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                                    BY-LAWS

                                       OF

                           KENTUCKY UTILITIES COMPANY

                              Dated April 28, 1998
                       (as amended through June 2, 1999)

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                                                                    EXHIBIT 3.06

                                    BY-LAWS

                                       OF

                           KENTUCKY UTILITIES COMPANY

                                   ARTICLE I

                                STOCK TRANSFERS

      Section 1. Each holder of fully paid stock shall be entitled to a
certificate or certificates of stock stating the number and the class of shares
owned by such holder, provided that, the Board of Directors may, by resolution,
authorize the issue of some or all of the shares of any or all classes or series
of stock without certificates. All certificates of stock shall, at the time of
their issuance, be signed by the Chairman of the Board, the President or a
Vice-President and by the Secretary or Assistant Secretary, and may be
authenticated and registered by a duly appointed registrar. If the stock
certificate is authenticated by a registrar, the signatures of the corporate
officers may be facsimiles. In case any officer designated for the purpose who
has signed or whose facsimile signature has been used on any stock certificate
shall, from any cause, cease to be such officer before the certificate has been
delivered by the Company, the certificate may nevertheless be adopted by the
Company and be issued and delivered as though the person had not ceased to be
such officer.

      Section 2. Shares of stock shall be transferable only on the books of the
Company and upon proper endorsement and surrender of the outstanding
certificates representing the same. If any outstanding certificate of stock
shall be lost, destroyed or stolen, the officers of the Company shall have
authority to cause a new certificate to be issued to replace such certificate
upon the receipt by the Company of satisfactory evidence that such certificate
has been lost, destroyed or stolen and of a bond of indemnity deemed sufficient
by the officers to protect the Company and any registrar and any transfer agent
of the Company against loss which may be sustained by reason of issuing such new
certificate to replace the certificate reported lost, destroyed or stolen; and
any transfer agent of the Company shall be authorized to issue and deliver such
new certificate and any registrar of the Company is authorized to register such
new certificate, upon written directions signed by the Chairman of the Board,
the President or a Vice-President and by the Treasurer or the Secretary of the
Company.

      Section 3. All certificates representing each class of stock shall be
numbered and a record of each certificate shall be kept showing the name of the
person to whom the certificate was issued with the number and the class of
shares and the date thereof. All certificates exchanged or returned to the
Company shall be cancelled and an appropriate record made.

      Section 4. The Board of Directors may fix a date not exceeding seventy
days preceding the date of any meeting of shareholders, or the date fixed for
the payment of any dividend or distribution, or the date of allotment of rights,
or, subject to contract rights with respect thereto,

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the date when any change or conversion or exchange of shares shall be made or go
into effect, as a record date for the determination of the shareholders entitled
to notice of and to vote at any such meeting, or entitled to receive payment of
any such dividend, or allotment of rights, or to exercise the rights with
respect to any such change, conversion or exchange of shares, and in such case
only shareholders of record on the date so fixed shall be entitled to notice of
and to vote at such meeting, or to receive payment of such dividend or allotment
of rights or to exercise such rights, as the case may be, notwithstanding any
transfer of shares on the books of the Company after the record date fixed as
aforesaid. The Board of Directors may close the books of the Company against
transfer of shares during the whole or any part of such period. When a
determination of shareholders entitled to notice of and to vote at any meeting
of shareholders has been made as provided in this section, such determination
shall apply to any adjournment thereof except as otherwise provided by statute.

                                   ARTICLE II

                            MEETINGS OF STOCKHOLDERS

      Section 1. An Annual Meeting of Stockholders of the Company shall be held
at such date and time as shall be designated from time to time by the Board of
Directors. Each such Annual Meeting shall be held at the principal office of the
Company in Kentucky or at such other place as the Board of Directors may
designate from time to time.

      Section 2. Special meetings of the stockholders may be called by the Board
of Directors or by the holders of not less than 51% of all the votes entitled to
be cast on each issue proposed to be considered at the special meeting, or in
such other manner as may be provided by statute. Business transacted at special
meetings shall be confined to the purposes stated in the notice of meeting.

      Section 3. Notice of the time and place of each annual or special meeting
of stockholders shall be sent by mail to the recorded address of each
stockholder entitled to vote not less than ten or more than sixty days before
the date of the meeting, except in cases where other special method of notice
may be required by statute, in which case the statutory method shall be
followed. The notice of special meeting shall state the object of the meeting.
Notice of any meeting of the stockholders may be waived by any stockholder.

