<PAGE>

                                 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 June 30, 1999
                                    -------------

                                      OR

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the transition period from __________________ to _______________


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


  1-11459          PP&L Resources, Inc.                    23-2758192
                   (Pennsylvania)
                   Two North Ninth Street
                   Allentown, PA  18101
                   (610) 774-5151

    1-905          PP&L, Inc.                              23-0959590
                   (Pennsylvania)
                   Two North Ninth Street
                   Allentown, PA 18101
                   (610) 774-5151


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

PP&L Resources, Inc.  Yes     X           No___________
                         -----------


PP&L, Inc.            Yes     X           No___________
                         -----------

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

PP&L Resources, Inc.                  Common stock, $.01 par value, 157,694,305
                                      shares outstanding at July 31, 1999,
                                      excluding 16,995,957 shares held as
                                      treasury stock

PP&L, Inc.                            Common stock, no par value, 157,300,382
                                      shares outstanding and all held by PP&L
                                      Resources, Inc. at July 31, 1999
<PAGE>

                             PP&L RESOURCES, INC.
                                      AND
                                  PP&L, INC.
                                  ----------



                                   FORM 10-Q
                      FOR THE QUARTER ENDED JUNE 30, 1999


                                     INDEX
                                     -----

<TABLE>
<CAPTION>
PART I.  FINANCIAL INFORMATION                                              Page
<S>                                                                         <C>
   Item 1.  Financial Statements

            PP&L Resources, Inc.

                Consolidated Statement of Income                               2
                Consolidated Statement of Cash Flows                           3
                Consolidated Balance Sheet                                     4
                Consolidated Statement of Shareowners' Common Equity           6

            PP&L, Inc.

                Consolidated Statement of Income                               8
                Consolidated Statement of Cash Flows                           9
                Consolidated Balance Sheet                                    10
                Consolidated Statement of Shareowner's Common Equity          12

            Notes to Consolidated Financial Statements
                PP&L Resources, Inc. and PP&L, Inc.                           13

   Item 2.  Management's Discussion and Analysis of
            Financial Condition and Results of Operations
                PP&L Resources, Inc. and PP&L, Inc.                           31

   Item 3.  Quantitative and Qualitative Disclosures
            About Market Risk                                                 49

PART II. OTHER INFORMATION

         Item 1. Legal Proceedings                                            50

         Item 4. Submission of Matters to a Vote of Security Holders          50

         Item 6. Exhibits and Reports on Form 8-K                             51

GLOSSARY OF TERMS AND ABBREVIATIONS                                           53

SIGNATURES                                                                    55

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES                             56
</TABLE>

<PAGE>

PP&L RESOURCES, INC. AND SUBSIDIARIES
-------------------------------------
Part 1. FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements
----------------------------

     In the opinion of PP&L Resources, the unaudited financial statements
included herein reflect all adjustments necessary to present fairly the
Consolidated Balance Sheet as of June 30, 1999 and December 31, 1998, and the
Consolidated Statement of Income, Consolidated Statement of Cash Flows, and the
Consolidated Statement of Shareowners' Common Equity for the periods ended June
30, 1999 and 1998. PP&L Resources is the parent holding company of PP&L, PP&L
Global, PP&L Spectrum, PP&L Capital Funding, Penn Fuel Gas, McClure, McCarl's,
and H. T. Lyons. The financial condition and results of operations of PP&L and
PP&L Global are currently the principal factors affecting PP&L Resources'
financial condition and results of operations.

CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Millions of Dollars, except per share data)

<TABLE>
<CAPTION>
                                                              Three Months                 Six Months
                                                             Ended June 30,              Ended June 30,
                                                        -----------------------     ------------------------
                                                           1999         1998           1999           1998
                                                        ----------    ---------     ---------      ---------
<S>                                                     <C>           <C>           <C>            <C>
Operating Revenues
  Electric.........................................      $     584     $    558       $ 1,251       $  1,175
  Gas and propane..................................             23                         68
  Wholesale energy marketing and trading...........            337          259           634            504
  Energy related businesses........................             60           21           118             40
                                                        ----------    ---------     ---------      ---------
  Total............................................          1,004          838         2,071          1,719
                                                        ----------    ---------     ---------      ---------

Operating Expenses
  Operation
    Electric fuel..................................             97          120           220            235
    Natural gas and propane........................             10                         33
    Energy purchases...............................            351          218           606            432
    Other..........................................            136          138           302            250
    Amortization of recoverable transition costs...             41                         86
  Maintenance......................................             57           53            97             91
  Depreciation and amortization....................             61           97           121            195
  Taxes, other than income.........................             43           49            95            102
  Energy related businesses........................             44           15            85             29
                                                        ----------    ---------     ---------      ---------
  Total............................................            840          690         1,645          1,334
                                                        ----------    ---------     ---------      ---------
Operating Income...................................            164          148           426            385
                                                        ----------    ---------     ---------      ---------
Other Income.......................................              7            4             7             11
                                                        ----------    ---------     ---------      ---------
Income Before Interest and Income Taxes............            171          152           433            396
Interest Expense...................................             61           54           123            106
                                                        ----------    ---------     ---------      ---------
Income Before Income Taxes and
  Extraordinary Items..............................            110           98           310            290

Income Taxes.......................................             40           38           114            122
                                                        ----------    ---------     ---------      ---------
Income Before Extraordinary Items..................             70           60           196            168

Extraordinary Items (net of $666 income taxes)
  (Note 6).........................................                        (948)                        (948)
                                                        ----------    ---------     ---------      ---------
Income(Loss) Before Dividends on Preferred Stock...             70         (888)          196           (780)

Preferred Stock Dividend Requirements..............              7            6            13             13
                                                        ----------    ---------     ---------      ---------
Net Income(Loss)...................................      $      63        ($894)      $   183          ($793)
                                                        ----------    ---------     ---------      ---------
Earnings Per Share of Common Stock
  Basic and Diluted (Note 3)
    Income Before Extraordinary Items..............      $    0.40     $   0.32       $  1.16       $   0.92
    Extraordinary Items (net of tax)...............                       (5.66)                       (5.67)
                                                        ----------    ---------     ---------      ---------
Net Income(Loss)...................................      $    0.40       ($5.34)      $  1.16         ($4.75)
                                                        ----------    ---------     ---------      ---------
Dividends Declared per Share of Common Stock.......      $    0.25     $ 0.4175       $  0.50       $  0.835
                                                        ==========    =========     =========      =========
</TABLE>

The accompanying Notes to Consolidated Financial Statements are an integral part
of the financial statements.
<PAGE>

PP&L RESOURCES, INC. AND SUBSIDIARIES
-------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Millions of Dollars)

<TABLE>
<CAPTION>
                                                                          Six Months
                                                                        Ended June 30,
                                                                   ------------------------
                                                                      1999           1998
                                                                   ---------      ---------
<S>                                                                <C>            <C>
Net Cash Provided by Operating Activities....................        $  287         $  281
                                                                   ---------      ---------

Cash Flows From Investing Activities
 Expenditures for property, plant and equipment..............          (228)          (149)
 Proceeds from sale of nuclear fuel to trust.................            14             15
 Purchases of available-for-sale securities..................                          (12)
 Sales and maturities of available-for-sale securities.......                           14
 Investment in unconsolidated affiliates.....................                         (276)
 Purchases and sales of other financial investments - net....                            4
 Other investing activities - net............................            (9)             2
                                                                   ---------      ---------
       Net cash used in investing activities.................          (223)          (402)
                                                                   ---------      ---------

Cash Flows From Financing Activities
 Issuance of long-term debt..................................                          260
 Issuance of common stock....................................             8             33
 Retirement or reacquisition of long-term debt...............           (32)          (267)
 Payments on capital lease obligations.......................           (27)           (26)
 Payments of preferred and common dividends..................           (91)          (152)
 Net increase in short-term debt.............................           276            260
 Other financing activities - net............................                           (1)
                                                                   ---------      ---------
       Net cash provided by financing activities.............           134            107
                                                                   ---------      ---------

Net Increase (Decrease) In Cash and Cash Equivalents.........           198            (14)
Cash and Cash Equivalents at Beginning of Period.............           195             50
                                                                   ---------      ---------
Cash and Cash Equivalents at End of Period...................        $  393         $   36
                                                                   =========      =========
Supplemental Disclosures of Cash Flow Information
 Cash paid during the period for:
  Interest (net of amount capitalized).......................        $  117         $  111
  Income taxes...............................................        $  111         $   98
</TABLE>

The accompanying Notes to Consolidated Financial Statements are an integral part
of the financial statements.
<PAGE>

PP&L RESOURCES,INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)

<TABLE>
<CAPTION>
                                                                 June 30,      December 31,
                                                                   1999            1998
                        ASSETS                                 (Unaudited)      (Audited)
                                                               -----------    -------------
<S>                                                            <C>            <C>
PROPERTY, PLANT AND EQUIPMENT
   Electric utility plant in service - net
     Transmission and distribution...........................     $ 2,184          $  2,179
     Generation..............................................       1,684             1,601
     General and intangible..................................         239               223
                                                                  -------         ---------
                                                                    4,107             4,003

   Construction work in progress - at cost...................         113               117
   Nuclear fuel owned and leased - net.......................         144               162
                                                                  -------         ---------
     Electric utility plant - net............................       4,364             4,282
   Gas and oil utility plant - net...........................         172               175
   Other property - net......................................          31                23
                                                                  -------         ---------
                                                                    4,567             4,480
                                                                  -------         ---------

Investments
   Investment in unconsolidated affiliates - at equity.......         701               688
   Nuclear plant decommissioning trust fund..................         229               206
   Other.....................................................          11                12
                                                                  -------         ---------
                                                                      941               906
                                                                  -------         ---------
Current Assets
   Cash and cash equivalents.................................         393               195
   Accounts receivable (less reserve:  1999, $18; 1998, $14)
       Utility customers.....................................         185               173
       Other.................................................         111               125
   Unbilled revenues
       Utility customers.....................................         133               106
       Other.................................................         162                64
   Fuel, materials and supplies - at average cost............         198               207
   Prepayments...............................................          82                15
   Unrealized mark-to-market energy trading gains............          53                 2
   Other.....................................................          69                61
                                                                  -------         ---------
                                                                    1,386               948
                                                                  -------         ---------

Regulatory Assets and Other Noncurrent Assets
   Recoverable transition costs..............................       2,733             2,819
   Other.....................................................         477               454
                                                                  -------         ---------
                                                                    3,210             3,273
                                                                  -------         ---------
                                                                  $10,104          $  9,607
                                                                  =======         =========
</TABLE>

The accompanying Notes to Consolidated Financial Statements are an integral part
of the financial statements.
<PAGE>

PP&L RESOURCES, INC. AND SUBSIDIARIES
-------------------------------------
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
<TABLE>
<CAPTION>

                                                                              June 30,           December 31,
                                                                                1999                 1998
                                                                            (Unaudited)            (Audited)
                                                                            -----------          ------------
                                         LIABILITIES
<S>                                                                        <C>                   <C>
Capitalization
  Common equity
    Common stock............................................                        $ 2                   $ 2
    Capital in excess of par value..........................                      1,874                 1,866
    Treasury stock..........................................                       (419)                 (419)
    Earnings reinvested.....................................                        477                   372
    Accumulated other comprehensive income..................                        (20)                   (4)
    Capital stock expense and other.........................                        (28)                  (27)
                                                                             -----------           -----------
                                                                                  1,886                 1,790
  Preferred stock
    With sinking fund requirements..........................                         47                    47
    Without sinking fund requirements.......................                         50                    50
  Company-obligated mandatorily redeemable preferred
    securities of subsidiary trusts holding solely
    company debentures......................................                        250                   250
  Long-term debt............................................                      2,831                 2,983
                                                                             -----------           -----------
                                                                                  5,064                 5,120
                                                                             -----------           -----------
Current Liabilities
  Short-term debt...........................................                        912                   636
  Long-term debt due within one year........................                        126                     1
  Capital lease obligations due within one year.............                         60                    59
  Above market NUG purchases due within one year............                        101                   105
  Accounts payable..........................................                        341                   197
  Taxes and interest accrued ...............................                        100                    95
  Dividends payable.........................................                         46                    46
  Unrealized mark-to-market energy trading losses...........                         41                     9
  Other.....................................................                        136                   128
                                                                             -----------           -----------
                                                                                  1,863                 1,276
                                                                             -----------           -----------
Deferred Credits and Other Noncurrent Liabilities
  Deferred income taxes and investment tax credits..........                      1,576                 1,574
  Above market NUG purchases................................                        724                   775
  Capital lease obligations.................................                         97                   109
  Other.....................................................                        780                   753
                                                                             -----------           -----------
                                                                                  3,177                 3,211
                                                                             -----------           -----------
Commitments and Contingent Liabilities (Note 11)............
                                                                             -----------           -----------
                                                                                $10,104                $9,607
                                                                             ===========           ===========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of the financial statements.
<PAGE>

PP&L RESOURCES, INC. AND SUBSIDIARIES
-------------------------------------
CONSOLIDATED STATEMENT OF SHAREOWNERS' COMMON EQUITY
(Unaudited)
(Millions of Dollars)

<TABLE>
<CAPTION>
                                                          Capital                               Accumulated     Capital
                                                             in                                    Other         Stock
                                                Common     Excess      Treasury     Earnings   Comprehensive  Expense and
                                                Stock      of Par       Stock      Reinvested      Income        Other      Total
                                               -------    --------     --------    ----------   ------------  -----------  -------
<S>                                            <C>        <C>          <C>         <C>         <C>            <C>          <C>
For the Three Months Ended June 30, 1999
----------------------------------------
Beginning Balance............................     $2       $1,874       ($419)       $  453        ($11)        ($27)      $1,872
Comprehensive income
  Net income.................................                                            63
  Other comprehensive income:
    Foreign currency translation
    adjustment, net of tax credits of $ 2....                                                        (9)
  Total comprehensive income.................                                                                                  54
Common dividends declared....................                                           (39)                                  (39)
Other........................................                                                                     (1)          (1)
                                               -------    --------     --------    ----------   ---------     ----------   -------
Ending Balance...............................     $2       $1,874       ($419)       $  477        ($20)        ($28)      $1,886
1998                                           =======    ========     ========    ==========   =========     ==========   =======

