
 3,724
 2,831
 3,148
LKE5,068
 5,592
 5,065
 5,439
LG&E1,619
 1,768
 1,617
 1,710
KU2,328
 2,602
 2,327
 2,514

(a)Amounts are net of debt issuance costs.
(a)Amounts are net of debt issuance costs.


The carrying amounts of other current financial instruments (except for long-term debt due within one year) approximate their fair values because of their short-term nature.
 
13.14. Derivative Instruments and Hedging Activities
 
Risk Management Objectives
 
(All Registrants)
 
PPL has a risk management policy approved by the Board of Directors to manage market risk associated with commodities, interest rates on debt issuances and foreign exchange (including price, liquidity and volumetric risk) and credit risk (including non-performance risk and payment default risk). The Risk Management Committee, comprised of senior management and

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chaired by the Senior Director-Risk Management, 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, verification of risk and transaction limits, value-at-risk analyses (VaR, 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) and the coordination and reporting of the Enterprise Risk Management program.
 
Market Risk
 
Market risk includes the potential loss that may be incurred as a result of price changes associated with a particular financial or commodity instrument as well as market liquidity and volumetric risks. Forward contracts, futures contracts, options, swaps and structured transactions are utilized as part of risk management strategies to minimize unanticipated fluctuations in earnings caused by changes in commodity prices interest rates and foreign currency exchangeinterest rates. Many of these contracts meet the definition of a derivative. All derivatives are recognized on the Balance Sheets at their fair value, unless NPNS is elected.
 
The following summarizes the market risks that affect PPL and its subsidiaries.
 
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Interest Rate Risk
 
•PPL and its subsidiaries are exposed to interest rate risk associated with forecasted fixed-rate and existing floating-rate debt issuances. PPL and WPD hold over-the-counter cross currency swaps to limit exposure to market fluctuations on interest and principal payments from changes in foreign currency exchange rates and interest rates. PPL, LKE and LG&E utilize over-the-counter interest rate swaps to limit exposure to market fluctuations on floating-rate debt. PPL, LKE, LG&E and KU utilize forward starting interest rate swaps to hedge changes in benchmark interest rates, when appropriate, in connection with future debt issuances.
•PPL and its subsidiaries are exposed to interest rate risk associated with debt securities and derivatives held by defined benefit plans. This risk is significantly mitigated to the extent that the plans are sponsored at, or sponsored on behalf of, the regulated domestic utilities and for certain plans at WPD due to the recovery methods in place.

Foreign Currency Risk (PPL)
PPL is exposed to foreign currency exchange risk primarily associated with its investments in and earnings of U.K. affiliates.


(All Registrants)


Commodity Price Risk
 
PPL is exposed to commodity price risk through its domestic subsidiaries as described below.
 
•PPL Electric is exposedrequired to purchase electricity to fulfill its obligation as a PLR. Potential commodity price risk from its obligation as PLR; however,is mitigated through its PUC-approved cost recovery mechanism substantially eliminates its exposure to this risk. PPL Electric also mitigates its exposure to commodity price risk by entering intoand full-requirement supply agreements to serve its PLR customers. These supply agreementscustomers which transfer the commodity price risk associated with the PLR obligation to the energy suppliers.
•LG&E's and KU's rates include certain mechanisms for fuel, fuel-related expenses and fuel-related expenses.energy purchases. In addition, LG&E's rates include a mechanism for natural gas supply expenses. These mechanisms generally provide for timely recovery of market price fluctuations associated with these expenses.


Volumetric Risk

Volumetric Risk
risk is the risk related to the changes in volume of retail sales due to weather, economic conditions or other factors. PPL is exposed to volumetric risk through its subsidiaries as described below.
WPD is exposed to volumetric risk which is significantly mitigated as a result of the method of regulation in the U.K. Under the RIIO-ED1 price control period, recovery of such exposure occurs on a two year lag. See Note 1 in PPL's 2016 Form 10-K for additional information on revenue recognition under RIIO-ED1.
subsidiaries. PPL Electric, LG&E and KU are exposed to volumetric risk on retail sales, mainly due to weather and other economic conditions for which there is limited mitigation between rate cases.


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Equity Securities Price Risk
 
•PPL and its subsidiaries are exposed to equity securities price risk associated with the fair value of the defined benefit plans' assets. This risk is significantly mitigated at the regulated domestic utilities and for certain plans at WPD due to the recovery methods in place.
•PPL is exposed to equity securities price risk from future stock sales and/or purchases.


Credit Risk
 
Credit risk is the potential loss that may be incurred due to a counterparty's non-performance.
 
PPL is exposed to credit risk from "in-the-money" interest rate and foreign currency derivativestransactions with financial institutions,counterparties as well as additional credit risk through certain of its subsidiaries, as discussed below.
 
In the event a supplier of PPL Electric, LG&E or KU defaults on its obligation, those Registrants would be required to seek replacement power or replacement fuel in the market. In general, subject to regulatory review or other processes, appropriate incremental costs incurred by these entities would be recoverable from customers through applicable rate mechanisms, thereby mitigating the financial risk for these entities.
 
PPL and its subsidiaries have credit policies in place to manage credit risk, including the use of an established credit approval process, daily monitoring of counterparty positions and the use of master netting agreements or provisions. These agreements generally include credit mitigation provisions, such as margin, prepayment or collateral requirements. PPL and its subsidiaries may request additional credit assurance, in certain circumstances, in the event that the counterparties' credit ratings fall below investment grade, their tangible net worth falls below specified percentages or their exposures exceed an established credit limit.
 
Master Netting Arrangements (PPL, LKELG&E and LG&E)KU)
 
Net derivative positions on the balance sheets are not offset against the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) under master netting arrangements.


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PPL, LG&E and KU had a $17 millionno obligation to return or post cash collateral under master netting arrangements at September 30, 2017 and a $19 million obligation to return cash collateral under master netting arrangements at DecemberMarch 31, 2016.

LKE and LG&E had no obligation to return cash collateral under master netting arrangements at September 30, 20172022 and December 31, 2016.2021.
PPL, LKE and LG&E posted $1 million and $3 million of cash collateral under master netting arrangements at September 30, 2017 and December 31, 2016.

See "Offsetting Derivative Instruments" below for a summary of derivative positions presented in the balance sheets where a right of setoff exists under these arrangements.
 
Interest Rate Risk
 
(All Registrants)
 
PPL and its subsidiaries issue debt to finance their operations, which exposes them to interest rate risk. A variety of financial derivative instruments are utilized to adjust the mix of fixed and floating interest rates in their debt portfolio,portfolios, adjust the duration of the debt portfolioportfolios and lock in benchmark interest rates in anticipation of future financing, when appropriate. Risk limits under PPL's risk management program are designed to balance risk exposure to volatility in interest expense and changes in the fair value of the debt portfolio due to changes in benchmark interest rates. In addition, the interest rate risk of certain subsidiaries is potentially mitigated as a result of the existing regulatory framework or the timing of rate cases.


Cash Flow Hedges(PPL)
 
Interest rate risks include exposure to adverse interest rate movements for outstanding variable rate debt and for future anticipated financings. Financial interest rate swap contracts that qualify as cash flow hedges may be entered into to hedge floating interest rate risk associated with both existing and anticipated debt issuances. At September 30, 2017, PPL held an

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aggregate notional value in interest rate swap contracts of £188 million (approximately $242 million based on spot rates) that mature in 2027 to hedge the interest payments of anticipated WPD debt issuances. These swaps require a mandatory early redemption on or before November 30, 2017.

For the three and nine months ended September 30, 2017, PPL had no hedge ineffectiveness associated with interest rate derivatives. For the three months ended September 30, 2016, PPL had no hedge ineffectiveness associated with interest rate derivatives and for the nine months ended September 30, 2016, PPL had an insignificant amount of hedge ineffectiveness associated with interest rate derivatives. such contracts at March 31, 2022.

At September 30, 2017, PPL held an aggregate notional value in cross-currency interest rate swap contracts of $802 million that range in maturity from 2017 through 2028 to hedge the interest payments and principal of WPD's U.S. dollar-denominated senior notes.

For the three and nine months ended September 30, 2017 and 2016, PPL had no hedge ineffectiveness associated with cross-currency interest rate swap derivatives.


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 period and any amounts previously recorded in AOCI are reclassified into earnings once it is determined that the hedged transaction is not probable of occurring.


For the three and nine months ended September 30, 2017, PPL had an insignificant amount of cash flow hedges reclassified into earnings associated with discontinued cash flow hedges. For the threeMarch 31, 2022 and nine months ended September 30, 2016,2021, PPL had no cash flow hedges reclassified into earnings associated with discontinued cash flow hedges.
 
At September 30, 2017,March 31, 2022, the amount of accumulated net unrecognized after-tax gains (losses) on qualifying derivatives expected to be reclassified into earnings during the next 12 months is insignificant. Amounts are reclassified as the hedged interest expense is recorded.
 
Economic Activity(PPL LKE and LG&E)
 
LG&E enters into interest rate swap contracts that economically hedge interest payments on variable rate debt.payments. Because realized gains and losses from the swaps, including terminated swap contracts, are recoverable through regulated rates, any subsequent changes in fair value of these derivatives are included in regulatory assets or liabilities until they are realized as interest expense. Realized gains and losses are recognized in "Interest Expense" on the Statements of Income at the time the underlying hedged interest expense is recorded. At September 30, 2017,March 31, 2022, LG&E held contracts with a notional amount of $147$64 million that rangemature in maturity through 2033.
 
Foreign Currency Risk
(PPL)
PPL is exposed to foreign currency risk, primarily through investments in and earnings of U.K. affiliates. 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 GBP earnings.
Net Investment Hedges
PPL enters into foreign currency contracts on behalf of a subsidiary to protect the value of a portion of its net investment in WPD. The contracts outstanding at September 30, 2017 had a notional amount of £92 million (approximately $125 million based on contracted rates). These contracts mature in December 2017.
At September 30, 2017 and December 31, 2016, PPL had $22 million and $21 million of accumulated net investment hedge after tax gains (losses) that were included in the foreign currency translation adjustment component of AOCI.

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Economic Activity
PPL enters into foreign currency contracts on behalf of a subsidiary to economically hedge GBP-denominated anticipated earnings. At September 30, 2017, the total exposure hedged by PPL was approximately £2.7 billion (approximately $3.7 billion based on contracted rates). These contracts had termination dates ranging from October 2017 through April 2020.
Accounting and Reporting
 
(All Registrants)
 
All derivative instruments are recorded at fair value on the Balance Sheet as an asset or liability unless NPNS is elected. NPNS contracts for PPL and PPL Electric include certain full-requirementfull requirement purchase contracts and other physical purchase contracts. Changes in the fair value of derivatives not designated as NPNS are recognized in earnings unless specific hedge accounting criteria are met and designated as such, except for the changes in fair values of LG&E's interest rate swaps that are recognized as regulatory assets or regulatory liabilities. See Note 6 for amounts recorded in regulatory assets and regulatory liabilities at September 30, 2017March 31, 2022 and December 31, 2016.2021.
 
See Note 1 in each Registrant's 20162021 Form 10-K for additional information on accounting policies related to derivative instruments.
 
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(PPL)

The following table presents the fair value and the location of derivative instruments recorded on the Balance Sheets.Sheets of derivatives not designated as hedging instruments.
September 30, 2017 December 31, 2016
Derivatives designated as
hedging instruments
 
Derivatives not designated
as hedging instruments
 
Derivatives designated as
hedging instruments
 
Derivatives not designated
as hedging instruments
 March 31, 2022December 31, 2021
Assets Liabilities Assets Liabilities Assets Liabilities Assets Liabilities AssetsLiabilitiesAssetsLiabilities
Current: 
  
  
  
      
  
Current:    
Price Risk Management 
  
  
  
  
  
  
  
Price Risk Management    
Assets/Liabilities (a): 
  
  
  
  
  
  
  
Interest rate swaps (b)$—
 $2
 $—
 $5
 $—
 $—
 $—
 $4
Cross-currency swaps (b)28
 —
 —
 —
 32
 —
 —
 —
Foreign currency contracts1
 —
 28
 86
 —
 —
 31
 21
Assets/Liabilities:Assets/Liabilities:    
Interest rate swaps (a)Interest rate swaps (a)$— $1 $— $1 
Total current29
 2
 28
 91
 32
 —
 31
 25
Total current— 1 — 1 
Noncurrent: 
  
  
  
  
  
  
  
Noncurrent:    
Price Risk Management 
  
  
  
  
  
  
  
Price Risk Management    
Assets/Liabilities (a): 
  
  
  
  
  
  
  
Assets/Liabilities:Assets/Liabilities:    
Interest rate swaps (b)(a)—
 —
 —
 24
 —
 —
 —
 27
— 13 — 17 
Cross-currency swaps (b)132
 —
 —
 —
 156
 —
 —
 —
Foreign currency contracts—
 —
 135
 81
 —
 —
 180
 6
Total noncurrent132
 —
 135
 105
 156
 —
 180
 33
Total noncurrent— 13 — 17 
Total derivatives$161
 $2
 $163
 $196
 $188
 $—
 $211
 $58
Total derivatives$— $14 $— $18 
 
(a)Current portion is included in "Price risk management assets" and "Other current liabilities" and noncurrent portion is included in "Price risk management assets" and "Other deferred credits and noncurrent liabilities" on the Balance Sheets.
(b)Excludes accrued interest, if applicable.

(a)Current portion is included in "Price risk management assets" and "Other current liabilities" and noncurrent portion is included in "Price risk management assets" and "Other deferred credits and noncurrent liabilities" on the Balance Sheets. Excludes accrued interest, if applicable.

The following tables present the pre-tax effect of derivative instruments recognized in income, OCI or regulatory assets and regulatory liabilities for the periodsperiod ended September 30, 2017.March 31, 2022.


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Three MonthsThree Months
Derivative
Relationships		Derivative Gain
(Loss) Recognized in
OCI		Location of
Gain (Loss)
Recognized
in Income
on Derivative		Gain (Loss)
Reclassified
from AOCI
into
Income
Cash Flow Hedges:
Interest rate swaps$— Interest expense$(1)
Total$— $(1)

        Three Months Nine Months
Derivative
Relationships		 
Derivative Gain
(Loss) Recognized in
OCI (Effective Portion)
 Location of
Gain (Loss)
Recognized
in Income
on Derivative		 Gain (Loss)
Reclassified
from AOCI
into Income
(Effective
Portion)		 Gain (Loss)
Recognized
in Income
on Derivative
(Ineffective
Portion and
Amount
Excluded from
Effectiveness
Testing)		 Gain (Loss)
Reclassified
from AOCI
into
Income
(Effective
Portion)		 Gain (Loss)
Recognized
in Income
on Derivative
(Ineffective
Portion and
Amount
Excluded from
Effectiveness
Testing)
 Three Months Nine Months     
Cash Flow Hedges:              
Interest rate swaps $—
 $(2) Interest expense $(2) $—
 $(6) $(1)
Cross-currency swaps 1
 (34) Interest expense 1
 —
 1
 —
      Other income (expense) - net 2
 —
 (24) —
Total $1
 $(36)   $1
 $—
 $(29) $(1)
Net Investment Hedges:              
    Foreign currency contracts $1
 $1
          
Derivatives Not Designated as Location of Gain (Loss) Recognized in    
Hedging Instruments Income on Derivative Three Months Nine Months
Foreign currency contracts Other income (expense) - net $(81) $(237)
Interest rate swaps Interest expense (1) (4)
  Total $(82) $(241)
Derivatives Not Designated as Location of Gain (Loss) Recognized as    
Hedging Instruments Regulatory Liabilities/Assets Three Months Nine Months
Interest rate swaps Regulatory assets - noncurrent $1
 $2
Derivatives Not Designated as
Hedging Instruments		Location of Gain (Loss) Recognized in
Income on Derivative		Three Months
Interest rate swapsInterest expense$1 
Derivatives Not Designated as
Hedging Instruments		Location of Gain (Loss) Recognized as
Regulatory Liabilities/Assets		Three Months
Interest rate swapsRegulatory assets - noncurrent$4 
 
The following tables present the pre-tax effect of derivative instruments recognized in income, OCI or regulatory assets and regulatory liabilities for the periodsperiod ended September 30, 2016.March 31, 2021.
 Three Months Three Months
Derivative
Relationships		Derivative Gain
(Loss) Recognized in
OCI		Location of
Gain (Loss)
Recognized
in Income
on Derivative		Gain (Loss)
Reclassified
from AOCI
into Income
Cash Flow Hedges:   
Interest rate swaps$— Interest expense$(1)
Loss from Discontinued Operations (net of taxes)(1)
Cross-currency swaps(46)Loss from Discontinued Operations (net of taxes)(37)
Total$(46) $(39)
Net Investment Hedges:
Foreign currency contracts in discontinued operations$1 
51
        Three Months Nine Months
Derivative
Relationships		 
Derivative Gain
(Loss) Recognized in
OCI (Effective Portion)
 Location of
Gain (Loss)
Recognized
in Income
on Derivative		 Gain (Loss)
Reclassified
from AOCI
into Income
(Effective
Portion)		 Gain (Loss)
Recognized
in Income
on Derivative
(Ineffective
Portion and
Amount
Excluded from
Effectiveness
Testing)		 Gain (Loss)
Reclassified
from AOCI
into
Income
(Effective
Portion)		 Gain (Loss)
Recognized
in Income
on Derivative
(Ineffective
Portion and
Amount
Excluded from
Effectiveness
Testing)
 Three Months Nine Months     
Cash Flow Hedges:              
Interest rate swaps $—
 $(21) Interest expense $(2) $—
 $(5) $—
Cross-currency swaps 78
 87
 Interest expense 2
 —
 2
 —
      Other income (expense) - net 86
 —
 80
 —
Total $78
 $66
   $86
 $—
 $77
 $—
Net Investment Hedges:              
    Foreign currency contracts $—
 $4
          

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Derivatives Not Designated as
Hedging Instruments		Location of Gain (Loss) Recognized in
Income on Derivative		Three Months
Foreign currency contractsLoss from Discontinued operations (net of taxes)$(25)
Interest rate swapsInterest expense(1)
Total$(26)
Derivatives Not Designated as
Hedging Instruments		Location of Gain (Loss) Recognized as
Regulatory Liabilities/Assets		Three Months
Interest rate swapsRegulatory assets - noncurrent$6 

Derivatives Not Designated as Location of Gain (Loss) Recognized in    
Hedging Instruments Income on Derivative Three Months Nine Months
Foreign currency contracts Other income (expense) - net $49
 $280
Interest rate swaps Interest expense (2) (6)
  Total $47
 $274
Derivatives Not Designated as Location of Gain (Loss) Recognized as    
Hedging Instruments Regulatory Liabilities/Assets Three Months Nine Months
Interest rate swaps Regulatory assets - noncurrent $2
 $(7)
The following table presents the effect of cash flow hedge activity on the Statement of Income for the period ended March 31, 2022.

Location and Amount of Gain (Loss) Recognized in Income on Hedging Relationships
Three Months
Interest ExpenseOther Income (Expense) - net
Total income and expense line items presented in the income statement in which the effect of cash flow hedges are recorded$107 $— 
The effects of cash flow hedges:
Gain (Loss) on cash flow hedging relationships:
Interest rate swaps:
Amount of gain (loss) reclassified from AOCI to income(1)— 
Cross-currency swaps:
Hedged items— — 
Amount of gain (loss) reclassified from AOCI to Income— — 
(LKE and LG
The following table presents the effect of cash flow hedge activity on the Statement of Income for the period ended March 31, 2021.
Location and Amount of Gain (Loss) Recognized in Income on Hedging Relationships
Three Months
Interest ExpenseLoss from Discontinued Operations (net of taxes)
Total income and expense line items presented in the income statement in which the effect of cash flow hedges are recorded$153 $(2,043)
The effects of cash flow hedges:
Gain (Loss) on cash flow hedging relationships:
Interest rate swaps:
Amount of gain (loss) reclassified from AOCI to income(1)1 
Cross-currency swaps:
Hedged items— 37 
Amount of gain (loss) reclassified from AOCI to Income— (37)

(LG&E)
 
The following table presents the fair value and the location on the Balance Sheets of derivatives not designated as hedging instruments.
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September 30, 2017 December 31, 2016 March 31, 2022December 31, 2021
Assets Liabilities Assets Liabilities AssetsLiabilities AssetsLiabilities
Current:       
Current:     
Price Risk Management       
Price Risk Management     
Assets/Liabilities:       
Assets/Liabilities:     
Interest rate swaps$—
 $5
 $—
 $4
Interest rate swaps$— $1  $— $1 
Total current—
 5
 —
 4
Total current— 1  — 1 
Noncurrent:     
  
Noncurrent:     
Price Risk Management     
  
Price Risk Management     
Assets/Liabilities:     
  
Assets/Liabilities:     
Interest rate swaps—
 24
 —
 27
Interest rate swaps— 13  — 17 
Total noncurrent—
 24
 —
 27
Total noncurrent— 13  — 17 
Total derivatives$—
 $29
 $—
 $31
Total derivatives$— $14  $— $18 
 
The following tables present the pre-tax effect of derivatives not designated as cash flow hedges that are recognized in income or regulatory assets for the periodsperiod ended September 30, 2017.March 31, 2022.
Location of Gain (Loss) Recognized in
Derivative InstrumentsIncome on DerivativesThree Months
Interest rate swapsInterest expense$1 
Location of Gain (Loss) Recognized in
Derivative InstrumentsRegulatory AssetsThree Months
Interest rate swapsRegulatory assets - noncurrent$4 
  Location of Gain (Loss) Recognized in    
Derivative Instruments Income on Derivatives Three Months Nine Months
Interest rate swaps Interest expense $(1) $(4)
  Location of Gain (Loss) Recognized in    
Derivative Instruments Regulatory Assets Three Months Nine Months
Interest rate swaps Regulatory assets - noncurrent $1
 $2


The following tables present the pre-tax effect of derivatives not designated as cash flow hedges that are recognized in income or regulatory assets for the periodsperiod ended September 30, 2016.March 31, 2021. 
Location of Gain (Loss) Recognized in
Derivative InstrumentsIncome on DerivativesThree Months
Interest rate swapsInterest expense$(1)
Location of Gain (Loss) Recognized in
Derivative InstrumentsRegulatory AssetsThree Months
Interest rate swapsRegulatory assets - noncurrent$6 
  Location of Gain (Loss) Recognized in    
Derivative Instruments Income on Derivatives Three Months Nine Months
Interest rate swaps Interest expense $(2) $(6)
  Location of Gain (Loss) Recognized in    
Derivative Instruments Regulatory Assets Three Months Nine Months
Interest rate swaps Regulatory assets - noncurrent $2
 $(7)

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(PPL, LKE, LG&E and KU)
 
Offsetting Derivative Instruments
 
PPL, LKE, LG&E and KU or certain of their subsidiaries have master netting arrangements in place and also enter into agreements pursuant to which they purchase or sell certain energy and other products. Under the agreements, upon termination of the agreement as a result of a default or other termination event, the non-defaulting party typically would have a right to set off amounts owed under the agreement against any other obligations arising between the two parties (whether under the agreement or not), whether matured or contingent and irrespective of the currency, place of payment or place of booking of the obligation.
 