      Section 4. At an Annual Meeting of the Stockholders, only such business
shall be conducted as shall have been properly brought before the meeting in
accordance with the procedures set forth in these By-laws. To be properly
brought before the Annual Meeting, business must be (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise be a proper matter for
consideration and otherwise be properly requested to be brought before the
meeting by a stockholder as hereinafter provided. For business to be properly
requested to be brought before an Annual Meeting by a stockholder, a stockholder
of a class of shares of the Company entitled to vote upon the matter requested
to be brought before the meeting (or his designated proxy as provided below)
must have given timely and proper notice thereof to the Secretary. To be timely,
a


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stockholder's notice must be given by personal delivery or mailed by United
States mail, postage prepaid, and received by the Secretary not fewer than sixty
calendar days prior to the meeting; provided, however, that in the event that
the date of the meeting is not publicly announced by mail, press release or
otherwise or disclosed in a public report, information statement, or other
filing made with the Securities and Exchange Commission, in either case, at
least seventy calendar days prior to the meeting, notice by the stockholder to
be timely must be received by the Secretary, as provided above, not later than
the close of business on the tenth day following the day on which such notice of
the date of the meeting or such public disclosure or filing was made. To be
proper, a stockholder's notice to the Secretary must be in writing and must set
forth as to each matter the stockholder proposes to bring before the Annual
Meeting (a) a description in reasonable detail of the business desired to be
brought before the Annual Meeting and the reasons for conducting such business
at the Annual Meeting, (b) the name and address, as they appear on the Company
books, of the stockholder proposing such business or granting a proxy to the
proponent or an intermediary, (c) a representation that the stockholder is a
holder of record of stock of the Company entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice, (d) the name and address of the proponent, if
the holder of a proxy from a qualified stockholder of record, and the names and
addresses of any intermediate proxies, (e) the class and number of shares of the
Company which are beneficially owned by the stockholder, and (f) any material
interest of the stockholder or the proponent in such business. The chairman of
an Annual Meeting shall determine whether business was properly brought before
the meeting, which determination absent manifest error will be conclusive for
all purposes.

      Section 5. The Chairman of the Board, if present, and in his absence the
President, and the Secretary of the Company, shall act as Chairman and
Secretary, respectively, at each stockholders meeting, unless otherwise provided
by the Board of Directors prior to the meeting. Unless otherwise determined by
the Board of Directors prior to the meeting, the Chairman of the stockholders'
meeting shall determine the order of business and shall have the authority in
his discretion to regulate the conduct of any such meeting, including, without
limitation, by imposing restrictions on the persons (other than stockholders of
the Company or their duly appointed proxies) who may attend any such
stockholders' meeting, by determining whether any stockholder or his proxy may
be excluded from any stockholders' meeting based upon any determination by the
Chairman, in his sole discretion, that any such person has unduly disrupted or
is likely to disrupt the proceedings thereat, and by regulating the
circumstances in which any person may make a statement or ask questions at any
stockholders' meeting.

      Section 6. The Company shall be entitled to treat the holder of record of
any share or shares as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share on
the part of any other person whether or not it shall have express or other
notice thereof, except as expressly provided by law.

      Section 7. The Board of Directors may postpone and reschedule any
previously scheduled annual or special meeting of stockholders and may adjourn
any convened meeting of stockholders to another date and time as specified by
the chairman of the meeting.


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                                   ARTICLE III

                               BOARD OF DIRECTORS

      Section 1. The Board of Directors shall consist of no more than fifteen
and no less than nine members as determined from time to time by resolution of
the Board of Directors. Subject to the special rights of the holders of shares
of the Preferred Stock and the holders of shares of the Preference Stock to
elect Directors as specified in the Articles of Incorporation, the Directors
shall be divided into three groups, with each group containing one-third of the
total, as near as may be, to be elected and to serve staggered terms as provided
in the Articles of Incorporation of the Company. Except as otherwise expressly
provided by the Articles of Incorporation, the Board of Directors may accept
resignations of individual Directors and may fill, until the first annual
election thereafter and until the necessary election shall have taken place,
vacancies occurring at any time in the membership of the Board by death,
resignation or otherwise. Written notice of such resignation shall be made as
provided by law.