Beginning Balance............................     $2       $1,685      $    0        $1,195       $   0        ( $26)      $2,856
Comprehensive income
  Net loss...................................                                          (894)
  Other comprehensive income:
    Foreign currency translation
    adjustment, net of tax credits
    of less than $1..........................                                                        (1)
Total comprehensive income...................                                                                                (895)
Issuance of common stock.....................                  17                                                              17
Common dividends declared....................                                           (70)                                  (70)
Other........................................                                                                     (1)          (1)
                                               -------    --------     --------    ----------   ---------     ----------   -------
Ending Balance...............................     $2       $1,702      $    0        $  231         ($1)        ($27)      $1,907
                                               =======    ========     ========    ==========   =========     ==========   =======


For the Six Months Ended June 30, 1999
--------------------------------------
Beginning Balance............................     $2       $1,866       ($419)       $  372         ($4)        ($27)      $1,790
Comprehensive income
  Net income.................................                                           183
  Other comprehensive income:
    Foreign currency translation
    adjustment, net of tax
    credits of $3............................                                                       (16)
Total comprehensive income...................                                                                                 167
Issuance of common stock.....................                   8                                                               8
Common dividends declared....................                                           (78)                                  (78)
Other........................................                                                                     (1)          (1)
                                               -------    --------     --------    ----------   ---------     ----------   -------
Ending Balance...............................     $2       $1,874       ($419)       $  477        ($20)        ($28)      $1,886
1998                                           =======    ========     ========    ==========   =========     ==========   =======

Beginning Balance............................     $2       $1,669      $    0        $1,164       $   0         ($26)      $2,809
Comprehensive income
  Net loss...................................                                          (793)
  Other comprehensive income:
    Foreign currency translation
    adjustment,  net of tax
    credits of $1............................                                                        (1)
Total comprehensive income...................                                                                                (794)
Issuance of common stock.....................                  33                                                              33
Common dividends declared....................                                          (140)                                 (140)
Other........................................                                                                     (1)          (1)
                                               -------    --------     --------    ----------   ---------     ----------   -------
Ending Balance...............................     $2       $1,702      $    0        $  231         ($1)        ($27)      $1,907
                                               =======    ========     ========    ==========   =========     ==========   =======
</TABLE>

The accompanying Notes to Consolidated Financial Statements are an integral part
                         of the financial statements.
<PAGE>

PP&L, INC. AND SUBSIDIARIES
---------------------------

     In the opinion of PP&L, the unaudited financial statements included herein
reflect all adjustments necessary to present fairly the Consolidated Balance
Sheet as of June 30, 1999 and December 31, 1998, and the Consolidated Statement
of Income, Consolidated Statement of Cash Flows, and the Consolidated Statement
of Shareowner's Common Equity for the periods ended June 30, 1999 and 1998. All
nonutility operating transactions are included in "Other Income" in PP&L's
Consolidated Statement of Income.

CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Millions of Dollars)
<TABLE>
<CAPTION>
                                                                   Three Months                     Six Months
                                                                  Ended June 30,                   Ended June 30,
                                                               -----------------------       ------------------------
                                                                  1999         1998             1999           1998
                                                               ----------   ----------       ----------     ---------
<S>                                                            <C>          <C>              <C>            <C>
Operating Revenues
  Electric........................................                 $584         $558           $1,251         $1,175
  Wholesale energy marketing and trading..........                  336          259              633            504
  Energy related businesses.......................                    3            1                7
                                                               --------   ----------       ----------     ----------
  Total...........................................                  923          818            1,891          1,679
                                                               --------   ----------       ----------     ----------

Operating Expenses
  Operation
    Electric fuel.................................                   97          120              220            235
    Energy purchases..............................                  350          218              605            432
    Other.........................................                  127          138              285            250
    Amortization of recoverable transition costs..                   41                            86
  Maintenance.....................................                   57           53               95             91
  Depreciation and amortization...................                   59           97              117            195
  Taxes, other than income........................                   41           49               91            102
  Energy related businesses.......................                    3                             7
                                                               --------   ----------       ----------     ----------
  Total...........................................                  775          675            1,506          1,305
                                                               --------   ----------       ----------     ----------
Operating Income..................................                  148          143              385            374
                                                               --------   ----------       ----------     ----------
Other Income......................................                   15            9               22             21
                                                               --------   ----------       ----------     ----------
Income Before Interest and Income Taxes...........                  163          152              407            395

Interest Expense..................................                   48           49               96             98
                                                               --------   ----------       ----------     ----------
Income Before Income Taxes and
  Extraordinary Items.............................                  115          103              311            297

Income Taxes......................................                   42           40              118            124
                                                               --------   ----------       ----------     ----------
Income Before Extraordinary Items ................                   73           63              193            173

Extraordinary Items (net of $666 income taxes)
  (Note 6)........................................                              (948)                           (948)
                                                               --------   ----------       ----------     ----------
Net Income(Loss) Before Dividends on
  Preferred Stock.................................                   73         (885)             193           (775)

Dividends on Preferred Stock......................                   12           12               24             24
                                                               --------   ----------       ----------     ----------
Earnings Available to PP&L Resources, Inc.........                 $ 61        ($897)          $  169          ($799)
                                                               ========   ==========       ==========     ==========
</TABLE>

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

<PAGE>

PP&L, INC. AND SUBSIDIARIES
---------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Millions of Dollars)

<TABLE>
<CAPTION>
                                                                                   Six Months
                                                                                 Ended June 30,
                                                                               -----------------
                                                                               1999         1998
                                                                               ----         ----
<S>                                                                            <C>          <C>
Net Cash Provided by Operating Activities.......................             $  241       $  307
                                                                             -------      ------
Cash Flows From Investing Activities
  Expenditures for property, plant and equipment................               (142)        (149)
  Proceeds from sales of nuclear fuel to trust..................                 14           15
  Purchases of available-for-sale securities ...................                             (12)
  Sales and maturities of available-for-sale securities ........                              14
  Purchases and sales of other financial investments - net......                               4
  Loan to parent................................................                (12)          (1)
  Other investing activities - net..............................                  3            1
                                                                             -------      ------
        Net cash used in investing activities...................               (137)        (128)
                                                                             -------      ------
Cash Flows From Financing Activities
  Issuance of long-term debt....................................                             200
  Retirement of long-term debt..................................                            (266)
  Payments on capital lease obligations.........................                (26)         (26)
  Payments of preferred and common dividends....................               (141)        (163)
  Net increase in short-term debt...............................                164           82
  Other financing activities - net..............................                              (1)
                                                                             -------      ------
        Net cash used in financing activities...................                 (3)        (174)
                                                                             -------      ------
Net Increase in Cash and Cash Equivalents.......................                101            5
Cash and Cash Equivalents at Beginning of Period................                 31           15
                                                                             -------      ------
Cash and Cash Equivalents at End of Period......................             $  132       $   20
                                                                             =======      ======

Supplemental Disclosures of Cash Flow Information
  Cash paid during the period for:
    Interest (net of amount capitalized)........................             $  103       $  105
    Income taxes................................................             $  122       $  102
</TABLE>

The accompanying Notes to Consolidated Financial Statements are an integral part
of the financial statements.
<PAGE>

PP&L INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)

<TABLE>
<CAPTION>
                                                                        June 30,          December 31,
                                                                         1999                 1998
                                                                      (Unaudited)          (Audited)
                                                                      -----------         ------------
<S>                                                                   <C>                 <C>
                                            ASSETS
PROPERTY, PLANT AND EQUIPMENT
  Electric utility plant in service - net
    Transmission and distribution...........................          $     2,184         $      2,179
    Generation..............................................                1,630                1,601
    General and intangible..................................                  217                  223
                                                                      -----------         ------------
                                                                            4,031                4,003

  Construction work in progress - at cost...................                  113                  117
  Nuclear fuel owned and leased - net.......................                  144                  162
                                                                      -----------         ------------
    Electric utility plant - net............................                4,288                4,282
  Gas and oil utility plant - net...........................                   27                   28
  Other property - net......................................                   21                   21
                                                                      -----------         ------------
                                                                            4,336                4,331
                                                                      -----------         ------------

INVESTMENTS
  Loan to parent............................................                  441                  429
  Nuclear plant decommissioning trust fund..................                  229                  206
  Investment in unconsolidated affiliate at equity..........                   17                   17
  Other.....................................................                   11                   13
                                                                      -----------         ------------
                                                                              698                  665
                                                                      -----------         ------------

CURRENT ASSETS
  Cash and cash equivalents.................................                  132                   31
  Accounts receivable (less reserve:  1999, $17; 1998, $14)
    Utility customers.......................................                  174                  163
    Other...................................................                   87                   67
  Unbilled revenues
    Utility customers.......................................                  131                  104
    Other...................................................                  157                   59
  Fuel, material and supplies - at average cost.............                  190                  196
  Prepayments ..............................................                   81                   14
  Unrealized mark-to-market energy trading gains............                   53                    2
  Other.....................................................                   62                   58
                                                                      -----------         ------------
                                                                            1,067                  694
                                                                      -----------         ------------

REGULATORY ASSETS AND OTHER NONCURRENT ASSETS
  Recoverable transition costs..............................                2,733                2,819
  Other.....................................................                  330                  329
                                                                      -----------         ------------
                                                                            3,063                3,148
                                                                      -----------         ------------

                                                                      $     9,164         $      8,838
                                                                      ===========         ============
</TABLE>

The accompanying Notes to Consolidated Financial Statements are an integral part
of the financial statements.
<PAGE>

PP&L, INC. AND SUBSIDIARIES
---------------------------
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)

<TABLE>
<CAPTION>
                                                                                  June 30,            December 31,
                                                                                   1999                  1998
                                                                                (Unaudited)            (Audited)
                                                                               ------------           ------------
<S>                                                                            <C>                    <C>
                                         LIABILITIES
Capitalization
  Common equity
    Common stock..........................................................     $     $1,476           $      1,476
    Additional paid-in capital............................................               70                     70
    Earnings reinvested...................................................              262                    210
    Accumulated other comprehensive income................................               (6)                    (6)
    Capital stock expense and other.......................................              (20)                   (20)
                                                                               ------------           ------------
                                                                                      1,782                  1,730
  Preferred stock
    With sinking fund requirements........................................              295                    295
    Without sinking fund requirements.....................................              171                    171
  Company-obligated mandatorily redeemable preferred
    securities of subsidiary trusts holding solely
    company debentures....................................................              250                    250
  Long-term debt..........................................................            2,445                  2,569
                                                                               ------------           ------------
                                                                                      4,943                  5,015
                                                                               ------------           ------------
Current Liabilities
  Short-term debt.........................................................              244                     80
  Long-term debt due within one year......................................              125
  Capital lease obligations due within one year...........................               60                     59
  Above market NUG purchases due within one year..........................              101                    105
  Accounts payable........................................................              308                    189
  Taxes and interest accrued..............................................               91                     86
  Dividends payable.......................................................               12                     12
  Unrealized mark-to-market energy trading losses.........................               41                      9
  Other...................................................................              105                    114
                                                                               ------------           ------------
                                                                                      1,087                    654
                                                                               ------------           ------------

Deferred Credits and Other Noncurrent Liabilities
  Deferred income taxes and investment tax credits........................            1,557                  1,561
  Above market NUG purchases..............................................              724                    775
  Capital lease obligations...............................................               97                    109
  Other...................................................................              756                    724
                                                                               ------------           ------------
                                                                                      3,134                  3,169
                                                                               ------------           ------------

Commitments and Contingent Liabilities (Note 11)..........................
                                                                               ------------           ------------
                                                                               $      9,164           $      8,838
                                                                               ============           ============
</TABLE>

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

<PAGE>

PP&L, INC. AND SUBSIDIARIES
---------------------------
CONSOLIDATED STATEMENT OF SHAREOWNER'S COMMON EQUITY
(Unaudited)
(Millions of Dollars)

<TABLE>
<CAPTION>
                                                                                  Accumulated
                                                       Additional                    Other       Capital Stock
                                              Common    Paid-in       Earnings   Comprehensive    Expense and
                                               Stock    Capital      Reinvested      Income          Other         Total
                                              ------   ----------    ----------  -------------   -------------     ------
<S>                                           <C>      <C>           <C>         <C>             <C>               <C>
For the Three Months Ended June 30,
-----------------------------------
1999
Beginning Balance.........................    $1,476   $       70    $      241            ($6)           ($20)    $1,761
Comprehensive income
  Net income..............................                                   61
  Other comprehensive income:
  Total comprehensive income..............                                                                             61
Common dividends declared.................                                  (40)                                      (40)
                                              ------   ----------    ----------  -------------   -------------     ------
Ending Balance............................    $1,476   $       70    $      262            ($6)           ($20)    $1,782
                                              ======   ==========    ==========  =============   =============     ======
1998
Beginning Balance.........................    $1,476   $       64    $    1,119             $0            ($20)    $2,639
Comprehensive income
  Net loss................................                                 (897)
  Other comprehensive income:
  Total comprehensive income..............                                                                           (897)
Common dividends declared.................                                  (69)                                      (69)
                                              ------   ----------    ----------  -------------   -------------     ------
Ending Balance............................    $1,476   $       64    $      153             $0            ($20)    $1,673
                                              ======   ==========    ==========  =============   =============     ======

For the Six Months Ended June 30,
---------------------------------
1999
Beginning Balance.........................    $1,476   $       70    $      210            ($6)           ($20)    $1,730
Comprehensive income
  Net income..............................                                  169
  Other comprehensive income:
  Total comprehensive income..............                                                                            169
Common dividends declared.................                                 (117)                                     (117)
                                              ------   ----------    ----------  -------------   -------------     ------
Ending Balance............................    $1,476   $       70    $      262            ($6)           ($20)    $1,782
                                              ======   ==========    ==========  =============   =============     ======
1998
Beginning Balance.........................    $1,476   $       64    $    1,092             $0            ($20)    $2,612
Comprehensive income
  Net loss................................                                 (799)
  Other comprehensive income:
  Total comprehensive income..............                                                                           (799)
Common dividends declared.................                                 (140)                                     (140)
                                              ------   ----------    ----------  -------------   -------------     ------
Ending Balance............................    $1,476   $       64    $      153             $0            ($20)    $1,673
                                              ======   ==========    ==========  =============   =============     ======
</TABLE>

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

<PAGE>

                      PP&L Resources, Inc. and PP&L, Inc.
                  Notes to Consolidated Financial Statements
                  ------------------------------------------


     Terms and abbreviations appearing in Notes to Consolidated Financial
Statements are explained in the glossary.