PPL, LKE, LG&E and KU have elected not to offset derivative assets and liabilities and not to offset net derivative positions against the right to reclaim cash collateral pledged (an asset) or the obligation to return cash collateral received (a liability) under derivatives agreements. The table below summarizes the derivative positions presented in the balance sheets where a right of setoff exists under these arrangements and related cash collateral received or pledged.
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AssetsLiabilities
Assets Liabilities  Eligible for Offset  Eligible for Offset 
  Eligible for Offset     Eligible for Offset  GrossDerivative
Instruments		Cash
Collateral
Received		NetGrossDerivative
Instruments		Cash
Collateral
Pledged		Net
Gross 
Derivative
Instruments
 
Cash
Collateral
Received
 Net Gross 
Derivative
Instruments
 
Cash
Collateral
Pledged
 Net
September 30, 2017               
March 31, 2022March 31, 2022        
Treasury Derivatives               Treasury Derivatives        
PPL$324
 $138
 $17
 $169
 $198
 $138
 $1
 $59
PPL$— $— $— $— $14 $— $— $14 
LKE—
 —
 —
 —
 29
 —
 1
 28
LG&E—
 —
 —
 —
 29
 —
 1
 28
LG&E— — — — 14 — — 14 
AssetsLiabilities
December 31, 2016               
 Eligible for Offset  Eligible for Offset 
GrossDerivative
Instruments		Cash
Collateral
Received		NetGrossDerivative
Instruments		Cash
Collateral
Pledged		Net
December 31, 2021December 31, 2021       
Treasury Derivatives               Treasury Derivatives       
PPL$399
 $27
 $19
 $353
 $58
 $27
 $3
 $28
PPL$— $— $— $— $18 $— $— $18 
LKE—
 —
 —
 —
 31
 —
 3
 28
LG&E—
 —
 —
 —
 31
 —
 3
 28
LG&E— — — — 18 — — 18 
 
Credit Risk-Related Contingent Features
 
Certain derivative contracts contain credit risk-related contingent features which, when in a net liability position, would permit the counterparties to require the transfer of additional collateral upon a decrease in the credit ratings of PPL, LKE, LG&E and KU or certain of their subsidiaries. Most of these features would require the transfer of additional collateral or permit the counterparty to terminate the contract if the applicable credit rating were to fall below investment grade. Some of these features also would allow the counterparty to require additional collateral upon each downgrade in credit rating at levels that remain above investment grade. In either case, if the applicable credit rating were to fall below investment grade, and assuming no assignment to an investment grade affiliate were allowed, most of these credit contingent features require either immediate payment of the net liability as a termination payment or immediate and ongoing full collateralization on derivative instruments in net liability positions.
 
Additionally, certain derivative contracts contain credit risk-related contingent features that require adequate assurance of performance be provided if the other party has reasonable concerns regarding the performance of PPL's, LKE's, LG&E's and KU's obligations under the contracts. 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" features.
 
(PPL, LKE and LG&E)(PPL)


At September 30, 2017,March 31, 2022, there were no derivative contracts in a net liability position that contain credit risk-related contingent features, collateral posted on those positions and the related effect of a decrease in credit ratings below investment grade are summarized as follows:grade.


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 PPL LKE LG&E
Aggregate fair value of derivative instruments in a net liability position with credit risk-related contingent features$43
 $11
 $11
Aggregate fair value of collateral posted on these derivative instruments1
 1
 1
Aggregate fair value of additional collateral requirements in the event of a credit downgrade below investment grade (a)42
 10
 10
(a)Includes the effect of net receivables and payables already recorded on the Balance Sheet.

14. Goodwill and Other Intangible Assets
(PPL)
The change in the carrying amount of goodwill for the nine months ended September 30, 2017 was due to the effect of foreign currency exchange rates on the U.K. Regulated segment.

The change in the carrying amount of other intangible assets for the nine months ended September 30, 2017 was primarily due to a change in WPD’s approach in acquiring rights-of-way relating to WPD equipment impacting landowners' property. A shorter term agreement at a lower cost is now being offered which has also reduced the estimated liability for claims not yet settled.

15. Asset Retirement Obligations


(PPL, LKE, LG&E and KU)

The changes in the carrying amounts of AROs were as follows.
 PPL LKE LG&E KU
Balance at December 31, 2016$488
 $433
 $145
 $288
Accretion16
 15
 5
 10
Effect of foreign exchange rates2
 —
 —
 —
Changes in estimated timing or cost(70) (63) (12) (51)
Obligations settled(30) (30) (20) (10)
Balance at September 30, 2017$406
 $355
 $118
 $237

PPL's, LKE's, LG&E's and KU's ARO liabilities are primarily related to CCR closure costs. See Note 910 for information on the final CCR rule. LG&E also has AROs related to natural gas mains and wells. LG&E's and KU's transmission and distribution lines largely operate under perpetual property easement agreements, which do not generally require restoration upon removal of the property. Therefore, no material AROs are recorded for transmission and distribution assets. For LKE, LG&E and KU, all ARO accretion and depreciation expenses are reclassified as a regulatory asset.asset or regulatory liability. ARO regulatory assets associated with approved ECRcertain CCR projects for CCRs are amortized to expense over a period of 10 to 25 years based on retirement expenditures made related to the obligation.in accordance with regulatory approvals. For other AROs, at the time of retirement, the related ARO regulatory assetdeferred accretion and depreciation expense is offset against the associatedrecovered through cost of removal regulatory liability, PP&E and ARO liability.removal.


LKE recorded decreases of $66 million ($56 million at KU and $10 million at LG&E) to the existing AROs during the nine months ended September 30, 2017 related to the closure of CCR impoundments. These revisions are the result of changes in closure plans related to expected costs and timing of closures. Further changes to AROs, capital plans or operating costs may be required as estimates of future cash flows are refined based on closure developments and regulatory or legal proceedings.
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The changes in the carrying amounts of AROs were as follows.

 PPLLG&EKU
Balance at December 31, 2021$189 $84 $105 
Accretion4 1 3 
Changes in estimated timing or cost1 1 — 
Obligations settled(13)(7)(6)
Balance at March 31, 2022$181 $79 $102 
16. Accumulated Other Comprehensive Income (Loss)
 
(PPL and LKE)(PPL)
 
The after-tax changes in AOCI by component for the periods ended September 30March 31 were as follows.
 Foreign
currency
translation
adjustments		Unrealized gains (losses)
 on qualifying
derivatives		 Defined benefit plans 
Equity
investees'
AOCI		Prior
service
costs		Actuarial
gain
(loss)		Total
PPL
December 31, 2021$— $1 $— $(6)$(152)$(157)
Amounts arising during the period— — 1 (1)— — 
Reclassifications from AOCI— 1 — 1 3 5 
Net OCI during the period— 1 1 — 3 5 
March 31, 2022$— $2 $1 $(6)$(149)$(152)
December 31, 2020$(1,158)$— $— $(16)$(3,046)$(4,220)
Amounts arising during the period303 (30)— — — 273 
Reclassifications from AOCI— 25 — — 40 65 
Net OCI during the period303 (5)— — 40 338 
March 31, 2021$(855)$(5)$— $(16)$(3,006)$(3,882)
 
Foreign
currency
translation
adjustments
 
Unrealized gains (losses)
 on qualifying
derivatives
   Defined benefit plans  
   
Equity
investees'
AOCI
 
Prior
service
costs
 
Actuarial
gain
(loss)
 Total
PPL           
June 30, 2017$(1,420) $(13) $—
 $(7) $(2,083) $(3,523)
Amounts arising during the period(12) 1
 —
 —
 (3) (14)
Reclassifications from AOCI—
 —
 —
 —
 34
 34
Net OCI during the period(12) 1
 —
 —
 31
 20
September 30, 2017$(1,432) $(12) $—
 $(7) $(2,052) $(3,503)
            
December 31, 2016$(1,627) $(7) $(1) $(8) $(2,135) $(3,778)
Amounts arising during the period195
 (29) —
 —
 (14) 152
Reclassifications from AOCI—
 24
 1
 1
 97
 123
Net OCI during the period195
 (5) 1
 1
 83
 275
September 30, 2017$(1,432) $(12) $—
 $(7) $(2,052) $(3,503)
            
June 30, 2016$(716) $(5) $(1) $(5) $(2,130) $(2,857)
Amounts arising during the period(641) 62
 —
 —
 (6) (585)
Reclassifications from AOCI—
 (69) —
 —
 31
 (38)
Net OCI during the period(641) (7) —
 —
 25
 (623)
September 30, 2016$(1,357) $(12) $(1) $(5) $(2,105) $(3,480)
            
December 31, 2015$(520) $(7) $—
 $(6) $(2,195) $(2,728)
Amounts arising during the period(837) 57
 —
 —
 (4) (784)
Reclassifications from AOCI—
 (62) (1) 1
 94
 32
Net OCI during the period(837) (5) (1) 1
 90
 (752)
September 30, 2016$(1,357) $(12) $(1) $(5) $(2,105) $(3,480)
            
LKE           
June 30, 2017    $—
 $(7) $(70) $(77)
Amounts arising during the period    —
 —
 (1) (1)
Reclassifications from AOCI    —
 —
 1
 1
Net OCI during the period    —
 —
 —
 —
September 30, 2017    $—
 $(7) $(70) $(77)
            
December 31, 2016    $(1) $(8) $(61) $(70)
Amounts arising during the period    —
 —
 (12) (12)
Reclassifications from AOCI    1
 1
 3
 5
Net OCI during the period    1
 1
 (9) (7)
September 30, 2017    $—
 $(7) $(70) $(77)
            
June 30, 2016    $(1) $(9) $(33) $(43)
Reclassifications from AOCI    —
 —
 1
 1
Net OCI during the period    —
 —
 1
 1
September 30, 2016    $(1) $(9) $(32) $(42)
            

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Foreign
currency
translation
adjustments
 
Unrealized gains (losses)
 on qualifying
derivatives
   Defined benefit plans  
   
Equity
investees'
AOCI
 
Prior
service
costs
 
Actuarial
gain
(loss)
 Total
December 31, 2015    $—
 $(10) $(36) $(46)
Amounts arising during the period    —
 —
 1
 1
Reclassifications from AOCI    (1) 1
 3
 3
Net OCI during the period    (1) 1
 4
 4
September 30, 2016    $(1) $(9) $(32) $(42)
(PPL)

The following table presents thePPL's gains (losses) and related income taxes for reclassifications from AOCI for the periods ended September 30. The defined benefit planMarch 31.
 Three MonthsAffected Line Item on the
Details about AOCI20222021Statements of Income
Qualifying derivatives   
Interest rate swaps$(1)$(1)Interest Expense
— (1)Loss from Discontinued Operations (net of income taxes)
Cross-currency swaps— (37)Loss from Discontinued Operations (net of income taxes)
Total Pre-tax(1)(39)
Income Taxes— 14  
Total After-tax(1)(25) 
Defined benefit plans  
Prior service costs (a)(1)— 
Net actuarial loss (a)(4)(62)
Total Pre-tax(5)(62)
Income Taxes1 22 
Total After-tax(4)(40)
Total reclassifications during the period$(5)$(65)

(a)    These AOCI components of AOCI are not reflected in their entirety in the Statement of Income during the periods; rather, they are included in the computation of net periodic defined benefit costs (credits) and subject to capitalization.cost. See Note 89 for additional information.
  Three Months Nine Months Affected Line Item on the
Details about AOCI 2017 2016 2017 2016 Statements of Income
Qualifying derivatives          
Interest rate swaps $(2) $(2) $(7) $(5) Interest Expense
Cross-currency swaps 2
 86
 (24) 80
 Other Income (Expense) - net
  1
 2
 1
 2
 Interest Expense
Total Pre-tax 1
 86
 (30) 77
  
Income Taxes (1) (17) 6
 (15)  
Total After-tax —
 69
 (24) 62
  
           
Equity investees' AOCI —
 —
 (1) 1
 Other Income (Expense) - net
Total Pre-tax —
 —
 (1) 1
  
Income Taxes —
 —
 —
 —
  
Total After-tax —
 —
 (1) 1
  
           
Defined benefit plans          
Prior service costs (1) (1) (2) (2)  
Net actuarial loss (44) (41) (125) (121)  
Total Pre-tax (45) (42) (127) (123)  
Income Taxes 11
 11
 29
 28
  
Total After-tax (34) (31) (98) (95)  
           
Total reclassifications during the period $(34) $38
 $(123) $(32)  

17. New Accounting Guidance Pending Adoption
(All Registrants)
Accounting for Revenue from Contracts with Customers
In May 2014, the Financial Accounting Standards Board (FASB) issued accounting guidance that establishes a comprehensive new model for the recognition of revenue from contracts with customers. This model is based on the core principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
The Registrants have completed an assessment of substantially all of their revenue under this new guidance and, for those assessments that have been completed, have determined it will not have a material impact on their current revenue recognition policies. The Registrants' operating revenues are derived primarily from tariff-based sales that result from providing electricity and natural gas to customers with no defined contractual term. Tariff-based sales are within the scope of the new guidance, and operating revenues under the new guidance will be equivalent to the electricity and natural gas delivered and billed in that

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period (including estimated billings), which is consistent with current practice. Management is still assessing the impact of the new standard on certain revenues in the U.K. Regulated segment and does not expect there to be a material impact to current practice, however, the assessment is still ongoing.
The disclosure requirements included in the standard will result in increased information being provided to enable the users of the financial statements to understand the nature, amount, timing and uncertainty of revenue arising from contracts with customers. These disclosures will include disaggregation of revenues by geographic location, customer class or type of service, as applicable for each Registrant. Some revenue arrangements, including alternative revenue programs and lease income, are excluded from the scope of the new guidance and will be accounted for and disclosed separately from revenues from contracts with customers. The Registrants will also be required to disclose the opening and closing balances of accounts receivable and any contract assets or contract liabilities resulting from contracts with customers.

For public business entities, this guidance can be applied using either a full retrospective or modified retrospective transition method, beginning in annual reporting periods after December 15, 2017 and interim periods within those years. The Registrants will adopt this guidance effective January 1, 2018 and will determine the transition method they will apply once they have completed their assessments and the implications of using either the full retrospective or modified retrospective transition methods are known.

Accounting for Leases
In February 2016, the FASB issued accounting guidance for leases. This new guidance requires lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). For income statement purposes, the FASB retained a dual model for lessees, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright line tests.
Lessor accounting under the new guidance is similar to the current model, but updated to align with certain changes to the lessee model and the new revenue recognition standard. Similar to current practice, lessors will classify leases as operating, direct financing, or sales-type.
The standard is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented.
The Registrants are currently assessing the impact of adopting this guidance. The Registrants will adopt this guidance effective January 1, 2019.

Accounting for Financial Instrument Credit Losses
In June 2016, the FASB issued accounting guidance that requires the use of a current expected credit loss (CECL) model for the measurement of credit losses on financial instruments within the scope of this guidance, which includes accounts receivable. The CECL model requires an entity to measure credit losses using historical information, current information and reasonable and supportable forecasts of future events, rather than the incurred loss impairment model required under current GAAP.

For public business entities, this guidance will be applied using a modified retrospective approach and is effective for fiscal years beginning after December 15, 2019, and interim periods within those years. All entities may early adopt this guidance in annual reporting periods beginning after December 15, 2018, including interim periods within those years.

The Registrants are currently assessing the impact of adopting this guidance and the period they will adopt it.

Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

In March 2017, the FASB issued accounting guidance that changes the income statement presentation of net periodic benefit cost. This new guidance requires the service cost component to be disaggregated from other components of net benefit cost and presented in the same income statement line items as other employee compensation costs arising from services rendered during

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the period. The other components of net periodic benefits will be presented separately from the line items that include the service cost and outside of any subtotal of operating income. Only the service cost component is eligible for capitalization.

For public business entities, the guidance on the presentation of the components of net periodic benefit costs will be applied retrospectively. The guidance that limits the capitalization to the service cost component of net periodic benefit costs will be applied prospectively. This guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those years. The Registrants will adopt this guidance effective January 1, 2018.

For PPL’s, LKE’s and LG&E’s U.S. defined benefit pension and PPL's and LKE's other postretirement benefit plans, the adoption of this new guidance is not expected to have a material impact on either the presentation on the income statements or the amounts capitalized and related impact to expense, as the difference between the service cost and the non-service cost components of net periodic benefit costs has not historically been and is not expected to be material in 2018.

For PPL’s U.K. defined benefit pension plans, the non-service cost components of net periodic benefit cost has been in a net-credit position for the current reporting periods and is expected to continue to be in a net-credit position for 2018. Therefore, the estimated impact of adopting this new guidance related to the non-service cost component credits to be reclassified from “Other operation and maintenance” to “Other Income (Expense)-net” on the Statements of Income is approximately $130 million and $90 million for the nine months ended 2017 and 2016.

The Registrants are continuing to assess the expected 2018 impacts of adopting the guidance as the amounts will be affected by market conditions and assumptions selected at December 31, 2017.
Improvements to Accounting for Hedging Activities

In August 2017, the FASB issued accounting guidance that reduces complexity when applying hedge accounting as well as improves transparency about an entity's risk management activities. This guidance eliminates recognizing hedge ineffectiveness for cash flow and net investment hedges and provides for the ability to perform subsequent effectiveness assessments qualitatively. The guidance also makes certain changes to allowable methodologies such as allowing entities to apply the short-cut method to partial-term fair value hedges of interest rate risk as well as expands the ability to apply the critical terms match method to cash flow hedges of groups of forecasted transactions. The guidance also updates certain recognition and presentation requirements as well as disclosure requirements.

For public business entities, this guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. This standard must be adopted using a modified retrospective approach and provides for certain transition elections that must be made prior to the first effectiveness testing date after adoption.

The Registrants are currently assessing the impact of adopting this guidance and the period they will adopt it.

(PPL, LKE, LG&E and KU)

Simplifying the Test for Goodwill Impairment

In January 2017, the FASB issued accounting guidance that simplifies the test for goodwill impairment by eliminating the second step of the quantitative test. The second step of the quantitative test requires a calculation of the implied fair value of goodwill, which is determined in the same manner as the amount of goodwill in a business combination. Under this new guidance, an entity will now compare the estimated fair value of a reporting unit with its carrying value and recognize an impairment charge for the amount the carrying amount exceeds the fair value of the reporting unit.

For public business entities, this guidance will be applied prospectively and is effective for annual or any interim goodwill impairment tests for fiscal years beginning after December 15, 2019. All entities may early adopt this guidance for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

The Registrants are currently assessing the impact of adopting this guidance and the period they will adopt it.


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Item 2. Combined Management's Discussion and Analysis of Financial Condition and
Results of Operations
 
(All Registrants)
 
This "Item 2. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" is separately filed by PPL, PPL Electric, LKE, LG&E and KU. Information contained herein relating to any individual Registrant is filed by such Registrant solely on its own behalf, and no Registrant makes any representation as to information relating to any other Registrant. The specific Registrant to which disclosures are applicable is identified in parenthetical headings in italics above the applicable disclosure or within the applicable disclosure for each Registrant's related activities and disclosures. Within combined disclosures, amounts are disclosed for individual Registrants when significant.
 
The following should be read in conjunction with the Registrants' Condensed Consolidated Financial Statements and the accompanying Notes and with the Registrants' 20162021 Form 10-K. Capitalized terms and abbreviations are defined in the glossary. Dollars are in millions, except per share data, unless otherwise noted.
 
"Management's Discussion and Analysis of Financial Condition and Results of Operations" includes the following information:
 
•"Overview" provides a description of each Registrant's business strategy and a discussion of important financial and operational developments.


•"Results of Operations" for all Registrants includes a "Statement of Income Analysis"Analysis," which discusses significant changes in principal line items on the Statements of Income, comparing the three and nine months ended September 30, 2017March 31, 2022 with the same periodsperiod in 2016. For2021. The PPL "Results of Operations" also includes "Segment Earnings" and "Margins""Adjusted Gross Margins," which provide a detailed analysis of earnings by reportable segment. These discussions include non-GAAP financial measures, including "Earnings from Ongoing Operations" and "Margins""Adjusted Gross Margins" and provide explanations of the non-GAAP financial measures and a reconciliation of the non-GAAP financial measures to the most comparable GAAP measure. The "2017 Outlook" discussion identifies key factors expected to impact 2017 earnings. For PPL Electric, LKE, LG&E and KU, a summary of earnings and margins is also provided.


•"Financial Condition - Liquidity and Capital Resources" provides an analysis of the Registrants' liquidity positions and credit profiles. This section also includes a discussion of rating agency actions.


•"Financial Condition - Risk Management" provides an explanation of the Registrants' risk management programs relating to market and credit risk.


Overview
 
Introduction
 
(PPL)
 
PPL, headquartered in Allentown, Pennsylvania, is a utility holding company. PPL, through its regulated utility subsidiaries, delivers electricity to customers in the U.K., Pennsylvania, Kentucky Virginia and Tennessee;Virginia; delivers natural gas to customers in Kentucky; and generates electricity from power plants in Kentucky.


PPL's principal subsidiaries are shown below (* denotes a Registrant).
 

