**UNITED          STATES**

**SECURITIES          AND EXCHANGE COMMISSION**

**Washington,          DC 20549**

**Form          10-Q**

| [X]                          | QUARTERLY                    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                    ACT OF                    1934 for the quarterly period ended September                    30, 2006        |
|------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                         | OR                                                                                                                                                                                                                           |
| [                     ] | TRANSITION                    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                    ACT OF                    1934 for the transition period from _________ to                    ___________ |

|   | Commission                    FileNumber | Registrant;                    State of Incorporation;Address                    and Telephone Number                                                                                                                                                                 | IRS                    EmployerIdentification                    No. |
|--------|------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------|
|   |                                     |                                                                                                                                                                                                                                                                  |                                                                 |
|   | 1-11459                                  | **PPL                    Corporation**(Exact                    name of Registrant as specified in its charter)(Pennsylvania)Two                    North Ninth StreetAllentown,                    PA 18101-1179(610)                    774-5151                    | 23-2758192                                                           |
|   |                                     |                                                                                                                                                                                                                                                                  |                                                                 |
|   | 333-74794                                | **PPL                    Energy Supply, LLC**(Exact                    name of Registrant as specified in its charter)(Delaware)Two                    North Ninth StreetAllentown,                    PA 18101-1179(610)                    774-5151                 | 23-3074920                                                           |
|   |                                     |                                                                                                                                                                                                                                                                  |                                                                 |
|   | 1-905                                    | **PPL                    Electric Utilities Corporation**(Exact                    name of Registrant as specified in its charter)(Pennsylvania)Two                    North Ninth StreetAllentown,                    PA 18101-1179(610)                    774-5151 | 23-0959590                                                           |
|   |                                     |                                                                                                                                                                                                                                                                  |                                                                 |
|   |                                     |                                                                                                                                                                                                                                                                  |                                                                 |

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

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

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

|   | PPL                    Corporation                    | Common                    stock, $.01 par value, 381,565,560 shares outstanding at October 31,                    2006.                                            |
|--------|-------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                  |                                                                                                                                                                    |
|   | PPL                    Energy Supply, LLC             | PPL                    Corporation indirectly holds all of the membership interests                    in PPL Energy                    Supply, LLC.                    |
|   |                                                  |                                                                                                                                                                    |
|   | PPL                    Electric Utilities Corporation | Common                    stock, no par value, 66,368,056 shares outstanding and all held                    by PPL                    Corporation at October 31, 2006. |
|   |                                                  |                                                                                                                                                                    |

**This          document is available free of charge at the Investor Center on PPL's Web          site at          www.pplweb.com. However, information on this Web site does not constitute          a part          of this Form 10-Q.**

----

**PPL          CORPORATION**

**PPL          ENERGY SUPPLY, LLC**

**PPL          ELECTRIC UTILITIES CORPORATION**

|                                                                                                                                                                                           | Page                                                                                                                                                   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                           |                                                                                                                                                   |
| GLOSSARY                    OF TERMS AND ABBREVIATIONS                                                                                                                                         | i                                                                                                                                                      |
|                                                                                                                                                                                           |                                                                                                                                                   |
| FORWARD-LOOKING                    INFORMATION                                                                                                                                                 | 1                                                                                                                                                      |
|                                                                                                                                                                                           |                                                                                                                                                   |
| PART                    I. FINANCIAL INFORMATION                                                                                                                                               |                                                                                                                                                   |
|                                                                                                                                                                                           | Item                    1. Financial Statements                                                                                                        |   |
|                                                                                                                                                                                           |                                                                                                                                                   | **PPL                    Corporation and Subsidiaries** |   |
|                                                                                                                                                                                           |                                                                                                                                                   |   | Condensed                    Consolidated                    Statements                    of Income | 2 |
|                                                                                                                                                                                           |                                                                                                                                                   |   | Condensed Consolidated                    Statements of Cash Flows | 3 |
|                                                                                                                                                                                           |                                                                                                                                                   |   | Condensed                    Consolidated                    Balance Sheets | 4 |
|                                                                                                                                                                                           |                                                                                                                                                   | **PPL                    Energy Supply, LLC and Subsidiaries** |   |
|                                                                                                                                                                                           |                                                                                                                                                   |   | Condensed Consolidated                    Statements of Income | 6 |
|                                                                                                                                                                                           |                                                                                                                                                   |   | Condensed                    Consolidated                    Statements of Cash Flows | 7 |
|                                                                                                                                                                                           |                                                                                                                                                   |   | Condensed                    Consolidated                    Balance Sheets | 8 |
|                                                                                                                                                                                           |                                                                                                                                                   | **PPL                    Electric Utilities Corporation and Subsidiaries** |   |
|                                                                                                                                                                                           |                                                                                                                                                   |   | Condensed                    Consolidated                    Statements of Income | 10 |
|                                                                                                                                                                                           |                                                                                                                                                   |   | Condensed                    Consolidated                    Statements                    of Cash Flows | 11 |
|                                                                                                                                                                                           |                                                                                                                                                   |   | Condensed                    Consolidated                    Balance Sheets | 12 |
|                                                                                                                                                                                           |                                                                                                                                                   | Combined                    Notes to                    Condensed                    Consolidated                    Financial Statements | 14 |
|                                                                                                                                                                                           | Item                    2. Management's Discussion and Analysis of Financial Condition                    and Results                    of Operations |   |
|                                                                                                                                                                                           |                                                                                                                                                   |   | PPL                    Corporation                    and Subsidiaries | 46 |
|                                                                                                                                                                                           |                                                                                                                                                   |   | PPL                    Energy                    Supply,                    LLC and Subsidiaries | 60 |
|                                                                                                                                                                                           |                                                                                                                                                   |   | PPL                    Electric Utilities                    Corporation                    and Subsidiaries | 72 |
|                                                                                                                                                                                           | Item                    3. Quantitative                    and Qualitative                    Disclosures About Market Risk                       | 77 |
|                                                                                                                                                                                           | Item                    4. Controls                    and                    Procedures                                                               | 77 |
|                                                                                                                                                                                           |                                                                                                                                                   |
| PART                    II. OTHER INFORMATION                                                                                                                                                  |                                                                                                                                                   |
|                                                                                                                                                                                           | Item                    1.  Legal                    Proceedings                                                                             | 77 |
|                                                                                                                                                                                           | Item                    1A. Risk Factors                                                                                                               | 77 |
|                                                                                                                                                                                           | Item                    6.                    Exhibits                                                                                                 | 78 |
|                                                                                                                                                                                           |                                                                                                                                                   |
| SIGNATURES                                                                                                                                                                                     | 79                                                                                                                                                     |
|                                                                                                                                                                                           |                                                                                                                                                   |
| COMPUTATION                    OF RATIO OF EARNINGS TO FIXED CHARGES                                                                                                                           |                                                                                                                                                   |
|                                                                                                                                                                                           |                                                                                                                                                   |   | PPL                    Corporation                    and                    Subsidiaries | 80 |
|                                                                                                                                                                                           |                                                                                                                                                   |   | PPL                    Energy Supply,                    LLC and Subsidiaries | 81 |
|                                                                                                                                                                                           |                                                                                                                                                   |   | PPL                    Electric Utilities Corporation and Subsidiaries | 82 |
|                                                                                                                                                                                           |                                                                                                                                                   |
| CERTIFICATES                    OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER                    PURSUANT                    TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 |                                                                                                                                                   |
|                                                                                                                                                                                           |                                                                                                                                                   |   | PPL                    Corporation | 83 |
|                                                                                                                                                                                           |                                                                                                                                                   |   | PPL                    Energy Supply,                    LLC | 85 |
|                                                                                                                                                                                           |                                                                                                                                                   |   | PPL                    Electric Utilities                    Corporation | 87 |
|                                                                                                                                                                                           |                                                                                                                                                   |
| CERTIFICATES                    OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER                    PURSUANT                    TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 |                                                                                                                                                   |
|                                                                                                                                                                                           |                                                                                                                                                   |   | PPL                    Corporation | 89 |
|                                                                                                                                                                                           |                                                                                                                                                   |   | PPL                    Energy                    Supply, LLC | 91 |
|                                                                                                                                                                                           |                                                                                                                                                   |   | PPL                    Electric                    Utilities Corporation | 93 |

----

**GLOSSARY          OF TERMS AND ABBREVIATIONS**

***PPL          Corporation and its current and former          subsidiaries***

***Elfec***

***Emel***

***Hyder***

***PPL***
*** ***

***PPL          Capital Funding***

***PPL          Electric***
*** ***

***PPL          Energy Funding***

***PPL          EnergyPlus***

***PPL          Energy Supply***

***PPL          Gas Utilities***

***PPL          Generation***

***PPL          Global***

***PPL          Martins Creek***

***PPL          Montana***

***PPL          Services***

***PPL          Susquehanna***

***PPL          Telcom***

***PPL          Transition Bond Company***

***SIUK          Capital Trust I***

***WPD***

***WPD          LLP***

***WPD***
**(South          Wales)**

***WPD***
**(South          West)**

***WPDH          Limited***

***WPDL***

----

***Other          terms and abbreviations***

**£**

***2005          Form 10-K***

***AFUDC***

***ARO***

***Bcf***

***Black          Lung Trust***

***Clean          Air Act***

***CTC***

***Customer          Choice Act***
*** ***

***DEP***

***DOE***

***EITF***

***EMF***

***EPA***

***EPS***

***FASB***
** **

***FERC***

***FIN***

***Fitch***

***FSP***

***GWh***

***IRS***
*** ***

***ISO***

***ITC***

***LIBOR***
** **
** **

***Montana          Power***

***Moody's***

***MW***

***MWh***

***NorthWestern***

***NRC***

***NUGs***
* *

***NYMEX***

***PCB***

***PJM***
*** ***

***PLR***

***PP&E***
*** ***

***PUC***
*** ***

***PUC          Final Order***

***PUHCA***

***PURPA***
*** ***

***Regulation          S-X***

***SAB***

***SCR***

***SEC***

***SFAS***

***S&P***

***Superfund***

***Synfuel          projects***

***Tolling          agreement***
*** ***

----

**FORWARD-LOOKING          INFORMATION**

| · | market                    demand and prices for energy, capacity and fuel;                                                                                                                                                                                                               |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | market                    prices for crude oil and the potential impact on synthetic fuel                    operations, synthetic fuel purchases from third parties and the                    phase-out                    of synthetic fuel tax credits;                              |
| · | weather                    conditions affecting generation production, customer energy usage                    and                    operating costs;                                                                                                                                  |
| · | competition                    in retail and wholesale power markets;                                                                                                                                                                                                                    |
| · | liquidity                    of wholesale power markets;                                                                                                                                                                                                                                 |
| · | the                    effect of any business or industry restructuring;                                                                                                                                                                                                                 |
| · | the                    profitability and liquidity, including access to capital markets                    and                    credit facilities, of PPL and its subsidiaries;                                                                                                        |
| · | new                    accounting requirements or new interpretations or applications                    of existing                    requirements;                                                                                                                                    |
| · | operation                    and availability of existing generation facilities and operating                    costs;                                                                                                                                                                  |
| · | transmission                    and distribution system conditions and operating costs;                                                                                                                                                                                                  |
| · | current                    and future environmental conditions and requirements and the                    related costs                    of compliance, including environmental capital expenditures and                    emission                    allowance and other expenses; |
| · | significant                    delays in the planned installation of pollution control equipment                    at                    certain coal-fired generating units in Pennsylvania due to weather                    conditions, contractor performance or other reasons;     |
| · | market                    prices of commodity inputs for ongoing capital                    expenditures;                                                                                                                                                                                |

| · | collective                    labor bargaining negotiations;                                                                                                                                                                  |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | 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;                                         |
| · | any                    impact of hurricanes or other severe weather on PPL and its subsidiaries,                    including any impact on fuel prices;                                                                      |
| · | receipt                    of necessary governmental permits, approvals and rate relief;                                                                                                                                      |
| · | new                    state, federal or foreign legislation, including new tax legislation;                                                                                                                                  |
| · | state,                    federal and foreign regulatory developments;                                                                                                                                                        |
| · | any                    impact of state, federal or foreign investigations applicable                    to PPL and                    its subsidiaries and the energy industry;                                               |
| · | capital                    market conditions, including changes in interest rates, and decisions                    regarding capital structure;                                                                              |
| · | stock                    price performance of PPL;                                                                                                                                                                            |
| · | the                    market prices of equity securities and the impact on pension                    costs and                    resultant cash funding requirements for defined benefit pension                    plans; |
| · | securities                    and credit ratings;                                                                                                                                                                             |
| · | foreign                    currency exchange rates;                                                                                                                                                                           |
| · | the                    outcome of litigation against PPL and its subsidiaries;                                                                                                                                                |
| · | potential                    effects of threatened or actual terrorism or war or other hostilities;                    and                                                                                                    |
| · | the                    commitments and liabilities of PPL and its                    subsidiaries.                                                                                                                            |

----

| **Part                  I. FINANCIAL INFORMATION**                                                                                                                                    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Item                  1. Financial Statements**                                                                                                                                     |
|                                                                                                                                                                                  |
| **CONDENSED                  CONSOLIDATED STATEMENTS OF INCOME**                                                                                                                      |
| **PPL                  Corporation and Subsidiaries**                                                                                                                                 |
| (Unaudited)                                                                                                                                                                           |
| *(Millions                  of Dollars, except per share data)*                                                                                                                       |
|                                                                                                                                                                                  |   | **Three                  Months Ended****September                  30,** |   | **Nine                  Months Ended****September                  30,** |
|                                                                                                                                                                                  |   | **2006** |   | **2005** |   | **2006** |   | **2005** |
| **Operating                  Revenues**                                                                                                                                               |   |   |   |   |   |   |   |   |
| Utility                                                                                                                                                                               |   | **$** | **1,124** |   |   | $ | 1,067 |   |   | **$** | **3,427** |   |   | $ | 3,234 |   |
| Unregulated                  retail electric                                                                                                                                          |   |   | **23** |   |   |   | 25 |   |   |   | **68** |   |   |   | 73 |   |
| Wholesale                  energy marketing                                                                                                                                           |   |   | **446** |   |   |   | 336 |   |   |   | **1,164** |   |   |   | 865 |   |
| Net                  energy trading margins                                                                                                                                           |   |   | **15** |   |   |   | 19 |   |   |   | **26** |   |   |   | 33 |   |
| Energy-related                  businesses                                                                                                                                            |   |   | **144** |   |   |   | 173 |   |   |   | **490** |   |   |   | 480 |   |
| Total                                                                                                                                                                                 |   |   | **1,752** |   |   |   | 1,620 |   |   |   | **5,175** |   |   |   | 4,685 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Operating                  Expenses**                                                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operation                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fuel                                                                                                                                                                                  |   |   | **249** |   |   |   | 270 |   |   |   | **702** |   |   |   | 679 |   |
| Energy                  purchases                                                                                                                                                     |   |   | **371** |   |   |   | 214 |   |   |   | **989** |   |   |   | 709 |   |
| Other                  operation and maintenance (Note 10)                                                                                                                            |   |   | **335** |   |   |   | 331 |   |   |   | **1,019** |   |   |   | 1,030 |   |
| Amortization                  of recoverable transition costs                                                                                                                         |   |   | **75** |   |   |   | 71 |   |   |   | **210** |   |   |   | 199 |   |
| Depreciation                                                                                                                                                                          |   |   | **107** |   |   |   | 108 |   |   |   | **326** |   |   |   | 315 |   |
| Taxes,                  other than income                                                                                                                                             |   |   | **74** |   |   |   | 73 |   |   |   | **214** |   |   |   | 214 |   |
| Energy-related                  businesses                                                                                                                                            |   |   | **161** |   |   |   | 170 |   |   |   | **469** |   |   |   | 486 |   |
| Total                                                                                                                                                                                 |   |   | **1,372** |   |   |   | 1,237 |   |   |   | **3,929** |   |   |   | 3,632 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Operating                  Income**                                                                                                                                                 |   |   | **380** |   |   |   | 383 |   |   |   | **1,246** |   |   |   | 1,053 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                  Income - net                                                                                                                                                   |   |   | **21** |   |   |   | 5 |   |   |   | **63** |   |   |   | 23 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  Expense                                                                                                                                                     |   |   | **125** |   |   |   | 127 |   |   |   | **365** |   |   |   | 387 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Income                  from Continuing Operations Before Income Taxes, Minority Interest                  and                  Dividends on Preferred Securities of a Subsidiary** |   |   | **276** |   |   |   | 261 |   |   |   | **944** |   |   |   | 689 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  Taxes                                                                                                                                                         |   |   | **41** |   |   |   | 64 |   |   |   | **219** |   |   |   | 138 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Minority                  Interest                                                                                                                                                    |   |   | **4** |   |   |   | 1 |   |   |   | **8** |   |   |   | 5 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends                  on Preferred Securities of a Subsidiary                                                                                                                    |   |   | **5** |   |   |   | 1 |   |   |   | **10** |   |   |   | 2 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Income                  from Continuing Operations**                                                                                                                                |   |   | **226** |   |   |   | 195 |   |   |   | **707** |   |   |   | 544 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss                  (Income) from Discontinued Operations (net of income                  taxes)                                                                                    |   |   |   |   |   |   | (2 | ) |   |   | **20** |   |   |   | 51 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Net                  Income**                                                                                                                                                       |   | **$** | **226** |   |   | $ | 197 |   |   | **$** | **687** |   |   | $ | 493 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Earnings                  Per Share of Common Stock:**                                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  from Continuing Operations:                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                                                                                                 |   | **$** | **0.59** |   |   | $ | 0.51 |   |   | **$** | **1.86** |   |   | $ | 1.44 |   |
| Diluted                                                                                                                                                                               |   |   | **0.58** |   |   |   | 0.50 |   |   |   | **1.83** |   |   |   | 1.42 |   |
| Net                  income:                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                                                                                                 |   | **$** | **0.59** |   |   | $ | 0.52 |   |   | **$** | **1.81** |   |   | $ | 1.30 |   |
| Diluted                                                                                                                                                                               |   |   | **0.58** |   |   |   | 0.51 |   |   |   | **1.78** |   |   |   | 1.29 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Dividends                  Declared per Share of Common Stock**                                                                                                                     |   | **$** | **0.275** |   |   | $ | 0.25 |   |   | **$** | **0.825** |   |   | $ | 0.71 |   |
|                                                                                                                                                                                  |

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

----

| **CONDENSED                  CONSOLIDATED STATEMENTS OF CASH FLOWS**                                                                                                                          |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PPL                  Corporation and Subsidiaries**                                                                                                                                         |
| (Unaudited)                                                                                                                                                                                   |
| *(Millions                  of Dollars)*                                                                                                                                                      |
|                                                                                                                                                                                          |   | **Nine                  Months Ended September 30,** |
|                                                                                                                                                                                          |   | **2006** |   | **2005** |
| **Cash                  Flows from Operating Activities**                                                                                                                                     |   |   |   |   |   |   |   |   |
| Net                  income                                                                                                                                                                   |   | **$** | **687** |   |   | $ | 493 |   |
| Adjustments                  to reconcile net income to net cash provided by operating                  activities                                                                            |   |   |   |   |   |   |   |   |
| Pre-tax                  loss from the sale of the Sundance plant                                                                                                                             |   |   |   |   |   |   | 72 |   |
| Pre-tax                  loss from the sale of interest in the Griffith plant                                                                                                                 |   |   | **40** |   |   |   |   |   |
| Depreciation                                                                                                                                                                                  |   |   | **326** |   |   |   | 318 |   |
| Amortization                  - recoverable transition costs and other                                                                                                                        |   |   | **234** |   |   |   | 223 |   |
| Deferred                  income tax benefits and investment tax credits                                                                                                                      |   |   | **(81** | **)** |   |   | (42 | ) |
| Pension                  and other postretirement benefits                                                                                                                                    |   |   | **(28** | **)** |   |   | (34 | ) |
| Realization                  of benefits related to Black Lung Trust assets                                                                                                                   |   |   | **(36** | **)** |   |   |   |   |
| Stock                  compensation expense                                                                                                                                                   |   |   | **21** |   |   |   | 30 |   |
| Accrual                  for PJM billing dispute                                                                                                                                              |   |   |   |   |   |   | 47 |   |
| Accrual                  for remediation of ash basin leak                                                                                                                                    |   |   | **(11** | **)** |   |   | 33 |   |
| Unrealized                  gain on derivatives and other hedging activities                                                                                                                  |   |   | **(2** | **)** |   |   | (26 | ) |
| Other                                                                                                                                                                                         |   |   | **39** |   |   |   | 12 |   |
| Change                  in current assets and current liabilities                                                                                                                             |   |   |   |   |   |   |   |   |
| Accounts                  receivable                                                                                                                                                          |   |   | **(2** | **)** |   |   | (85 | ) |
| Accounts                  payable                                                                                                                                                             |   |   | **(14** | **)** |   |   | 95 |   |
| Fuel,                  materials and supplies                                                                                                                                                 |   |   | **(22** | **)** |   |   | 33 |   |
| Other                                                                                                                                                                                         |   |   | **100** |   |   |   | (38 | ) |
| Other                  operating activities                                                                                                                                                   |   |   |   |   |   |   |   |   |
| Other                  assets                                                                                                                                                                 |   |   | **5** |   |   |   | 11 |   |
| Other                  liabilities                                                                                                                                                            |   |   | **2** |   |   |   | (19 | ) |
| Net                  cash provided by operating activities                                                                                                                                    |   |   | **1,258** |   |   |   | 1,123 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Cash                  Flows from Investing Activities**                                                                                                                                     |   |   |   |   |   |   |   |   |
| Expenditures                  for property, plant and equipment                                                                                                                               |   |   | **(859** | **)** |   |   | (538 | ) |
| Proceeds                  from the sale of the Sundance plant                                                                                                                                 |   |   |   |   |   |   | 190 |   |
| Proceeds                  from the sale of interest in the Griffith plant                                                                                                                     |   |   | **115** |   |   |   |   |   |
| Purchases                  of emission allowances                                                                                                                                             |   |   | **(68** | **)** |   |   | (132 | ) |
| Proceeds                  from the sale of emission allowances                                                                                                                                |   |   | **42** |   |   |   | 57 |   |
| Purchases                  of nuclear decommissioning trust investments                                                                                                                       |   |   | **(178** | **)** |   |   | (166 | ) |
| Proceeds                  from the sale of nuclear decommissioning trust investments                                                                                                          |   |   | **166** |   |   |   | 155 |   |
| Purchases                  of other marketable securities                                                                                                                                     |   |   | **(331** | **)** |   |   | (19 | ) |
| Proceeds                  from the sale of other marketable securities                                                                                                                        |   |   | **271** |   |   |   | 83 |   |
| Net                  decrease (increase) in restricted cash                                                                                                                                   |   |   | **8** |   |   |   | (20 | ) |
| Other                  investing activities                                                                                                                                                   |   |   | **16** |   |   |   | (9 | ) |
| Net                  cash used in investing activities                                                                                                                                        |   |   | **(818** | **)** |   |   | (399 | ) |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Cash                  Flows from Financing Activities**                                                                                                                                     |   |   |   |   |   |   |   |   |
| Issuance                  of common stock                                                                                                                                                     |   |   | **13** |   |   |   | 36 |   |
| Issuance                  of long-term debt                                                                                                                                                   |   |   | **800** |   |   |   | 224 |   |
| Issuance                  of preference stock, net of issuance costs                                                                                                                          |   |   | **245** |   |   |   |   |   |
| Retirement                  of long-term debt                                                                                                                                                 |   |   | **(757** | **)** |   |   | (1,177 | ) |
| Payment                  of common stock dividends                                                                                                                                            |   |   | **(304** | **)** |   |   | (252 | ) |
| Net                  (decrease) increase in short-term debt                                                                                                                                   |   |   | **(172** | **)** |   |   | 80 |   |
| Other                  financing activities                                                                                                                                                   |   |   | **(21** | **)** |   |   | (20 | ) |
| Net                  cash used in financing activities                                                                                                                                        |   |   | **(196** | **)** |   |   | (1,109 | ) |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Effect                  of Exchange Rates on Cash and Cash Equivalents**                                                                                                                    |   |   | **1** |   |   |   | 4 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Net                  Increase (Decrease) in Cash and Cash Equivalents**                                                                                                                     |   |   | **245** |   |   |   | (381 | ) |
| Cash                  and Cash Equivalents at Beginning of Period                                                                                                                             |   |   | **555** |   |   |   | 616 |   |
| Cash                  and Cash Equivalents at End of Period                                                                                                                                   |   | **$** | **800** |   |   | $ | 235 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| *The                  accompanying Notes to Condensed Consolidated Financial Statements                  are an                  integral part of the financial                  statements.* |

----

| **CONDENSED                  CONSOLIDATED BALANCE SHEETS**                                                                                                                                    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PPL                  Corporation and Subsidiaries**                                                                                                                                         |
| (Unaudited)                                                                                                                                                                                   |
| *(Millions                  of Dollars)*                                                                                                                                                      |
|                                                                                                                                                                                          |   | **September                  30,****2006** |   | **December                  31,****2005** |
| **Assets**                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Current                  Assets**                                                                                                                                                           |   |   |   |   |   |   |   |   |
| Cash                  and cash equivalents                                                                                                                                                    |   | **$** | **800** |   |   | $ | 555 |   |
| Restricted                  cash                                                                                                                                                              |   |   | **88** |   |   |   | 93 |   |
| Accounts                  receivable (less reserve: 2006, $53; 2005, $87)                                                                                                                     |   |   | **559** |   |   |   | 544 |   |
| Unbilled                  revenues                                                                                                                                                            |   |   | **397** |   |   |   | 479 |   |
| Fuel,                  materials and supplies                                                                                                                                                 |   |   | **369** |   |   |   | 346 |   |
| Prepayments                                                                                                                                                                                   |   |   | **105** |   |   |   | 53 |   |
| Deferred                  income taxes                                                                                                                                                        |   |   | **175** |   |   |   | 192 |   |
| Price                  risk management assets                                                                                                                                                 |   |   | **526** |   |   |   | 488 |   |
| Other                  acquired intangibles                                                                                                                                                   |   |   | **138** |   |   |   | 50 |   |
| Other                                                                                                                                                                                         |   |   | **153** |   |   |   | 110 |   |
| Total                  Current Assets                                                                                                                                                         |   |   | **3,310** |   |   |   | 2,910 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Investments**                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Investment                  in unconsolidated affiliates - at equity                                                                                                                          |   |   | **49** |   |   |   | 56 |   |
| Nuclear                  plant decommissioning trust funds                                                                                                                                    |   |   | **483** |   |   |   | 444 |   |
| Other                                                                                                                                                                                         |   |   | **7** |   |   |   | 8 |   |
| Total                  Investments                                                                                                                                                            |   |   | **539** |   |   |   | 508 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Property,                  Plant and Equipment**                                                                                                                                            |   |   |   |   |   |   |   |   |
| Electric                  plant in service                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Transmission                  and distribution                                                                                                                                                |   |   | **8,552** |   |   |   | 7,984 |   |
| Generation                                                                                                                                                                                    |   |   | **8,693** |   |   |   | 8,761 |   |
| General                                                                                                                                                                                       |   |   | **748** |   |   |   | 646 |   |
|                                                                                                                                                                                          |   |   | **17,993** |   |   |   | 17,391 |   |
| Construction                  work in progress                                                                                                                                                |   |   | **524** |   |   |   | 259 |   |
| Nuclear                  fuel                                                                                                                                                                 |   |   | **316** |   |   |   | 327 |   |
| Electric                  plant                                                                                                                                                               |   |   | **18,833** |   |   |   | 17,977 |   |
| Gas                  and oil plant                                                                                                                                                            |   |   | **369** |   |   |   | 349 |   |
| Other                  property                                                                                                                                                               |   |   | **304** |   |   |   | 289 |   |
|                                                                                                                                                                                          |   |   | **19,506** |   |   |   | 18,615 |   |
| Less:                  accumulated depreciation                                                                                                                                               |   |   | **7,960** |   |   |   | 7,699 |   |
| Total                  Property, Plant and Equipment                                                                                                                                          |   |   | **11,546** |   |   |   | 10,916 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Regulatory                  and Other Noncurrent Assets**                                                                                                                                   |   |   |   |   |   |   |   |   |
| Recoverable                  transition costs                                                                                                                                                 |   |   | **955** |   |   |   | 1,165 |   |
| Goodwill                                                                                                                                                                                      |   |   | **1,113** |   |   |   | 1,070 |   |
| Other                  acquired intangibles                                                                                                                                                   |   |   | **348** |   |   |   | 412 |   |
| Price                  risk management assets                                                                                                                                                 |   |   | **180** |   |   |   | 84 |   |
| Other                                                                                                                                                                                         |   |   | **866** |   |   |   | 861 |   |
| Total                  Regulatory and Other Noncurrent Assets                                                                                                                                 |   |   | **3,462** |   |   |   | 3,592 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Total                  Assets**                                                                                                                                                             |   | **$** | **18,857** |   |   | $ | 17,926 |   |
|                                                                                                                                                                                          |
| *The                  accompanying Notes to Condensed Consolidated Financial Statements                  are an                  integral part of the financial                  statements.* |

