|UNITED STATES
        SECURITIES AND EXCHANGE COMMISSION
        Washington, D.C. 20549
|---------------------------------------------------------------------------------------
|                                                                                       
|FORM 10-K                                                                              
|                                                                                       
|[X]                                                                                    
|OR                                                                                     
|[   ]                                                                                  
|                                                                                       
|Commission FileNumber                                                                  
|                                                                                       
|1-11459                                                                                
|                                                                                       
|333-74794                                                                              
|                                                                                       
|1-905                                                                                  
|                                                                                       
|Securities registered pursuant to Section
        12(b) of the Act:                    
|                                                                                       
|Title of each class                                                                    
|                                                                                       
|Common Stock of PPL Corporation                                                        
|                                                                                       
|Preferred Stock of PPL Electric
        Utilities Corporation                          
|                                                                                       
|                                                                                       

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

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

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



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

Indicate by check mark whether the Registrants are accelerated filers (as defined
  in Rule 12b-2 of the Act).

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

As of June 30, 2004, PPL Corporation had 188,894,379 shares of its $.01 par
  value Common Stock outstanding, excluding 31,034,476 shares held as treasury
  stock. The aggregate market value of these common shares (based upon the closing
  price of these shares on the New York Stock Exchange on that date) held by non-affiliates
  was $8,670,251,996. As of January 31, 2005, PPL Corporation had 189,122,513
  shares of its $.01 par value Common Stock outstanding, excluding 31,045,853
  shares held as treasury stock.

As of June 30, 2004, PPL Corporation held all 78,029,863 outstanding common
  shares, no par value, of PPL Electric Utilities Corporation, excluding 79,270,519
  shares held as treasury stock. The aggregate market value of the voting preferred
  stock held by non-affiliates of PPL Electric Utilities Corporation at June 30,
  2004, was $39,080,968.

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

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

Documents incorporated by reference:

PPL Corporation and PPL Electric Utilities Corporation have incorporated herein
  by reference certain sections of PPL Corporation's 2005 Notice of Annual Meeting
  and Proxy Statement, and PPL Electric Utilities Corporation's 2005 Notice of
  Annual Meeting and Information Statement, which will be filed with the Securities
  and Exchange Commission not later than 120 days after December 31, 2004. Such
  Statements will provide the information required by Part III of this Report.



---



PPL CORPORATION
  PPL ENERGY SUPPLY, LLC
  PPL ELECTRIC UTILITIES CORPORATION

FORM 10-K ANNUAL REPORT TO
  THE SECURITIES AND EXCHANGE COMMISSIONFOR THE YEAR ENDED DECEMBER 31, 2004

TABLE OF CONTENTS

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

|Item     |  |                                                                                                                                                                             | Page
|-------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----
|PART I  
|1.       |  | Business                                                                                                                                                                    | 1   
|2.       |  | Properties                                                                                                                                                                  | 12  
|3.       |  | Legal
        Proceedings                                                                                                                                                   | 13  
|4.       |  | Submission
        of Matters to a Vote of Security Holders                                                                                                                 | 16  
|         |  | Executive
        Officers of the Registrants                                                                                                                               | 17  
|         |  |                                                                                                                                                                             |     
|PART II 
|        
|5.       |  | Market
        for the Registrant's Common Equity, Related Stockholder Matters and Issuer
        
            Purchases of Equity Securities                               | 19  
|6.       |  | Selected
        Financial and Operating Data                                                                                                                               | 19  
|7.       |  | Management's
        Discussion and Analysis of Financial Condition and Results of Operations                                                                               | 22  
|7A.      |  | Quantitative
        and Qualitative Disclosures About Market Risk                                                                                                          | 74  
|         |  | Report
        of Independent Registered Public Accounting Firm                                                                                                             | 75  
|8.       |  | Financial
        Statements and Supplementary Data                                                                                                                         | 79  
|9.       |  | Changes
        in and Disagreements with Accountants on Accounting and Financial Disclosure                                                                                | 163 
|9A.      |  | Controls
        and Procedures                                                                                                                                             | 163 
|9B.      |  | Other
        Information                                                                                                                                                   | 163 
|         |  |                                                                                                                                                                             |     
|PART III
|        
|10.      |  | Directors
        and Executive Officers of the Registrant                                                                                                                  | 164 
|11.      |  | Executive
        Compensation                                                                                                                                              | 164 
|12.      |  | Security
        Ownership of Certain Beneficial Owners and Management                                                                                                      | 165 
|13.      |  | Certain
        Relationships and Related Transactions                                                                                                                      | 166 
|14.      |  | Principal
        Accounting Fees and Services                                                                                                                              | 166 
|        
|PART IV 
|        
|15.      |  | Exhibits
        and Financial Statement Schedules                                                                                                                          | 167 
|         |  | Shareowner
        and Investor Information                                                                                                                                 | 168 
|         |  | Signatures                                                                                                                                                                  | 170 
|         |  | Exhibit
        Index                                                                                                                                                       | 173 
|         |  | Computation
        of Ratio of Earnings to Fixed Charges                                                                                                                   | 181 
|         |  | Certifications
        of Principal Executive Officer and Principal Financial Officer Pursuant
        to 
           Section 302 of the Sarbanes-Oxley Act of
        2002 | 184 
|         |  | Certificates
        of Principal Executive Officer and Principal Financial Officer Pursuant
        to 
           Section 906 of the Sarbanes-Oxley Act of
        2002   | 190 
|         |  | PPL
        Corporation - Corporate Organization                                                                                                                            | 196 

---

GLOSSARY OF TERMS AND ABBREVIATIONS

£ - British pounds sterling.

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

2001 Senior Secured Bond Indenture - PPL Electric's Indenture,
  dated as of August 1, 2001, to JPMorgan Chase Bank, as trustee, as supplemented.

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

ANEEL - National Electric Energy Agency, Brazil's agency that
  regulates the transmission and distribution of electricity.

APA - Asset Purchase Agreement.

APB- Accounting Principles Board.

ARB- Accounting Research Bulletin.

ARO - asset retirement obligation.

Bangor Hydro - Bangor Hydro-Electric Company.

Bcf - billion cubic feet.

CEMAR - Companhia Energética do Maranhão, a Brazilian
  electric distribution company in which PPL Global had a majority ownership interest
  until the transfer of this interest in April 2004.

CGE-Compañia General de Electricidad, S.A., a
  distributor of electricity and natural gas with other industrial segments in
  Chile and Argentina in which PPL Global had an 8.7% direct and indirect minority
  ownership interest until the sale of this interest in March 2004.

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

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

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

DelSur-Distribuidora de Electricidad Del Sur,
  S.A. de C.V., an electric distribution company in El Salvador, a majority of
  which is owned by EC.

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

Derivative - a financial instrument or other contract with all
  three of the following characteristics:

1. It has (1) one or more underlyings and (2) one or more notional amounts
    or payment provisions or both. Those terms determine the amount of the settlement
    or settlements, and, in some cases, whether or not a settlement is required.
2. It requires no initial net investment or an initial net investment that
    is smaller than would be required for other types of contracts that would
    be expected to have a similar response to changes in market factors.
3. Its terms require or permit net settlement, it can readily be settled net
    by a means outside the contract, or it provides for delivery of an asset that
    puts the recipient in a position not substantially different from net settlement.

DIG- Derivatives Implementation Group.

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

DRIP - Dividend Reinvestment Plan.

EC - Electricidad de Centroamerica, S.A. de C.V., an El Salvadoran
  holding company and the majority owner of DelSur. EC was also the majority owner
  of El Salvador Telecom, S.A. de C.V. until the sale of this company in June
  2004. PPL Global has 100% ownership of EC.

EGS - electric generation supplier.

EITF - Emerging Issues Task Force, an organization that assists
  the FASB in improving financial reporting through the identification, discussion
  and resolution of financial accounting issues within the framework of existing
  authoritative literature.

Elfec- Empresa de Luz y Fuerza Electrica Cochabamba S.A., a
  Bolivian electric distribution company in which PPL Global has a majority ownership
  interest.

Emel - Empresas Emel S.A., a Chilean electric distribution holding
  company in which PPL Global has a majority ownership interest.

EMF - electric and magnetic fields.

Enrichment - the concentration of fissionable isotopes to produce
  a fuel suitable for use in a nuclear reactor.

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

EPS - earnings per share.

ESOP - Employee Stock Ownership Plan.

EWG - exempt wholesale generator.

Fabrication - the process which manufactures nuclear fuel assemblies
  for insertion into the reactor.

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

FERC - Federal Energy Regulatory Commission, the federal agency
  that regulates interstate transmission and wholesale sales of electricity and
  related matters.

FIN- FASB Interpretation.

FSP - FASB Staff Position.

GAAP - generally accepted accounting principles.

Griffith- a 600 MW gas-fired station in Kingman, Arizona, which
  is jointly owned by indirect subsidiaries of PPL Generation and Duke Energy
  Corporation.

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

Hyder - Hyder Limited, a subsidiary of WPDL that was the previous
  owner of South Wales Electricity plc. In March 2001, South Wales Electricity
  plc was acquired by WPDH Limited and renamed WPD (South Wales).

IBEW - International Brotherhood of Electrical Workers.

ICP - Incentive Compensation Plan.

ICPKE - Incentive Compensation Plan for Key Employees.

Integra - Empresa de Ingenieria y Servicios Integrales Cochabamba
  S.A., a Bolivian construction and engineering services company in which PPL
  Global has a majority ownership interest.

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

ISO - Independent System Operator.

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

kVA- kilovolt-ampere.

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

LIBOR-London Interbank Offered Rate.

MicDos - Minicentrales Dos, S.A., a Spanish company which owns
  several small hydroelectric generating facilities in Spain. PPL Global sold
  its ownership interest in MicDos in June 2004.

Mirant - Mirant Corporation, a diversified energy company based
  in Atlanta. PPL Global and Mirant jointly owned WPD from 1996 until September
  6, 2002.

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

MW - megawatt, one thousand kilowatts.

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

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

NPDES - National Pollutant Discharge Elimination System.

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

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

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

OSM - Office of Surface Mining, a U.S. government agency.

PCB - polychlorinated biphenyl, an additive to oil used in certain
  electrical equipment up to the late-1970s. It is now classified as a hazardous
  chemical.

PEPS Units (Premium Equity Participating Security Units, or PEPSSM
  Units) - securities issued by PPL and PPL Capital Funding Trust I that consisted
  of a Preferred Security and a forward contract to purchase PPL common stock.

PEPS Units, Series B(Premium Equity Participating Security Units,
  or PEPSSM Units, Series B) - securities issued by PPL and PPL Capital
  Funding that consisted of an undivided interest in a debt security issued by
  PPL Capital Funding and guaranteed by PPL, and a forward contract to purchase
  PPL common stock.

PJM(PJM Interconnection, L.L.C.) - operator of the electric
  transmission network and electric energy market in all or parts of Delaware,
  Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, Ohio, Pennsylvania,
  Tennessee, Virginia, West Virginia and the District of Columbia.

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

PP&E- property, plant and equipment.

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

PPL Capital Funding - PPL Capital Funding, Inc., a PPL financing
  subsidiary.

PPL Capital Funding Trust I - a Delaware statutory business trust
  created to issue the Preferred Security component of the PEPS Units. This trust
  was terminated in June 2004.

PPL Coal Supply- PPL Coal Supply, LLC, a limited liability company
  owned by PPL Coal Holdings Corporation (a subsidiary of PPL Generation) and
  Iris Energy LLC. PPL Coal Supply procures coal, which it sells to PPL Generation
  for power plants and to Iris Energy for synfuel production.

PPL Development Company- PPL Development Company, LLC, a subsidiary
  of PPL Services that has responsibility for all of PPL's acquisition, divestiture
  and development activities.

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

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

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

PPL Energy Supply - PPL Energy Supply, LLC, a subsidiary of PPL
  Energy Funding and the parent company of PPL Generation, PPL EnergyPlus, PPL
  Global and other subsidiaries.

PPL Gas Utilities - PPL Gas Utilities Corporation, a regulated
  utility subsidiary of PPL that specializes in natural gas distribution, transmission
  and storage services, and the competitive sale of propane.

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

PPL Global - PPL Global, LLC, a subsidiary of PPL Energy Supply
  that owns and operates international energy businesses that are focused on the
  distribution of electricity.

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

PPL Maine - PPL Maine, LLC, a subsidiary of PPL Generation that
  owns generating operations in Maine.

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

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

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

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

PPL Telcom - PPL Telcom, LLC, an indirect subsidiary of PPL Energy
  Funding that delivers high bandwidth telecommunication services in the Northeast
  corridor from Washington, D.C., to New York City and to six metropolitan areas
  in central and eastern Pennsylvania.

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

Preferred Securities - company-obligated mandatorily redeemable
  preferred securities issued by PPL Capital Funding Trust I, which solely held
  debentures of PPL Capital Funding, and by SIUK Capital Trust I, which solely
  holds debentures of WPD LLP.

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

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

PUHCA - Public Utility Holding Company Act of 1935, legislation
  passed by the U.S. Congress.

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

PURTA - the Pennsylvania Public Utility Realty Tax Act.

RMC - Risk Management Committee.

Sarbanes-Oxley 404- Section 404 of the Sarbanes-Oxley Act of
  2002, which sets requirements for management assessment of internal controls
  for financial reporting. It also requires an independent auditor to attest to
  and report on management's assessment.

SCR - selective catalytic reduction, a pollution control process.

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

SFAS - Statement of Financial Accounting Standards, the accounting
  and financial reporting rules issued by the FASB.

SIUK Capital Trust I- a business trust created to issue preferred
  securities and whose common securities are held by WPD  LLP.

SIUK Limited-was an intermediate holding company
  within the WPDH Limited group. In January 2003, SIUK Limited transferred its
  assets and liabilities to WPD LLP.

SPE - special purpose entity.

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

Synfuel projects - production facilities that manufacture synthetic
  fuel from coal or coal byproducts. Favorable federal tax credits are available
  on qualified synthetic fuel products.

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

UF- inflation-indexed Chilean peso-denominated unit.

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

WPD - refers collectively to WPDH Limited and WPDL. PPL Global
  purchased Mirant's 49% ownership interest in these entities on September 6,
  2002, thereby achieving 100% ownership and operational control.

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

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

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

WPDH Limited - Western Power Distribution Holdings Limited, an
  indirect, wholly owned subsidiary of PPL Global. WPDH Limited owns WPD LLP.

WPDL - WPD Investment Holdings Limited, an indirect wholly owned
  subsidiary of PPL Global. WPDL owns 100% of the common shares of Hyder.

---

Forward-looking Information

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

- market demand and prices for energy, capacity and fuel;
- weather conditions affecting customer energy usage and operating costs;
- competition in retail and wholesale power markets;
- the effect of any business or industry restructuring;
- the profitability and liquidity of PPL and its subsidiaries;
- new accounting requirements or new interpretations or applications of existing
    requirements;
- operation and availability of existing generation facilities and operating
    costs;
- transmission and distribution system conditions and operating costs;
- environmental conditions and requirements;
- development of new projects, markets and technologies;
- performance of new ventures;
- asset acquisitions and dispositions;
- political, regulatory or economic conditions in states, regions or countries
    where PPL or its subsidiaries conduct business;
- receipt of necessary governmental permits, approvals and rate relief;
- impact of state, federal or foreign investigations applicable to PPL and
    its subsidiaries and the energy industry;
- the outcome of litigation against PPL and its subsidiaries;
- capital market conditions and decisions regarding capital structure;
- stock price performance;
- the market prices of equity securities and the impact on pension income
    and resultant cash funding requirements for defined benefit pension plans;
- securities and credit ratings;
- state, federal and foreign regulatory developments;
- foreign exchange rates;
- new state, federal or foreign legislation, including new tax legislation;
- national or regional economic conditions, including any potential effects
    arising from terrorist attacks in the U.S., the situation in Iraq and any
    consequential hostilities or other hostilities; and
- the commitments and liabilities of PPL and its subsidiaries.

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

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

---

PART I

ITEM 1. BUSINESS

BACKGROUND

PPL Corporation, headquartered in Allentown, PA, is an energy and utility holding
  company that was incorporated in 1994. PPL has been exempted by the SEC from
  the provisions of PUHCA applicable to it as a holding company. Through its subsidiaries,
  PPL generates electricity from power plants in the northeastern and western
  U.S.; markets wholesale or retail energy primarily in the northeastern and western
  portions of the U.S.; delivers electricity to nearly five million customers
  in Pennsylvania, the U.K. and Latin America; and provides energy services for
  businesses in the mid-Atlantic and northeastern U.S. PPL's significant subsidiaries
  are shown below:



See Exhibit 99 in Item 15 for a listing of the current corporate organization.
  In addition to PPL Corporation, the other SEC registrants included in this filing
  are:

PPL Energy Supply, LLC, an indirect, wholly owned subsidiary of PPL
  formed in 2000, is an energy company engaged through its subsidiaries in the
  generation and marketing of power primarily in the northeastern and western
  power markets of the U.S. and in the delivery of electricity in the U.K. and
  Latin America. PPL Energy Supply's major operating subsidiaries are PPL Generation,
  PPL EnergyPlus and PPL Global. PPL Energy Supply owns or controls 12,274 MW
  of electric power generation capacity, and has current plans to implement capital
  projects at certain of its existing generation facilities in Pennsylvania and
  Montana that would provide 255 MW of additional generation capacity by 2010.

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

Segment Information

PPL is organized into segments consisting of Supply, Delivery and International.
  PPL Energy Supply's segments consist of Supply and International. PPL Electric
  operates in a single business segment, Delivery. See Note 2 to the Financial
  Statements for financial information about the segments and geographic financial
  data.

| | Supply Segment -                                                                                                                                                                                                                                                                                        
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                         
|  | Owns and operates power plants to generate
        electricity; markets this electricity and other power purchases to deregulated
        wholesale and retail markets; and acquires and develops domestic generation
        projects. Consists of the activities of PPL Generation and PPL EnergyPlus.

PPL has generation assets that are focused on the eastern and western markets.
  The eastern generation assets are focused on the Northeast/Mid-Atlantic energy
  markets - including PJM, the New York ISO, ISO New England and the Mid-American
  Interconnection Network. PPL's western generating capacity is focused on the
  markets within the Western Systems Coordinating Council.

| | PPL Generation
| | --------------

PPL Generation had a total generating capacity of 12,274 MW at December 31,
  2004. Through subsidiaries, PPL Generation owns and operates power plants in
  Pennsylvania, Montana, Maine, Connecticut, Arizona, Illinois and New York. See
  "Power Supply" for a complete listing of PPL's generating capacity.

The Pennsylvania generation plants had a total capacity of 9,227 MW at December
  31, 2004. These plants are fueled by nuclear reaction, coal, gas, oil and hydro
  power. The electricity from these plants is sold to PPL EnergyPlus under FERC-jurisdictional
  power purchase agreements.

PPL's U.S. generation subsidiaries are EWGs, which sell electricity into the
  wholesale market. PPL's EWGs are subject to regulation by the FERC but not subject
  to regulation under PUHCA. The FERC has authorized these EWGs to sell generation
  from their facilities at market-based prices.

PPL Susquehanna, a subsidiary of PPL Generation, owns a 90% undivided interest
  in each of the two nuclear-fueled generating units at its Susquehanna station,
  while Allegheny Electric Cooperative, Inc. owns the remaining 10% undivided
  interest. PPL's 90% share of Susquehanna's capacity was 2,124 MW at December
  31, 2004. In 2004, PPL Susquehanna completed the installation of more efficient
  steam turbines at Unit 1 that increased the capacity of the Susquehanna plant
  by 49 MW, of which PPL Susquehanna has a 90% undivided interest.

PPL Generation operates its Pennsylvania and Illinois power plants in conjunction
  with PJM. PPL Generation's Pennsylvania power plants and PPL EnergyPlus are
  parties to the Mid-Atlantic Area Coordination Agreement. PPL's Illinois power
  plants are parties to the Mid-America Interconnected Network Agreement. Refer
  to "Delivery Segment" for information regarding PJM's operations and functions
  and the Mid-Atlantic Area Coordination Agreement.

The Montana generating stations were acquired from Montana Power in 1999. The
  coal-fired and hydro-powered stations have a capacity of 1,259 MW. PPL Montana
  supplies 300 MW of around-the-clock electricity and 150 MW of unit-contingent
  on-peak electricity to NorthWestern under two five-year agreements that began
  in July 2002. These contracts accounted for 30% of PPL Montana's operating revenue
  in 2004. PPL Montana also purchases 98 MW of firm energy and capacity during
  the months of November through April from Basin Electric Cooperative. PPL Montana's
  power plants are parties to the Western Electricity Coordinating Council Agreement.

The Maine generating assets were acquired from Bangor Hydro in 1998. The oil-fired
  and hydro-powered stations have a total capacity of 96 MW. The Maine generating
  assets are operated in conjunction with ISO New England and are parties to the
  Northeast Power Coordinating Council Agreement. See Note 9 for information on
  the possible sale of three hydroelectric dams.

The Connecticut generating station was constructed by PPL and began commercial
  operations in 2001. This natural gas-fired station has a total capacity of 243
  MW. The Connecticut generating station is operated in conjunction with ISO New
  England and is party to the Northeast Power Coordinating Council Agreement.

During 2002, PPL began commercial operations in Arizona of two natural gas-fired
  generating stations. PPL's ownership interest in the Griffith station is 300
  MW. The Sundance station has a total capacity of 450 MW. PPL's Arizona generating
  stations are parties to the Western Electricity Coordinating Council Agreement.
  See Note 9 for additional information on the possible sale of the Sundance facility.

In 2002, PPL also began commercial operations in Illinois of its University
  Park 540 MW natural gas-fired generating station, and in New York of its Edgewood
  natural gas-fired generating station and its Shoreham oil-fired generating station.
  The New York plants have a combined capacity of 159 MW. The New York generating
  stations are operated in connection with the New York ISO and are parties to
  the Northeast Power Coordinating Council Agreement.

In 2004, PPL began commercial operations in Pennsylvania of its Lower Mt. Bethel
  582 MW natural gas-fired generating station.

PPL Generation has current plans to implement capital projects at certain of
  its generation facilities in Pennsylvania and Montana that would provide 255
  MW of additional generation capacity by 2010.

Refer to the "Power Supply" section for additional information regarding the
  various power plants operated by PPL Generation, to the "Fuel Supply" section
  for a discussion of fuel requirements and contractual arrangements for fuel
  and to "Item 2. Properties" for additional information regarding PPL's proposed
  capital projects to increase its generation capacity.

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

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

| | PPL EnergyPlus
| | --------------

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

PPL EnergyPlus buys and sells energy at competitive prices. PPL EnergyPlus
  purchases electric capacity and energy at the wholesale level, and also sells
  electric capacity and energy at the wholesale level under FERC market-based
  tariffs. PPL EnergyPlus enters into these agreements to market available energy
  and capacity from PPL Generation's assets and to profit from market price fluctuations.
  PPL EnergyPlus actively manages its portfolios to maximize the value of PPL's
  generating assets and to limit exposure to price fluctuations. PPL EnergyPlus
  also purchases and sells energy forward and futures contracts as well as other
  commodity-based financial instruments in accordance with PPL's risk management
  policies, objectives and strategies.

PPL EnergyPlus has executed contracts to provide electricity to PPL Electric
  sufficient for it to meet its PLR obligation through 2009, at the predetermined
  capped rates PPL Electric is entitled to charge its customers during this period.
  This arrangement with PPL Electric accounted for 34% of PPL Energy Supply's
  consolidated revenues in 2004. See Note 15 to the Financial Statements for more
  information concerning these contracts.

PPL EnergyPlus has a PUC license to act as an EGS in Pennsylvania. This license
  permits PPL EnergyPlus to offer retail electric supply to customers throughout
  Pennsylvania. In 2004, PPL EnergyPlus was licensed, and supplied energy to industrial
  and commercial customers in Pennsylvania, New Jersey and Montana. PPL EnergyPlus
  also is licensed to provide energy in Delaware, Maryland, Maine and Massachusetts.
  PPL EnergyPlus currently is not marketing to residential customers in the competitive
  marketplace based on economic considerations.

PPL EnergyPlus also develops distributed generation plants on customer sites
  using technologies such as fuel cells, small turbines, microturbines and reciprocating
  engines. As of December 31, 2004, a subsidiary of PPL Energy Supply owned approximately
  11 MW of installed capacity serving commercial and industrial customers.

PPL Synfuel Investments, LLC, a subsidiary of PPL EnergyPlus, indirectly owns,
  through its subsidiaries, two production facilities that manufacture synthetic
  fuel from coal or coal byproducts. PPL receives federal tax credits for these
  qualified manufactured synfuel products. See Note 14 for additional information.

| | PPL Telcom
| | ----------

PPL Telcom, an unregulated subsidiary of PPL Energy Funding, has a fiber optic
  network and markets available capacity on PPL Electric's fiber optic cables
  in eastern and central Pennsylvania. The fiber optic services include point-to-point
  data transport, high-speed connections among multiple sites and access to national
  and global fiber networks. PPL Telcom markets its services to customers such
  as other telecommunications companies, internet service providers and large
  enterprises that need high-speed data connections between multiple locations.
  Additionally, PPL Telcom provides engineering, construction and site leasing
  services to wireless carriers.

In 2003, a subsidiary of PPL Telcom acquired the fiber optic network of a Fairfax,
  Virginia-based company. The 1,330-route-mile metropolitan area fiber network
  connects New York, northern New Jersey, Philadelphia, Baltimore and Washington,
  D.C.

| | Delivery Segment -                                                                                        
|- | ----------------------------------------------------------------------------------------------------------
|  |                                                                                                           
|  | Includes the regulated electric and gas
        delivery operations of PPL Electric and PPL Gas Utilities.

| |             
| | ------------
| | PPL Electric

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

Pursuant to the PUC Final Order, PPL Electric agreed in 1998 to a cap on the
  electricity transmission and distribution rates that it collected from retail
  customers in its service territory. This cap expired on December 31, 2004. In
  March 2004, PPL Electric filed a request with the PUC for an overall annual
  net increase in distribution rates of approximately $164 million (subsequently
  amended to $160 million), based on a return on equity of 11.5%, and notified
  the PUC that it planned to pass through to customers approximately $57 million
  in increased transmission charges imposed on PPL Electric by PJM. In December
  2004, the PUC approved an increase in PPL Electric's distribution rates of approximately
  $137 million (based on a return on equity of 10.7%), and approved PPL Electric's
  proposed mechanism for collecting the additional $57 million in transmission-related
  charges, for a total increase of approximately $194 million, effective January
  1, 2005.

In addition to providing electricity delivery service in its service territory
  in Pennsylvania, PPL Electric also provides electricity supply to retail customers
  in that territory as a PLR under the Customer Choice Act. As part of the PUC
  Final Order, PPL Electric agreed to provide this electricity supply at predetermined
  capped rates through 2009. PPL Electric has executed two contracts to purchase
  electricity from PPL EnergyPlus sufficient for PPL Electric to meet its PLR
  obligation through 2009, at the predetermined capped rates. PPL Electric's PLR
  obligation after 2009 will be determined by the PUC pursuant to rules that have
  not yet been promulgated.

During 2004, about 94% of PPL Electric's operating revenues were derived from
  regulated electricity deliveries and supply as a PLR. About 6% of 2004 operating
  revenues were from wholesale sales, primarily the sale to PPL EnergyPlus of
  power purchased from NUGs. During 2004, about 43% of electricity delivery and
  PLR revenues were from residential customers, 36% from commercial customers,
  20% from industrial customers and 1% from other customer classes.

PPL Electric's transmission facilities are operated as part of PJM. PJM operates
  the electric transmission network and electric energy market in the mid-Atlantic
  and Midwest regions of the U.S. Bulk electricity is transmitted to wholesale
  users throughout a geographic area including all or part of Delaware, Illinois,
  Indiana, Kentucky, Maryland, Michigan, New Jersey, Ohio, Pennsylvania, Tennessee,
  Virginia, West Virginia and the District of Columbia. PPL Electric also is a
  party to the Mid-Atlantic Area Coordination Agreement, which provides for the
  coordinated planning of generation and transmission facilities by the companies
  included in PJM.

PJM serves as a FERC-approved Regional Transmission Organization (RTO) in order
  to accommodate greater competition and broader participation in the region.
  (An RTO, like an ISO, is a designation provided by the FERC to a FERC-approved
  independent entity that operates the transmission system and typically administers
  a competitive power market.) A purpose of the RTO/ISO is to separate the operation
  of, and access to, the transmission grid from PJM electric utilities' generation
  interests. PJM also administers regional markets for energy, capacity and ancillary
  services. Electric utilities continue to own the transmission assets, but the
  RTO/ISO directs the control and operation of the transmission facilities. As
  described above, effective January 1, 2005, PPL Electric began to fully recover
  from retail customers the charges that it pays
  to PJM for transmission-related services. PJM imposes these charges pursuant
  to its FERC-approved Open Access Transmission Tariff. PPL Electric's retail
  electric tariff authorizes it to recover such charges from its retail customers,
  but PPL Electric had been precluded from such recovery through December 31,
  2004, pursuant to the transmission and distribution rate cap described above.

PPL Electric is subject to regulation as a public utility by the PUC, and certain
  of its activities are subject to the jurisdiction of the FERC under the Federal
  Power Act. PPL Electric is not a holding company under PUHCA.

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

In November 2004, Pennsylvania enacted the Alternative Energy Portfolio Standards
  legislation, which requires electric distribution companies, such as PPL Electric,
  and electric generation suppliers serving retail load to provide 18% of the
  electricity sold to retail customers in Pennsylvania from alternative sources
  within 15 years (by 2020). Under this new state legislation, alternative sources
  include hydro, wind, solar, waste coal, landfill methane and fuel cells. An
  electric distribution company will pay an alternative compliance payment of
  $45 for each MWh that it is short of its required alternative energy supply
  percentage. Since PPL Electric's PLR generation rates are capped through 2009
  as described above and the legislation allows for a cost recovery exemption
  period, PPL Electric will not be subject to the requirements of this legislation
  until 2010. In that year, PPL Electric will have to supply about 9% of the total
  amount of electricity it delivers to its PLR customers from alternative energy
  sources. At this time, PPL Electric cannot predict the impact of this legislation
  on its future results of operations because the impact will depend on a number
  of factors that will not be known until 2010, including customer load requirements,
  PLR contract terms and available alternative energy sources in the market at
  that time.

| | PPL Gas Utilities
| | -----------------

PPL Gas Utilities operates a natural gas distribution and propane business
  in portions of various counties in Pennsylvania, as well as in a small portion
  of Maryland and Delaware, providing natural gas and propane services to approximately
  107,000 customers. PPL Gas Utilities provides its natural gas services in Pennsylvania
  subject to the regulatory jurisdiction of the PUC. PPL Gas Utilities also provides
  intrastate and interstate natural gas storage service from storage fields in
  Pennsylvania. The intrastate storage service is regulated by the PUC and the
  interstate storage service is regulated by the FERC. However, by order of the
  FERC issued in 1992, rates for interstate storage services are the rates set
  by the PUC for intrastate service. The propane delivery service is not subject
  to the regulatory jurisdiction of the PUC or the FERC. PPL Gas Utilities was
  formed in 1946 and PPL acquired the company in 1998.

| | International Segment -                                                                                       
|- | --------------------------------------------------------------------------------------------------------------
|  |                                                                                                               
|  | Owns and operates international energy
        businesses that are focused on the distribution of electricity.

In September 2002, PPL Global's acquisition of Mirant's 49% interest for approximately
  $236 million provided PPL Global with complete ownership of WPD. WPD, through
  indirect wholly owned subsidiaries, operates two electric distribution companies
  in the U.K., that together serve approximately 2.6 million end-users. WPD delivered
  28,847 million kWh of electricity in 2004. See Note 9 to the Financial Statements
  for additional information on this acquisition.

In November 2004, Ofgem published its final decision on new price controls
  for the five-year regulatory period commencing April 1, 2005. Ofgem's decision
  provides for a price increase of 1.5% for WPD (South West) and 6.2% for WPD
  (South Wales), or an average of 3.6% for WPD. The price increase is in effect
  for the 12-month period beginning April 1, 2005, followed by an adjustment in
  prices reflecting WPD's capital investment program and inflationary effects
  in each of the following four years. The price increases include reimbursement
  for higher operating and capital costs to be incurred during the new regulatory
  period. Ofgem set the weighted average cost of capital at 4.8% on an after-tax
  basis, equivalent to 6.9% on a pre-tax real basis, which is a 0.4% increase
  from the previous regulatory period. Although published as a price increase
  by Ofgem, the net effect of the new price controls to WPD is a revenue decrease
  of approximately 3.5% when excluding certain reclassifications and cost pass-through
  reimbursements.

PPL Global also has controlling interests in electric transmission and distribution
  companies serving customers in Chile, El Salvador and Bolivia. Emel, of which
  PPL Global owns 95.4%, serves approximately 544,000 customers through subsidiary
  distribution companies in northern Chile and just south of its headquarters
  in Santiago, Chile. DelSur, of which PPL Global owns 86.4%, is an electric distribution
  company headquartered in San Salvador, which serves approximately 268,000 customers
  in the central and southern regions of El Salvador, including a portion of the
  city of San Salvador. Elfec, of which PPL Global owns 92.1%, is the second largest
  electric distribution company in Bolivia, and serves approximately 259,000 customers
  in Cochabamba. Currently, there is significant political and economic instability
  in Bolivia, and PPL at this time is unable to predict the impact of this instability
  on its Bolivian operations.

PPL Global also has a minority investment in a combined generating and natural
  gas production facility in Peru.

In August 2002, PPL Global deconsolidated its 90% equity interest in its Brazilian
  investment, CEMAR, when ANEEL authorized an administrative intervention and
  fully assumed operational and financial control of the company. In April 2004,
  PPL Global sold its investment in CEMAR. See Note 9 to the Financial Statements
  for additional information on the CEMAR investment.

In 2004, PPL Global also sold its minority investments in generating facilities
  in Spain and in an electricity and natural gas distributor in Chile, as well
  as its majority ownership interest in a telecommunications company in El Salvador.
  See Note 9 to the Financial Statements for additional information on these divestitures.

| | Other
|- | -----

PPL Services

Various corporate service functions reside in PPL Services, an unregulated
  subsidiary of PPL. PPL Services provides shared services for PPL and its subsidiaries.
  These services include financial, legal, human resources and information services.
  These services are directly charged or allocated, as appropriate, to the Supply,
  Delivery and International segments. In the third quarter of 2004, PPL Services
  formed a wholly owned subsidiary, PPL Development Company, which has responsibility
  for all of PPL's acquisition, divestiture and development activities. These
  activities previously were the responsibility of PPL Global.

Seasonality

Demand for and market prices of electricity are impacted by weather. As a result,
  PPL's overall operating results in the future may fluctuate substantially on
  a seasonal basis, especially when more severe weather conditions such as heat
  waves or winter storms make such fluctuations more pronounced. The pattern of
  this fluctuation may change depending on the nature and location of the facilities
  PPL acquires and the terms of the contracts to sell electricity.

FINANCIAL CONDITION

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

CAPITAL EXPENDITURE REQUIREMENTS

See "Financial Condition - Capital Expenditure Requirements" in PPL's, PPL
  Energy Supply's and PPL Electric's Management's Discussion and Analysis of Financial
  Condition and Results of Operations for information concerning estimated capital
  expenditure requirements for the years 2005-2009. See Note 14 to the Financial
  Statements for additional information concerning expected capital expenditures
  for environmental matters.

COMPETITION

The unregulated businesses and markets that PPL and its subsidiaries participate
  in are highly competitive. The electric industry has experienced an increase
  in the level of competition in the energy markets over the last several years
  due to federal and state deregulation initiatives.

In 1992, the Energy Act amended the PUHCA to create a new class of independent
  power producers, and amended the Federal Power Act to provide open access to
  electric transmission systems for wholesale transactions. In 1996, the Customer
  Choice Act was enacted in Pennsylvania to restructure the state's electric utility
  industry in order to create retail access to a competitive market for the generation
  of electricity. Certain other states in which PPL's subsidiaries operate have
  also adopted a "customer choice" plan to allow customers to choose their electricity
  supplier. Competitive factors affecting PPL's results of operations include
  energy and fuel prices, new market entrants, construction by others of generating
  assets, the actions of regulatory authorities and other factors. PPL cannot
  predict the impact of these and other competitive factors on its future results
  of operations or financial condition.

PPL and its subsidiaries believe that competition in deregulated energy markets
  will continue to be intense. In addition to deregulation, competitive pressures
  have resulted from technological advances in power generation and electronic
  communications and the greater efficiency of energy markets.

The wholesale power markets in which PPL Generation subsidiaries and PPL EnergyPlus
  operate are highly competitive. Competitors include regulated utilities, industrial
  companies, non-utility generators and unregulated subsidiaries of regulated
  utilities. Although PPL EnergyPlus has long-term supply agreements (see "Background
  - Supply Segment"), a substantial portion of PPL's future sales will be made
  into the competitive wholesale markets. Competition will occur principally on
  the basis of the price of products and, to a lesser extent, on the basis of
  reliability and availability.

PPL EnergyPlus also faces competition in the wholesale markets for energy capacity
  and ancillary services. As pricing information becomes increasingly available
  in the energy trading and marketing business and assuming deregulation in the
  electricity markets continues, PPL EnergyPlus anticipates that trading, marketing
  and risk management operations will experience greater competition. PPL EnergyPlus
  primarily competes with other energy merchants based on the ability to aggregate
  supplies at competitive prices from different sources and locations and to efficiently
  utilize transportation from third-party pipelines and transmission from electric
  utilities. Competitors may employ widely differing strategies in their fuel
  supply and power sales contracts with respect to pricing and other terms and
  conditions. PPL EnergyPlus also competes against other energy marketers on the
  basis of relative financial condition and access to credit sources.

Some restructured markets have recently experienced supply problems and price
  volatility. In a number of these markets, government agencies and other interested
  parties have made proposals to delay market restructuring or even re-regulate
  certain areas of these markets that have previously been deregulated. In California,
  legislation has been passed placing a moratorium on the sale of generation plants
  by public utilities regulated by the California Public Utilities Commission.
  In June 2001, the FERC instituted a series of price controls designed to mitigate
  (or cap) prices in the entire western U.S. to address the extreme volatility
  in the California energy markets. These price controls have contributed to the
  lowering of spot and forward energy prices in the western market. In addition,
  RTO/ISOs that oversee the transmission systems in certain wholesale power markets
  have from time to time been authorized to address volatility in power markets.
  These types of price limitations and other mechanisms may adversely impact the
  profitability of PPL's wholesale power marketing and trading business. Other
  proposals to institute price controls or to re-regulate the energy industry
  may be made, and legislative or other actions may cause the electric power restructuring
  process to be delayed, discontinued or reversed in the states in which PPL currently,
  or may in the future, operates. If the competitive restructuring of the wholesale
  and retail power markets is delayed, discontinued or reversed, PPL's business
  prospects and financial condition could be materially adversely affected.

See Note 14 to the Financial Statements for information on the FERC Proposed
  Rules entitled "Remedying Undue Discrimination through Open Access Transmission
  Service and Standard Electricity Market Design."

Pursuant to PPL Electric's authorizations from the Commonwealth of Pennsylvania
  and the PUC, PPL Electric operates a regulated distribution monopoly in its
  service area. Accordingly, PPL Electric does not face competition in its distribution
  business. Although the majority of PPL Global's international electricity transmission
  and distribution companies operate in non-exclusive concession areas in their
  respective countries, these companies currently face little or no competition
  with respect to residential customers. See "Franchises and Licenses" for more
  information.

POWER SUPPLY

PPL Generation's system capacity (winter rating) at December 31, 2004,
  was as follows:

|Plant                                          | Net MW
        Capacity
|---------------------------------------------- | -----------------------
|                                               |                        
|Pennsylvania                                   |                        
|Nuclear-fueled steam station                   |                        
|                                               | Susquehanna            
|                                               |                        
|Coal-fired steam stations                      |                        
|                                               | Montour                
|                                               |                        
|                                               | Brunner Island         
|                                               |                        
|                                               | Martins Creek          
|                                               |                        
|                                               | Keystone               
|                                               |                        
|                                               | Conemaugh              
|                                               |                        
|                                               |                        
|                                               |                        
|Gas- and oil-fired steam station               |                        
|                                               | Martins Creek          
|                                               |                        
|                                               | Lower Mt. Bethel       
|                                               |                        
|                                               |                        
|                                               |                        
|Combustion turbines and diesels                | 451                    
|                                               |                        
|Hydroelectric                                  | 153                    
|                                               |                        
|                                               |                        
|                                               |                        
|Firm purchases                                 |                        
|                                               | Hydroelectric          
|                                               |                        
|                                               | Qualifying facilities  
|                                               |                        
|                                               |                        
|                                               |                        
|Total system capacity - Pennsylvania           | 9,227                  
|                                               |                        
|Montana                                        |                        
|Coal-fired stations                            |                        
|                                               |                        
|                                               | Colstrip Units 1 & 2   
|                                               |                        
|                                               | Colstrip Unit 3        
|                                               |                        
|                                               | Corette                
|                                               |                        
|                                               |                        
|                                               |                        
|Hydroelectric                                  | 576                    
|                                               |                        
|Total system capacity - Montana                | 1,259                  
|                                               |                        
|                                               |                        
|Arizona                                        |                        
|Natural gas-fired stations                     |                        
|                                               | Griffith               
|                                               |                        
|                                               | Sundance               
|                                               |                        
|Total system capacity - Arizona                | 750                    
|                                               |                        
|Connecticut                                    |                        
|Natural gas-fired station                      |                        
|                                               |                        
|                                               | Wallingford            
|                                               |                        
|Illinois                                       |                        
|Natural gas-fired station                      |                        
|                                               |                        
|                                               | University Park        
|                                               |                        
|New York                                       |                        
|Natural gas- and oil-fired stations            |                        
|                                               |                        
|                                               | Edgewood and Shoreham  
|                                               |                        
|Maine                                          |                        
|Oil-fired generating station                   |                        
|                                               | Wyman Unit 4           
|                                               |                        
|Hydroelectric                                  | 44                     
|                                               |                        
|Total system capacity - Maine                  | 96                     
|                                               |                        
|Total system capacity - PPL
        Generation | 12,274                 
|                                               |                        
|                                               |                        

|(a) |  | PPL's 90% interest.                                             
|--- |  | ----------------------------------------------------------------
|(b) |  | PPL's 12.34% interest.                                          
|(c) |  | PPL's 16.25% interest.                                          
|(d) |  | Began commercial operations in May 2004.                        
|(e) |  | From Safe Harbor Water Power Corporation.                       
|(f) |  | PPL's 50% leasehold interest.                                   
|(g) |  | PPL's 30% leasehold interest.                                   
|(h) |  | PPL's 50% interest.                                             
|(i) |  | PPL's 8.33% interest.                                           
|(j) |  | Includes PPL's 50% interest in the West Enfield
        Station.

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

During 2004, PPL Generation's plants generated the following amounts of electricity:

|State        | Millions of kWh
|------------ | ---------------
|             |                
|Pennsylvania | 44,337         
|Montana      | 8,313          
|Arizona      | 593            
|Maine        | 341            
|New York     | 148            
|Illinois     | 116            
|Connecticut  | 60             
|             |                
|             | Total          
|             |                

This generation represented a 3% increase over the output for 2003. Of this
  generation, 56% of the energy was generated by coal-fired stations, 30% from
  nuclear operations at the Susquehanna station, 8% from hydroelectric stations
  and 6% from oil/gas-fired stations.

On average, approximately 83% of PPL's expected annual generation output for
  the period 2005 through 2009 is committed to meet:

- PPL EnergyPlus' obligation under two contracts to provide electricity for
    PPL Electric to satisfy its PLR obligation under the Customer Choice Act;
- PPL EnergyPlus' obligation under two contracts to provide electricity to
    NorthWestern through June 2007; and
- other contractual sales to other counterparties for terms of various lengths.

See Note 14 to the Financial Statements for more information regarding PPL's
  wholesale energy commitments and Note 15 for more information regarding the
  PLR contracts. These contractual arrangements are consistent with and are an
  integral part of PPL's overall business strategy, which includes the matching
  of PPL's anticipated energy supply with load, or customer demand, under long-term
  and intermediate-term contracts with creditworthy counterparties to capture
  profits while reducing PPL's exposure to movements in energy and fuel prices
  and counterparty credit risk.

FUEL SUPPLY

Coal

Pennsylvania

PPL Coal Supply provides coal to three PPL Generation power plants and to Iris
  Energy, LLC for the production of synthetic fuel. In 2004, synthetic fuel from
  Iris Energy provided 57% of the fuel requirements of PPL Generation's Pennsylvania
  stations. The contract with Iris Energy terminates at the end of 2007. The balance
  of the requirements was met by coal provided by PPL Coal Supply. PPL Coal Supply
  actively manages its supply base principally in central Appalachia and western
  and central Pennsylvania.

During 2004, about 89% of the coal delivered to PPL Generation's Pennsylvania
  stations was purchased under long-term contracts and 11% was obtained through
  open market purchases. These long-term contracts provided PPL Generation with
  about 7.3 million tons of coal. Contracts currently in place are expected to
  provide approximately 7.7 million tons in 2005. At December 31, 2004, Pennsylvania
  plants had sufficient supply for about 37 days of operations. The amount of
  coal in inventory varies from time-to-time depending on market conditions and
  plant operations.

At December 31, 2004, a PPL Generation subsidiary owned a 12.34% interest in
  the Keystone station and a 16.25% interest in the Conemaugh station. The owners
  of the Keystone station have a long-term contract with a synthetic fuel supplier
  to provide 90% of the station's fuel requirements, up to 4.5 million tons in
  2005. This contract terminates at the end of 2007. In addition, the Keystone
  station contracts with Keystone Fuels, LLC for the balance of its requirements.
  The owners of the Conemaugh station have a long-term contract with a synthetic
  fuel supplier to provide a minimum of 2.4 million tons through 2007. The balance
  of the Conemaugh station requirements is purchased under contract from Conemaugh
  Fuels, LLC.

Montana

PPL Montana has a 50% leasehold interest in Colstrip Units 1 and 2, and a 30%
  leasehold interest in Unit 3. PPL Montana is party to contracts to purchase
  coal from a neighboring mine with defined quality characteristics and specifications.
  The coal supply contract for Units 1 and 2 is in effect through December 31,
  2009. The coal supply contract for Unit 3 is in effect through December 31,
  2019.

Coal supply contracts are in place to purchase low-sulfur coal with defined
  quality characteristics and specifications for PPL Montana's Corette station.
  The contracts supplied 100% of the plant coal requirements in 2004. Similar
  contracts are currently in place to supply 100% of the expected coal requirements
  through 2008.

Oil and Natural Gas

PPL Generation's Martins Creek Units 3 and 4 burn both oil and natural gas.
  PPL EnergyPlus is responsible for procuring the oil and natural gas supply for
  all PPL Generation operations. During 2004, 100% of the physical oil requirements
  for the Martins Creek units were purchased on the spot market. As of December
  31, 2004, PPL EnergyPlus had no long-term agreements for these requirements.

PPL EnergyPlus has a long-term pipeline capacity contract for delivery of gas
  supply representing approximately 10% of the maximum requirements of the Sundance
  facility, but has no long-term supply agreement to purchase natural gas. As
  of December 31, 2004, there were no long-term delivery or supply agreements
  to purchase natural gas for University Park.

PPL EnergyPlus has a long-term contract for approximately 40% of the expected
  pipeline transportation requirements of the Wallingford facility, but has no
  long-term supply agreement to purchase natural gas. Likewise, PPL EnergyPlus
  has long-term pipeline transportation contracts in place for the Griffith facility
  equaling 100% of the expected requirements.

In 2004, PPL EnergyPlus began supplying natural gas for the commercial operation
  at the Lower Mt. Bethel facility. PPL EnergyPlus has two gas transportation
  contracts in place for approximately 30% of the maximum daily requirements of
  the plant. These contracts expire in September 2008 and 2013.

PPL EnergyPlus employs a strategy of procuring natural gas and oil in conjunction
  with electricity sales commitments.

Nuclear

PPL Susquehanna has in effect uranium supply and conversion agreements that,
  including options, satisfy 100% of its uranium requirements in 2005 and 2006
  and will satisfy approximately 75% of its requirements in 2007, and approximately
  30% of its requirements in 2008 and 2009. Deliveries under these agreements
  are expected to provide sufficient uranium to permit Unit 1 to operate into
  the first quarter of 2008 and Unit 2 to operate into the first quarter of 2009.

PPL Susquehanna has executed an agreement that satisfies all of its enrichment
  requirements through 2008. Assuming that the other uranium components of the
  nuclear fuel cycle are satisfied, deliveries under this agreement are expected
  to provide sufficient enrichment to permit Unit 1 to operate into the first
  quarter of 2010 and Unit 2 to operate into the first quarter of 2011.

PPL Susquehanna has entered into an agreement that, including options, satisfies
  all of its fabrication requirements through 2014. Assuming that the uranium
  and other components of the nuclear fuel cycle are satisfied, deliveries under
  this agreement can provide sufficient fabrication to permit Unit 1 to operate
  into the first quarter of 2016 and Unit 2 to operate into the first quarter
  of 2015.

Federal law requires the federal government to provide for the permanent disposal
  of commercial spent nuclear fuel. Under the Nuclear Waste Policy Act (NWPA),
  the DOE initiated an analysis of a site in Nevada for a permanent nuclear waste
  repository. DOE does not expect the repository to be operational before 2010.
  As a result, it was necessary to expand Susquehanna's on-site spent fuel storage
  capacity. To support this expansion, PPL Susquehanna contracted for the design
  and construction of a spent fuel storage facility employing dry cask fuel storage
  technology. The facility is modular, so that additional storage capacity can
  be added as needed. The facility began receiving spent nuclear fuel in 1999.
  PPL Susquehanna estimates that there is sufficient storage capacity in the spent
  nuclear fuel pools and the on-site spent fuel storage facility at Susquehanna
  to accommodate spent fuel discharged through approximately 2017, under current
  operating conditions. If necessary, the on-site spent fuel storage facility
  can be expanded, assuming appropriate regulatory approvals are obtained, such
  that, together, the spent fuel pools and the expanded dry fuel storage facility
  will accommodate all of the spent fuel expected to be discharged through the
  current licensed life of the plant.

In 2002, President Bush approved the Congressional override of a veto by the
  State of Nevada, designating Yucca Mountain, Nevada as the site for development
  of a long-term repository for high-level radioactive waste. The next step is
  for the DOE to submit a license application to the NRC to build and then operate
  the Yucca Mountain repository. The DOE has not announced a date when that license
  application will be submitted.

In 1996, the U.S. Court of Appeals for the District of Columbia Circuit ruled
  that the NWPA imposed on DOE an unconditional obligation to begin accepting
  spent nuclear fuel on or before January 31, 1998. In 1997, the Court ruled that
  the contracts between the utilities and the DOE provide a potentially adequate
  remedy if the DOE failed to begin disposal of spent nuclear fuel by January
  31, 1998. The DOE did not, in fact, begin to dispose of spent nuclear fuel on
  that date. The DOE continues to contest claims that its failures resulted in
  recoverable damages. On January 22, 2004, PPL Susquehanna filed suit in the
  U.S. Court of Federal Claims for unspecified damages suffered as a result of
  the DOE's breach of its contract to accept and dispose of spent nuclear fuel.
  PPL Susquehanna's lawsuit currently remains stayed, pending developments in
  lawsuits filed by other plaintiffs. PPL cannot predict the outcome of these
  proceedings.

ENVIRONMENTAL MATTERS

Certain PPL subsidiaries, including PPL Electric and PPL Generation subsidiaries,
  are subject to certain present and developing federal, regional, state and local
  laws and regulations with respect to air and water quality, land use and other
  environmental matters. See PPL's and PPL Energy Supply's "Financial Condition
  - Capital Expenditure Requirements" in Management's Discussion and Analysis
  of Financial Condition and Results of Operations for information concerning
  environmental expenditures during 2004 and their estimate of those expenditures
  during the years 2005-2009. PPL believes that its subsidiaries are in substantial
  compliance with applicable environmental laws and regulations.

See "Environmental Matters" in Note 14 to the Financial Statements for information
  concerning federal clean air legislation, groundwater degradation and waste
  water control at facilities owned by PPL's subsidiaries and PPL Electric's and
  PPL Gas Utilities' agreements with the Pennsylvania DEP concerning remediation
  at certain sites. Other environmental laws, regulations and developments that
  may have a substantial impact on PPL's subsidiaries are discussed below.

Air

The Clean Air Act includes, among other things, provisions that: (a) restrict
  the construction of, and revise the performance standards for, new and substantially
  modified coal-fired and oil-fired generating stations; and (b) authorize the
  EPA to impose substantial noncompliance penalties of up to $27,500 per day of
  violation for each facility found to be in violation of the requirements of
  an applicable state implementation plan. The state agencies administer the EPA's
  air quality regulations through the state implementation plans and have concurrent
  authority to impose penalties for non-compliance.

In its Clean Air Interstate Rule, the EPA has proposed substantial reductions
  for sulfur dioxide and nitrogen oxide emissions in 29 midwestern and eastern
  states, including Pennsylvania; and, in a separate rule, the EPA has proposed
  mercury reductions nationwide. Similarly, the Bush administration's Clear Skies
  Initiative and proposals by certain members of Congress would amend the Clean
  Air Act to require significant reductions in nitrogen oxide, sulfur dioxide
  and mercury. In addition, there is mounting pressure from various states and
  environmental groups and at the federal level for mandatory carbon dioxide reductions.
  For example, although the Bush administration's Clear Skies Initiative does
  not address carbon emissions, several states have already passed legislation
  capping carbon emissions and bills have been introduced at the federal level
  proposing mandatory reductions. The amount and timing of any such reductions
  that may be required is not yet clear. Such requirements could result in increased
  capital and operating expenses which are not now determinable, but could be
  significant.

Water

To implement the requirements of the Federal Water Pollution Control Act of
  1972, as amended by the Clean Water Act of 1977 and the Water Quality Act of
  1987, the EPA has adopted regulations on effluent standards for steam electric
  stations. The states administer the EPA's effluent standards through state laws
  and regulations relating to, among other things, effluent discharges and water
  quality. The standards adopted by the EPA pursuant to the Clean Water Act may
  have a significant impact on existing facilities of certain PPL subsidiaries,
  depending on the states' interpretation and future amendments to regulations.

Pursuant to the Surface Mining and Reclamation Act of 1977, the Office of Surface
  Mining (OSM) has adopted effluent guidelines which are applicable to PPL subsidiaries
  as a result of their past coal mining and coal processing activities. The EPA
  and the OSM limitations, guidelines and standards also are enforced through
  the issuance of NPDES permits. In accordance with the provisions of the Clean
  Water Act and the Reclamation Act of 1977, the EPA and the OSM have authorized
  the states to implement the NPDES program. Compliance with applicable water
  quality standards is assured by state imposition of NPDES permit conditions
  and requirements to address acid mine drainage.

Solid and Hazardous Waste

The provisions of Superfund authorize the EPA to require past and present owners
  of contaminated sites and generators of any hazardous substance found at a site
  to clean-up the site or pay the EPA or the state for the costs of clean-up.
  The generators and past owners can be liable even if the generator contributed
  only a minute portion of the hazardous substances at the site. Present owners
  can be liable even if they contributed no hazardous substances to the site.

State laws such as the Pennsylvania and Montana Superfund statutes also give
  state agencies broad authority to identify hazardous or contaminated sites and
  to order owners or responsible parties to clean-up the sites. If responsible
  parties cannot or will not perform the clean-up, the agency can hire contractors
  to clean-up the sites and then require reimbursement from the responsible parties
  after the clean-up is completed. Another Pennsylvania statute, the Land Recycling
  and Environmental Remediation Standards, encourages voluntary clean-ups by allowing
  responsible parties to choose from a menu of clean-up standards and providing
  liability protection commensurate with the clean-up standard chosen.

Certain federal and state statutes, including federal and state Superfund statutes,
  also impose liability on the responsible parties for the lost value of damaged
  natural resources.

Low-Level Radioactive Waste

Under federal law, each state is responsible for the disposal of low-level
  radioactive waste generated in that state. States may join in regional compacts
  to jointly fulfill their responsibilities. The states of Pennsylvania, Maryland,
  Delaware and West Virginia are members of the Appalachian States Low-Level Radioactive
  Waste Compact. Efforts to develop a regional disposal facility in Pennsylvania
  were suspended by the Pennsylvania DEP in 1998. The Commonwealth retains the
  legal authority and may be required to resume the siting process should it be
  necessary. Low-level radioactive waste resulting from the operation of the Susquehanna
  facility is currently being sent to Barnwell, South Carolina, and Clive, Utah,
  for disposal. In the event these or other emergent disposal options become unavailable
  or no longer cost-effective, the low-level radioactive waste will be stored
  on-site at Susquehanna. PPL Susquehanna cannot predict the future availability
  of low-level waste disposal facilities or the cost of such disposal.

Asbestos

There have been increasing litigation claims throughout the U.S. based on exposure
  to asbestos against companies that manufacture or distribute asbestos products
  or that have these products on their premises. Certain of PPL's generation subsidiaries
  and certain of its energy services subsidiaries, such as those that have supplied,
  may have supplied or installed asbestos material in connection with the repair
  or installation of process piping and heating, ventilating and air conditioning
  systems, have been named as defendants in asbestos-related lawsuits. PPL cannot
  predict the outcome of these lawsuits or whether additional claims may be asserted
  against its subsidiaries in the future. PPL does not expect that the ultimate
  resolution of the current lawsuits will have a material adverse effect on its
  financial condition.

Electric and Magnetic Fields

Concerns have been expressed by some members of the public regarding potential
  health effects of power frequency electric and/or magnetic fields (EMFs), which
  are emitted by all devices carrying electricity, including electric transmission
  and distribution lines and substation equipment. Government officials in the
  U.S. and the U.K. have reviewed this issue. The U.S. National Institute of Environmental
  Health Sciences concluded in 2002 that, for most health outcomes, there is no
  evidence of EMFs causing adverse effects. The agency further noted that there
  is some epidemiological evidence of an association with childhood leukemia,
  but that this evidence is difficult to interpret without supporting laboratory
  evidence. The U.K. National Radiological Protection Board concluded in 2004
  that, while the research on EMFs does not provide a basis to find that EMFs
  cause any illness, there is a basis to consider precautionary measures beyond
  existing exposure guidelines. PPL and its subsidiaries believe the current efforts
  to determine whether EMFs cause adverse health effects should continue and are
  taking steps to reduce EMFs, where practical, in the design of new transmission
  and distribution facilities. PPL is unable to predict what effect, if any, the
  EMF issue might have on its operations and facilities either in the U.S. or
  abroad, and the associated cost, or what, if any, liabilities it might incur
  related to the EMF issue.

General

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

FRANCHISES AND LICENSES

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

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

PPL Susquehanna operates Units 1 and 2 pursuant to NRC operating licenses which
  expire in 2022 and 2024, respectively. In November 2001, PPL Susquehanna notified
  the NRC that it intends to seek extensions of its operating licenses. The application
  for this extension will be made in 2006, in accordance with NRC guidelines.
  If the NRC approves PPL Susquehanna's application, the operating licenses for
  Units 1 and 2 would each be extended for an additional 20 years, to 2042 and
  2044, respectively.

PPL Holtwood operates the Holtwood hydroelectric generating station pursuant
  to a license renewed by the FERC in 1980 and expiring in 2014. PPL Holtwood
  operates the Wallenpaupack hydroelectric generating station pursuant to a license
  with the FERC that is in the process of being renewed. PPL Holtwood also owns
  one-third of the capital stock of Safe Harbor Water Power Corporation (Safe
  Harbor), which holds a project license that extends the operation of its hydroelectric
  generating station until 2030. The total capacity of the Safe Harbor generating
  station is 418 MW, and PPL Holtwood is entitled by contract to one-third of
  the total capacity.

The 11 hydroelectric facilities and one storage reservoir purchased from Montana
  Power in 1999 are licensed by the FERC. These licenses expire periodically,
  and the generating facilities must be relicensed at such times. The FERC license
  for the Mystic facility expires in 2009; the Thompson Falls and Kerr licenses
  expire in 2025 and 2035, respectively; and the licenses for the nine Missouri-Madison
  facilities expire in 2040. PPL Montana is working to have the Mystic facility
  relicensed.

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

PPL Global's international electricity transmission and distribution companies
  are authorized by the governments of their respective countries to provide electric
  distribution services within their concession areas and service territories,
  subject to certain conditions and obligations. For instance, each of these companies
  is subject to governmental regulation on the prices that it can charge and the
  quality of service it must provide, and the companies can be fined or even have
  their licenses or concessions revoked if they do not meet the mandated quality
  of service.

WPD operates under distribution licenses granted, and price controls set, by
  Ofgem. The price control formula that governs WPD's allowed revenue is normally
  determined every five years, with the most recent review having been completed
  in late-2004 and new prices effective April 1, 2005.

Emel is subject to regulated maximum tariffs set by Chile's National Energy
  Commission. The components of the distribution tariffs are energy and capacity
  prices, a transmission surcharge and the value added on account of distribution
  costs (VAD). The VAD includes a targeted return on invested capital of 10% per
  year. The energy and capacity prices are a direct pass-through to regulated
  customers of the energy charge that Emel pays to the generation companies. The
  tariffs are calculated every four years, with the most recent tariff review
  having been completed and revised rates becoming effective as of November 2004.

DelSur is subject to regulated maximum tariffs set by El Salvador's General
  Superintendent of Electricity and Telecommunications. The three components of
  the distribution tariff are an energy price, a commercialization charge and
  a distribution charge. DelSur's tariff specifies the energy price as a trailing
  six-month average of the spot market price. The tariffs are calculated every
  5 years and are adjusted for inflation on January 1 of each year. The next comprehensive
  tariff review will take place in 2007 and be effective in 2008.

Elfec is subject to regulated maximum tariffs set by Bolivia's Superintendent
  of Electricity. Tariffs are calculated every four years based on the trailing
  three-year average of the equity returns from companies listed in the Dow Jones
  Utility Index. Tariffs are adjusted on a monthly basis for local inflation and
  every six months to reflect any changes in the energy node prices, which is
  a pass-through to regulated customers of the energy charge that Elfec pays to
  generation companies. The tariffs are calculated every four years. The most
  recent tariff review was completed in January 2004 and new prices became effective
  beginning in 2004.

EMPLOYEE RELATIONS

As of December 31, 2004, PPL and its subsidiaries had the following full-time
  employees:

|PPL Energy Supply    |                         |              
|-------------------- | ----------------------- | -------------
|                     | PPL Generation          | 2,626        
|                     | PPL EnergyPlus          | 1,745        
|                     | PPL Global              |              
|                     |                         | Domestic     
|                     |                         | International
|                     |                         |              
|                     | Total PPL Energy Supply | 8,207        
|PPL Electric         | 2,212                   |              
|PPL Gas Utilities    | 396                     |              
|PPL Services & Other | 1,213                   |              
|                     |                         |              
|Total PPL            | 12,028                  |              
|                     |                         |              

|(a) |  | Includes union employees of mechanical contracting
        subsidiaries, which tend to fluctuate due to the nature of their business.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | Includes employees of WPD and PPL Global's
        consolidated subsidiaries in Latin America.                                       

Approximately 59%, or 4,802, of PPL's domestic workforce are members of labor
  unions, with four IBEW locals representing 3,208 employees. The other unions
  primarily represent employees of the mechanical contractors and gas utility
  employees in Pennsylvania. The bargaining agreement with the largest union was
  negotiated in May 2002 and expires in May 2006. Eight four-year contracts with
  smaller gas utility locals in Pennsylvania were negotiated in 2003. In June
  2004, the IBEW representing approximately 240 employees at the Montana Colstrip
  power plant approved a new four-year labor agreement. In 2001, a four-year contract
  was concluded with an IBEW local in Montana that represents approximately 80
  employees. This IBEW contract expires in April 2005.

Approximately 86%, or 3,301, of PPL's international workforce are members of
  labor unions. WPD employs the majority of the international workforce. WPD recognizes
  five unions, the largest of which represents 37% of union members. WPD has two
  employment agreements which are negotiated with the unions. The largest agreement,
  the Electricity Business Agreement, covers 2,376 employees; it may be amended
  by agreement between WPD and the unions and is terminable with 12 months' notice
  by either side.

PPL's Latin American subsidiaries have 879 union employees that are represented
  by 12 unions. Emel and DelSur have agreements in place until 2006. Annually,
  Elfec negotiates adjustments to its compensation and benefits.

AVAILABLE INFORMATION

PPL's Internet Web site is www.pplweb.com. On the Investor Center page of that
  Web site, PPL provides access to all SEC filings of PPL registrants free of
  charge, as soon as reasonably practicable after filing with the SEC. Additionally,
  PPL registrants' filings are available at the SEC's Web site (www.sec.gov) and
  at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549,
  or by calling 1-800-SEC-0330.

---

ITEM 2. PROPERTIES

Domestic Generation

For a description of PPL's domestic generation portfolio, see "Item 1. Business
  - Power Supply."

At December 31, 2004, PPL Generation was planning on implementing the following
  incremental capacity increases:

|Project      |                    | Type |            | Total
        MW
        Capacity(a) |     | PPL
        Ownership or Lease
        Interest in MW |     | Expected
        In-Service Date(b) |         
|------------ | ------------------ | ---- | ---------- | ------------------------------------ | --- | ----------------------------------------------------- | --- | ----------------------------------- | --------
|             |                    |      |            |                                      |     |                                                       |     |                                     |         
|Pennsylvania |                    |      |            |                                      |     |                                                       |     |                                     |         
|             | Susquehanna (c)    |      | Nuclear    |                                      | 197 |                                                       | 177 |                                     | (90%)   
|             | Susquehanna (d)    |      | Nuclear    |                                      | 20  |                                                       | 18  |                                     | (90%)   
|             | Brunner Island (e) |      | Coal-fired |                                      | 16  |                                                       | 16  |                                     | (100%)  
|             | Montour (e)        |      | Coal-fired |                                      | 16  |                                                       | 16  |                                     | (100%)  
|Montana      |                    |      |            |                                      |     |                                                       |     |                                     |         
|             | Colstrip (f)       |      | Coal-fired |                                      | 74  |                                                       | 20  |                                     | (15-50%)
|             | Corette (e)        |      | Coal-fired |                                      | 8   |                                                       | 8   |                                     | (100%)  
|             |                    |      |            |                                      |     |                                                       |     |                                     |         
|Total        |                    |      |            | 331                                  |     | 255                                                   |     |                                     |         
|             |                    |      |            |                                      |     |                                                       |     |                                     |         

|(a) |  | The capacity of generation
        units is based on a number of factors, including the operating experience
        and physical condition of the units, and may be revised periodically to
        reflect changed circumstances.                                                                                                                
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | The expected in-service
        dates are subject to receipt of required approvals and permits and to
        other contingencies.                                                                                                                                                                                                                 
|(c) |  | This project involves the
        extended uprate of Units 1 and 2 and will be implemented during two refueling
        outages per unit, with the first increase being an average of 60 MW per
        unit. The outages for Unit 1 are expected to occur in 2008 and 2010. The
        outages for Unit 2 are expected to occur in 2007 and 2009.
|(d) |  | This project involves the
        installation of more efficient internals for the high pressure turbine
        moisture separators on Units 1 and 2.                                                                                                                                                                                             
|(e) |  | These projects involve
        turbine upgrades.                                                                                                                                                                                                                                                                                                   
|(f) |  | This project involves turbine
        upgrades to all four Colstrip Units that are expected to be implemented
        over three years during the normal overhaul schedules. Units 1 and 4 are
        expected to be completed in 2006, Unit 3 in 2007 and Unit 2 in 2008.                                                                        

PPL continually reexamines development projects based on market conditions
  and other factors to determine whether to proceed with these projects, sell
  them, expand them, execute tolling agreements or pursue other opportunities.

Domestic Delivery

Electric

For a description of PPL Electric's service territory, see "Item 1. Business
  - Background." At December 31, 2004, PPL Electric had electric transmission
  and distribution lines in public streets and highways pursuant to franchises
  and rights-of-way secured from property owners. PPL Electric's system included
  380 substations with a total capacity of 25.7 million kVA, 32,896 circuit miles
  of overhead lines and 6,525 cable miles of underground conductors. All of PPL
  Electric's facilities are located in Pennsylvania. Substantially all of PPL
  Electric's transmission and distribution properties are subject to the lien
  of PPL Electric's 1945 First Mortgage Bond Indenture and its 2001 Senior Secured
  Bond Indenture.

Gas

PPL Gas Utilities distributes natural gas and propane to customers in northern,
  southeastern and central Pennsylvania and in a small portion of Maryland and
  Delaware. It also has natural gas storage facilities in Pennsylvania. At December
  31, 2004, PPL Gas Utilities had approximately 107,000 natural gas and propane
  delivery customers and 3,753 miles of pipeline mains, with 18 miles in Maryland
  and the remainder in Pennsylvania.

International Delivery

PPL Global has consolidated investments in electricity distribution companies,
  serving approximately 3.5 million delivery customers in Latin America and the
  U.K., as follows:

|Company        |  | Location                  |  | PPL 
        Ownership Interest |  |  |  | 2004
        Electricity
        Sales GWh(a) | 
|-------------- |  | ------------------------- |  | ------------------------------- |  |  |  | --------------------------------------------- | 
|               |  |                           |  |                                 |  |  |  |                                               | 
|Latin America  |  |                           |  |                                 |  |  |  |                                               | 
|Emel           |  | Santiago, Chile           |  | 95.4%                           |  |  |  | 2,438                                         | 
|Elfec          |  | Cochabamba, Bolivia       |  | 92.1%                           |  |  |  | 606                                           | 
|DelSur         |  | San Salvador, El Salvador |  | 86.4%                           |  |  |  | 955                                           | 
|United Kingdom |  |                           |  |                                 |  |  |  |                                               | 
|WPDH Limited   |  | Bristol, England          |  | 100%                            |  |  |  | 28,847                                        | 
|               |  |                           |  |                                 |  |  |  |                                               | 
|Total          |  |                           |  |                                 |  |  |  | 32,846                                        | 
|               |  |                           |  |                                 |  |  |  |                                               | 

|(a) |  | Corresponds to
        revenues recorded by PPL Global in 2004.
|--- |  | ---------------------------------------------------------------

PPL Global's distribution system in Latin America includes 94 substations with
  a total capacity of 1.9 million kVA, 22,478 miles of overhead lines and 75 cable
  miles of underground conductors. PPL Global's distribution system in the U.K.
  includes 641 substations with a total capacity of 22.9 million kVA, 29,218 miles
  of overhead lines and 22,347 cable miles of underground conductors.



---



See "Item 1. Business - Fuel Supply," for information concerning a lawsuit
  against the DOE for failure of that agency to perform certain contractual obligations.
  See "Environmental Matters" in Note 14 to the Financial Statements for information
  concerning legal proceedings regarding certain environmental matters.

Montana Power Shareholders' Litigation

In August 2001, a purported class-action lawsuit was filed by a group of shareholders
  of Montana Power against Montana Power, the directors of Montana Power, certain
  advisors and consultants of Montana Power and PPL Montana. The plaintiffs allege,
  among other things, that Montana Power was required to, and did not, obtain
  shareholder approval of the sale of Montana Power's generation assets to PPL
  Montana in 1999. Although most of the claims in the complaint are against Montana
  Power, its board of directors, and its consultants and advisors, two claims
  are asserted against PPL Montana. In the first claim, plaintiffs seek a declaration
  that because Montana Power shareholders did not vote on the 1999 sale of generating
  assets to PPL Montana, that sale "was null and void ab initio." The second claim
  alleges that PPL Montana was privy to and participated in a strategy whereby
  Montana Power would sell its generation assets to PPL Montana without first
  obtaining Montana Power shareholder approval, and that PPL Montana has made
  net profits in excess of $100 million as the result of this alleged illegal
  sale. In the second claim, plaintiffs request that the court impose a "resulting
  and/or constructive trust" on both the generation assets themselves and all
  profits, plus interest on the amounts subject to the trust. This lawsuit is
  currently pending in the U.S. District Court of Montana, Butte Division. In
  July 2004, the plaintiffs notified the District Court that the parties had reached
  an oral partial settlement of the case that would result in the dismissal of
  PPL Montana as a defendant, and in January 2005 a global settlement agreement
  was filed with the District Court along with a motion to approve the agreement.
  Under the terms of the global settlement agreement, the plaintiffs' claims against
  PPL Montana would be dismissed and PPL Montana would not have to pay any amounts
  to the plaintiffs. The global settlement agreement must still be approved by
  the District Court. PPL and PPL Energy Supply cannot predict whether the global
  settlement agreement will be approved or the outcome of this matter if it is
  not approved.

NorthWestern Corporation Litigation

In connection with the acquisition of the Montana generation assets, the Montana
  Power APA, which was previously assigned to PPL Montana by PPL Global, includes
  a provision concerning the proposed purchase by PPL Montana of a portion of
  NorthWestern's interest in the 500-kilovolt Colstrip Transmission System (CTS)
  for $97 million. During 2002, PPL Montana had been in discussions with NorthWestern
  regarding the proposed purchase of the CTS and the claims that PPL Montana believes
  it has against NorthWestern arising from the Montana Power APA and related agreements.
  Notwithstanding such discussions, in September 2002, NorthWestern filed a lawsuit
  against PPL Montana in Montana state court seeking specific performance of PPL
  Montana's purchase of the CTS or, alternatively, damages for breach of contract.
  Pursuant to PPL Montana's application, the matter was removed to the U.S. District
  Court of Montana, Butte Division. Following removal, NorthWestern asserted additional
  claims for damages against PPL Montana, including a claim for punitive damages.
  PPL Montana filed defenses denying liability for NorthWestern's claims as well
  as counterclaims against NorthWestern seeking damages PPL Montana believes it
  has suffered under the Montana Power APA and related agreements.

In October 2004, the federal district court in Delaware, where NorthWestern's
  bankruptcy proceeding had been pending, approved a joint stipulation between
  PPL Montana and NorthWestern under which NorthWestern agreed to establish a
  segregated reserve to be used for any distributions to be made to satisfy any
  final judgment that PPL Montana may be awarded pursuant to PPL Montana's counterclaims.
  This segregated reserve has been funded with shares of NorthWestern common stock
  equal to $50 million, valued as of the effective date of NorthWestern's plan
  of reorganization. Also in October, the federal district court in Delaware confirmed
  NorthWestern's plan of reorganization, and in November 2004, NorthWestern announced
  that it officially emerged from bankruptcy protection.

The trial for this matter is expected to commence in the Montana federal district
  court in the last half of 2005. PPL and PPL Energy Supply cannot predict the
  outcome of this litigation.

Montana Hydroelectric Litigation

In October 2003, a lawsuit was filed against PPL Montana, PPL Services, Avista
  Corporation, PacifiCorp and nine John Doe defendants in the U.S. District Court
  of Montana, Missoula Division, by two residents allegedly acting in a representative
  capacity on behalf of the State of Montana. In January 2004, the complaint was
  amended to, among other things, include the Great Falls school districts as
  additional plaintiffs. In May 2004, the Montana Attorney General filed a motion
  to allow the State of Montana to intervene as an additional plaintiff in the
  litigation. This motion was granted without objection. Both the individual plaintiffs'
  and the school districts' complaint and the State's complaint sought declaratory
  judgment, compensatory damages and attorneys fees and costs for use of state
  and/or "school trust" lands by hydropower facilities and to require the defendants
  to adequately compensate the State and/or the State School Trust fund for full
  market value of lands occupied. Generally, the suit is founded on allegations
  that the bed of navigable rivers became state-owned property upon Montana's
  admission to statehood, and that the use thereof for placement of dam structures,
  affiliated structures and reservoirs should, under an existing regulatory scheme,
  trigger lease payments for use of land underneath. The plaintiffs also sought
  relief on theories of unjust enrichment, trespass and negligence. No specific
  amount of damages or future rental value has been claimed by the plaintiffs.
  The defendants filed separate motions to dismiss the individual plaintiffs'
  and school district's complaint, as well as the complaint of the State of Montana.
  In September 2004, the federal court granted the motions to dismiss the individual
  plaintiffs' and school districts' complaint but denied the similar motions as
  to the State of Montana's complaint. Following the federal court's September
  decision, PPL Montana and the other defendants filed a motion to dismiss the
  State of Montana's complaint for lack of diversity jurisdiction and also filed
  a motion to vacate certain portions of the decision. The federal court has not
  yet ruled on these motions.

In November 2004, PPL Montana, Avista Corporation and PacifiCorp commenced
  an action for declaratory judgment in Montana First Judicial District Court
  seeking a determination that no lease payments or other compensation for the
  hydropower facilities' use and occupancy of streambeds can be collected by the
  State of Montana. The State subsequently filed counterclaims and a motion for
  summary judgment. In February 2005, the individual plaintiffs and school districts
  who were dismissed from the federal court proceeding, along with a state teachers'
  union, filed a motion to intervene as additional defendants in this state court
  proceeding, and also filed a proposed answer and counterclaims to be used if
  their motion to intervene is granted. The state court has not yet ruled on any
  of the above-described motions. PPL Montana and PPL Services cannot predict
  the outcome of either the federal or the state court proceeding.

California ISO and Western Markets

Through its subsidiaries, PPL made approximately $18 million of sales to the
  California ISO during the period from October 2000 through June 2001, of which
  $17 million has not been paid to PPL subsidiaries. Given the myriad of electricity
  supply problems presently faced by the California electric utilities and the
  California ISO, PPL cannot predict whether or when it will receive payment.
  As of December 31, 2004, PPL has fully reserved for possible underrecoveries
  of payments for these sales.

Regulatory proceedings arising out of the California electricity supply situation
  have been filed at the FERC. The FERC has determined that all sellers of energy
  into markets operated by the California ISO and the California Power Exchange,
  including PPL Montana, should be subject to refund liability for the period
  beginning October 2, 2000, through June 20, 2001, and initiated an evidentiary
  hearing concerning refund amounts. In April 2003, the FERC changed the manner
  in which this refund liability is to be computed and ordered further proceedings
  to determine the exact amounts that the sellers, including PPL Montana, would
  be required to refund. In September 2004, the U.S. Court of Appeals for the
  Ninth Circuit held that the FERC had the additional legal authority to order
  refunds for periods prior to October 2, 2000, and ordered the FERC to determine
  whether or not it would be appropriate to grant such additional refunds.

In June 2003, the FERC took several actions as a result of a number of related
  investigations. The FERC terminated proceedings pursuant to which it had been
  considering whether to order refunds for spot market bilateral sales made in
  the Pacific Northwest, including sales made by PPL Montana, during the period
  December 2000 through June 2001. The FERC explained that the totality of the
  circumstances made refunds unfeasible and inequitable, and that it had provided
  adequate relief by adopting a price cap throughout the western U.S. The FERC
  also denied pending complaints against long-term contracts in the western U.S.
  In these complaints, various power buyers had challenged selected long-term
  contracts that they entered into during 2000 and 2001, complaining that the
  power prices were too high and reflected manipulation of those energy markets.
  The FERC found that the complainants had not met their burden of showing that
  changing or canceling the contracts was "in the public interest" and that the
  dysfunction in the California markets did not justify changing these long-term
  contracts. These orders have been appealed to the U.S. Court of Appeals for
  the Ninth Circuit. In two separate orders, the FERC also ordered 65 different
  companies, agencies or municipalities to show cause why they should not be ordered
  to disgorge profits for "gaming" or anomalous market behavior during 2000 and
  2001. These orders to show cause address both unilateral and joint conduct identified
  as the "Enron trading strategies." Neither PPL EnergyPlus nor PPL Montana was
  included in these orders to show cause, and they previously have explained in
  responses to data requests from the FERC that they have not engaged in such
  trading strategies. Finally, the FERC issued a new investigation order directing
  its staff to investigate any bids made into the California markets in excess
  of $250/MWh during the period from May 2000 to October 2000, a period of time
  prior to the period examined in connection with most of the proceedings described
  above. To their knowledge, neither PPL EnergyPlus nor PPL Montana is being investigated
  by the FERC under this new order.

Litigation arising out of the California electricity supply situation has been
  filed in California courts against sellers of energy to the California ISO.
  The plaintiffs and intervenors in these legal proceedings allege, among other
  things, abuse of market power, manipulation of market prices, unfair trade practices
  and violations of state antitrust laws, and seek other relief, including treble
  damages and attorneys' fees. While PPL's subsidiaries have not been named by
  the plaintiffs in these legal proceedings, PPL Montana was named by a defendant
  in its cross-complaint in a consolidated court proceeding, which combined into
  one master proceeding several of the lawsuits alleging antitrust violations
  and unfair trade practices. This generator denies that any unlawful, unfair
  or fraudulent conduct occurred but asserts that, if it is found liable, the
  other generators and power marketers, including PPL Montana, caused, contributed
  to and/or participated in the plaintiffs' alleged losses.

In February 2004, the Montana Public Service Commission initiated a limited
  investigation of the Montana retail electricity market for the years 2000 and
  2001, focusing on how that market was affected by transactions involving the
  possible manipulation of the electricity grid in the western U.S. The investigation
  includes all public utilities and licensed electricity suppliers in Montana,
  as well as other entities that may possess relevant information. Through its
  subsidiaries, PPL is a licensed electricity supplier in Montana and a wholesale
  supplier in the western U.S. In June 2004, the Montana Attorney General served
  PPL Montana and more than 20 other companies with subpoenas requesting documents,
  and PPL Montana has provided responsive documents to the Montana Attorney General.
  As with the other investigations taking place as a result of the issues arising
  out of the electricity supply situation in California and other western states,
  PPL and its subsidiaries believe that they have not engaged in any improper
  trading or marketing practices affecting the Montana retail electricity market.

While PPL and its subsidiaries believe that they have not engaged in any improper
  trading practices, they cannot predict whether, or the extent to which, any
  PPL subsidiaries will be the target of any additional governmental investigations
  or named in other lawsuits or refund proceedings, the outcome of any such lawsuits
  or proceedings or whether the ultimate impact on them of the electricity supply
  situation in California and other western states will be material.

PJM Capacity Litigation

In December 2002, PPL was served with a complaint against PPL, PPL EnergyPlus
  and PPL Electric filed in the U.S. District Court for the Eastern District of
  Pennsylvania by a group of 14 Pennsylvania boroughs that apparently alleges,
  among other things, violations of the federal antitrust laws in connection with
  the pricing of installed capacity in the PJM daily market during the first quarter
  of 2001. These boroughs were wholesale customers of PPL Electric. The claims
  of the boroughs are similar to those previously alleged by a single borough
  in litigation brought in the same court that is still pending. In addition,
  in November 2003, PPL and PPL EnergyPlus were served with a complaint which
  was filed in the same court by Joseph Martorano, III (d/b/a ENERCO), that also
  alleges violations of the federal antitrust laws in early 2001. The complaint
  indicates that ENERCO provides consulting and energy procurement services to
  clients in Pennsylvania and New Jersey. In September 2004, this complaint was
  dismissed by the District Court and the plaintiff has appealed the dismissal
  to the U.S. Court of Appeals for the Third Circuit.

Each of the U.S. Department of Justice - Antitrust Division, the FERC and the
  Pennsylvania Attorney General conducted investigations regarding PPL's PJM capacity
  market transactions in early 2001 and did not find any reason to take action
  against PPL.

Although PPL, PPL Energy Supply and PPL Electric believe the claims in these
  complaints are without merit, they cannot predict the outcome of these matters.

New England Investigation

In January 2004, PPL became aware of an investigation by the Connecticut Attorney
  General and the FERC's Office of Market Oversight and Investigation (OMOI) regarding
  allegations that natural gas-fired generators located in New England illegally
  sold natural gas instead of generating electricity during the week of January
  12, 2004. Subsequently, PPL and other generators were served with a data request
  by OMOI. The data request indicated that PPL was not under suspicion of a regulatory
  violation, but that OMOI was conducting an initial investigation. PPL has responded
  to this data request. PPL also has responded to data requests of ISO - New England
  and data requests served by subpoena from the Connecticut Attorney General.
  Both OMOI and ISO - New England have issued preliminary reports finding no regulatory
  or other violations concerning these matters. While PPL does not believe that
  it committed any regulatory or other violations concerning the subject matter
  of these investigations, PPL cannot predict the outcome of these investigations.

PJM Billing

In December 2004, Exelon Corporation, on behalf of its subsidiary, PECO Energy,
  Inc. (PECO), filed a complaint against PJM and PPL Electric with the FERC alleging
  that PJM had overcharged PECO from April 1998 through May 2003 as a result of
  an error by PJM in the State Estimator Program used in connection with billing
  all PJM customers for certain transmission, spot market energy and ancillary
  services charges. Specifically, the complaint alleges that PJM mistakenly identified
  PPL Electric's Elroy substation transformer as belonging to PECO and that, as
  a consequence, during times of congestion, PECO's bills for transmission congestion
  from PJM erroneously reflected energy that PPL Electric took from the Elroy
  substation and used to serve PPL Electric's load. The complaint requests the
  FERC, among other things, to direct PPL Electric to refund to PJM $39 million,
  plus interest of approximately $8 million, and for PJM to refund these same
  amounts to PECO. PPL Electric and PPL Energy Supply do not believe that they
  or any PPL subsidiaries have any financial responsibility or liability to PJM
  or PECO as a result of PJM's alleged error. PPL Electric and PPL Energy Supply
  cannot predict the outcome of this matter or the impact on any PPL subsidiary.

FERC Market-Based Rate Authority

In December 1998, the FERC issued an order authorizing PPL EnergyPlus to make
  wholesale sales of electric power and related products at market-based rates.
  In that order, the FERC directed PPL EnergyPlus to file an updated market analysis
  within three years of the date of the order, and every three years thereafter.
  PPL EnergyPlus filed its initial updated market analysis in December 2001. Several
  parties thereafter filed interventions and protests requesting that PPL EnergyPlus
  be required to provide additional information demonstrating that it has met
  the FERC's market power tests necessary for PPL EnergyPlus to continue its market-based
  rate authority. PPL EnergyPlus has responded that the FERC does not require
  the economic test suggested by the intervenors and that, in any event, it would
  meet such economic test if required by the FERC.

In June 2004, FERC approved certain changes to its standards for granting market-based
  rate authority. As a result of the schedule adopted by the FERC, PPL EnergyPlus,
  PPL Electric, PPL Montana and most of PPL Generation's subsidiaries were required
  to file in November 2004 updated analyses demonstrating that they should continue
  to maintain market-based rate authority under the new standards. PPL made two
  filings, one for PPL Montana and one for most of the other PPL subsidiaries.
  The Montana Public Service Commission and the Montana Consumer Counsel filed
  pleadings opposing the filing by PPL Montana. The Montana Public Service Commission
  requested that the FERC hold a hearing on the market-based rate renewal application,
  while the Montana Consumer Counsel suggested applying an altered version of
  the FERC's tests for assessing market power in reviewing the renewal application.
  The PJM Industrial Customer Coalition, the PP&L Industrial Customer Alliance
  and the consumer advocates of Maryland and Pennsylvania filed pleadings opposing
  the filings by the other PPL subsidiaries. These parties challenge the FERC's
  continued reliance on market-based rates to yield just and reasonable prices
  for wholesale electric transactions and suggest that the FERC change its tests
  for market power to include capacity and ancillary services markets. While PPL
  believes its filings demonstrate that all PPL subsidiaries pass the new tests
  established by the FERC in June 2004, PPL cannot predict the outcome of these
  proceedings.

Lower Mt. Bethel

In August 2002, the Northampton County Court of Common Pleas issued a decision
  setting the permissible noise levels for operation of the Lower Mt. Bethel facility.
  PPL appealed the court's decision to the Commonwealth Court, and an intervenor
  in the lawsuit cross-appealed the court's decision. In May 2003, the Commonwealth
  Court remanded the case to the Court of Common Pleas for further findings of
  fact concerning the zoning application relating to the construction of the facility.
  In September 2003, the Court of Common Pleas ruled in PPL's favor while also
  reaffirming its decision on the noise levels, and the intervenor appealed this
  ruling to the Commonwealth Court. In April 2004, the Commonwealth Court affirmed
  the decision of the Court of Common Pleas. The intervenor has pending before
  the Supreme Court of Pennsylvania a Petition for Allowance of Appeal.

The certificate of occupancy for the Lower Mt. Bethel facility was issued by
  the local township zoning officer in April 2004, and the facility was placed
  in service in May 2004. In May 2004, the intervenor in the legal proceedings
  regarding the facility's permissible noise levels filed an appeal with the township
  board regarding the issuance of the certificate of occupancy. The hearing on
  the appeal was held in December 2004, and the intervenor's appeal was denied.



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

There were no matters submitted to a vote of security holders, through the
  solicitation of proxies or otherwise, during the fourth quarter of 2004.



---



EXECUTIVE OFFICERS OF THE REGISTRANTS

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

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

Listed below are the executive officers at December 31, 2004:

|PPL Corporation      
|---------------------
|                     
|Name                 
|                     
|William F. Hecht     
|                     
|John R. Biggar       
|                     
|                     
|James H. Miller      
|                     
|                     
|                     
|                     
|Robert J. Grey       
|                     
|Paul T. Champagne*   
|                     
|                     
|Rick L. Klingensmith*
|                     
|                     
|                     
|                     
|Roger L. Petersen*   
|                     
|                     
|                     
|Bryce L. Shriver*    
|                     
|                     
|                     
|                     
|John F. Sipics*      
|                     
|                     
|                     
|                     
|James E. Abel        
|                     
|Paul A. Farr         
|                     
|                     
|                     
|                     
|                     
|                     
|*                    



|PPL Electric Utilities
        Corporation
|------------------------------------------
|                                          
|Name                                      
|                                          
|John F. Sipics                            
|                                          
|                                          
|                                          
|                                          
|James E. Abel                             
|                                          
|                                          
|Paul A. Farr                              
|                                          
|                                          
|                                          
|                                          
|                                          

PPL Energy Supply, LLC

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



---



PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON
  EQUITY, 
  RELATED STOCKHOLDER MATTERS ANDISSUER PURCHASES OF EQUITY SECURITIES

PPL Corporation

Additional information for this item is set forth in the sections entitled
  "Quarterly Financial, Common Stock Price and Dividend Data," "Item 12. Security
  Ownership of Certain Beneficial Owners and Management and Related Stockholder
  Matters" and "Shareowner and Investor Information" of this report. The number
  of common shareowners is set forth in "Item 6. Selected Financial and Operating
  Data."

PPL Energy Supply, LLC

There is no established public trading market for PPL Energy Supply's membership
  interests. PPL Energy Funding, a direct wholly owned subsidiary of PPL, owns
  all of PPL Energy Supply's outstanding membership interests. Distributions on
  the membership interests will be paid as determined by PPL Energy Supply's Board
  of Managers. PPL Energy Supply made cash distributions to PPL Energy Funding
  of approximately $410 million in 2004 and $1.2 billion in 2003.

PPL Electric Utilities Corporation

Additional information for this item is set forth in the sections entitled
  "Quarterly Financial Data" and "Shareowner and Investor Information" of this
  report.

---

ITEM 6. SELECTED FINANCIAL AND OPERATING DATA

PPL Energy Supply, LLC

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



|ITEM 6. SELECTED FINANCIAL
        AND OPERATING DATA
|-----------------------------------------------------
|                                                     
|PPL Corporation
        (a)                          
|                                                     
|Income Items- millions                               
|                                                     
|                                                     
|                                                     
|                                                     
|Balance Sheet Items-
        millions (c)            
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|Financial Ratios                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|Common Stock Data                                    
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|Sales Data- millions
        of kWh                  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|(a)                                                  
|(b)                                                  
|(c)                                                  
|(d)                                                  
|(e)                                                  
|(f)                                                  
|(g)                                                  
|(h)                                                  

|ITEM 6. SELECTED FINANCIAL AND OPERATING DATA 
|----------------------------------------------
|                                              
|PPL Electric Utilities Corporation
        (a)
|                                              
|Income Items- millions                        
|                                              
|                                              
|                                              
|Balance Sheet Items-
        millions (b)     
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|Financial Ratios                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|Sales Data                                    
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|(a)                                           
|(b)                                           
|(c)                                           
|(d)                                           
|                                              



---

PPL CORPORATIONITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS

Overview

PPL is an energy and utility holding company with headquarters in Allentown,
  PA. See "Item 1. Business - Background," for descriptions of PPL's major segments.
  See Exhibit 99 in Item 15 for a listing of the current corporate organization.
  Through its subsidiaries, PPL is primarily engaged in the generation and marketing
  of electricity in two key markets - the northeastern and western U.S. - and
  in the delivery of electricity in Pennsylvania, the U.K. and Latin America.
  PPL's strategy for its electricity generation and marketing business is to match
  energy supply with load, or customer demand, under long-term and intermediate-term
  contracts with creditworthy counterparties. PPL's strategy for its electricity
  delivery businesses is to own and operate these businesses at the highest level
  of quality and reliability and at the most efficient cost.

PPL faces several risks in its generation business. The principal risks are
  electricity wholesale price risk, fuel supply and price risk, power plant performance
  and counterparty credit risk. PPL attempts to manage these risks through various
  means. For instance, PPL operates a portfolio of generation assets that is diversified
  as to geography, fuel source, cost structure and operating characteristics.
  PPL is focused on the operating efficiency of these power plants and maintaining
  their availability. In addition, PPL has in place and continues to pursue long-term
  and intermediate-term contracts for energy sales and fuel supply, and other
  means, to mitigate the risks associated with adverse changes in the difference,
  or margin, between the cost to produce electricity and the price at which PPL
  sells it. PPL's contractual commitments for energy sales are primarily satisfied
  through its own generation assets - i.e., PPL primarily markets and trades around
  its physical portfolio of generating assets through integrated generation, marketing
  and trading functions. PPL has in place risk management programs that, among
  other things, are designed to monitor and manage its exposure to volatility
  of earnings and cash flows related to changes in energy and fuel prices, interest
  rates, foreign currency exchange rates, counterparty credit quality and the
  operational performance of its generating units.

PPL's electricity delivery businesses are rate-regulated. Accordingly, these
  businesses are subject to regulatory risk in terms of the costs that they may
  recover and the investment returns that they may collect in customer rates.
  The principal challenge that PPL faces in its electricity delivery businesses
  is to maintain high standards of customer service and reliability in a cost-effective
  manner. PPL faces certain financial risks by conducting international operations,
  such as fluctuations in currency exchange rates. PPL attempts to manage these
  financial risks through its risk management program.

A key challenge for PPL's business as a whole is to maintain a strong credit
  profile. In the past few years, investors, analysts and rating agencies that
  follow companies in the energy industry have been particularly focused on the
  credit quality and liquidity position of energy companies. PPL is focused on
  strengthening its balance sheet and improving its liquidity position, thereby
  improving its credit profile.

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

- "Results of Operations" provides an overview of PPL's operating results
    in 2004, 2003 and 2002, starting with a review of earnings. The earnings review
    includes a listing of certain unusual items that had significant impacts in
    these years, and it also includes a description of key factors that management
    expects may impact future earnings. "Results of Operations" also includes
    an explanation of changes during this three-year period in significant income
    statement components, such as energy margins, utility revenues, operation
    and maintenance expenses, financing costs, income taxes and cumulative effects
    of accounting changes.

- "Financial Condition - Liquidity" provides an analysis of PPL's liquidity
    position and credit profile, including its sources of cash (including bank
    credit facilities and sources of operating cash flow) and uses of cash (including
    contractual commitments and capital expenditure requirements) and the key
    risks and uncertainties that impact PPL's past and future liquidity position
    and financial condition. This subsection also includes an explanation of recent
    rating agency decisions affecting PPL, as well as a listing of PPL's current
    credit ratings.