1.  Interim Financial Statements

     Certain information in footnote disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting principles,
has been condensed or omitted in this Form 10-Q pursuant to the rules and
regulations of the SEC.  These financial statements should be read in
conjunction with the financial statements and notes included in PP&L Resources'
and PP&L's Annual Reports to the SEC on Form 10-K for the year ended December
31, 1998.

     Certain amounts in the June 30, 1998 and December 31, 1998 financial
statements have been reclassified to conform to the presentation in the June 30,
1999 financial statements.

2.  Summary of Significant Accounting Policies

     Reference is made to the "Summary of Significant Accounting Policies" in
PP&L Resources' and PP&L's Form 10-K for the year ended December 31, 1998.
Following are updates to the accounting policies described therein.

Recoverable Transition Costs

     Pursuant to the PUC Final Order, PP&L began amortizing its recoverable
transition (or stranded) costs over an eleven-year transition period on January
1, 1999. Reference is made to Note 3 to the Financial Statements in PP&L
Resources' and PP&L's Form 10-K for the year ended December 31, 1998 for the
"Annual Stranded Cost Amortization and Return Schedule." This schedule is
subject to revision for actual CTC collections. A portion of the recoverable
transition costs were converted to intangible transition costs when securitized
by the issuance of transition bonds. (See Note 4 for additional information.)

Liability for Above Market NUG Purchases

     At June 30, 1998, PP&L recorded an estimated liability for above-market
purchases under existing NUG contracts.  This liability was recorded as part of
the PUC restructuring adjustments.  (See Note 6 for additional information.)
Effective January 1, 1999, PP&L began reducing this liability as an offset to
"Energy Purchases" on the Consolidated Statement of Income.  This reduction is
based on the estimated timing of the purchases from the NUGs and projected
market prices for this

<PAGE>

generation. This accounting will continue through 2014, when the last of the
existing NUG contracts expire. This liability is subject to future revision if
the underlying estimates of energy prices change.

Accounting for Price Risk Management

     PP&L Resources and PP&L entered into forward starting swaps and treasury
locks to hedge the interest rate risk associated with anticipated debt
financing.  These interest rate swaps are accounted for under the accrual
method.  Accordingly, the gains or losses on these swaps will be recognized over
the life of the debt.  (See Note 9 for additional information.)

Comprehensive Income

     SFAS 130, "Reporting Comprehensive Income," established standards for
reporting and disclosure of comprehensive income and its components in a full
set of financial statements.  Comprehensive income consists of net income and
other comprehensive income which result in certain changes in common equity
from transactions not related to shareowners.  For PP&L, other comprehensive
income consists of unrealized gains or losses on available-for-sale securities
and the excess of additional pension liability over unamortized prior service
costs.  The other comprehensive income of PP&L Resources consists of the
foregoing as well as foreign currency translation adjustments recorded by PP&L
Global.  In accordance with SFAS 130, comprehensive income is reflected on the
Consolidated Statement of Shareowners' Common Equity, and accumulated other
comprehensive income is presented in the capitalization section of the
Consolidated Balance Sheet.

3. Earnings Per Share

     SFAS 128, "Earnings Per Share," requires the disclosure of basic and
diluted EPS.  Basic EPS is calculated by dividing earnings available to common
shareowners ("Net Income" on the PP&L Resources' Consolidated Statement of
Income) by the weighted average number of common shares outstanding during the
period.  In the calculation of diluted EPS, weighted average shares outstanding
are increased for additional shares that would be outstanding if potentially
dilutive securities were converted to common stock.

<PAGE>

     In April 1999, PP&L Resources made its initial award of stock options under
the Incentive Compensation Plan. At present, stock options are the only
potentially dilutive securities outstanding. (See Note 14 for additional
information.)

     Following are the calculations of basic and diluted EPS for PP&L Resources
during the three and six months ended June 30, 1999:

<TABLE>
<CAPTION>
                                       (Millions of dollars, except per share data)
                                                (Thousands of shares)
                                                    June 30, 1999
                               ---------------------------------------------------------
                                   Three months ended             Six months ended
                               ---------------------------   ---------------------------
                                          Weighted                      Weighted
                                         Avg Shares                    Avg Shares
                              Earnings  Outstanding   EPS    Earnings  Outstanding   EPS
                              --------  -----------  -----   --------  -----------  -----
<S>                           <C>       <C>          <C>     <C>       <C>          <C>
Basic EPS                        $63       157,694   $0.40     $183       157,653   $1.16
Effect of Dilutive Shares                       45                             22
                                 ---       -------   -----     ----       -------   -----
Diluted EPS                      $63       157,739   $0.40     $183       157,675   $1.16
</TABLE>

     There were no dilutive shares outstanding in 1998. The weighted average
shares outstanding (in thousands) for the three and six months ended June 30,
1998 were 167,436 and 167,106, respectively.

4.  Securitization

     As part of its approval of the settlement of PP&L's restructuring
proceeding in August 1998, the PUC issued a Qualified Rate Order permitting PP&L
to issue transition bonds to securitize up to $2.85 billion of its stranded
costs.


     In August 1999, PP&L Transition Bond Company LLC, a wholly owned subsidiary
of PP&L, issued $2.42 billion of transition bonds in eight different classes,
carrying expected average lives ranging from 1 year up to 8.7 years. PP&L used a
portion of the proceeds to acquire equity held by PP&L Resources, including all
the preferred stock held by PP&L Resources, $380 million, and $481 million of
its common stock. In addition, PP&L used a portion of the proceeds to repurchase
$1.467 billion of its first mortgage bonds through tender offers and open market
purchases. In the third quarter of 1999, PP&L will record an extraordinary
charge of about $59 million, for the premiums and related expenses paid to
reacquire the first mortgage bonds. PP&L Resources used $417 million of the
proceeds it received from PP&L to purchase 14 million shares of its common
stock.

     In the third quarter of 1999, PP&L anticipates releasing approximately $78
million of deferred income taxes associated with the CTC that are no longer
required after securitization.

<PAGE>

     PP&L customers will benefit from the securitization through an expected
average rate reduction of approximately one percent for the period the
transition bonds are outstanding. Customer bills currently reflect the
impact of a CTC. With securitization, a substantial portion of the CTC will be
replaced with an ITC, which results in lower charges due to the flow through of
75% of the net financing savings from securitization. The actual reduction will
vary year by year, and also by customer class and level of use.


5. PUC Restructuring Decision

     In August 1998, the PUC entered its Final Order approving the settlement of
PP&L's restructuring proceeding under Pennsylvania's Customer Choice Act.  Among
other things, that Order:

     .   permitted PP&L to recover $2.97 billion (on a net present value basis)
         in stranded costs over 11 years - i.e., from January 1, 1999 through
         December 31, 2009.  PP&L's stranded costs are those which would have
         been recoverable under traditional rate regulation, but may not be
         recoverable in the competitive marketplace.  PP&L is permitted a return
         of 10.86% on the unamortized balance of these stranded costs.

     .   authorized PP&L to issue transition bonds to securitize up to $2.85
         billion of its stranded costs.

     .   required PP&L to reduce rates to all retail customers by four percent
         effective January 1, 1999 through December 31, 1999.

     .   required PP&L to unbundle its retail electric rates beginning on
         January 1, 1999, to reflect separate prices for the transmission and
         distribution charges, the CTC (and if applicable, the ITC), and the
         generation charge. The CTC is a charge to be paid by all customers who
         receive delivery service from PP&L, to recover PP&L's stranded costs.
         The ITC, which offsets the CTC on customer bills, is a charge to be
         paid by delivery customers to reflect the securitization of stranded
         costs.

     .   required PP&L to transfer its retail marketing function to a new
         subsidiary, PP&L EnergyPlus. PP&L EnergyPlus has a PUC license to act
         as a Pennsylvania EGS. This license permits PP&L EnergyPlus to offer
         retail electric supply to participating customers in PP&L's service
         territory and in the service territories of other Pennsylvania
         utilities. In 1999, PP&L EnergyPlus is offering such supply to
         industrial and commercial customers throughout the state and effective
         August 1, 1999 PP&L EnergyPlus can market electricity in New Jersey.

<PAGE>

     .   permitted, but did not require, PP&L to transfer ownership and
         operation of its generating facilities to a separate corporate entity
         at book value.

6.  Extraordinary Items

     PP&L prepares its financial statements for its regulated operations in
accordance with SFAS 71, which requires rate-regulated companies to reflect the
effects of regulatory decisions in their financial statements.  PP&L deferred
certain costs pursuant to rate actions of the PUC and the FERC and is
recovering, or expects to recover, such costs in electric rates charged to
customers.

     The EITF addressed the appropriateness of the continued application of SFAS
71 by entities in states that have enacted restructuring legislation similar to
Pennsylvania's Customer Choice Act.  The EITF came to a consensus on Issue No.
97-4, "Deregulation of the Pricing of Electricity - Issues Related to the
Application of FASB Statements 71 and 101," which concluded that an entity
should cease to apply SFAS 71 when a deregulation plan is in place and its terms
are known.  For PP&L, with respect to the generation portion of its business,
this occurred effective June 30, 1998, based upon the outcome of the PUC
restructuring proceeding.  (Refer to Note 5 for additional information related
to the PUC Restructuring Decision.)  PP&L adopted SFAS 101 for the generation
side of its business.  SFAS 101 required a determination of impairment of plant
assets performed in accordance with SFAS 121, and the elimination of all effects
of rate regulation that were recognized as assets and liabilities under SFAS 71.

     PP&L performed impairment tests of its electric generation assets on a
plant specific basis and determined that $2.388 billion of its generation plant
was impaired at June 30, 1998.  Impaired plant was the excess of the net plant
investment at June 30, 1998, over the present value of the net cash flows during
the remaining lives of the plants.  Annual net cash flows were determined by
comparing estimated generation sustenance costs to estimated regulated revenues
for the remainder of 1998, market revenues for 1999 and beyond, and revenues
from bulk power contracts.  The net cash flows were then discounted to present
value.

     In addition to the impaired generation plant, PP&L estimated that there
were other stranded costs totaling $1.989 billion at June 30, 1998.  These other
stranded costs included primarily generation-related regulatory assets and
liabilities and an estimated liability for above-market purchases under NUG
contracts.  The total estimated impairment described above was $4.377 billion.
The PUC's Final Order in the restructuring proceeding, entered on August 27,
1998, permitted the recovery of $2.819 billion through the CTC on a present
value basis, excluding amounts for nuclear decommissioning and consumer
education, resulting in a net under-recovery of $1.558 billion.  PP&L recorded
such amount as an extraordinary charge in June 1998.
<PAGE>

     Under FERC Order 888, 16 small utilities which had power supply agreements
with PP&L signed before July 11, 1994, requested and were provided with PP&L's
current estimate of its stranded costs applicable to these customers if they
were to terminate their agreements in 1999.  Subject to certain conditions,
FERC-approved settlement agreements executed with 15 of these customers provide
for continued power supply by PP&L through January 2004.  As a result of these
settlements, PP&L recorded an extraordinary charge in the amount of $56 million
in the second quarter of 1998.

     The extraordinary items related to the PUC restructuring proceeding and the
FERC settlement are reflected on the Statement of Income, net of income taxes.

     Details of amounts written-off in June 1998 are as follows (millions of
dollars):

<TABLE>
   <S>                                                        <C>
   Impaired generation-related assets                         $ 2,388
   Above-market NUG contracts                                     854
   Generation-related regulatory assets and other               1,135
                                                              -------
   Total                                                        4,377
   Recoverable transition costs (a)                            (2,819)
                                                              -------
   Extraordinary item pre-tax - PUC                             1,558
                              - FERC                               56
                                                              -------
   Extraordinary items pre-tax- Total                           1,614
   Tax effects                                                   (666)
                                                              -------
   Extraordinary items                                        $   948
                                                              =======
</TABLE>

(a)  Excluding recoveries for nuclear decommissioning and consumer education
expenditures.

7.   Segment and Related Information

     PP&L Resources' principal business segment is PP&L, which provides
electricity delivery service in eastern and central Pennsylvania, sells retail
electricity throughout Pennsylvania, and markets wholesale electricity in 30
states and Canada.  PP&L Resources' other reported business segment, PP&L
Global, invests in and develops worldwide power projects, with the majority of
its investments located in the U.K., Chile, and El Salvador.  PP&L Global also
owns and operates generating facilities.  PP&L Global's revenue represents
equity earnings in investments and revenues from the sale of generation to
wholesale customers.  Other operating revenues of PP&L Resources represent gas
distribution, mechanical contracting and engineering, and unregulated energy
services.  Financial data for PP&L Resources' business segments are as follows
(millions of dollars):
<PAGE>

<TABLE>
<CAPTION>
Three months ended June 30, 1999
--------------------------------
                                                                              Other
                                                             PP&L           and Elimin-      PP&L
                                                PP&L         Global           ations      Resources
                                            ------------  ------------      ----------    ----------
<S>                                         <C>           <C>               <C>           <C>
Income statement data:
 Operating revenues                              $  923           $20           $ 61         $1,004
 Interest expense                                    48             7              6             61
 Depreciation and amortization                       59                            2             61
 Income taxes                                        42             1             (3)            40
 Net income                                          61             5             (3)            63

Six months ended June 30, 1999
------------------------------
                                                                              Other
                                                              PP&L          and Elimin-      PP&L
                                               PP&L           Global          ations      Resources
                                             -----------  ------------      ----------    ---------
<S>                                         <C>           <C>               <C>           <C>
Income statement data:
 Operating revenues                              $1,891           $41             $139       $2,071
 Interest expense                                    96            15               12          123
 Depreciation and amortization                      117                              4          121
 Income taxes                                       118                             (4)         114
 Net income                                         169            14                           183
Cash flow data:
 Property, plant and equipment
  expenditures                                      142            80                6          228
 Investments in unconsolidated
  affiliates