----

| **CONDENSED                  CONSOLIDATED BALANCE SHEETS**                                                                                                                                    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PPL                  Corporation and Subsidiaries**                                                                                                                                         |
| (Unaudited)                                                                                                                                                                                   |
| *(Millions                  of Dollars)*                                                                                                                                                      |
|                                                                                                                                                                                          |   | **September                  30,****2006** |   | **December                  31,****2005** |
| **Liabilities                  and Equity**                                                                                                                                                   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Current                  Liabilities**                                                                                                                                                      |   |   |   |   |   |   |   |   |
| Short-term                  debt                                                                                                                                                              |   | **$** | **43** |   |   | $ | 214 |   |
| Long-term                  debt                                                                                                                                                               |   |   | **1,174** |   |   |   | 1,126 |   |
| Accounts                  payable                                                                                                                                                             |   |   | **543** |   |   |   | 542 |   |
| Above                  market NUG contracts                                                                                                                                                   |   |   | **66** |   |   |   | 70 |   |
| Taxes                                                                                                                                                                                         |   |   | **211** |   |   |   | 168 |   |
| Interest                                                                                                                                                                                      |   |   | **125** |   |   |   | 112 |   |
| Dividends                                                                                                                                                                                     |   |   | **110** |   |   |   | 96 |   |
| Price                  risk management liabilities                                                                                                                                            |   |   | **558** |   |   |   | 533 |   |
| Other                                                                                                                                                                                         |   |   | **469** |   |   |   | 479 |   |
| Total                  Current Liabilities                                                                                                                                                    |   |   | **3,299** |   |   |   | 3,340 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Long-term                  Debt**                                                                                                                                                           |   |   | **6,016** |   |   |   | 5,955 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Long-term                  Debt with Affiliate Trust**                                                                                                                                      |   |   | **89** |   |   |   | 89 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Deferred                  Credits and Other Noncurrent Liabilities**                                                                                                                        |   |   |   |   |   |   |   |   |
| Deferred                  income taxes and investment tax credits                                                                                                                             |   |   | **2,282** |   |   |   | 2,197 |   |
| Price                  risk management liabilities                                                                                                                                            |   |   | **524** |   |   |   | 541 |   |
| Accrued                  pension obligations                                                                                                                                                  |   |   | **343** |   |   |   | 374 |   |
| Asset                  retirement obligations                                                                                                                                                 |   |   | **314** |   |   |   | 298 |   |
| Above                  market NUG contracts                                                                                                                                                   |   |   | **87** |   |   |   | 136 |   |
| Other                                                                                                                                                                                         |   |   | **454** |   |   |   | 471 |   |
| Total                  Deferred Credits and Other Noncurrent Liabilities                                                                                                                      |   |   | **4,004** |   |   |   | 4,017 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Commitments                  and Contingent Liabilities (Note 11)**                                                                                                                         |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Minority                  Interest**                                                                                                                                                        |   |   | **58** |   |   |   | 56 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Preferred                  Securities of a Subsidiary**                                                                                                                                     |   |   | **301** |   |   |   | 51 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Shareowners'                  Common Equity**                                                                                                                                               |   |   |   |   |   |   |   |   |
| Common                  stock - $0.01 par value (a)                                                                                                                                           |   |   | **4** |   |   |   | 4 |   |
| Capital                  in excess of par value (b)                                                                                                                                           |   |   | **2,798** |   |   |   | 3,602 |   |
| Treasury                  stock (a) (b)                                                                                                                                                       |   |   |   |   |   |   | (838 | ) |
| Earnings                  reinvested                                                                                                                                                          |   |   | **2,553** |   |   |   | 2,182 |   |
| Accumulated                  other comprehensive loss                                                                                                                                         |   |   | **(265** | **)** |   |   | (532 | ) |
| Total                  Shareowners' Common Equity                                                                                                                                             |   |   | **5,090** |   |   |   | 4,418 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Total                  Liabilities and Equity**                                                                                                                                             |   | **$** | **18,857** |   |   | $ | 17,926 |   |
|                                                                                                                                                                                          |
| (a)                                                                                                                                                                                           |   | 780                  million shares authorized; 382 million shares issued and outstanding                  at                  September 30, 2006, and 380 million shares issued and outstanding,                  excluding 62 million shares held as treasury stock, at December                  31,                  2005. |
| (b)                                                                                                                                                                                           |   | See                  Note 2 for additional information on the retirement of all treasury                  stock                  in 2006. |
|                                                                                                                                                                                          |
| *The                  accompanying Notes to Condensed Consolidated Financial Statements                  are an                  integral part of the financial                  statements.* |

----

| **CONDENSED                  CONSOLIDATED STATEMENTS OF INCOME**                                                                                                                              |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PPL                  Energy Supply, LLC and Subsidiaries**                                                                                                                                  |
| (Unaudited)                                                                                                                                                                                   |
| *(Millions                  of Dollars)*                                                                                                                                                      |
|                                                                                                                                                                                          |   | **Three                  Months Ended****September                  30,** |   | **Nine                  Months Ended****September                  30,** |
|                                                                                                                                                                                          |   | **2006** |   | **2005** |   | **2006** |   | **2005** |
| **Operating                  Revenues**                                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Wholesale                  energy marketing                                                                                                                                                   |   | **$** | **446** |   |   | $ | 336 |   |   | **$** | **1,164** |   |   | $ | 865 |   |
| Wholesale                  energy marketing to affiliate                                                                                                                                      |   |   | **445** |   |   |   | 415 |   |   |   | **1,286** |   |   |   | 1,194 |   |
| Utility                                                                                                                                                                                       |   |   | **301** |   |   |   | 264 |   |   |   | **934** |   |   |   | 841 |   |
| Unregulated                  retail electric                                                                                                                                                  |   |   | **23** |   |   |   | 25 |   |   |   | **68** |   |   |   | 73 |   |
| Net                  energy trading margins                                                                                                                                                   |   |   | **15** |   |   |   | 19 |   |   |   | **26** |   |   |   | 33 |   |
| Energy-related                  businesses                                                                                                                                                    |   |   | **142** |   |   |   | 164 |   |   |   | **471** |   |   |   | 459 |   |
| Total                                                                                                                                                                                         |   |   | **1,372** |   |   |   | 1,223 |   |   |   | **3,949** |   |   |   | 3,465 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Operating                  Expenses**                                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operation                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fuel                                                                                                                                                                                          |   |   | **236** |   |   |   | 259 |   |   |   | **588** |   |   |   | 593 |   |
| Energy                  purchases                                                                                                                                                             |   |   | **317** |   |   |   | 152 |   |   |   | **834** |   |   |   | 509 |   |
| Energy                  purchases from affiliate                                                                                                                                              |   |   | **41** |   |   |   | 41 |   |   |   | **119** |   |   |   | 111 |   |
| Other                  operation and maintenance                                                                                                                                              |   |   | **254** |   |   |   | 254 |   |   |   | **753** |   |   |   | 756 |   |
| Depreciation                                                                                                                                                                                  |   |   | **73** |   |   |   | 76 |   |   |   | **224** |   |   |   | 220 |   |
| Taxes,                  other than income                                                                                                                                                     |   |   | **25** |   |   |   | 25 |   |   |   | **71** |   |   |   | 75 |   |
| Energy-related                  businesses                                                                                                                                                    |   |   | **160** |   |   |   | 162 |   |   |   | **453** |   |   |   | 463 |   |
| Total                                                                                                                                                                                         |   |   | **1,106** |   |   |   | 969 |   |   |   | **3,042** |   |   |   | 2,727 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Operating                  Income**                                                                                                                                                         |   |   | **266** |   |   |   | 254 |   |   |   | **907** |   |   |   | 738 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                  Income - net                                                                                                                                                           |   |   | **24** |   |   |   | 9 |   |   |   | **69** |   |   |   | 28 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  Expense                                                                                                                                                             |   |   | **76** |   |   |   | 69 |   |   |   | **203** |   |   |   | 199 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  Expense with Affiliates                                                                                                                                             |   |   | **3** |   |   |   | 5 |   |   |   | **9** |   |   |   | 18 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Income                  from Continuing Operations Before****Income****Taxes and Minority Interest**                                                                                        |   |   | **211** |   |   |   | 189 |   |   |   | **764** |   |   |   | 549 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  Taxes                                                                                                                                                                 |   |   | **25** |   |   |   | 31 |   |   |   | **166** |   |   |   | 75 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Minority                  Interest                                                                                                                                                            |   |   | **4** |   |   |   | 1 |   |   |   | **8** |   |   |   | 5 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Income                  from Continuing Operations**                                                                                                                                        |   |   | **182** |   |   |   | 157 |   |   |   | **590** |   |   |   | 469 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss                  (Income) from Discontinued Operations (net of income                  taxes)                                                                                            |   |   |   |   |   |   | (2 | ) |   |   | **20** |   |   |   | 51 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Net                  Income**                                                                                                                                                               |   | **$** | **182** |   |   | $ | 159 |   |   | **$** | **570** |   |   | $ | 418 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *The                  accompanying Notes to Condensed Consolidated Financial Statements                  are an                  integral part of the financial                  statements.* |

----

| **CONDENSED                  CONSOLIDATED STATEMENTS OF CASH FLOWS**                                                                                                                          |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PPL                  Energy Supply, LLC and Subsidiaries**                                                                                                                                  |
| (Unaudited)                                                                                                                                                                                   |
| *(Millions                  of Dollars)*                                                                                                                                                      |
|                                                                                                                                                                                          |   | **Nine                  Months Ended September 30,** |
|                                                                                                                                                                                          |   | **2006** |   | **2005** |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Cash                  Flows from Operating Activities**                                                                                                                                     |   |   |   |   |   |   |   |   |
| Net                  income                                                                                                                                                                   |   | **$** | **570** |   |   | $ | 418 |   |
| Adjustments                  to reconcile net income to net cash provided by operating                  activities                                                                            |   |   |   |   |   |   |   |   |
| Pre-tax                  loss from the sale of the Sundance plant                                                                                                                             |   |   |   |   |   |   | 72 |   |
| Pre-tax                  loss from the sale of interest in the Griffith plant                                                                                                                 |   |   | **40** |   |   |   |   |   |
| Depreciation                                                                                                                                                                                  |   |   | **225** |   |   |   | 223 |   |
| Amortization                  - energy commitments and other                                                                                                                                  |   |   | **5** |   |   |   | 4 |   |
| Deferred                  income taxes and investment tax credits                                                                                                                             |   |   | **23** |   |   |   | 50 |   |
| Pension                  and other postretirement benefits                                                                                                                                    |   |   | **(35** | **)** |   |   | (31 | ) |
| Stock                  compensation expense                                                                                                                                                   |   |   | **15** |   |   |   | 19 |   |
| Unrealized                  gain on derivatives and other hedging activities                                                                                                                  |   |   | **(6** | **)** |   |   | (25 | ) |
| Accrual                  for remediation of ash basin leak                                                                                                                                    |   |   | **(11** | **)** |   |   | 33 |   |
| Other                                                                                                                                                                                         |   |   | **19** |   |   |   | 21 |   |
| Change                  in current assets and current liabilities                                                                                                                             |   |   |   |   |   |   |   |   |
| Accounts                  receivable                                                                                                                                                          |   |   | **(13** | **)** |   |   | (42 | ) |
| Accounts                  payable                                                                                                                                                             |   |   | **(2** | **)** |   |   | 93 |   |
| Fuel,                  materials and supplies                                                                                                                                                 |   |   | **(22** | **)** |   |   | 31 |   |
| Other                                                                                                                                                                                         |   |   | **112** |   |   |   | (59 | ) |
| Other                  operating activities                                                                                                                                                   |   |   |   |   |   |   |   |   |
| Other                  assets                                                                                                                                                                 |   |   |   |   |   |   | 8 |   |
| Other                  liabilities                                                                                                                                                            |   |   | **(23** | **)** |   |   | (26 | ) |
| Net                  cash provided by operating activities                                                                                                                                    |   |   | **897** |   |   |   | 789 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Cash                  Flows from Investing Activities**                                                                                                                                     |   |   |   |   |   |   |   |   |
| Expenditures                  for property, plant and equipment                                                                                                                               |   |   | **(584** | **)** |   |   | (387 | ) |
| Proceeds                  from the sale of the Sundance plant                                                                                                                                 |   |   |   |   |   |   | 190 |   |
| Proceeds                  from the sale of interest in the Griffith plant                                                                                                                     |   |   | **115** |   |   |   |   |   |
| Purchases                  of emission allowances                                                                                                                                             |   |   | **(68** | **)** |   |   | (132 | ) |
| Proceeds                  from the sale of emission allowances                                                                                                                                |   |   | **42** |   |   |   | 57 |   |
| Purchases                  of nuclear decommissioning trust investments                                                                                                                       |   |   | **(178** | **)** |   |   | (166 | ) |
| Proceeds                  from the sale of nuclear decommissioning trust investments                                                                                                          |   |   | **166** |   |   |   | 155 |   |
| Purchases                  of other marketable securities                                                                                                                                     |   |   | **(196** | **)** |   |   | (15 | ) |
| Proceeds                  from the sale of other marketable securities                                                                                                                        |   |   | **136** |   |   |   | 66 |   |
| Net                  decrease (increase) in restricted cash                                                                                                                                   |   |   | **4** |   |   |   | (11 | ) |
| Other                  investing activities                                                                                                                                                   |   |   | **13** |   |   |   | (13 | ) |
| Net                  cash used in investing activities                                                                                                                                        |   |   | **(550** | **)** |   |   | (256 | ) |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Cash                  Flows from Financing Activities**                                                                                                                                     |   |   |   |   |   |   |   |   |
| Issuance                  of long-term debt                                                                                                                                                   |   |   | **800** |   |   |   |   |   |
| Retirement                  of long-term debt                                                                                                                                                 |   |   | **(144** | **)** |   |   | (209 | ) |
| Distributions                  to Member                                                                                                                                                      |   |   | **(651** | **)** |   |   | (206 | ) |
| Contributions                  from Member                                                                                                                                                    |   |   | **116** |   |   |   | 50 |   |
| Net                  (decrease) increase in short-term debt                                                                                                                                   |   |   | **(172** | **)** |   |   | 80 |   |
| Net                  decrease in note payable to affiliate                                                                                                                                    |   |   | **(8** | **)** |   |   | (495 | ) |
| Other                  financing activities                                                                                                                                                   |   |   | **(20** | **)** |   |   | (4 | ) |
| Net                  cash used in financing activities                                                                                                                                        |   |   | **(79** | **)** |   |   | (784 | ) |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Effect                  of Exchange Rates on Cash and Cash Equivalents**                                                                                                                    |   |   | **1** |   |   |   | 4 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Net                  Increase (Decrease) in Cash and Cash Equivalents**                                                                                                                     |   |   | **269** |   |   |   | (247 | ) |
| Cash                  and Cash Equivalents at Beginning of Period                                                                                                                             |   |   | **227** |   |   |   | 357 |   |
| Cash                  and Cash Equivalents at End of Period                                                                                                                                   |   | **$** | **496** |   |   | $ | 110 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| *The                  accompanying Notes to Condensed Consolidated Financial Statements                  are an                  integral part of the financial                  statements.* |

----

| **CONDENSED****CONSOLIDATED                  BALANCE SHEETS**                                                                                                                                 |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PPL                  Energy Supply, LLC and Subsidiaries**                                                                                                                                  |
| (Unaudited)                                                                                                                                                                                   |
| *(Millions                  of Dollars)*                                                                                                                                                      |
|                                                                                                                                                                                          |   | **September                  30,****2006** |   | **December                  31,****2005** |
| **Assets**                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Current                  Assets**                                                                                                                                                           |   |   |   |   |   |   |   |   |
| Cash                  and cash equivalents                                                                                                                                                    |   | **$** | **496** |   |   | $ | 227 |   |
| Restricted                  cash                                                                                                                                                              |   |   | **34** |   |   |   | 39 |   |
| Accounts                  receivable (less reserve: 2006, $31; 2005, $65)                                                                                                                     |   |   | **312** |   |   |   | 291 |   |
| Unbilled                  revenues                                                                                                                                                            |   |   | **263** |   |   |   | 300 |   |
| Accounts                  receivable from affiliates                                                                                                                                          |   |   | **131** |   |   |   | 149 |   |
| Collateral                  on PLR energy supply to affiliate                                                                                                                                 |   |   | **300** |   |   |   | 300 |   |
| Fuel,                  materials and supplies                                                                                                                                                 |   |   | **318** |   |   |   | 295 |   |
| Prepayments                                                                                                                                                                                   |   |   | **77** |   |   |   | 39 |   |
| Deferred                  income taxes                                                                                                                                                        |   |   | **129** |   |   |   | 166 |   |
| Price                  risk management assets                                                                                                                                                 |   |   | **525** |   |   |   | 487 |   |
| Other                  acquired intangibles                                                                                                                                                   |   |   | **138** |   |   |   | 50 |   |
| Other                                                                                                                                                                                         |   |   | **104** |   |   |   | 41 |   |
| Total                  Current Assets                                                                                                                                                         |   |   | **2,827** |   |   |   | 2,384 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Investments**                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Investment                  in unconsolidated affiliates - at equity                                                                                                                          |   |   | **51** |   |   |   | 56 |   |
| Nuclear                  plant decommissioning trust funds                                                                                                                                    |   |   | **483** |   |   |   | 444 |   |
| Other                                                                                                                                                                                         |   |   | **4** |   |   |   | 3 |   |
| Total                  Investments                                                                                                                                                            |   |   | **538** |   |   |   | 503 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Property,                  Plant and Equipment**                                                                                                                                            |   |   |   |   |   |   |   |   |
| Electric                  plant in service                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Transmission                  and distribution                                                                                                                                                |   |   | **4,411** |   |   |   | 3,950 |   |
| Generation                                                                                                                                                                                    |   |   | **8,693** |   |   |   | 8,761 |   |
| General                                                                                                                                                                                       |   |   | **290** |   |   |   | 272 |   |
|                                                                                                                                                                                          |   |   | **13,394** |   |   |   | 12,983 |   |
| Construction                  work in progress                                                                                                                                                |   |   | **466** |   |   |   | 210 |   |
| Nuclear                  fuel                                                                                                                                                                 |   |   | **316** |   |   |   | 327 |   |
| Electric                  plant                                                                                                                                                               |   |   | **14,176** |   |   |   | 13,520 |   |
| Gas                  and oil plant                                                                                                                                                            |   |   | **64** |   |   |   | 64 |   |
| Other                  property                                                                                                                                                               |   |   | **301** |   |   |   | 198 |   |
|                                                                                                                                                                                          |   |   | **14,541** |   |   |   | 13,782 |   |
| Less:                  accumulated depreciation                                                                                                                                               |   |   | **6,082** |   |   |   | 5,871 |   |
| Total                  Property, Plant and Equipment                                                                                                                                          |   |   | **8,459** |   |   |   | 7,911 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Other                  Noncurrent Assets**                                                                                                                                                  |   |   |   |   |   |   |   |   |
| Goodwill                                                                                                                                                                                      |   |   | **1,058** |   |   |   | 1,015 |   |
| Other                  acquired intangibles                                                                                                                                                   |   |   | **233** |   |   |   | 283 |   |
| Price                  risk management assets                                                                                                                                                 |   |   | **174** |   |   |   | 80 |   |
| Other                                                                                                                                                                                         |   |   | **512** |   |   |   | 488 |   |
| Total                  Other Noncurrent Assets                                                                                                                                                |   |   | **1,977** |   |   |   | 1,866 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Total                  Assets**                                                                                                                                                             |   | **$** | **13,801** |   |   | $ | 12,664 |   |
|                                                                                                                                                                                          |
| *The                  accompanying Notes to Condensed Consolidated Financial Statements                  are an                  integral part of the financial                  statements.* |

----

| **CONDENSED****CONSOLIDATED                  BALANCE SHEETS**                                                                                                                                 |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PPL                  Energy Supply, LLC and Subsidiaries**                                                                                                                                  |
| (Unaudited)                                                                                                                                                                                   |
| *(Millions                  of Dollars)*                                                                                                                                                      |
|                                                                                                                                                                                          |   | **September                  30,****2006** |   | **December                  31,****2005** |
| **Liabilities                  and Equity**                                                                                                                                                   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Current                  Liabilities**                                                                                                                                                      |   |   |   |   |   |   |   |   |
| Short-term                  debt                                                                                                                                                              |   | **$** | **1** |   |   | $ | 172 |   |
| Note                  payable to affiliate                                                                                                                                                    |   |   |   |   |   |   | 8 |   |
| Long-term                  debt                                                                                                                                                               |   |   | **341** |   |   |   | 445 |   |
| Accounts                  payable                                                                                                                                                             |   |   | **467** |   |   |   | 445 |   |
| Accounts                  payable to affiliates                                                                                                                                               |   |   | **30** |   |   |   | 27 |   |
| Above                  market NUG contracts                                                                                                                                                   |   |   | **66** |   |   |   | 70 |   |
| Taxes                                                                                                                                                                                         |   |   | **163** |   |   |   | 72 |   |
| Interest                                                                                                                                                                                      |   |   | **103** |   |   |   | 79 |   |
| Deferred                  revenue on PLR energy supply to affiliate                                                                                                                           |   |   | **12** |   |   |   | 12 |   |
| Price                  risk management liabilities                                                                                                                                            |   |   | **545** |   |   |   | 519 |   |
| Other                                                                                                                                                                                         |   |   | **301** |   |   |   | 313 |   |
| Total                  Current Liabilities                                                                                                                                                    |   |   | **2,029** |   |   |   | 2,162 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Long-term                  Debt**                                                                                                                                                           |   |   | **4,324** |   |   |   | 3,506 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Long-term                  Debt with Affiliate Trust**                                                                                                                                      |   |   | **89** |   |   |   | 89 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Deferred                  Credits and Other Noncurrent Liabilities**                                                                                                                        |   |   |   |   |   |   |   |   |
| Deferred                  income taxes and investment tax credits                                                                                                                             |   |   | **1,328** |   |   |   | 1,157 |   |
| Price                  risk management liabilities                                                                                                                                            |   |   | **500** |   |   |   | 523 |   |
| Accrued                  pension obligations                                                                                                                                                  |   |   | **210** |   |   |   | 232 |   |
| Asset                  retirement obligations                                                                                                                                                 |   |   | **314** |   |   |   | 298 |   |
| Above                  market NUG contracts                                                                                                                                                   |   |   | **87** |   |   |   | 136 |   |
| Deferred                  revenue on PLR energy supply to affiliate                                                                                                                           |   |   | **26** |   |   |   | 35 |   |
| Other                                                                                                                                                                                         |   |   | **329** |   |   |   | 321 |   |
| Total                  Deferred Credits and Other Noncurrent Liabilities                                                                                                                      |   |   | **2,794** |   |   |   | 2,702 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Commitments                  and Contingent Liabilities (Note 11)**                                                                                                                         |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Minority                  Interest**                                                                                                                                                        |   |   | **58** |   |   |   | 56 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Member's                  Equity**                                                                                                                                                          |   |   | **4,507** |   |   |   | 4,149 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Total                  Liabilities and Equity**                                                                                                                                             |   | **$** | **13,801** |   |   | $ | 12,664 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| *The                  accompanying Notes to Condensed Consolidated Financial Statements                  are an                  integral part of the financial                  statements.* |

----

| **CONDENSED                  CONSOLIDATED STATEMENTS OF INCOME**                                                                                                                              |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PPL                  Electric Utilities Corporation and                  Subsidiaries**                                                                                                     |
| (Unaudited)                                                                                                                                                                                   |
| *(Millions                  of Dollars)*                                                                                                                                                      |
|                                                                                                                                                                                          |   | **Three                  Months Ended****September                  30,** |   | **Nine                  Months Ended****September                  30,** |
|                                                                                                                                                                                          |   | **2006** |   | **2005** |   | **2006** |   | **2005** |
| **Operating                  Revenues**                                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Retail                  electric                                                                                                                                                              |   | **$** | **800** |   |   | $ | 782 |   |   | **$** | **2,331** |   |   | $ | 2,258 |   |
| Wholesale                  electric                                                                                                                                                           |   |   |   |   |   |   | 1 |   |   |   | **2** |   |   |   | 3 |   |
| Wholesale                  electric to affiliate                                                                                                                                              |   |   | **41** |   |   |   | 41 |   |   |   | **119** |   |   |   | 111 |   |
| Total                                                                                                                                                                                         |   |   | **841** |   |   |   | 824 |   |   |   | **2,452** |   |   |   | 2,372 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Operating                  Expenses**                                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operation                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Energy                  purchases                                                                                                                                                             |   |   | **53** |   |   |   | 63 |   |   |   | **155** |   |   |   | 201 |   |
| Energy                  purchases from affiliate                                                                                                                                              |   |   | **445** |   |   |   | 415 |   |   |   | **1,286** |   |   |   | 1,194 |   |
| Other                  operation and maintenance (Note 10)                                                                                                                                    |   |   | **81** |   |   |   | 77 |   |   |   | **266** |   |   |   | 268 |   |
| Amortization                  of recoverable transition costs                                                                                                                                 |   |   | **75** |   |   |   | 71 |   |   |   | **210** |   |   |   | 199 |   |
| Depreciation                                                                                                                                                                                  |   |   | **29** |   |   |   | 28 |   |   |   | **86** |   |   |   | 83 |   |
| Taxes,                  other than income                                                                                                                                                     |   |   | **49** |   |   |   | 48 |   |   |   | **143** |   |   |   | 138 |   |
| Total                                                                                                                                                                                         |   |   | **732** |   |   |   | 702 |   |   |   | **2,146** |   |   |   | 2,083 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Operating                  Income**                                                                                                                                                         |   |   | **109** |   |   |   | 122 |   |   |   | **306** |   |   |   | 289 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                  Income - net                                                                                                                                                           |   |   | **7** |   |   |   | 5 |   |   |   | **23** |   |   |   | 15 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  Expense                                                                                                                                                             |   |   | **34** |   |   |   | 39 |   |   |   | **108** |   |   |   | 132 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  Expense with Affiliate                                                                                                                                              |   |   | **4** |   |   |   | 3 |   |   |   | **12** |   |   |   | 8 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Income                  Before Income Taxes**                                                                                                                                               |   |   | **78** |   |   |   | 85 |   |   |   | **209** |   |   |   | 164 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  Taxes                                                                                                                                                                 |   |   | **23** |   |   |   | 32 |   |   |   | **68** |   |   |   | 59 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Net                  Income**                                                                                                                                                               |   |   | **55** |   |   |   | 53 |   |   |   | **141** |   |   |   | 105 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends                  on Preferred Securities                                                                                                                                            |   |   | **5** |   |   |   | 1 |   |   |   | **10** |   |   |   | 2 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Income                  Available to PPL**                                                                                                                                                  |   | **$** | **50** |   |   | $ | 52 |   |   | **$** | **131** |   |   | $ | 103 |   |
|                                                                                                                                                                                          |
| *The                  accompanying Notes to Condensed Consolidated Financial Statements                  are an                  integral part of the financial                  statements.* |