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PPL Corporation*
PPL Capital Funding
●Provides financing for the operations of PPL and certain subsidiaries
PPL Global
●Engages in the regulated distribution of electricity in the U.K.
LKE*
PPL Electric*
●Engages in the regulated transmission and distribution of electricity in Pennsylvania
LKE
A holding company that owns regulated utility operations through its subsidiaries, LG&E and KU
PPL Capital Funding
Provides financing for the operations of PPL and certain subsidiaries
LG&E*
●Engages in the regulated generation, transmission, distribution and sale of electricity and regulated distribution and sale of natural gas in Kentucky
KU*
●Engages in the regulated generation, transmission, distribution and sale of electricity, primarily in Kentucky
U.K.
Pennsylvania
Regulated Segment
Kentucky

Regulated Segment
Pennsylvania
Regulated Segment
 

PPL's reportable segments' results primarily represent the results of PPL Global, LKE, including its wholly-owned subsidiaries, LG&E and KU, and PPL Electric, except that the reportable segments are also allocated certain corporate level financing and other costs that are not included in the results of PPL Global, LKE and PPL Electric. Although PPL Global is not a Registrant, unaudited annual consolidated financial statements for the U.K. Regulated segment are furnished on a Form 8-K with the SEC.

In addition to PPL, the other Registrants included in this filing are as follows.
 
(PPL Electric)
 
PPL Electric, headquartered in Allentown, Pennsylvania, is a direct wholly ownedwholly-owned subsidiary of PPL and a regulated public utility that is an electricity transmission and distribution service provider in eastern and central Pennsylvania. 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 in its Pennsylvania service area and provides electricity supply to retail customers in that area as a PLR under the Customer Choice Act.
(LKE)
LKE, headquartered PPL Electric was organized in Louisville, Kentucky, is a wholly owned subsidiary of PPL and a holding company that owns regulated utility operations through its subsidiaries, LG&E and KU, which constitute substantially all of LKE's assets. LG&E and KU are engaged in the generation, transmission, distribution and sale of electricity. LG&E also engages in the distribution and sale of natural gas. LG&E and KU maintain separate corporate identities and serve customers in Kentucky under their respective names. KU also serves customers in Virginia under the Old Dominion1920 as Pennsylvania Power name and in Tennessee under the KU name.& Light Company.
 
(LG&E)
 
LG&E, headquartered in Louisville, Kentucky, is a wholly ownedwholly-owned subsidiary of LKE and a regulated utility engaged in the generation, transmission, distribution and sale of electricity and distribution and sale of natural gas in Kentucky. LG&E is subject to regulation as a public utility by the KPSC, and certain of its transmission activities are subject to the jurisdiction of the FERC under the Federal Power Act.
 
(KU)
 
KU, headquartered in Lexington, Kentucky, is a wholly ownedwholly-owned subsidiary of LKE and a regulated utility engaged in the generation, transmission, distribution and sale of electricity in Kentucky Virginia and Tennessee.Virginia. KU is subject to regulation as

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a public utility by the KPSC the VSCC and the Tennessee Public Utility Commission,VSCC, and certain of its transmission and wholesale power activities are subject to the jurisdiction of the FERC under the Federal Power Act. KU serves its Kentucky customers under the KU name and its Virginia customers under the Old Dominion Power name and its Kentucky and Tennessee customers under the KU name.
 
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Business Strategy
 
(All Registrants)
 
PPLPPL's strategy, which is supported by the other Registrants, is to achieve industry-leading performance in safety, reliability, customer satisfaction and operational efficiency; to advance a fully regulated business consisting of seven diverse, high-performing utilities. These utilities are located in the U.K., Pennsylvaniaclean energy transition while maintaining affordability and Kentuckyreliability; to maintain a strong financial foundation and each jurisdiction has different regulatory structures and customer classes. The Company believes this diverse portfolio provides strong earnings and dividend growth potential that will create significantlong-term value for its shareownersour shareowners; to foster a diverse and positions PPL well for continued growthexceptional workplace; and success.to build strong communities in areas that we serve.

Central to PPL's businesses of WPD, PPL Electric, LG&E and KU plan to achieve growth by providing efficient, reliable and safe operations and strong customer service, maintaining constructive regulatory relationships and achieving timely recovery of costs. These businesses are expected to achieve strong, long-term growth in rate base and RAV, as applicable, driven by planned significant capital expenditures to maintain existing assets and improve system reliability and, for LKE, LG&E and KU, to comply with federal and state environmental regulations related to coal-fired electricity generation facilities. Additionally, significant transmission rate base growth is expected through at least 2020 at PPL Electric.
For the U.S. businesses, ourother Registrants' strategy is to recoverrecovering capital project costs efficiently through various rate-making mechanisms, including periodic base rate case proceedings using forward test years, annual FERC formula rate mechanisms and other regulatory agency-approved recovery mechanisms designed to limit regulatory lag. In Kentucky, the KPSC has adopted a series of regulatory mechanisms (ECR, DSM, GLT, fuel adjustment clause, and gas supply clauseclause) and recovery on construction work-in-progress)work-in-progress that reduce regulatory lag and provide timely recovery of and return on, as appropriate, prudently incurred costs. In addition, the KPSC requires a utility to obtain a CPCN prior to constructing a facility, unless the construction is an ordinary extension of existing facilities in the usual course of business or does not involve sufficient capital outlay to materially affect the utility's financial condition. Although such KPSC proceedings do not directly address cost recovery issues, the KPSC, in awarding a CPCN, concludes that the public convenience and necessity require the construction of the facility on the basis that the facility is the lowest reasonable cost alternative to address the need. In Pennsylvania, the FERC transmission formula rate, DSIC mechanism, Smart Meter Rider and other recovery mechanisms are in placeoperate to reduce regulatory lag and provide for timely recovery of and a return on, as appropriate, prudently incurred costs.

Rate base growth inIn March 2021, PPL entered into definitive agreements that strategically reposition the domesticcompany as a U.S.-based energy company focused on building the utilities is expectedof the future. These transactions are intended to result instrengthen PPL’s credit metrics, enhance long-term earnings growth forand predictability, and provide the foreseeable future. In 2017, earnings from the U.K. Regulated segment are expectedcompany with greater financial flexibility to decline mainly dueinvest in sustainable energy solutions. See Note 9 to the unfavorable impact of lower GBP to U.S. dollar exchange rates. RAV growth is expectedFinancial Statements in the U.K. Regulated segment through the RIIO-ED1 price control period which ends on March 31, 2023 and to result in earnings growth after 2017 through at least 2020 at WPD. See "Item 1. Business - Segment Information - U.K. Regulated Segment" of PPL's 20162021 Form 10-K and the "Share Purchase Agreement to Acquire Narragansett Electric" discussion in "Financial and Operational Developments" below for additional information on RIIO-ED1.
To manage financing costs and access to credit markets, and to fund capital expenditures, a key objective of the Registrants is to maintain their investment grade credit ratings and adequate liquidity positions. In addition, the Registrants have financial and operational risk management programs that, among other things, are designed to monitor and manage exposure to earnings and cash flow volatility, as applicable, related to changes in interest rates, foreign currency exchange rates and counterparty credit quality. To manage these risks, PPL generally uses contracts such as forwards, options and swaps. See "Financial Condition - Risk Management" below for further information.


Earnings generated by PPL's U.K. subsidiaries are subject to foreign currency translation risk. Because WPD's earnings represent such a significant portion of PPL's consolidated earnings, PPL enters into foreign currency contracts to economically hedge the value of the GBP versus the U.S. dollar. These hedges do not receive hedge accounting treatment under GAAP.

The U.K. subsidiaries also have currency exposure to the U.S. dollar to the extent of their U.S. dollar denominated debt. To manage these risks, PPL generally uses contracts such as forwards, options and cross-currency swaps that contain characteristics of both interest rate and foreign currency exchange contracts.
As discussed above, a key component of this strategy is to maintain constructive relationships with regulators in all jurisdictions in which we operate (U.K., U.S. federal and state). This is supported by our strong culture of integrity and delivering on commitments to customers, regulators and shareowners, and a commitment to continue to improve our customer service, reliability and efficiency of operations.

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Financial and Operational Developments

U.S. Tax Reform (All Registrants)(PPL)


Tax reform has been discussed asShare Purchase Agreement to Acquire Narragansett Electric

On March 17, 2021, PPL and its subsidiary, PPL Energy Holdings, entered into a high priorityshare purchase agreement (Narragansett SPA) with National Grid USA (National Grid U.S.), a subsidiary of National Grid plc to acquire 100% of the outstanding shares of common stock of Narragansett Electric for approximately $3.8 billion in cash. On May 3, 2021, an Assignment and Assumption Agreement was entered into by PPL, PPL Energy Holdings, PPL Rhode Island Holdings and National Grid U.S. presidential administration. Significant uncertainty exists aswhereby certain interests of PPL Energy Holdings in the Narragansett SPA were assigned to and assumed by PPL Rhode Island Holdings. Pursuant to that Assignment and Assumption Agreement, PPL Rhode Island Holdings became the ultimate changes that may be made,purchasing entity under the timingNarragansett SPA. PPL has agreed to guarantee all obligations of those changesPPL Energy Holdings and PPL Rhode Island Holdings under the Narragansett SPA and the related impactAssignment and Assumption Agreement.

The closing of the acquisition is subject to the Registrants' financial conditionreceipt of certain U.S. regulatory approvals or resultswaivers, and other customary conditions to closing. To date, all required regulatory approvals or waivers have been received. However, a stay has been granted by the Rhode Island Superior Courton the Rhode Island Division of operations. The Registrants are working with industry groupsPublic Utilities and carefully monitoring related developments in an effort both to have inputCarriers order, pending resolution of the appeal. See Note 8 to the legislative process where possible and plan effectively to respondFinancial Statements for additional information regarding the current status of these proceedings. The regulatory approvals remain subject to any forthcoming changes in a manner that will optimize value for ratepayers and shareowners.

U.K. Membership in European Union (PPL)

On March 29, 2017, the U.K. formally notified the European Councilapplicable appeal periods. The consummation of the European Union (EU) of its intenttransaction is not subject to withdraw from the EU, thereby commencing the two-year negotiation period to establish the terms of that withdrawal under Article 50 of the Lisbon Treaty. Article 50 specifies that if a member state decides to withdraw from the EU, it must notify the European Council of its intention to leave the EU, negotiate the terms of withdrawal and establish the legal grounds for its future relationship with the EU. Article 50 provides two years from the date of the Article 50 notification to conclude negotiations. Failure to complete negotiations within two years, unless negotiations are extended, would result in the treaties governing the EU no longer being applicablefinancing condition.

See Note 8 to the U.K. with there being no agreement in place governing the U.K.'s relationship with the EU. Under the terms of Article 50, negotiations can only be extended beyond two years if all of the 27 remaining EU states agree to an extension. Any withdrawal agreement will need to be approved by both the European Council and the European Parliament. There remains significant uncertainty as to the ultimate outcome of the withdrawal negotiations and the related impact on the U.K. economy and the GBP to U.S. dollar exchange rate.Financial Statements for additional information.

PPL has executed hedges to mitigate the foreign exchange risk to the Company's U.K. earnings. As of October 18, 2017, PPL's foreign exchange exposure related to budgeted earnings is 100% hedged for the remainder of 2017 at an average rate of $1.22 per GBP, 99% hedged for 2018 at an average rate of $1.32 per GBP, 100% hedged for 2019 at an average rate of $1.39 per GBP and 15% hedged for 2020 at an average rate of $1.47 per GBP.

PPL cannot predict either the short-term or long-term impact to foreign exchange rates or long-term impact on PPL's financial condition that may be experienced as a result of the actions taken by the U.K. government to withdraw from the EU, although such impacts could be significant.


Regulatory Requirements


(All Registrants)

The Registrants cannot predict the impact that future regulatory requirements may have on their financial condition or results of operations.

(PPL)

In July 2017, Ofgem published an open letter commencing its RIIO-2 framework review, which covers all U.K. gas and electricity, transmission and distribution price controls. The purpose of this framework review is to build on lessons learned from the current price controls and to develop a framework that will be adaptable to meeting the needs of an evolving U.K. energy sector.

The letter sets out the context for the development of the next price controls, RIIO-2, and seeks views from stakeholders on the RIIO-2 framework. Responses to the open letter were published in September 2017 and will be used to guide the full RIIO-2 framework consultation which is expected to be published in the first quarter of 2018. The promulgation of sector specific price controls will begin with the gas and electricity transmission networks, with electricity distribution price control work scheduled to begin in 2020, at which time Ofgem plans to publish its RIIO-ED2 strategy consultation document.

The current electricity distribution price control, RIIO-ED1, continues through March 31, 2023 and will not be impacted by this RIIO-2 consultation process. PPL cannot predict the outcome of this process or the long-term impact it or the final RIIO-ED2 regulations will have on its financial condition or results of operations. 

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(PPL, LKE,Environmental Considerations for Coal-Fired Generation (PPL, LG&E and KU)

The businesses of LKE, LG&E and KU are subject to extensive federal, state and local environmental laws, rules and regulations, including those pertaining to CCRs, GHGsGHG, and ELGs. See Note 9Notes 6, 10 and 15 to the Financial Statements for a discussion of the otherthese significant environmental matters. These and other environmental requirements led PPL, LG&E and KU to retire approximately 1,200 MW of coal-fired generating plants in Kentucky since 2010. As part of the long-term generation planning process, LG&E and KU evaluate a range of factors including the impact of potential stricter environmental regulations, fuel price scenarios, the cost of replacement generation, continued operations and major maintenance costs and the risk of major equipment failures in determining when to retire generation assets. As a result of environmental requirements and aging infrastructure, LG&E anticipates retiring two older coal-fired units at the Mill Creek Plant and KU anticipates retiring one coal-fired unit at the E.W. Brown plant. Mill Creek Unit 1 has 300 MW of capacity and is expected to be retired in 2024. Mill Creek Unit 2 and E.W. Brown Unit 3 have capacities of 297 MW and 412 MW and are expected to be retired in 2028. LG&E and KU anticipate earning recovery of and return on any remaining net book value of these assets through the Retired Asset Recovery (RAR) rider. See Note 7 to the Financial Statements in the Registrants' 2021 Form 10-K for additional information related to the RAR rider.


FERC Transmission Rate Filing (PPL, LG&E and KU)

In 2018, LG&E and KU applied to the FERC requesting elimination of certain on-going credits to a sub-set of transmission customers relating to the 1998 merger of LG&E's and KU's parent entities and the 2006 withdrawal of LG&E and KU from the Midcontinent Independent System Operator, Inc. (MISO), a regional transmission operator and energy market. The application sought termination of LG&E's and KU's commitment to provide certain Kentucky municipalities mitigation for certain horizontal market power concerns arising out of the 1998 LG&E and KU merger and 2006 MISO withdrawal. The amounts at issue are generally waivers or credits granted to a limited number of Kentucky municipalities for either certain LG&E and KU or MISO transmission charges incurred for transmission service received. In 2019, the FERC granted LG&E's and KU's request to remove the ongoing credits, conditioned upon the implementation by LG&E and KU of a transition mechanism for certain existing power supply arrangements, which was subsequently filed, modified, and approved by the FERC in 2020 and 2021. In 2020, LG&E and KU and other parties filed appeals with the D.C. Circuit Court of Appeals regarding FERC's orders on the elimination of the mitigation and required transition mechanism. Oral arguments in the appellate proceeding occurred on February 14, 2022. LG&E and KU cannot predict the outcome of the respective appellate and FERC proceedings. LG&E and KU currently receive recovery of the waivers and credits provided through other rate mechanisms and such rate recovery would be anticipated to be adjusted in future rate proceedings consistent with potential changes or terminations of the waivers and credits, as such become effective.

Rate Case Proceedings (PPL and KU)
(LKE and KU)

On September 29, 2017,August 31, 2021, KU filed a request seeking approval fromwith the VSCC tofor an annual increase annualin Virginia base electricity revenue by $7 million, representing an increaserates of 10.4%.approximately $12 million. KU's request is based on an authorized 10.42%10.4% return on equity. On March 11, 2022, KU and the VSCC staff reached a partial stipulation and recommendation agreement providing KU with an increase in base electricity rates of approximately $7 million based on an authorized 9.4% return on equity. A hearing on open issues occurred on March 17, 2022 and the Hearing Examiner subsequently issued a report supporting the proposed agreement as appropriate. Subject to regulatory review and approval, new rates would become effective JulyJune 1, 2018.2022.


(PPL, LKE and KU)

In October 2016, KU filed a request with the FERC to modify its formula rates to provide for the recovery of CCR impoundment closure costs from its departing municipal customers. In December 2016, the FERC accepted the revised rate schedules providing recovery of the costs effective December 31, 2016, subject to refund, and established limited hearing and settlement judge procedures relating to determining the applicable amortization period. In March 2017, the parties reached a settlement in principle regarding a suitable amortization period. In June 2017, a FERC judge issued an order implementing the settlement's rates on an interim basis, effective July 1, 2017. In August 2017, the FERC issued a final order approving the settlement.

Results of Operations

(PPL)
The "Statement of Income Analysis" discussion below describes significant changes in principal line items on PPL's Statements of Income, comparing the three and nine months ended September 30, 2017 with the same periods in 2016. The "Segment Earnings" and "Margins" discussions for PPL provide a review of results by reportable segment. These discussions include non-GAAP financial measures, including "Earnings from Ongoing Operations" and "Margins," and provide explanations of the non-GAAP financial measures and a reconciliation of those measures to the most comparable GAAP measure. The "2017 Outlook" discussion identifies key factors expected to impact 2017 earnings.

Tables analyzing changes in amounts between periods within "Statement of Income Analysis," "Segment Earnings" and "Margins" are presented on a constant GBP to U.S. dollar 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 GBP to U.S. dollar exchange rate basis are calculated by translating current year results at the prior year weighted-average GBP to U.S. dollar exchange rate.

(PPL Electric, LKE, LG&E and KU)
A "Statement of Income Analysis, Earnings and Margins" is presented separately for PPL Electric, LKE, LG&E and KU.
The "Statement of Income Analysis" discussion below describes significant changes in principal line items on the Statements of Income, comparing the three and nine months ended September 30, 2017March 31, 2022 with the same periodsperiod in 2016.2021. The "Earnings" discussion provides"Segment Earnings" and "Adjusted Gross Margins" discussions provide a summaryreview of earnings. The "Margins" discussion includesresults by reportable segment. These discussions include non-GAAP financial measures, including "Earnings from Ongoing Operations" and "Adjusted Gross Margins," and provide explanations of the non-GAAP financial measures and a reconciliation of non-GAAP financialthose measures to "Operating Income."the most comparable GAAP measure.

(PPL Electric, LG&E and KU)

A "Statement of Income Analysis" is presented separately for PPL Electric, LG&E and KU. The "Statement of Income Analysis" discussion below describes significant changes in principal line items on the Statements of Income, comparing the three months ended March 31, 2022 with the same period in 2021.

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(All Registrants)

The results for interim periods can be disproportionately influenced by numerous factors and developments and by seasonal variations. As such, the results of operations for interim periods do not necessarily indicate results or trends for the year or future periods.




PPL: Statement of Income Analysis, Segment Earnings and Adjusted Gross Margins


Statement of Income Analysis

Net income for the periods ended September 30March 31 includes the following results.results:
 Three Months
 20222021$ Change
Operating Revenues$1,782 $1,498 $284 
Operating Expenses
Operation
Fuel212 177 35 
Energy purchases352 220 132 
Other operation and maintenance433 367 66 
Depreciation271 267 4 
Taxes, other than income60 52 8 
Total Operating Expenses1,328 1,083 245 
Other Income (Expense) - net— — — 
Interest Expense107 153 (46)
Income from Continuing Operations Before Income Taxes347 262 85 
Income Taxes74 59 15 
Income from Continuing Operations After Income Taxes273 203 70 
Loss from Discontinued Operations (net of income taxes) (Note 8)— (2,043)2,043 
Net Income (Loss)$273 $(1,840)$2,113 
 Three Months Nine Months
 2017 2016 $ Change 2017 2016 $ Change
Operating Revenues$1,845
 $1,889
 $(44) $5,521
 $5,685
 $(164)
Operating Expenses           
Operation           
Fuel202
 227
 (25) 576
 607
 (31)
Energy purchases143
 151
 (8) 494
 531
 (37)
Other operation and maintenance397
 417
 (20) 1,217
 1,292
 (75)
Depreciation257
 232
 25
 745
 692
 53
Taxes, other than income69
 76
 (7) 214
 229
 (15)
Total Operating Expenses1,068
 1,103
 (35) 3,246
 3,351
 (105)
Other Income (Expense) - net(76) 49
 (125) (235) 284
 (519)
Interest Expense230
 223
 7
 669
 671
 (2)
Income Taxes116
 139
 (23) 321
 510
 (189)
Net Income$355
 $473
 $(118) $1,050
 $1,437
 $(387)


Operating Revenues

The increase (decrease) in operating revenues for the periods ended September 30, 2017 compared with 2016 was due to:
 Three Months Nine Months
Domestic:   
PPL Electric Distribution price (a)$16
 $46
PPL Electric Distribution volume(20) (30)
PPL Electric PLR Revenue (b)(1) (32)
PPL Electric Transmission Formula Rate20
 25
LKE Base rates31
 31
LKE Volumes(41) (86)
LKE Fuel and other energy prices(8) 10
Other(3) (2)
Total Domestic(6) (38)
U.K.:   
Price(3) 74
Volume(12) (24)
Foreign currency exchange rates(21) (183)
Other(2) 7
Total U.K.(38) (126)
Total$(44) $(164)

(a)Distribution rider prices resulted in increases of $16 million and $40 million for the three and nine months ended September 30, 2017.Three Months
(b)Decrease for the nine months ended September 30, 2017 compared with 2016, primarily due to lower
PPL Electric distribution volume (a)$12 
PPL Electric PLR (b)114 
PPL Electric transmission formula rate (c)45 
LG&E retail rates (d)28 
LG&E fuel and other energy prices at PPL Electric.(e)37 
KU retail rates (d)30 
KU fuel and other energy prices (e)26 
Other(8)
Total$284 

Table
(a)The increase was due to weather and higher customer volumes.
(b)The increase was primarily due to higher energy prices, higher customer volumes and lower volumes of Contents
shopping customers.


Fuel

Fuel decreased $25(c)The increase was primarily due to a $27 million for revenue reduction recorded in the three months ended September 30, 2017 compared with 2016,March 31, 2021 due to a challenge to the transmission formula rate return on equity, which was partially offset by $11 million of lower revenue in the three months ended March 31, 2022 due to the settled reduction in the return on equity, $17 million due to a higher PPL zonal peak load billing factor in 2022 and $10 million due to returns on additional transmission capital investments. See Note 6 to the Financial Statements for additional details on the transmission formula rate return on equity reduction.
(d)The increase was due to new base rates approved by the KPSC effective July 1, 2021.
(e)The increase was primarily due to a $16 million decrease in volumes driven by milder weather in the third quarterhigher recoveries of 2017fuel and a $9 million decrease in market prices for coal.