- "Financial Condition - Risk Management - Energy Marketing & Trading
    and Other" includes an explanation of PPL's risk management program relating
    to market risk (i.e., commodity price, interest rate and foreign currency
    exchange risk) and credit risk (i.e., counterparty credit risk).

- "Application of Critical Accounting Policies" provides an overview of the
    accounting policies that are particularly important to the results of operations
    and financial condition of PPL and that require PPL's management to make significant
    estimates, assumptions and other judgments. Although PPL's management believes
    that these estimates, assumptions and other judgments are appropriate, they
    relate to matters that are inherently uncertain. Accordingly, changes in the
    estimates, assumptions and other judgments applied to these accounting policies
    could have a significant impact on PPL's results of operations and financial
    condition, as reflected in PPL's Financial Statements.

The information provided in "Management's Discussion and Analysis of Financial
  Condition and Results of Operations" should be read in conjunction with PPL's
  Financial Statements and the accompanying Notes.

Terms and abbreviations are explained in the glossary. Dollars are in millions,
  except per share data, unless otherwise noted.

Results of Operations

The following discussion, which explains significant annual changes in principal
  items on the Statement of Income, compares 2004 to 2003 and compares 2003 to
  2002.

WPD's results, as consolidated in PPL's Statement of Income, are impacted by
  changes in foreign currency exchange rates. Changes in foreign exchange rates
  increased WPD's portion of revenue and expense line items by about 12% in 2004
  compared with 2003, and by about 9% in 2003 compared with 2002.

The comparability of certain items on the 2003 and 2002 Statements of Income
  has also been impacted by PPL Global's investment in CEMAR. The consolidated
  results of CEMAR are included from January to August 2002, when PPL had a controlling
  interest. See Note 9 to the Financial Statements for more information, including
  the sale of this investment in 2004.

Earnings

Net income and the related EPS were as follows:

|              |  | 2004 |      |  | 2003 |   |      | 2002 | 
|------------- |  | ---- | ---- |  | ---- | - | ---- | ---- | 
|              |  |      |      |  |      |   |      |      | 
|Net income    |  | $    | 698  |  |      | $ | 734  |      | 
|              |  |      |      |  |      |   |      |      | 
|EPS - basic   |  | $    | 3.79 |  |      | $ | 4.25 |      | 
|              |  |      |      |  |      |   |      |      | 
|EPS - diluted |  | $    | 3.77 |  |      | $ | 4.24 |      | 
|              |  |      |      |  |      |   |      |      | 

The after-tax changes in net income were primarily due to:

|          |                                                                                                                     | 2004 vs. 2003  |   |     | 2003 vs. 2002 | 
|--------- | ------------------------------------------------------------------------------------------------------------------- | -------------- | - | --- | ------------- | 
|          |                                                                                                                     |                |   |     |               | 
|Domestic: |                                                                                                                     |                |   |     |               | 
|          |                                                                                                                     |                |   |     |               | 
|          | Eastern U.S. non-trading margins                                                                                    |                | $ | 35  |               | 
|          |                                                                                                                     |                |   |     |               | 
|          | Northwestern U.S. non-trading
        margins                                                                       |                |   | (1  | )             | 
|          |                                                                                                                     |                |   |     |               | 
|          | Southwestern U.S. non-trading
        margins                                                                       |                |   | (5  | )             | 
|          |                                                                                                                     |                |   |     |               | 
|          | Net energy trading margins                                                                                          |                |   | 7   |               | 
|          |                                                                                                                     |                |   |     |               | 
|          | Delivery revenues (net of CTC/ITC
        amortization, interest expense on transition bonds and ancillary charges) |                |   | 5   |               | 
|          |                                                                                                                     |                |   |     |               | 
|          | Operation and maintenance expenses                                                                                  |                |   | (17 | )             | 
|          |                                                                                                                     |                |   |     |               | 
|          | Realized earnings on nuclear
        decommissioning trust (Note 16)                                                |                |   | (16 | )             | 
|          |                                                                                                                     |                |   |     |               | 
|          | Contribution of property                                                                                            |                |   | (10 | )             | 
|          |                                                                                                                     |                |   |     |               | 
|          | Taxes, other than income (excluding
        gross receipts tax)                                                     |                |   | 10  |               | 
|          |                                                                                                                     |                |   |     |               | 
|          | Synfuel earnings                                                                                                    |                |   | 11  |               | 
|          |                                                                                                                     |                |   |     |               | 
|          | Depreciation                                                                                                        |                |   | (22 | )             | 
|          |                                                                                                                     |                |   |     |               | 
|          | Energy related businesses                                                                                           |                |   | (5  | )             | 
|          |                                                                                                                     |                |   |     |               | 
|          | Interest income on IRS tax settlement                                                                               |                |   | 14  |               | 
|          |                                                                                                                     |                |   |     |               | 
|          | Reduction in tax reserves associated
        with stranded costs securitization                                     |                |   | 22  |               | 
|          |                                                                                                                     |                |   |     |               | 
|          | Interest expense and distributions
        on preferred securities                                                  |                |   | (14 | )             | 
|          |                                                                                                                     |                |   |     |               | 
|          | Other                                                                                                               |                |   | 6   |               | 
|          |                                                                                                                     |                |   |     |               | 
|          |                                                                                                                     | Total Domestic |   |     | 20            | 
|          |                                                                                                                     |                |   |     |               | 



|               |                  | 2004 vs. 2003                                                |     |    | 2003 vs. 2002 |  
|-------------- | ---------------- | ------------------------------------------------------------ | --- | -- | ------------- | -
|               |                  |                                                              |     |    |               |  
|International: |                  |                                                              |     |    |               |  
|               |                  |                                                              |     |    |               |  
|               | U.K. operations: |                                                              |     |    |               |  
|               |                  |                                                              |     |    |               |  
|               |                  | Benefit of complete ownership of WPD (Note
        9)        |     |    |               |  
|               |                  |                                                              |     |    |               |  
|               |                  | Impact of changes in foreign currency
        exchange rates |     |    | 22            |  
|               |                  |                                                              |     |    |               |  
|               |                  | Distribution margins                                         |     |    | 5             |  
|               |                  |                                                              |     |    |               |  
|               |                  | Operation and maintenance expenses                           |     |    | 11            |  
|               |                  |                                                              |     |    |               |  
|               |                  | Other                                                        |     |    | (6            | )
|               |                  |                                                              |     |    |               |  
|               | Latin America    |                                                              |     | 3  |               |  
|               |                  |                                                              |     |    |               |  
|               | Other            |                                                              |     | (7 | )             |  
|               |                  |                                                              |     |    |               |  
|               |                  | Total International                                          |     |    | 28            |  
|               |                  |                                                              |     |    |               |  
|Unusual items  |                  |                                                              | (84 | )  |               |  
|               |                  |                                                              |     |    |               |  
|               |                  | $                                                            | (36 | )  |               | $
|               |                  |                                                              |     |    |               |  

The changes in net income from year to year were, in part, attributable to
  several unusual items with significant earnings impacts, including accounting
  changes, discontinued operations and infrequently occurring items. The after-tax
  impacts of these unusual items are:

|                                                                 |                                                               |   | 2004 |   |  | 2003 |     |     | 2002 |  
|---------------------------------------------------------------- | ------------------------------------------------------------- | - | ---- | - |  | ---- | --- | --- | ---- | -
|                                                                 |                                                               |   |      |   |  |      |     |     |      |  
|Accounting changes:                                              |                                                               |   |      |   |  |      |     |     |      |  
|                                                                 |                                                               |   |      |   |  |      |     |     |      |  
|                                                                 | ARO (Note 21)                                                 |   |      |   |  |      | $   | 63  |      |  
|                                                                 |                                                               |   |      |   |  |      |     |     |      |  
|                                                                 | Consolidation of variable interest entities
        (Note 22) |   |      |   |  |      |     | (27 | )    |  
|                                                                 |                                                               |   |      |   |  |      |     |     |      |  
|                                                                 | Goodwill impairment (Note 19)                                 |   |      |   |  |      |     |     |      |  
|                                                                 |                                                               |   |      |   |  |      |     |     |      |  
|Sale of CGE (Note 9)                                             |                                                               | $ | (7   | ) |  |      |     |     |      |  
|                                                                 |                                                               |   |      |   |  |      |     |     |      |  
|Sale of CEMAR (Note 9)                                           |                                                               |   | 23   |   |  |      |     |     |      |  
|                                                                 |                                                               |   |      |   |  |      |     |     |      |  
|Discontinued operations (Note 9)                                 |                                                               |   | (2   | ) |  |      | (20 | )   |      |  
|                                                                 |                                                               |   |      |   |  |      |     |     |      |  
|CEMAR-related net tax benefit 
        (Note 5)                  |                                                               |   |      |   |  |      | 81  |     |      |  
|                                                                 |                                                               |   |      |   |  |      |     |     |      |  
|Impairment of investment in technology
        supplier (Note 9) |                                                               |   | (6   | ) |  |      |     |     |      |  
|                                                                 |                                                               |   |      |   |  |      |     |     |      |  
|Workforce reduction (Note 20)                                    |                                                               |   |      |   |  |      | (5  | )   |      |  
|                                                                 |                                                               |   |      |   |  |      |     |     |      |  
|Write-down of generation assets
        (Note 9)                 |                                                               |   |      |   |  |      |     |     |      |  
|                                                                 |                                                               |   |      |   |  |      |     |     |      |  
|CEMAR operating losses (Note 9)                                  |                                                               |   |      |   |  |      |     |     |      |  
|                                                                 |                                                               |   |      |   |  |      |     |     |      |  
|CEMAR impairment (Note 9)                                        |                                                               |   |      |   |  |      |     |     |      |  
|                                                                 |                                                               |   |      |   |  |      |     |     |      |  
|Tax benefit - Teesside (Note 9)                                  |                                                               |   |      |   |  |      |     |     |      |  
|                                                                 |                                                               |   |      |   |  |      |     |     |     
|Total                                                            |                                                               | $ | 8    |   |  | $    | 92  |     |      | $
|                                                                 |                                                               |   |      |   |  |      |     |     |     

The year-to-year changes in earnings components, including domestic gross energy
  margins by region and income statement line items, are discussed in the balance
  of "Results of Operations."

PPL's future earnings could be, or will be, impacted by a number of key factors,
  including the following:

- PPL's future energy margins and, consequently, its future earnings, may
    be impacted by fluctuations in market prices for electricity, as well as fluctuations
    in fuel prices, fuel transportation costs and emission allowance expenses.
    For instance, although PPL expects market prices for electricity in 2005 to
    be higher than in 2004, PPL is not expecting an increase in its 2005 energy
    margins due to expected increases in the cost of fuel, fuel transportation
    and emissions allowances.

- A key part of PPL's overall strategy is to enter into long-term and intermediate-term
    energy supply agreements in order to mitigate market price and supply risk.
    PPL's ability to continue to enter into such agreements, and to renew existing
    energy supply agreements, may affect its future earnings. See "Item 1. Business
    - Power Supply" and Note 14 to the Financial Statements for more information
    regarding PPL's wholesale energy commitments and Note 15 for more information
    regarding the PLR contracts.

- As discussed in "Item 1. Business - Background," PPL Electric has agreed
    to provide electricity supply to its PLR customers at predetermined rates
    through 2009, and it has entered into PUC-approved, full requirements energy
    supply agreements with PPL EnergyPlus to fulfill its PLR obligation. The predetermined
    charges for generation supply which PPL Electric collects from its PLR customers
    and pays to PPL EnergyPlus under the energy supply agreements provide for
    annual increases in each year commencing in 2006 and continuing through 2009.
    PPL Electric's PLR obligation after 2009 will be determined by the PUC pursuant
    to rules that have not yet been promulgated.

- Due to current electricity and natural gas price levels, there is a risk
    that PPL may be unable to recover its investment in certain gas-fired generation
    facilities. Under GAAP, PPL does not believe that there is an impairment charge
    to be recorded for these facilities at this time. PPL is unable to predict
    the earnings impact of this issue, based upon future energy and fuel price
    levels, applicable accounting rules and other factors, but such impact may
    be material.

- In June 2004, a subsidiary of PPL Generation agreed to sell the 450 MW Sundance
    power plant to Arizona Public Service Company (APS). Each party has waived
    the remaining contractual conditions for approval of the transaction by the
    Arizona Corporation Commission. The sale still requires approvals of the FERC
    under the Federal Power Act. PPL cannot predict whether or when these approvals
    will be obtained. PPL estimates that a loss on sale or an impairment charge
    of about $47 million after tax, or $0.25 per share, could be recorded in 2005
    depending on the timing and likelihood of obtaining the FERC approvals.

- PPL's ability to manage operational risk with respect to its generation
    plants is critical to its financial performance. Specifically, depending on
    the timing and duration of both planned and unplanned outages (in particular,
    if such outages are during peak periods or periods of severe weather), PPL's
    revenue from energy sales could be adversely affected and its need to purchase
    power to satisfy its energy commitments could be significantly increased.
    PPL has been successful in the past several years in increasing fleet-wide
    equivalent availability (i.e., the percentage of time in a year that a generating
    unit is capable of producing power) from the low 80% range to over 90%. However,
    since many of its generating units are reaching mid-life, PPL is faced with
    the potential for outages of longer duration to accommodate significant investments
    in major component replacements.

- PPL has interests in two synthetic fuel facilities and receives tax credits
    pursuant to Section 29 of the Internal Revenue Code based on its sale of synthetic
    fuel to unaffiliated third-party purchasers. PPL has estimated that these
    facilities will contribute approximately $0.21 to annual EPS through 2007.
    See Note 14 to the Financial Statements for a discussion of the requirements
    to receive the Section 29 tax credits, the IRS review of synthetic fuel production
    procedures and the impact of higher oil prices on the Section 29 tax credits.

- In March 2004, PPL Electric filed a request with the PUC for an overall
    annual net increase in distribution rates of approximately $164 million (subsequently
    amended to $160 million), based on a return on equity of 11.5%, and notified
    the PUC that it planned to pass through to customers approximately $57 million
    in increased transmission charges imposed on PPL Electric by PJM. In December
    2004, the PUC approved an increase in PPL Electric's distribution rates of
    approximately $137 million (based on a return on equity of 10.7%), and approved
    PPL Electric's proposed mechanism for collecting the additional $57 million
    in transmission-related charges, for a total increase of approximately $194
    million, effective January 1, 2005.

- In January 2005, severe ice storms hit PPL Electric's service territory.
    PPL Electric had to restore service to about 238,000 customers. Although the
    actual cost of these storms and the specific allocation of such cost between
    operation and maintenance expense and capital costs is not yet finalized,
    PPL Electric currently estimates a total cost of $22 million, with approximately
    85% being expensed.

On February 11, 2005, PPL Electric filed a petition with the PUC for authority
  to defer and amortize for regulatory accounting and reporting purposes its actual
  cost of these storms, excluding capitalized costs of approximately $3 million
  and regular payroll expenses of approximately $2 million (pursuant to PUC precedent
  on this issue). If the PUC grants this petition, PPL Electric's management at
  that time will assess the recoverability of these costs in PPL Electric's next
  general rate increase proceeding. Based on the PUC's action on the petition
  and management's assessment, PPL Electric would either record these storm expenses,
  excluding regular payroll, as a regulatory asset in accordance with SFAS 71,
  "Accounting for the Effects of Certain Types of Regulation," or record these
  storm expenses on its income statement. If the PUC grants the petition before
  PPL Electric files its Form 10-Q for the first quarter of 2005, the result of
  this assessment will be reflected in PPL Electric's financial statements for
  the first quarter of 2005. If the PUC has not acted on or has denied the petition
  by such date, PPL Electric would record these storm expenses on its income statement.
  At this time, PPL Electric cannot predict the outcome of this matter.

- Earnings in 2005 and beyond are expected to continue to be adversely affected
    by increased pension costs. Specifically, WPD will experience increased pension
    costs due to a recent actuarial valuation of WPD's plans that reflects higher
    pension obligations. The increase in pension costs in 2005 is forecasted to
    be approximately $22 million after tax, and the increase in pension costs
    is expected to continue to be significant in 2006. See "Other Operation and
    Maintenance" for the impact on earnings in 2004.

- PPL is unable to predict whether future impairments of goodwill may be required
    for its domestic and international investments. While no goodwill impairments
    were required based on the annual review performed in the fourth quarter of
    2004, future impairments may occur due to determinations of carrying value
    exceeding the fair value of these investments.

- See Note 14 to the Financial Statements for potential commitments and contingent
    liabilities that may impact future earnings.

- See "Application of Critical Accounting Policies" for an overview of accounting
    policies that are particularly important to the results of operations and
    financial condition of PPL and that require PPL's management to make significant
    estimates, assumptions and other judgments. Although PPL's management believes
    that these estimates, assumptions and other judgments are appropriate, they
    relate to matters that are inherently uncertain.

- See Note 23 to the Financial Statements for new accounting standards that
    have been issued but not yet adopted by PPL that may impact future earnings.

Domestic Gross Energy Margins

The following table provides changes in the income statement line items that
  comprise domestic gross energy margins:

|                                                     |                     | 2004
        vs. 2003         |      |    | 2003
        vs. 2002 |  
|---------------------------------------------------- | ------------------- | ----------------------------- | ---- | -- | --------------------- | -
|                                                     |                     |                               |      |    |                       |  
|Utility revenues                                     |                     | $                             | 183  |    |                       | $
|                                                     |                     |                               |      |    |                       |  
|Unregulated retail electric
        and gas revenues |                     |                               | (34  | )  |                       |  
|                                                     |                     |                               |      |    |                       |  
|Wholesale energy marketing revenues                  |                     |                               | 25   |    |                       |  
|                                                     |                     |                               |      |    |                       |  
|Net energy trading margins                           |                     |                               | 12   |    |                       |  
|                                                     |                     |                               |      |    |                       |  
|Other revenue adjustments (a)                        |                     |                               | (112 | )  |                       |  
|                                                     |                     |                               |      |    |                       |  
|                                                     | Total revenues      |                               |      | 74 |                       |  
|                                                     |                     |                               |      |    |                       |  
|Fuel                                                 |                     |                               | 125  |    |                       |  
|                                                     |                     |                               |      |    |                       |  
|Energy purchases                                     |                     |                               | (87  | )  |                       |  
|                                                     |                     |                               |      |    |                       |  
|Other cost adjustments (a)                           |                     |                               | (25  | )  |                       |  
|                                                     |                     |                               |      |    |                       |  
|                                                     | Total cost of sales |                               |      | 13 |                       |  
|                                                     |                     |                               |      |    |                       |  
|                                                     |                     | Domestic gross energy margins |      | $  | 61                    |  
|                                                     |                     |                               |      |    |                       |  
|                                                     |                     |                               |      |    |                       |  

|(a) |  | Adjusted to exclude the impact of any revenues
        and costs not associated with domestic gross energy margins, in particular,
        revenues and energy costs related to the international operations of PPL
        Global and the domestic delivery operations of PPL Electric and PPL Gas
        Utilities. Also adjusted to include gains or losses on sales of emission
        allowances, which are included in "Other operation and maintenance" expenses
        on the Statement of Income, and the reduction of the reserve for Enron
        receivables, as described in Note 17 to the Financial Statements.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Changes in Domestic Gross Energy Margins By Region

Domestic gross energy margins are generated through PPL's normal and hedge
  activities (non-trading), as well as trading activities. Non-trading margins
  are now discussed on a geographic basis rather than on an activity basis, as
  reported prior to 2004. A regional perspective more closely matches the internal
  view of how PPL's energy business is managed.

|                              |                               | 2004 vs. 2003 |    |    | 2003 vs. 2002 |  
|----------------------------- | ----------------------------- | ------------- | -- | -- | ------------- | -
|                              |                               |               |    |    |               |  
|Eastern U.S. non-trading      |                               | $             | 59 |    |               | $
|                              |                               |               |    |    |               |  
|Northwestern U.S. non-trading |                               |               | (2 | )  |               |  
|                              |                               |               |    |    |               |  
|Southwestern U.S. non-trading |                               |               | (8 | )  |               |  
|                              |                               |               |    |    |               |  
|Net energy trading            |                               |               | 12 |    |               |  
|                              |                               |               |    |    |               |  
|                              | Domestic gross energy margins |               | $  | 61 |               |  
|                              |                               |               |    |    |               |  

Eastern U.S.

Eastern U.S. non-trading margins were higher in 2004 compared to 2003, primarily
  due to 3% higher generation, as well as higher prices and slightly higher sales
  volumes. In PJM, where the majority of PPL's Eastern wholesale activity occurs,
  average spot prices rose 15% in 2004 over 2003. PPL also benefited from favorable
  transmission congestion positions. In addition, retail energy prices increased
  by approximately 1% in 2004 in accordance with the schedule established by the
  PUC Final Order. The higher volumes reflect the return of customers who had
  previously shopped for electricity, as well as new load obligations in Connecticut
  and New Jersey, partially offset by lower wholesale sales. Partially offsetting
  these improvements were increased supply costs driven by increased fossil fuel
  and purchased power prices.

Eastern U.S. non-trading margins were essentially flat in 2003 compared to
  2002 due to lower supply costs in 2002 caused by the buyout of a NUG contract
  in February 2002, which reduced 2002's power purchases by $25 million. Excluding
  the NUG buyout, margins in 2003 were higher compared to 2002, primarily due
  to higher wholesale volumes, which increased by 47%. The higher volumes were
  primarily driven by market opportunities to optimize the value of generating
  assets and by higher spot prices that allowed PPL Energy Supply to increase
  the utilization of its higher-cost generating units.

Northwestern U.S.

Northwestern U.S. non-trading margins were slightly lower in 2004 compared
  to 2003, due in part to a retroactive coal price adjustment caused by an unfavorable
  arbitration ruling. Incremental expense of $6 million was recorded in 2004 as
  a result of the ruling, most of which related to years 2001 to 2003. Contributing
  to the decrease in margins in 2004 compared to 2003 was a $6 million positive
  impact to 2003 margins related to a partial reversal of a reserve against Enron
  receivables (discussed in Note 17 to the Financial Statements) and a 2003 favorable
  litigation settlement of $3 million with Energy West Resources. These decreases
  were offset by improved generation and higher prices.

Northwestern U.S. non-trading margins were higher in 2003 compared to 2002,
  due to higher wholesale prices. Average wholesale prices for 2003 were $6/MWh
  higher than prices in 2002. A $6 million partial reversal of a reserve against
  Enron receivables (discussed in Note 17 to the Financial Statements) and a favorable
  settlement of $3 million with Energy West Resources also positively impacted
  margins in 2003.

Southwestern U.S.

Southwestern U.S. non-trading margins were lower in 2004 compared to 2003,
  primarily due to wholesale sales volumes decreasing 17%. Also contributing to
  the decrease in margins in 2004 compared to 2003 was a $3 million positive impact
  to 2003 margins related to a partial reversal of a reserve against Enron receivables
  (discussed in Note 17 to the Financial Statements).

Southwestern U.S. non-trading margins were higher in 2003 compared to 2002,
  due to the inception of new tolling agreements in Arizona and an increase of
  average wholesale prices by $16/MWh in 2003 compared to 2002. In addition, margins
  were positively impacted by $3 million in 2003 related to a partial reversal
  of a reserve against Enron receivables.

Net Energy Trading

PPL enters into certain energy contracts that meet the criteria of trading
  derivatives as defined by EITF Issue 02-3, "Issues Involved in Accounting for
  Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy
  Trading and Risk Management Activities." These physical and financial contracts
  cover trading activity associated with electricity, gas and oil. The $12 million
  increase in 2004 compared to 2003 was due to a $6 million increase in electricity
  positions and a $6 million increase in gas and oil positions. The $10 million
  decrease in 2003 compared to 2002 was primarily due to realized electric swap
  losses in 2003. The physical volumes associated with energy trading were 5,700
  GWh and 11.7 Bcf in 2004; 5,200 GWh and 12.6 Bcf in 2003; and 9,600 GWh and
  12.4 Bcf in 2002. The amount of energy trading margins from unrealized mark-to-market
  transactions was $13 million in 2004 and not significant in 2003 and 2002.

Utility Revenues

The increases in utility revenues were attributable to the following:

|               |                                                   | 2004 vs. 2003                  |     |     | 2003 vs. 2002 |  
|-------------- | ------------------------------------------------- | ------------------------------ | --- | --- | ------------- | -
|               |                                                   |                                |     |     |               |  
|Domestic:      |                                                   |                                |     |     |               |  
|               |                                                   |                                |     |     |               |  
|               | Retail electric revenue (PPL
        Electric)    |                                |     |     |               |  
|               |                                                   |                                |     |     |               |  
|               |                                                   | PLR electric generation supply |     | $   | 94            |  
|               |                                                   |                                |     |     |               |  
|               |                                                   | Electric delivery              |     |     | (7            | )
|               |                                                   |                                |     |     |               |  
|               | Wholesale electric revenue (PPL
        Electric) |                                |     | (23 | )             |  
|               |                                                   |                                |     |     |               |  
|               | Gas revenue (PPL Gas Utilities)                   |                                |     | 22  |               |  
|               |                                                   |                                |     |     |               |  
|               | Other                                             |                                |     | (1  | )             |  
|               |                                                   |                                |     |     |               |  
|International: |                                                   |                                |     |     |               |  
|               |                                                   |                                |     |     |               |  
|               | Retail electric delivery (PPL
        Global)     |                                |     |     |               |  
|               |                                                   |                                |     |     |               |  
|               |                                                   | U.K.                           |     |     | 70            |  
|               |                                                   |                                |     |     |               |  
|               |                                                   | Chile                          |     |     | 27            |  
|               |                                                   |                                |     |     |               |  
|               |                                                   | Bolivia                        |     |     | 1             |  
|               |                                                   |                                |     |     |               |  
|               |                                                   | Brazil                         |     |     |               |  
|               |                                                   |                                |     |     |               |  
|               |                                                   | El Salvador                    |     |     |               |  
|               |                                                   |                                |     |     |               |  
|               |                                                   | $                              | 183 |     |               | $
|               |                                                   |                                |     |     |               |  
|               |                                                   |                                |     |     |               |  

The increase in utility revenues for 2004 compared with 2003 was attributable
  to:

- higher PLR revenues due to higher energy and capacity rates, and a 3.6%
    increase in volume, in part due to the return of customers previously served
    by alternate suppliers;
- higher gas revenues primarily due to off-system sales of storage gas in
    the fourth quarter of 2004, and the increase in natural gas prices, which
    are a pass-through to customer rates, partially offset by a decrease in volume;
- higher WPD revenues, primarily due to the change in foreign currency exchange
    rates;
- higher revenues in Chile, due to higher energy prices, which are a pass-through
    to customer rates, the change in foreign currency exchange rates, and a 7%
    increase in sales volume; partially offset by
- lower electric delivery revenues due to a decrease in ITC and CTC revenue
    as a result of lower ITC rates, and several rate groups reaching their rate
    cap; and
- lower wholesale electric revenues, due to the expiration of all PPL Electric
    municipal purchase power agreements at the end of January 2004.

The increase in utility revenues for 2003 compared with 2002 was attributable
  to:

- higher electric delivery revenues resulting from a 1.1% increase in delivery
    sales, in part due to colder winter weather in the first quarter of 2003;
- higher PLR revenues, due to higher energy and capacity rates;
- higher gas revenues, primarily due to higher sales volume of propane and
    natural gas;
- higher WPD revenues, primarily due to the change in foreign currency exchange
    rates;
- higher revenues in El Salvador, primarily due to higher volume and higher
    pass-through energy costs, partially offset by a 6% tariff reduction effective
    January 1, 2003; and
- higher revenues in Chile, primarily due to higher volume and the consolidation
    of TransEmel (see Note 9 to the Financial Statements); partially offset by
- lower revenues in Brazil attributable to the deconsolidation of CEMAR in
    August 2002 (see Note 9).

Energy Related Businesses

Energy related businesses contributed $45 million less to operating income
  in 2004 compared with 2003. The decrease was primarily attributable to the following:

- a $15 million pre-tax loss on the sale of CGE in 2004 (see Note 9 to the
    Financial Statements);
- a $5 million pre-tax decrease from mechanical contracting and engineering
    subsidiaries due to the continued decline in capital spending in commercial
    and industrial markets, lower margins experienced in those markets, and cost
    overruns at two major projects;
- a $3 million pre-tax decrease from Latin American subsidiaries due primarily
    to lower dividends received and lower construction sales; and
- a $17 million higher pre-tax operating loss from synfuel projects.

Energy related businesses contributed $17 million less to operating income
  in 2003 compared with 2002. The decrease resulted primarily from:

- $7 million of credits recorded on development projects in 2002, due largely
    to a favorable settlement on the cancellation of a generation project in Washington
    state;
- a $5 million operating loss on some Hyder properties in the first quarter
    of 2003, which were subsequently sold in April 2003;
- an $8 million decrease in Latin America revenues from lower material and
    construction project sales (In 2002, a Bolivian subsidiary participated in
    the construction of a 1,500 kilometer transmission line in rural areas.);
    and
- a $3 million decrease in margins from telecommunications, due to the acquisition
    of a fiber optic network and start-up activities for new products; partially
    offset by
- a $3 million improvement in contributions from mechanical contracting subsidiaries,
    due to enhanced project controls that were implemented to minimize project
    overruns, offset by a continuing decline in construction markets in 2003.

Other Operation and Maintenance

The increases in other operation and maintenance expenses were primarily due
  to:

|                                                                                                                                                                                |  | 2004 vs. 2003 |     |   | 2003 vs. 2002 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | --- | - | ------------- | -
|                                                                                                                                                                                |  |               |     |   |               |  
|Property damage and environmental
        insurance settlements which were recorded in 2003                                                                                     |  | $             | 27  |   |               | $
|                                                                                                                                                                                |  |               |     |   |               |  
|Increase in domestic and international
        pension costs                                                                                                                    |  |               | 18  |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Increased operating expenses
        in domestic business lines and other                                                                                                       |  |               |     |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Additional expenses of new generating
        facilities                                                                                                                        |  |               | 5   |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Increase in WPD expenses due
        to regulatory accounting adjustments, and resolution of purchase accounting
        contingencies in 2002 related to the Hyder acquisition |  |               |     |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Increase in foreign currency
        exchange rates                                                                                                                             |  |               | 15  |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Increase in WPD tree trimming
        costs                                                                                                                                     |  |               | 8   |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Decrease in the Clean Air Act
        contingency relating to generating facilities recorded in 2003                                                                            |  |               | 8   |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Outage costs associated with
        planned maintenance at the Montour and Conemaugh plants                                                                                    |  |               | 7   |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Consulting and independent auditor
        costs to meet the requirements of Sarbanes-Oxley 404                                                                                 |  |               | 6   |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Write-off of Hurricane Isabel
        costs not approved for recovery by the PUC                                                                                                |  |               | 4   |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Accretion expense as a result
        of applying SFAS 143 (Note 21)                                                                                                            |  |               | 1   |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Timing and extent of outage
        costs associated with the planned refueling and inspection at the Susquehanna
        station and of other nuclear-related expenses         |  |               | 2   |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Change to account for CEMAR
        on the cost method in 2002                                                                                                                  |  |               |     |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Estimated reduction in salaries
        and benefits as a result of the workforce reduction initiated in 2002
        (Note 20)                                                 |  |               |     |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Decrease in lease expense due
        to consolidation of the Sundance and University Park generation facilities                                                                |  |               | (24 | ) |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Vacation liability adjustment
        in 2002 in conjunction with the workforce reduction                                                                                       |  |               |     |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|WPD capitalization                                                                                                                                                              |  |               | (13 | ) |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Increase (decrease) in other
        postretirement benefit expense                                                                                                             |  |               | (12 | ) |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Decrease in Brunner Island expenses
        due to outage work in 2003. No major outage work performed in 2004                                                                  |  |               | (6  | ) |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Gains on sales of emission allowances                                                                                                                                           |  |               | (1  | ) |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Other                                                                                                                                                                           |  |               | (3  | ) |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|                                                                                                                                                                                |  | $             | 42  |   |               | $
|                                                                                                                                                                                |  |               |     |   |               |  

The $18 million increase in net pension costs was attributable to reductions
  in the discount rate assumption for PPL's domestic and international pension
  plans at December 31, 2003. Although financial markets have improved and PPL's
  domestic and international pension plans have experienced significant asset
  gains in 2003 and 2004, domestic interest rates on fixed-income obligations
  have continued to fall, requiring a further reduction in the discount rate assumption
  for PPL's domestic plans as of December 31, 2004. The reduction in the discount
  rate assumption has a significant impact on the measurement of plan obligations
  and net pension cost. In addition, there was an increase in the obligations
  of the WPD pension plan as determined by its most recent actuarial valuation
  as of March 31, 2004. PPL's net pension costs are expected to increase
  by approximately $40 million in 2005. Approximately $31 million of the increased
  costs is attributable to the WPD pension plans. See Note 12 to the Financial
  Statements for details of the funded status of PPL's pension plans.

Depreciation

Increases in depreciation expense were primarily due to:

|                                                                                                                                     |  | 2004 vs. 2003 |     |   | 2003 vs. 2002 |  
|------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | --- | - | ------------- | -
|                                                                                                                                     |  |               |     |   |               |  
|Additions to PP&E                                                                                                                    |  | $             | 13  |   |               | $
|                                                                                                                                     |  |               |     |   |               |  
|Sundance and University Park generation
        facilities - FIN 46 (a)                                                              |  |               | 15  |   |               |  
|                                                                                                                                     |  |               |     |   |               |  
|Depreciation on Lower Mt. Bethel generation
        facility, which began commercial operation in May 2004                           |  |               | 10  |   |               |  
|                                                                                                                                     |  |               |     |   |               |  
|Foreign currency exchange rates                                                                                                      |  |               | 16  |   |               |  
|                                                                                                                                     |  |               |     |   |               |  
|Lower depreciation due to deconsolidation
        of CEMAR in 2002                                                                   |  |               |     |   |               |  
|                                                                                                                                     |  |               |     |   |               |  
|2003 purchase accounting adjustments to
        WPD assets (Note 9)                                                                  |  |               | (22 | ) |               |  
|                                                                                                                                     |  |               |     |   |               |  
|No decommissioning expense in 2003 due
        to application of SFAS 143, "Accounting for Asset Retirement Obligations"
        (b) |  |               |     |   |               |  
|                                                                                                                                     |  |               |     |   |               |  
|                                                                                                                                     |  | $             | 32  |   |               | $
|                                                                                                                                     |  |               |     |   |               |  

|(a) |  | The lessor of these facilities was consolidated
        under FIN 46, "Consolidation of Variable Interest Entities, an Interpretation
        of ARB No. 51," effective December 31, 2003. In June 2004, subsidiaries
        of PPL Energy Supply purchased the Sundance and University Park generation
        assets from the lessor that was consolidated by PPL Energy Supply under
        FIN 46. See Note 22 to the Financial Statements for additional information.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | There was a corresponding recording of accretion
        expense for PPL Susquehanna in 2003, which is included in "Other operation
        and maintenance" expense on the Statement of Income. See Note 21 to the
        Financial Statements for additional information.                                                                                                                                                                                                

Taxes, Other Than Income

Taxes, other than income, decreased by $6 million in 2004 compared with 2003.
  The decrease was primarily due to a $14 million reversal of a prior year accrual
  and a $5 million decrease in domestic capital stock expense, partially offset
  by a $9 million increase in WPD property taxes. In the first quarter of 2004,
  PPL Electric reversed a $14 million accrued liability for 1998 and 1999 PURTA
  taxes that had been accrued based on potential exposure in the proceedings regarding
  the Susquehanna nuclear station tax assessment. The rights of the third-party
  intervenors to further appeal expired in 2004. WPD's property taxes increased
  by $9 million, primarily from the impact of changes in foreign currency exchange
  rates, adjustments recorded in 2003 and an increase in property tax rates.

Taxes, other than income, increased by $25 million in 2003 compared with 2002
  due to the settlement of prior years' capital stock tax refund claims of $8
  million in 2002, higher taxes related to an increase in the basis on which capital
  stock tax is calculated in 2003 and higher real estate taxes.

Other Charges

Other charges of $9 million in 2003 consisted of a charge for a workforce reduction
  program (see Note 20 to the Financial Statements).

Other charges of $232 million in 2002 consisted of the write-down of PPL Global's
  investment in CEMAR and several smaller impairment charges on other international
  investments (see Note 9), the write-down of generation assets (see Note 9) and
  a charge for a workforce reduction program (see Note 20).

Other Income - net

See Note 16 to the Financial Statements for details of other income and deductions.

Financing Costs

The increase (decrease) in financing costs, which include "Interest Expense"
  and "Distributions on Preferred Securities," were primarily due to:

|                                                                                                                                                                                        |  | 2004 vs. 2003 |     |   | 2003 vs. 2002 |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | --- | - | ------------- | -
|                                                                                                                                                                                        |  |               |     |   |               |  
|Increase in interest expense
        due to consolidation of the lessors of the Sundance, University Park and
        Lower Mt. Bethel generation facilities, in accordance with FIN 46 |  | $             | 34  |   |               |  
|                                                                                                                                                                                        |  |               |     |   |               |  
|Financing costs associated with
        the repayment of the consolidated trust's debt for the Sundance and University
        Park generation facilities                               |  |               | 9   |   |               |  
|                                                                                                                                                                                        |  |               |     |   |               |  
|Increase in foreign currency
        exchange rates                                                                                                                                     |  |               | 15  |   |               | $
|                                                                                                                                                                                        |  |               |     |   |               |  
|Decrease in interest expense
        due to hedging activities accounted for under SFAS 133, "Accounting for
        Derivative Instruments and Hedging Activities"                     |  |               | (10 | ) |               |  
|                                                                                                                                                                                        |  |               |     |   |               |  
|Decrease in amortization expense                                                                                                                                                        |  |               | (5  | ) |               |  
|                                                                                                                                                                                        |  |               |     |   |               |  
|Decrease in short-term debt
        interest expense                                                                                                                                    |  |               | (10 | ) |               |  
|                                                                                                                                                                                        |  |               |     |   |               |  
|Decrease in long-term
        debt interest expense                                                                                                                                     |  |               | (1  | ) |               |  
|                                                                                                                                                                                        |  |               |     |   |               |  
|Decrease in long-term debt interest
        from the deconsolidation of CEMAR in August 2002                                                                                            |  |               |     |   |               |  
|                                                                                                                                                                                        |  |               |     |   |               |  
|Charge in 2002 related to the
        ineffectiveness and subsequent dedesignation of hedges on anticipated
        debt issuances that did not occur                                   |  |               |     |   |               |  
|                                                                                                                                                                                        |  |               |     |   |               |  
|Charge in 2002 to cancel a remarketing
        agreement                                                                                                                                |  |               |     |   |               |  
|                                                                                                                                                                                        |  |               |     |   |               |  
|Decrease in capitalized interest                                                                                                                                                        |  |               | 1   |   |               |  
|                                                                                                                                                                                        |  |               |     |   |               |  
|Write-off of unamortized
        swap costs on WPD debt restructuring in 2003                                                                                                           |  |               | (11 | ) |               |  
|                                                                                                                                                                                        |  |               |     |   |               |  
|Other                                                                                                                                                                                   |  |               | 1   |   |               |  
|                                                                                                                                                                                        |  |               |     |   |               |  
|                                                                                                                                                                                        |  | $             | 23  |   |               | $
|                                                                                                                                                                                        |  |               |     |   |               |  

Income Taxes

Income tax expense increased by $25 million in 2004 compared with 2003. This
  increase was primarily attributable to:

- an $84 million tax benefit recognized in 2003 related to foreign investment
    losses not recurring in 2004; and
- a $9 million tax benefit recognized in 2003 related to a charitable contribution
    of property not recurring in 2004; offset by
- a $22 million tax benefit recognized in 2004 related to a reduction in tax
    reserves associated with stranded costs securitization predicated upon management's
    reassessment of its best estimate of probable tax exposure, relative to 2003;
- a $25 million decrease in tax expense on foreign earnings in 2004; and
- a $22 million tax benefit recognized in 2004 related to additional nonconventional
    fuel tax credits in excess of credits recognized in 2003.

Income tax expense decreased by $40 million in 2003 compared with 2002. This
  decrease was due to:

- a $31 million reduction related to deferred income tax valuation allowances
    recorded on impairment charges on PPL's investment in Brazil recorded during
    2002;
- an $84 million reduction in income taxes related to the tax benefit recognized
    in 2003 on foreign investment losses included in the 2002 federal income tax
    return;
- a $9 million decrease related to a contribution of property; and
- a $2 million decrease related to additional nonconventional fuel tax credits
    recognized; offset by
- higher pre-tax domestic book income, resulting in an $84 million increase
    in income taxes.

Annual tax provisions include amounts considered sufficient to pay assessments
  that may result from examination of prior year tax returns by taxing authorities.
  However, the amount ultimately paid upon resolution of any issues raised by
  such authorities may differ materially from the amount accrued. In evaluating
  the exposure associated with various filing positions, PPL accounts for changes
  in probable exposures based on management's best estimate of the amount that
  should be recognized. An allowance is maintained for the tax contingencies,
  the balance of which management believes to be adequate. During 2004, PPL reached
  partial settlement with the IRS with respect to the tax years 1991 through 1995
  and received a cash refund in the amount of $52 million. As a result of this
  settlement, the net tax impact recorded in 2004 was not significant.

See Note 5 to the Financial Statements for details on effective income tax
  rates and for information on the American Jobs Creation Act of 2004.

Discontinued Operations

In 2003, PPL reported a loss of $20 million in connection with the approval
  of a plan of sale of PPL Global's investment in a Latin American telecommunications
  company. An additional $2 million loss was recorded in 2004, representing operating
  losses through the date of the sale. See "Discontinued Operations" in Note 9
  to the Financial Statements for additional information related to the sale.

Cumulative Effects of Changes in Accounting Principles

In 2003, PPL recorded a charge of $27 million, after-tax, as a cumulative effect
  of a change in accounting principle in connection with the adoption of FIN 46,
  "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51,"
  for certain entities. See Note 22 to the Financial Statements for additional
  information.

PPL adopted SFAS 143, "Accounting for Asset Retirement Obligations," effective
  January 1, 2003. SFAS 143 addresses the accounting for obligations associated
  with the retirement of tangible long-lived assets. It requires legal obligations
  associated with the retirement of long-lived assets to be recognized as a liability
  in the financial statements. Application of the new rules resulted in a cumulative
  effect of adoption that increased net income by $63 million in 2003. See Note
  21 to the Financial Statements for additional information.

PPL adopted SFAS 142, "Goodwill and Other Intangible Assets," on January 1,
  2002. SFAS 142 requires an annual impairment test of goodwill and other intangible
  assets that are not subject to amortization. PPL performed a transition impairment
  analysis in the first quarter of 2002 and recorded a transition goodwill impairment
  charge of $150 million. See Note 19 to the Financial Statements for additional
  information.

Financial Condition

Liquidity

PPL is focused on maintaining a strong liquidity position and strengthening
  its balance sheet, thereby improving its credit profile. PPL believes that its
  cash on hand, operating cash flows, access to debt and equity capital markets
  and borrowing capacity, taken as a whole, provide sufficient resources to fund
  its ongoing operating requirements, future security maturities and estimated
  future capital expenditures. PPL currently expects cash on hand at the end of
  2005 to be about $300 million, with about $2.3 billion in available credit facilities.
  However, PPL's cash flows from operations and its access to cost effective bank
  and capital markets are subject to risks and uncertainties, including but not
  limited to, the following:

- changes in market prices for electricity;
- changes in commodity prices that may increase the cost of producing power
    or decrease the amount PPL receives from selling power;
- price and credit risks associated with selling and marketing products in
    the wholesale power markets;
- ineffectiveness of trading, marketing and risk management policies and programs
    used to mitigate PPL's risk exposure to adverse energy and fuel prices, interest
    rates, foreign currency exchange rates and counterparty credit;
- unusual or extreme weather that may damage PPL's transmission and distribution
    facilities or affect energy sales to customers;
- reliance on transmission and distribution facilities that PPL does not own
    or control to deliver its electricity and natural gas;
- unavailability of generating units (due to unscheduled or longer-than-anticipated
    generation outages) and the resulting loss of revenues and additional costs
    of replacement electricity;
- ability to recover and the timeliness and adequacy of recovery of costs
    associated with regulated utility businesses; and
- a downgrade in PPL's or PPL's subsidiaries' credit ratings that could negatively
    affect their ability to access capital and increase the cost of maintaining
    credit facilities and any new debt.

At December 31, 2004, PPL had $616 million in cash and cash equivalents and
  $42 million of short-term debt compared to $466 million in cash and cash equivalents
  and $56 million of short-term debt at December 31, 2003, and $245 million in
  cash and cash equivalents and $943 million of short-term debt at December 31,
  2002. The changes in cash and cash equivalents resulted from the following:

|                                                            |  | 2004 |       |   | 2003 |   |       | 2002 | 
|----------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- | 
|                                                            |  |      |       |   |      |   |       |      | 
|Net Cash Provided by Operating Activities                   |  | $    | 1,437 |   |      | $ | 1,340 |      | 
|                                                            |  |      |       |   |      |   |       |      | 
|Net Cash Used in Investing Activities                       |  |      | (718  | ) |      |   | (739  | )    | 
|                                                            |  |      |       |   |      |   |       |      | 
|Net Cash Used in Financing Activities                       |  |      | (578  | ) |      |   | (387  | )    | 
|                                                            |  |      |       |   |      |   |       |      | 
|Effect of Exchange Rates on Cash &
        Cash Equivalents |  |      | 9     |   |      |   | 7     |      | 
|                                                            |  |      |       |   |      |   |       |      | 
|Increase (Decrease) in Cash & Cash
        Equivalents      |  | $    | 150   |   |      | $ | 221   |      | 
|                                                            |  |      |       |   |      |   |       |      | 

Net Cash Provided by Operating Activities

Net cash from operating activities increased by 7%, or $97 million, in 2004
  versus 2003, reflecting higher energy margins and other improvements in cash-adjusted
  net income.

Important elements supporting the stability of PPL's cash provided by operating
  activities are the long-term and intermediate-term commitments from wholesale
  and retail customers and long-term fuel supply contracts PPL has in place. PPL
  estimates that, on average, approximately 83% of its expected annual generation
  output for the period 2005 through 2009 is committed under long-term and intermediate-term
  energy supply contracts. PPL EnergyPlus also enters into contracts under which
  it agrees to sell and purchase electricity, natural gas, oil and coal. These
  contracts often require cash collateral or other credit enhancement, or reductions
  or terminations of a portion of the entire contract through cash settlement
  in the event of a downgrade of PPL or the respective subsidiary's credit ratings
  or adverse changes in market prices. For example, in addition to limiting its
  trading ability, if PPL or its respective subsidiary's ratings were lowered
  to below "investment grade" and energy prices increased by 10%, PPL estimates
  that, based on its December 31, 2004, positions, it would have had to post additional
  collateral of approximately $280 million, compared to $190 million at December
  31, 2003. PPL has in place risk management programs that, among other things,
  are designed to monitor and manage its exposure to volatility of cash flows
  related to changes in energy prices, interest rates, foreign currency exchange
  rates, counterparty credit quality and the operational performance of its generating
  units.

Net cash from operating activities increased by $566 million in 2003 versus
  2002 reflecting higher net income adjusted for non-cash items, working capital
  improvements and lower cash income taxes. In addition, 2002 included cash outlays
  of $152 million for the cancellation of generation projects and $50 million
  for the termination of a NUG contract. The higher net income in 2003 was principally
  driven by complete ownership of WPD, higher wholesale energy margins, lower
  interest expense and savings from a workforce reduction program in the U.S.
  that commenced in 2002. The working capital improvements resulted from a decrease
  in accounts receivable and prepayments. These positive changes were partially
  offset by rising transmission and distribution operating costs at PPL Electric
  and other factors.

Net Cash Used in Investing Activities

Net cash used in investing activities decreased by 3%, or $21 million, in 2004
  versus 2003 primarily as the result of the $123 million proceeds from the sale
  of PPL's minority interest in CGE. The primary use of cash for investing activities
  is capital and investment expenditures. See "Capital Expenditure Requirements"
  for capital and investment expenditures in 2004 and expected expenditures in
  2005 through 2009. In 2005, PPL expects to be able to fund all of its capital
  expenditures with cash from operations and cash on hand.

The $318 million reduction in net cash used in investing activities in 2003,
  compared with 2002, was primarily due to reduced investment in generation assets
  and electric energy projects and the acquisition of the controlling interest
  in WPD in September 2002.

Net Cash Used in Financing Activities

Net cash used in financing activities was $578 million in 2004, compared to
  $387 million in 2003. The increase primarily reflects higher retirement of long-term
  debt and increased dividends to shareholders. In 2004, cash used in financing
  activities primarily consisted of net debt retirements of $863 million and common
  and preferred dividends paid of $299 million, partially offset by common stock
  sale proceeds of $596 million, of which $575 million related to the settlement
  of the common stock purchase contracts that were a component of the PEPS Units
  and the PEPS Units, Series B. In 2003, cash used in financing activities primarily
  consisted of net debt retirements of $460 million, preferred stock retirements
  of $31 million and common and preferred dividends paid of $287 million, partially
  offset by common stock sale proceeds of approximately $426 million. PPL currently
  has no plans to issue any significant amounts of additional common stock. See
  Note 8 to the Financial Statements for additional information on common stock
  sales in 2004.

PPL's debt financing activity in 2004 was as follows:

|                                                                |       | Issuances |     |     | Retirements |  
|--------------------------------------------------------------- | ----- | --------- | --- | --- | ----------- | -
|                                                                |       |           |     |     |             |  
|PPL Energy Supply Senior Unsecured
        Notes                |       | $         | 300 |     |             |  
|                                                                |       |           |     |     |             |  
|PPL Capital Funding Medium-Term
        Notes                   |       |           |     |     |             | $
|                                                                |       |           |     |     |             |  
|PPL Transition Bond Company Transition
        Bonds            |       |           |     |     |             |  
|                                                                |       |           |     |     |             |  
|PPL Electric First Mortgage Bonds                               |       |           |     |     |             |  
|                                                                |       |           |     |     |             |  
|PPL Electric Senior Secured Bonds                               |       |           |     |     |             |  
|                                                                |       |           |     |     |             |  
|PPL Energy Supply lease financing                               |       |           |     |     |             |  
|                                                                |       |           |     |     |             |  
|WPD short-term debt (net change)                                |       |           |     |     |             |  
|                                                                |       |           |     |     |             |  
|PPL Electric Asset-backed Commercial
        Paper (net change) |       |           | 42  |     |             |  
|                                                                |       |           |     |     |             |  
|North Penn Gas, Inc. Notes                                      |       |           |     |     |             |  
|                                                                |       |           |     |     |             |  
|Latin American companies long-term
        debt                 |       |           | 22  |     |             |  
|                                                                |       |           |     |     |             |  
|                                                                | Total |           | $   | 364 |             |  
|                                                                |       |           |     |     |             |  
|Net reduction                                                   |       |           |     |     |             | $
|                                                                |       |           |     |     |             |  



Debt issued during 2004 had stated interest rates ranging from 1.1% to 9.0%
  and maturities from 2004 through 2014. See Note 8 to the Financial Statements
  for more detailed information regarding PPL's financing activities.

In March 2004, PPL Electric reactivated its commercial paper program to provide
  it with an additional financing source to fund its short-term liquidity needs,
  if and when necessary. At December 31, 2004, PPL Electric had no commercial
  paper outstanding.

In August 2004, PPL Electric began participating in an asset-backed commercial
  paper program through which PPL Electric obtains financing by selling and contributing
  its eligible accounts receivable and unbilled revenue to a special purpose,
  wholly owned subsidiary on an ongoing basis. The subsidiary pledges these assets
  to secure loans of up to an aggregate of $150 million from a commercial paper
  conduit sponsored by a financial institution. PPL Electric expects to use the
  proceeds from the program for general corporate purposes and to cash collateralize
  letters of credit. At December 31, 2004, the loan balance outstanding was $42
  million, all of which was being used to cash collateralize letters of credit.

In December 2004, PPL Energy Supply reactivated its commercial paper program
  to provide it with an additional financing source to fund its short-term liquidity
  needs, if and when necessary. At December 31, 2004, PPL Energy Supply had no
  commercial paper outstanding and currently has no plans to access the commercial
  paper market in the short-term.

At December 31, 2004, PPL's total committed borrowing capacity under credit
  facilities and the use of this borrowing capacity were as follows:



|                                                |       | Committed
        Capacity |       |       | Borrowed |  |  | Letters
        of Credit Issued (d) |  |   | Available
        Capacity |    
|----------------------------------------------- | ----- | -------------------------- | ----- | ----- | -------- |  |  | ------------------------------------ |  | - | -------------------------- | ---
|                                                |       |                            |       |       |          |  |  |                                      |  |   |                            |    
|PPL Electric Credit Facilities
        (a)      |       | $                          | 300   |       |          |  |  |                                      |  |   |                            |    
|                                                |       |                            |       |       |          |  |  |                                      |  |   |                            |    
|PPL Energy Supply Credit Facilities
        (b) |       |                            | 1,100 |       |          |  |  |                                      |  | $ | 250                        |    
|                                                |       |                            |       |       |          |  |  |                                      |  |   |                            |    
|WPD (South West) Bank Facilities
        (c)    |       |                            | 769   |       |          |  |  |                                      |  |   | 2                          |    
|                                                |       |                            |       |       |          |  |  |                                      |  |   |                            |    
|                                                | Total |                            | $     | 2,169 |          |  |  |                                      |  |   | $                          | 252
|                                                |       |                            |       |       |          |  |  |                                      |  |   |                            |    
|                                                |       |                            |       |       |          |  |  |                                      |  |   |                            |    

|(a) |  | PPL Electric's credit facilities allow for
        borrowings at LIBOR-based rates plus a spread, depending upon the company's
        public debt rating. PPL Electric also has the capability to cause the
        lenders to issue up to $300 million of letters of credit under these facilities,
        which issuances reduce available borrowing capacity.
      The credit facilities contain a financial covenant requiring debt to
        total capitalization to not exceed 70%. At December 31, 2004 and 2003,
        PPL Electric's consolidated debt to total capitalization percentages,
        as calculated in accordance with its credit facilities, were 54% and 57%.
        The credit facilities also contain certain representations and warranties
        that must be made for PPL Electric to borrow under them, including, but
        not limited to, a material adverse change clause that relates to PPL Electric's
        ability to perform its obligations under the credit agreements and related
        loan documents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(b) |  | PPL Energy Supply's credit facilities allow
        for borrowings at LIBOR-based rates plus a spread, depending upon the
        company's public debt rating. PPL Energy Supply also has the capability
        to cause the lenders to issue up to $950 million of letters of credit
        under these facilities, which issuances reduce available borrowing capacity.
      These credit facilities contain financial covenants requiring debt to
        total capitalization to not exceed 65% and requiring that PPL Energy Supply
        maintain an interest coverage ratio to not be less than 2.0 times consolidated
        earnings before income taxes, depreciation and amortization. At December
        31, 2004 and 2003, PPL Energy Supply's consolidated debt to total capitalization
        percentages, as calculated in accordance with one of its credit facilities,
        were 35% and 36%. Under a second credit facility entered into in June
        2004, the consolidated debt to capitalization percentage was 34% at December
        31, 2004. At December 31, 2004 and 2003, PPL Energy Supply's interest
        coverage ratios, as calculated in accordance with its credit facilities,
        were 6.2 and 6.3. The credit facilities also contain certain representations
        and warranties that must be made for PPL Energy Supply to borrow under
        them, including, but not limited to, a material adverse change clause
        that relates to PPL Energy Supply's ability to perform its obligations
        under the credit agreements and related loan documents.
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(c) |  | WPD (South West)'s credit facilities allow
        for borrowings at LIBOR-based rates plus a spread, depending upon the
        company's public debt rating.
      These credit facilities contain financial covenants that require WPD
        (South West) to maintain an interest coverage ratio of not less than 3.0
        times consolidated earnings before income taxes, depreciation and amortization
        and a regulatory asset base (RAB) at £150 million greater than total
        gross debt, in each case as calculated in accordance with the credit facilities.
        At December 31, 2004 and 2003, WPD (South West)'s interest coverage ratio,
        as calculated in accordance with its credit lines, were 6.8 and 6.7. At
        December 31, 2004 and 2003, WPD (South West)'s RAB, as calculated in accordance
        with the credit facilities, exceeded its total gross debt by £531
        million and £482 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(d) |  | The Borrower under each of these facilities
        has a reimbursement obligation to the extent any letters of credit are
        drawn. The letters of credit issued as of December 31, 2004, expire in
        2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

These credit agreements contain various other covenants. Failure to meet those
  covenants beyond applicable grace periods could result in acceleration of due
  dates of borrowings and/or termination of the agreements. PPL monitors the covenants
  on a regular basis. At December 31, 2004, PPL was in material compliance with
  those covenants. PPL Energy Supply and WPD (South West) intend to renew and
  extend all of their syndicated credit facilities in 2005.

The increase of $24 million in net cash used in financing activities in 2003
  compared to 2002 primarily reflected the repayment of short-term debt, retirement
  of long-term debt and increased dividends to shareholders. In 2003, the $387
  million of net cash used in financing activities primarily consisted of net
  debt retirements of $460 million, preferred stock retirements of $31 million
  and common and preferred dividends paid of $287 million, partially offset by
  common stock sale proceeds of approximately $426 million. In 2002, the $363
  million of net cash used in financing activities primarily consisted of net
  debt retirements of $412 million, company-obligated mandatorily redeemable preferred
  security retirements of $250 million and common and preferred dividends paid
  of $261 million, partially offset by common stock sale proceeds of approximately
  $587 million.

Operating Leases

PPL and its subsidiaries also have available funding sources that are provided
  through operating leases. PPL's subsidiaries lease vehicles, office space, land,
  buildings, personal computers and other equipment. These leasing structures
  provide PPL with additional operating and financing flexibility. The operating
  leases contain covenants that are typical for these agreements, such as maintaining
  insurance, maintaining corporate existence and timely payment of rent and other
  fees. Failure to meet these covenants could limit or restrict access to these
  funds or require early payment of obligations. At this time, PPL believes that
  these covenants will not limit access to these funding sources or cause acceleration
  or termination of the leases.

PPL, through its subsidiary PPL Montana, leases a 50% interest in Colstrip
  Units 1 and 2 and a 30% interest in Unit 3, under four 36-year non-cancelable
  operating leases. These operating leases are not recorded on PPL's Balance Sheet,
  which is in accordance with applicable accounting guidance. The leases place
  certain restrictions on PPL Montana's ability to incur additional debt, sell
  assets and declare dividends. At this time, PPL believes that these restrictions
  will not limit access to these funding sources or cause acceleration or termination
  of the leases. See Note 8 to the Financial Statements for a discussion of other
  dividend restrictions related to PPL subsidiaries.

See Note 10 to the Financial Statements for further discussion of the operating
  leases.

Contractual Obligations

At December 31, 2004, the estimated contractual cash obligations of PPL were
  as follows:



|Contractual Cash Obligations                                                      |  | Total |        |  | Less
        Than
        1 Year |   |       | 1-3
        Years |  |   | 3-5
        Years |  |  | After 5
        Years |      
|--------------------------------------------------------------------------------- |  | ----- | ------ |  | -------------------------------- | - | ----- | ----------------- |  | - | ----------------- |  |  | --------------------- | -----
|                                                                                  |  |       |        |  |                                  |   |       |                   |  |   |                   |  |  |                       |      
|Long-term Debt (a)                                                                |  | $     | 7,755  |  |                                  | $ | 866   |                   |  | $ | 2,266             |  |  | $                     | 1,310
|                                                                                  |  |       |        |  |                                  |   |       |                   |  |   |                   |  |  |                       |      
|Capital Lease Obligations                                                         |  |       | 18     |  |                                  |   | 1     |                   |  |   | 2                 |  |  |                       | 2    
|                                                                                  |  |       |        |  |                                  |   |       |                   |  |   |                   |  |  |                       |      
|Operating Leases                                                                  |  |       | 784    |  |                                  |   | 77    |                   |  |   | 133               |  |  |                       | 117  
|                                                                                  |  |       |        |  |                                  |   |       |                   |  |   |                   |  |  |                       |      
|Purchase Obligations (b)                                                          |  |       | 3,273  |  |                                  |   | 684   |                   |  |   | 1,280             |  |  |                       | 580  
|                                                                                  |  |       |        |  |                                  |   |       |                   |  |   |                   |  |  |                       |      
|Other Long-term Liabilities Reflected
        on the Balance Sheet under GAAP (c) |  |       | 174    |  |                                  |   | 38    |                   |  |   | 116               |  |  |                       | 20   
|                                                                                  |  |       |        |  |                                  |   |       |                   |  |   |                   |  |  |                       |      
|Total Contractual Cash Obligations                                                |  | $     | 12,004 |  |                                  | $ | 1,666 |                   |  | $ | 3,797             |  |  | $                     | 2,029
|                                                                                  |  |       |        |  |                                  |   |       |                   |  |   |                   |  |  |                       |      

|(a) |  | Reflects principal maturities only, including
        maturities of consolidated lease debt.                                                                                                                     
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | The payments reflected herein are subject
        to change, as certain purchase obligations included are estimates based
        on projected obligated quantities and/or projected pricing under the contracts.
|(c) |  | The amounts reflected represent estimated
        pension funding requirements.                                                                                                                                  

Credit Ratings

Standard & Poor's Ratings Services (S&P), Moody's Investors Service,
  Inc. (Moody's) and Fitch Ratings (Fitch) periodically review the credit ratings
  on the debt and preferred securities of PPL and its subsidiaries. Based on their
  respective reviews, the rating agencies may make certain ratings revisions.

The ratings of S&P, Moody's and Fitch are not a recommendation to buy,
  sell or hold any securities of PPL or its subsidiaries. Such ratings may be
  subject to revisions or withdrawal by the agencies at any time and should be
  evaluated independently of each other and any other rating that may be assigned
  to their securities.

The following table summarizes the credit ratings of PPL and its key financing
  subsidiaries at December 31, 2004:

|                            |                                          | Moody's |          | S&P |          | Fitch
|--------------------------- | ---------------------------------------- | ------- | -------- | --- | -------- | -----
|                            |                                          |         |          |     |          |      
|                            |                                          |         |          |     |          |      
|PPL                         |                                          |         |          |     |          |      
|                            | Issuer Rating                            |         |          |     | BBB      |      
|                            | Senior Unsecured Debt                    |         | Baa3     |     | BBB-     |      
|                            | Outlook                                  |         | STABLE   |     | STABLE   |      
|                            |                                          |         |          |     |          |      
|PPL Energy Supply           |                                          |         |          |     |          |      
|                            | Issuer Rating                            |         |          |     | BBB      |      
|                            | Senior Unsecured Notes                   |         | Baa2     |     | BBB      |      
|                            | Commercial Paper                         |         | P-2      |     | A-2      |      
|                            | Outlook                                  |         | STABLE   |     | STABLE   |      
|                            |                                          |         |          |     |          |      
|PPL Capital Funding         |                                          |         |          |     |          |      
|                            | Senior Unsecured Debt                    |         | Baa3     |     | BBB-     |      
|                            | Subordinated Debt                        |         | Ba1      |     | BBB-     |      
|                            | Medium -Term Notes                       |         | Baa3     |     | BBB-     |      
|                            | Outlook                                  |         | STABLE   |     | STABLE   |      
|                            |                                          |         |          |     |          |      
|PPL Electric                |                                          |         |          |     |          |      
|                            | Senior Unsecured/Issuer
          Rating |         | Baa2     |     | A-       |      
|                            | First Mortgage Bonds                     |         | Baa1     |     | A-       |      
|                            | Pollution Control Bonds (a)              |         | Aaa      |     | AAA      |      
|                            | Senior Secured Bonds                     |         | Baa1     |     | A-       |      
|                            | Commercial Paper                         |         | P-2      |     | A-2      |      
|                            | Preferred Stock                          |         | Ba1      |     | BBB      |      
|                            | Outlook                                  |         | STABLE   |     | NEGATIVE |      
|                            |                                          |         |          |     |          |      
|PPL Transition Bond Company |                                          |         |          |     |          |      
|                            | Transition Bonds                         |         | Aaa      |     | AAA      |      
|                            |                                          |         |          |     |          |      
|PPL Montana                 |                                          |         |          |     |          |      
|                            | Pass -Through Certificates               |         | Baa3     |     | BBB-     |      
|                            | Outlook                                  |         | STABLE   |     | STABLE   |      
|                            |                                          |         |          |     |          |      
|WPDH Limited                |                                          |         |          |     |          |      
|                            | Issuer Rating                            |         | Baa3     |     | BBB-     |      
|                            | Senior Unsecured Debt                    |         | Baa3     |     | BBB-     |      
|                            | Short-term Debt                          |         |          |     | A-3      |      
|                            | Outlook                                  |         | NEGATIVE |     | NEGATIVE |      
|                            |                                          |         |          |     |          |      
|WPD LLP                     |                                          |         |          |     |          |      
|                            | Issuer Rating                            |         |          |     | BBB-     |      
|                            | Senior Unsecured Debt                    |         | Baa2     |     | BBB-     |      
|                            | Short-term Debt                          |         |          |     | A-3      |      
|                            | Preferred Stock                          |         | Baa3     |     | BB       |      
|                            | Outlook                                  |         | NEGATIVE |     | NEGATIVE |      
|                            |                                          |         |          |     |          |      
|WPD (South Wales)           |                                          |         |          |     |          |      
|                            | Issuer Rating                            |         |          |     | BBB+     |      
|                            | Senior Unsecured Debt                    |         | Baa1     |     | BBB+     |      
|                            | Short-term Debt                          |         |          |     | A-2      |      
|                            | Outlook                                  |         | STABLE   |     | NEGATIVE |      
|                            |                                          |         |          |     |          |      
|WPD (South West)            |                                          |         |          |     |          |      
|                            | Issuer Rating                            |         | Baa1     |     | BBB+     |      
|                            | Senior Unsecured Debt                    |         | Baa1     |     | BBB+     |      
|                            | Short-term Debt                          |         | P-2      |     | A-2      |      
|                            | Outlook                                  |         | STABLE   |     | NEGATIVE |      



|(a) |  | Insured as to payment of principal and interest.
|--- |  | ------------------------------------------------

Rating Agency Actions in 2004

S&P

In May 2004, S&P affirmed its BBB ratings on both PPL and PPL Energy Supply
  and revised its outlook on both entities from negative to stable. S&P also
  affirmed its BBB- rating on PPL Montana's Pass-Through Certificates due 2020
  and revised its outlook from negative to stable. At the same time, S&P affirmed
  its A-/A-2 rating and negative outlook on PPL Electric. Also, S&P indicated
  that the following ratings would remain unchanged following the aforementioned
  revision to PPL's outlook:

- WPDH Limited of BBB-/Negative/A-3;
- WPD (South West) of BBB+/Negative/A-2; and
- WPD (South Wales) of BBB+/Negative/A-2.

In December 2004, S&P confirmed its A-2 rating on PPL Energy Supply's reactivated
  commercial paper program.

Moody's

In March 2004, Moody's confirmed its P-2 rating on PPL Electric's reactivated
  commercial paper program.

In December 2004, Moody's confirmed its P-2 rating on PPL Energy Supply's reactivated
  commercial paper program.

Also in December 2004, Moody's downgraded the senior unsecured long-term debt
  ratings of WPDH Limited from Baa2 to Baa3 with a negative outlook. At the same
  time, Moody's changed the outlook on the senior unsecured long-term debt rating
  of WPD LLP from stable to negative and affirmed its Baa1 senior unsecured long-term
  ratings of WPD (South West) and WPD (South Wales). The outlook on WPD (South
  West) and WPD (South Wales) is stable.

Moody's indicated that its ratings actions with respect to WPD reflect its
  concern that WPDH Limited has an adjusted net debt/Regulatory Asset Base (RAB)
  ratio in excess of 95% after pension deficits that are not recoverable through
  the U.K. regulatory process are taken into account. Moody's also indicated that
  the ratings reflect its expectation that adjusted net debt/RAB will fall to
  less than 90% during the course of 2005.

Fitch

In March 2004, Fitch confirmed its F2 rating on PPL Electric's reactivated
  commercial paper program.

In December 2004, Fitch confirmed its F2 rating on PPL Energy Supply's reactivated
  commercial paper program.

Ratings Triggers

PPL Energy Supply's 2.625% Convertible Senior Notes due 2023 are convertible
  upon the occurrence of certain events, including if the long-term credit ratings
  assigned to the notes by S&P and Moody's are lower than BB and Ba2, or either
  S&P or Moody's no longer rates the notes. The terms of the notes were modified
  in November 2004 to, among other things, require cash settlement of the principal
  amount upon conversion of the notes. These modifications were made in response
  to the FASB's ratification of EITF Issue 04-8, "The Effect of Contingently Convertible
  Instruments on Diluted Earnings per Share." See Note 4 to the Financial Statements
  for more information concerning these modifications, Note 8 for a discussion
  of the consent solicitation that effected these modifications and Note 23 for
  a discussion of EITF Issue 04-8.

PPL and its respective subsidiaries do not have additional material liquidity
  exposures caused by a ratings downgrade below "investment grade" that would
  accelerate the due dates of borrowings. However, if PPL and PPL Energy Supply's
  debt ratings were below investment grade at December 31, 2004, PPL and PPL Energy
  Supply would have had to post an additional $118 million of collateral to counterparties.

Subsequent Ratings Events

In January 2005, S&P affirmed PPL Electric's A-/A-2 corporate credit ratings
  and has favorably revised its outlook on the company to stable from negative
  following the authorization of a $194 million rate increase by the PUC. S&P
  indicated that the outlook revision reflects its expectations that the rate
  increase, effective January 1, 2005, will allow for material improvement in
  PPL Electric's financial profile, which had lagged S&P's expectations in
  recent years. S&P indicated that the stable outlook reflects its expectations
  that PPL Electric "will rapidly improve and then maintain financial metrics
  more consistent with its ratings." S&P indicated that it expects PPL Electric's
  operations to remain stable through the expiration of the PLR agreement.

Additionally, in January 2005, S&P revised its outlooks on the WPD companies
  to stable from negative. S&P attributes this positive change to financial
  profile improvements resulting from the final regulatory outcome published by
  Ofgem in November 2004. At the same time, S&P affirmed the WPD companies'
  long-term and short-term credit ratings.

Also in January 2005, Fitch announced that it downgraded the WPD companies'
  senior unsecured credit ratings by one notch as follows:

- WPDH Limited to BBB- from BBB
- WPD LLP to BBB from BBB+
- WPD (South West) and WPD (South Wales) to BBB+/F2 from A-/F1

Fitch has a stable outlook on all of the WPD companies.

Fitch stated that its downgrade was prompted by the high level of pension adjusted
  leverage at WPD. Fitch acknowledged that WPD's funding plan should reduce its
  pension deficit over time and it expects WPD to proceed with its de-leveraging
  program. However, Fitch indicated that it is not certain enough, due to the
  unpredictability in future pension valuations, that pension adjusted leverage
  will support a BBB rating at WPDH Limited. Fitch indicated that WPD (South West)
  and WPD (South Wales) have been downgraded to maintain a two-notch differential
  with WPDH Limited because Fitch does not believe that WPD's financial ring-fencing
  is restrictive enough to support a three-notch differential.

Dividend Policy

In December 2004, PPL's Board of Directors adopted a dividend policy that provides
  for growing the common stock dividend in the future at a rate that exceeds the
  projected rate of growth in earnings per share from ongoing operations. Earnings
  from ongoing operations exclude unusual items. PPL plans to pursue this policy
  until the dividend payout ratio reaches the 50% level, subject to the Board
  of Directors' quarterly dividend declarations based on the company's financial
  position and other relevant considerations at the time.

Off-Balance Sheet Arrangements

PPL provides guarantees for certain affiliate financing arrangements that enable
  certain transactions. Some of the guarantees contain financial and other covenants
  that, if not met, would limit or restrict the affiliates' access to funds under
  these financing arrangements, require early maturity of such arrangements or
  limit the affiliates' ability to enter into certain transactions. At this time,
  PPL believes that these covenants will not limit access to the relevant funding
  sources.

PPL has entered into certain guarantee agreements that are within the scope
  of FIN 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees,
  Including Indirect Guarantees of Indebtedness of Others, an Interpretation of
  FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No.
  34." See Note 14 to the Financial Statements for a discussion on guarantees.

Risk Management - Energy Marketing & Trading and Other

Market Risk

Background

Market risk is the potential loss PPL may incur as a result of price changes
  associated with a particular financial or commodity instrument. PPL is exposed
  to market risk from:

- commodity price risk for energy and energy-related products associated with
    the sale of electricity, the purchase of fuel for the generating assets and
    energy trading activities;
- interest rate risk associated with variable-rate debt and the fair value
    of fixed-rate debt used to finance operations, as well as the fair value of
    debt securities invested in by PPL's nuclear decommissioning fund;
- foreign currency exchange rate risk associated with investments in affiliates
    in Latin America and Europe, as well as purchases of equipment in currencies
    other than U.S. dollars; and
- equity securities price risk associated with the fair value of equity securities
    invested in by PPL's nuclear decommissioning fund.

PPL has a risk management policy approved by its Board of Directors to manage
  market risk and counterparty credit risk. (Credit risk is discussed below.)
  The RMC, comprised of senior management and chaired by the Vice President-Risk
  Management, oversees the risk management function. Key risk control activities
  designed to monitor compliance with risk policies and detailed programs include,
  but are not limited to, credit review and approval, validation of transactions
  and market prices, verification of risk and transaction limits, sensitivity
  analyses, and daily portfolio reporting, including open positions, mark-to-market
  valuations and other risk measurement metrics.

The forward-looking information presented below provides estimates of what
  may occur in the future, assuming certain adverse market conditions, due to
  reliance on model assumptions. Actual future results may differ materially from
  those presented. These disclosures are not precise indicators of expected future
  losses, but only indicators of reasonably possible losses.

Contract Valuation

PPL utilizes forward contracts, futures contracts, options, swaps and tolling
  agreements as part of its risk management strategy to minimize unanticipated
  fluctuations in earnings caused by commodity price, interest rate and foreign
  currency volatility.When available, quoted market prices are used to
  determine the fair value of a commodity or financial instrument. This may include
  exchange prices, the average mid-point bid/ask spreads obtained from brokers,
  or an independent valuation by an external source, such as a bank. However,
  market prices for energy or energy-related contracts may not be readily determinable
  because of market illiquidity. If no active trading market exists, contracts
  are valued using internally developed models, which are then reviewed by an
  independent, internal group. Although PPL believes that its valuation methods
  are reasonable, changes in the underlying assumptions could result in significantly
  different values and realization in future periods.

To record derivatives at their fair value, PPL discounts the forward values
  using LIBOR. Additionally, PPL reduces derivative assets' carrying values to
  recognize differences in counterparty credit quality and potential illiquidity
  in the market:

- The credit adjustment takes into account the probability of default, as
    calculated by an independent service, for each counterparty that has an out-of-the
    money position with PPL.

- The liquidity adjustment takes into account the fact that it may not be
    appropriate to value contracts at the midpoint of the bid/ask spread. PPL
    might have to accept the "bid" price if PPL wanted to close an open sales
    position or PPL might have to accept the "ask" price if PPL wanted to close
    an open purchase position.

Accounting and Reporting

To account for and report on contracts entered into to manage market risk,
  PPL follows the provisions of SFAS 133, "Accounting for Derivative Instruments
  and Hedging Activities," as amended by SFAS 138, "Accounting for Certain Derivative
  Instruments and Certain Hedging Activities," and SFAS 149, "Amendment of Statement
  133 on Derivative Instruments and Hedging Activities," and interpreted by DIG
  issues (together, "SFAS 133"), EITF 02-3, "Issues Involved in Accounting for
  Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy
  Trading and Risk Management Activities," and EITF 03-11, "Reporting Realized
  Gains and Losses on Derivative Instruments That Are Subject to FASB Statement
  No. 133 and Not 'Held for Trading Purposes' as Defined in Issue No. 02-3." SFAS
  133 requires that all derivative instruments be recorded at fair value on the
  balance sheet as an asset or liability (unless they meet SFAS 133's criteria
  for exclusion) and that changes in the derivative's fair value be recognized
  currently in earnings unless specific hedge accounting criteria are met.

In April 2003, the FASB issued SFAS 149, which amends and clarifies SFAS 133
  to improve financial accounting and reporting for derivative instruments and
  hedging activities. To ensure that contracts with comparable characteristics
  are accounted for similarly, SFAS 149 clarified the circumstances under which
  a contract with an initial net investment meets the characteristics of a derivative,
  clarified when a derivative contains a financing component, amended the definition
  of an "underlying" and amended certain other existing pronouncements. Additionally,
  SFAS 149 placed additional limitations on the use of the normal purchase or
  normal sale exception. SFAS 149 was effective for contracts entered into or
  modified and for hedging relationships designated after June 30, 2003, except
  certain provisions relating to forward purchases or sales of when-issued securities
  or other securities that did not yet exist. PPL adopted SFAS 149 as of July
  1, 2003. The adoption of SFAS 149 did not have a significant impact on PPL.

PPL adopted the final provisions of EITF 02-3 during the fourth quarter of
  2002. As such, PPL now reflects its net realized and unrealized gains and losses
  associated with all derivatives that are held for trading purposes in the "Net
  energy trading margins" line on the Statement of Income. Non-derivative contracts
  that met the definition of energy trading activities as defined by EITF 98-10,
  "Accounting for Energy Trading and Risk Management Activities" are reflected
  in the financial statements using the accrual method of accounting. Under the
  accrual method of accounting, unrealized gains and losses are not reflected
  in the financial statements. Prior periods were reclassified. No cumulative
  effect adjustment was required upon adoption.

PPL adopted the final provisions of EITF 03-11 prospectively as of October
  1, 2003. As a result of this adoption, non-trading bilateral sales of electricity
  at major market delivery points are netted with purchases that offset the sales
  at those same delivery points. A major market delivery point is any delivery
  point with liquid pricing available. See Note 17 to the Financial Statements
  for the impact of the adoption of EITF 03-11.

PPL's short-term derivative contracts are recorded as "Price risk management
  assets" and "Price risk management liabilities" on the Balance Sheet. Long-term
  derivative contracts are included in "Regulatory and Other Noncurrent Assets
  - Other" and "Deferred Credits and Other Noncurrent Liabilities - Other."

Accounting Designation

Energy contracts that do not qualify as derivatives receive accrual accounting.
  For energy contracts that meet the definition of a derivative, the circumstances
  and intent existing at the time that energy transactions are entered into determine
  their accounting designation. In addition to energy-related transactions, PPL
  enters into financial interest rate and foreign currency swap contracts to hedge
  interest expense associated with both existing and anticipated debt issuances.
  PPL also enters into foreign currency swap contracts to hedge the fair value
  of firm commitments denominated in foreign currency and net investments in foreign
  operations. As with energy transactions, the circumstances and intent existing
  at the time of the transaction determine a contract's accounting designation.
  These designations are verified by a separate internal group on a daily basis.
  See Note 17 to the Financial Statements for a summary of the guidelines that
  have been provided to the traders who are responsible for contract designation
  for derivative energy contracts due to the adoption of SFAS 149.

Commodity Price Risk (Non-trading)

Commodity price risk is one of PPL's most significant risks due to the level
  of investment that PPL maintains in its generation assets, coupled with the
  volatility of prices for energy and energy-related products. Several factors
  influence price levels and volatilities. These factors include, but are not
  limited to, seasonal changes in demand, weather conditions, available generating
  assets within regions, transportation availability and reliability within and
  between regions, market liquidity, and the nature and extent of current and
  potential federal and state regulations. To hedge the impact of market price
  fluctuations on PPL's energy-related assets, liabilities and other contractual
  arrangements, PPL EnergyPlus sells and purchases physical energy at the wholesale
  level under FERC market-based tariffs throughout the U.S. and enters into financial
  exchange-traded and over-the-counter contracts. Because PPL owns or controls
  generating assets, the majority of PPL's energy transactions qualify for accrual
  or hedge accounting.

Within PPL's hedge portfolio, the decision to enter into energy contracts hinges
  on the expected value of PPL's generation. To address this risk, PPL takes a
  conservative approach in determining the number of MWhs that are available to
  be sold forward. In this regard, PPL reduces the maximum potential output that
  a plant may produce by three factors - planned maintenance, unplanned outages
  and economic conditions. The potential output of a plant is first reduced by
  the amount of unavailable generation due to planned maintenance on a particular
  unit. Another reduction, representing the unplanned outage rate, is the amount
  of MWhs that historically is not produced by a plant due to such factors as
  equipment breakage. Finally, the potential output of certain plants (like peaking
  units) are reduced because their higher cost of production will not allow them
  to economically run during all hours.

PPL's non-trading portfolio also includes full requirements energy contracts.
  The net obligation to serve these contracts changes minute by minute. PPL analyzes
  historical on-peak and off-peak usage patterns, as well as spot prices and weather
  patterns, to determine a monthly level of a block of electricity that best fits
  the usage patterns in order to minimize earnings volatility. On a forward basis,
  PPL reserves a block amount of generation for full requirements energy contracts
  that is expected to be the best match with their anticipated usage patterns
  and energy peaks. Anticipated usage patterns and peaks are affected by expected
  load growth, regional economic drivers and seasonality.

PPL's commodity derivative contracts that qualify for hedge accounting treatment
  mature at various times through 2010. The following chart sets forth PPL's net
  fair market value of these contracts as of December 31:

|                                                                           |  | Gains (Losses) |    
|-------------------------------------------------------------------------- |  | -------------- | ---
|                                                                           |  |                |    
|                                                                           |  | 2004           |    
|                                                                           |  |                |    
|Fair value of contracts outstanding at
        the beginning of the period |  | $              | 86 
|                                                                           |  |                |    
|Contracts realized or otherwise settled
        during the period          |  |                | (66
|                                                                           |  |                |    
|Fair value of new contracts at inception                                   |  |                |    
|                                                                           |  |                |    
|Other changes in fair values                                               |  |                | (31
|                                                                           |  |                |    
|Fair value of contracts outstanding at
        the end of the period       |  | $              | (11
|                                                                           |  |                |    

The following chart segregates estimated fair values of PPL's commodity derivative
  contracts that qualify for hedge accounting treatment at December 31, 2004,
  based on whether the fair values are determined by quoted market prices or other
  more subjective means.

|                                                                     |  | Fair Value
        of Contracts at Period-End
        Gains (Losses) |   
|-------------------------------------------------------------------- |  | -------------------------------------------------------------------- | --
|                                                                     |  |                                                                      |   
|                                                                     |  | Maturity
        Less Than
        1 Year                            |   
|                                                                     |  |                                                                      |   
|Source of Fair Value                                                 |  |                                                                      |   
|                                                                     |  |                                                                      |   
|Prices actively quoted                                               |  | $                                                                    | 4 
|                                                                     |  |                                                                      |   
|Prices provided by other external sources                            |  |                                                                      | 14
|                                                                     |  |                                                                      |   
|Prices based on models and other valuation
        methods           |  |                                                                      |   
|                                                                     |  |                                                                      |   
|Fair value of contracts outstanding at
        the end of the period |  | $                                                                    | 18
|                                                                     |  |                                                                      |   
|                                                                     |  |                                                                      |   

The "Prices actively quoted" category includes the fair value of exchange-traded
  natural gas futures contracts quoted on the New York Mercantile Exchange (NYMEX).
  The NYMEX has currently quoted prices through 2010.

The "Prices provided by other external sources" category includes PPL's forward
  positions and options in natural gas and power and natural gas basis swaps at
  points for which over-the-counter (OTC) broker quotes are available. The fair
  value of electricity positions recorded above use the midpoint of the bid/ask
  spreads obtained through OTC brokers. On average, OTC quotes for forwards and
  swaps of natural gas and power extend one and two years into the future.

The "Prices based on models and other valuation methods" category includes
  the value of transactions for which an internally developed price curve was
  constructed as a result of the long-dated nature of the transaction or the illiquidity
  of the market point, or the value of options not quoted by an exchange or OTC
  broker. Additionally, this category includes "strip" transactions whose prices
  are obtained from external sources and then modeled to monthly prices as appropriate.

Because of PPL's efforts to hedge the value of the energy from its generation
  assets, PPL sells electricity and buys fuel on a forward basis, resulting in
  open contractual positions. If PPL were unable to deliver firm capacity and
  energy or to accept delivery of fuel under its agreements, under certain circumstances
  it could be required to pay damages. These damages would be based on the difference
  between the market price and the contract price of the commodity. Depending
  on price volatility in the wholesale energy markets, such damages could be significant.
  Extreme weather conditions, unplanned power plant outages, transmission disruptions,
  non-performance by counterparties (or their counterparties) with which it has
  energy contracts and other factors could affect PPL's ability to meet its obligations,
  or cause significant increases in the market price of replacement energy. Although
  PPL attempts to mitigate these risks, there can be no assurance that it will
  be able to fully meet its firm obligations, that it will not be required to
  pay damages for failure to perform, or that it will not experience counterparty
  non-performance in the future.

As of December 31, 2004, PPL estimated that a 10% adverse movement in market
  prices across all geographic areas and time periods would have decreased the
  value of the commodity contracts in its non-trading portfolio by approximately
  $165 million, compared to a decrease of $146 million at December 31, 2003.
  However, the change in the value of the non-trading portfolio would have been
  substantially offset by an increase in the value of the underlying commodity,
  the electricity generated, because these contracts serve to reduce the market
  risk inherent in the generation of electricity. Additionally, the value of PPL's
  unsold generation would be improved. Because PPL's electricity portfolio is
  generally in a net sales position, the adverse movement in prices is usually
  an increase in prices. Conversely, because PPL's commodity fuels portfolio is
  generally in a net purchase position, the adverse movement in prices is usually
  a decrease in prices. If both of these scenarios happened, the implied margins
  for the unsold generation would increase.

In accordance with its marketing strategy, PPL does not completely hedge its
  generation output or fuel requirements. PPL estimates that for its entire portfolio,
  including all generation and physical and financial energy positions, a 10%
  adverse change in power prices across all geographic zones and time periods
  will decrease expected 2005 gross margins by about $2 million. Similarly, a
  10% adverse movement in all fossil fuel prices will decrease 2005 gross margins
  by $5 million.

PPL also executes energy contracts to take advantage of market opportunities.
  As a result, PPL may at times create a net open position in its portfolio that
  could result in significant losses if prices do not move in the manner or direction
  anticipated. The margins from these trading activities are shown in the Statement
  of Income as "Net energy trading margins."

Commodity Price Risk (Trading)

PPL's trading contracts mature at various times through 2006. The following
  chart sets forth PPL's net fair market value of trading contracts as of December
  31:

|                                                                           |  | Gains (Losses) |    
|-------------------------------------------------------------------------- |  | -------------- | ---
|                                                                           |  | 2004           |    
|                                                                           |  |                |    
|Fair value of contracts outstanding
        at the beginning of the period |  | $              | 3  
|                                                                           |  |                |    
|Contracts realized or otherwise
        settled during the period          |  |                | (12
|                                                                           |  |                |    
|Fair value of new contracts
        at inception                           |  |                | 1  
|                                                                           |  |                |    
|Other changes in fair values                                               |  |                | 18 
|                                                                           |  |                |    
|Fair value of contracts outstanding
        at the end of the period       |  | $              | 10 
|                                                                           |  |                |    

PPL will reverse approximately $3 million of the $10 million unrealized trading
  gains over the first three months of 2005 as the transactions are realized.

The following chart segregates estimated fair values of PPL's trading portfolio
  at December 31, 2004, based on whether the fair values are determined by quoted
  market prices or other more subjective means.

|                                                                     |  | Fair Value
        of Contracts at Period-End
        Gains (Losses) |   
|-------------------------------------------------------------------- |  | -------------------------------------------------------------------- | --
|                                                                     |  |                                                                      |   
|                                                                     |  | Maturity
        Less Than
        1 Year                            |   
|                                                                     |  |                                                                      |   
|Source of Fair Value                                                 |  |                                                                      |   
|                                                                     |  |                                                                      |   
|Prices actively quoted                                               |  | $                                                                    | 3 
|                                                                     |  |                                                                      |   
|Prices provided by other external sources                            |  |                                                                      | 6 
|                                                                     |  |                                                                      |   
|Prices based on models and other valuation
        methods           |  |                                                                      | (3
|                                                                     |  |                                                                      |   
|Fair value of contracts outstanding at
        the end of the period |  | $                                                                    | 6 
|                                                                     |  |                                                                      |   
|                                                                     |  |                                                                      |   

See "Commodity Price Risk (Non-trading)" for information on the various sources
  of fair value.

As of December 31, 2004, PPL estimated that a 10% adverse movement in market
  prices across all geographic areas and time periods would have decreased the
  value of the commodity contracts in its trading portfolio by $5 million, compared
  to a decrease of $3 million at December 31, 2003.

Interest Rate Risk

PPL and its subsidiaries have issued debt to finance their operations. PPL
  utilizes various financial derivative products to adjust the mix of fixed and
  floating interest rates in its debt portfolio, adjust the duration of its debt
  portfolio and lock in U.S. Treasury rates (and interest rate spreads over treasuries)
  in anticipation of future financing, when appropriate. Risk limits under the
  risk management program are designed to balance risk exposure to volatility
  in interest expense and changes in the fair value of PPL's debt portfolio due
  to changes in the absolute level of interest rates.

At December 31, 2004, PPL's potential annual exposure to increased interest
  expense, based on a 10% increase in interest rates, was estimated at $4 million,
  compared to a $2 million exposure at December 31, 2003.

PPL is also exposed to changes in the fair value of its domestic and international
  debt portfolios. At December 31, 2004, PPL estimated that its potential exposure
  to a change in the fair value of its debt portfolio, through a 10% adverse movement
  in interest rates, was approximately $216 million, compared to $212 million
  at December 31, 2003.

PPL utilizes various risk management instruments to reduce its exposure to
  adverse interest rate movements for future anticipated financing. While PPL
  is exposed to changes in the fair value of these instruments, they are designed
  such that any economic loss in value should generally be offset by interest
  rate savings at the time the future anticipated financing is completed. At December
  31, 2004, PPL estimated that its potential exposure to a change in the fair
  value of these instruments, through a 10% adverse movement in interest rates,
  was approximately $2 million, compared to a $6 million exposure at December
  31, 2003.

PPL also utilizes various risk management instruments to adjust the mix of
  fixed and floating interest rates in its debt portfolio. While PPL is exposed
  to changes in the fair value of these instruments, any change in market value
  is recorded with an equal and offsetting change in the value of the debt being
  hedged. At December 31, 2004, PPL estimated that its potential exposure to a
  change in the fair value of these instruments, through a 10% adverse movement
  in interest rates, was approximately $19 million, compared to a $28 million
  exposure at December 31, 2003.

Foreign Currency Risk

PPL is exposed to foreign currency risk, primarily through investments in affiliates
  in Latin America and Europe. In addition, PPL may make purchases of equipment
  in currencies other than U.S. dollars.

PPL has adopted a foreign currency risk management program designed to hedge
  certain foreign currency exposures, including firm commitments, recognized assets
  or liabilities and net investments. In addition, PPL enters into financial instruments
  to protect against foreign currency translation risk.

PPL executed net forward sale transactions for £13.7 million to hedge
  a portion of its net investment in WPDH Limited. The estimated value of these
  agreements as of December 31, 2004, was $2 million, being the amount PPL would
  pay to terminate the transactions.

WPDH Limited held a net position in cross-currency swaps totaling $1.1 billion
  to hedge the interest payments and value of its U.S. dollar-denominated bonds.
  The estimated value of this position at December 31, 2004, being the amount
  PPL would pay to terminate it, including accrued interest, was $274 million.

On the Statement of Income, gains and losses associated with hedges of interest
  payments denominated in foreign currencies are reflected in "Interest Expense."
  Gains and losses associated with the purchase of equipment are reflected in
  "Depreciation." Gains and losses associated with net investment hedges remain
  in "Accumulated other comprehensive loss" on the Balance Sheet until the investment
  is disposed.

Nuclear Decommissioning Fund - Securities Price Risk

In connection with certain NRC requirements, PPL Susquehanna maintains trust
  funds to fund certain costs of decommissioning the Susquehanna station. As of
  December 31, 2004, these funds were invested primarily in domestic equity
  securities and fixed-rate, fixed-income securities and are reflected at fair
  value on PPL's Balance Sheet. The mix of securities is designed to provide returns
  to be used to fund Susquehanna's decommissioning and to compensate for inflationary
  increases in decommissioning costs. However, the equity securities included
  in the trusts are exposed to price fluctuation in equity markets, and the values
  of fixed-rate, fixed-income securities are exposed to changes in interest rates.
  PPL Susquehanna actively monitors the investment performance and periodically
  reviews asset allocation in accordance with its nuclear decommissioning trust
  policy statement. At December 31, 2004, a hypothetical 10% increase in
  interest rates and a 10% decrease in equity prices would have resulted in an
  estimated $30 million reduction in the fair value of the trust assets, as compared
  to a $24 million reduction at December 31, 2003. See Note 6 to the Financial
  Statements for more information regarding the nuclear decommissioning trust
  funds.

Credit Risk

Credit risk relates to the risk of loss that PPL would incur as a result of
  non-performance by counterparties of their contractual obligations. PPL maintains
  credit policies and procedures with respect to counterparties (including requirements
  that counterparties maintain certain credit ratings criteria) and requires other
  assurances in the form of credit support or collateral in certain circumstances
  in order to limit counterparty credit risk. However, PPL has concentrations
  of suppliers and customers among electric utilities, natural gas distribution
  companies and other energy marketing and trading companies. These concentrations
  of counterparties may impact PPL's overall exposure to credit risk, either positively
  or negatively, in that counterparties may be similarly affected by changes in
  economic, regulatory or other conditions. As discussed above in "Contract Valuation,"
  PPL records certain non-performance reserves to reflect the probability that
  a counterparty with contracts that are out of the money (from the counterparty's
  standpoint) will default in its performance, in which case PPL would have to
  sell into a lower-priced market or purchase from a higher-priced market. These
  reserves are reflected in the fair value of assets recorded in "Price risk management
  assets" on the Balance Sheet. PPL also records reserves to reflect the probability
  that a counterparty will not make payments for deliveries PPL has made but not
  yet billed. These reserves are reflected in "Unbilled revenues" on the Balance
  Sheet. PPL has also established a reserve with respect to certain sales to the
  California ISO for which PPL has not yet been paid, as well as a reserve related
  to PPL's exposure as a result of the Enron bankruptcy, which are reflected in
  "Accounts receivable" on the Balance Sheet. See Notes 14 and 17 to the Financial
  Statements.

Related Party Transactions

PPL is not aware of any material ownership interests or operating responsibility
  by senior management of PPL, PPL Energy Supply or PPL Electric in outside partnerships,
  including leasing transactions with variable interest entities, or other entities
  doing business with PPL.

For additional information on related party transactions, see Note 15 to the
  Financial Statements.

Capital Expenditure Requirements

The schedule below shows PPL's current capital expenditure projections for
  the years 2005-2009 and actual spending for the year 2004:

|                                          |                                                  | Actual                          |    | Projected |    
|----------------------------------------- | ------------------------------------------------ | ------------------------------- | -- | --------- | ---
|                                          |                                                  |                                 |    |           |    
|                                          |                                                  | 2004                            |    | 2005      |    
|                                          |                                                  |                                 |    |           |    
|Construction expenditures (a)
        (b) |                                                  |                                 |    |           |    
|                                          |                                                  |                                 |    |           |    
|                                          | Generating facilities                            |                                 | $  | 156       |    
|                                          |                                                  |                                 |    |           |    
|                                          | Transmission and distribution
        facilities |                                 |    | 461       |    
|                                          |                                                  |                                 |    |           |    
|                                          | Environmental                                    |                                 |    | 23        |    
|                                          |                                                  |                                 |    |           |    
|                                          | Other                                            |                                 |    | 43        |    
|                                          |                                                  |                                 |    |           |    
|                                          |                                                  | Total Construction Expenditures |    |           | 683
|                                          |                                                  |                                 |    |           |    
|Nuclear fuel                              |                                                  |                                 | 58 |           |    
|                                          |                                                  |                                 |    |           |    
|                                          |                                                  | Total Capital Expenditures      |    | $         | 741
|                                          |                                                  |                                 |    |           |    
|                                          |                                                  |                                 |    |           |    

|(a) |  | Construction expenditures include AFUDC
        and capitalized interest, which are expected to be less than $19 million
        in each of the years 2005-2009.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | This information excludes any potential
        investments by PPL Global and PPL Development Company for new projects.                                         

PPL's capital expenditure projections for the years 2005-2009 total about $5.0
  billion. Capital expenditure plans are revised periodically to reflect changes
  in market and asset regulatory conditions. PPL also leases vehicles, personal
  computers and other equipment, as described in Note 10 to the Financial Statements.
  See Note 14 for additional information regarding potential capital expenditures
  for environmental projects.