----

| **CONDENSED                  CONSOLIDATED STATEMENTS OF CASH FLOWS**                                                                                                                          |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PPL                  Electric Utilities Corporation and                  Subsidiaries**                                                                                                     |
| (Unaudited)                                                                                                                                                                                   |
| *(Millions                  of Dollars)*                                                                                                                                                      |
|                                                                                                                                                                                          |   | **Nine                  Months Ended September 30,** |
|                                                                                                                                                                                          |   | **2006** |   | **2005** |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Cash                  Flows from Operating Activities**                                                                                                                                     |   |   |   |   |   |   |   |   |
| Net                  income                                                                                                                                                                   |   | **$** | **141** |   |   | $ | 105 |   |
| Adjustments                  to                  reconcile net income to net cash provided by operating                  activities                                                           |   |   |   |   |   |   |   |   |
| Depreciation                                                                                                                                                                                  |   |   | **86** |   |   |   | 83 |   |
| Stock                  compensation expense                                                                                                                                                   |   |   | **4** |   |   |   | 7 |   |
| Amortization                  - recoverable transition costs and other                                                                                                                        |   |   | **226** |   |   |   | 216 |   |
| Deferred                  income tax benefits and investment tax credits                                                                                                                      |   |   | **(3** | **)** |   |   | (5 | ) |
| Realization                  of benefits related to Black Lung Trust assets                                                                                                                   |   |   | **(36** | **)** |   |   |   |   |
| Pension                  and other postretirement benefits                                                                                                                                    |   |   | **7** |   |   |   |   |   |
| Accrual                  for PJM billing dispute                                                                                                                                              |   |   |   |   |   |   | 47 |   |
| Deferral                  of ice storm related costs                                                                                                                                          |   |   |   |   |   |   | (12 | ) |
| Reversal                  of Hurricane Isabel costs deferral                                                                                                                                  |   |   | **11** |   |   |   |   |   |
| Change                  in current assets and current liabilities                                                                                                                             |   |   |   |   |   |   |   |   |
| Accounts                  receivable                                                                                                                                                          |   |   | **(4** | **)** |   |   | (16 | ) |
| Accounts                  payable                                                                                                                                                             |   |   | **(40** | **)** |   |   | (39 | ) |
| Other                                                                                                                                                                                         |   |   | **(33** | **)** |   |   | (40 | ) |
| Other                  operating activities                                                                                                                                                   |   |   |   |   |   |   |   |   |
| Other                  assets                                                                                                                                                                 |   |   | **2** |   |   |   | (3 | ) |
| Other                  liabilities                                                                                                                                                            |   |   | **(1** | **)** |   |   | 18 |   |
| Net                  cash provided by operating activities                                                                                                                                    |   |   | **360** |   |   |   | 361 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Cash                  Flows from Investing Activities**                                                                                                                                     |   |   |   |   |   |   |   |   |
| Expenditures                  for property, plant and equipment                                                                                                                               |   |   | **(200** | **)** |   |   | (125 | ) |
| Purchases                  of marketable securities                                                                                                                                           |   |   | **(122** | **)** |   |   |   |   |
| Proceeds                  from the sale of marketable securities                                                                                                                              |   |   | **122** |   |   |   | 10 |   |
| Net                  decrease (increase) in restricted cash                                                                                                                                   |   |   | **3** |   |   |   | (3 | ) |
| Other                  investing activities                                                                                                                                                   |   |   | **3** |   |   |   | 2 |   |
| Net                  cash used in investing activities                                                                                                                                        |   |   | **(194** | **)** |   |   | (116 | ) |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Cash                  Flows from Financing Activities**                                                                                                                                     |   |   |   |   |   |   |   |   |
| Issuance                  of preference stock, net of issuance costs                                                                                                                          |   |   | **245** |   |   |   |   |   |
| Issuance                  of long-term debt                                                                                                                                                   |   |   |   |   |   |   | 224 |   |
| Retirement                  of long-term debt                                                                                                                                                 |   |   | **(365** | **)** |   |   | (497 | ) |
| Contribution                  from PPL                                                                                                                                                        |   |   | **75** |   |   |   |   |   |
| Repurchase                  of common stock from PPL                                                                                                                                          |   |   | **(200** | **)** |   |   |   |   |
| Payment                  of common stock dividends to PPL                                                                                                                                     |   |   | **(84** | **)** |   |   | (59 | ) |
| Other                  financing activities                                                                                                                                                   |   |   | **(5** | **)** |   |   | (11 | ) |
| Net                  cash used in financing activities                                                                                                                                        |   |   | **(334** | **)** |   |   | (343 | ) |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Net                  Decrease in Cash and Cash Equivalents**                                                                                                                                |   |   | **(168** | **)** |   |   | (98 | ) |
| Cash                  and Cash Equivalents at Beginning of Period                                                                                                                             |   |   | **298** |   |   |   | 151 |   |
| Cash                  and Cash Equivalents at End of Period                                                                                                                                   |   | **$** | **130** |   |   | $ | 53 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| *The                  accompanying Notes to Condensed Consolidated Financial Statements                  are an                  integral part of the financial                  statements.* |

----

| **CONDENSED                  CONSOLIDATED BALANCE SHEETS**                                                                                                                                    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PPL                  Electric Utilities Corporation and                  Subsidiaries**                                                                                                     |
| (Unaudited)                                                                                                                                                                                   |
| *(Millions                  of Dollars)*                                                                                                                                                      |
|                                                                                                                                                                                          |   | **September                  30,****2006** |   | **December                  31,****2005** |
| **Assets**                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Current                  Assets**                                                                                                                                                           |   |   |   |   |   |   |   |   |
| Cash                  and cash equivalents                                                                                                                                                    |   | **$** | **130** |   |   | $ | 298 |   |
| Restricted                  cash                                                                                                                                                              |   |   | **42** |   |   |   | 42 |   |
| Accounts                  receivable (less reserve: 2006, $20; 2005, $20)                                                                                                                     |   |   | **233** |   |   |   | 224 |   |
| Unbilled                  revenues                                                                                                                                                            |   |   | **130** |   |   |   | 174 |   |
| Accounts                  receivable from affiliates                                                                                                                                          |   |   | **1** |   |   |   | 10 |   |
| Note                  receivable from affiliate                                                                                                                                               |   |   | **300** |   |   |   | 300 |   |
| Prepayments                                                                                                                                                                                   |   |   | **20** |   |   |   | 4 |   |
| Prepayment                  on PLR energy supply from affiliate                                                                                                                               |   |   | **12** |   |   |   | 12 |   |
| Other                                                                                                                                                                                         |   |   | **100** |   |   |   | 87 |   |
| Total                  Current Assets                                                                                                                                                         |   |   | **968** |   |   |   | 1,151 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Property,                  Plant and Equipment**                                                                                                                                            |   |   |   |   |   |   |   |   |
| Electric                  plant in service                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Transmission                  and distribution                                                                                                                                                |   |   | **4,141** |   |   |   | 4,034 |   |
| General                                                                                                                                                                                       |   |   | **416** |   |   |   | 356 |   |
|                                                                                                                                                                                          |   |   | **4,557** |   |   |   | 4,390 |   |
| Construction                  work in progress                                                                                                                                                |   |   | **52** |   |   |   | 43 |   |
| Electric                  plant                                                                                                                                                               |   |   | **4,609** |   |   |   | 4,433 |   |
| Other                  property                                                                                                                                                               |   |   | **2** |   |   |   | 3 |   |
|                                                                                                                                                                                          |   |   | **4,611** |   |   |   | 4,436 |   |
| Less:                  accumulated depreciation                                                                                                                                               |   |   | **1,780** |   |   |   | 1,720 |   |
| Total                  Property, Plant and Equipment                                                                                                                                          |   |   | **2,831** |   |   |   | 2,716 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Regulatory                  and Other Noncurrent Assets**                                                                                                                                   |   |   |   |   |   |   |   |   |
| Recoverable                  transition costs                                                                                                                                                 |   |   | **955** |   |   |   | 1,165 |   |
| Acquired                  intangibles                                                                                                                                                         |   |   | **111** |   |   |   | 114 |   |
| Prepayment                  on PLR energy supply from affiliate                                                                                                                               |   |   | **26** |   |   |   | 35 |   |
| Other                                                                                                                                                                                         |   |   | **336** |   |   |   | 356 |   |
| Total                  Regulatory and Other Noncurrent Assets                                                                                                                                 |   |   | **1,428** |   |   |   | 1,670 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Total                  Assets**                                                                                                                                                             |   | **$** | **5,227** |   |   | $ | 5,537 |   |
|                                                                                                                                                                                          |
| *The                  accompanying Notes to Condensed Consolidated Financial Statements                  are an                  integral part of the financial                  statements.* |

----

| **CONDENSED                  CONSOLIDATED BALANCE SHEETS**                                |
|-------------------------------------------------------------------------------------------|
| **PPL                  Electric Utilities Corporation and                  Subsidiaries** |
| (Unaudited)                                                                               |
| *(Millions                  of Dollars)*                                                  |
|                                                                                      |   | **September                  30,****2006** |   | **December                  31,****2005** |
| **Liabilities                  and Equity**                                               |   |   |   |   |   |   |   |   |
|                                                                                      |   |   |   |   |   |   |   |   |
| **Current                  Liabilities**                                                  |   |   |   |   |   |   |   |   |
| Short-term                  debt                                                          |   | **$** | **42** |   |   | $ | 42 |   |
| Long-term                  debt                                                           |   |   | **552** |   |   |   | 434 |   |
| Accounts                  payable                                                         |   |   | **41** |   |   |   | 42 |   |
| Accounts                  payable to affiliates                                           |   |   | **146** |   |   |   | 183 |   |
| Taxes                                                                                     |   |   | **36** |   |   |   | 76 |   |
| Collateral                  on PLR energy supply from affiliate                           |   |   | **300** |   |   |   | 300 |   |
| Other                                                                                     |   |   | **133** |   |   |   | 147 |   |
| Total                  Current Liabilities                                                |   |   | **1,250** |   |   |   | 1,224 |   |
|                                                                                      |   |   |   |   |   |   |   |   |
| **Long-term                  Debt**                                                       |   |   | **1,494** |   |   |   | 1,977 |   |
|                                                                                      |   |   |   |   |   |   |   |   |
| **Deferred                  Credits and Other Noncurrent Liabilities**                    |   |   |   |   |   |   |   |   |
| Deferred                  income taxes and investment tax credits                         |   |   | **778** |   |   |   | 771 |   |
| Other                                                                                     |   |   | **162** |   |   |   | 190 |   |
| Total                  Deferred Credits and Other Noncurrent Liabilities                  |   |   | **940** |   |   |   | 961 |   |
|                                                                                      |   |   |   |   |   |   |   |   |
| **Commitments                  and Contingent Liabilities (Note 11)**                     |   |   |   |   |   |   |   |   |
|                                                                                      |   |   |   |   |   |   |   |   |
| **Shareowners'                  Equity**                                                  |   |   |   |   |   |   |   |   |
| Preferred                  securities                                                     |   |   | **301** |   |   |   | 51 |   |
| Common                  stock - no par value (a)                                          |   |   | **364** |   |   |   | 1,476 |   |
| Additional                  paid-in capital                                               |   |   | **424** |   |   |   | 354 |   |
| Treasury                  stock (a)                                                       |   |   |   |   |   |   | (912 | ) |
| Earnings                  reinvested                                                      |   |   | **454** |   |   |   | 406 |   |
| Total                  Shareowners' Equity                                                |   |   | **1,543** |   |   |   | 1,375 |   |
|                                                                                      |   |   |   |   |   |   |   |   |
| **Total                  Liabilities and Equity**                                         |   | **$** | **5,227** |   |   | $ | 5,537 |   |

| (a)                                                                                                                                                                                           |   | 170                  million shares authorized; 66 million shares issued and outstanding                  at                  September 30, 2006, and 78 million shares issued and outstanding,                  excluding 79 million shares held as treasury stock, at December                  31, 2005.                  See Note 2 for additional information on the retirement of all                  treasury                  stock in 2006. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                          |
| *The                  accompanying Notes to Condensed Consolidated Financial Statements                  are an                  integral part of the financial                  statements.* |

----

**Combined          Notes to Condensed Consolidated Financial Statements          (Unaudited)**

| **1.  ** | **Interim                  Financial Statements** |
|--------------------|---------------------------------------------------|

*(PPL,          PPL Energy Supply and PPL Electric)*

*(PPL          and PPL Electric)*

*(PPL          and PPL Energy Supply)*

| **2.  ** | **Summary                  of Significant Accounting                  Policies** |
|--------------------|----------------------------------------------------------------------------------|

**Allowance          for Doubtful Accounts **
*(PPL          and PPL Energy Supply)*

**Treasury          Stock **

*(PPL)*

*(PPL          Electric)*

**Regulation          **
*(PPL          and PPL Electric)*

**Leases          **
*(PPL,          PPL Energy Supply and PPL Electric)*

**New          Accounting Standards **
*(PPL,          PPL Energy Supply and PPL Electric)*

| **3.  ** | **Segment                  and Related Information** |
|--------------------|------------------------------------------------------|

*(PPL          and PPL Energy Supply)*

|                                                |                                      | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September                    30,** |
|-----------------------------------------------------|-------------------------------------------|-------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|
| **PPL**                                             |                                      | **2006**                                                                      |   | **2005**                                                                     |   | **2006** |   | **2005** |
| **Income                    Statement Data**        |                                      |                                                                          |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues                    from external customers |                                      |                                                                          |   |                                                                         |   |   |   |   |   |   |   |   |   |
|                                                | Supply                                    |                                                                          | $      | 608                                                                          |   |   | $ | 528 |   |   | $ | 1,684 |   |   | $ | 1,395 |   |
|                                                | International                    Delivery |                                                                          |   | 320                                                                          |   |   |   | 283 |   |   |   | 998 |   |   |   | 897 |   |
|                                                | Pennsylvania                    Delivery  |                                                                          |   | 824                                                                          |   |   |   | 809 |   |   |   | 2,493 |   |   |   | 2,393 |   |
|                                                |                                      |                                                                          |   | 1,752                                                                        |   |   |   | 1,620 |   |   |   | 5,175 |   |   |   | 4,685 |   |
| Intersegment                    revenues            |                                      |                                                                          |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                | Supply                                    |                                                                          |   | 445                                                                          |   |   |   | 415 |   |   |   | 1,286 |   |   |   | 1,194 |   |
|                                                | Pennsylvania                    Delivery  |                                                                          |   | 41                                                                           |   |   |   | 41 |   |   |   | 121 |   |   |   | 113 |   |
|                                                |                                      |                                                                          |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    Income                       |                                      |                                                                          |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                | Supply                    (a)             |                                                                          |   | 120                                                                          |   |   |   | 112 |   |   |   | 337 |   |   |   | 238 |   |
|                                                | International                    Delivery |                                                                          |   | 59                                                                           |   |   |   | 36 |   |   |   | 219 |   |   |   | 152 |   |
|                                                | Pennsylvania                    Delivery  |                                                                          |   | 47                                                                           |   |   |   | 49 |   |   |   | 131 |   |   |   | 103 |   |
|                                                |                                      |                                                                          | $      | 226                                                                          |   |   | $ | 197 |   |   | $ | 687 |   |   | $ | 493 |   |

| **PPL**                                   |                                      | **September                    30,****2006** |   | **December                    31,****2005** |
|-------------------------------------------|-------------------------------------------|----------------------------------------------|--------|---------------------------------------------|
| **Balance                    Sheet Data** |                                      |                                         |   |                                        |   |   |   |   |
| Total                    assets           |                                      |                                         |   |                                        |   |   |   |   |
|                                      | Supply                                    |                                         | $      | 7,852                                       |   |   | $ | 7,118 |   |
|                                      | International                    Delivery |                                         |   | 5,586                                       |   |   |   | 5,089 |   |
|                                      | Pennsylvania                    Delivery  |                                         |   | 5,419                                       |   |   |   | 5,719 |   |
|                                      |                                      | $                                            | 18,857 |                                        |   | $ | 17,926 |   |

|                                                |                                      | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September                    30,** |
|-----------------------------------------------------|-------------------------------------------|-------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|
| **PPL                    Energy Supply**            |                                      | **2006**                                                                      |   | **2005**                                                                     |   | **2006** |   | **2005** |
| **Income                    Statement Data**        |                                      |                                                                          |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues                    from external customers |                                      |                                                                          |   |                                                                         |   |   |   |   |   |   |   |   |   |
|                                                | Supply                                    |                                                                          | $      | 1,052                                                                        |   |   | $ | 940 |   |   | $ | 2,951 |   |   | $ | 2,568 |   |
|                                                | International                    Delivery |                                                                          |   | 320                                                                          |   |   |   | 283 |   |   |   | 998 |   |   |   | 897 |   |
|                                                |                                      |                                                                          |   | 1,372                                                                        |   |   |   | 1,223 |   |   |   | 3,949 |   |   |   | 3,465 |   |
| Net                    Income                       |                                      |                                                                          |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                | Supply                    (a)             |                                                                          |   | 123                                                                          |   |   |   | 123 |   |   |   | 351 |   |   |   | 266 |   |
|                                                | International                    Delivery |                                                                          |   | 59                                                                           |   |   |   | 36 |   |   |   | 219 |   |   |   | 152 |   |
|                                                |                                      | $                                                                             | 182    |                                                                         |   | $ | 159 |   |   | $ | 570 |   |   | $ | 418 |   |

| **PPL                    Energy Supply**  |                                      | **September                    30,****2006** |   | **December                    31,****2005** |
|-------------------------------------------|-------------------------------------------|----------------------------------------------|--------|---------------------------------------------|
| **Balance                    Sheet Data** |                                      |                                         |   |                                        |   |   |   |   |
| Total                    assets           |                                      |                                         |   |                                        |   |   |   |   |
|                                      | Supply                                    |                                         | $      | 8,215                                       |   |   | $ | 7,575 |   |
|                                      | International                    Delivery |                                         |   | 5,586                                       |   |   |   | 5,089 |   |
|                                      |                                      | $                                            | 13,801 |                                        |   | $ | 12,664 |   |

| (a) |   | 2006                    and 2005 include the results of discontinued operations. See                    Note 8                    for additional information. |
|-----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **4.  ** | **Earnings                  Per Share** |
|--------------------|-----------------------------------------|

*(PPL)*

| · | 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; and                                  |
| · | convertible                    senior notes.                                                                                                                        |

|                                                 |                                                                                                   | **Three                    Months Ended****September                    30,** |    | **Nine                    Months Ended****September                    30,** |
|------------------------------------------------------|--------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------|---------|------------------------------------------------------------------------------|
|                                                 |                                                                                                   | **2006**                                                                      |    | **2005**                                                                     |   | **2006** |   | **2005** |
| **Income                    (Numerator)**            |                                                                                                   |                                                                          |    |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                    from continuing operations |                                                                                                   | $                                                                             | 226     |                                                                         |   | $ | 195 |   |   | $ | 707 |   |   | $ | 544 |   |
|                                                 | Loss                    (income) from discontinued operations (net of income                    taxes) |                                                                          |    |                                                                         |   |   |   | (2 | ) |   |   | 20 |   |   |   | 51 |   |
| Net                    Income                        |                                                                                                   | $                                                                             | 226     |                                                                         |   | $ | 197 |   |   | $ | 687 |   |   | $ | 493 |   |
|                                                 |                                                                                                   |                                                                          |    |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| **Shares                    (Denominator)**          |                                                                                                   |                                                                          |    |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares                    for Basic EPS              |                                                                                                   |                                                                          | 380,806 |                                                                         |   |   | 379,660 |   |   |   | 380,269 |   |   |   | 378,955 |   |
| Add                    incremental shares:           |                                                                                                   |                                                                          |    |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                 | Convertible                    Senior Notes                                                            |                                                                          |    | 3,920                                                                        |   |   |   | 3,326 |   |   |   | 3,212 |   |   |   | 2,106 |   |
|                                                 | Stock                    options and other share-based awards                                          |                                                                          |    | 2,876                                                                        |   |   |   | 2,523 |   |   |   | 2,792 |   |   |   | 2,288 |   |
| Shares                    for Diluted EPS            |                                                                                                   |                                                                          | 387,602 |                                                                         |   |   | 385,509 |   |   |   | 386,273 |   |   |   | 383,349 |   |
|                                                 |                                                                                                   |                                                                          |    |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| **Basic                    EPS**                     |                                                                                                   |                                                                          |    |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                    from continuing operations |                                                                                                   | $                                                                             | 0.59    |                                                                         |   | $ | 0.51 |   |   | $ | 1.86 |   |   | $ | 1.44 |   |
|                                                 | Loss                    (income) from discontinued operations (net of income                    taxes) |                                                                          |    |                                                                         |   |   |   | (0.01 | ) |   |   | 0.05 |   |   |   | 0.14 |   |
| Net                    Income                        |                                                                                                   | $                                                                             | 0.59    |                                                                         |   | $ | 0.52 |   |   | $ | 1.81 |   |   | $ | 1.30 |   |
|                                                 |                                                                                                   |                                                                          |    |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| **Diluted                    EPS**                   |                                                                                                   |                                                                          |    |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                    from continuing operations |                                                                                                   | $                                                                             | 0.58    |                                                                         |   | $ | 0.50 |   |   | $ | 1.83 |   |   | $ | 1.42 |   |
|                                                 | Loss                    (income) from discontinued operations (net of income                    taxes) |                                                                          |    |                                                                         |   |   |   | (0.01 | ) |   |   | 0.05 |   |   |   | 0.13 |   |
| Net                    Income                        |                                                                                                   | $                                                                             | 0.58    |                                                                         |   | $ | 0.51 |   |   | $ | 1.78 |   |   | $ | 1.29 |   |

|                                          |   | **Three                    Months Ended****September                    30,** |   |   |   | **Nine                    Months Ended****September                    30,** |   |
|-----------------------------------------------|--------|-------------------------------------------------------------------------------|--------|--------|--------|------------------------------------------------------------------------------|--------|
| *(Thousands                    of Shares)*    |   | **2006**                                                                      |   |   |   | **2005**                                                                     |   |   |   | **2006** |   |   |   | **2005** |   |
| Antidilutive                    stock options |   |                                                                          |   |   |   |                                                                         |   |   |   | 445 |   |   |   |   |   |

| **5.  ** | **Income                  Taxes** |
|--------------------|-----------------------------------|

*(PPL          and PPL Energy Supply)*

|                                                                              |                                                                                                                                                                                                                                                                                      | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September                    30,** |
|-----------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|
| **PPL**                                                                           |                                                                                                                                                                                                                                                                                      | **2006**                                                                      |   | **2005**                                                                     |   | **2006** |   | **2005** |
| **Reconciliation                    of****Income                    Tax Expense** |                                                                                                                                                                                                                                                                                      |                                                                          |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                              | Indicated                    federal income tax on Income from Continuing Operations Before                    Income                    Taxes, Minority Interest and Dividends on Preferred Securities                    of a                    Subsidiary at statutory tax rate - 35% |                                                                          | $      | 96                                                                           |   |   | $ | 91 |   |   | $ | 330 |   |   | $ | 241 |   |
| Increase                    (decrease) due to:                                    |                                                                                                                                                                                                                                                                                      |                                                                          |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                              | State                    income taxes                                                                                                                                                                                                                                                     |                                                                          |   | 3                                                                            |   |   |   | 8 |   |   |   | 13 |   |   |   | 10 |   |
|                                                                              | Amortization                    of investment tax credit                                                                                                                                                                                                                                  |                                                                          |   | (3                                                                           | ) |   |   | (3 | ) |   |   | (8 | ) |   |   | (8 | ) |
|                                                                              | Difference                    related to income recognition of foreign affiliates (net of foreign                    income                    taxes)                                                                                                                                     |                                                                          |   | (14                                                                          | ) |   |   | (7 | ) |   |   | (36 | ) |   |   | (27 | ) |
|                                                                              | Chilean                    deferred tax adjustment (Note 3)                                                                                                                                                                                                                               |                                                                          |   | (9                                                                           | ) |   |   |   |   |   |   | (9 | ) |   |   |   |   |
|                                                                              | Transfer                    of WPD tax items                                                                                                                                                                                                                                              |                                                                          |   |                                                                         |   |   |   |   |   |   |   | (20 | ) |   |   |   |   |
|                                                                              | Stranded                    cost securitization                                                                                                                                                                                                                                           |                                                                          |   | (2                                                                           | ) |   |   |   |   |   |   | (5 | ) |   |   |   |   |
|                                                                              | Federal                    income tax credits                                                                                                                                                                                                                                             |                                                                          |   | (24                                                                          | ) |   |   | (27 | ) |   |   | (38 | ) |   |   | (81 | ) |
|                                                                              | Change                    in tax reserves                                                                                                                                                                                                                                                 |                                                                          |   | (6                                                                           | ) |   |   | 2 |   |   |   | (6 | ) |   |   | 2 |   |
|                                                                              | Other                                                                                                                                                                                                                                                                                     |                                                                          |   |                                                                         |   |   |   |   |   |   |   | (2 | ) |   |   | 1 |   |
|                                                                              |                                                                                                                                                                                                                                                                                      |                                                                          | (55    | )                                                                            |   |   | (27 | ) |   |   | (111 | ) |   |   | (103 | ) |
| **Total                    income tax expense**                                   |                                                                                                                                                                                                                                                                                      | $                                                                             | 41     |                                                                         |   | $ | 64 |   |   | $ | 219 |   |   | $ | 138 |   |
| **Effective                    income tax rate**                                  |                                                                                                                                                                                                                                                                                      |                                                                          | 14.9%  |                                                                         |   |   | 24.5% |   |   |   | 23.2% |   |   |   | 20.0% |   |

|                                                                                  |                                                                                                                                                                                                   | **Three                      Months Ended****September                      30,** |   | **Nine                      Months Ended****September                      30,** |
|---------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------|
| **PPL                      Energy Supply**                                            |                                                                                                                                                                                                   | **2006**                                                                          |   | **2005**                                                                         |   | **2006** |   | **2005** |
| **Reconciliation                      of****Income                      Tax Expense** |                                                                                                                                                                                                   |                                                                              |   |                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                  | Indicated                      federal income tax on Income from Continuing Operations Before                      Income                      Taxes and Minority Interest at statutory tax rate - 35% |                                                                              | $      | 73                                                                               |   |   | $ | 66 |   |   | $ | 267 |   |   | $ | 192 |   |
| Increase                      (decrease) due to:                                      |                                                                                                                                                                                                   |                                                                              |   |                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                  | State                      income taxes                                                                                                                                                                |                                                                              |   | 4                                                                                |   |   |   | 1 |   |   |   | 16 |   |   |   | (3 | ) |
|                                                                                  | Amortization                      of investment tax credit                                                                                                                                             |                                                                              |   | (2                                                                               | ) |   |   | (2 | ) |   |   | (6 | ) |   |   | (6 | ) |
|                                                                                  | Difference                      related to income recognition of foreign affiliates (net of                      foreign income                      taxes)                                            |                                                                              |   | (14                                                                              | ) |   |   | (7 | ) |   |   | (36 | ) |   |   | (27 | ) |
|                                                                                  | Chilean                      deferred tax adjustment (Note 3)                                                                                                                                          |                                                                              |   | (9                                                                               | ) |   |   |   |   |   |   | (9 | ) |   |   |   |   |
|                                                                                  | Transfer                      of WPD tax items                                                                                                                                                         |                                                                              |   |                                                                             |   |   |   |   |   |   |   | (20 | ) |   |   |   |   |
|                                                                                  | Federal                      income tax credits                                                                                                                                                        |                                                                              |   | (24                                                                              | ) |   |   | (27 | ) |   |   | (38 | ) |   |   | (81 | ) |
|                                                                                  | Change                      in tax reserves                                                                                                                                                            |                                                                              |   | (4                                                                               | ) |   |   | 2 |   |   |   | (4 | ) |   |   | 2 |   |
|                                                                                  | Other                                                                                                                                                                                                  |                                                                              |   | 1                                                                                |   |   |   | (2 | ) |   |   | (4 | ) |   |   | (2 | ) |
|                                                                                  |                                                                                                                                                                                                   |                                                                              | (48    | )                                                                                |   |   | (35 | ) |   |   | (101 | ) |   |   | (117 | ) |
| **Total                      income tax expense**                                     |                                                                                                                                                                                                   | $                                                                                 | 25     |                                                                             |   | $ | 31 |   |   | $ | 166 |   |   | $ | 75 |   |
| **Effective                      income tax rate**                                    |                                                                                                                                                                                                   |                                                                              | 11.8%  |                                                                             |   |   | 16.4% |   |   |   | 21.7% |   |   |   | 13.7% |   |

*(PPL          Electric)*

|                                                                              |                                                                                                                                            | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September                    30,** |
|-----------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|
| **PPL                    Electric**                                               |                                                                                                                                            | **2006**                                                                      |   | **2005**                                                                     |   | **2006** |   | **2005** |
| **Reconciliation                    of****Income                    Tax Expense** |                                                                                                                                            |                                                                          |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                              | Indicated                    federal income tax on Income Before Income Taxes at statutory                    tax rate -                    35% |                                                                          | $      | 27                                                                           |   |   | $ | 30 |   |   | $ | 73 |   |   | $ | 57 |   |
| Increase                    (decrease) due to:                                    |                                                                                                                                            |                                                                          |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                              | State                    income taxes                                                                                                           |                                                                          |   | 2                                                                            |   |   |   | 3 |   |   |   | 3 |   |   |   | 3 |   |
|                                                                              | Amortization                    of investment tax credit                                                                                        |                                                                          |   | (1                                                                           | ) |   |   | (1 | ) |   |   | (2 | ) |   |   | (2 | ) |
|                                                                              | Stranded                    cost securitization                                                                                                 |                                                                          |   | (2                                                                           | ) |   |   |   |   |   |   | (5 | ) |   |   |   |   |
|                                                                              | Change                    in tax reserves                                                                                                       |                                                                          |   | (3                                                                           | ) |   |   |   |   |   |   | (2 | ) |   |   | (1 | ) |
|                                                                              | Other                                                                                                                                           |                                                                          |   |                                                                         |   |   |   |   |   |   |   | 1 |   |   |   | 2 |   |
|                                                                              |                                                                                                                                            |                                                                          | (4     | )                                                                            |   |   | 2 |   |   |   | (5 | ) |   |   | 2 |   |
| **Total                    income tax expense**                                   |                                                                                                                                            | $                                                                             | 23     |                                                                         |   | $ | 32 |   |   | $ | 68 |   |   | $ | 59 |   |
| **Effective                    income tax rate**                                  |                                                                                                                                            |                                                                          | 29.5%  |                                                                         |   |   | 37.6% |   |   |   | 32.5% |   |   |   | 36.0% |   |

| **6.  ** | **Comprehensive                  Income** |
|--------------------|-------------------------------------------|