Fuel decreased $31 million for the nine months endedSeptember 30, 2017 compared with 2016, primarilyenergy purchases due to a $28 million decrease in volumes driven by milder weather in 2017 and a $4 million decrease in market prices for coal.higher commodity costs.


Energy PurchasesFuel


Energy purchases decreased $8Fuel increased $35 million for the three months ended September 30, 2017March 31, 2022 compared with 2016,2021, primarily due to a $12$9 million decreaseincrease in PLR volumes,commodity costs at LG&E and a $27 million increase in commodity costs, partially offset by a $6$7 million increasedecrease in PLR pricesvolumes due to the timing of generation maintenance outages at PPL Electric.KU.

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Energy Purchases

Energy purchases decreased $37increased $132 million for the ninethree months ended September 30, 2017March 31, 2022 compared with 2016,2021, primarily due to a $24 million decrease inhigher PLR prices of $90 million and an $11 million decrease inhigher PLR volumes of $16 million at PPL Electric.Electric and a $25 million increase at LG&E primarily due to an increase in commodity costs.


Other Operation and Maintenance


The increase (decrease) in other operation and maintenance for the periods ended September 30, 2017 compared with 2016 was due to:
 Three Months Nine Months
Domestic:   
PPL Electric Act 129$3
 $11
PPL Electric payroll-related costs(5) (6)
PPL Electric vegetation management(4) (7)
PPL Electric bad debts(4) (10)
Other(1) 1
U.K.:   
Pension (a)(17) (52)
Foreign currency exchange rates(2) (18)
Network maintenance4
 (4)
Third-party engineering(1) 5
Other7
 5
Total$(20) $(75)

(a)The decreases were primarily dueThree Months
PPL Electric bad debts$5 
PPL Electric storm costs8 
PPL Electric universal service programs3 
Charges related to increases in expected returns on higher asset balances and lower interest costs duethe sale of the U.K. utility business(7)
Charges related to a lower discount rate.the acquisition of Narragansett Electric (a)34 
Stock compensation expense3 
Other20 
Total$66 


(a)Costs related to the integration of Narragansett Electric, including approximately $12 million of IT systems implementation costs and approximately $22 million of other external consultant and internal costs. PPL does not expect to recover these costs. See Note 8 to the Financial Statements for additional information.

Depreciation

Depreciation increased $25The increase in depreciation was due to:
Three Months
Additions to PP&E, net (a)$(2)
Depreciation rate change effective July 20216 
Total$4 

(a)The decrease was primarily due to a decrease in software and computer hardware depreciation of $12 million at PPL Electric Utilities, as a result of end-of-life retirements, partially offset by increases of $4 million at LG&E and $53$3 million for the three and nine months ended September 30, 2017 compared with 2016, primarilyat KU due to additional assets placed into service, net of retirements, and higher depreciation rates effective July 1, 2017 at LG&E and KU, partially offset by the impact of foreign currency exchange rates at WPD.retirements.

Taxes, Other Than Income

The increase (decrease) in taxes, other than income was due to:
Three Months
State gross receipts tax$6 
Domestic property tax expense2 
Total$8 

Other Income (Expense) - net

OtherThe increase (decrease) in other income (expense) - net decreased $125 million and $519 million for the three and nine months ended September 30, 2017 compared with 2016, primarilywas due to changes in realized and unrealized gains (losses) on foreign currency contracts to economically hedge GBP denominated earnings from WPD.to:
Three Months
Defined benefit plans - non-service credits (Note 9)$6 
Other(6)
Total$— 


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Interest Expense


The increase (decrease) in interest expense for the periods ended September 30, 2017 compared with 2016 was due to:
Three Months
Long-term debt (a)$(42)
Other(4)
Total$(46)
 Three Months Nine Months
Long-term debt interest expense$9
 $22
Short-term debt interest expense2
 6
Foreign currency exchange rates(4) (31)
Other—
 1
Total$7
 $(2)

(a)    The decrease was primarily due to PPL Capital Funding debt that was redeemed in June and July 2021.

Income Taxes


The increase (decrease) in income taxes was due to:
Three Months
Change in pre-tax income$27 
Valuation allowance adjustments(5)
Amortization of investment tax credit including deferred taxes on basis difference(2)
Amortization of excess deferred federal and state income taxes(6)
Other1 
Total$15 
Loss from Discontinued Operations (net of income taxes)

Loss from discontinued operations (net of income taxes) decreased $2,043 million for the three months ended March 31, 2022 compared with 2021. The decrease was due to the completion of the sale of the U.K. utility business in the second quarter of 2021. See "Discontinued Operations" in Note 8 to the Financial Statements for summarized results of operations of the U.K. utility business in 2021.

Segment Earnings

PPL's Net Income by reportable segment for the periods ended September 30, 2017 compared with 2016March 31 was due to:
 Three Months Nine Months
Change in pre-tax income at current period tax rates$(56) $(198)
Valuation allowances adjustments—
 (4)
U.S. income tax on foreign earnings - net of foreign tax credit (a)(7) (21)
Impact of U.K. Finance Acts (b)39
 30
Stock-based compensation1
 5
Other—
 (1)
Total$(23) $(189)
(a)Lower income taxes primarily due to the tax benefit of accelerated pension contributions made in the first quarter of 2017. The related tax benefit is recognized over the annual period as a result of utilizing an estimated annual effective tax rate.
(b)The U.K. Finance Act 2016, enacted in September 2016, reduces the U.K. statutory income tax rate effective April 1, 2020 from 18% to 17%. As a result, PPL reduced its net deferred tax liabilities and recognized a deferred tax benefit during the three and nine months ended September 30, 2016.

Segment Earnings
PPL's net income by reportable segments for the periods ended September 30 were as follows:
 Three Months
 20222021$ Change
Kentucky Regulated$179 $146 $33 
Pennsylvania Regulated143 113 30 
Corporate and Other (a)(49)(56)7 
Discontinued Operations (b)— (2,043)2,043 
Net Income$273 $(1,840)$2,113 
 Three Months Nine Months
 2017 2016 $ Change 2017 2016 $ Change
U.K. Regulated$126
 $281
 $(155) $560
 $915
 $(355)
Kentucky Regulated125
 126
 (1) 299
 314
 (15)
Pennsylvania Regulated95
 91
 4
 251
 263
 (12)
Corporate and Other (a)9
 (25) 34
 (60) (55) (5)
Net Income$355
 $473
 $(118) $1,050
 $1,437
 $(387)

(a)Primarily represents financing and certain other costs incurred at the corporate level that have not been allocated or assigned to the segments, which are presented to reconcile segment information to PPL's consolidated results. The changes in 2017 compared with 2016 are primarily due to the timing impact of recording annual estimated taxes. This impact is expected to continue to reverse through the remainder of the year.

(a)Primarily represents financing and certain other costs incurred at the corporate level that have not been allocated or assigned to the segments, which are presented to reconcile segment information to PPL's consolidated results.
(b)See Note 8 to the Financial Statements for additional information.

Earnings from Ongoing Operations

Management utilizes "Earnings from Ongoing Operations" as a non-GAAP financial measure that should not be considered as an alternative to net income, an indicator of operating performance determined in accordance with GAAP. PPL believes that Earnings from Ongoing Operations is useful and meaningful to investors because it provides management's view of PPL's earnings performance as another criterion in making investment decisions. In addition, PPL's management uses Earnings from Ongoing Operations in measuring achievement of certain corporate performance goals, including targets for certain executive incentive compensation. Other companies may use different measures to present financial performance.

Earnings from Ongoing Operations is adjusted for the impact of special items. Special items are presented in the financial tables on an after-tax basis with the related income taxes on special items separately disclosed. Income taxes on special items, when applicable, are calculated based on the effectivestatutory tax rate of the entity where the activity is recorded. Special items include:may include items such as:



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• Unrealized gains or losses on foreign currency economic hedges (as discussed below).
• Gains and losses on sales of assets not in the ordinary course of business.
• Impairment charges.
• Significant workforce reduction and other restructuring effects.
• Acquisition and divestiture-related adjustments.
• Significant losses on early extinguishment of debt.
• Other charges or credits that are, in management's view, non-recurring or otherwise not reflective of the company's ongoing operations.
Unrealized gains or losses on foreign currency economic hedges include the changes in fair value of foreign currency contracts used to hedge GBP-denominated anticipated earnings. The changes in fair value of these contracts are recognized immediately within GAAP earnings. Management believes that excluding these amounts from Earnings from Ongoing Operations until settlement of the contracts provides a better matching of the financial impacts of those contracts with the economic value of PPL's underlying hedged earnings. See Note 13 to the Financial Statements and "Risk Management" below for additional information on foreign currency economic activity.


PPL's Earnings from Ongoing Operations by reportable segment for the periods ended September 30March 31 were as follows:
 Three Months
 20222021$ Change
Kentucky Regulated$183 $142 $41 
Pennsylvania Regulated143 126 17 
Corporate and Other(21)(49)28 
Earnings from Ongoing Operations$305 $219 $86 
 Three Months Nine Months
 2017 2016 $ Change 2017 2016 $ Change
U.K. Regulated$163
 $235
 $(72) $682
 $741
 $(59)
Kentucky Regulated125
 126
 (1) 300
 314
 (14)
Pennsylvania Regulated95
 91
 4
 251
 263
 (12)
Corporate and Other5
 (25) 30
 (64) (53) (11)
Earnings from Ongoing Operations$388
 $427
 $(39) $1,169
 $1,265
 $(96)


See "Reconciliation of Earnings from Ongoing Operations" below for a reconciliation of this non-GAAP financial measure to Net Income.

U.K. Regulated Segment
The U.K. Regulated segment consists of PPL Global, which primarily includes WPD's regulated electricity distribution operations, the results of hedging the translation of WPD's earnings from GBP into U.S. dollars, and certain costs, such as U.S. income taxes, administrative costs and certain acquisition-related financing costs. The U.K. Regulated segment represents 53% of PPL's Net Income for the nine months ended September 30, 2017 and 39% of PPL's assets at September 30, 2017.
Net Income and Earnings from Ongoing Operations for the periods ended September 30 include the following results.
 Three Months Nine Months
 2017 2016 $ Change 2017 2016 $ Change
Operating revenues$477
 $515
 $(38) $1,547

$1,673
 $(126)
Other operation and maintenance69
 78
 (9) 195
 260
 (65)
Depreciation58
 58
 —
 170
 178
 (8)
Taxes, other than income33
 34
 (1) 94
 104
 (10)
Total operating expenses160
 170
 (10) 459
 542
 (83)
Other Income (Expense) - net(80) 50
 (130) (236) 283
 (519)
Interest Expense103
 100
 3
 294
 310
 (16)
Income Taxes8
 14
 (6) (2) 189
 (191)
Net Income126

281
 (155) 560

915
 (355)
Less: Special Items(37) 46
 (83) (122) 174
 (296)
Earnings from Ongoing Operations$163
 $235
 $(72) $682
 $741
 $(59)
The following after-tax gains (losses), which management considers special items, impacted the U.K. Regulated segment's results and are excluded from Earnings from Ongoing Operations during the periods ended September 30.

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 Income Statement Line Item Three Months Nine Months
  2017 2016 2017 2016
Foreign currency economic hedges, net of tax of $20, $103, $66, $34 (a)Other Income (Expense) - net $(37) $(193) $(122) $(65)
Settlement of foreign currency contracts, net of tax of $0, ($108), $0, ($108) (b)Other Income (Expense) - net —
 202
 —
 202
Change in U.K. tax rate (c)Income Taxes —
 37
 —
 37
Total Special Items  $(37) $46
 $(122) $174
(a)Represents unrealized gains (losses) on contracts that economically hedge anticipated GBP-denominated earnings. The three and nine months ended September 30, 2016 include the reversal of $310 million ($202 million after-tax) of unrealized gains related to the settlement of 2017 and 2018 contracts.
(b)In the third quarter of 2016, PPL settled 2017 and 2018 foreign currency contracts, resulting in $310 million of cash received ($202 million after-tax).
The settlement did not have a material impact on net income as the contracts were previously marked to fair value and recognized in "Other Income (Expense) - net" on the Statements of Income.
(c)The U.K. Finance Act 2016, enacted in September 2016, reduced the U.K.'s statutory income tax rate effective April 1, 2020 from 18% to 17%. As a result, PPL reduced its net deferred tax liability and recognized an income tax benefit of $42 million in the third quarter of 2016. Of this amount, $37 million relates to deferred taxes recorded in prior years and was treated as a special item.

The changes in the components of the U.K. Regulated segment's results between these periods are due to the factors set forth below, which reflect amounts classified as U.K. Gross Margins, the items that management considers special and the effects of movements in foreign currency exchange, including the effects of foreign currency hedge contracts, on separate lines and not in their respective Statement of Income line items.
 Three Months Nine Months
U.K. 
  
Gross margins$(17) $52
Other operation and maintenance7
 50
Depreciation(3) (12)
Interest expense(7) (15)
Other(2) (4)
Income taxes(2) 2
U.S.   
Interest expense and other1
 3
Income taxes(3) 28
Foreign currency exchange, after-tax(46) (163)
Earnings from Ongoing Operations(72) (59)
Special items, after-tax(83) (296)
Net Income$(155) $(355)

U.K.
See "Margins - Changes in Margins" for an explanation of U.K. Gross Margins.

Lower other operation and maintenance expense for the three month period primarily due to $17 million from lower pension expense due to an increase in expected returns on higher asset balances and lower interest costs due to a lower discount rate, partially offset by $4 million from higher network maintenance expense.

Lower other operation and maintenance expense for the nine month period primarily due to $52 million from lower pension expense due to an increase in expected returns on higher asset balances and lower interest costs due to a lower discount rate.

Higher interest expense for the three and nine month periods primarily due to higher interest expense on indexed linked bonds.

Higher income taxes for the three month period primarily due to $9 million related to tax rate changes to deferred taxes, partially offset by a decrease of $4 million from lower pre-tax income.


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Lower income taxes for the nine month period primarily due to decreases of $10 million related to accelerated tax deductions and $6 million from 2016 expense related to the finalization of U.K. tax returns, partially offset by increases of $14 million from higher pre-tax income.

U.S.

Lower income taxes for the nine month period primarily due to the tax benefit on accelerated pension contributions made in the first quarter of 2017.

Kentucky Regulated Segment

The Kentucky Regulated segment consists primarily of LKE'sthe regulated electricity generation, transmission and distribution operations ofconducted by LG&E and KU, as well as LG&E's regulated distribution and sale of natural gas. In addition, certain acquisition-related financing costs are allocated to the Kentucky Regulated segment. The Kentucky Regulated segment represents 28% of PPL's Net Income for the nine months ended September 30, 2017 and 35% of PPL's assets at September 30, 2017.

Net Income and Earnings from Ongoing Operations for the periods ended September 30March 31 include the following results.


Three Months
20222021$ Change
Operating revenues$1,004 $885 $119 
Fuel  212 177 35 
Energy purchases96 71 25 
Other operation and maintenance225 220 5 
Depreciation169 156 13 
Taxes, other than income23 21 2 
Total operating expenses725 645 80 
Other Income (Expense) - net(2)— (2)
Interest Expense47 51 (4)
Interest Expense with Affiliate (a)14 13 1 
Income Taxes37 30 7 
Net Income179 146 33 
Less: Special Items(4)4 (8)
Earnings from Ongoing Operations$183 $142 $41 
 Three Months Nine Months
 2017 2016 $ Change 2017 2016 $ Change
Operating revenues$818
 $835
 $(17) $2,350
 $2,382
 $(32)
Fuel  202
 227
 (25) 576
 607
 (31)
Energy purchases22
 24
 (2) 120
 118
 2
Other operation and maintenance199
 197
 2
 598
 603
 (5)
Depreciation114
 102
 12
 324
 301
 23
Taxes, other than income17
 16
 1
 49
 46
 3
Total operating expenses554
 566
 (12) 1,667
 1,675
 (8)
Other Income (Expense) - net1
 (3) 4
 (5) (9) 4
Interest Expense65
 65
 —
 196
 194
 2
Income Taxes75
 75
 —
 183
 190
 (7)
Net Income125
 126
 (1) 299
 314
 (15)
Less: Special Items—
 —
 —
 (1) —
 (1)
Earnings from Ongoing Operations$125
 $126
 $(1) $300
 $314
 $(14)


(a)Borrowings between LKE and PPL were $1,456 million and $2,166 million as of March 31, 2022 and December 31, 2021.

The following after-tax gain (loss)gains (losses), which management considers a special item,items, impacted the Kentucky Regulated segment's results and isare excluded from Earnings from Ongoing Operations during the periods ended September 30.March 31.
Income Statement Line ItemThree Months
20222021
Strategic corporate initiatives, net of tax of $1Other Income (Expense)$(4)$— 
Valuation allowance adjustment (a)Income Taxes— 4 
Total Special Items$(4)$4 

(a)Adjustment of valuation allowances related to certain tax credits recorded in 2017 as a result of the TCJA.

63
 Income Statement Line Item Three Months Nine Months
  2017 2016 2017 2016
Adjustment to investment, net of tax of $0, $0, $0, $0 (a)Other Income (Expense) - net $—
 $—
 $(1) $—
Total Special Items  $—
 $—
 $(1) $—

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(a)KU recorded a write-off of an equity method investment.

The changes in the components of the Kentucky Regulated segment's results between these periods arewere due to the factors set forth below, which reflect amounts classified as Kentucky Adjusted Gross Margins and the itemitems that management considers special on separate lines and not in their respective Statement of Income line items.

Three Months
Kentucky Adjusted Gross Margins$89 
Other operation and maintenance(6)
Depreciation(40)
Taxes, other than income(4)
Other Income (Expense) - net3 
Interest Expense4 
Interest Expense with Affiliate(1)
Income Taxes(4)
Earnings from Ongoing Operations41 
Special items, after-tax(8)
Net Income$33 
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 Three Months Nine Months
Kentucky Gross Margins$10
 $(13)
Other operation and maintenance(5) 6
Depreciation(10) (15)
Taxes, other than income—
 (2)
Other Income (Expense) - net4
 5
Interest Expense—
 (2)
Income Taxes—
 7
Earnings from Ongoing Operations(1) (14)
Special items, after-tax—
 (1)
Net Income$(1) $(15)
•See "Margins"Adjusted Gross Margins - Changes in Adjusted Gross Margins" for an explanation of Kentucky Adjusted Gross Margins.


•Higher depreciation expense fordue to a $30 million increase related to certain ECR and GLT depreciation expenses transferred to base rates as a result of the three2020 Kentucky rate case, a $5 million increase due to additional assets placed into service, net of retirements and nine month periods primarilya $5 million increase due to higher depreciation rates, effective July 1, 2017, and additions to PP&E, net of retirements.2021.

Pennsylvania Regulated Segment

The Pennsylvania Regulated segment includes the regulated electricity transmission and distribution operations of PPL Electric. In addition, certain costs are allocated to the Pennsylvania Regulated segment. The Pennsylvania Regulated segment represents 24% of PPL's Net Income for the nine months ended September 30, 2017 and 25% of PPL's assets at September 30, 2017.


Net Income and Earnings from Ongoing Operations for the periods ended September 30March 31 include the following results.
Three Months
  
20222021$ Change
Operating revenues$775 $605 $170 
Energy purchases256 149 107 
Other operation and maintenance160 128 32 
Depreciation98 108 (10)
Taxes, other than income37 32 5 
Total operating expenses551 417 134 
Other Income (Expense) - net8 5 3 
Interest Expense39 43 (4)
Income Taxes50 37 13 
Net Income143 113 30 
Less: Special Item— (13)13 
Earnings from Ongoing Operations$143 $126 $17 

The following after-tax gains (losses), which management considers special items, impacted the Pennsylvania Regulated segment's results and are excluded from Earnings from Ongoing Operations during the periods ended March 31.
Income Statement Line ItemThree Months
20222021
Transmission formula rate return on equity reduction, net of tax of $0, $6 (a)Operating revenues$— $(13)
Total Special Items$— $(13)

(a) Represents the portion of the reduction recognized in the March 31, 2021 Statement of Income related to the period from May 21, 2020 through December 31, 2020. See Note 6 to the Financial Statements for additional information.

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 Three Months Nine Months
 2017 2016 $ Change 2017 2016 $ Change
Operating revenues$547
 $539
 $8
 $1,620
 $1,619
 $1
Energy purchases121
 129
 (8) 374
 414
 (40)
Other operation and maintenance132
 143
 (11) 435
 431
 4
Depreciation77
 64
 13
 228
 185
 43
Taxes, other than income27
 26
 1
 79
 79
 —
Total operating expenses357
 362
 (5) 1,116
 1,109
 7
Other Income (Expense) - net5
 4
 1
 11
 12
 (1)
Interest Expense36
 32
 4
 105
 97
 8
Income Taxes64
 58
 6
 159
 162
 (3)
Net Income95
 91
 4
 251
 263
 (12)
Less: Special Items (a)—

—
 —
 —

—
 —
Earnings from Ongoing Operations$95
 $91
 $4
 $251
 $263
 $(12)
(a)There are no items that management considers special for the periods presented.

The changes in the components of the Pennsylvania Regulated segment's results between these periods are due to the factors set forth below, which reflect amounts classified as Pennsylvania Adjusted Gross Margins and the items that management considers special on a separate linelines and not in their respective Statement of Income line items.
Three Months
Pennsylvania Adjusted Gross Margins$45 
Other operation and maintenance(28)
Depreciation(1)
Taxes, other than income1 
Other Income (Expense) - net3 
Interest Expense4 
Income Taxes(7)
Earnings from Ongoing Operations17 
Special Item, after tax13 
Net Income$30 
 Three Months Nine Months
Pennsylvania Gross Margins$6
 $14
Other operation and maintenance16
 8
Depreciation(8) (29)
Taxes, other than income(1) 1
Other Income (Expense) - net1
 (1)
Interest Expense(4) (8)
Income Taxes(6) 3
Net Income$4
 $(12)


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•See "Margins"Adjusted Gross Margins - Changes in Adjusted Gross Margins" for an explanation of Pennsylvania Adjusted Gross Margins.