Three months ended June 30, 1998
--------------------------------
                                                                              Other
                                                            PP&L            and Elimin-    PP&L
                                               PP&L        Global             ations      Resources
                                            -----------   -----------       -----------   ---------
<S>                                         <C>           <C>               <C>           <C>
Income statement data:
 Operating revenues                              $  818           $ 8              $ 12      $  838
 Extraordinary items, net of taxes                 (948)                                       (948)
 Interest expense                                    49             5                            54
 Depreciation and amortization                       97                                          97
 Income taxes                                        40             1                (3)         38
 Net income                                        (897)            1                 2        (894)
</TABLE>

<PAGE>

Six months ended June 30, 1998
-----------------------------

<TABLE>
<CAPTION>
                                                                               Other
                                                             PP&L           and Elimin-      PP&L
                                               PP&L         Global             ations      Resources
                                            -----------   -----------       -----------   -----------
<S>                                         <C>           <C>               <C>           <C>
Income statement data:
  Operating revenues                             $1,679          $ 17       $      23         $ 1,719
  Extraordinary items, net of taxes                (948)                                         (948)
  Interest expense                                   98             8                             106
  Depreciation and amortization                     195                                           195
  Income taxes                                      124             2              (4)            122
  Net income                                       (799)            2               4            (793)
Cash flow data:
  Property, plant and equipment
    expenditures                                    149                                           149
  Investments in unconsolidated
    affiliates                                                    276                             276
</TABLE>

<TABLE>
<CAPTION>
                                                                               Other
                                                             PP&L           and Elimin-       PP&L
                                               PP&L         Global             ations      Resources
                                            -----------   -----------       -----------   -----------
<S>                                         <C>           <C>               <C>           <C>
June 30, 1999
-------------
Balance sheet data:
  Cumulative net investment in
    unconsolidated affiliates                    $   17          $684                         $   701
  Total assets                                    9,164           927       $      13          10,104

December 31, 1998
-----------------
Balance sheet data:
  Cumulative net investment in
    unconsolidated affiliates                    $   17          $671                         $   688
  Total assets                                    8,838           757       $      12           9,607
</TABLE>

8.  Sales to Other Electric Utilities

     Under an existing power purchase contract, PP&L is providing JCP&L with
189,000 kilowatts of capacity and related energy from all of its generating
units during 1999.  The agreement with JCP&L will terminate on December 31,
1999.  PP&L expects to be able to resell the returning capacity and energy
through its Energy Marketing Center.

     Under a separate agreement, PP&L is providing additional capacity and
energy to JCP&L.  This capacity and energy sale increased from 150,000 kilowatts
to 200,000 kilowatts in June 1998, and increased to 300,000 kilowatts in June
1999 through the end of the agreement in May 2004.  Prices for this capacity and
energy are market-based.

     In February 1999, PP&L and UGI executed new interconnection and power
supply agreements, which were submitted to the FERC in July 1999 for review and
acceptance.  Under the new power supply agreement beginning in 1999, UGI will
purchase capacity from PP&L equal to UGI's PJM capacity obligation less the
capacity reserve value of UGI's owned generation and
<PAGE>

an existing power purchase agreement. In 2000, UGI will purchase a firm block of
energy in addition to the capacity. The power supply agreement ends in February
2001.

9.   Financial Instruments

     During the first six months of 1999, PP&L Resources and PP&L entered into
forward starting interest rate swaps and treasury locks with various
counterparties to hedge the interest rate risk associated with anticipated debt
issuances, including the issuance of transition bonds in August 1999.  At June
30, 1999, the notional amount of the financial instruments issued to hedge
interest rate risk associated with the transition bonds was $640 million for
PP&L Resources, plus an additional $555 million for PP&L.  In July 1999, PP&L
entered into additional forward interest rate swaps with notional amounts
totaling $200 million. All financial instruments associated with hedging the
interest rate risk of the transition bonds were settled at the end of July.  The
proceeds were received and recorded in August 1999.  As a result of these
hedging activities, interest expense on the transition bonds, applied under the
effective interest method, will be reduced by $24.8 million. Seventy-five
percent of these savings will be passed back to customers. On the same day that
PP&L priced its transition bonds, PP&L entered into short dated treasury lock
transactions with a notional amount of $1.07 billion to lock in the treasury
rate related to PP&L's tender offer to purchase any or all of $1.66 billion of
selected series of its mortgage bonds. These contracts were settled one week
later for an immaterial amount, on the date that PP&L announced the purchase
prices associated with the tender offer to purchase. (See Note 4 for additional
information about transition bonds.)

     At June 30, 1999, PP&L Resources had entered into forward starting interest
rate swaps with various counterparties to hedge the interest rate risk
associated with debt issuances expected in the fourth quarter of 1999.  These
interest rate swap agreements involve the exchange of floating rate interest
rate payments for fixed rate interest payments over the life of the agreements.
PP&L Resources agreed to pay a fixed rate of 5.77% on a notional amount of $60
million with a maturity date of September 15, 2004 and fixed rates between 5.92%
and 6.08% on notional amounts of $260 million with a maturity date of September
15, 2009. PP&L Resources will receive a variable interest payment based on the
6-month LIBOR rate through the maturity dates of the agreements. The estimated
fair value of the forward interest rate swaps, which represents the estimated
amount PP&L Resources would receive if it had terminated these agreements on
June 30, 1999, was $17.7 million.

10.  Credit Arrangements and Financing Activities

     PP&L issues commercial paper and, from time to time, borrows from banks to
provide short-term funds for PP&L's general corporate purposes.  Bank borrowings
generally bear interest at rates negotiated at the time of
<PAGE>

the borrowing. At June 30, 1999, PP&L had $44 million of commercial paper
outstanding.

     PP&L Capital Funding, whose purpose is to provide debt funding for PP&L
Resources and its subsidiaries other than PP&L, also issues commercial paper.
As with all PP&L Capital Funding debt, this commercial paper is guaranteed by
PP&L Resources.  As of June 30, 1999, PP&L Capital Funding had $666 million of
commercial paper outstanding.

     On July 1, 1999, PP&L and PP&L Capital Funding entered into a new $750
million credit facility.  This facility replaced a $350 million 364-day
revolving credit agreement shared by PP&L and PP&L Capital Funding and also five
separate $80 million 364-day credit facilities maintained by PP&L Capital
Funding.  No borrowings are outstanding under this new facility.

     PP&L Capital Funding registered $400 million of debt securities with the
SEC in early January 1999.  It is expected that these debt securities will be
issued from time to time as medium-term notes to provide long-term debt
financing for PP&L Resources and its subsidiaries other than PP&L.

     In June 1999, PP&L instituted a short-term bond program in order to meet
certain short-term working capital requirements and to increase financing
flexibility.  Under this program, up to $600 million of short-term bonds could
be issued from time to time with no more than $200 million of such bonds
outstanding at any one time.  As of June 30, 1999, $200 million of these bonds
were outstanding.  This program was completed in August 1999 with a total of
$600 million issued and subsequently paid upon maturity.

     In January and February 1999, PP&L Resources issued $8 million of new
common stock through the DRIP.    Effective March 1, 1999, the DRIP was changed
from a new issue to an open market purchase program.

     In anticipation of funds becoming available to PP&L Resources from the
securitization of PP&L's stranded costs, PP&L announced its intention to
purchase 14 million shares of common stock on the open market.  In connection
with this program, PP&L Resources entered into forward purchase agreements with
a third party.  As of June 30, 1999, the third party had purchased 11 million
shares of PP&L Resources' common stock.  If the forward purchase agreements had
been settled on a net share basis on June 30, 1999, based on the closing price
of the PP&L Resources' common stock on that date, PP&L Resources would have
received approximately 606,000 shares of its common stock.  In August 1999, the
forward purchase agreements were settled and PP&L Resources purchased 14 million
shares from the third party for $417 million.

     In July 1999, PP&L commenced cash tender offers for any and all of
approximately $1.66 billion of 11 series of its first mortgage bonds. In August
1999, these tenders were completed. Through the tender offers and open market
repurchases $1.467 billion of first

<PAGE>

mortgage bonds were repurchased and subsequently retired. See Note 4 for
additional information on the issuance of $2.42 billion of transition bonds to
securitize stranded costs, the proceeds of which were partially used to fund the
purchase of tendered debt.

11.  Commitments and Contingent Liabilities

     There have been no material changes related to PP&L Resources' or PP&L's
commitments and contingent liabilities since the companies filed their joint
1998 Form 10-K, except as described below.

     For discussion pertaining to PP&L Resources' and PP&L's credit arrangements
and financing activities, see Note 10.

Nuclear Insurance

     PP&L is a member of certain insurance programs which provide coverage for
property damage to members' nuclear generating stations.  Facilities at the
Susquehanna station are insured against property damage losses up to $2.75
billion under these programs.  PP&L is also a member of an insurance program
which provides insurance coverage for the cost of replacement power during
prolonged outages of nuclear units caused by certain specified conditions.
Under the property and replacement power insurance programs, PP&L could be
assessed retroactive premiums in the event of the insurers' adverse loss
experience.  At June 30, 1999, the maximum amount PP&L could be assessed under
these programs was about $25 million.

     PP&L's public liability for claims resulting from a nuclear incident at the
Susquehanna station is limited to about $9.7 billion under provisions of The
Price Anderson Amendments Act of 1988.  PP&L is protected against this liability
by a combination of commercial insurance and an industry assessment program.  In
the event of a nuclear incident at any of the reactors covered by The Price
Anderson Amendments Act of 1988, PP&L could be assessed up to $168 million per
incident, payable at a rate of $20 million per year, plus an additional 5%
surcharge, if applicable.

Environmental Matters

     Air
     ---

     The Clean Air Act deals, in part, with acid rain, attainment of federal
ambient ozone standards and toxic air emissions.  PP&L has complied with the
1995 Phase I acid rain provisions by installing continuous emission monitors on
all units, burning lower sulfur coal and installing low NOx burners on most
units.  To comply with the year 2000 Phase II acid rain provisions, PP&L plans
to purchase lower sulfur coal and use banked or purchased emission allowances
instead of installing FGD on its wholly owned units.
<PAGE>

     PP&L has met the 1995 ambient ozone requirements of the Clean Air Act by
reducing its rate of NOx emissions by nearly 50% through the use of low NOx
burners.  Further seasonal (i.e., 5 month) NOx reductions to 55% and 75% of 1990
levels for 1999 and 2003, respectively, are specified under the Northeast Ozone
Transport Region's Memorandum of Understanding.  The Pennsylvania DEP has
finalized regulations which require PP&L to reduce its ozone seasonal NOx by 57%
from 1999 levels beginning in May 1999.  PP&L is complying with this reduction
with operational initiatives that rely, to a large extent, on the existing low
NOx burners.

     In 1997, the EPA finalized new national standards for ambient levels of
ground-level ozone and fine particulates.  Those standards were challenged by
industry groups and have been held invalid by the D. C. Circuit Court of
Appeals.  Based in part on the new ozone standard, the EPA has called for 22
states (including PA) to revise their regulations capping their NOx emissions to
specified levels in 2003. PA's NOx emissions cap in effect requires
approximately an 80% reduction in NOx emissions from the 1990 level.  The EPA
required states to make these revisions to their regulations by September 1999.
However, these EPA requirements have also been challenged in the D. C. Circuit
Court of Appeals and the Court has stayed the September 1999 deadline.

     Pursuant to Section 126 of the Clean Air Act, several Northeast states have
petitioned the EPA to find that major sources of NOx emissions, including PP&L's
power plants, are significantly contributing to non-attainment in those states.
The EPA found significant contribution by most sources named in the petitions
and proposed to require emissions reductions at those sources if the states in
which these sources are located fail to develop plans by September 1999 to
implement the proposed 2003 limits.  The EPA's finding of significant
contribution has been challenged in the D.C. Circuit Court of Appeals.  The EPA
has recently issued an interim stay of its action on these 126 petitions in
light of the D. C. Circuit Court of Appeals' decisions.  PP&L estimates that
compliance with the 2003 emissions reduction requirements could require
installation of NOx emissions removal systems on PP&L's three largest coal-fired
units, at a capital cost of approximately $35 million per unit.  A new
particulates standard, if ultimately upheld, may require further reductions in
SO2 and may expand the planned seasonal NOx reductions to year round in the
2010-2012 timeframe.

     Under the Clean Air Act, the EPA has been studying the health effects of
hazardous air emissions from power plants and other sources, in order to
determine whether those emissions should be regulated.  The EPA released a
technical report of its findings to date and concluded that mercury is the power
plant air toxic of greatest concern, but that more evaluation is needed before
it can determine whether regulation of air toxics from fossil fuel plants is
necessary.  The EPA is now seeking mercury and chlorine sampling and other data
from electric generating units, including PP&L's.  In addition, the EPA has
announced an enforcement initiative against older coal-fired plants.  Several of
PP&L's
<PAGE>

coal-fired plants could fall into this category. These EPA initiatives could
result in compliance costs for PP&L in amounts which are not now determinable
but which could be material.

     Expenditures to meet the 2000 acid rain and 1999 NOx reduction requirements
are included in the table of projected construction expenditures in the section
entitled "Financial Condition - Capital Expenditure Requirements" in the Review
of the Financial Condition and Results of Operations in the 1998 Form 10-K.
PP&L currently estimates that additional capital expenditures and operating
costs for environmental compliance under the Clean Air Act will be incurred
beyond 2002 in amounts which are not now determinable but which could be
material.

     Water and Residual Waste
     ------------------------

     PP&L has installed dry fly ash handling systems at most of its power
stations, which reduces waste water discharge.  In other cases, PP&L has
modified the existing facilities to allow continued operation of the ash basins
under a DEP residual waste permit.  Any groundwater contamination caused by the
basins must also be addressed under DEP's residual waste regulations.

     Groundwater degradation related to fuel oil leakage from underground
facilities and seepage from coal refuse disposal areas and coal storage piles
has been identified at several PP&L generating stations.  Remedial work related
to oil leakage is substantially completed at two generating stations, and the
remedial work to abate a localized groundwater degradation problem associated
with a waste disposal impoundment at the Montour plant has been completed.

     The final NPDES permit for the Montour plant contains stringent limits for
iron and chlorine discharges.  Depending on the results of a toxic reduction
study, additional water treatment facilities or operational changes may be
needed at this plant.