*(PPL          and PPL Energy Supply)*

|                                                  |                                                                           | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September                    30,** |
|-------------------------------------------------------|--------------------------------------------------------------------------------|-------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|
| **PPL**                                               |                                                                           | **2006**                                                                      |   | **2005**                                                                     |   | **2006** |   | **2005** |
| Net                    Income                         |                                                                           | $                                                                             | 226    |                                                                         |   | $ | 197 |   |   | $ | 687 |   |   | $ | 493 |   |
| Other                    comprehensive income (loss): |                                                                           |                                                                          |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                  | Foreign                    currency translation adjustments                    |                                                                          |   | 17                                                                           |   |   |   | 9 |   |   |   | 99 |   |   |   | (30 | ) |
|                                                  | Net                    unrealized gain (loss) on available-for-sale securities |                                                                          |   | 7                                                                            |   |   |   | 5 |   |   |   | (1 | ) |   |   | 5 |   |
|                                                  | Net                    unrealized gain (loss) on qualifying derivatives        |                                                                          |   | 43                                                                           |   |   |   | (124 | ) |   |   | 169 |   |   |   | (204 | ) |
|                                                  | Total                    other comprehensive income (loss)                     |                                                                          |   | 67                                                                           |   |   |   | (110 | ) |   |   | 267 |   |   |   | (229 | ) |
| Comprehensive                    Income               |                                                                           | $                                                                             | 293    |                                                                         |   | $ | 87 |   |   | $ | 954 |   |   | $ | 264 |   |

| **PPL                    Energy Supply**              |                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|-------------------------------------------------------|--------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Net                    Income                         |                                                                           | $      | 182    |   |   | $      | 159    |   |   | $      | 570    |   |   | $      | 418    |   |
| Other                    comprehensive income (loss): |                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                  | Foreign                    currency translation adjustments                    |   |   | 17     |   |   |   | 9      |   |   |   | 99     |   |   |   | (30    | ) |
|                                                  | Net                    unrealized gain (loss) on available-for-sale securities |   |   | 7      |   |   |   | 6      |   |   |   | (1     | )      |   |   | 5      |   |
|                                                  | Net                    unrealized gain (loss) on qualifying derivatives        |   |   | 53     |   |   |   | (134   | )      |   |   | 161    |   |   |   | (213   | ) |
|                                                  | Total                    other comprehensive income (loss)                     |   |   | 77     |   |   |   | (119   | )      |   |   | 259    |   |   |   | (238   | ) |
| Comprehensive                    Income               |                                                                           | $      | 259    |   |   | $      | 40     |   |   | $      | 829    |   |   | $      | 180    |   |

*(PPL          Electric)*

| **7.  ** | **Credit                  Arrangements and Financing                  Activities** |
|--------------------|------------------------------------------------------------------------------------|

**Credit          Arrangements**

*(PPL          and PPL Electric)*

*(PPL          and PPL Energy Supply)*

*(PPL,          PPL Energy Supply and PPL Electric)*

**Financing          Activities**

*(PPL)*

*(PPL          and PPL Electric)*

*(PPL          Electric)*

*(PPL          and PPL Energy Supply)*

*(PPL          Energy Supply)*

**Dividends          **

*(PPL)*

*(PPL          and PPL Electric)*

| **8.  ** | **Acquisitions,                  Development and Divestitures** |
|--------------------|-----------------------------------------------------------------|

*(PPL          and PPL Energy Supply)*

**Discontinued          Operations**

|                                                                                                                                                                      |   | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September                    30,** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|
|                                                                                                                                                                      |   | **2006**                                                                      |   | **2005**                                                                     |   | **2006** |   | **2005** |
| Operating                    revenues                                                                                                                                     |   | $                                                                             |   |                                                                         |   | $ | 23 |   |   | $ | 5 |   |   | $ | 37 |   |
| Operating                    expenses                                                                                                                                     |   |                                                                          |   |                                                                         |   |   | 19 |   |   |   | 10 |   |   |   | 37 |   |
| Loss                    (income) from operations before income taxes                                                                                                      |   |                                                                          |   |                                                                         |   |   | (4 | ) |   |   | 5 |   |   |   |   |   |
| Income                    tax expense (benefit)                                                                                                                           |   |                                                                          |   |                                                                         |   |   | 2 |   |   |   | (2 | ) |   |   |   |   |
| Loss                    (income) from operations after income taxes                                                                                                       |   |                                                                          |   |                                                                         |   |   | (2 | ) |   |   | 3 |   |   |   |   |   |
| Loss                    on sale of interest (net of tax benefit of $16 million)                                                                                           |   |                                                                          |   |                                                                         |   |   |   |   |   |   | 24 |   |   |   |   |   |
| Acceleration                    of net unrealized gains on derivatives associated with the plant                    (net of                    tax expense of $4 million) |   |                                                                          |   |                                                                         |   |   |   |   |   |   | (7 | ) |   |   |   |   |
| Loss                    (Income) from Discontinued Operations (net of income                    taxes)                                                                    |   | $                                                                             |   |                                                                         |   | $ | (2 | ) |   | $ | 20 |   |   | $ |   |   |

|                                                                       |   | **September                    30, 2005** |
|----------------------------------------------------------------------------|--------|-------------------------------------------|
|                                                                       |   | **Three                    Months Ended** |   | **Nine                    Months Ended** |
| Operating                    revenues                                      |   | $                                         |   |   |   | $ | 4 |   |
| Operating                    expenses                                      |   |                                      |   |   |   |   | 10 |   |
| Loss                    from operations before income taxes                |   |                                      |   |   |   |   | 6 |   |
| Income                    tax benefit                                      |   |                                      |   |   |   |   | (2 | ) |
| Loss                    from operations after income taxes                 |   |                                      |   |   |   |   | 4 |   |
| Loss                    on disposal (net of tax benefit of $26 million)    |   |                                      |   |   |   |   | 47 |   |
| Loss                    from Discontinued Operations (net of income taxes) |   | $                                         |   |   |   | $ | 51 |   |

**International**

**Domestic**

**Other**

| **9.  ** | **Stock-Based                  Compensation** |
|--------------------|-----------------------------------------------|

*(PPL,          PPL Energy Supply and PPL Electric)*

*(PPL)*

*(PPL          Energy Supply)*

*(PPL          Electric)*

**Restricted          Stock and Restricted Stock Units **
*(PPL,          PPL Energy Supply and PPL Electric)*

|                                               |   | **Restricted****Shares** |      | **Weighted-****Average****Grant                    Date****Fair****Value** |
|----------------------------------------------------|--------|--------------------------|-----------|----------------------------------------------------------------------------|
| **PPL**                                            |   |                     |      |                                                                       |   |   |   |   |
| Nonvested                    at January 1, 2006    |   |                     | 1,557,123 |                                                                       |   |   | $21.23 |   |
| Granted                                            |   |                     | 797,555   |                                                                       |   |   | 30.85 |   |
| Vested                                             |   |                     | (339,266  | )                                                                          |   |   | 18.61 |   |
| Forfeited                                          |   |                     | (96,392   | )                                                                          |   |   | 20.20 |   |
| Nonvested                    at September 30, 2006 |   |                     | 1,919,020 |                                                                       |   |   | 25.76 |   |
|                                               |   |                     |      |                                                                       |   |   |   |   |
| **PPL                    Energy Supply**           |   |                     |      |                                                                       |   |   |   |   |
| Nonvested                    at January 1, 2006    |   |                     | 671,901   |                                                                       |   |   | $19.67 |   |
| Granted                                            |   |                     | 305,600   |                                                                       |   |   | 31.14 |   |
| Vested                                             |   |                     | (130,146  | )                                                                          |   |   | 17.75 |   |
| Forfeited                                          |   |                     | (45,640   | )                                                                          |   |   | 25.33 |   |
| Transferred                                        |   |                     | 43,230    |                                                                       |   |   | 28.01 |   |
| Nonvested                    at September 30, 2006 |   |                     | 844,945   |                                                                       |   |   | 24.28 |   |
|                                               |   |                     |      |                                                                       |   |   |   |   |
| **PPL                    Electric**                |   |                     |      |                                                                       |   |   |   |   |
| Nonvested                    at January 1, 2006    |   |                     | 116,260   |                                                                       |   |   | $23.09 |   |
| Granted                                            |   |                     | 58,550    |                                                                       |   |   | 31.17 |   |
| Vested                                             |   |                     | (33,340   | )                                                                          |   |   | 17.69 |   |
| Nonvested                    at September 30, 2006 |   |                     | 141,470   |                                                                       |   |   | 27.68 |   |

|                                 |   | **Unrecognized                    Compensation Cost** |   | **Weighted-Average****Period                    for Recognition** |
|--------------------------------------|--------|-------------------------------------------------------|--------|-------------------------------------------------------------------|
|                                 |   |                                                  |   |                                                              |   |   |   |   |
| PPL                                  |   | $                                                     | 13     |                                                              |   |   | 2.6                    years |   |
| PPL                    Energy Supply |   |                                                  | 7      |                                                              |   |   | 2.7                    years |   |
| PPL                    Electric      |   |                                                  | 1      |                                                              |   |   | 1.5                    years |   |

|                                 |   | **September                    30,****2006** |   | **September                    30,****2005** |
|--------------------------------------|--------|----------------------------------------------|--------|----------------------------------------------|
|                                 |   |                                         |   |                                         |   |   |   |   |
| PPL                                  |   | $                                            | 11     |                                         |   | $ | 10 |   |
| PPL                    Energy Supply |   |                                         | 4      |                                         |   |   | 4 |   |
| PPL                    Electric      |   |                                         | 1      |                                         |   |   | 1 |   |

**Stock          Options **
*(PPL,          PPL Energy Supply and PPL Electric)*

|                                                              |        | **Number                    of Options** |      | **Weighted-Average                    Exercise Price** |   | **Weighted-Average                    Remaining Contractual Term** |   | **Aggregate                    Total Intrinsic Value** |
|-------------------------------------------------------------------|-------------|------------------------------------------|-----------|--------------------------------------------------------|--------|--------------------------------------------------------------------|--------|--------------------------------------------------------|
| **PPL**                                                           |        |                                     |      |                                                   |   |                                                               |   |                                                   |   |   |   |   |   |   |   |   |
| Outstanding                    at January 1, 2006                 |        |                                     | 5,586,072 |                                                   |   | $                                                                  | 21.81  |                                                   |   |   |   |   |   |   |   |   |
|                                                              | Granted     |                                     |      | 1,335,420                                              |   |                                                               |   | 30.14                                                  |   |   |   |   |   |   |   |   |   |
|                                                              | Exercised   |                                     |      | (999,186                                               | )      |                                                               |   | 18.50                                                  |   |   |   |   |   |   |   |   |   |
|                                                              | Forfeited   |                                     |      | (64,540                                                | )      |                                                               |   | 30.14                                                  |   |   |   |   |   |   |   |   |   |
| Outstanding                    at September 30, 2006              |        |                                     | 5,857,766 |                                                   |   |                                                               | 24.18  |                                                   |   |   | 7.3                    years |   |   | $ | 52 |   |
| Options                    exercisable at September 30, 2006      |        |                                     | 3,267,255 |                                                   |   |                                                               | 21.36  |                                                   |   |   | 6.3                    years |   |   |   | 38 |   |
| Weighted-average                    fair value of options granted |        | $                                        | 4.86      |                                                   |   |                                                               |   |                                                   |   |   |   |   |   |   |   |   |
|                                                              |        |                                     |      |                                                   |   |                                                               |   |                                                   |   |   |   |   |   |   |   |   |
| **PPL                    Energy Supply**                          |        |                                     |      |                                                   |   |                                                               |   |                                                   |   |   |   |   |   |   |   |   |
| Outstanding                    at January 1, 2006                 |        |                                     | 1,225,502 |                                                   |   | $                                                                  | 21.72  |                                                   |   |   |   |   |   |   |   |   |
|                                                              | Granted     |                                     |      | 494,660                                                |   |                                                               |   | 30.14                                                  |   |   |   |   |   |   |   |   |   |
|                                                              | Exercised   |                                     |      | (212,960                                               | )      |                                                               |   | 18.56                                                  |   |   |   |   |   |   |   |   |   |
|                                                              | Transferred |                                     |      | 194,360                                                |   |                                                               |   | 23.93                                                  |   |   |   |   |   |   |   |   |   |
| Outstanding                    at September 30, 2006              |        |                                     | 1,701,562 |                                                   |   |                                                               | 24.82  |                                                   |   |   | 7.6                    years |   |   | $ | 14 |   |
| Options                    exercisable at September 30, 2006      |        |                                     | 782,487   |                                                   |   |                                                               | 20.85  |                                                   |   |   | 6.3                    years |   |   |   | 10 |   |
| Weighted-average                    fair value of options granted |        | $                                        | 4.86      |                                                   |   |                                                               |   |                                                   |   |   |   |   |   |   |   |   |
|                                                              |        |                                     |      |                                                   |   |                                                               |   |                                                   |   |   |   |   |   |   |   |   |
| **PPL                    Electric**                               |        |                                     |      |                                                   |   |                                                               |   |                                                   |   |   |   |   |   |   |   |   |
| Outstanding                    at January 1, 2006                 |        |                                     | 285,372   |                                                   |   | $                                                                  | 22.95  |                                                   |   |   |   |   |   |   |   |   |
|                                                              | Granted     |                                     |      | 88,540                                                 |   |                                                               |   | 30.14                                                  |   |   |   |   |   |   |   |   |   |
| Outstanding                    at September 30, 2006              |        |                                     | 373,912   |                                                   |   |                                                               | 24.65  |                                                   |   |   | 7.1                    years |   |   | $ | 3 |   |
| Options                    exercisable at September 30, 2006      |        |                                     | 215,796   |                                                   |   |                                                               | 22.30  |                                                   |   |   | 5.9                    years |   |   |   | 2 |   |
| Weighted-average                    fair value of options granted |        | $                                        | 4.86      |                                                   |   |                                                               |   |                                                   |   |   |   |   |   |   |   |   |

|                                 |   | **Nine                    Months Ended****September                    30,** |
|--------------------------------------|--------|------------------------------------------------------------------------------|
|                                 |   | **2006**                                                                     |   | **2005** |
|                                 |   |                                                                         |   |   |   |   |   |   |
| PPL                                  |   | $                                                                            | 15 |   |   | $ | 18 |   |
| PPL                    Energy Supply |   |                                                                         | 3 |   |   |   | 4 |   |
| PPL                    Electric      |   |                                                                         |   |   |   |   | 3 |   |

|                                 |   | **Unrecognized                    Compensation Cost** |   | **Weighted-Average****Period                    for Recognition** |
|--------------------------------------|--------|-------------------------------------------------------|--------|-------------------------------------------------------------------|
|                                 |   |                                                  |   |                                                              |   |   |   |   |
| PPL                                  |   | $                                                     | 2      |                                                              |   |   | 2.0                    years |   |
| PPL                    Energy Supply |   |                                                  | 2      |                                                              |   |   | 2.0                    years |   |

|                                         |   | **2006**                     |   | **2005**                     |   |
|----------------------------------------------|--------|------------------------------|--------|------------------------------|--------|
|                                         |   |                         |   |                         |   |
| Risk-free                    interest rate   |   | 4.06%                        |   | 4.09%                        |   |
| Expected                    option life      |   | 6.25                    yrs. |   | 7.00                    yrs. |   |
| Expected                    stock volatility |   | 19.86%                       |   | 18.09%                       |   |
| Dividend                    yield            |   | 3.76%                        |   | 3.88%                        |   |

**Directors          Stock Units**
*(PPL)*

**Stock          Appreciation Rights**
*(PPL          and PPL Energy Supply)*

| **10.  ** | **Pension                  and Other Postretirement                  Benefits** |
|---------------------|---------------------------------------------------------------------------------|

*(PPL          and PPL Energy Supply)*

|                                                                                                             |   | **Pension                    Benefits**                 |
|------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------|
|                                                                                                             |   | **Three                    Months Ended September 30,** |   | **Nine                    Months Ended September 30,** |
|                                                                                                             |   | **Domestic**                                            |   | **International** |   | **Domestic** |   | **International** |
|                                                                                                             |   | **2006**                                                |   | **2005** |   | **2006** |   | **2005** |   | **2006** |   | **2005** |   | **2006** |   | **2005** |
| **PPL**                                                                                                          |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service                    cost                                                                                  |   | $                                                       | 15 |   |   | $ | 14 |   |   | $ | 6 |   |   | $ | 4 |   |   | $ | 46 |   |   | $ | 42 |   |   | $ | 16 |   |   | $ | 13 |   |
| Interest                    cost                                                                                 |   |                                                    | 31 |   |   |   | 29 |   |   |   | 36 |   |   |   | 37 |   |   |   | 93 |   |   |   | 86 |   |   |   | 104 |   |   |   | 113 |   |
| Expected                    return on plan assets                                                                |   |                                                    | (41 | ) |   |   | (40 | ) |   |   | (51 | ) |   |   | (49 | ) |   |   | (123 | ) |   |   | (119 | ) |   |   | (146 | ) |   |   | (153 | ) |
| Amortization                    of transition obligation                                                         |   |                                                    | (1 | ) |   |   | (1 | ) |   |   |   |   |   |   |   |   |   |   | (3 | ) |   |   | (3 | ) |   |   |   |   |   |   |   |   |
| Amortization                    of prior service cost                                                            |   |                                                    | 4 |   |   |   | 4 |   |   |   | 1 |   |   |   | 2 |   |   |   | 11 |   |   |   | 11 |   |   |   | 4 |   |   |   | 4 |   |
| Amortization                    of loss                                                                          |   |                                                    | 1 |   |   |   |   |   |   |   | 13 |   |   |   | 7 |   |   |   | 2 |   |   |   | 2 |   |   |   | 36 |   |   |   | 21 |   |
| Net                    periodic pension costs (credits) prior to special termination                    benefits |   |                                                    | 9 |   |   |   | 6 |   |   |   | 5 |   |   |   | 1 |   |   |   | 26 |   |   |   | 19 |   |   |   | 14 |   |   |   | (2 | ) |
| Special                    termination benefits (a)                                                              |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 6 |   |
| Net                    periodic pension costs                                                                    |   | $                                                       | 9 |   |   | $ | 6 |   |   | $ | 5 |   |   | $ | 1 |   |   | $ | 26 |   |   | $ | 19 |   |   | $ | 14 |   |   | $ | 4 |   |
|                                                                                                             |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **PPL                    Energy Supply**                                                                         |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service                    cost                                                                                  |   | $                                                       | 1 |   |   | $ | 1 |   |   | $ | 6 |   |   | $ | 4 |   |   | $ | 3 |   |   | $ | 3 |   |   | $ | 16 |   |   | $ | 13 |   |
| Interest                    cost                                                                                 |   |                                                    | 1 |   |   |   | 1 |   |   |   | 36 |   |   |   | 37 |   |   |   | 3 |   |   |   | 3 |   |   |   | 104 |   |   |   | 113 |   |
| Expected                    return on plan assets                                                                |   |                                                    | (1 | ) |   |   | (1 | ) |   |   | (51 | ) |   |   | (49 | ) |   |   | (5 | ) |   |   | (4 | ) |   |   | (146 | ) |   |   | (153 | ) |
| Amortization                    of prior service cost                                                            |   |                                                    |   |   |   |   |   |   |   |   | 1 |   |   |   | 2 |   |   |   |   |   |   |   |   |   |   |   | 4 |   |   |   | 4 |   |
| Amortization                    of loss                                                                          |   |                                                    |   |   |   |   |   |   |   |   | 13 |   |   |   | 7 |   |   |   | 1 |   |   |   |   |   |   |   | 36 |   |   |   | 21 |   |
| Net                    periodic pension costs (credits) prior to special termination                    benefits |   |                                                    | 1 |   |   |   | 1 |   |   |   | 5 |   |   |   | 1 |   |   |   | 2 |   |   |   | 2 |   |   |   | 14 |   |   |   | (2 | ) |
| Special                    termination benefits (a)                                                              |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 6 |   |
| Net                    periodic pension costs                                                                    |   | $                                                       | 1 |   |   | $ | 1 |   |   | $ | 5 |   |   | $ | 1 |   |   | $ | 2 |   |   | $ | 2 |   |   | $ | 14 |   |   | $ | 4 |   |

| (a) |   | The                    2005 amounts are related to a WPD-approved staff reduction plan                    as a                    result of the merger of its two control rooms, metering reorganization                    and                    other staff efficiencies. Additional pension costs were recognized                    due to                    early retirement and pension enhancement provisions granted to                    the                    employees. |
|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                      |   | **Other                    Postretirement Benefits**          |
|-----------------------------------------------------------|--------|---------------------------------------------------------------|
|                                                      |   | **Three                    Months Ended****September****30,** |   | **Nine                    Months Ended****September                    30,** |
|                                                      |   | **2006**                                                      |   | **2005** |   | **2006** |   | **2005** |
| **PPL**                                                   |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service                    cost                           |   | $                                                             | 2 |   |   | $ | 1 |   |   | $ | 6 |   |   | $ | 5 |   |
| Interest                    cost                          |   |                                                          | 7 |   |   |   | 6 |   |   |   | 22 |   |   |   | 19 |   |
| Expected                    return on plan assets         |   |                                                          | (5 | ) |   |   | (5 | ) |   |   | (15 | ) |   |   | (15 | ) |
| Amortization                    of transition obligation  |   |                                                          | 2 |   |   |   | 2 |   |   |   | 6 |   |   |   | 7 |   |
| Amortization                    of prior service cost     |   |                                                          | 2 |   |   |   | 1 |   |   |   | 4 |   |   |   | 3 |   |
| Amortization                    of loss                   |   |                                                          | 2 |   |   |   |   |   |   |   | 7 |   |   |   | 4 |   |
| Net                    other postretirement benefits cost |   | $                                                             | 10 |   |   | $ | 5 |   |   | $ | 30 |   |   | $ | 23 |   |

**Pension          Protection Act of 2006 **

*(PPL,          PPL Energy Supply and PPL Electric)*

*(PPL          and PPL Electric)*

**Expected          Cash Flows - Domestic Pension Plans **
*(PPL)*

**Expected          Cash Flows - International Pension Plans **
*(PPL          and PPL Energy Supply)*

| **11.  ** | **Commitments                  and Contingent Liabilities** |
|---------------------|-------------------------------------------------------------|

**Energy          Purchases, Energy Sales and Other Commitments**

*(PPL,          PPL Energy Supply and PPL Electric)*

*(PPL          and PPL Energy Supply)*

| Period                                  |   | On-Peak                    Supply |                      |   | Off-Peak                    Supply |   |
|-----------------------------------------|--------|-----------------------------------|---------------------------|--------|------------------------------------|--------|
|                                    |   |                              |                      |   |                               |   |   |   |
| 7/1/2007                    - 6/30/2010 |   |                              | 325                    MW |   |                               |   | 175                    MW |   |
| 7/1/2010                    - 6/30/2012 |   |                              | 275                    MW |   |                               |   | 150                    MW |   |
| 7/1/2012                    - 6/30/2014 |   |                              | 200                    MW |   |                               |   | 125                    MW |   |

** **
*(PPL          and PPL Energy Supply)*

**Legal          Matters**

*(PPL,          PPL Energy Supply and PPL Electric)*

** **
*(PPL          and PPL Energy Supply)*

*(PPL          and PPL Energy Supply)*

**Regulatory          Issues**

*(PPL          and PPL Energy Supply)*

** **
*(PPL,          PPL Energy Supply and PPL Electric)*

*(PPL          and PPL Energy Supply)*

*(PPL,          PPL Energy Supply and PPL Electric)*

*(PPL          and PPL Energy Supply)*

*PPL          and PPL Energy Supply)*

*(PPL          and PPL Energy Supply)*

*(PPL          and PPL Energy Supply)*

*(PPL,          PPL Energy Supply and PPL Electric)*

| · | The                    Public Utility Holding Company Act of 1935 has been repealed.                    PUHCA                    significantly restricted mergers and acquisitions in the electric                    utility                    sector.                                                                                                                                            |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | The                    FERC has appointed the North American Electric Reliability Council                    as the                    electric reliability organization to establish and enforce mandatory                    reliability rules regarding the bulk power system, and the FERC                    will                    oversee this process and independently enforce the rules. |
| · | The                    FERC will establish incentives for transmission companies, such                    as                    performance-based rates, recovery of the costs to comply with                    reliability                    rules and accelerated depreciation for investments in transmission                    infrastructure.                                               |
| · | The                    Price Anderson Amendments                    Act of 1988,                    which provides the framework for nuclear liability protection,                    was                    extended to 2025.                                                                                                                                                                      |
| · | Federal                    support will be available for certain clean coal power initiatives,                    nuclear power projects and renewable energy technologies.                                                                                                                                                                                                                         |

**Environmental          Matters - Domestic**

*(PPL,          PPL Energy Supply and PPL Electric)*

*          (PPL          and PPL Energy Supply)*

*          (PPL          and PPL Energy Supply)*

*(PPL,          PPL Energy Supply and PPL Electric)*

*(PPL          and PPL Energy Supply)*

*(PPL,          PPL Energy Supply and PPL Electric)*

*(PPL,          PPL Energy Supply and PPL Electric)*

**Environmental          Matters - International **
*(PPL          and PPL Energy Supply)*

**Other**

** **
*(PPL          and PPL Energy Supply)*

*(PPL)*

*(PPL,          PPL Energy Supply and PPL Electric)*

|                                                                                                                                                      |   |   | **Recorded                      Liability at**           |   | **Exposure                      at**       |   |                                               |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------|--------|--------------------------------------------|--------|----------------------------------------------------|
|                                                                                                                                                      |   |   | **September**** ****30,                      2006** |   | **December                      31, 2005** |   | **September****30,                      2006 (a)** |   | **Expiration                      Date** |
| **PPL                      Energy Supply**                      (b)                                                                                       |   |   |                                                     |   |                                       |   |                                               |   |   |   |   |   |   |
| WPD                      LLP guarantee of obligations under SIUK Capital Trust I preferred                      securities                                |   |   |                                                     |   |                                       |   |                                               | $ | 82 |  (c) |   | 2027 |   |
| Letters                      of credit issued on behalf of affiliates                                                                                     |   |   |                                                     |   |                                       |   |                                               |   | 7 |  (d) |   | 2007 |   |
| Support                      agreements to guarantee partnerships' obligations for the sale                      of                      coal             |   |   |                                                     |   |                                       |   |                                               |   | 9 |   |   | 2007 |   |
| Retroactive                      premiums under nuclear insurance programs                                                                                |   |   |                                                     |   |                                       |   |                                               |   | 38 |   |   |   |   |
| Nuclear                      claims under The Price-Anderson Act Amendments under The Energy                      Policy Act                      of 2005 |   |   |                                                     |   |                                       |   |                                               |   | 201 |  (e) |   |   |   |
| Contingent                      purchase price payments to former owners of synfuel                      projects                                         |   |   |                                                     |   |                                       |   |                                               |   | 27 |  (f) |   | 2007 |   |
| WPD                      guarantee of pension and other obligations of unconsolidated                      entities                                       |   | $      | 4                                                        |   | $                                          | 4      |                                               |   | 39 |  (g) |   | 2017 |   |
| Tax                      indemnification related to unconsolidated WPD affiliates                                                                         |   |   |                                                     |   |                                       |   |                                               |   | 5 |   |   | 2012 |   |
| Indemnifications                      for entities in liquidation and sales of assets                                                                     |   |   | 7                                                        |   |                                       | 1      |                                               |   | 294 |  (h) |   | 2008                      to 2012 | (h) |
| Assignment                      of Enron claims                                                                                                           |   |   |                                                     |   |                                       |   |                                               |   | 11 |  (i) |   |   | (i) |
|                                                                                                                                                      |   |   |                                                     |   |                                       |   |                                               |   |   |   |   |   |   |
| **PPL                      Electric**** **(b)                                                                                                        |   |   |                                                     |   |                                       |   |                                               |   |   |   |   |   |   |
| Guarantee                      of a portion of an unconsolidated entity's debt                                                                            |   |   |                                                     |   |                                       |   |                                               |   | 7 |  (c) |   | 2008 |   |

| (a) |   | Represents                    the estimated maximum potential amount of future payments that                    could be                    required to be made under the guarantee.                                                                                                                                                                    |
|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) |   | Other                    than the exceptions noted in (d) below, all guarantees of PPL                    Energy                    Supply and PPL Electric also apply to PPL on a consolidated                    basis.                                                                                                                               |
| (c) |   | Reflects                    principal payments only.                                                                                                                                                                                                                                                                                                    |
| (d) |   | Represents                    letters of credit issued at the direction of PPL Energy Supply                    for the                    benefit of third parties for assurance against nonperformance                    by PPL and                    PPL Gas Utilities. This is not a guarantee by PPL on a consolidated                    basis. |
| (e) |   | Amount                    is per incident.                                                                                                                                                                                                                                                                                                              |

| (f) |   | Actual                    payments are based upon production at the synfuel facilities.                    Future                    production levels are uncertain. See "IRS Synthetic Fuels Tax                    Credits"                    within this note for further discussion.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|-----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (g) |   | Neither                    the expiration date nor the maximum amount of potential payments                    for                    certain obligations is explicitly stated in the related agreements                    and,                    therefore, have been estimated based on the types of                    obligations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (h) |   | PPL                    Energy Supply's maximum exposure with respect to certain guarantees                    and                    the expiration of the guarantees cannot be estimated because,                    in the case                    of certain of the indemnification provisions, the maximum potential                    liability is not capped by the transaction documents and the                    expiration                    date is based on the applicable statute of limitations. The exposure                    noted                    is only for those cases in which the agreements provide for a                    specific                    limit on the amount of the indemnification. In                    connection with the liquidation of wholly owned subsidiaries                    that have                    been deconsolidated upon turning the entities over to the liquidators,                    certain affiliates of PPL Global have agreed to indemnify the                    liquidators,                    directors and/or the entities themselves for any liabilities                    or expenses                    arising during the liquidation process, including liabilities                    and expenses                    of the entities placed into liquidation. In some cases, the                    indemnifications are limited to a maximum amount that is based                    on                    distributions made from the subsidiary to its parent either prior                    or                    subsequent to being placed into liquidation. In other cases,                    the maximum                    amount of the indemnifications is not explicitly stated in the                    agreements.                    The indemnifications generally expire two to seven years subsequent                    to the                    date of dissolution of the entities. The exposure noted only                    includes                    those cases in which the agreements provide for a specific limit                    on the                    amount of the indemnification, and the expiration date was based                    on an                    estimate of the dissolution date of the entities. Certain                    of the indemnifications provided to the purchaser of the Sundance                    plant                    are triggered only if the purchaser's losses reach $1 million                    in the                    aggregate, are capped at 50% of the purchase price (or $95 million),                    and                    survive for a period of only 24 months after the May 13, 2005,                    transaction                    closing. The indemnification provision for unknown environmental                    and tort                    liabilities related to periods prior to the ownership by PPL                    Sundance                    Energy, LLC of the real property on which the Sundance plant                    is located                    are capped at $4 million in the aggregate and survive for a maximum                    period                    of five years after the transaction closing. Certain                    of the indemnifications provided to the purchaser of the interest                    of PPL                    Southwest Generation Holdings, LLC in the Griffith plant are                    triggered                    only if the purchaser's losses reach $750,000 in the aggregate,                    are capped                    at 35% of the purchase price (or approximately $41 million),                    and survive                    for a period of only 18 months after the June 30, 2006, transaction                    closing. In the case of most such indemnification obligations,                    the                    purchaser's existing 50% ownership of the Griffith plant prior                    to closing                    is taken into account for purposes of determining and calculating                    the                    purchaser's losses, and such indemnification obligations are                    therefore                    limited to 50% of any such purchaser losses. PPL                    Energy Supply has also guaranteed the obligation of PPL Southwest                    Generation Holdings, LLC to indemnify the purchaser of its interest                    in the                    Griffith plant for one-half of the total cost of repairing a                    damaged steam                    turbine at the plant. The maximum exposure for this indemnification                    is                    equal to an insurance deductible of $2 million. PPL Energy Supply                    also                    agreed to guarantee payment of a variable amount to the purchaser                    for each                    day until completion of repair of the turbine. The maximum amount                    of                    exposure associated with this guarantee cannot be estimated because                    the                    amount is not capped by the transaction documents and the expiration                    of                    the guarantee depends on a determination that the turbine has                    been                    repaired and is available for dispatch and scheduling. Although                    PPL Energy                    Supply believes that the turbine repair was complete and that                    the turbine                    was available for dispatch and scheduling on July 12, 2006, PPL                    Energy                    Supply is continuing to discuss this issue with the purchaser.                    At this                    time, PPL Energy Supply believes that it has adequately reserved                    its                    exposure under the contract. |
| (i) |   | In                      July 2006, two subsidiaries of PPL Energy Supply assigned their                      Enron                      claims to an independent third party (claims purchaser). In                      connection                      with the assignment, the subsidiaries agreed to repay a pro                      rata share of                      the purchase price paid by the claims purchaser, plus interest,                      in the                      event that any of the assigned claims are disallowed under                      certain                      circumstances. The bankruptcy court overseeing the Enron bankruptcy                      approved the assigned claims prior to their assignment to the                      claims                      purchaser. The subsidiaries' repayment obligations will remain                      in effect                      until the claims purchaser has received all distributions with                      respect to                      the assigned claims. See Note 2 for additional information                      regarding the                      assignment of the claims.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

| **12.  ** | **Related                  Party Transactions** |
|---------------------|-------------------------------------------------|