Lower•Higher other operation and maintenance expense for the three month period primarily due to $5higher Corporate support costs of $10 million, higher nonrecoverable storm costs of lower payroll related expenses, $4$8 million of lowerand higher bad debt expense and $4 million of lower vegetation management expenses.$5 million.


Lower other operation and maintenance expense for the nine month period primarily due to $10 million of lower bad debt expenses, $7 million of lower vegetation management expenses and $7 million of lower payroll related expenses, partially offset by $17 million of higher corporate service costs allocated to PPL Electric.

Higher depreciation expense for the three and nine month periods primarily due to transmission and distribution additions placed into service related to the ongoing efforts to improve reliability and replace aging infrastructure, net of retirements.

Higher interest expense for the nine month period primarily due to the issuance of $475 million of 3.950% First Mortgage Bonds in May 2017.

Reconciliation of Earnings from Ongoing Operations

The following tables contain after-tax gains (losses), in total, which management considers special items, that are excluded from Earnings from Ongoing Operations and a reconciliation to PPL's "Net Income" for the periods ended September 30.March 31.
2022 Three Months
KY
Regulated		PA
Regulated		Corporate
and Other		Discontinued Operations (a)Total
Net Income$179 $143 $(49)$— $273 
Less: Special Items (expense) benefit:
Talen litigation costs, net of tax of $1 (b)— — (4)— (4)
Strategic corporate initiatives, net of tax of $1, $0, $1(4)— (4)— (8)
Acquisition integration, net of tax of $6 (c)— — (21)— (21)
Solar panel impairment, net of tax of $0— — 1 — 1 
Total Special Items(4)— (28)— (32)
Earnings from Ongoing Operations$183 $143 $(21)$— $305 
2021 Three Months
KY
Regulated		PA
Regulated		Corporate
and Other		Discontinued Operations (a)Total
Net Income$146 $113 $(56)$(2,043)$(1,840)
Less: Special Items (expense) benefit:
Loss from Discontinued Operations— — — (2,047)(2,047)
Talen litigation costs, net of tax of $1 (b)— — (3)— (3)
Valuation allowance adjustment (d)4 — (4)4 4 
Transmission formula rate return on equity reduction, net of tax of $6— (13)— — (13)
Total Special Items4 (13)(7)(2,043)(2,059)
Earnings from Ongoing Operations$142 $126 $(49)$— $219 

(a)See Note 8 to the Financial Statements for additional information.
(b)PPL incurred legal expenses related to litigation with its former affiliate, Talen Montana. See Note 10 to the Financial Statements for additional information.
(c)Costs related to the integration of Narragansett Electric, including approximately $9 million of IT systems implementation costs and approximately $12 million primarily related to other external consultant costs. PPL does not expect to recover these costs. See Note 8 to the Financial Statements for additional information.
(d)Adjustment of valuation allowances related to certain tax credits recorded in 2017 as a result of the TCJA.
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 2017 Three Months
 
U.K.
Regulated
 
KY
Regulated
 
PA
Regulated
 
Corporate
and Other
 Total
Net Income$126
 $125
 $95
 $9
 $355
Less: Special Items (expense) benefit:         
Foreign currency economic hedges, net of tax of $20(37) —
 —
 —
 (37)
Spinoff of the Supply segment, net of tax of ($2) (a)—
 —
 —
 4
 4
Total Special Items(37) —
 —
 4
 (33)
Earnings from Ongoing Operations$163
 $125
 $95
 $5
 $388
 2016 Three Months
 
U.K.
Regulated
 
KY
Regulated
 
PA
Regulated
 
Corporate
and Other
 Total
Net Income$281
 $126
 $91
 $(25) $473
Less: Special Items (expense) benefit:         
Foreign currency economic hedges, net of tax of $103(193) —
 —
 —
 (193)
Other:
 
 
 
 
Settlement of foreign currency contracts, net of tax of ($108)202
 —
 —
 —
 202
Change in U.K. tax rate37
 —
 —
 —
 37
Total Special Items46
 —
 —
 —
 46
Earnings from Ongoing Operations$235
 $126
 $91
 $(25) $427
 2017 Nine Months
 
U.K.
Regulated
 
KY
Regulated
 
PA
Regulated
 
Corporate
and Other
 Total
Net Income$560
 $299
 $251
 $(60) $1,050
Less: Special Items (expense) benefit:         
Foreign currency economic hedges, net of tax of $66(122) —
 —
 —
 (122)
Spinoff of the Supply segment, net of tax of ($2) (a)—
 —
 —
 4
 4
Adjustment to investment, net of tax of $0—
 (1) —
 —
 (1)
Total Special Items(122) (1) —
 4
 (119)
Earnings from Ongoing Operations$682
 $300
 $251
 $(64) $1,169

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 2016 Nine Months
 
U.K.
Regulated
 
KY
Regulated
 
PA
Regulated
 
Corporate
and Other
 Total
Net Income$915
 $314
 $263
 $(55) $1,437
Less: Special Items (expense) benefit:         
Foreign currency economic hedges, net of tax of $34(65) —
 —
 —
 (65)
Spinoff of the Supply segment, net of tax of $2—
 —
 —
 (2) (2)
Other:

 

 

 

 

Settlement of foreign currency contracts, net of tax of ($108)202
 —
 —
 —
 202
Change in U.K. tax rate37
 —
 —
 —
 37
Total Special Items174
 —
 —
 (2) 172
Earnings from Ongoing Operations$741
 $314
 $263
 $(53) $1,265

(a)Represents a tax settlement associated with the former Supply segment. Included in "Taxes, other than income" on the Statements of Income.

Adjusted Gross Margins

Management also utilizes the following non-GAAP financial measures as indicators of performance for its businesses:

"U.K. Gross Margins" is a single financial performance measure of the electricity distribution operations of the U.K. Regulated segment. In calculating this measure, direct costs such as connection charges from National Grid, which owns and manages the electricity transmission network in England and Wales, and Ofgem license fees (recorded in "Other operation and maintenance" on the Statements of Income) are deducted from operating revenues, as they are costs passed through to customers. As a result, this measure represents the net revenues from the delivery of electricity across WPD's distribution network in the U.K. and directly related activities.
•"Kentucky Adjusted Gross Margins" is a single financial performance measure of the electricity generation, transmission and distribution operations of the Kentucky Regulated segment, LKE, LG&E and KU, as well as the Kentucky Regulated segment's LKE's and LG&E's distribution and sale of natural gas. In calculating this measure, fuel, energy purchases and certain variable costs of production (recorded in "Other operation and maintenance" on the Statements of Income) are deducted from operating revenues. In addition, certain other expenses, recorded in "Other operation and maintenance",maintenance," "Depreciation" and "Taxes, other than income" on the Statements of Income, associated with approved cost recovery mechanisms are offset against the recovery of those expenses, which are included in revenues. These mechanisms allow for direct recovery of these expenses and, in some cases, returns on capital investments and performance incentives. As a result, this measure represents the net revenues from electricity and gas operations.


•"Pennsylvania Adjusted Gross Margins" is a single financial performance measure of the electricity transmission and distribution operations of the Pennsylvania Regulated segment and PPL Electric.segment. In calculating this measure, utility revenues and expenses associated with approved recovery mechanisms, including energy provided as a PLR, are offset with minimal impact on earnings. Costs associated with these mechanisms are recorded in "Energy purchases," "Other operation and maintenance,"maintenance" (which are primarily Act 129, Storm Damage and Universal Service program costs), "Depreciation" (which is primarily related to the Act 129 Smart Meter program) and "Taxes, other than income,"income" (which is primarily gross receipts tax) on the Statements of Income. This measure represents the net revenues from the Pennsylvania Regulated segment's and PPL Electric's electricity 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 report their results of operations. Management believes these measures provide additional useful criteria to make investment decisions. These performance measures are used, in conjunction with other information, by senior management and PPL's Board of Directors to manage operations and analyze actual results compared with budget.

Changes in Adjusted Gross Margins

The following table shows Adjusted Gross Margins by PPL's reportable segment and by component, as applicable for the periods ended September 30March 31 as well as the change between periods. The factors that gave rise to the changes are described following the table.

 Three Months
 20222021$ Change
Kentucky Regulated   
Kentucky Adjusted Gross Margins$659 $570 $89 
Pennsylvania Regulated
Pennsylvania Adjusted Gross Margins
Distribution$265 $247 $18 
Transmission183 156 27 
Total Pennsylvania Adjusted Gross Margins$448 $403 $45 
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 Three Months Nine Months
 2017 2016 $ Change 2017 2016 $ Change
U.K. Regulated 
  
  
  
  
  
U.K. Gross Margins$441
 $476
 $(35) $1,446
 $1,566
 $(120)
Impact of changes in foreign currency exchange rates    (18)     (172)
U.K. Gross Margins excluding impact of foreign currency exchange rates    $(17)     $52
            
Kentucky Regulated           
Kentucky Gross Margins           
LG&E$245
 $237
 $8
 $678
 $676
 $2
KU302
 300
 2
 842
 857
 (15)
Total Kentucky Gross Margins$547
 $537
 $10
 $1,520
 $1,533
 $(13)
            
Pennsylvania Regulated           
Pennsylvania Gross Margins           
Distribution$233
 $246
 $(13) $710
 $721
 $(11)
Transmission134
 115
 19
 357
 332
 25
Total Pennsylvania Gross Margins$367
 $361
 $6
 $1,067
 $1,053
 $14

U.K.Kentucky Adjusted Gross Margins
U.K. Gross Margins, excluding the impact of changes in foreign currency exchange rates, decreased for the three months ended September 30, 2017 compared with 2016, primarily due to $12 million of lower volumes and $3 million from the April 1, 2017 price decrease, which includes lower true-up mechanisms partially offset by higher base demand revenue.

U.K. Gross Margins, excluding the impact of changes in foreign currency exchange rates, increased for the nine months ended September 30, 2017 compared with 2016, primarily due to $83 million from the April 1, 2016 price increase partially offset by $24 million of lower volumes and $9 million from the April 1, 2017 price decrease, which includes lower true-up mechanisms partially offset by higher base demand revenue.


Kentucky Gross Margins
KentuckyAdjusted Gross Margins increased for the three months ended September 30, 2017March 31, 2022 compared with 2016,2021, primarily due to higher base rates of $31$58 million ($18 million at LG&E and $13 million at KU) as newenvironmental and gas cost recoveries added to base rates wereof $33 million, partially offset by $9 million of lower adjusted gross margins as a result of the economic relief billing credit, net of amortization.

The increase in base rates was the result of new rates approved by the KPSC effective July 1, 2017, partially offset by $20 million2021. The environmental and gas cost recoveries added to base rates were the result of lower sales volumes due to milder weatherthe transfer of certain ECR and GLT expenses into base rates as a result of the 2020 Kentucky rate case. This transfer results in 2017 ($8 million at LG&Edepreciation and $12 million at KU).

other operation and maintenance expenses associated with the ECR and GLT programs being excluded from margins in the second half of 2021, while the recovery of such costs remain in Kentucky Gross Margins decreased for the nine months ended September 30, 2017 compared with 2016, primarily due to $51 millionthrough base rates.
66
Table of lower sales volumes due to milder weather in 2017 ($17 million at LG&E and $34 million at KU), partially offset by higher base rates of $31 million ($18 million at LG&E and $13 million at KU) as new base rates were approved by the KPSC effective July 1, 2017.Contents


Pennsylvania Adjusted Gross Margins


Distribution


Distribution margins decreased for the three and nine month periods ended September 30, 2017 compared with 2016, primarily due to $11 million and $16 million of lower electricity sales volumes due to milder weather in 2017.

Transmission

Transmission marginsAdjusted Gross Margins increased for the three months ended September 30, 2017March 31, 2022 compared with 2016,2021 primarily due to an increasehigher sales volumes of $20$5 million fromand favorable weather of $5 million. The remaining items were not individually significant in comparison to the prior year.

Transmission

Transmission Adjusted Gross Margins increased for the three months ended March 31, 2022 compared with 2021, primarily due to $17 million as a result of a higher annual PPL zonal peak load billing factor in 2022 and $10 million of returns on additional transmission capital investments focused on replacing aging infrastructure and improving reliability.


Table of Contents


Transmission margins increased for the nine months ended September 30, 2017 compared with 2016, primarily due to an increase of $42 million primarily from returns on additional transmission capital investments focused on replacing aging infrastructure and improving reliability, partially offset by a $17 million decrease as a result of a lower PPL zonal peak load billing factor which affected transmission revenue in the first five months of 2017.

Reconciliation of Adjusted Gross Margins

The following tables contain the components from the Statement of Income that are included in the non-GAAP financial measures and a reconciliation to PPL's "Operating Income" for the periods ended September 30.March 31.
2022 Three Months
Kentucky
 Adjusted Gross
Margins		Pennsylvania Adjusted Gross
Margins		Other (a)Operating
Income (b)
Operating Revenues$1,004 $775 $3 $1,782 
Operating Expenses
Fuel212 — — 212 
Energy purchases96 256 — 352 
Other operation and maintenance24 29 380 433 
Depreciation13 6 252 271 
Taxes, other than income— 36 24 60 
Total Operating Expenses345 327 656 1,328 
Total   $659 $448 $(653)$454 
 2021 Three Months
Kentucky
 Adjusted Gross
Margins		Pennsylvania Adjusted Gross
Margins		Other (a)Operating
Income (b)
Operating Revenues$885 $624 $(11)$1,498 
Operating Expenses
Fuel177 — — 177 
Energy purchases71 149 — 220 
Other operation and maintenance25 25 317 367 
Depreciation40 17 210 267 
Taxes, other than income2 30 20 52 
Total Operating Expenses315 221 547 1,083 
Total   $570 $403 $(558)$415 

(a)Represents amounts excluded from Adjusted Gross Margins.
(b)As reported on the Statements of Income.

 2017 Three Months
 U.K.
Gross
Margins		 Kentucky
Gross
Margins		 PA Gross
Margins		 Other (a) Operating
Income (b)
Operating Revenues$467
(c)$818
 $547
 $13
 $1,845
Operating Expenses         
Fuel—
 202
 —
 —
 202
Energy purchases—
 22
 121
 —
 143
Other operation and maintenance26
 30
 29
 312
 397
Depreciation—
 16
 5
 236
 257
Taxes, other than income—
 1
 25
 43
 69
Total Operating Expenses26
 271
 180
 591
 1,068
Total   $441
 $547
 $367
 $(578) $777
67
 2016 Three Months
 U.K.
Gross
Margins		 Kentucky
Gross
Margins		 PA Gross
Margins		 Other (a) Operating
Income (b)
Operating Revenues$504
(c)$835
 $539
 $11
 $1,889
Operating Expenses         
Fuel—
 227
 —
 —
 227
Energy purchases—
 24
 129
 (2) 151
Other operation and maintenance28
 33
 24
 332
 417
Depreciation—
 14
 —
 218
 232
Taxes, other than income—
 —
 25
 51
 76
Total Operating Expenses28
 298
 178
 599
 1,103
Total   $476
 $537
 $361
 $(588) $786
 2017 Nine Months
 
U.K.
Gross
Margins
 
Kentucky
Gross
Margins
 
PA Gross
Margins
 Other (a) 
Operating
Income (b)
Operating Revenues$1,517
(c)$2,350
 $1,620
 $34
 $5,521
Operating Expenses         
Fuel—
 576
 —
 —
 576
Energy purchases—
 120
 374
 —
 494
Other operation and maintenance71
 82
 89
 975
 1,217
Depreciation—
 48
 14
 683
 745
Taxes, other than income—
 4
 76
 134
 214
Total Operating Expenses71
 830
 553
 1,792
 3,246
Total   $1,446
 $1,520
 $1,067
 $(1,758) $2,275

Table of Contents

 2016 Nine Months
 
U.K.
Gross
Margins
 
Kentucky
Gross
Margins
 
PA Gross
Margins
 Other (a) 
Operating
Income (b)
Operating Revenues$1,641
(c)$2,382
 $1,619
 $43
 $5,685
Operating Expenses         
Fuel—
 607
 —
 —
 607
Energy purchases—
 118
 414
 (1) 531
Other operation and maintenance75
 81
 77
 1,059
 1,292
Depreciation—
 40
 —
 652
 692
Taxes, other than income—
 3
 75
 151
 229
Total Operating Expenses75
 849
 566
 1,861
 3,351
Total   $1,566
 $1,533
 $1,053
 $(1,818) $2,334
(a)Represents amounts excluded from Margins.
(b)As reported on the Statements of Income.
(c)Excludes ancillary revenues of $11 million and $30 million for the three and nine months ended September 30, 2017 and $11 million and $32 million for the three and nine months ended September 30, 2016.

2017 Outlook

(PPL)
The following projections and factors underlying these projections (on an after-tax basis) are provided for PPL's segments and the Corporate and Other category and the related Registrants.

(PPL's U.K. Regulated Segment)
Lower net income is projected in 2017 compared with 2016, primarily driven by a lower assumed GBP exchange rate in 2017, lower true-up mechanisms, lower incentive revenues, higher interest expense and higher depreciation expense, partially offset by lower operation and maintenance expense, including pension expense, and higher base revenue from the April 1, 2017 price reset.

(PPL's Kentucky Regulated Segment and LKE, LG&E and KU)
Lower net income is projected in 2017 compared with 2016, primarily driven by lower electricity sales volumes due to unfavorable weather in 2017 and higher depreciation expense, partially offset by electricity and gas base rate increases.

(PPL's Pennsylvania Regulated Segment and PPL Electric)
Relatively flat net income is projected in 2017 compared with 2016, primarily driven by higher transmission earnings and lower operation and maintenance expense, offset by higher depreciation expense and higher interest expense.
(PPL's Corporate and Other Category)
Relatively flat costs are projected in 2017 compared with 2016.
(All Registrants)
Earnings in future periods are subject to various risks and uncertainties. See "Forward-Looking Information," the rest of this Item 2, Notes 6 and 9 to the Financial Statements and "Item 1A. Risk Factors" in this Form 10-Q (as applicable) and "Item 1. Business" and "Item 1A. Risk Factors" in the Registrants' 2016 Form 10-K for a discussion of the risks, uncertainties and factors that may impact future earnings.

Table of Contents

PPL Electric: Statement of Income Analysis Earnings and Margins


Statement of Income Analysis


Net income for the periods ended September 30March 31 includes the following results.
 Three Months
 20222021$ Change
Operating Revenues$775 $605 $170 
Operating Expenses
Operation
Energy purchases256 149 107 
Other operation and maintenance160 128 32 
Depreciation98 108 (10)
Taxes, other than income37 32 5 
Total Operating Expenses551 417 134 
Other Income (Expense) - net6 5 1 
Interest Income from Affiliate2 — 2 
Interest Expense39 43 (4)
Income Taxes50 37 13 
Net Income$143 $113 $30 
 Three Months Nine Months
 2017 2016 $ Change 2017 2016 $ Change
Operating Revenues$547
 $539
 $8
 $1,620
 $1,619
 $1
Operating Expenses           
Operation           
Energy purchases121
 129
 (8) 374
 414
 (40)
Other operation and maintenance133
 144
 (11) 435
 431
 4
Depreciation77
 64
 13
 228
 185
 43
Taxes, other than income27
 26
 1
 79
 79
 —
Total Operating Expenses358
 363
 (5) 1,116
 1,109
 7
Other Income (Expense) - net4
 4
 —
 8
 12
 (4)
Interest Income from Affiliate2
 —
 2
 3
 —
 3
Interest Expense36
 32
 4
 105
 97
 8
Income Taxes64
 58
 6
 159
 162
 (3)
Net Income$95
 $90
 $5
 $251
 $263
 $(12)


Operating Revenues

The increase (decrease) in operating revenues for the periods ended September 30, 2017 compared with 2016 was due to:
 Three Months Nine Months
Distribution Price (a)$16
 $46
Distribution volume(20) (30)
PLR (b)(1) (32)
Transmission Formula Rate20
 25
Other(7) (8)
Total$8
 $1

(a)Three Months
Distribution rider prices resulted in increases of $16 million and $40 million for the three and nine months ended September 30, 2017.price (a)$(6)
Distribution volume (b)12 
PLR (c)114 
Transmission formula rate (d)45 
(b)The decrease for the nine month period was primarily due to lower energy prices as described below.
Other5 
Total$170 


(a)The decrease was primarily due to reconcilable cost recovery mechanisms approved by the PUC.
(b)The increase was due to weather and higher customer volumes.
(c)The increase was primarily due to higher energy prices, higher customer volumes and lower volumes of shopping customers.
(d)The increase was primarily due to a $27 million revenue reduction recorded in the three months ended March 31, 2021 due to a challenge to the transmission formula rate return on equity, which was partially offset by $11 million of lower revenue in the three months ended March 31, 2022 due to the settled reduction in the return on equity, $17 million due to a higher PPL zonal peak load billing factor in 2022 and $10 million due to returns on additional transmission capital investments. See Note 6 to the Financial Statements for additional details on the transmission formula rate return on equity reduction.

Energy Purchases


Energy purchases decreased $8increased $107 million for the three months ended September 30, 2017March 31, 2022 compared with 2016,2021. This increase was primarily due to lower PLR volumes of $12 million partially offset by higher PLR prices of $6 million.

Energy purchases decreased $40 million for the nine months ended September 30, 2017 compared with 2016, primarily due to lower PLR prices of $24$90 million and lowerhigher PLR volumes of $11$16 million.


Other Operation and Maintenance


The increase (decrease) in other operation and maintenance for the periods ended September 30, 2017 compared with 2016 was due to:

Three Months
Support costs$10 
Storm costs8 
Universal service programs3 
Bad debts5 
Other6 
Total$32 
68

 Three Months Nine Months
Corporate service costs$—
 $17
Vegetation management(4) (7)
Payroll-related costs(5) (6)
Act 1293
 11
Bad debts(4) (10)
Other(1) (1)
Total$(11) $4

Depreciation

Depreciation increased $13 million and $43decreased $10 million for the three and nine months ended September 30, 2017March 31, 2022 compared with 2016,2021, primarily due to additional assets placed into service, related to the ongoing efforts to ensure the reliabilitya $12 million decrease in software and computer hardware depreciation as a result of the delivery system and the replacement of aging infrastructure as well as the roll-out of the Act 129 Smart Meter program, net ofend-of-life retirements.