Acquisitions, Development and Divestitures

From time-to-time, PPL and its subsidiaries are involved in negotiations with
  third parties regarding acquisitions, joint ventures and other arrangements
  which may or may not result in definitive agreements. See Note 9 to the Financial
  Statements for information regarding recent acquisitions and development activities.

At December 31, 2004, PPL Global had investments in foreign facilities, including
  consolidated investments in WPD, Emel, EC and others. See Note 3 to the Financial
  Statements for information on unconsolidated investments accounted for under
  the equity method.

In connection with an on-going review of its non-core international minority
  ownership investments, PPL Global sold its interest in CGE in 2004. See Note
  9 to the Financial Statements for additional information.

PPL is currently planning incremental capacity increases of 255 MW at several
  existing domestic generating facilities.

PPL is continuously reexamining development projects based on market conditions
  and other factors to determine whether to proceed with these projects, sell
  them, cancel them, expand them, execute tolling agreements or pursue other opportunities.

Environmental Matters

See Note 14 to the Financial Statements for a discussion of environmental matters.

Competition

See "Item 1. Business - Competition," for a discussion of competitive factors
  affecting PPL.

New Accounting Standards

See Note 23 to the Financial Statements for information on new accounting standards
  adopted in 2004 or pending adoption.

Application of Critical Accounting Policies

PPL's financial condition and results of operations are impacted by the methods,
  assumptions and estimates used in the application of critical accounting policies.
  The following accounting policies are particularly important to the financial
  condition or results of operations of PPL, and require estimates or other judgments
  of matters inherently uncertain. Changes in the estimates or other judgments
  included within these accounting policies could result in a significant change
  to the information presented in the financial statements. (These accounting
  policies are also discussed in Note 1 to the Financial Statements.) PPL's senior
  management has reviewed these critical accounting policies, and the estimates
  and assumptions regarding them, with its Audit Committee. In addition, PPL's
  senior management has reviewed the following disclosures regarding the application
  of these critical accounting policies with the Audit Committee.

See "Risk Management - Energy Marketing & Trading and Other" in Financial
      Condition.

PPL follows the guidance of SFAS 87, "Employers' Accounting for Pensions,"
  and SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than
  Pensions," when accounting for pension and other postretirement benefits. Under
  these accounting standards, assumptions are made regarding the valuation of
  benefit obligations and the performance of plan assets. Delayed recognition
  of differences between actual results and expected or estimated results is a
  guiding principle of these standards. This delayed recognition of actual results
  allows for a smoothed recognition of changes in benefit obligations and plan
  performance over the working lives of the employees who benefit under the plans.
  The primary assumptions are as follows:

- Discount Rate - The discount rate is used in calculating the present value
    of benefits, which is based on projections of benefit payments to be made
    in the future.

- Expected Return on Plan Assets - Management projects the future return on
    plan assets considering prior performance, but primarily based upon the plans'
    mix of assets and expectations for the long-term returns on those asset classes.
    These projected returns reduce the net benefit costs PPL records currently.

- Rate of Compensation Increase - Management projects employees' annual pay
    increases, which are used to project employees' pension benefits at retirement.

- Health Care Cost Trend Rate - Management projects the expected increases
    in the cost of health care.

In selecting discount rates, PPL considers fixed-income security yield rates.
  At December 31, 2004, PPL decreased the discount rate for its domestic plans
  from 6.25% to 5.75% as a result of decreased domestic fixed-income security
  returns. The discount rate remained at 5.50% at December 31, 2004, for PPL's
  international pension plans.

In selecting an expected return on plan assets, PPL considers tax implications,
  past performance and economic forecasts for the types of investments held by
  the plans. At December 31, 2004, PPL's expected return on plan assets remained
  at 9.0% for its domestic pension plans and increased to 7.9% from 7.8% for its
  other postretirement benefit plans. For its international plans, PPL maintained
  8.30% as the expected return on plan assets at December 31, 2004.

In selecting a rate of compensation increase, PPL considers past experience
  in light of movements in inflation rates. At December 31, 2004, PPL's rate of
  compensation increase remained at 4.0% for its domestic plans. For its international
  plans, PPL's rate of compensation increase remained at 3.75% at December 31,
  2004.

In selecting health care cost trend rates, PPL considers past performance and
  forecasts of health care costs. At December 31, 2004, PPL's health care
  cost trend rates were 10% for 2005, gradually declining to 5.0% for 2010.

A variance in the assumptions listed above could have a significant impact
  on projected benefit obligations, accrued pension and other postretirement benefit
  liabilities, reported annual net periodic pension and other postretirement benefit
  cost and other comprehensive income (OCI). The following chart reflects the
  sensitivities in the 2004 Financial Statements associated with a change in certain
  assumptions. While the chart below reflects either an increase or decrease in
  each assumption, the inverse of this change would impact the projected benefit
  obligation, accrued pension and other postretirement benefit liabilities, reported
  annual net periodic pension and other postretirement benefit cost and OCI by
  a similar amount in the opposite direction. Each sensitivity below reflects
  an evaluation of the change based solely on a change in that assumption.

|                                |  | Increase
        (Decrease)  |        
|------------------------------- |  | ---------------------------- | -------
|                                |  |                              |        
|Actuarial Assumption            |  | Change in
        Assumption |        
|                                |  |                              |        
|Discount Rate                   |  |                              | (0.25)%
|                                |  |                              |        
|Expected Return on Plan Assets  |  |                              | (0.25)%
|                                |  |                              |        
|Rate of Compensation Increase   |  |                              | 0.25%  
|                                |  |                              |        
|Health Care Cost Trend Rate (b) |  |                              | 1.0%   
|                                |  |                              |        

|(a) |  | Excludes the impact of additional minimum
        liability.
|--- |  | ------------------------------------------------------------
|(b) |  | Only impacts other postretirement benefits.                 

PPL's total net pension and other postretirement benefit obligation as of December
  31, 2004, was $886 million. PPL recognized an aggregate net accrued pension
  and other postretirement benefit liability of $517 million on its Balance Sheet
  as of December 31, 2004. The total obligation is not fully reflected in the
  current financial statements due to the delayed recognition criteria of the
  accounting standards for these obligations.

In 2004, PPL recognized net periodic pension and other postretirement costs
  charged to operating expenses of $7 million. This amount represents a $6 million
  increase from 2003. This increase in expense was primarily due to the decrease
  in the discount rate at December 31, 2003, offset by decreased postretirement
  medical costs resulting from increased employee cost sharing.

As a result of the decrease in the assumed discount rate at December 31, 2004
  for its domestic pension plans and the increase in the obligations for its international
  plans determined by their 2004 valuation, PPL was required to increase its recognized
  additional minimum pension liability. Recording the change in the additional
  minimum liability resulted in a $53 million increase to the pension-related
  charge to OCI, net of taxes, translation adjustment and unrecognized prior service
  costs, with no effect on net income. This charge increased the pension-related
  balance in OCI, which is a reduction to shareowners' equity, to $369 million
  at December 31, 2004. The charges to OCI will reverse in future periods if the
  fair value of trust assets exceeds the accumulated benefit obligation.

Refer to Note 12 to the Financial Statements for additional information regarding
  pension and other postretirement benefits.

PPL performs impairment analyses for long-lived assets, including intangibles,
  that are subject to depreciation or amortization in accordance with SFAS 144,
  "Accounting for the Impairment or Disposal of Long-Lived Assets." PPL tests
  for impairment whenever events or changes in circumstances indicate that a long-lived
  asset's carrying value may not be recoverable. Examples of such events or changes
  in circumstances are:

- a significant decrease in the market price of an asset;
- a significant adverse change in the manner in which an asset is being used
    or in its physical condition;
- a significant adverse change in legal factors or in the business climate;
- an accumulation of costs significantly in excess of the amount originally
    expected for the acquisition or construction of an asset;
- a current-period operating or cash flow loss combined with a history of
    losses or a forecast that demonstrates continuing losses; or
- a current expectation that, more likely than not, an asset will be sold
    or otherwise disposed of before the end of its previously estimated useful
    life.

For a long-lived asset, an impairment exists when the carrying value exceeds
  the sum of the estimated undiscounted cash flows expected to result from the
  use and eventual disposition of the asset. If the asset is impaired, an impairment
  loss is recorded to adjust the asset's carrying value to its estimated fair
  value.

In determining asset impairments, management must make significant judgments
  to estimate future cash flows, the useful lives of long-lived assets, the fair
  value of the assets and management's intent to use the assets. Changes in assumptions
  and estimates included within the impairment reviews could result in significantly
  different results than those identified and recorded in the financial statements.
  For determining fair value, the FASB has indicated that quoted market prices
  in active markets are the best evidence of fair value. However, when market
  prices are unavailable, other valuation techniques may be used. PPL has generally
  used a present value technique (i.e., discounted cash flow). Discounted cash
  flow is calculated by estimating future cash flow streams and applying appropriate
  discount rates to determine the present value of the cash flow streams.

PPL has determined that when alternative courses of action to recover the carrying
  value of a long-lived asset are being considered, it uses estimated cash flows
  from the most likely approach to assess impairment whenever one scenario is
  clearly the most likely outcome. If no scenario is clearly most likely, then
  a probability-weighted approach is used taking into consideration estimated
  cash flows from the alternative scenarios. For assets tested for impairment
  as of the balance sheet date, the estimates of future cash flows used in that
  test consider the likelihood of possible outcomes that existed at the balance
  sheet date, including the assessment of the likelihood of the future sale of
  the assets. That assessment made as of the balance sheet date is not revised
  based on events that occur after the balance sheet date.

During 2004, PPL and its subsidiaries evaluated certain gas-fired generation
  assets for impairment, as events and circumstances indicated that the carrying
  value of these assets may not be recoverable. PPL did not record an impairment
  of these gas-fired generation assets in 2004. For
  these impairment analyses, the most significant assumption was the estimate
  of future cash flows. PPL estimates future cash flows using information from
  its corporate business plan adjusted for any recent sales or purchase commitments.
  Key factors that impact cash flows include projected prices for electricity
  and gas as well as firm sales and purchase commitments. A 10% decrease in estimated
  future cash flows for certain gas-fired generation assets would have resulted
  in an impairment charge.

In June 2004, a subsidiary of PPL Generation agreed to sell the 450 MW Sundance
  power plant to Arizona Public Service Company, subject to the receipt of various
  state and federal regulatory approvals and customary closing conditions. At
  December 31, 2004, as a result of the significant regulatory approvals still
  needed to complete the sale, PPL management did not believe that it was more
  likely than not that the sale would be consummated and concluded that no impairment
  charge was required at that time. See Note 9 to the Financial Statements for
  additional information on the potential sale of Sundance.

PPL performs impairment analyses for goodwill in accordance with SFAS 142,
  "Goodwill and Other Intangible Assets." PPL performs an annual impairment test
  for goodwill, or more frequently if events or changes in circumstances indicate
  that the asset might be impaired.

SFAS 142 requires goodwill to be tested for impairment at the reporting unit
  level. PPL has determined its reporting units to be one level below its operating
  segments.

Goodwill is tested for impairment using a two-step approach. The first step
  of the goodwill impairment test compares the estimated fair value of a reporting
  unit with its carrying value, including goodwill. If the estimated fair value
  of a reporting unit exceeds its carrying value, goodwill of the reporting unit
  is considered not impaired. If the carrying value exceeds the estimated fair
  value of the reporting unit, the second step is performed to measure the amount
  of impairment loss, if any.

The second step requires a calculation of the implied fair value of goodwill.
  The implied fair value of goodwill is determined in the same manner as the amount
  of goodwill in a business combination. That is, the estimated fair value of
  a reporting unit is allocated to all of the assets and liabilities of that unit
  as if the reporting unit had been acquired in a business combination and the
  estimated fair value of the reporting unit was the price paid to acquire the
  reporting unit. The excess of the estimated fair value of a reporting unit over
  the amounts assigned to its assets and liabilities is the implied fair value
  of goodwill. The implied fair value of the reporting unit goodwill is then compared
  with the carrying value of that goodwill. If the carrying value exceeds the
  implied fair value, an impairment loss is recognized in an amount equal to that
  excess. The loss recognized cannot exceed the carrying value of the reporting
  unit's goodwill.

PPL completed its annual goodwill impairment test in the fourth quarter of
  2004. This test did not require any second-step assessments and did not result
  in any impairments. PPL's most significant assumptions surrounding the goodwill
  impairment test relate to the estimates of reporting unit fair values. PPL estimated
  fair values primarily based upon discounted cash flows. Although a full two-step
  evaluation was not completed, a decrease in the forecasted cash flows of 10%
  or an increase of the discount rates by 25 basis points would have resulted
  in the carrying value of certain reporting units exceeding their estimated fair
  values, indicating a potential impairment of goodwill.

PPL applies the provisions of SFAS 13, "Accounting for Leases," to all
      leasing transactions. In addition, PPL applies the provisions of numerous
      other accounting pronouncements issued by the FASB and the EITF that provide
      specific guidance and additional requirements related to accounting for
      various leasing arrangements. In general, there are two types of leases
      from a lessee's perspective: operating leases - leases accounted for off-balance
      sheet; and capital leases - leases capitalized on the balance sheet.

In accounting for leases, management makes various assumptions, including
      the discount rate, the fair market value of the leased assets and the estimated
      useful life, in determining whether a lease should be classified as operating
      or capital. Changes in these assumptions could result in the difference
      between whether a lease is determined to be an operating lease or a capital
      lease, thus significantly impacting the amounts to be recognized in the
      financial statements.

In addition to uncertainty inherent in management's assumptions, leasing
      transactions and the related accounting rules become increasingly complex
      when they involve: real estate and/or related integral equipment; sale/leaseback
      accounting (leasing transactions where the lessee previously owned the leased
      assets); synthetic leases (leases that qualify for operating lease treatment
      for book accounting purposes and financing treatment for tax accounting
      purposes); and lessee involvement in the construction of leased assets.

At December 31, 2004, PPL continued to participate in a significant sale/leaseback
      transaction. In July 2000, PPL Montana sold its interest in the Colstrip
      generating plant to owner lessors who are leasing the assets back to PPL
      Montana under four 36-year operating leases. This transaction is accounted
      for as an operating lease in accordance with current rules related to sale/leaseback
      arrangements. If for any reason this transaction did not meet the requirements
      for off-balance sheet operating lease treatment as a sale/leaseback, PPL
      would have recorded approximately $290 million of additional assets and
      approximately $331 million of additional liabilities on its balance sheet
      at December 31, 2004, and would have recorded additional expenses currently
      estimated at $8 million, after-tax, in 2004.

See Note 10 to the Financial Statements for additional information related
      to operating leases.

PPL periodically accrues losses for the estimated impacts of various conditions,
  situations or circumstances involving uncertain outcomes. These events are called
  "contingencies," and PPL's accounting for such events is prescribed by SFAS
  5, "Accounting for Contingencies." SFAS 5 defines a contingency as "an existing
  condition, situation, or set of circumstances involving uncertainty as to possible
  gain or loss to an enterprise that will ultimately be resolved when one or more
  future events occur or fail to occur."

For loss contingencies, the loss must be accrued if (1) information is available
  that indicates it is "probable" that the loss has been incurred, given the likelihood
  of the uncertain future events and (2) the amount of the loss can be reasonably
  estimated. FASB defines "probable" as cases in which "the future event or events
  are likely to occur." SFAS 5 does not permit the accrual of contingencies that
  might result in gains. PPL continuously assesses potential loss contingencies
  for environmental remediation, litigation claims, income taxes, regulatory penalties
  and other events.

PPL also has accrued estimated losses on long-term purchase commitments when
  significant events have occurred. For example, estimated losses were accrued
  when long-term purchase commitments were assumed under asset acquisition agreements
  and when PPL Electric's generation business was deregulated. Under regulatory
  accounting, PPL Electric recorded the above-market cost of energy purchases
  from NUGs as part of its purchased power costs on an as-incurred basis, since
  these costs were recovered in regulated rates. When the generation business
  was deregulated, the estimated loss associated with these long-term purchase
  commitments to make above-market NUG purchases was recorded because PPL Electric
  was committed to purchase electricity at above market prices but it could no
  longer recover these costs in regulated rates.

The accounting aspects of estimated loss accruals include: (1) the initial
  identification and recording of the loss; (2) the determination of triggering
  events for reducing a recorded loss accrual; and (3) the on-going assessment
  as to whether a recorded loss accrual is sufficient. All three aspects of accounting
  for loss accruals - the initial identification and recording of a probable loss,
  the identification of triggering events to reduce the loss accrual, and the
  ongoing assessment of the sufficiency of a recorded loss accrual - require significant
  judgment by PPL's management.

Initial Identification and Recording of the Loss Accrual

PPL uses its internal expertise and outside experts (such as lawyers, tax specialists
  and engineers), as necessary, to help estimate the probability that a loss has
  been incurred and the amount (or range) of the loss.

PPL has identified certain events which could give rise to a loss, but which
  do not meet the conditions for accrual under SFAS 5. SFAS 5 requires disclosure,
  but not a recording, of potential losses when it is "reasonably possible" that
  a loss has been incurred. The FASB defines "reasonably possible" as cases in
  which "the chance of the future event or events occurring is more than remote
  but less than likely." See Note 14 to the Financial Statements for disclosure
  of potential loss contingencies, most of which have not met the criteria for
  accrual under SFAS 5.

Reducing Recorded Loss Accruals

When an estimated loss is accrued, PPL identifies, where applicable, the triggering
  events for subsequently reducing the loss accrual. The triggering events generally
  occur when the contingency has been resolved and the actual loss is incurred,
  or when the risk of loss has diminished or been eliminated. The following are
  some of the triggering events that provide for the reduction of certain recorded
  loss accruals:

- Certain loss accruals are systematically reduced based on the expiration
    of contract terms. An example of this is the loss accrual for above-market
    NUG purchase commitments, which is described below. This loss accrual is being
    reduced over the lives of the NUG purchase contracts.

- Allowances for excess or obsolete inventory are reduced as the inventory
    items are pulled from the warehouse shelves and sold as scrap or otherwise
    disposed.

- Allowances for uncollectible accounts are reduced when accounts are written
    off after prescribed collection procedures have been exhausted or when underlying
    amounts are ultimately collected.

- Environmental and other litigation contingencies are reduced when the contingency
    is resolved and PPL makes actual payments or the loss is no longer considered
    probable.

On-Going Assessment of Recorded Loss Accruals

PPL reviews its loss accruals on a regular basis to assure that the recorded
  potential loss exposures are sufficient. This involves on-going communication
  and analyses with internal and external legal counsel, engineers, tax specialists,
  operation management and other parties.

The largest loss accrual on PPL's balance sheet, and the loss accrual that
  changed most significantly in 2004, was for an impairment of above-market NUG
  purchase commitments. This loss accrual reflects the estimated difference between
  the above-market contract terms, under the purchase commitments, and the fair
  value of the electricity to be purchased. This loss accrual was originally recorded
  at $854 million in 1998, when PPL Electric's generation business was deregulated.
  This loss accrual was transferred to PPL EnergyPlus in the July 1, 2000, corporate
  realignment. The above-market loss accrual was $279 million at December 31,
  2004.

When the loss accrual related to NUG purchases was recorded in 1998, PPL Electric
  established the triggering events for when the loss accrual would be reduced.
  A schedule was established to reduce the liability based on projected purchases
  over the lives of the NUG contracts. All but one of the NUG contracts expire
  by 2009, with the last one ending in 2014. PPL EnergyPlus reduces the above-market
  NUG liability based on the aforementioned schedule. As PPL EnergyPlus reduces
  the liability for the above-market NUG purchases, it offsets the actual cost
  of NUG purchases, thereby bringing the net power purchase expense more in line
  with market prices.

PPL EnergyPlus assessed the remaining $279 million above-market liability at
  December 31, 2004, comparing the projected electricity purchases under the pricing
  terms of the NUG contracts with the purchases assuming current projected market
  prices for the energy. This assessment was based on projected PJM market prices,
  including capacity, and a discount factor for the unit contingent nature of
  each NUG's output through 2014. The assessment also used a sensitivity around
  the market prices, adjusting such prices downward by 15%. PPL management believes
  that the 15% range in volatility is appropriate due to the significant increase
  in energy prices over the last few years. For example, at December 31, 2004,
  PJM future market prices, including capacity, were 18% higher than the comparable
  projections at December 31, 2003.

The assessment is dependent on the market prices of energy and the estimated
  output levels of the NUGs. Market prices of energy are dependent on many variables,
  including growth in electricity demand in PJM, available generation, and changes
  in regulatory and economic conditions. Accordingly, a market price sensitivity
  was used in the assessment. Based on current projected market prices for energy,
  the loss accrual for the above-market NUG purchase commitments would be approximately
  $225 million. Even if estimated market prices were adjusted downwards by 15%
  during the remaining term of the NUG contracts, the loss accrual for the above-market
  NUG purchase commitments would be approximately $287 million. As noted above,
  it is very difficult to estimate future electricity prices, which are dependent
  on many variables and subject to significant volatility. However, based on this
  assessment, PPL's management believes that the current recorded NUG above-market
  liability of $279 million was sufficient at December 31, 2004.

SFAS 143, "Accounting for Asset Retirement Obligations," requires legal obligations
  associated with the retirement of long-lived assets to be recognized as a liability
  in the financial statements. The initial obligation should be measured at the
  estimated fair value. An equivalent amount should be recorded as an increase
  in the value of the capitalized asset and allocated to expense over the useful
  life of the asset. Until the obligation is settled, the liability should be
  increased, through the recognition of accretion expense in the income statement,
  for changes in the obligation due to the passage of time.

In determining asset retirement obligations, management must make significant
  judgments and estimates to calculate fair value. Fair value is developed through
  consideration of estimated retirement costs in today's dollars, inflated to
  the anticipated retirement date and then discounted back to the date the asset
  retirement obligation was incurred. Changes in assumptions and estimates included
  within the calculations of asset retirement obligations could result in significantly
  different results than those identified and recorded in the financial statements.

At December 31, 2004, PPL had asset retirement obligations totaling $257 million
  recorded on the Balance Sheet. PPL's most significant assumptions surrounding
  asset retirement obligations are the forecasted retirement cost, discount rate
  and inflation rate. A variance in the forecasted retirement cost, discount rate
  or inflation rate could have a significant impact on the ARO liability.

The following chart reflects the sensitivities related to the ARO liability
  as of December 31, 2004, associated with a change in these assumptions at the
  time of initial recognition. There is no significant change to the ARO asset
  value, depreciation expense of the ARO asset or accretion expense of the ARO
  liability as a result of changing the assumptions. Each sensitivity below reflects
  an evaluation of the change based solely on a change in that assumption.



|                |  | Change inAssumption |  | Impact onARO Liability
|--------------- |  | ------------------- |  | ----------------------
|                |  |                     |  |                       
|Retirement Cost |  | 10%/(10)%           |  | $23/$(23)             
|                |  |                     |  |                       
|Discount Rate   |  | 0.25%/(0.25)%       |  | $(25)/$27             
|                |  |                     |  |                       
|Inflation Rate  |  | 0.25%/(0.25)%       |  | $29/$(26)             



Other Information

PPL's Audit Committee has approved the independent auditor to provide audit
  and audit-related services and other services permitted by the Sarbanes-Oxley
  Act of 2002 and SEC rules. The audit and audit-related services include services
  in connection with statutory and regulatory filings, reviews of offering documents
  and registration statements, employee benefit plan audits and internal control
  reviews.

---

PPL ENERGY SUPPLY, LLCITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
  RESULTS OF OPERATIONS

Overview

PPL Energy Supply is an energy company with headquarters in Allentown, PA.
  See "Item 1. Business - Background," for a description of PPL Energy Supply's
  domestic and international businesses. See Exhibit 99 in Item 15 for a listing
  of its principal subsidiaries. Through its subsidiaries, PPL Energy Supply is
  primarily engaged in the generation and marketing of electricity in two key
  markets - the northeastern and western U.S. - and in the delivery of electricity
  in the U.K. and Latin America. PPL Energy Supply's strategy for its electricity
  generation and marketing business is to match energy supply with load, or customer
  demand, under long-term and intermediate-term contracts with creditworthy counterparties.
  PPL Energy Supply's strategy for its international electricity delivery businesses
  is to own and operate these businesses at the highest level of quality and reliability
  and at the most efficient cost.

PPL Energy Supply faces several risks in its generation business. The principal
  risks are electricity wholesale price risk, fuel supply and price risk, power
  plant performance and counterparty credit risk. PPL Energy Supply attempts to
  manage these risks through various means. For instance, PPL Energy Supply operates
  a portfolio of generation assets that is diversified as to geography, fuel source,
  cost structure and operating characteristics. PPL Energy Supply is focused on
  the operating efficiency of these power plants and maintaining their availability.
  In addition, PPL Energy Supply has in place and continues to pursue long-term
  and intermediate-term contracts for energy sales and fuel supply, and other
  means, to mitigate the risks associated with adverse changes in the difference,
  or margin, between the cost to produce electricity and the price at which PPL
  Energy Supply sells it. PPL Energy Supply's contractual commitments for energy
  sales are primarily satisfied through its own generation assets - i.e., PPL
  Energy Supply primarily markets and trades around its physical portfolio of
  generating assets through integrated generation, marketing and trading functions.
  PPL Energy Supply has in place risk management programs that, among other things,
  are designed to monitor and manage its exposure to volatility of earnings and
  cash flows related to changes in energy and fuel prices, interest rates, foreign
  currency exchange rates, counterparty credit quality and the operational performance
  of its generating units.

PPL Energy Supply's international electricity delivery businesses are rate-regulated.
  Accordingly, these businesses are subject to regulatory risks in terms of the
  costs that they may recover and the investment returns that they may collect
  in customer rates. The principal challenge that PPL Energy Supply faces in its
  international electricity delivery businesses is to maintain high standards
  of customer service and reliability in a cost-effective manner. PPL Energy Supply
  faces certain financial risks by conducting international operations, such as
  fluctuations in currency exchange rates. PPL Energy Supply attempts to manage
  these financial risks through its risk management program.

A key challenge for PPL Energy Supply's business as a whole is to maintain
  a strong credit profile. In the past few years, investors, analysts and rating
  agencies that follow companies in the energy industry have been particularly
  focused on the credit quality and liquidity position of energy companies. PPL
  Energy Supply is focused on strengthening its balance sheet and improving its
  liquidity position, thereby improving its credit profile.

The purpose of "Management's Discussion and Analysis of Financial Condition
  and Results of Operations" is to provide information concerning PPL Energy Supply's
  past and expected future performance in implementing the strategies and managing
  the risks and challenges outlined above. Specifically:

- "Results of Operations" provides an overview of PPL Energy Supply's operating
    results in 2004, 2003 and 2002, starting with a review of earnings. The earnings
    review includes a listing of certain unusual items that had significant impacts
    in these years, and it also includes a description of key factors that management
    expects may impact future earnings. "Results of Operations" also includes
    an explanation of changes during this three-year period in significant income
    statement components, such as energy margins, utility revenues, operation
    and maintenance expenses, financing costs, income taxes and cumulative effects
    of accounting changes.

- "Financial Condition - Liquidity" provides an analysis of PPL Energy Supply's
    liquidity position and credit profile, including its sources of cash (including
    bank credit facilities and sources of operating cash flow) and uses of cash
    (including contractual commitments and capital expenditure requirements) and
    the key risks and uncertainties that impact PPL Energy Supply's past and future
    liquidity position and financial condition. This subsection also includes
    an explanation of recent rating agency decisions affecting PPL Energy Supply,
    as well as a listing of PPL Energy Supply's current credit ratings.

- "Financial Condition - Risk Management - Energy Marketing & Trading
    and Other" includes an explanation of PPL Energy Supply's risk management
    program relating to market risk (i.e., commodity price, interest rate and
    foreign currency exchange risk) and credit risk (i.e., counterparty credit
    risk).

- "Application of Critical Accounting Policies" provides an overview of the
    accounting policies that are particularly important to the results of operations
    and financial condition of PPL Energy Supply and that require PPL Energy Supply's
    management to make significant estimates, assumptions and other judgments.
    Although PPL Energy Supply's management believes that these estimates, assumptions
    and other judgments are appropriate, they relate to matters that are inherently
    uncertain. Accordingly, changes in the estimates, assumptions and other judgments
    applied to these accounting policies could have a significant impact on PPL
    Energy Supply's results of operations and financial condition, as reflected
    in PPL Energy Supply's Financial Statements.

The information provided in "Management's Discussion and Analysis of Financial
  Condition and Results of Operations" should be read in conjunction with PPL
  Energy Supply's Financial Statements and the accompanying Notes.

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

Results of Operations

The following discussion, which explains significant annual changes in principal
  items on the Statement of Income, compares 2004 to 2003 and compares 2003 to
  2002.

WPD's results, as consolidated in PPL Energy Supply's Statement of Income,
  are impacted by changes in foreign currency exchange rates. Changes in foreign
  exchange rates increased WPD's portion of revenue and expense line items by
  about 12% in 2004 compared with 2003, and by about 9% in 2003 compared with
  2002.

The comparability of certain items on the 2003 and 2002 Statements of Income
  has also been impacted by PPL Global's investment in CEMAR. The consolidated
  results of CEMAR are included from January to August 2002, when PPL had a controlling
  interest. See Note 9 to the Financial Statements for more information, including
  the sale of this investment in 2004.

Earnings

Net income was as follows:

| |  | 2004 |     |  | 2003 |   |     | 2002 | 
| |  | ---- | --- |  | ---- | - | --- | ---- | 
| |  |      |     |  |      |   |     |      | 
| |  | $    | 651 |  |      | $ | 727 |      | 
| |  |      |     |  |      |   |     |      | 

The after-tax changes in net income were primarily due to:

|               |                                                                      | 2004 vs. 2003                                                |     |     | 2003 vs. 2002 |  
|-------------- | -------------------------------------------------------------------- | ------------------------------------------------------------ | --- | --- | ------------- | -
|               |                                                                      |                                                              |     |     |               |  
|Domestic:      |                                                                      |                                                              |     |     |               |  
|               |                                                                      |                                                              |     |     |               |  
|               | Eastern U.S. non-trading margins                                     |                                                              | $   | 35  |               |  
|               |                                                                      |                                                              |     |     |               |  
|               | Northwestern U.S. non-trading
        margins                        |                                                              |     | (1  | )             |  
|               |                                                                      |                                                              |     |     |               |  
|               | Southwestern U.S. non-trading
        margins                        |                                                              |     | (5  | )             |  
|               |                                                                      |                                                              |     |     |               |  
|               | Net energy trading margins                                           |                                                              |     | 7   |               |  
|               |                                                                      |                                                              |     |     |               |  
|               | Other income - affiliated interest                                   |                                                              |     | (6  | )             |  
|               |                                                                      |                                                              |     |     |               |  
|               | Energy related businesses                                            |                                                              |     | (6  | )             |  
|               |                                                                      |                                                              |     |     |               |  
|               | Realized earnings on nuclear
        decommissioning trust (Note 16) |                                                              |     | (16 | )             |  
|               |                                                                      |                                                              |     |     |               |  
|               | Depreciation                                                         |                                                              |     | (18 | )             |  
|               |                                                                      |                                                              |     |     |               |  
|               | Trademark license fees from
        affiliate                        |                                                              |     | 3   |               |  
|               |                                                                      |                                                              |     |     |               |  
|               | Interest income on IRS tax settlement                                |                                                              |     | 9   |               |  
|               |                                                                      |                                                              |     |     |               |  
|               | Operation and maintenance expenses                                   |                                                              |     | (5  | )             |  
|               |                                                                      |                                                              |     |     |               |  
|               | Interest expense                                                     |                                                              |     | (34 | )             |  
|               |                                                                      |                                                              |     |     |               |  
|               | Synfuel earnings                                                     |                                                              |     | 11  |               |  
|               |                                                                      |                                                              |     |     |               |  
|               | Other                                                                |                                                              |     | 5   |               |  
|               |                                                                      |                                                              |     |     |               |  
|               |                                                                      | Total Domestic                                               |     |     | (21           | )
|               |                                                                      |                                                              |     |     |               |  
|International: |                                                                      |                                                              |     |     |               |  
|               |                                                                      |                                                              |     |     |               |  
|               | U.K. operations:                                                     |                                                              |     |     |               |  
|               |                                                                      |                                                              |     |     |               |  
|               |                                                                      | Benefit of complete ownership of WPD (Note
        9)        |     |     |               |  
|               |                                                                      |                                                              |     |     |               |  
|               |                                                                      | Impact of changes in foreign currency
        exchange rates |     |     | 22            |  
|               |                                                                      |                                                              |     |     |               |  
|               |                                                                      | Distribution margins                                         |     |     | 5             |  
|               |                                                                      |                                                              |     |     |               |  
|               |                                                                      | Operation and maintenance expenses                           |     |     | 11            |  
|               |                                                                      |                                                              |     |     |               |  
|               |                                                                      | Other                                                        |     |     | (6            | )
|               |                                                                      |                                                              |     |     |               |  
|               | Latin America                                                        |                                                              |     | 3   |               |  
|               |                                                                      |                                                              |     |     |               |  
|               | Other                                                                |                                                              |     | (7  | )             |  
|               |                                                                      |                                                              |     |     |               |  
|               |                                                                      | Total International                                          |     |     | 28            |  
|               |                                                                      |                                                              |     |     |               |  
|Unusual items  |                                                                      |                                                              | (83 | )   |               |  
|               |                                                                      |                                                              |     |     |               |  
|               |                                                                      | $                                                            | (76 | )   |               | $
|               |                                                                      |                                                              |     |     |               |  

The changes in net income from year to year were, in part, attributable to
  several unusual items with significant earnings impacts, including accounting
  changes, discontinued operations and infrequently occurring items. The after-tax
  impacts of these unusual items are:

|                                                 |                                                               |   | 2004 |   |  | 2003 |     |     | 2002 |  
|------------------------------------------------ | ------------------------------------------------------------- | - | ---- | - |  | ---- | --- | --- | ---- | -
|                                                 |                                                               |   |      |   |  |      |     |     |      |  
|Accounting changes:                              |                                                               |   |      |   |  |      |     |     |      |  
|                                                 |                                                               |   |      |   |  |      |     |     |      |  
|                                                 | ARO (Note 21)                                                 |   |      |   |  |      | $   | 63  |      |  
|                                                 |                                                               |   |      |   |  |      |     |     |      |  
|                                                 | Consolidation of variable interest entities
        (Note 22) |   |      |   |  |      |     | (27 | )    |  
|                                                 |                                                               |   |      |   |  |      |     |     |      |  
|                                                 | Goodwill impairment (Note 19)                                 |   |      |   |  |      |     |     |      |  
|                                                 |                                                               |   |      |   |  |      |     |     |      |  
|Sale of CGE (Note 9)                             |                                                               | $ | (7   | ) |  |      |     |     |      |  
|                                                 |                                                               |   |      |   |  |      |     |     |      |  
|Sale of CEMAR (Note 9)                           |                                                               |   | 23   |   |  |      |     |     |      |  
|                                                 |                                                               |   |      |   |  |      |     |     |      |  
|Discontinued operations (Note 9)                 |                                                               |   | (2   | ) |  |      | (20 | )   |      |  
|                                                 |                                                               |   |      |   |  |      |     |     |      |  
|CEMAR-related net tax benefit 
        (Note 5)  |                                                               |   |      |   |  |      | 81  |     |      |  
|                                                 |                                                               |   |      |   |  |      |     |     |      |  
|Workforce reduction (Note 20)                    |                                                               |   |      |   |  |      |     |     |      |  
|                                                 |                                                               |   |      |   |  |      |     |     |      |  
|Write-down of generation assets
        (Note 9) |                                                               |   |      |   |  |      |     |     |      |  
|                                                 |                                                               |   |      |   |  |      |     |     |      |  
|CEMAR operating losses (Note 9)                  |                                                               |   |      |   |  |      |     |     |      |  
|                                                 |                                                               |   |      |   |  |      |     |     |      |  
|CEMAR impairment (Note 9)                        |                                                               |   |      |   |  |      |     |     |      |  
|                                                 |                                                               |   |      |   |  |      |     |     |      |  
|Tax benefit - Teesside (Note 9)                  |                                                               |   |      |   |  |      |     |     |      |  
|                                                 |                                                               |   |      |   |  |      |     |     |     
|Total                                            |                                                               | $ | 14   |   |  | $    | 97  |     |      | $
|                                                 |                                                               |   |      |   |  |      |     |     |     

The year-to-year changes in earnings components, including domestic gross energy
  margins by region and income statement line items, are discussed in the balance
  of "Results of Operations."

PPL Energy Supply's future earnings could be, or will be, impacted by a number
  of key factors, including the following:

- PPL Energy Supply's future energy margins and, consequently, its future
    earnings, may be impacted by fluctuations in market prices for electricity,
    as well as fluctuations in fuel prices, fuel transportation costs and emission
    allowance expenses. For instance, although PPL Energy Supply expects market
    prices for electricity in 2005 to be higher than in 2004, PPL Energy Supply
    is not expecting an increase in its 2005 energy margins due to expected increases
    in the cost of fuel, fuel transportation and emissions allowances.

- A key part of PPL Energy Supply's overall strategy is to enter into long-term
    and intermediate-term energy supply agreements in order to mitigate market
    price and supply risk. PPL Energy Supply's ability to continue to enter into
    such agreements, and to renew existing energy supply agreements, may affect
    its future earnings. See "Item 1. Business - Power Supply" and Note 14 to
    the Financial Statements for more information regarding PPL Energy Supply's
    wholesale energy commitments and Note 15 for more information regarding the
    PLR contracts.

- As discussed in "Item 1. Business - Background," PPL Electric has agreed
    to provide electricity supply to its PLR customers at predetermined rates
    through 2009, and it has entered into PUC-approved, full requirements energy
    supply agreements with PPL EnergyPlus to fulfill its PLR obligation. The predetermined
    charges for generation supply which PPL Electric collects from its PLR customers
    and pays to PPL EnergyPlus under the energy supply agreements provide for
    annual increases in each year commencing in 2006 and continuing through 2009.
    PPL Electric's PLR obligation after 2009 will be determined by the PUC pursuant
    to rules that have not yet been promulgated.

- Due to current electricity and natural gas price levels, there is a risk
    that PPL Energy Supply may be unable to recover its investment in certain
    gas-fired generation facilities. Under GAAP, PPL Energy Supply does not believe
    that there is an impairment charge to be recorded for these facilities at
    this time. PPL Energy Supply is unable to predict the earnings impact of this
    issue, based upon future energy price and fuel levels, applicable accounting
    rules and other factors, but such impact may be material.

- In June 2004, a subsidiary of PPL Generation agreed to sell the 450 MW Sundance
    power plant to Arizona Public Service Company (APS). Each party has waived
    the remaining contractual conditions for approval of the transaction by the
    Arizona Corporation Commission. The sale still requires approvals of the FERC
    under the Federal Power Act. PPL Energy Supply cannot predict whether or when
    these approvals will be obtained. PPL Energy Supply estimates that a loss
    on sale or an impairment charge of about $47 million after tax, could be recorded
    in 2005 depending on the timing and likelihood of obtaining the FERC approvals.

- PPL Energy Supply's ability to manage operational risk with respect to its
    generation plants is critical to its financial performance. Specifically,
    depending on the timing and duration of both planned and unplanned outages
    (in particular, if such outages are during peak periods or periods of severe
    weather), PPL Energy Supply's revenue from energy sales could be adversely
    affected and its need to purchase power to satisfy its energy commitments
    could be significantly increased. PPL Energy Supply has been successful in
    the past several years in increasing fleet-wide equivalent availability (i.e.,
    the percentage of time in a year that a generating unit is capable of producing
    power) from the low 80% range to over 90%. However, since many of its generating
    units are reaching mid-life, PPL Energy Supply is faced with the potential
    for outages of longer duration to accommodate significant investments in major
    component replacements.

- PPL Energy Supply has interests in two synthetic fuel facilities and receives
    tax credits pursuant to Section 29 of the Internal Revenue Code based on its
    sale of synthetic fuel to unaffiliated third-party purchasers. PPL Energy
    Supply has estimated that these facilities will contribute approximately $40
    million per year to earnings through 2007. See Note 14 to the Financial Statements
    for a discussion of the requirements to receive the Section 29 tax credits,
    the IRS review of synthetic fuel production procedures and the impact of higher
    oil prices on the Section 29 tax credits.

- Earnings in 2005 and beyond are expected to continue to be adversely affected
    by increased pension costs. Specifically, WPD will experience increased pension
    costs due to a recent actuarial valuation of WPD's plans that reflects higher
    pension obligations. The increase in pension costs in 2005 is forecasted to
    be approximately $22 million after tax, and the increase in pension costs
    is expected to continue to be significant in 2006. See "Other Operation and
    Maintenance" for the impact on earnings in 2004.

- PPL Energy Supply is unable to predict whether future impairments of goodwill
    may be required for its domestic and international investments. While no goodwill
    impairments were required based on the annual review performed in the fourth
    quarter of 2004, future impairments may occur due to determinations of carrying
    value exceeding the fair value of these investments.

- See Note 14 to the Financial Statements for potential commitments and contingent
    liabilities that may impact future earnings.

- See "Application of Critical Accounting Policies" for an overview of accounting
    policies that are particularly important to the results of operations and
    financial condition of PPL Energy Supply and that require PPL Energy Supply's
    management to make significant estimates, assumptions and other judgments.
    Although PPL Energy Supply's management believes that these estimates, assumptions
    and other judgments are appropriate, they relate to matters that are inherently
    uncertain.

- See Note 23 to the Financial Statements for new accounting standards that
    have been issued but not yet adopted by PPL Energy Supply that may impact
    future earnings.

Domestic Gross Energy Margins

The following table provides changes in the income statement line items that
  comprise domestic gross energy margins:

|                                                          |  | 2004 vs. 2003                 |     |   | 2003 vs. 2002 |  
|--------------------------------------------------------- |  | ----------------------------- | --- | - | ------------- | -
|                                                          |  |                               |     |   |               |  
|Wholesale energy marketing revenues                       |  | $                             | 25  |   |               | $
|                                                          |  |                               |     |   |               |  
|Wholesale energy marketing to affiliates
        revenues |  |                               | 56  |   |               |  
|                                                          |  |                               |     |   |               |  
|Unregulated retail electric and gas revenues              |  |                               | (34 | ) |               |  
|                                                          |  |                               |     |   |               |  
|Net energy trading margins                                |  |                               | 12  |   |               |  
|                                                          |  |                               |     |   |               |  
|Other revenue adjustments (a)                             |  |                               | 15  |   |               |  
|                                                          |  |                               |     |   |               |  
|Total revenues                                            |  |                               | 74  |   |               |  
|                                                          |  |                               |     |   |               |  
|Fuel                                                      |  |                               | 105 |   |               |  
|                                                          |  |                               |     |   |               |  
|Energy purchases                                          |  |                               | (95 | ) |               |  
|                                                          |  |                               |     |   |               |  
|Energy purchases from affiliates                          |  |                               | 2   |   |               |  
|                                                          |  |                               |     |   |               |  
|Other cost adjustments (a)                                |  |                               | 1   |   |               |  
|                                                          |  |                               |     |   |               |  
|Total cost of sales                                       |  |                               | 13  |   |               |  
|                                                          |  |                               |     |   |               |  
|                                                          |  | Domestic gross energy margins |     | $ | 61            |  
|                                                          |  |                               |     |   |               |  

|(a) |  | Adjusted to exclude the impact of any revenues
        and costs not associated with domestic gross energy margins, in particular,
        revenues and energy costs related to the international operations of PPL
        Global. Also adjusted to include gains or losses on sales of emission
        allowances, which are included in "Other operation and maintenance" expenses
        on the Statement of Income, and the reduction of the reserve for Enron
        receivables, as described in Note 17 to the Financial Statements.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

Changes in Domestic Gross Energy Margins By Region

Domestic gross energy margins are generated through PPL Energy Supply's normal
  and hedge activities (non-trading), as well as trading activities. Non-trading
  margins are now discussed on a geographic basis rather than on an activity basis,
  as reported prior to 2004. A regional perspective more closely matches the internal
  view of how PPL Energy Supply's energy business is managed.

|                              |                               | 2004 vs. 2003 |    |    | 2003 vs. 2002 |  
|----------------------------- | ----------------------------- | ------------- | -- | -- | ------------- | -
|                              |                               |               |    |    |               |  
|Eastern U.S. non-trading      |                               | $             | 59 |    |               | $
|                              |                               |               |    |    |               |  
|Northwestern U.S. non-trading |                               |               | (2 | )  |               |  
|                              |                               |               |    |    |               |  
|Southwestern U.S. non-trading |                               |               | (8 | )  |               |  
|                              |                               |               |    |    |               |  
|Net energy trading            |                               |               | 12 |    |               |  
|                              |                               |               |    |    |               |  
|                              | Domestic gross energy margins |               | $  | 61 |               |  
|                              |                               |               |    |    |               |  

Eastern U.S.

Eastern U.S. non-trading margins were higher in 2004 compared to 2003, primarily
  due to 3% higher generation, as well as higher prices and slightly higher sales
  volumes. In PJM, where the majority of PPL's Eastern wholesale activity occurs,
  average spot prices rose 15% in 2004 over 2003. PPL Energy Supply also benefited
  from favorable transmission congestion positions. In addition, retail energy
  prices increased by approximately 1% in 2004 in accordance with the schedule
  established by the PUC Final Order. The higher volumes reflect the return of
  customers who had previously shopped for electricity, as well as new load obligations
  in Connecticut and New Jersey, partially offset by lower wholesale sales. Partially
  offsetting these improvements were increased supply costs driven by increased
  fossil fuel and purchased power prices.

Eastern U.S. non-trading margins were essentially flat in 2003 compared to
  2002 due to lower supply costs in 2002 caused by the buyout of a NUG contract
  in February 2002, which reduced 2002's power purchases by $25 million. Excluding
  the NUG buyout, margins in 2003 were higher compared to 2002, primarily due
  to higher wholesale volumes, which increased by 47%. The higher volumes were
  primarily driven by market opportunities to optimize the value of generating
  assets and by higher spot prices that allowed PPL Energy Supply to increase
  the utilization of its higher-cost generating units.

Northwestern U.S.

Northwestern U.S. non-trading margins were slightly lower in 2004 compared
  to 2003, due in part to a retroactive coal price adjustment caused by an unfavorable
  arbitration ruling. Incremental expense of $6 million was recorded in 2004 as
  a result of the ruling, most of which related to years 2001 to 2003. Contributing
  to the decrease in margins in 2004 compared to 2003 was a $6 million positive
  impact to 2003 margins related to a partial reversal of a reserve against Enron
  receivables (discussed in Note 17 to the Financial Statements) and a 2003 favorable
  litigation settlement of $3 million with Energy West Resources. These decreases
  were offset by improved generation and higher prices.

Northwestern U.S. non-trading margins were higher in 2003 compared to 2002,
  due to higher wholesale prices. Average wholesale prices for 2003 were $6/MWh
  higher than prices in 2002. A $6 million partial reversal of a reserve against
  Enron receivables (discussed in Note 17 to the Financial Statements) and a favorable
  settlement of $3 million with Energy West Resources also positively impacted
  margins in 2003.

Southwestern U.S.

Southwestern U.S. non-trading margins were lower in 2004 compared to 2003,
  primarily due to wholesale sales volumes decreasing 17%. Also contributing to
  the decrease in margins in 2004 compared to 2003 was a $3 million positive impact
  to 2003 margins related to a partial reversal of a reserve against Enron receivables
  (discussed in Note 17 to the Financial Statements).

Southwestern U.S. non-trading margins were higher in 2003 compared to 2002,
  due to the inception of new tolling agreements in Arizona and an increase of
  average wholesale prices by $16/MWh in 2003 compared to 2002. In addition, margins
  were positively impacted by $3 million in 2003 related to a partial reversal
  of a reserve against Enron receivables.

Net Energy Trading

PPL Energy Supply enters into certain energy contracts that meet the criteria
  of trading derivatives as defined by EITF Issue 02-3, "Issues Involved in Accounting
  for Derivative Contracts Held for Trading Purposes and Contracts Involved in
  Energy Trading and Risk Management Activities." These physical and financial
  contracts cover trading activity associated with electricity, gas and oil. The
  $12 million increase in 2004 compared to 2003 was due to a $6 million increase
  in electricity positions and a $6 million increase in gas and oil positions.
  The $10 million decrease in 2003 compared to 2002 was primarily due to realized
  electric swap losses in 2003. The physical volumes associated with energy trading
  were 5,700 GWh and 11.7 Bcf in 2004; 5,200 GWh and 12.6 Bcf in 2003; and 9,600
  GWh and 12.4 Bcf in 2002. The amount of energy trading margins from unrealized
  mark-to-market transactions was $13 million in 2004 and not significant in 2003
  and 2002.

Utility Revenues

The increase (decrease) in utility revenues was attributable to the following:

|                                              |             | 2004 vs. 2003 |    |    | 2003 vs. 2002 |  
|--------------------------------------------- | ----------- | ------------- | -- | -- | ------------- | -
|                                              |             |               |    |    |               |  
|International:                                |             |               |    |    |               |  
|                                              |             |               |    |    |               |  
|Retail electric delivery (PPL
        Global) |             |               |    |    |               |  
|                                              |             |               |    |    |               |  
|                                              | U.K.        |               | $  | 70 |               |  
|                                              |             |               |    |    |               |  
|                                              | Chile       |               |    | 27 |               |  
|                                              |             |               |    |    |               |  
|                                              | Bolivia     |               |    | 1  |               |  
|                                              |             |               |    |    |               |  
|                                              | Brazil      |               |    |    |               |  
|                                              |             |               |    |    |               |  
|                                              | El Salvador |               |    |    |               |  
|                                              |             |               |    |    |               |  
|                                              |             | $             | 98 |    |               | $
|                                              |             |               |    |    |               |  

The increase for 2004 compared with 2003 was primarily due to:

- higher WPD revenues, primarily due to the change in foreign currency exchange
    rates; and
- higher revenues in Chile, due to higher energy prices, which are a pass-through
    to customer rates, the change in foreign currency exchange rates, and a 7%
    increase in sales volume.

The decrease for 2003 compared with 2002 was primarily due to the deconsolidation
  of CEMAR in August 2002. (See Note 9 to the Financial Statements for additional
  information.) This decrease was partially offset by:

- higher WPD revenues, primarily due to the change in foreign currency exchange
    rates;
- higher revenues in Chile, primarily due to higher volume and the consolidation
    of TransEmel (See Note 9); and
- higher revenues in El Salvador, primarily due to higher volume and higher
    pass-through energy costs, partially offset by a 6% tariff reduction effective
    January 1, 2003.

Energy Related Businesses

Energy related businesses contributed $45 million less to operating income
  in 2004 compared with 2003. The decrease was attributable to the following:

- a $15 million pre-tax loss on the sale of CGE in 2004 (see Note 9 to the
    Financial Statements);
- a $5 million pre-tax decrease from mechanical contracting and engineering
    subsidiaries due to the continued decline in capital spending in commercial
    and industrial markets, lower margins experienced in those markets, and cost
    overruns at two major projects;
- a $3 million pre-tax decrease from Latin American subsidiaries due primarily
    to lower dividends received and lower construction sales; and
- a $17 million higher pre-tax operating loss from synfuel projects.

Energy related businesses contributed $16 million less to operating income
  in 2003 compared with 2002. The decrease resulted primarily from:

- $7 million of credits recorded on development projects in 2002, due largely
    to a favorable settlement on the cancellation of a generation project in Washington
    state;
- a $5 million operating loss on some Hyder properties in the first quarter
    of 2003, which were subsequently sold in April 2003; and
- an $8 million decrease in Latin America revenues from lower material and
    construction project sales (In 2002, a Bolivian subsidiary participated in
    the construction of a 1,500 kilometer transmission line in rural areas.);
    partially offset by
- a $3 million improvement in contributions from mechanical contracting subsidiaries,
    due to enhanced project controls that were implemented to minimize project
    overruns, offset by a continuing decline in construction markets in 2003.

Other Operation and Maintenance

The increases in other operation and maintenance expenses were primarily due
  to:

|                                                                                                                                                                                |  | 2004 vs. 2003 |     |   | 2003 vs. 2002 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | --- | - | ------------- | -
|                                                                                                                                                                                |  |               |     |   |               |  
|Property damage and environmental
        insurance settlements which were recorded in 2003                                                                                     |  | $             | 26  |   |               | $
|                                                                                                                                                                                |  |               |     |   |               |  
|Increase in foreign currency
        exchange rates                                                                                                                             |  |               | 15  |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Increase in domestic and international
        pension costs                                                                                                                    |  |               | 8   |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Additional expenses of new generating
        facilities                                                                                                                        |  |               | 5   |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Increase in WPD expenses due
        to regulatory accounting adjustments, and resolution of purchase accounting
        contingencies in 2002 related to the Hyder acquisition |  |               |     |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Increase in WPD tree trimming
        costs                                                                                                                                     |  |               | 8   |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Decrease in the Clean Air Act
        contingency relating to generating facilities recorded in 2003                                                                            |  |               | 8   |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Accretion expense as a result
        of applying SFAS 143 (Note 21)                                                                                                            |  |               | 1   |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Increased operating expenses
        in domestic business lines and other                                                                                                       |  |               |     |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Outage costs associated with
        planned maintenance at the Montour and Conemaugh plants                                                                                    |  |               | 7   |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Timing and extent of outage
        costs associated with the planned refueling and inspection at the Susquehanna
        station and of other nuclear-related expenses         |  |               | 2   |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Change to account for CEMAR
        on the cost-method in 2002                                                                                                                  |  |               |     |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Estimated reduction in salaries
        and benefits as a result of the workforce reduction initiated in 2002
        (Note 20)                                                 |  |               |     |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Vacation liability adjustment
        in 2002 in conjunction with the workforce reduction                                                                                       |  |               |     |   |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Decrease in lease expense due
        to the consolidation of the Sundance and University Park generation facilities                                                            |  |               | (24 | ) |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|WPD capitalization                                                                                                                                                              |  |               | (13 | ) |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Decrease in Brunner Island expenses
        due to outage work in 2003. No major outage work performed in 2004                                                                  |  |               | (6  | ) |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Trademark license fees from
        a PPL subsidiary (Note 15)                                                                                                                  |  |               | (5  | ) |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Increase (decrease) in other
        postretirement benefit expense                                                                                                             |  |               | (2  | ) |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Gains on sales of emission allowances                                                                                                                                           |  |               | (1  | ) |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|Other                                                                                                                                                                           |  |               | (13 | ) |               |  
|                                                                                                                                                                                |  |               |     |   |               |  
|                                                                                                                                                                                |  | $             | 16  |   |               | $
|                                                                                                                                                                                |  |               |     |   |               |  

The $8 million increase in net pension costs was attributable to reductions
  in the discount rate assumptions for PPL's and PPL Energy Supply's domestic
  and international pension plans at December 31, 2003. Although financial markets
  have improved and the domestic and international pension plans have experienced
  significant asset gains in 2003 and 2004, domestic interest rates on fixed-income
  obligations have continued to fall, requiring a further reduction in the discount
  rate assumption for the domestic plans as of December 31, 2004. The reduction
  in the discount rate assumption has a significant impact on the measurement
  of plan obligations and net pension cost. In addition, there was an increase
  in the obligations of the WPD pension plan as determined by its most recent
  actuarial valuation as of March 31, 2004. PPL Energy Supply's net pension costs
  are expected to increase by approximately $34 million in 2005. Approximately
  $31 million of the increased costs is attributable to the WPD pension plans.
  See Note 12 to the Financial Statements for details of the funded status of
  PPL's pension plans.

Depreciation

Increases in depreciation expense were primarily due to:

|                                                                                                                                     |  | 2004 vs. 2003 |     |   | 2003 vs. 2002 |  
|------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | --- | - | ------------- | -
|                                                                                                                                     |  |               |     |   |               |  
|Additions to PP&E                                                                                                                    |  | $             | 7   |   |               | $
|                                                                                                                                     |  |               |     |   |               |  
|Sundance and University Park generation
        facilities - FIN46 (a)                                                               |  |               | 15  |   |               |  
|                                                                                                                                     |  |               |     |   |               |  
|Depreciation on Lower Mt. Bethel generation
        facility, which began commercial operation in May 2004                           |  |               | 10  |   |               |  
|                                                                                                                                     |  |               |     |   |               |  
|Foreign currency exchange rates                                                                                                      |  |               | 16  |   |               |  
|                                                                                                                                     |  |               |     |   |               |  
|Lower depreciation due to deconsolidation
        of CEMAR in 2002                                                                   |  |               |     |   |               |  
|                                                                                                                                     |  |               |     |   |               |  
|2003 purchase accounting adjustments to
        WPD assets (Note 9)                                                                  |  |               | (22 | ) |               |  
|                                                                                                                                     |  |               |     |   |               |  
|No decommissioning expense in 2003 due
        to application of SFAS 143, "Accounting for Asset Retirement Obligations"
        (b) |  |               |     |   |               |  
|                                                                                                                                     |  |               |     |   |               |  
|                                                                                                                                     |  | $             | 26  |   |               | $
|                                                                                                                                     |  |               |     |   |               |  

|(a) |  | The lessor of these facilities was consolidated
        under FIN 46, "Consolidation of Variable Interest Entities, an Interpretation
        of ARB No. 51," effective December 31, 2003. In June 2004, subsidiaries
        of PPL Energy Supply purchased the Sundance and University Park generation
        assets from the lessor that was consolidated by PPL Energy Supply under
        FIN 46. See Note 22 to the Financial Statements for additional information.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | There was a corresponding recording of accretion
        expense for PPL Susquehanna in 2003, which is included in "Other operation
        and maintenance" expense on the Statement of Income. See Note 21 to the
        Financial Statements for additional information.                                                                                                                                                                                                

Taxes, Other Than Income

Taxes, other than income, increased by $7 million in 2004, compared with 2003.
  The increase was primarily due to higher WPD property taxes of approximately
  $9 million, primarily from the impact of changes in foreign currency exchange
  rates, adjustments recorded in 2003 and an increase in property tax rates.

Taxes, other than income, increased by $11 million in 2003 compared with 2002,
  due to higher taxes related to increases in the basis on which capital stock tax
  is calculated and higher real estate taxes in 2003.

Other Charges

Other charges of $198 million in 2002 consisted of the write-down of PPL Global's
  investment in CEMAR and several smaller impairment charges on other international
  investments (see Note 9 to the Financial Statements), the write-down of generation
  assets (see Note 9) and a charge for a workforce reduction program (see Note
  20).

Other Income - net

See Note 16 to the Financial Statements for details of other income and deductions.

Financing Costs

The increase (decrease) in financing costs, which include "Interest Expense,"
  "Interest Expense with Affiliate" and "Distributions on Preferred Securities,"
  were primarily due to:

|                                                                                                                                                                                        |  | 2004 vs. 2003 |     |   | 2003 vs. 2002 |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | --- | - | ------------- | -
|                                                                                                                                                                                        |  |               |     |   |               |  
|Increase in interest expense
        due to consolidation of the lessors of the Sundance, University Park and
        Lower Mt. Bethel generation facilities, in accordance with FIN 46 |  | $             | 34  |   |               |  
|                                                                                                                                                                                        |  |               |     |   |               |  
|Financing costs associated with
        the repayment of the consolidated trust's debt for the Sundance and University
        Park generation facilities                               |  |               | 9   |   |               |  
|                                                                                                                                                                                        |  |               |     |   |               |  
|Increase in long-term debt interest
        expense                                                                                                                                     |  |               | 36  |   |               | $
|                                                                                                                                                                                        |  |               |     |   |               |  
|Increase in foreign currency
        exchange rates                                                                                                                                     |  |               | 15  |   |               |  
|                                                                                                                                                                                        |  |               |     |   |               |  
|Increase in interest expense
        with affiliate                                                                                                                                     |  |               | 7   |   |               |  
|                                                                                                                                                                                        |  |               |     |   |               |  
|Decrease in amortization expense                                                                                                                                                        |  |               | (9  | ) |               |  
|                                                                                                                                                                                        |  |               |     |   |               |  
|Decrease in short-term debt
        interest expense                                                                                                                                    |  |               | (10 | ) |               |  
|                                                                                                                                                                                        |  |               |     |   |               |  
|Decrease in long-term debt interest
        from the deconsolidation of CEMAR in August 2002                                                                                            |  |               |     |   |               |  
|                                                                                                                                                                                        |  |               |     |   |               |  
|Decrease in capitalized interest                                                                                                                                                        |  |               | 1   |   |               |  
|                                                                                                                                                                                        |  |               |     |   |               |  
|Write-off of unamortized
        swap costs on WPD debt restructuring in 2003                                                                                                           |  |               | (11 | ) |               |  
|                                                                                                                                                                                        |  |               |     |   |               |  
|Other                                                                                                                                                                                   |  |               | 1   |   |               |  
|                                                                                                                                                                                        |  |               |     |   |               |  
|                                                                                                                                                                                        |  | $             | 73  |   |               | $
|                                                                                                                                                                                        |  |               |     |   |               |  

Income Taxes

Income tax expense increased by $14 million in 2004 compared with 2003. This
  increase was primarily attributable to:

- an $84 million tax benefit recognized in 2003 related to foreign investment
    losses not recurring in 2004; offset by
- a $22 million tax benefit recognized in 2004 related to additional nonconventional
    fuel tax credits in excess of credits recognized in 2003;
- a $25 million decrease in tax expense on foreign earnings in 2004; and
- a $27 million reduction in income taxes related to lower pre-tax book income.

Income tax expense decreased by $81 million in 2003 compared with 2002. This
  decrease was due to:

- a $31 million reduction related to deferred income tax valuation allowances
    recorded on impairment charges on PPL Energy Supply's investment in Brazil
    recorded during 2002;
- an $84 million reduction in income taxes related to the tax benefit recognized
    in 2003 on foreign investment losses included in the 2002 federal income tax
    return; and
- a $2 million decrease related to additional nonconventional fuel tax credits
    recognized; offset by
- higher pre-tax domestic book income, resulting in a $39 million increase
    in income taxes.

Annual tax provisions include amounts considered sufficient to pay assessments
  that may result from examination of prior year tax returns by taxing authorities.
  However, the amount ultimately paid upon resolution of any issues raised by
  such authorities may differ materially from the amount accrued. In evaluating
  the exposure associated with various filing positions, PPL Energy Supply accounts
  for changes in probable exposures based on management's best estimate of the
  amount that should be recognized. An allowance is maintained for the tax contingencies,
  the balance of which management believes to be adequate. During 2004, PPL Energy
  Supply reached partial settlement with the IRS with respect to the tax years
  1991 through 1995 and received a cash refund in the amount of $7 million. As
  a result of this settlement, the net tax impact recorded in 2004 was not significant.

See Note 5 to the Financial Statements for details on effective income tax
  rates and for information on the American Jobs Creation Act of 2004.

Discontinued Operations

In 2003, PPL Energy Supply reported a loss of $20 million in connection with
  the approval of a plan of sale of PPL Global's investment in a Latin American
  telecommunications company. An additional $2 million loss was recorded in 2004,
  representing operating losses through the date of the sale. See "Discontinued
  Operations" in Note 9 to the Financial Statements for additional information
  related to the sale.

Cumulative Effects of Changes in Accounting Principles

In 2003, PPL Energy Supply recorded a charge of $27 million, after-tax, as
  a cumulative effect of a change in accounting principle in connection with the
  adoption of FIN 46, "Consolidation of Variable Interest Entities, an Interpretation
  of ARB No. 51," for certain entities. See Note 22 to the Financial Statements
  for additional information.

PPL Energy Supply adopted SFAS 143, "Accounting for Asset Retirement Obligations,"
  effective January 1, 2003. SFAS 143 addresses the accounting for obligations
  associated with the retirement of tangible long-lived assets. It requires legal
  obligations associated with the retirement of long-lived assets to be recognized
  as a liability in the financial statements. Application of the new rules resulted
  in a cumulative effect of adoption that increased net income by $63 million
  in 2003. See Note 21 to the Financial Statements for additional information.

PPL Energy Supply adopted SFAS 142, "Goodwill and Other Intangible Assets,"
  on January 1, 2002. SFAS 142 requires an annual impairment test of goodwill
  and other intangible assets that are not subject to amortization. PPL Energy
  Supply performed a transition impairment analysis in the first quarter of 2002
  and recorded a transition goodwill impairment charge of $150 million. See Note
  19 to the Financial Statements for additional information.

Financial Condition

Liquidity

PPL Energy Supply is focused on maintaining a strong liquidity position and
  strengthening its balance sheet, thereby improving its credit profile. PPL Energy
  Supply believes that its cash on hand, operating cash flows, access to debt
  and equity capital markets and borrowing capacity, taken as a whole, provide
  sufficient resources to fund its ongoing operating requirements, future security
  maturities and estimated future capital expenditures. PPL Energy Supply currently
  expects cash on hand at the end of 2005 to be approximately $180 million, with
  about $1.9 billion in credit facilities. However, PPL Energy Supply's cash flows
  from operations and its access to cost effective bank and capital markets are
  subject to risks and uncertainties, including but not limited to, the following:

- changes in market prices for electricity;
- changes in commodity prices that may increase the cost of producing power
    or decrease the amount PPL Energy Supply receives from selling power;
- price and credit risks associated with selling and marketing products in
    the wholesale power markets;
- ineffectiveness of trading, marketing and risk management policies and programs
    used to mitigate PPL Energy Supply's risk exposure to adverse energy and fuel
    prices, interest rates, foreign currency exchange rates and counterparty credit;
- unusual or extreme weather that may damage its international transmission
    and distribution facilities or affect energy sales to customers;
- reliance on transmission and distribution facilities that PPL Energy Supply
    does not own or control to deliver its electricity and natural gas;
- unavailability of generating units (due to unscheduled or longer-than-anticipated
    generation outages) and the resulting loss of revenues and additional costs
    of replacement electricity;
- ability to recover and the timeliness and adequacy of recovery of costs
    associated with international electricity delivery businesses; and
- a downgrade in PPL Energy Supply's or its rated subsidiaries' credit ratings
    that could negatively affect their ability to access capital and increase
    the cost of maintaining credit facilities and any new debt.

At December 31, 2004, PPL Energy Supply had $357 million in cash and cash equivalents
  and no short-term debt compared to $222 million in cash and cash equivalents
  and $56 million of short-term debt at December 31, 2003, and $149 million in
  cash and cash equivalents and $928 million of short-term debt at December 31,
  2002. The changes in cash and cash equivalents resulted from the following:

|                                                            |  | 2004 |      |   | 2003 |   |        | 2002 | 
|----------------------------------------------------------- |  | ---- | ---- | - | ---- | - | ------ | ---- | 
|                                                            |  |      |      |   |      |   |        |      | 
|Net Cash Provided by Operating Activities                   |  | $    | 556  |   |      | $ | 904    |      | 
|                                                            |  |      |      |   |      |   |        |      | 
|Net Cash Provided by (Used in) Investing
        Activities |  |      | (465 | ) |      |   | 205    |      | 
|                                                            |  |      |      |   |      |   |        |      | 
|Net Cash Provided by (Used in) Financing
        Activities |  |      | 35   |   |      |   | (1,043 | )    | 
|                                                            |  |      |      |   |      |   |        |      | 
|Effect of Exchange Rates on Cash &
        Cash Equivalents |  |      | 9    |   |      |   | 7      |      | 
|                                                            |  |      |      |   |      |   |        |      | 
|Increase (Decrease) in Cash & Cash
        Equivalents      |  | $    | 135  |   |      | $ | 73     |      | 
|                                                            |  |      |      |   |      |   |        |      | 

Net Cash Provided by Operating Activities

Net cash from operating activities decreased by 38%, or $348 million, in 2004
  versus 2003, reflecting the posting of $300 million in cash collateral to PPL
  Electric related to the PLR energy supply agreements and higher cash taxes,
  partially offset by higher energy margins.

Important elements supporting the stability of PPL Energy Supply's cash provided
  by operating activities are the long-term and intermediate-term commitments
  from wholesale and retail customers and long-term fuel supply contracts PPL
  Energy Supply has in place. PPL Energy Supply estimates that, on average, approximately
  83% of its expected annual generation output for the period 2005 through 2009
  is committed under long-term and intermediate-term energy supply contracts.
  PPL EnergyPlus also enters into contracts under which it agrees to sell and
  purchase electricity, natural gas, oil and coal. These contracts often require
  cash collateral or other credit enhancement, or reductions or terminations of
  a portion of the entire contract through cash settlement in the event of a downgrade
  of PPL Energy Supply or the respective subsidiary's credit ratings or adverse
  changes in market prices. For example, in addition to limiting its trading ability,
  if PPL Energy Supply or its respective subsidiary's ratings were lowered to
  below "investment grade" and energy prices increased by 10%, PPL Energy Supply
  estimates that, based on its December 31, 2004 positions, it would have had
  to post collateral of approximately $280 million as compared to $490 million
  at December 31, 2003. PPL Energy Supply has in place risk management programs
  that, among other things, are designed to monitor and manage its exposure to
  volatility of cash flows related to changes in energy prices, interest rates,
  foreign currency exchange rates, counterparty credit quality and the operational
  performance of its generating units.

Net cash provided by operating activities increased by 44%, or $278 million,
  in 2003 versus 2002, reflecting higher net income adjusted for non-cash items
  and lower cash income taxes. In addition, 2002 included cash outlays of $152
  million for the cancellation of generation projects and $50 million for the
  termination of a NUG contract. The higher net income in 2003 was principally
  driven by complete ownership of WPD, higher wholesale energy margins, lower
  interest expense and savings from a workforce reduction program in the U.S.
  that commenced in 2002.

Net Cash Provided by (Used in) Investing Activities

Net cash used in investing activities increased by $670 million in 2004 versus
  2003. The primary reason for the increase was the repayment of a $653 note receivable
  from an affiliate in 2003. The primary use of cash for investing activities
  is capital and investment expenditures. See "Capital Expenditure Requirements"
  for capital and investment expenditures in 2004 and expected expenditures in
  2005 through 2009. In 2005, PPL Energy Supply expects to be able to fund all
  of its capital expenditures with cash from operating activities.

The increase of $1.3 billion in net cash provided by investing activities in
  2003 compared to 2002 was primarily due to the reduced investment in generation
  assets and electric energy projects, the acquisition of the controlling interest
  in WPD in September 2002, and a repayment of a loan by an affiliate.

Net Cash Provided by (Used in) Financing Activities

Net cash from financing activities in 2004 increased by $1.1 billion versus
  2003. The primary reasons for the increase in cash from financing activities
  was due to a net reduction of $758 million in distributions to member and a
  $495 million increase in note payable to affiliate.

PPL Energy Supply's debt financing activity in 2004 was as follows:

|                                                    |       | Issuances |     |     | Retirements |  
|--------------------------------------------------- | ----- | --------- | --- | --- | ----------- | -
|                                                    |       |           |     |     |             |  
|PPL Energy Supply Senior Unsecured
        Notes    |       | $         | 300 |     |             |  
|                                                    |       |           |     |     |             |  
|PPL Energy Supply lease financing                   |       |           |     |     |             | $
|                                                    |       |           |     |     |             |  
|PPL Energy Supply Note Payable
        to Affiliate |       |           | 495 |     |             |  
|                                                    |       |           |     |     |             |  
|WPD short-term debt (net change)                    |       |           |     |     |             |  
|                                                    |       |           |     |     |             |  
|Latin American companies long-term
        debt     |       |           | 22  |     |             |  
|                                                    |       |           |     |     |             |  
|                                                    | Total |           | $   | 817 |             |  
|                                                    |       |           |     |     |             |  
|Net addition                                        |       | $         | 90  |     |             |  
|                                                    |       |           |     |     |             |  

Debt issued during 2004 had stated interest rates ranging from 2.1% to 9.0%
  and maturities from 2006 through 2014. See Note 8 to the Financial Statements
  for more detailed information regarding PPL Energy Supply's financing activities.

In December 2004, PPL Energy Supply reactivated its commercial paper program
  to provide it with an additional financing source to fund its short-term liquidity
  needs, if and when necessary. At December 31, 2004, PPL Energy Supply had no
  commercial paper outstanding and currently has no plans to access the commercial
  paper market in the short-term.

At December 31, 2004, PPL Energy Supply's total committed borrowing capacity
  under credit facilities and the use of this borrowing capacity were as follows:



|                                                |       | Committed
        Capacity |       |       | Borrowed |  |  | Letters of
        Credit Issued (c) |  |   | Available
        Capacity |    
|----------------------------------------------- | ----- | -------------------------- | ----- | ----- | -------- |  |  | ------------------------------------ |  | - | -------------------------- | ---
|                                                |       |                            |       |       |          |  |  |                                      |  |   |                            |    
|PPL Energy Supply Credit Facilities
        (a) |       | $                          | 1,100 |       |          |  |  |                                      |  | $ | 250                        |    
|                                                |       |                            |       |       |          |  |  |                                      |  |   |                            |    
|WPD (South West) Bank Facilities
        (b)    |       |                            | 769   |       |          |  |  |                                      |  |   | 2                          |    
|                                                |       |                            |       |       |          |  |  |                                      |  |   |                            |    
|                                                | Total |                            | $     | 1,869 |          |  |  |                                      |  |   | $                          | 252
|                                                |       |                            |       |       |          |  |  |                                      |  |   |                            |    
|                                                |       |                            |       |       |          |  |  |                                      |  |   |                            |    

|(a) |  | PPL Energy Supply's credit facilities allow
        for borrowings at LIBOR-based rates plus a spread, depending upon the
        company's public debt rating. PPL Energy Supply also has the capability
        to cause the lenders to issue up to $950 million of letters of credit
        under these facilities, which issuances reduce available borrowing capacity.
      These credit facilities contain financial covenants requiring debt to
        total capitalization to not exceed 65% and requiring that PPL Energy Supply
        maintain an interest coverage ratio to not be less than 2.0 times consolidated
        earnings before income taxes, depreciation and amortization. At December
        31, 2004 and 2003, PPL Energy Supply's consolidated debt to total capitalization
        percentages, as calculated in accordance with one of its credit facilities,
        were 35% and 36%. Under a second credit facility entered into in June
        2004, the consolidated debt to capitalization percentage was 34% at December
        31, 2004. At December 31, 2004 and 2003, PPL Energy Supply's interest
        coverage ratios, as calculated in accordance with its credit facilities,
        were 6.2 and 6.3. The credit facilities also contain certain representations
        and warranties that must be made for PPL Energy Supply to borrow under
        them, including, but not limited to, a material adverse change clause
        that relates to PPL Energy Supply's ability to perform its obligations
        under the credit agreements and related loan documents.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(b) |  | WPD (South West)'s credit facilities allow
        for borrowings at LIBOR-based rates plus a spread, depending upon the
        company's public debt rating.
      These credit facilities contain financial covenants that require WPD
        (South West) to maintain an interest coverage ratio of not less than 3.0
        times consolidated earnings before income taxes, depreciation and amortization
        and a regulatory asset base (RAB) at £150 million greater than total
        gross debt, in each case as calculated in accordance with the credit facilities.
        At December 31, 2004 and 2003, WPD (South West)'s interest coverage ratio,
        as calculated in accordance with its credit lines, were 6.8 and 6.7. At
        December 31, 2004 and 2003, WPD (South West)'s RAB, as calculated in accordance
        with the credit facilities, exceeded its total gross debt by £531
        million and £482 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(c) |  | PPL Energy Supply and WPD (South West) have
        a reimbursement obligation to the extent any letters of credit are drawn
        upon. The letters of credit issued as of December 31, 2004, expire in
        2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

These credit agreements contain various other covenants. Failure to meet those
  covenants beyond applicable grace periods could result in acceleration of due
  dates of borrowings and/or termination of the agreements. PPL Energy Supply
  monitors the covenants on a regular basis. At December 31, 2004, PPL Energy
  Supply was in material compliance with those covenants. At this time, PPL Energy
  Supply believes that these covenants and other borrowing conditions will not
  limit access to these funding sources. PPL Energy Supply and WPD (South West)
  intend to renew and extend all of their syndicated credit facilities in 2005.

The increase of $868 million in net cash used in financing activities in 2003
  compared to 2002 primarily reflected the repayment of short-term debt, retirement
  of long-term debt, distributions to PPL to support dividend payments to PPL
  shareholders, and maturities and interest payments on PPL Capital Funding's
  debt. In 2003, PPL Energy Supply had net retirements of $120 million compared
  with net issuances of $378 million in 2002. Net distributions to Member were
  $907 million in 2003 compared with $550 million in 2002.

Operating Leases

PPL Energy Supply and its subsidiaries also have available funding sources
  that are provided through operating leases. PPL Energy Supply's subsidiaries
  lease vehicles, office space, land, buildings, personal computers and other
  equipment. These leasing structures provide PPL Energy Supply with additional
  operating and financing flexibility. The operating leases contain covenants
  that are typical for these agreements, such as maintaining insurance, maintaining
  corporate existence and timely payment of rent and other fees. Failure to meet
  these covenants could limit or restrict access to these funds or require early
  payment of obligations. At this time, PPL Energy Supply believes that these
  covenants will not limit access to these funding sources or cause acceleration
  or termination of the leases.

PPL Energy Supply, through its subsidiary PPL Montana, leases a 50% interest
  in Colstrip Units 1 and 2 and a 30% interest in Unit 3, under four 36-year non-cancelable
  operating leases. These operating leases are not recorded on PPL Energy Supply's
  Balance Sheet, which is in accordance with applicable accounting guidance. The
  leases place certain restrictions on PPL Montana's ability to incur additional
  debt, sell assets and declare dividends. At this time, PPL Energy Supply believes
  that these restrictions will not limit access to these funding sources or cause
  acceleration or termination of the leases. See Note 8 to the Financial Statements
  for a discussion of other dividend restrictions related to PPL Global subsidiaries.

See Note 10 to the Financial Statements for further discussion of the operating
  leases.

Contractual Obligations

At December 31, 2004, the estimated contractual cash obligations of PPL Energy
  Supply were as follows:

|Contractual Cash Obligations                                                      |  | Total |       |  | Less
        Than
        1 Year |   |     | 1-3
        Years |  |   | 3-5
        Years |  |  | After 5
        Years |    
|--------------------------------------------------------------------------------- |  | ----- | ----- |  | -------------------------------- | - | --- | ----------------- |  | - | ----------------- |  |  | --------------------- | ---
|                                                                                  |  |       |       |  |                                  |   |     |                   |  |   |                   |  |  |                       |    
|Long-term Debt (a)                                                                |  | $     | 3,974 |  |                                  | $ | 181 |                   |  | $ | 604               |  |  | $                     | 228
|                                                                                  |  |       |       |  |                                  |   |     |                   |  |   |                   |  |  |                       |    
|Capital Lease Obligations                                                         |  |       |       |  |                                  |   |     |                   |  |   |                   |  |  |                       |    
|                                                                                  |  |       |       |  |                                  |   |     |                   |  |   |                   |  |  |                       |    
|Operating Leases                                                                  |  |       | 733   |  |                                  |   | 63  |                   |  |   | 115               |  |  |                       | 107
|                                                                                  |  |       |       |  |                                  |   |     |                   |  |   |                   |  |  |                       |    
|Purchase Obligations (b)                                                          |  |       | 2,900 |  |                                  |   | 623 |                   |  |   | 1,162             |  |  |                       | 516
|                                                                                  |  |       |       |  |                                  |   |     |                   |  |   |                   |  |  |                       |    
|Other Long-term Liabilities Reflected
        on the Balance Sheet under GAAP (c) |  |       | 174   |  |                                  |   | 38  |                   |  |   | 116               |  |  |                       | 20 
|                                                                                  |  |       |       |  |                                  |   |     |                   |  |   |                   |  |  |                       |    
|Total Contractual Cash Obligations                                                |  | $     | 7,781 |  |                                  | $ | 905 |                   |  | $ | 1,997             |  |  | $                     | 871
|                                                                                  |  |       |       |  |                                  |   |     |                   |  |   |                   |  |  |                       |    

|(a) |  | Reflects principal maturities only, including
        maturities of consolidated lease debt.                                                                                                              
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | The payments reflected herein are subject
        to change, as the purchase obligation reflected is an estimate based on
        projected obligated quantities and projected pricing under the contract.
|(c) |  | The amounts reflected represent estimated
        pension funding requirements.                                                                                                                           

Credit Ratings

Standard & Poor's Ratings Services (S&P), Moody's Investors Service,
  Inc. (Moody's) and Fitch Ratings (Fitch) periodically review the credit ratings
  on the debt and preferred securities of PPL Energy Supply and its subsidiaries.
  Based on their respective reviews, the rating agencies may make certain ratings
  revisions.

The ratings of S&P, Moody's and Fitch are not a recommendation to buy,
  sell or hold any securities of PPL Energy Supply or its subsidiaries. Such ratings
  may be subject to revisions or withdrawal by the agencies at any time and should
  be evaluated independently of each other and any other rating that may be assigned
  to their securities.

The following table summarizes the credit ratings of PPL Energy Supply and
  its financing subsidiaries at December 31, 2004:

|                  |                            | Moody's |          | S&P |          | Fitch
|----------------- | -------------------------- | ------- | -------- | --- | -------- | -----
|                  |                            |         |          |     |          |      
|PPL Energy Supply |                            |         |          |     |          |      
|                  | Issuer Rating              |         |          |     | BBB      |      
|                  | Senior Unsecured Notes     |         | Baa2     |     | BBB      |      
|                  | Commercial Paper           |         | P-2      |     | A-2      |      
|                  | Outlook                    |         | STABLE   |     | STABLE   |      
|                  |                            |         |          |     |          |      
|PPL Montana       |                            |         |          |     |          |      
|                  | Pass -Through Certificates |         | Baa3     |     | BBB-     |      
|                  | Outlook                    |         | STABLE   |     | STABLE   |      
|                  |                            |         |          |     |          |      
|WPDH Limited      |                            |         |          |     |          |      
|                  | Issuer Rating              |         | Baa3     |     | BBB-     |      
|                  | Senior Unsecured Debt      |         | Baa3     |     | BBB-     |      
|                  | Short-term Debt            |         |          |     | A-3      |      
|                  | Outlook                    |         | NEGATIVE |     | NEGATIVE |      
|                  |                            |         |          |     |          |      
|WPD LLP           |                            |         |          |     |          |      
|                  | Issuer Rating              |         |          |     | BBB-     |      
|                  | Senior Unsecured Debt      |         | Baa2     |     | BBB-     |      
|                  | Short-term Debt            |         |          |     | A-3      |      
|                  | Preferred Stock            |         | Baa3     |     | BB       |      
|                  | Outlook                    |         | NEGATIVE |     | NEGATIVE |      
|                  |                            |         |          |     |          |      
|WPD (South Wales) |                            |         |          |     |          |      
|                  | Issuer Rating              |         |          |     | BBB+     |      
|                  | Senior Unsecured Debt      |         | Baa1     |     | BBB+     |      
|                  | Short-term Debt            |         |          |     | A-2      |      
|                  | Outlook                    |         | STABLE   |     | NEGATIVE |      
|                  |                            |         |          |     |          |      
|WPD (South West)  |                            |         |          |     |          |      
|                  | Issuer Rating              |         | Baa1     |     | BBB+     |      
|                  | Senior Unsecured Debt      |         | Baa1     |     | BBB+     |      
|                  | Short-term Debt            |         | P-2      |     | A-2      |      
|                  | Outlook                    |         | STABLE   |     | NEGATIVE |      
|                  |                            |         |          |     |          |      

Rating Agency Actions in 2004

In December 2004, S&P, Moody's and Fitch confirmed their ratings of A-2,
  P-2 and F2, respectively, for PPL Energy Supply commercial paper.

S&P

In May 2004, S&P affirmed its BBB ratings on PPL Energy Supply and revised
  its outlook from negative to stable. S&P also affirmed its BBB- rating on
  PPL Montana's Pass-Through Certificates due 2020 and revised its outlook from
  negative to stable. Also, S&P indicated that the following ratings would
  remain unchanged following the aforementioned revision to PPL Energy Supply's
  outlook:

- WPDH Limited of BBB-/Negative/A-3;
- WPD (South West) of BBB+/Negative/A-2; and
- WPD (South Wales) of BBB+/Negative/A-2.

Moody's

Also in December 2004, Moody's downgraded the senior unsecured long-term debt
  ratings of WPDH Limited from Baa2 to Baa3 with a negative outlook. At the same
  time, Moody's changed the outlook on the senior unsecured long-term debt rating
  of WPD LLP from stable to negative and affirmed its Baa1 senior unsecured long-term
  ratings of WPD (South West) and WPD (South Wales.) The outlook on WPD (South
  West) and WPD (South Wales) is stable.

Moody's indicated that its ratings actions with respect to WPD reflect its
  concern that WPDH Limited has an adjusted net debt/ Regulatory Asset Base (RAB)
  ratio in excess of 95% after pension deficits that are not recoverable through
  the U.K. regulatory process are taken into account. Moody's also indicated that
  the ratings reflect its expectation that adjusted net debt/RAB will fall to
  less than 90% during the course of 2005.

Ratings Triggers

PPL Energy Supply's 2.625% Convertible Senior Notes due 2023 are convertible
  upon the occurrence of certain events, including if the long-term credit ratings
  assigned to the notes by S&P and Moody's are lower than BB and Ba2, or either
  S&P or Moody's no longer rates the notes. The terms of the notes were modified
  in November 2004 to, among other things, require cash settlement of the principal
  amount upon conversion of the notes. These modifications were made in response
  to the FASB's ratification of EITF Issue 04-8, "The Effect of Contingently Convertible
  Instruments on Diluted Earnings per Share." See Note 4 to the Financial Statements
  for more information concerning these modifications, Note 8 for a discussion
  of the consent solicitation that effected these modifications and Note 23 for
  a discussion of EITF Issue 04-8.

PPL Energy Supply and its respective subsidiaries do not have additional material
  liquidity exposures caused by a ratings downgrade below "investment grade" that
  would accelerate the due dates of borrowings. However, if PPL Energy Supply's
  debt ratings were below investment grade at December 31, 2004, PPL Energy Supply
  and its respective subsidiaries would have had to post an additional $118 million
  of collateral to counterparties.

Subsequent Ratings Events

In January 2005, S&P revised its outlooks on the WPD companies to stable
  from negative. S&P attributes this positive change to financial profile
  improvements resulting from the final regulatory outcome published by Ofgem
  in November 2004. At the same time, S&P affirmed the WPD companies' long-term
  and short-term credit ratings.

Also in January 2005, Fitch announced that it downgraded the WPD companies'
  senior unsecured credit ratings by one notch as follows:

- WPDH Limited to BBB- from BBB
- WPD LLP to BBB from BBB+
- WPD (South West) and WPD (South Wales) to BBB+/F2 from A-/F1

Fitch has a stable outlook on all of the WPD companies.

Fitch stated that its downgrade was prompted by the high level of pension adjusted
  leverage at WPD. Fitch acknowledged that WPD's funding plan should reduce its
  pension deficit over time and it expects WPD to proceed with its de-leveraging
  program. However, Fitch indicated that it is not certain enough, due to the
  unpredictability in future pension valuations, that pension adjusted leverage
  will support a BBB rating at WPDH Limited. Fitch indicated that WPD (South West)
  and WPD (South Wales) have been downgraded to maintain a two-notch differential
  with WPDH Limited because it does not believe that the financial ring-fencing
  is restrictive enough to support a three-notch differential.

Off-Balance Sheet Arrangements

PPL Energy Supply provides guarantees for certain affiliate financing arrangements
  that enable certain transactions. Some of the guarantees contain financial and
  other covenants that, if not met, would limit or restrict the affiliates' access
  to funds under these financing arrangements, require early maturity of such
  arrangements or limit the affiliates' ability to enter into certain transactions.
  At this time, PPL Energy Supply believes that these covenants will not limit
  access to the relevant funding sources.

PPL Energy Supply has entered into certain guarantee agreements that are within
  the scope of FIN 45, "Guarantor's Accounting and Disclosure Requirements for
  Guarantees, Including Indirect Guarantees of Indebtedness of Others, an Interpretation
  of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation
  No. 34." See Note 14 to the Financial Statements for a discussion on guarantees.

Risk Management - Energy Marketing & Trading and Other

Market Risk

Background

Market risk is the potential loss PPL Energy Supply may incur as a result of
  price changes associated with a particular financial or commodity instrument.
  PPL Energy Supply is exposed to market risk from:

- commodity price risk for energy and energy-related products associated with
    the sale of electricity, the purchase of fuel for the generating assets and
    energy trading activities;
- interest rate risk associated with variable-rate debt and the fair value
    of fixed-rate debt used to finance operations, as well as the fair value of
    debt securities invested in by PPL Energy Supply's nuclear decommissioning
    fund;
- foreign currency exchange rate risk associated with investments in affiliates
    in Latin America and Europe, as well as purchases of equipment in currencies
    other than U.S. dollars; and
- equity securities price risk associated with the fair value of equity securities
    invested in by PPL Energy Supply's nuclear decommissioning fund.

PPL Energy Supply has a risk management policy approved by PPL's Board of Directors
  to manage market risk and counterparty credit risk. (Credit risk is discussed
  below.) The RMC, comprised of senior management and chaired by the Vice President-Risk
  Management, oversees the risk management function. Key risk control activities
  designed to monitor compliance with risk policies and detailed programs include,
  but are not limited to, credit review and approval, validation of transactions
  and market prices, verification of risk and transaction limits, sensitivity
  analyses, and daily portfolio reporting, including open positions, mark-to-market
  valuations and other risk measurement metrics.

The forward-looking information presented below provides estimates of what
  may occur in the future, assuming certain adverse market conditions, due to
  reliance on model assumptions. Actual future results may differ materially from
  those presented. These disclosures are not precise indicators of expected future
  losses, but only indicators of reasonably possible losses.

Contract Valuation

PPL Energy Supply utilizes forward contracts, futures contracts, options, swaps
  and tolling agreements as part of its risk management strategy to minimize unanticipated
  fluctuations in earnings caused by commodity price, interest rate and foreign
  currency volatility.When available, quoted market prices are used to
  determine the fair value of a commodity or financial instrument. This may include
  exchange prices, the average mid-point bid/ask spreads obtained from brokers,
  or an independent valuation by an external source, such as a bank. However,
  market prices for energy or energy-related contracts may not be readily determinable
  because of market illiquidity. If no active trading market exists, contracts
  are valued using internally developed models, which are then reviewed by an
  independent, internal group. Although PPL Energy Supply believes that its valuation
  methods are reasonable, changes in the underlying assumptions could result in
  significantly different values and realization in future periods.

To record derivatives at their fair value, PPL Energy Supply discounts the
  forward values using LIBOR. Additionally, PPL Energy Supply reduces derivative
  assets' carrying values to recognize differences in counterparty credit quality
  and potential illiquidity in the market:

- The credit adjustment takes into account the probability of default, as
    calculated by an independent service, for each counterparty that has an out-of-the
    money position with PPL Energy Supply.

- The liquidity adjustment takes into account the fact that it may not be
    appropriate to value contracts at the midpoint of the bid/ask spread. PPL
    Energy Supply might have to accept the "bid" price if PPL Energy Supply wanted
    to close an open sales position or PPL Energy Supply might have to accept
    the "ask" price if PPL Energy Supply wanted to close an open purchase position.

Accounting and Reporting

To account for and report on contracts entered into to manage market risk,
  PPL Energy Supply follows the provisions of SFAS 133, "Accounting for Derivative
  Instruments and Hedging Activities," as amended by SFAS 138, "Accounting for
  Certain Derivative Instruments and Certain Hedging Activities," and SFAS 149,
  "Amendment of Statement 133 on Derivative Instruments and Hedging Activities,"
  and interpreted by DIG issues (together, "SFAS 133"), EITF 02-3, "Issues Involved
  in Accounting for Derivative Contracts Held for Trading Purposes and Contracts
  Involved in Energy Trading and Risk Management Activities," and EITF 03-11,
  "Reporting Realized Gains and Losses on Derivative Instruments That Are Subject
  to FASB Statement No. 133 and Not 'Held for Trading Purposes' as Defined in
  Issue No. 02-3." SFAS 133 requires that all derivative instruments be recorded
  at fair value on the balance sheet as an asset or liability (unless they meet
  SFAS 133's criteria for exclusion) and that changes in the derivative's fair
  value be recognized currently in earnings unless specific hedge accounting criteria
  are met.

In April 2003, the FASB issued SFAS 149, which amends and clarifies SFAS 133
  to improve financial accounting and reporting for derivative instruments and
  hedging activities. To ensure that contracts with comparable characteristics
  are accounted for similarly, SFAS 149 clarified the circumstances under which
  a contract with an initial net investment meets the characteristics of a derivative,
  clarified when a derivative contains a financing component, amended the definition
  of an "underlying" and amended certain other existing pronouncements. Additionally,
  SFAS 149 placed additional limitations on the use of the normal purchase or
  normal sale exception. SFAS 149 was effective for contracts entered into or
  modified and for hedging relationships designated after June 30, 2003, except
  certain provisions relating to forward purchases or sales of when-issued securities
  or other securities that did not yet exist. PPL Energy Supply adopted SFAS 149
  as of July 1, 2003. The adoption of SFAS 149 did not have a significant impact
  on PPL Energy Supply.

PPL Energy Supply adopted the final provisions of EITF 02-3 during the fourth
  quarter of 2002. As such, PPL Energy Supply now reflects its net realized and
  unrealized gains and losses associated with all derivatives that are held for
  trading purposes in the "Net energy trading margins" line on the Statement of
  Income. Non-derivative contracts that met the definition of energy trading activities
  as defined by EITF 98-10, "Accounting for Energy Trading and Risk Management
  Activities" are reflected in the financial statements using the accrual method
  of accounting. Under the accrual method of accounting, unrealized gains and
  losses are not reflected in the financial statements. Prior periods were reclassified.
  No cumulative effect adjustment was required upon adoption.

PPL Energy Supply adopted the final provisions of EITF 03-11 prospectively
  as of October 1, 2003. As a result of this adoption, non-trading bilateral sales
  of electricity at major market delivery points are netted with purchases that
  offset the sales at those same delivery points. A major market delivery point
  is any delivery point with liquid pricing available. See Note 17 to the Financial
  Statements for the impact of the adoption of EITF 03-11.

PPL Energy Supply's short-term derivative contracts are recorded as "Price
  risk management assets" and "Price risk management liabilities" on the Balance
  Sheet. Long-term derivative contracts are included in "Other Noncurrent Assets
  - Other" and "Deferred Credits and Other Noncurrent Liabilities - Other."

Accounting Designation

Energy contracts that do not qualify as derivatives receive accrual accounting.
  For energy contracts that meet the definition of a derivative, the circumstances
  and intent existing at the time that energy transactions are entered into determine
  their accounting designation. In addition to energy-related transactions, PPL
  Energy Supply enters into financial interest rate and foreign currency swap
  contracts to hedge interest expense associated with both existing and anticipated
  debt issuances. PPL Energy Supply also enters into foreign currency swap contracts
  to hedge the fair value of firm commitments denominated in foreign currency
  and net investments in foreign operations. As with energy transactions, the
  circumstances and intent existing at the time of the transaction determine the
  contract's accounting designation. These designations are verified by a separate
  internal group on a daily basis. See Note 17 to the Financial Statements for
  a summary of the guidelines that have been provided to the traders who are responsible
  for contract designation for derivative energy contracts due to the adoption
  of SFAS 149.