**Affiliate          Trust **
*(PPL          and PPL Energy Supply)*

**PLR          Contracts **
*(PPL          Energy Supply and PPL Electric)*

**NUG          Purchases **
*(PPL          Energy Supply and PPL Electric)*

**Allocations          of Corporate Service Costs**
** **
*(PPL          Energy Supply and PPL Electric*

|   |                                 | **Three                    Months Ended****September** **30,** |   | **Nine                    Months Ended****September** **30,** |   |
|--------|--------------------------------------|---------------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|
|   |                                 | **2006**                                                            |   | **2005**                                                           |   | **2006** |   | **2005** |   |
|   |                                 |                                                                |   |                                                               |   |   |   |   |   |   |   |   |   |
|   | PPL                    Energy Supply |                                                                | $      | 44                                                                 |   | $ | 39 |   | $ | 140 |   | $ | 128 |   |
|   | PPL                    Electric      |                                                                |   | 32                                                                 |   |   | 27 |   |   | 93 |   |   | 90 |   |

**Intercompany          Borrowings**

*(PPL          Energy Supply)*

*PPL          Electric)*

**Intercompany          Derivatives **
*(*
*PPL          Energy Supply)*

**Trademark          Royalties **
*(*
*PPL          Energy Supply)*

| **13.  ** | **Other                  Income - Net** |
|---------------------|-----------------------------------------|

*(PPL,          PPL Energy Supply and PPL Electric)*

|                                      |                                                                                                     | **Three                    Months Ended****September****30,** |   | **Nine                    Months Ended****September****30,** |
|-------------------------------------------|----------------------------------------------------------------------------------------------------------|---------------------------------------------------------------|--------|--------------------------------------------------------------|
|                                      |                                                                                                     | **2006**                                                      |   | **2005**                                                     |   | **2006** |   | **2005** |
| **PPL**                                   |                                                                                                     |                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| **Other                    Income**       |                                                                                                     |                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|                                      | Hyder                    liquidation distributions (Note 8)                                              |                                                          | $      | 3                                                            |   |   |   |   |   |   | $ | 27 |   |   |   |   |   |
|                                      | Interest                    income                                                                       |                                                          |   | 12                                                           |   |   | $ | 5 |   |   |   | 29 |   |   | $ | 17 |   |
|                                      | Equity                    earnings                                                                       |                                                          |   | 1                                                            |   |   |   |   |   |   |   | 3 |   |   |   | 2 |   |
|                                      | Realized                    earnings on nuclear decommissioning trust                                    |                                                          |   | 3                                                            |   |   |   |   |   |   |   | 8 |   |   |   | 3 |   |
|                                      | Gain                    on transfer of international equity investment                    (Note 8)  |                                                          |   | 5                                                            |   |   |   |   |   |   |   | 5 |   |   |   |   |   |
|                                      | Gain                    on sale of investment in an unconsolidated affiliate (Note                    8) |                                                          |   |                                                         |   |   |   |   |   |   |   | 3 |   |   |   |   |   |
|                                      | Miscellaneous                    - International                                                         |                                                          |   | 1                                                            |   |   |   | 3 |   |   |   | 4 |   |   |   | 6 |   |
|                                      | Miscellaneous                    - Domestic                                                              |                                                          |   | 1                                                            |   |   |   | 2 |   |   |   | 7 |   |   |   | 6 |   |
|                                      | Total                                                                                                    |                                                          |   | 26                                                           |   |   |   | 10 |   |   |   | 86 |   |   |   | 34 |   |
| **Other                    Deductions**   |                                                                                                     |                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|                                      | Impairment                    of investment in U.K. real estate (Note                    8)              |                                                          |   |                                                         |   |   |   |   |   |   |   | 8 |   |   |   |   |   |
|                                      | Charitable                    contributions                                                              |                                                          |   | 2                                                            |   |   |   | 1 |   |   |   | 4 |   |   |   | 3 |   |
|                                      | Miscellaneous                    - International                                                         |                                                          |   | 1                                                            |   |   |   | 1 |   |   |   | 3 |   |   |   | 3 |   |
|                                      | Miscellaneous                    - Domestic                                                              |                                                          |   | 2                                                            |   |   |   | 3 |   |   |   | 8 |   |   |   | 5 |   |
| **Other                    Income - net** |                                                                                                     | $                                                             | 21     |                                                         |   | $ | 5 |   |   | $ | 63 |   |   | $ | 23 |   |
|                                      |                                                                                                     |                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| **PPL                    Energy Supply**  |                                                                                                     |                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| **Other                    Income**       |                                                                                                     |                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|                                      | Hyder                    liquidation distributions (Note 8)                                              |                                                          | $      | 3                                                            |   |   |   |   |   |   | $ | 27 |   |   |   |   |   |
|                                      | Interest                    income                                                                       |                                                          |   | 9                                                            |   |   | $ | 3 |   |   |   | 18 |   |   | $ | 11 |   |
|                                      | Affiliated                    interest income                                                            |                                                          |   | 5                                                            |   |   |   | 5 |   |   |   | 16 |   |   |   | 10 |   |
|                                      | Equity                    earnings                                                                       |                                                          |   | 1                                                            |   |   |   | 1 |   |   |   | 3 |   |   |   | 3 |   |
|                                      | Realized                    earnings on nuclear decommissioning trust                                    |                                                          |   | 3                                                            |   |   |   |   |   |   |   | 8 |   |   |   | 3 |   |
|                                      | Gain                    on transfer of international equity investment                    (Note 8)  |                                                          |   | 5                                                            |   |   |   |   |   |   |   | 5 |   |   |   |   |   |
|                                      | Gain                    on sale of investment in an unconsolidated affiliate (Note                    8) |                                                          |   |                                                         |   |   |   |   |   |   |   | 3 |   |   |   |   |   |
|                                      | Miscellaneous                    - International                                                         |                                                          |   | 1                                                            |   |   |   | 3 |   |   |   | 4 |   |   |   | 6 |   |
|                                      | Miscellaneous                    - Domestic                                                              |                                                          |   |                                                         |   |   |   | 1 |   |   |   | 2 |   |   |   | 3 |   |
|                                      | Total                                                                                                    |                                                          |   | 27                                                           |   |   |   | 13 |   |   |   | 86 |   |   |   | 36 |   |
| **Other                    Deductions**   |                                                                                                     |                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|                                      | Impairment                    of investment in U.K. real estate (Note                    8)              |                                                          |   |                                                         |   |   |   |   |   |   |   | 8 |   |   |   |   |   |
|                                      | Miscellaneous                    - International                                                         |                                                          |   | 1                                                            |   |   |   | 1 |   |   |   | 3 |   |   |   | 3 |   |
|                                      | Miscellaneous                    - Domestic                                                              |                                                          |   | 2                                                            |   |   |   | 3 |   |   |   | 6 |   |   |   | 5 |   |
| **Other                    Income - net** |                                                                                                     | $                                                             | 24     |                                                         |   | $ | 9 |   |   | $ | 69 |   |   | $ | 28 |   |
|                                      |                                                                                                     |                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| **PPL                    Electric**       |                                                                                                     |                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| **Other                    Income**       |                                                                                                     |                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|                                      | Affiliated                    interest income                                                            |                                                          | $      | 5                                                            |   |   | $ | 4 |   |   | $ | 15 |   |   | $ | 10 |   |
|                                      | Interest                    income                                                                       |                                                          |   | 3                                                            |   |   |   | 2 |   |   |   | 8 |   |   |   | 5 |   |
|                                      | Miscellaneous                                                                                            |                                                          |   |                                                         |   |   |   |   |   |   |   | 1 |   |   |   | 2 |   |
|                                      | Total                                                                                                    |                                                          |   | 8                                                            |   |   |   | 6 |   |   |   | 24 |   |   |   | 17 |   |
| **Other                    Deductions**   |                                                                                                     |                                                          | 1      |                                                         |   |   | 1 |   |   |   | 1 |   |   |   | 2 |   |
| **Other                    Income - net** |                                                                                                     | $                                                             | 7      |                                                         |   | $ | 5 |   |   | $ | 23 |   |   | $ | 15 |   |

| **14.  ** | **Derivative                  Instruments and Hedging                  Activities** |
|---------------------|-------------------------------------------------------------------------------------|

*(PPL          and PPL Energy Supply)*

**Sale          of Interest in Griffith Plant**

**Fair          Value Hedges**

**Cash          Flow Hedges**

|                                     |                                                                                                         | **Three                    Months Ended****September****30,** |   | **Nine                    Months Ended****September****30,** |
|------------------------------------------|--------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------|--------|--------------------------------------------------------------|
|                                     |                                                                                                         | **2006**                                                      |   | **2005**                                                     |   | **2006** |   | **2005** |
| **PPL**                                  |                                                                                                         |                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|                                     | Beginning                    accumulated derivative loss                                                     |                                                          | $      | (120                                                         | ) |   | $ | (143 | ) |   | $ | (246 | ) |   | $ | (63 | ) |
|                                     | Net                    change associated with current period hedging activities and                    other |                                                          |   | 5                                                            |   |   |   | (131 | ) |   |   | 51 |   |   |   | (179 | ) |
|                                     | Net                    change from reclassification into earnings (a)                                        |                                                          |   | 38                                                           |   |   |   | 7 |   |   |   | 118 |   |   |   | (25 | ) |
|                                     | Ending                    accumulated derivative loss                                                        |                                                          | $      | (77                                                          | ) |   | $ | (267 | ) |   | $ | (77 | ) |   | $ | (267 | ) |
|                                     |                                                                                                         |                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **PPL                    Energy Supply** |                                                                                                         |                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|                                     | Beginning                    accumulated derivative loss                                                     |                                                          | $      | (129                                                         | ) |   | $ | (124 | ) |   | $ | (237 | ) |   | $ | (45 | ) |
|                                     | Net                    change associated with current period hedging activities and                    other |                                                          |   | 16                                                           |   |   |   | (140 | ) |   |   | 47 |   |   |   | (184 | ) |
|                                     | Net                    change from reclassification into earnings (a)                                        |                                                          |   | 37                                                           |   |   |   | 6 |   |   |   | 114 |   |   |   | (29 | ) |
|                                     | Ending                    accumulated derivative loss                                                        |                                                          | $      | (76                                                          | ) |   | $ | (258 | ) |   | $ | (76 | ) |   | $ | (258 | ) |

| (a) |   | The                    nine months ended September 30, 2006, include $7 million for                    the                    acceleration of unrealized gains associated with the Griffith                    plant that                    have been recorded as a component of "Loss (Income) from Discontinued                    Operations." |
|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Other          Hedging Activities**

**Credit          Concentration**

*(PPL          and PPL Energy Supply)*

*(PPL          Electric)*

| **15.  ** | **Restricted                  Cash** |
|---------------------|--------------------------------------|

*(PPL,          PPL Energy Supply and PPL Electric)*

|                                                                  |                                            | **September****30,                    2006** |
|-----------------------------------------------------------------------|-------------------------------------------------|----------------------------------------------|
|                                                                  |                                            | **PPL**                                      |   | **PPL                    Energy Supply** |   | **PPL                    Electric** |
| **Current:**                                                          |                                            |                                         |   |   |   |   |   |   |   |   |   |   |
| Collateral                    for letters of credit (a)               |                                            | $                                            | 42 |   |   |   |   |   |   | $ | 42 |   |
| Deposits                    for trading purposes with NYMEX broker    |                                            |                                         | 32 |   |   | $ | 32 |   |   |   |   |   |
| Client                    deposits                                    |                                            |                                         | 12 |   |   |   |   |   |   |   |   |   |
| Miscellaneous                                                         |                                            |                                         | 2 |   |   |   | 2 |   |   |   |   |   |
|                                                                  | Restricted                    cash - current    |                                         |   | 88 |   |   |   | 34 |   |   |   | 42 |   |
| **Noncurrent:**                                                       |                                            |                                         |   |   |   |   |   |   |   |   |   |   |
| Required                    deposits of WPD (b)                       |                                            |                                         | 19 |   |   |   | 19 |   |   |   |   |   |
| PPL                    Transition Bond Company Indenture reserves (c) |                                            |                                         | 29 |   |   |   |   |   |   |   | 29 |   |
|                                                                  | Restricted                    cash - noncurrent |                                         |   | 48 |   |   |   | 19 |   |   |   | 29 |   |
|                                                                  | Total                    restricted cash        |                                         | $ | 136 |   |   | $ | 53 |   |   | $ | 71 |   |

|                                                                  |                                            | **December                    31, 2005** |
|-----------------------------------------------------------------------|-------------------------------------------------|------------------------------------------|
|                                                                  |                                            | **PPL**                                  |   | **PPL                    Energy Supply** |   | **PPL                    Electric** |
| **Current:**                                                          |                                            |                                     |   |   |   |   |   |   |   |   |   |   |
| Collateral                    for letters of credit (a)               |                                            | $                                        | 42 |   |   |   |   |   |   | $ | 42 |   |
| Deposits                    for trading purposes with NYMEX broker    |                                            |                                     | 29 |   |   | $ | 29 |   |   |   |   |   |
| Counterparty                    collateral                            |                                            |                                     | 9 |   |   |   | 9 |   |   |   |   |   |
| Client                    deposits                                    |                                            |                                     | 12 |   |   |   |   |   |   |   |   |   |
| Miscellaneous                                                         |                                            |                                     | 1 |   |   |   | 1 |   |   |   |   |   |
|                                                                  | Restricted                    cash - current    |                                     |   | 93 |   |   |   | 39 |   |   |   | 42 |   |
| **Noncurrent:**                                                       |                                            |                                     |   |   |   |   |   |   |   |   |   |   |
| Required                    deposits of WPD (b)                       |                                            |                                     | 16 |   |   |   | 16 |   |   |   |   |   |
| PPL                    Transition Bond Company Indenture reserves (c) |                                            |                                     | 32 |   |   |   |   |   |   |   | 32 |   |
|                                                                  | Restricted                    cash - noncurrent |                                     |   | 48 |   |   |   | 16 |   |   |   | 32 |   |
|                                                                  | Total                    restricted cash        |                                     | $ | 141 |   |   | $ | 55 |   |   | $ | 74 |   |

| (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 7 for further discussion on the asset-backed                    commercial                    paper program. |
|-----|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) |   | Includes                    insurance reserves of $18 million and $15 million at September 30,                    2006 and December 31, 2005.                                                                                                                                                                                                        |
| (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.                                                                                                                              |

| **16.  ** | **Goodwill** |
|---------------------|--------------|

*(PPL          and PPL Energy Supply)*

|                                                         |   | **PPL                    Energy Supply** |   |                          |   | **PPL**   |
|--------------------------------------------------------------|--------|------------------------------------------|--------|-------------------------------|--------|-----------|
|                                                         |   | **Supply**                               |   | **International****Delivery** |   | **Total** |   | **Pennsylvania                    Delivery** |   | **Total** |
|                                                         |   |                                     |   |                          |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                    at December 31, 2005         |   | $                                        | 94     |                          |   | $         | 921 |   |   | $ | 1,015 |   |   | $ | 55 |   |   | $ | 1,070 |   |
| Effect                    of foreign currency exchange rates |   |                                     |   |                          |   |      | 68 |   |   |   | 68 |   |   |   |   |   |   |   | 68 |   |
| Purchase                    accounting adjustments (a)       |   |                                     |   |                          |   |      | (25 | ) |   |   | (25 | ) |   |   |   |   |   |   | (25 | ) |
| Balance                    at September 30, 2006   |   | $                                        | 94     |                          |   | $         | 964 |   |   | $ | 1,058 |   |   | $ | 55 |   |   | $ | 1,113 |   |

| (a) |   | Adjustments                    pursuant to EITF Issue 93-7, "Uncertainties Related to Income                    Taxes in a                    Purchase Business Combination." See Note 5 for a discussion of                    a $12                    million goodwill adjustment related to the transfer of WPD tax                    items. The                    adjustments also include an $8 million decrease in the third                    quarter                    related to deferred income taxes associated with monetary indexation                    of                    assets at WPD. |
|-----|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **17.  ** | **Asset                  Retirement Obligations** |
|---------------------|---------------------------------------------------|

*(PPL          and PPL Energy Supply)*

| AROs                    at December 31, 2005                     |   | $      | 298 |   |
|------------------------------------------------------------------|--------|--------|-----|--------|
| Accretion                    expense                             |   |   | 18  |   |
| Obligations                    settled                           |   |   | (2  | )      |
| AROs                    at                    September 30, 2006 |   | $      | 314 |   |

| **18.  ** | **New                  Accounting Standards** |
|---------------------|-----------------------------------------------|

*(PPL,          PPL Energy Supply and PPL Electric)*

**FIN          48 **

**FSP          No. FIN 46(R)-6**

**SAB          108 **

**SFAS          123(R) **

**SFAS          155 **

**SFAS          157 **

**SFAS          158**

|                                 |   | **Assets** |   | **Liabilities** |   | **Equity** |
|--------------------------------------|--------|------------|--------|-----------------|--------|------------|
| PPL                                  |   | $          | 132    |            |   | $          | 424 |   |   | $ | (292 | ) |
| PPL                    Energy Supply |   |       | 63     |            |   |       | 250 |   |   |   | (187 | ) |
| PPL                    Electric      |   |       | 41     |            |   |       | 99 |   |   |   | (58 | ) |

*(PPL          and PPL Electric)*

----

**PPL          CORPORATION AND SUBSIDIARIES**

**Item          2. Management's Discussion and Analysis of Financial Condition and Results          of          Operations**

**Overview**

**Results          of Operations**

**Earnings**

|                             |   | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September****30,** |
|----------------------------------|--------|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------|
|                             |   | **2006**                                                                      |   | **2005**                                                     |   | **2006** |   | **2005** |
| Net                    income    |   | $                                                                             | 226    |                                                         |   | $ | 197 |   |   | $ | 687 |   |   | $ | 493 |   |
| EPS                    - basic   |   | $                                                                             | 0.59   |                                                         |   | $ | 0.52 |   |   | $ | 1.81 |   |   | $ | 1.30 |   |
| EPS                    - diluted |   | $                                                                             | 0.58   |                                                         |   | $ | 0.51 |   |   | $ | 1.78 |   |   | $ | 1.29 |   |

**Segment          Results **

|                                      |   | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September****30,** |
|-------------------------------------------|--------|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------|
|                                      |   | **2006**                                                                      |   | **2005**                                                     |   | **2006** |   | **2005** |
| Supply                                    |   | $                                                                             | 120    |                                                         |   | $ | 112 |   |   | $ | 337 |   |   | $ | 238 |   |
| International                    Delivery |   |                                                                          | 59     |                                                         |   |   | 36 |   |   |   | 219 |   |   |   | 152 |   |
| Pennsylvania                    Delivery  |   |                                                                          | 47     |                                                         |   |   | 49 |   |   |   | 131 |   |   |   | 103 |   |
|                                      | Total  |                                                                          | $      | 226                                                          |   |   | $ | 197 |   |   | $ | 687 |   |   | $ | 493 |   |

|                                                          |                                        | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September****30,** |
|---------------------------------------------------------------|---------------------------------------------|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------|
|                                                          |                                        | **2006**                                                                      |   | **2005**                                                     |   | **2006** |   | **2005** |
| Energy                    revenues                            |                                        |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                          | External                                    |                                                                          | $      | 483                                                          |   |   | $ | 374 |   |   | $ | 1,258 |   |   | $ | 971 |   |
|                                                          | Intersegment                                |                                                                          |   | 445                                                          |   |   |   | 415 |   |   |   | 1,286 |   |   |   | 1,194 |   |
| Energy-related                    businesses                  |                                        |                                                                          | 125    |                                                         |   |   | 154 |   |   |   | 426 |   |   |   | 424 |   |
|                                                          | Total                    operating revenues |                                                                          |   | 1,053                                                        |   |   |   | 943 |   |   |   | 2,970 |   |   |   | 2,589 |   |
| Fuel                    and energy purchases                  |                                        |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                          | External                                    |                                                                          |   | 467                                                          |   |   |   | 339 |   |   |   | 1,171 |   |   |   | 906 |   |
|                                                          | Intersegment                                |                                                                          |   | 41                                                           |   |   |   | 41 |   |   |   | 121 |   |   |   | 113 |   |
| Other                    operation and maintenance            |                                        |                                                                          | 172    |                                                         |   |   | 186 |   |   |   | 513 |   |   |   | 545 |   |
| Depreciation                                                  |                                        |                                                                          | 40     |                                                         |   |   | 37 |   |   |   | 116 |   |   |   | 109 |   |
| Taxes,                    other than income                   |                                        |                                                                          | 10     |                                                         |   |   | 10 |   |   |   | 29 |   |   |   | 32 |   |
| Energy-related                    businesses                  |                                        |                                                                          | 153    |                                                         |   |   | 162 |   |   |   | 442 |   |   |   | 465 |   |
|                                                          | Total                    operating expenses |                                                                          |   | 883                                                          |   |   |   | 775 |   |   |   | 2,392 |   |   |   | 2,170 |   |
| Other                    Income - net                         |                                        |                                                                          | 3      |                                                         |   |   | (3 | ) |   |   | 4 |   |   |   | (2 | ) |
| Interest                    Expense                           |                                        |                                                                          | 31     |                                                         |   |   | 32 |   |   |   | 87 |   |   |   | 89 |   |
| Income                    Taxes                               |                                        |                                                                          | 22     |                                                         |   |   | 23 |   |   |   | 137 |   |   |   | 38 |   |
| Minority                    Interest                          |                                        |                                                                          |   |                                                         |   |   |   |   |   |   | 1 |   |   |   | 1 |   |
| Loss                    (Income) from Discontinued Operations |                                        |                                                                          |   |                                                         |   |   | (2 | ) |   |   | 20 |   |   |   | 51 |   |
|                                                          | Total                                       |                                                                          | $      | 120                                                          |   |   | $ | 112 |   |   | $ | 337 |   |   | $ | 238 |   |

|                                                     |   | **Sept.                    30, 2006 vs. Sept. 30, 2005** |
|----------------------------------------------------------|--------|----------------------------------------------------------|
|                                                     |   | **Three                    Months Ended**                |   | **Nine                    Months Ended** |
|                                                     |   |                                                     |   |   |   |   |   |   |
| Eastern                    U.S. non-trading margins      |   | $                                                        | 17 |   |   | $ | 56 |   |
| Northwestern                    U.S. non-trading margins |   |                                                     | (6 | ) |   |   | 14 |   |
| Southwestern                    U.S. non-trading margins |   |                                                     | (4 | ) |   |   | (3 | ) |
| Net                    energy trading margins            |   |                                                     | (3 | ) |   |   | (5 | ) |
| Operation                    and maintenance expenses    |   |                                                     | (8 | ) |   |   | (24 | ) |
| Earnings                    from synfuel projects        |   |                                                     | (17 | ) |   |   | (29 | ) |
| Interest                    expense                      |   |                                                     | 3 |   |   |   | 4 |   |
| Energy-related                    businesses             |   |                                                     | 2 |   |   |   | 4 |   |
| Taxes,                    other than income              |   |                                                     | 1 |   |   |   | 3 |   |
| Other                                                    |   |                                                     | 4 |   |   |   | 10 |   |
| Unusual                    items                         |   |                                                     | 19 |   |   |   | 69 |   |
|                                                     |   | $                                                        | 8 |   |   | $ | 99 |   |

|                                                                                                                           |   | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September****30,** |
|--------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------|
|                                                                                                                           |   | **2006**                                                                      |   | **2005**                                                     |   | **2006** |   | **2005** |
|                                                                                                                           |   |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Sale                    of Sundance plant (Note 8)                                                                             |   |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   | $ | (47 | ) |
| Sale                    of interest in the Griffith plant (Note 8)                                                        |   |                                                                          |   |                                                         |   |   |   |   |   | $ | (17 | ) |   |   |   |   |
| Reduction                    in Enron reserve (Note 2)                                                                         |   |                                                                          |   |                                                         |   |   |   |   |   |   | 11 |   |   |   |   |   |
| Off-site                    remediation of ash basin leak (Note 11)                                                       |   |                                                                          |   |                                                         |   | $ | (19 | ) |   |   | 6 |   |   |   | (19 | ) |
| Settlement                    of NorthWestern litigation                                                                       |   |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   | (6 | ) |
| Impairment                    of synfuel-related assets (Note 11)                                                              |   |                                                                          |   |                                                         |   |   |   |   |   |   | (6 | ) |   |   |   |   |
| Acceleration                    of stock-based compensation expense for periods prior to 2005                    (Note 9) |   |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   | (3 | ) |
|                                                                                                                           | Total  |                                                                          |   |                                                         |   |   | $ | (19 | ) |   | $ | (6 | ) |   | $ | (75 | ) |

| · | See                    "Domestic Gross Energy Margins" for an explanation of non-trading                    margins                    by geographic region and for an explanation of net energy trading                    margins.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| · | Higher                    operation and maintenance expenses for the three months ended                    September                    30, 2006, compared with the same period in 2005, were primarily                    due to the                    timing of outages at the Susquehanna nuclear station and other                    generating                    stations. Higher operation and maintenance expenses for the nine                    months                    ended September 30, 2006, compared with the same period in 2005,                    were                    primarily due to increased outage and non-outage expenses at                    the                    Susquehanna station, two forced outages at the Brunner Island                    plant and                    the timing of other planned outages.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| · | The                    decline in earnings contribution from synfuel projects for the                    three                    months ended September 30, 2006, compared with the same period                    in 2005,                    resulted primarily from unrealized losses on options purchased                    to hedge a                    portion of the risk associated with the phase-out of the synthetic                    fuel                    tax credits for 2006 and 2007, partially offset by lower operating                    losses                    due to lower production levels. The decline for the nine months                    ended                    September 30, 2006, compared with the same period in 2005, was                    primarily                    due to the anticipated phase-out of synthetic fuel tax credits                    starting in                    2006 and lower production levels.  In                    June 2006, based upon observed and forecasted higher crude oil                    prices and                    projected cash flows, PPL fully impaired its synfuel-related                    assets. This                    adjustment decreased earnings by $6 million after tax (or $0.01                    per                    share). |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| · | In                    May 2005, a subsidiary of PPL Energy Supply completed the sale                    of its 450                    MW Sundance power plant located in Pinal County, Arizona to Arizona                    Public                    Service Company for $190 million in cash. The subsidiary recorded                    a loss                    on the sale of $47 million after tax (or $0.12 per                    share).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| · | In                    June 2006, a subsidiary of PPL Energy Supply completed the sale                    of its 50%                    ownership interest in the 600 MW Griffith power plant located                    in Kingman,                    Arizona, for $115 million in cash. The subsidiary recorded a                    loss on the                    sale of $24 million after tax (or $0.07 per share). Another                    subsidiary of PPL Energy Supply recorded the acceleration of                    net                    unrealized gains on derivatives associated with the plant of                    $7 million                    after tax (or $0.02 per share).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| · | In                    the third quarter of 2005, PPL recognized a charge of $22 million                    after                    tax (or $0.06 per share) in connection with the on-site and off-site                    costs                    related to the Martins Creek ash basin leak remediation. An additional                    charge of $9 million after tax (or $0.02 per share) was recorded                    in the                    fourth quarter of 2005. In 2006, PPL reduced its estimate of                    the costs for                    the Martins Creek ash basin leak remediation. This adjustment                    increased                    earnings by $6 million after tax (or $0.01 per share). Most of                    the                    reduction was related to an insurance claim settlement. PPL cannot                    predict                    the final costs to be incurred as a result of this                    matter.                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| · | In                    the first and second quarters of 2006, PPL decreased its reserve                    on claims                    related to the Enron bankruptcy. These adjustments increased                    earnings by                    $11 million after tax (or $0.03 per share).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| · | In                    the first quarter of 2005, PPL recognized a charge of $6 million                    after tax                    (or $0.02 per share) for a loss contingency related to the litigation                    with                    NorthWestern. In September 2005, PPL and NorthWestern reached                    a final                    agreement to settle this litigation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