Interest ExpenseIncome Taxes


Interest expenseIncome taxes increased $4 million and $8$13 million for the three and nine months ended September 30, 2017March 31, 2022 compared with 2016,2021 primarily due to the May 2017 issuance of $475 million of 3.950% First Mortgage Bonds due 2047.a change in pre-tax income.


Income Taxes

The increase (decrease) in income taxes for the periods ended September 30, 2017 compared with 2016 was due to:
 Three Months Nine Months
Change in pre-tax income at current period tax rates$3
 $(7)
Stock-based compensation—
 2
Other3
 2
Total$6
 $(3)

Earnings
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Net Income$95
 $90
 $251
 $263
Special items, gains (losses), after-tax (a)—
 —
 —
 —
(a)There are no items that management considers special for the periods presented.

Earnings increased for the three month period in 2017 compared with 2016 as higher transmission margins from additional capital investments and lower other operation and maintenance expense were offset by lower sales volumes due to unfavorable weather and higher depreciation expense.

Earnings decreased for the nine month period in 2017 compared with 2016, primarily due to higher depreciation expense, primarily due to transmission and distribution additions placed into service related to the ongoing efforts to improve reliability and replace aging infrastructure, net of retirements, higher interest expense, and lower distribution margins primarily due to lower sales volumes due to unfavorable weather in 2017. Higher transmission margins from additional capital investments were partially offset by a lower PPL zonal peak load billing factor.

The table below quantifies the changes in the components of Net Income between these periods, which reflect amounts classified as Pennsylvania Gross Margins on a separate line and not in their respectiveLG&E: Statement of Income line items.Analysis

Table of Contents

 Three Months Nine Months
Pennsylvania Gross Margins$6
 $14
Other operation and maintenance16
 8
Depreciation(8) (29)
Taxes, other than income(1) 1
Other Income (Expense) - net2
 (1)
Interest Expense(4) (8)
Income Taxes(6) 3
Net Income$5
 $(12)
Margins
"Pennsylvania Gross Margins" is a non-GAAP financial performance measure that management utilizes as an indicator of the performance of its business. See PPL's "Results of Operations - Margins" for information on why management believes this measure is useful and for explanations of the underlying drivers of the changes between periods.

The following tables contain the components from the Statements of Income that are included in this non-GAAP financial measure and a reconciliation to "Operating Income" for the periods ended September 30. 
 2017 Three Months 2016 Three Months
 
PA Gross
Margins
 Other (a) 
Operating
Income (b)
 PA Gross
Margins		 Other (a) 
Operating
Income (b)
Operating Revenues$547
 $—
 $547
 $539
 $—
 $539
Operating Expenses           
Energy purchases121
 —
 121
 129
 —
 129
Other operation and maintenance29
 104
 133
 24
 120
 144
Depreciation5
 72
 77
 —
 64
 64
Taxes, other than income25
 2
 27
 25
 1
 26
Total Operating Expenses180
 178
 358
 178
 185
 363
Total   $367
 $(178) $189
 $361
 $(185) $176
            
 2017 Nine Months 2016 Nine Months
 PA Gross
Margins		 Other (a) 
Operating
Income (b)
 PA Gross
Margins		 Other (a) 
Operating
Income (b)
Operating Revenues$1,620
 $—
 $1,620
 $1,619
 $—
 $1,619
Operating Expenses           
Energy purchases374
 —
 374
 414
 —
 414
Other operation and maintenance89
 346
 435
 77
 354
 431
Depreciation14
 214
 228
 —
 185
 185
Taxes, other than income76
 3
 79
 75
 4
 79
Total Operating Expenses553
 563
 1,116
 566
 543
 1,109
Total   $1,067
 $(563) $504
 $1,053
 $(543) $510

(a)Represents amounts excluded from Margins.
(b)As reported on the Statements of Income.

Table of Contents

LKE: Statement of Income Analysis, Earnings and Margins

Statement of Income Analysis

Net income for the periods ended September 30March 31 includes the following results.
 Three Months
 20222021$ Change
Operating Revenues
Retail and wholesale$481 $421 $60 
Electric revenue from affiliate12 7 5 
Total Operating Revenues493 428 65 
Operating Expenses
Operation
Fuel81 67 14 
Energy purchases91 66 25 
Energy purchases from affiliate2 5 (3)
Other operation and maintenance100 96 4 
Depreciation74 66 8 
Taxes, other than income12 11 1 
Total Operating Expenses360 311 49 
Other Income (Expense) - net(1)(2)1 
Interest Expense20 21 (1)
Income Taxes19 19 — 
Net Income$93 $75 $18 
 Three Months Nine Months
 2017 2016 $ Change 2017 2016 $ Change
Operating Revenues$818
 $835
 $(17) $2,350
 $2,382
 $(32)
Operating Expenses           
Operation           
Fuel202
 227
 (25) 576
 607
 (31)
Energy purchases22
 24
 (2) 120
 118
 2
Other operation and maintenance199
 197
 2
 598
 603
 (5)
Depreciation114
 102
 12
 324
 301
 23
Taxes, other than income17
 16
 1
 49
 46
 3
Total Operating Expenses554
 566
 (12) 1,667
 1,675
 (8)
Other Income (Expense) - net1
 (3) 4
 (5) (9) 4
Interest Expense49
 50
 (1) 148
 147
 1
Interest Expense with Affiliate5
 4
 1
 13
 12
 1
Income Taxes79
 79
 —
 195
 202
 (7)
Net Income$132
 $133
 $(1) $322
 $337
 $(15)

Operating Revenues


The increase (decrease) in operating revenues for the periods ended September 30, 2017 compared with 2016 was due to:
Three Months
Fuel and other energy prices (a)$37 
Retail rates (b)28 
Economic relief billing credit, net of amortization of $5(6)
Other6 
Total$65 
 Three Months Nine Months
Base rates$31
 $31
Volumes(41) (86)
Fuel and other energy prices(8) 10
Other1
 13
Total$(17) $(32)


Fuel

Fuel decreased $25 million for the three months ended September 30, 2017 compared with 2016,(a) The increase was primarily due to a $16 million decrease in volumes driven by milder weather in the third quarterhigher recoveries of 2017fuel and a $9 million decrease in market prices for coal.

Fuel decreased $31 million for the nine months endedSeptember 30, 2017 compared with 2016, primarilyenergy purchases due to a $28 million decrease in volumes driven by milder weather in 2017 and a $4 million decrease in market prices for coal.higher commodity costs.

Depreciation

Depreciation increased $12 million for the three months ended September 30, 2017 compared with 2016(b) The increase was due to a $7 million increase related to higher depreciationnew base rates approved by the KPSC effective July 1, 2017 and a $5 million increase related to additions to PP&E, net of retirements.2021.

Depreciation increased $23 million for the nine months endedSeptember 30, 2017 compared with 2016 due to a $16 million increase related to additions to PP&E, net of retirements, and a $7 million increase related to higher depreciation rates effective July 1, 2017.


Table of Contents

Earnings
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Net Income$132
 $133
 $322
 $337
Special items, gains (losses), after-tax—
 —
 (1) —

Earnings decreased for the three and nine month periods in 2017 compared with 2016, primarily due to lower sales volumes driven by milder weather and higher depreciation expense, partially offset by higher base rates effective July 1, 2017.

The table below quantifies the changes in the components of Net Income between these periods, which reflect amounts classified as Margins and an item that management considers special on separate lines and not in their respective Statement of Income line items.  
 Three Months Nine Months
Margins$10
 $(13)
Other operation and maintenance(5) 6
Depreciation(10) (15)
Taxes, other than income—
 (2)
Other Income (Expense) - net4
 5
Interest Expense—
 (2)
Income Taxes—
 7
Special items, gains (losses), after-tax (a)—
 (1)
Net Income$(1) $(15)

(a)See PPL's "Results of Operations - Segment Earnings - Kentucky Regulated Segment" for details of the special item.

Margins
"Margins" is a non-GAAP financial performance measure that management utilizes as an indicator of the performance of its business. See PPL's "Results of Operations - Margins" for an explanation of why management believes this measure is useful and the factors underlying changes between periods. Within PPL's discussion, LKE's Margins are referred to as "Kentucky Gross Margins."
The following tables contain the components from the Statements of Income that are included in this non-GAAP financial measure and a reconciliation to "Operating Income" for the periods ended September 30.
 2017 Three Months 2016 Three Months
 Margins Other (a) Operating
Income (b)		 Margins Other (a) Operating
Income (b)
Operating Revenues$818
 $—
 $818
 $835
 $—
 $835
Operating Expenses           
Fuel202
 —
 202
 227
 —
 227
Energy purchases22
 —
 22
 24
 —
 24
Other operation and maintenance30
 169
 199
 33
 164
 197
Depreciation16
 98
 114
 14
 88
 102
Taxes, other than income1
 16
 17
 —
 16
 16
Total Operating Expenses271
 283
 554
 298
 268
 566
Total$547
 $(283) $264
 $537
 $(268) $269
            

Table of Contents

 2017 Nine Months 2016 Nine Months
 Margins Other (a) Operating
Income (b)		 Margins Other (a) Operating
Income (b)
Operating Revenues$2,350
 $—
 $2,350
 $2,382
 $—
 $2,382
Operating Expenses           
Fuel576
 —
 576
 607
 —
 607
Energy purchases120
 —
 120
 118
 —
 118
Other operation and maintenance82
 516
 598
 81
 522
 603
Depreciation48
 276
 324
 40
 261
 301
Taxes, other than income4
 45
 49
 3
 43
 46
Total Operating Expenses830
 837
 1,667
 849
 826
 1,675
Total$1,520
 $(837) $683
 $1,533
 $(826) $707

(a)Represents amounts excluded from Margins.
(b)As reported on the Statements of Income.

LG&E: Statement of Income Analysis, Earnings and Margins
Statement of Income Analysis

Net income for the periods ended September 30 includes the following results.
 Three Months Nine Months
 2017 2016 $ Change 2017 2016 $ Change
Operating Revenues    

     

Retail and wholesale$361
 $366
 $(5) $1,055
 $1,058
 $(3)
Electric revenue from affiliate2
 2
 —
 23
 19
 4
Total Operating Revenues363
 368
 (5) 1,078
 1,077
 1
Operating Expenses    

     

Operation           
Fuel76
 86
 (10) 225
 233
 (8)
Energy purchases18
 19
 (1) 107
 104
 3
Energy purchases from affiliate3
 5
 (2) 8
 10
 (2)
Other operation and maintenance89
 85
 4
 262
 264
 (2)
Depreciation47
 43
 4
 136
 126
 10
Taxes, other than income8
 9
 (1) 25
 24
 1
Total Operating Expenses241
 247
 (6) 763
 761
 2
Other Income (Expense) - net(1) (1) —
 (2) (6) 4
Interest Expense17
 18
 (1) 53
 53
 —
Income Taxes39
 39
 —
 99
 98
 1
Net Income$65
 $63
 $2
 $161
 $159
 $2

Table of Contents

Operating Revenues

The increase (decrease) in operating revenues for the periods ended September 30, 2017 compared with 2016 was due to:
 Three Months Nine Months
Base rates$18
 $18
Volumes(16) (26)
Fuel and other energy prices(4) 4
Other(3) 5
Total$(5) $1


Fuel


Fuel decreased $10 million for the three months ended September 30, 2017 compared with 2016, primarily due to a $6 million decrease in market prices for coal and a $5 million decrease in volumes driven by milder weather in the third quarter of 2017.

Other Operation and Maintenance

The increase (decrease) in other operation and maintenance for the periods ended September 30, 2017 compared with 2016 was due to:
 Three Months Nine Months
Plant operations and maintenance$1
 $(1)
Pension expense1
 1
Timing and scope of generation maintenance outages—
 (1)
Storm costs—
 (1)
Other2
 —
Total$4
 $(2)

Depreciation

Depreciation increased $4$14 million for the three months ended September 30, 2017March 31, 2022 compared with 20162021, due to a $2$9 million increase related to higher depreciation rates effective July 1, 2017in commodity costs and a $2$5 million increase related to additions to PP&E, net of retirements.

Earnings
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Net Income$65
 $63
 $161
 $159
Special items, gains (losses), after-tax (a)—
 —
 —
 —

(a)There are no items management considers special for the periods presented.
Earnings increased for the three month period in 2017 compared with 2016, primarilyvolumes due to higher base rates effective July 1, 2017, partially offset by lower sales volumes driven by milder weather.to KU as a result of the timing and scope of generation maintenance outages.

Earnings increased for the nine month period in 2017 compared with 2016, primarily due to higher base rates effective July 1, 2017 and lower other operation and maintenance expense, partially offset by lower sales volumes driven by milder weather.

The table below quantifies the changes in the components of Net Income between these periods, which reflect amounts classified as Margins on a separate line and not in their respective Statement of Income line items.

69

Energy Purchases

 Three Months Nine Months
Margins$8
 $2
Other operation and maintenance(4) 3
Depreciation(5) (6)
Taxes, other than income2
 —
Other Income (Expense) - net—
 4
Interest Expense1
 —
Income Taxes—
 (1)
Net Income$2
 $2
Margins
"Margins" is a non-GAAP financial performance measure that management utilizes as an indicator of the performance of its business. See PPL's "Results of Operations - Margins" for an explanation of why management believes this measure is useful and the factors underlying changes between periods. Within PPL's discussion, LG&E's Margins are included in "Kentucky Gross Margins."
The following tables contain the components from the Statements of Income that are included in this non-GAAP financial measure and a reconciliation to "Operating Income" for the periods ended September 30.
 2017 Three Months 2016 Three Months
 Margins Other (a) Operating Income (b) Margins Other (a) Operating Income (b)
Operating Revenues$363
 $—
 $363
 $368
 $—
 $368
Operating Expenses           
Fuel76
 —
 76
 86
 —
 86
Energy purchases, including affiliate21
 —
 21
 24
 —
 24
Other operation and maintenance13
 76
 89
 13
 72
 85
Depreciation7
 40
 47
 8
 35
 43
Taxes, other than income1
 7
 8
 —
 9
 9
Total Operating Expenses118
 123
 241
 131
 116
 247
Total   $245
 $(123) $122
 $237
 $(116) $121
            
 2017 Nine Months 2016 Nine Months
 Margins Other (a) Operating Income (b) Margins Other (a) Operating Income (b)
Operating Revenues$1,078
 $—
 $1,078
 $1,077
 $—
 $1,077
Operating Expenses           
Fuel225
 —
 225
 233
 —
 233
Energy purchases, including affiliate115
 —
 115
 114
 —
 114
Other operation and maintenance33
 229
 262
 32
 232
 264
Depreciation24
 112
 136
 20
 106
 126
Taxes, other than income3
 22
 25
 2
 22
 24
Total Operating Expenses400
 363
 763
 401
 360
 761
Total   $678
 $(363) $315
 $676
 $(360) $316
(a)Represents amounts excluded from Margins.
(b)As reported on the Statements of Income.

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KU: Statement of Income Analysis, Earnings and Margins

Statement of Income Analysis
Net income for the periods ended September 30 includes the following results.
 Three Months Nine Months
 2017 2016 $ Change 2017 2016 $ Change
Operating Revenues           
Retail and wholesale$457
 $469
 $(12) $1,295
 $1,324
 $(29)
Electric revenue from affiliate3
 5
 (2) 8
 10
 (2)
Total Operating Revenues460
 474
 (14) 1,303
 1,334
 (31)
Operating Expenses           
Operation           
Fuel126
 141
 (15) 351
 374
 (23)
Energy purchases4
 5
 (1) 13
 14
 (1)
Energy purchases from affiliate2
 2
 —
 23
 19
 4
Other operation and maintenance104
 107
 (3) 313
 320
 (7)
Depreciation67
 59
 8
 188
 175
 13
Taxes, other than income9
 7
 2
 24
 22
 2
Total Operating Expenses312
 321
 (9) 912
 924
 (12)
Other Income (Expense) - net—
 (3) 3
 (3) (4) 1
Interest Expense24
 24
 —
 72
 71
 1
Income Taxes47
 48
 (1) 120
 128
 (8)
Net Income$77
 $78
 $(1) $196
 $207
 $(11)

Operating Revenue
The increase (decrease) in operating revenue for the periods ended September 30, 2017 compared with 2016 was due to:
 Three Months Nine Months
Base rates$13
 $13
Volumes(27) (57)
Fuel and other energy prices(3) 5
Other3
 8
Total$(14) $(31)

Fuel

Fuel decreased $15Energy purchases increased $25 million for the three months ended September 30, 2017March 31, 2022 compared with 2016,2021, primarily due to an $11 million decreaseincrease in volumes driven by milder weather in the third quarter of 2017 and a $3 million decrease in market prices for coal.commodity costs.

Fuel decreased $23 million for the nine months ended September 30, 2017 compared with 2016, primarily due to a $29 million decrease in volumes driven by milder weather in 2017.


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Depreciation


Depreciation increased $8 million for the three months ended September 30, 2017March 31, 2022 compared with 20162021, due to a $5$4 million increase related todriven by additional assets placed into service, net of retirements, and a $4 million increase driven by higher depreciation rates effective July 1, 20172021.

KU: Statement of Income Analysis

Statement of Income Analysis
Net income for the periods ended March 31 includes the following results.
 Three Months
 20222021$ Change
Operating Revenues
Retail and wholesale$523 $464 $59 
Electric revenue from affiliate2 5 (3)
Total Operating Revenues525 469 56 
Operating Expenses
Operation
Fuel131 110 21 
Energy purchases5 5 — 
Energy purchases from affiliate12 7 5 
Other operation and maintenance113 115 (2)
Depreciation95 89 6 
Taxes, other than income11 10 1 
Total Operating Expenses367 336 31 
Other Income (Expense) - net— 1 (1)
Interest Expense27 27 — 
Income Taxes24 21 3 
Net Income$107 $86 $21 

Operating Revenues
The increase in operating revenues was due to:
Three Months
Retail rates (a)$30 
Fuel and other energy prices (b)26 
Economic relief billing credit, net of amortization of $0(3)
Other3 
Total$56 

(a)The increase was due to new base rates approved by the KPSC effective July 1, 2021.
(b)The increase was primarily due to higher recoveries of fuel and energy purchases due to higher commodity costs.

Fuel

Fuel increased $21 million for the three months ended March 31, 2022 compared with 2021, primarily due to a $27 million increase in commodity costs, partially offset by a $7 million decrease in volumes due to the timing and scope of generation maintenance outages.

70
Depreciation

Depreciation increased $6 million for the three months ended March 31, 2022 compared with 2021, primarily due to a $3 million increase related to additions to PP&E, net of retirements.

Depreciation increased $13 million for the nine months ended September 30, 2017 compared with 2016 due to an $8 million increase related to additions to PP&E,driven by additional assets placed into service, net of retirements, and a $5$2 million increase related todriven by higher depreciation rates effective July 1, 2017.2021.

Earnings
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Net Income$77
 $78
 $196
 $207
Special items, gains (losses), after-tax—
 —
 (1) —

Earnings decreased for the three month period in 2017 compared with 2016, primarily due to lower electricity sales volumes driven by milder weather and higher depreciation expense, partially offset by higher base rates effective July 1, 2017.

Earnings decreased for the nine month period in 2017 compared with 2016, primarily due to lower electricity sales volumes driven by milder weather and higher depreciation expense, partially offset by higher base rates effective July 1, 2017 and lower other operation and maintenance expense.

The table below quantifies the changes in the components of Net Income between these periods, which reflect amounts classified as Margins on a separate line and not in their respective Statement of Income line items.
 Three Months Nine Months
Margins$2
 $(15)
Other operation and maintenance—
 7
Depreciation(5) (9)
Taxes, other than income(2) (2)
Other Income (Expense) - net3
 2
Interest Expense—
 (1)
Income Taxes1
 8
Special items, gains (losses), after-tax (a)—
 (1)
Net Income$(1) $(11)

(a)See PPL's "Results of Operations - Segment Earnings - Kentucky Regulated Segment" for details of the special item.
Margins
"Margins" is a non-GAAP financial performance measure that management utilizes as an indicator of the performance of its business. See PPL's "Results of Operations - Margins" for an explanation of why management believes this measure is useful and the factors underlying changes between periods. Within PPL's discussion, KU's Margins are included in "Kentucky Gross Margins."
The following tables contain the components from the Statements of Income that are included in this non-GAAP financial measure and a reconciliation to "Operating Income" for the periods ended September 30.

Table of Contents

 2017 Three Months 2016 Three Months
 Margins Other (a) Operating
Income (b)		 Margins Other (a) Operating
Income (b)
Operating Revenues$460
 $—
 $460
 $474
 $—
 $474
Operating Expenses           
Fuel126
 —
 126
 141
 —
 141
Energy purchases, including affiliate6
 —
 6
 7
 —
 7
Other operation and maintenance17
 87
 104
 20
 87
 107
Depreciation9
 58
 67
 6
 53
 59
Taxes, other than income—
 9
 9
 —
 7
 7
Total Operating Expenses158
 154
 312
 174
 147
 321
Total$302
 $(154) $148
 $300
 $(147) $153
            
 2017 Nine Months 2016 Nine Months
 Margins Other (a) Operating
Income (b)		 Margins Other (a) Operating
Income (b)
Operating Revenues$1,303
 $—
 $1,303
 $1,334
 $—
 $1,334
Operating Expenses           
Fuel351
 —
 351
 374
 —
 374
Energy purchases, including affiliate36
 —
 36
 33
 —
 33
Other operation and maintenance49
 264
 313
 49
 271
 320
Depreciation24
 164
 188
 20
 155
 175
Taxes, other than income1
 23
 24
 1
 21
 22
Total Operating Expenses461
 451
 912
 477
 447
 924
Total$842
 $(451) $391
 $857
 $(447) $410

(a)Represents amounts excluded from Margins.
(b)As reported on the Statements of Income.

Financial Condition


The remainder of this Item 2 in this Form 10-Q is presented on a combined basis, providing information, as applicable, for all Registrants.