Commodity Price Risk (Non-Trading)

Commodity price risk is one of PPL Energy Supply's most significant risks due
  to the level of investment that PPL Energy Supply maintains in its generation
  assets, coupled with the volatility of prices for energy and energy-related
  products. Several factors influence price levels and volatilities. These factors
  include, but are not limited to, seasonal changes in demand, weather conditions,
  available generating assets within regions, transportation availability and
  reliability within and between regions, market liquidity, and the nature and
  extent of current and potential federal and state regulations. To hedge the
  impact of market price fluctuations on PPL Energy Supply's energy-related assets,
  liabilities and other contractual arrangements, PPL EnergyPlus sells and purchases
  physical energy at the wholesale level under FERC market-based tariffs throughout
  the U.S. and enters into financial exchange-traded and over-the-counter contracts.
  Because PPL Energy Supply owns or controls generating assets, the majority of
  PPL Energy Supply's energy transactions qualify for accrual or hedge accounting.

Within PPL Energy Supply's hedge portfolio, the decision to enter into energy
  contracts hinges on the expected value of PPL Energy Supply's generation. To
  address this risk, PPL Energy Supply takes a conservative approach in determining
  the number of MWhs that are available to be sold forward. In this regard, PPL
  Energy Supply reduces the maximum potential output that a plant may produce
  by three factors - planned maintenance, unplanned outages and economic conditions.
  The potential output of a plant is first reduced by the amount of unavailable
  generation due to planned maintenance on a particular unit. Another reduction,
  representing the unplanned outage rate, is the amount of MWhs that historically
  are not produced by a plant due to such factors as equipment breakage. Finally,
  the potential output of certain plants (like peaking units) are reduced because
  their higher cost of production will not allow them to economically run during
  all hours.

PPL Energy Supply's non-trading portfolio also includes full requirements energy
  contracts. The net obligation to serve these contracts changes minute by minute.
  PPL Energy Supply analyzes historical on-peak and off-peak usage patterns, as
  well as spot prices and weather patterns, to determine a monthly level of a
  block of electricity that best fits the usage patterns in order to minimize
  earnings volatility. On a forward basis, PPL Energy Supply reserves a block
  amount of generation for full requirements energy contracts that is expected
  to be the best match with their anticipated usage patterns and energy peaks.
  Anticipated usage patterns and peaks are affected by expected load growth, regional
  economic drivers and seasonality.

PPL Energy Supply's commodity derivative contracts that qualify for hedge accounting
  treatment mature at various times through 2010. The following chart sets forth
  PPL Energy Supply's net fair market value of these contracts as of December 31:

|                                                                           |  | Gains (Losses) |    
|-------------------------------------------------------------------------- |  | -------------- | ---
|                                                                           |  |                |    
|                                                                           |  | 2004           |    
|                                                                           |  |                |    
|Fair value of contracts outstanding at
        the beginning of the period |  | $              | 86 
|                                                                           |  |                |    
|Contracts realized or otherwise settled
        during the period          |  |                | (66
|                                                                           |  |                |    
|Fair value of new contracts at inception                                   |  |                |    
|                                                                           |  |                |    
|Other changes in fair values                                               |  |                | (29
|                                                                           |  |                |    
|Fair value of contracts outstanding at
        the end of the period       |  | $              | (9 
|                                                                           |  |                |    

The following chart segregates estimated fair values of PPL Energy Supply's
  commodity derivative contracts that qualify for hedge accounting treatment at
  December 31, 2004, based on whether the fair values are determined by quoted
  market prices or other more subjective means.

|                                                                     |  | Fair Value
        of Contracts at Period-End
        Gains (Losses) |   
|-------------------------------------------------------------------- |  | -------------------------------------------------------------------- | --
|                                                                     |  |                                                                      |   
|                                                                     |  | Maturity
        Less Than
        1 Year                            |   
|                                                                     |  |                                                                      |   
|Source of Fair Value                                                 |  |                                                                      |   
|                                                                     |  |                                                                      |   
|Prices actively quoted                                               |  | $                                                                    | 4 
|                                                                     |  |                                                                      |   
|Prices provided by other external sources                            |  |                                                                      | 15
|                                                                     |  |                                                                      |   
|Prices based on models and other valuation
        methods           |  |                                                                      |   
|                                                                     |  |                                                                      |   
|Fair value of contracts outstanding at
        the end of the period |  | $                                                                    | 19
|                                                                     |  |                                                                      |   
|                                                                     |  |                                                                      |   

The "Prices actively quoted" category includes the fair value of exchange-traded
  natural gas futures contracts quoted on the New York Mercantile Exchange (NYMEX).
  The NYMEX has currently quoted prices through 2010.

The "Prices provided by other external sources" category includes PPL Energy
  Supply's forward positions and options in natural gas and power and natural
  gas basis swaps at points for which over-the-counter (OTC) broker quotes are
  available. The fair value of electricity positions recorded above use the midpoint
  of the bid/ask spreads obtained through OTC brokers. On average, OTC quotes
  for forwards and swaps of natural gas and power extend one and two years into
  the future.

The "Prices based on models and other valuation methods" category includes
  the value of transactions for which an internally developed price curve was
  constructed as a result of the long-dated nature of the transaction or the illiquidity
  of the market point, or the value of options not quoted by an exchange or OTC
  broker. Additionally, this category includes "strip" transactions whose prices
  are obtained from external sources and then modeled to monthly prices as appropriate.

Because of PPL Energy Supply's efforts to hedge the value of the energy from
  its generation assets, PPL Energy Supply sells electricity and buys fuel on
  a forward basis, resulting in open contractual positions. If PPL Energy Supply
  were unable to deliver firm capacity and energy or to accept the delivery of
  fuel under its agreements, under certain circumstances it could be required
  to pay damages. These damages would be based on the difference between the market
  price and the contract price of the commodity. Depending on price volatility
  in the wholesale energy markets, such damages could be significant. Extreme
  weather conditions, unplanned power plant outages, transmission disruptions,
  non-performance by counterparties (or their counterparties) with which it has
  energy contracts and other factors could affect PPL Energy Supply's ability
  to meet its obligations, or cause significant increases in the market price
  of replacement energy. Although PPL Energy Supply attempts to mitigate these
  risks, there can be no assurance that it will be able to fully meet its firm
  obligations, that it will not be required to pay damages for failure to perform,
  or that it will not experience counterparty non-performance in the future.

As of December 31, 2004, PPL Energy Supply estimated that a 10% adverse movement
  in market prices across all geographic areas and time periods would have decreased
  the value of the commodity contracts in its non-trading portfolio by approximately
  $165 million, compared to a decrease of $146 million at December 31, 2003. However,
  the change in the value of the non-trading portfolio would have been substantially
  offset by an increase in the value of the underlying commodity, the electricity
  generated, because these contracts serve to reduce the market risk inherent
  in the generation of electricity. Additionally, the value of PPL Energy Supply's
  unsold generation would be improved. Because PPL Energy Supply's electricity
  portfolio is generally in a net sales position, the adverse movement in prices
  is usually an increase in prices. Conversely, because PPL Energy Supply's commodity
  fuels portfolio is generally in a net purchase position, the adverse movement
  in prices is usually a decrease in prices. If both of these scenarios happened,
  the implied margins for the unsold generation would increase.

In accordance with its marketing strategy, PPL Energy Supply does not completely
  hedge its generation output or fuel requirements. PPL Energy Supply estimates
  that for its entire portfolio, including all generation and physical and financial
  energy positions, a 10% adverse change in power prices across all geographic
  zones and time periods will decrease expected 2005 gross margins by about $2
  million. Similarly, a 10% adverse movement in all fossil fuel prices will decrease
  2005 gross margins by $5 million.

PPL Energy Supply also executes energy contracts to take advantage of market
  opportunities. As a result, PPL Energy Supply may at times create a net open
  position in its portfolio that could result in significant losses if prices
  do not move in the manner or direction anticipated. The margins from these trading
  activities are shown in the Statement of Income as "Net energy trading margins."

Commodity Price Risk (Trading)

PPL Energy Supply's trading contracts mature at various times through 2006.
  The following chart sets forth PPL Energy Supply's net fair market value of
  trading contracts as of December 31:

|                                                                           |  | Gains (Losses) |    
|-------------------------------------------------------------------------- |  | -------------- | ---
|                                                                           |  |                |    
|                                                                           |  | 2004           |    
|                                                                           |  |                |    
|Fair value of contracts outstanding at
        the beginning of the period |  | $              | 3  
|                                                                           |  |                |    
|Contracts realized or otherwise settled
        during the period          |  |                | (14
|                                                                           |  |                |    
|Fair value of new contracts at inception                                   |  |                | 1  
|                                                                           |  |                |    
|Other changes in fair values                                               |  |                | 19 
|                                                                           |  |                |    
|Fair value of contracts outstanding at
        the end of the period       |  | $              | 9  
|                                                                           |  |                |    

PPL Energy Supply will reverse approximately $2 million of the $9 million unrealized
  trading gains over the first three months of 2005 as the transactions are realized.

The following chart segregates estimated fair values of PPL Energy Supply's
  trading portfolio at December 31, 2004, based on whether the fair values are
  determined by quoted market prices or other more subjective means.

|                                                                     |  | Fair Value
        of Contracts at Period-End
        Gains (Losses) |   
|-------------------------------------------------------------------- |  | -------------------------------------------------------------------- | --
|                                                                     |  |                                                                      |   
|                                                                     |  | Maturity
        Less Than
        1 year                            |   
|                                                                     |  |                                                                      |   
|Source of Fair Value                                                 |  |                                                                      |   
|                                                                     |  |                                                                      |   
|Prices actively quoted                                               |  | $                                                                    | 3 
|                                                                     |  |                                                                      |   
|Prices provided by other external sources                            |  |                                                                      | 5 
|                                                                     |  |                                                                      |   
|Prices based on models and other valuation
        methods           |  |                                                                      | (3
|                                                                     |  |                                                                      |   
|Fair value of contracts outstanding at
        the end of the period |  | $                                                                    | 5 
|                                                                     |  |                                                                      |   
|                                                                     |  |                                                                      |   

See "Commodity Price Risk (Non-trading)" for information on the various sources
  of fair value.

As of December 31, 2004, PPL Energy Supply estimated that a 10% adverse movement
  in market prices across all geographic areas and time periods would have decreased
  the value of the commodity contracts in its trading portfolio by $5 million,
  compared to a decrease of $3 million at December 31, 2003.

Interest Rate Risk

PPL Energy Supply and its subsidiaries have issued debt to finance their operations.
  PPL manages interest rate risk for PPL Energy Supply by using various financial
  derivative products to adjust the mix of fixed and floating interest rates in
  its debt portfolio, adjust the duration of its debt portfolio and lock in U.S.
  Treasury rates (and interest rate spreads over treasuries) in anticipation of
  future financing, when appropriate. Risk limits under the risk management program
  are designed to balance risk exposure to volatility in interest expense and
  changes in the fair value of PPL Energy Supply's debt portfolio due to changes
  in the absolute level of interest rates.

At December 31, 2004, PPL Energy Supply's potential annual exposure to increased
  interest expense, based on a 10% increase in interest rates, was estimated at
  $1 million, and was insignificant at December 31, 2003.

PPL Energy Supply is also exposed to changes in the fair value of its domestic
  and international debt portfolio. At December 31, 2004, PPL Energy Supply
  estimated that its potential exposure to a change in the fair value of its debt
  portfolio, through a 10% adverse movement in interest rates, was approximately
  $156 million, compared to $143 million at December 31, 2003.

PPL and PPL Energy Supply utilize various risk management instruments to reduce
  PPL Energy Supply's exposure to adverse interest rate movements for future anticipated
  financing. While PPL Energy Supply is exposed to changes in the fair value of
  these instruments, they are designed such that any economic loss in value should
  generally be offset by interest rate savings at the time the future anticipated
  financing is completed. At December 31, 2004, PPL Energy Supply had none of
  these instruments outstanding. At December 31, 2003, PPL Energy Supply estimated
  that its potential exposure to a change in the fair value of these instruments,
  through a 10% adverse movement in interest rates, was approximately $1 million.

PPL and PPL Energy Supply also utilize various risk management instruments
  to adjust the mix of fixed and floating interest rates in PPL Energy Supply's
  debt portfolio. While PPL Energy Supply is exposed to changes in the fair value
  of these instruments, any change in market value is recorded with an equal and
  offsetting change in the value of the debt being hedged. At December 31, 2004,
  PPL Energy Supply estimated that its potential exposure to a change in the fair
  value of these instruments, through a 10% adverse movement in interest rates,
  was approximately $2 million, compared to an exposure of $1 million at December
  31, 2003.

Foreign Currency Risk

PPL Energy Supply is exposed to foreign currency risk, primarily through investments
  in affiliates in Latin America and Europe. In addition, PPL Energy Supply may
  make purchases of equipment in currencies other than U.S. dollars.

PPL has adopted a foreign currency risk management program designed to hedge
  certain foreign currency exposures, including firm commitments, recognized assets
  or liabilities and net investments. In addition, PPL enters into financial instruments
  to protect against foreign currency translation risk.

PPL executed net forward sale transactions for £13.7 million to hedge
  a portion of its net investment in WPDH Limited. The estimated value of these
  agreements as of December 31, 2004, was $2 million, being the amount PPL would
  pay to terminate the transactions.

WPDH Limited held a net position in cross-currency swaps totaling $1.1 billion
  to hedge the interest payments and value of its U.S. dollar-denominated bonds.
  The estimated value of this position at December 31, 2004, being the amount
  PPL would pay to terminate it, including accrued interest, was $274 million.

On the Statement of Income, gains and losses associated with hedges of interest
  payments denominated in foreign currencies are reflected in "Interest Expense."
  Gains and losses associated with the purchase of equipment are reflected in
  "Depreciation." Gains and losses associated with net investment hedges remain
  in accumulated other comprehensive loss on the Balance Sheet until the investment
  is disposed.

Nuclear Decommissioning Fund - Securities Price Risk

In connection with certain NRC requirements, PPL Susquehanna maintains trust
  funds to fund certain costs of decommissioning the Susquehanna station. As of
  December 31, 2004, these funds were invested primarily in domestic equity
  securities and fixed-rate, fixed-income securities and are reflected at fair
  value on PPL Energy Supply's Balance Sheet. The mix of securities is designed
  to provide returns to be used to fund Susquehanna's decommissioning and to compensate
  for inflationary increases in decommissioning costs. However, the equity securities
  included in the trusts are exposed to price fluctuation in equity markets, and
  the values of fixed-rate, fixed-income securities are exposed to changes in
  interest rates. PPL Susquehanna actively monitors the investment performance
  and periodically reviews asset allocation in accordance with its nuclear decommissioning
  trust policy statement. At December 31, 2004, a hypothetical 10% increase
  in interest rates and a 10% decrease in equity prices would have resulted in
  an estimated $30 million reduction in the fair value of the trust assets, as
  compared to a $24 million reduction at December 31, 2003. See Note 6 to the
  Financial Statements for more information regarding the nuclear decommissioning
  trust funds.

Credit Risk

Credit risk relates to the risk of loss that PPL Energy Supply would incur
  as a result of non-performance by counterparties of their contractual obligations.
  PPL Energy Supply maintains credit policies and procedures with respect to counterparties
  (including requirements that counterparties maintain certain credit ratings
  criteria) and requires other assurances in the form of credit support or collateral
  in certain circumstances in order to limit counterparty credit risk. However,
  PPL Energy Supply has concentrations of suppliers and customers among electric
  utilities, natural gas distribution companies and other energy marketing and
  trading companies. These concentrations of counterparties may impact PPL Energy
  Supply's overall exposure to credit risk, either positively or negatively, in
  that counterparties may be similarly affected by changes in economic, regulatory
  or other conditions. As discussed above in "Contract Valuation," PPL Energy
  Supply records certain non-performance reserves to reflect the probability that
  a counterparty with contracts that are out of the money (from the counterparty's
  standpoint) will default in its performance, in which case PPL Energy Supply
  would have to sell into a lower-priced market or purchase from a higher-priced
  market. These reserves are reflected in the fair value of assets recorded in
  "Price risk management assets" on the Balance Sheet. PPL Energy Supply also
  records reserves to reflect the probability that a counterparty will not make
  payments for deliveries PPL Energy Supply has made but not yet billed. These
  reserves are reflected in "Unbilled revenues" on the Balance Sheet. PPL Energy
  Supply has also established a reserve with respect to certain sales to the California
  ISO for which PPL Energy Supply has not yet been paid, as well as a reserve
  related to PPL Energy Supply's exposure as a result of the Enron bankruptcy,
  which are reflected in "Accounts receivable" on the Balance Sheet. See Notes
  14 and 17 to the Financial Statements.

Related Party Transactions

PPL Energy Supply is not aware of any material ownership interests or operating
  responsibility by senior management of PPL Energy Supply in outside partnerships,
  including leasing transactions with variable interest entities, or other entities
  doing business with PPL Energy Supply.

For additional information on related party transactions, see Note 15 to the
  Financial Statements.

Capital Expenditure Requirements

The schedule below shows PPL Energy Supply's current capital expenditure projections
  for the years 2005-2009 and actual spending for the year 2004:

|                                          |                                                  | Actual                          |                            | Projected |    
|----------------------------------------- | ------------------------------------------------ | ------------------------------- | -------------------------- | --------- | ---
|                                          |                                                  |                                 |                            |           |    
|                                          |                                                  | 2004                            |                            | 2005      |    
|                                          |                                                  |                                 |                            |           |    
|Construction expenditures (a)
        (b) |                                                  |                                 |                            |           |    
|                                          |                                                  |                                 |                            |           |    
|                                          | Generating facilities                            |                                 | $                          | 156       |    
|                                          |                                                  |                                 |                            |           |    
|                                          | Transmission and distribution
        facilities |                                 |                            | 275       |    
|                                          |                                                  |                                 |                            |           |    
|                                          | Environmental                                    |                                 |                            | 23        |    
|                                          |                                                  |                                 |                            |           |    
|                                          | Other                                            |                                 |                            | 19        |    
|                                          |                                                  |                                 |                            |           |    
|                                          |                                                  | Total Construction Expenditures |                            |           | 473
|                                          |                                                  |                                 |                            |           |    
|Nuclear fuel                              |                                                  |                                 | 58                         |           |    
|                                          |                                                  |                                 |                            |           |    
|                                          |                                                  |                                 | Total Capital Expenditures |           | $  
|                                          |                                                  |                                 |                            |           |    

|(a) |  | Construction expenditures include capitalized
        interest, which is expected to be less than $16 million in each of the
        years 2005-2009.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | This information excludes any potential investments
        by PPL Global for new projects.                                                          

PPL Energy Supply's capital expenditure projections for the years 2005-2009
  total about $3.7 billion. Capital expenditure plans are revised periodically
  to reflect changes in market and asset regulatory conditions. PPL Energy Supply
  also leases vehicles, personal computers and other equipment as described in
  Note 10 to the Financial Statements. See Note 14 for additional information
  regarding potential capital expenditures for environmental projects.

Acquisitions, Development and Divestitures

From time-to-time, PPL Energy Supply and its subsidiaries are involved in negotiations
  with third parties regarding acquisitions, joint ventures and other arrangements
  which may or may not result in definitive agreements. See Note 9 to the Financial
  Statements for information regarding recent acquisitions and development activities.

At December 31, 2004, PPL Global had investments in foreign facilities, including
  consolidated investments in WPD, Emel, EC and others. See Note 3 to the Financial
  Statements for information on unconsolidated investments accounted for under
  the equity method.

In connection with an on-going review of its non-core international minority
  ownership investments, PPL Global sold its interest in CGE in 2004. See Note
  9 to the Financial Statements for additional information.

PPL Energy Supply is currently planning incremental capacity increases of 255
  MW at several existing domestic generating facilities.

PPL Energy Supply is continuously reexamining development projects based on
  market conditions and other factors to determine whether to proceed with these
  projects, sell them, cancel them, expand them, execute tolling agreements or
  pursue other opportunities.

Environmental Matters

See Note 14 to the Financial Statements for a discussion of environmental matters.

Competition

See "Item 1. Business - Competition," for a discussion of competitive factors
  affecting PPL Energy Supply.

New Accounting Standards

See Note 23 to the Financial Statements for information on new accounting standards
  adopted in 2004 or pending adoption.

Application of Critical Accounting Policies

PPL Energy Supply's financial condition and results of operations are impacted
  by the methods, assumptions and estimates used in the application of critical
  accounting policies. The following accounting policies are particularly important
  to the financial condition or results of operations of PPL Energy Supply, and
  require estimates or other judgments of matters inherently uncertain. Changes
  in the estimates or other judgments included within these accounting policies
  could result in a significant change to the information presented in the financial
  statements. (These accounting policies are also discussed in Note 1 to the Financial
  Statements.) PPL's senior management has reviewed these critical accounting
  policies, and the estimates and assumptions regarding them, with its Audit Committee.
  In addition, PPL's senior management has reviewed the following disclosures
  regarding the application of these critical accounting policies with the Audit
  Committee.

See "Risk Management - Energy Marketing & Trading and Other" in Financial
      Condition.

As described in Note 12 to the Financial Statements, PPL Energy Supply subsidiaries
  sponsor various pension and other postretirement plans and participate in, and
  are allocated a significant portion of the liability and net periodic pension
  cost of the PPL Retirement Plan and the PPL Postretirement Benefit Plan. PPL
  and PPL Energy Supply follow the guidance of SFAS 87, "Employers' Accounting
  for Pensions," and SFAS 106, "Employers' Accounting for Postretirement Benefits
  Other Than Pensions," when accounting for these pension and other postretirement
  benefits. Under these accounting standards, assumptions are made regarding the
  valuation of benefit obligations and the performance of plan assets. Delayed
  recognition of differences between actual results and expected or estimated
  results is a guiding principle of these standards. This delayed recognition
  of actual results allows for a smoothed recognition of changes in benefit obligations
  and plan performance over the working lives of the employees who benefit under
  the plans. The primary assumptions are as follows:

- Discount Rate - The discount rate is used in calculating the present value
    of benefits, which are based on projections of benefit payments to be made
    in the future.

- Expected Return on Plan Assets - Management projects the future return on
    plan assets considering prior performance, but primarily based upon the plans'
    mix of assets and expectations for the long-term returns on those asset classes.
    These projected returns reduce the net benefit costs PPL Energy Supply records
    currently.

- Rate of Compensation Increase - Management projects employees' annual pay
    increases, which are used to project employees' pension benefits at retirement.

- Health Care Cost Trend Rate - Management projects the expected increases
    in the cost of health care.

In selecting discount rates, PPL and PPL Energy Supply consider fixed-income
  security yield rates. At December 31, 2004, PPL and PPL Energy Supply decreased
  the discount rate for their domestic plans from 6.25% to 5.75% as a result of
  decreased domestic fixed-income security returns. The discount rate remained
  at 5.50% at December 31, 2004 for PPL Energy Supply's international pension
  plans.

In selecting an expected return on plan assets, PPL and PPL Energy Supply consider
  tax implications, past performance and economic forecasts for the types of investments
  held by the plans. At December 31, 2004, PPL and PPL Energy Supply's expected
  return on plan assets for their domestic pension plans remained at 9.0%. For
  its international plans, PPL Energy Supply maintained 8.30% as the expected
  return on plan assets at December 31, 2004.

In selecting a rate of compensation increase, PPL and PPL Energy Supply consider
  past experience in light of movements in inflation rates. At December 31, 2004,
  PPL and PPL Energy Supply's rates of compensation increase remained at 4.0%
  for their domestic plans. For its international plans, PPL Energy Supply's rate
  of compensation increase remained at 3.75% at December 31, 2004.

In selecting health care cost trend rates, PPL and PPL Energy Supply consider
  past performance and forecasts of health care costs. At December 31, 2004, PPL
  and PPL Energy Supply's health care cost trend rates were 10% for 2005, gradually
  declining to 5.0% for 2010.

A variance in the assumptions listed above could have a significant impact
  on projected benefit obligations, accrued pension and other postretirement benefit
  liabilities, reported annual net periodic pension and other postretirement benefit
  cost and other comprehensive income (OCI). The following chart reflects the
  sensitivities in the 2004 Financial Statements associated with a change in certain
  assumptions. While the chart below reflects either an increase or decrease in
  each assumption, the inverse of this change would impact the projected benefit
  obligation, accrued pension and other postretirement benefit liabilities, reported
  annual net periodic pension and other postretirement benefit cost and OCI by
  a similar amount in the opposite direction. Each sensitivity below reflects
  an evaluation of the change based solely on a change in that assumption.

|                                |  | Increase
        (Decrease)  |        
|------------------------------- |  | ---------------------------- | -------
|                                |  |                              |        
|Actuarial Assumption            |  | Change in
        Assumption |        
|                                |  |                              |        
|Discount Rate                   |  |                              | (0.25)%
|                                |  |                              |        
|Expected Return on Plan Assets  |  |                              | (0.25)%
|                                |  |                              |        
|Rate of Compensation Increase   |  |                              | 0.25%  
|                                |  |                              |        
|Health Care Cost Trend Rate (b) |  |                              | 1.0%   
|                                |  |                              |        

|(a) |  | Excludes the impact of additional minimum
        liability.
|--- |  | ------------------------------------------------------------
|(b) |  | Only impacts other postretirement benefits.                 

The total net pension and other postretirement benefit obligation for PPL Energy
  Supply's plans was $473 million as of December 31, 2004. PPL Energy Supply recognized
  an aggregate net accrued pension and other postretirement benefit liability
  of $327 million on its Balance Sheet as of December 31, 2004, for its plans.
  The total obligation is not fully reflected in the current financial statements
  due to the delayed recognition criteria of the accounting standards for these
  obligations. At December 31, 2004, PPL Energy Supply also reflected a net
  liability of $58 million on its Balance Sheet for pension liabilities and prepaid
  other postretirement benefit costs allocated from plans sponsored by PPL Services.

In 2004, PPL Energy Supply was allocated and recognized net periodic pension
  and other postretirement income credited to operating expenses of $19 million.
  This amount represents a $6 million decrease versus the credit recognized during
  2003. This decrease was primarily due to the decrease in the discount rate at
  December 31, 2003.

As a result of the decrease in the assumed discount rate at December 31, 2004,
  for its domestic pension plans and the increase in the obligations for its international
  plans determined by their 2004 valuations, PPL Energy Supply was required to
  increase its recognized additional minimum pension liability. Recording the
  change in the additional minimum liability resulted in a $51 million increase
  to the pension-related charge to OCI, net of taxes, translation adjustment and
  unrecognized prior service costs, with no effect on net income. This charge
  increased the pension-related balance in OCI, which is a reduction to Member's
  Equity, to $360 million at December 31, 2004. The charges to OCI will reverse
  in future periods if the fair value of trust assets exceeds the accumulated
  benefit obligation.

Refer to Note 12 to the Financial Statements for additional information regarding
  pension and other postretirement benefits.

PPL Energy Supply performs impairment analyses for long-lived assets, including
  intangibles, that are subject to depreciation or amortization in accordance
  with SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."
  PPL Energy Supply tests for impairment whenever events or changes in circumstances
  indicate that a long-lived asset's carrying value may not be recoverable. Examples
  of such events or changes in circumstances are:

- a significant decrease in the market price of an asset;
- a significant adverse change in the manner in which an asset is being
    used or in its physical condition;
- a significant adverse change in legal factors or in the business climate;
- an accumulation of costs significantly in excess of the amount originally
    expected for the acquisition or construction of an asset;
- a current-period operating or cash flow loss combined with a history of
    losses or a forecast that demonstrates continuing losses; or
- a current expectation that, more likely than not, an asset will be sold
    or otherwise disposed of before the end of its previously estimated useful
    life.

For a long-lived asset, an impairment exists when the carrying value exceeds
  the sum of the estimated undiscounted cash flows expected to result from the
  use and eventual disposition of the asset. If the asset is impaired, an impairment
  loss is recorded to adjust the asset's carrying value to its estimated fair
  value.

In determining asset impairments, management must make significant judgments
  to estimate future cash flows, the useful lives of long-lived assets, the fair
  value of the assets and management's intent to use the assets. Changes in assumptions
  and estimates included within the impairment reviews could result in significantly
  different results than those identified and recorded in the financial statements.
  For determining fair value, the FASB has indicated that quoted market prices
  in active markets are the best evidence of fair value. However, when market
  prices are unavailable, other valuation techniques may be used. PPL Energy Supply
  has generally used a present value technique (i.e., discounted cash flow). Discounted
  cash flow is calculated by estimating future cash flow streams and applying
  appropriate discount rates to determine the present value of the cash flow streams.

PPL Energy Supply has determined that when alternative courses of action to
  recover the carrying value of a long-lived asset are being considered, it uses
  estimated cash flows from the most likely approach to assess impairment whenever
  one scenario is clearly the most likely outcome. If no scenario is clearly most
  likely, then a probability-weighted approach is used taking into consideration
  estimated cash flows from the alternative scenarios. For assets tested for impairment
  as of the balance sheet date, the estimates of future cash flows used in that
  test consider the likelihood of possible outcomes that existed at the balance
  sheet date, including the assessment of the likelihood of the future sale of
  the assets. That assessment made as of the balance sheet date is not revised
  based on events that occur after the balance sheet date.

During 2004, PPL Energy Supply and its subsidiaries evaluated certain gas-fired
  generation assets for impairment, as events and circumstances indicated that
  the carrying value of these assets may not be recoverable. PPL Energy Supply
  did not record an impairment of these gas-fired generation assets in 2004. For
  these impairment analyses, the most significant assumption was the estimate
  of future cash flows. PPL Energy Supply estimates future cash flows using information
  from its corporate business plan adjusted for any recent sales or purchase commitments.
  Key factors that impact cash flows include projected prices for electricity
  and gas as well as firm sales and purchase commitments. A 10% decrease in estimated
  future cash flows for certain gas-fired generation assets would have resulted
  in an impairment charge.

In June 2004, a subsidiary of PPL Generation agreed to sell the 450 MW Sundance
  power plant to Arizona Public Service Company, subject to the receipt of various
  state and federal regulatory approvals and customary closing conditions. At
  December 31, 2004, as a result of the significant regulatory approvals still
  needed to complete the sale, PPL management did not believe that it was more
  likely than not that the sale would be consummated and concluded that no impairment
  charge was required at that time. See Note 9 to the Financial Statements for
  additional information on the potential sale of Sundance.

PPL Energy Supply performs impairment analyses for goodwill in accordance with
  SFAS 142, "Goodwill and Other Intangible Assets." PPL Energy Supply performs
  an annual impairment test for goodwill, or more frequently if events or changes
  in circumstances indicate that the asset might be impaired.

SFAS 142 requires goodwill to be tested for impairment at the reporting unit
  level. PPL Energy Supply has determined its reporting units to be one level
  below its operating segments.

Goodwill is tested for impairment using a two-step approach. The first step
  of the goodwill impairment test compares the estimated fair value of a reporting
  unit with its carrying value, including goodwill. If the estimated fair value
  of a reporting unit exceeds its carrying value, goodwill of the reporting unit
  is considered not impaired. If the carrying value exceeds the estimated fair
  value of the reporting unit, the second step is performed to measure the amount
  of impairment loss, if any.

The second step requires a calculation of the implied fair value of goodwill.
  The implied fair value of goodwill is determined in the same manner as the amount
  of goodwill in a business combination. That is, the estimated fair value of
  a reporting unit is allocated to all of the assets and liabilities of that unit
  as if the reporting unit had been acquired in a business combination and the
  estimated fair value of the reporting unit was the price paid to acquire the
  reporting unit. The excess of the estimated fair value of a reporting unit over
  the amounts assigned to its assets and liabilities is the implied fair value
  of goodwill. The implied fair value of the reporting unit goodwill is then compared
  with the carrying value of that goodwill. If the carrying value exceeds the
  implied fair value, an impairment loss is recognized in an amount equal to that
  excess. The loss recognized cannot exceed the carrying value of the reporting
  unit's goodwill.

PPL Energy Supply completed its annual goodwill impairment test in the fourth
  quarter of 2004. This test did not require any second-step assessments and did
  not result in any impairments. PPL Energy Supply's most significant assumptions
  surrounding the goodwill impairment test relate to the estimates of reporting
  unit fair values. PPL Energy Supply estimated fair values primarily based upon
  discounted cash flows. Although a full two-step evaluation was not completed,
  a decrease in the forecasted cash flows of 10% or an increase of the discount
  rates by 25 basis points would have resulted in the carrying value of certain
  reporting units exceeding their estimated fair values, indicating a potential
  impairment of goodwill.

PPL Energy Supply applies the provisions of SFAS 13, "Accounting for Leases,"
      to all leasing transactions. In addition, PPL Energy Supply applies the
      provisions of numerous other accounting pronouncements issued by the FASB
      and the EITF that provide specific guidance and additional requirements
      related to accounting for various leasing arrangements. In general, there
      are two types of leases from a lessee's perspective: operating leases -
      leases accounted for off-balance sheet; and capital leases - leases capitalized
      on the balance sheet.

In accounting for leases, management makes various assumptions, including
      the discount rate, the fair market value of the leased assets and the estimated
      useful life, in determining whether a lease should be classified as operating
      or capital. Changes in these assumptions could result in the difference
      between whether a lease is determined to be an operating lease or a capital
      lease, thus significantly impacting the amounts to be recognized in the
      financial statements.

In addition to uncertainty inherent in management's assumptions, leasing
      transactions and the related accounting rules become increasingly complex
      when they involve: real estate and/or related integral equipment; sale/leaseback
      accounting (leasing transactions where the lessee previously owned the leased
      assets); synthetic leases (leases that qualify for operating lease treatment
      for book accounting purposes and financing treatment for tax accounting
      purposes); and lessee involvement in the construction of leased assets.

At December 31, 2004, PPL Energy Supply continued to participate in a significant
      sale/leaseback transaction. In July 2000, PPL Montana sold its interest
      in the Colstrip generating plant to owner lessors who are leasing the assets
      back to PPL Montana under four 36-year operating leases. This transaction
      is accounted for as an operating lease in accordance with current rules
      related to sale/leaseback arrangements. If for any reason this transaction
      did not meet the requirements for off-balance sheet operating lease treatment
      as a sale/leaseback, PPL Energy Supply would have recorded approximately
      $290 million of additional assets and approximately $331 million of additional
      liabilities on its balance sheet at December 31, 2004, and would have recorded
      additional expenses currently estimated at $8 million, after-tax, in 2004.

See Note 10 to the Financial Statements for additional information related
      to operating leases.

PPL Energy Supply periodically accrues losses for the estimated impacts of
  various conditions, situations or circumstances involving uncertain outcomes.
  These events are called "contingencies," and PPL Energy Supply's accounting
  for such events is prescribed by SFAS 5, "Accounting for Contingencies." SFAS
  5 defines a contingency as "an existing condition, situation, or set of circumstances
  involving uncertainty as to possible gain or loss to an enterprise that will
  ultimately be resolved when one or more future events occur or fail to occur."

For loss contingencies, the loss must be accrued if (1) information is available
  that indicates it is "probable" that the loss has been incurred, given the likelihood
  of the uncertain future events and (2) the amount of the loss can be reasonably
  estimated. FASB defines "probable" as cases in which "the future event or events
  are likely to occur." SFAS 5 does not permit the accrual of contingencies that
  might result in gains. PPL Energy Supply continuously assesses potential loss
  contingencies for environmental remediation, litigation claims, income taxes,
  regulatory penalties and other events.

PPL Energy Supply also has accrued estimated losses on long-term purchase commitments
  when significant events have occurred. For example, estimated losses were accrued
  when long-term purchase commitments were assumed under asset acquisition agreements
  and when PPL Electric's generation business was deregulated. Under regulatory
  accounting, PPL Electric recorded the above-market cost of energy purchases
  from NUGs as part of its purchased power costs on an as-incurred basis, since
  these costs were recovered in regulated rates. When the generation business
  was deregulated, the estimated loss associated with these long-term purchase
  commitments to make above-market NUG purchases was recorded because PPL Electric
  was committed to purchase electricity at above market prices but it could no
  longer recover these costs in regulated rates.

The accounting aspects of estimated loss accruals include: (1) the initial
  identification and recording of the loss; (2) the determination of triggering
  events for reducing a recorded loss accrual; and (3) the on-going assessment
  as to whether a recorded loss accrual is sufficient. All three aspects of accounting
  for loss accruals - the initial identification and recording of a probable loss,
  the identification of triggering events to reduce the loss accrual, and the
  ongoing assessment of the sufficiency of a recorded loss accrual - require significant
  judgment by PPL Energy Supply's management.

Initial Identification and Recording of the Loss Accrual

PPL Energy Supply uses its internal expertise and outside experts (such as
  lawyers, tax specialists and engineers), as necessary, to help estimate the
  probability that a loss has been incurred and the amount (or range) of the loss.

PPL Energy Supply has identified certain events which could give rise to a
  loss, but which do not meet the conditions for accrual under SFAS 5. SFAS 5
  requires disclosure, but not a recording, of potential losses when it is "reasonably
  possible" that a loss has been incurred. The FASB defines "reasonably possible"
  as cases in which "the chance of the future event or events occurring is more
  than remote but less than likely." See Note 14 to the Financial Statements for
  disclosure of potential loss contingencies, most of which have not met the criteria
  for accrual under SFAS 5.

Reducing Recorded Loss Accruals

When an estimated loss is accrued, PPL Energy Supply identifies, where applicable,
  the triggering events for subsequently reducing the loss accrual. The triggering
  events generally occur when the contingency has been resolved and the actual
  loss is incurred, or when the risk of loss has diminished or been eliminated.
  The following are some of the triggering events that provide for the reduction
  of certain recorded loss accruals:

- Certain loss accruals are systematically reduced based on the expiration
    of contract terms. An example of this is the loss accrual for above-market
    NUG purchase commitments, which is described below. This loss accrual is being
    reduced over the lives of the NUG purchase contracts.

- Allowances for excess or obsolete inventory are reduced as the inventory
    items are pulled from the warehouse shelves and sold as scrap or otherwise
    disposed.

- Allowances for uncollectible accounts are reduced when accounts are written
    off after prescribed collection procedures have been exhausted or when underlying
    amounts are ultimately collected.

- Environmental and other litigation contingencies are reduced when the contingency
    is resolved and PPL Energy Supply makes actual payments or the loss is no
    longer considered probable.

On-Going Assessment of Recorded Loss Accruals

PPL Energy Supply reviews its loss accruals on a regular basis to assure that
  the recorded potential loss exposures are sufficient. This involves on-going
  communication and analyses with internal and external legal counsel, engineers,
  tax specialists, operation management and other parties.

The largest loss accrual on PPL Energy Supply's balance sheet, and the loss
  accrual that changed most significantly in 2004, was for an impairment of above-market
  NUG purchase commitments. This loss accrual reflects the estimated difference
  between the above-market contract terms, under the purchase commitments, and
  the fair value of the electricity to be purchased. This loss accrual was originally
  recorded at $854 million in 1998, when PPL Electric's generation business was
  deregulated. This loss accrual was transferred to PPL EnergyPlus in the July
  1, 2000, corporate realignment. The above-market loss accrual was $279 million
  at December 31, 2004.

When the loss accrual related to NUG purchases was recorded in 1998, PPL Electric
  established the triggering events for when the loss accrual would be reduced.
  A schedule was established to reduce the liability based on projected purchases
  over the lives of the NUG contracts. All but one of the NUG contracts expire
  by 2009, with the last one ending in 2014. PPL EnergyPlus reduces the above-market
  NUG liability based on the aforementioned schedule. As PPL EnergyPlus reduces
  the liability for the above-market NUG purchases, it offsets the actual cost
  of NUG purchases, thereby bringing the net power purchase expense more in line
  with market prices.

PPL EnergyPlus assessed the remaining $279 million above-market liability at
  December 31, 2004, comparing the projected electricity purchases under the pricing
  terms of the NUG contracts with the purchases assuming current projected market
  prices for the energy. This assessment was based on projected PJM market prices,
  including capacity, and a discount factor for the unit contingent nature of
  each NUG's output through 2014. The assessment also used a sensitivity around
  the market prices, adjusting such prices downward by 15%. PPL Energy Supply
  management believes that the 15% range in volatility is appropriate due to the
  significant increase in energy prices over the last few years. For example,
  at December 31, 2004, PJM future market prices, including capacity, were 18%
  higher than the comparable projections at December 31, 2003.

The assessment is dependent on the market prices of energy and the estimated
  output levels of the NUGs. Market prices of energy are dependent on many variables,
  including growth in electricity demand in PJM, available generation, and changes
  in regulatory and economic conditions. Accordingly, a market price sensitivity
  was used in the assessment. Based on current projected market prices for energy,
  the loss accrual for the above-market NUG purchase commitments would be approximately
  $225 million. Even if estimated market prices were adjusted downwards by 15%
  during the remaining term of the NUG contracts, the loss accrual for the above-market
  NUG purchase commitments would be approximately $287 million. As noted above,
  it is very difficult to estimate future electricity prices, which are dependent
  on many variables and subject to significant volatility. However, based on this
  assessment, PPL Energy Supply's management believes that the current recorded
  NUG above-market liability of $279 million was sufficient at December 31, 2004.

SFAS 143, "Accounting for Asset Retirement Obligations," requires legal obligations
  associated with the retirement of long-lived assets to be recognized as a liability
  in the financial statements. The initial obligation should be measured at the
  estimated fair value. An equivalent amount should be recorded as an increase
  in the value of the capitalized asset and allocated to expense over the useful
  life of the asset. Until the obligation is settled, the liability should be
  increased, through the recognition of accretion expense in the income statement,
  for changes in the obligation due to the passage of time.

In determining asset retirement obligations, management must make significant
  judgments and estimates to calculate fair value. Fair value is developed through
  consideration of estimated retirement costs in today's dollars, inflated to
  the anticipated retirement date and then discounted back to the date the asset
  retirement obligation was incurred. Changes in assumptions and estimates included
  within the calculations of asset retirement obligations could result in significantly
  different results than those identified and recorded in the financial statements.

At December 31, 2004, PPL Energy Supply had asset retirement obligations totaling
  $257 million recorded on the Balance Sheet. PPL's Energy Supply most significant
  assumptions surrounding asset retirement obligations are the forecasted retirement
  cost, discount rate and inflation rate. A variance in the forecasted retirement
  cost, discount rate or inflation rate could have a significant impact on the
  ARO liability.

The following chart reflects the sensitivities related to the ARO liability
  as of December 31, 2004, associated with a change in these assumptions at the
  time of initial recognition. There is no significant change to the ARO asset
  value, depreciation expense of the ARO asset or accretion expense of the ARO
  liability as a result of changing the assumptions. Each sensitivity below reflects
  an evaluation of the change based solely on a change in that assumption.



|                |  | Change inAssumption |  | Impact onARO Liability
|--------------- |  | ------------------- |  | ----------------------
|                |  |                     |  |                       
|Retirement Cost |  | 10%/(10)%           |  | $23/$(23)             
|                |  |                     |  |                       
|Discount Rate   |  | 0.25%/(0.25)%       |  | $(25)/$27             
|                |  |                     |  |                       
|Inflation Rate  |  | 0.25%/(0.25)%       |  | $29/$(26)             



Other Information

PPL's Audit Committee has approved the independent auditor to provide audit
  and audit-related services and other services permitted by the Sarbanes-Oxley
  Act of 2002 and SEC rules. The audit and audit-related services include services
  in connection with statutory and regulatory filings, reviews of offering documents
  and registration statements, employee benefit plan audits and internal control
  reviews. See "Item 14. Principal Accounting Fees and Services" for more information.

---

PPL ELECTRIC UTILITIES CORPORATIONITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
  RESULTS OF OPERATIONS

Overview

PPL Electric provides electricity delivery service in eastern and central Pennsylvania.
  Its headquarters are in Allentown, PA. See "Item 1. Business - Background,"
  for a description of PPL Electric's business. PPL Electric's strategy and principal
  challenge is to own and operate its electricity delivery business at the highest
  level of quality and reliability and at the most efficient cost.

PPL Electric's electricity delivery business is rate-regulated. Accordingly,
  PPL Electric is subject to regulatory risks in terms of the costs that it may
  recover and the investment returns that it may collect in customers' rates.

An important challenge for PPL Electric is to maintain a strong credit profile.
  In the past few years, investors, analysts and rating agencies that follow companies
  in the energy industry have been particularly focused on the credit quality
  and liquidity position of these companies. PPL Electric is focused on strengthening
  its balance sheet and improving its liquidity position, thereby improving its
  credit profile.

The purpose of "Management's Discussion and Analysis of Financial Condition
  and Results of Operations" is to provide information concerning PPL Electric's
  past and expected future performance in implementing the strategy and challenges
  outlined above. Specifically:

- "Results of Operations" provides an overview of PPL Electric's operating
    results in 2004, 2003 and 2002, starting with a review of earnings. The earnings
    review discusses the outcome of the delivery rate increase that PPL Electric
    filed with the PUC in 2004. "Results of Operations" also includes an explanation
    of changes during this three-year period in significant income statement components,
    such as operating revenues, operation and maintenance expenses, financing
    costs and income taxes.

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

- "Financial Condition - Risk Management" includes an explanation of PPL Electric's
    risk management activities regarding commodity price risk and interest rate
    risk.

- "Application of Critical Accounting Policies" provides an overview of the
    accounting policies that are particularly important to the results of operations
    and financial condition of PPL Electric and that require PPL Electric's management
    to make significant estimates, assumptions and other judgments. Although PPL
    Electric's management believes that these estimates, assumptions and other
    judgments are appropriate, they relate to matters that are inherently uncertain.
    Accordingly, changes in the estimates, assumptions and other judgments applied
    to these accounting policies could have a significant impact on PPL Electric's
    results of operations and financial condition, as reflected in PPL Electric's
    Financial Statements.

The information provided in "Management's Discussion and Analysis of Financial
  Condition and Results of Operations" should be read in conjunction with PPL
  Electric's Financial Statements and the accompanying Notes.

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

Results of Operations

The following discussion, which explains significant annual changes in principal
  items on the Statement of Income, compares 2004 to 2003 and compares 2003 to
  2002.

Earnings

Income available to PPL was as follows:

| |  | 2004 |    |  | 2003 |   |    | 2002 | 
| |  | ---- | -- |  | ---- | - | -- | ---- | 
| |  |      |    |  |      |   |    |      | 
| |  | $    | 74 |  |      | $ | 25 |      | 
| |  |      |    |  |      |   |    |      | 

The after-tax changes in income available to PPL were primarily due to:

|                                                                                                                    |  | 2004 vs. 2003 |    |   | 2003 vs. 2002 |  
|------------------------------------------------------------------------------------------------------------------- |  | ------------- | -- | - | ------------- | -
|                                                                                                                    |  |               |    |   |               |  
|Delivery revenues (net of CTC/ITC amortization,
        interest expense on transition bonds and ancillary charges) |  | $             | 5  |   |               | $
|                                                                                                                    |  |               |    |   |               |  
|Operation and maintenance expenses                                                                                  |  |               | (3 | ) |               |  
|                                                                                                                    |  |               |    |   |               |  
|Taxes, other than income (excluding gross
        receipts tax)                                                     |  |               | 9  |   |               |  
|                                                                                                                    |  |               |    |   |               |  
|Depreciation                                                                                                        |  |               | (2 | ) |               |  
|                                                                                                                    |  |               |    |   |               |  
|Reduction in tax reserves associated with
        stranded costs securitization                                     |  |               | 22 |   |               |  
|                                                                                                                    |  |               |    |   |               |  
|Interest income on IRS tax settlement                                                                               |  |               | 5  |   |               |  
|                                                                                                                    |  |               |    |   |               |  
|Financing costs (excluding transition
        bond interest expense)                                                |  |               | 2  |   |               |  
|                                                                                                                    |  |               |    |   |               |  
|Other                                                                                                               |  |               | 6  |   |               |  
|                                                                                                                    |  |               |    |   |               |  
|Unusual item - workforce reduction (Note
        20)                                                                |  |               | 5  |   |               |  
|                                                                                                                    |  |               |    |   |               |  
|                                                                                                                    |  | $             | 49 |   |               | $
|                                                                                                                    |  |               |    |   |               |  
|                                                                                                                    |  |               |    |   |               |  

The year-to-year changes in earnings components are discussed in the balance
  of "Results of Operations."

PPL Electric's future earnings could be, or will be, impacted by a number of
  factors, including the following:

- In March 2004, PPL Electric filed a request with the PUC for an overall
    annual net increase in distribution rates of approximately $164 million (subsequently
    amended to $160 million), based on a return on equity of 11.5%, and notified
    the PUC that it planned to pass through to customers approximately $57 million
    in increased transmission charges imposed on PPL Electric by PJM. In December
    2004, the PUC approved an increase in PPL Electric's distribution rates of
    approximately $137 million (based on a return on equity of 10.7%), and approved
    PPL Electric's proposed mechanism for collecting the additional $57 million
    in transmission-related charges, for a total increase of approximately $194
    million, effective January 1, 2005.

- As discussed in "Item 1. Business - Background," PPL Electric has agreed
    to provide electricity supply to its PLR customers at predetermined rates
    through 2009, and it has entered into PUC-approved, full requirements energy
    supply agreements with PPL EnergyPlus to fulfill its PLR obligation. The predetermined
    charges for generation supply which PPL Electric collects from its PLR customers
    and pays to PPL EnergyPlus under the energy supply agreements provide for
    annual increases in each year commencing in 2006 and continuing through 2009.
    PPL Electric's PLR obligation after 2009 will be determined by the PUC pursuant
    to rules that have not yet been promulgated.

- In January 2005, severe ice storms hit PPL Electric's service territory.
    PPL Electric had to restore service to about 238,000 customers. Although the
    actual cost of these storms and the specific allocation of such cost between
    operation and maintenance expense and capital costs is not yet finalized,
    PPL Electric currently estimates a total cost of $22 million, with approximately
    85% being expensed.

On February 11, 2005, PPL Electric filed a petition with the PUC for authority
  to defer and amortize for regulatory accounting and reporting purposes its actual
  cost of these storms, excluding capitalized costs of approximately $3 million
  and regular payroll expenses of approximately $2 million (pursuant to PUC precedent
  on this issue). If the PUC grants this petition, PPL Electric's management at
  that time will assess the recoverability of these costs in PPL Electric's next
  general rate increase proceeding. Based on the PUC's action on the petition
  and management's assessment, PPL Electric would either record these storm expenses,
  excluding regular payroll, as a regulatory asset in accordance with SFAS 71,
  "Accounting for the Effects of Certain Types of Regulation," or record these
  storm expenses on its income statement. If the PUC grants the petition before
  PPL Electric files its Form 10-Q for the first quarter of 2005, the result of
  this assessment will be reflected in PPL Electric's financial statements for
  the first quarter of 2005. If the PUC has not acted on or has denied the petition
  by such date, PPL Electric would record these storm expenses on its income statement.
  At this time, PPL Electric cannot predict the outcome of this matter.

- See Note 14 to the Financial Statements for potential commitments and contingent
    liabilities that may impact future earnings.

- See "Application of Critical Accounting Policies" for an overview of accounting
    policies that are particularly important to the results of operations and
    financial condition of PPL Electric and that require PPL Electric's management
    to make significant estimates, assumptions and other judgments. Although PPL
    Electric's management believes that these estimates, assumptions and other
    judgments are appropriate, they relate to matters that are inherently uncertain.

- See Note 23 to the Financial Statements for new accounting standards that
    have been issued but not yet adopted by PPL Electric that may impact future
    earnings.

Operating Revenues

Retail Electric (Including to Affiliate)

The increases in revenues from retail electric operations were attributable
  to the following:

| |                                                   | 2004 vs. 2003 |    |    | 2003 vs. 2002 |  
| | ------------------------------------------------- | ------------- | -- | -- | ------------- | -
| |                                                   |               |    |    |               |  
| | PLR electric generation supply                    |               | $  | 94 |               |  
| |                                                   |               |    |    |               |  
| | Electric delivery                                 |               |    | (7 | )             |  
| |                                                   |               |    |    |               |  
| | Delivery and PLR supply to PPL
        Generation |               |    | (5 | )             |  
| |                                                   |               |    |    |               |  
| | Other                                             |               |    | (1 | )             |  
| |                                                   |               |    |    |               |  
| |                                                   | $             | 81 |    |               | $
| |                                                   |               |    |    |               |  
| |                                                   |               |    |    |               |  

The increase in revenues from retail electric operations for 2004 compared
  with 2003 was primarily due to:

- higher PLR revenues due to higher energy and capacity rates, and a 3.6%
    increase in volume, in part due to the return of customers previously served
    by alternate suppliers; partially offset by
- lower electric delivery revenues due to a decrease in ITC and CTC revenue
    as a result of lower ITC rates, and several rate groups reaching their cap;
    and
- lower sales to PPL Generation. PPL Generation's power plants began self-supplying
    their station use in April 2003, rather than taking supply from PPL Electric.

The increase in revenues from retail electric operations for 2003 compared
  with 2002 was primarily due to:

- higher PLR revenues due to higher energy and capacity rates; and
- higher electric delivery revenues resulting from a 1.1% increase in delivery
    sales, in part due to colder winter weather in the first quarter of 2003;
    partially offset by
- lower sales to PPL Generation. PPL Generation's power plants began self-supplying
    their station use in April 2003, rather than taking supply from PPL Electric.

Wholesale Electric

PPL Electric wholesale revenues are derived from sales to municipalities. The
  $23 million decrease in wholesale electric revenues in 2004 compared with 2003
  was due to the expiration of all municipal purchase power agreements at the
  end of January 2004.

Wholesale Electric to Affiliate

PPL Electric has a contract to sell to PPL EnergyPlus the electricity that
  PPL Electric purchases under contracts with NUGs. The termination of one NUG
  contract in April 2003 and another in February 2002 caused PPL Electric to purchase
  $8 million less NUG energy in 2003 compared to 2002. PPL Electric therefore
  had less electricity to sell to PPL EnergyPlus.

Energy Purchases from Affiliate

Energy purchases from affiliate increased by $56 million in 2004 compared with
  2003. The increase reflects an increase in PLR load, as well as higher prices
  for energy purchased under the power supply contracts with PPL EnergyPlus needed
  to support PLR load.

Energy purchases from affiliate increased by $13 million in 2003 compared with
  2002, reflecting higher prices under the power supply contracts with PPL EnergyPlus.

Other Operation and Maintenance

The increases in other operation and maintenance expenses were primarily due
  to:

|                                                                                                              |  | 2004 vs. 2003 |     |   | 2003 vs. 2002 |  
|------------------------------------------------------------------------------------------------------------- |  | ------------- | --- | - | ------------- | -
|                                                                                                              |  |               |     |   |               |  
|Increase in pension costs                                                                                     |  | $             | 5   |   |               | $
|                                                                                                              |  |               |     |   |               |  
|Lower net rent allocations to
        other PPL affiliates in 2004 and 2003                                   |  |               | 4   |   |               |  
|                                                                                                              |  |               |     |   |               |  
|Write-off of Hurricane Isabel
        costs not approved for recovery by the PUC                              |  |               | 4   |   |               |  
|                                                                                                              |  |               |     |   |               |  
|Increase in expenses related
        to pole attachments                                                      |  |               | 2   |   |               |  
|                                                                                                              |  |               |     |   |               |  
|Increase (decrease) in other
        postretirement benefit expense                                           |  |               | (11 | ) |               |  
|                                                                                                              |  |               |     |   |               |  
|Increases in expenses in responding
        to customers' service calls                                       |  |               |     |   |               |  
|                                                                                                              |  |               |     |   |               |  
|Work performed to assure reliability
        of the T&D system                                                |  |               |     |   |               |  
|                                                                                                              |  |               |     |   |               |  
|Environmental accrual in 2003
        for a former manufactured gas plant                                     |  |               | (2  | ) |               |  
|                                                                                                              |  |               |     |   |               |  
|Estimated reduction in salaries
        and benefits as a result of the workforce reduction initiated in 2002 |  |               |     |   |               |  
|                                                                                                              |  |               |     |   |               |  
|Vacation liability adjustment
        in 2002 in conjunction with the workforce reduction                     |  |               |     |   |               |  
|                                                                                                              |  |               |     |   |               |  
|Other - net                                                                                                   |  |               | 6   |   |               |  
|                                                                                                              |  |               |     |   |               |  
|                                                                                                              |  | $             | 8   |   |               | $
|                                                                                                              |  |               |     |   |               |  

Depreciation

Depreciation increased by $4 million in 2004 compared to 2003 and by $9 million
  in 2003 compared to 2002. These increases were primarily due to plant additions,
  including the Automated Meter Reading project. Additionally, 2003 compared with
  2002 was impacted by software additions.

Taxes, Other Than Income

In the first quarter of 2004, PPL Electric reversed a $14 million accrued liability
  for 1998 and 1999 PURTA taxes that had been accrued based on potential exposure
  in the proceedings regarding the Susquehanna nuclear station tax assessment.
  The rights of the third-party intervenors to further appeal expired in 2004.
  The reversal is the primary reason for the $12 million decrease in taxes in
  2004, compared with 2003. Also contributing to the decrease was lower capital
  stock tax expense. These decreases were partially offset by higher gross receipts
  tax expense.

Taxes, other than income, increased by $11 million in 2003 compared with 2002
  due to the settlement of prior years' capital stock tax refund claims of $8
  million in 2002, and higher taxes related to an increase in the basis on which
  capital stock tax is calculated in 2003.

Workforce Reduction

See Note 20 to the Financial Statements for information on the charges recorded
  in 2003 and 2002.

Other Income - net

See Note 16 to the Financial Statements for details of other income and deductions.

Financing Costs

Interest expense decreased by $21 million in 2004 compared to 2003 and by $7
  million in 2003 compared to 2002. These decreases reflect the net impact of
  long-term debt retirements. Over the past two years, $824 million of long-term
  debt retirements have occurred, while new issuances over the same period totaled
  $190 million.

Distributions on preferred securities decreased by $13 million in 2003 compared
  to 2002 due to retirements and redemptions of preferred securities and preferred
  stock.

Income Taxes

Income tax expense decreased by $10 million in 2004 compared with 2003. This
  decrease was primarily attributable to:

- a $22 million tax benefit recognized in 2004 related to a reduction in tax
    reserves associated with stranded costs securitization predicated upon management's
    reassessment of its best estimate of probable tax exposure, relative to 2003;
    offset by
- a $15 million increase in income tax expense related to higher pre-tax book
    income.

Income tax expense did not change for 2003 compared with 2002. This was due
  to lower pre-tax book income, resulting in a $5 million reduction in income
  taxes, offset by a $3 million increase in income tax expense related to the
  filing of PPL Electric's income tax returns.

Annual tax provisions include amounts considered sufficient to pay assessments
  that may result from examination of prior year tax returns by taxing authorities.
  However, the amount ultimately paid upon resolution of any issues raised by
  such authorities may differ materially from the amount accrued. In evaluating
  the exposure associated with various filing positions, PPL Electric accounts
  for changes in probable exposures based on management's best estimate of the
  amount that should be recognized. An allowance is maintained for the tax contingencies,
  the balance of which management believes to be adequate. During 2004, PPL Electric
  reached partial settlement with the IRS with respect to the tax years 1991 through
  1995 and received a cash refund in the amount of $45 million. As a result of
  this settlement, the net tax impact recorded in 2004 was not significant.

See Note 5 to the Financial Statements for details on effective income tax
  rates and other income tax related matters.

Financial Condition

Liquidity

PPL Electric is focused on maintaining a strong liquidity position and strengthening
  its balance sheet, thereby improving its credit profile. PPL Electric believes
  that its cash on hand, operating cash flows, access to debt and equity capital
  markets and borrowing capacity, taken as a whole, provide sufficient resources
  to fund its ongoing operating requirements, future security maturities and estimated
  future capital expenditures. PPL Electric currently expects cash on hand at
  the end of 2005 to be approximately $100 million, with about $300 million in
  credit facilities and up to $150 million in short-term debt capacity related
  to an asset-backed commercial paper program. However, PPL Electric's cash flows
  from operations and its access to cost effective bank and capital markets are
  subject to risks and uncertainties, including but not limited to, the following:

- unusual or extreme weather that may damage PPL Electric's transmission and
    distribution facilities or affect energy sales to customers;
- ability to recover and the timeliness and adequacy of recovery of costs
    associated with regulated utility businesses; and
- a downgrade in PPL Electric's credit ratings that could negatively affect
    its ability to access capital and increase the cost of maintaining credit
    facilities and any new debt.

At December 31, 2004, PPL Electric had $151 million in cash and cash equivalents
  and $42 million of short-term debt compared to $162 million in cash and cash
  equivalents and no short-term debt at December 31, 2003, and $29 million in
  cash and cash equivalents and $15 million of short-term debt at December 31,
  2002. The $42 million increase in short-term debt from 2003 to 2004 resulted
  entirely from loan proceeds attributable to the asset-backed commercial paper
  program, of which the full amount was used to cash collateralize letters of
  credit. The change in short-term debt from 2002 to 2003 reflects the repayment
  of PPL Electric commercial paper. The changes in cash and cash equivalents resulted
  from the following:

|                                                            |  | 2004 |      |   | 2003 |   |      | 2002 | 
|----------------------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- | 
|                                                            |  |      |      |   |      |   |      |      | 
|Net Cash Provided by Operating Activities                   |  | $    | 898  |   |      | $ | 528  |      | 
|                                                            |  |      |      |   |      |   |      |      | 
|Net Cash Provided by (Used in) Investing
        Activities |  |      | (523 | ) |      |   | (145 | )    | 
|                                                            |  |      |      |   |      |   |      |      | 
|Net Cash Used in Financing Activities                       |  |      | (386 | ) |      |   | (250 | )    | 
|                                                            |  |      |      |   |      |   |      |      | 
|Increase (Decrease) in Cash & Cash
        Equivalents      |  | $    | (11  | ) |      | $ | 133  |      | 
|                                                            |  |      |      |   |      |   |      |      | 

Net Cash Provided by Operating Activities

Net cash provided by operating activities increased by $370 million in 2004
  versus 2003, reflecting primarily the receipt of $300 million in cash collateral
  related to the PLR energy supply agreements and a federal income tax refund.

An important element supporting the stability of PPL Electric's cash from operations
  is its long-term purchase contracts with PPL EnergyPlus. These contracts provide
  sufficient energy for PPL Electric to meet its PLR obligation through 2009,
  at the predetermined capped rates it is entitled to charge its customers over
  this period. These contracts require cash collateral or other credit enhancement,
  or reductions or terminations of a portion of the entire contract through cash
  settlement in the event of a downgrade of PPL Electric or adverse changes in
  market prices. For example, if PPL Electric's ratings were lowered to below
  "investment grade" and energy prices decreased by 10% from year-end 2004 or
  2003 price levels, PPL Electric estimates that, based on its December 31, 2004
  positions, it would not have had to post additional collateral compared to $300
  million at December 31, 2003. The maximum amount that PPL Electric would have
  to post under these contracts is $300 million.

The increase of $258 million in net cash provided by operating activities in
  2003 compared to 2002 reflected working capital improvements resulting from
  a decrease in accounts receivable and an increase in accounts payable. The savings
  from a workforce reduction program that was commenced in 2002 was more than
  offset by rising transmission and distribution operating costs.

Net Cash Provided by (Used in) Investing Activities

Net cash used in investing activities increased by $378 million in 2004 versus
  2003 primarily as a result of initiating a $300 million demand loan to an affiliate.
  The primary use of cash for investing activities is capital and investment expenditures.
  See "Capital Expenditure Requirements" for capital and investment expenditures
  in 2004 and expected expenditures in 2005 through 2009. In 2005, PPL Electric
  expects to be able to fund all of its capital expenditures with cash from operations.

The increase of $234 million in net cash used in investing activities in 2003
  compared to 2002 was primarily the result of a lower loan repayment by an affiliate.

Net Cash Used in Financing Activities

Net cash used in financing activities increased by $136 million in 2004 compared
  to 2003, due to the lack of new long-term debt issuances in 2004 compared to
  $190 million in 2003. In 2004, the $386 million of cash used in financing activities
  consisted of net debt retirements of $352 million and common and preferred dividends
  of $26 million.

PPL Electric's debt financing activity in 2004 was as follows:



|                                                                |       | Issuances |    |    | Retirements |  
|--------------------------------------------------------------- | ----- | --------- | -- | -- | ----------- | -
|                                                                |       |           |    |    |             |  
|PPL Transition Bond Company Transition
        Bonds            |       |           |    |    |             | $
|                                                                |       |           |    |    |             |  
|PPL Electric First Mortgage Bonds                               |       |           |    |    |             |  
|                                                                |       |           |    |    |             |  
|PPL Electric Senior Secured Bonds                               |       |           |    |    |             |  
|                                                                |       |           |    |    |             |  
|PPL Electric Asset-backed Commercial
        Paper (net change) |       | $         | 42 |    |             |  
|                                                                |       |           |    |    |             |  
|                                                                | Total |           | $  | 42 |             |  
|                                                                |       |           |    |    |             |  
|Net reduction                                                   |       |           |    |    |             | $
|                                                                |       |           |    |    |             |  



Debt issued during 2004 had stated interest rates ranging from 1.1% to 2.3%
  and with maturities in 2004 or 2005. See Note 8 to the Financial Statements
  for more detailed information regarding PPL Electric's financing activities.



In March 2004, PPL Electric reactivated its commercial paper program to provide
  it with an additional financing source to fund its short-term liquidity needs,
  if and when necessary. At December 31, 2004, PPL Electric had no commercial
  paper outstanding.

In August 2004, PPL Electric began participating in an asset-backed commercial
  paper program through which PPL Electric obtains financing by selling and contributing
  its eligible accounts receivable and unbilled revenue to a special purpose,
  wholly owned subsidiary on an ongoing basis. The subsidiary pledges these assets
  to secure loans of up to an aggregate of $150 million from a commercial paper
  conduit sponsored by a financial institution. PPL Electric expects to use the
  proceeds from the program for general corporate purposes and to cash collateralize
  letters of credit. At December 31, 2004, the loan balance outstanding was $42
  million, all of which was being used to cash collateralize letters of credit.



At December 31, 2004, PPL Electric's total committed borrowing capacity under
  credit facilities and the use of this borrowing capacity were as follows:



|                                   |  | Committed
        Capacity |     |  | Borrowed |  |  | Letters of
        Credit Issued (b) |  |  | Available
        Capacity | 
|---------------------------------- |  | -------------------------- | --- |  | -------- |  |  | ------------------------------------ |  |  | -------------------------- | 
|                                   |  |                            |     |  |          |  |  |                                      |  |  |                            | 
|PPL Electric Credit Facilities (a) |  | $                          | 300 |  |          |  |  |                                      |  |  |                            | 
|                                   |  |                            |     |  |          |  |  |                                      |  |  |                            | 

|(a) |  | PPL Electric's credit facilities allow for
        borrowings at LIBOR-based rates plus a spread, depending upon the company's
        public debt rating. PPL Electric also has the capability to cause the
        lenders to issue up to $300 million of letters of credit under these facilities,
        which issuances reduce available borrowing capacity.
      The credit facilities contain a financial covenant requiring debt to
        total capitalization to not exceed 70%. At December 31, 2004 and 2003,
        PPL Electric's consolidated debt to total capitalization percentages,
        as calculated in accordance with its credit facilities, were 54% and 57%.
        The credit facilities also contain certain representations and warranties
        that must be made for PPL Electric to borrow under them, including, but
        not limited to, a material adverse change clause that relates to PPL Electric's
        ability to perform its obligations under the credit agreements and related
        loan documents.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(b) |  | PPL Electric has a reimbursement obligation
        to the extent any letters of credit are drawn.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

These credit agreements contain various other covenants. Failure to meet those
  covenants beyond applicable grace periods could result in acceleration of due
  dates of borrowings and/or termination of the agreements. PPL Electric monitors
  the covenants on a regular basis. At December 31, 2004, PPL Electric was in
  material compliance with those covenants. At this time PPL Electric believes
  that these covenants and other borrowing conditions will not limit access to
  these funding sources.

PPL Electric's 2001 Senior Secured Bond Indenture restricts dividend payments
  in the event that PPL Electric fails to meet interest coverage ratios or fails
  to comply with certain requirements included in its Articles of Incorporation
  and Bylaws to maintain its separateness from PPL and PPL's other subsidiaries.
  PPL Electric does not, at this time, expect that any of such limitations would
  significantly impact its ability to declare dividends.

The decrease of $115 million in net cash used in financing activities in 2003
  compared to 2002 reflects the repayment of long-term debt. In 2003, the $250
  million of cash used in financing activities primarily consisted of net debt
  retirements of $255 million, preferred stock retirements of $31 million, and
  common and preferred dividends paid of $32 million, offset by a contribution
  from parent of $75 million.

Operating Leases

PPL Electric has operating lease agreements to lease vehicles, office space,
  land, buildings, personal computers and other equipment. These leasing structures
  provide PPL Electric with additional operating and financing flexibility. The
  operating leases contain covenants that are typical for these agreements, such
  as maintaining insurance, maintaining corporate existence and timely payment
  of rent and other fees. Failure to meet these covenants could limit or restrict
  access to these funds or require early payment of obligations. At this time,
  PPL Electric believes that these covenants will not limit access to these funding
  sources or cause acceleration or termination of the leases.

See Note 10 to the Financial Statements for further discussion of the operating
  leases.

Contractual Obligations

At December 31, 2004, the estimated contractual cash obligations of PPL Electric
  were as follows:

|Contractual Cash Obligations                                                  |  | Total |        |  | Less
        Than
        1 Year |   |       | 1-3
        Years |  |   | 3-5
        Years |  |  | After 5
        Years |      
|----------------------------------------------------------------------------- |  | ----- | ------ |  | -------------------------------- | - | ----- | ----------------- |  | - | ----------------- |  |  | --------------------- | -----
|                                                                              |  |       |        |  |                                  |   |       |                   |  |   |                   |  |  |                       |      
|Long-term Debt (a)                                                            |  | $     | 2,548  |  |                                  | $ | 336   |                   |  | $ | 989               |  |  | $                     | 881  
|                                                                              |  |       |        |  |                                  |   |       |                   |  |   |                   |  |  |                       |      
|Capital Lease Obligations                                                     |  |       |        |  |                                  |   |       |                   |  |   |                   |  |  |                       |      
|                                                                              |  |       |        |  |                                  |   |       |                   |  |   |                   |  |  |                       |      
|Operating Leases                                                              |  |       | 49     |  |                                  |   | 13    |                   |  |   | 18                |  |  |                       | 10   
|                                                                              |  |       |        |  |                                  |   |       |                   |  |   |                   |  |  |                       |      
|Purchase Obligations (b)                                                      |  |       | 8,890  |  |                                  |   | 1,564 |                   |  |   | 3,517             |  |  |                       | 3,809
|                                                                              |  |       |        |  |                                  |   |       |                   |  |   |                   |  |  |                       |      
|Other Long-term Liabilities Reflected
        on the Balance Sheet under GAAP |  |       |        |  |                                  |   |       |                   |  |   |                   |  |  |                       |      
|                                                                              |  |       |        |  |                                  |   |       |                   |  |   |                   |  |  |                       |      
|Total Contractual Cash Obligations                                            |  | $     | 11,487 |  |                                  | $ | 1,913 |                   |  | $ | 4,524             |  |  | $                     | 4,700
|                                                                              |  |       |        |  |                                  |   |       |                   |  |   |                   |  |  |                       |      

|(a) |  | Reflects maturities only. Includes $1.2 billion
        of transition bonds issued by PPL Transition Bond Company in 1999 to securitize
        a portion of PPL Electric's stranded costs. This debt is non-recourse
        to PPL Electric.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | The payments reflected herein are subject
        to change, as the purchase obligation reflected is an estimate based
        on projected obligated quantities and projected pricing under the contract.                                    

Credit Ratings

Standard & Poor's Ratings Services (S&P), Moody's Investors Service,
  Inc. (Moody's) and Fitch Ratings (Fitch) periodically review the credit ratings
  on the debt and preferred securities of PPL Electric and its subsidiary. Based
  on their respective reviews, the rating agencies may make certain ratings revisions.

The ratings of S&P, Moody's and Fitch are not a recommendation to buy,
  sell or hold any securities of PPL Electric or its subsidiary, PPL Transition
  Bond Company. 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 their securities.

The following table summarizes the credit ratings of PPL Electric and its subsidiary,
  PPL Transition Bond Company, at December 31, 2004:

|                            |                                          | Moody's |        | S&P |          | Fitch
|--------------------------- | ---------------------------------------- | ------- | ------ | --- | -------- | -----
|                            |                                          |         |        |     |          |      
|PPL Electric                |                                          |         |        |     |          |      
|                            | Senior Unsecured/Issuer
          Rating |         | Baa2   |     | A-       |      
|                            | First Mortgage Bonds                     |         | Baa1   |     | A-       |      
|                            | Pollution Control Bonds (a)              |         | Aaa    |     | AAA      |      
|                            | Senior Secured Bonds                     |         | Baa1   |     | A-       |      
|                            | Commercial Paper                         |         | P-2    |     | A-2      |      
|                            | Preferred Stock                          |         | Ba1    |     | BBB      |      
|                            | Outlook                                  |         | STABLE |     | NEGATIVE |      
|                            |                                          |         |        |     |          |      
|PPL Transition Bond Company |                                          |         |        |     |          |      
|                            | Transition Bonds                         |         | Aaa    |     | AAA      |      
|                            |                                          |         |        |     |          |      

|(a) |  | Insured as to payment of principal and interest.
|--- |  | ------------------------------------------------

Rating Agency Actions in 2004

In March 2004, Moody's and Fitch confirmed their ratings of
  P-2 and F2, respectively, for PPL Electric's commercial paper.

In May 2004, S&P affirmed its A-/A-2 rating and negative outlook on PPL
  Electric.

Subsequent Ratings Events

In January 2005, S&P affirmed PPL Electric's A-/A-2 corporate credit ratings
  and has favorably revised its outlook on the company to stable from negative
  following the authorization of a $194 million rate increase by the PUC. S&P
  indicated that the outlook revision reflects its expectations that the rate
  increase, effective January 1, 2005, will allow for material improvement in
  PPL Electric's financial profile, which had lagged S&P's expectations in
  recent years. S&P indicated that the stable outlook reflects its expectations
  that PPL Electric "will rapidly improve and then maintain financial metrics
  more consistent with its ratings." S&P indicated that it expects PPL Electric's
  operations to remain stable through the expiration of the PLR agreement.

Off-Balance Sheet Arrangements

PPL Electric has entered into certain guarantee agreements that are within
  the scope of FIN 45, "Guarantor's Accounting and Disclosure Requirements for
  Guarantees, Including Indirect Guarantees of Indebtedness of Others, an Interpretation
  of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation
  No. 34." See Note 14 to the Financial Statements for a discussion on guarantees.

Risk Management

Market Risk

Commodity Price Risk - PLR Contracts

PPL Electric and PPL EnergyPlus have power supply agreements under which PPL
  EnergyPlus sells to PPL Electric (under a predetermined pricing arrangement)
  energy and capacity to fulfill PPL Electric's PLR obligation through 2009. As
  a result, PPL Electric has shifted any electric price risk relating to its PLR
  obligation to PPL EnergyPlus through 2009. See Note 15 to the Financial Statements
  for information on the PLR contracts.

Interest Rate Risk

PPL Electric has issued debt to finance its operations, which increases its
  interest rate risk. At December 31, 2004 and 2003, PPL Electric's potential
  annual exposure to increased interest expense, based on a 10% increase in interest
  rates, was insignificant.

PPL Electric is also exposed to changes in the fair value of its debt portfolio.
  At December 31, 2004, PPL Electric estimated that its potential exposure to
  a change in the fair value of its debt portfolio, through a 10% adverse movement
  in interest rates, was approximately $50 million, compared to $59 million at
  December 31, 2003.

Related Party Transactions

PPL Electric is not aware of any material ownership interests or operating
  responsibility by senior management of PPL Electric in outside partnerships,
  including leasing transactions with variable interest entities, or other entities
  doing business with PPL Electric.

For additional information on related party transactions, see Note 15 to the
  Financial Statements.

Capital Expenditure Requirements

The schedule below shows PPL Electric's current capital expenditure projections
  for the years 2005-2009 and actual spending for the year 2004:

|                              |                                                  | Actual |   | Projected | 
|----------------------------- | ------------------------------------------------ | ------ | - | --------- | 
|                              |                                                  |        |   |           | 
|                              |                                                  | 2004   |   | 2005      | 
|                              |                                                  |        |   |           | 
|Construction expenditures (a) |                                                  |        |   |           | 
|                              |                                                  |        |   |           | 
|                              | Transmission and distribution
        facilities |        | $ | 179       | 
|                              |                                                  |        |   |           | 

|(a) | Construction expenditures include AFUDC
        and capitalized interest, which are expected to be less than $3 million
        in each of the years 2005-2009.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

PPL Electric's capital expenditure projections for the years 2005-2009 total
  $1.1 billion. Capital expenditure plans are revised periodically to reflect
  changes in market and asset regulatory conditions. PPL Electric also leases
  vehicles, personal computers and other equipment, as described in Note 10 to
  the Financial Statements.

Environmental Matters

See Note 14 to the Financial Statements for a discussion of environmental matters.

Competition

See "Item 1. Business - Competition," for a discussion of competitive factors
  affecting PPL Electric.

New Accounting Standards

See Note 23 to the Financial Statements for information on new accounting standards
  adopted in 2004 or pending adoption.

Application of Critical Accounting Policies

PPL Electric's financial condition and results of operations are impacted by
  the methods, assumptions and estimates used in the application of critical accounting
  policies. The following accounting policies are particularly important to the
  financial condition or results of operations of PPL Electric, and require estimates
  or other judgments of matters inherently uncertain. Changes in the estimates
  or other judgments included within these accounting policies could result in
  a significant change to the information presented in the financial statements.
  (These accounting policies are also discussed in Note 1 to the Financial Statements.)
  PPL's senior management has reviewed these critical accounting policies, and
  the estimates and assumptions regarding them, with its Audit Committee. In addition,
  PPL's senior management has reviewed the following disclosures regarding the
  application of these critical accounting policies with the Audit Committee.

As described in Note 12 to the Financial Statements, PPL Electric participates
  in, and is allocated a significant portion of the liability and net periodic
  pension cost of the PPL Retirement Plan and the PPL Postretirement Benefit Plan.
  PPL follows the guidance of SFAS 87, "Employers' Accounting for Pensions," and
  SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions,"
  when accounting for these benefits. Under these accounting standards, assumptions
  are made regarding the valuation of benefit obligations and performance of plan
  assets. Delayed recognition of differences between actual results and expected
  or estimated results is a guiding principle of these standards. This delayed
  recognition of actual results allows for a smoothed recognition of changes in
  benefit obligations and plan performance over the working lives of the employees
  who benefit under the plans. The primary assumptions are as follows:

- Discount Rate - The discount rate is used in calculating the present value
    of benefits, which are based on projections of benefit payments to be made
    in the future.

- Expected Return on Plan Assets - Management projects the future return on
    plan assets considering prior performance, but primarily based upon the plans'
    mix of assets and expectations for the long-term returns on those asset classes.
    These projected returns reduce the net benefit costs PPL Electric records
    currently.

- Rate of Compensation Increase - Management projects employees' annual pay
    increases, which are used to project employees' pension benefits at retirement.

- Health Care Cost Trend Rate - Management projects the expected increases
    in the cost of health care.

In selecting discount rates, PPL considers fixed-income security yield rates.
  At December 31, 2004, PPL decreased the discount rate for its domestic plans
  from 6.25% to 5.75% as a result of decreased fixed-income security returns.

In selecting an expected return on plan assets, PPL considers tax implications,
  past performance and economic forecasts for the types of investments held by
  the plan. At December 31, 2004, PPL's expected return on plan assets for its
  domestic pension plans remained at 9.0%.

In selecting a rate of compensation increase, PPL considers past experience
  in light of movements in inflation rates. At December 31, 2004, PPL's rate of
  compensation increase remained at 4.0% for its domestic plans.

In selecting health care cost trend rates, PPL considers past performance and
  forecasts of health care costs. At December 31, 2004, PPL's health care
  cost trend rates were 10% for 2005, gradually declining to 5.0% for 2010.

A variance in the assumptions listed above could have a significant impact
  on the accrued pension and other postretirement benefit liabilities and reported
  annual net periodic pension and other postretirement benefit cost allocated
  to PPL Electric. The following chart reflects the sensitivities in the 2004
  Financial Statements associated with a change in certain assumptions. While
  the chart below reflects either an increase or decrease in each assumption,
  the inverse of this change would impact the accrued pension and other postretirement
  benefit liabilities and reported annual net periodic pension and other postretirement
  benefit cost by a similar amount in the opposite direction. Each sensitivity
  below reflects an evaluation of the change based solely on a change in that
  assumption.



|                               |  | Increase (Decrease)          |        
|------------------------------ |  | ---------------------------- | -------
|                               |  |                              |        
|Actuarial Assumption           |  | Change in
        Assumption |        
|                               |  |                              |        
|Discount Rate                  |  |                              | (0.25)%
|                               |  |                              |        
|Expected Return on Plan Assets |  |                              | (0.25)%
|                               |  |                              |        
|Rate of Compensation Increase  |  |                              | 0.25%  
|                               |  |                              |        

At December 31, 2004, PPL Electric's Balance Sheet reflected a net liability
  of $72 million for pension liabilities and prepaid other postretirement benefit
  costs allocated from plans sponsored by PPL Services.

In 2004, PPL Electric was allocated net periodic pension and other postretirement
  costs charged to operating expense of $10 million. This amount represents a
  $6 million reduction in the charge recognized during 2003. This reduction was
  primarily due to decreased postretirement costs resulting from increased employee
  cost sharing, offset by increased pension costs resulting from the decrease
  in the discount rate at December 31, 2003.

Refer to Note 12 to the Financial Statements for additional information regarding
  pension and other postretirement benefits.

PPL Electric periodically accrues losses for the estimated impacts of various
  conditions, situations or circumstances involving uncertain outcomes. These
  events are called "contingencies," and PPL Electric's accounting for such events
  is prescribed by SFAS 5, "Accounting for Contingencies." SFAS 5 defines a contingency
  as "an existing condition, situation, or set of circumstances involving uncertainty
  as to possible gain or loss to an enterprise that will ultimately be resolved
  when one or more future events occur or fail to occur."

For loss contingencies, the loss must be accrued if (1) information is available
  that indicates it is "probable" that the loss has been incurred, given the likelihood
  of the uncertain future events and (2) the amount of the loss can be reasonably
  estimated. FASB defines "probable" as cases in which "the future event or events
  are likely to occur." SFAS 5 does not permit the accrual of contingencies that
  might result in gains. PPL Electric continuously assesses potential loss contingencies
  for environmental remediation, litigation claims, income taxes, regulatory penalties
  and other events.

PPL Electric also has accrued estimated losses on long-term purchase commitments
  when significant events have occurred. For example, estimated losses were accrued
  when PPL Electric's generation business was deregulated. Under regulatory accounting,
  PPL Electric recorded the above-market cost of energy purchases from NUGs as
  part of its purchased power costs on an as-incurred basis, since these costs
  were recovered in regulated rates. When the generation business was deregulated,
  the estimated loss associated with these long-term purchase commitments to make
  above-market NUG purchases was recorded because PPL Electric was committed to
  purchase electricity at above market prices but it could no longer recover these
  costs in regulated rates.

The accounting aspects of estimated loss accruals include: (1) the initial
  identification and recording of the loss; (2) the determination of triggering
  events for reducing a recorded loss accrual; and (3) the on-going assessment
  as to whether a recorded loss accrual is sufficient. All three aspects of accounting
  for loss accruals - the initial identification and recording of a probable loss,
  the identification of triggering events to reduce the loss accrual, and the
  ongoing assessment of the sufficiency of a recorded loss accrual - require significant
  judgment by PPL Electric's management.

Initial Identification and Recording of the Loss Accrual

PPL Electric uses its internal expertise and outside experts (such as lawyers,
  tax specialists and engineers), as necessary, to help estimate the probability
  that a loss has been incurred and the amount (or range) of the loss.

PPL Electric has identified certain events which could give rise to a loss,
  but which do not meet the conditions for accrual under SFAS 5. SFAS 5 requires
  disclosure, but not a recording, of potential losses when it is "reasonably
  possible" that a loss has been incurred. The FASB defines "reasonably possible"
  as cases in which "the chance of the future event or events occurring is more
  than remote but less than likely." See Note 14 to the Financial Statements for
  disclosure of potential loss contingencies, most of which have not met the criteria
  for accrual under SFAS 5.

Reducing Recorded Loss Accruals

When an estimated loss is accrued, PPL Electric identifies, where applicable,
  the triggering events for subsequently reducing the loss accrual. The triggering
  events generally occur when the contingency has been resolved and the actual
  loss is incurred, or when the risk of loss has diminished or been eliminated.
  The following are some of the triggering events that provide for the reduction
  of certain recorded loss accruals:

- Certain loss accruals are systematically reduced based on the expiration
    of contract terms. An example of this is the loss accrual for above-market
    NUG purchase commitments, which is described below. This loss accrual is being
    reduced over the lives of the NUG purchase contracts.

- Allowances for excess or obsolete inventory are reduced as the inventory
    items are pulled from the warehouse shelves and sold as scrap or otherwise
    disposed.

- Allowances for uncollectible accounts are reduced when accounts are written
    off after prescribed collection procedures have been exhausted or when underlying
    amounts are ultimately collected.

- Environmental and other litigation contingencies are reduced when the contingency
    is resolved and PPL Electric makes actual payments or the loss is no longer
    considered probable.

On-Going Assessment of Recorded Loss Accruals

PPL Electric reviews its loss accruals on a regular basis to assure that the
  recorded potential loss exposures are sufficient. This involves on-going communication
  and analyses with internal and external legal counsel, engineers, tax specialists,
  operation management and other parties.

The largest loss accrual that had been on PPL Electric's balance sheet was
  for an impairment of above-market NUG purchase commitments. This loss accrual
  reflected the estimated difference between the above-market contract terms,
  under the purchase commitments, and the fair value of the electricity to be
  purchased. This loss accrual was originally recorded at $854 million in 1998,
  when PPL Electric's generation business was deregulated. This loss accrual was
  transferred to PPL EnergyPlus in the July 1, 2000, corporate realignment.

When the loss accrual related to NUG purchases was recorded in 1998, PPL Electric
  established the triggering events for when the loss accrual would be reduced.
  A schedule was established to reduce the liability based on projected purchases
  over the lives of the NUG contracts. All but one of the NUG contracts expire
  by 2009, with the last one ending in 2014. Prior to the July 1, 2000 transfer,
  PPL Electric reduced the above-market NUG liability based on the aforementioned
  schedule. As PPL Electric reduced the liability for the above-market NUG purchases,
  it offset the actual cost of NUG purchases, thereby bringing the net power purchase
  expense more in line with market prices.

Other Information

PPL's Audit Committee has approved the independent auditor to provide audit
  and audit-related services and other services permitted by the Sarbanes-Oxley
  Act of 2002 and SEC rules. The audit and audit-related services include services
  in connection with statutory and regulatory filings, reviews of offering documents
  and registration statements, employee benefit plan audits and internal control
  reviews.

---



ITEM 7A. QUANTITATIVE AND QUALITATIVE
  DISCLOSURES ABOUT MARKET RISK

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

Reference is made to "Risk Management - Energy Marketing & Trading and
  Other" for PPL and PPL Energy Supply and "Risk Management" for PPL Electric
  in Management's Discussion and Analysis of Financial Condition and Results of
  Operations.

---

Report of Independent Registered Public Accounting Firm



To the Board of Directors and Shareowners of PPL Corporation:

We have completed an integrated audit of PPL Corporation's 2004 consolidated
  financial statements and of its internal control over financial reporting as
  of December 31, 2004 and audits of its 2003 and 2002 consolidated financial
  statements in accordance with the standards of the Public Company Accounting
  Oversight Board (United States). Our opinions, based on our audits, are presented
  below.

Consolidated financial statements and financial statement schedule

In our opinion, the consolidated financial statements listed in the accompanying
  index present fairly, in all material respects, the financial position
  of PPL Corporation and its subsidiaries (the "Company") at December 31, 2004
  and 2003, and the results of their operations and their cash flows for each
  of the three years in the period ended December 31, 2004 in conformity with
  accounting principles generally accepted in the United States of America. In
  addition, in our opinion, the financial statement schedule listed in the accompanying
  index presents fairly, in all material respects, the information set forth therein
  when read in conjunction with the related consolidatedfinancial statements.
  These financial statements and financial statement schedule are the responsibility
  of the Company's management. Our responsibility is to express an opinion on
  these financial statements and financial statement schedulebased on
  our audits. We conducted our audits of these statements in accordance with the
  standards of the Public Company Accounting Oversight Board (United States).
  Those standards require that we plan and perform the audit to obtain reasonable
  assurance about whether the financial statements are free of material misstatement.
  An audit of financial statements includes examining, on a test basis, evidence
  supporting the amounts and disclosures in the financial statements, assessing
  the accounting principles used and significant estimates made by management,
  and evaluating the overall financial statement presentation. We believe that
  our audits provide a reasonable basis for our opinion.

As discussed in Note 1 to the consolidated financial statements, the Company
  adopted Emerging Issues Task Force Issue No. 03-11, Reporting Realized Gains
  and Losses on Derivative Instruments That Are Subject to FAS 133 and Not "Held
  for Trading Purposes" as Defined in Issue No. 02-3and FASB Interpretation
  ("FIN") No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees,
  Including Indirect Guarantees of Indebtedness of Others,in 2003. Also,
  as discussed in Note 1 to the consolidated financial statements, the Company
  elected the fair value method of accounting for stock-based compensation as
  prescribed by Statement of Financial Accounting Standards ("SFAS") No. 123,
  Accounting for Stock-Based Compensation, as amended by SFAS No. 148,
  Accounting for Stock-Based Compensation Transition and Disclosure, an Amendment
  of FASB Statement No. 123, in 2003. As discussed in Note 8 to the consolidated
  financial statements, the Company adopted SFAS No. 150, Accounting for Certain
  Financial Instruments with Characteristics of both Liabilities and Equity,
  in 2003. As discussed in Note 21 to the consolidated financial statements,
  the Company adopted SFAS No. 143, Accounting for Asset Retirement Obligations,
  in 2003. As discussed in Note 22 to the consolidated financial statements, the
  Company adopted FIN No. 46, Consolidation of Variable Interest Entities --
  an interpretation of ARB 51, as amended by FIN No. 46(R), in 2003.

Internal control over financial reporting

Also, in our opinion, management's assessment, included in "Management's Report
  on Internal Control Over Financial Reporting" appearing under Item 9A, that
  the Company maintained effective internal control over financial reporting as
  of December 31, 2004 based on criteria established in Internal Control -
  Integrated Framework issued by the Committee of Sponsoring Organizations
  of the Treadway Commission (COSO), is fairly stated, in all material respects,
  based on those criteria. Furthermore, in our opinion, the Company maintained,
  in all material respects, effective internal control over financial reporting
  as of December 31, 2004, based on criteria established in Internal Control
  - Integrated Framework issued by the COSO. The Company's management is responsible
  for maintaining effective internal control over financial reporting and for
  its assessment of the effectiveness of internal control over financial reporting.
  Our responsibility is to express opinions on management's assessment and on
  the effectiveness of the Company's internal control over financial reporting
  based on our audit. We conducted our audit of internal control over financial
  reporting in accordance with the standards of the Public Company Accounting
  Oversight Board (United States). Those standards require that we plan and perform
  the audit to obtain reasonable assurance about whether effective internal control
  over financial reporting was maintained in all material respects. An audit of
  internal control over financial reporting includes obtaining an understanding
  of internal control over financial reporting, evaluating management's assessment,
  testing and evaluating the design and operating effectiveness of internal control,
  and performing such other procedures as we consider necessary in the circumstances.
  We believe that our audit provides a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed
  to provide reasonable assurance regarding the reliability of financial reporting
  and the preparation of financial statements for external purposes in accordance
  with generally accepted accounting principles. A company's internal control
  over financial reporting includes those policies and procedures that (i) pertain
  to the maintenance of records that, in reasonable detail, accurately and fairly
  reflect the transactions and dispositions of the assets of the company; (ii) provide
  reasonable assurance that transactions are recorded as necessary to permit preparation
  of financial statements in accordance with generally accepted accounting principles,
  and that receipts and expenditures of the company are being made only in accordance
  with authorizations of management and directors of the company; and (iii) provide
  reasonable assurance regarding prevention or timely detection of unauthorized
  acquisition, use, or disposition of the company's assets that could have a material
  effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
  may not prevent or detect misstatements. Also, projections of any evaluation
  of effectiveness to future periods are subject to the risk that controls may
  become inadequate because of changes in conditions, or that the degree of compliance
  with the policies or procedures may deteriorate.





/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
  February 25, 2005

---

Report of Independent Registered Public Accounting Firm



To the Board of Managers and Sole Member of PPL Energy Supply, LLC:

In our opinion, the consolidated financial statements listed in the accompanying
  index present fairly, in all material respects, the financial position of PPL
  Energy Supply, LLC and its subsidiaries (the "Company") at December 31, 2004
  and 2003, and the results of their operations and their cash flows for each
  of the three years in the period ended December 31, 2004 in conformity with
  accounting principles generally accepted in the United States of America. In
  addition, in our opinion, the financial statement schedule listed in the accompanying
  index presents fairly, in all material respects, the information
  set forth therein when read in conjunction with the related consolidated financial
  statements. These financial statements and financial statement schedule are
  the responsibility of the Company's management. Our responsibility is to express
  an opinion on these financial statements and financial statement schedule based
  on our audits. We conducted our audits of these statements in accordance with
  the standards of the Public Company Accounting Oversight Board (United States).
  Those standards require that we plan and perform the audit to obtain reasonable
  assurance about whether the financial statements are free of material misstatement.
  An audit includes examining, on a test basis, evidence supporting the amounts
  and disclosures in the financial statements, assessing the accounting principles
  used and significant estimates made by management, and evaluating the overall
  financial statement presentation. We believe that our audits provide a reasonable
  basis for our opinion.

As discussed in Note 1 to the consolidated financial statements, the Company
  adopted Emerging Issues Task Force Issue No. 03-11, Reporting Realized Gains
  and Losses on Derivative Instruments That Are Subject to FAS 133 and Not "Held
  for Trading Purposes" as Defined in Issue No. 02-3and FASB Interpretation
  ("FIN") No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees,
  Including Indirect Guarantees of Indebtedness of Others,in 2003. As discussed
  in Note 8 to the consolidated financial statements, the Company adopted SFAS
  No. 150, Accounting for Certain Financial Instruments with Characteristics
  of both Liabilities and Equity, in 2003. As discussed in Note 21
  to the consolidated financial statements, the Company adopted SFAS No. 143,
  Accounting for Asset Retirement Obligations, in 2003. As discussed in
  Note 22 to the consolidated financial statements, the Company adopted FIN No.
  46, Consolidation of Variable Interest Entities -- an interpretation of ARB
  51, as amended by FIN No. 46(R), in 2003.