     Capital expenditures through the year 2003 to correct groundwater
degradation at fossil-fueled generating stations and to address waste water
control at PP&L facilities are included in the table of construction
expenditures in the section entitled "Financial Condition - Capital Expenditure
Requirements" in the Review of the Financial Condition and Results of Operations
in the 1998 Form 10-K.  In this regard, PP&L currently estimates that $5.5
million of additional expenditures may be required in the next four years to
close some of the ash basins and address other ash basin issues at various
generating plants.  Additional expenditures could be required beyond the year
2003 in amounts which are not now determinable but which could be material.
Actions taken to correct groundwater degradation, to comply with the DEP's
regulations and to address waste water control are also expected to result in
increased operating costs in amounts which are not now determinable but which
could be material.
<PAGE>

     Remediation Under Multi-Site Consent Orders
     -------------------------------------------

     In 1995, PP&L entered into a consent order with the DEP to address a number
of sites where PP&L may be liable for remediation of contamination.  This may
include potential PCB contamination at certain PP&L substations and pole sites;
potential contamination at a number of coal gas manufacturing facilities
formerly owned and operated by PP&L; and oil or other contamination which may
exist at some of PP&L's former generating facilities.  As of June 30, 1999, PP&L
has completed work on slightly more than half of the sites included in the
consent order.

     In 1996, Penn Fuel Gas entered into a similar consent order with the DEP to
address a number of its sites where Penn Fuel Gas may be liable for remediation
of contamination.  The sites primarily include former coal gas manufacturing
facilities.  Prior to PP&L Resources acquiring Penn Fuel Gas on August 21, 1998,
Penn Fuel Gas had obtained a "no further action" determination from the DEP for
two of the 20 sites covered by the order.

     At June 30, 1999, PP&L had accrued approximately $6 million and Penn Fuel
Gas had accrued $15 million, representing the respective amounts PP&L and Penn
Fuel Gas can reasonably estimate they will have to spend to remediate sites
involving the removal of hazardous or toxic substances, including those covered
by each company's consent orders mentioned above.  Future cleanup or remediation
work at sites currently under review, or at sites not currently identified, may
result in material additional operating costs for PP&L or Penn Fuel Gas, which
neither company can estimate at this time.  In addition, certain federal and
state statutes, including Superfund and the Pennsylvania Hazardous Sites Cleanup
Act, empower certain governmental agencies, such as the EPA and the DEP, to seek
compensation from the responsible parties for the lost value of damaged natural
resources.  The EPA and the DEP may file such compensation claims against the
parties, including PP&L or Penn Fuel Gas, held responsible for cleanup of such
sites.  Such natural resource damage claims against PP&L or Penn Fuel Gas could
result in material additional liabilities.

     General
     -------

     Due to the environmental issues discussed above or other environmental
matters, PP&L may be required to modify, replace or cease operating certain
facilities to comply with statutes, regulations and actions by regulatory bodies
or courts.  In this regard, PP&L also may incur capital expenditures, operating
expenses and other costs in amounts which are not now determinable but which
could be material.

Loan and Other Guarantees of Affiliated Companies

     PP&L Resources provides certain guarantees for its subsidiaries.
Specifically, PP&L Resources guarantees all of the debt of PP&L Capital
<PAGE>

Funding. As of June 30, 1999, PP&L Resources had guaranteed (as shown on its
Consolidated Balance Sheet) $397 million of medium-term notes and $666 million
of commercial paper issued by PP&L Capital Funding and $19 million of notes of a
subsidiary of Penn Fuel Gas. In addition, PP&L Resources provided $113 million
of guarantees to PP&L Global subsidiaries.

     As of June 30, 1999, PP&L Resources also had guaranteed certain obligations
of PP&L EnergyPlus for up to $235 million under certain power purchase and sales
agreements.

     As of June 30, 1999, PP&L had provided a guarantee in the amount of $12
million in support of one of its subsidiaries.

12.  Acquisitions and Divestitures

     In February 1999, PP&L Resources acquired McCarl's; and in April 1999, PP&L
Spectrum acquired Burns Mechanical. In July 1999, PP&L Resources announced an
agreement to acquire another mechanical contractor and engineering firm Western
Massachusetts Holdings, Inc. The purchase prices for these mechanical
contracting and engineering firms were not material.

     In May 1999, PP&L signed a definitive agreement to sell its Sunbury plant
and the principal assets of its wholly owned coal processing subsidiary, Lady
Jane Collieries, to Sunbury Holdings, LLC.  PP&L expects to receive total cash
proceeds of about $106 million for the assets, including coal inventory, which
would translate into a one-time contribution of about 25 cents per share to PP&L
Resources' 1999 earnings.  The closing, which is subject to certain regulatory
approvals and other closing conditions, is expected later in 1999.

     In May 1999, PP&L Global acquired most of Bangor Hydro-Electric Company's
generating assets and certain transmission rights, as well as its interest in an
oil-fired generation facility, for $79 million. In July 1999, PP&L Global
purchased Bangor Hydro-Electric Company's 50% interest in the 13 megawatt West
Enfield hydroelectric station for $10 million. While the economic interest in
this project has been transferred, the associated stock transfer requires the
approval of the Maine PUC. This approval is expected by the end of 1999.

     In July 1999, PP&L Global completed the acquisition of an additional 29.2%
interest in Emel, one of Chile's largest electricity distribution companies.
Emel provides electricity distribution service to about 800,000 customers in
Chile, Bolivia and El Salvador.  The $95 million acquisition brings PP&L
Global's ownership of Emel to 66.7%, thereby achieving full operational control
of the company.

     PP&L Global also has signed definitive agreements with the Montana Power
Company, Portland General Electric Company and Puget Sound Energy, Inc. to
acquire 13 Montana power plants, with 2,614 Mw of generating capacity, for a
purchase price of $1.586 billion.  The acquisition is subject to several
conditions, including the receipt of required state and
<PAGE>

federal regulatory approvals and third party consents. In this regard, FERC has
approved the sale of the power plants to PP&L Global. Upon completion of this
acquisition PP&L Global will have 100% ownership interest in these power plants
except for Colstrip Units 3 and 4. PP&L Global's ownership interest of these
units will be 75%, since both PacifiCorp and Avista Corporation will maintain
their existing ownership percentages. PP&L Global expects to complete this
acquisition by the end of 1999. About 65% of the acquisition cost is expected to
be financed on a project credit basis, non-recourse to PP&L Resources. The
balance of the acquisition cost is expected to be financed through a combination
of debt and equity issued by PP&L Resources. The agreements also provide for
PP&L Resources' acquisition of related transmission assets for an additional
$182 million, subject to certain conditions, including federal regulatory
approval.

     PP&L Resources is in the process of acquiring the energy marketing
operation of the Montana Power Company for an amount that is not material. The
Montana marketing and trading operation will become part of PP&L EnergyPlus,
PP&L's marketing company, and will sell electricity in both the wholesale and
retail markets in Montana and the Northwest.

     In June 1999, PP&L Global's U.K. subsidiary, SWEB, announced an agreement
to sell a portion of its operations, known as the electricity supply business,
to London Electricity for about $256 million.  PP&L Global owns 51% of SWEB.
Southern Energy, based in Atlanta, owns 49% and has operational and management
control of SWEB.  The supply business represents about 15% of SWEB's annual
earnings.  SWEB will continue to own and operate an extensive power network in
southwest Britain, transporting and delivering electricity to 1.4 million
customers.

     In August 1999, the U.K.'s Office of Gas and Electricity Markets, the
regulatory authority for electricity and natural gas distribution in the U.K.,
issued proposed base rate reductions for the country's 14 electricity
distribution businesses, including SWEB.  The proposed rate reduction for SWEB
is between 21% and 26%. The affected companies have until September 17, 1999 to
respond to the proposed rate reductions.  Under the proposal, the final rates
would be issued in November 1999 and would be in effect for five years beginning
in April 2000.  SWEB has indicated that it intends to manage its business
operations in a manner that mitigates the financial impact of any rate
reductions.  PP&L Resources at this time is unable to predict the ultimate
financial impact of this proposal.

     In July 1999, PP&L Global reached an agreement with Duke Energy North
America to jointly complete the Griffith Energy Project, a gas-fired, combined-
cycle power plant near Kingman, Arizona. As part of the agreement, PP&L Global
will transfer a 50 percent interest in the project to Duke, and Duke will fund
50 percent of the capital cost of the project. The facility, expected to be in
service in 2001, would have a nominal base-load capacity of 500 megawatts and a
peak capacity of 600 megawatts. The project cost is anticipated at about $300
million.

13.  Jointly Owned Facilities

     In May 1999, a PP&L Global subsidiary acquired an 8.33% share of the Wyman
oil-fired generating station located in Yarmouth, Maine.  At June 30, 1999, PP&L
Resources' balance sheet includes $15 million plant in service for this station.
Accumulated depreciation, recorded subsequent to the May acquisition, is not
material.  There was no construction work in progress at June 30, 1999.

     PP&L Resources will provide its own financing for this facility.  The
operating costs of the Wyman facility are included in the Consolidated Statement
of Income of PP&L Resources.
<PAGE>

14.  Stock Option Program

     In April 1999, the shareowners of PP&L Resources approved the amendment of
the Incentive Compensation Plan to effectuate a new stock option program and to
enable PP&L Resources to make stock option awards and other stock-based awards
under that Plan that are deductible under Section 162(m) of the Internal Revenue
Code.  Under the Plan, the Compensation & Corporate Governance Committee of the
Board of Directors is authorized to grant both incentive stock options and non-
qualified stock options to officers and other key employees of PP&L Resources or
its subsidiaries.  These options are exercisable at a price per share not less
than the fair market value per share at the date of grant.  The options are
exercisable beginning one year after the grant, assuming the individual is still
in the employ of PP&L Resources or a subsidiary, in installments as determined
by the Committee.  The options may not be exercised after ten years from the
grant date.

     In April 1999, the Committee, pursuant to the Incentive Compensation Plan,
granted non-qualified stock options to purchase 694,800 shares of PP&L
Resources' common stock. The exercise price of these options is $26.8438 per
share. Of the stock options initially awarded, 62,700 were forfeited and 632,100
were outstanding at June 30, 1999. The options have a remaining life of about
9.8 years, and will vest in equal installments on April 23 in the years 2000,
2001 and 2002.

     As provided for in SFAS 123, "Accounting For Stock-Based Compensation,"
PP&L Resources continues to account for stock options based on the intrinsic
value method in accordance with Accounting Principles Board Opinion 25,
"Accounting For Stock Issued to Employees."  The compensation expense under the
fair value method, another method permitted by SFAS 123, would not have been
materially different during the three and six months ended June 30, 1999. The
dilutive effect of the stock options is presented in Note 3.

15.  New Accounting Standards

     In June 1999, the FASB issued SFAS 137 which defers the effective date of
SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," to
fiscal years beginning after June 15, 2000.  SFAS 137 also changed the look-back
period for bifurcating embedded derivatives in host contracts from December 31,
1997, to December 31, 1998.  PP&L Resources and PP&L intend to adopt SFAS 133 as
of January 1, 2001.  The impact of the adoption of this statement on the net
income and financial position of PP&L Resources and PP&L is not yet determinable
but may be material.
<PAGE>

                      PP&L Resources, Inc. and PP&L, Inc.
                      -----------------------------------

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

     The financial condition and results of operations of PP&L and PP&L Global
are currently the principal factors affecting the financial condition and
results of operations of PP&L Resources.  Unless specifically noted,
fluctuations are primarily due to activities of PP&L.  This discussion should be
read in conjunction with the section entitled "Review of the Financial Condition
and Results of Operations of PP&L Resources, Inc. and PP&L, Inc." in PP&L
Resources' and PP&L's Annual Report to the SEC on Form 10-K for the year ended
December 31, 1998.

     Terms and abbreviations appearing in Management's Discussion and Analysis
of Financial Condition and Results of Operations are explained in the glossary.

                          Forward-looking Information
                          ---------------------------

     Certain statements contained in this Form 10-Q concerning expectations,
beliefs, plans, objectives, goals, strategies, future events or performance and
underlying assumptions and other statements which are other than statements of
historical facts, including, but not limited to, statements with respect to
future earnings growth, are "forward-looking statements" within the meaning of
the federal securities laws.  Although PP&L Resources and PP&L believe that the
expectations and assumptions reflected in these statements are reasonable, there
can be no assurance that these expectations will prove to have been correct.
These forward-looking statements involve a number of risks and uncertainties,
and actual results may differ materially from the results discussed in the
forward-looking statements.  The following are among the important factors that
could cause actual results to differ materially from the forward-looking
statements:  state and federal regulatory developments; new state or federal
legislation; national or regional economic conditions; market demand and prices
for energy, capacity and fuel; weather variations affecting customer energy
usage; competition in retail and wholesale power markets; the need for and
effect of any business or industry restructuring; PP&L Resources' and PP&L's
profitability and liquidity; new accounting requirements or new interpretations
or applications of existing requirements; operating performance of plants and
other facilities; environmental conditions and requirements; system conditions
(including actual results in achieving Year 2000 compliance by PP&L Resources,
its subsidiaries and others) and operating costs; performance of new ventures;
political, regulatory or economic conditions in foreign countries where PP&L
Global makes investments; foreign exchange rates; and PP&L Resources' and PP&L's
commitments and liabilities.  Any such forward-looking statements should be
considered in light of such important factors and in conjunction with PP&L
Resources' and PP&L's other documents on file with the SEC.
<PAGE>

     New factors that could cause actual results to differ materially from those
described in forward-looking statements emerge from time to time, and it is not
possible for PP&L Resources or PP&L to predict all of such factors, or the
extent to which any such factor or combination of factors may cause actual
results to differ from those contained in any forward-looking statement.  Any
forward-looking statement speaks only as of the date on which such statement is
made, and neither PP&L Resources nor PP&L undertakes any obligation to update
the information contained in such statement to reflect subsequent developments
or information.

                             Results of Operations
                             ---------------------

     The following discussion explains material changes in principal items on
the Consolidated Statement of Income comparing the three months and six months
ended June 30, 1999, to the comparable periods ended June 30, 1998.

     The Consolidated Statement of Income reflects the results of past
operations and is not intended as any indication of the results of future
operations.  Future results of operations will necessarily be affected by
various and diverse factors and developments.  Furthermore, because results for
interim periods can be disproportionately influenced by various factors and
developments and by seasonal variations, the results of operations for interim
periods are not necessarily indicative of results or trends for the year.