Liquidity and Capital Resources


(All Registrants)


The Registrants had the following at:
 PPL (a) PPL Electric LKE LG&E KU
September 30, 2017         
Cash and cash equivalents$676
 $243
 $40
 $9
 $31
Notes receivable from affiliate  2
 —
 —
 10
Short-term debt1,211
 —
 190
 190
 —
Notes payable with affiliate  —
 159
 10
 —
          
December 31, 2016         
Cash and cash equivalents$341
 $13
 $13
 $5
 $7
Short-term debt923
 295
 185
 169
 16
Notes payable with affiliate  —
 163
 —
 —
 PPLPPL ElectricLG&EKU
March 31, 2022    
Cash and cash equivalents$4,249 $46 $9 $8 
Short-term debt985 — 353 285 
Long-term debt due within one year474 474 — — 
Notes payable to affiliates— — 4 
December 31, 2021    
Cash and cash equivalents$3,571 $21 $9 $13 
Short-term debt69 — 69 — 
Long-term debt due within one year474 474 — — 
Notes payable to affiliates— 324 294 
 
(a)At September 30, 2017, $86 million of cash and cash equivalents were denominated in GBP. If these amounts would be remitted as dividends, PPL would not anticipate a material incremental U.S. tax cost. Historically, dividends paid by foreign subsidiaries have been limited to distributions of the current year's earnings. See Note 5 to the Financial Statements in PPL's 2016 Form 10-K for additional information on undistributed earnings of WPD.
(PPL)


TableThe Statements of Contents
Cash Flows separately report the cash flows of discontinued operations. The "Operating Activities",

"Investing Activities" and "Financing Activities" sections below include only the cash flows of continuing operations.

(All Registrants)

Net cash provided by (used in) operating, investing and financing activities for the ninethree month periods ended September 30,March 31, and the changes between periods, were as follows.
PPLPPL ElectricLG&EKU
PPL PPL Electric LKE LG&E KU
2017         
20222022    
Operating activities$1,754
 $575
 $920
 $418
 $501
Operating activities$502 $122 $218 $219 
Investing activities(2,164) (858) (575) (293) (289)Investing activities(427)15 (103)(129)
Financing activities738
 513
 (318) (121) (188)Financing activities603 (112)(115)(95)
2016         
20212021    
Operating activities$2,230
 $595
 $816
 $383
 $469
Operating activities$396 $121 $181 $224 
Investing activities(2,066) (740) (599) (343) (254)Investing activities(472)(222)(111)(127)
Financing activities(558) 134
 (236) (55) (219)Financing activities55 90 (70)(111)
Change - Cash Provided (Used)         Change - Cash Provided (Used)    
Operating activities$(476) $(20) $104
 $35
 $32
Operating activities$106 $1 $37 $(5)
Investing activities(98) (118) 24
 50
 (35)Investing activities45 237 8 (2)
Financing activities1,296
 379
 (82) (66) 31
Financing activities548 (202)(45)16 
 
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Table of Contents
Operating Activities

The components of the change in cash provided by (used in) operating activities for the ninethree months ended September 30, 2017March 31, 2022 compared with 20162021 were as follows.
PPL PPL Electric LKE LG&E KUPPLPPL ElectricLG&EKU
Change - Cash Provided (Used)         Change - Cash Provided (Used)    
Net income$(387) $(12) $(15) $2
 $(11)Net income$70 $30 $18 $21 
Non-cash components(23) 34
 (18) (11) 4
Non-cash components(9)12 2 8 
Working capital91
 (3) 78
 (9) 31
Working capital(16)(84)22 (27)
Defined benefit plan funding(213) (24) 50
 42
 (3)Defined benefit plan funding30 21 1 — 
Other operating activities56
 (15) 9
 11
 11
Other operating activities31 22 (6)(7)
Total$(476) $(20) $104
 $35
 $32
Total$106 $1 $37 $(5)
 
(PPL)


PPL's cash provided by operating activities in 2017 decreased $4762022 increased $106 million compared with 2016.2021.
The $27•Net income increased $70 million between the periods and included a decrease in non-cash componentscharges of $9 million. The decrease in non-cash charges was primarily due to a decrease in deferred income taxes and investment tax expense (primarily due to lower income taxes from tax benefits related to accelerated pension contributions to the U.K. pension plans) andcredits partially offset by an increase in the U.K. net periodic defined benefit credits (primarilystock-based compensation expense.

•The $16 million decrease in cash from changes in working capital was primarily due to a decrease in unbilled revenues (primarily due to weather), a decrease in regulatory liabilities (primarily due to PPL Electric's refunds to customers related to the U.K. pension plan discount rates used to calculate the interest cost componenttransmission formula rate return on equity reduction and timing of the net periodic defined benefit costs)rate recovery mechanisms), partially offset by an increase in unrealized lossesaccounts receivable, taxes payable and accounts payable (primarily due to timing).

•The $30 million decrease in defined benefit plan funding was primarily due to a decrease in contribution to its pension plans in 2022, as PPL's defined benefit pension plans have the option to utilize available prior year credit balances to meet current and future contribution requirements.

•The $31 million increase in cash provided by other operating activities was primarily due to an increase in pension plan assets and long-term payment agreements at PPL Electric, partially offset by a decrease in accrued pension obligations.

(PPL Electric)
PPL Electric's cash provided by operating activities in 2022 increased $1 million compared with 2021.
•Net income increased $30 million between the periods and included an increase in non-cash components of $12 million. The increase in non-cash components was primarily due to an increase in deferred income taxes and investment tax credits (primarily due to the impact of the transmission formula rate return on hedgingequity reduction) partially offset by a decrease in depreciation expense (primarily related to a decrease in software and computer hardware depreciation as a result of end-of-life retirements).

•The $84 million decrease in cash from changes in working capital was primarily due to a decrease in regulatory liabilities (primarily due to refunds to customers related to the transmission formula rate return on equity reduction and timing of rate recovery mechanisms).

•A $21 million decrease in defined benefit plan funding.

•The $22 million increase in cash provided by other operating activities was driven primarily by payments received on long-term payment agreements.

(LG&E)
LG&E's cash provided by operating activities in 2022 increased $37 million compared with 2021.
•Net income increased $18 million between the periods and included an increase in non-cash components of $2 million. The increase in non-cash components was driven by an increase in depreciation expense (primarily due to additional assets placed into service, net of retirements and higher depreciation rates effective July 1, 2017,2021), partially offset by the impacta decrease in deferred income tax expense (primarily due to amortization of foreign currency exchange rates at WPD)excess deferred income taxes).

72
Table of Contents

•The $91 million increase in cash from changes in working capital was primarily due to a decrease in accounts receivable and unbilled revenuenet regulatory assets (primarily due to a decrease in volumes due to milder weather in 2017 compared to 2016), a decrease in net regulatory assets and liabilities (due tothe timing of rate recovery mechanisms), a decrease in fuel, materialfuels, materials and supplies (primarily due to higher priced natural gas withdrawn from storage), a decrease in fuel purchasesother current assets and liabilities, accounts receivable and accounts receivable from affiliates (primarily due to milder weather in 2017 compared to 2016)timing of payments), andpartially offset by an increase in accrued interest, partially offset byunbilled revenues (primarily due to weather) and a decrease in accounts payable and accounts payable to affiliates (primarily due to an increase in accrued expenditures for property, plant and equipment and timing of payments) and.

•The decrease in cash provided by other operating activities was driven by a decrease in taxes payableother liabilities (primarily due to an increase in current income tax benefit in 2017)timing of payments).


Defined benefit plan funding was $213 million higher in 2017. The increase was primarily due to the acceleration of WPD's contributions to its U.K. pension plans. See Note 8 to the Financial Statements for additional information.

(PPL Electric)(KU)
 
PPL Electric'sKU's cash provided by operating activities in 20172022 decreased $20$5 million compared with 2016.2021.

Table•Net income increased $21 million between the periods and included an increase in non-cash components of Contents

$8 million. The $34 million increase in non-cash components was primarily due todriven by an increase in depreciation expense (primarily due to additional assets placed into service, related to the ongoing efforts to ensure the reliability of the delivery system and the replacement of aging infrastructure as well as the roll-out of the Act 129 Smart Meter program, net of retirements), partially offset by a decrease in deferred income taxes (primarily due to book versus tax plant timing differences)retirements and higher depreciation rates effective July 1, 2021).


•The $3 million decrease in cash from changes in working capital was primarily due to an increase in prepaymentsunbilled revenues (primarily due to weather), a decrease in accounts payable to affiliates (primarily due to timing of payments), an increase in the 2017 gross receipts tax prepayment comparedfuel, materials and supplies (primarily due to 2016)higher commodity costs) and an increase in accounts receivable (primarily due to higher commodity costs), partially offset by a decrease in other current assets and liabilities (primarily due to the timing of payments), an increase in taxes payable and accounts payable (primarily due to timing of payments), partially offset by a decrease in net regulatory assets and liabilities (due to timing of rate recovery mechanisms), a decrease in unbilled revenue (primarily due to lower volumes due to milder weather in 2017 compared to 2016), an increase in taxes payable (primarily due to a decrease in the current income tax benefit) and a decrease in accounts receivable (primarily due to a decrease in volumes due to milder weather in 2017 and income tax refunds received).


Defined benefit plan funding was $24 million higher in 2017.

(LKE)
LKE's cash provided by operating activities in 2017 increased $104 million compared with 2016.
The increase in cash from changes in working capital was primarily driven by decreases in accounts receivable from customers and unbilled revenues due to milder weather in 2017 compared to 2016, a decrease in fuel purchases due to lower generation driven by weather in 2017 compared to 2016, and an increase in taxes payable due to timing of payments, partially offset by a decrease in accounts payable due to the timing of fuel purchases and payments.

Defined benefit plan funding was $50 million lower in 2017.

(LG&E)
LG&E's cash provided by operating activities in 2017 increased $35 million compared with 2016.
•The decrease in cash from changes in working capital was primarily driven by decreases in accounts payable due to fuel purchases from lower generation and timing of payments and taxes payable due to timing of payments, partially offset by decreases in accounts receivable from customers and unbilled revenues due to milder weather in 2017 compared to 2016 and accounts receivable from affiliates due to timing of intercompany settlements associated with inventory and energy sales to KU.

Defined benefit plan funding was $42 million lower in 2017.

(KU)
KU's cash provided by other operating activities in 2017 increased $32 million compared with 2016.
The increase in cash from changes in working capital was driven primarily driven by a decrease in accounts receivable from customers and unbilled revenues due to milder weather in 2017 compared to 2016, a decrease in fuel purchases due to lower generation driven by weather in 2017 compared to 2016, and an increase in accounts payable dueother assets (primarily related to the timing of fuel purchases and payments, partially offset by a decrease in taxes payable due to timing of payments and accounts payable to affiliates due to timing of intercompany settlements associated with inventory and energy purchases from LG&E.noncurrent regulatory assets).


Investing Activities

(All Registrants)
 
Expenditures for Property, Plant and Equipment
Investment in PP&E is the primary investing activityThe components of the Registrants. The change in cash usedprovided by (used in) investing activities for the three months ended March 31, 2022 compared with 2021 were as follows.
 PPLPPL ElectricLG&EKU
Change - Cash Provided (Used)
Expenditures for PP&E$44 $35 $12 $(2)
Notes receivable from affiliate— 203 (4)— 
Other investing activities1 (1)— — 
Total$45 $237 $8 $(2)

For PPL, the decrease in expenditures for PP&E for the nine months ended September 30, 2017 compared with 2016 was as follows. 
 PPL PPL Electric LKE LG&E KU
Decrease (Increase)$(79) $(112) $21
 $50
 $(28)

Table of Contents


For PPL, the increase in expenditures was due to higherlower project expenditures at PPL Electric and KU partially offset by lower project expenditures at WPD and LG&E. The increasedecrease in expenditures forat PPL Electric was primarily due to an increasea reduction in transmission capital spending related to the ongoing efforts to improve reliability and replace aging infrastructure, as well as the roll-out of the Act 129 Smart Meter program.projects. The decrease in expenditures for WPD was primarily due to a decrease in foreign currency exchange rates partially offset by an increase in expenditures to enhance system reliability. The decrease in expenditures forat LG&E was primarily due to reducedlower spending on various projects that are not individually significant.

For PPL Electric, the change in "Notes receivable from affiliate" activity resulted from payments received on the short-term note between affiliates in 2022, issued to support general corporate purposes. See Note 11 to the Financial Statements for environmental air projects at LG&E's Mill Creek plant, partially offset by increased spending for environmental water projects at LG&E’s Mill Creek plant. The increase in expenditures for KU was primarily due to increased spending for environmental water projects at KU’s Ghent plant.further discussion of intercompany borrowings.

Financing Activities
 
(All Registrants)
 
The components of the change in cash provided by (used in) financing activities for the ninethree months ended September 30, 2017March 31, 2022 compared with 20162021 were as follows.
73
Table of Contents
PPLPPL ElectricLG&EKU
Change - Cash Provided (Used)Change - Cash Provided (Used)    
PPL PPL Electric LKE LG&E KU
Change - Cash Provided (Used)         
Debt issuance/retirement, net$692
 $470
 $—
 $—
 $—
Settlement of cross-currency swaps(46) —
 —
 —
 —
Stock issuances/redemptions, net142
 —
 —
 —
 —
Dividends(28) (38) —
 (63) 26
Dividends$14 $43 $(15)$(34)
Capital contributions/distributions, net—
 375
 (129) (47) (20)Capital contributions/distributions, net— (40)— — 
Retirement of term loanRetirement of term loan300 — — — 
Change in short-term debt, net537
 (425) 135
 35
 25
Change in short-term debt, net164 (205)253 308 
Notes payable with affiliate—
 —
 (88) 10
 —
Retirement of commercial paperRetirement of commercial paper73 — 41 32 
Net increase in notes payable with affiliateNet increase in notes payable with affiliate— — (324)(290)
Other financing activities(1) (3) —
 (1) —
Other financing activities(3)— — — 
Total$1,296
 $379
 $(82) $(66) $31
Total$548 $(202)$(45)$16 
 
See Note 7 to the Financial Statements in this Form 10-Q for information on 20172022 short-term and long-term debt activity, equity transactions and PPL dividends. See Note 8 to the Financial Statements in the Registrants' 20162021 Form 10-K for information on 20162021 activity.
 
Credit Facilities
 
The Registrants maintain credit facilities to enhance liquidity, provide credit support and provide a backstop to commercial paper programs. Amounts borrowed under these credit facilities are reflected in "Short-term debt" on the Balance Sheets. At September 30, 2017,March 31, 2022, the total committed borrowing capacity under credit facilities and the use of that capacityborrowings under these credit facilities was as follows:were:
 
External
 
Committed
Capacity
 Borrowed 
Letters of
Credit
and
Commercial
Paper Issued
 
Unused
Capacity
PPL Capital Funding Credit Facilities$1,400
 $—
 $303
 $1,097
PPL Electric Credit Facility650
 —
 1
 649
        
LKE Credit Facility75
 —
 —
 75
LG&E Credit Facility500
 —
 190
 310
KU Credit Facilities598
 —
 198
 400
Total LKE1,173
 —
 388
 785
Total U.S. Credit Facilities (a)$3,223
 $—
 $692
 $2,531
Total U.K. Credit Facilities (b)£1,285
 £501
 £—
 £783
Committed
Capacity		BorrowedLetters of
Credit
and
Commercial
Paper Issued		Unused
Capacity
PPL Capital Funding Credit Facilities$1,350 $— $347 $1,003 
PPL Electric Credit Facility650 — 1 649 
LG&E Credit Facilities500 — 353 147 
KU Credit Facilities400 — 285 115 
Total Credit Facilities (a)$2,900 $— $986 $1,914 
 

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(a)(a)The commitments under the U.S. credit facilities are provided by a diverse bank group, with no one bank and its affiliates providing an aggregate commitment of more than the following percentages of the total committed capacity: PPL - 10%, PPL Electric - 7%, LKE - 21%, LG&E - 7% and KU - 37%.
(b)The amounts borrowed at September 30, 2017 were a USD-denominated borrowing of $200 million and GBP-denominated borrowings which equated to $446 million. The unused capacity reflects the USD-denominated borrowing amount borrowed in GBP of £156 million as of the date borrowed. At September 30, 2017, the USD equivalent of unused capacity under the U.K. committed credit facilities was $1.0 billion.

The commitments under the U.K. credit facilities are provided by a diverse bank group, with no one bank and its affiliates providing an aggregate commitment of more than 20%the following percentages of the total committed capacity.capacity: PPL - 9%, PPL Electric - 7%, LG&E - 7% and KU - 7%.
 
See Note 7 to the Financial Statements for further discussion of the Registrants' credit facilities.


Intercompany (LKE, (LG&E and KU)


Committed
Capacity		BorrowedCommercial Paper Program
Capacity		Unused
Capacity
LG&E Money Pool (a)$750 $— $425 $325 
KU Money Pool (a)650 4 350 296 

(a)LG&E and KU)KU participate in an intercompany money pool agreement whereby LKE and/or KU make available to LG&E, and LKE and/or LG&E make available to KU funds up to the difference between LG&E's and KU's FERC borrowing limit and LG&E's and KU's commercial paper capacity limit, at an interest rate based on the lower of a market index of commercial paper issues and two additional rate options based on LIBOR.
 
Committed
Capacity
 Borrowed 
Other Used
Capacity
 
Unused
Capacity
LKE Credit Facility$225
 $159
 $—
 $66
LG&E Money Pool (a)500
 10
 190
 300
KU Money Pool (a)500
 —
 —
 500

(a)LG&E and KU participate in an intercompany money pool agreement whereby LKE, LG&E and/or KU make available funds up to $500 million at an interest rate based on a market index of commercial paper issues. However, the FERC has issued a maximum aggregate short-term debt limit for each utility at $500 million from all covered sources.


See Note 1011 to the Financial Statements for further discussion of intercompany credit facilities.
 
Commercial Paper(All Registrants)
 
PPL, PPL Electric, LG&E and KUThe Registrants maintain commercial paper programs to provide an additional financing source to fund short-term liquidity needs, as necessary. Commercial paper issuances, included in "Short-term debt" on the Balance Sheets, are supported by the respective Registrant's Syndicated Credit Facility.credit facility. The following commercial paper programs were in place at September 30, 2017:March 31, 2022:
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Capacity 
Commercial
Paper
Issuances
 
Unused
Capacity
CapacityCommercial
Paper
Issuances		Unused
Capacity
PPL Capital Funding$1,000
 $285
 $715
PPL Capital Funding$1,350 $347 $1,003 
PPL Electric650
 —
 650
PPL Electric650 — 650 
     
LG&E350
 190
 160
LG&E425 353 72 
KU350
 —
 350
KU350 285 65 
Total LKE700
 190
 510
Total PPL$2,350
 $475
 $1,875
Total PPL$2,775 $985 $1,790 


Long-term Debt (All Registrants)


See Note 7 to the Financial Statements for information regarding the Registrants’ long-term debt activities.


(PPL)

ATM ProgramEquity Securities Activities

ForShare Repurchase

In August 2021, PPL's Board of Directors authorized share repurchases of up to $3 billion of PPL common shares. In 2021, PPL repurchased approximately $1 billion of PPL common shares. There were no share repurchases during the periodsthree months ended September 30, 2017,March 31, 2022. The actual additional amounts to be repurchased pursuant to this authority will depend on various factors, including PPL’s share price, market conditions, and the determination of other uses for the proceeds from the sale of the U.K. utility business, including for incremental capital expenditures. PPL issued the following:may purchase shares on each trading day subject to market conditions and principles of best execution.
 Three Months Nine Months
Number of shares (in thousands)2,049
 5,526
Average share price$39.04
 $38.49
Net Proceeds$79
 $211


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See Note 7 to the Financial Statements for further discussion ofinformation regarding the ATM program.Registrants’ equity securities activities.


Common Stock Dividends
 
In August 2017,February 2022, PPL declared a quarterly common stock dividend, payable October 2, 2017,April 1, 2022, of 39.520.0 cents per share (equivalent to $1.58 per annum).share. Future dividends, declared at the discretion of the Board of Directors, will depend upon future earnings, cash flows, financial and legal requirements and other factors.factors, including the timing of the closing of the acquisition of Narragansett Electric.


Rating Agency Actions
 
(All Registrants)
 
Moody's and S&P have periodically reviewedreview the credit ratings of the debt of the Registrants and their 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 the Registrants and their subsidiaries are based on information provided by the Registrants and other sources. The ratings of Moody's and S&P are not a recommendation to buy, sell or hold any securities of the Registrants or their 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.

The credit ratings of the Registrants and their subsidiaries affect their liquidity, access to capital markets and cost of borrowing under their credit facilities. A downgrade in the Registrants' or their subsidiaries' credit ratings could result in higher borrowing costs and reduced access to capital markets. The Registrants and their subsidiaries have no credit rating triggers that would result in the reduction of access to capital markets or the acceleration of maturity dates of outstanding debt.

The ratingratings agencies have taken the followingdid not take any actions related to the Registrants and their subsidiaries during 2017:in the first quarter of 2022.

(PPL)

In March 2017, Moody's and S&P assigned ratings of Baa1 and A- to WPD (South Wales)’s £50 million 0.01% Index-linked Senior Notes due 2029.

In September 2017, Moody's and S&P assigned ratings of Baa2 and BBB+ to PPL Capital Funding’s $500 million 4.00% Senior Notes due 2047.

(PPL and PPL Electric)

In January 2017, Moody's and S&P affirmed their commercial paper ratings for PPL Electric's $650 million commercial paper program.

In May 2017, Moody's and S&P assigned ratings of A1 and A to PPL Electric's $475 million 3.95% First Mortgage Bonds due 2047.

In August 2017, Moody's assigned a rating of A1 and S&P confirmed its rating of A for LCIDA's $116 million 1.80% Pollution Control Revenue Refunding Bonds (PPL Electric Utilities Corporation Project) Series 2016A due 2029 and LCIDA's $108 million 1.80% Pollution Control Revenue Refunding Bonds (PPL Electric Utilities Corporation Project) Series 2016B due 2027, each previously issued on behalf of PPL Electric.

(PPL, LKE and LG&E)

In March 2017, Moody’s assigned a rating of A1 and S&P confirmed its rating of A for the Louisville/Jefferson Metro Government of Kentucky's $128 million 1.5% Pollution Control Revenue Bonds, 2003 Series A (Louisville Gas and Electric Company Project) due 2033, previously issued on behalf of LG&E.

In May 2017, Moody’s and S&P assigned ratings of A1 and A to the County of Trimble, Kentucky's $60 million 3.75% Environmental Facilities Revenue Bonds, 2017 Series A (Louisville Gas and Electric Company Project) due 2033, issued on behalf of LG&E.