/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania

  February 25, 2005

---





Report of Independent Registered Public Accounting Firm





To the Board of Directors and Shareowner of PPL Electric Utilities Corporation:

In our opinion, the consolidated financial statements listed in the accompanying
  index present fairly, in all material respects, the financial position of PPL
  Electric Utilities Corporation and its subsidiaries (the "Company") at December
  31, 2004 and 2003, and the results of their operations and their cash flows
  for each of the three years in the period ended December 31, 2004 in conformity
  with accounting principles generally accepted in the United States of America.
  In addition, in our opinion, the financial statement schedule listed in the
  accompanying index presents fairly, in all material respects, the
  information set forth therein when read in conjunction with the related consolidated
  financial statements. These financial statements and financial statement schedule
  are the responsibility of the Company's management. Our responsibility is to
  express an opinion on these financial statements and financial statement schedule
  based on our audits. We conducted our audits of these statements in accordance
  with the standards of the Public Company Accounting Oversight Board (United
  States). Those standards require that we plan and perform the audit to obtain
  reasonable assurance about whether the financial statements are free of material
  misstatement. An audit includes examining, on a test basis, evidence supporting
  the amounts and disclosures in the financial statements, assessing the accounting
  principles used and significant estimates made by management, and evaluating
  the overall financial statement presentation. We believe that our audits provide
  a reasonable basis for our opinion.





/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
  February 25, 2005

---



(THIS PAGE LEFT BLANK INTENTIONALLY.)

---

|INDEX
        TO ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |                                                                                    
|-------------------------------------------------------------------- | -----------------------------------------------------------------------------------
|                                                                     | Page                                                                               
|FINANCIAL
        STATEMENTS                                         |                                                                                    
|                                                                     | PPL
        Corporation                                                            
|                                                                     |                                                                                    
|                                                                     |                                                                                    
|                                                                     |                                                                                    
|                                                                     |                                                                                    
|                                                                     |                                                                                    
|                                                                     |                                                                                    
|                                                                     |                                                                                    
|                                                                     | PPL
        Energy Supply, LLC                                                     
|                                                                     |                                                                                    
|                                                                     |                                                                                    
|                                                                     |                                                                                    
|                                                                     |                                                                                    
|                                                                     |                                                                                    
|                                                                     |                                                                                    
|                                                                     | PPL
        Electric Utilities Corporation                                         
|                                                                     |                                                                                    
|                                                                     |                                                                                    
|                                                                     |                                                                                    
|                                                                     |                                                                                    
|                                                                     |                                                                                    
|                                                                     |                                                                                    
|                                                                     |                                                                                    
|COMBINED
        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS          | 101                                                                                
|                                                                     |                                                                                    
|FINANCIAL
        STATEMENT SCHEDULES                                |                                                                                    
|                                                                     | Schedule
        II - Valuation and Qualifying Accounts and Reserves               
|                                                                     |                                                                                    
|                                                                     |                                                                                    
|                                                                     |                                                                                    
|                                                                     | Quarterly
        Financial, Common Stock Price and Dividend Data - PPL Corporation
|                                                                     | Quarterly
        Financial Data - PPL Electric Utilities Corporation              

---



|ITEM
        8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                         
|------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                    
|CONSOLIDATED STATEMENT OF INCOME FOR
        THE YEARS ENDED DECEMBER 31,                                                           
|PPL Corporation and Subsidiaries                                                                                                    
|(Millions of Dollars, except
        per share data)                                                                                
|                                                                                                                                    
|Operating Revenues                                                                                                                  
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|Operating Expenses                                                                                                                  
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|Operating Income                                                                                                                    
|                                                                                                                                    
|Other Income - net
        (Note 16)                                                                                                
|                                                                                                                                    
|Interest Expense                                                                                                                    
|                                                                                                                                    
|Income from Continuing Operations
        Before Income Taxes,
          Minority Interest and Distributions on Preferred Securities
|                                                                                                                                    
|Income Taxes (Note
        5)                                                                                                       
|                                                                                                                                    
|Minority Interest
        (Note 9)                                                                                                  
|                                                                                                                                    
|Distributions on Preferred
        Securities (Note 8)                                                                              
|                                                                                                                                    
|Income from Continuing Operations                                                                                                   
|                                                                                                                                    
|Loss from Discontinued Operations
        (net of income taxes) (Note 9)                                                            
|                                                                                                                                    
|Income Before Cumulative
        Effects of Changes in Accounting
          Principles                                              
|                                                                                                                                    
|Cumulative Effects of Changes
        in Accounting Principles (net of income 
          taxes) (Notes 19, 21 and 22)               
|                                                                                                                                    
|Net Income                                                                                                                          
|                                                                                                                                    
|Earnings Per Share
        of Common Stock (Note 4)                                                                                 
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|Dividends Declared
        Per Share of Common Stock                                                                                
|                                                                                                                                    
|The
        accompanying Notes to Consolidated Financial Statements are an integral
        part of the financial statements.       

---



|CONSOLIDATED STATEMENT OF CASH FLOWS FOR
        THE YEARS ENDED DECEMBER 31,                                                
|-----------------------------------------------------------------------------------------------------------------------------
|PPL Corporation and Subsidiaries                                                                                             
|(Millions of Dollars)                                                                                                        
|                                                                                                                             
|Cash Flows From Operating Activities                                                                                         
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Cash Flows From Investing
        Activities                                                                                 
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Cash Flows From Financing Activities                                                                                         
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Effect of Exchange Rates
        on Cash and Cash Equivalents                                                                
|                                                                                                                             
|Net Increase (Decrease) in
        Cash and Cash Equivalents                                                                 
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Supplemental Disclosures
        of Cash Flow Information                                                                    
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|The accompanying
        Notes to Consolidated Financial Statements are an integral part of the
        financial statements.

---

|CONSOLIDATED
        BALANCE SHEET AT DECEMBER 31,                                                                           
|-----------------------------------------------------------------------------------------------------------------------------
|PPL Corporation and Subsidiaries                                                                                             
|(Millions of Dollars)                                                                                                        
|                                                                                                                             
|                                                                                                                             
|Assets                                                                                                                       
|                                                                                                                             
|Current Assets                                                                                                               
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Investments                                                                                                                  
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Property, Plant and Equipment
        - net (Note 1)                                                                         
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Regulatory and Other Noncurrent
        Assets (Note 1)                                                                      
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|The accompanying
        Notes to Consolidated Financial Statements are an integral part of the
        financial statements.

---



|CONSOLIDATED BALANCE SHEET AT DECEMBER
        31,                                                                           
|-----------------------------------------------------------------------------------------------------------------------------
|PPL Corporation and Subsidiaries                                                                                             
|(Millions of Dollars)                                                                                                        
|                                                                                                                             
|                                                                                                                             
|Liabilities and Equity                                                                                                       
|                                                                                                                             
|Current Liabilities                                                                                                          
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Long-term Debt                                                                                                               
|                                                                                                                             
|                                                                                                                             
|Long-term Debt with Affiliate
        Trusts (Notes 15 and 22)                                                               
|                                                                                                                             
|                                                                                                                             
|Deferred Credits and Other
        Noncurrent Liabilities                                                                    
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Commitments and Contingent
        Liabilities (Note 14)                                                                     
|                                                                                                                             
|                                                                                                                             
|Minority Interest                                                                                                            
|                                                                                                                             
|                                                                                                                             
|Preferred Stock without Sinking
        Fund Requirements                                                                    
|                                                                                                                             
|Shareowners' Common Equity                                                                                                   
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|The accompanying
        Notes to Consolidated Financial Statements are an integral part of the
        financial statements.

---



|CONSOLIDATED
        STATEMENT OF SHAREOWNERS' COMMON EQUITY                                                                 
|-----------------------------------------------------------------------------------------------------------------------------
|AND COMPREHENSIVE INCOME FOR THE YEARS
        ENDED DECEMBER 31,                                                            
|PPL Corporation and Subsidiaries                                                                                             
|(Millions of Dollars, except per share
        amounts)                                                                      
|                                                                                                                             
|                                                                                                                             
|Common stock at beginning of
        year                                                                                    
|                                                                                                                             
|Common stock at end of year                                                                                                  
|                                                                                                                             
|Capital in excess of par value
        at beginning of year                                                                  
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Capital in excess of par value
        at end of year                                                                        
|                                                                                                                             
|Treasury stock at beginning
        of year                                                                                  
|                                                                                                                             
|                                                                                                                             
|Treasury stock at end of year                                                                                                
|                                                                                                                             
|Earnings reinvested at beginning
        of year                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Earnings reinvested at end of
        year                                                                                   
|                                                                                                                             
|Accumulated other comprehensive
        loss at beginning of year (c)                                                        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Accumulated other comprehensive
        loss at end of year                                                                  
|                                                                                                                             
|Capital stock expense and other
        at beginning of year                                                                 
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Capital stock expense and other
        at end of year                                                                       
|                                                                                                                             
|Total Shareowners' Common Equity                                                                                             
|                                                                                                                             
|Common stock shares at beginning
        of year (a)                                                                         
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Common stock shares at end of
        year                                                                                   
|                                                                                                                             
|(a)                                                                                                                          
|(b)                                                                                                                          
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|(c)                                                                                                                          
|                                                                                                                             
|The accompanying
        Notes to Consolidated Financial Statements are an integral part of the
        financial statements.

---





|CONSOLIDATED STATEMENT OF PREFERRED STOCK
        AT DECEMBER 31,                                      
|-------------------------------------------------------------------------------------------------------
|PPL Corporation and Subsidiaries (a)                                                                   
|(Millions of Dollars)                                                                                  
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|PPL Electric                                                                                           
|Preferred Stock - $100 par,
        
          cumulative, without sinking 
          fund requirements
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       

|Decreases in Preferred
        Stock (c)                                                                                                                                                                          |                  |                                                                                                                                                                                                                                                                                                                                                                        |  |        |  |        |  |        |  |           |  |        |      |        |  | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------ |  | ------ |  | ------ |  | --------- |  | ------ | ---- | ------ |  | 
|                                                                                                                                                                                                                  |                  |                                                                                                                                                                                                                                                                                                                                                                        |  | 2004   |  | 2003   |  | 2002  
|                                                                                                                                                                                                                  |                  |                                                                                                                                                                                                                                                                                                                                                                        |  |        |  |        |  |       
|                                                                                                                                                                                                                  |                  |                                                                                                                                                                                                                                                                                                                                                                        |  | Shares |  | Amount |  | Shares |  | Amount    |  | Shares |      | Amount
|                                                                                                                                                                                                                  |                  |                                                                                                                                                                                                                                                                                                                                                                        |  |        |  |        |  |        |  |           |  |        |      |       
|                                                                                                                                                                                                                  | Series Preferred |                                                                                                                                                                                                                                                                                                                                                                        |  |        |  |        |  |        |  |           |  |        |      |        |  | 
|                                                                                                                                                                                                                  |                  | 6.125%                                                                                                                                                                                                                                                                                                                                                                 |  |        |  |        |  |        |  | (167,500) |  | $      | (17) |        |  | 
|                                                                                                                                                                                                                  |                  | 6.15%                                                                                                                                                                                                                                                                                                                                                                  |  |        |  |        |  |        |  | (97,500)  |  |        | (10) |        |  | 
|                                                                                                                                                                                                                  |                  | 6.33%                                                                                                                                                                                                                                                                                                                                                                  |  |        |  |        |  |        |  | (46,000)  |  |        | (4)  |        |  | 
|                                                                                                                                                                                                                  |                  |                                                                                                                                                                                                                                                                                                                                                                        |  |        |  |        |  |        |  |           |  |        |      |        |  | 
|Decreases in Preferred Stock normally represent:
        (i) the redemption of stock pursuant to mandatory sinking fund requirements;
        or (ii) shares redeemed pursuant to optional redemption provisions.
|                                                                                                                                                                                                                  |                 
|(a)                                                                                                                                                                                                               |                  | Each share of PPL Electric's preferred
        stock entitles the holder to one vote on matters on which PPL Electric's
        shareowners are entitled to vote. There were 10 million shares of PPL's
        preferred stock and 5 million shares of PPL Electric's preference stock
        authorized; none were outstanding at December 31, 2004 and 2003.      
|(b)                                                                                                                                                                                                               |                  | The involuntary liquidation price
        of the preferred stock is $100 per share. The optional voluntary liquidation
        price is the optional redemption price per share in effect, except for
        the 4-1/2% Preferred Stock and the 6.75% Series Preferred Stock for which
        such price is $100 per share (plus in each case any unpaid dividends).
|(c)                                                                                                                                                                                                               |                  | Decreases in 2003 were redemptions
        of previously outstanding preferred stock with sinking fund requirements.                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                 
|The accompanying
        Notes to Consolidated Financial Statements are an integral part of the
        financial statements.                                                                                    

---



|CONSOLIDATED STATEMENT
        OF LONG-TERM DEBT AT DECEMBER 31,                                                             
|-----------------------------------------------------------------------------------------------------------------------------
|PPL Corporation and Subsidiaries                                                                                             
|(Millions of Dollars)                                                                                                        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Bonds:                                                                                                                       
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Notes:                                                                                                                       
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Term Loan - variable rate (2.56%
        at December 31, 2003)                                                               
|Trust Securities - variable
        rate (3.435% at December 31,   2003)                                                     
|Other Long-term Debt                                                                                                         
|                                                                                                                             
|                                                                                                                             
|Fair Value Swaps                                                                                                             
|Unamortized Discount                                                                                                         
|                                                                                                                             
|                                                                                                                             
|Less amount due within one year                                                                                              
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Long-term Debt with Affiliate
        Trusts:                                                                                
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|See Note 8 for information on debt issuances,
        debt retirements and other changes in long-term debt.                  
|                                                                                                                             
|(a)                                                                                                                          
|(b)                                                                                                                          
|(c)                                                                                                                          
|(d)                                                                                                                          
|(e)                                                                                                                          
|                                                                                                                             
|The accompanying
        Notes to Consolidated Financial Statements are an integral part of the
        financial statements.



---



(THIS PAGE LEFT BLANK INTENTIONALLY.)





---

|CONSOLIDATED
        STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31,                                                            
|-------------------------------------------------------------------------------------------------------------------------------------
|PPL Energy Supply, LLC and Subsidiaries                                                                                              
|(Millions of Dollars)                                                                                                                
|                                                                                                                                     
|                                                                                                                                     
|Operating Revenues                                                                                                                   
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|Operating Expenses                                                                                                                   
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|                                                                                                                                     
|Operating Income                                                                                                                     
|                                                                                                                                     
|Other Income - net (Note 16)                                                                                                         
|                                                                                                                                     
|Interest Expense                                                                                                                     
|                                                                                                                                     
|Interest Expense with Affiliate
        (Note 15)                                                                                    
|                                                                                                                                     
|                                                                                                                                     
|Income from Continuing Operations
        Before Income Taxes,   
        Minority Interest and Distributions on Preferred Securities
|                                                                                                                                     
|Income Taxes (Note 5)                                                                                                                
|                                                                                                                                     
|Minority Interest (Note 9)                                                                                                           
|                                                                                                                                     
|Distributions on Preferred Securities
        (Note 8)                                                                               
|                                                                                                                                     
|                                                                                                                                     
|Income from Continuing Operations                                                                                                    
|                                                                                                                                     
|Loss from Discontinued Operations
        (net of income taxes) (Note 9)                                                             
|                                                                                                                                     
|                                                                                                                                     
|Income Before Cumulative
        Effects of Changes in Accounting   Principles                                                       
|                                                                                                                                     
|Cumulative Effects of Changes
        in Accounting Principles (net of 
          income taxes) (Notes 19, 21 and 22)                
|                                                                                                                                     
|                                                                                                                                     
|Net Income                                                                                                                           
|                                                                                                                                     
|The
        accompanying Notes to Consolidated Financial Statements are an integral
        part of the financial statements.        

---



|CONSOLIDATED STATEMENT OF CASH FLOWS FOR
        THE YEARS ENDED DECEMBER 31,                                                
|-----------------------------------------------------------------------------------------------------------------------------
|PPL Energy Supply, LLC and Subsidiaries                                                                                      
|(Millions of Dollars)                                                                                                        
|                                                                                                                             
|                                                                                                                             
|Cash Flows From Operating
        Activities                                                                                 
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Cash Flows From Investing
        Activities                                                                                 
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Cash Flows From Financing
        Activities                                                                                 
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Effect of Exchange Rates
        on Cash and Cash Equivalents                                                                
|                                                                                                                             
|Net Increase (Decrease) in
        Cash and Cash Equivalents                                                                 
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Supplemental Disclosures
        of Cash Flow Information                                                                    
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|The
        accompanying Notes to Consolidated Financial Statements are an integral
        part of the financial statements.

---

|CONSOLIDATED
        BALANCE SHEET AT DECEMBER 31,                                                                           
|-----------------------------------------------------------------------------------------------------------------------------
|PPL Energy Supply, LLC and Subsidiaries                                                                                      
|(Millions of Dollars)                                                                                                        
|                                                                                                                             
|                                                                                                                             
|Assets                                                                                                                       
|                                                                                                                             
|Current Assets                                                                                                               
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Investments                                                                                                                  
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Property, Plant and Equipment
        - net (Note 1)                                                                         
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Other Noncurrent Assets                                                                                                      
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|The accompanying
        Notes to Consolidated Financial Statements are an integral part of the
        financial statements.

---



|CONSOLIDATED BALANCE SHEET AT
        DECEMBER 31,                                                                           
|-----------------------------------------------------------------------------------------------------------------------------
|PPL Energy Supply, LLC and Subsidiaries                                                                                      
|(Millions of Dollars)                                                                                                        
|                                                                                                                             
|                                                                                                                             
|Liabilities and Equity                                                                                                       
|                                                                                                                             
|Current Liabilities                                                                                                          
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Long-term Debt                                                                                                               
|                                                                                                                             
|                                                                                                                             
|Note Payable to
        Affiliate (Note 15)                                                                                  
|                                                                                                                             
|                                                                                                                             
|Long-term Debt
        with Affiliate Trust (Notes 15 and 22)                                                                
|                                                                                                                             
|                                                                                                                             
|Deferred Credits
        and Other Noncurrent Liabilities                                                                    
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Commitments and
        Contingent Liabilities (Note 14)                                                                     
|                                                                                                                             
|                                                                                                                             
|Minority Interest                                                                                                            
|                                                                                                                             
|                                                                                                                             
|Member's Equity                                                                                                              
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|The
        accompanying Notes to Consolidated Financial Statements are an integral
        part of the financial statements.

---



|CONSOLIDATED
        STATEMENT OF MEMBER'S EQUITY AND COMPREHENSIVE INCOME 
        FOR THE YEARS ENDED DECEMBER 31,         
|-----------------------------------------------------------------------------------------------------------------------------
|PPL Energy Supply, LLC and Subsidiaries                                                                                      
|(Millions of Dollars)                                                                                                        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Member's Equity at beginning
        of year                                                                                 
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Member's Equity at end of year                                                                                               
|                                                                                                                             
|                                                                                                                             
|(a)                                                                                                                          
|(b)                                                                                                                          
|                                                                                                                             
|The accompanying
        Notes to Consolidated Financial Statements are an integral part of the
        financial statements.

---



|CONSOLIDATED STATEMENT
        OF LONG-TERM DEBT AT DECEMBER 31,                                                             
|-----------------------------------------------------------------------------------------------------------------------------
|PPL Energy Supply, LLC and Subsidiaries                                                                                      
|(Millions of Dollars)                                                                                                        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|5.40% - 6.40% Senior Unsecured
        Notes                                                                                 
|2.625% Convertible Senior Notes                                                                                              
|5.875% to 9.25% Unsecured Bonds                                                                                              
|Term loan - variable rate (2.56%
        at December 31,   2003)                                                             
|Trust Securities - variable
        rate (3.435% at 
          December 31, 2003)                                            
|8.05% Senior Secured Notes (b)                                                                                               
|8.30% Senior Secured Notes (b)                                                                                               
|6.20% - 6.40% Bonds - Inflation-linked
        bonds                                                                         
|6% Bolivian Govt.                                                                                                            
|5.0% to 8.5% UF-denominated
        debt                                                                                     
|6.8% - 9.0% Bolivian Bonds                                                                                                   
|Other Long-term Debt                                                                                                         
|                                                                                                                             
|                                                                                                                             
|Fair Value Swaps                                                                                                             
|Unamortized Discount                                                                                                         
|                                                                                                                             
|                                                                                                                             
|Less amount due within one year                                                                                              
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Long-term Debt with Affiliate
        Trust:                                                                                 
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|See Note 8 for information on debt issuances,
        debt retirements and other changes in long-term debt.                  
|                                                                                                                             
|(a)                                                                                                                          
|(b)                                                                                                                          
|(c)                                                                                                                          
|(d)                                                                                                                          
|                                                                                                                             
|The accompanying
        Notes to Consolidated Financial Statements are an integral part of the
        financial statements.

---



|CONSOLIDATED
        STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31,                                                    
|-----------------------------------------------------------------------------------------------------------------------------
|PPL Electric Utilities Corporation and
        Subsidiaries                                                                  
|(Millions of Dollars)                                                                                                        
|                                                                                                                             
|                                                                                                                             
|Operating Revenues                                                                                                           
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Operating Expenses                                                                                                           
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Operating Income                                                                                                             
|                                                                                                                             
|Other Income - net
        (Note 16)                                                                                         
|                                                                                                                             
|Interest Expense                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Income Before Income
        Taxes                                                                                           
|                                                                                                                             
|Income Taxes (Note
        5)                                                                                                
|                                                                                                                             
|                                                                                                                             
|Income Before Distributions
        on Preferred Securities                                                                  
|                                                                                                                             
|Distributions on Preferred
        Securities                                                                                
|                                                                                                                             
|                                                                                                                             
|Income Available
        to PPL Corporation                                                                                  
|                                                                                                                             
|                                                                                                                             
|The
        accompanying Notes to Consolidated Financial Statements are an integral
        part of the financial statements.

---



|CONSOLIDATED
        STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,                                                
|-----------------------------------------------------------------------------------------------------------------------------
|PPL Electric Utilities Corporation
        and Subsidiaries                                                                  
|(Millions of Dollars)                                                                                                        
|                                                                                                                             
|                                                                                                                             
|Cash Flows From
        Operating Activities                                                                                 
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Cash Flows From
        Investing Activities                                                                                 
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Cash Flows From
        Financing Activities                                                                                 
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Net Increase (Decrease)
        in Cash and Cash Equivalents                                                                 
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Supplemental Disclosures
        of Cash Flow Information                                                                    
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|The
        accompanying Notes to Consolidated Financial Statements are an integral
        part of the financial statements.

---



|CONSOLIDATED
        BALANCE SHEET AT DECEMBER 31,                                                                           
|-----------------------------------------------------------------------------------------------------------------------------
|PPL Electric Utilities Corporation and
        Subsidiaries                                                                  
|(Millions of Dollars)                                                                                                        
|                                                                                                                             
|                                                                                                                             
|Assets                                                                                                                       
|                                                                                                                             
|Current Assets                                                                                                               
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Property, Plant and Equipment
        - net (Note 1)                                                                         
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Regulatory and Other Noncurrent
        Assets (Note 1)                                                                      
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|The accompanying
        Notes to Consolidated Financial Statements are an integral part of the
        financial statements.

---



|CONSOLIDATED BALANCE SHEET AT DECEMBER
        31,                                                                           
|-----------------------------------------------------------------------------------------------------------------------------
|PPL Electric Utilities Corporation and
        Subsidiaries                                                                  
|(Millions of Dollars)                                                                                                        
|                                                                                                                             
|                                                                                                                             
|Liabilities and Equity                                                                                                       
|                                                                                                                             
|Current Liabilities                                                                                                          
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Long-term Debt                                                                                                               
|                                                                                                                             
|                                                                                                                             
|Deferred Credits
        and Other Noncurrent Liabilities                                                                    
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Commitments and
        Contingent Liabilities (Note 14)                                                                     
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Preferred Stock
        without Sinking Fund Requirements                                                                    
|                                                                                                                             
|                                                                                                                             
|Shareowner's Common
        Equity                                                                                           
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|The
        accompanying Notes to Consolidated Financial Statements are an integral
        part of the financial statements.

---



|CONSOLIDATED
        STATEMENT OF SHAREOWNER'S COMMON EQUITY
        FOR THE YEARS ENDED DECEMBER 31,                        
|-----------------------------------------------------------------------------------------------------------------------------
|PPL Electric Utilities Corporation and
        Subsidiaries                                                                  
|(Millions of Dollars, except
        share amounts)                                                                          
|                                                                                                                             
|                                                                                                                             
|Common stock at beginning of
        year                                                                                    
|                                                                                                                             
|Common stock at end of year                                                                                                  
|                                                                                                                             
|                                                                                                                             
|Additional paid-in capital at
        beginning of year                                                                      
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Additional paid-in capital at
        end of year                                                                            
|                                                                                                                             
|                                                                                                                             
|Treasury stock at beginning
        of year                                                                                  
|                                                                                                                             
|Treasury stock at end of year                                                                                                
|                                                                                                                             
|                                                                                                                             
|Earnings reinvested at beginning
        of year                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Earnings reinvested at end of
        year                                                                                   
|                                                                                                                             
|                                                                                                                             
|Capital stock expense and other
        at beginning of year                                                                 
|                                                                                                                             
|                                                                                                                             
|Capital stock expense and other
        at end of year                                                                       
|                                                                                                                             
|Total Shareowner's Common Equity                                                                                             
|                                                                                                                             
|                                                                                                                             
|Common stock shares at beginning
        of year (b)                                                                         
|                                                                                                                             
|Common stock shares at end of
        year                                                                                   
|                                                                                                                             
|                                                                                                                             
|(a)                                                                                                                          
|(b)                                                                                                                          
|                                                                                                                             
|The
        accompanying Notes to Consolidated Financial Statements are an integral
        part of the financial statements.

---



|CONSOLIDATED
        STATEMENT OF PREFERRED STOCK AT DECEMBER 31,                             
|----------------------------------------------------------------------------------------------
|PPL Electric Utilities Corporation and
        Subsidiaries (a)                               
|(Millions of Dollars)                                                                         
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Preferred Stock - $100 par,
        
          cumulative, without sinking   fund requirements
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              

|Decreases in Preferred Stock
        (c)                                                                                                                                                                          |                  |                                                                                                                                                                                                                                                                                                                                                                        |  |        |  |        |  |        |  |           |  |        |      |        |  | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------ |  | ------ |  | ------ |  | --------- |  | ------ | ---- | ------ |  | 
|                                                                                                                                                                                                                  |                  |                                                                                                                                                                                                                                                                                                                                                                        |  | 2004   |  | 2003   |  | 2002  
|                                                                                                                                                                                                                  |                  |                                                                                                                                                                                                                                                                                                                                                                        |  |        |  |        |  |       
|                                                                                                                                                                                                                  |                  |                                                                                                                                                                                                                                                                                                                                                                        |  | Shares |  | Amount |  | Shares |  | Amount    |  | Shares |      | Amount
|                                                                                                                                                                                                                  |                  |                                                                                                                                                                                                                                                                                                                                                                        |  |        |  |        |  |        |  |           |  |        |      |       
|                                                                                                                                                                                                                  | Series Preferred |                                                                                                                                                                                                                                                                                                                                                                        |  |        |  |        |  |        |  |           |  |        |      |        |  | 
|                                                                                                                                                                                                                  |                  | 6.125%                                                                                                                                                                                                                                                                                                                                                                 |  |        |  |        |  |        |  | (167,500) |  | $      | (17) |        |  | 
|                                                                                                                                                                                                                  |                  | 6.15%                                                                                                                                                                                                                                                                                                                                                                  |  |        |  |        |  |        |  | (97,500)  |  |        | (10) |        |  | 
|                                                                                                                                                                                                                  |                  | 6.33%                                                                                                                                                                                                                                                                                                                                                                  |  |        |  |        |  |        |  | (46,000)  |  |        | (4)  |        |  | 
|                                                                                                                                                                                                                  |                  |                                                                                                                                                                                                                                                                                                                                                                        |  |        |  |        |  |        |  |           |  |        |      |        |  | 
|Decreases in Preferred Stock normally represent:
        (i) the redemption of stock pursuant to mandatory sinking fund requirements;
        or (ii) shares redeemed pursuant to optional redemption provisions.
|                                                                                                                                                                                                                  |                 
|(a)                                                                                                                                                                                                               |                  | Each share of PPL Electric's preferred
        stock entitles the holder to one vote on matters on which PPL Electric's
        shareowners are entitled to vote. There were 5 million shares of PPL Electric's
        preference stock authorized; none were outstanding at December 31, 2004
        and 2003.                                                     
|(b)                                                                                                                                                                                                               |                  | The involuntary liquidation price
        of the preferred stock is $100 per share. The optional voluntary liquidation
        price is the optional redemption price per share in effect, except for
        the 4-1/2% Preferred Stock and the 6.75% Series Preferred Stock for which
        such price is $100 per share (plus in each case any unpaid dividends).
|(c)                                                                                                                                                                                                               |                  | Decreases in 2003 were redemptions
        of previously outstanding preferred stock with sinking fund requirements.                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                 
|The accompanying
        Notes to Consolidated Financial Statements are an integral part of the
        financial statements.                                                                                    

---



|CONSOLIDATED STATEMENT
        OF LONG-TERM DEBT AT DECEMBER 31,
|----------------------------------------------------------------
|PPL Electric Utilities Corporation and
        Subsidiaries     
|(Millions of Dollars)                                           
|                                                                
|                                                                
|                                                                
|                                                                
|First Mortgage
        Bonds(b)                                 
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                
|First Mortgage
        Pollution Control Bonds(b)               
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                
|Senior Secured
        Bonds(b)                                 
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                
|Series 1999-1 Transition
        Bonds                          
|                                                                
|                                                                
|Pollution Control
        Revenue Bonds - 2.0%                  
|                                                                
|                                                                
|Unamortized discount                                            
|                                                                
|                                                                
|Less amount due within
        one year                         
|                                                                
|                                                                
|                                                                

|See Note 8 for information on debt issuances,
        debt retirements and other changes in long-term debt.                  
|-----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                             
|(a)                                                                                                                          
|(b)                                                                                                                          
|                                                                                                                             
|The accompanying
        Notes to Consolidated Financial Statements are an integral part of the
        financial statements.

---

COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Terms and abbreviations appearing in Combined Notes to Consolidated Financial
  Statements are explained in the glossary. Dollars are in millions, except per
  share data, unless otherwise noted.

1. Summary of Significant Accounting Policies
    Business and Consolidation
    (PPL, PPL Energy Supply and PPL Electric)
    PPL is an energy and utility holding company that, through its subsidiaries,
      is primarily engaged in the generation and marketing of electricity in the
      northeastern and western U.S. and in the delivery of electricity in Pennsylvania,
      the U.K. and Latin America. Based in Allentown, PA, PPL's principal direct
      subsidiaries are PPL Energy Funding, PPL Electric, PPL Gas Utilities, PPL
      Services and PPL Capital Funding.
    (PPL and PPL Energy Supply)
    PPL Energy Funding is the parent of PPL Energy Supply, which serves as
      the holding company for PPL's principal unregulated subsidiaries. PPL Energy
      Supply is the parent of PPL Generation, PPL EnergyPlus and PPL Global.
    PPL Generation owns and operates a portfolio of domestic power generating
      assets. These power plants are located in Pennsylvania, Montana, Arizona,
      Illinois, Connecticut, New York and Maine and use well-diversified fuel
      sources including coal, nuclear, natural gas, oil and hydro. PPL EnergyPlus
      markets or brokers electricity produced by PPL Generation, along with purchased
      power, natural gas and oil in competitive wholesale and deregulated retail
      markets, primarily in the northeastern and western portions of the U.S.
      PPL Global owns and operates international energy businesses that are primarily
      focused on the distribution of electricity.
    (PPL and PPL Electric)
    PPL Electric is a rate-regulated subsidiary of PPL. PPL Electric's principal
      businesses are the transmission and distribution of electricity to serve
      retail customers in its franchised territory in eastern and central Pennsylvania,
      and the supply of electricity to retail customers in that territory as a
      PLR.
    (PPL, PPL Energy Supply and PPL Electric)
    The consolidated financial statements of PPL, PPL Energy Supply and PPL
      Electric include each company's own accounts as well as the accounts of
      all entities in which the company has a controlling financial interest.
      Investments in entities in which the company has the ability to exercise
      significant influence but does not have a controlling financial interest
      are accounted for under the equity method. See Note 3 for further discussion.
      All other investments are carried at cost or fair value. All significant
      intercompany transactions have been eliminated. Any minority interests are
      reflected in the consolidated financial statements.
    (PPL and PPL Energy Supply)
    It is the policy of PPL and PPL Energy Supply to consolidate or record
      equity in earnings of foreign entities on a lag, based on the availability
      of financial data on a U.S. GAAP basis:
    
        PPL and PPL Energy Supply consolidate
            the results of foreign entities in which they have a controlling financial
            interest (WPD, Emel, EC, the Bolivian subsidiaries and other investments)
            on a one-month lag.
        Earnings from foreign equity method investments
            are recorded on a three-month lag.Effective August 21, 2002, PPL Energy Supply deconsolidated CEMAR and began
      accounting for it using the cost method. See Note 9 for further discussion,
      including the sale of this investment.
    Effective December 31, 2003, PPL's and PPL Energy Supply's consolidated
      financial statements include the accounts of the lessors under the operating
      leases for the Sundance, University Park and Lower Mt. Bethel generation
      facilities. These entities were not included in the consolidated financial
      statements for periods ending prior to December 31, 2003. See Note 22 for
      further discussion.
    Effective December 31, 2003, PPL deconsolidated PPL Capital Funding Trust
      I, a wholly owned trust. PPL and PPL Energy Supply deconsolidated SIUK Capital
      Trust I, also a wholly owned trust. Both entities were included in PPL's
      consolidated financial statements for periods ending prior to December 31,
      2003. SIUK Capital Trust I was included in PPL Energy Supply's consolidated
      financial statements for periods ending prior to December 31, 2003. See
      Note 22 for further discussion.
    The consolidated financial statements of PPL and PPL Energy Supply include
      their share of undivided interests in jointly-owned facilities, as well
      as their share of the related operating costs of those facilities. See Note
      13 for additional information.
    Use of Estimates(PPL, PPL Energy Supply and PPL Electric)
    The preparation of financial statements in conformity with U.S. GAAP requires
      management to make estimates and assumptions that affect the reported amounts
      of assets and liabilities, the disclosure of contingent liabilities at the
      date of the financial statements and the reported amounts of revenues and
      expenses during the reporting period. Actual results could differ from those
      estimates.
    Loss Accruals(PPL, PPL Energy Supply and PPL Electric)
    Loss accruals are recorded in accordance with SFAS 5, "Accounting for Contingencies."
      Potential losses are accrued when (1) information is available that indicates
      it is "probable" that the loss has been incurred, given the likelihood of
      the uncertain future events and (2) the amount of the loss can be reasonably
      estimated.
    Guarantees(PPL, PPL Energy Supply and PPL Electric)
    In accordance with the provisions of FIN 45, "Guarantor's Accounting and
      Disclosure Requirements for Guarantees, Including Indirect Guarantees of
      Indebtedness of Others, an Interpretation of FASB Statements No. 5, 57,
      and 107 and Rescission of FASB Interpretation No. 34," which was adopted
      by PPL and its subsidiaries effective January 1, 2003, the fair values of
      guarantees related to arrangements entered into prior to January 1, 2003,
      as well as guarantees excluded from the initial recognition and measurement
      provisions of FIN 45, are not recorded in the financial statements. See
      Note 14 for further discussion of recorded and unrecorded guarantees.
    Accounting Records(PPL and PPL Electric)
    The system of accounts for PPL Electric and PPL Gas Utilities are maintained
      in accordance with the Uniform System of Accounts prescribed by the FERC
      and adopted by the PUC.
    Cash Equivalents(PPL, PPL Energy Supply and PPL Electric)
    All highly liquid debt instruments purchased with original maturities of
      three months or less are considered to be cash equivalents.

PPL invests in auction rate and similar securities which provide for periodic reset of interest rates and are highly liquid.  Even though PPL
considers these debt securities as part of its liquid portfolio, it does not include these securities in cash and cash equivalents
due to the stated maturity of the securities.  These securities are included in "Current Assets - Other" on the Balance Sheet.


Restricted Cash(PPL, PPL Energy Supply and PPL Electric)
    Bank deposits that are restricted by agreement or that have been designated
      for a specific purpose are classified as restricted cash. The change in
      restricted cash is reported as an investing activity in the Statement of
      Cash Flows. On the Balance Sheet, the current portion of restricted cash
      is shown as "Restricted cash" within current assets, while the noncurrent
      portion is included in "Other" within other noncurrent assets. See Note
      18 for the components of restricted cash.
    Allowance for Doubtful Accounts(PPL, PPL Energy Supply and PPL
      Electric)
    Accounts receivable collectibility is evaluated using a combination of
      factors. Reserve balances are analyzed to assess the reasonableness of the
      balances in comparison to the actual accounts receivable balances and write-offs.
      Adjustments are made to reserve balances based on the results of analysis,
      the aging of receivables, and historical and industry trends.
    Additional specific reserves for uncollectible accounts receivable, such
      as bankruptcies, are recorded on a case-by-case basis after having been
      researched and reviewed by management. Unusual items, trends in write-offs,
      the age of the receivable, counterparty creditworthiness and economic conditions
      are considered as a basis for determining the adequacy of the reserve for
      uncollectible account balances.
    Fuels, Materials and Supplies
    (PPL)
    PPL and its subsidiaries value inventory at the lower of cost or market
      primarily using the average cost method. PPL Gas Utilities values a portion
      of its natural gas inventory using the last-in, first-out method, consistent
      with its rate-making treatment. The carrying value of that inventory was
      $5 million and $14 million at December 31, 2004 and 2003, and the excess
      of replacement cost over carrying value was $7 million and $5 million at
      December 31, 2004 and 2003.
    (PPL Energy Supply and PPL Electric)
    Fuels, materials and supplies are valued at the lower of cost or market
      using the average cost method.
    Property, Plant and Equipment(PPL, PPL Energy Supply and PPL
      Electric)
    PP&E is recorded at original cost, unless impaired. If impaired, the
      asset is written down to fair value at that time, which becomes the asset's
      new cost basis. Original cost includes material, labor, contractor costs,
      construction overheads and financing costs, where applicable. The cost of
      repairs and minor replacements are charged to expense as incurred. PPL records
      costs associated with planned major maintenance projects in the period in
      which the costs are incurred. No costs are accrued in advance of the period
      in which the work is performed.
    AFUDC is capitalized as part of the construction costs for regulated projects.
      Interest is capitalized as part of construction costs for non-regulated
      projects.
    Depreciation is computed over the estimated useful lives of property using
      various methods including the straight-line, composite and group methods.
      PPL and its subsidiaries periodically review and adjust the depreciable
      lives of their fixed assets. When a component of PP&E is retired that
      was depreciated under the composite or group method, the original cost is
      charged to accumulated depreciation. When all or a significant portion of
      an operating unit that was depreciated under the composite or group method
      is retired or sold, the property and the related accumulated depreciation
      account is reduced and any gain or loss is included in income, unless otherwise
      required by regulators.
    Following are the classes of PP&E, with the associated accumulated
      depreciation, at December 31:
    
    2004PPL
        
        
        PPL Energy
            Supply
        
        
        PPL ElectricElectric plantGeneration
        
        $
        8,877
        
        
        $
        8,877Transmission and distribution
        
        
        7,991
        
        
        
        4,088
        
        
        $
        3,903General
        
        
        736
        
        
        
        372
        
        
        
        353Construction work in progress
        
        
        148
        
        
        
        115
        
        
        
        29Nuclear fuel
        
        
        314
        
        
        
        314Gas and oil plant
        
        
        336
        
        
        
        64Other property
        
        
        290
        
        
        
        214
        
        
        
        418,692
        
        
        
        14,044
        
        
        
        4,289Less: Accumulated depreciation
            and amortization
        
        
        7,483
        
        
        
        5,755
        
        
        
        1,632$
        11,209
        
        
        $
        8,289
        
        
        $
        2,6572003PPL
        
        
        PPL Energy
            Supply
        
        
        PPL ElectricElectric plantGeneration
        
        $
        8,347
        
        
        $
        8,347Transmission and distribution
        
        
        7,324
        
        
        
        3,568
        
        
        $
        3,756General
        
        
        733
        
        
        
        370
        
        
        
        353Construction work in progress
        
        
        614
        
        
        
        580
        
        
        
        31Nuclear fuel
        
        
        308
        
        
        
        308Gas and oil plant
        
        
        321
        
        
        
        63Other property
        
        
        276
        
        
        
        213
        
        
        
        517,923
        
        
        
        13,449
        
        
        
        4,145Less: Accumulated depreciation
            and amortization
        
        
        7,330
        
        
        
        5,690
        
        
        
        1,556$
        10,593
        
        
        $
        7,759
        
        
        $
        2,589Following are the weighted-average rates of depreciation at December 31:
    2004PPL
        
        
        PPL Energy
            Supply
        
        
        PPL ElectricGeneration
        
        
        2.11%
        
        
        
        2.11%Transmission and distribution
        
        
        2.86%
        
        
        
        3.49%
        
        
        
        2.22%General
        
        
        3.41%
        
        
        
        3.75%
        
        
        
        3.19%2003PPL
        
        
        PPL Energy
            Supply
        
        
        PPL ElectricGeneration
        
        
        2.01%
        
        
        
        2.01%Transmission and distribution
        
        
        3.16%
        
        
        
        4.10%
        
        
        
        2.31%General
        
        
        3.75%
        
        
        
        3.96%
        
        
        
        3.64%The annual provisions for depreciation have been computed principally in
      accordance with the following ranges, in years, of assets lives:
    PPL
        
        
        PPL Energy
            Supply
        
        
        PPL ElectricGeneration
        
        
        5-65
        
        
        
        5-65Transmission and distribution
        
        
        15-80
        
        
        
        30-40
        
        
        
        15-80General
        
        
        3-80
        
        
        
        3-60
        
        
        
        10-80(PPL)
    Included in PP&E above are capitalized costs of software projects that
      were developed or obtained for internal use. At December 31, 2004 and 2003,
      capitalized software costs were $82 million and $76 million, and there was
      $43 million and $31 million of accumulated amortization. Such capitalized
      amounts are amortized ratably over the expected lives of the projects when
      they become operational, generally not to exceed 10 years. During 2004,
      2003 and 2002, PPL amortized capitalized software costs of $11 million,
      $11 million, and $5 million.
    (PPL Energy Supply)
    Included in PP&E above are capitalized costs of software projects that
      were developed or obtained for internal use. At December 31, 2004 and 2003,
      capitalized software costs were $51 million and $47 million, and there was
      $30 million and $24 million of accumulated amortization. Such capitalized
      amounts are amortized ratably over the expected lives of the projects when
      they become operational, generally not to exceed 10 years. During 2004,
      2003 and 2002, PPL Energy Supply amortized capitalized software costs of
      $5 million, $5 million, and $3 million.
    (PPL Electric)
    Included in PP&E above are capitalized costs of software projects that
      were developed or obtained for internal use. At both December 31, 2004 and
      2003, capitalized software costs were $20 million. At December 31, 2004
      and 2003, accumulated amortization was $8 million and $4 million. Such capitalized
      amounts are amortized ratably over the expected lives of the projects when
      they become operational, generally not to exceed 5 years. During 2004, 2003
      and 2002, PPL Electric amortized capitalized software costs of $4 million,
      $5 million, and $1 million.
    Impairments - Property, Plant and Equipment, Goodwill and Intangible
      Assets(PPL, PPL Energy Supply and PPL Electric)
    PPL and its subsidiaries review long-lived assets, including intangibles,
      that are subject to depreciation or amortization for impairment when events
      or circumstances indicate carrying amounts may not be recoverable. An impairment
      loss is recognized if the carrying amount of long-lived assets is not recoverable
      from undiscounted future cash flow. The impairment charge is measured by
      the difference between the carrying amount of the asset and its fair value.
    Goodwill is reviewed for impairment, at the reporting unit level, annually
      or more frequently when events or circumstances indicate that the carrying
      value may be greater than the implied fair value. PPL's reporting units
      are one level below its operating segments. If the carrying value of the
      reporting unit exceeds its fair value, the implied fair value of goodwill
      must be calculated. If the implied fair value of goodwill is less than its
      carrying value, the difference represents the amount of impairment. See
      Notes 9 and 19 for a discussion of asset impairment charges recorded.
    Asset Retirement Obligations(PPL, PPL Energy Supply and PPL
      Electric)
    In 2001, the FASB issued SFAS 143, "Accounting for Asset Retirement Obligations,"
      which addresses the accounting for obligations associated with the retirement
      of tangible long-lived assets. SFAS 143 requires legal obligations associated
      with the retirement of long-lived assets to be recognized as a liability
      in the financial statements. The initial obligation should be measured at
      the estimated fair value. An equivalent amount should be recorded as an
      increase in the value of the capitalized asset and allocated to expense
      over the useful life of the asset. Until the obligation is settled, the
      liability should be increased, through the recognition of accretion expense
      in the income statement, for changes in the obligation due to the passage
      of time. See Note 21 for a discussion of accounting for asset retirement
      obligations.
    Goodwill and Other Intangible Assets (PPL, PPL Energy Supply
      and PPL Electric)
    Goodwill represents the excess of the purchase price paid over the estimated
      fair value of the assets acquired and liabilities assumed in the acquisition
      of a business. Upon the adoption of SFAS 142, "Goodwill and Other Intangible
      Assets," on January 1, 2002, PPL and its subsidiaries stopped amortizing
      goodwill.
    Other intangible assets that have finite useful lives are valued at cost
      and amortized over their useful lives based upon the pattern in which the
      economic benefits of the intangible asset are consumed or otherwise used
      up.
    Investments in Debt and Marketable Equity Securities (PPL, PPL
      Energy Supply and PPL Electric)
    Investments in debt securities are classified as held-to-maturity, and
      measured at amortized cost, when there is an intent and ability to hold
      the securities to maturity. Debt securities and marketable equity securities
      that are acquired and held principally for the purpose of selling them in
      the near-term are classified as trading. All other investments in debt and
      marketable equity securities are classified as available-for-sale. Both
      trading and available-for-sale securities are carried at fair value. Any
      unrealized gains and losses for trading securities are included in earnings.
      Unrealized gains and losses for available-for-sale securities are reported,
      net of tax, in other comprehensive income or are recognized currently in
      earnings when a decline in fair value is determined to be other than temporary.
      The specific identification method is used to calculate realized gains and
      losses on debt and marketable equity securities. See Note 6 for additional
      information on securities held in the nuclear decommissioning trusts.
    Regulation(PPL, PPL Energy Supply and PPL Electric)
    PPL Electric, PPL Gas Utilities, and Elfec account for regulated operations
      in accordance with the provisions of SFAS 71, "Accounting for the Effects
      of Certain Types of Regulation," which requires rate-regulated entities
      to reflect the effects of regulatory decisions in their financial statements.
    The following regulatory assets were included in the "Regulatory and Other
      Noncurrent Assets" section of the Balance Sheet at December 31:
    PPL
        
        
        PPL Electric2004
        
        
        2003
        
        
        2004
        
        
        2003Recoverable transition costs
        
        $
        1,431
        
        
        $
        1,687
        
        
        $
        1,431
        
        
        $
        1,687Taxes recoverable through future rates
        
        
        276
        
        
        
        250
        
        
        
        261
        
        
        
        242Other
        
        
        20
        
        
        
        24
        
        
        
        17
        
        
        
        20$
        1,727
        
        
        $
        1,961
        
        
        $
        1,709
        
        
        $
        1,949Based on the PUC Final Order, PPL Electric began amortizing its competitive
      transition (or stranded) costs, $2.97 billion, over an 11-year transition
      period effective January 1, 1999. In August 1999, competitive transition
      costs of $2.4 billion were converted to intangible transition costs when
      they were securitized by the issuance of transition bonds. The intangible
      transition costs are being amortized over the life of the transition bonds,
      through December 2008, in accordance with an amortization schedule filed
      with the PUC. The assets of PPL Transition Bond Company, including the intangible
      transition property, are not available to creditors of PPL or PPL Electric.
      The transition bonds are obligations of PPL Transition Bond Company and
      are non-recourse to PPL and PPL Electric. The remaining competitive transition
      costs are also being amortized based on an amortization schedule previously
      filed with the PUC, adjusted for those competitive transition costs that
      were converted to intangible transition costs. As a result of the conversion
      of a significant portion of the competitive transition costs into intangible
      transition costs, amortization of substantially all of the remaining competitive
      transition costs will occur in 2009.
    Included in "Other" above as of December 31, 2004 and 2003, are approximately
      $11 million and $15 million of storm restoration costs associated with the
      September 2003 Hurricane Isabel. PPL Electric deferred these costs in accordance
      with the PUC declaratory order of January 2004. The $4 million reduction
      in deferred costs is the result of a PUC order entered in December 2004.
      The remaining costs will be recovered through customer transmission and
      distribution rates, and will be amortized over ten years beginning in 2005.
    In March 2004, PPL Electric filed a proposed distribution rate increase
      of $164 million (subsequently amended to $160 million) and, at the same
      time, notified the PUC of an estimated increase in transmission service
      charges of $57 million. In December 2004, the PUC entered its order granting
      PPL Electric a distribution rate increase of $137 million and approved PPL
      Electric's proposed mechanism for collecting the additional $57 million
      in transmission-related charges.
    Accounting for Derivatives and Other Contracts Held for Trading Purposes(PPL and PPL Energy Supply)
    PPL and PPL Energy Supply enter into energy and energy-related contracts
      to hedge the variability of expected cash flows associated with their generating
      units and for trading purposes. PPL and PPL Energy Supply enter into interest
      rate derivative contracts to hedge their exposure to changes in the fair
      value of their debt instruments and to hedge their exposure to variability
      in expected cash flows associated with existing debt instruments or forecasted
      transactions. PPL and PPL Energy Supply also enter into foreign currency
      derivative contracts to hedge foreign currency exposures, including firm
      commitments, recognized assets or liabilities, forecasted transactions,
      net investments, or foreign earnings translation.
    Contracts that meet the definition of a derivative are accounted for under
      SFAS 133, "Accounting for Derivative Instruments and Hedging Activities,"
      as amended and interpreted. Certain energy contracts have been excluded
      from the requirements of SFAS 133 because they meet the definition of a
      "normal purchase or normal sale" under DIG Issue C15, "Scope Exceptions:
      Normal Purchases and Normal Sales Exception for Certain Option-Type Contracts
      and Forward Contracts in Electricity." These contracts are reflected in
      the financial statements using the accrual method of accounting.
    Additionally, PPL and PPL Energy Supply adopted SFAS No. 149, "Amendment
      of Statement 133 on Derivative Instruments and Hedging Activities," as of
      July 1, 2003. The requirements of SFAS 149, which required prospective application,
      placed additional limitations on the use of the normal purchase or normal
      sale exception. Therefore, the accounting for certain types of transactions
      has been changed on a prospective basis to conform with SFAS 149.
    All derivative contracts that are subject to the requirements of SFAS 133
      and its amendments are reflected on the balance sheet at their fair value.
      On the date the derivative contract is executed, PPL designates the derivative
      as a hedge of the fair value of a recognized asset or liability or of an
      unrecognized firm commitment ("fair value" hedge), a hedge of a forecasted
      transaction or of the variability of cash flows to be received or paid related
      to a recognized asset or liability ("cash flow" hedge), a foreign currency
      fair value or cash flow hedge ("foreign currency" hedge), a hedge of a net
      investment in a foreign operation or a trading derivative. Changes in the
      fair value of a derivative that is highly effective as, and is designated
      and qualifies as, a fair value hedge, along with the loss or gain on the
      hedged asset or liability that is attributable to the hedged risk, are recorded
      in current-period earnings. Changes in the fair value of a derivative that
      is highly effective as, and is designated as and qualifies as, a cash flow
      hedge are recorded in other comprehensive income, until earnings are affected
      by the variability of cash flows being hedged. Changes in the fair value
      of derivatives that are designated as and qualify as foreign currency hedges
      are recorded in either current-period earnings or other comprehensive income,
      depending on whether the hedge transaction is a fair value hedge or a cash
      flow hedge. If a derivative is used as a hedge of a net investment in a
      foreign operation, its changes in fair value, to the extent effective as
      a hedge, are recorded within other comprehensive income. Changes in the
      fair value of derivatives that are not designated as hedging instruments
      are reported in current-period earnings.
    Unrealized gains and losses from changes in market prices of energy contracts
      accounted for as fair value hedges are reflected in "Energy purchases" on
      the Statement of Income, as are changes in the underlying positions. Realized
      gains and losses from energy contracts accounted for as fair value hedges
      or cash flow hedges, when recognized on the Statement of Income, are reflected
      in "Wholesale energy marketing" revenues, "Fuel," or "Energy purchases,"
      consistent with the hedged item. Gains and losses from interest rate and
      foreign currency derivative contracts that hedge interest payments, when
      recognized on the Statement of Income, are accounted for in "Interest Expense."
      Gains and losses from foreign currency derivative contracts that economically
      hedge foreign earnings translation are recognized in "Other Income - net."
      Gains and losses from foreign currency derivative contracts that hedge foreign
      currency payments for equipment, when recognized on the Statement of Income,
      are accounted for in "Depreciation."
    In the fourth quarter of 2002, PPL Energy Supply adopted the accounting
      requirements under EITF 02-3, "Issues Involved in Accounting for Derivative
      Contracts Held for Trading Purposes and Contracts Involved in Energy Trading
      and Risk Management Activities." As such, PPL reflects its net realized
      and unrealized gains and losses associated with all derivatives that are
      held for trading purposes in the "Net energy trading margins" line on the
      Statement of Income. Non-derivative contracts that met the definition of
      energy trading activities as defined by EITF 98-10, "Accounting for Energy
      Trading and Risk Management Activities" are reflected in the financial statements
      using the accrual method of accounting. Prior periods were restated.
    PPL Energy Supply adopted the final provisions of EITF 03-11, "Reporting
      Realized Gains and Losses on Derivative Instruments That Are Subject to
      FASB Statement No. 133 and Not 'Held for Trading Purposes' as Defined in
      Issue No. 02-3," prospectively as of October 1, 2003. As a result of the
      adoption, non-trading bilateral sales of electricity at major market delivery
      points are netted with purchases that offset the sales at those same delivery
      points. A major market delivery point is any delivery point with liquid
      pricing available.
    See Note 17 for additional information on SFAS 133, its amendments and
      related accounting guidance.
    Revenue Recognition (PPL, PPL Energy Supply and PPL Electric)
    Operating revenues, except for "Energy related businesses," are recorded
      based on energy deliveries through the end of the calendar month. Unbilled
      retail revenues result because customers' meters are read and bills are
      rendered throughout the month, rather than all being read at the end of
      the month. Unbilled revenues for a month are calculated by multiplying an
      estimate of unbilled kWh by the estimated average cents per kWh. Unbilled
      wholesale energy revenues are recorded at month-end to reflect estimated
      amounts until actual dollars and MWhs are confirmed and invoiced. At that
      time, unbilled revenue is reversed and actual revenue is recorded.
    "Energy related businesses" revenue includes revenues from the mechanical
      contracting and engineering subsidiaries and PPL Global's proportionate
      share of affiliate earnings under the equity or cost method of accounting,
      as described in the "Business and Consolidation" section of Note 1. The
      mechanical contracting and engineering subsidiaries record profits from
      construction contracts on the percentage-of-completion method of accounting.
      Income from time and material contracts is recognized currently as the work
      is performed.
    Utility Revenue
    (PPL and PPL Energy Supply)
    The Statement of Income "Utility" line item contains revenues from domestic
      and international rate-regulated delivery operations.
    WPD revenues are stated net of value-added tax.
    (PPL Electric)
    Since most of PPL Electric's operations are regulated, it is not meaningful
      to use a "Utility" caption. Therefore, the revenues of PPL Electric are
      presented according to specific types of revenue.
    Income Taxes
    (PPL, PPL Energy Supply and PPL Electric)
    The income tax provision for PPL and its subsidiaries is calculated in
      accordance with SFAS 109, "Accounting for Income Taxes." PPL and its domestic
      subsidiaries file a consolidated U.S. federal income tax return.
    Significant management judgment is required in developing PPL's provision
      for income taxes, including the determination of deferred tax assets and
      liabilities and any valuation allowances that might be required against
      the deferred tax assets. PPL and its subsidiaries record valuation allowances
      to reduce deferred tax assets to the amounts that are more likely than not
      to be realized. PPL and its subsidiaries have considered future taxable
      income and ongoing prudent and feasible tax planning strategies in assessing
      the need for valuation allowances. If PPL and its subsidiaries determined
      that they would be able to realize deferred tax assets in the future in
      excess of net deferred tax assets, adjustments to the deferred tax assets
      would increase income by reducing tax expense in the period that such determination
      was made. Likewise, if PPL and its subsidiaries determined that they would
      not be able to realize all or part of net deferred tax assets in the future,
      adjustments to the deferred tax assets would decrease income by increasing
      tax expense in the period that such determination was made.
    Annual tax provisions include amounts considered sufficient to pay assessments
      that may result from examination by taxing authorities of prior year tax
      returns; however, the amount ultimately paid upon resolution of issues raised
      by such authorities may differ materially from the amount accrued and may
      materially impact PPL's financial statements. In evaluating the exposure
      associated with various tax filing positions, PPL and its subsidiaries accrue
      charges for probable exposures based on management's best estimate of the
      amount that should be recognized. PPL and its subsidiaries maintain an allowance
      for tax contingencies, the balance of which management believes to be adequate.
    The provision for PPL Energy Supply and PPL Electric is calculated in accordance
      with an intercompany tax sharing policy which provides that the taxable
      income be calculated as if PPL Energy Supply and PPL Electric and its domestic
      subsidiaries filed a separate consolidated return. PPL Energy Supply's intercompany
      tax liability was $44 million and $61 million at December 31, 2004 and 2003.
      PPL Electric's intercompany tax receivable was $5 million and $20 million
      at December 31, 2004 and 2003.
    PPL Energy Supply and PPL Electric deferred investment tax credits when
      they were utilized and are amortizing the deferrals over the average lives
      of the related assets. See Note 5 for additional discussion regarding income
      taxes.
    (PPL and PPL Electric)
    The provision for PPL Electric's deferred income taxes for regulated assets
      is based upon the ratemaking principles reflected in rates established by
      the PUC and the FERC. The difference in the provision for deferred income
      taxes for regulated assets and the amount that otherwise would be recorded
      under U.S. GAAP is deferred and included in taxes recoverable through future
      rates in "Regulatory and Other Noncurrent Assets - Other" on the Balance
      Sheet. See Note 5 for additional information.
    Leases
    (PPL, PPL Energy Supply and PPL Electric)
    PPL and its subsidiaries apply the provisions of SFAS 13, "Accounting for
      Leases," as amended and interpreted, to all transactions that qualify for
      lease accounting. See Note 10 for a discussion of accounting for leases
      under which PPL, PPL Energy Supply and PPL Electric are lessees.
    (PPL and PPL Energy Supply)
    In 2002, PPL began commercial operation of its 79.9 MW oil-powered station
      in Shoreham, New York. The Long Island Power Authority has contracted to
      purchase all of the plant's capacity and ancillary services as part of a
      15-year power purchase agreement with PPL EnergyPlus. The capacity payments
      in the power purchase agreement result in the plant being classified as
      a direct financing lease, under which PPL EnergyPlus is the lessor. In December
      2004, PPL and PPL Energy Supply recorded a sales-type lease related to an
      8 MW on-site electrical generation plant, under which a subsidiary of PPL
      Energy Supply is the lessor.
    As of December 31, 2004 and 2003, PPL and PPL Energy Supply had receivable
      balances of $273 million and $277 million (included in "Current Assets -
      Other" and "Regulatory and Other Noncurrent Assets - Other" for PPL and
      "Current Assets - Other" and "Other Noncurrent Assets - Other" for PPL Energy
      Supply) and unearned revenue balances of $158 million and $167 million (included
      in "Deferred Credits and Other Noncurrent Liabilities - Other"). The receivable
      balances include $65 million of an unguaranteed residual value. Rental income
      received during 2004, 2003 and 2002 was $14 million, $15 million and $5
      million. Total future minimum lease payments expected to be received on
      both leases are estimated at $16 million for each of the years from 2005
      through 2009.
    Stock-Based Compensation
    (PPL, PPL Energy Supply and PPL Electric)
    PPL grants stock options, restricted stock, restricted stock units and
      stock units to employees and directors under several stock-based compensation
      plans. SFAS 123, "Accounting for Stock-Based Compensation," encourages entities
      to record compensation expense for stock-based compensation plans at fair
      value but provides the option of measuring compensation expense using the
      intrinsic value method prescribed by APB Opinion No. 25, "Accounting for
      Stock Issued to Employees." The fair value method under SFAS 123 is the
      preferable method of accounting for stock-based compensation, as it provides
      a consistent basis of accounting for all stock-based awards, thereby facilitating
      a better measure of compensation cost and improved financial reporting.
    Prior to 2003, PPL accounted for stock-based compensation in accordance
      with APB Opinion No. 25, as permitted by SFAS 123. Effective January 1,
      2003, PPL and its subsidiaries adopted the fair value method of accounting
      for stock-based compensation, as prescribed by SFAS 123, using the prospective
      method of transition permitted by SFAS 148, "Accounting for Stock-Based
      Compensation - Transition and Disclosure, an Amendment of FASB Statement
      No. 123." The prospective method of transition requires PPL and its subsidiaries
      to use the fair value method under SFAS 123 for all stock-based compensation
      awards granted, modified or settled on or after January 1, 2003. Thus, all
      awards granted prior to January 1, 2003, continue to be accounted for under
      the intrinsic value method of APB Opinion No. 25, to the extent such awards
      are not modified or settled. Stock-based compensation is recognized on a
      straight-line basis over the vesting period of the awards and is included
      in "Other operation and maintenance" expense on PPL's Statement of Income.
    Use of the fair value method prescribed by SFAS 123 requires PPL and its
      subsidiaries to recognize compensation expense for stock options issued.
      Fair value for the stock options is determined using the Black-Scholes options
      pricing model.
    PPL and its subsidiaries were not required to recognize compensation expense
      for stock options issued and accounted for under the intrinsic value method
      of APB Opinion No. 25, since PPL grants stock options with an exercise price
      that is not less than the fair market value of PPL's common stock on the
      date of grant. For stock options granted and accounted for under the fair
      value method of SFAS 123, stock option expense for PPL was approximately
      $6 million for 2004 and $3 million for 2003. As currently structured, awards
      of restricted stock, restricted stock units and stock units result in the
      same amount of compensation expense under the fair value method of SFAS
      123 as they would under the intrinsic value method of APB Opinion No. 25.
    See Note 23 for a discussion of SFAS 123 (revised 2004), "Share-Based Payment."
      See Note 11 for a discussion of stock-based compensation.
    The following table illustrates the pro forma effect on net income and
      EPS as if the fair value method had been used to account for all outstanding
      stock-based compensation awards in the years shown:
    (PPL)
    2004
        
        
        2003
        
        
        2002Net IncomeNet Income - as reported
        
        $
        698
        
        
        $
        734
        
        
        $
        208Add: Stock-based employee compensation
            expense included in reported net income, net of tax
        
        
        8
        
        
        
        5
        
        
        
        3Deduct: Total stock-based compensation
            expense determined under the fair value method for all awards, net
            of tax
        
        
        10
        
        
        
        9
        
        
        
        8Pro forma Net Income
        
        $
        696
        
        
        $
        730
        
        
        $
        203EPSBasic - as reported
        
        $
        3.79
        
        
        $
        4.25
        
        
        $
        1.37Basic - pro forma
        
        $
        3.78
        
        
        $
        4.23
        
        
        $
        1.34Diluted - as reported
        
        $
        3.77
        
        
        $
        4.24
        
        
        $
        1.36Diluted - pro forma
        
        $
        3.76
        
        
        $
        4.22
        
        
        $
        1.33
    (PPL Energy Supply)
    2004
        
        
        2003
        
        
        2002Net IncomeNet Income - as reported
        
        $
        651
        
        
        $
        727
        
        
        $
        279Add: Stock-based employee compensation
            expense included in reported net income, net of tax
        
        
        5
        
        
        
        3
        
        
        
        2Deduct: Total stock-based compensation
            expense determined under the fair value method for all awards, net
            of tax
        
        
        7
        
        
        
        6
        
        
        
        5Pro forma Net Income
        
        $
        649
        
        
        $
        724
        
        
        $
        276Stock-based compensation expense includes an allocation of PPL Services'
      expense.
    (PPL Electric)
    Stock-based compensation expense, including awards granted to employees
      and an allocation of costs of awards granted to employees of PPL Services,
      was insignificant under both the intrinsic value and fair value methods
      for each of 2004, 2003 and 2002.
    Pension and Other Postretirement Benefits(PPL, PPL Energy Supply
      and PPL Electric)
    PPL and certain of its subsidiaries sponsor various pension and other postretirement
      and postemployment benefit plans. PPL follows the guidance of SFAS 87, "Employers'
      Accounting for Pensions," and SFAS 106, "Employers' Accounting for Postretirement
      Benefits Other Than Pensions," when accounting for these benefits.
    PPL and certain of its subsidiaries also provide supplemental retirement
      benefits to directors, executives and other key management employees through
      unfunded nonqualified retirement plans.
    The majority of employees of PPL's domestic subsidiaries will become eligible
      for certain health care and life insurance benefits upon retirement through
      contributory plans. Postretirement benefits under the PPL Retiree Health
      Plans (covering retirees of PPL Electric and various other affiliated PPL
      companies) and certain employees of PPL Gas Utilities are paid from funded
      VEBA trusts sponsored by the respective companies.
    See Note 12 for a discussion of pension and other postretirement benefits.
    Comprehensive Income(PPL and PPL Energy Supply)
    Comprehensive income consists of net income and other comprehensive income,
      defined as changes in common equity from transactions not related to shareowners.
      Other comprehensive income consists of foreign currency translation adjustments
      recorded by PPL Global, unrealized gains or losses on available-for-sale
      securities and qualifying derivatives, and the excess of additional pension
      liability over unamortized prior service costs, net of taxes. Comprehensive
      income is reflected on the PPL Statement of Shareowners' Common Equity and
      Comprehensive Income, and "Accumulated other comprehensive loss" is presented
      on the PPL Balance Sheet. Comprehensive income is reflected on the PPL Energy
      Supply Statement of Member's Equity and Comprehensive Income, and accumulated
      other comprehensive loss is included in Member's Equity on the PPL Energy
      Supply Balance Sheet.
    The accumulated other comprehensive loss of PPL consisted of the following
      after tax amounts at December 31:
    2004
        
        
        2003Foreign currency translation adjustments
        
        $
        75
        
        
        $
        (37
        )Net unrealized gains on available-for-sale
            securities
        
        
        40
        
        
        
        20Minimum pension liability
        
        
        (369
        )
        
        
        (316
        )Unrealized gains (losses) on qualifying
            derivatives
        
        
        (69
        )
        
        
        36$
        (323
        )
        
        $
        (297
        )The accumulated other comprehensive loss of PPL Energy Supply consisted
      of the following after tax amounts at December 31:
    2004
        
        
        2003Foreign currency translation adjustments
        
        $
        75
        
        
        $
        (37
        )Net unrealized gains on available-for-sale
            securities
        
        
        39
        
        
        
        22Minimum pension liability
        
        
        (360
        )
        
        
        (309
        )Unrealized gains (losses) on qualifying
            derivatives
        
        
        (51
        )
        
        
        56$
        (297
        )
        
        $
        (268
        )Treasury Stock(PPL and PPL Electric)
    Treasury shares are reflected on the balance sheet as an offset to common
      equity under the cost method of accounting. Management has no definitive
      plans for the future use of these shares. Treasury shares are not considered
      outstanding in calculating EPS.
    At December 31, 2004 and 2003, PPL had 31,045,853 and 31,019,352 shares
      of treasury stock outstanding. At December 31, 2004 and 2003, PPL Electric
      had 79,270,519 shares of treasury stock outstanding.
    Foreign Currency Translation and Transactions(PPL and PPL Energy
      Supply)
    Assets and liabilities of international operations, where the local currency
      is the functional currency, are translated at year-end exchange rates, and
      related revenues and expenses are translated at average exchange rates prevailing
      during the year. Adjustments resulting from translation are recorded in
      accumulated other comprehensive loss.
    Gains or losses relating to foreign currency transactions are recognized
      currently in income. The aggregate transaction gain (loss) was an insignificant
      amount in 2004, $(1) million in 2003 and $(9) million in 2002.
    Independent System Operator (PPL, PPL Energy Supply and PPL Electric)
    Certain PPL subsidiaries participate in PJM in several roles. Certain PPL
      subsidiaries also participate in the New England ISO (ISO-NE) and the New
      York ISO (NYISO) in a less significant way than in PJM. In PJM, PPL EnergyPlus
      is a marketer, a load-serving entity to its customers who selected it as
      a supplier under the Customer Choice Act and a seller for PPL's generation
      subsidiaries. PPL Electric is a transmission owner and provider of last
      resort in PJM. In ISO-NE, PPL EnergyPlus is a marketer, a load-serving entity,
      and a seller for PPL's New England generating assets. In the NYISO, PPL
      EnergyPlus acts as a marketer. PPL Electric does not participate in ISO-NE
      or NYISO.
    A function of interchange accounting is to match participants' MWh entitlements
      (generation plus scheduled bilateral purchases) against their MWh obligations
      (load plus scheduled bilateral sales) during every hour of every day. If
      the net result during any given hour is an entitlement, the participant
      is credited with a spot market sale to the ISO at the respective market
      price for that hour; if the net result is an obligation, the participant
      is charged with a spot market purchase from the ISO at the respective market
      price for that hour. ISO purchases and sales are not allocated to individual
      customers.
    PPL records the hourly net sales and purchases in its financial statements
      as sales to and purchases from the respective ISOs, in accordance with the
      FERC and industry accounting.
    Reclassifications(PPL, PPL Energy Supply and PPL Electric)
    Certain amounts in the 2003 and 2002 financial statements have been reclassified
      to conform to the current presentation. The reclassifications did not affect
      net income or total equity.
    New Accounting Standards(PPL, PPL Energy Supply and PPL Electric)
    See Note 23 for a discussion of new accounting standards adopted in 2004
      or pending adoption.
2. Segment and Related Information
    (PPL and PPL Energy Supply)
    PPL's reportable segments are Supply, Delivery and International. The Supply
      segment primarily consists of the domestic energy marketing, domestic generation
      and domestic development operations of PPL Energy Supply. The Delivery segment
      includes the regulated electric and gas delivery operations of PPL Electric
      and PPL Gas Utilities. The International segment includes operations of
      the international energy businesses of PPL Global. The majority of PPL Global's
      international businesses are located in the U.K., Chile, El Salvador and
      Bolivia.
    PPL Energy Supply's reportable segments are Supply and International. The
      International segment at the PPL Energy Supply level is consistent with
      the International segment at the PPL level. The Supply segment information
      reported at the PPL Energy Supply level will not agree with the Supply segment
      information reported at the PPL level. Additional Supply segment functions,
      including telecommunications, exist at PPL that are outside of PPL Energy
      Supply. Furthermore, certain income items, including PLR revenue and certain
      interest income, exist at the PPL Energy Supply level, but are eliminated
      in consolidation at the PPL level. Finally, certain expense items are fully
      allocated to the segments at the PPL level only.
    Segments include direct charges, as well as an allocation of indirect corporate
      costs, for services provided by PPL Services. These service costs include
      functions such as financial, legal, human resources and information services.
    Financial data for the segments are as follows:
    PPL
        
        
        PPL Energy
            Supply2004
        
        
        2003
        
        
        2002
        
        
        2004
        
        
        2003
        
        
        2002Income Statement DataRevenues from external customersSupply
        
        $
        1,846
        
        
        $
        1,804
        
        
        $
        1,707
        
        
        $
        3,327
        
        
        $
        3,230
        
        
        $
        3,124Delivery
        
        
        2,869
        
        
        
        2,778
        
        
        
        2,706International
        
        
        1,097
        
        
        
        1,014
        
        
        
        1,078
        
        
        
        1,097
        
        
        
        1,014
        
        
        
        1,0785,812
        
        
        
        5,596
        
        
        
        5,491
        
        
        
        4,424
        
        
        
        4,244
        
        
        
        4,202Intersegment revenuesSupply
        
        
        1,500
        
        
        
        1,444
        
        
        
        1,431Delivery
        
        
        157
        
        
        
        160
        
        
        
        183Equity in earnings of unconsolidated
            affiliatesSupply
        
        
        (10
        )
        
        
        (14
        )
        
        
        (12
        )
        
        
        (9
        )
        
        
        (11
        )
        
        
        (11
        )International
        
        
        2
        
        
        
        3
        
        
        
        3
        
        
        
        2
        
        
        
        3
        
        
        
        3(8
        )
        
        
        (11
        )
        
        
        (9
        )
        
        
        (7
        )
        
        
        (8
        )
        
        
        (8
        )DepreciationSupply
        
        
        152
        
        
        
        120
        
        
        
        129
        
        
        
        146
        
        
        
        116
        
        
        
        127Delivery
        
        
        114
        
        
        
        110
        
        
        
        100International
        
        
        146
        
        
        
        150
        
        
        
        138
        
        
        
        146
        
        
        
        150
        
        
        
        138412
        
        
        
        380
        
        
        
        367
        
        
        
        292
        
        
        
        266
        
        
        
        265Amortizations - recoverable
            transition costs and otherSupply
        
        
        (25
        )
        
        
        (27
        )
        
        
        (38
        )
        
        
        (40
        )
        
        
        (38
        )
        
        
        (56
        )Delivery
        
        
        267
        
        
        
        271
        
        
        
        236242
        
        
        
        244
        
        
        
        198
        
        
        
        (40
        )
        
        
        (38
        )
        
        
        (56
        )
    PPL
        
        
        PPL Energy
            Supply2004
        
        
        2003
        
        
        2002
        
        
        2004
        
        
        2003
        
        
        2002Interest incomeSupply
        
        
        15
        
        
        
        (2
        )
        
        
        (5
        )
        
        
        23
        
        
        
        17
        
        
        
        27Delivery
        
        
        16
        
        
        
        7
        
        
        
        20International
        
        
        8
        
        
        
        7
        
        
        
        13
        
        
        
        8
        
        
        
        7
        
        
        
        1339
        
        
        
        12
        
        
        
        28
        
        
        
        31
        
        
        
        24
        
        
        
        40Interest expenseSupply
        
        
        124
        
        
        
        41
        
        
        
        107
        
        
        
        74
        
        
        
        (19
        )
        
        
        (29
        )Delivery
        
        
        196
        
        
        
        214
        
        
        
        214International
        
        
        203
        
        
        
        218
        
        
        
        239
        
        
        
        203
        
        
        
        218
        
        
        
        239523
        
        
        
        473
        
        
        
        560
        
        
        
        277
        
        
        
        199
        
        
        
        210Income taxes - totalSupply
        
        
        119
        
        
        
        177
        
        
        
        119
        
        
        
        140
        
        
        
        215
        
        
        
        199Delivery
        
        
        17
        
        
        
        23
        
        
        
        24International
        
        
        59
        
        
        
        (30
        )
        
        
        67
        
        
        
        59
        
        
        
        (30
        )
        
        
        67195
        
        
        
        170
        
        
        
        210
        
        
        
        199
        
        
        
        185
        
        
        
        266Deferred income taxes and
            investment tax creditsSupply
        
        
        18
        
        
        
        19
        
        
        
        (21
        )
        
        
        105
        
        
        
        99
        
        
        
        73Delivery
        
        
        87
        
        
        
        22
        
        
        
        21International
        
        
        50
        
        
        
        55
        
        
        
        85
        
        
        
        50
        
        
        
        55
        
        
        
        85155
        
        
        
        96
        
        
        
        85
        
        
        
        155
        
        
        
        154
        
        
        
        158Net IncomeSupply (a)
        
        
        421
        
        
        
        502
        
        
        
        356
        
        
        
        454
        
        
        
        531
        
        
        
        475Delivery
        
        
        80
        
        
        
        36
        
        
        
        48International (b)
        
        
        197
        
        
        
        196
        
        
        
        (196
        )
        
        
        197
        
        
        
        196
        
        
        
        (196
        )$
        698
        
        
        $
        734
        
        
        $
        208
        
        
        $
        651
        
        
        $
        727
        
        
        $
        279Cash Flow DataExpenditures for property,
            plant and equipmentSupply
        
        $
        228
        
        
        $
        270
        
        
        $
        291
        
        
        $
        211
        
        
        $
        256
        
        
        $
        283Delivery
        
        
        196
        
        
        
        251
        
        
        
        237International
        
        
        279
        
        
        
        246
        
        
        
        113
        
        
        
        279
        
        
        
        246
        
        
        
        113703
        
        
        
        767
        
        
        
        641
        
        
        
        490
        
        
        
        502
        
        
        
        396Investment in generating
            assets and electric energy projectsSupply
        
        
        31
        
        
        
        
        
        
        
        261
        
        
        
        31
        
        
        
        
        
        
        
        261International (c)
        
        
        
        
        
        
        
        
        
        
        211
        
        
        
        
        
        
        
        
        
        
        
        211$
        31
        
        
        $
        
        
        
        $
        472
        
        
        $
        31
        
        
        $
        
        
        
        $
        472
    PPL
        
        
        PPL Energy
            SupplyAs of
            December 31,
        
        
        As of
            December 31,2004
        
        
        2003
        
        
        2004
        
        
        2003Balance Sheet DataNet investment in unconsolidated
            affiliates - at equitySupply
        
        $
        36
        
        
        $
        48
        
        
        $
        36
        
        
        $
        30International
        
        
        15
        
        
        
        26
        
        
        
        15
        
        
        
        2651
        
        
        
        74
        
        
        
        51
        
        
        
        56Total assetsSupply
        
        
        6,673
        
        
        
        6,491
        
        
        
        7,094
        
        
        
        6,308Delivery
        
        
        5,698
        
        
        
        5,690International
        
        
        5,390
        
        
        
        4,942
        
        
        
        5,390
        
        
        
        4,942$
        17,761
        
        
        $
        17,123
        
        
        $
        12,484
        
        
        $
        11,250PPL
        
        
        PPL Energy
            Supply2004
        
        
        2003
        
        
        2002
        
        
        2004
        
        
        2003
        
        
        2002Geographic DataRevenues from external customersDomestic
        
        $
        4,715
        
        
        $
        4,582
        
        
        $
        4,413
        
        
        $
        3,327
        
        
        $
        3,230
        
        
        $
        3,124Foreign
        
        
        1,097
        
        
        
        1,014
        
        
        
        1,078
        
        
        
        1,097
        
        
        
        1,014
        
        
        
        1,078$
        5,812
        
        
        $
        5,596
        
        
        $
        5,491
        
        
        $
        4,424
        
        
        $
        4,244
        
        
        $
        4,202PPL
        
        
        PPL Energy
            SupplyAs of
            December 31,
        
        
        As of
            December 31,2004
        
        
        2003
        
        
        2004
        
        
        2003Property, plant and equipment
            - netDomestic
        
        $
        7,359
        
        
        $
        7,219
        
        
        $
        4,439
        
        
        $
        4,385Foreign
        
        
        3,850
        
        
        
        3,374
        
        
        
        3,850
        
        
        
        3,374$
        11,209
        
        
        $
        10,593
        
        
        $
        8,289
        
        
        $
        7,759(a)
        
        2003 includes two cumulative-effect changes
            in accounting principle recorded in January and December 2003. See
            Notes 21 and 22 for additional information.(b)
        
        2002 includes the cumulative-effect change
            in accounting principle recorded in March 2002. See Note 19 for additional
            information. The International segment also includes the write-downs
            of the CEMAR investment recorded in March and June 2002, as described
            in Note 9.(c)
        
        The 2002 amount represents the acquisition
            of the controlling interest in WPD.
3. Investment in Unconsolidated Affiliates - at Equity
    (PPL and PPL Energy Supply)
    Investment in unconsolidated affiliates accounted for under the equity
      method were as follows as of December 31 (equity ownership percentages as
      of December 31, 2004):
    2004
        
        
        2003Aguaytia Energy, LLC - 11.4%
        
        $
        9
        
        
        $
        11Bangor Pacific Hydro Associates
            - 50.0%
        
        
        15
        
        
        
        15MicDos
        
        
        
        
        
        
        9Safe Harbor Water Power
            Corporation - 33.3%
        
        
        15
        
        
        
        15Other
        
        
        12
        
        
        
        6Total PPL Energy Supply
        
        
        51
        
        
        
        56PPL Capital Funding Trust
            I
        
        
        
        
        
        
        18Total PPL
        
        $
        51
        
        
        $
        74The 50% investment interest in MicDos was sold in June 2004. See Note 9
      for additional information. PPL no longer has its 100% interest in PPL Capital
      Funding Trust I as a result of exchanges of securities involving the trust
      preferred securities in January and February 2004 and the liquidation of
      the trust in March 2004. See Note 8 for additional information.
    A PPL subsidiary has a 50% interest in a partnership that owns the Griffith
      gas-fired generation station. The partnership arrangement is essentially
      a cost-sharing arrangement, in that each of the partners has rights to one-half
      of the plant capacity and energy, and an obligation to cover one-half of
      the operating costs of the station. Accordingly, the equity investment is
      not reflected in the table above and is classified as "Electric Plant in
      Service - Generation" on the Balance Sheet.
4. Earnings Per Share
    (PPL)
    Basic EPS is calculated using the weighted-average number of common shares
      outstanding during the period. Diluted EPS is calculated using weighted
      average shares outstanding that are increased for additional shares that
      would be outstanding if potentially dilutive securities were converted to
      common stock. Potentially dilutive securities consist of:
    
        stock options, restricted stock and restricted
            stock units granted under the incentive compensation plans;
        stock units representing common stock
            granted under the directors compensation programs;
        common stock purchase contracts that
            were a component of the PEPS Units and PEPS Units, Series B; and
        convertible senior notes.The basic and diluted EPS calculations, and the reconciliation of the shares
      (in thousands) used in the calculations, are shown below:
    2004
        
        
        2003
        
        
        2002Income (Numerator)Income from continuing operations
        
        $
        700
        
        
        $
        719
        
        
        $
        360Loss from discontinued operations
            (net of tax)
        
        
        (2
        )
        
        
        (20
        )
        
        
        (2
        )Cumulative effects of changes in accounting
            principles (net of tax)
        
        
        
        
        
        
        35
        
        
        
        (150
        )Net Income
        
        $
        698
        
        
        $
        734
        
        
        $
        208Shares (Denominator)Shares for Basic EPS
        
        
        184,228
        
        
        
        172,795
        
        
        
        152,492Add: Incremental sharesConvertible Senior Notes
        
        
        67Stock options and other share-based
            awards
        
        
        698
        
        
        
        597
        
        
        
        317Shares for Diluted EPS
        
        
        184,993
        
        
        
        173,392
        
        
        
        152,809Basic EPSIncome from continuing operations
        
        $
        3.80
        
        
        $
        4.16
        
        
        $
        2.36Loss from discontinued operations
            (net of tax)
        
        
        (0.01
        )
        
        
        (0.11
        )
        
        
        (0.01
        )Cumulative effects of changes in accounting
            principles (net of tax)
        
        
        
        
        
        
        0.20
        
        
        
        (0.98
        )Net Income
        
        $
        3.79
        
        
        $
        4.25
        
        
        $
        1.37Diluted EPSIncome from continuing operations
        
        $
        3.78
        
        
        $
        4.15
        
        
        $
        2.36Loss from discontinued operations
            (net of tax)
        
        
        (0.01
        )
        
        
        (0.11
        )
        
        
        (0.01
        )Cumulative effects of changes in accounting
            principles (net of tax)
        
        
        
        
        
        
        0.20
        
        
        
        (0.99
        )Net Income
        
        $
        3.77
        
        
        $
        4.24
        
        
        $
        1.36In May 2001, PPL and PPL Capital Funding Trust I issued 23 million PEPS
      Units that contained a purchase contract component for PPL's common stock.
      The purchase contracts were only dilutive if the average price of PPL's
      common stock exceeded a threshold appreciation price, which was adjusted
      for cash distributions on PPL common stock. The threshold appreciation price
      was initially set at $65.03 and was adjusted to $63.38 as of April 1, 2004,
      based on dividends paid on PPL's common stock since issuance. The purchase
      contracts were settled in May 2004. Since the average price did not exceed
      the threshold appreciation price, the purchase contracts were excluded from
      the diluted EPS calculations for 2004, 2003 and 2002.
    In January 2004, PPL completed an exchange offer resulting in the exchange
      of approximately four million PEPS Units for PEPS Units, Series B. The primary
      difference in the units related to the debt component. The purchase contract
      components of both units, which were potentially dilutive, were identical.
      The threshold appreciation price for the purchase contract component of
      the PEPS Units, Series B was adjusted in the same manner as that of the
      PEPS Units and was $63.38 as a result of the adjustment as of April 1, 2004.
      These purchase contracts were settled in May 2004. Since the average price
      did not exceed the threshold appreciation price, the purchase contracts
      were excluded from the diluted EPS calculations for 2004. See Note 8 for
      a more detailed discussion of the exchange offer.
    In May 2003, PPL Energy Supply issued $400 million of 2.625% Convertible
      Senior Notes due 2023. The notes are guaranteed by PPL and, as originally
      issued, could be converted into shares of PPL common stock if:
    
        during any fiscal quarter starting after
            June 30, 2003, the market price of PPL's common stock trades at or
            above $59.67 per share over a certain period during the preceding
            fiscal quarter;
        PPL calls the debt for redemption;
        the holder exercises its right to put
            the debt on any five-year anniversary of the offering;
        the long-term credit rating assigned
            to the notes by Moody's Investors Service, Inc. and Standard &
            Poor's Ratings Services falls below Ba2 and BB or the notes are not
            rated; or
        certain specified corporate transactions
            occur, e.g., change in control and certain distributions to the holders
            of PPL common stock.The initial conversion rate is 20.1106 shares per $1,000 principal amount
      of notes. It will be adjusted if certain specified distributions, whether
      in the form of cash, stock, other equity interests, evidence of indebtedness
      or assets, are made to holders of PPL common stock. Additionally, the conversion
      rate can be increased by PPL if its Board of Directors has made a determination
      that to do so would be in the best interests of either PPL or holders of
      PPL common stock.
    Depending upon which of the conversion events identified above occurs,
      the Convertible Senior Notes, as originally issued, could have been settled
      in cash or shares. However, the notes were modified in November 2004 to
      require cash settlement of the principal amount, permit settlement of any
      conversion premium in cash or stock and eliminate a provision that required
      settlement in stock in the event of default. These modifications were made
      in response to the FASB's ratification of EITF Issue 04-8, "The Effect of
      Contingently Convertible Instruments on Diluted Earnings per Share,"
      as well as other anticipated rules relating to EPS. See Note 23 for a discussion
      of EITF Issue 04-8, and Note 8 for a discussion of the consent solicitation
      that effected these modifications.
    The maximum number of shares that could potentially be issued to settle
      the conversion premium, based upon the current conversion rate, is 8,044,240
      shares. Based on PPL's common stock price at December 31, 2004, the conversion
      premium equated to 536,732 shares, or approximately $29 million.
    As currently structured, the Convertible Senior Notes will have a dilutive
      impact when the average market price of PPL common stock exceeds the conversion
      price of $49.73. The Convertible Senior Notes did not have a dilutive impact
      on 2003 EPS.
    The following number of stock options to purchase PPL common shares were
      excluded in the periods' computations of diluted EPS because the effect
      would have been antidilutive.
    (Thousands of Shares)
        
        2004
        
        
        2003
        
        
        2002Antidilutive stock options
        
        
        1,133
        
        
        
        1,683
        
        
        
        1,294See Note 23 for a discussion of EITF Issue 03-6 "Participating Securities
      and the Two-Class Method under FASB Statement No. 128, 'Earnings Per Share'."
5. Income and Other Taxes
    For 2004, 2003 and 2002, the statutory U.S. corporate federal income tax
      rate was 35%. The statutory corporate net income tax rate for Pennsylvania
      was 9.99%.
    (PPL)
    "Income from Continuing Operations Before Income Taxes, Minority Interest
      and Distributions on Preferred Securities" included the following components
      for the years ended December 31:
    2004
        
        
        2003
        
        
        2002Domestic income
        
        $
        641
        
        
        $
        727
        
        
        $
        605Foreign income
        
        
        264
        
        
        
        198
        
        
        
        110$
        905
        
        
        $
        925
        
        
        $
        715Deferred income taxes reflect the net tax effects of temporary differences
      between the carrying amounts of assets and liabilities for accounting purposes
      and their basis for income tax purposes and the tax effects of net operating
      loss and tax credit carryforwards.
    Net deferred tax assets have been recognized based on management's estimates
      of future taxable income for U.S. and certain foreign jurisdictions in which
      PPL's operations have historically been profitable.
    Significant components of PPL's deferred income tax assets and liabilities
      from continuing operations were as follows:
    2004
        
        
        2003Deferred Tax AssetsDeferred investment tax credits
        
        $
        42
        
        
        $
        48NUG contracts and buybacks
        
        
        135
        
        
        
        168Accrued pension costs
        
        
        86
        
        
        
        81Federal tax credit carryforwards
        
        
        58
        
        
        
        9Foreign loss carryforwards
        
        
        152
        
        
        
        278Foreign - pensions
        
        
        51
        
        
        
        67Foreign - other
        
        
        26
        
        
        
        38Contribution in aid of construction
        
        
        65
        
        
        
        63Other
        
        
        219
        
        
        
        218Valuation allowance
        
        
        (164
        )
        
        
        (293
        )670
        
        
        
        677Deferred Tax LiabilitiesPlant - net
        
        
        1,291
        
        
        
        1,073Restructuring - CTC
        
        
        526
        
        
        
        617Taxes recoverable through future rates
        
        
        115
        
        
        
        106Reacquired debt costs
        
        
        14
        
        
        
        11Foreign - plant
        
        
        770
        
        
        
        792Foreign - other
        
        
        55
        
        
        
        1Other domestic
        
        
        62
        
        
        
        612,833
        
        
        
        2,661Net deferred tax liability
        
        $
        2,163
        
        
        $
        1,984Details of the components of income tax expense, a reconciliation of federal
      income taxes derived from statutory tax rates applied to income from continuing
      operations for accounting purposes, and details of taxes other than income
      are as follows:
    2004
        
        
        2003
        
        
        2002Income Tax ExpenseCurrent-Federal
        
        $
        45
        
        
        $
        26
        
        
        $
        41Current-State
        
        
        (32
        )
        
        
        13
        
        
        
        (9
        )Current-Foreign
        
        
        27
        
        
        
        35
        
        
        
        5240
        
        
        
        74
        
        
        
        84Deferred-Federal
        
        
        102
        
        
        
        39
        
        
        
        70Deferred-State
        
        
        17
        
        
        
        24
        
        
        
        27Deferred-Foreign
        
        
        51
        
        
        
        48
        
        
        
        44170
        
        
        
        111
        
        
        
        141Investment tax credit, net-federal
        
        
        (15
        )
        
        
        (15
        )
        
        
        (15
        )Total income tax expense from continuing
            operations
        
        $
        195
        
        
        $
        170
        
        
        $
        210Total income tax expense-Federal
        
        $
        132
        
        
        $
        50
        
        
        $
        96Total income tax expense-State
        
        
        (15
        )
        
        
        37
        
        
        
        18Total income tax expense-Foreign
        
        
        78
        
        
        
        83
        
        
        
        96Total income tax expense from continuing
            operations
        
        $
        195
        
        
        $
        170
        (a)
        
        $
        210(a)
        Excludes $26 million of current and deferred
            federal and state tax expense related to the cumulative effect of
            changes in accounting principles recorded net of tax.In 2004, 2003 and 2002, PPL realized stock option tax benefits, recorded
      as an increase to capital in excess of par value, of approximately $3 million,
      $5 million and an insignificant amount.