Earnings


<TABLE>
<CAPTION>
                                           Comparison of Earnings - June 30
                                      ------------------------------------------
                                       Three Months Ended     Six Months Ended
                                      --------------------   -------------------
                                        1999       1998        1999       1998
                                      --------   ---------   --------   --------
<S>                                   <C>        <C>         <C>        <C>
Earnings per share - excluding
 weather variances and
 one-time adjustments                   $ 0.41   $  0.35      $ 1.20    $  1.06

Weather variances on
 billing adjusted sales                  (0.01)    (0.03)      (0.04)     (0.14)
One-time adjustments
 PUC Restructuring Charge                          (5.47)                 (5.48)
 FERC Municipalities Settlement                    (0.19)                 (0.19)
                                        ------   -------      ------    -------
Earnings per share - reported           $ 0.40    ($5.34)     $ 1.16     ($4.75)
                                        ======   =======      ======    =======
</TABLE>

     PP&L had two extraordinary items in June 1998 related to the PUC
restructuring proceeding and a settlement with municipalities under FERC
jurisdiction.  Refer to Note 6 to the Financial Statements for further
information.

     Earnings per share, excluding weather variances and extraordinary items,
were $.06 higher for the three months ended June 30, 1999, and $.14 higher for
the first six months of 1999, when compared with the same periods in 1998.
<PAGE>

     The earnings improvements in both periods reflect higher sales of
electricity delivered to retail customers, higher margins on wholesale energy
marketing and trading activities and higher earnings of PP&L Global.
Depreciation and the effective income tax rate were lower than comparable
periods in 1998, a direct result of the restructuring adjustments recorded by
PP&L in June 1998. PP&L Resources' September 1998 common stock purchase program
also had a favorable impact on earnings per share.

     These earnings gains were partially offset by a four percent rate reduction
for electricity delivery customers effective January 1, 1999, through December
31, 1999.  PP&L revenues were further impacted by the loss of commercial and
industrial customers who chose alternate suppliers for their generation supply.
In addition, PP&L lost the benefit of certain regulatory treatments that
improved earnings during the first six months of 1998.  In 1998, PP&L was able
to defer the loss of revenue experienced during the customer choice pilot
program.  Moreover, PP&L was permitted to recoup a portion of its undercollected
energy costs as part of its restructuring filing.

Securitization

     Refer to Note 4 to the Financial Statements for information regarding the
securitization of stranded costs.
<PAGE>

Electric Energy Sales

     Electricity sales for 1999 and 1998 were as follows:

<TABLE>
<CAPTION>

                                        June 30, 1999 vs. June 30, 1998
                                  --------------------------------------------
                                  Three Months Ended        Six Months Ended
                                  -------------------     --------------------
                                     1999      1998         1999        1998
                                     ----      ----         ----        ----
                                               (Millions of kWh)
<S>                               <C>         <C>          <C>         <C>
Electricity delivered to
retail customers by PP&L (a)         7,704    7,378        16,884      15,834

Less:  Electricity supplied
by others                            2,345      483         4,068         974
                                     -----    -----        ------      ------

Electricity supplied to retail
customers by PP&L                    5,359    6,895        12,816      14,860

Electricity supplied to retail
customers by PP&L EnergyPlus         2,595      439         4,067         670
                                     -----    -----        ------      ------

Total electricity supplied to
retail customers (a)                 7,954    7,334        16,883      15,530

Wholesale Energy Sales               7,236    8,212        16,168      17,045
</TABLE>

(a)  kWh for customers residing in PP&L's service territory who received energy
from PP&L or PP&L EnergyPlus are reflected in both of these categories.

     Under Pennsylvania's Electric Choice program, beginning on January 1, 1999
customers are allowed to choose the supplier of their electricity. Customers
making this choice continue to have the utility that serves their territory
deliver electricity from the supplier of choice. "Electricity delivered to
retail customers by PP&L" is the amount of electricity delivered by PP&L to
customers in its service territory. "Electricity supplied to retail customers by
PP&L" represents the amount of electricity supplied to PP&L service territory
customers who are not participating in the Electric Choice program. "Electricity
supplied to retail customers by PP&L EnergyPlus" is electricity supplied to
customers within and outside PP&L's service territory who participate in the
Electric Choice program and chose PP&L EnergyPlus as their energy supplier.

     Electricity delivered to retail customers in the three months ended June
30, 1999, increased by 326 million kWh, or 4.4%, from the comparable period in
1998. Weather did not have a significant impact during the second quarter of
either period.

     Total electricity supplied to retail customers increased by 620 million
kWh, or 8.5%, when comparing three months ended June 30, 1999, to the same
period in 1998.  Total electricity supplied increased more than electricity
delivered because PP&L EnergyPlus' gains in the competitive

<PAGE>

electricity supply market were greater than the losses to other utilities.
Overall, PP&L's supply of electricity in the second quarter to retail customers
inside and outside of its regulated service territory was 3% higher than its
delivery of electricity within its regulated service territory.

     Electricity delivered to retail customers in the six months ended June 30,
1999, increased by 1,050 million kWh, or 6.6%, from the comparable period in
1998.  If normal weather had been experienced in the first half of 1999 and
1998, deliveries would have increased by 3.6%.

     Electricity supplied to retail customers increased by 1,353 million kWh, or
8.7%, when comparing six months ended June 30, 1999, to the same period in 1998.
This increase is due to the increased sales by PP&L EnergyPlus in the
competitive market, and the impact of mild weather on sales in the first quarter
of 1998.

     Wholesale energy sales, which includes sales to other utilities and energy
marketers through contracts, spot market transactions or power pool
arrangements, decreased by 976 million kWh and 877 million kWh in the three and
six month periods ending June 30, 1999, when compared to the same periods in
1998.  These decreases were primarily the result of decreased activity of the
Energy Marketing Center in the wholesale market because of retail market needs,
and the decrease or expiration of contracts.

Energy Marketing and Trading Activities

     PP&L purchases and sells electric capacity and energy at the wholesale
level under its FERC market-based tariff. PP&L has entered into agreements to
sell firm capacity or energy under its market-based tariff to certain entities
located inside and outside of the PJM power pool. PP&L enters into these
agreements to market available energy and capacity from its generating assets
and to profit from market price fluctuations. PP&L is actively managing its
portfolio to attempt to capture the opportunities and limit its exposure to
volatile prices. In July 1999, PP&L entered into an insurance contract to
mitigate risk associated with a potential forced outage during periods of high
market prices.

     PP&L has entered into an agreement to provide wholesale energy marketing,
trading and energy portfolio management services for an energy cooperative
organization that provides energy-related services to public power entities.
The market risk associated with this type of activity is not material.  PP&L
expects to expand its activities by entering into similar agreements with other
counterparties.

Quantitative and Qualitative Disclosures About Market Risk

     The effects of PP&L Resources' and PP&L's market risks associated with
commodity prices, foreign currency exchange rates, equity prices, and interest
rates for debt recorded on the Consolidated Balance Sheet have not changed
materially since December 31, 1998. However, during the first
<PAGE>

six months of 1999, PP&L Resources and PP&L entered into forward starting
interest rate swaps and treasury locks with various counterparties to hedge the
interest rate risk associated with anticipated debt issuances, including the
issuance of transition bonds in August 1999. (See Note 4 to the Financial
Statements.) At June 30, 1999, the notional amount of the financial instruments
issued to hedge interest rate risk associated with the transition bonds was $640
million for PP&L Resources, plus an additional $555 million for PP&L. In July
1999, PP&L entered into additional forward interest rate swaps with notional
amounts totaling $200 million. All financial instruments associated with hedging
the interest rate risk of the transition bonds were settled at the end of July.
The proceeds were received and recorded in August 1999. As a result of these
hedging activities, interest expense on the transition bonds, applied under the
effective interest method, will be reduced by $24.8 million. Seventy-five
percent of these savings will be passed back to customers. On the same day that
PP&L priced its transition bonds, PP&L entered into short dated treasury lock
transactions with a notional amount of $1.07 billion to lock in the treasury
rate related to PP&L's tender offer to purchase any or all of $1.66 billion of
selected series of its mortgage bonds. These contracts were settled one week
later for an immaterial amount, on the date that PP&L announced the purchase
prices associated with the tender offer.

     In addition, at June 30, 1999, PP&L Resources had entered into forward
starting interest rate swaps with various counterparties to hedge the interest
rate risk associated with debt issuances expected in the fourth quarter of 1999.
These interest rates swap agreements involve the exchange of floating rate
interest rate payments for fixed rate interest payments over the life of the
agreements. PP&L Resources agreed to pay a fixed rate of 5.77% on a notional
amount of $60 million with a maturity date of September 15, 2004 and fixed rates
between 5.92% and 6.08% on notional amounts of $260 million with a maturity date
of September 15, 2009. PP&L Resources will receive a variable interest payment
based on the 6-month LIBOR rate through the maturity dates of the agreements.
The estimated fair value of the forward interest rate swaps, which represents
the estimated amount PP&L Resources would receive if it had terminated these
agreements on June 30, 1999, was $17.7 million.

     PP&L Resources remains exposed to changes in the fair value of the forward
starting interest rate swaps described in the preceding paragraph. At June 30,
1999, PP&L Resources, based on historical trends, estimated its potential
maximum exposure to a change in the fair value of these instruments through a
downward movement in interest rates over a one-day period, based on a confidence
level of 97.5%, at $2.9 million.
<PAGE>

Operating Revenues

Electric
--------

     The increase (decrease) in revenues from electric operations was
attributable to the following:

<TABLE>
<CAPTION>
                                   June 30, 1999 vs. June 30, 1998
                                --------------------------------------
                                Three Months Ended   Six Months Ended
                                -------------------  -----------------
                                         (Millions of Dollars)
<S>                             <C>                  <C>
Retail Electric Revenue
  PP&L:
    Weather effect                       $  2              $  25
    Sales volume and sales mix            (82)              (120)
    Unbilled                               (5)               (22)
  PP&L EnergyPlus:
    Sales volume and sales mix            101                151
    Unbilled                                1                 28
  Other                                     9                 14
                                         ----              -----
                                         $ 26              $  76
                                         ====              =====
</TABLE>

     Operating revenues for electric operations increased by $26 million, or
4.7%, and $76 million, or 6.5%, for the three and six months ended June 30,
1999, respectively, when compared to the same periods in 1998.  Excluding the
effects of weather in both periods, revenue increased by $24 million and $51
million in 1999 over 1998 for the three and six months ended June 30,
respectively.  Although weather unfavorably impacted sales for the first six
months in 1999, the same period in 1998 saw the largest unfavorable weather
impact on sales in the 27 years PP&L has tracked such weather effects.

     Weather-normalized retail revenues of PP&L were $87 million and $142
million lower for the three and six months ended June 30, 1999, respectively,
when compared to the same periods in 1998.  In connection with the PUC's Final
Order in PP&L's restructuring proceeding, retail rates were reduced by four
percent effective January 1, 1999 through December 31, 1999.  Additionally, PP&L
revenues were impacted by the loss of commercial and industrial customers who
chose alternate suppliers for their generation supply.  A portion of the revenue
collected from customers is applied to amortize the recoverable transition costs
established as part of the restructuring filing.  This amortization is reflected
as a separate line on the Consolidated Statement of Income under "Operating
Expenses."

     PP&L EnergyPlus, an unregulated subsidiary of PP&L marketing energy in
Pennsylvania, provided $102 million and $179 million of billed and unbilled
revenues in the three and six months ended June 30, 1999, respectively.  These
revenues offset increased power purchases.
<PAGE>

Gas and Propane
---------------

     PP&L Resources acquired Penn Fuel Gas in August 1998.  The results of Penn
Fuel Gas, including revenues and the associated costs from gas and propane
operations, have been recorded subsequent to acquisition.

Wholesale Energy Marketing and Trading Activities
-------------------------------------------------

     The increase (decrease) in revenues from wholesale energy marketing and
trading activities was attributable to the following:

<TABLE>
<CAPTION>
                                June 30, 1999 vs. June 30, 1998
                             --------------------------------------
                             Three Months Ended   Six Months Ended
                             -------------------  -----------------
                                     (Millions of Dollars)
     <S>                     <C>                  <C>
     Bilaterial Sales                 $ 48               $ 69
     PJM                                (9)                 4
     Cost-based contracts              (15)               (31)
     Oil & gas sales                    54                 88
                                      ----               ----
                                      $ 78               $130
                                      ====               ====
</TABLE>

     Revenues from wholesale energy marketing and trading activities increased
by $78 million and $130 million for the three and six months ended June 30,
1999, respectively, when compared to the same periods in 1998.  Revenues in both
periods increased despite the phase-down of the capacity and energy agreement
with JCP&L and the end of the capacity and energy agreement with Atlantic.
These revenue decreases are reflected in cost-based contracts.  The overall
revenue increase reflects PP&L's continued emphasis in competing in wholesale
markets.  Energy purchases have also increased to meet these increased sales.
Refer to "Energy Purchases" for more information.

Energy-Related Businesses

     Energy-related businesses contributed $16 million and $6 million to the
operating income of PP&L Resources for the three months ended June 30, 1999 and
1998, respectively. For the six months ended June 30, 1999 and 1998, these
businesses contributed a total of $33 million and $11 million to operating
income, respectively. These results primarily reflect higher equity earnings due
to PP&L Global's additional investment in SWEB. These earnings were partially
offset by higher interest and development expenses. Energy-related businesses,
including PP&L Global, PP&L Spectrum, H.T. Lyons, McClure, McCarl's and Burns
Mechanical, are expected to provide an increasing share of PP&L Resources'
future earnings.

Electric Fuel Costs

     Electric fuel costs decreased $23 million and $15 million for the three and
six months ended June 30, 1999, respectively, from the comparable periods in
1998. These decreases were primarily due to unplanned outages and lower fuel
prices. The decrease for the three month period was partially offset by higher
generation at the Susquehanna
<PAGE>

generating station. The decrease for the six month period was partially offset
by a one-time charge of $5 million in 1999 to accrue for the increase in
estimated costs of dry cask canisters for on-site spent fuel storage at the
Susquehanna plant.

Energy Purchases

     Energy purchases increased by $133 million and $174 million for the three
months and six months ended June 30, 1999, respectively, over the comparable
periods in 1998. These increases were primarily due to higher prices for energy
purchases along with additional purchases to support unplanned outages at PP&L
generating stations. An increase in gas purchases during 1999 to support the
Energy Marketing Center's marketing and trading activities also contributed to
the increase in energy purchases.