*Outlook*

|                                               |                                        | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September****30,** |
|----------------------------------------------------|---------------------------------------------|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------|
|                                               |                                        | **2006**                                                                      |   | **2005**                                                     |   | **2006** |   | **2005** |
|                                               |                                        |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Utility                    revenues                |                                        | $                                                                             | 301    |                                                         |   | $ | 264 |   |   | $ | 934 |   |   | $ | 841 |   |
| Energy-related                    businesses       |                                        |                                                                          | 19     |                                                         |   |   | 19 |   |   |   | 64 |   |   |   | 56 |   |
|                                               | Total                    operating revenues |                                                                          |   | 320                                                          |   |   |   | 283 |   |   |   | 998 |   |   |   | 897 |   |
| Energy                    purchases                |                                        |                                                                          | 86     |                                                         |   |   | 69 |   |   |   | 250 |   |   |   | 197 |   |
| Other                    operation and maintenance |                                        |                                                                          | 70     |                                                         |   |   | 56 |   |   |   | 204 |   |   |   | 180 |   |
| Depreciation                                       |                                        |                                                                          | 36     |                                                         |   |   | 41 |   |   |   | 118 |   |   |   | 117 |   |
| Taxes,                    other than income        |                                        |                                                                          | 15     |                                                         |   |   | 15 |   |   |   | 42 |   |   |   | 44 |   |
| Energy-related                    businesses       |                                        |                                                                          | 8      |                                                         |   |   | 7 |   |   |   | 27 |   |   |   | 20 |   |
|                                               | Total                    operating expenses |                                                                          |   | 215                                                          |   |   |   | 188 |   |   |   | 641 |   |   |   | 558 |   |
| Other                    Income - net              |                                        |                                                                          | 10     |                                                         |   |   | 3 |   |   |   | 35 |   |   |   | 10 |   |
| Interest                    Expense                |                                        |                                                                          | 54     |                                                         |   |   | 50 |   |   |   | 153 |   |   |   | 152 |   |
| Income                    Taxes                    |                                        |                                                                          | (2     | )                                                            |   |   | 11 |   |   |   | 13 |   |   |   | 41 |   |
| Minority                    Interest               |                                        |                                                                          | 4      |                                                         |   |   | 1 |   |   |   | 7 |   |   |   | 4 |   |
|                                               | Total                                       |                                                                          | $      | 59                                                           |   |   | $ | 36 |   |   | $ | 219 |   |   | $ | 152 |   |

|                                                                  |                                                                     | **Sept.                    30, 2006 vs. Sept. 30, 2005** |
|-----------------------------------------------------------------------|--------------------------------------------------------------------------|----------------------------------------------------------|
|                                                                  |                                                                     | **Three                    Months Ended**                |   | **Nine                    Months Ended** |
| U.K.                                                                  |                                                                     |                                                     |   |   |   |   |   |   |
|                                                                  | Delivery                    margins                                      |                                                     | $ | 3 |   |   | $ | 30 |   |
|                                                                  | Operating                    expenses                                    |                                                     |   | (6 | ) |   |   | (20 | ) |
|                                                                  | Income                    taxes                                          |                                                     |   |   |   |   |   | 22 |   |
|                                                                  | Impact                    of changes in foreign currency exchange rates  |                                                     |   | 2 |   |   |   | (9 | ) |
|                                                                  | Impairment                    of investment in U.K. real estate (Note 8) |                                                     |   |   |   |   |   | (6 | ) |
|                                                                  | Gain                    on transfer of equity investment (Note 8)        |                                                     |   | 5 |   |   |   | 5 |   |
|                                                                  | Hyder                    liquidation distribution (Note 8)               |                                                     |   | 3 |   |   |   | 27 |   |
|                                                                  | Other                                                                    |                                                     |   |   |   |   |   | 3 |   |
| Latin                    America                                      |                                                                     |                                                     |   |   |   |   |   |   |
|                                                                  | Delivery                    margins                                      |                                                     |   | 4 |   |   |   | 7 |   |
|                                                                  | Operation                    and maintenance expenses                    |                                                     |   | 4 |   |   |   | 2 |   |
|                                                                  | Income                    taxes                                          |                                                     |   | 9 |   |   |   | 9 |   |
|                                                                  | Impact                    of changes in foreign currency exchange rates  |                                                     |   | 1 |   |   |   | 3 |   |
|                                                                  | Other                                                                    |                                                     |   | (3 | ) |   |   | 1 |   |
| U.S.                    income taxes                                  |                                                                     |                                                     | 1 |   |   |   | (9 | ) |
| Other                                                                 |                                                                     |                                                     |   |   |   |   | 1 |   |
| Unusual                    item - collection of receivable from Enron |                                                                     |                                                     |   |   |   |   | 1 |   |
|                                                                  |                                                                     | $                                                        | 23 |   |   | $ | 67 |   |

| · | The                    U.K.'s earnings were positively impacted by higher margins, primarily                    due                    to price increases and 1% higher sales volumes for the nine months                    ended                    September 30, 2006, compared with the same period in                    2005.                                                                                                                                               |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| · | In                    2006, WPD has credited income for $27 million after tax for distributions                    received from the planned ongoing liquidation of Hyder's non-electricity                    delivery businesses. PPL                    does not expect income from the sale or liquidation of Hyder's                    non-electricity delivery businesses to continue at the same level                    in 2007                    as occurred in 2006. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| · | Higher                    operating expenses in the U.K. for the nine months ended September                    30,                    2006, compared with the same period in 2005, were attributable                    to higher                    depreciation, partially due to a reduction in meter lives in                    2005, and                    higher pension costs at WPD.                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| · | Changes                    in foreign exchange rates increased WPD's portion of revenue                    and expense                    line items by 4% during the three months ended September 30,                    2006, and                    decreased them by 4% during the nine months ended September 30,                    2006,                    compared with the same periods in 2005.                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| · | Lower                    U.K. income taxes in 2006, compared with the same period in 2005,                    were                    primarily due to the transfer of a future tax liability from                    WPD and                    certain surplus tax losses from Hyder to a former Hyder affiliate.                    See                    Note 5 to the Financial Statements for additional                    information.                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

| · | Latin                    America earnings were positively impacted in both periods, primarily                    due                    to higher margins due to a 7% increase in sales volumes and accounting                    adjustments related to Chilean deferred taxes and depreciation                    for prior                    periods. See Note 3 to the Financial Statements for additional                    information                    on the accounting adjustments. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Outlook*

|                                                            |                                        | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September****30,** |
|-----------------------------------------------------------------|---------------------------------------------|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------|
|                                                            |                                        | **2006**                                                                      |   | **2005**                                                     |   | **2006** |   | **2005** |
| Operating                    revenues                           |                                        |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            | External                                    |                                                                          | $      | 824                                                          |   |   | $ | 809 |   |   | $ | 2,493 |   |   | $ | 2,393 |   |
|                                                            | Intersegment                                |                                                                          |   | 41                                                           |   |   |   | 41 |   |   |   | 121 |   |   |   | 113 |   |
|                                                            | Total                    operating revenues |                                                                          |   | 865                                                          |   |   |   | 850 |   |   |   | 2,614 |   |   |   | 2,506 |   |
| Fuel                    and energy purchases                    |                                        |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            | External                                    |                                                                          |   | 67                                                           |   |   |   | 76 |   |   |   | 270 |   |   |   | 285 |   |
|                                                            | Intersegment                                |                                                                          |   | 445                                                          |   |   |   | 415 |   |   |   | 1,286 |   |   |   | 1,194 |   |
| Other                    operation and maintenance              |                                        |                                                                          | 93     |                                                         |   |   | 89 |   |   |   | 302 |   |   |   | 305 |   |
| Amortization                    of recoverable transition costs |                                        |                                                                          | 75     |                                                         |   |   | 71 |   |   |   | 210 |   |   |   | 199 |   |
| Depreciation                                                    |                                        |                                                                          | 31     |                                                         |   |   | 30 |   |   |   | 92 |   |   |   | 89 |   |
| Taxes,                    other than income                     |                                        |                                                                          | 49     |                                                         |   |   | 48 |   |   |   | 143 |   |   |   | 138 |   |
| Energy-related                    business                      |                                        |                                                                          |   |                                                         |   |   | 1 |   |   |   |   |   |   |   | 1 |   |
|                                                            | Total                    operating expenses |                                                                          |   | 760                                                          |   |   |   | 730 |   |   |   | 2,303 |   |   |   | 2,211 |   |
| Other                    Income - net                           |                                        |                                                                          | 8      |                                                         |   |   | 5 |   |   |   | 24 |   |   |   | 15 |   |
| Interest                    Expense                             |                                        |                                                                          | 40     |                                                         |   |   | 45 |   |   |   | 125 |   |   |   | 146 |   |
| Income                    Taxes                                 |                                        |                                                                          | 21     |                                                         |   |   | 30 |   |   |   | 69 |   |   |   | 59 |   |
| Dividends                    on Preferred Securities            |                                        |                                                                          | 5      |                                                         |   |   | 1 |   |   |   | 10 |   |   |   | 2 |   |
|                                                            | Total                                       |                                                                          | $      | 47                                                           |   |   | $ | 49 |   |   | $ | 131 |   |   | $ | 103 |   |

|                                                                                                                                              |   | **Sept.                    30, 2006 vs. Sept. 30, 2005** |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|
|                                                                                                                                              |   | **Three                    Months Ended**                |   | **Nine                    Months Ended** |
|                                                                                                                                              |   |                                                     |   |   |   |   |   |   |
| Delivery                    revenues (net of CTC/ITC amortization, interest expense on transition                    bonds and ancillary charges) |   | $                                                        | (2 | ) |   | $ | (4 | ) |
| Operation                    and maintenance expenses                                                                                             |   |                                                     | (17 | ) |   |   | (15 | ) |
| Interest                    expense                                                                                                               |   |                                                     | (2 | ) |   |   | (3 | ) |
| Other                                                                                                                                             |   |                                                     | 5 |   |   |   | 7 |   |
| Unusual                    items                                                                                                                  |   |                                                     | 14 |   |   |   | 43 |   |
|                                                                                                                                              |   | $                                                        | (2 | ) |   | $ | 28 |   |

|                                                                                                                           |   | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September****30,** |
|--------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------|
|                                                                                                                           |   | **2006**                                                                      |   | **2005**                                                     |   | **2006** |   | **2005** |
| Reversal                    of cost recovery - Hurricane Isabel (Note 2)                                                       |   | $                                                                             | (7     | )                                                            |   |   |   |   |   | $ | (7 | ) |   |   |   |   |
| Realization                    of benefits related to Black Lung Trust assets (Note 10)                                        |   |                                                                          | 21     |                                                         |   |   |   |   |   |   | 21 |   |   |   |   |   |
| PJM                    billing dispute (Note                    11)                                                            |   |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   | $ | (27 | ) |
| Acceleration                    of stock-based compensation expense for periods prior to 2005                    (Note 9) |   |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   | (2 | ) |
|                                                                                                                           | Total  |                                                                          | $      | 14                                                           |   |   |   |   |   |   | $ | 14 |   |   | $ | (29 | ) |

| · | As                    a result of a court's decision, in the third quarter of 2006,                    PPL Electric                    recognized an after-tax charge of $7 million (or $0.02 per share)                    for the                    reversal of a regulatory asset that was previously recorded to                    defer                    restoration costs associated with Hurricane Isabel in September                    2003 and                    record a liability for amounts already billed to customers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| · | In                    the third quarter of 2006, PPL Electric recognized an after-tax                    credit of                    $21 million (or $0.05 per share) in connection with the realization                    of                    benefits related to the ability to use excess Black Lung Trust                    assets to                    make future benefit payments for retired mine workers' medical                    costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| · | PPL                    Electric recognized an after-tax charge of $27 million (or $0.07                    per                    share) in the first quarter of 2005 for a loss contingency related                    to the                    PJM billing dispute. PPL cannot be certain of the outcome or                    impact of                    this matter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| · | Higher                    operation and maintenance expenses in both periods were primarily                    due to                    higher tree trimming costs, a union contract ratification bonus                    and storm                    costs. The three months ended September, 30, 2005, includes the                    deferral                    of the January 2005 ice storm costs as discussed below.  In                    January 2005, severe ice storms hit PPL Electric's service territory.                    The                    total cost of restoring service to 238,000 customers, excluding                    capitalized costs and regular payroll expenses, was $16                    million. In                    August 2005, the PUC issued an order granting PPL Electric's                    petition for                    authority to defer and amortize for regulatory accounting and                    reporting                    purposes a portion of the ice storm costs, subject to certain                    conditions.                    As a result of the PUC Order and in accordance with SFAS 71,                    "Accounting                    for the Effects of Certain Types of Regulation," in the third                    quarter of                    2005, PPL Electric deferred $12 million of its previously expensed                    storm                    costs. The deferral was based on its assessment of the timing                    and                    likelihood of recovering the deferred costs in PPL Electric's                    next                    distribution base rate case. |

*Outlook*

**Statement          of Income Analysis -- **

**Domestic          Gross Energy Margins**

|                                             |                                             | **Sept.                    30, 2006 vs. Sept. 30, 2005** |
|--------------------------------------------------|--------------------------------------------------|----------------------------------------------------------|
|                                             |                                             | **Three                    Months Ended**                |   | **Nine                    Months Ended** |
|                                             |                                             |                                                     |   |   |   |   |
| Utility                                          |                                             | $                                                        | 57 |   |   | $ | 193 |   |
| Unregulated                    retail electric   |                                             |                                                     | (2 | ) |   |   | (5 | ) |
| Wholesale                    energy marketing    |                                             |                                                     | 110 |   |   |   | 299 |   |
| Net                    energy trading margins    |                                             |                                                     | (4 | ) |   |   | (7 | ) |
| Other                    revenue adjustments (a) |                                             |                                                     | (20 | ) |   |   | (94 | ) |
|                                             | Total                    revenues                |                                                     |   | 141 |   |   |   | 386 |   |
| Fuel                                             |                                             |                                                     | (21 | ) |   |   | 23 |   |
| Energy                    purchases              |                                             |                                                     | 157 |   |   |   | 280 |   |
| Other                    cost adjustments (a)    |                                             |                                                     | (1 | ) |   |   | (34 | ) |
|                                             | Total                    cost of sales           |                                                     |   | 135 |   |   |   | 269 |   |
|                                             | Domestic                    gross energy margins |                                                     | $ | 6 |   |   | $ | 117 |   |

| (a) |   | Adjusted                    to exclude the impact of any revenues and costs not associated                    with                    domestic gross energy margins. This includes revenues and energy                    costs                    related to the international operations of PPL Global, the domestic                    delivery operations of PPL Electric and PPL Gas Utilities and                    an accrual                    for the loss contingency related to the PJM billing dispute in                    2005 (see                    Note 11 to the Financial Statements for additional information).                    Also                    adjusted to include the margins of the Griffith and Sundance                    plants prior                    to their sales in June 2006 and May 2005, which are included                    in "Loss                    (Income) from Discontinued Operations," and gains or losses on                    sales of                    emission allowances, which are included in "Other operation and                    maintenance" expenses on the Statements of                    Income. |
|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                  | **Sept.                    30, 2006 vs. Sept. 30, 2005**                  |
|---------------------------------------|---------------------------------------------------------------------------|
|                                  | **Three                    Months Ended**                                 |   | **Nine                    Months Ended** |
| Non-trading                           |                                                                      |   |   |   |   |   |   |
|                                  | Eastern                    U.S.                                           | $ | 28 |   |   | $ | 96 |   |
|                                  | Northwestern                    U.S.                                      |   | (10 | ) |   |   | 24 |   |
|                                  | Southwestern                    U.S.                                      |   | (7 | ) |   |   | (6 | ) |
| Net                    energy trading |                                                                      | (5 | ) |   |   | 3 |   |
|                                  |                         Domestic gross energy margins | $ | 6 |   |   | $ | 117 |   |

*Eastern          U.S.*

*Northwestern          U.S.*

*Southwestern          U.S.*

*Net          Energy Trading*

**Utility          Revenues**

|               |                                                      | **Sept.                    30, 2006 vs. Sept. 30, 2005** |
|--------------------|-----------------------------------------------------------|----------------------------------------------------------|
|               |                                                      | **Three                    Months Ended**                |   | **Nine                    Months Ended** |
| **Domestic:**      |                                                      |                                                     |   |   |   |   |   |   |
|               | Retail                    electric revenue (PPL Electric) |                                                     |   |   |   |   |   |   |   |
|               | PLR                    electric generation supply         |                                                     | $ | 33 |   |   | $ | 100 |   |
|               | Electric                    delivery                      |                                                     |   | (14 | ) |   |   | (28 | ) |
|               | Gas                    revenue (PPL Gas Utilities)        |                                                     |   | 2 |   |   |   | 27 |   |
|               | Other                                                     |                                                     |   | (1 | ) |   |   | 1 |   |
| **International:** |                                                      |                                                     |   |   |   |   |   |   |
|               | Retail                    electric delivery (PPL Global)  |                                                     |   |   |   |   |   |   |   |
|               | U.K.                                                      |                                                     |   | 5 |   |   |   | 42 |   |
|               | Chile                                                     |                                                     |   | 12 |   |   |   | 33 |   |
|               | El                    Salvador                            |                                                     |   | 8 |   |   |   | 15 |   |
|               | Bolivia                                                   |                                                     |   | 1 |   |   |   | 4 |   |
|               | Foreign                    currency exchange rates        |                                                     |   | 11 |   |   |   | (1 | ) |
|               |                                                      |                                                     | $ | 57 |   |   | $ | 193 |   |

| · | higher                    PLR revenues attributable to an increase of 8.4% in prices and                    an increase                    in commercial and industrial sales volumes, due in part to the                    return of                    customers previously served by alternate suppliers, offset by                    a decrease                    in residential sales volumes, due in part to milder weather in                    2006                    compared with 2005; |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | a                    decrease in domestic electric delivery revenues resulting primarily                    from                    the impact of milder weather on residential sales in 2006 compared                    with                    2005;                                                                                                                                                                                                                                                |
| · | higher                    gas revenues primarily due to the increase in natural gas prices,                    which                    are passed through to customers;                                                                                                                                                                                                                                                                                                                               |
| · | higher                    average prices overall and an increase of 1% in sales volumes                    in the U.K.                    for the nine months ended September 30, 2006, compared with the                    same                    period in 2005, partially offset by a 2% decrease in sales volumes                    for the                    three months ended September 30, 2006, compared with the same                    period in                    2005;              |
| · | increases                    of 7% in Chilean electric delivery sales volumes and higher average                    prices                    overall; and                                                                                                                                                                                                                                                                                                                                             |
| · | increases                    of 8% in electric delivery sales volumes in El Salvador and higher                    average                    prices overall.                                                                                                                                                                                                                                                                                                                                          |

**Energy-related          Businesses**

| · | a                    $36 million net unrealized loss on options purchased to hedge                    a portion of                    the risk associated with the phase-out of the synthetic fuel                    tax credits                    for 2006 and 2007; partially offset by |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | $12                    million of lower operating losses due to lower production                    levels.                                                                                                                                                                                 |

| · | $18                    million of higher pre-tax contributions from synfuel projects.                    This                    reflects a $6 million net unrealized gain on options purchased                    to hedge a                    portion of the risk associated with the phase-out of the synthetic                    fuel                    tax credits for 2006 and 2007 and $22 million of lower operating                    losses                    due to lower production levels, partially offset by an impairment                    charge                    of $10 million on the synfuel-related assets; and |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | a                    $7 million increase from PPL Telcom due to an increase in                    transport-related sales, as well as reduced spending on a product                    line.                    (The increase in net energy-related business income for PPL Telcom                    is                    before depreciation, interest expense and income                    taxes.)                                                                                                                                                                                                                                       |

**Other          Operation and Maintenance**

|                                                                                                          |   | **Sept.                    30, 2006 vs. Sept. 30, 2005** |
|---------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|
|                                                                                                          |   | **Three                    Months Ended**                |   | **Nine                    Months Ended** |
|                                                                                                          |   |                                                     |   |   |   |   |
| Reduction                    in Enron reserve (Note 2)                                                        |   |                                                     |   |   |   | $ | (19 | ) |
| Costs                    associated with severe ice storms in January 2005                                    |   |                                                     |   |   |   |   | (16 | ) |
| Subsequent                    deferral of a portion of 2005 ice storm costs                                   |   | $                                                        | 12 |   |   |   | 12 |   |
| Martins                    Creek ash basin remediation adjustment (Note 11)                                   |   |                                                     | (33 | ) |   |   | (22 | ) |
| Reversal                    of cost recovery - Hurricane Isabel (Note 2)                                      |   |                                                     | 11 |   |   |   | 11 |   |
| NorthWestern                    litigation accrual in March 2005                                         |   |                                                     |   |   |   |   | (9 | ) |
| Susquehanna                    plant refueling and inspection costs                                           |   |                                                     | 4 |   |   |   | 16 |   |
| Union                    contract ratification bonus                                                          |   |                                                     | 7 |   |   |   | 7 |   |
| Increase                    in domestic and international pension and postretirement                    costs |   |                                                     | 11 |   |   |   | 21 |   |
| Outage                    costs at Martins Creek and Brunner Island plants                                    |   |                                                     | 3 |   |   |   | 11 |   |
| PUC                    reportable storm costs in 2006                                                         |   |                                                     | 3 |   |   |   | 10 |   |
| Tree                    trimming costs                                                                        |   |                                                     | 2 |   |   |   | 4 |   |
| Increase                    in international operation and maintenance expenses                               |   |                                                     | 7 |   |   |   | 13 |   |
| Accelerated                    amortization of stock-based compensation in 2005 (Note                    9)   |   |                                                     |   |   |   |   | (18 | ) |
| Other                                                                                                         |   |                                                     | 13 |   |   |   | 4 |   |
|                                                                                                          |   | $                                                        | 40 |   |   | $ | 25 |   |

**Depreciation**

|                                                                        |   | **Sept.                    30, 2006 vs. Sept. 30, 2005** |
|-----------------------------------------------------------------------------|--------|----------------------------------------------------------|
|                                                                        |   | **Three                    Months Ended**                |   | **Nine                    Months Ended** |
|                                                                        |   |                                                     |   |   |   |   |
| Additions                    to PP&E                                    |   | $                                                        | 4 |   |   | $ | 19 |   |
| Reduction                    of useful lives of certain distribution assets |   |                                                     |   |   |   |   | 3 |   |
| Changes                    in foreign currency exchange rates               |   |                                                     | 2 |   |   |   | (2 | ) |
| Extension                    of useful lives of certain generation assets   |   |                                                     |   |   |   |   | (2 | ) |
| Chilean                    depreciation accounting adjustment (Note 3) |   |                                                     | (7 | ) |   |   | (7 | ) |
|                                                                        |   | $                                                        | (1 | ) |   | $ | 11 |   |

**Other          Income - net**

**Financing          Costs**

|                                                                                                                                                                                                                           |   | **Sept.                    30, 2006 vs. Sept. 30, 2005** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|
|                                                                                                                                                                                                                           |   | **Three                    Months Ended**                |   | **Nine                    Months Ended** |
|                                                                                                                                                                                                                           |   |                                                     |   |   |   |   |
| Increase                    in interest expense due to hedging activities                                                                                                                                                      |   | $                                                        | 5 |   |   | $ | 22 |   |
| Dividends                    on 6.25% Series Preference Stock                                                                                                                                                                  |   |                                                     | 4 |   |   |   | 8 |   |
| Increase                    in capitalized interest                                                                                                                                                                            |   |                                                     | (5 | ) |   |   | (10 | ) |
| Interest                    accrued in 2005 for PJM billing dispute (Note 11)                                                                                                                                                  |   |                                                     |   |   |   |   | (8 | ) |
| Increase                    (decrease) in long-term debt interest expense                                                                                                                                                      |   |                                                     | 8 |   |   |   | (6 | ) |
| Write-off                    in 2005 of financing costs associated with PPL Energy Supply's                    2.625%                    Convertible Senior Notes due to the market trigger price being                    met |   |                                                     | (6 | ) |   |   | (6 | ) |
| Decrease                    in amortization of debt                                                                                                                                                                            |   |                                                     | (4 | ) |   |   | (5 | ) |
| Decrease                    in short-term debt interest expense                                                                                                                                                                |   |                                                     | (1 | ) |   |   | (4 | ) |
| Change                    in foreign currency exchange rates                                                                                                                                                                   |   |                                                     | 1 |   |   |   | (3 | ) |
| Other                                                                                                                                                                                                                          |   |                                                     |   |   |   |   | (2 | ) |
|                                                                                                                                                                                                                           |   | $                                                        | 2 |   |   | $ | (14 | ) |

**Income          Taxes**

|                                                                                                        |   | **Sept.                    30, 2006 vs. Sept. 30, 2005** |
|-------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|
|                                                                                                        |   | **Three                    Months Ended**                |   | **Nine                    Months Ended** |
|                                                                                                        |   |                                                     |   |   |   |   |
| Higher                    (lower) pre-tax book income                                                       |   | $                                                        | (1 | ) |   | $ | 80 |   |
| Reduction                    in tax benefits related to nonconventional fuel tax                    credits |   |                                                     | 2 |   |   |   | 42 |   |
| Decrease                    in tax expense on foreign earnings                                              |   |                                                     | (8 | ) |   |   | (8 | ) |
| Chilean                    deferred tax accounting adjustment (Note 3)                                      |   |                                                     | (9 | ) |   |   | (9 | ) |
| Transfer                    of WPD tax items in 2006 (Note 5)                                          |   |                                                     |   |   |   |   | (20 | ) |
| Decrease                    in tax expense related to tax reserves                                          |   |                                                     | (7 | ) |   |   | (7 | ) |
| Other                                                                                                       |   |                                                     |   |   |   |   | 3 |   |
|                                                                                                        |   | $                                                        | (23 | ) |   | $ | 81 |   |

**Discontinued          Operations**

**Financial          Condition**

**Liquidity          and Capital Resources**

| · | $1.3                    billion of cash provided by operating activities;                                                                                                      |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | the                    issuance of $800 million of long-term debt;                                                                                                             |
| · | $245                    million of net proceeds from the issuance of preference stock;                    and                                                                  |
| · | $115                    million of proceeds from the sale of PPL's interest in the Griffith                    plant;                    offset by                             |
| · | $859                    million of capital expenditures (including $103 million to purchase                    equipment previously leased);                                   |
| · | the                    retirement of $757 million of long-term debt;                                                                                                           |
| · | a                    net decrease in short-term debt of $172 million (excluding the                    impact of                    foreign currency translation adjustments); |
| · | the                    payment of $304 million of common stock dividends; and                                                                                                  |
| · | $26                    million of net purchases of emission                    allowances.                                                                                     |

*Moody's*

| · | PPL                    - assigned a Baa2 issuer rating;                                                                                                                                                                                                                                                           |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | PPL                    Capital Funding - upgraded the ratings of its senior unsecured                    debt and                    Medium Term Notes to Baa2 from Baa3 and subordinated debt to                    Baa3 from                    Ba1; and                                                        |
| · | PPL                    Electric - upgraded the issuer rating to Baa1 from Baa2 and upgraded                    the                    ratings of its First Mortgage Bonds and Senior Secured Bonds                    to A3 from                    Baa1 and preferred stock to Baa3 from                    Ba1. |