    2004
        
        
        2003
        
        
        2002Reconciliation of Income
            Tax ExpenseIndicated federal income tax on pre-tax
            income before cumulative effects of changes in accounting principles
            at statutory tax rate - 35%
        
        $
        317
        
        
        $
        324
        
        
        $
        250Increase (decrease) due
            to:State income taxes
        
        
        11
        
        
        
        25
        
        
        
        11Amortization of investment tax credit
        
        
        (10
        )
        
        
        (10
        )
        
        
        (11
        )Write-down of international energy
            projects
        
        
        
        
        
        
        (83
        )
        
        
        14Difference related to income recognition
            of foreign affiliates (net of foreign income taxes)
        
        
        (32
        )
        
        
        (7
        )
        
        
        18Stranded cost securitization
        
        
        (22
        )Federal income tax credits
        
        
        (74
        )
        
        
        (52
        )
        
        
        (50
        )Contribution of property
        
        
        (2
        )
        
        
        (9
        )Other
        
        
        7
        
        
        
        (18
        )
        
        
        (22
        )(122
        )
        
        
        (154
        )
        
        
        (40
        )Total income tax expense
            from continuing operations
        
        $
        195
        
        
        $
        170
        
        
        $
        210Effective income tax
            rate
        
        
        21.5%
        
        
        
        18.4%
        
        
        
        29.4%Taxes, Other than IncomeState gross receipts
        
        $
        156
        
        
        $
        155
        
        
        $
        154State utility realty
        
        
        (10
        )
        
        
        3
        
        
        
        3State capital stock
        
        
        22
        
        
        
        27
        
        
        
        7Property - foreign
        
        
        54
        
        
        
        44
        
        
        
        42Other - foreign
        
        
        1Domestic property and other
        
        
        27
        
        
        
        27
        
        
        
        25$
        250
        
        
        $
        256
        
        
        $
        231PPL had federal alternative minimum tax credit carryforwards with an indefinite
      carryforward period of $58 million and $9 million at December 31, 2004 and
      2003. PPL also had state net operating loss carryforwards that expire between
      2005 and 2023 of approximately $77 million and $78 million at December 31,
      2004 and 2003. Valuation allowances have been established for the amount
      that, more likely than not, will not be realized.
    PPL Global had foreign net operating loss carryforwards of approximately
      $27 million and $13 million at December 31, 2004 and 2003. PPL Global also
      had foreign capital loss carryforwards of $486 million at December 31, 2004
      and $920 million at December 31, 2003. All of these losses have an unlimited
      carryforward period. However, it is more likely than not that these losses
      will not be utilized and, as such, a full valuation allowance has been provided
      against the related deferred tax asset.
    PPL Global does not pay or record U.S. income taxes on the undistributed
      earnings of its foreign subsidiaries where management has determined that
      the earnings are permanently reinvested. The cumulative undistributed earnings
      are included in "Earnings reinvested" on the Balance Sheet. The amounts
      considered permanently reinvested at December 31, 2004 and 2003, were $750
      million and $530 million. If the earnings were remitted as dividends, PPL
      Global may be subject to additional U.S. taxes, net of allowable foreign
      tax credits. It is not practical to estimate the amount of additional taxes
      that might be payable on these foreign earnings.
    (PPL Energy Supply)
    "Income From Continuing Operations Before Income Taxes, Minority Interest
      and Distributions on Preferred Securities" included the following components
      for the years ended December 31:
    2004
        
        
        2003
        
        
        2002Domestic income
        
        $
        596
        
        
        $
        711
        
        
        $
        674Foreign income
        
        
        264
        
        
        
        198
        
        
        
        110$
        860
        
        
        $
        909
        
        
        $
        784Deferred income taxes reflect the net tax effects of temporary differences
      between the carrying amounts of assets and liabilities for accounting purposes
      and their basis for income tax purposes and the tax effects of net operating
      loss and tax credit carryforwards.
    Net deferred tax assets have been recognized based on management's estimates
      of future taxable income for U.S. and certain foreign jurisdictions in which
      PPL's operations have historically been profitable.
    Significant components of PPL Energy Supply's deferred income tax assets
      and liabilities from continuing operations were as follows:
    2004
        
        
        2003Deferred Tax AssetsDeferred investment tax credits
        
        $
        33
        
        
        $
        37NUG contracts and buybacks
        
        
        135
        
        
        
        168Accrued pension costs
        
        
        29
        
        
        
        26Federal tax credit carryforwards
        
        
        58
        
        
        
        9Foreign loss carryforwards
        
        
        152
        
        
        
        278Foreign - pensions
        
        
        51
        
        
        
        67Foreign - other
        
        
        26
        
        
        
        38Other domestic
        
        
        132
        
        
        
        111Valuation allowance
        
        
        (160
        )
        
        
        (288
        )456
        
        
        
        446Deferred Tax LiabilitiesPlant - net
        
        
        644
        
        
        
        481Foreign investments
        
        
        7
        
        
        
        9Foreign - plant
        
        
        770
        
        
        
        792Foreign - other
        
        
        55
        
        
        
        1Other domestic
        
        
        32
        
        
        
        421,508
        
        
        
        1,325Net deferred tax liability
        
        $
        1,052
        
        
        $
        879Details of the components of income tax expense, a reconciliation of federal
      income taxes derived from statutory tax rates applied to income from continuing
      operations for accounting purposes, and details of taxes other than income
      are as follows:
    2004
        
        
        2003
        
        
        2002Income Tax ExpenseCurrent-Federal
        
        $
        8
        
        
        $
        (15
        )
        
        $
        22Current-State
        
        
        9
        
        
        
        11
        
        
        
        (6
        )Current-Foreign
        
        
        27
        
        
        
        35
        
        
        
        5244
        
        
        
        31
        
        
        
        68Deferred-Federal
        
        
        101
        
        
        
        94
        
        
        
        134Deferred-State
        
        
        15
        
        
        
        24
        
        
        
        32Deferred-Foreign
        
        
        51
        
        
        
        48
        
        
        
        44167
        
        
        
        166
        
        
        
        210Investment tax credit, net-federal
        
        
        (12
        )
        
        
        (12
        )
        
        
        (12
        )Total income tax expense from continuing
            operations
        
        $
        199
        
        
        $
        185
        
        
        $
        266Total income tax expense-Federal
        
        $
        97
        
        
        $
        67
        
        
        $
        144Total income tax expense-State
        
        
        24
        
        
        
        35
        
        
        
        26Total income tax expense-Foreign
        
        
        78
        
        
        
        83
        
        
        
        96Total income tax expense from continuing
            operations
        
        $
        199
        
        
        $
        185
        (a)
        
        $
        266(a)
        
        Excludes $26 million of current and
            deferred federal and state tax expense related to the cumulative effect
            of changes in accounting principles recorded net of tax.In 2004, 2003 and 2002, PPL Energy Supply realized stock option tax benefits,
      recorded as an increase to additional paid-in-capital, of approximately
      $1 million, $2 million and an insignificant amount.
    2004
        
        
        2003
        
        
        2002Reconciliation of Income
            Tax ExpenseIndicated federal income tax on pre-tax
            income before cumulative effects of changes in accounting principles
            at statutory tax rate - 35%
        
        $
        301
        
        
        $
        318
        
        
        $
        274Increase (decrease) due
            to:State income taxes
        
        
        19
        
        
        
        27
        
        
        
        17Amortization of investment tax credit
        
        
        (8
        )
        
        
        (8
        )
        
        
        (8
        )Write-down of international energy
            projects
        
        
        
        
        
        
        (83
        )
        
        
        14Difference related to income recognition
            of foreign affiliates (net of foreign income taxes)
        
        
        (32
        )
        
        
        (7
        )
        
        
        18Federal income tax credits
        
        
        (74
        )
        
        
        (52
        )
        
        
        (50
        )Other
        
        
        (7
        )
        
        
        (10
        )
        
        
        1(102
        )
        
        
        (133
        )
        
        
        (8
        )Total income tax expense
            from continuing operations
        
        $
        199
        
        
        $
        185
        
        
        $
        266Effective income tax
            rate
        
        
        23.1%
        
        
        
        20.4%
        
        
        
        33.9%
    2004
        
        
        2003
        
        
        2002Taxes, Other than IncomeState gross receipts
        
        $
        2
        
        
        $
        3
        
        
        $
        4State capital stock
        
        
        13
        
        
        
        14
        
        
        
        9Property - foreign
        
        
        54
        
        
        
        44
        
        
        
        42Foreign - other
        
        
        1Domestic property and other
        
        
        26
        
        
        
        28
        
        
        
        23$
        96
        
        
        $
        89
        
        
        $
        78PPL Energy Supply had federal alternative minimum tax credit carryforwards
      with an indefinite carryforward period of $58 million and $9 million at
      December 31, 2004 and 2003.
    PPL Global had foreign net operating loss carryforwards of approximately
      $27 million and $13 million at December 31, 2004 and 2003. PPL Global also
      had foreign capital loss carryforwards of $486 million at December 31, 2004
      and $920 million at December 31, 2003. All of these losses have an unlimited
      carryforward period. However, it is more likely than not that these losses
      will not be utilized and, as such, a full valuation allowance has been provided
      against the related deferred tax asset.
    PPL Global does not pay or record U.S. income taxes on the undistributed
      earnings of its foreign subsidiaries where management has determined that
      the earnings are permanently reinvested. The cumulative undistributed earnings
      are included in "Member's Equity" on the Balance Sheet. The amounts considered
      permanently reinvested at December 31, 2004 and 2003, were $750 million
      and $530 million. If the earnings were remitted as dividends, PPL Global
      may be subject to additional U.S. taxes, net of allowable foreign tax credits.
      It is not practical to estimate the amount of additional taxes that might
      be payable on these foreign earnings.
    (PPL Electric)
    The provision for PPL Electric's deferred income taxes for regulated assets
      is based upon the ratemaking principles reflected in rates established by
      the PUC and the FERC. The difference in the provision for deferred income
      taxes for regulated assets and the amount that otherwise would be recorded
      under U.S. GAAP is deferred and included in taxes recoverable through future
      rates in "Regulatory and Other Noncurrent Assets - Other" on the Balance
      Sheet.
    The tax effects of significant temporary differences comprising PPL Electric's
      net deferred income tax liability were as follows:
    2004
        
        
        2003Deferred Tax AssetsDeferred investment tax credits
        
        $
        8
        
        
        $
        9Accrued pension costs
        
        
        35
        
        
        
        34Contribution in aid of construction
        
        
        62
        
        
        
        62Other
        
        
        39
        
        
        
        64144
        
        
        
        1692004
        
        
        2003Deferred Tax LiabilitiesElectric utility plant - net
        
        
        603
        
        
        
        558Restructuring - CTC
        
        
        142
        
        
        
        143Taxes recoverable through future rates
        
        
        108
        
        
        
        100Reacquired debt costs
        
        
        13
        
        
        
        11Other
        
        
        21
        
        
        
        18887
        
        
        
        830Net deferred tax liability
        
        $
        743
        
        
        $
        661Details of the components of income tax expense, a reconciliation of federal
      income taxes derived from statutory tax rates applied to income from continuing
      operations for accounting purposes, and details of taxes other than income
      are as follows:
    2004
        
        
        2003
        
        
        2002Income Tax ExpenseCurrent-Federal
        
        $
        (33
        )
        
        $
        (2
        )
        
        $
        (8
        )Current-State
        
        
        (40
        )
        
        
        3
        
        
        
        5(73
        )
        
        
        1
        
        
        
        (3
        )Deferred-Federal
        
        
        79
        
        
        
        22
        
        
        
        27Deferred-State
        
        
        5
        
        
        
        (2
        )
        
        
        (3
        )84
        
        
        
        20
        
        
        
        24Investment tax credit, net-federal
        
        
        (3
        )
        
        
        (3
        )
        
        
        (3
        )Total
        
        $
        8
        
        
        $
        18
        
        
        $
        18Total income tax expense-Federal
        
        $
        43
        
        
        $
        17
        
        
        $
        16Total income tax expense-State
        
        
        (35
        )
        
        
        1
        
        
        
        2Total
        
        $
        8
        
        
        $
        18
        
        
        $
        18In 2004, 2003 and 2002, PPL Electric realized stock option tax benefits,
      recorded as an increase to additional paid-in capital, which were insignificant.
    2004
        
        
        2003
        
        
        2002Reconciliation of Income
            Tax ExpenseIndicated federal income tax on pre-tax
            income at statutory tax rate - 35%
        
        $
        30
        
        
        $
        16
        
        
        $
        26Increase (decrease) due
            to:State income taxes
        
        
        (1
        )
        
        
        1
        
        
        
        1Flow-through of depreciation differences
            not previously normalized
        
        
        1
        
        
        
        1Stranded cost securitization
        
        
        (22
        )Amortization of investment tax credit
        
        
        (2
        )
        
        
        (2
        )
        
        
        (3
        )Other
        
        
        2
        
        
        
        2
        
        
        
        (6
        )(22
        )
        
        
        2
        
        
        
        (8
        )Total income tax expense
        
        $
        8
        
        
        $
        18
        
        
        $
        18Effective income tax
            rate
        
        
        9.4%
        
        
        
        39.1%
        
        
        
        24.7%Taxes, Other than IncomeState gross receipts
        
        $
        155
        
        
        $
        152
        
        
        $
        151State utility realty
        
        
        (10
        )
        
        
        3
        
        
        
        3State capital stock
        
        
        7
        
        
        
        10
        
        
        
        (2
        )Property and other
        
        
        
        
        
        
        (1
        )
        
        
        1$
        152
        
        
        $
        164
        
        
        $
        153(PPL, PPL Energy Supply and PPL Electric)
    In October 2004, President Bush signed the American Jobs Creation Act of
      2004 (the Act). The Act creates a temporary incentive for U.S. corporations
      to repatriate accumulated income earned abroad by providing an 85% dividends
      received deduction for certain dividends from controlled foreign corporations.
      The deduction is subject to a number of limitations, and uncertainty remains
      as to how to interpret numerous provisions in the Act. As such, PPL is not
      in a position to decide on whether, and to what extent, it might repatriate
      foreign earnings that have not yet been remitted to the U.S. based on its
      analysis to date. However, it is reasonably possible that PPL Energy Supply
      may repatriate some amount between zero and $500 million, with the respective
      tax liability ranging from zero to $27 million. PPL expects to be in a position
      to finalize its assessment by December 31, 2005.
    The Act also provides, beginning in 2005, a tax deduction from income for
      certain qualified domestic production activities. FSP FAS 109-1, "Application
      of FASB Statement No. 109, 'Accounting for Income Taxes,' to the Tax Deduction
      on Qualified Production Activities Provided by the American Jobs Creation
      Act of 2004," specifies that this tax deduction will be treated as a special
      deduction and not as a tax rate reduction. For 2004, this deduction had
      no effect with respect to PPL's or PPL Energy Supply's deferred tax assets
      and liabilities associated with such qualified domestic production activities.
      Additionally, as the Act specifically excludes the gross receipts from the
      transmission of electricity from the definition of qualifying domestic production
      gross receipts, PPL Electric will not receive a tax benefit from this new
      deduction.
6. Nuclear Decommissioning
    (PPL and PPL Energy Supply)
    The expected cost to decommission the Susquehanna station is based on a
      2002 site-specific study that estimated the cost to dismantle and decommission
      each unit immediately following final shutdown. PPL Susquehanna's 90% share
      of the total estimated cost of decommissioning the Susquehanna station was
      approximately $936 million measured in 2002 dollars. This estimate includes
      decommissioning the radiological portions of the station and the cost of
      removal of non-radiological structures and materials.
    Beginning in January 1999, in accordance with the PUC Final Order, approximately
      $130 million of decommissioning costs are being recovered from PPL Electric's
      customers through the CTC over the 11-year life of the CTC rather than the
      remaining life of Susquehanna. The recovery includes a return on unamortized
      decommissioning costs. Under the power supply agreements between PPL Electric
      and PPL EnergyPlus, these revenues are passed on to PPL EnergyPlus. Similarly,
      these revenues are passed on to PPL Susquehanna under a power supply agreement
      between PPL EnergyPlus and PPL Susquehanna.
    Effective January 1, 2003, PPL adopted SFAS 143, "Accounting for Asset
      Retirement Obligations." Accretion expense, as determined under the provisions
      of SFAS 143, was $18 million and $16 million in 2004 and 2003, and is included
      in "Other operation and maintenance." In 2002, decommissioning expenses
      were $22 million and were recorded as a component of depreciation expense.
      Accrued nuclear decommissioning expenses, as determined under the provisions
      of SFAS 143, were $236 million and $218 million at December 31, 2004
      and 2003, and are included in "Asset Retirement Obligations." See Note 21
      for additional information on SFAS 143.
    The amounts collected for decommissioning, less applicable taxes, are deposited
      in external trust funds for investment and can be used only for future decommissioning
      costs. To the extent that the actual costs for decommissioning exceed the
      amounts in the nuclear decommissioning trust funds, PPL Susquehanna would
      be obligated to fund 90% of the shortfall.
    PPL and PPL Energy Supply classify investments in the trust funds for decommissioning
      the nuclear plant as available-for-sale. The following tables show the fair
      values and gross unrealized gains and gross unrealized losses for the securities
      held in the trust funds.
    December
            31, 2004Gross
            Unrealized
            Gains
        
        
        Gross
            Unrealized
            Losses
        
        
        Fair ValueCash and cash equivalents
        
        
        
        
        
        
        
        
        
        $
        11Equity securities
        
        $
        70
        
        
        
        
        
        
        
        279Debt securitiesGovernment obligations
        
        
        1
        
        
        $
        (3
        )
        
        
        102Other debt securities
        
        
        
        
        
        
        
        
        
        
        17Total debt securities
        
        
        1
        
        
        
        (3
        )
        
        
        119Total
        
        $
        71
        
        
        $
        (3
        )
        
        $
        409December
            31, 2003Gross
            Unrealized
            Gains
        
        
        Gross
            Unrealized
            Losses
        
        
        Fair ValueCash and cash equivalents
        
        
        
        
        
        
        
        
        
        $
        8Equity securities
        
        $
        42
        
        
        $
        (6
        )
        
        
        215Debt securitiesGovernment obligations
        
        
        1
        
        
        
        (6
        )
        
        
        115Other debt securities
        
        
        
        
        
        
        (1
        )
        
        
        19Total debt securities
        
        
        1
        
        
        
        (7
        )
        
        
        134Total
        
        $
        43
        
        
        $
        (13
        )
        
        $
        357The following table shows proceeds from and realized gains and losses on
      sales of securities held in the trust:
    2004
        
        
        2003Proceeds from sales
        
        $
        113
        
        
        $
        140Gross realized gains
        
        
        3
        
        
        
        14Gross realized losses (a)
        
        
        (17
        )
        
        
        (3
        )(a)
        2004 includes a $(10) million adjustment
            to the net realized gains recorded in 2003. The adjustment was included
            in gross realized losses in this table.Net pre-tax unrealized gains associated with current year activities increased
      accumulated other comprehensive income by $24 million ($15 million after
      tax) and $41 million ($23 million after tax) in 2004 and 2003. Net pre-tax
      gains (losses) reclassified from accumulated other comprehensive income
      and realized in "Other Income - net" in the Statement of Income were $(14)
      million ($(8) million after tax) and $11 million ($6 million after tax)
      in 2004 and 2003.
    Prior to 2003, any trust activity was reflected on the balance sheet in
      the trust fund account and noncurrent liabilities. Beginning in January
      2003, upon adoption of SFAS 143, any realized gains and losses were recognized
      in "Other Income - net."
    The proceeds from the sales of securities are reinvested in the trust.
      These funds, along with deposits of amounts collected from customers, are
      used to pay income taxes and fees related to managing the trust. Due to
      the restricted nature of these investments, they are not included in cash
      and cash equivalents of PPL or PPL Energy Supply.
    The government obligations and other debt securities that exist at December
      31, 2004, mature on the following schedule:
    Within 1 year
        
        $
        7After 1 year through 5 years
        
        
        44After 5 years through 10 years
        
        
        42After 10 years
        
        
        26Total maturities of debt obligations
        
        $
        119PPL Susquehanna intends to file with the NRC in 2006 for 20-year license
      renewals for each of the Susquehanna units. If approved, the operating licenses
      would be extended from 2022 to 2042 for Unit 1 and from 2024 to 2044 for
      Unit 2.
7. Financial Instruments
    (PPL, PPL Energy Supply and PPL Electric)
    At December 31, 2004 and 2003, the carrying value of cash and cash equivalents,
      investments in the nuclear decommissioning trust funds, other investments
      and short-term debt approximated fair value due to the short-term nature
      of the instruments, variable interest rates associated with the financial
      instruments or the carrying value of the instruments being based on established
      market prices. Price risk management assets and liabilities are valued using
      either exchange-traded market quotes or prices obtained through third-party
      brokers and are recorded at fair value. Financial instruments where the
      carrying amount on the Balance Sheet and the estimated fair value (based
      on quoted market prices for the securities where available and estimates
      based on current rates where quoted market prices are not available) are
      different, are set forth below:
    December
            31, 2004
        
        
        December
            31, 2003Carrying
            Amount
        
        
        Fair
            Value
        
        
        Carrying
            Amount
        
        
        Fair
            ValuePPLLong-term debt
        
        $
        7,658
        
        
        $
        8,141
        
        
        $
        7,859
        
        
        $
        8,443Long-term debt with affiliate trusts
        
        
        89
        
        
        
        84
        
        
        
        681
        
        
        
        612PPL Energy SupplyLong-term debt
        
        $
        3,875
        
        
        $
        4,126
        
        
        $
        4,146
        
        
        $
        4,384Long-term debt with affiliate trust
        
        
        89
        
        
        
        84
        
        
        
        89
        
        
        
        87PPL ElectricLong-term debt
        
        $
        2,544
        
        
        $
        2,711
        
        
        $
        2,937
        
        
        $
        3,215
8. Credit Arrangements and Financing Activities
    Credit Arrangements
    (PPL, PPL Energy Supply and PPL Electric)
    In February 2004, PPL Energy Supply reduced the size of its $500 million
      three-year credit facility expiring in June 2004 to $200 million. In June
      2004, PPL Energy Supply replaced this facility and its $300 million three-year
      facility expiring in June 2005 with an $800 million five-year facility expiring
      in June 2009. PPL Energy Supply also has a $300 million three-year credit
      facility that expires in June 2006. Also in June 2004, PPL Electric replaced
      its $200 million 364-day facility expiring in June 2004 with a $200 million
      five-year facility expiring in June 2009. PPL Electric also has a $100 million
      three-year credit facility that expires in June 2006. At December 31, 2004,
      no cash borrowings were outstanding under any credit facilities of PPL Electric
      or PPL Energy Supply. Both PPL Electric and PPL Energy Supply have the ability
      to cause the lenders under their respective facilities to issue letters
      of credit. At December 31, 2004, PPL Electric had no letters of credit
      outstanding under its credit facilities, and PPL Energy Supply had $250
      million of letters of credit outstanding under its credit facilities.
    (PPL and PPL Energy Supply)
    In December 2004, WPD (South West) borrowed £108 million (approximately
      $208 million at current exchange rates) under its credit facilities. This
      is not reflected on the Balance Sheet at December 31, 2004, due to the one-month
      reporting lag. In October 2004, WPD (South West) replaced its expiring £100
      million 364-day credit facility expiring in October 2004 with a £100
      million 364-day credit facility expiring in October 2005, extended its £150
      million five-year credit facility to October 2009 and added a £150
      million three-year credit facility expiring in October 2007. WPD also has
      a £2.5 million uncommitted borrowing line, which has £1.275
      million (approximately $2 million at current exchange rates) of letters
      of credit outstanding.
    (PPL, PPL Energy Supply and PPL Electric)
    The subsidiaries of PPL are separate legal entities. PPL's subsidiaries
      are not liable for the debts of PPL. Accordingly, creditors of PPL may not
      satisfy their debts from the assets of the subsidiaries absent a specific
      contractual undertaking by a subsidiary to pay PPL's creditors or as required
      by applicable law or regulation. Similarly, absent a specific contractual
      undertaking or as required by applicable law or regulation, PPL is not liable
      for the debts of its subsidiaries. Accordingly, creditors of PPL's subsidiaries
      may not satisfy their debts from the assets of PPL absent a specific contractual
      undertaking by PPL to pay the creditors of its subsidiaries or as required
      by applicable law or regulation.
    Similarly, the subsidiaries of PPL Energy Supply and PPL Electric are separate
      legal entities. These subsidiaries are not liable for the debts of PPL Energy
      Supply and PPL Electric. Accordingly, creditors of PPL Energy Supply and
      PPL Electric may not satisfy their debts from the assets of their subsidiaries
      absent a specific contractual undertaking by a subsidiary to pay the creditors
      or as required by applicable law or regulation. In addition, absent a specific
      contractual undertaking or as required by applicable law or regulation,
      PPL Energy Supply and PPL Electric are not liable for the debts of their
      subsidiaries. Accordingly, creditors of these subsidiaries may not satisfy
      their debts from the assets of PPL Energy Supply or PPL Electric absent
      a specific contractual undertaking by that parent to pay the creditors of
      its subsidiaries or as required by applicable law or regulation.
    Financing Activities
    PEPS Units Transactions
    (PPL)
    In November 2003, PPL initiated an offer to exchange up to $573 million
      of its outstanding PEPS Units for up to $573 million of its PEPS Units,
      Series B and a cash payment by PPL of $0.375 for each validly tendered and
      accepted outstanding PEPS Unit. See Note 22 for a discussion of the PEPS
      Units. The exchange offer, which closed in January 2004, resulted in $99
      million, or 17.28%, of the outstanding PEPS Units being exchanged.
    In February 2004, pursuant to the terms of the PEPS Units, PPL remarketed
      $257 million of the PPL Capital Funding Trust I trust preferred securities
      that were a component of the PEPS Units. The trust preferred securities
      were remarketed at a price of 107.284% of their aggregate stated liquidation
      amount, resulting in a yield to maturity of 3.912% based on the reset distribution
      rate of 7.29% per annum. Under the terms of the PEPS Units, holders were
      entitled to surrender their trust preferred securities for remarketing in
      order to settle the purchase contract component of the PEPS Units in May
      2004. Holders of an aggregate of $218 million of the trust preferred securities
      elected not to participate in the remarketing. Those holders retained their
      trust preferred securities at a distribution rate of 7.29% per annum.
    Additionally, in February 2004, PPL Capital Funding issued $201 million
      of senior unsecured notes guaranteed by PPL in exchange for $185 million
      of the trust preferred securities of PPL Capital Funding Trust I and a payment
      of $400,000 in cash. The senior notes bear interest at a rate of 4.33% per
      year that is payable semi-annually on March 1 and September 1 of each year,
      from September 1, 2004, through the maturity date of March 1, 2009. The
      senior notes are not redeemable by PPL or PPL Capital Funding, and the holders
      will not be entitled to require PPL or PPL Capital Funding to repurchase
      the senior notes before maturity. The senior notes were issued in an SEC
      Rule 144A private offering to qualified institutional buyers and were exchanged
      in full for senior notes registered with the SEC pursuant to an exchange
      offer completed by PPL and PPL Capital Funding in July 2004. The registered
      senior notes issued pursuant to the exchange offer have the same terms as
      the senior notes issued in the 144A private offering.
    The January and February 2004 exchanges resulted in the cancellation of
      an aggregate of $284 million of the trust preferred securities and an aggregate
      of $9 million of PPL Capital Funding Trust I's common securities held by
      PPL Capital Funding, as well as a corresponding cancellation of the $293
      million of PPL Capital Funding 7.29% subordinated notes due 2006 underlying
      these trust securities. The cancellation of the underlying PPL Capital Funding
      subordinated notes together with the issuance of the new PPL Capital Funding
      debt, as a result of the exchanges, resulted in a net decrease of $9 million
      of long-term debt, including "Long-term Debt with Affiliate Trusts," as
      reflected in the Balance Sheet. Following these exchanges, there remained
      outstanding $290 million of trust preferred securities and $9 million of
      trust common securities, as well as $299 million of underlying PPL Capital
      Funding 7.29% subordinated notes due 2006.
    In March 2004, PPL liquidated PPL Capital Funding Trust I, resulting in
      the cancellation of all of the outstanding trust preferred securities and
      the trust common securities. In exchange for the cancellation of the trust
      securities, PPL Capital Funding Trust I caused $290 million of underlying
      PPL Capital Funding 7.29% subordinated notes due 2006 to be distributed
      to the holders of the trust preferred securities and $9 million of PPL Capital
      Funding 7.29% subordinated notes due 2006, held by the trust, to be cancelled.
      The impact to PPL Capital Funding as a result of these cancellations was
      an additional net decrease of $9 million of long-term debt, including "Long-term
      Debt with Affiliate Trusts," as reflected in the Balance Sheet.
    In May 2004, pursuant to the terms of the PEPS Units, Series B, PPL remarketed
      approximately $99 million of the PPL Capital Funding notes due 2006 that
      were a component of the PEPS Units, Series B. The notes were remarketed
      at a price of 100.5% of their aggregate principal amount with a floating
      reset interest rate initially equal to 2.31%, which is three-month LIBOR
      plus a spread of 105 basis points, or 1.05%. Interest on the notes resets
      quarterly at three-month LIBOR plus a spread of 105 basis points, and is
      payable quarterly from May 18, 2004, through, but excluding, the maturity
      date of May 18, 2006. Under the terms of the PEPS Units, Series B, holders
      were entitled to surrender their PPL Capital Funding notes for remarketing
      in order to settle the purchase contract component of the PEPS Units, Series
      B in May 2004.
    (PPL and PPL Energy Supply)
    The purchase contract component of the PEPS Units and the PEPS Units, Series
      B settled in May 2004. Pursuant to the settlement of the purchase contracts,
      PPL issued an aggregate of approximately 11 million shares of its common
      stock and received aggregate proceeds of approximately $575 million. In
      June 2004, subsidiaries of PPL Energy Supply used these proceeds and cash
      on hand to purchase, for approximately $660 million, the Sundance and University
      Park generation assets that it had been leasing, through a synthetic lease
      arrangement, from a trust that was consolidated by PPL Energy Supply in
      accordance with FIN 46, "Consolidation of Variable Interest Entities, an
      Interpretation of ARB No. 51." See Note 22 for a discussion of FIN 46. Under
      the terms of the synthetic lease arrangement, the PPL Energy Supply subsidiary
      had the right at any time to purchase these assets for an amount sufficient
      to pay off the consolidated trust's related financing, including accrued
      and unpaid interest. Repayment of the consolidated trust's debt resulted
      in a loss of approximately $9 million pre-tax, which is reflected in "Interest
      Expense."
    Other Financing Activities
    (PPL)
    In April 2004, PPL Capital Funding repurchased $4 million of its 8-3/8%
      Medium-term Notes due 2007 at a market value of approximately $5 million.
      This repurchase resulted in a loss of approximately $1 million pre-tax,
      which is reflected in "Interest Expense."
    In September 2004, a subsidiary of PPL Gas Utilities repurchased all remaining
      $2 million of its outstanding 9.64% Notes due 2010 at an approximately equivalent
      market value.
    In November 2004, PPL Capital Funding retired $100 million of its 6.79%
      Medium Term Notes due November 2004 at par value.
    (PPL and PPL Energy Supply)
    During 2004, a Bolivian subsidiary of PPL Global issued $13 million of
      bonds with interest rates varying from 6.8% to 7.4% and serial maturities
      from December 2005 to December 2008. In addition, the PPL Global subsidiary
      issued bonds denominated in UFVs (inflation-indexed bolivianos) totaling
      72.3 million bolivianos (approximately $9 million at current exchange rates)
      with interest rates ranging from 8% to 9% and with maturities in December
      2007 and May 2010. The proceeds of both issuances were used to repay intercompany
      loans, short-term bank borrowings, and $9 million of its multi-currency
      denominated Inter-American Development Bank note maturing in November 2009.
    In August 2004, PPL Energy Supply issued $300 million of 5.4% Senior Notes
      maturing in August 2014. These securities were issued under PPL Energy Supply's
      existing shelf registration statement on file with the SEC. The proceeds
      of the notes will be applied to the repayment at maturity of approximately
      $320 million of PPL Capital Funding's 7-3/4% Medium-term Notes that are
      due in April 2005. PPL EnergyPlus currently is using the proceeds to satisfy
      its collateral obligation under one of its PLR contracts with PPL Electric.
      See Note 15 for a discussion of the collateral requirement under this PLR
      contract.
    During 2004, PPL Energy Supply distributed approximately $410 million to
      its parent company, PPL Energy Funding, and received capital contributions
      of $358 million.
    In May 2004, PPL Energy Supply issued a $495 million note payable to an
      affiliate. The note matures in May 2006, with interest payable monthly in
      arrears at LIBOR plus 1%.
    In November 2004, PPL and PPL Energy Supply successfully completed their
      solicitation of consents from the holders of PPL Energy Supply's outstanding
      $400 million 2.625% Convertible Senior Notes due 2023 to amend certain provisions
      of the Indenture dated May 21, 2003, pursuant to which the Convertible Senior
      Notes were issued. The purpose of the consent solicitation was to modify
      the terms of the Convertible Senior Notes in response to changes to the
      calculation of diluted EPS resulting from EITF Issue 04-8, "The Effect of
      Contingently Convertible Instruments on Diluted Earnings per Share," as
      well as other anticipated rules relating to EPS. See Note 23 for a discussion
      of EITF Issue 04-8 and additional information.
    In December 2004, PPL Energy Supply reactivated its commercial paper program
      to provide an additional financing source to fund its short-term liquidity
      needs, if and when necessary or appropriate.
    At December 31, 2004, PPL Energy Supply had no commercial paper outstanding
      under its commercial paper program, and PPL Energy Supply currently has
      no plans to access the commercial paper market in the near-term.
    In December 2004, WPD retired $178 million of its 6.75% Unsecured Bonds,
      which will be reflected in the 2005 Financial Statements due to the one-month
      reporting lag.
    (PPL and PPL Electric)
    In March 2004, PPL Electric retired approximately $25 million of its outstanding
      First Mortgage Bonds, 6.875% Series due March 2004, at par value. Also in
      March, PPL Electric redeemed approximately $6 million aggregate principal
      amount of its First Mortgage Bonds, 7.30% Series due 2024, at par value,
      through the application of cash deposited with the trustee to release certain
      transmission lines and other equipment from the lien of the 1945 First Mortgage
      Bond Indenture.
    In April 2004, PPL Electric completed an offer to repurchase its outstanding
      First Mortgage Bonds, 6-1/2% Series due 2005. Pursuant to the offer, PPL
      Electric repurchased approximately $41 million of the bonds at a market
      value of $43 million. PPL Electric also repurchased in the open market $45
      million of 5-7/8% Senior Secured Bonds and $14 million of 6-1/4% Senior
      Secured Bonds at market values of $48 million and $16 million, respectively.
      These repurchases resulted in a loss of approximately $7 million pre-tax,
      which is reflected in other noncurrent assets as an unamortized loss on
      reacquired debt. The purpose of the repurchases was to reduce future interest
      expense.
    In August 2004, PPL Electric began participating in an asset-backed commercial
      paper program through which PPL Electric obtains financing by selling and
      contributing its eligible accounts receivable and unbilled revenue to a
      special purpose, wholly owned subsidiary on an ongoing basis. The subsidiary
      has pledged these assets to secure loans from a commercial paper conduit
      sponsored by a financial institution. PPL Electric expects to use the proceeds
      from the credit agreement for general corporate purposes and to cash collateralize
      letters of credit. The subsidiary's borrowing limit under this credit agreement
      is $150 million, and interest under the credit agreement varies based on
      the commercial paper conduit's actual cost to issue commercial paper that
      supports the debt. At December 31, 2004, $96 million of accounts receivable
      and $128 million of unbilled revenue were pledged under the credit agreement.
      At December 31, 2004, there was $42 million of short-term debt outstanding
      under the credit agreement at an interest rate of 2.33%, with such debt
      being used to cash collateralize letters of credit issued on PPL Electric's
      behalf. At December 31, 2004, based on the accounts receivables and unbilled
      revenues pledged, an additional $100 million was available for borrowing.
      The funds used to cash collateralize the letters of credit are reported
      in "Restricted cash" on the Balance Sheet. PPL Electric's sale to its subsidiary
      of the accounts receivable and unbilled revenue is an absolute sale of the
      assets, and PPL Electric does not retain an interest in these assets. However,
      for financial reporting purposes, the subsidiary's financial results are
      consolidated in PPL Electric's financial statements. PPL Electric will continue
      to perform certain record-keeping and cash collection functions with respect
      to the assets in return for a servicing fee from the subsidiary. PPL Electric
      expects the subsidiary to renew the credit agreement on an annual basis.
    In 2004, PPL Transition Bond Company made principal payments on transition
      bonds totaling $264 million.
    At December 31, 2004, PPL Electric had no commercial paper outstanding
      under its commercial paper program.
    In February 2005, the Lehigh County Industrial Development Authority (LCIDA)
      issued $115.5 million of 4.70% Pollution Control Revenue Refunding Bonds
      due 2029 on behalf of PPL Electric. The proceeds of the LCIDA bonds will
      be used in March 2005 to refund the LCIDA's $115.5 million of 6.40% Pollution
      Control Revenue Refunding Bonds due 2029. PPL Electric has entered into
      a loan agreement with the LCIDA pursuant to which the LCIDA has loaned to
      PPL Electric the proceeds of the LCIDA bonds on payment terms that correspond
      to the LCIDA bonds. The scheduled principal and interest payments on the
      LCIDA bonds are insured. In order to secure its obligations to the insurance
      provider, PPL Electric issued $115.5 million aggregate principal amount
      of its Senior Secured Bonds (under its 2001 Senior Secured Bond Indenture),
      which also have payment terms that correspond to the LCIDA bonds.
    Dividends and Dividend Restrictions
    (PPL)
    In February 2004, PPL announced an increase to its quarterly common stock
      dividend, effective April 1, 2004, from 38.5 cents per share to 41 cents
      per share (equivalent to $1.64 per annum). In February 2005, PPL announced
      an increase to its quarterly common stock dividend, payable April 1, 2005, to 46 cents
      per share (equivalent to $1.84 per annum). Future dividends, declared at
      the discretion of the Board of Directors, will be dependent upon future
      earnings, cash flows, financial requirements and other factors.
    (PPL and PPL Energy Supply)
    The PPL Montana Colstrip lease places certain restrictions on PPL Montana's
      ability to declare dividends. At this time, PPL believes that these covenants
      will not limit PPL's or PPL Energy Supply's ability to operate as desired
      and will not affect their ability to meet any of their cash obligations.
      Certain of PPL Global's international subsidiaries also have financing arrangements
      which limit their ability to pay dividends. However, PPL does not, at this
      time, expect that any of such limitations would significantly impact PPL's
      or PPL Energy Supply's ability to meet their cash obligations.
    (PPL and PPL Electric)
    PPL Electric's 2001 Senior Secured Bond Indenture restricts dividend payments
      in the event that PPL Electric fails to meet interest coverage ratios or
      fails to comply with certain requirements included in its Articles of Incorporation
      and Bylaws to maintain its separateness from PPL and PPL's other subsidiaries.
      PPL Electric does not, at this time, expect that any of such limitations
      would significantly impact its ability to declare dividends.
    Mandatorily Redeemable Securities
    (PPL, PPL Energy Supply and PPL Electric)
    On July 1, 2003, PPL adopted the provisions of SFAS 150, "Accounting for
      Certain Financial Instruments with Characteristics of Both Liabilities and
      Equity." As a result, PPL changed its classification of the trust preferred
      securities of PPL Capital Funding Trust I, which were issued as a component
      of the PEPS Units, PPL Energy Supply changed its classification of the trust
      preferred securities issued by SIUK Capital Trust I and PPL Electric changed
      its classification of its preferred stock with sinking fund requirements.
      Under SFAS 150, these securities were required to be classified as liabilities
      instead of "mezzanine" equity on the balance sheet because they were considered
      mandatorily redeemable securities. As of December 31, 2004 and 2003, no
      amounts were included in long-term debt for any of these securities because
      of the following: PPL deconsolidated PPL Capital Funding Trust I in accordance
      with FASB Interpretation No. 46, "Consolidation of Variable Interest Entities,
      an Interpretation of ARB No. 51," effective December 31, 2003, and terminated
      the trust in 2004; PPL Energy Supply deconsolidated SIUK Capital Trust I
      in accordance with FIN 46, effective December 31, 2003; and there was no
      preferred stock with sinking fund requirements of PPL Electric outstanding
      (due to preferred stock redemptions). See Note 22 for a discussion of the
      deconsolidation of the trusts. As a result of the deconsolidation of the
      trusts, the subordinated debt securities that support the trust preferred
      securities, rather than the trust preferred securities themselves, are reflected
      in long-term debt as of December 31, 2004 and 2003, to the extent they were
      still outstanding.
    SFAS 150 also required the distributions on these mandatorily redeemable
      securities to be included as a component of "Interest Expense" instead of
      "Distributions on Preferred Securities" in the Statement of Income, effective
      July 1, 2003. "Interest Expense" for 2003 includes distributions on these
      securities totaling $27 million for PPL, $5 million for PPL Energy Supply
      and an insignificant amount for PPL Electric. As a result of the adoption
      of FIN 46 by PPL and PPL Energy Supply and the redemption of the preferred
      stock with sinking fund requirements by PPL Electric, no amounts are reflected
      in "Interest Expense" for these mandatorily redeemable securities in 2004.
      Periods ending prior to July 1, 2003, were not restated to conform to these
      presentations since SFAS 150 specifically prohibits the restatement of financial
      statements for periods prior to its adoption.
9. Acquisitions, Development and Divestitures
    Domestic Generation Projects(PPL and PPL Energy Supply)
    In 2002, PPL Global evaluated its options with respect to six unassigned
      turbines and other related equipment that were complete or substantially
      complete. These units were intended to be used at the Kings Park site on
      Long Island, New York. At that time, given low energy prices and the unavailability
      of a power contract, PPL Global was reevaluating its options with respect
      to the Kings Park project.
    Due to the uncertainty of the project and the absence of other viable projects,
      a valuation based upon replacement costs of the turbines and the other related
      equipment was completed. This resulted in the recognition of a $44 million
      impairment charge in 2002, which is reported on the Statement of Income
      as "Write-down of generation assets," a component of "Other charges." A
      deferred income tax benefit of $18 million was recognized on the write-down.
    In January 2003, PPL announced that it had decided not to proceed with
      development of the 300 MW Kings Park project. In March 2003, PPL Global
      sold its interest in Kings Park Energy, LLC. At that time, the six unassigned
      gas combustion turbine generators and other related equipment to be used
      at the Kings Park site were transferred to PPL Generation and retained as
      spare parts.
    In November 2003, PPL Generation sold four of the six spare gas combustion
      turbine generators and related equipment for approximately $33 million.
      PPL Generation received substantially all of the proceeds in January 2004.
      The pre-tax loss on the sale of about $3 million is included in "Other Income
      - net" on the Statement of Income in 2003. In February 2004, a subsidiary
      of PPL Generation sold one spare gas combustion turbine generator and related
      equipment for approximately $10 million. In June 2004, the subsidiary sold
      the remaining spare gas combustion turbine generator and related equipment
      for approximately $9 million. The net loss from these two sales was insignificant.
    In 2003, PPL Maine entered into an agreement in principle with a coalition
      of government agencies and private groups to sell three of its nine hydroelectric
      dams in Maine. The parties reached a final agreement in June 2004 and submitted
      the plan to the FERC for approval. Under the agreement, a non-profit organization
      designated by the coalition would have a five-year option to purchase the
      dams for approximately $25 million, and PPL Maine would receive rights to
      increase energy output at its other hydroelectric dams in Maine. The coalition
      has announced plans to remove or bypass the dams subject to the agreement
      in order to restore runs of Atlantic salmon and other migratory fish to
      the Penobscot River. The agreement requires several approvals by the FERC,
      and PPL cannot predict whether or when these regulatory approvals will be
      obtained.
    The turbine upgrade for PPL Susquehanna Unit 1 was completed in April 2004.
      This project provides a nominal power increase of 49 MW of generation capacity,
      of which PPL Susquehanna has a 90% undivided interest. Through December 31,
      2004, approximately $82 million had been incurred on the Unit 1 upgrade.
    In May 2004, the 582 MW Lower Mt. Bethel plant in eastern Pennsylvania
      was placed in service. Construction of the natural gas-fired power plant
      began in December 2001. Through December 31, 2004, approximately $459 million
      had been capitalized in connection with the original plant construction.
    During 2004, a subsidiary of PPL Energy Supply placed in service 11 MW
      of distributed generation generating capacity to serve commercial and industrial
      customers under long-term agreements.
    See Note 8 for a discussion of the June 2004 purchase of the Sundance and
      University Park generation assets from a lessor trust consolidated by PPL
      Energy Supply.
    In June 2004, a subsidiary of PPL Generation agreed to sell the 450 MW
      Sundance power plant located in Pinal County, Arizona, to Arizona Public
      Service Company (APS) for approximately $190 million in cash, subject to
      the receipt of various state and federal regulatory approvals and customary
      closing conditions. In January 2005, each party waived the remaining contractual
      obligation for approval by the state regulator, the Arizona Corporation
      Commission. The sale still requires approvals by the FERC under the Federal
      Power Act. PPL estimates that a loss on sale or impairment charge of about
      $47 million after tax, or $0.25 per share, could be recorded in 2005 depending
      on the timing and likelihood of obtaining FERC approvals. PPL cannot predict
      whether or when the FERC approvals for this transaction will be obtained.
    International Energy Projects (PPL and PPL Energy Supply)
    Acquisitions
    WPD
    In 2002, PPL Global acquired the remaining 49% equity interest in WPDH
      Limited and WPDL from Mirant for approximately $236 million, including acquisition
      costs. The acquisition of Mirant's 49% interest provides PPL Global with
      complete ownership of WPD.
    Prior to the acquisition, PPL Global held 51% of the equity interest in
      WPD but shared control with Mirant pursuant to a shareholders' agreement.
      The shareholders' agreement was terminated in connection with the closing
      of the acquisition. No regulatory approvals were required for this transaction.
    The purchase of Mirant's interest in WPD was accounted for as a step-acquisition
      and resulted in the consolidation of WPD's accounts by PPL and PPL Energy
      Supply.
    The assets acquired and liabilities assumed were recorded at estimated
      fair value as determined by management based on information available at
      the time of acquisition. In 2003, management completed its review and determination
      of the fair values assigned to assets acquired and liabilities assumed.
      The fair value of PP&E, based on an independent appraisal, was approximately
      $800 million lower than the preliminary valuation. Accordingly, PP&E
      was reduced, with offsetting increases in goodwill and reductions in deferred
      income taxes.
    The following table summarizes the final allocation of the purchase price
      based on fair values of the assets acquired and liabilities assumed at the
      date of acquisition, plus the book value of assets and liabilities underlying
      PPL Global's previous 51% equity ownership:
    Current assets
        
        $
        236Investments (a)
        
        
        (450
        )PP&E
        
        
        2,629Goodwill
        
        
        740Other intangibles
        
        
        4Other
        
        
        244Total assets acquired
        
        
        3,403Current liabilities
        
        
        767Long-term debt
        
        
        1,668Other
        
        
        732Total liabilities assumed
        
        
        3,167Net assets acquired
        
        $
        236(a)
        
        Includes the reversal of PPL Global's
            equity investment.The goodwill reflected above includes the remaining value of PPL Global's
      51% share of the goodwill recognized by WPD on its acquisition of Hyder,
      in addition to the $568 million of non-deductible goodwill arising upon
      acquisition of Mirant's 49% interest.
    The PPL income statements include consolidated WPD results for the twelve-month
      periods ended November 30. This reflects PPL Global's policy of recording
      the results of foreign controlled subsidiaries on a one-month lag. The portion
      of earnings attributable to Mirant, $73 million for the year ended December
      31, 2002, is reported on the Statement of Income in "Minority Interest."
    TransEmel
    Emel acquired the remaining 40% interest in a provider of transmission
      service to northern Chile in 2003 at a net cost of $3 million, bringing
      its total ownership interest in TransEmel to 100%. As a result of this acquisition,
      the operating results of TransEmel have been consolidated beginning January
      1, 2003. The portion of earnings attributable to the minority shareholder
      is reported on the Statement of Income in "Minority Interest."
    Sale of CEMAR
    In 2001, PPL Global estimated that the long-term viability of its CEMAR
      investment was jeopardized and that there was minimal probability of positive
      future cash flows. At that time, PPL Global recorded an impairment loss
      of $217 million in the carrying value of its net assets in CEMAR. In March
      2002, PPL Global recorded a further impairment loss of $6 million, which
      was charged to "Write-down of international energy projects." In June 2002,
      PPL made a decision to exit the investment. At that time, PPL Global's remaining
      portion of its CEMAR investment, which related to foreign currency translation
      adjustments (CTA), was written-off. The $94 million charge was also recorded
      in "Write-down of international energy projects." Accounting guidance prohibited
      the inclusion of CTA in impairment calculations prior to designating such
      assets as held for disposal.
    In August 2002, ANEEL authorized an administrative intervention in CEMAR
      and fully assumed operational and financial control of the company. The
      intervenor appointed by ANEEL initiated efforts to transfer the ownership
      interest in CEMAR to a new owner. Since PPL Global no longer controlled
      or managed CEMAR, it deconsolidated the assets and liabilities of CEMAR
      from its financial statements and stopped recording CEMAR's operating results
      at that time. In February 2003, due to the inability to discharge their
      obligations under the continuing intervention, PPL-related officers and
      directors of CEMAR resigned from their respective positions.
    In April 2004, PPL Global transferred its interest in CEMAR to two companies
      controlled by a private equity fund managed by GP Investimentos, a Brazilian
      private equity firm. The sale resulted in a credit of approximately $23
      million, and is included in "Other Income - net" on the Statement of Income.
      This credit is a result of the reversal of the negative carrying value and
      the associated cumulative translation adjustment.
    Other Write-downs of International Energy Projects
    In 2002, PPL Global evaluated certain investments for impairment and recorded
      a $5 million impairment charge in connection with its investment in CGE,
      a $4 million impairment of a corporate joint venture's investment in Brazil,
      and a $4 million write-down of certain non-electrical assets in Bolivia.
    Discontinued Operations
    In December 2003, PPL Global's Board of Managers authorized PPL Global
      to sell its investment in a Latin American telecommunications company, and
      approved a plan of sale. It was determined that the viability of this non-strategic
      business was not economical. As a result, PPL Global recorded an $18 million
      write-down in the carrying value of the company's net assets to their estimated
      fair value of approximately $1 million as of December 31, 2003.
    In June 2004, PPL Global sold this investment to local management for a
      nominal amount. The operating results of the Latin American telecommunications
      company, which was a loss of approximately $2 million in 2004, 2003 and
      2002, as well as the write-down of its net assets, which was an insignificant
      amount in 2004 and approximately $18 million in 2003, are recorded as "Loss
      from Discontinued Operations" on the Statement of Income. The discontinued
      operation had assets of $5 million and liabilities of $4 million at December
      31, 2003, and are included in "Current Assets - Other" and "Current Liabilities
      - Other" on the Balance Sheet.
    Other Sales
    In 2003, a subsidiary of WPD sold certain Hyder properties. PPL Global
      received approximately $17 million from the sales, and recorded a pre-tax
      gain of about $2 million. This gain is included in "Other Income - net"
      on the Statement of Income.
    In March 2004, PPL Global completed the sale of its minority interest in
      shares of CGE for approximately $123 million. The sale resulted in a charge
      of approximately $15 million pre-tax, which is included in operating expenses,
      as "Energy related businesses," on the Statement of Income. This charge
      was due to the write-off of the associated cumulative translation adjustment,
      primarily as a result of the devaluation of the Chilean peso since the original
      acquisition in 2000.
    In June 2004, PPL Global completed the sale of its 50% ownership interest
      in MicDos for approximately $8 million. There was an insignificant loss
      on this transaction.
    DelSur Tender Offer
    In April 2004, EC launched a tender offer to acquire up to all of the outstanding
      shares of DelSur for an aggregate purchase price of up to $17 million. The
      offer closed in May, with a purchase of 163,927 shares for approximately
      $5 million, increasing EC's ownership of DelSur by 5.34%. Additional shares
      are purchased as they become available. At December 31, 2004, EC owned approximately
      86.4% of DelSur.
    Other
    WPD has an equity interest in Teesside Power Limited (Teesside), the owner
      of the 1,875 MW Teesside Power Station, located in northeast England. Through
      its European affiliates, Enron was an owner, operator and power purchaser
      of the station's output. As a result of Enron being placed into receivership
      in the U.K. and its default on obligations under the power purchase agreements,
      in 2001, WPD wrote off its entire equity investment in Teesside. In 2002,
      PPL Global recognized an $8 million tax benefit on the worthlessness of
      WPD's investment in Teesside.
    Other(PPL)
    In 2003, a subsidiary of PPL Telcom acquired the fiber optic network of
      a Fairfax, Virginia-based company for approximately $21 million, consisting
      of $9 million in cash and a $12 million capital lease obligation for the
      right to use portions of a fiber optic network. The 1,330-route-mile metropolitan
      area fiber network connects New York, northern New Jersey, Philadelphia,
      Baltimore and Washington, D.C. The acquisition required certain regulatory
      approvals and authorizations in the area served by the network.
    In June 2004, a PPL subsidiary evaluated its investment in a technology
      supplier for impairment. As a result of the evaluation, the subsidiary recorded
      an impairment charge of approximately $10 million pre-tax, which is included
      in "Other Income - net" on the Statement of Income.
10. Leases
    Colstrip Generating Plant(PPL and PPL Energy Supply)
    PPL Montana leases a 50% interest in Colstrip Units 1 and 2 and a 30% interest
      in Unit 3, under four 36-year non-cancelable operating leases. These leases
      provide two renewal options based on the economic useful life of the generation
      assets. PPL Montana is required to pay all expenses associated with the
      operations of the generation units. The leases place certain restrictions
      on PPL Montana's ability to incur additional debt, sell assets and declare
      dividends and require PPL Montana to maintain certain financial ratios related
      to cash flow and net worth. The amount outstanding under these leases at
      December 31, 2004, was $278 million. There are no residual value guarantees
      in these leases. However, upon an event of default or an event of loss,
      the lessee could be required to pay a termination value of amounts sufficient
      to allow the lessor to repay amounts owing on the lessor notes and make
      the lessor whole for its equity investment and anticipated return on investment.
      The events of default include payment defaults, breaches of representations
      or covenants, acceleration of other indebtedness of PPL Montana, change
      in control of PPL Montana and certain bankruptcy events. The termination
      value was estimated to be $613 million at December 31, 2004.
    Other Leases
    (PPL, PPL Energy Supply and PPL Electric)
    PPL and its subsidiaries have leases for vehicles, office space, land,
      buildings, personal computers and other equipment. Rental expense for all
      operating leases was as follows:
    PPL
        
        PPL
            Energy Supply
        
        PPL
            Electric2004
        
        $
        65
        
        $
        44
        
        $
        212003
        
        
        85
        
        
        63
        
        
        212002
        
        
        62
        
        
        46
        
        
        15Total future minimum rental payments for all operating leases are estimated
      as follows:
    PPL
        
        PPL
            Energy Supply
        
        PPL
            Electric2005
        
        $
        77
        
        $
        63
        
        $
        132006
        
        
        70
        
        
        60
        
        
        102007
        
        
        62
        
        
        54
        
        
        82008
        
        
        60
        
        
        54
        
        
        62009
        
        
        57
        
        
        53
        
        
        4Thereafter
        
        
        457
        
        
        448
        
        
        8$
        783
        
        $
        732
        
        $
        49(PPL)
    In connection with the acquisition of the fiber optic network discussed
      in Note 9, a subsidiary of PPL Telcom assumed a capital lease obligation
      through 2020 for the right to use portions of the fiber optic network. The
      balance outstanding at December 31, 2004 was $11 million. Total future minimum
      rental payments for this capital lease are estimated at $1 million for each
      of the years from 2005 through 2009, and $13 million thereafter.
11. Stock-Based Compensation
    (PPL, PPL Energy Supply and PPL Electric)
    Under the PPL Incentive Compensation Plan (ICP) and the Incentive Compensation
      Plan for Key Employees (ICPKE) (together, the Plans), restricted shares
      of PPL common stock, restricted stock units and stock options may be granted
      to officers and other key employees of PPL, PPL Electric and other affiliated
      companies. Awards under the Plans are made by the Compensation and Corporate
      Governance Committee (CCGC) of the PPL Board of Directors, in the case of
      the ICP, and by the PPL Corporate Leadership Council (CLC), in the case
      of the ICPKE. The ICP limits the total number of awards that may be granted
      under it after April 23, 1999, to 7,884,715 awards, or 5% of the total shares
      of common stock that were outstanding at April 23, 1999. The ICPKE limits
      the total number of awards that may be granted under it after April 25,
      2003, to 8,286,804 awards, or 5% of the total shares of common stock that
      were outstanding at January 1, 2003, reduced by outstanding awards for which
      common stock was not yet issued as of April 25, 2003. In addition, each
      Plan limits the number of shares available for awards in any calendar year
      to 2% of the outstanding common stock of PPL on the first day of such calendar
      year. The maximum number of options that can be awarded under each Plan
      to any single eligible employee in any calendar year is 1.5 million shares.
      Any portion of these options that has not been granted may be carried over
      and used in any subsequent year. If any award lapses, is forfeited or the
      rights of the participant terminate, the shares of common stock underlying
      such an award are again available for grant. Shares delivered under the
      Plans may be in the form of authorized and unissued common stock, common
      stock held in treasury by PPL or common stock purchased on the open market
      (including private purchases) in accordance with applicable securities laws.
    Restricted Stock
    Restricted shares of PPL common stock are outstanding shares with full
      voting and dividend rights. Restricted stock awards are subject to a restriction
      or vesting period as determined by the CCGC in the case of the ICP, and
      the CLC in the case of the ICPKE. In addition, the shares are subject to
      forfeiture or accelerated payout under Plan provisions for termination,
      retirement, disability and death of employees. Restricted shares vest fully
      if control of PPL changes, as defined by the plans.
    Restricted Stock Units
    In 2003, the Plans were amended to allow for the grant of restricted stock
      units. Restricted stock units are awards based on the fair market value
      of PPL common stock. Actual PPL common shares will be issued upon completion
      of a restriction or vesting period as determined by the CCGC in the case
      of the ICP, and the CLC in the case of the ICPKE. Recipients of restricted
      stock units may also be granted the right to receive dividend equivalents
      through the end of the restriction period or until the award is forfeited.
      Restricted stock units are subject to forfeiture or accelerated payout under
      the Plan provisions for termination, retirement, disability and death of
      employees. Restricted stock units vest fully if control of PPL changes,
      as defined by the Plans.
    A summary of restricted stock/unit grants follows:
    Restricted
            Shares 
            Granted
        
        Weighted
            Average
            Fair
            Value
        
        Restricted
            Units
            Granted
        
        Weighted
            Average
            Fair
            Value2004PPL
        
        
        
        
        
        
        233,055
        
        
        $46.05PPL Energy Supply
        
        
        
        
        
        
        93,935
        
        
        $46.28PPL Electric
        
        
        
        
        
        
        21,540
        
        
        $46.252003PPL
        
        42,090
        
        
        $36.23
        
        139,732
        
        
        $35.09PPL Energy Supply
        
        10,110
        
        
        $36.23
        
        77,306
        
        
        $35.11PPL Electric
        
        2,850
        
        
        $36.23
        
        21,170
        
        
        $35.072002PPL
        
        147,735
        
        
        $34.12PPL Energy Supply
        
        82,211
        
        
        $34.45PPL Electric
        
        18,860
        
        
        $33.71Compensation expense related to restricted stock and restricted stock unit
      awards was $6 million, $5 million and $5 million for PPL for 2004, 2003
      and 2002. At December 31, 2004, PPL had 366,201 restricted shares and 341,199
      restricted units outstanding. These awards currently vest from three to
      25 years from the date of grant.
    Compensation expense related to restricted stock and restricted stock unit
      awards for PPL Energy Supply in 2004, 2003 and 2002 was $5 million, $4 million
      and $4 million. Compensation expense related to restricted stock and restricted
      stock unit awards for PPL Electric was $1 million for 2004, 2003 and 2002.
    Stock Options(PPL, PPL Energy Supply and PPL Electric)
    Under the Plans, stock options may also be granted with an option exercise
      price per share not less than the fair market value of PPL's common stock
      on the date of grant. The options are exercisable beginning one year after
      the date of grant, assuming the individual is still employed by PPL or a
      subsidiary, in installments as determined by the CCGC in the case of the
      ICP, and the CLC in the case of the ICPKE. Options outstanding at December
      31, 2004, vest over a three-year period from the date of grant in equal
      installments. The CCGC and CLC have discretion to accelerate the exercisability
      of the options. All options expire no later than ten years from the grant
      date. The options become exercisable immediately if control of PPL changes,
      as defined by the Plans.
    A summary of stock option activity follows:
   2004
        
        
        2003
        
        
        2002Number
            of Options
        
        
        Weighted
            Average Exercise Price
        
        
        Number
            of Options
        
        
        Weighted
            Average Exercise Price
        
        
        Number
            of Options
        
        
        Weighted
            Average Exercise PricePPLOutstanding at beginning
            of year
        
        
        2,912,258
        
        
        
        $35.56
        
        
        
        3,008,685
        
        
        
        $32.09
        
        
        
        2,255,051
        
        
        
        $31.36Granted
        
        
        760,440
        
        
        
        45.18
        
        
        
        816,110
        
        
        
        36.23
        
        
        
        840,430
        
        
        
        33.49Exercised
        
        
        (653,653
        )
        
        
        31.40
        
        
        
        (860,915
        )
        
        
        24.09
        
        
        
        (62,710
        )
        
        
        22.82Forfeited
        
        
        (38,070
        )
        
        
        42.74
        
        
        
        (51,622
        )
        
        
        35.32
        
        
        
        (24,086
        )
        
        
        36.18Outstanding at end of year
        
        
        2,980,975
        
        
        
        38.83
        
        
        
        2,912,258
        
        
        
        35.56
        
        
        
        3,008,685
        
        
        
        32.09Options exercisable at end
            of year
        
        
        1,550,337
        
        
        
        37.54
        
        
        
        1,354,075
        
        
        
        34.64
        
        
        
        1,400,701
        
        
        
        29.88Weighted-average fair value
            of options granted
        
        
        $12.31
        
        
        
        
        
        
        
        $11.92
        
        
        
        
        
        
        
        $11.68PPL Energy SupplyOutstanding at beginning
            of year
        
        
        864,882
        
        
        
        36.14
        
        
        
        903,549
        
        
        
        32.78
        
        
        
        675,179
        
        
        
        31.64Granted
        
        
        203,160
        
        
        
        45.18
        
        
        
        266,760
        
        
        
        36.23
        
        
        
        304,480
        
        
        
        33.49Transferred
        
        
        (96,563
        )
        
        
        35.38Exercised
        
        
        (261,998
        )
        
        
        35.92
        
        
        
        (253,805
        )
        
        
        24.41
        
        
        
        (61,160
        )
        
        
        22.72Forfeited
        
        
        (24,630
        )
        
        
        41.41
        
        
        
        (51,622
        )
        
        
        35.32
        
        
        
        (14,950
        )
        
        
        37.07Outstanding at end of year
        
        
        684,851
        
        
        
        38.83
        
        
        
        864,882
        
        
        
        36.14
        
        
        
        903,549
        
        
        
        32.78Options exercisable at end
            of year
        
        
        293,525
        
        
        
        37.09
        
        
        
        366,209
        
        
        
        35.90
        
        
        
        381,657
        
        
        
        30.75Weighted-average fair value
            of options granted
        
        
        $12.31
        
        
        
        
        
        
        
        $11.92
        
        
        
        
        
        
        
        $11.68PPL ElectricOutstanding at beginning
            of year
        
        
        226,193
        
        
        
        37.42
        
        
        
        232,376
        
        
        
        34.40
        
        
        
        163,942
        
        
        
        34.92Granted
        
        
        48,180
        
        
        
        45.18
        
        
        
        66,630
        
        
        
        36.23
        
        
        
        77,570
        
        
        
        33.49Transferred
        
        
        
        
        
        
        
        
        
        
        3,114
        
        
        
        26.84Exercised
        
        
        (42,493
        )
        
        
        34.12
        
        
        
        (75,927
        )
        
        
        26.68Forfeited
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        (9,136
        )
        
        
        36.20Outstanding at end of year
        
        
        231,880
        
        
        
        40.08
        
        
        
        226,193
        
        
        
        37.42
        
        
        
        232,376
        
        
        
        34.40Options exercisable at end
            of year
        
        
        171,827
        
        
        
        39.65
        
        
        
        87,488
        
        
        
        39.75
        
        
        
        95,561
        
        
        
        31.97Weighted-average fair value
            of options granted
        
        
        $12.31
        
        
        
        
        
        
        
        $11.92
        
        
        
        
        
        
        
        $11.68The estimated fair value of each option granted was calculated using a
      Black-Scholes option-pricing model. The weighted average assumptions used
      in the model were as follows:
    2004
        
        2003
        
        2002Risk-free interest rate
        
        3.79%
        
        3.81%
        
        5.35%Expected option life
        
        7.47 yrs.
        
        7.75 yrs.
        
        10 yrs.Expected stock volatility
        
        32.79%
        
        39.94%
        
        39.11%Dividend yield
        
        3.51%
        
        3.48%
        
        3.34%The following table summarizes information about stock options at December
      31, 2004:
    PPL
    Options
            Outstanding
        
        Options
            ExercisableRange of 
            Exercise Prices
        
        Number 
            Outstanding
        
        Weighted-
            Avg. 
            Remaining 
            Contractual 
            Life
        
        Weighted-
            Avg. 
            Exercise 
            Prices
        
        Number 
            Exercisable
        
        Weighted-
            Avg. 
            Exercise 
            Price$19.00-$24.00
        
        38,090
        
        5.1
        
        $21.42
        
        38,090
        
        $21.42$25.00-$29.00
        
        192,453
        
        4.3
        
        26.84
        
        192,453
        
        26.84$30.00-$35.00
        
        564,822
        
        7.1
        
        33.49
        
        333,113
        
        33.49$36.00-$39.00
        
        714,747
        
        8.1
        
        36.23
        
        226,068
        
        36.23$40.00-$44.00
        
        736,923
        
        6.1
        
        43.16
        
        736,923
        
        43.16$45.00-$49.00
        
        733,940
        
        9.1
        
        45.18
        
        23,690
        
        45.18Total options outstanding had a weighted-average remaining life of 7.4
      years at December 31, 2004.
    PPL Energy Supply
    Options
            Outstanding
        
        Options
            ExercisableRange of 
            Exercise Prices
        
        Number 
            Outstanding
        
        Weighted-
            Avg. 
            Remaining 
            Contractual 
            Life
        
        Weighted-
            Avg. 
            Exercise 
            Prices
        
        Number 
            Exercisable
        
        Weighted-
            Avg. 
            Exercise 
            Price$19.00-$24.00
        
        32,970
        
        5.1
        
        $21.23
        
        32,970
        
        $21.23$25.00-$29.00
        
        16,880
        
        4.3
        
        26.84
        
        16,880
        
        26.84$30.00-$35.00
        
        122,543
        
        7.1
        
        33.49
        
        58,507
        
        33.49$36.00-$39.00
        
        168,385
        
        8.1
        
        36.23
        
        31,195
        
        36.23$40.00-$44.00
        
        153,973
        
        6.1
        
        43.16
        
        153,973
        
        43.16$45.00-$49.00
        
        190,100
        
        9.1
        
        45.18Total options outstanding had a weighted-average remaining life of 7.5
      years at December 31, 2004.
    PPL Electric
    Options
            Outstanding
        
        Options
            ExercisableRange of 
            Exercise Prices
        
        Number 
            Outstanding
        
        Weighted-
            Avg. 
            Remaining 
            Contractual 
            Life
        
        Weighted-
            Avg. 
            Exercise 
            Prices
        
        Number 
            Exercisable
        
        Weighted-
            Avg. 
            Exercise 
            Price$30.00-$35.00
        
        36,240
        
        7.1
        
        $33.49
        
        28,340
        
        $33.49$36.00-$39.00
        
        66,630
        
        8.1
        
        36.23
        
        50,857
        
        36.23$40.00-$44.00
        
        80,830
        
        6.1
        
        43.16
        
        80,830
        
        43.16$45.00-$49.00
        
        48,180
        
        9.1
        
        45.18
        
        11,800
        
        45.18Total options outstanding had a weighted-average remaining life of 7.4
      years at December 31, 2004.
    Directors Stock Units (PPL)
    Under the Directors Deferred Compensation Plan, stock units are used to
      compensate members of PPL's Board of Directors who are not employees of
      PPL. Such stock units represent shares of PPL's common stock to which board
      members are entitled after they cease serving as a member of the Board of
      Directors. Board members are also entitled to defer any or all of their
      cash compensation into stock units. The stock unit accounts of each board
      member are increased based on dividends paid or other distributions on PPL's
      common stock. There were 116,389 stock units outstanding at December 31,
      2004. Compensation expense was $2 million for 2004 and insignificant for
      2003 and 2002.
    Stock Appreciation Rights (PPL and PPL Energy Supply)
    WPD uses stock appreciation rights to compensate senior management employees.
      Stock appreciation rights are granted with a reference price to PPL's common
      stock at the date of grant. These awards vest over a three-year period and
      have a 10-year term, during which time employees are entitled to receive
      a cash payment of any appreciation in the price of PPL's common stock over
      the grant date value. At December 31, 2004, there were 91,502 stock appreciation
      rights outstanding. Compensation expense for all periods reported was insignificant.
12. Retirement and Postemployment Benefits
    (PPL, PPL Energy Supply and PPL Electric)
    Pension and Other Postretirement Benefits
    The following disclosures distinguish between PPL's domestic and international
      pension plans.
    PPL uses a December 31 measurement date for its domestic pension and other
      postretirement benefit plans and its international pension plans.

    Net pension and other postretirement benefit costs (credits) were as follows:
    Pension
            Benefits
        
        
        Other
            Postretirement
            Benefits2004
        
        
        2003
        
        
        2002
        
        
        2004
        
        
        2003
        
        
        2002Domestic
        
        
        International
        
        
        Domestic
        
        
        International
        
        
        Domestic
        
        
        InternationalPPLService cost
        
        $
        49
        
        
        $
        15
        
        
        $
        42
        
        
        $
        14
        
        
        $
        40
        
        
        $
        13
        
        
        $
        6
        
        
        $
        7
        
        
        $
        5Interest cost
        
        
        112
        
        
        
        139
        
        
        
        105
        
        
        
        124
        
        
        
        99
        
        
        
        98
        
        
        
        29
        
        
        
        31
        
        
        
        26Expected return on
            plan assets
        
        
        (151
        )
        
        
        (205
        )
        
        
        (143
        )
        
        
        (188
        )
        
        
        (147
        )
        
        
        (179
        )
        
        
        (17
        )
        
        
        (13
        )
        
        
        (12
        )Net amortization
            and deferral
        
        
        4
        
        
        
        11
        
        
        
        (6
        )
        
        
        4
        
        
        
        (31
        )
        
        
        3
        
        
        
        19
        
        
        
        25
        
        
        
        15Net periodic pension
            and postretirement costs (credits) prior to special termination benefits
        
        
        14
        
        
        
        (40
        )
        
        
        (2
        )
        
        
        (46
        )
        
        
        (39
        )
        
        
        (65
        )
        
        
        37
        
        
        
        50
        
        
        
        34Special termination
            benefits
        
        
        
        
        
        
        
        
        
        
        9
        
        
        
        
        
        
        
        62
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        4Net periodic pension
            and postretirement benefit cost (credit)
        
        $
        14
        
        
        $
        (40
        )
        
        $
        7
        
        
        $
        (46
        )
        
        $
        23
        
        
        $
        (65
        )
        
        $
        37
        
        
        $
        50
        
        
        $
        38PPL Energy SupplyService cost
        
        $
        3
        
        
        $
        15
        
        
        $
        3
        
        
        $
        14
        
        
        $
        2
        
        
        $
        13Interest cost
        
        
        4
        
        
        
        139
        
        
        
        4
        
        
        
        124
        
        
        
        4
        
        
        
        98
        
        
        $
        1
        
        
        $
        1
        
        
        $
        1Expected return on
            plan assets
        
        
        (5
        )
        
        
        (205
        )
        
        
        (4
        )
        
        
        (188
        )
        
        
        (3
        )
        
        
        (179
        )Net amortization and
            deferral
        
        
        1
        
        
        
        11
        
        
        
        1
        
        
        
        4
        
        
        
        
        
        
        
        3Net periodic pension
            and postretirement benefit cost (credit)
        
        $
        3
        
        
        $
        (40
        )
        
        $
        4
        
        
        $
        (46
        )
        
        $
        3
        
        
        $
        (65
        )
        
        $
        1
        
        
        $
        1
        
        
        $
        1Net periodic pension cost charged (credited) to operating expense, excluding
      amounts charged to construction and other non-expense accounts, were:
    2004
        
        
        2003
        
        
        2002Domestic
        
        
        Int'l
        
        
        Domestic
        
        
        Int'l
        
        
        Domestic
        
        
        Int'lPPL (a)
        
        $
        12
        
        
        $
        (36
        )
        
        $
        (2
        )
        
        $
        (40
        )
        
        $
        (31
        )
        
        $
        (58
        )PPL Energy Supply (b)
        
        
        6
        
        
        
        (36
        )
        
        
        2
        
        
        
        (40
        )
        
        
        (9
        )
        
        
        (58
        )PPL Electric (c)
        
        
        1
        
        
        
        
        
        
        
        (4
        )
        
        
        
        
        
        
        (17
        )(a)
        The domestic amounts for 2003 and
            2002 exclude the $9 million and $62 million cost of special termination
            benefits, which are included separately on the Statement of Income,
            within the "Workforce reduction" charge for those years.(b)
        In addition to the specific plans
            sponsored by PPL Energy Supply, PPL Generation subsidiaries and PPL
            EnergyPlus are also allocated a portion of the costs of pension plans
            sponsored by PPL Services, included in the PPL total cost above, based
            on their participation in those plans.(c)
        PPL Electric is also allocated a portion
            of the costs of pension plans sponsored by PPL Services, included
            in the PPL total cost above, based on participation in those plans.PPL uses an accelerated amortization method for the recognition of gains
      and losses for its pension plans. Under the accelerated method, gains and
      losses in excess of 10% but less than 30% of the greater of the plan's projected
      benefit obligation or the market-related value of plan assets are amortized
      on a straight-line basis over the estimated average future service period
      of plan participants. Gains and losses in excess of 30% of the plan's projected
      benefit obligation are amortized on a straight-line basis over a period
      equal to one-half of the average future service period of the plan participants.
    Other postretirement benefit costs charged to operating expense, excluding
      amounts charged to construction and other non-expense accounts, were:
    2004
        
        
        2003
        
        
        2002PPL
        
        $
        31
        
        
        $
        43
        
        
        $
        27PPL Energy Supply (a)
        
        
        12
        
        
        
        14
        
        
        
        9PPL Electric (b)
        
        
        9
        
        
        
        20
        
        
        
        13(a)
        In addition to the specific plans
            sponsored by PPL Energy Supply, PPL Generation subsidiaries and PPL
            EnergyPlus are also allocated a portion of the costs of other postretirement
            benefit plans sponsored by PPL Services, included in the PPL total
            cost above, based on their participation in those plans.(b)
        PPL Electric is also allocated a portion
            of the costs of other postretirement benefit plans sponsored by PPL
            Services, included in the PPL total cost above, based on participation
            in those plans.The following assumptions were used in the valuation of the benefit obligations
      at December 31 and determination of net periodic benefit cost for the years
      ended December 31:
    PPL
    Pension Benefits
        
        2004
        
        2003
        
        2002Domestic
        
        Int'l
        
        Domestic
        
        Int'l
        
        Domestic
        
        Int'lDiscount rate- obligations
        
        5.75%
        
        5.50%
        
        6.25%
        
        5.50%
        
        6.75%
        
        5.75%- cost
        
        6.25%
        
        5.50%
        
        6.75%
        
        5.75%
        
        7.25%
        
        5.75%Expected return on plan assets- obligations
        
        9.0%
        
        8.30%
        
        9.0%
        
        8.30%
        
        9.0%
        
        8.31%- cost
        
        9.0%
        
        8.30%
        
        9.0%
        
        8.31%
        
        9.2%
        
        8.31%Rate of compensation increase- obligations
        
        4.0%
        
        3.75%
        
        4.0%
        
        3.75%
        
        4.0%
        
        3.75%- cost
        
        4.0%
        
        3.75%
        
        4.0%
        
        3.75%
        
        4.25%
        
        3.75%Other Postretirement Benefits
        
        2004
        
        2003
        
        2002Discount rate- obligations
        
        5.75%
        
        6.25%
        
        6.75%- cost
        
        6.25%
        
        6.75%
        
        7.25%Expected return on plan assets- obligations
        
        7.90%
        
        7.80%
        
        7.80%- cost
        
        7.80%
        
        7.80%
        
        7.60%Rate of compensation increase- obligations
        
        4.0%
        
        4.0%
        
        4.0%- cost
        
        4.0%
        
        4.0%
        
        4.25%PPL Energy Supply
    Pension Benefits
        
        2004
        
        2003
        
        2002Domestic
        
        Int'l
        
        Domestic
        
        Int'l
        
        Domestic
        
        Int'lDiscount rate- obligations
        
        5.75%
        
        5.50%
        
        6.25%
        
        5.50%
        
        6.75%
        
        5.75%- cost
        
        6.25%
        
        5.50%
        
        6.75%
        
        5.75%
        
        7.25%
        
        5.75%Expected return on plan assets- obligations
        
        8.6%
        
        8.30%
        
        9.0%
        
        8.30%
        
        9.0%
        
        8.31%- cost
        
        9.0%
        
        8.30%
        
        9.0%
        
        8.31%
        
        9.2%
        
        8.31%Rate of compensation increase- obligations
        
        4.0%
        
        3.75%
        
        4.0%
        
        3.75%
        
        4.0%
        
        3.75%- cost
        
        4.0%
        
        3.75%
        
        4.0%
        
        3.75%
        
        4.25%
        
        3.75%Other Postretirement Benefits
        
        2004
        
        2003
        
        2002Discount rate- obligations
        
        5.75%
        
        6.25%
        
        6.75%- cost
        
        6.25%
        
        6.75%
        
        7.25%Expected return on plan assets
        
        N/A
        
        N/A
        
        N/ARate of compensation increase- obligations
        
        4.0%
        
        4.0%
        
        4.0%- cost
        
        4.0%
        
        4.0%
        
        4.25%PPL and PPL Energy Supply
    Assumed health care cost trend
            rates at December 31,
        
        2004
        
        2003
        
        2002Health care cost trend rate assumed
            for next year- obligations
        
        10%
        
        11%
        
        12%- cost
        
        11%
        
        12%
        
        7%Rate to which the cost trend rate
            is assumed to decline (the ultimate trend rate)- obligations
        
        5%
        
        5%
        
        5%- cost
        
        5%
        
        5%
        
        6%Year that the rate reaches the ultimate
            trend rate- obligations
        
        2010
        
        2010
        
        2010- cost
        
        2010
        
        2010
        
        2006A one-percentage point change in the assumed health care costs trend assumption
      would have the following effects in 2004:
    One
            Percentage PointIncrease
        
        
        DecreasePPLEffect on service cost and interest
            cost components
        
        $
        1
        
        
        $
        (1
        )Effect on postretirement benefit obligation
        
        
        12
        
        
        
        (10
        )PPL Energy SupplyEffect on service cost and interest
            cost components
        
        
        -
        
        
        
        -Effect on postretirement benefit obligation
        
        
        1
        
        
        
        (1
        )The expected long-term rate of return for PPL's domestic pension plans
      considers the plans' historical experience, but is primarily based on the
      plans' mix of assets and expectations for long-term returns of those asset
      classes.
    (PPL)
    The expected long-term rate of return for PPL's other postretirement benefit
      plans is based onthe VEBA trusts' mix of assets and expectations
      for long-term returns of those asset classes considering that a portion
      of those assets are taxable.
    (PPL and PPL Energy Supply)
    The expected rate of return for PPL's international pension plans considers
      that a portfolio largely invested in equities would be expected to achieve
      an average rate of return in excess of a portfolio largely invested in long-term
      bonds. The historical experience has been an excess return of 2% to 4% per
      annum on average over the return on long-term bonds.
    (PPL)
    The funded status of the PPL plans was as follows:
    Pension
            Benefits
        
        
        Other
            Postretirement
            Benefits2004
        
        
        2003
        
        
        2004
        
        
        2003Domestic
        
        
        International
        
        
        Domestic
        
        
        InternationalChange in Benefit ObligationBenefit Obligation, January
            1
        
        $
        1,772
        
        
        $
        2,474
        
        
        $
        1,558
        
        
        $
        2,126
        
        
        $
        512
        
        
        $
        423Service cost
        
        
        49
        
        
        
        15
        
        
        
        42
        
        
        
        14
        
        
        
        6
        
        
        
        7Interest cost
        
        
        112
        
        
        
        139
        
        
        
        105
        
        
        
        124
        
        
        
        29
        
        
        
        31Participant contributions
        
        
        
        
        
        
        5
        
        
        
        
        
        
        
        5
        
        
        
        4
        
        
        
        1Plan amendments
        
        
        
        
        
        
        
        
        
        
        3
        
        
        
        
        
        
        
        (47
        )
        
        
        48Actuarial (gain) loss
        
        
        115
        
        
        
        180
        
        
        
        127
        
        
        
        101
        
        
        
        17
        
        
        
        30Special termination benefits
        
        
        
        
        
        
        
        
        
        
        9Actual expense paid
        
        
        (1
        )
        
        
        
        
        
        
        (1
        )Net benefits paid
        
        
        (78
        )
        
        
        (160
        )
        
        
        (71
        )
        
        
        (131
        )
        
        
        (36
        )
        
        
        (28
        )Currency conversion
        
        
        
        
        
        
        278
        
        
        
        
        
        
        
        235Benefit Obligation, December
            31
        
        
        1,969
        
        
        
        2,931
        
        
        
        1,772
        
        
        
        2,474
        
        
        
        485
        
        
        
        512Change in Plan AssetsPlan assets at fair value,
            January 1
        
        
        1,653
        
        
        
        2,164
        
        
        
        1,376
        
        
        
        1,757
        
        
        
        219
        
        
        
        163Actual return on plan assets
        
        
        184
        
        
        
        232
        
        
        
        329
        
        
        
        332
        
        
        
        20
        
        
        
        27Employer contributions
        
        
        9
        
        
        
        3
        
        
        
        20
        
        
        
        
        
        
        
        42
        
        
        
        56Participant contributions
        
        
        
        
        
        
        5
        
        
        
        
        
        
        
        5
        
        
        
        4
        
        
        
        1Actual expense paid
        
        
        (1
        )
        
        
        
        
        
        
        (1
        )Net benefits paid
        
        
        (78
        )
        
        
        (160
        )
        
        
        (71
        )
        
        
        (131
        )
        
        
        (36
        )
        
        
        (28
        )Currency conversion
        
        
        
        
        
        
        239
        
        
        
        
        
        
        
        201Plan assets at fair value,
            December 31
        
        
        1,767
        
        
        
        2,483
        
        
        
        1,653
        
        
        
        2,164
        
        
        
        249
        
        
        
        219Funded StatusFunded Status of Plan
        
        
        (202
        )
        
        
        (448
        )
        
        
        (119
        )
        
        
        (310
        )
        
        
        (236
        )
        
        
        (293
        )Unrecognized actuarial (gain)
            loss
        
        
        (100
        )
        
        
        676
        
        
        
        (187
        )
        
        
        477
        
        
        
        141
        
        
        
        134Unrecognized prior service
            cost
        
        
        154
        
        
        
        32
        
        
        
        167
        
        
        
        33
        
        
        
        23
        
        
        
        76Unrecognized transition
            assets
        
        
        (23
        )
        
        
        
        
        
        
        (27
        )
        
        
        
        
        
        
        69
        
        
        
        78Currency conversion
        
        
        
        
        
        
        69
        
        
        
        
        
        
        
        57Net amount recognized at
            end of year
        
        $
        (171
        )
        
        $
        329
        
        
        $
        (166
        )
        
        $
        257
        
        
        $
        (3
        )
        
        $
        (5
        )Amounts recognized in
            the Balance Sheet consist of:Prepaid benefit cost
        
        $
        7
        
        
        $
        329
        
        
        $
        4
        
        
        $
        257
        
        
        $
        8
        
        
        $
        4Accrued benefit liability
        
        
        (178
        )
        
        
        
        
        
        
        (170
        )
        
        
        
        
        
        
        (11
        )
        
        
        (9
        )Additional minimum liability
        
        
        (37
        )
        
        
        (635
        )
        
        
        (28
        )
        
        
        (516
        )Intangible asset
        
        
        9
        
        
        
        36
        
        
        
        9
        
        
        
        37Accumulated other comprehensive income
            (pre-tax)
        
        
        28
        
        
        
        503
        
        
        
        19
        
        
        
        434Cumulative translation adjustment
        
        
        
        
        
        
        96
        
        
        
        
        
        
        
        45Net amount recognized at
            end of year
        
        $
        (171
        )
        
        $
        329
        
        
        $
        (166
        )
        
        $
        257
        
        
        $
        (3
        )
        
        $
        (5
        )Total accumulated benefit
            obligation for defined benefit pension plans
        
        $
        1,710
        
        
        $
        2,789
        
        
        $
        1,553
        
        
        $
        2,423Information for pension plans with projected benefit obligations in excess
      of plan assets follows:

    2004
        
        
        2003Domestic
        
        
        Int'l
        
        
        Domestic
        
        
        Int'lProjected benefit obligation
        
        $
        1,969
        
        
        $
        2,931
        
        
        $
        1,765
        
        
        $
        2,474Accumulated benefit obligation
        
        $
        1,710
        
        
        $
        2,789
        
        
        $
        1,546
        
        
        $
        2,423Fair value of assets
        
        $
        1,767
        
        
        $
        2,483
        
        
        $
        1,646
        
        
        $
        2,164Information for pension plans with accumulated benefit obligations in excess
      of plan assets follows:
    2004
        
        
        2003Domestic
        
        
        Int'l
        
        
        Domestic
        
        
        Int'lProjected benefit obligation
        
        $
        174
        
        
        $
        2,931
        
        
        $
        142
        
        
        $
        2,474Accumulated benefit obligation
        
        $
        159
        
        
        $
        2,789
        
        
        $
        130
        
        
        $
        2,423Fair value of assets
        
        $
        95
        
        
        $
        2,483
        
        
        $
        76
        
        
        $
        2,164
    Information for other postretirement benefit plans with accumulated postretirement
      benefit obligations in excess of plan assets follows:
    2004
        
        
        2003Accumulated postretirement benefit
            obligation
        
        $
        485
        
        
        $
        512Fair value of assets
        
        $
        249
        
        
        $
        219(PPL Energy Supply)
    The funded status of the PPL Energy Supply plans was as follows:
    Pension
            Benefits
        
        
        Other
            Postretirement
            Benefits2004
        
        
        2003
        
        
        2004
        
        
        2003Domestic
        
        
        International
        
        
        Domestic
        
        
        InternationalChange in Benefit ObligationBenefit Obligation, January
            1
        
        $
        62
        
        
        $
        2,474
        
        
        $
        58
        
        
        $
        2,126
        
        
        $
        11
        
        
        $
        9Service cost
        
        
        3
        
        
        
        15
        
        
        
        3
        
        
        
        14Interest cost
        
        
        4
        
        
        
        139
        
        
        
        4
        
        
        
        124
        
        
        
        1
        
        
        
        1Participant contributions
        
        
        
        
        
        
        5
        
        
        
        
        
        
        
        5Actuarial (gain) loss
        
        
        6
        
        
        
        180
        
        
        
        
        
        
        
        101
        
        
        
        
        
        
        
        1Net benefits paid
        
        
        (1
        )
        
        
        (160
        )
        
        
        (1
        )
        
        
        (131
        )Net transfer out
        
        
        
        
        
        
        
        
        
        
        (2
        )Currency conversion
        
        
        
        
        
        
        278
        
        
        
        
        
        
        
        235Benefit Obligation, December
            31
        
        
        74
        
        
        
        2,931
        
        
        
        62
        
        
        
        2,474
        
        
        
        12
        
        
        
        11Change in Plan AssetsPlan assets at fair value,
            January 1
        
        
        53
        
        
        
        2,164
        
        
        
        30
        
        
        
        1,757Actual return on plan assets
        
        
        5
        
        
        
        232
        
        
        
        9
        
        
        
        332Employer contributions
        
        
        4
        
        
        
        3
        
        
        
        15Participant contributions
        
        
        
        
        
        
        5
        
        
        
        
        
        
        
        5Net benefits paid
        
        
        (1
        )
        
        
        (160
        )
        
        
        (1
        )
        
        
        (131
        )Currency conversion
        
        
        
        
        
        
        239
        
        
        
        
        
        
        
        201Plan assets at fair value,
            December 31
        
        
        61
        
        
        
        2,483
        
        
        
        53
        
        
        
        2,164Funded StatusFunded Status of Plan
        
        
        (13
        )
        
        
        (448
        )
        
        
        (9
        )
        
        
        (310
        )
        
        
        (12
        )
        
        
        (11
        )Unrecognized actuarial loss
        
        
        14
        
        
        
        676
        
        
        
        9
        
        
        
        477
        
        
        
        4
        
        
        
        4Unrecognized prior service
            cost
        
        
        3
        
        
        
        32
        
        
        
        4
        
        
        
        33Currency conversion
        
        
        
        
        
        
        69
        
        
        
        
        
        
        
        57Net amount recognized at
            end of year
        
        $
        4
        
        
        $
        329
        
        
        $
        4
        
        
        $
        257
        
        
        $
        (8
        )
        
        $
        (7
        )Amounts recognized in
            the Balance Sheet consist of:Prepaid benefit cost
        
        $
        4
        
        
        $
        329
        
        
        $
        4
        
        
        $
        257Accrued benefit liability
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        $
        
        (8
        )
        
        $
        (7
        )Additional minimum liability
        
        
        (17
        )
        
        
        (635
        )
        
        
        (11
        )
        
        
        (516
        )Intangible asset
        

        
        3
        
        
        
        36
        
        
        
        3
        
        
        
        37Accumulated other comprehensive income
            (pre-tax)
        
        
        14
        
        
        
        503
        
        
        
        8
        
        
        
        434Cumulative translation adjustment
        
        
        
        
        
        
        96
        
        
        
        
        
        
        
        45Net amount recognized at
            end of year
        
        $
        4
        
        
        $
        329
        
        
        $
        4
        
        
        $
        257
        
        
        $
        (8
        )
        
        $
        (7
        )Total accumulated benefit
            obligation for defined benefit pension plans
        
        $
        74
        
        
        $
        2,789
        
        
        $
        62
        
        
        $
        2,423Information for pension plans with projected and accumulated benefit obligations
      in excess of plan assets follows:
    2004
        
        
        2003Domestic
        
        
        Int'l
        
        
        Domestic
        
        
        Int'lProjected benefit obligation
        
        $
        74
        
        
        $
        2,931
        
        
        $
        55
        
        
        $
        2,474Accumulated benefit obligation
        
        $
        74
        
        
        $
        2,789
        
        
        $
        55
        
        
        $
        2,423Fair value of assets
        
        $
        61
        
        
        $
        2,483
        
        
        $
        46
        
        
        $
        2,164Information for other postretirement benefit plans with accumulated postretirement
      benefit obligations in excess of plan assets follows:
    2004
        
        
        2003Accumulated postretirement benefit
            obligation
        
        $
        12
        
        
        $
        11Fair value of assets
        
        $
        
        
        
        $In addition to the plans sponsored by PPL Energy Supply, PPL Generation
      subsidiaries and PPL EnergyPlus are allocated a portion of the liabilities
      and costs of the pension and other postretirement benefit plans sponsored
      by PPL Services based on their participation in those plans. The pension
      liabilities assumed by PPL Energy Supply for these plans were $60 million
      and $58 million at December 31, 2004 and 2003. The prepaid other postretirement
      benefit costs assumed by PPL Energy Supply for these plans were $2 million
      and $1 million at December 31, 2004 and 2003.
    PPL Energy Supply subsidiaries engaged in the mechanical contracting business
      make contributions to various multi-employer pension and health and welfare
      plans, depending on an employee's status. Contributions of $28 million,
      $23 million and $30 million were made in 2004, 2003 and 2002. The change
      in contributions from year to year was primarily the result of the changes
      in the workforce at the mechanical contracting companies. The contribution
      rates have also increased from year to year.
    (PPL Electric)
    Although PPL Electric does not directly sponsor any pension or other postretirement
      benefit plans, it is allocated a portion of the liabilities and costs of
      plans sponsored by PPL Services based on participation in those plans. At
      December 31, 2004 and 2003, the recorded balance of PPL Electric's
      allocated share of the total pension liability was $76 million and $74 million.
      At December 31, 2004 and 2003, the balance in PPL Electric's allocated share
      of the total prepaid other postretirement benefit cost was $4 million and
      $2 million.
    At December 31, 2004, PPL Electric had a regulatory asset of $4 million
      relating to postretirement benefits that is being amortized and recovered
      in rates, with a remaining life of eight years. PPL Electric also maintains
      an additional liability for the cost of health care of retired miners of
      former subsidiaries that had been engaged in coal mining. At December 31,
      2004, the liability was $29 million. The liability is the net of $58 million
      of estimated future benefit payments offset by $29 million of available
      assets in a PPL Electric-funded VEBA trust.
    Plan Assets - Domestic Pension Plans(PPL and PPL Energy Supply)
    The asset allocation for the PPL Retirement Plan Master Trust and the target
      allocation, by asset category, is detailed below.
    Asset
            Category
        
        Percentage
            of plan assets at December 31,
        
        
        Target
            asset allocation2004
        
        
        2003Equity securities
        
        
        73%
        
        
        
        73%
        
        
        
        70%Debt securities
        
        
        22%
        
        
        
        22%
        
        
        
        25%Real estate and
            other
        
        
        5%
        
        
        
        5%
        
        
        
        5%Total
        
        
        100%
        
        
        
        100%
        
        
        
        100%The domestic pension plan assets are managed by outside investment managers
      and are rebalanced as necessary to maintain the target asset allocation
      ranges. PPL's investment strategy with respect to the domestic pension assets
      is to achieve a satisfactory risk-adjusted return on assets that, in combination
      with PPL's funding policy and tolerance for return volatility, will ensure
      that sufficient dollars are available to provide benefit payments.
    Plan Assets - Domestic Other Postretirement Benefit Plans(PPL)
    The asset allocation for the PPL other postretirement benefit plans by
      asset category is detailed below.
    Asset
            Category
        
        Percentage
            of plan assets at December 31,2004
        
        
        2003Equity securities
        
        
        60%
        
        
        
        56%Debt securities
        
        
        40%
        
        
        
        44%Total
        
        
        100%
        
        
        
        100%PPL's investment strategy with respect to its other postretirement benefit
      obligations is to fund the VEBA trusts with voluntary contributions and
      to invest in a tax efficient manner utilizing a prudent mix of assets. Based
      on the current VEBA and postretirement plan structure, a targeted asset
      allocation range of 50% to 60% equity and 40% to 50% debt is maintained.
    Plan Assets - International Pension Plans(PPL and PPL Energy
      Supply)
    WPD operates three defined benefit plans, the WPD Group segment of the
      Electricity Supply Pension Scheme (ESPS), the Western Power Utilities Pension
      Scheme and the Infralec 1992 Scheme. The assets of all three schemes are
      held separately from those of WPD in trustee-administered funds.
    PPL's international pension plan asset allocation and target allocation
      is detailed below.
    Asset
            Category
        
        Percentage
            of plan assets at December 31,
        
        
        Target
            asset allocation2004
        
        
        2003Equity securities
        
        
        74%
        
        
        
        75%
        
        
        
        75%Debt securities
        
        
        22%
        
        
        
        21%
        
        
        
        23%Real estate and
            other
        
        
        4%
        
        
        
        4%
        
        
        
        2%Total
        
        
        100%
        
        
        
        100%
        
        
        
        100%In consultation with its investment advisor and with WPD, the group trustees
      of the WPD Group of the ESPS have drawn up a Statement of Investment Principles
      to comply with the requirements of U.K. legislation.
    The group trustees' primary investment objective is to maximize investment
      returns within the constraint of avoiding excessive volatility in the funding
      position.
    Expected Cash Flows - Domestic Pension and Other Postretirement Benefit
      Plans
    (PPL)
    There are no contributions required for PPL's primary domestic pension
      plan or any of PPL's other domestic subsidiary pension plans. However, PPL
      subsidiaries expect to contribute approximately $10 million to their pension
      plans in 2005 to ensure future compliance with minimum funding requirements.
    PPL sponsors various non-qualified supplemental pension plans for which
      no assets are segregated from corporate assets. PPL expects to make approximately
      $2 million of benefit payments under these plans in 2005.
    PPL is not required to make contributions to its other postretirement benefit
      plans, but has historically funded these plans in amounts equal to the postretirement
      benefit costs recognized. Continuation of this past practice would provide
      for PPL to contribute $36 million to its other postretirement benefit plans
      in 2005.
    The following benefit payments, which reflect expected future service,
      as appropriate, are expected to be paid and the following federal subsidy
      payments are expected to be received:
    Other
            PostretirementPension
        
        
        Benefit
            Payment
        
        
        Expected
            Federal Subsidy2005
        
        $
        79
        
        
        $
        372006
        
        
        80
        
        
        
        40
        
        
        $
        22007
        
        
        84
        
        
        
        44
        
        
        
        22008
        
        
        89
        
        
        
        48
        
        
        
        32009
        
        
        95
        
        
        
        52
        
        
        
        32010 - 2014
        
        
        605
        
        
        
        321
        
        
        
        7(PPL Energy Supply)
    There are no contributions required for the PPL Montana pension plan. However,
      PPL Montana expects to contribute approximately $6 million to the plan in
      2005 to ensure future compliance with minimum funding requirements.
    The following benefit payments, which reflect expected future service,
      as appropriate, are expected to be paid:
    Pension
        
        
        Other
            Postretirement2005
        
        $
        1
        
        
        $
        12006
        
        
        2
        
        
        
        12007
        
        
        2
        
        
        
        12008
        
        
        2
        
        
        
        12009
        
        
        3
        
        
        
        12010 - 2014
        
        
        20
        
        
        
        10Expected Cash Flows - International Pension Plans(PPL and PPL
      Energy Supply)
    The pension plans of WPD are subject to formal actuarial valuations every
      three years, which are used to determine funding requirements. Future contributions
      were evaluated in accordance with the latest valuation performed as of March 31,
      2004, in respect of WPD's principal pension scheme, the ESPS, to determine
      contribution requirements for 2005 and forward. WPD expects to make contributions
      of approximately $38 million in 2005.
    The following benefit payments, which reflect expected future service,
      as appropriate, are expected to be paid:
    Pension2005
        
        $
        1682006
        
        
        1722007
        
        
        1772008
        
        
        1812009
        
        
        1862010 - 2014
        
        
        1,001Medicare Prescription Drug, Improvement and Modernization Act of 2003(PPL, PPL Energy Supply and PPL Electric)
    In December 2003, the Medicare Prescription Drug, Improvement and Modernization
      Act of 2003 (the Act) was signed into law. The Act introduces a prescription
      drug benefit under Medicare Part D and also provides for a tax-free federal
      subsidy to sponsors of retiree health care benefit plans that provide an
      actuarially equivalent level of prescription drug benefits. The subsidy
      would be 28% of eligible drug costs for retirees that are over age 65 and
      covered under PPL's other postretirement benefit plans.
    In January 2004, the FASB issued FSP FAS 106-1, "Accounting and Disclosure
      Requirements Related to the Medicare Prescription Drug, Improvement and
      Modernization Act of 2003." FSP FAS 106-1 permitted companies to defer accounting
      for the effects of the Act, as the impact of the Act on the provisions of
      SFAS 106, "Employers' Accounting for Postretirement Benefits Other than
      Pensions," had not been determined as of such time. PPL elected to defer
      recognizing the effects of the Act in accounting for its other postretirement
      benefit plans until authoritative guidance on the accounting for the federal
      subsidy was issued.
    In May 2004, the FASB issued FSP FAS 106-2, "Accounting and Disclosure
      Requirements Related to the Medicare Prescription Drug, Improvement and
      Modernization Act of 2003," which supersedes FSP FAS 106-1. FSP FAS 106-2
      details the accounting for the effects of the Act under SFAS 106 and requires
      certain disclosures. FSP FAS 106-2 is effective for the first interim or
      annual period beginning after June 15, 2004.
    PPL has consulted with its independent actuary and determined that portions
      of certain of its other postretirement benefit plans provide benefits that
      may be actuarially equivalent to Medicare Part D benefits, pending final
      detailed guidance from the U.S. Department of Health and Human Services.
      For those significant plans that provide benefits that are at least actuarially
      equivalent to Medicare Part D, PPL remeasured its plan assets and accumulated
      benefit obligation as of July 1, 2004, under the prospective method of adoption
      of FSP FAS 106-2. The prospective method of adoption allows for measuring
      the effects of the Act as of the date of adoption of FSP FAS 106-2. As a
      result, PPL's accumulated postretirement benefit obligation was reduced
      by approximately $12 million as of July 1, 2004, and resulted in an unrecognized
      actuarial gain of a similar amount. PPL's postretirement benefit cost recognized
      in 2004 was reduced by approximately $1 million.