      Section 2. Nominations for the election of directors may be made by the
Board of Directors or a committee appointed by the Board of Directors or by any
stockholder entitled to vote in the election of directors generally. However,
any stockholder entitled to vote in the election of directors generally may
nominate one or more persons for election as directors at a meeting only if the
stockholder has given timely and proper notice thereof to the Secretary. To be
timely, a stockholder's notice must be given by personal delivery or mailed by
United States mail, postage prepaid, and received by the Secretary not fewer
than sixty calendar days or more than ninety calendar days prior to the meeting;
provided, however, that in the event that the date of the meeting is not
publicly announced by mail, press release or otherwise or disclosed in a public
report, information statement or other filing made with the Securities and
Exchange Commission, in either case, at least seventy calendar days prior to the
meeting, notice by the stockholder to be timely must be so received by the
Secretary, as provided above, not later than the close of business on the tenth
day following the day on which such notice of the date of the meeting or such
public disclosure or filing was made. To be proper, a stockholder's notice of
nomination to the Secretary must be in writing and must set forth as to each
nominee: (a) the name and address, as they appear on the Company books, of the
stockholder who intends to make the nomination or granting a proxy to the
proponent or an intermediary; (b) the name and address of the person or persons
to be nominated; (c) a representation that the stockholder is a holder of record
of stock of the Company entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (d) a description of all arrangements or understandings between
the stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the stockholder; (e) such other information regarding each nominee
proposed by such stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission, had the nominee been nominated, or intended to be nominated, by the
Board of Directors, provided that (i) such information does not in any way
violate any applicable Securities and Exchange Commission regulation, including
regulations concerning public availability of information, and (ii) any
information withheld on such basis shall be provided by separate notice at such
time as would not be in violation of any applicable Securities and Exchange
Commission


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regulation, such notice to be a supplement to the notice otherwise required
herein; (f) the class and number of shares of the Company which are beneficially
owned by the stockholder; and (g) the signed consent of each nominee to serve as
a director of the Company if so elected.

      Section 3. If the Chairman of the meeting for the election of Directors
determines that a nomination of any candidate for election as a director at such
meeting was not made in accordance with the applicable provisions of these
By-laws, such nomination shall be void.

      Section 4. The Board of Directors may adopt such special rules and
regulations for the conduct of their meetings and the management of the affairs
of the Company as they may determine to be appropriate, not inconsistent with
law or these By-laws.

      Section 5. A regular meeting of the Board of Directors shall be held as
soon as practicable after the annual meeting of stockholders in each year. In
addition, regular quarterly meetings of the Board may be held at the general
offices of the Company in Kentucky, or at such other place as shall be specified
in the notice of such meeting on the last Monday of January, July and October in
each year. Written notice of every regular meeting of the Board, stating the
time of day at which such meeting will be held, shall be given to each Director
not less than two days prior to the date of the meeting. Such notice may be
given personally in writing, or by telegraph or other written means of
electronic communication, or by depositing the same, properly addressed, in the
mail.

      Section 6. Special meetings of the Board may be called at any time by the
Chairman of the Board, or the President, or by a Vice-President when acting as
President, or by any two Directors. Notice of such meeting, stating the place,
day and hour of the meeting shall be given to each Director not less than one
day prior to the date of the meeting. Such notice may be given personally in
writing, or by telegraph or other written means of electronic communication, or
by depositing the same, properly addressed, in the mail.

      Section 7. Notice of any meeting of the Board may be waived by any
Director.

      Section 8. A majority of the Board of Directors shall constitute a quorum
for the transaction of business at any meeting of the board, but a less number
may adjourn the meeting to some other day or sine die. The Board of Directors
shall keep minutes of their proceedings at their meetings. The members of the
Board may be paid such fees or compensations for their services as Directors as
the Board, from time to time, by resolution, may determine.

      Section 9. The Chairman of the Board, if such person is present, shall
serve as Chairman at each regular or special meeting of the Board of Directors
and shall determine the order of business at such meeting. If the Chairman of
the Board is not present at a regular or special meeting of the Board of
Directors, the Vice Chairman of the Board shall serve as Chairman of such
meeting and shall determine the order of business of such meeting. The Board of
Directors may elect one of its members as Vice Chairman of the Board.