     These increased purchase costs were offset by the mark-to-market accounting
related to energy trading activities as well as the amortization of the above
market NUG purchases. See Financial Note 15 of PP&L Resources' 1998 Form 10-K
for additional information.

Other Operation Expenses

     Other operation expenses increased by $52 million for the six months ended
June 30, 1999, compared with the same period in 1998. About $31 million of the
increase was due to certain regulatory credits that were no longer effective in
1999. In 1998, PP&L was able to defer the loss of revenue experienced during the
customer choice pilot program. In 1998, PP&L also was permitted to defer
uncollected energy costs. These regulatory credits were recorded as offsets to
Other Operating Expense in the first half of 1998. The remaining increase was
due to increased selling expenses associated with supplying energy to customers
throughout Pennsylvania participating in the state's Electric Choice program, an
increase in wage and benefit costs, and the operating costs of Penn Fuel Gas,
which was acquired in August 1998.

     There was no material change in other operating expenses for the three
months ended June 30, 1999 versus June 30, 1998.

Power Plant Operations

     On April 29, 1999, PP&L's Holtwood coal-fired generating station was
closed. The adjacent hydroelectric plant continues to operate. The closing,
which was announced in August 1998, is part of an effort to reduce operating
costs and position PP&L for the competitive marketplace.

     On May 24, 1999, PP&L signed a definitive agreement to sell its Sunbury
plant and the principal assets of its wholly owned coal processing subsidiary,
Lady Jane Collieries, to Sunbury Holdings, LLC. PP&L expects to receive total
cash proceeds of about $106 million for the assets, including coal inventory,
which would translate into a one-time contribution of about 25 cents per share
to PP&L Resources' 1999 earnings.
<PAGE>

The closing, which is subject to certain regulatory approvals and other closing
conditions, is expected to occur later in 1999.

     The senior management of PP&L has commenced an analysis of the feasibility,
benefits and costs of transferring ownership and operation of its generating
facilities to an affiliated company. However, this analysis has not been
completed and no recommendation to PP&L's Board of Directors has been made with
respect to any such transaction. Consequently, at this time PP&L is unable to
predict the likelihood or timing of such a transfer.

Depreciation and Amortization Expenses

     Depreciation and amortization expenses decreased by $36 million and $74
million, respectively, for the three and six months ended June 30, 1999,
compared with the same periods in 1998. These decreases were mainly due to the
write-down of generation-related assets in connection with the restructuring
adjustments recorded in June 1998.  See Note 6 to the Financial Statements for
additional information.

                              Financial Condition
                              -------------------

Financing Activities

     The following financing activities have occurred to date in 1999:

     .   In January and February 1999, PP&L Resources issued $8 million of new
         common stock through the DRIP.  Effective March 1, 1999, the DRIP was
         changed from a new issue to an open market purchase program.

     .   In anticipation of funding becoming available to PP&L Resources from
         the securitization of PP&L's stranded costs, PP&L Resources entered
         into forward purchase agreements with a third party to acquire 14
         million shares of its common stock.  At June 30, 1999, the third party
         had purchased 11 million shares of PP&L Resources stock.  In August
         1999, the forward purchase agreement was completed and PP&L Resources
         purchased 14 million shares from the third party for $417 million.

     .   In June 1999, PP&L instituted a short-term bond program in order to
         meet short-term working capital requirements and to increase financing
         flexibility. Under this program, up to $600 million of short-term bonds
         could be issued from time to time with no more than $200 million of
         such bonds outstanding at any one time. As of June 30, 1999, $200
         million of these bonds were outstanding. This program was completed in
         August 1999 with a total of $600 million issued and subsequently paid
         upon maturity.

     .   In July 1999, PP&L commenced cash tender offers for any and all of
         approximately $1.66 billion of 11 series of its first mortgage bonds.
         In August 1999, these tenders were completed. Through these tender
         offers and open market repurchases, $1.467 billion of first mortgage
         bonds were repurchased and subsequently retired.

     .   Refer to Note 4 to the Financial Statements for information on the
         issuance of $2.42 billion of transition bonds to securitize stranded
         costs.

<PAGE>

     Refer to Note 10 to the Financial Statements for additional information on
credit arrangements and financing activities.

Financing and Liquidity

     The change in cash and cash equivalents for PP&L Resources for the six
months ended June 30, 1999, increased $212 million from the comparable period in
1998.  The reasons for this change were:

     .    A $6 million increase in cash provided by operating activities,
          primarily due to the increase in net income when adjusted for the
          impact of certain non-cash items.  Earnings in 1999 benefited from a
          net unrealized mark-to-market gain on trading activities, amortization
          of the liability for above-market NUG purchases, equity in earnings of
          unconsolidated affiliates and lower depreciation.

     .    A $179 million decrease in cash used in investing activities,
          primarily due to a decrease in PP&L Global's investment in
          unconsolidated affiliates. This was partially offset by an increase in
          PP&L Global's investment in domestic power plants.

     .    A $27 million increase in cash from financing activities. This
          increase was due to higher short-term debt and a decline in common
          dividends paid. Lower issuance of common stock partially offset the
          increase in cash from financing activities.

Financial Indicators

     The results for the twelve months ended June 30, 1999 and 1998 were
impacted by extraordinary items, other one-time adjustments and weather. The
following financial indicators for PP&L Resources reflect the elimination of
these impacts from earnings, and provide an additional measure of the underlying
earnings performance of PP&L Resources and its subsidiaries.
<PAGE>

<TABLE>
<CAPTION>
                                    12 Months Ended June 30,
                                   --------------------------
                                       1999          1998
                                   ------------  ------------
<S>                                <C>           <C>
Earnings per share, as adjusted         $ 2.23        $ 1.94

Return on average common equity          13.70%        11.19%

Ratio of pre-tax income to
  interest charges                        3.32          3.60

Dividends declared per share            $ 1.00        $ 1.67
</TABLE>


Acquisitions and Divestitures

     Refer to Note 12 to the Financial Statements for information regarding
Acquisitions and Divestitures.

     As of June 30, 1999, PP&L Global had investments of $684 million in
distribution, transmission and generation facilities in the U.K., Bolivia, Peru,
Argentina, Brazil, Spain, Portugal, Chile and El Salvador.  PP&L Global's major
investments to date are SWEB, Emel and DelSur.

     PP&L Global continues to pursue opportunities to develop and acquire
electric generation, transmission and distribution facilities in the United
States and abroad.

Commitments and Contingent Liabilities

     There have been no material changes related to PP&L Resources' or PP&L's
commitments and contingent liabilities since the companies filed their joint
1998 Form 10-K, except for loan guarantees discussed in Note 11 to the Financial
Statements.

Increasing Competition

     Background
     ----------

     The electric utility industry has experienced and will continue to
experience a significant increase in the level of competition in the energy
supply market.  PP&L has publicly expressed its support for full customer choice
of electricity suppliers for all customer classes.  PP&L is actively involved in
efforts at both the state and federal levels to encourage a smooth transition to
full competition.

     State Activities
     ----------------

     Reference is made to Note 3 to the Financial Statements in PP&L Resources'
and PP&L's Form 10-K for the year ended December 31, 1998 for a discussion of
PP&L's PUC restructuring proceeding under the Customer Choice Act.

     Reference is also made to Note 3 to the Financial Statements in PP&L
Resources' and PP&L's Form 10-K for the year ended December 31, 1998 regarding
PP&L's transfer of its retail electric marketing function to
<PAGE>

PP&L EnergyPlus, a separate affiliated corporation. PP&L EnergyPlus has a PUC
license to act as a Pennsylvania EGS. This license permits PP&L EnergyPlus to
offer retail electric supply to participating customers in PP&L's service
territory and in the service territories of other Pennsylvania utilities. In
1999, PP&L EnergyPlus is offering such supply to industrial and commercial
customers throughout the state. In July 1999, PP&L EnergyPlus received an
interim license to market electricity in New Jersey effective August 1999.

     Federal Activities
     ------------------

     In June 1997, all of the PJM companies except PECO (the PJM Supporting
Companies) filed proposals with the FERC to amend the PJM tariff and restructure
the PJM pool.  PECO filed a separate request with the FERC to amend the PJM
tariff.  Furthermore, PECO and certain electric marketers submitted
significantly different proposals to restructure the PJM pool.

     In November 1997, the FERC approved, with certain modifications, the PJM
Supporting Companies' proposals for transforming the PJM into an ISO. In
summary, the FERC order: (i) approved the PJM's open access transmission rates
based on geographic zones, but required PJM to file a single PJM system-wide
rate proposal by 2002; (ii) accepted the PJM Supporting Companies' methodology
to price transmission when the system is congested and to charge these
congestion costs to system users in addition to the open access transmission
rates, but ordered PJM to file an additional proposal to address concerns raised
over price certainty for buyers and sellers during periods of congestion; (iii)
determined that the ISO is to operate both the transmission system and the power
exchange which provides for the purchase and sale of spot energy within the PJM
market; and (iv) accepted the PJM Supporting Companies' proposal regarding
mandatory installed capacity obligations for all entities serving firm retail
and wholesale load within PJM, but rejected their proposal for allocating the
capacity benefits which result from PJM's ability to import power from other
regional power pools.

     The PJM Supporting Companies and numerous other parties have filed requests
for amendment and/or rehearing of virtually every portion of the FERC's PJM ISO
order. PP&L also has filed its own request for amendment and/or rehearing. The
FERC has not yet taken action on these filings. PP&L's primary issue with the
FERC's order relates to a requirement that existing wholesale contracts for
sales service and transmission service be modified to have the new PJM
transmission tariff applied to service under these existing contracts and the
requirement that PP&L modify these contracts to ensure that customers are not
assessed multiple transmission charges.

     In March 1999, the FERC approved the request of the PJM Supporting
Companies to permit generators to use market-based bids instead of cost-based
bids when selling into the PJM Interchange Market.  The existing
<PAGE>

$1000 per MWH cap on bids was retained. Accordingly, beginning on April 1, 1999,
the hourly price of energy purchased on the PJM Interchange Market will be a
market-based rate not exceeding $1000 per MWH.

     In September 1998, PP&L filed its EGS Coordination Tariff with the FERC.
The EGS Coordination Tariff applies to entities licensed to serve retail
electricity customers under the Commonwealth of Pennsylvania's retail access
program.  The purpose of the EGS Coordination Tariff is to permit PP&L to
provide EGSs with certain FERC-jurisdictional services which will facilitate the
ability of EGSs to meet their obligations under the PJM Open Access Transmission
Tariff and related agreements of the PJM.  The FERC accepted the EGS
Coordination Tariff for filing in October 1998 but in a later order stated that
it would issue a decision holding that the EGS Coordination Tariff did not need
to be filed with the FERC.  That decision has not yet been issued.

     In June 1999, PP&L filed with the FERC an application requesting authority
to sell specified ancillary services at market-based rates in the following
markets: the New England power pool, the New York power pool, the market
administered by the California ISO, and PJM. FERC granted the application in
July 1999.

     PP&L EnergyPlus has authority from the FERC to sell electric energy and
capacity at market-based rates and to sell, assign or transfer transmission
rights and associated ancillary services.  PP&L has a FERC-filed code of conduct
governing its relationship with such affiliates that engage in the sale and/or
transmission of electric energy.

     In July 1999, PP&L EnergyPlus filed an application with the FERC requesting
authority to sell specified ancillary services at market-based rates in the
following markets:  the New England power pool, the New York power pool, the
market administered by the California ISO, and PJM.  FERC has not yet acted on
the application.

Year 2000

     PP&L Resources is faced with the task of addressing the Year 2000 issue.
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year and other programming
techniques which limit date calculations or assign special meanings to some
dates. Any of PP&L's computer systems that have date-sensitive software or
microprocessors may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to measure usage, read meters, process transactions, send bills or operate
electric generation stations. In addition, the Year 2000 issue could affect the
ability of customers to receive bills sent by PP&L or to make payments on these
bills.

     A Company-wide Year 2000 coordination committee was formed to raise the
awareness of the Year 2000 issue, share information and review progress towards
compliance. A seven-step approach was developed to
<PAGE>

achieve Year 2000 compliance by assessing and remediating the problem in
application software, hardware, plant control systems and devices containing
embedded microprocessors. The seven steps in the plan include awareness,
inventory, assessment, remediation, testing, implementation, and contingency
planning.

     Delivery of electricity is dependent on the overall reliability of the
electric grid. PP&L is cooperating and coordinating with the North American
Electric Reliability Council and the PJM Interconnection regarding Year 2000
remediation efforts.

     PP&L's power plant and electricity delivery systems are ready for the Year
2000, six months in advance of January 1, 2000. PP&L has completed testing all
electricity generation and delivery systems. This testing has determined that
the equipment necessary for the delivery of safe and reliable electricity to
customers is ready for the turnover to the Year 2000.

     .    The inventory and assessment steps have addressed computer system;
          embedded systems at power plants; equipment involved in the
          transmission and distribution of electricity on various grids,
          including substations; security systems; environmental monitoring
          equipment; elevators; and other areas. (Embedded systems are one or
          more integral computer chips containing a calendar/clock function.)

     .    In addition, PP&L has a team of employees from departments throughout
          the company that is reviewing the equipment and systems within their
          departments to ensure that they are either "compliant" or "ready" for
          the Year 2000.

     .    The company has also contacted appropriate vendors to ensure they are
          aware of the Year 2000 issues, and that they are taking appropriate
          steps to deal with those issues.

     .    PP&L also has tested appropriate systems to make sure they can
          continue operating on January 1, 2000, and beyond. The testing on the
          major systems, those involved in the production of power and its
          delivery, has been completed.

     It is anticipated that all systems will be Year 2000 ready by November 30,
1999. Year 2000 compliant means computer systems or equipment with date-
sensitive chips will accurately process date and time data. Year 2000 ready
means that the computer systems or equipment with date-sensitive chips can be
used on January 1, 2000 and beyond, but are not fully Year 2000 compliant.

     For many years, PP&L has had basic contingency plans in place to address
issues such as blackouts on the electrical grid, cold starts of generating
facilities and disaster recovery procedures for the computing environment. PP&L
recognized that additional contingency plans were
<PAGE>

necessary and, as part of the seven-step remediation process, developed
additional contingency plans.