    On January 21, 2005, the final regulations for implementing the Act were
      released. Although PPL has not been able to obtain a firm estimate of the
      effect of the regulations, any adjustments to the initial impact as disclosed
      above for changes in the accumulated postretirement benefit obligation and
      postretirement benefit cost are expected to be insignificant based on preliminary
      discussions with our actuaries.
    Savings Plans(PPL, PPL Energy Supply and PPL Electric)
    Substantially all employees of PPL's domestic subsidiaries are eligible
      to participate in deferred savings plans (401(k)s). Contributions to the
      plans charged to operating expense approximated the following:
    2004
        
        2003
        
        2002PPL
        
        $
        13
        
        $
        11
        
        $
        11PPL Energy Supply
        
        
        7
        
        
        6
        
        
        6PPL Electric
        
        
        3
        
        
        2
        
        
        2Employee Stock Ownership Plan(PPL, PPL Energy Supply and PPL
      Electric)
    PPL sponsors a non-leveraged ESOP, in which substantially all employees,
      excluding those of PPL Global, PPL Montana, PPL Gas Utilities and the mechanical
      contractors, are enrolled after one year of credited service. Dividends
      paid on ESOP shares are treated as ordinary dividends by PPL. Under existing
      income tax laws, PPL is permitted to deduct the amount of those dividends
      for income tax purposes and to contribute the resulting tax savings (dividend-based
      contribution) to the ESOP.
    The dividend-based contribution is used to buy shares of PPL's common stock
      and is expressly conditioned upon the deductibility of the contribution
      for federal income tax purposes. Contributions to the ESOP are allocated
      to eligible participants' accounts as of the end of each year, based 75%
      on shares held in existing participants' accounts and 25% on the eligible
      participants' compensation.
    Amounts charged as compensation expense for ESOP contributions approximated
      $5 million in each of 2004, 2003 and 2002. These amounts were offset by
      the dividend-based contribution tax savings and had no impact on PPL's earnings.
    ESOP shares outstanding at December 31, 2004, were 4,628,117, or 2% of
      total common shares outstanding, and are included in all EPS calculations.
    Postemployment Benefits
    (PPL, PPL Energy Supply and PPL Electric)
    Certain PPL subsidiaries provide health and life insurance benefits to
      disabled employees and income benefits to eligible spouses of deceased employees.
      Postemployment benefits charged to operating expenses were not significant
      in 2004, 2003 and 2002.
    (PPL and PPL Energy Supply)
    Certain of PPL Global subsidiaries, including Emel, EC, Elfec and Integra,
      provide limited non-pension benefits to all current employees. All active
      employees are entitled to benefits in the event of termination or retirement
      in accordance with government-sponsored programs. These plans generally
      obligate a company to pay one month's salary per year of service to employees
      in the event of involuntary termination. Under certain plans, employees
      with five or more years of service are entitled to this payment in the event
      of voluntary or involuntary termination.
    The liabilities for these plans are accounted for under the guidance of
      EITF 88-1 "Determination of Vested Benefit Obligation for a Defined Benefit
      Pension Plan," using what is commonly referred to as the "shut down" method,
      where a company records the undiscounted obligation as if it were payable
      at each balance sheet date. The combined liabilities for these plans at
      December 31, 2004 and 2003, were $9 million and $8 million, and are recorded
      in "Deferred Credits and Noncurrent Liabilities - Other" on the Balance
      Sheet.
13. Jointly-Owned Facilities
    (PPL and PPL Energy Supply)
    At December 31, 2004, subsidiaries of PPL and PPL Energy Supply owned interests
      in the facilities listed below. The Balance Sheets of PPL and PPL Energy
      Supply include the amounts noted in the table below:
    Ownership
            Interest
        
        Electric
            Plant in Service
        
        Other
            Property
        
        Accumulated
            Depreciation
        
        Construction
            Work 
            in ProgressPPL GenerationGenerating StationsSusquehanna
        
        90.00%
        
        $
        4,345
        
        
        
        
        $
        3,483
        
        $
        20Griffith (a)
        
        50.00%
        
        
        151Conemaugh
        
        16.25%
        
        
        196
        
        
        
        
        
        76
        
        
        1Keystone
        
        12.34%
        
        
        99
        
        
        
        
        
        52
        
        
        2Wyman Unit 4
        
        8.33%
        
        
        15
        
        
        
        
        
        4Merrill Creek Reservoir
        
        8.37%
        
        
        
        
        $
        22
        
        
        13(a)
        
        A PPL subsidiary has a 50% interest in
            a partnership that owns the Griffith gas-fired generating station.
            The partnership arrangement is essentially a cost-sharing arrangement,
            in that each of the partners has rights to one-half of the plant capacity
            and energy, and an obligation to cover one-half of the operating costs
            of the station. Accordingly, the equity investment is classified as
            "Electric Plant in Service - Generation" on the Balance Sheet.Each PPL Generation subsidiary provided its own funding for its share of
      the facility. Each receives a portion of the total output of the generating
      stations equal to its percentage ownership. The share of fuel and other
      operating costs associated with the stations is reflected on the Statement
      of Income.
    In addition to the interests mentioned above, PPL Montana is the operator
      of the jointly-owned, coal-fired generating units comprising the Colstrip
      steam generation facility. At December 31, 2004 and 2003, PPL Montana had
      a 50% leasehold interest in Colstrip Units 1 and 2 and a 30% leasehold interest
      in Colstrip Unit 3 under operating leases. See Note 10 for additional information.
    PPL Montana's share of direct expenses associated with the operation and
      maintenance of these facilities is included in the corresponding operating
      expenses on the Statement of Income. Each joint-owner in these facilities
      provides its own financing. As operator of all Colstrip Units, PPL Montana
      invoices each joint-owner for their respective portion of the direct expenses.
      The amount due from joint-owners was approximately $6 million and $9 million
      at December 31, 2004 and 2003.
    At December 31, 2004, NorthWestern owned a 30% leasehold interest in Colstrip
      Unit 4. PPL Montana and NorthWestern have a sharing agreement to govern
      each party's responsibilities regarding the operation of Colstrip Units
      3 and 4, and each party is responsible for 15% of the respective operating
      and construction costs, regardless of whether a particular cost is specified
      to Colstrip Unit 3 or 4. However, each party is responsible for its own
      fuel-related costs.
14. Commitments and Contingent Liabilities
    Energy Purchases and Sales Commitments
    Energy Purchase Commitments (PPL, PPL Energy Supply and PPL Electric)
    
    PPL and PPL Energy Supply enter into long-term purchase contracts to supply
      the fuel requirements for generation facilities. These include contracts
      to purchase coal, natural gas, oil and uranium. These contracts extend for
      terms through 2019. PPL and PPL Energy Supply also enter into long-term
      contracts for the storage and transport of natural gas. These contracts
      extend through 2014 and 2032, respectively. Additionally, PPL Energy Supply
      enters into long-term contracts to purchase power to meet load requirements
      and emissions allowances for its generation facilities. These contracts
      extend for terms through 2010.
    PPL Energy Supply entered into long-term power purchase agreements with
      two wind project developers to purchase the full output of their facilities
      when they are placed in commercial operation, which is expected by the end
      of 2005. One of the power purchase agreements is for 100 MW and extends
      for a term of 15 years, while the other is for 20 MW and extends for a term
      of 20 years.
    
    Liability for Above Market NUG Contracts
    In 1998, PPL Electric recorded a loss accrual for above market contracts
      with NUGs of $854 million, due to its generation business being deregulated.
      Effective January 1999, PPL Electric began reducing this liability as an
      offset to "Energy purchases" on the Statement of Income. This reduction
      is based on the estimated timing of the purchases from the NUGs and projected
      market prices for this generation. The final existing NUG contract expires
      in 2014. In connection with the corporate realignment in 2000, the remaining
      balance of this liability was transferred to PPL EnergyPlus. At December 31,
      2004, the remaining liability associated with the above market NUG contracts
      was $279 million.
    Energy Sales Commitments (PPL and PPL Energy Supply)
    PPL Energy Supply enters into long-term power sales contracts in connection
      with its load-serving activities or associated with certain of its power
      plants. These power sales contracts extend for terms through 2017. All long-term
      contracts were executed at pricing that approximated market rates, including
      profit margin, at the time of execution.
    As part of the purchase of generation assets from Montana Power, PPL Montana
      assumed a power purchase agreement and a power sales agreement, which were
      still in effect at December 31, 2004. In accordance with purchase accounting
      guidelines, PPL Montana recorded liabilities of $65 million as the estimated
      fair value of these agreements at the acquisition date. The power sales
      agreement was re-evaluated under DIG Issue C20, "Scope Exceptions: Interpretation
      of the Meaning of Not Clearly and Closely Related in Paragraph 10(b) Regarding
      Contracts with a Price Adjustment Feature," and is now reflected at its
      fair value as a derivative instrument. The liability for the power purchase
      agreement is being reduced over the term of the agreement, through 2010,
      as an adjustment to "Energy purchases" on the Statement of Income. The unamortized
      balance of the liability related to the power purchase agreement at December 31,
      2004, was $54 million and is included in "Deferred Credits and Other Noncurrent
      Liabilities - Other" on the Balance Sheet.
    On July 1, 2002, PPL EnergyPlus began to sell to NorthWestern an aggregate
      of 450 MW of energy supplied by PPL Montana. Under two five-year agreements,
      PPL EnergyPlus is supplying 300 MW of around-the-clock electricity and 150
      MW of unit-contingent on-peak electricity. PPL Montana also makes short-term
      energy sales to NorthWestern.
    In September 2003, NorthWestern filed a voluntary petition for relief seeking
      to reorganize under Chapter 11 of the U.S. Bankruptcy Code, and in November
      2004, NorthWestern announced that it had officially emerged from bankruptcy
      protection. NorthWestern had assumed the two energy supply agreements with
      PPL EnergyPlus in the bankruptcy proceeding and is current on all payments
      under the agreements.
    In April 2003, the Maryland Public Service Commission authorized the competitive
      provision of the Standard Offer Service (SOS) to allow utilities to procure
      SOS for customers through the competitive selection of wholesale supply.
      In March 2004, PPL EnergyPlus was awarded an 11-month fixed-price SOS contract
      for customer load (approximately 60 MW) for Potomac Electric Power Company.
      This contract commenced in July 2004.
    As a result of New Jersey's Electric Discount and Energy Competition Act,
      the New Jersey Board of Public Utilities authorized and made available to
      power suppliers, on a competitive basis, the opportunity to provide Basic
      Generation Service (BGS) to all non-shopping New Jersey customers. In February
      2003, PPL EnergyPlus was awarded a 34-month fixed-price BGS contract for
      a fixed percentage of customer load (approximately 1,000 MW) for Atlantic
      City Electric Company, Jersey Central Power & Light Company and Public
      Service Electric & Gas Company. In February 2003, PPL EnergyPlus also
      was awarded a 10-month hourly energy price supply contract for about 500
      MW. These contracts commenced in August 2003. Additionally, in February
      2004, PPL EnergyPlus was awarded a 12-month hourly energy price supply BGS
      contract for a fixed percentage of customer load (approximately 450 MW)
      for Atlantic City Electric Company, Jersey Central Power & Light Company
      and Public Service Electric & Gas Company. These contracts commenced
      in June 2004.
    In April 2003, PPL EnergyPlus entered into an agreement with Arizona Public
      Service Company to provide 112 MW of capacity and associated electricity
      from July through September of 2003 and 150 MW from June through September
      of 2004 and 2005. See Note 9 for information regarding the possible sale
      of the Sundance power plant to Arizona Public Service Company.
    In January 2004, PPL EnergyPlus began supplying 12.5% of Connecticut Light
      & Power Company's Transitional Standard Offer load, under a three-year
      fixed-price contract. During peak hours, PPL EnergyPlus' obligation to supply
      the Transitional Standard Offer load may reach 625 MW.
    Legal Matters
    (PPL, PPL Energy Supply and PPL Electric)
    PPL and its subsidiaries are involved in numerous 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.
    Montana Power Shareholders' Litigation(PPL and PPL Energy
      Supply)
    In August 2001, a purported class-action lawsuit was filed by a group of
      shareholders of Montana Power against Montana Power, the directors of Montana
      Power, certain advisors and consultants of Montana Power and PPL Montana.
      The plaintiffs allege, among other things, that Montana Power was required
      to, and did not, obtain shareholder approval of the sale of Montana Power's
      generation assets to PPL Montana in 1999. Although most of the claims in
      the complaint are against Montana Power, its board of directors, and its
      consultants and advisors, two claims are asserted against PPL Montana. In
      the first claim, plaintiffs seek a declaration that because Montana Power
      shareholders did not vote on the 1999 sale of generating assets to PPL Montana,
      that sale "was null and void ab initio." The second claim alleges that PPL
      Montana was privy to and participated in a strategy whereby Montana Power
      would sell its generation assets to PPL Montana without first obtaining
      Montana Power shareholder approval, and that PPL Montana has made net profits
      in excess of $100 million as the result of this alleged illegal sale. In
      the second claim, plaintiffs request that the court impose a "resulting
      and/or constructive trust" on both the generation assets themselves and
      all profits, plus interest on the amounts subject to the trust. This lawsuit
      is currently pending in the U.S. District Court of Montana, Butte Division.
      In July 2004, the plaintiffs notified the District Court that the parties
      had reached an oral partial settlement of the case that would result in
      the dismissal of PPL Montana as a defendant, and in January 2005 a global
      settlement agreement was filed with the District Court along with a motion
      to approve the agreement. Under the terms of the global settlement agreement,
      the plaintiffs' claims against PPL Montana would be dismissed and PPL Montana
      would not have to pay any amounts to the plaintiffs. The global settlement
      agreement must still be approved by the District Court. PPL and PPL Energy
      Supply cannot predict whether the global settlement agreement will be approved
      or the outcome of this matter if it is not approved.
    NorthWestern Corporation Litigation(PPL and PPL Energy
      Supply)
    In connection with the acquisition of the Montana generation assets, the
      Montana Power APA, which was previously assigned to PPL Montana by PPL Global,
      includes a provision concerning the proposed purchase by PPL Montana of
      a portion of NorthWestern's interest in the 500-kilovolt Colstrip Transmission
      System (CTS) for $97 million. During 2002, PPL Montana had been in discussions
      with NorthWestern regarding the proposed purchase of the CTS and the claims
      that PPL Montana believes it has against NorthWestern arising from the Montana
      Power APA and related agreements. Notwithstanding such discussions, in September
      2002, NorthWestern filed a lawsuit against PPL Montana in Montana state
      court seeking specific performance of PPL Montana's purchase of the CTS
      or, alternatively, damages for breach of contract. Pursuant to PPL Montana's
      application, the matter was removed to the U.S. District Court of Montana,
      Butte Division. Following removal, NorthWestern asserted additional claims
      for damages against PPL Montana, including a claim for punitive damages.
      PPL Montana filed defenses denying liability for NorthWestern's claims as
      well as counterclaims against NorthWestern seeking damages PPL Montana believes
      it has suffered under the Montana Power APA and related agreements.
    In October 2004, the federal district court in Delaware, where NorthWestern's
      bankruptcy proceeding had been pending, approved a joint stipulation between
      PPL Montana and NorthWestern under which NorthWestern agreed to establish
      a segregated reserve to be used for any distributions to be made to satisfy
      any final judgment that PPL Montana may be awarded pursuant to PPL Montana's
      counterclaims. This segregated reserve has been funded with shares of NorthWestern
      common stock equal to $50 million, valued as of the effective date of NorthWestern's
      plan of reorganization. Also in October, the federal district court in Delaware
      confirmed NorthWestern's plan of reorganization, and in November 2004, NorthWestern
      announced that it officially emerged from bankruptcy protection.
    The trial for this matter is expected to commence in the Montana federal
      district court in the last half of 2005. PPL and PPL Energy Supply cannot
      predict the outcome of this litigation.
    Montana Hydroelectric Litigation (PPL and PPL Energy Supply)
    In October 2003, a lawsuit was filed against PPL Montana, PPL Services,
      Avista Corporation, PacifiCorp and nine John Doe defendants in the U.S.
      District Court of Montana, Missoula Division, by two residents allegedly
      acting in a representative capacity on behalf of the State of Montana. In
      January 2004, the complaint was amended to, among other things, include
      the Great Falls school districts as additional plaintiffs. In May 2004,
      the Montana Attorney General filed a motion to allow the State of Montana
      to intervene as an additional plaintiff in the litigation. This motion was
      granted without objection. Both the individual plaintiffs' and the school
      districts' complaint and the State's complaint sought declaratory judgment,
      compensatory damages and attorneys fees and costs for use of state and/or
      "school trust" lands by hydropower facilities and to require the defendants
      to adequately compensate the State and/or the State School Trust fund for
      full market value of lands occupied. Generally, the suit is founded on allegations
      that the bed of navigable rivers became state-owned property upon Montana's
      admission to statehood, and that the use thereof for placement of dam structures,
      affiliated structures and reservoirs should, under an existing regulatory
      scheme, trigger lease payments for use of land underneath. The plaintiffs
      also sought relief on theories of unjust enrichment, trespass and negligence.
      No specific amount of damages or future rental value has been claimed by
      the plaintiffs. The defendants filed separate motions to dismiss the individual
      plaintiffs' and school district's complaint, as well as the complaint of
      the State of Montana. In September 2004, the federal court granted the motions
      to dismiss the individual plaintiffs' and school districts' complaint but
      denied the similar motions as to the State of Montana's complaint. Following
      the federal court's September decision, PPL Montana and the other defendants
      filed a motion to dismiss the State of Montana's complaint for lack of diversity
      jurisdiction and also filed a motion to vacate certain portions of the decision.
      The federal court has not yet ruled on these motions.
    In November 2004, PPL Montana, Avista Corporation and PacifiCorp commenced
      an action for declaratory judgment in Montana First Judicial District Court
      seeking a determination that no lease payments or other compensation for
      the hydropower facilities' use and occupancy of streambeds can be collected
      by the State of Montana. The State subsequently filed counterclaims and
      a motion for summary judgment. In February 2005, the individual plaintiffs
      and school districts who were dismissed from the federal court proceeding,
      along with a state teachers' union, filed a motion to intervene as additional
      defendants in this state court proceeding, and also filed a proposed answer
      and counterclaims to be used if their motion to intervene is granted. The
      state court has not yet ruled on any of the above-described motions. PPL
      Montana and PPL Services cannot predict the outcome of either the federal
      or the state court proceeding.
    Regulatory Issues
    California ISO and Western Markets (PPL and PPL Energy Supply)
    Through its subsidiaries, PPL made approximately $18 million of sales to
      the California ISO during the period from October 2000 through June 2001,
      of which $17 million has not been paid to PPL subsidiaries. Given the myriad
      of electricity supply problems presently faced by the California electric
      utilities and the California ISO, PPL cannot predict whether or when it
      will receive payment. As of December 31, 2004, PPL has fully reserved
      for possible underrecoveries of payments for these sales.
    Regulatory proceedings arising out of the California electricity supply
      situation have been filed at the FERC. The FERC has determined that all
      sellers of energy into markets operated by the California ISO and the California
      Power Exchange, including PPL Montana, should be subject to refund liability
      for the period beginning October 2, 2000, through June 20, 2001, and initiated
      an evidentiary hearing concerning refund amounts. In April 2003, the FERC
      changed the manner in which this refund liability is to be computed and
      ordered further proceedings to determine the exact amounts that the sellers,
      including PPL Montana, would be required to refund. In September 2004, the
      U.S. Court of Appeals for the Ninth Circuit held that the FERC had the additional
      legal authority to order refunds for periods prior to October 2, 2000, and
      ordered the FERC to determine whether or not it would be appropriate to
      grant such additional refunds.
    In June 2003, the FERC took several actions as a result of a number of
      related investigations. The FERC terminated proceedings pursuant to which
      it had been considering whether to order refunds for spot market bilateral
      sales made in the Pacific Northwest, including sales made by PPL Montana,
      during the period December 2000 through June 2001. The FERC explained that
      the totality of the circumstances made refunds unfeasible and inequitable,
      and that it had provided adequate relief by adopting a price cap throughout
      the western U.S. The FERC also denied pending complaints against long-term
      contracts in the western U.S. In these complaints, various power buyers
      had challenged selected long-term contracts that they entered into during
      2000 and 2001, complaining that the power prices were too high and reflected
      manipulation of those energy markets. The FERC found that the complainants
      had not met their burden of showing that changing or canceling the contracts
      was "in the public interest" and that the dysfunction in the California
      markets did not justify changing these long-term contracts. These orders
      have been appealed to the U.S. Court of Appeals for the Ninth Circuit. In
      two separate orders, the FERC also ordered 65 different companies, agencies
      or municipalities to show cause why they should not be ordered to disgorge
      profits for "gaming" or anomalous market behavior during 2000 and 2001.
      These orders to show cause address both unilateral and joint conduct identified
      as the "Enron trading strategies." Neither PPL EnergyPlus nor PPL Montana
      was included in these orders to show cause, and they previously have explained
      in responses to data requests from the FERC that they have not engaged in
      such trading strategies. Finally, the FERC issued a new investigation order
      directing its staff to investigate any bids made into the California markets
      in excess of $250/MWh during the period from May 2000 to October 2000, a
      period of time prior to the period examined in connection with most of the
      proceedings described above. To their knowledge, neither PPL EnergyPlus
      nor PPL Montana is being investigated by the FERC under this new order.
    Litigation arising out of the California electricity supply situation has
      been filed in California courts against sellers of energy to the California
      ISO. The plaintiffs and intervenors in these legal proceedings allege, among
      other things, abuse of market power, manipulation of market prices, unfair
      trade practices and violations of state antitrust laws, and seek other relief,
      including treble damages and attorneys' fees. While PPL's subsidiaries have
      not been named by the plaintiffs in these legal proceedings, PPL Montana
      was named by a defendant in its cross-complaint in a consolidated court
      proceeding, which combined into one master proceeding several of the lawsuits
      alleging antitrust violations and unfair trade practices. This generator
      denies that any unlawful, unfair or fraudulent conduct occurred but asserts
      that, if it is found liable, the other generators and power marketers, including
      PPL Montana, caused, contributed to and/or participated in the plaintiffs'
      alleged losses.
    In February 2004, the Montana Public Service Commission initiated a limited
      investigation of the Montana retail electricity market for the years 2000
      and 2001, focusing on how that market was affected by transactions involving
      the possible manipulation of the electricity grid in the western U.S. The
      investigation includes all public utilities and licensed electricity suppliers
      in Montana, as well as other entities that may possess relevant information.
      Through its subsidiaries, PPL is a licensed electricity supplier in Montana
      and a wholesale supplier in the western U.S. In June 2004, the Montana Attorney
      General served PPL Montana and more than 20 other companies with subpoenas
      requesting documents, and PPL Montana has provided responsive documents
      to the Montana Attorney General. As with the other investigations taking
      place as a result of the issues arising out of the electricity supply situation
      in California and other western states, PPL and its subsidiaries believe
      that they have not engaged in any improper trading or marketing practices
      affecting the Montana retail electricity market.
    While PPL and its subsidiaries believe that they have not engaged in any
      improper trading practices, they cannot predict whether, or the extent to
      which, any PPL subsidiaries will be the target of any additional governmental
      investigations or named in other lawsuits or refund proceedings, the outcome
      of any such lawsuits or proceedings or whether the ultimate impact on them
      of the electricity supply situation in California and other western states
      will be material.
    PJM Capacity Litigation(PPL, PPL Energy Supply and PPL
      Electric)
    In December 2002, PPL was served with a complaint against PPL, PPL EnergyPlus
      and PPL Electric filed in the U.S. District Court for the Eastern District
      of Pennsylvania by a group of 14 Pennsylvania boroughs that apparently alleges,
      among other things, violations of the federal antitrust laws in connection
      with the pricing of installed capacity in the PJM daily market during the
      first quarter of 2001. These boroughs were wholesale customers of PPL Electric.
      The claims of the boroughs are similar to those previously alleged by a
      single borough in litigation brought in the same court that is still pending.
      In addition, in November 2003, PPL and PPL EnergyPlus were served with a
      complaint which was filed in the same court by Joseph Martorano, III (d/b/a
      ENERCO), that also alleges violations of the federal antitrust laws in early
      2001. The complaint indicates that ENERCO provides consulting and energy
      procurement services to clients in Pennsylvania and New Jersey. In September
      2004, this complaint was dismissed by the District Court and the plaintiff
      has appealed the dismissal to the U.S. Court of Appeals for the Third Circuit.
    Each of the U.S. Department of Justice - Antitrust Division, the FERC and
      the Pennsylvania Attorney General conducted investigations regarding PPL's
      PJM capacity market transactions in early 2001 and did not find any reason
      to take action against PPL.
    Although PPL, PPL Energy Supply and PPL Electric believe the claims in
      these complaints are without merit, they cannot predict the outcome of these
      matters.
    New England Investigation (PPL and PPL Energy Supply)
    In January 2004, PPL became aware of an investigation by the Connecticut
      Attorney General and the FERC's Office of Market Oversight and Investigation
      (OMOI) regarding allegations that natural gas-fired generators located in
      New England illegally sold natural gas instead of generating electricity
      during the week of January 12, 2004. Subsequently, PPL and other generators
      were served with a data request by OMOI. The data request indicated that
      PPL was not under suspicion of a regulatory violation, but that OMOI was
      conducting an initial investigation. PPL has responded to this data request.
      PPL also has responded to data requests of ISO - New England and data requests
      served by subpoena from the Connecticut Attorney General. Both OMOI and
      ISO - New England have issued preliminary reports finding no regulatory
      or other violations concerning these matters. While PPL does not believe
      that it committed any regulatory or other violations concerning the subject
      matter of these investigations, PPL cannot predict the outcome of these
      investigations.
    PJM Billing (PPL, PPL Energy Supply and PPL Electric)
    
    In December 2004, Exelon Corporation, on behalf of its subsidiary, PECO
      Energy, Inc. (PECO), filed a complaint against PJM and PPL Electric with
      the FERC alleging that PJM had overcharged PECO from April 1998 through
      May 2003 as a result of an error by PJM in the State Estimator Program used
      in connection with billing all PJM customers for certain transmission, spot
      market energy and ancillary services charges. Specifically, the complaint
      alleges that PJM mistakenly identified PPL Electric's Elroy substation transformer
      as belonging to PECO and that, as a consequence, during times of congestion,
      PECO's bills for transmission congestion from PJM erroneously reflected
      energy that PPL Electric took from the Elroy substation and used to serve
      PPL Electric's load. The complaint requests the FERC, among other things,
      to direct PPL Electric to refund to PJM $39 million, plus interest of approximately
      $8 million, and for PJM to refund these same amounts to PECO. PPL Electric
      and PPL Energy Supply do not believe that they or any PPL subsidiaries have
      any financial responsibility or liability to PJM or PECO as a result of
      PJM's alleged error. PPL Electric and PPL Energy Supply cannot predict the
      outcome of this matter or the impact on any PPL subsidiary.
    FERC Market-Based Rate Authority (PPL and PPL Energy Supply)
    In December 1998, the FERC issued an order authorizing PPL EnergyPlus to
      make wholesale sales of electric power and related products at market-based
      rates. In that order, the FERC directed PPL EnergyPlus to file an updated
      market analysis within three years of the date of the order, and every three
      years thereafter. PPL EnergyPlus filed its initial updated market analysis
      in December 2001. Several parties thereafter filed interventions and protests
      requesting that PPL EnergyPlus be required to provide additional information
      demonstrating that it has met the FERC's market power tests necessary for
      PPL EnergyPlus to continue its market-based rate authority. PPL EnergyPlus
      has responded that the FERC does not require the economic test suggested
      by the intervenors and that, in any event, it would meet such economic test
      if required by the FERC.
    In June 2004, FERC approved certain changes to its standards for granting
      market-based rate authority. As a result of the schedule adopted by the
      FERC, PPL EnergyPlus, PPL Electric, PPL Montana and most of PPL Generation's
      subsidiaries were required to file in November 2004 updated analyses demonstrating
      that they should continue to maintain market-based rate authority under
      the new standards. PPL made two filings, one for PPL Montana and one for
      most of the other PPL subsidiaries. The Montana Public Service Commission
      and the Montana Consumer Counsel filed pleadings opposing the filing by
      PPL Montana. The Montana Public Service Commission requested that the FERC
      hold a hearing on the market-based rate renewal application, while the Montana
      Consumer Counsel suggested applying an altered version of the FERC's tests
      for assessing market power in reviewing the renewal application. The PJM
      Industrial Customer Coalition, the PP&L Industrial Customer Alliance
      and the consumer advocates of Maryland and Pennsylvania filed pleadings
      opposing the filings by the other PPL subsidiaries. These parties challenge
      the FERC's continued reliance on market-based rates to yield just and reasonable
      prices for wholesale electric transactions and suggest that the FERC change
      its tests for market power to include capacity and ancillary services markets.
      While PPL believes its filings demonstrate that all PPL subsidiaries pass
      the new tests established by the FERC in June 2004, PPL cannot predict the
      outcome of these proceedings.
    FERC Proposed Rules (PPL, PPL Energy Supply and PPL Electric)
    In July 2002, the FERC issued a Notice of Proposed Rulemaking entitled
      "Remedying Undue Discrimination through Open Access Transmission Service
      and Standard Electricity Market Design." The proposed rule is currently
      available for public comment and contains a proposed implementation date
      of July 31, 2003. However, since the issuance of the proposed rule, the
      FERC has delayed the implementation date. This far-reaching proposed rule,
      in its current form, purports to establish uniform transmission rules and
      a standard market design by, among other things:
    
        enacting standard transmission tariffs
            and uniform market mechanisms,
        monitoring and mitigating "market power,"
        managing transmission congestion through
            pricing and tradable financial rights,
        requiring independent operational control
            over transmission facilities,
        forming state advisory committees on
            regional transmission organizations and resource adequacy, and
        exercising FERC jurisdiction over all
            transmission service.In April 2003, the FERC issued a white paper describing certain modifications
      to the proposed rule. The FERC has requested comments and is holding numerous
      public comment sessions concerning the white paper.
    If adopted, this proposed rule may have a significant impact on PPL and
      its subsidiaries, which cannot be predicted at this time.
    In November 2003, the FERC adopted a proposed rule to require all existing
      and new electric market-based tariffs and authorizations to include provisions
      prohibiting the seller from engaging in anticompetitive behavior or the
      exercise of market power. The FERC order adopts a list of market behavior
      rules that apply to all electric market-based rate tariffs and authorizations,
      including those of PPL EnergyPlus and any other PPL subsidiaries that hold
      market-based rate authority. PPL does not expect this rule to have a significant
      impact on its subsidiaries.
    Wallingford Deactivation (PPL and PPL Energy Supply)
    In January 2003, PPL negotiated an agreement with ISO - New England that
      would declare that four of the five units at PPL's Wallingford, Connecticut
      facility are "reliability must run" units and put those units under cost-based
      rates. This agreement and the cost-based rates are subject to the FERC's
      approval, and PPL filed a request with the FERC for such approval. PPL requested
      authority for cost-based rates because the current and anticipated wholesale
      prices in New England are insufficient to cover the costs of keeping these
      units available for operation. In March 2003, PPL filed an application with
      the New England Power Pool to temporarily deactivate these four units. In
      May 2003, the FERC denied PPL's request for cost-based rates in light of
      the FERC's changes to the market and bid mitigation rules of ISO - New England
      made in a similar case involving generating units owned by NRG Energy, Inc.
      PPL subsequently has explained to the FERC that its changes to the market
      and bid mitigation rules of ISO - New England will not provide sufficient
      revenues to PPL, and PPL continues to seek approval of its cost-based rates.
      However, PPL has informed the New England Power Pool that it will not pursue
      its request to temporarily deactivate certain Wallingford units. In February
      2004, PPL appealed the FERC's denial of its request for cost-based rates
      to the U.S. Court of Appeals for the District of Columbia Circuit. PPL cannot
      predict the outcome of this matter.
    IRS Synthetic Fuels Tax Credits (PPL and PPL Energy Supply)
    PPL, through its subsidiaries, has interests in two synthetic fuel production
      facilities: the Somerset facility located in Pennsylvania and the Tyrone
      facility located in Kentucky. PPL receives tax credits pursuant to Section
      29 of the Internal Revenue Code based on the sale of synthetic fuel from
      these facilities to unaffiliatedthird-party purchasers. Section
      29 of the Internal Revenue Code provides tax credits for the production
      and sale of solid synthetic fuels produced from coal. Section 29 tax credits
      are currently scheduled to expire at the end of 2007.
    To qualify for the Section 29 tax credits, the synthetic fuel must meet
      three primary conditions: (i) there must be a significant chemical change
      in the coal feedstock, (ii) the product must be sold to an unaffiliated
      entity, and (iii) the production facility must have been placed in service
      before July 1, 1998. In addition, Section 29 provides for the phase-out
      of the synthetic fuel tax credit when the reference price for crude oil,
      as adjusted for inflation, exceeds a certain threshold. The reference price
      is the annual average wellhead price per barrel for all unregulated domestic
      crude oil. The average reference price for crude oil through October 31,
      2004, was $36.18 per barrel. Accordingly, the tax credit phase-out did not
      impact results in 2004. Accounting for inflation, PPL estimates that the
      2005 tax credit phase-out would start at $51.15 per barrel and the tax credit
      would be totally eliminated at $64.20 per barrel.
    A PPL subsidiary owns and operates the Somerset facility. In November 2001,
      PPL received a private letter ruling from the IRS pursuant to which, among
      other things, the IRS concluded that the synthetic fuel produced at the
      Somerset facility qualifies for Section 29 tax credits. The Somerset facility
      uses the Covol technology to produce synthetic fuel, and the IRS issued
      the private letter ruling after its review and approval of that technology.
      In reliance on this private letter ruling, PPL has sold synthetic fuel produced
      at the Somerset facility resulting in an aggregate of approximately $205 million
      of tax credits as of December 31, 2004.
    PPL owns a limited partnership interest in the entity that owns and operates
      the Tyrone facility. In April 2004, this entity received a private letter
      ruling from the IRS. Similar to its conclusions relating to the Somerset
      facility, the IRS concluded that the synthetic fuel to be produced at the
      Tyrone facility qualifies for Section 29 tax credits. In reliance on this
      private letter ruling, this entity has sold synthetic fuel produced at the
      Tyrone facility resulting in an aggregate of approximately $15 million of
      tax credits as of December 31, 2004. The Tyrone facility commenced commercial
      operations in the third quarter of 2004, after being relocated to Kentucky
      from Pennsylvania.
    PPL also purchases synthetic fuel from unaffiliated third parties, at prices
      below the market price of coal, for use at its coal-fired power plants.
    In June 2003, the IRS announced that it had reason to question the scientific
      validity of certain test procedures and results that have been presented
      to it by taxpayers with interests in synthetic fuel operations as evidence
      that the required significant chemical change has occurred, and that it
      was reviewing information regarding these test procedures and practices.
      In October 2003, the IRS announced that it had completed its review and
      determined that the test procedures and results used by taxpayers are scientifically
      valid, if the procedures are applied in a consistent and unbiased manner.
      The IRS indicated that it would require taxpayers to comply with certain
      sampling and data/record retention practices to obtain or maintain a ruling
      on significant chemical change.
    PPL believes that the October 2003 IRS announcement and its receipt of
      the private letter ruling for the Tyrone facility following this announcement
      confirms that PPL is justified in its reliance on the private letter rulings
      for the Somerset and Tyrone facilities, and that the test results that PPL
      presented to the IRS in connection with its private letter rulings are scientifically
      valid. In addition, PPL believes that the Somerset facility and the Tyrone
      facility have been operated in compliance with their respective private
      letter rulings and Section 29 of the Internal Revenue Code.
    In October 2003, following the IRS announcement, it was reported that the
      U.S. Senate Permanent Subcommittee on Investigations, of the Committee on
      Governmental Affairs, had begun an investigation of the synthetic fuel industry
      and its producers. That investigation is ongoing. PPL cannot predict when
      the investigation will be completed or the potential results of the investigation.
    During 2004, certain other owners or operators of synthetic fuel facilities
      reported that the IRS had questioned whether their facilities were placed
      in service before July 1, 1998. Whether or not a facility meets the "placed-in
      service" requirement is based on the particular facts and circumstances
      relating to the operation of that facility. PPL is not aware of the facts
      and circumstances relating to the operation of the facilities being questioned
      by the IRS or the specific IRS position in these other matters. However,
      PPL believes that the Tyrone and Somerset facilities meet the in-service
      requirement.
    Environmental Matters - Domestic
    (PPL, PPL Energy Supply and PPL Electric)
    Due to the environmental issues discussed below or other environmental
      matters, PPL subsidiaries may be required to modify, replace or cease operating
      certain facilities to comply with statutes, regulations and actions by regulatory
      bodies or courts. In this regard, PPL subsidiaries also may incur capital
      expenditures or operating expenses in amounts which are not now determinable,
      but which could be significant.
    Air(PPL and PPL Energy Supply)
    The Clean Air Act deals, in part, with acid rain, attainment of federal
      ambient ozone standards, fine particulate matter standards and toxic air
      emissions in the U.S. PPL's subsidiaries are in substantial compliance with
      the Clean Air Act. The Bush administration's Clear Skies Initiative and
      proposals of certain members of Congress would amend the Clean Air Act.
      These amendments could require significant further reductions in emissions
      of nitrogen oxide and sulfur dioxide and reductions in emission of mercury.
      Although the Bush administration's Clear Skies Initiative does not include
      limits on carbon dioxide emissions, rising concerns about global warming
      have prompted several states to pass legislation capping carbon emissions
      and other bills have been introduced at the federal level proposing mandatory
      carbon dioxide reductions. An initiative is underway in nine Northeast states
      to propose a cap-and-trade program, the details of which are expected to
      be released in mid-2005 for carbon dioxide emissions from fossil fuel-fired
      power plants. Increased pressure is also coming from investor organizations
      and the international community. Pennsylvania and Montana have not, at this
      time, established any formal programs to address carbon dioxide and other
      greenhouse gases. If these or other legislative or regulatory initiatives
      result in mandatory reductions being imposed, the cost of such reductions
      could be significant.
    The EPA has developed new standards for ambient levels of ozone and fine
      particulates in the U.S. These standards have been upheld following court
      challenges. To facilitate attainment of these standards, the EPA has proposed
      a rule (now called the Clean Air Interstate Rule - CAIR) for 29 midwestern
      and eastern states, including Pennsylvania, to reduce national sulfur dioxide
      emissions by 40% (about 50% in the CAIR region) and to extend the currently
      seasonal program for nitrogen oxide emission reductions to a year-round
      program (in the CAIR region) starting in 2010. Starting in 2015, the proposed
      rule would require further reductions in sulfur dioxide and nitrogen oxide
      of 30% and 20%, respectively, from 2010 levels. The proposed rule would
      allow these reductions to be achieved through cap-and-trade programs, and
      is consistent with the Bush administration's proposed amendments to the
      Clean Air Act, except that it applies to only the 29 states. In order to
      continue meeting existing sulfur dioxide reduction requirements of the Clean
      Air Act, PPL will need to use its banked sulfur dioxide allowances and to
      purchase additional allowances. Currently, PPL has enough sulfur dioxide
      allowances to cover expected consumption through 2006, but will experience
      shortfalls in some years after 2006. As a result and based on projected
      allowance prices, PPL plans to complete the installation of sulfur dioxide
      scrubbers at its Montour Units 1 and 2 by 2008 and Brunner Island Unit 3
      by 2010. PPL also is evaluating under CAIR the possible installation of
      SCR technology to reduce nitrogen oxide emissions at Brunner Island Unit
      3 at a later date. The combined cost of the scrubbers at Montour and Brunner
      Island and of the SCR at Brunner Island is expected to be approximately
      $730 million.
    The EPA has proposed mercury and nickel regulations and is expected to
      finalize these regulations in 2005. The proposed mercury regulations affect
      coal-fired plants. With respect to mercury, the EPA has proposed two alternative
      approaches: an emission trading program to take effect beginning January
      2010 or a requirement to take effect in March 2008 that every unit install
      maximum achievable control technology (MACT). The proposed nickel regulations
      impose MACT requirements on oil-fired units to take effect in 2008. The
      nickel regulations would affect Martins Creek Units 3 and 4. The cost of
      complying with these regulations is not now determinable, but could be significant.
    The Ozone Transport Commission (consisting of Pennsylvania and ten other
      states and the District of Columbia) has passed a resolution calling for
      reductions in sulfur dioxide, nitrogen oxide and mercury emissions that
      are more stringent than those proposed by EPA or contemplated by the Clear
      Skies Initiative. Should Pennsylvania implement such reductions, the cost
      to PPL is not now determinable but could be significant.
    In 1999, the EPA initiated enforcement actions against several utilities,
      asserting that older, coal-fired power plants operated by those utilities
      have, over the years, been modified in ways that subject them to more stringent
      "New Source" requirements under the Clean Air Act. The EPA has since issued
      notices of violation and commenced enforcement activities against other
      utilities. The future direction of the EPA's enforcement initiative is presently
      unclear. However, states and environmental groups have also been bringing
      enforcement actions alleging violations of "New Source" requirements by
      coal-fired plants. At this time, PPL is unable to predict whether such EPA,
      state or citizens enforcement actions will be brought with respect to any
      of its affiliates' plants. However, the EPA regional offices that regulate
      plants in Pennsylvania (Region III) and Montana (Region VIII) have indicated
      an intention to issue information requests to all utilities in their jurisdiction.
      The Region VIII office issued such a request to PPL Montana's Corette plant
      in 2000 and the Colstrip plant in 2003. The Region III office issued such
      a request to PPL Generation's Martins Creek plant in 2002. PPL and its subsidiaries
      have responded to the Corette and Martins Creek information requests and
      began responding to the Colstrip information request. The EPA has stayed
      further production of Colstrip documents pending discussion among the Colstrip
      owners and the EPA. The EPA has taken no further action following the Martins
      Creek and Corette submittals. PPL cannot presently predict what, if any,
      action the EPA might take in this regard. Should the EPA or any state or
      citizens group initiate one or more enforcement actions against PPL or its
      subsidiaries, compliance with any such enforcement actions could result
      in additional capital and operating expenses which are not now determinable,
      but could be significant.
    In 2003, the EPA issued changes to its "New Source" regulations that clarify
      what projects are exempt from "New Source" requirements as routine maintenance
      and repair. Under these clarifications, any project to replace existing
      equipment with functionally equivalent equipment would be considered routine
      maintenance and excluded from "New Source" review if the cost of the replaced
      equipment does not exceed 20% of the replacement cost of the entire process
      unit, the basic design is not changed and no permit limit is exceeded. These
      clarifications would substantially reduce the uncertainties under the prior
      "New Source" regulations; however, they have been stayed by the U.S. Court
      of Appeals for the District of Columbia Circuit. PPL is therefore continuing
      to operate under the "New Source" regulations as they existed prior to the
      EPA's 2003 clarifications.
    The New Jersey DEP and some New Jersey residents raised environmental concerns
      with respect to the Martins Creek plant, particularly with respect to sulfur
      dioxide emissions and the opacity of the plant's plume. These issues were
      raised in the context of an appeal by the New Jersey DEP of the Air Quality
      Plan Approval issued by the Pennsylvania DEP to the adjacent Lower Mt. Bethel
      facility. In October 2003, PPL finalized an agreement with the New Jersey
      DEP and the Pennsylvania DEP pursuant to which PPL will reduce sulfur dioxide
      emissions from its Martins Creek power plant. Under the agreement, PPL Martins
      Creek will shut down the plant's two coal-fired generating units by September
      2007 and may repower them any time after shutting them down so long as it
      follows all applicable state and federal requirements, including installing
      the best available pollution control technology. Pursuant to the agreement,
      PPL Martins Creek began reducing the fuel sulfur content for the coal units
      as well as the plant's two oil-fired units in June 2004. In addition, PPL
      will donate to a non-profit organization 70% of the excess emission allowances
      and emission reduction credits that result from shutting down or repowering
      the coal units. As a result of the agreement, the New Jersey DEP withdrew
      its challenge to the Air Quality Plan Approval for the Lower Mt. Bethel
      facility. The agreement will not result in material costs to PPL. The agreement
      does not address the issues raised by the New Jersey DEP regarding the visible
      opacity of emissions from the oil-fired units at the Martins Creek plant.
      If it is determined that actions must be taken to address the visible opacity
      of these emissions, such actions could result in costs that are not now
      determinable, but could be significant.
    In addition to the opacity concerns raised by the New Jersey DEP, the Pennsylvania
      DEP also has raised concerns about the opacity of emissions from the Martins
      Creek and Montour plants. PPL is discussing these concerns with the Pennsylvania
      DEP. If it is determined that actions must be taken to address the Pennsylvania
      DEP's concerns, such actions could result in costs that are not now determinable,
      but could be significant.
    
    In December 2003, PPL Montana, as operator of the Colstrip facility, received
      an Administrative Compliance Order (ACO) from the EPA pursuant to the Clean
      Air Act. The ACO alleges that Units 3 and 4 of the facility have been in
      violation of the Clean Air Act permit at Colstrip since 1980. The permit
      required Colstrip to submit for review and approval by the EPA an analysis
      and proposal for reducing emissions of nitrogen oxide to address visibility
      concerns if and when the EPA promulgates Best Available Retrofit Technology
      requirements for nitrogen oxide emissions. The EPA is asserting that regulations
      it promulgated in 1980 triggered this requirement. PPL believes that the
      ACO is unfounded and is discussing the matter with the EPA. In addition,
      the Montana Department of Environmental Quality (DEQ) is questioning whether
      the permit limits for sulfur dioxide emissions from Colstrip Units 3 and
      4 are too high under provisions of the Clean Air Act that limit allowable
      emissions from sources built after 1978. PPL is engaged in settlement negotiations
      on these matters with the EPA, the Montana DEQ and the Northern Cheyenne
      Tribe.
    Water/Waste(PPL and PPL Energy Supply)
    Seepages have been detected at one of the wastewater basins at the Montour
      station, and PPL Montour is working with the Pennsylvania DEP to assess
      the seepage and develop an abatement plan. PPL Brunner Island is assessing
      impacted groundwater at two closed wastewater basins to determine what abatement
      actions may be needed. PPL plans to comprehensively address issues related
      to wastewater basins at all of its Pennsylvania plants as part of the process
      to renew the residual waste permits for these basins which expire within
      the next three years. The cost of addressing seepages at PPL's Pennsylvania
      plants is not now determinable, but could be significant.
    PPL Montana continues to undertake certain groundwater investigation and
      remediation measures at its Colstrip plant to address groundwater contamination
      and property damage claims noted below. These measures include offering
      to extend city water to certain residents who live near the plant. The costs
      of these investigations and remedial measures are not now determinable,
      but could be significant.
    In May 2003, approximately 50 plaintiffs brought an action now pending
      at the Montana Sixteenth Judicial District Court, Rosebud County, against
      PPL Montana and the other owners of the Colstrip plant alleging property
      damage from seepage from the freshwater and wastewater ponds at Colstrip.
      This action could result in PPL Montana and the other Colstrip owners being
      liable for damages and being required to take additional remedial measures
      beyond those noted above. The cost to PPL Montana of any such damages and
      remedial measures is not now determinable, but could be significant.
    Brunner Island's NPDES permit contains a provision requiring further studies
      on the thermal impact of the cooling water discharge from the plant. These
      studies are underway and are expected to be completed in 2006. The Pennsylvania
      DEP has stated that it believes the studies to date show that the temperature
      of the discharge must be lowered. The Pennsylvania DEP has also stated that
      it believes the plant is in violation of a permit condition prohibiting
      the discharge from changing the river temperature by more than two degrees
      per hour. PPL is discussing these matters with the agency. Depending on
      the outcome of these discussions, the plant could be subject to additional
      capital and operating costs that are not now determinable, but could be
      significant.
    The EPA has significantly tightened the water quality standard for arsenic.
      The revised standard becomes effective in 2006. The revised standard may
      result in action by individual states that could require several PPL subsidiaries
      to either further treat wastewater or take abatement action at their power
      plants, or both. The cost of complying with any such requirements is not
      now determinable, but could be significant.
    The EPA recently finalized requirements for new or modified water intake
      structures. These requirements affect where generating facilities are built,
      establish intake design standards, and could lead to requirements for cooling
      towers at new and modified power plants. Another new rule that was finalized
      in July 2004 addresses existing structures. PPL does not believe that either
      of these rules will impose material costs on PPL subsidiaries. However,
      six northeastern states have challenged the new rules for existing structures
      as being inadequate. If this challenge is successful, it could result in
      the EPA establishing stricter standards for existing structures that could
      impose significant costs on PPL subsidiaries.
    Superfund and Other Remediation
    (PPL, PPL Energy Supply and PPL Electric)
    In 1995, PPL Electric and PPL Generation entered into a consent order with
      the Pennsylvania DEP to address a number of sites that were not being addressed
      under another regulatory program such as Superfund, but for which PPL Electric
      or PPL Generation may be liable for remediation. This may include potential
      PCB contamination at certain PPL Electric substations and pole sites; potential
      contamination at a number of coal gas manufacturing facilities formerly
      owned or operated by PPL Electric; oil or other contamination which may
      exist at some of PPL Electric's former generating facilities; and potential
      contamination at abandoned power plant sites owned by PPL Generation. As
      of December 31, 2004, work has been completed for 98% of the sites included
      in the consent order. Additional sites formerly owned or operated by PPL
      Electric are added to the consent order on a case-by-case basis.
    In 1996, PPL Gas Utilities entered into a similar consent order with the
      Pennsylvania DEP to address a number of sites where subsidiaries of PPL
      Gas Utilities may be liable for remediation. The sites primarily include
      former coal gas manufacturing facilities. Subsidiaries of PPL Gas Utilities
      are also investigating the potential for any mercury contamination from
      gas meters and regulators. Accordingly, PPL Gas Utilities and the Pennsylvania
      DEP have agreed to add 72 meter/regulation sites to the consent order. As
      of December 31, 2004, PPL Gas Utilities had addressed 48% of the sites
      under its consent order.
    Since the PPL Electric Consent Order expired on January 31, 2005, and since
      only four sites remained, PPL has negotiated a new consent order with Pennsylvania
      DEP that combines both PPL Electric's and PPL Gas Utilities' consent orders
      into one single agreement.
    At December 31, 2004, PPL Electric and PPL Gas Utilities had accrued
      approximately $3 million and $8 million, representing the estimated amounts
      each will have to spend for site remediation, including those sites covered
      by each company's consent orders mentioned above. Depending on the outcome
      of investigations at sites where investigations have not begun or have not
      been completed, the costs of remediation and other liabilities could be
      substantial. PPL also could face other non-remediation liabilities at sites
      included in the consent order or other contaminated sites, the costs of
      which are not now determinable, but could be significant.
    (PPL and PPL Energy Supply)
    Under the Pennsylvania Clean Streams Law, subsidiaries of PPL Generation
      are obligated to remediate acid mine drainage at former mine sites and may
      be required to take additional measures to prevent potential acid mine drainage
      at previously capped refuse piles. One PPL Generation subsidiary is pumping
      and treating mine water at two mine sites. Another PPL Generation subsidiary
      is installing passive wetlands treatment at a third site, and the Pennsylvania
      DEP has suggested that it may require that PPL Generation subsidiary to
      pump and treat the mine water at that third site. At December 31, 2004,
      a PPL Energy Supply subsidiary had accrued $28 million to cover the costs
      of pumping and treating groundwater at the two mine sites for 50 years and
      for operating and maintaining passive wetlands treatment at the third site.
    In 1999, the Montana Supreme Court held in favor of several citizens' groups
      that the right to a clean and healthful environment is a fundamental right
      guaranteed by the Montana Constitution. The court's ruling could result
      in significantly more stringent environmental laws and regulations, as well
      as an increase in citizens' suits under Montana's environmental laws. The
      effect on PPL Montana of any such changes in laws or regulations or any
      such increase in legal actions is not currently determinable, but could
      be significant.
    (PPL, PPL Energy Supply and PPL Electric)
    Future cleanup or remediation work at sites currently under review, or
      at sites not currently identified, may result in material additional operating
      costs for PPL subsidiaries that cannot be estimated at this time.
    Asbestos (PPL and PPL Energy Supply)
    There have been increasing litigation claims throughout the U.S. based
      on exposure to asbestos against companies that manufacture or distribute
      asbestos products or that have these products on their premises. Certain
      of PPL's generation subsidiaries and certain of its energy services subsidiaries,
      such as those that have supplied, may have supplied or installed asbestos
      material in connection with the repair or installation of process piping
      and heating, ventilating and air conditioning systems, have been named as
      defendants in asbestos-related lawsuits. PPL cannot predict the outcome
      of these lawsuits or whether additional claims may be asserted against its
      subsidiaries in the future. PPL does not expect that the resolution of the
      current lawsuits will have a material adverse effect on its results of operations.
    Electric and Magnetic Fields (PPL, PPL Energy Supply and PPL
      Electric)
    Concerns have been expressed by some members of the public regarding potential
      health effects of power frequency electric and/or magnetic fields (EMFs),
      which are emitted by all devices carrying electricity, including electric
      transmission and distribution lines and substation equipment. Government
      officials in the U.S. and the U.K. have reviewed this issue. The U.S. National
      Institute of Environmental Health Sciences concluded in 2002 that, for most
      health outcomes, there is no evidence of EMFs causing adverse effects. The
      agency further noted that there is some epidemiological evidence of an association
      with childhood leukemia, but that this evidence is difficult to interpret
      without supporting laboratory evidence. The U.K. National Radiological Protection
      Board concluded in 2004 that, while the research on EMFs does not provide
      a basis to find that EMFs cause any illness, there is a basis to consider
      precautionary measures beyond existing exposure guidelines. PPL and its
      subsidiaries believe the current efforts to determine whether EMFs cause
      adverse health effects should continue and are taking steps to reduce EMFs,
      where practical, in the design of new transmission and distribution facilities.
      PPL is unable to predict what effect, if any, the EMF issue might have on
      its operations and facilities either in the U.S. or abroad, and the associated
      cost, or what, if any, liabilities it might incur related to the EMF issue.
    Lower Mt. Bethel (PPL and PPL Energy Supply)
    In August 2002, the Northampton County Court of Common Pleas issued a decision
      setting the permissible noise levels for operation of the Lower Mt. Bethel
      facility. PPL appealed the court's decision to the Commonwealth Court, and
      an intervenor in the lawsuit cross-appealed the court's decision. In May
      2003, the Commonwealth Court remanded the case to the Court of Common Pleas
      for further findings of fact concerning the zoning application relating
      to the construction of the facility. In September 2003, the Court of Common
      Pleas ruled in PPL's favor while also reaffirming its decision on the noise
      levels, and the intervenor appealed this ruling to the Commonwealth Court.
      In April 2004, the Commonwealth Court affirmed the decision of the Court
      of Common Pleas. The intervenor has pending before the Supreme Court of
      Pennsylvania a Petition for Allowance of Appeal.
    The certificate of occupancy for the Lower Mt. Bethel facility was issued
      by the local township zoning officer in April 2004, and the facility was
      placed in service in May 2004. In May 2004, the intervenor in the legal
      proceedings regarding the facility's permissible noise levels filed an appeal
      with the township board regarding the issuance of the certificate of occupancy.
      The hearing on the appeal was held in December 2004, and the intervenor's
      appeal was denied.
    Environmental Matters - International(PPL and PPL Energy Supply)
    U.K.
    WPD's distribution businesses are subject to numerous regulatory and statutory
      requirements with respect to environmental matters. PPL believes that WPD
      has taken and continues to take measures to comply with the applicable laws
      and governmental regulations for the protection of the environment. There
      are no material legal or administrative proceedings pending against WPD
      with respect to environmental matters. See "Environmental Matters - Domestic
      - Electric and Magnetic Fields" for a discussion of EMFs.
    Latin America
    Certain of PPL's affiliates have electric distribution operations in Latin
      America. PPL believes that these affiliates have taken and continue to take
      measures to comply with the applicable laws and governmental regulations
      for the protection of the environment. There are no material legal or administrative
      proceedings pending against PPL's affiliates in Latin America with respect
      to environmental matters.
    Other
    Nuclear Insurance(PPL and PPL Energy Supply)
    PPL Susquehanna is a member of certain insurance programs which provide
      coverage for property damage to members' nuclear generating stations. Facilities
      at the Susquehanna station are insured against property damage losses up
      to $2.75 billion under these programs. PPL Susquehanna is also a member
      of an insurance program which provides insurance coverage for the cost of
      replacement power during prolonged outages of nuclear units caused by certain
      specified conditions. Under the property and replacement power insurance
      programs, PPL Susquehanna could be assessed retroactive premiums in the
      event of the insurers' adverse loss experience. At December 31, 2004, this
      maximum assessment was about $39 million.

    PPL Susquehanna's public liability for claims resulting from a nuclear
      incident at the Susquehanna station is limited to about $10.8 billion under
      provisions of The Price Anderson Amendments Act of 1988. PPL Susquehanna
      is protected against this liability by a combination of commercial insurance
      and an industry assessment program. In the event of a nuclear incident at
      any of the reactors covered by The Price Anderson Amendments Act of 1988,
      PPL Susquehanna could be assessed up to $201 million per incident, payable
      at $20 million per year.
    Guarantees and Other Assurances
    (PPL, PPL Energy Supply and PPL Electric)
    In the normal course of business, PPL, PPL Energy Supply and PPL Electric
      enter into agreements that provide financial performance assurance to third
      parties on behalf of certain subsidiaries. Such agreements include, for
      example, guarantees, stand-by letters of credit issued by financial institutions
      and surety bonds issued by insurance companies. These agreements are entered
      into primarily to support or enhance the creditworthiness attributed to
      a subsidiary on a stand-alone basis or to facilitate the commercial activities
      in which these subsidiaries enter.
    (PPL)
    PPL fully and unconditionally guarantees all of the debt securities of
      PPL Capital Funding, a wholly owned financing subsidiary of PPL.
    (PPL, PPL Energy Supply and PPL Electric)
    PPL, PPL Energy Supply and PPL Electric provide certain guarantees that
      are required to be disclosed in accordance with FIN 45, "Guarantor's Accounting
      and Disclosure Requirements for Guarantees, Including Indirect Guarantees
      of Indebtedness of Others, an Interpretation of FASB Statements No. 5, 57,
      and 107 and Rescission of FASB Interpretation No. 34." The table below details
      guarantees provided as of December 31, 2004:
   Recorded
        Liability at
        December 31,
    
    Exposure
        at
        December 31,
    
    Expiration2004
    
    2003
    
    2004
        (a)
    
    Date
    
    DescriptionPPLResidual value guarantees of leased equipment
    
    
    
    
    
    
    
    $
    6
    
    2005
    
    (c)PPL Energy Supply (b)WPD LLP guarantee of obligations under SIUK
        Capital Trust I preferred securities
    
    
    
    
    
    
    
    
    82
    
    2027
    
    WPD LLP guarantees all of the obligations
        of SIUK Capital Trust I, an unconsolidated wholly owned financing subsidiary
        of WPD LLP, under its trust preferred securities. The exposure at December
        31, 2004, reflects principal payments only. See Note 22 for further discussion.Letters of credit issued on behalf of affiliates
    
    
    
    
    
    
    
    
    8
    
    2005
    
    Standby letter of credit arrangements under
        PPL Energy Supply's $300 million three-year credit facility for the purposes
        of protecting various third parties against nonperformance by PPL and
        PPL Gas Utilities. This is not a guarantee of PPL on a consolidated basis.Support agreements to guarantee partnerships'
        obligations for the sale of coal
    
    
    
    
    
    
    
    
    9
    
    2007
    
    PPL Generation has entered into certain partnership
        arrangements for the sale of coal to third parties. PPL Generation also
        has executed support agreements for the benefit of these third-party purchasers
        pursuant to which it guarantees the partnerships' obligations in an amount
        up to its pro rata ownership interest in the partnerships.Retroactive premiums under nuclear insurance
        programs
    
    
    
    
    
    
    
    
    39
    
    
    
    PPL Susquehanna is contingently obligated
        to pay this amount related to potential retroactive premiums that could
        be assessed under its nuclear insurance programs. See "Nuclear Insurance"
        for additional information.Nuclear claims under The Price Anderson Amendments
        Act of 1988
    
    
    
    
    
    
    
    
    201
    
    
    
    Under the Price Anderson Amendments Act of
        1988, this is the maximum amount PPL Susquehanna could be assessed for
        each incident at any of the nuclear reactors covered by this Act. See
        "Nuclear Insurance" for additional information.Contingent purchase price payments to former
        owners of synfuel projects
    
    $
    11
    
    $
    4
    
    
    56
    
    2007
    
    Certain agreements relating to the purchase
        of ownership interests in synfuel projects contain provisions that require
        certain PPL Energy Supply subsidiaries to make contingent purchase price
        payments to the former owners. These payments are non-recourse to PPL,
        PPL Energy Supply and their other subsidiaries and are based primarily
        upon production levels of the synfuel projects. The maximum potential
        amount of future payments is not explicitly stated in the related agreements.Residual value guarantees of leased equipment
    
    
    
    
    
    
    
    
    3
    
    2005
    
    (c)WPD guarantee related to a contract assigned
        as part of a sale of one of its businesses
    
    
    
    
    
    
    
    
    20
    
    2005
    
    Guarantee of a payment (£10 million)
        under a contract that was assigned as part of a sale of one of WPD's businesses.Indemnifications for entities in liquidation
    
    
    
    
    
    
    
    
    293
    
    2008 to 2012
    
    In connection with the liquidation of wholly
        owned subsidiaries that have been deconsolidated upon turning the entities
        over to the liquidators, certain affiliates of PPL Global have agreed
        to indemnify the liquidators, directors and/or the entities themselves
        for any liabilities or expenses arising during the liquidation process,
        including liabilities and expenses of the entities placed into liquidation.
        In some cases, the indemnifications are limited to a maximum amount that
        is based on distributions made from the subsidiary to its parent either
        prior or subsequent to being placed into liquidation. In other cases,
        the maximum amount of the indemnifications is not explicitly stated in
        the agreements. The indemnifications generally expire two to seven years
        subsequent to the date of dissolution of the entities. The exposure noted
        is only for those cases in which the agreements provide for a specific
        limit on the amount of the indemnification, and the expiration date was
        based on an estimate of the dissolution date of the entities.WPD guarantee of an unconsolidated entity's
        lease obligations
    
    
    
    
    
    
    
    
    2
    
    2008
    
    The maximum potential amount of future payments
        is not explicitly stated in the related agreements.Written put options for commodities
    
    
    
    
    
    
    
    
    7
    
    2005
    
    PPL EnergyPlus enters into written put option
        contracts under which, in exchange for a premium received, it agrees to
        purchase a specified quantity of a commodity for a specified price if
        the counterparty exercises the option.PPL Electric(b)Guarantee of a portion of an unconsolidated
        entity's debt
    
    
    
    
    
    
    
    
    7
    
    2008
    
    The exposure at December 31, 2004, reflects
        principal payments only.Residual value guarantees of leased equipment
    
    
    1
    
    
    16
    
    
    81
    
    2005
    
    (c)(a)
        
        Represents the estimated maximum potential
            amount of future payments that could be required to be made under
            the guarantee.(b)
        
        Other than the letters of credit, all
            guarantees of PPL Energy Supply and PPL Electric also apply to PPL
            on a consolidated basis.(c)
        
        PPL Services, PPL Montana and PPL Electric
            lease certain equipment under master operating lease agreements. The
            term for each piece of equipment leased by PPL Services and PPL Montana
            is one year, after which time the lease may be extended from month-to-month
            until terminated. The term for each piece of equipment leased by PPL
            Electric ranges from one to three years, after which time the lease
            term may be extended for certain equipment either (i) from month-to-month
            until terminated or (ii) for up to two additional years. Under these
            lease arrangements, PPL Services, PPL Montana and PPL Electric provide
            residual value guarantees to the lessors. PPL Services, PPL Montana
            and PPL Electric generally could be required to pay the guaranteed
            residual value of the leased equipment if the proceeds received from
            the sale of a piece of equipment upon termination of the lease are
            less than the expected residual value of the equipment. These guarantees
            generally expire within one year, unless the lease terms are extended.
            The liability recorded is included in "Other current liabilities"
            on the Balance Sheet. Although the expiration date noted is 2005,
            equipment of similar value is generally leased and guaranteed on an
            on-going basis.PPL, PPL Energy Supply and PPL Electric and their subsidiaries provide
      other miscellaneous guarantees through contracts entered into in the normal
      course of business. These guarantees are primarily in the form of various
      indemnifications or warranties related to services or equipment, and vary
      in duration. The obligated amounts of these guarantees often are not explicitly
      stated, and the overall maximum amount of the obligation under such guarantees
      cannot be reasonably estimated. Historically, PPL, PPL Energy Supply and
      PPL Electric and their subsidiaries have not made any significant payments
      with respect to these types of guarantees. As of December 31, 2004, the
      aggregate fair value of these indemnifications related to arrangements entered
      into subsequent to December 31, 2002, was insignificant. Among these guarantees
      are the following:
    
        The companies' or their subsidiaries'
            leasing arrangements, including those discussed above, contain certain
            indemnifications in favor of the lessors (e.g., tax and environmental
            matters).
        In connection with their issuances of
            securities, the companies and their subsidiaries engage underwriters,
            purchasers and purchasing agents to whom they provide indemnification
            for damages incurred by such parties arising from the companies' material
            misstatements or omissions in the related offering documents. In addition,
            in connection with these securities offerings and other financing
            transactions, the companies also engage trustees or custodial, escrow
            or other agents to act for the benefit of the investors or to provide
            other agency services. The companies and their subsidiaries typically
            provide indemnification to these agents for any liabilities or expenses
            incurred by them in performing their obligations.
        In connection with certain of their credit
            arrangements, such as the asset-backed commercial paper program in
            which PPL Electric began participating in August 2004, the companies
            provide the creditors or credit arrangers with indemnification that
            is standard for each particular type of transaction. For instance,
            under the credit agreement for the asset-backed commercial paper program,
            PPL Electric and its special purpose subsidiary have agreed to indemnify
            the commercial paper conduit, the sponsoring financial institution
            and the liquidity banks for damages incurred by such parties arising
            from, among other things, a breach by PPL Electric or the subsidiary
            of their various representations, warranties and covenants in the
            credit agreement, PPL Electric's activities as servicer with respect
            to the pledged accounts receivable and any dispute by PPL Electric's
            customers with respect to payment of the accounts receivable.
        PPL EnergyPlus is party to numerous energy
            trading or purchase and sale agreements pursuant to which the parties
            indemnify each other for any damages arising from events that occur
            while the indemnifying party has title to the electricity or natural
            gas. For example, in the case of the party that is delivering the
            product, such party would be responsible for damages arising from
            events occurring prior to delivery.
        In connection with their sales of various
            businesses, WPD and its affiliates have provided the purchasers with
            indemnifications that are standard for such transactions, including
            indemnifications for certain pre-existing liabilities and environmental
            and tax matters. In addition, in connection with certain of these
            sales, WPD and its affiliates have agreed to continue their obligations
            under existing third-party guarantees, either for a set period of
            time following the transactions or upon the condition that the purchasers
            make reasonable efforts to terminate the guarantees. Finally, WPD
            and its affiliates remain secondarily responsible for lease payments
            under certain leases that they have assigned to third parties.PPL, on behalf of itself and its subsidiaries, maintains insurance that
      covers liability assumed under contract for bodily injury and property damage.
      The coverage requires a $4 million deductible per occurrence and provides
      maximum aggregate coverage of approximately $175 million. This insurance
      may be applicable to certain obligations under the contractual arrangements
      discussed above.
15. Related Party Transactions
    Affiliate Trusts (PPL and PPL Energy Supply)
    See Note 22 for a discussion of PPL Capital Funding Trust I and SIUK Capital
      Trust I, and see Note 8 for a discussion of various transactions involving
      PPL Capital Funding subordinated notes that were held by PPL Capital Funding
      Trust I. As of December 31, 2004 and 2003, $89 million and $681 million
      is reflected as "Long-term Debt with Affiliate Trusts" on PPL's Balance
      Sheet, and $89 million is reflected, as of both dates, as "Long-term Debt
      with Affiliate Trust" on PPL Energy Supply's Balance Sheet.
    PLR Contracts(PPL Energy Supply and PPL Electric)
    PPL Electric has power sales agreements with PPL EnergyPlus, effective
      January 1, 2002, to supply all of PPL Electric's PLR load through 2009.
      Under these contracts, PPL EnergyPlus provides electricity at the predetermined
      capped prices that PPL Electric is authorized to charge its PLR customers.
      These purchases totaled $1.5 billion in 2004 and $1.4 billion in 2003 and
      2002, including nuclear decommissioning recovery and amortization of an
      up-front contract payment. These purchases are included in the Statement
      of Income as "Energy purchases from affiliate" by PPL Electric, and as "Wholesale
      energy marketing to affiliate" revenues by PPL Energy Supply.
    Under one of the PLR contracts, PPL Electric is required to make performance
      assurance deposits with PPL EnergyPlus when the market price of electricity
      is less than the contract price by more than its contract collateral threshold.
      Conversely, PPL EnergyPlus is required to make performance assurance deposits
      with PPL Electric when the market price of electricity is greater than the
      contract price by more than its contract collateral threshold. At December
      31, 2004, PPL Energy Supply was required to provide PPL Electric with performance
      assurance of $300 million, the maximum amount required under the contract.
      PPL Energy Supply's deposit with PPL Electric was $300 million at December
      31, 2004. This deposit is shown on the Balance Sheet as "Collateral on PLR
      energy supply to/from affiliate," a current asset of PPL Energy Supply and
      a current liability of PPL Electric. On their Statements of Cash Flows,
      PPL Electric treats the collateral as cash provided by operating activities,
      and PPL Energy Supply treats it as cash used in operating activities. PPL Electric pays interest equal to the one-month LIBOR plus 0.5% on
      this deposit, which is included in "Interest Expense" on the Statement of
      Income.
    In 2001, PPL Electric made a $90 million up-front payment to PPL EnergyPlus
      in connection with the PLR contracts. The up-front payment is being amortized
      by both parties over the term of the PLR contracts. The unamortized balance
      of this payment, and other payments under the contract, was $58 million
      at December 31, 2004 and $70 million at December 31, 2003. This balance
      is reported on the Balance Sheet as "Prepayment on PLR energy supply from
      affiliate" by PPL Electric and as "Deferred revenue on PLR energy supply
      to affiliate" by PPL Energy Supply.
    NUG Purchases(PPL Energy Supply and PPL Electric)
    PPL Electric has a reciprocal contract with PPL EnergyPlus to sell electricity
      purchased under contracts with NUGs. PPL Electric purchases electricity
      from the NUGs at contractual rates and then sells the electricity at the
      same price to PPL EnergyPlus. These purchases totaled $154 million in 2004,
      $152 million in 2003 and $160 million in 2002. These amounts are included
      in the Statement of Income as "Wholesale electric to affiliate" revenues
      by PPL Electric, and as "Energy purchases from affiliate" by PPL Energy
      Supply.
    Allocations of Corporate Service Costs(PPL Energy Supply and
      PPL Electric)
    PPL Services provides corporate functions such as financial, legal, human
      resources and information services. PPL Services bills the respective PPL
      subsidiaries for the cost of such services when they can be specifically
      identified. The cost of these services that is not directly charged to PPL
      subsidiaries is allocated to certain of the subsidiaries based on an average
      of the subsidiaries' relative invested capital, operation and maintenance
      expenses, and number of employees. PPL Services allocated the following
      charges to PPL Energy Supply and PPL Electric:
    2004
        
        
        2003
        
        
        2002Direct expensesPPL Energy Supply
        
        $
        102
        
        
        $
        94
        
        
        $
        88PPL Electric
        
        
        59
        
        
        
        56
        
        
        
        56Overhead costsPPL Energy Supply
        
        
        69
        
        
        
        63
        
        
        
        38PPL Electric
        
        
        29
        
        
        
        27
        
        
        
        28Intercompany Borrowings
    (PPL Energy Supply)
    PPL Energy Supply subsidiaries had no notes receivable from affiliates
      at December 31, 2004. At December 31, 2003, a PPL Energy Supply subsidiary
      had a $2 million note receivable from an affiliate with interest equal to
      the one-month LIBOR plus 3%. Interest earned on loans to affiliates, included
      in "Other Income - net" on the Statement of Income, was $6 million, $16
      million and $22 million for 2004, 2003 and 2002.
    In May 2004, PPL Energy Supply issued a $495 million note payable to an
      affiliate, which is shown on the Balance Sheet as "Note Payable to Affiliate."
      The note matures in May 2006 with interest payable monthly in arrears at
      LIBOR plus 1%.
    Interest expense with affiliate, as shown on the Statement of Income, was
      $8 million, $1 million and $3 million for 2004, 2003 and 2002.
    (PPL Electric)
    In August 2004, a PPL Electric subsidiary made a $300 million demand loan
      to an affiliate, with interest due quarterly at a rate equal to the 3-month
      LIBOR plus 1.25%. This loan is shown on the Balance Sheet as "Note Receivable
      from Affiliate."
    Interest earned on loans to affiliates, included in "Other Income - net"
      on the Statement of Income, was $3 million for both 2004 and 2003 and $9
      million for 2002.
    Trademark Royalties(PPL Energy Supply)
    In the fourth quarter of 2002, a PPL subsidiary that owns PPL trademarks
      began billing certain affiliates which use these trademarks. PPL Energy
      Supply was allocated $34 million of this license fee in 2004, $39 million
      in 2003 and $8 million in 2002. These allocations are primarily included
      in "Other Operation and Maintenance" on the Statement of Income.
    Other(PPL Energy Supply and PPL Electric)
    PPL Energy Supply owns no domestic transmission or distribution facilities,
      other than facilities to interconnect its generation with the electric transmission
      system. Therefore, PPL EnergyPlus and other PPL Generation subsidiaries
      must pay PJM, the operator of the transmission system, to deliver the energy
      these subsidiaries supply to retail and wholesale customers in PPL Electric's
      franchised territory in eastern and central Pennsylvania.
16. Other Income - Net
    (PPL)
    The breakdown of PPL's "Other Income - net" was as follows:
    2004
        
        
        2003
        
        
        2002Other IncomeInterest income - IRS settlement
        
        $
        23Other interest income
        
        
        16
        
        
        $
        12
        
        
        $
        28Sale of CEMAR (Note 9)
        
        
        23Equity earnings
        
        
        3
        
        
        
        
        
        
        
        2Realized earnings on nuclear decommissioning
            trust (a)
        
        
        (7
        )
        
        
        20Gain by WPD on the disposition of
            property
        
        
        3
        
        
        
        3
        
        
        
        6Hyder-related activity
        
        
        3
        
        
        
        8Rental income
        
        
        
        
        
        
        4Reduction of reserves for receivables
            from Enron
        
        
        
        
        
        
        10Legal claim settlements
        
        
        
        
        
        
        3Miscellaneous - domestic
        
        
        7
        
        
        
        8
        
        
        
        5Miscellaneous - international
        
        
        7
        
        
        
        10
        
        
        
        13Total
        
        
        78
        
        
        
        78
        
        
        
        54Other DeductionsImpairment of investment in technology
            supplier (Note 9)
        
        
        10Asset valuation write-down
        
        
        
        
        
        
        3
        
        
        
        1Charitable contributions
        
        
        2
        
        
        
        2
        
        
        
        2Realized loss on available-for-sale
            investment
        
        
        6Non-operating taxes, other than income
        
        
        2
        
        
        
        1
        
        
        
        3Hyder-related activity
        
        
        
        
        
        
        
        
        
        
        5Miscellaneous - domestic
        
        
        6
        
        
        
        4
        
        
        
        7Miscellaneous - international
        
        
        11
        
        
        
        10
        
        
        
        7Other Income - net
        
        $
        41
        
        
        $
        58
        
        
        $
        29(a)
        
        2004 includes a $(10) million and a $(2)
            million adjustment to the realized earnings on the nuclear decommissioning
            trust recorded in 2003 and 2004, respectively. The adjustment was
            recorded in the fourth quarter of 2004, as the adjustment was not
            material to the financial statements for any affected periods in 2003
            or 2004, or as recorded in the fourth quarter of 2004.(PPL Energy Supply)
    The breakdown of PPL Energy Supply's "Other Income - net" was as follows:
    2004
        
        
        2003
        
        
        2002Other IncomeInterest income - IRS settlement
        
        $
        15Affiliated interest income
        
        
        6
        
        
        $
        16
        
        
        $
        22Other interest income
        
        
        10
        
        
        
        8
        
        
        
        18Sale of CEMAR (Note 9)
        
        
        23Reduction of reserves for receivables
            from Enron
        
        
        
        
        
        
        10Gain by WPD on the disposition of
            property
        
        
        3
        
        
        
        3
        
        
        
        6Legal claim settlements
        
        
        
        
        
        
        3Realized earnings on nuclear decommissioning
            trust (a)
        
        
        (7
        )
        
        
        20Rental income
        
        
        
        
        
        
        4Equity earnings
        
        
        4
        
        
        
        4
        
        
        
        3Hyder-related activity
        
        
        3
        
        
        
        8Miscellaneous - domestic
        
        
        3
        
        
        
        6
        
        
        
        3Miscellaneous - international
        
        
        7
        
        
        
        11
        
        
        
        13Total
        
        
        67
        
        
        
        93
        
        
        
        65Other DeductionsLoss on sale of property
        
        
        
        
        
        
        2Asset valuation write-down
        
        
        
        
        
        
        3
        
        
        
        1Non-operating taxes, other than income
        
        
        2
        
        
        
        2
        
        
        
        2Hyder-related activity
        
        
        
        
        
        
        
        
        
        
        5Miscellaneous - domestic
        
        
        3
        
        
        
        3
        
        
        
        6Miscellaneous - international
        
        
        11
        
        
        
        10
        
        
        
        7Other Income - net
        
        $
        51
        
        
        $
        73
        
        
        $
        44(a)
        
        2004 includes a $(10) million and a $(2)
            million adjustment to the realized earnings on the nuclear decommissioning
            trust recorded in 2003 and 2004, respectively. The adjustment was
            recorded in the fourth quarter of 2004, as the adjustment was not
            material to the financial statements for any affected periods in 2003
            or 2004, or as recorded in the fourth quarter of 2004.(PPL Electric)
    The breakdown of PPL Electric's "Other Income - net" was as follows:
    2004
        
        
        2003
        
        
        2002Other IncomeAffiliated interest income
        
        $
        3
        
        
        $
        3
        
        
        $
        9Interest income - IRS settlement
        
        
        8Other interest income
        
        
        5
        
        
        
        4
        
        
        
        8Miscellaneous
        
        
        
        
        
        
        
        
        
        
        1Total
        
        
        16
        
        
        
        7
        
        
        
        18Other DeductionsMiscellaneous
        
        
        1
        
        
        
        1
        
        
        
        2Other Income - net
        
        $
        15
        
        
        $
        6
        
        
        $
        16
17. Derivative Instruments and Hedging Activities
    (PPL and PPL Energy Supply)
    PPL and PPL Energy Supply adopted SFAS 133, "Accounting for Derivative
      Instruments and Hedging Activities," on January 1, 2001. In April 2003,
      the FASB issued SFAS 149, "Amendment of Statement 133 on Derivative Instruments
      and Hedging Activities," which amended and clarified SFAS 133 to improve
      financial accounting and reporting for derivative instruments and hedging
      activities. To ensure that contracts with comparable characteristics are
      accounted for similarly, SFAS 149 clarified the circumstances under which
      a contract with an initial net investment meets the characteristics of a
      derivative, clarified when a derivative contains a financing component,
      amended the definition of an "underlying" and amended certain other existing
      pronouncements. Additionally, SFAS 149 placed additional limitations on
      the use of the normal purchase or normal sale exception. SFAS 149 was effective
      for contracts entered into or modified and for hedging relationships designated
      after June 30, 2003, except certain provisions relating to forward purchases
      or sales of when-issued securities or other securities that did not yet
      exist. PPL adopted SFAS 149 as of July 1, 2003. The adoption of SFAS 149
      did not have a significant impact on PPL or PPL Energy Supply.
    Management of Market Risk Exposures
    Market risk is the potential loss PPL and PPL Energy Supply may incur as
      a result of price changes associated with a particular financial or commodity
      instrument. PPL and PPL Energy Supply are exposed to market risk from:
    
        commodity price risk for energy and energy-related
            products associated with the sale of electricity from its generating
            assets and other electricity marketing activities, the purchase of
            fuel for the generating assets and energy trading activities;
        interest rate risk associated with variable-rate
            debt and the fair value of fixed-rate debt used to finance operations,
            as well as the fair value of debt securities invested in by PPL Energy
            Supply's nuclear decommissioning fund;
        foreign currency exchange rate risk associated
            with investments in affiliates in Latin America and Europe, as well
            as purchases of equipment in currencies other than U.S. dollars; and
        equity securities price risk associated
            with the fair value of equity securities invested in by PPL Energy
            Supply's nuclear decommissioning fund.PPL has a risk management policy approved by the Board of Directors to
      manage market risk and counterparty credit risk. The RMC, comprised of senior
      management and chaired by the Vice President-Risk Management, oversees the
      risk management function. Key risk control activities designed to ensure
      compliance with risk policies and detailed programs include, but are not
      limited to, credit review and approval, validation of transactions and market
      prices, verification of risk and transaction limits, sensitivity analyses,
      and daily portfolio reporting, including open positions, mark-to-market
      valuations, and other risk measurement metrics.
    PPL and PPL Energy Supply utilize forward contracts, futures contracts,
      options, swaps and tolling agreements as part of its risk management strategy
      to minimize unanticipated fluctuations in earnings caused by commodity price,
      interest rate and foreign currency volatility. All derivatives are recognized
      on the balance sheet at their fair value, unless they meet SFAS 133 criteria
      for exclusion (see discussion in "Accounting Designations" below).
    Fair Value Hedges
    PPL and PPL Energy Supply enter into financial or physical contracts to
      hedge a portion of the fair value of firm commitments of forward electricity
      sales. These contracts range in maturity through 2006. Additionally, PPL
      and PPL Energy Supply enter into financial contracts to hedge fluctuations
      in market value of existing debt issuances. These contracts range in maturity
      through 2029.
    PPL and PPL Energy Supply did not recognize significant gains or losses
      resulting from hedges of firm commitments that no longer qualified as fair
      value hedges for 2004, 2003 or 2002.
    PPL and PPL Energy Supply also did not recognize any gains or losses resulting
      from the ineffective portion of fair value hedges for these years.
    Cash Flow Hedges
    PPL and PPL Energy Supply enter into financial and physical contracts,
      including forwards, futures and swaps, to hedge the price risk associated
      with electric, gas and oil commodities. These contracts range in maturity
      through 2010. Additionally, PPL and PPL Energy Supply enter into financial
      interest rate swap contracts to hedge interest expense associated with both
      existing and anticipated debt issuances. These swaps range in maturity through
      2015 for PPL. PPL Energy Supply was not a party to any financial interest
      rate swap contracts as of December 31, 2004. PPL and PPL Energy Supply also
      enter into foreign currency forward contracts to hedge the cash flows associated
      with foreign currency-denominated debt, the exchange rates associated with
      firm commitments denominated in foreign currencies and the net investment
      of foreign operations. These forward contracts range in maturity through
      2028.
    Cash flow hedges may be discontinued if it is probable that the original
      forecasted transaction will not occur by the end of the originally specified
      time period. Due to the extinguishment of a consolidated trust's debt related
      to the Sundance and University Park generating facilities in June 2004,
      interest rate swaps that hedged the interest payments on the debt were terminated.
      Therefore, PPL and PPL Energy Supply reclassified a $3 million pre-tax loss
      ($2 million after-tax) from other comprehensive income to "Interest Expense"
      on the Statement of Income for the twelve months ended December 31,
      2004. Additionally, PPL and PPL Energy Supply discontinued certain cash
      flow hedges for the years ended December 31, 2003 and 2002, which resulted
      in the reclassification of the following net gains or losses, after tax,
      from other comprehensive income (reported in "Wholesale energy marketing"
      revenues, "Energy purchases" and "Interest Expense" on the Statement of
      Income):
    2004
        
        
        2003
        
        
        2002PPL
        
        $
        (2
        )
        
        $
        (7
        )
        
        $
        (9
        )PPL Energy Supply
        
        
        (2
        )
        
        
        (7
        )Due to hedge ineffectiveness, PPL and PPL Energy Supply reclassified net
      gains and losses, after tax, that were not significant, from other comprehensive
      income (reported in "Wholesale energy marketing" revenues and "Energy purchases"
      on the Statement of Income) for the years ended December 31, 2004 and 2003.
      PPL and PPL Energy Supply reclassified a $2 million net loss, after tax,
      due to hedge ineffectiveness from other comprehensive income to income for
      the year ended December 31, 2002.
    