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                                   ARTICLE IV

                                   COMMITTEES

      Section 1. The Board of Directors may, by resolution passed by a majority
of the whole Board, appoint an Executive Committee of not less than three
members of the Board, including the Chairman of the Board, if there be one, and
the President of the Company. The Executive Committee may make its own rules of
procedure and elect its Chairman, and shall meet where and as provided by such
rules, or by resolution of the Board of Directors. A majority of the members of
the Committee shall constitute a quorum for the transaction of business. During
the intervals between the meetings of the Board of Directors, the Executive
Committee shall have all the powers of the Board in the management of the
business and affairs of the Company except as limited by statute, including
power to authorize the seal of the Company to be affixed to all papers which
require it, and, by majority vote of all its members, may exercise any and all
such powers in such manner as such Committee shall deem best for the interests
of the Company, in all cases in which specific directions shall not have been
given by the Board of Directors. The Executive Committee shall keep regular
minutes of its proceedings and report the same to the Board at meetings thereof.

      Section 2. The Board of Directors may appoint other committees, standing
or special, from time to time from among their own number, or otherwise, and
confer powers on such committees, and revoke such powers and terminate the
existence of such committees at its pleasure.

      Section 3. Meetings of any committee may be called in such manner and may
be held at such times and places as such committee may by resolution determine,
provided that a meeting of any committee may be called at any time by the
Chairman of the Board or by the President. Notice of such meeting, stating the
place, day and hour of the meeting shall be given to each Director not less than
one day prior to the meeting. Such notice may be given personally in writing, or
by telegraph or other written means of electronic communication, or by
depositing the same, properly addressed, in the mail. Members of all committees
may be paid such fees for attendance at meetings as the Board of Directors may
determine.

                                    ARTICLE V

                                    OFFICERS

      Section 1. The officers of the Company shall be a Chief Executive Officer,
President, Chief Operating Officer, Chief Financial Officer, Chief
Administrative Officer, one or more Vice Presidents, Secretary, Treasurer,
Controller or such other officers (including, if so directed by a resolution of
the Board of Directors, the Chairman of the Board) as the Board or the Chief
Executive Officer may from time to time elect or appoint. Any two of the offices
may be combined in one person, but no officer shall execute, acknowledge, or
verify any instrument in more than one capacity. If practicable, officers are to
be elected or appointed by the Board of Directors or the Chief Executive Officer
at the first meeting of the Board following the annual


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meeting of stockholders and, unless otherwise specified, shall hold office for
one year or until their successors are elected and qualified. Any vacancy shall
be filled by the Board of Directors or the Chief Executive Officer. Except as
provided below, officers shall perform those duties usually incident to the
office or as otherwise required by the Board of Directors, the Chief Executive
Officer, or the officer to whom they report. An officer may be removed with or
without cause and at any time by the Board of Directors or by the Chief
Executive Officer.

      Section 2. The Chief Executive Officer of the Company shall have full
charge of all of the affairs of the Company and shall report directly to the
Board of Directors.

      Section 3. The President, should that office be created and filled, shall
exercise such functions as may be delegated by the Chief Executive Officer and
shall exercise the functions of the Chief Executive Officer during the absence
or disability of the Chief Executive Officer.

      Section 4. The Chief Operating Officer, should that office be created and
filled, shall have responsibility for the management and direction of the
Company, subject to the direction and approval of the Chief Executive Officer.

      Section 5. The Chief Financial Officer, should that office be created and
filled, shall have responsibility for the financial affairs of the Company,
including maintaining accurate books and records, meeting all financial
reporting requirements and controlling Company funds, subject to the direction
and approval of the Chief Executive Officer.

      Section 6. The Chief Administrative Officer, should that office be created
and filled, shall have responsibility for the general administrative and human
resources operations of the Company, subject to the direction and approval of
the Chief Executive Officer.

      Section 7. The Vice President or Vice Presidents, should such offices be
created and filled, may be designated as Vice President, Senior Vice President
or Executive Vice President, as the Board of Directors or Chief Executive
Officer may determine.

      Section 8. The Secretary shall be present at and record the proceedings of
all meetings of the Board of Directors and of the stockholders, give notices of
meetings of Directors and stockholders, have custody of the seal of the Company
and affix it to any instrument requiring the same, and shall have the power to
sign certificates for shares of stock of the Company.

      Section 9. The Treasurer, should that office be created and filled, shall
have responsibility for all receipts and disbursements of the Company and be
custodian of the Company's funds.

      Section 10. The Controller, should that office be created and filled,
shall have responsibility for the accounting records of the Company.