*S&P*

*Fitch*

| · | WPDH                    Limited IDR of BBB- and senior unsecured rating to BBB from                    BBB-;                                                           |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | WPD                    LLP IDR of BBB, senior unsecured rating to BBB+ from BBB and                    preferred                    stock rating to BBB from BBB-; and |
| · | WPD                    (South Wales) and WPD (South West) IDR of BBB+ and senior unsecured                    debt                    rating to A- from BBB+.          |

|                                             |                                                        | **Projected**                                      |   |
|--------------------------------------------------|-------------------------------------------------------------|----------------------------------------------------|--------|
|                                             |                                                        | **2006**                                           |   | **2007** |   | **2008** |   | **2009** |   | **2010** |   |
| Construction                    expenditures (a) |                                                        |                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             | Generating                    facilities                    |                                               | $      | 296 |   | $ | 241 |   | $ | 186 |   | $ | 296 |   | $ | 295 |   |
|                                             | Transmission                    and distribution facilities |                                               |   | 551 |   |   | 550 |   |   | 533 |   |   | 575 |   |   | 639 |   |
|                                             | Environmental                                               |                                               |   | 340 |   |   | 582 |   |   | 378 |   |   | 125 |   |   | 75 |   |
|                                             | Other                                                       |                                               |   | 98 |   |   | 86 |   |   | 48 |   |   | 41 |   |   | 41 |   |
|                                             |                                                        | Total                    Construction Expenditures |   |   | 1,285 |   |   | 1,459 |   |   | 1,145 |   |   | 1,037 |   |   | 1,050 |   |
| Nuclear                    fuel                  |                                                        |                                               | 79     |   |   | 92 |   |   | 97 |   |   | 97 |   |   | 99 |   |
|                                             |                                                        | Total                    Capital Expenditures      |   | $ | 1,364 |   | $ | 1,551 |   | $ | 1,242 |   | $ | 1,134 |   | $ | 1,149 |   |

| (a) |   | Construction                    expenditures include AFUDC and capitalized interest, which are                    expected to                    be $162 million for the 2006-2010                    period. |
|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Risk          Management - Energy Marketing & Trading and Other **

*Commodity          Price Risk (Non-trading)*

|                                                                                                     |   | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September****30,** |
|----------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------|
|                                                                                                     |   | **2006**                                                                      |   | **2005**                                                     |   | **2006** |   | **2005** |
|                                                                                                     |   |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Fair                    value of contracts outstanding at the beginning of the                    period |   | $                                                                             | (99    | )                                                            |   | $ | (129) |   |   | $ | (284 | ) |   | $ | (11 | ) |
| Contracts                    realized or otherwise settled during the period                             |   |                                                                          | (1     | )                                                            |   |   | (8 | ) |   |   | 11 |   |   |   | (31 | ) |
| Fair                    value of new contracts at inception                                              |   |                                                                          | (27    | )                                                            |   |   | 9 |   |   |   | (27 | ) |   |   | 22 |   |
| Other                    changes in fair values                                                          |   |                                                                          | 20     |                                                         |   |   | (147 | ) |   |   | 193 |   |   |   | (255 | ) |
| Fair                    value of contracts outstanding at the end of the period                          |   | $                                                                             | (107   | )                                                            |   | $ | (275 | ) |   | $ | (107 | ) |   | $ | (275 | ) |

|                                                                            |   | **Fair                    Value of Contracts at Period-End****Gains                    (Losses)** |
|---------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------|
|                                                                            |   | **Maturity****Less                    Than****1                    Year**                         |   | **Maturity****1-3                    Years** |   | **Maturity****4-5                    Years** |   | **Maturity****in                    Excess****of                    5 Years** |   | **Total                    Fair****Value** |
| **Source                    of Fair Value**                                     |   |                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Prices                    actively quoted                                       |   | $                                                                                                 | (3 | ) |   | $ | 2 |   |   | $ | 4 |   |   | $ | 1 |   |   | $ | 4 |   |
| Prices                    provided by other external sources                    |   |                                                                                              | (39 | ) |   |   | (174 | ) |   |   | (6 | ) |   |   | 3 |   |   |   | (216 | ) |
| Prices                    based on models and other valuation methods           |   |                                                                                              | 43 |   |   |   | 62 |   |   |   |   |   |   |   |   |   |   |   | 105 |   |
| Fair                    value of contracts outstanding at the end of the period |   | $                                                                                                 | 1 |   |   | $ | (110 | ) |   | $ | (2 | ) |   | $ | 4 |   |   | $ | (107 | ) |

*Commodity          Price Risk (Trading)*

|                                                                                                     |   | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September****30,** |
|----------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------|
|                                                                                                     |   | **2006**                                                                      |   | **2005**                                                     |   | **2006** |   | **2005** |
|                                                                                                     |   |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Fair                    value of contracts outstanding at the beginning of the                    period |   | $                                                                             | 19     |                                                         |   | $ | 11 |   |   | $ | 5 |   |   | $ | 10 |   |
| Contracts                    realized or otherwise settled during the period                             |   |                                                                          | 20     |                                                         |   |   | (10 | ) |   |   | 2 |   |   |   | (17 | ) |
| Fair                    value of new contracts at inception                                              |   |                                                                          | (16    | )                                                            |   |   | (2 | ) |   |   | (13 | ) |   |   | 2 |   |
| Other                    changes in fair values                                                          |   |                                                                          | 6      |                                                         |   |   | 11 |   |   |   | 35 |   |   |   | 15 |   |
| Fair                    value of contracts outstanding at the end of the period                          |   | $                                                                             | 29     |                                                         |   | $ | 10 |   |   | $ | 29 |   |   | $ | 10 |   |

|                                                                            |   | **Fair                    Value of Contracts at Period-End****Gains                    (Losses)** |
|---------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------|
|                                                                            |   | **Maturity****Less                    Than****1                    Year**                         |   | **Maturity****1-3                    Years** |   | **Maturity****4-5                    Years** |   | **Maturity****in                    Excess****of                    5 Years** |   | **Total                    Fair****Value** |
| **Source                    of Fair Value**                                     |   |                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Prices                    actively quoted                                       |   | $                                                                                                 | (1 | ) |   | $ | (1 | ) |   | $ | 1 |   |   |   |   |   |   | $ | (1 | ) |
| Prices                    provided by other external sources                    |   |                                                                                              | 12 |   |   |   | 4 |   |   |   |   |   |   |   |   |   |   |   | 16 |   |
| Prices                    based on models and other valuation methods           |   |                                                                                              | 4 |   |   |   | 10 |   |   |   |   |   |   |   |   |   |   |   | 14 |   |
| Fair                    value of contracts outstanding at the end of the period |   | $                                                                                                 | 15 |   |   | $ | 13 |   |   | $ | 1 |   |   |   |   |   |   | $ | 29 |   |

*Interest          Rate Risk*

*Foreign          Currency Risk*

*Nuclear          Decommissioning Trust Funds - Securities Price Risk*

*Synthetic          Fuel Tax Credit Risk*

**Related          Party Transactions**

**Acquisitions,          Development and Divestitures**

**Environmental          Matters**

**New          Accounting Standards**

**Application          of Critical Accounting Policies**

----

**PPL          ENERGY SUPPLY, LLC AND SUBSIDIARIES**

**Item          2. Management's Discussion and Analysis of Financial Condition and Results          of          Operations**

**Overview**

**Results          of Operations**

**Earnings**

|   |   | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September****30,** |
|--------|--------|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------|
|   |   | **2006**                                                                      |   | **2005**                                                     |   | **2006** |   | **2005** |
|   |   |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|   |   | $                                                                             | 182    |                                                         |   | $ | 159 |   |   | $ | 570 |   |   | $ | 418 |   |

**Segment          Results **

|                                      |   | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September****30,** |
|-------------------------------------------|--------|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------|
|                                      |   | **2006**                                                                      |   | **2005**                                                     |   | **2006** |   | **2005** |
| Supply                                    |   | $                                                                             | 123    |                                                         |   | $ | 123 |   |   | $ | 351 |   |   | $ | 266 |   |
| International                    Delivery |   |                                                                          | 59     |                                                         |   |   | 36 |   |   |   | 219 |   |   |   | 152 |   |
|                                      | Total  |                                                                          | $      | 182                                                          |   |   | $ | 159 |   |   | $ | 570 |   |   | $ | 418 |   |

|                                                          |                                        | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September****30,** |
|---------------------------------------------------------------|---------------------------------------------|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------|
|                                                          |                                        | **2006**                                                                      |   | **2005**                                                     |   | **2006** |   | **2005** |
|                                                          |                                        |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Energy                    revenues                            |                                        | $                                                                             | 929    |                                                         |   | $ | 795 |   |   | $ | 2,544 |   |   | $ | 2,165 |   |
| Energy-related                    businesses                  |                                        |                                                                          | 123    |                                                         |   |   | 145 |   |   |   | 407 |   |   |   | 403 |   |
|                                                          | Total                    operating revenues |                                                                          |   | 1,052                                                        |   |   |   | 940 |   |   |   | 2,951 |   |   |   | 2,568 |   |
| Fuel                    and energy purchases                  |                                        |                                                                          | 508    |                                                         |   |   | 383 |   |   |   | 1,291 |   |   |   | 1,016 |   |
| Other                    operation and maintenance            |                                        |                                                                          | 184    |                                                         |   |   | 198 |   |   |   | 549 |   |   |   | 576 |   |
| Depreciation                                                  |                                        |                                                                          | 37     |                                                         |   |   | 35 |   |   |   | 106 |   |   |   | 103 |   |
| Taxes,                    other than income                   |                                        |                                                                          | 10     |                                                         |   |   | 10 |   |   |   | 29 |   |   |   | 31 |   |
| Energy-related                    businesses                  |                                        |                                                                          | 152    |                                                         |   |   | 155 |   |   |   | 426 |   |   |   | 443 |   |
|                                                          | Total                    operating expenses |                                                                          |   | 891                                                          |   |   |   | 781 |   |   |   | 2,401 |   |   |   | 2,169 |   |
| Other                    Income - net                         |                                        |                                                                          | 14     |                                                         |   |   | 6 |   |   |   | 34 |   |   |   | 18 |   |
| Interest                    Expense                           |                                        |                                                                          | 25     |                                                         |   |   | 24 |   |   |   | 59 |   |   |   | 65 |   |
| Income                    Taxes                               |                                        |                                                                          | 27     |                                                         |   |   | 20 |   |   |   | 153 |   |   |   | 34 |   |
| Minority                    Interest                          |                                        |                                                                          |   |                                                         |   |   |   |   |   |   | 1 |   |   |   | 1 |   |
| Loss                    (Income) from Discontinued Operations |                                        |                                                                          |   |                                                         |   |   | (2 | ) |   |   | 20 |   |   |   | 51 |   |
|                                                          | Total                                       |                                                                          | $      | 123                                                          |   |   | $ | 123 |   |   | $ | 351 |   |   | $ | 266 |   |

|                                                     |   | **Sept.                    30, 2006 vs. Sept. 30, 2005** |
|----------------------------------------------------------|--------|----------------------------------------------------------|
|                                                     |   | **Three                    Months Ended**                |   | **Nine                    Months Ended** |
| Eastern                    U.S. non-trading margins      |   | $                                                        | 17 |   |   | $ | 56 |   |
| Northwestern                    U.S. non-trading margins |   |                                                     | (6 | ) |   |   | 14 |   |
| Southwestern                    U.S. non-trading margins |   |                                                     | (4 | ) |   |   | (3 | ) |
| Net                    energy trading margins            |   |                                                     | (3 | ) |   |   | (5 | ) |
| Operation                    and maintenance expenses    |   |                                                     | (7 | ) |   |   | (24 | ) |
| Interest                    expense                      |   |                                                     | (1 | ) |   |   | 3 |   |
| Earnings                    from synfuel projects        |   |                                                     | (17 | ) |   |   | (29 | ) |
| Other                                                    |   |                                                     | 2 |   |   |   | 4 |   |
| Unusual                    items                         |   |                                                     | 19 |   |   |   | 69 |   |
|                                                     |   | $                                                        |   |   |   | $ | 85 |   |

|                                                                                                                           |   | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September****30,** |
|--------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------|
|                                                                                                                           |   | **2006**                                                                      |   | **2005**                                                     |   | **2006** |   | **2005** |
| Sale                    of Sundance plant (Note 8)                                                                             |   |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   | $ | (47 | ) |
| Sale                    of interest in the Griffith plant (Note 8)                                                        |   |                                                                          |   |                                                         |   |   |   |   |   | $ | (17 | ) |   |   |   |   |
| Reduction                    in Enron reserve (Note 2)                                                                         |   |                                                                          |   |                                                         |   |   |   |   |   |   | 11 |   |   |   |   |   |
| Off-site                    remediation of ash basin leak (Note 11)                                                       |   |                                                                          |   |                                                         |   | $ | (19 | ) |   |   | 6 |   |   |   | (19 | ) |
| Settlement                    of NorthWestern litigation                                                                       |   |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   | (6 | ) |
| Impairment                    of synfuel-related assets (Note 11)                                                              |   |                                                                          |   |                                                         |   |   |   |   |   |   | (6 | ) |   |   |   |   |
| Acceleration                    of stock-based compensation expense for periods prior to 2005                    (Note 9) |   |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   | (3 | ) |
|                                                                                                                           | Total  |                                                                          |   |                                                         |   |   | $ | (19 | ) |   | $ | (6 | ) |   | $ | (75 | ) |

| · | See                    "Domestic Gross Energy Margins" for an explanation of non-trading                    margins                    by geographic region and for an explanation of net energy trading                    margins.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| · | Higher                    operation and maintenance expenses for the three months ended                    September                    30, 2006, compared with the same period in 2005, were primarily                    due to the                    timing of outages at the Susquehanna nuclear station and other                    generating                    stations. Higher operation and maintenance expenses for the nine                    months                    ended September 30, 2006, compared with the same period in 2005,                    were                    primarily due to increased outage and non-outage expenses at                    the                    Susquehanna station, two forced outages at the Brunner Island                    plant and                    the timing of other planned outages.                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| · | The                    decline in earnings contribution from synfuel projects for the                    three                    months ended September 30, 2006, compared with the same period                    in 2005,                    resulted primarily from unrealized losses on options purchased                    to hedge a                    portion of the risk associated with the phase-out of the synthetic                    fuel                    tax credits for 2006 and 2007, partially offset by lower operating                    losses                    due to lower production levels. The decline for the nine months                    ended                    September 30, 2006, compared with the same period in 2005, was                    primarily                    due to the anticipated phase-out of synthetic fuel tax credits                    starting in                    2006 and lower production levels.  In                    June 2006, based upon observed and forecasted higher crude oil                    prices and                    projected cash flows, PPL Energy Supply fully impaired its synfuel-related                    assets. This adjustment decreased earnings by $6 million after                    tax. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| · | In                    May 2005, a subsidiary of PPL Energy Supply completed the sale                    of its 450                    MW Sundance power plant located in Pinal County, Arizona to Arizona                    Public                    Service Company for $190 million in cash. The subsidiary recorded                    a loss                    on the sale of $47 million after tax.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| · | In                    June 2006, a subsidiary of PPL Energy Supply completed the sale                    of its 50%                    ownership interest in the 600 MW Griffith power plant located                    in Kingman,                    Arizona, for $115 million in cash. The subsidiary recorded a                    loss on the                    sale of $24 million after tax. Another subsidiary of PPL Energy                    Supply                    recorded the acceleration of net unrealized gains on derivatives                    associated with the plant of $7 million after tax.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| · | In                    the third quarter of 2005, PPL Energy Supply recognized a charge                    of $22                    million after tax in connection with the on-site and off-site                    costs                    related to the Martins Creek ash basin leak remediation. An additional                    charge of $9 million after tax was recorded in the fourth quarter                    of 2005.                    In 2006, PPL Energy Supply reduced its estimate of the costs                    for the                    Martins Creek ash basin leak remediation. This adjustment increased                    earnings by $6 million after tax. Most of the reduction was related                    to an                    insurance claim settlement. PPL Energy Supply cannot predict                    the final                    costs to be incurred as a result of this matter.                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| · | In                    the first and second quarters of 2006, PPL Energy Supply decreased                    its                    reserve on claims related to the Enron bankruptcy. These adjustments                    increased earnings by $11 million after tax.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| · | In                    the first quarter of 2005, PPL Energy Supply recognized a charge                    of $6                    million after tax for a loss contingency related to the litigation                    with                    NorthWestern. In September 2005, PPL Energy Supply and NorthWestern                    reached a final agreement to settle this                    litigation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

*Outlook*

|                                               |                                        | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September****30,** |
|----------------------------------------------------|---------------------------------------------|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------|
|                                               |                                        | **2006**                                                                      |   | **2005**                                                     |   | **2006** |   | **2005** |
|                                               |                                        |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Utility                    revenues                |                                        | $                                                                             | 301    |                                                         |   | $ | 264 |   |   | $ | 934 |   |   | $ | 841 |   |
| Energy-related                    businesses       |                                        |                                                                          | 19     |                                                         |   |   | 19 |   |   |   | 64 |   |   |   | 56 |   |
|                                               | Total                    operating revenues |                                                                          |   | 320                                                          |   |   |   | 283 |   |   |   | 998 |   |   |   | 897 |   |
| Energy                    purchases                |                                        |                                                                          | 86     |                                                         |   |   | 69 |   |   |   | 250 |   |   |   | 197 |   |
| Other                    operation and maintenance |                                        |                                                                          | 70     |                                                         |   |   | 56 |   |   |   | 204 |   |   |   | 180 |   |
| Depreciation                                       |                                        |                                                                          | 36     |                                                         |   |   | 41 |   |   |   | 118 |   |   |   | 117 |   |
| Taxes,                    other than income        |                                        |                                                                          | 15     |                                                         |   |   | 15 |   |   |   | 42 |   |   |   | 44 |   |
| Energy-related                    businesses       |                                        |                                                                          | 8      |                                                         |   |   | 7 |   |   |   | 27 |   |   |   | 20 |   |
|                                               | Total                    operating expenses |                                                                          |   | 215                                                          |   |   |   | 188 |   |   |   | 641 |   |   |   | 558 |   |
| Other                    Income - net              |                                        |                                                                          | 10     |                                                         |   |   | 3 |   |   |   | 35 |   |   |   | 10 |   |
| Interest                    Expense                |                                        |                                                                          | 54     |                                                         |   |   | 50 |   |   |   | 153 |   |   |   | 152 |   |
| Income                    Taxes                    |                                        |                                                                          | (2     | )                                                            |   |   | 11 |   |   |   | 13 |   |   |   | 41 |   |
| Minority                    Interest               |                                        |                                                                          | 4      |                                                         |   |   | 1 |   |   |   | 7 |   |   |   | 4 |   |
|                                               | Total                                       |                                                                          | $      | 59                                                           |   |   | $ | 36 |   |   | $ | 219 |   |   | $ | 152 |   |

|                                                                  |                                                                     | **Sept.                    30, 2006 vs. Sept. 30, 2005** |
|-----------------------------------------------------------------------|--------------------------------------------------------------------------|----------------------------------------------------------|
|                                                                  |                                                                     | **Three                    Months Ended**                |   | **Nine                    Months Ended** |
| U.K.                                                                  |                                                                     |                                                     |   |   |   |   |   |   |
|                                                                  | Delivery                    margins                                      |                                                     | $ | 3 |   |   | $ | 30 |   |
|                                                                  | Operating                    expenses                                    |                                                     |   | (6 | ) |   |   | (20 | ) |
|                                                                  | Income                    taxes                                          |                                                     |   |   |   |   |   | 22 |   |
|                                                                  | Impact                    of changes in foreign currency exchange rates  |                                                     |   | 2 |   |   |   | (9 | ) |
|                                                                  | Impairment                    of investment in U.K. real estate (Note 8) |                                                     |   |   |   |   |   | (6 | ) |
|                                                                  | Gain                    on transfer of equity investment (Note 8)        |                                                     |   | 5 |   |   |   | 5 |   |
|                                                                  | Hyder                    liquidation distribution (Note 8)               |                                                     |   | 3 |   |   |   | 27 |   |
|                                                                  | Other                                                                    |                                                     |   |   |   |   |   | 3 |   |
| Latin                    America                                      |                                                                     |                                                     |   |   |   |   |   |   |
|                                                                  | Delivery                    margins                                      |                                                     |   | 4 |   |   |   | 7 |   |
|                                                                  | Operation                    and maintenance expenses                    |                                                     |   | 4 |   |   |   | 2 |   |
|                                                                  | Income                    taxes                                          |                                                     |   | 9 |   |   |   | 9 |   |
|                                                                  | Impact                    of changes in foreign currency exchange rates  |                                                     |   | 1 |   |   |   | 3 |   |
|                                                                  | Other                                                                    |                                                     |   | (3 | ) |   |   | 1 |   |
| U.S.                    income taxes                                  |                                                                     |                                                     | 1 |   |   |   | (9 | ) |
| Other                                                                 |                                                                     |                                                     |   |   |   |   | 1 |   |
| Unusual                    item - collection of receivable from Enron |                                                                     |                                                     |   |   |   |   | 1 |   |
|                                                                  |                                                                     | $                                                        | 23 |   |   | $ | 67 |   |

| · | The                    U.K.'s earnings were positively impacted by higher margins, primarily                    due                    to price increases and 1% higher sales volumes for the nine months                    ended                    September 30, 2006, compared with the same period in                    2005.                                                                                                                                                                                |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| · | In                    2006, WPD has credited income for $27 million after tax for distributions                    received from the planned ongoing liquidation of Hyder's non-electricity                    delivery businesses. PPL                    Energy Supply does not expect income from the sale or liquidation                    of                    Hyder's non-electricity delivery businesses to continue at the                    same level                    in 2007 as occurred in 2006. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| · | Higher                    operating expenses in the U.K. for the nine months ended September                    30,                    2006, compared with the same period in 2005, were attributable                    to higher                    depreciation, partially due to a reduction in meter lives in                    2005, and                    higher pension costs at WPD.                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| · | Changes                    in foreign exchange rates increased WPD's portion of revenue                    and expense                    line items by 4% during the three months ended September 30,                    2006, and                    decreased them by 4% during the nine months ended September 30,                    2006,                    compared with the same periods in 2005.                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| · | Lower                    U.K. income taxes in 2006, compared with the same period in 2005,                    were                    primarily due to the transfer of a future tax liability from                    WPD and                    certain surplus tax losses from Hyder to a former Hyder affiliate.                    See                    Note 5 to the Financial Statements for additional                    information.                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

| · | Latin                    America earnings were positively impacted in both periods, primarily                    due                    to higher margins due to a 7% increase in sales volumes and accounting                    adjustments related to Chilean deferred taxes and depreciation                    for prior                    periods. See Note 3 to the Financial Statements for additional                    information                    on the accounting adjustments. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Outlook*

**Statement          of Income Analysis -- **

**Domestic          Gross Energy Margins**

|                                                       |                                             | **Sept.                    30, 2006 vs. Sept. 30, 2005** |
|------------------------------------------------------------|--------------------------------------------------|----------------------------------------------------------|
|                                                       |                                             | **Three                    Months Ended**                |   | **Nine                    Months Ended** |
|                                                       |                                             |                                                     |   |   |   |   |
| Wholesale                    energy marketing              |                                             | $                                                        | 110 |   |   | $ | 299 |   |
| Wholesale                    energy marketing to affiliate |                                             |                                                     | 30 |   |   |   | 92 |   |
| Unregulated                    retail electric             |                                             |                                                     | (2 | ) |   |   | (5 | ) |
| Net                    energy trading margins              |                                             |                                                     | (4 | ) |   |   | (7 | ) |
| Other                    revenue adjustments (a)           |                                             |                                                     | 7 |   |   |   | 7 |   |
|                                                       | Total                    revenues                |                                                     |   | 141 |   |   |   | 386 |   |
| Fuel                                                       |                                             |                                                     | (23 | ) |   |   | (5 | ) |
| Energy                    purchases                        |                                             |                                                     | 165 |   |   |   | 325 |   |
| Energy                    purchases from affiliate         |                                             |                                                     |   |   |   |   | 8 |   |
| Other                    cost adjustments (a)              |                                             |                                                     | (7 | ) |   |   | (59 | ) |
|                                                       | Total                    cost of sales           |                                                     |   | 135 |   |   |   | 269 |   |
|                                                       | Domestic                    gross energy margins |                                                     | $ | 6 |   |   | $ | 117 |   |

| (a) |   | Adjusted                    to exclude the impact of any revenues and costs not associated                    with                    domestic gross energy margins. This includes revenues and energy                    costs                    related to the international operations of PPL Global. Also                    adjusted to include the margins of the Griffith and Sundance                    plants prior                    to their sales in June 2006 and May 2005, which are included                    in "Loss                    (Income) from Discontinued Operations," and gains or losses on                    sales of                    emission allowances, which are included in "Other operation and                    maintenance" expenses on the Statements of                    Income. |
|-----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                  | **Sept.                    30, 2006 vs. Sept. 30, 2005**                  |
|---------------------------------------|---------------------------------------------------------------------------|
|                                  | **Three                    Months Ended**                                 |   | **Nine                    Months Ended** |
| Non-trading                           |                                                                      |   |   |   |   |   |   |
|                                  | Eastern                    U.S.                                           | $ | 28 |   |   | $ | 96 |   |
|                                  | Northwestern                    U.S.                                      |   | (10 | ) |   |   | 24 |   |
|                                  | Southwestern                    U.S.                                      |   | (7 | ) |   |   | (6 | ) |
| Net                    energy trading |                                                                      | (5 | ) |   |   | 3 |   |
|                                  |                         Domestic gross energy margins | $ | 6 |   |   | $ | 117 |   |

*Eastern          U.S.*

*Northwestern          U.S.*

*Southwestern          U.S.*

*Net          Energy Trading*

**Utility          Revenues**

|               |                                                     | **Sept.                    30, 2006 vs. Sept. 30, 2005** |
|--------------------|----------------------------------------------------------|----------------------------------------------------------|
|               |                                                     | **Three                    Months Ended**                |   | **Nine                    Months Ended** |
| **International:** |                                                     |                                                     |   |   |   |   |   |   |
|               | Retail                    electric delivery (PPL Global) |                                                     |   |   |   |   |   |   |   |
|               | U.K.                                                     |                                                     | $ | 5 |   |   | $ | 42 |   |
|               | Chile                                                    |                                                     |   | 12 |   |   |   | 33 |   |
|               | El                    Salvador                           |                                                     |   | 8 |   |   |   | 15 |   |
|               | Bolivia                                                  |                                                     |   | 1 |   |   |   | 4 |   |
|               | Foreign                    currency exchange rates       |                                                     |   | 11 |   |   |   | (1 | ) |
|               |                                                     |                                                     | $ | 37 |   |   | $ | 93 |   |

| · | higher                    average prices overall and an increase of 1% in sales volumes                    in the U.K.                    for the nine months ended September 30, 2006, compared with the                    same                    period in 2005, partially offset by a 2% decrease in sales volumes                    for the                    three months ended September 30, 2006, compared with the same                    period in                    2005; |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | increases                    of 7% in Chilean electric delivery sales volumes and higher average                    prices                    overall; and                                                                                                                                                                                                                                                                                                                                |
| · | increases                    of 8% in electric delivery sales volumes in El Salvador and higher                    average                    prices overall.                                                                                                                                                                                                                                                                                                                             |

**Energy-related          Businesses**

| · | a                    $36 million net unrealized loss on options purchased to hedge                    a portion of                    the risk associated with the phase-out of the synthetic fuel                    tax credits                    for 2006 and 2007; partially offset by |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | $12                    million of lower operating losses due to lower production                    levels.                                                                                                                                                                                 |

| · | a                    $6 million net unrealized gain on options purchased to hedge                    a portion of                    the risk associated with the phase-out of the synthetic fuel                    tax credits                    for 2006 and 2007; and |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | $22                    million of lower operating losses due to lower production levels;                    partially offset by                                                                                                                                            |
| · | an                    impairment charge of $10 million on the synfuel-related                    assets.                                                                                                                                                                   |

**Other          Operation and Maintenance **

|                                                                                                          |   | **Sept.                    30, 2006 vs. Sept. 30, 2005** |
|---------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|
|                                                                                                          |   | **Three                    Months Ended**                |   | **Nine                    Months Ended** |
|                                                                                                          |   |                                                     |   |   |   |   |
| Martins                    Creek ash basin remediation adjustment (Note 11)                                   |   | $                                                        | (33 | ) |   | $ | (22 | ) |
| Reduction                    in Enron reserve (Note 2)                                                        |   |                                                     |   |   |   |   | (19 | ) |
| Accelerated                    amortization of stock-based compensation in 2005 (Note 9)                 |   |                                                     |   |   |   |   | (13 | ) |
| NorthWestern                    litigation accrual in March 2005                                         |   |                                                     |   |   |   |   | (9 | ) |
| Stock-based                    compensation (Note 9)                                                          |   |                                                     |   |   |   |   | (5 | ) |
| Susquehanna                    plant refueling and inspection costs                                           |   |                                                     | 4 |   |   |   | 16 |   |
| Outage                    costs at Martins Creek and Brunner Island plants                                    |   |                                                     | 3 |   |   |   | 11 |   |
| Change                    in allocation of corporate service costs (Note 12)                                  |   |                                                     | 5 |   |   |   | 12 |   |
| Increase                    in domestic and international pension and postretirement                    costs |   |                                                     | 7 |   |   |   | 13 |   |
| Increase                    in international operation and maintenance expenses                               |   |                                                     | 7 |   |   |   | 13 |   |
| Union                    contract ratification bonus                                                          |   |                                                     | 2 |   |   |   | 2 |   |
| Change                    in foreign currency exchange rates                                                  |   |                                                     | 2 |   |   |   |   |   |
| Other                                                                                                         |   |                                                     | 3 |   |   |   | (2 | ) |
|                                                                                                          |   | $                                                        |   |   |   | $ | (3 | ) |