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In May 2017, Moody’s assigned a rating of A1 and in June 2017, S&P confirmed its rating of A for the Louisville/Jefferson Metro Government of Kentucky's $31 million 1.25% Environmental Facilities Revenue Refunding Bonds, 2007 Series A (Louisville Gas and Electric Company Project) due 2033, previously issued on behalf of LG&E.

In May 2017, Moody’s assigned a rating of A1 and in June 2017, S&P confirmed its rating of A for the Louisville/Jefferson Metro Government of Kentucky's $35 million 1.25% Environmental Facilities Revenue Refunding Bonds, 2007 Series B (Louisville Gas and Electric Company Project) due 2033, previously issued on behalf of LG&E.

(PPL, LKE and KU)

In July 2017, Moody’s affirmed its rating of Aa2 and in August 2017, S&P confirmed its rating of AA for the County of Mercer, Kentucky's $13 million Solid Waste Disposal Facility Revenue Bonds, 2000 Series A (Kentucky Utilities Company Project) due 2023, the County of Carroll, Kentucky's $50 million Environmental Facilities Revenue Bonds, 2004 Series A (Kentucky Utilities Company Project) due 2034, the County of Carroll, Kentucky's $78 million Environmental Facilities Revenue Bonds, 2008 Series A (Kentucky Utilities Company Project) due 2032 and the County of Carroll, Kentucky's $54 million Environmental Facilities Revenue Refunding Bonds, 2006 Series B (Kentucky Utilities Company Project) due 2034, each previously issued on behalf of KU.

Ratings Triggers
 
(PPL, LKE, LG&E and KU)
 
Various derivative and non-derivative contracts, including contracts for the sale and purchase of electricity and fuel, commodity transportation and storage, and interest rate and foreign currency instruments, (for PPL), contain provisions that require the posting of additional collateral or permit the counterparty to terminate the contract, if PPL's, LKE's, LG&E's or KU's or their subsidiaries' credit rating, as applicable, were to fall below investment grade. See Note 1314 to the Financial Statements for a discussion of "Credit Risk-Related Contingent Features," including a discussion of the potential additional collateral requirements for PPL LKE and LG&E for derivative contracts in a net liability position at September 30, 2017.March 31, 2022.
 
(All Registrants)
 
For additional information on the Registrants' liquidity and capital resources, see "Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Registrants' 20162021 Form 10-K.


Risk Management
Market Risk
 
(All Registrants)
 
Market Risk
See Notes 1213 and 1314 to the Financial Statements for information about the Registrants' 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 are not precise indicators of expected future losses, but are rather only indicators of possible losses under normal market conditions at a given confidence level.
 
Interest Rate Risk

The RegistrantsPPL and theirits subsidiaries issue debt to finance their operations, which exposes them to interest rate risk. The Registrants and their subsidiaries utilize variousA variety of financial derivative instruments are utilized to adjust the mix of fixed and floating interest rates in their debt portfolios, adjust the duration of theirthe debt portfolios and lock in benchmark interest rates in anticipation of future financing, when appropriate. Risk limits under thePPL's risk management program are designed to balance risk exposure to volatility in interest expense and changes in the fair value of the debt portfoliosportfolio due to changes in the absolute level ofbenchmark interest rates. In addition, the interest rate risk of certain subsidiaries is potentially mitigated as a result of the existing regulatory framework or the timing of rate cases.


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The following interest rate hedges were outstanding at September 30, 2017.March 31, 2022.
 
Exposure
Hedged
 
Fair Value,
Net - Asset
(Liability) (a)
 
Effect of a
10% Adverse
Movement
in Rates (b)
 
Maturities
Ranging
Through
PPL 
  
  
  
Cash flow hedges       
Interest rate swaps (c)$242
 $(2) $(3) 2027
Cross-currency swaps (c)802
 162
 (90) 2028
Economic hedges       
Interest rate swaps (d)147
 (29) (1) 2033
LKE       
Economic hedges 
  
  
  
Interest rate swaps (d)147
 (29) (1) 2033
LG&E 
  
  
  
Economic hedges 
  
  
  
Interest rate swaps (d)147
 (29) (1) 2033
Exposure
Hedged		Fair Value,
Net - Asset
(Liability) (a)		Effect of a
10% Adverse
Movement
in Rates (b)		Maturities
Ranging
Through
PPL and LG&E    
Economic hedges    
Interest rate swaps (c)64 (14)(1)2033
 
(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. Sensitivities represent a 10% adverse movement in interest rates, except for cross-currency swaps which also includes a 10% adverse movement in foreign currency exchange rates.
(c)Changes in the fair value of these instruments are recorded in equity and reclassified into earnings in the same period during which the item being hedged affects earnings.
(d)Realized changes in the fair value of such economic hedges are recoverable through regulated rates and any subsequent changes in the fair value of these derivatives are included in regulatory assets or regulatory liabilities.

(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. Sensitivities represent a 10% adverse movement in interest rates.
(c)Realized changes in the fair value of such economic hedges are recoverable through regulated rates and any subsequent changes in the fair value of these derivatives are included in regulatory assets or regulatory liabilities.

The Registrants are exposed to a potential increase in interest expense and to changes in the fair value of their debt portfolios. The estimated impact of a 10% adverse movement in interest rates on interest expense at September 30, 2017March 31, 2022 was insignificant for PPL, PPL Electric, LKE, LG&E and KU. The estimated impact of a 10% adverse movement in interest rates on the fair value of debt at September 30, 2017March 31, 2022 is shown below.
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10% Adverse
Movement
in Rates
PPL$600
PPL Electric165
LKE172
LG&E63
KU95
Foreign Currency Risk (PPL)
PPL is exposed to foreign currency risk primarily through investments in U.K. affiliates. Under its risk management program, PPL may enter into financial instruments to hedge certain foreign currency exposures, including translation risk of expected earnings, firm commitments, recognized assets or liabilities, anticipated transactions and net investments.
The following foreign currency hedges were outstanding at September 30, 2017.
 
Exposure
Hedged
 
Fair Value,
Net - Asset
(Liability)
 
Effect of a
10%
Adverse
Movement
in Foreign
Currency
Exchange
Rates (a)
 
Maturities
Ranging
Through
Net investment hedges (b)£92
 $1
 $(12) 2017
Economic hedges (c)2,728
 (4) (340) 2020
(a)Effects of adverse movements decrease assets or increase liabilities, as applicable, which could result 10% Adverse
Movement
in an asset becoming a liability.Rates

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PPL$432 
(b)PPL ElectricTo protect the value of a portion of its net investment in WPD, PPL executes forward contracts to sell GBP.
177 
(c)LG&ETo economically hedge the translation risk of expected earnings denominated in GBP.82 
KU124 

(All Registrants)
 
Commodity Price Risk
 
PPL is exposed to commodity price risk through its domestic subsidiaries as described below.


•PPL Electric is exposedrequired to purchase electricity to fulfill its obligation as a PLR. Potential commodity price risk from its obligation as PLR; however,is mitigated through its PUC-approved cost recovery mechanism substantially eliminates its exposure to this risk. PPL Electric also mitigates its exposure to commodity price risk by entering intoand full-requirement supply agreements to serve its PLR customers. These supply agreementscustomers which transfer the commodity price risk associated with the PLR obligation to the energy suppliers.
•LG&E's and KU's rates include certain mechanisms for fuel, fuel-related expenses and fuel-related expenses.energy purchases. In addition, LG&E's rates include a mechanism for natural gas supply expenses. These mechanisms generally provide for timely recovery of market price fluctuations associated with these expenses.


Volumetric Risk

Volumetric risk is the risk related to the changes in volume of retail sales due to weather, economic conditions or other factors. PPL is exposed to volumetric risk through its subsidiaries as described below.
WPD is exposed to volumetric risk which is significantly mitigated as a result of the method of regulation in the U.K. Under the RIIO-ED1 price control period, recovery of such exposure occurs on a two year lag. See Note 1 in PPL's 2016 Form 10-K for additional information on revenue recognition under RIIO-ED1.
subsidiaries. PPL Electric, LG&E, and KU are exposed to volumetric risk on retail sales, mainly due to weather and other economic conditions for which there is limited mitigation between rate cases.


Inflation and Supply Chain Related Risk

PPL and its subsidiaries continue to monitor the impact of inflation and supply chain disruptions. PPL and its subsidiaries monitor the cost of fuel, construction, regulatory and environmental compliance costs and other costs. Mechanisms are in place to mitigate the risk of inflationary effects and supply chain disruptions, to the extent possible, but increased costs and supply chain disruptions may directly or indirectly affect our ongoing operations. These mechanisms include pricing strategies, productivity improvements and cost reductions in order to ensure that the Registrants are able to procure the necessary materials and other resources needed to maintain services in a safe and reliable manner, and to grow infrastructure consistent with the capital expenditure plan. For additional information see "Forward-looking Information” at the beginning of this report and “Item 1A. Risk Factors" of the Registrants' 2021 Form 10-K.

Credit Risk(All Registrants)
 
See Notes 1213 and 1314 to the Financial Statements in this Form 10-Q and "Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Risk Management - Credit Risk" in the Registrants' 20162021 Form 10-K for additional information.
 
Foreign Currency Translation(PPL)
The value of the British pound sterling fluctuates in relation to the U.S. dollar. Changes in this exchange rate resulted in a foreign currency translation gain of $194 million for the nine months ended September 30, 2017, which primarily reflected a $345 million increase to PP&E and a $75 million increase to goodwill partially offset by a $203 million increase to long-term debt and a $23 million increase to other net liabilities. Changes in this exchange rate resulted in a foreign currency translation loss of $840 million for the nine months ended September 30, 2016, which primarily reflected a $1.6 billion decrease to PP&E and $375 million decrease to goodwill partially offset by a $995 million decrease to long-term debt and a $160 million decrease to other net liabilities. The impact of foreign currency translation is recorded in AOCI.
Related Party Transactions(All Registrants)
 
The Registrants are not aware of any material ownership interests or operating responsibility by senior management in outside partnerships, including leasing transactions with variable interest entities, or other entities doing business with the Registrants. See Note 1011 to the Financial Statements for additional information on related party transactions for PPL Electric, LKE, LG&E and KU.
 
Acquisitions, Development and Divestitures(All Registrants)
 
The Registrants from time to time evaluate opportunities for potential acquisitions, divestitures and development projects. Development projects are reexamined based on market conditions and other factors to determine whether to proceed with, modify or terminate the projects. Any resulting transactions may impact future financial results. See Note 8 to the Financial Statements in the Registrants' 2016 Form 10-K for additional information on the more significant activities.share purchase agreement to acquire Narragansett Electric.



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Environmental Matters(All Registrants)
 
Extensive federal, state and local environmental laws and regulations are applicable to PPL's, PPL Electric's, LKE's, LG&E's and KU'sthe Registrants' air emissions, water discharges and the management of hazardous and solid waste, as well as other aspects of the Registrants' businesses. The costcosts of compliance or alleged non-compliance cannot be predicted with certainty but could be significant. In addition, 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 expenditures or operating and maintenance expenses, monetary fines, penalties or other restrictions. In addition, the regulatory reviews specified in the President's March 2017 Executive Order promoting energy independence and economic growth could result in future regulatory changes and additional uncertainty. Many of these environmental law considerations are also applicable to the operations of key suppliers, or customers, such as coal producers and industrial power users, and may impact the costcosts for their products or their demand for the Registrants' services. Increased capital and operating costs are expected to be subject to rate recovery. PPL, PPL Electric, LKE, LG&E and KUThe Registrants can provide no assurances as to the ultimate outcome of future environmental or rate proceedings before regulatory authorities.
 
See "Environmental Matters" in Item 1. "Business" in the Registrants' 2021 Form 10-K for information about environmental laws and regulations affecting the Registrants' business. See "Legal Matters" in Note 910 to the Financial Statements for a discussion of the more significant environmental matters including:
Legal Matters,
Climate Change,
CCRs,
ELGs,claims. See "Financial Condition - Liquidity and
NAAQS.

Additionally, see Capital Resources - Forecasted Uses of Cash - Capital Expenditures" in "Item 1. Business - Environmental Matters"7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrants' 20162021 Form 10-K for additional information on projected environmental matters.
New Accounting Guidance(All Registrants)
capital expenditures for 2022 through 2024. See Note 1715 to the Financial Statements for information related to the impacts of CCRs on AROs.

The information below represents an update to “Item 1. Business – Environmental Matters – Air – NAAQS” and "Item 1. Business – Environmental Matters – Air – Climate Change" in the Registrants' 2021 Form 10-K.

NAAQS (PPL, LG&E and KU)

In March 2021, the EPA released final revisions to the Cross-State Air Pollution Rule (CSAPR) providing for reductions in ozone season nitrogen oxide emissions for 2021 and subsequent years from sources in 12 states, including Kentucky. Additionally, the EPA reversed its previous approval of the Kentucky State Implementation Plan with respect to these requirements. The CSAPR revisions, aimed at ensuring compliance with the 2008 ozone NAAQS, are not expected to be material. In February 2022, the EPA Administrator released a discussionproposed Federal Implementation Plan (FIP) under the Good Neighbor provisions of the CAA providing for significant additional nitrogen oxide emission reductions for compliance with the revised 2015 ozone NAAQS. PPL, LG&E and KU are currently assessing the potential impact of the Good Neighbor Plan revisions on operations. Pursuant to the President’s executive order, the EPA is currently reviewing its previous determinations made in December 2020 to retain the existing NAAQS for ozone and particulate matter without change.

PPL, LG&E, and KU are unable to predict future emission reductions that may be required by future federal rules or state implementation actions. Compliance with the NAAQS, CSAPR and related requirements may require installation of additional pollution controls or other compliance actions, inclusive of retirements, the costs of which PPL, LG&E and KU believe would be subject to rate recovery.

Climate Change (All Registrants)

The Biden administration is undertaking wide-ranging efforts to address climate change. Recent government actions and policy developments, including the President’s announced goal of a carbon free electricity sector by 2035, could have far-reaching impacts on PPL’s business operations, products, and services. The Supreme Court is currently considering legal challenges to the Affordable Clean Energy (ACE) Rule and the repeal of the Clean Power Plan (CPP). The EPA has announced that it plans on issuing a greenhouse gas replacement rule in the future. All of these developments are preliminary or ongoing in nature and the Registrants cannot predict their final outcome or ultimate impact on operations.

New Accounting Guidance(All Registrants)
There has been no new accounting guidance adopted in 2022 and there is no new significant accounting guidance pending adoption.adoption as of March 31, 2022.
 
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Application of Critical Accounting Policies(All Registrants)

Financial condition and results of operations are impacted by the methods, assumptions and estimates used in the application of critical accounting policies. The following table summarizes the accounting policies by Registrant that are particularly important to an understanding of the reported financial condition or results of operations and require management to make estimates or other judgments of matters that are inherently uncertain. See "Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrants' 20162021 Form 10-K for a discussion of each critical accounting policy.
PPL
PPLElectricLKELG&ELG&EKU
Defined BenefitsXXXXX
Income TaxesXXXXX
Goodwill ImpairmentXXXX
AROsXXXX
Price Risk ManagementX
Regulatory Assets and LiabilitiesXXXXX
Goodwill ImpairmentXXX
AROsXX
Revenue Recognition - Unbilled RevenueXXX






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PPL Corporation
PPL Electric Utilities Corporation
LG&E and KU Energy LLC
Louisville Gas and Electric Company
Kentucky Utilities Company


Item 3. Quantitative and Qualitative Disclosures About Market Risk
 
Reference is made to "Risk Management" in "Item 2. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations."
 
Item 4. Controls and Procedures

(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) or 15d-15(e) of the Securities Exchange Act of 1934) have concluded that, as of September 30, 2017,March 31, 2022, 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 quarterly 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.
 
(b) Change in internal controls over financial reporting.
 
The Registrants' principal executive officers and principal financial officers have concluded that there were no changes in the Registrants' internal controlcontrols over financial reporting during the Registrants' thirdfirst fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Registrants' internal control over financial reporting.
PART II. OTHER INFORMATION


Item 1. Legal Proceedings
 
For information regarding pending administrative and judicial proceedings involvinglegal, tax, regulatory, environmental andor other matters, which information is incorporated by reference into this Part II,administrative proceedings that became reportable events or were pending in the first quarter of 2022 see:
 
•"Item 3. Legal Proceedings" in each Registrant's 20162021 Form 10-K; and
•Notes 5, 6, 8 and 910 to the Financial Statements.


Item 1A. Risk Factors
 
There have been no material changes in the Registrants' risk factors from those disclosed in "Item 1A. Risk Factors" of the Registrants' 20162021 Form 10-K.


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

Purchases of PPL Corporation Equity Securities by the Issuer and Affiliated Purchasers (PPL)

The following table provides information about PPL's purchases of equity securities that are registered by PPL Corporation pursuant to Section 12 of the Exchange Act of 1934 for the quarter ended March 31, 2022:
PeriodTotal Number of Shares (or Units) PurchasedAverage Price Paid per Share (or Unit)Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (a)
January 1 to January 31, 2022— $— — $1,997,876,503 
February 1 to February 28, 2022— — — — $1,997,876,503 
March 1 to March 31, 2022— — — $1,997,876,503 
Total— $— — $1,997,876,503 

(a)PPL Corporation's Board of Directors approved a share repurchase plan in August 2021. See "Equity Securities - Share Repurchase" in Note 7 to the Financial Statements for additional information.

Item 4. Mine Safety Disclosures

Not applicable.

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Item 6. Exhibits


The following Exhibits indicated by an asterisk preceding the Exhibit number are filed herewith. The balance of the Exhibits has heretofore been filed with the Commission and pursuant to Rule 12(b)-32-23 are incorporated herein by reference. Exhibits indicated by a [_] are filed or listed pursuant to Item 601(b)(10)(iii) of Regulation S-K.

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4(a)
-Supplemental Indenture No. 16, dated as of September 8, 2017, among PPL Capital Funding, Inc., PPL Corporation and The Bank of New York Mellon (as successor to JPMorgan Chase Bank, N.A. (formerly known as The Chase Manhattan Bank)), as Trustee (Exhibit 4(b) to PPL Corporation Form 8-K Report (File No. 1-11459) dated September 6, 2017)
*4(b)
-£3,000,000,000 Euro Medium Term Note Programme entered into by Western Power Distribution (East Midlands) plc, Western Power Distribution (South Wales) plc, Western Power Distribution (South West) plc and Western Power Distribution (West Midlands) plc, dated as of September 15, 2017
*4(c)
-Amendment No. 1 to PPL Employee Stock Ownership Plan, dated October 2, 2017
*10(a)-1
-£20,000,000 Uncommitted Facility Letter entered into between Western Power Distribution (South West) plc, Western Power Distribution (South Wales) plc, Western Power Distribution (West Midlands) plc, Western Power Distribution (East Midlands) plc and BNP Paribas, dated as of January 23, 2014
*10(a)-2
-Amendment to said Uncommitted Facility Letter, dated as of July 28, 2017
*10(b)
-$200,000,000 Term Loan Credit Agreement, dated as of October 26, 2017, among Louisville Gas and Electric Company, as the Borrower, the Lenders from time to time party hereto and U.S. Bank National Association, as Administrative Agent
*12(a)
-PPL Corporation and Subsidiaries Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
*12(b)
-PPL Electric Utilities Corporation and Subsidiaries Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
*12(c)
-LG&E and KU Energy LLC and Subsidiaries Computation of Ratio of Earnings to Fixed Charges
*12(d)
-Louisville Gas and Electric Company Computation of Ratio of Earnings to Fixed Charges
*12(e)
-Kentucky Utilities Company Computation of Ratio of Earnings to Fixed Charges
Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, for the quarterly period ended September 30, 2017,March 31, 2022, filed by the following officers for the following companies:
-PPL Corporation's principal executive officer
-PPL Corporation's principal financial officer
-PPL Electric Utilities Corporation's principal executive officer
-PPL Electric Utilities Corporation's principal financial officer
-LG&E and KU Energy LLC's principal executive officer
*31(f)
-LG&E and KU Energy LLC's principal financial officer
*31(g)
-Louisville Gas and Electric Company's principal executive officer
-Louisville Gas and Electric Company's principal financial officer
-Kentucky Utilities Company's principal executive officer
-Kentucky Utilities Company's principal financial officer
Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, for the quarterly period ended September 30, 2017,March 31, 2022, furnished by the following officers for the following companies:
-PPL Corporation's principal executive officer and principal financial officer
-PPL Electric Utilities Corporation's principal executive officer and principal financial officer
-LG&E and KU Energy LLC's principal executive officer and principal financial officer
*32(d)
-Louisville Gas and Electric Company's principal executive officer and principal financial officer
-Kentucky Utilities Company's principal executive officer and principal financial officer

Table of Contents

101.INS-
101.INS-XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH-XBRL Taxonomy Extension Schema
101.CAL-XBRL Taxonomy Extension Calculation Linkbase
101.DEF-XBRL Taxonomy Extension Definition Linkbase
101.LAB-XBRL Taxonomy Extension Label Linkbase
101.PRE-XBRL Taxonomy Extension Presentation Linkbase
104-The Cover Page Interactive Data File is formatted as Inline XBRL and contained in Exhibits 101.

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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized. The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiaries.
 
PPL Corporation
(Registrant)
Date:May 5, 2022/s/  Marlene C. Beers
Marlene C. Beers
Vice President and Controller
(Principal Accounting Officer)
PPL Electric Utilities Corporation
(Registrant)
Date:May 5, 2022/s/  Marlene C. Beers
Marlene C. Beers
Vice President and Controller
(Principal Accounting and Financial Officer)
PPL Corporation
(Registrant)
Date:November 1, 2017/s/  Stephen K. Breininger
Stephen K. Breininger
Vice President and Controller
(Principal Accounting Officer)
PPL Electric Utilities Corporation
(Registrant)
Date:November 1, 2017/s/  Marlene C. Beers
Marlene C. Beers
Controller
(Principal Financial Officer and Principal Accounting Officer)
LG&E and KU Energy LLC
(Registrant)
Louisville Gas and Electric Company
(Registrant)
Kentucky Utilities Company
(Registrant)
Date:November 1, 2017May 5, 2022/s/  Kent W. BlakeChristopher M. Garrett
Kent W. Blake
Chief Financial Officer
Christopher M. Garrett
Vice President-Finance and Accounting
(Principal Financial Officer and Principal Accounting and Financial Officer)













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