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                                   ARTICLE VI

                                  MISCELLANEOUS

      Section 1. The funds of the Company shall be deposited to its credit in
such banks or trust companies as are selected by the Treasurer, subject to the
approval of the chief executive officer. Such funds shall be withdrawn only on
checks or drafts of the Company for the purpose of the Company, except that such
funds may be withdrawn without the issuance of a check or draft (a) to effect a
transfer of funds between accounts maintained by the Company at one or more
depositaries; (b) to effect the withdrawal of funds, pursuant to resolution of
the Board of Directors, for the payment of either commercial paper promissory
notes of other entities or government securities purchased by the Company; (c)
to effect a withdrawal of funds by the Company pursuant to the terms of any
agreement or other document, approved by the Board of Directors, which requires
or contemplates payment or payments by the Company by means other than a check
or draft; or (d) to effect a withdrawal of funds for such other purpose as the
Board of Directors by resolution shall provide. All checks and drafts of the
Company shall be signed in such manner and by such officer or officers or such
individuals as the Board of Directors, from time to time by resolution, shall
determine. Only checks and drafts so signed shall be valid checks or drafts of
the Company.

      Section 2. No debt shall be contracted except for current expenses unless
authorized by the Board of Directors or the Executive Committee, and no bills
shall be paid by the Treasurer unless audited and approved by the Controller or
some other person or committee expressly authorized by the Board of Directors or
the Executive Committee, to audit and approve bills for payment. All notes of
the Company shall be executed by two different officers of the Company. Either
or both of such executions may be by facsimile.

      Section 3. The fiscal year of the Company shall close at the end of
December annually.

                                   ARTICLE VII

                     INDEMNIFICATION OF DIRECTORS, OFFICERS,
                              EMPLOYEES AND AGENTS

      Section 1. Unless prohibited by law, the Company shall indemnify each of
its Directors, officers, employees and agents against expenses (including
attorneys' fees), judgments, taxes, fines and amounts paid in settlement,
incurred by such person in connection with, and shall advance expenses
(including attorneys' fees) incurred by such person in defending any threatened,
pending or completed action, suit or proceeding (whether civil, criminal,
administrative or investigative) to which such person was, is, or is threatened
to be made a party by reason of the fact that such person is or was a Director,
officer, employee or agent of another domestic or foreign corporation,
partnership, joint venture, trust, other enterprise, or employee benefit plan.
Advancement of expenses shall be made upon receipt of a written statement of his
good faith belief that he has met the standard of conduct as required by statute
and a written undertaking, with such security, if any, as the Board may
reasonably require, by or on behalf of


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the person seeking indemnification, to repay amounts advanced if it shall
ultimately be determined that such person is not entitled to be indemnified by
the Company.

      Section 2. In addition (and not by way of limitation of) the foregoing
provisions of Section 1 of this Article VII and the provisions of the Kentucky
Business Corporation Act, each person (including the heirs, executors,
administrators and estate of such person) who is or was or had agreed to become
a Director, officer, employee or agent of the Company and each person (including
the heirs, executors, administrators and estate of such person) who is or was
serving or who had agreed to serve at the request of the Directors or any
officer of the Company as a Director, officer, employee, trustee, partner or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise shall be indemnified by the Company to the
fullest extent permitted by the Kentucky Business Corporation Act or any other
applicable laws as presently or hereafter in effect. Without limiting the
generality or the effect of the foregoing, the Company is authorized to enter
into one or more agreements with any person which provide for indemnification
greater or different than that provided in this Article VII. Any repeal or
modification of this Article by the stockholders of the Company shall not
adversely affect any indemnification of any person hereunder in respect of any
act or omission occurring prior to the time of such repeal or modification.

      Section 3. The Company may purchase and maintain insurance on behalf of
any person who is or was entitled to indemnification as described above, whether
or not the Company would have the power or duty to indemnify such person against
such liability under this Article VII or applicable law.

      Section 4. To the extent required by applicable law, any indemnification
of, or advance of expenses to, any person who is or was entitled to
indemnification as described above, if arising out of a proceeding by or in the
right of the Company, shall be reported in writing to the stockholders with or
before the notice of the next stockholder' meeting.

      Section 5. The indemnification provided by this Article VII: (a) shall not
be deemed exclusive of any other rights to which the Company's Directors,
officers, employees or agents may be entitled pursuant to the Articles of
Incorporation, any agreement of indemnity, as a matter of law or otherwise; and
(b) shall continue as to a person who has ceased to be a Director, officer,
employee or agent and shall inure to the benefit of such person's heirs,
executors and administrators.

                                  ARTICLE VIII

                         AMENDMENT OR REPEAL OF BY-LAWS

      These By-laws may be added to, amended or repealed at any meeting of the
Board of Directors, and may also be added to, amended or repealed by the
stockholders.




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