**Depreciation**

|                                                                        |   | **Sept.                    30, 2006 vs. Sept. 30, 2005** |
|-----------------------------------------------------------------------------|--------|----------------------------------------------------------|
|                                                                        |   | **Three                    Months Ended**                |   | **Nine                    Months Ended** |
|                                                                        |   |                                                     |   |   |   |   |
| Additions                    to PP&E                                    |   | $                                                        | 1 |   |   | $ | 10 |   |
| Reduction                    of useful lives of certain distribution assets |   |                                                     |   |   |   |   | 3 |   |
| Changes                    in foreign currency exchange rates               |   |                                                     | 2 |   |   |   | (2 | ) |
| Extension                    of useful lives of certain generation assets   |   |                                                     |   |   |   |   | (2 | ) |
| Chilean                    depreciation accounting adjustment (Note 3) |   |                                                     | (7 | ) |   |   | (7 | ) |
| Other                                                                       |   |                                                     | 1 |   |   |   | 2 |   |
|                                                                        |   | $                                                        | (3 | ) |   | $ | 4 |   |

**Other          Income - net**

**Interest          Expense**

|                                                                                                                                                                                                 |   | **Sept.                    30, 2006 vs. Sept. 30, 2005** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|
|                                                                                                                                                                                                 |   | **Three                    Months Ended**                |   | **Nine                    Months Ended** |
|                                                                                                                                                                                                 |   |                                                     |   |   |   |   |
| Increase                    in long-term debt interest expense                                                                                                                                       |   | $                                                        | 17 |   |   | $ | 28 |   |
| Decrease                    in interest expense with affiliates                                                                                                                                      |   |                                                     | (2 | ) |   |   | (9 | ) |
| Increase                    in capitalized interest                                                                                                                                                  |   |                                                     | (5 | ) |   |   | (10 | ) |
| Write-off                    in 2005 of financing costs associated with PPL Energy Supply's                    2.625%                    Convertible Notes due to the market trigger price being met |   |                                                     | (6 | ) |   |   | (6 | ) |
| Change                    in foreign currency exchange rates                                                                                                                                         |   |                                                     | 1 |   |   |   | (3 | ) |
| Decrease                    in short-term debt interest expense                                                                                                                                      |   |                                                     | (1 | ) |   |   | (4 | ) |
| Other                                                                                                                                                                                                |   |                                                     | 1 |   |   |   | (1 | ) |
|                                                                                                                                                                                                 |   | $                                                        | 5 |   |   | $ | (5 | ) |

**Income          Taxes**

|                                                                                                        |   | **Sept.                    30, 2006 vs. Sept. 30, 2005** |
|-------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|
|                                                                                                        |   | **Three                    Months Ended**                |   | **Nine                    Months Ended** |
|                                                                                                        |   |                                                     |   |   |   |   |
| Higher                    pre-tax book income                                                               |   | $                                                        | 10 |   |   | $ | 85 |   |
| Reduction                    in tax benefits related to nonconventional fuel tax                    credits |   |                                                     | 2 |   |   |   | 42 |   |
| Decrease                    in tax expense on foreign earnings                                              |   |                                                     | (8 | ) |   |   | (8 | ) |
| Chilean                    deferred tax accounting adjustment (Note 3)                                      |   |                                                     | (9 | ) |   |   | (9 | ) |
| Transfer                    of WPD tax items in 2006 (Note 5)                                          |   |                                                     |   |   |   |   | (20 | ) |
| Other                                                                                                       |   |                                                     | (1 | ) |   |   | 1 |   |
|                                                                                                        |   | $                                                        | (6 | ) |   | $ | 91 |   |

**Discontinued          Operations**

**Financial          Condition**

**Liquidity          and Capital Resources**

| · | $897                    million of cash provided by operating activities;                                                                                                                                                                        |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | the                    issuance of $800 million of long-term debt;                                                                                                                                                                               |
| · | contributions                    from Member of $116 million; and                                                                                                                                                                                |
| · | $115                    million of proceeds from the sale of PPL Energy Supply's interest                    in the                    Griffith plant; offset by                                                                                 |
| · | $584                    million of capital expenditures (including $6 million to purchase                    equipment previously leased);                                                                                                       |
| · | distributions                    to Member of $651 million;                                                                                                                                                                                      |
| · | the                    retirement of $144 million of long-term debt;                                                                                                                                                                             |
| · | a                    net decrease in short-term debt (including a note payable to                    an affiliate)                    of $180 million (excluding the impact of foreign currency translation                    adjustments); and |
| · | $26                    million of net purchases of emission                    allowances.                                                                                                                                                       |

| · | WPDH                    Limited IDR of BBB- and senior unsecured rating to BBB from                    BBB-;                                                           |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | WPD                    LLP IDR of BBB, senior unsecured rating to BBB+ from BBB and                    preferred                    stock rating to BBB from BBB-; and |
| · | WPD                    (South Wales) and WPD (South West) IDR of BBB+ and senior unsecured                    debt                    rating to A- from BBB+.          |

|                                             |                                                        | **Projected**                                      |   |
|--------------------------------------------------|-------------------------------------------------------------|----------------------------------------------------|--------|
|                                             |                                                        | **2006**                                           |   | **2007** |   | **2008** |   | **2009** |   | **2010** |   |
| Construction                    expenditures (a) |                                                        |                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             | Generating                    facilities                    |                                               | $      | 296 |   | $ | 241 |   | $ | 186 |   | $ | 296 |   | $ | 295 |   |
|                                             | Transmission                    and distribution facilities |                                               |   | 289 |   |   | 289 |   |   | 290 |   |   | 298 |   |   | 310 |   |
|                                             | Environmental                                               |                                               |   | 340 |   |   | 582 |   |   | 378 |   |   | 125 |   |   | 75 |   |
|                                             | Other                                                       |                                               |   | 43 |   |   | 50 |   |   | 13 |   |   | 10 |   |   | 8 |   |
|                                             |                                                        | Total                    Construction Expenditures |   |   | 968 |   |   | 1,162 |   |   | 867 |   |   | 729 |   |   | 688 |   |
| Nuclear                    fuel                  |                                                        |                                               | 79     |   |   | 92 |   |   | 97 |   |   | 97 |   |   | 99 |   |
|                                             |                                                        | Total                    Capital Expenditures      |   | $ | 1,047 |   | $ | 1,254 |   | $ | 964 |   | $ | 826 |   | $ | 787 |   |

| (a) |   | Construction                    expenditures include AFUDC and capitalized interest, which are                    expected to                    be $147 million for the 2006-2010                    period. |
|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Risk          Management - Energy Marketing & Trading and Other **

*Commodity          Price Risk (Non-Trading)*

|                                                                                                     |   | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September****30,** |
|----------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------|
|                                                                                                     |   | **2006**                                                                      |   | **2005**                                                     |   | **2006** |   | **2005** |
|                                                                                                     |   |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Fair                    value of contracts outstanding at the beginning of the                    period |   | $                                                                             | (95    | )                                                            |   | $ | (127 | ) |   | $ | (278 | ) |   | $ | (9 | ) |
| Contracts                    realized or otherwise settled during the period                             |   |                                                                          | (5     | )                                                            |   |   | (9 | ) |   |   |   |   |   |   | (33 | ) |
| Fair                    value of new contracts at inception                                              |   |                                                                          | (27    | )                                                            |   |   | 9 |   |   |   | (27 | ) |   |   | 22 |   |
| Other                    changes in fair values                                                          |   |                                                                          | 21     |                                                         |   |   | (145 | ) |   |   | 199 |   |   |   | (252 | ) |
| Fair                    value of contracts outstanding at the end of the period                          |   | $                                                                             | (106   | )                                                            |   | $ | (272 | ) |   | $ | (106 | ) |   | $ | (272 | ) |

|                                                                            |   | **Fair                    Value of Contracts at Period-End****Gains                    (Losses)** |
|---------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------|
|                                                                            |   | **Maturity****Less                    Than****1                    Year**                         |   | **Maturity****1-3                    Years** |   | **Maturity****4-5                    Years** |   | **Maturity****in                    Excess****of                    5 Years** |   | **Total                    Fair****Value** |
| **Source                    of Fair Value**                                     |   |                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Prices                    actively quoted                                       |   | $                                                                                                 | (3 | ) |   | $ | 2 |   |   | $ | 4 |   |   | $ | 1 |   |   | $ | 4 |   |
| Prices                    provided by other external sources                    |   |                                                                                              | (38 | ) |   |   | (174 | ) |   |   | (6 | ) |   |   | 3 |   |   |   | (215 | ) |
| Prices                    based on models and other valuation methods           |   |                                                                                              | 43 |   |   |   | 62 |   |   |   |   |   |   |   |   |   |   |   | 105 |   |
| Fair                    value of contracts outstanding at the end of the period |   | $                                                                                                 | 2 |   |   | $ | (110 | ) |   | $ | (2 | ) |   | $ | 4 |   |   | $ | (106 | ) |

*Commodity          Price Risk (Trading)*

|                                                                                                     |   | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September****30,** |
|----------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------|
|                                                                                                     |   | **2006**                                                                      |   | **2005**                                                     |   | **2006** |   | **2005** |
|                                                                                                     |   |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Fair                    value of contracts outstanding at the beginning of the                    period |   | $                                                                             | 19     |                                                         |   | $ | 11 |   |   | $ | 5 |   |   | $ | 9 |   |
| Contracts                    realized or otherwise settled during the period                             |   |                                                                          | 20     |                                                         |   |   | (10 | ) |   |   | 2 |   |   |   | (16 | ) |
| Fair                    value of new contracts at inception                                              |   |                                                                          | (16    | )                                                            |   |   | (2 | ) |   |   | (13 | ) |   |   | 2 |   |
| Other                    changes in fair values                                                          |   |                                                                          | 6      |                                                         |   |   | 11 |   |   |   | 35 |   |   |   | 15 |   |
| Fair                    value of contracts outstanding at the end of the period                          |   | $                                                                             | 29     |                                                         |   | $ | 10 |   |   | $ | 29 |   |   | $ | 10 |   |

|                                                                            |   | **Fair                    Value of Contracts at Period-End****Gains                    (Losses)** |
|---------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------|
|                                                                            |   | **Maturity****Less                    Than****1                    year**                         |   | **Maturity****1-3                    years** |   | **Maturity****4-5                    years** |   | **Maturity****in                    Excess****of                    5 Years** |   | **Total                    Fair****Value** |
| **Source                    of Fair Value**                                     |   |                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Prices                    actively quoted                                       |   | $                                                                                                 | (1 | ) |   | $ | (1 | ) |   | $ | 1 |   |   |   |   |   |   | $ | (1 | ) |
| Prices                    provided by other external sources                    |   |                                                                                              | 12 |   |   |   | 4 |   |   |   |   |   |   |   |   |   |   |   | 16 |   |
| Prices                    based on models and other valuation methods           |   |                                                                                              | 4 |   |   |   | 10 |   |   |   |   |   |   |   |   |   |   |   | 14 |   |
| Fair                    value of contracts outstanding at the end of the period |   | $                                                                                                 | 15 |   |   | $ | 13 |   |   | $ | 1 |   |   |   |   |   |   | $ | 29 |   |

*Interest          Rate Risk*

*Foreign          Currency Risk*

*Nuclear          Decommissioning Trust Funds - Securities Price Risk*

*Synthetic          Fuel Tax Credit Risk*

**Related          Party Transactions**

**Acquisitions,          Development and Divestitures**

**Environmental          Matters**

**New          Accounting Standards**

**Application          of Critical Accounting Policies**

----

**PPL          ELECTRIC UTILITIES CORPORATION AND SUBSIDIARIES**

**Item          2. Management's Discussion and Analysis of Financial Condition and Results          of          Operations**

**Overview**

**Results          of Operations**

**Earnings**

|   |   | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September****30,** |
|--------|--------|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------|
|   |   | **2006**                                                                      |   | **2005**                                                     |   | **2006** |   | **2005** |
|   |   |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|   |   | $                                                                             | 50     |                                                         |   | $ | 52 |   |   | $ | 131 |   |   | $ | 103 |   |

|                                                                                                                                              |   | **Sept.                    30, 2006 vs. Sept. 30, 2005** |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|
|                                                                                                                                              |   | **Three                    Months Ended**                |   | **Nine                    Months Ended** |
|                                                                                                                                              |   |                                                     |   |   |   |   |   |   |
| Delivery                    revenues (net of CTC/ITC amortization, interest expense on transition                    bonds and ancillary charges) |   | $                                                        | (2 | ) |   | $ | (4 | ) |
| Operation                    and maintenance expenses                                                                                             |   |                                                     | (18 | ) |   |   | (15 | ) |
| Other                                                                                                                                             |   |                                                     | 4 |   |   |   | 4 |   |
| Unusual                    items                                                                                                                  |   |                                                     | 14 |   |   |   | 43 |   |
|                                                                                                                                              |   | $                                                        | (2 | ) |   | $ | 28 |   |

|                                                                                                                           |   | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September****30,** |
|--------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------|
|                                                                                                                           |   | **2006**                                                                      |   | **2005**                                                     |   | **2006** |   | **2005** |
| Reversal                    of cost recovery - Hurricane Isabel (Note 2)                                                       |   | $                                                                             | (7     | )                                                            |   |   |   |   |   | $ | (7 | ) |   |   |   |   |
| Realization                    of benefits related to Black Lung Trust assets (Note 10)                                        |   |                                                                          | 21     |                                                         |   |   |   |   |   |   | 21 |   |   |   |   |   |
| PJM                    billing dispute (Note                    11)                                                            |   |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   | $ | (27 | ) |
| Acceleration                    of stock-based compensation expense for periods prior to 2005                    (Note 9) |   |                                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |   | (2 | ) |
|                                                                                                                           | Total  |                                                                          | $      | 14                                                           |   |   |   |   |   |   | $ | 14 |   |   | $ | (29 | ) |

| · | As                    a result of a court's decision, in the third quarter of 2006,                    PPL Electric                    recognized an after-tax charge of $7 million for the reversal                    of a                    regulatory asset that was previously recorded to defer restoration                    costs                    associated with Hurricane Isabel in September 2003 and record                    a liability                    for amounts already billed to customers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| · | In                    the third quarter of 2006, PPL Electric recognized an after-tax                    credit of                    $21 million in connection with the realization of benefits related                    to the                    ability to use excess Black Lung Trust assets to make future                    benefit                    payments for retired mine workers' medical costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| · | PPL                    Electric recognized an after-tax charge of $27 million in the                    first                    quarter of 2005 for a loss contingency related to the PJM billing                    dispute.                    PPL Electric cannot be certain of the outcome or impact of this                    matter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| · | Higher                    operation and maintenance expenses in both periods were primarily                    due to                    higher tree trimming costs, a union contract ratification bonus                    and storm                    costs. The three months ended September, 30, 2005, includes the                    deferral                    of the January 2005 ice storm costs as discussed below.  In                    January 2005, severe ice storms hit PPL Electric's service territory.                    The                    total cost of restoring service to 238,000 customers, excluding                    capitalized costs and regular payroll expenses, was $16                    million. In                    August 2005, the PUC issued an order granting PPL Electric's                    petition for                    authority to defer and amortize for regulatory accounting and                    reporting                    purposes a portion of the ice storm costs, subject to certain                    conditions.                    As a result of the PUC Order and in accordance with SFAS 71,                    "Accounting                    for the Effects of Certain Types of Regulation," in the third                    quarter of                    2005, PPL Electric deferred $12 million of its previously expensed                    storm                    costs. The deferral was based on its assessment of the timing                    and                    likelihood of recovering the deferred costs in PPL Electric's                    next                    distribution base rate case. |

*Outlook*

**Statement          of Income Analysis -- **

**Operating          Revenues**

|                                              |   | **Sept.                    30, 2006 vs. Sept. 30, 2005** |
|---------------------------------------------------|--------|----------------------------------------------------------|
|                                              |   | **Three                    Months Ended**                |   | **Nine                    Months Ended** |
| PLR                    electric generation supply |   | $                                                        | 33 |   |   | $ | 100 |   |
| Electric                    delivery              |   |                                                     | (14 | ) |   |   | (28 | ) |
| Other                                             |   |                                                     | (1 | ) |   |   | 1 |   |
|                                              |   | $                                                        | 18 |   |   | $ | 73 |   |

**Energy          Purchases**

**Energy          Purchases from Affiliate**

**Other          Operation and Maintenance **

|                                                                             |   | **Sept.                    30, 2006 vs. Sept. 30, 2005** |
|----------------------------------------------------------------------------------|--------|----------------------------------------------------------|
|                                                                             |   | **Three                    Months Ended**                |   | **Nine                    Months Ended** |
| Costs                    associated with severe ice storms in January 2005       |   |                                                     |   |   |   | $ | (16 | ) |
| Subsequent                    deferral of a portion of 2005 ice storm costs      |   | $                                                        | 12 |   |   |   | 12 |   |
| Reversal                    of cost recovery - Hurricane Isabel (Note 2)         |   |                                                     | 11 |   |   |   | 11 |   |
| PUC                    reportable storm costs in 2006                            |   |                                                     | 3 |   |   |   | 10 |   |
| Tree                    trimming costs                                           |   |                                                     | 2 |   |   |   | 4 |   |
| Union                    contract ratification bonus                             |   |                                                     | 3 |   |   |   | 3 |   |
| Increase                    in pension and postretirement costs                  |   |                                                     | 2 |   |   |   | 3 |   |
| Allocation                    of corporate service costs (Note 12)          |   |                                                     | 5 |   |   |   | 3 |   |
| Accelerated                    amortization of stock-based compensation (Note 9) |   |                                                     |   |   |   |   | (5 | ) |
| Other                                                                            |   |                                                     | 2 |   |   |   | 9 |   |
|                                                                             |   | $                                                        | 40 |   |   | $ | 34 |   |

**Other          Income - net**

**Financing          Costs**

|                                                                          |   | **Sept.                    30, 2006 vs. Sept. 30, 2005** |
|-------------------------------------------------------------------------------|--------|----------------------------------------------------------|
|                                                                          |   | **Three                    Months Ended**                |   | **Nine                    Months Ended** |
|                                                                          |   |                                                     |   |   |   |   |
| Dividends                    on 6.25% Series Preference Stock                 |   | $                                                        | 4 |   |   | $ | 8 |   |
| Additional                    interest on PLR contract collateral             |   |                                                     | 1 |   |   |   | 4 |   |
| Decrease                    in long-term debt interest expense                |   |                                                     | (5 | ) |   |   | (15 | ) |
| Interest                    accrued in 2005 for PJM billing dispute (Note 11) |   |                                                     |   |   |   |   | (8 | ) |
| Other                                                                         |   |                                                     |   |   |   |   | (1 | ) |
|                                                                          |   | $                                                        |   |   |   | $ | (12 | ) |

**Income          Taxes**

|                                                               |   | **Sept.                    30, 2006 vs. Sept. 30, 2005** |
|--------------------------------------------------------------------|--------|----------------------------------------------------------|
|                                                               |   | **Three                    Months Ended**                |   | **Nine                    Months Ended** |
|                                                               |   |                                                     |   |   |   |   |
| Higher                    (lower) pre-tax book income              |   | $                                                        | (4 | ) |   | $ | 15 |   |
| Decrease                    in tax expense related to tax reserves |   |                                                     | (5 | ) |   |   | (6 | ) |
|                                                               |   | $                                                        | (9 | ) |   | $ | 9 |   |

**Financial          Condition**

**Liquidity          and Capital Resources**

| · | the                    retirement of $365 million of long-term debt;                                                                        |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------|
| · | $200                    million of capital expenditures (including $50 million to purchase                    equipment previously leased); |
| · | the                    repurchase of $200 million of common stock from PPL; and                                                             |
| · | the                    payment of $84 million of common stock dividends to PPL; offset                    by                                |
| · | $360                    million of cash provided by operating activities;                                                                   |
| · | $245                    million of net proceeds from the issuance of preference stock;                    and                               |
| · | a                    contribution of $75 million from                    PPL.                                                               |

|                                             |                                                        | **Projected** |   |
|--------------------------------------------------|-------------------------------------------------------------|---------------|--------|
|                                             |                                                        | **2006**      |   | **2007** |   | **2008** |   | **2009** |   | **2010** |   |
| Construction                    expenditures (a) |                                                        |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             | Transmission                    and distribution facilities |          | $      | 252 |   | $ | 251 |   | $ | 230 |   | $ | 267 |   | $ | 319 |   |
| Other                                            |                                                        |          | 11     |   |   | 23 |   |   | 26 |   |   | 22 |   |   | 23 |   |
|                                             | Total                    Capital Expenditures               |          | $      | 263 |   | $ | 274 |   | $ | 256 |   | $ | 289 |   | $ | 342 |   |

| (a) |   | Construction                    expenditures include AFUDC, which is expected to be $15 million                    for the                    2006-2010 period. |
|-----|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Risk          Management**

*Commodity          Price Risk - PLR Contracts*

*Interest          Rate Risk*

**Related          Party Transactions**

**Environmental          Matters**

**New          Accounting Standards**

**Application          of Critical Accounting Policies**

----

**PPL          CORPORATION**

**PPL          ENERGY SUPPLY, LLC **

**PPL          ELECTRIC UTILITIES CORPORATION**

**Item          3. Quantitative and Qualitative Disclosures About Market          Risk**

**Item          4. Controls and Procedures**

| (a)    |   | Evaluation                    of disclosure controls and procedures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   | The                    registrants' principal executive officers and principal financial                    officers, based on their evaluation of the registrants' disclosure                    controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)                    of                    the Securities Exchange Act of 1934) have concluded that, as                    of September                    30, 2006, the registrants' disclosure controls and procedures                    are                    effective to ensure that material information relating to the                    registrants                    and their consolidated subsidiaries is recorded, processed, summarized                    and                    reported within the time periods specified by the SEC's rules                    and forms,                    particularly during the period for which this quarterly report                    has been                    prepared. The aforementioned principal officers have concluded                    that the                    disclosure controls and procedures are also effective to ensure                    that                    information required to be disclosed in reports filed under the                    Exchange                    Act is accumulated and communicated to management, including                    the principal                    executive and principal financial officers, to allow for timely                    decisions                    regarding required disclosure. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (b)    |   | Change                    in internal controls over financial reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   | The                    registrants' principal executive officers and principal financial                    officers                    have concluded that there were no changes in the registrants'                    internal                    control over financial reporting during the registrants' third                    fiscal                    quarter that have materially affected, or are reasonably likely                    to                    materially affect, the registrants' internal control over financial                    reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

**PART          II. OTHER INFORMATION**

| **Item                    1. Legal Proceedings**                                                                                                                                                                                                                                                                                                                |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                            |
| For                    additional information regarding various pending administrative                    and                    judicial proceedings involving regulatory, environmental and                    other                    matters, which information is incorporated by reference into                    this Part II,                    see: |
|                                                                                                                                                                                                                                                                                                                                                            |   |   |
| ·                                                                                                                                                                                                                                                                                                                                                          |   | "Item                    3. Legal Proceedings" in PPL's, PPL Energy Supply's and PPL Electric's                    2005 Form 10-K; and |
|                                                                                                                                                                                                                                                                                                                                                            |   |   |
| ·                                                                                                                                                                                                                                                                                                                                                          |   | Note                    11 of the registrants' "Combined Notes to Condensed Consolidated                    Financial                    Statements" in Part I of this                    report. |

| **Item                    1A. Risk Factors**                                                                                                                                                                                                                            |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                    |
| There                    have been no material changes in PPL's, PPL Energy Supply's and                    PPL                    Electric's risk factors from those disclosed in "Item 1A. Risk                    Factors" of                    the 2005 Form 10-K. |

| **Item                    6. Exhibits**                                                                                                                                                                                                                                                        |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                           |   |   |
| *[_]10(a)                                                                                                                                                                                                                                                                                 | -  | Compensation                    arrangement changes regarding James H. Miller (PPL Corporation                    Form 8-K                    Report (File No. 1-11459) dated September 15, 2006)  |
| 10(b)                                                                                                                                                                                                                                                                                     | -  | Fourth                    Amendment dated April 12, 2006, to Reimbursement Agreement, dated                    as of                    March 31, 2005, among PPL Energy Supply, LLC, The Bank of Nova                    Scotia, as                    Issuer and Administrative Agent, and the Lenders party thereto                    from time                    to time  |
| *[_]10(c)                                                                                                                                                                                                                                                                                 | -  | Compensation                    arrangement changes for Named Executive Officers of PPL Corporation                    and                    PPL Electric Utilities Corporation and non-employee Directors                    of PPL                    Corporation (PPL Corporation and PPL Electric Utilities Corporation                    Form                    8-K Report (File Nos. 1-11459 and 1-905) dated November 1,                    2006)  |
| 12(a)                                                                                                                                                                                                                                                                                     | -  | PPL                    Corporation and Subsidiaries Computation of Ratio of Earnings                    to Combined                    Fixed Charges and Preferred Stock Dividends  |
| 12(b)                                                                                                                                                                                                                                                                                     | -  | PPL                    Energy Supply, LLC and Subsidiaries Computation of Ratio of Earnings                    to                    Fixed Charges  |
| 12(c)                                                                                                                                                                                                                                                                                     | -  | PPL                    Electric Utilities Corporation and Subsidiaries Computation of                    Ratio of                    Earnings to Combined Fixed Charges and Preferred Stock                    Dividends  |
| *                    -                    Previously filed                                                                                                                                                                                                                                     |
| [_]                    - Filed or listed pursuant to Item 601(b)(10)(iii) of Regulation                    S-K                                                                                                                                                                                 |
|                                                                                                                                                                                                                                                                                           |   |   |
| Certifications                    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, for                    the                    quarterly period ended September 30, 2006, filed by the following                    officers                    for the following companies:  |
| 31(a)                                                                                                                                                                                                                                                                                     | -  | James                    H. Miller for PPL Corporation  |
| 31(b)                                                                                                                                                                                                                                                                                     | -  | John                    R. Biggar for PPL Corporation  |
| 31(c)                                                                                                                                                                                                                                                                                     | -  | James                    H. Miller for PPL Energy Supply, LLC  |
| 31(d)                                                                                                                                                                                                                                                                                     | -  | Paul                    A. Farr for PPL Energy Supply, LLC  |
| 31(e)                                                                                                                                                                                                                                                                                     | -  | John                    F. Sipics for PPL Electric Utilities Corporation  |
| 31(f)                                                                                                                                                                                                                                                                                     | -  | Paul                    A. Farr for PPL Electric Utilities Corporation  |
| Certifications                    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, for                    the                    quarterly period ended September 30, 2006, furnished by the following                    officers for the following companies:                 |
| 32(a)                                                                                                                                                                                                                                                                                     | -  | James.                    H. Miller for PPL Corporation  |
| 32(b)                                                                                                                                                                                                                                                                                     | -  | John                    R. Biggar for PPL Corporation  |
| 32(c)                                                                                                                                                                                                                                                                                     | -  | James                    H. Miller for PPL Energy Supply, LLC  |
| 32(d)                                                                                                                                                                                                                                                                                     | -  | Paul                    A. Farr for PPL Energy Supply, LLC  |
| 32(e)                                                                                                                                                                                                                                                                                     | -  | John                    F. Sipics for PPL Electric Utilities Corporation  |
| 32(f)                                                                                                                                                                                                                                                                                          | - | Paul                    A. Farr for PPL Electric Utilities                    Corporation |

----

SIGNATURES

|                                                 | **PPL                    Corporation**                                                                                                                                                                                                                                                               |
|------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                 | (Registrant)                                                                                                                                                                                                                                                                                         |   |
|                                                 |                                                                                                                                                                                                                                                                                                 |   |
|                                                 | **PPL                    Energy Supply, LLC**                                                                                                                                                                                                                                                        |
|                                                 | (Registrant)                                                                                                                                                                                                                                                                                         |   |
|                                                 |                                                                                                                                                                                                                                                                                                 |   |
|                                                 | **PPL                    Electric Utilities Corporation**                                                                                                                                                                                                                                            |
|                                                 | (Registrant)                                                                                                                                                                                                                                                                                         |   |
|                                                 |                                                                                                                                                                                                                                                                                                 |   |
|                                                 |                                                                                                                                                                                                                                                                                                 |   |
|                                                 |                                                                                                                                                                                                                                                                                                 |   |
|                                                 |                                                                                                                                                                                                                                                                                                 |   |
| Date:  November                    3, 2006 | /s/  Matt                    Simmons                                          |
|                                                 | Matt                    Simmons                                                                                                                                                                                                                                                                      |   |
|                                                 | Vice                    President and Controller                                                                                                                                                                                                                                                     |   |
|                                                 | (Principal                    Accounting Officer)                                                                                                                                                                                                                                                    |   |