     The additional plans that have been developed address loss of
telecommunications, loss of off-site power to various generating stations,
degradation of emergency planning capabilities, running out of consumables,
electrical system disturbance or failure, power plant control system failures,
fuel delivery problems, problems with various relays or programming logic
control, and staffing concerns. PP&L has completed the development of these
contingency plans.

     In May 1998, the NRC issued a notification requirement under which nuclear
utilities are required to inform the NRC, in writing, that they are working to
solve the Year 2000 computer problem. In addition, nuclear utilities had until
July 1, 1999 to inform the NRC that their computers are Year 2000 compliant and
Year 2000 ready or to submit a status report summarizing the ongoing work. On
July 1, 1999, PP&L filed its written response with the NRC, stating that PP&L's
nuclear power plant is Year 2000 ready.

     In February 1999, an independent assessment of the Year 2000 Program
Readiness Plan for PP&L's nuclear department was performed with no significant
adverse findings identified. The results of that assessment were incorporated
into the overall Year 2000 Program Readiness Plan for PP&L's nuclear department.
In May 1999, the NRC conducted an audit of PP&L's nuclear-related Year 2000
compliance activities. This audit was observed by the PUC. There were no adverse
findings identified as a result of the audit.

     In July 1998, the PUC initiated a non-adversarial investigation to be
conducted by the Office of Administrative Law Judge to accurately assess any and
all steps taken and proposed to be taken to resolve the Year 2000 compliance
issue by all jurisdictional fixed utilities and mission-critical service
providers such as the PJM. The PUC required all jurisdictional utilities to file
a written response to a list of questions concerning Year 2000 compliance and,
if mission-critical systems cannot be made Year 2000 compliant on or before
March 31, 1999, to file a detailed contingency plan by that date. PP&L filed its
written response to the PUC questions in August 1998 and in November 1998
submitted testimony to the PUC that PP&L would have its mission-critical systems
Year 2000 ready by July 1, 1999, and all systems ready by November 30, 1999. On
March 31, 1999, PP&L filed its contingency plans with the PUC and will continue
to update these plans on an ongoing basis. On July 1, 1999, PP&L informed the
PUC that all of the systems that support the generation and delivery of
electricity are Year 2000 ready. PP&L also filed its updated Year 2000
contingency plans with the PUC.

     In early March 1999, the PUC conducted an audit of PP&L's Year 2000
compliance activities. In conjunction with this audit, PP&L submitted to the PUC
an update to its November 1998 testimony. On March 26, 1999, PP&L filed its Year
2000 testing schedule with the PUC; meanwhile, the PUC staff has been on-site
observing some of the testing being performed.
<PAGE>

     PP&L, along with utilities throughout the country, participated in an
emergency exercise that simulated the loss of normal communications on the power
grid as a result of Year 2000 computer problems. The results of this exercise
demonstrated that all backup communication systems operated properly.

     An internal audit performed during the first quarter of 1999 evaluated the
approaches used by each business entity within PP&L to address Year 2000 issues.
This review indicated that some improvements were required by certain business
entities to improve their Year 2000 efforts to ensure that all mission-critical
systems are either Year 2000 compliant or Year 2000 ready by July 1, 1999. The
audit recommendations were incorporated into the respective business entities'
Year 2000 remediation efforts.

     As of July 1, 1999, PP&L has achieved the following completion percentages
on the seven steps referenced above for Year 2000 compliance: awareness, 97%;
inventory, 100%; assessment, 99%; remediation, 96%; testing, 96%;
implementation, 92%; and additional contingency plans, beyond the basic plans
referenced above, 74%. The preceding percentages are for all of PP&L's computer
systems, including components of the computer systems that are mission-critical.

     Third-party relationships are very important to the continued operations of
PP&L. These third-party relationships are the means to acquire equipment,
services, consumables and fuel that are needed to keep the generating and
transmission and distribution facilities running smoothly. PP&L began addressing
third-party relationships with respect to the Year 2000 issue during the fourth
quarter of 1998 by identifying the suppliers that are important to PP&L's
day-to-day operations. PP&L identified approximately 400 of these suppliers. An
introductory letter, as well as two follow-up letters, were mailed to the
suppliers asking for their Year 2000 compliance status. Approximately 96% of all
vendors have responded to date, with 99% of their responses being favorable. All
of the mission-critical vendors have provided favorable responses. PP&L is
responding to those suppliers whose Year 2000 compliance status does not meet
PP&L's expectations.

     PP&L has participated in three Year 2000 tests with the PJM and plans to
participate in a fourth. The first test with the PJM focused on basic data
communications. The second test with the PJM was done in conjunction with NERC
on April 9, 1999, and focused on redundant communications. The third test
focused on system interfaces. PP&L is planning on participating with the PJM on
the next NERC-sponsored Year 2000 test on September 8, 1999, which will be a
full simulation of generation, transmission and distribution operational plans.
PP&L also will participate with all PJM member companies on September 23, 1999
in conducting similar testing.

     Based upon present assessments, PP&L Resources estimates that it will incur
approximately $14 million in Year 2000 remediation costs. Through June 30, 1999,
PP&L Resources had spent approximately $12 million in
<PAGE>

remediation costs, which included assistance from outside consultants. These
costs are being expensed as incurred.
<PAGE>

                      PP&L Resources, Inc. and PP&L, Inc.
                      -----------------------------------

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


     Reference is made to "Quantitative and Qualitative Disclosures About Market
Risk," in Management's Discussion and Analysis of Financial Condition and
Results of Operations.
<PAGE>

                           PP&L RESOURCES, INC. AND
                           ------------------------

                          PP&L, INC. AND SUBSIDIARIES
                          ---------------------------

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings
--------------------------

     Reference is made to "Increasing Competition" for information regarding
pending FERC proceedings.

Item 4.  Submission of Matters to a Vote of Security Holders
------------------------------------------------------------

     At PP&L Resources' Annual Meeting of Shareowners held on April 23, 1999,
the shareowners:

     (1)  Elected all three nominees for the office of director. The vote for
          all nominees was 117,391,080. The votes for individual nominees were
          as follows:

<TABLE>
<CAPTION>
                                        Number of Votes
                              -----------------------------------
                                    For        Withhold Authority
                              ---------------  ------------------
     <S>                      <C>              <C>
     Frederick M. Bernthal        117,574,630           2,520,407
     William J. Flood             117,491,549           2,603,488
     Frank A. Long                117,391,080           2,703,957
</TABLE>

     The vote to withhold authority for all nominees was 2,520,407.

     (2)  Ratified the appointment of PricewaterhouseCoopers LLP as independent
          auditors for the year ended December 31, 1999. The vote was
          117,674,799 in favor and 1,200,242 against, with 1,219,996 abstaining.

     (3)  Approved the Amended and Restated Incentive Compensation Plan. The
          vote was 74,855,488 in favor and 39,961,227 against, with 5,278,322
          abstaining.

     (4)  Approved the Short-Term Incentive Plan. The vote was 104,117,511 in
          favor and 12,505,692 against, with 3,471,834 abstaining.

     At PP&L's Annual Meeting of Shareowners held on April 23, 1999, the
shareowners:

     (1)  Elected all three nominees for the office of director. The vote for
          all nominees was 161,135,942. The votes for individual nominees were
          as follows:
<PAGE>

<TABLE>
<CAPTION>
                                        Number of Votes
                              -----------------------------------
                                    For        Withhold Authority
                              ---------------  ------------------
     <S>                      <C>              <C>
     Frederick M. Bernthal        161,135,942               4,369
     William J. Flood             161,135,942               4,369
     Frank A. Long                161,135,942               4,369
</TABLE>

     The vote to withhold authority for all nominees was 4,369.

     (2)  Approved the Amendment to the Articles of Incorporation. The vote was
          161,130,418 in favor and 3,680 against, with 6,213 abstaining.

Item 6.  Exhibits and Reports on Form 8-K
-------------------------------------------

     (a)  Exhibits

               4 - 67th Supplemental Indenture dated as of June 1, 1999, to
     PP&L, Inc.'s Mortgage and Deed of Trust.

              10 - $750 Million Revolving Credit Facility among PP&L, Inc., PP&L
     Capital Funding, Inc., PP&L Resources, Inc. and a Group of Banks, dated as
     of July 1, 1999.

              12 - Computation of Ratio of Earnings to Fixed Charges

              27 - Financial Data Schedule

     (b)  Reports on Form 8-K

     Report dated April 23, 1999
     ---------------------------

     Item 5.  Other Events

          Information regarding PP&L Resources' annual meeting on April 23,
     1999.

     Report dated May 24, 1999
     -------------------------

     Item 5. Other Events

          Information regarding PP&L's agreement to sell its Sunbury plant and
     the principal assets of Lady Jane Collieries.

     Report dated June 10, 1999
     --------------------------

     Item 5. Other Events
<PAGE>

     Information regarding PP&L Global's acquisition of a majority ownership of
the Chilean electricity distribution company Empresas Emel S.A. and SWEB's
agreement to sell its U. K. electricity supply business.
<PAGE>

GLOSSARY OF TERMS AND ABBREVIATIONS

Atlantic - Atlantic City Electric Company

Bangor Hydro - Bangor Hydro-Electric Company

Burns Mechanical - Burns Mechanical, Inc., a PP&L Spectrum unregulated
subsidiary specializing in mechanical contracting and engineering.

Clean Air Act (Federal Clean Air Act Amendments of 1990) - legislation enacted
to address environmental issues including acid rain, ozone and toxic air
emissions.

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

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

DelSur - Distributidora Electricidad del Sur S.A., an electric distribution
company in El Salvador

DEP - Pennsylvania Department of Environmental Protection

District Court - United States District Court for the Eastern District of
Pennsylvania.

DRIP (Dividend Reinvestment Plan) - program available to shareowners of PP&L
Resources' common stock and PP&L preferred stock to reinvest dividends in PP&L
Resources' common stock instead of receiving dividend checks.

EGS - electric generation supplier

EITF - (Emerging Issues Task Force) - an organization that aids the FASB in
identifying emerging issues that may require FASB action.

Emel - Empresas Emel, S.A., a Chilean electric distribution holding company

Energy Marketing Center - organization within PP&L responsible for marketing and
trading wholesale energy

EPA - Environmental Protection Agency

EPS - Earnings per share

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

FGD - flue gas desulfurization equipment installed at coal-fired power plants to
reduce sulfur dioxide emissions.

FERC (Federal Energy Regulatory Commission) - federal agency that regulates
interstate transmission and sale of electricity and related matters.

H.T. Lyons - H.T. Lyons, Inc., a PP&L Resources unregulated subsidiary
specializing in mechanical contracting and engineering.

ISO - Independent System Operator

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

JCP&L - Jersey Central Power & Light Company

LIBOR - London Interbank Offering Rate

McCarl's - McCarl's Inc., a PP&L Resources unregulated subsidiary specializing
in mechanical contracting.

McClure - McClure Company, a PP&L Resources unregulated subsidiary specializing
in mechanical contracting and engineering.

NOx - nitrogen oxide

NPDES - National Pollutant Discharge Elimination System

<PAGE>

NRC (Nuclear Regulatory Commission) - federal agency that regulates operation of
nuclear power facilities

NUG (Non-Utility Generator) - generating plants not owned by regulated
utilities.  If the NUG meets certain criteria, its electrical output must be
purchased by public utilities as required by PURPA.

PCB (Polychlorinated Biphenyl) - additive to oil used in certain electrical
equipment up to the late-1970s.  Now classified as a hazardous chemical.

PECO - PECO Energy Company

Penn Fuel Gas - Penn Fuel Gas, Inc., a PP&L Resources regulated subsidiary
specializing in natural gas distribution, transmission and storage services, and
the sale of propane.

PJM (PJM Interconnection, LLC) - operates the electric transmission network and
electric energy market in the mid-Atlantic region of the U.S.

PP&L - PP&L, Inc.

PP&L Capital Funding - PP&L Capital Funding, Inc., PP&L Resources' financing
subsidiary.

PP&L EnergyPlus - Refers to PP&L, Inc. d/b/a PP&L EnergyPlus, and PP&L
EnergyPlus Co., LLC, a PP&L, Inc. unregulated subsidiary which is involved in
retail electric generating supply.  During 1998, PP&L, Inc. d/b/a PP&L
EnergyPlus provided retail electric generating supply in the Pennsylvania retail
pilot program.  As a result of the PUC restructuring settlement, PP&L EnergyPlus
became a separate subsidiary of PP&L, Inc. in September 1998.  As of January
1999, PP&L EnergyPlus Co. is providing retail electric generating supply to
customers throughout Pennsylvania.

PP&L Global  - PP&L Global, Inc., a PP&L Resources unregulated subsidiary which
invests in and develops world-wide power projects.

PP&L Resources - PP&L Resources, Inc., the parent holding company of PP&L, PP&L
Global and other subsidiaries.

PP&L Spectrum - PP&L Spectrum, Inc., a PP&L Resources unregulated subsidiary
which offers energy-related products and services.

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

PUC Final Order - Final order issued by the PUC on August 27, 1998, approving
the settlement of PP&L, Inc.'s restructuring proceeding.

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

SEC - Securities and Exchange Commission

SO2 - Sulfur dioxide

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

Superfund - federal and state legislation that addresses remediation of
contaminated sites.

SWEB - South Western Electricity plc, a British regional electric utility
company.

UGI - UGI Corporation

U.K. - United Kingdom

Year 2000 - a set of date-related problems that may be experienced by software
systems or applications.
<PAGE>

                                  SIGNATURES
                                  ----------

          Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature for each undersigned
company shall be deemed to relate only to matters having reference to such
company or its subsidiary.


                                             PP&L Resources, Inc.
                                             --------------------
                                                (Registrant)

                                             PP&L, Inc.
                                             ----------
                                                (Registrant)



Date:  August 16, 1999                            /s/ John R. Biggar
                                          --------------------------------------
                                                     John R. Biggar
                                               Senior Vice President and
                                                  Chief Financial Officer
                                           (PP&L Resources, Inc. and PP&L, Inc.)


                                                  /s/ Joseph J. McCabe
                                          --------------------------------------
                                                     Joseph J. McCabe
                                               Vice President & Controller
                                           (PP&L Resources, Inc. and PP&L, Inc.)