    Ineffectiveness associated with interest rate and foreign currency derivatives
      was not significant for 2004, 2003 and 2002.
    As of December 31, 2004, the deferred net loss, after tax, on derivative
      instruments in "Accumulated other comprehensive income" expected to be reclassified
      into earnings during the next twelve months was $42 million and $37 million
      for PPL and PPL Energy Supply.
    The following table shows the change in accumulated unrealized gains or
      losses on derivatives, after tax, in accumulated other comprehensive income
      for the following periods:
    2004
        
        2003PPLBeginning accumulated derivative gain
        
        $
        36
        
        
        $
        7Net change associated with current
            period hedging activities and other
        
        
        (211
        )
        
        
        (42
        )Net change associated with net investment
            hedges
        
        
        1
        
        
        
        (6
        )Net change from reclassification into
            earnings
        
        
        105
        
        
        
        77Ending accumulated derivative gain
            (loss)
        
        $
        (69
        )
        
        $
        36PPL Energy SupplyBeginning accumulated derivative gain
        
        $
        56
        
        
        $
        23Net change associated with current
            period hedging activities and other
        
        
        (206
        )
        
        
        (44
        )Net change associated with net investment
            hedges
        
        
        1
        
        
        
        (6
        )Net change from reclassification into
            earnings
        
        
        98
        
        
        
        83Ending accumulated derivative gain
            (loss)
        
        $
        (51
        )
        
        $
        56Accounting Designations
    For energy contracts that meet the definition of a derivative, the circumstances
      and intent existing at the time that energy transactions are entered into
      determine their accounting designation, which is subsequently verified by
      an independent internal group on a daily basis. The following summarizes
      the electricity guidelines that have been provided to the marketers who
      are responsible for contract designation for derivative energy contracts
      in accordance with SFAS 149:
    
        Any wholesale and retail contracts to
            sell electricity and the related capacity that are expected to be
            delivered from PPL's generation or that do not meet the definition
            of a derivative are considered "normal." These transactions are not
            recorded in the financial statements and have no earnings impact until
            delivery.
        Physical electricity-only transactions
            can receive cash flow hedge treatment if all of the qualifications
            under SFAS 133 are met.
        Any physical energy sale or purchase
            deemed to be a "market call" are considered speculative, with unrealized
            gains or losses recorded immediately through earnings.
        Financial transactions, which can be
            settled in cash, cannot be considered "normal" because they do not
            require physical delivery. These transactions receive cash flow hedge
            treatment if they lock in the price PPL will receive or pay for energy
            expected to be generated or purchased in the spot market.
        Physical and financial transactions for
            gas and oil to meet fuel and retail requirements can receive cash
            flow hedge treatment if they lock-in the price PPL will pay in the
            spot market.
        Option contracts that do not meet the
            requirements of DIG Issue C15, "Scope Exceptions: Interpreting the
            Normal Purchases and Normal Sales Exception as an Election," do not
            receive hedge accounting treatment and are marked to market through
            earnings.Any unrealized gains or losses on transactions receiving cash flow hedge
      treatment are recorded in other comprehensive income. These unrealized gains
      and losses become realized when the contracts settle and are recognized
      in income when the hedged transactions occur.
    In addition to energy-related transactions, PPL enters into financial interest
      rate and foreign currency swap contracts to hedge interest expense associated
      with both existing and anticipated debt issuances. PPL and PPL Energy Supply
      also enter into foreign currency swap contracts to hedge the fair value
      of firm commitments denominated in foreign currency and net investments
      in foreign operations. As with energy transactions, the circumstances and
      intent existing at the time of the transaction determine a contract's accounting
      designation, which is subsequently verified by an independent internal group
      on a daily basis. The following is a summary of certain guidelines that
      have been provided to PPL's treasury department, which is responsible for
      contract designation:
    
        Transactions to lock-in an interest rate
            prior to a debt issuance are considered cash flow hedges. Any unrealized
            gains or losses on transactions receiving cash flow hedge treatment
            are recorded in other comprehensive income and are amortized as a
            component of interest expense over the life of the debt.
        Transactions entered into to hedge fluctuations
            in the value of existing debt are considered fair value hedges. To
            the extent that the change in the fair value of the derivative offsets
            the change in the fair value of the existing debt, there is no earnings
            impact, as both changes are reflected in interest expense. Realized
            gains and losses over the life of the hedge are reflected in interest
            expense.
        Transactions entered into to hedge the
            value of a net investment of foreign operations are considered net
            investment hedges. To the extent that the derivatives are highly effective
            at hedging the value of the net investment, gains and losses are recorded
            in other comprehensive income/loss and will not be recorded in earnings
            until the investment is disposed of.
        Derivative transactions which do not
            qualify for hedge accounting treatment are marked to market through
            earnings.Related Implementation Issues
    In June 2001, the FASB issued definitive guidance on DIG Issue C15, "Scope
      Exceptions: Normal Purchases and Normal Sales Exception for Certain Option-Type
      Contracts and Forward Contracts in Electricity." DIG Issue C15 provides
      additional guidance on the classification and application of derivative
      accounting rules relating to purchases and sales of electricity utilizing
      forward and option contracts. This guidance became effective as of July
      1, 2001. In December 2001, the FASB revised the guidance in DIG Issue C15,
      principally related to the eligibility of options for the normal purchases
      and normal sales exception. The revised guidance was effective April 1,
      2002. In November 2003, the FASB again revised the guidance in DIG Issue
      C15 to clarify the application of derivative accounting rules for contracts
      that may involve capacity. The guidance was effective January 1, 2004, for
      PPL and did not have a significant impact on its financial statements.
    In June 2003, the FASB issued DIG Issue C20, "Scope Exceptions: Interpretation
      of the Meaning of Not Clearly and Closely Related in Paragraph 10(b) Regarding
      Contracts with a Price Adjustment Feature," which became effective October 1,
      2003. DIG Issue C20 addresses a requirement in SFAS 133 that contracts that
      qualify for normal treatment must feature pricing that is clearly and closely
      related to the asset being sold. Diversity in practice had developed among
      companies. DIG Issue C20 permits normal treatment if a price adjustment
      factor, such as a broad market index (e.g., Consumer Price Index), is not
      extraneous to both the cost and the fair value of the asset being sold and
      is not significantly disproportionate in terms of the magnitude and direction
      when compared with the asset being sold. However, DIG Issue C20 also stated
      that prior guidance did not permit the use of a broad market index to serve
      as a proxy for an ingredient or direct factor. Thus, DIG Issue C20 required
      that contracts that had been accounted for as normal, but were not eligible
      for normal treatment under prior guidance, be reflected on the balance sheet
      at their fair value, with an offsetting amount reflected in income as of
      the date of adoption. These contracts could then be evaluated under the
      provisions of DIG Issue C20 to determine whether they could qualify for
      normal treatment prospectively. PPL and PPL Energy Supply recorded a pre-tax
      charge to income of $2 million in the fourth quarter of 2003 to comply with
      the provisions of DIG Issue C20.
    PPL and PPL Energy Supply adopted the final provisions of EITF 02-3, "Issues
      Involved in Accounting for Derivative Contracts Held for Trading Purposes
      and Contracts Involved in Energy Trading and Risk Management Activities,"
      during the fourth quarter of 2002. As such, PPL and PPL Energy Supply reflect
      their net realized and unrealized gains and losses associated with all derivatives
      that are held for trading purposes in the "Net energy trading margins" line
      on the Statement of Income. Non-derivative contracts that met the definition
      of energy trading activities as defined by EITF 98-10, "Accounting for Energy
      Trading and Risk Management Activities" are reflected in the financial statements
      using the accrual method of accounting. Under the accrual method of accounting,
      unrealized gains and losses are not reflected in the financial statements.
      Prior periods were reclassified. No cumulative effect adjustment was required
      upon adoption.
    PPL and PPL Energy Supply adopted the final provisions of EITF 03-11, "Reporting
      Realized Gains and Losses on Derivative Instruments That Are Subject to
      FASB Statement No. 133 and Not 'Held for Trading Purposes' as Defined in
      Issue No. 02-3," prospectively as of October 1, 2003. As a result of this
      adoption, non-trading bilateral sales of electricity at major market delivery
      points are netted with purchases that offset the sales at those same delivery
      points. A major market delivery point is any delivery point with liquid
      pricing available. The impact of adopting EITF 03-11 was a reduction in
      both "Wholesale energy marketing" revenues and "Energy purchases" by $277
      million in PPL's and PPL Energy Supply's Statements of Income for the year
      ended December 31, 2004, and a reduction of $105 million for the year ended
      December 31, 2003.
    Credit Concentration
    (PPL and PPL Energy Supply)
    PPL and PPL Energy Supply enter into contracts with many entities for the
      purchase and sale of energy. Many of these contracts are considered a normal
      part of doing business and, as such, the mark-to-market value of these contracts
      is not reflected in the financial statements. However, the mark-to-market
      value of these contracts is considered when committing to new business from
      a credit perspective.
    PPL and PPL Energy Supply have credit exposures to energy trading partners.
      The majority of these exposures are the mark-to-market value of multi-year
      contracts for energy sales and purchases. Therefore, if these counterparties
      fail to perform their obligations under such contracts, PPL and PPL Energy
      Supply would not experience an immediate financial loss, but would experience
      lower revenues or higher costs in future years to the extent that replacement
      sales or purchases could not be made at the same prices as those under the
      defaulted contracts.
    At December 31, 2004, PPL had a credit exposure of $296 million to energy
      trading partners. Ten counterparties accounted for 69% of this exposure.
      No other individual counterparty accounted for more than 3% of the exposure.
      Eight of the ten counterparties had an investment grade credit rating from
      Standard & Poor's Ratings Services (S&P). Two non-investment grade
      counterparties have remained current on obligations under their respective
      contracts.
    At December 31, 2004, PPL Energy Supply had a credit exposure of $291 million
      to energy trading partners. Ten counterparties accounted for 70% of this
      exposure. No other individual counterparty accounted for more than 3% of
      the exposure. Eight of the ten counterparties had an investment grade credit
      rating from S&P. Two non-investment grade counterparties have remained
      current on obligations under their respective contracts.
    PPL and PPL Energy Supply have the right to request collateral from each
      of these counterparties, except for one government agency, in the event
      their credit ratings fall below investment grade. It is also the policy
      of PPL and PPL Energy Supply to enter into netting agreements with all of
      their counterparties to minimize credit exposure.
    (PPL Energy Supply and PPL Electric)
    In past years, PPL Energy Supply has had an exposure to PPL Electric under
      the long-term contract to provide PPL Electric's PLR load. However, increases
      in electricity prices during 2004 have reversed this position. PPL Electric
      estimates that, at December 31, 2004, the market price of electricity would
      exceed the contract price by approximately $1.5 billion. In accordance with
      the terms of one of the PLR contracts, PPL Energy Supply provided PPL Electric
      with cash collateral in the amount of $300 million, the maximum amount required
      under the contract. This is the only credit exposure for PPL Electric that
      has a mark-to-market element. No other counterparty accounts for more than
      1% of PPL Electric's total exposure.
    Enron Bankruptcy
    (PPL and PPL Energy Supply)
    In connection with the December 2001 bankruptcy filings by Enron Corporation
      and its affiliates (collectively, Enron), two PPL subsidiaries terminated
      certain electricity, gas and other trading agreements with Enron. In October
      2002, the PPL subsidiaries filed proofs of claim in Enron's bankruptcy proceedings
      in the aggregate of approximately $50 million, which reflected the fair
      value of the forward contracts at the time of termination, as well as any
      net unpaid receivables from completed transactions. These claims were against
      Enron North America and Enron Power Marketing (the Enron Subsidiaries),
      and against Enron Corporation, which had guaranteed the Enron Subsidiaries'
      performance (the Enron Corporation Guarantees). PPL established a reserve
      for uncollectible accounts for the total amount of the claim.
    During 2003, PPL and Enron engaged in discussions regarding the amount
      of claims that would be allowed against the Enron Subsidiaries. Although
      no formal agreement on such amounts was reached, PPL believed that its claims
      against the Enron Subsidiaries would eventually be allowed in the bankruptcy
      at approximately $46 million. Accordingly, PPL reduced its receivables from
      Enron, and the associated reserve for uncollectible accounts, by $4 million.
      PPL also determined that it is probable that its subsidiaries will recover
      approximately $10 million of these receivables from the Enron Subsidiaries,
      and may collect additional amounts under the Enron Corporation Guarantees.
      Therefore, PPL determined that it was appropriate to reduce its reserve
      by an additional $10 million.
    In September 2004, the PPL subsidiaries entered into an agreement with
      the Enron Subsidiaries pursuant to which the parties agreed that the PPL
      claims would be allowed in the bankruptcy at approximately $46 million.
      In January 2005, the bankruptcy court in the Enron case approved this agreement.
    Enron Corporation has filed suits against the PPL subsidiaries asserting
      that the Enron Corporation Guarantees should be voided as fraudulent transfers.
      If Enron Corporation were successful in these suits, the claims against
      Enron Corporation under the Enron Corporation Guarantees would not be allowed
      in the bankruptcy proceeding.
18. Restricted Cash
    (PPL, PPL Energy Supply and PPL Electric)
    The following table details the components of restricted cash by reporting
      entity and by type:
     December
            31, 2004PPL
        
        
        PPL Energy
            Supply
        
        
        PPL ElectricCurrent:Collateral for letters of
            credit (a)
        $
        42
        
        
        
        
        
        
        $
        42Miscellaneous
        
        8
        
        
        $
        3Restricted cash - current
        
        50
        
        
        
        3
        
        
        
        42Noncurrent:Insurance subsidiary required
            reserves (b)
        
        37
        
        
        
        37PPL Transition Bond Company
            Indenture reserves (c)
        
        22
        
        
        
        
        
        
        
        22Restricted cash - noncurrent
        
        59
        
        
        
        37
        
        
        
        22Total restricted cash
        $
        109
        
        
        $
        40
        
        
        $
        64December
            31, 2003PPL
        
        
        PPL Energy
            Supply
        
        
        PPL ElectricCurrent:Miscellaneous
        $
        10
        
        
        $
        3Restricted cash - current
        
        10
        
        
        
        3Noncurrent:Insurance subsidiary required
            reserves (b)
        
        19
        
        
        
        19PPL Transition Bond Company
            Indenture reserves (c)
        
        29
        
        
        
        
        
        
        $
        29Restricted cash - noncurrent
        
        48
        
        
        
        19
        
        
        
        29Total restricted cash
        $
        58
        
        
        $
        22
        
        
        $
        29(a)
        
        A deposit with a financial institution
            of funds from the asset-backed commercial paper program to fully collateralize
            $42 million of letters of credit. See Note 8 for further discussion
            on the asset-backed commercial paper program.(b)
        
        Funds that WPD's insurance subsidiary
            is required to keep on deposit.(c)
        
        Credit enhancement for PPL Transition
            Bond Company's $2.4 billion Series 1999-1 Bonds to protect against
            losses or delays in scheduled payments.
19. Goodwill and Other Intangible Assets
    Acquired Intangible Assets
    (PPL)
    The carrying amount and the accumulated amortization of acquired intangible
      assets were as follows:
    December
            31, 2004
        
        
        December
            31, 2003Carrying
            
            Amount
        
        
        Accumulated
            Amortization
        
        
        Carrying
            Amount
        
        
        Accumulated
            AmortizationLand and transmission rights
        
        $
        275
        
        
        $
        98
        
        
        $
        269
        
        
        $
        94Emission allowances
        
        
        78
        
        
        
        
        
        
        
        49Licenses and other
        
        
        71
        
        
        
        11
        
        
        
        51
        
        
        
        4$
        424
        
        
        $
        109
        
        
        $
        369
        
        
        $
        98Current intangible assets are included in "Current Assets - Other," and
      long-term intangible assets are included in "Other intangibles" on the Balance
      Sheet.
    Amortization expense for 2004, 2003 and 2002 was approximately $6 million
      each year. Amortization expense is estimated at $7 million per year for
      2005 through 2009.
    (PPL Energy Supply)
    The carrying amount and the accumulated amortization of acquired intangible
      assets were as follows:
    December
            31, 2004
        
        
        December
            31, 2003Carrying
            
            Amount
        
        
        Accumulated
            Amortization
        
        
        Carrying
            Amount
        
        
        Accumulated
            AmortizationLand and transmission rights
        
        $
        61
        
        
        $
        16
        
        
        $
        58
        
        
        $
        15Emission allowances
        
        
        78
        
        
        
        
        
        
        
        49Licenses and other
        
        
        70
        
        
        
        11
        
        
        
        50
        
        
        
        4$
        209
        
        
        $
        27
        
        
        $
        157
        
        
        $
        19Current intangible assets are included in "Current Assets - Other," and
      long-term intangible assets are included in "Other intangibles" on the Balance
      Sheet.
    Amortization expense was approximately $3 million for 2004 and $2 million
      for 2003 and 2002. Amortization expense is estimated at $4 million per year
      for 2005 through 2009.
    (PPL Electric)
    The carrying amount and the accumulated amortization of acquired intangible
      assets were as follows:
    December
            31, 2004
        
        
        December
            31, 2003Carrying
            
            Amount
        
        
        Accumulated
            Amortization
        
        
        Carrying
            Amount
        
        
        Accumulated
            AmortizationLand and transmission rights
        
        $
        196
        
        
        $
        79
        
        
        $
        193
        
        
        $
        77Intangible assets are shown as "Intangibles" on the Balance Sheet.
    Amortization expense was approximately $3 million for 2004 and $2 million
      for 2003 and 2002. Amortization expense is estimated at $3 million per year
      for 2005 through 2009.
    Goodwill(PPL and PPL Energy Supply)
    The changes in the carrying amounts of goodwill by segment were as follows:
    PPL Energy
            Supply
        
        
        
        
        
        PPLSupply
        
        
        International
        
        
        Total
        
        
        Delivery(a)
        
        
        TotalBalance as of December 31, 2002
        
        $
        85
        
        
        $
        334
        
        
        $
        419
        
        
        $
        55
        
        
        $
        474Effect of foreign currency exchange
            rates
        
        
        
        
        
        
        92
        
        
        
        92
        
        
        
        
        
        
        
        92Purchase accounting adjustments (b)
        
        
        8
        
        
        
        500
        
        
        
        508
        
        
        
        
        
        
        
        508Discontinued operations
        
        
        
        
        
        
        (6
        )
        (c)
        
        (6
        )
        
        
        
        
        
        
        (6
        )Balance as of December 31, 2003
        
        
        93
        
        
        
        920
        
        
        
        1,013
        
        
        
        55
        
        
        
        1,068Effect of foreign currency exchange
            rates
        
        
        
        
        
        
        93
        
        
        
        93
        
        
        
        
        
        
        
        93Purchase accounting adjustments
        
        
        1
        
        
        
        (35
        )
        (d)
        
        (34
        )
        
        
        
        
        
        
        (34
        )Balance as of December 31, 2004
        
        $
        94
        
        
        $
        978
        
        
        $
        1,072
        
        
        $
        55
        
        
        $
        1,127(a)
        
        The Delivery segment is not part of PPL
            Energy Supply.(b)
        
        See Note 9 for additional information
            on international goodwill adjustments.(c)
        
        In December 2003, the PPL Global Board
            of Managers authorized the sale of its investment in a Latin American
            telecommunications company. As a result of this decision, PPL Global
            wrote off $6 million of goodwill. See Note 9 for additional information.(d)
        
        Consists primarily of adjustments pursuant
            to EITF Issue 97-3, "Uncertainties Related to Income Taxes in a Purchase
            Business Combination."In accordance with SFAS 142, "Goodwill and Other Intangible Assets," which
      PPL and its subsidiaries adopted on January 1, 2002, the reporting units
      of the Supply, Delivery and International segments completed the transition
      impairment test in the first quarter of 2002. A transition goodwill impairment
      loss of $150 million was recognized in the Latin American reporting unit
      within the International segment, and is reported in "Cumulative Effects
      of Changes in Accounting Principles" on the Statement of Income. The fair
      value of the reporting unit was estimated using the expected present value
      of future cash flows.
20. Workforce Reduction
    (PPL, PPL Energy Supply and PPL Electric)
    In an effort to improve operational efficiency and reduce costs, PPL and
      its subsidiaries commenced a workforce reduction assessment in June 2002.
      The program was broad-based and impacted all employee groups, except certain
      positions that are key to providing high-quality service to PPL's electricity
      delivery customers.
    PPL recorded charges of $9 million and $75 million in 2003 and 2002. PPL
      Energy Supply recorded charges of $41 million in 2002. PPL Electric recorded
      charges of $9 million and $33 million in 2003 and 2002. These charges included
      employee terminations associated with implementation of the Automated Meter
      Reading project. There was no impact to earnings in 2004.
    As of December 31, 2004, 587 employees of PPL subsidiaries were terminated
      and four have committed to retire in early 2005, completing the workforce
      reduction plan. The program provided primarily for enhanced early retirement
      benefits and/or one-time special pension separation allowances based on
      an employee's age and years of service. These features of the program are
      paid from the PPL Retirement Plan pension trust and increased PPL's pension
      liabilities in 2002 and 2003 when recorded. Substantially all of the accrued
      non-pension benefits have been paid.
21. Asset Retirement Obligations
    (PPL and PPL Energy Supply)
    PPL and PPL Energy Supply adopted SFAS 143, "Accounting for Asset
      Retirement Obligations," effective January 1, 2003. In connection with
      the adoption of SFAS 143, PPL and PPL Energy Supply recorded a cumulative
      effect of adoption that increased net income by $63 million (net of tax
      of $44 million), or $0.36 per share.
    PPL and PPL Energy Supply identified various legal obligations to retire
      long-lived assets, the largest of which relates to the decommissioning of
      the Susquehanna station. PPL and PPL Energy Supply identified and recorded
      other asset retirement obligations related to significant interim retirements
      at the Susquehanna station, and various environmental requirements for coal
      piles, ash basins and other waste basin retirements.
    PPL and PPL Energy Supply also identified legal retirement obligations
      that were not measurable at this time. These items included the retirement
      of certain transmission assets and a reservoir. These retirement obligations
      were not measurable due to indeterminable dates of retirement.
    Amounts collected from PPL Electric's customers for decommissioning, less
      applicable taxes, are deposited in external trust funds for investment and
      can only be used for future decommissioning costs. The fair value of the
      nuclear decommissioning trust fund was $409 million and $357 million as
      of December 31, 2004 and 2003.
    The changes in the carrying amounts of asset retirement obligations were
      as follows:
    Asset retirement obligation at January
            1, 2003
        
        $
        229Add: Accretion expense
        
        
        18Less: Settlement
        
        
        5Asset retirement obligation at December
            31, 2003
        
        
        242Add: Accretion expense
        
        
        19Less: Settlement
        
        
        4Asset retirement obligation at December
            31, 2004
        
        $
        257(PPL Electric)
    PPL Electric adopted SFAS 143 effective January 1, 2003, and did not record
      any asset retirement obligations upon adoption. PPL Electric identified
      legal retirement obligations for the retirement of certain transmission
      assets that were not measurable at this time due to indeterminable dates
      of retirement.
22. Variable Interest Entities
    (PPL, PPL Energy Supply and PPL Electric)
    In January 2003, the FASB issued Interpretation No. 46, "Consolidation
      of Variable Interest Entities, an Interpretation of ARB No. 51." FIN 46
      clarified that variable interest entities, as defined therein, that do not
      disperse risks among the parties involved should be consolidated by the
      entity that is determined to be the primary beneficiary. In December 2003,
      the FASB revised FIN 46 by issuing Interpretation No. 46 (revised December
      2003), "Consolidation of Variable Interest Entities, an Interpretation of
      ARB No. 51," which is known as FIN 46(R) and replaces FIN 46. FIN 46(R)
      does not change the general consolidation concepts of FIN 46. Among other
      things, FIN 46(R) clarifies certain provisions of FIN 46 and provides additional
      scope exceptions for certain types of businesses. FIN 46 applied immediately
      to variable interest entities created after January 31, 2003, and to variable
      interest entities in which an enterprise obtained an interest after January
      31, 2003. FIN 46(R) provides that a public entity that is not a small business
      issuer (i) should apply FIN 46 or FIN 46(R) to entities that are considered
      to be SPEs no later than the end of the first reporting period that ends
      after December 15, 2003 and (ii) should apply the provisions of FIN
      46(R) to all entities no later than the end of the first reporting period
      that ends after March 15, 2004.
    As permitted by FIN 46(R), PPL and its subsidiaries adopted FIN 46 effective
      December 31, 2003, for entities created before February 1, 2003, that are
      considered to be SPEs. This adoption resulted in the consolidation of the
      lessors under the operating leases for the Sundance, University Park and
      Lower Mt. Bethel generation facilities, as well as the deconsolidation of
      two wholly owned trusts. See below for further discussion. Also, as permitted
      by FIN 46(R), PPL and its subsidiaries deferred the application of FIN 46
      for other entities and adopted FIN 46(R) for all entities on March 31, 2004.
      The adoption of FIN 46(R) did not have a material impact on the results
      of PPL and its subsidiaries.
    (PPL and PPL Energy Supply)
    Additional Entities Consolidated
    In May 2001, a subsidiary of PPL Energy Supply entered into a lease arrangement,
      as lessee, for the development, construction and operation of commercial
      power generation facilities. The lessor was created for the sole purpose
      of owning the facilities and incurring the related financing costs. The
      $660 million operating lease arrangement covered the 450 MW gas-fired Sundance
      project near Coolidge, Arizona and the 540 MW gas-fired University Park
      project near University Park, Illinois. These facilities were substantially
      complete in July 2002, at which time the initial lease term commenced. In
      June 2004, PPL Energy Supply subsidiaries purchased the Sundance and University
      Park generation assets from the lessor. See Note 8 for further discussion
      of the purchase.
    In December 2001, another subsidiary of PPL Energy Supply entered into
      a $455 million operating lease arrangement, as lessee, for the development,
      construction and operation of a 582 MW gas-fired combined-cycle generation
      facility located in Lower Mt. Bethel Township, Northampton County, Pennsylvania.
      The lessor was created for the sole purpose of owning the facilities and
      incurring the related financing costs. The initial lease term commenced
      on the date of commercial operation, which occurred in May 2004, and ends
      in December 2013. The lease financing, which is included in "Long-term
      Debt," is secured by, among other things, the generation facility.
      As of December 31, 2004, the facility had a carrying value of $470 million,
      net of accumulated depreciation and amortization of $10 million, and was
      included in "Property, Plant and Equipment - net" and "Other intangibles"
      on the Balance Sheet. As of December 31, 2003, the facility had a carrying
      value of $442 million, which was included in "Construction work in progress"
      and "Other intangibles" on the Balance Sheet.
    PPL Energy Supply was required to consolidate the financial statements
      of the lessors under the operating leases for the Sundance, University Park
      and Lower Mt. Bethel generation facilities effective December 31, 2003,
      since it was the primary beneficiary of these entities. Upon initial consolidation,
      PPL Energy Supply recognized a charge of $27 million (net of a tax benefit
      of $18 million) as a cumulative effect of a change in accounting principle.
    Entities Deconsolidated
    Effective December 31, 2003, PPL deconsolidated PPL Capital Funding Trust
      I, and PPL Energy Supply deconsolidated SIUK Capital Trust I. These trusts
      were deconsolidated because PPL and PPL Energy Supply were not the primary
      beneficiaries of the trusts under interpretations of FIN 46. The deconsolidation
      of the trusts did not impact the earnings of PPL and PPL Energy Supply.
      See below for a discussion of PPL's and PPL Energy Supply's interest in
      the trusts. See Note 15 for a discussion of the presentation of the related
      party debt.
    (PPL)
    In May 2001, PPL and PPL Capital Funding Trust I, a wholly owned financing
      subsidiary of PPL, issued $575 million of 7.75% PEPS Units. Each PEPS Unit
      consisted of (i) a contract to purchase shares of PPL common stock on or
      prior to May 2004 and (ii) a trust preferred security of PPL Capital Funding
      Trust I with a maturity date of May 2006. The trust's sole source of funds
      for distributions were from payments of interest on 7.29% subordinated notes
      of PPL Capital Funding, due May 18, 2006, that were issued to the trust.
      PPL guaranteed the payment of principal and interest on the subordinated
      notes issued to the trust by PPL Capital Funding. PPL also fully and unconditionally
      guaranteed all of the trust's obligations under the trust preferred securities.
      All of the preferred securities of PPL Capital Funding Trust I were cancelled
      in 2004, and the trust was terminated in June 2004. See Note 8 for a discussion
      of the cancellation of the trust preferred securities.
    (PPL and PPL Energy Supply)
    SIUK Capital Trust I issued $82 million of 8.23% preferred securities maturing
      in February 2027 and invested the proceeds in 8.23% subordinated debentures
      maturing in February 2027 issued by SIUK Limited. Thus, the preferred securities
      are supported by a corresponding amount of subordinated debentures. SIUK
      Limited owned all of the common securities of SIUK Capital Trust I and guaranteed
      all of SIUK Capital Trust I's obligations under the preferred securities.
      In January 2003, SIUK Limited transferred its assets and liabilities, including
      the common securities of SIUK Capital Trust I and the obligations under
      the subordinated debentures, to WPD LLP. Therefore, WPD LLP currently guarantees
      all of SIUK Capital Trust I's obligations under the preferred securities.
      SIUK Capital Trust I may, at the discretion of WPD LLP, redeem the preferred
      securities, in whole or in part, at 104.115% of par beginning February 2007
      and thereafter at an annually declining premium over par through January
      2017, after which time they are redeemable at par.
23. New Accounting Standards
    SFAS 123(R)(PPL, PPL Energy Supply and PPL Electric)
    In December 2004, the FASB issued SFAS 123 (revised 2004), "Share-Based
      Payment," which is known as SFAS 123(R) and replaces SFAS 123, "Accounting
      for Stock-Based Compensation," as amended by SFAS 148, "Accounting for Stock-Based
      Compensation-Transition and Disclosure." Among other things, SFAS 123(R)
      eliminates the alternative to use the intrinsic value method of accounting
      for stock-based compensation. SFAS 123(R) requires public entities to recognize
      compensation expense for awards of equity instruments to employees based
      on the grant-date fair value of the awards. SFAS 123(R) is effective for
      public entities that do not file as small business issuers as of the beginning
      of the first interim or annual period that begins after June 15, 2005.
    SFAS 123(R) requires public entities to apply the modified prospective
      application transition method of adoption. Under this application, entities
      must recognize compensation expense based on the grant-date fair value for
      new awards granted or modified after the effective date and for unvested
      awards outstanding on the effective date. Additionally, public entities
      may choose to apply modified retrospective application to periods before
      the effective date of SFAS 123(R). This application may be applied either
      to all prior years for which SFAS 123 was effective or only to prior interim
      periods in the year of initial adoption of SFAS 123(R). Under modified retrospective
      application, prior periods would be adjusted to recognize compensation expense
      as though stock-based awards granted, modified or settled in cash in fiscal
      years beginning after December 15, 1994, had been accounted for under SFAS
      123.
    PPL and its subsidiaries must adopt SFAS 123(R) no later than July 1, 2005.
      PPL and its subsidiaries do not plan to apply modified retrospective application
      to any periods prior to the date of adoption. In addition, PPL and its subsidiaries
      adopted the fair-value method of accounting for stock-based compensation
      under SFAS 123 effective January 1, 2003. Therefore, the adoption of SFAS
      123(R) is not expected to have a material impact on PPL and its subsidiaries.
      See Note 1 for a discussion of the change in accounting for stock-based
      compensation as of January 1, 2003.
    FIN 46(R)(PPL, PPL Energy Supply and PPL Electric)
    See Note 22 for a discussion of FIN 46(R) "Consolidation of Variable Interest
      Entities, an Interpretation of ARB No. 51," and the impact of its adoption.
    EITF Issue 03-1
    (PPL, PPL Energy Supply and PPL Electric)
    In March 2004, the FASB ratified certain consensuses in EITF Issue
      03-1, "The Meaning of Other-Than-Temporary Impairment and Its Application
      to Certain Investments." EITF Issue 03-1 provides guidance for determining
      when an investment in certain debt and equity securities is considered impaired,
      whether that impairment is other than temporary and the measurement of an
      impairment loss. EITF Issue 03-1 also contains disclosure requirements related
      to information about impairments that have not been recognized as other
      than temporary as well as disclosure requirements for investments accounted
      for under the cost method. The recognition and measurement provisions of
      EITF Issue 03-1 were originally required to be applied to other-than-temporary
      impairment evaluations as of the balance sheet date in reporting periods
      beginning after June 15, 2004. However, in September 2004 the FASB
      issued FSP EITF Issue 03-1-1, "Effective Date of Paragraphs 10-20 of EITF
      Issue No. 03-1, 'The Meaning of Other-Than-Temporary Impairment and Its
      Application to Certain Investments'," which temporarily delayed the effective
      date for applying the recognition and measurement provisions. The disclosure
      provisions related to cost method investments are effective for annual financial
      statements for fiscal years ending after June 15, 2004, while all other
      disclosure provisions were effective for annual financial statements for
      fiscal years ending after December 15, 2003.
    The EITF is currently considering issuing additional guidance on assessing
      other-than-temporary impairments under EITF Issue 03-1. The potential impact
      of adopting the recognition and measurement provisions of EITF Issue 03-1
      is not yet determinable, but could be material.
    (PPL and PPL Energy Supply)
    As of December 31, 2004, PPL Energy Supply's nuclear decommissioning trust
      fund contained investments with an aggregate unrealized loss position of
      approximately $3 million, of which $1 million was attributable to investments
      with an aggregate fair value of approximately $56 million that have been
      in a continuous unrealized loss position for less than 12 months and $2
      million was attributable to investments with an aggregate fair value of
      approximately $29 million that have been in a continuous unrealized loss
      position for 12 months or longer. This minor decline in value is primarily
      due to interest rate changes on government securities. Currently, PPL Energy
      Supply believes it is reasonable to expect these securities to recover from
      this temporary decline in value.
    EITF Issue 03-6(PPL)
    In March 2004, the FASB ratified EITF Issue 03-6, "Participating Securities
      and the Two-Class Method under FASB Statement No. 128, 'Earnings per Share'."
      EITF Issue 03-6 addresses a number of issues regarding the calculation of
      basic EPS by companies that have issued securities other than common stock
      that participate in dividends and earnings, which are known as participating
      securities. EITF Issue 03-6 requires participating securities to be included
      in the calculation of basic EPS using the two-class method and provides
      guidance in applying the two-class method. EITF Issue 03-6 is effective
      for reporting periods beginning after March 31, 2004, and it requires restatement
      of prior periods. PPL adopted EITF Issue 03-6 during the second quarter
      of 2004. The initial adoption did not have an impact on PPL.
    EITF Issue 03-16(PPL, PPL Energy Supply and PPL Electric)
    In March 2004, the FASB ratified EITF Issue 03-16, "Accounting for Investments
      in Limited Liability Companies." EITF Issue 03-16 provides that an investment
      in a limited liability company (LLC) that maintains a specific ownership
      account for each investor should be viewed similarly to an investment in
      a limited partnership for purposes of determining whether a noncontrolling
      interest in the LLC should be accounted for using the cost or equity method.
      EITF Issue 03-16 is effective for reporting periods beginning after June
      15, 2004, and is required to be applied as a change in accounting principle
      with a cumulative effect adjustment reflected in the period of adoption.
      PPL and its subsidiaries adopted EITF Issue 03-16 effective July 1, 2004.
      The adoption did not have a material impact on the results of PPL and its
      subsidiaries.
    EITF Issue 04-8 (PPL)
    In October 2004, the FASB ratified the consensuses in EITF Issue 04-8,
      "The Effect of Contingently Convertible Instruments on Diluted Earnings
      per Share." EITF Issue 04-8 requires contingently convertible instruments
      to be included in diluted EPS, if dilutive, regardless of whether the market
      price trigger for conversion has been met. EITF Issue 04-8 is effective
      for reporting periods ending after December 15, 2004, and it requires restatement
      of prior periods in certain circumstances. PPL adopted EITF Issue 04-8 effective
      December 31, 2004. Since PPL modified the terms of PPL Energy Supply's 2.625%
      Convertible Senior Notes due 2023 in November 2004, the adoption did not
      have a material impact on PPL's diluted EPS for 2004 and did not result
      in any changes to diluted EPS for prior periods. See Note 4 for a discussion
      of the modification of the terms of the Convertible Senior Notes and for
      the 2004 dilutive impact of the Convertible Senior Notes. See Note 8 for
      a discussion of the consent solicitation that effected the modifications.
    FSP FAS 106-1 and FSP FAS 106-2 (PPL, PPL Energy Supply and PPL
      Electric)
    See Note 12 for a discussion of FSP FAS 106-1 and FSP FAS 106-2, "Accounting
      and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement
      and Modernization Act of 2003."
    FSP FAS 109-1 and FSP FAS 109-2 (PPL and PPL Energy Supply)
    In December 2004, the FASB issued FSP FAS 109-1, "Application of FASB Statement
      No. 109, 'Accounting for Income Taxes,' to the Tax Deduction on Qualified
      Production Activities Provided by the American Jobs Creation Act of 2004"
      and FSP FAS 109-2, "Accounting and Disclosure Guidance for the Foreign Earnings
      Repatriation Provision within the American Jobs Creation Act of 2004." FSP
      FAS 109-1 requires companies to account for the tax deduction for qualified
      domestic production activities provided by the American Jobs Creation Act
      as a special deduction in accordance with SFAS 109. Thus, the impact of
      the deduction will be reported in the period in which the deduction is claimed
      on the tax return. FSP FAS 109-2 provides an exception to the SFAS 109 requirement
      to reflect in the period of enactment the effect of a new tax law. Under
      FSP FAS 109-2, a company is allowed time beyond the financial reporting
      period in which enactment occurred in order to evaluate the effect of the
      American Jobs Creation Act on its plan for reinvestment or repatriation
      of foreign earnings for purposes of applying SFAS 109. FSP FAS 109-2 provides
      that a company that is evaluating the repatriation provision of the American
      Jobs Creation Act shall apply the provisions of SFAS 109 as it decides on
      a plan for reinvestment or repatriation of its unremitted foreign earnings.
      Both FSP FAS 109-1 and FSP FAS 109-2 are effective December 21, 2004.
    FSP FAS 109-1 and FSP FAS 109-2 did not impact PPL and its subsidiaries'
      financial results for 2004. PPL and its subsidiaries are in the process
      of evaluating the impact on future years, and such impact could be material.
      See Note 5 for discussion of the American Jobs Creation Act and disclosures
      regarding potential future repatriation of earnings.

---

|SCHEDULE II
        - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES 
|---------------------------------------------------------------------
|PPL Corporation                                                      
|(Millions of Dollars)                                                
|                                                                     
|Column A                                                             
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Description                                                          
|                                                                     
|                                                                     
|Year Ended December 31, 2004                                         
|Reserves deducted from assets
        in the 
          Balance Sheet
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Year Ended December 31, 2003                                         
|Reserves deducted from assets
        in the 
          Balance Sheet
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Year Ended December 31, 2002                                         
|Reserves deducted from assets
        in the 
          Balance Sheet
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|(a)                                                                  
|(b)                                                                  
|(c)                                                                  
|(d)                                                                  
|(e)                                                                  

---



|SCHEDULE II -
        VALUATION AND QUALIFYING ACCOUNTS AND RESERVES 
|---------------------------------------------------------------------
|PPL Energy Supply, LLC                                               
|(Millions of Dollars)                                                
|                                                                     
|Column A                                                             
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Description                                                          
|                                                                     
|                                                                     
|Year Ended December 31, 2004                                         
|Reserves deducted from assets
        in the 
          Balance Sheet
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Year Ended December 31, 2003                                         
|Reserves deducted from assets
        in the 
          Balance Sheet
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Year Ended December 31, 2002                                         
|Reserves deducted from assets
        in the 
          Balance Sheet
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|(a)                                                                  
|(b)                                                                  
|(c)                                                                  
|(d)                                                                  
|(e)                                                                  

---



|SCHEDULE II
        - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES 
|---------------------------------------------------------------------
|PPL Electric Utilities Corporation                                   
|(Millions of Dollars)                                                
|                                                                     
|Column A                                                             
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Description                                                          
|                                                                     
|                                                                     
|Year Ended December 31, 2004                                         
|Reserves deducted from assets
        in the 
          Balance Sheet
|                                                                     
|                                                                     
|Year Ended December 31, 2003                                         
|Reserves deducted from assets
        in the 
          Balance Sheet
|                                                                     
|                                                                     
|Year Ended December 31, 2002                                         
|Reserves deducted from assets
        in the 
          Balance Sheet
|                                                                     
|                                                                     
|                                                                     

---



|QUARTERLY
        FINANCIAL, COMMON STOCK PRICE AND DIVIDEND DATA (Unaudited)
|-----------------------------------------------------------------------------
|PPL Corporation and Subsidiaries                                             
|(Millions of Dollars, except per share
        data)                         
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Operating revenues                                                           
|Operating income                                                             
|Income from continuing operations                                            
|Net income                                                                   
|Basic earnings per common share:
        (b)                                 
|                                                                             
|                                                                             
|Diluted earnings per common
        share: (b)                               
|                                                                             
|                                                                             
|Dividends declared per common
        share (c)                              
|Price per common share                                                       
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Operating revenues as previously
        reported                            
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Operating income                                                             
|Income from continuing operations                                            
|Net income                                                                   
|Basic earnings per common share:
        (b)                                 
|                                                                             
|                                                                             
|Diluted earnings per common
        share: (b)                               
|                                                                             
|                                                                             
|Dividends declared per common
        share (c)                              
|Price per common share                                                       
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|(a)                                                                          
|(b)                                                                          
|(c)                                                                          

---

|QUARTERLY
        FINANCIAL DATA (Unaudited)               
|-----------------------------------------------------------
|PPL Electric Utilities Corporation
        and Subsidiaries
|(Millions of Dollars)                                      
|                                                           
|                                                           
|                                                           
|2004                                                       
|Operating revenues                                         
|Operating income                                           
|Income available to PPL                                    
|                                                           
|                                                           
|2003                                                       
|Operating revenues                                         
|Operating income                                           
|Income (loss) available
        to PPL                     
|                                                           
|                                                           
|(a)                                                        

---



ITEM 9. CHANGES IN AND DISAGREEMENTS
  WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

None.

|ITEM
        9A. CONTROLS AND PROCEDURES                                              
|--------------------------------------------------------------------------------------
|                                                                                      
|PPL Corporation, PPL Energy
        Supply, LLC and PPL Electric Utilities Corporation
|                                                                                      
|(a)                                                                                   
|                                                                                      
|                                                                                      
|                                                                                      
|(b)                                                                                   
|                                                                                      
|                                                                                      
|                                                                                      
|Management's Report on Internal
        Control over Financial Reporting              
|                                                                                      
|PPL Corporation                                                                       
|                                                                                      
|                                                                                      
|                                                                                      
|PPL Energy Supply, LLC and
        PPL Electric Utilities Corporation                 
|                                                                                      
|                                                                                      
|                                                                                      
|ITEM
        9B. OTHER INFORMATION                                                    
|                                                                                      
|PPL Corporation, PPL Energy
        Supply, LLC and PPL Electric Utilities Corporation
|                                                                                      
|                                                                                      

---



PART III

ITEM 10. DIRECTORS AND EXECUTIVE
  OFFICERS OF THE REGISTRANT

PPL Corporation

Additional information for this item will be set forth in the sections entitled
  "Nominees for Directors," "Directors Continuing in Office," "Section 16(a) Beneficial
  Ownership Reporting Compliance" and "Board Committees - Audit Committee" in
  PPL's 2005 Notice of Annual Meeting and Proxy Statement, which will be filed
  with the SEC not later than 120 days after December 31, 2004, and which
  information is incorporated herein by reference. Information required by this
  item concerning the executive officers of PPL is set forth at the end of Part
  I of this report.

PPL has adopted a code of ethics entitled "Standards of Conduct and Integrity"
  that applies to all directors, managers, trustees, officers (including the principal
  executive officers, principal financial officers and principal accounting officers
  (each, a "principal officer")), employees and agents of PPL and PPL's subsidiaries
  for which it has operating control (including PPL Energy Supply and PPL Electric).
  The "Standards of Conduct and Integrity" are posted on PPL's Internet Web site:
  www.pplweb.com/about/corporate+governance, and are available in print
  to any shareholder who requests them. A description of any amendment to the
  "Standards of Conduct and Integrity" (other than a technical, administrative
  or other non-substantive amendment) will be posted on PPL's Internet Web site
  within five business days following the date of the amendment. In addition,
  if a waiver constituting a material departure from a provision of the "Standards
  of Conduct and Integrity" is granted to one of the principal officers, a description
  of the nature of the waiver, the name of the person to whom the waiver was granted
  and the date of the waiver will be posted on PPL's Internet Web site within
  five business days following the date of the waiver.

PPL also has adopted its "Guidelines for Corporate Governance," which address,
  among other things, director qualification standards and director and board
  committee responsibilities. These guidelines, and the charters of each of the
  committees of PPL's board of directors, are posted on PPL's Internet Web site:
  www.pplweb.com/about/corporate+governance and are available in print
  to any shareholder who requests them.

PPL Energy Supply, LLC

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

PPL Electric Utilities Corporation

Information for this item will be set forth in the sections entitled "Nominees
  for Directors" and "Directors Continuing in Office" in PPL Electric's 2005 Notice
  of Annual Meeting and Information Statement, which will be filed with the SEC
  not later than 120 days after December 31, 2004, and which information
  is incorporated herein by reference. Information required by this item concerning
  the executive officers of PPL Electric is set forth at the end of Part I of
  this report.



ITEM 11. EXECUTIVE COMPENSATION

PPL Corporation

Information for this item will be set forth in the sections entitled "Compensation
  of Directors," "Board Committees - Audit Committee," "Summary Compensation Table,"
  "Option Grants in Last Fiscal Year" and "Retirement Plans for Executive Officers"
  in PPL's 2005 Notice of Annual Meeting and Proxy Statement, which will be filed
  with the SEC not later than 120 days after December 31, 2004, and which
  information is incorporated herein by reference.

PPL Energy Supply, LLC

Item 11 is omitted as PPL Energy Supply meets the conditions set forth in General
  Instruction (I)(1)(a) and (b) of Form 10-K.

PPL Electric Utilities Corporation

Information for this item will be set forth in the sections entitled "Compensation
  of Directors," "Summary Compensation Table," "Option Grants in Last Fiscal Year"
  and "Retirement Plans for Executive Officers" in PPL Electric's 2005 Notice
  of Annual Meeting and Information Statement, which will be filed with the SEC
  not later than 120 days after December 31, 2004, and which information
  is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN
  BENEFICIAL OWNERS AND MANAGEMENT

PPL Corporation

Information for this item will be set forth in the section entitled "Stock
  Ownership" in PPL's 2005 Notice of Annual Meeting and Proxy Statement, which
  will be filed with the SEC not later than 120 days after December 31, 2004,
  and which information is incorporated herein by reference. In addition, provided
  below in tabular format is information as of December 31, 2004, with respect
  to compensation plans (including individual compensation arrangements) under
  which equity securities of PPL are authorized for issuance.

Equity Compensation Plan Information



|                                                                       | Number of securities to be issued upon
        exercise of outstanding options, warrants and rights (3) | Weighted-average exercise price of outstanding
        options, warrants and rights (3) | Number of securities remaining available
        for future issuance under equity compensation plans (4)
|---------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------
|Equity compensation plans approved by security
        holders (1)     | 2,025,460 - ICP 955,515 - ICPKE
        2,980,975 - Total                                               | $38.74 - ICP
        $39.02 - ICPKE
        $38.83- Combined                            | 3,787,771 - ICP
           6,717,919 - ICPKE
          7,377,742 - DDCP
         17,883,432- Total      
|                                                                       |                                                                                                         |                                                                                         |                                                                                                         
|Equity compensation plans not approved by
        security holders (2) |                                                                                                         |                                                                                         |                                                                                                         



|(1) |  | Includes (a) the Amended
        and Restated Incentive Compensation Plan (ICP), under which stock options,
        restricted stock, restricted stock units, dividend equivalents and other
        stock-based awards may be awarded to executive officers of PPL; (b) the
        Amended and Restated Incentive Compensation Plan for Key Employees (ICPKE),
        under which stock options, restricted stock, restricted stock units, dividend
        equivalents and other stock-based awards may be awarded to non-executive
        key employees of PPL and its subsidiaries; and (c) the Directors Deferred
        Compensation Plan (DDCP), under which stock units may be awarded to directors
        of PPL. See Note 11 to the financial statements for additional information.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(2) |  | All of PPL's current compensation
        plans under which equity securities of PPL are authorized for issuance
        have been approved by PPL's shareholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(3) |  | Relates to common stock
        issuable upon the exercise of stock options awarded under the ICP and
        ICPKE as of December 31, 2004. In addition, as of December 31, 2004, the
        following other securities had been awarded and are outstanding under
        the ICP, ICPKE and DDCP: 156,240 shares of restricted stock and 84,520
        restricted stock units under the ICP; 212,981 shares of restricted stock
        and 255,439 restricted stock units under the ICPKE; and 116,389 stock
        units under the DDCP.                                                                                                                                                                                                                                                   
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(4) |  | Based upon the following
        aggregate award limitations under the ICP, ICPKE and DDCP: (a) under the
        ICP, 7,884,715 awards (i.e., 5% of the total PPL common stock outstanding
        as of April 23, 1999) granted after April 23, 1999; (b) under the ICPKE,
        8,286,804 awards (i.e., 5% of the total PPL common stock outstanding as
        of January 1, 2003) granted after April 25, 2003, reduced by outstanding
        awards for which common stock was not yet issued as of such date; and
        (c) under the DDCP, 7,526,428 securities. In addition, each of the ICP
        and ICPKE includes an annual award limitation of 2% of total PPL common
        stock outstanding as of January 1 of each year.                                                 

PPL Energy Supply, LLC

Item 12 is omitted as PPL Energy Supply meets the conditions set forth in General
  Instruction (I)(1)(a) and (b) of Form 10-K.

PPL Electric Utilities Corporation

Information for this item will be set forth in the section entitled "Stock
  Ownership" in PPL Electric's 2005 Notice of Annual Meeting and Information Statement,
  which will be filed with the SEC not later than 120 days after December 31,
  2004, and which information is incorporated herein by reference.



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PPL Corporation

None.

PPL Energy Supply, LLC

Item 13 is omitted as PPL Energy Supply meets the conditions set forth in General
  Instruction (I)(1)(a) and (b) of Form 10-K.

PPL Electric Utilities Corporation

None.

ITEM 14. PRINCIPAL ACCOUNTING FEES
  AND SERVICES

PPL Corporation

Information for this item will be set forth in the section entitled "Fees to
  Independent Auditor for 2004 and 2003" in PPL's 2005 Notice of Annual Meeting
  and Proxy Statement, which will be filed with the SEC not later than 120 days
  after December 31, 2004, and which information is incorporated herein by reference.

PPL Energy Supply, LLC

The following table presents fees billed by PricewaterhouseCoopers LLP (PwC)
  for the fiscal years ended December 31, 2004, and December 31, 2003, for professional
  services rendered for the audit of PPL Energy Supply's annual financial statements
  and for fees billed for other services rendered by PwC.



|                       |  | 2004           |       |  | 2003
|---------------------- |  | -------------- | ----- |  | ----
|                       |  |                |       |  |     
|                       |  | (in thousands)
|                       |  |                |       |  |     
|Audit fees (a)         |  | $              | 1,657 |  |     
|                       |  |                |       |  |     
|Audit-related fees (b) |  |                | 61    |  |     
|                       |  |                |       |  |     
|Tax fees (c)           |  |                |       |  |     
|                       |  |                |       |  |     
|All other fees (d)     |  |                | 3     |  |     

|(a) |  | Includes audit of annual financial statements
        and review of financial statements included in PPL Energy Supply's Quarterly
        Reports on Form 10-Q and for services in connection with statutory and
        regulatory filings or engagements, including comfort letters and consents
        for financings and filings made with the SEC.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                          
|(b) |  | Fees for audits of employee benefit plans
        and consultation to ensure appropriate accounting and reporting in connection
        with various business and financing transactions.                                                                                                                                                                
|    |  |                                                                                                                                                                                                                                                                                                                                                          
|(c) |  | Fees for international tax consulting and
        advisory services. PwC no longer provides these types of services to PPL
        Energy Supply or any of its affiliates.                                                                                                                                                                               
|    |  |                                                                                                                                                                                                                                                                                                                                                          
|(d) |  | Fees for access to a research database licensed
        by PwC that provides authoritative accounting and reporting guidance.                                                                                                                                                                                                                            



Approval of FeesThe Audit Committee of PPL has procedures for
  pre-approving audit and non-audit services to be provided by the independent
  auditor. The procedures are designed to ensure the continued independence of
  the independent auditor. More specifically, the use of the independent auditor
  to perform either audit or non-audit services is prohibited unless specifically
  approved in advance by the Audit Committee of PPL. As a result of this approval
  process, the Audit Committee of PPL has established specific categories of services
  and authorization levels. All services outside of the specified categories and
  all amounts exceeding the authorization levels are reviewed by the Chair of
  the Audit Committee of PPL, who serves as the Committee designee to review and
  approve audit and non-audit related services during the year. A listing of the
  approved audit and non-audit services is reviewed with the full Audit Committee
  of PPL no later than its next meeting.

The Audit Committee of PPL approved 100% of the 2004 and 2003 audit and non-audit
  related fees.

PPL Electric Utilities Corporation

Information for this item will be set forth in the section entitled "Fees to
  Independent Auditor for 2004 and 2003" in PPL Electric's 2005 Notice of Annual
  Meeting and Information Statement, which will be filed with the SEC not later
  than 120 days after December 31, 2004, and which information is incorporated
  herein by reference.

---

PART IV



ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

|PPL Corporation, PPL Energy Supply,
        LLC and PPL Electric Utilities Corporation
|--------------------------------------------------------------------------------------
|                                                                                      
|(a) The following documents are filed
        as part of this report:                 
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      

---

SHAREOWNER AND INVESTOR INFORMATION

Annual Meetings: The annual meeting of shareowners of PPL Corporation
  is held each year on the fourth Friday of April. The 2005 meeting for PPL Corporation
  will be held on Friday, April 22, 2005, at Lehigh University's Stabler Arena,
  at the Goodman Campus Complex located in Lower Saucon Township, outside Bethlehem,
  Pennsylvania. The 2005 meeting for PPL Electric will be held on Tuesday, April
  19, 2005, at the offices of the company at Two North Ninth Street, Allentown,
  Pennsylvania.

Proxy and Information Statement Material:A proxy statement and information
  statement and notice of PPL's and PPL Electric's annual meetings are mailed
  to all shareowners of record as of February 28, 2005.

Dividends:Subject to the declaration of dividends on PPL common stock
  by the PPL Board of Directors or its Executive Committee and PPL Electric preferred
  stock by the PPL Electric Board of Directors, dividends are paid on the first
  day of April, July, October and January. Dividend checks are mailed in advance
  of those dates with the intention that they arrive as close as possible to the
  payment dates. The 2005 record dates for dividends are expected to be March
  10, June 10, September 9, and December 9.

Direct Deposit of Dividends:Shareowners may choose to have their dividend
  checks deposited directly into their checking or savings account. Quarterly
  dividend payments are electronically credited on the dividend date, or the first
  business day thereafter.

Dividend Reinvestment Plan:Shareowners may choose to have dividends
  on their PPL common stock or PPL Electric preferred stock reinvested in PPL
  common stock instead of receiving the dividend by check.

Certificate Safekeeping: Shareowners participating in the Dividend Reinvestment
  Plan may choose to have their common stock certificates forwarded to PPL for
  safekeeping.

Lost Dividend or Interest Checks: Dividend or interest checks lost by
  investors, or those that may be lost in the mail, will be replaced if the check
  has not been located by the 10th business day following the payment date.

Transfer of Stock or Bonds: Stock or bonds may be transferred from one
  name to another or to a new account in the name of another person. Please contact
  Investor Services regarding transfer instructions.

Bondholder Information:Much of the information and many of the procedures
  detailed here for shareowners also apply to bondholders. Questions related to
  bondholder accounts should be directed to Investor Services.

Lost Stock or Bond Certificates: Please contact Investor Services for
  an explanation of the procedure to replace lost stock or bond certificates.

PPL Annual Report:Published and mailed in mid-March to all shareowners
  of record.

Periodic Mailings:Letters regarding new investor programs, special
  items of interest, or other pertinent information are mailed on a non-scheduled
  basis as necessary.

Duplicate Mailings:The annual report and other investor publications
  are mailed to each investor account. If you have more than one account, or if
  there is more than one investor in your household, you may contact Investor
  Services to request that only one publication be delivered to your address.
  Please provide account numbers for all duplicate mailings.

Shareowner Information Line:Shareowners can get detailed corporate
  and financial information 24 hours a day using the Shareowner Information Line.
  They can hear timely recorded messages about earnings, dividends and other company
  news releases; request information by fax; and request printed materials in
  the mail.

The toll-free Shareowner Information Line is 1-800-345-3085.

Other PPL publications, such as the annual and quarterly reports to the Securities
  and Exchange Commission (Forms 10-K and 10-Q) will be mailed upon request.

Shareowners can also obtain information free of charge from PPL's Internet
  home page (www.pplweb.com). Shareowners can access PPL Securities and Exchange
  Commission filings, corporate governance materials, news releases, stock quotes
  and historical performance. Visitors to our Web site can provide their E-mail
  address and indicate their desire to receive future earnings or news releases
  automatically.

Investor Services:For any questions you have or additional information
  you require about PPL and its subsidiaries, please call the Shareowner Information
  Line, or write to:

| | Manager-PPL Investor Services  
| | -------------------------------
| | Two North Ninth Street (GENTW8)
| | Allentown, PA 18101            

Internet Access:For updated information throughout the year, check
  out our home page at www.pplweb.com. You may also contact Investor Services
  via E-mail at invserv@pplweb.com.

Registered shareowners can access account information by visiting shareowneronline.com.



|Listed Securities:                  |                                     | Fiscal Agents:                      
|----------------------------------- | ----------------------------------- | ------------------------------------
|New York Stock Exchange             |                                     | Stock Transfer Agents and           
|                                    |                                     | Registrars                          
|                                    | PPL Corporation:                    |                                     
|                                    | Common Stock (Code: PPL)            |                                     
|                                    |                                     |                                     
|                                    | PPL Electric Utilities Corporation: |                                     
|                                    | 4-1/2% Preferred Stock              |                                     
|                                    | (Code: PPLPRB)                      |                                     
|                                    | 4.40% Series Preferred Stock        |                                     
|                                    | (Code: PPLPRA)                      |                                     
|                                    |                                     |                                     
|Philadelphia Stock
        Exchange |                                     | Dividend Reinvestment Plan Agent    
|                                    |                                     |                                     
|                                    | PPL Corporation:                    |                                     
|                                    | Common Stock                        |                                     
|                                    |                                     | Mortgage Bond Trustee               
|                                    |                                     | Deutsche Bank Trust Company Americas
|                                    |                                     | Attn: Security Transfer Unit        
|                                    |                                     | 648 Grassmere Park Road             
|                                    |                                     | Nashville, TN 37211                 
|                                    |                                     |                                     
|                                    |                                     | Indenture Trustee                   
|                                    |                                     | JPMorgan Chase Bank, N.A.           
|                                    |                                     |                                     
|                                    |                                     | New York, NY 10004                  
|                                    |                                     |                                     
|                                    |                                     | Bond Interest Paying Agent          
|                                    |                                     | PPL Services Corporation            
|                                    |                                     | Investor Services Department        
|                                    |                                     |                                     
|                                    |                                     |                                     

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
  Act of 1934, the Registrant has duly caused this report to be signed on its
  behalf by the undersigned, thereunto duly authorized.

PPL Corporation
  (Registrant)

|By /s/ William F. Hecht                                                                                                                                                                                                              |  |                     |  |                                                 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------- |  | ------------------------------------------------
|                                                                                                                                                                                                                                     |  |                     |  |                                                 
|William F. Hecht -                                                                                                                                                                                                                   |  |                     |  |                                                 
|Chairman, President                                                                                                                                                                                                                  |  |                     |  |                                                 
|and Chief Executive                                                                                                                                                                                                                  |  |                     |  |                                                 
|Officer                                                                                                                                                                                                                              |  |                     |  |                                                 
|                                                                                                                                                                                                                                     |  |                     |  |                                                 
|Pursuant to the requirements of the
        Securities Exchange Act of 1934, this report has been signed below by
        the following persons on behalf of the Registrant and in the capacities
        and on the date indicated.
|                                                                                                                                                                                                                                     |  |                     |  |                                                 
|                                                                                                                                                                                                                                     |  |                     |  |                                                 
|                                                                                                                                                                                                                                     |  |                     |  |                                                 
|                                                                                                                                                                                                                                     |  |                     |  | TITLE                                           
|                                                                                                                                                                                                                                     |  |                     |  |                                                 
|By /s/ William F. Hecht                                                                                                                                                                                                              |  |                     |  | Principal Executive Officer and
        Director
|                                                                                                                                                                                                                                     |  |                     |  |                                                 
|William F. Hecht -                                                                                                                                                                                                                   |  |                     |  |                                                 
|Chairman, President                                                                                                                                                                                                                  |  |                     |  |                                                 
|and Chief Executive                                                                                                                                                                                                                  |  |                     |  |                                                 
|Officer                                                                                                                                                                                                                              |  |                     |  |                                                 
|                                                                                                                                                                                                                                     |  |                     |  |                                                 
|                                                                                                                                                                                                                                     |  |                     |  |                                                 
|By /s/ John R. Biggar                                                                                                                                                                                                                |  |                     |  | Principal Financial Officer and
        Director
|                                                                                                                                                                                                                                     |  |                     |  |                                                 
|John R. Biggar -                                                                                                                                                                                                                     |  |                     |  |                                                 
|Executive Vice President                                                                                                                                                                                                             |  |                     |  |                                                 
|and Chief Financial Officer                                                                                                                                                                                                          |  |                     |  |                                                 
|                                                                                                                                                                                                                                     |  |                     |  |                                                 
|                                                                                                                                                                                                                                     |  |                     |  |                                                 
|By /s/ Paul A. Farr                                                                                                                                                                                                                  |  |                     |  | Principal Accounting Officer                    
|                                                                                                                                                                                                                                     |  |                     |  |                                                 
|Paul A. Farr -                                                                                                                                                                                                                       |  |                     |  |                                                 
|Vice President and Controller                                                                                                                                                                                                        |  |                     |  |                                                 
|                                                                                                                                                                                                                                     |  |                     |  |                                                 
|                                                                                                                                                                                                                                     |  |                     |  |                                                 
|                                                                                                                                                                                                                                     |  |                     |  |                                                 
|Directors:                                                                                                                                                                                                                           |  |                     |  |                                                 
|                                                                                                                                                                                                                                     |  |                     |  |                                                 
|Frederick M. Bernthal                                                                                                                                                                                                                |  | Stuart Heydt        |  |                                                 
|John W. Conway                                                                                                                                                                                                                       |  | W. Keith Smith      |  |                                                 
|E. Allen Deaver                                                                                                                                                                                                                      |  | Susan M. Stalnecker |  |                                                 
|Louise K. Goeser                                                                                                                                                                                                                     |  |                     |  |                                                 
|                                                                                                                                                                                                                                     |  |                     |  |                                                 
|                                                                                                                                                                                                                                     |  |                     |  |                                                 
|By /s/ William F. Hecht                                                                                                                                                                                                              |  |                     |  |                                                 
|                                                                                                                                                                                                                                     |  |                     |  |                                                 
|William F. Hecht, Attorney-in-fact                                                                                                                                                                                                   |  | Date: March 1, 2005 |  |                                                 



---



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
  Act of 1934, the Registrant has duly caused this report to be signed on its
  behalf by the undersigned, thereunto duly authorized.

PPL Energy Supply, LLC
  (Registrant)

|By /s/ William F. Hecht                                                                                                                                                                                                              |  |  |  |                                                 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  |  | ------------------------------------------------
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|William F. Hecht -                                                                                                                                                                                                                   |  |  |  |                                                 
|President                                                                                                                                                                                                                            |  |  |  |                                                 
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|Pursuant to the requirements of the
        Securities Exchange Act of 1934, this report has been signed below by
        the following persons on behalf of the Registrant and in the capacities
        and on the date indicated.
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|                                                                                                                                                                                                                                     |  |  |  | TITLE                                           
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|By /s/ William F. Hecht                                                                                                                                                                                                              |  |  |  | Principal Executive Officer and
        Manager 
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|William F. Hecht -                                                                                                                                                                                                                   |  |  |  |                                                 
|President                                                                                                                                                                                                                            |  |  |  |                                                 
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|By /s/ James E. Abel                                                                                                                                                                                                                 |  |  |  | Principal Financial Officer and
        Manager 
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|James E. Abel -                                                                                                                                                                                                                      |  |  |  |                                                 
|Vice President and Treasurer                                                                                                                                                                                                         |  |  |  |                                                 
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|By /s/ Paul A. Farr                                                                                                                                                                                                                  |  |  |  | Principal Accounting Officer and
        Manager
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|Paul A. Farr -                                                                                                                                                                                                                       |  |  |  |                                                 
|Vice President and Controller                                                                                                                                                                                                        |  |  |  |                                                 
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|Managers:                                                                                                                                                                                                                            |  |  |  |                                                 
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|/s/ John R. Biggar                                                                                                                                                                                                                   |  |  |  |                                                 
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|John R. Biggar                                                                                                                                                                                                                       |  |  |  |                                                 
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|/s/ Robert J. Grey                                                                                                                                                                                                                   |  |  |  |                                                 
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|Robert J. Grey                                                                                                                                                                                                                       |  |  |  |                                                 
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|/s/ James H. Miller                                                                                                                                                                                                                  |  |  |  |                                                 
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|James H. Miller                                                                                                                                                                                                                      |  |  |  |                                                 
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|Date: March 1, 2005                                                                                                                                                                                                                  |  |  |  |                                                 

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
  Act of 1934, the Registrant has duly caused this report to be signed on its
  behalf by the undersigned, thereunto duly authorized.

PPL Electric Utilities Corporation
  (Registrant)

|By /s/ John F. Sipics                                                                                                                                                                                                                |  |  |  |                                                 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  |  | ------------------------------------------------
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|John F. Sipics -                                                                                                                                                                                                                     |  |  |  |                                                 
|President                                                                                                                                                                                                                            |  |  |  |                                                 
|                                                                                                                                                                                                                                    
|Pursuant to the requirements of the
        Securities Exchange Act of 1934, this report has been signed below by
        the following persons on behalf of the Registrant and in the capacities
        and on the date indicated.
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|                                                                                                                                                                                                                                     |  |  |  | TITLE                                           
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|By /s/ John F. Sipics                                                                                                                                                                                                                |  |  |  | Principal Executive Officer and
        Director
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|John F. Sipics -                                                                                                                                                                                                                     |  |  |  |                                                 
|President                                                                                                                                                                                                                            |  |  |  |                                                 
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|By /s/ James E. Abel                                                                                                                                                                                                                 |  |  |  | Principal Financial Officer                     
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|James E. Abel -                                                                                                                                                                                                                      |  |  |  |                                                 
|Treasurer                                                                                                                                                                                                                            |  |  |  |                                                 
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|By /s/ Paul A. Farr                                                                                                                                                                                                                  |  |  |  | Principal Accounting Officer                    
|                                                                                                                                                                                                                                     |  |  |  |                                                 
|Paul A. Farr -                                                                                                                                                                                                                       |  |  |  |                                                 
|Vice President and Controller                                                                                                                                                                                                        |  |  |  |                                                 
|                                                                                                                                                                                                                                     |  |  |  |                                                 

|                      |  |                          |  |                      
|--------------------- |  | ------------------------ |  | ---------------------
|Directors:            |  |                          |  |                      
|                      |  |                          |  |                      
|/s/ William F. Hecht  |  | /s/ Dean A. Christiansen |  | /s/ James H. Miller  
|                      |  |                          |  |                      
|William F. Hecht      |  | Dean A. Christiansen     |  | James H. Miller      
|                      |  |                          |  |                      
|/s/ John R. Biggar    |  | /s/ Robert J. Grey       |  | /s/ Roger L. Petersen
|                      |  |                          |  |                      
|John R. Biggar        |  | Robert J. Grey           |  | Roger L. Petersen    
|                      |  |                          |  |                      
|/s/ Paul T. Champagne |  | /s/ Rick L. Klingensmith |  | /s/ Bryce L. Shriver 
|                      |  |                          |  |                      
|Paul T. Champagne     |  | Rick L. Klingensmith     |  | Bryce L. Shriver     
|                      |  |                          |  |                      
|                      |  |                          |  |                      
|                      |  |                          |  |                      
|                      |  |                          |  |                      
|                      |  |                          |  |                      
|Date: March 1, 2005   |  |                          |  |                      



---



EXHIBIT INDEX

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

|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|---------- | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3(a)-1     | - | Articles of Incorporation of PPL
        Corporation (Exhibit B to Proxy Statement of PPL Electric Utilities Corporation
        and Prospectus of PPL Corporation, dated March 9, 1995)                                                                                                                                                                                                                                                                                                                              
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|3(a)-2     | - | Articles of Amendment of PPL Corporation
        (Exhibit 3.2 to PPL Corporation Form S-3 (Registration Statement Nos.
        333-54504, 333-54504-01 and 333-54504-02))                                                                                                                                                                                                                                                                                                                                             
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|3(a)-3     | - | Amended and Restated Articles of
        Incorporation of PPL Electric Utilities Corporation (Exhibit 3(a)-3 to
        PPL Electric Utilities Corporation Form 10-K Report (File No. 1-905) for
        the year ended December 31, 2001)                                                                                                                                                                                                                                                                            
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|3(a)-4     | - | Certificate of Formation of PPL
        Energy Supply, LLC (Exhibit 3.1 to PPL Energy Supply, LLC Form S-4 (Registration
        Statement No. 333-74794))                                                                                                                                                                                                                                                                                                                                                            
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|3(b)-1     | - | Bylaws of PPL Corporation (Exhibit
        3(ii)(a) to PPL Corporation Form 10-Q Report (File No. 1-11459) for the
        quarter ended September 30, 1998)                                                                                                                                                                                                                                                                                                                                                          
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|3(b)-2     | - | Bylaws of PPL Electric Utilities
        Corporation, as amended effective July 16, 2004 (Exhibit 3 to PPL Electric
        Utilities Corporation Form 10-Q Report (File No. 1-905) for the quarter
        ended June 30, 2004)                                                                                                                                                                                                                                                                                      
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|3(b)-3     | - | Limited Liability Company Agreement
        of PPL Energy Supply, LLC, dated March 20, 2001 (Exhibit 3.2 to PPL Energy
        Supply, LLC Form S-4 (Registration Statement No. 333-74794))                                                                                                                                                                                                                                                                                                                           
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(a)-1     | - | Amended and Restated Employee Stock
        Ownership Plan, dated June 12, 2000 (Exhibit 4(a) to PPL Corporation Form
        10-K Report (File No. 1-11459) for the year ended December 31, 2000)                                                                                                                                                                                                                                                                                                                    
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(a)-2     | - | Amendment No. 1 to said Employee
        Stock Ownership Plan, dated September 10, 2001 (Exhibit 4(a)-2 to PPL
        Corporation Form 10-K Report (File No. 1-11459) for the year ended December
        31, 2001)                                                                                                                                                                                                                                                                                                  
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(a)-3     | - | Amendment No. 2 to said Employee
        Stock Ownership Plan, dated October 8, 2002 (Exhibit 4(a)-3 to PPL Corporation
        Form 10-K Report (File No. 1-11459) for the year ended December 31, 2002)                                                                                                                                                                                                                                                                                                             
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(a)-4     | - | Amendment No. 3 to said Employee
        Stock Ownership Plan, dated April 1, 2003 (Exhibit 4(a)-4 to PPL Corporation
        Form 10-K Report (File No. 1-11459) for the year ended December 31, 2003)                                                                                                                                                                                                                                                                                                               
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(a)-5     | - | Amendment No. 4 to said Employee
        Stock Ownership Plan, dated May 7, 2003 (Exhibit 4(a)-5 to PPL Corporation
        Form 10-K Report (File No. 1-11459) for the year ended December 31, 2004)                                                                                                                                                                                                                                                                                                                 
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(b)-1     | - | Mortgage and Deed of Trust, dated
        as of October 1, 1945, between PPL Electric Utilities Corporation and
        Bankers Trust Company (as successor Trustee) (Exhibit 2(a)-4 to Registration
        Statement No. 2-60291)                                                                                                                                                                                                                                                                                   
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(b)-2     | - | Supplement, dated as of July 1,
        1954, to said Mortgage and Deed of Trust (Exhibit 2(b)-5 to Registration
        Statement No. 219255)                                                                                                                                                                                                                                                                                                                                                                        
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(b)-3     | - | Supplement, dated as of July 1,
        1991, to said Mortgage and Deed of Trust (Exhibit 4(a) to PPL Electric
        Utilities Corporation Form 8-K Report (File No. 1-905) dated July 29,
        1991)                                                                                                                                                                                                                                                                                                            
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(b)-4     | - | Supplement, dated as of May 1,
        1992, to said Mortgage and Deed of Trust (Exhibit 4(a) to PPL Electric
        Utilities Corporation Form 8-K Report (File No. 1-905) dated June 1, 1992)                                                                                                                                                                                                                                                                                                                      
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(b)-5     | - | Supplement, dated as of November
        1, 1992, to said Mortgage and Deed of Trust (Exhibit 4(b)-29 to PPL Electric
        Utilities Corporation Form 10-K Report (File 1-905) for the year ended
        December 31, 1992)                                                                                                                                                                                                                                                                                       
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(b)-6     | - | Supplement, dated as of April 1,
        1993, to said Mortgage and Deed of Trust (Exhibit 4(a) to PPL Electric
        Utilities Corporation Form 8-K Report (File No. 1-905) dated April 30,
        1993)                                                                                                                                                                                                                                                                                                          
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(b)-7     | - | Supplement, dated as of February
        15, 1994, to said Mortgage and Deed of Trust (Exhibit 4(a) to PPL Electric
        Utilities Corporation Form 8-K Report (File No. 1-905) dated March 11,
        1994)                                                                                                                                                                                                                                                                                                      
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(b)-8     | - | Supplement, dated as of March 1,
        1994, to said Mortgage and Deed of Trust (Exhibit 4(b) to PPL Electric
        Utilities Corporation Form 8-K Report (File No. 1-905) dated March 11,
        1994)                                                                                                                                                                                                                                                                                                          
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(b)-9     | - | Supplement, dated as of March 15,
        1994, to said Mortgage and Deed of Trust (Exhibit 4(a) to PPL Electric
        Utilities Corporation Form 8-K Report (File No. 1-905) dated March 30,
        1994)                                                                                                                                                                                                                                                                                                         
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(b)-10    | - | Supplement, dated as of September
        1, 1994, to said Mortgage and Deed of Trust (Exhibit 4(a) to PPL Electric
        Utilities Corporation Form 8-K (File No. 1-905) dated October 3, 1994)                                                                                                                                                                                                                                                                                                                    
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(b)-11    | - | Supplement, dated as of October
        1, 1994, to said Mortgage and Deed of Trust (Exhibit 4(a) to PPL Electric
        Utilities Corporation Form 8-K Report (File No. 1-905) dated October 3,
        1994)                                                                                                                                                                                                                                                                                                       
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(b)-12    | - | Supplement, dated as of August
        1, 1995, to said Mortgage and Deed of Trust (Exhibit 6(a) to PPL Electric
        Utilities Corporation Form 10-Q Report (File No. 1-905) for the quarter
        ended September 30, 1995)                                                                                                                                                                                                                                                                                    
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(b)-13    | - | Supplement, dated as of April 1,
        1997, to said Mortgage and Deed of Trust (Exhibit 4(b)-17 to PPL Electric
        Utilities Corporation Form 10-K Report (File No. 1-905) for the year ended
        December 31, 1997)                                                                                                                                                                                                                                                                                      
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(b)-14    | - | Supplement, dated as of May 5,
        1998, to said Mortgage and Deed of Trust (Exhibit 4.3 to PPL Electric
        Utilities Corporation Form 8-K Report (File No. 1-905) dated May 1, 1998)                                                                                                                                                                                                                                                                                                                        
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(b)-15    | - | Supplement, dated as of June 1,
        1999, to said Mortgage and Deed of Trust (Exhibit 4(b)-19 to PPL Electric
        Utilities Corporation Form 10-K Report (File No. 1-905) for the year ended
        December 31, 1999)                                                                                                                                                                                                                                                                                       
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(b)-16    | - | Supplement, dated as of August
        1, 2001, to said Mortgage and Deed of Trust (Exhibit 4.5 to PPL Electric
        Utilities Corporation Form 8-K Report (File No. 1-905) dated August 21,
        2001)                                                                                                                                                                                                                                                                                                         
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(b)-17    | - | Supplement, dated as of January
        1, 2002, to said Mortgage and Deed of Trust (Exhibit 4(b)-19 to PPL Electric
        Utilities Corporation Form 10-K Report (File No. 1-905) for the year ended
        December 31, 2001)                                                                                                                                                                                                                                                                                    
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(b)-18    | - | Supplement, dated as of February
        1, 2003, to said Mortgage and Deed of Trust (Exhibit 4(b)-20 to PPL Electric
        Utilities Corporation Form 10-K Report (File No. 1-905) for the year ended
        December 31, 2002)                                                                                                                                                                                                                                                                                   
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(b)-19    | - | Supplement, dated as of May 1,
        2003, to said Mortgage and Deed of Trust (Exhibit 10(c) to PPL Electric
        Utilities Corporation Form 10-Q Report (File No. 1-905) for quarter ended
        June 30, 2003)                                                                                                                                                                                                                                                                                               
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*4(b)-20   | - | Supplement, dated as of February
        1, 2005, to said Mortgage and Deed of Trust                                                                                                                                                                                                                                                                                                                                                                                                                                  
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(c)-1     | - | Indenture, dated as of November
        1, 1997, among PPL Corporation, PPL Capital Funding, Inc. and JPMorgan
        Chase Bank (formerly The Chase Manhattan Bank), as Trustee (Exhibit 4.1
        to PPL Corporation Form 8-K Report (File No. 1-11459) dated November 12,
        1997)                                                                                                                                                                                                                         
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(c)-2     | - | Supplement, dated as of November
        1, 1997, to said Indenture (Exhibit 4.2 to PPL Corporation Form 8-K Report
        (File No. 1-11459) dated November 12, 1997)                                                                                                                                                                                                                                                                                                                                               
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(c)-3     | - | Supplement, dated as of March 1,
        1999, to said Indenture (Exhibit 4.3 to Registration Statement Nos. 333-87847,
        333-87847-01 and 333-87847-02)                                                                                                                                                                                                                                                                                                                                                        
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(c)-4     | - | Supplement, dated as of October
        1, 1999, to said Indenture (Exhibit 4(c)-4 to PPL Corporation Form 10-K
        Report (File No. 1-11459) for the year ended December 31, 1999)                                                                                                                                                                                                                                                                                                                               
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(c)-5     | - | Supplement, dated as of June 1,
        2000, to said Indenture (Exhibit 4 to PPL Corporation Form 10-Q Report
        (File No. 1-11459) for the quarter ended June 30, 2000)                                                                                                                                                                                                                                                                                                                                        
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(c)-6     | - | Supplement, dated as of January
        21, 2003, to said Indenture (Exhibit 99.1 to PPL Corporation Form 8-K
        Report (File No. 1-11459) dated January 22, 2003)                                                                                                                                                                                                                                                                                                                                               
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(c)-7     | - | Supplement, dated as of January
        21, 2004, to said Indenture (Exhibit 4(a) to PPL Corporation Form 10-Q
        Report (File No. 1-11459) for the quarter ended March 31, 2004)                                                                                                                                                                                                                                                                                                                                
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(c)-8     | - | Supplement, dated as of May 18,
        2004, to said Indenture (Exhibit 4.7 to Registration Statement Nos. 333-116478,
        333-116478-01 and 333-116478-02)                                                                                                                                                                                                                                                                                                                                                      
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(d)-1     | - | Junior Subordinated Indenture,
        dated as of April 1, 1997, between PPL Electric Utilities Corporation
        and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as Trustee
        (Exhibit 4.1 to Registration Statement No. 333-20661)                                                                                                                                                                                                                                                            
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(d)-2     | - | Amended and Restated Trust Agreement,
        dated as of April 8, 1997, among PPL Electric Utilities Corporation, JPMorgan
        Chase Bank (formerly The Chase Manhattan Bank), as Property Trustee, Chase
        Manhattan Bank (Delaware), as Delaware Trustee, and John R. Biggar and
        James E. Abel, as Administrative Trustees (Exhibit 4.4 to Registration
        Statement No. 333-20661)                                                                                                         
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(d)-3     | - | Guarantee Agreement, dated as of
        April 8, 1997, between PPL Electric Utilities Corporation and JPMorgan
        Chase Bank (formerly The Chase Manhattan Bank), as Trustee (Exhibit 4.6
        to Registration Statement No. 333-20661)                                                                                                                                                                                                                                                                      
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(e)-1     | - | Amended and Restated Trust Agreement,
        dated as of June 13, 1997, among PPL Electric Utilities Corporation, JPMorgan
        Chase Bank (formerly The Chase Manhattan Bank), as Property Trustee, Chase
        Manhattan Bank (Delaware), as Delaware Trustee, and John R. Biggar and
        James E. Abel, as Administrative Trustees (Exhibit 4.4 to Registration
        Statement No. 333-27773)                                                                                                         
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(e)-2     | - | Guarantee Agreement, dated as of
        June 13, 1997, between PPL Electric Utilities Corporation and JPMorgan
        Chase Bank (formerly The Chase Manhattan Bank), as Trustee (Exhibit 4.6
        to Registration Statement No. 333-27773)                                                                                                                                                                                                                                                                      
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(f)-1     | - | Subordinated Indenture, dated as
        of May 9, 2001, between PPL Capital Funding, Inc., PPL Corporation and
        JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as Trustee (Exhibit
        4.1 to PPL Corporation Form 8-K Report (File No. 1-11459) dated May 9,
        2001)                                                                                                                                                                                                                     
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(f)-2     | - | Supplement, dated as of May 9,
        2001, to said Subordinated Indenture (Exhibit 4.2 to PPL Corporation Form
        8-K Report (File No. 1-11459) dated May 9, 2001)                                                                                                                                                                                                                                                                                                                                             
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(f)-3     | - | Trust Securities Guarantee Agreement,
        dated as of May 9, 2001 (Exhibit 4.10 to PPL Corporation Form 8-K Report
        (File No. 1-11459) dated May 9, 2001)                                                                                                                                                                                                                                                                                                                                                  
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(f)-4     | - | Amended and Restated Trust Agreement,
        dated as of May 9, 2001, among PPL Corporation, PPL Capital Funding, Inc.,
        JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as Property Trustee,
        Chase Manhattan Bank USA National Association, as Delaware Trustee, John
        R. Biggar and James E. Abel, as Administrative Trustees, and the several
        Holders of the Trust Securities (Exhibit 4.8 to PPL Corporation Form 8-K
        Report (File No. 1-11459) dated May 9, 2001)
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(g)-1     | - | Indenture, dated as of August 1,
        2001, by PPL Electric Utilities Corporation and JPMorgan Chase Bank (formerly
        The Chase Manhattan Bank), as Trustee (Exhibit 4.1 to PPL Electric Utilities
        Corporation Form 8-K Report (File No. 1-905) dated August 21, 2001)                                                                                                                                                                                                                               
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(g)-2     | - | Supplement, dated as of August
        1, 2001, to said Indenture (Exhibit 4.2 to PPL Electric Utilities Corporation
        Form 8-K Report (File No. 1-905) dated August 21, 2001)                                                                                                                                                                                                                                                                                                                                  
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(g)-3     | - | Supplement, dated as of February
        1, 2003, to said Indenture (Exhibit 4(g)-3 to PPL Electric Utilities Corporation
        Form 10-K Report (File No. 1-905) for the year ended December 31, 2002)                                                                                                                                                                                                                                                                                                             
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(g)-4     | - | Supplement, dated as of May 1,
        2003, to said Indenture (Exhibit 10(d) to PPL Electric Utilities Corporation
        Form 10-Q Report (File No. 1-905) for the quarter ended June 30, 2002)                                                                                                                                                                                                                                                                                                                    
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*4(g)-5    | - | Supplement, dated as of February
        1, 2005, to said Indenture                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(h)-1     | - | Indenture, dated as of October
        1, 2001, by PPL Energy Supply, LLC and JPMorgan Chase Bank (formerly The
        Chase Manhattan Bank), as Trustee (Exhibit 4.1 to PPL Energy Supply, LLC
        Form S-4 (Registration Statement No. 333-74794))                                                                                                                                                                                                                                                             
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(h)-2     | - | Supplement, dated as of October
        1, 2001, to said Indenture (Exhibit 4.2 to PPL Energy Supply, LLC Form
        S-4 (Registration Statement No. 333-74794))                                                                                                                                                                                                                                                                                                                                                    
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(h)-3     | - | Registration Rights Agreement,
        dated October 19, 2001, between PPL Energy Supply, LLC and the Initial
        Purchasers (Exhibit 4.5 to PPL Energy Supply, LLC Form S-4 (Registration
        Statement No. 333-74794))                                                                                                                                                                                                                                                                                      
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*4(h)-4    | - | Supplement, dated as of August
        15, 2004, to said Indenture                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(i)-1     | - | Indenture, dated as of May 21,
        2003, by PPL Energy Supply, LLC, PPL Corporation and JPMorgan Chase Bank,
        as Trustee (Exhibit 4.3 to PPL Energy Supply, LLC and PPL Corporation
        Form S-4 (Registration Statement No. 333-106200))                                                                                                                                                                                                                                                              
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(i)-2     | - | Registration Rights Agreement,
        dated as of May 21, 2003, by PPL Energy Supply, LLC, PPL Corporation and
        the Representatives of the Initial Purchasers (Exhibit 4.2 to PPL Energy
        Supply, LLC and PPL Corporation Form S-4 (Registration Statement No. 333-106200))                                                                                                                                                                                                                            
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(i)-3     | - | Supplement, dated November 12,
        2004, to said Indenture (Exhibit 99.1 to PPL Energy Supply, LLC Form 8-K
        Report (File No. 333-74794) dated November 17, 2004)                                                                                                                                                                                                                                                                                                                                          
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(j)-1     | - | Indenture, dated as of February
        26, 2004, among PPL Corporation, PPL Capital Funding, Inc. and JPMorgan
        Chase Bank, as Trustee (Exhibit 4(b) to PPL Corporation Form 10-Q Report
        (File No. 1-11459) for the quarter ended March 31, 2004)                                                                                                                                                                                                                                                     
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4(j)-2     | - | Registration Rights Agreement,
        dated as of February 26, 2004, among PPL Corporation, PPL Capital Funding,
        Inc. and the Representatives of the Initial Purchasers (Exhibit 4(c) to
        PPL Corporation Form 10-Q Report (File No. 1-11459) for the quarter ended
        March 31, 2004)                                                                                                                                                                                                           
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*4(k)      | - | Trust Deed, dated November 9, 1995,
        between Western Power Distribution (South Wales) plc and Bankers Trustee
        Company Limited                                                                                                                                                                                                                                                                                                                                                                          
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*4(l)-1    | - | Indenture, dated as of November
        21, 1996, among Western Power Distribution LLP and Western Power Distribution
        Holdings Limited (as successor co-obligors), Deutsche Bank Trust Company
        Americas (formerly Bankers Trust Company), as Trustee, and Deutsche Bank
        Luxembourg S.A. (formerly Bankers Trust Luxembourg S.A.), as Paying and
        Transfer Agent                                                                                                                        
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*4(l)-2    | - | Supplement, dated as of November
        21, 1996, to said Indenture                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*4(l)-3    | - | Supplement, dated as of December
        2, 1998, to said Indenture                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*4(l)-4    | - | Supplement, dated as of January
        30, 2003, to said Indenture                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*4(l)-5    | - | Supplement, dated as of January
        30, 2003, to said Indenture                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*4(m)-1    | - | Indenture, dated as of January
        29, 1997, among Western Power Distribution LLP and Western Power Distribution
        Holdings Limited (as successor co-obligors), Deutsche Bank Trust Company
        Americas (formerly Bankers Trust Company), as Trustee, and Deutsche Bank
        Luxembourg S.A. (formerly Bankers Trust Luxembourg S.A.), as Paying and
        Transfer Agent                                                                                                                         
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*4(m)-2    | - | Supplement, dated as of December
        2, 1998, to said Indenture                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*4(m)-3    | - | Supplement, dated as of January
        30, 2003, to said Indenture                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*4(m)-4    | - | Supplement, dated as of January
        30, 2003, to said Indenture                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*4(n)-1    | - | Indenture, dated as of March 16,
        2001, among Western Power Distribution Holdings Limited (as successor
        obligor), Deutsche Bank Trust Company Americas (formerly Bankers Trust
        Company), as Trustee, and Deutsche Bank Luxembourg S.A. (formerly Bankers
        Trust Luxembourg S.A.), as Paying and Transfer Agent                                                                                                                                                                          
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*4(n)-2    | - | Supplement, dated as of March 16,
        2001, to said Indenture                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*4(n)-3    | - | Supplement, dated as of January
        30, 2003, to said Indenture                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*4(o)-1    | - | Trust Deed, dated March 25, 2003,
        between Western Power Distribution (South West) plc and J.P. Morgan Corporate
        Trustee Services Limited                                                                                                                                                                                                                                                                                                                                                              
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*4(o)-2    | - | Supplement, dated as of May 27,
        2003, to said Trust Deed                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10(a)      | - | $300 million Three-Year Credit
        Agreement, dated as of June 24, 2003, among PPL Energy Supply, LLC and
        the banks named therein (Exhibit 10(e) to PPL Energy Supply, LLC Form
        10-Q Report (File No. 333-74794) for the quarter ended June 30, 2003)                                                                                                                                                                                                                                             
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10(b)      | - | $800 million Five-Year Credit Agreement,
        dated as of June 22, 2004, among PPL Energy Supply, LLC and the banks
        named therein (Exhibit 10(b) to PPL Energy Supply, LLC Form 10-Q Report
        (File No. 333-74794) for the quarter ended June 30, 2004)                                                                                                                                                                                                                                              
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10(c)      | - | $100 million Three-Year Credit
        Agreement, dated as of June 24, 2003, among PPL Electric Utilities Corporation
        and the banks named therein (Exhibit 10(f) to PPL Electric Utilities Corporation
        Form 10-Q Report (File No. 1-905) for the quarter ended June 30, 2003)                                                                                                                                                                                                                         
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10(d)      | - | $200 million Five-Year Credit Agreement,
        dated as of June 22, 2004, among PPL Electric Utilities Corporation and
        the banks named therein (Exhibit 10(c) to PPL Electric Utilities Corporation
        Form 10-Q Report (File No. 1-905) for the quarter ended June 30, 2004)                                                                                                                                                                                                                          
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10(e)      | - | $150 Million Credit and Reimbursement
        Agreement, dated as of April 25, 2001, among PPL Montana, LLC and the
        banks named therein (Exhibit 10(d) to PPL Montana, LLC Form 10-Q Report
        (File No. 333-50350) for the quarter ended June 30, 2001)                                                                                                                                                                                                                                                 
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10(f)      | - | Generation Supply Agreement, dated
        as of June 20, 2001, between PPL Electric Utilities Corporation and PPL
        EnergyPlus, LLC (Exhibit 10.5 to PPL Energy Supply, LLC Form S-4 (Registration
        Statement No. 333-74794))                                                                                                                                                                                                                                                                           
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10(g)      | - | Master Power Purchase and Sale
        Agreement, dated as of October 15, 2001, between Northwestern Energy Division
        (successor in interest to The Montana Power Company) and PPL Montana,
        LLC (Exhibit 10(g) to PPL Montana, LLC Form 10-K Report (File No. 333-50350)
        for year ended December 31, 2001)                                                                                                                                                                                     
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10(h)      | - | Guaranty, dated as of December
        21, 2001, from PPL Energy Supply, LLC in favor of LMB Funding, Limited
        Partnership (Exhibit 10(j) to PPL Energy Supply, LLC Form 10-K Report
        (File No. 333-74794) for the year ended December 31, 2001)                                                                                                                                                                                                                                                        
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10(i)-1    | - | Agreement for Lease, dated as of
        December 21, 2001, between LMB Funding, Limited Partnership and Lower
        Mt. Bethel Energy, LLC (Exhibit 10(m) to PPL Energy Supply, LLC Form 10-K
        Report (File No. 333-74794) for the year ended December 31, 2003)                                                                                                                                                                                                                                            
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10(i)-2    | - | Amendment No. 1 to Agreement for
        Lease, dated as of September 16, 2002, between LMB Funding, Limited Partnership
        and Lower Mt. Bethel Energy, LLC (Exhibit 10(m)-1 to PPL Energy Supply,
        LLC Form 10-K Report (File No. 333-74794) for the year ended December
        31, 2003)                                                                                                                                                                                                              
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10(j)-1    | - | Lease Agreement, dated as of December
        21, 2001, between LMB Funding, Limited Partnership and Lower Mt. Bethel
        Energy, LLC (Exhibit 10(n) to PPL Energy Supply, LLC Form 10-K Report
        (File No. 333-74794) for the year ended December 31, 2003)                                                                                                                                                                                                                                                
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10(j)-2    | - | Amendment No. 1 to Lease Agreement,
        dated as of September 16, 2002, between LMB Funding, Limited Partnership
        and Lower Mt. Bethel Energy, LLC (Exhibit 10(n)-1 to PPL Energy Supply,
        LLC Form 10-K Report (File No. 333-74794) for the year ended December
        31, 2003)                                                                                                                                                                                                                  
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10(k)      | - | Pollution Control Facilities Loan
        Agreement, dated as of May 1, 1973, between PPL Electric Utilities Corporation
        and the Lehigh County Industrial Development Authority (Exhibit 5(z) to
        Registration Statement No. 2-60834)                                                                                                                                                                                                                                                                  
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|[_]10(l)-1 | - | Amended and Restated Directors
        Deferred Compensation Plan, dated June 12, 2000 (Exhibit 10(h) to PPL
        Corporation Form 10-K Report (File No. 1-11459) for the year ended December
        31, 2000)                                                                                                                                                                                                                                                                                                    
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|[_]10(l)-2 | - | Amendment No. 1 to Amended and
        Restated Directors Deferred Compensation Plan, dated December 18, 2002
        (Exhibit 10(m)-1 to PPL Corporation Form 10-K Report (File No. 1-11459)
        for the year ended December 31, 2002)                                                                                                                                                                                                                                                                           
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|[_]10(l)-3 | - | Amendment No. 2 to Amended and
        Restated Directors Deferred Compensation Plan, dated December 4, 2003
        (Exhibit 10(q)-2 to PPL Corporation Form 10-K Report (File No. 1-11459)
        for the year ended December 31, 2003)                                                                                                                                                                                                                                                                            
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|[_]10(m)   | - | Amended and Restated Officers Deferred
        Compensation Plan, dated December 8, 2003 (Exhibit 10(r) to PPL Corporation
        Form 10-K Report (File No. 1-11459) for the year ended December 31, 2003)                                                                                                                                                                                                                                                                                                          
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|[_]10(n)-1 | - | Amended and Restated Supplemental
        Executive Retirement Plan, dated December 8, 2003 (Exhibit 10(s) to PPL
        Corporation Form 10-K Report (File No. 1-11459) for the year ended December
        31, 2003)                                                                                                                                                                                                                                                                                               
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|[_]10(n)-2 | - | Amendment No. 1 to Supplemental
        Executive Retirement Plan, dated December 16, 2004 (Exhibit 99.1 to PPL
        Corporation Form 8-K Report (File No. 1-11459) dated December 17, 2004)                                                                                                                                                                                                                                                                                                                       
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|[_]10(o)-1 | - | Incentive Compensation Plan, amended
        and restated effective January 1, 2003 (Exhibit 10(p) to PPL Corporation
        Form 10-K Report (File No. 1-11459) for the year ended December 31, 2002)                                                                                                                                                                                                                                                                                                               
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|[_]10(o)-2 | - | Form of Stock Option Agreement
        for stock option awards under the Incentive Compensation Plan (Exhibit
        10(b) to PPL Corporation Form 10-Q Report (File No. 1-11459) for the quarter
        ended September 30, 2004)                                                                                                                                                                                                                                                                                  
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|[_]10(p)   | - | Incentive Compensation Plan for
        Key Employees, amended and restated effective January 1, 2003 (Schedule
        B to Proxy Statement of PPL Corporation, dated March 17, 2003)                                                                                                                                                                                                                                                                                                                                
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|[_]10(q)   | - | Short-term Incentive Plan (Schedule
        B to Proxy Statement of PPL Corporation, dated March 12, 1999)                                                                                                                                                                                                                                                                                                                                                                                                            
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|[_]10(r)   | - | Form of Severance Agreement entered
        into between PPL Corporation and the Executive Officers listed in this
        Form 10-K Report (Exhibit 10(r) to PPL Corporation Form 10-K Report (File
        No. 1-11459) for the year ended December 31, 2001)                                                                                                                                                                                                                                                       
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|[_]10(s)   | - | Form for Retention Agreement entered
        into between PPL Corporation and Messrs. Champagne, Miller and Petersen
        (Exhibit 10(s) to PPL Corporation Form 10-K Report (File No. 1-11459)
        for the year ended December 31, 2001)                                                                                                                                                                                                                                                                      
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|[_]10(t)   | - | Agreement dated January 15, 2003
        between PPL Corporation and Mr. Miller regarding Supplemental Pension
        Benefits (Exhibit 10(u) to PPL Corporation Form 10-K Report (File No.
        1-11459) for the year ended December 31, 2002)                                                                                                                                                                                                                                                                   
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10(u)      | - | Equity Contribution Agreement,
        among PPL Corporation, PPL Montana, LLC, and The Chase Manhattan Bank,
        as Trustee (Exhibit 10.15 to PPL Montana, LLC Form S-4 (Registration Statement
        No. 333-50350))                                                                                                                                                                                                                                                                                          
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10(v)      | - | Facility Lease Agreement (BA 1/2)
        between PPL Montana, LLC and Montana OL3, LLC (Exhibit 4.7a to PPL Montana,
        LLC Form S-4 (Registration Statement No. 333-50350))                                                                                                                                                                                                                                                                                                                                    
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10(w)      | - | Facility Lease Agreement (BA 3)
        between PPL Montana, LLC and Montana OL4, LLC (Exhibit 4.8a to PPL Montana,
        LLC Form S-4 (Registration Statement No. 333-50350))                                                                                                                                                                                                                                                                                                                                      
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10(x)      | - | Services Agreement, dated as of
        July 1, 2000, among PPL Corporation, PPL Energy Funding Corporation and
        its direct and indirect subsidiaries in various tiers, PPL Capital Funding,
        Inc., PPL Gas Utilities Corporation, PPL Services Corporation and CEP
        Commerce, LLC (Exhibit 10.20 to PPL Energy Supply, LLC Form S-4 (Registration
        Statement No. 333-74794))                                                                                                             
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10(y)      | - | Pollution Control Facilities Loan
        Agreement, dated as of February 1, 2003, between PPL Electric Utilities
        Corporation and the Lehigh County Industrial Development Authority                                                                                                                                                                                                                                                                                                                          
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10(z)-1    | - | Asset Purchase Agreement, dated
        as of June 1, 2004, by and between PPL Sundance Energy, LLC, as Seller,
        and Arizona Public Service Company, as Purchaser (Exhibit 10(a) to PPL
        Corporation and PPL Energy Supply, LLC Form 10-Q Reports (File Nos. 1-11459
        and 333-74794) for the quarter ended June 30, 2004)                                                                                                                                                                        
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10(z)-2    | - | Amendment No. 1, dated December
        14, 2004, to said Asset Purchase Agreement (Exhibit 99.1 to PPL Corporation
        and PPL Energy Supply, LLC Form 8-K Reports (File Nos. 1-11459 and 333-74794)
        dated December 15, 2004)                                                                                                                                                                                                                                                                            
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|[_]10(aa)  | - | Separation Agreement and General
        Release dated July 27, 2004 (Exhibit 10(a) to PPL Corporation Form 10-Q
        Report (File No. 1-11459) for the quarter ended September 30, 2004)                                                                                                                                                                                                                                                                                                                          
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10(bb)     | - | Receivables Sale Agreement, dated
        as of August 1, 2004, between PPL Electric Utilities Corporation, as Originator,
        and PPL Receivables Corporation, as Buyer (Exhibit 10(d) to PPL Electric
        Utilities Corporation Form 10-Q Report (File No. 1-905) for the quarter
        ended June 30, 2004)                                                                                                                                                                                              
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10(cc)     | - | Credit and Security Agreement,
        dated as of August 1, 2004, among PPL Receivables Corporation, as Borrower,
        PPL Electric Utilities Corporation, as Servicer, Blue Ridge Asset Funding
        Corporation, the Liquidity Banks from time to time party thereto and Wachovia
        Bank, National Association, as Agent (Exhibit 10(e) to PPL Electric Utilities
        Corporation Form 10-Q Report (File No. 1-905) for the quarter ended June
        30, 2004)                                   
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*10(dd)    | - | $300 Demand Loan Agreement, dated
        as of August 20, 2004, among CEP Lending, Inc. and PPL Energy Funding
        Corporation                                                                                                                                                                                                                                                                                                                                                                                   
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*10(ee)    | - | Amended and Restated £400,000,000Credit Agreement, dated as of October 12, 2004, among Western Power
        Distribution (South West) plc and the banks named therein                                                                                                                                                                                                                                                                                                                                                
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*10(ff)    | - | Pollution Control Facilities Loan
        Agreement, dated as of February 1, 2005, between PPL Electric Utilities
        Corporation and the Lehigh County Industrial Development Authority                                                                                                                                                                                                                                                                                                                          
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*10(gg)    | - | PPL Corporation Director and
        Named Executive Officer Compensation Matters                                                                                                                                                                                                                                                                                                                                                                                                                                     
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*10(hh)    | - | PPL Electric Utilities Corporation
        Named Executive Officer Compensation Matters                                                                                                                                                                                                                                                                                                                                                                                                                               
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*12(a)     | - | PPL Corporation and Subsidiaries
        Computation of Ratio of Earnings to Fixed Charges                                                                                                                                                                                                                                                                                                                                                                                                                            
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*12(b)     | - | PPL Energy Supply, LLC and Subsidiaries
        Computation of Ratio of Earnings to Fixed Charges                                                                                                                                                                                                                                                                                                                                                                                                                     
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*12(c)     | - | PPL Electric Utilities Corporation
        and Subsidiaries Computation of Ratio of Earnings to Fixed Charges                                                                                                                                                                                                                                                                                                                                                                                                         
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*21(a)     | - | Subsidiaries of PPL Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*21(b)     | - | Subsidiaries of PPL Electric Utilities
        Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*23(a)     | - | Consent of PricewaterhouseCoopers
        LLP - PPL Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*23(b)     | - | Consent of PricewaterhouseCoopers
        LLP - PPL Energy Supply, LLC                                                                                                                                                                                                                                                                                                                                                                                                                                                
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*24        | - | Power of Attorney                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*31(a)     | - | Certificate of PPL's principal
        executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of
        2002                                                                                                                                                                                                                                                                                                                                                                                            
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*31(b)     | - | Certificate of PPL's principal
        financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of
        2002                                                                                                                                                                                                                                                                                                                                                                                            
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*31(c)     | - | Certificate of PPL Energy Supply's
        principal executive officer pursuant to Section 302 of the Sarbanes-Oxley
        Act of 2002                                                                                                                                                                                                                                                                                                                                                                              
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*31(d)     | - | Certificate of PPL Energy Supply's
        principal financial officer pursuant to Section 302 of the Sarbanes-Oxley
        Act of 2002                                                                                                                                                                                                                                                                                                                                                                              
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*31(e)     | - | Certificate of PPL Electric's principal
        executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of
        2002                                                                                                                                                                                                                                                                                                                                                                                   
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*31(f)     | - | Certificate of PPL Electric's principal
        financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of
        2002                                                                                                                                                                                                                                                                                                                                                                                   
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*32(a)     | - | Certificate of PPL's principal
        executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of
        2002                                                                                                                                                                                                                                                                                                                                                                                            
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*32(b)     | - | Certificate of PPL's principal
        financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of
        2002                                                                                                                                                                                                                                                                                                                                                                                            
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*32(c)     | - | Certificate of PPL Energy Supply's
        principal executive officer pursuant to Section 906 of the Sarbanes-Oxley
        Act of 2002                                                                                                                                                                                                                                                                                                                                                                              
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*32(d)     | - | Certificate of PPL Energy Supply's
        principal financial officer pursuant to Section 906 of the Sarbanes-Oxley
        Act of 2002                                                                                                                                                                                                                                                                                                                                                                              
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*32(e)     | - | Certificate of PPL Electric's principal
        executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of
        2002                                                                                                                                                                                                                                                                                                                                                                                   
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*32(f)     | - | Certificate of PPL Electric's principal
        financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of
        2002                                                                                                                                                                                                                                                                                                                                                                                   
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|*99        | - | PPL Corporate Organization (Selected
        Subsidiaries)