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, 2009OR[
       ]
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934 for the transition period from _________ to
    ___________
  Commission
      File
                Number
              Registrant;
      State of Incorporation;
                Address
      and Telephone Number
              IRS
      Employer
                Identification
      No.1-11459
              PPL
      Corporation
                (Exact
      name of Registrant as specified in its charter)
                (Pennsylvania)
                Two
      North Ninth Street
                Allentown,
      PA  18101-1179
                (610)
      774-5151
              23-27581921-32944
              PPL
      Energy Supply, LLC
                (Exact
      name of Registrant as specified in its charter)
                (Delaware)
                Two
      North Ninth Street
                Allentown,
      PA  18101-1179
                (610)
      774-5151
              23-30749201-905
              PPL
      Electric Utilities Corporation
                (Exact
      name of Registrant as specified in its charter)
                (Pennsylvania)
                Two
      North Ninth Street
                Allentown,
      PA  18101-1179
                (610)
      774-5151
              23-0959590
   Indicate
by check mark whether the Registrants (1) have filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrants were
required to file such reports), and (2) have been subject to such filing
requirements for the past 90 days.
  PPL
      Corporation
              Yes X
              NoPPL
      Energy Supply, LLC
              Yes X
              NoPPL
      Electric Utilities Corporation
              Yes X
              No
  Indicate
by check mark whether the Registrants have submitted electronically and posted
on their corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
Registrants were required to submit and post such files).
  PPL
      Corporation
              Yes
              NoPPL
      Energy Supply, LLC
              Yes
              NoPPL
      Electric Utilities Corporation
              Yes
              No
  Indicate
by check mark whether the Registrants are large accelerated filers, accelerated
filers, non-accelerated filers, or a smaller reporting company.  See
definition of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.  (Check
one):
  Large
      accelerated filer
              Accelerated
                filer
              Non-accelerated
                filer
              Smaller
      reporting
                companyPPL
      Corporation
              [ X
      ]
              [     ]
              [     ]
              [     ]PPL
      Energy Supply, LLC
              [     ]
              [     ]
              [ X
      ]
              [     ]PPL
      Electric Utilities Corporation
              [     ]
              [     ]
              [ X
      ]
              [     ]
  Indicate
by check mark whether the Registrants are shell companies (as defined in Rule
12b-2 of the Exchange Act).
  PPL
      Corporation
              Yes
              No XPPL
      Energy Supply, LLC
              Yes
              No XPPL
      Electric Utilities Corporation
              Yes
              No X
  Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:
  PPL
      Corporation
              Common
      stock, $.01 par value, 376,580,347 shares outstanding at July 24,
      2009.PPL
      Energy Supply, LLC
              PPL
      Corporation indirectly holds all of the membership interests in PPL Energy
      Supply, LLC.PPL
      Electric Utilities Corporation
              Common
      stock, no par value, 66,368,056 shares outstanding and all held by PPL
      Corporation at July 24, 2009.
  This
document is available free of charge at the Investor Center on PPL's Web site at
www.pplweb.com.  However, information on this Web site does not
constitute a part of this Form 10-Q.
 
 PPL
CORPORATION
 PPL
ENERGY SUPPLY, LLC
 PPL
ELECTRIC UTILITIES CORPORATION
  FORM
10-Q
 FOR THE
QUARTER ENDED June 30, 2009
  Table
of Contents
 PageGLOSSARY OF TERMS AND ABBREVIATIONS
                iFORWARD-LOOKING INFORMATION
                1PART
      I.  FINANCIAL INFORMATIONItem
      1.  Financial StatementsPPL
      Corporation and SubsidiariesCondensed Consolidated Statements of
      Income
                2Condensed Consolidated Statements of Cash
      Flows
                3Condensed Consolidated Balance
      Sheets
                4Condensed Consolidated Statements of
      Equity
                6Condensed Consolidated Statements of Comprehensive
      Income
                7PPL
      Energy Supply, LLC and SubsidiariesCondensed Consolidated Statements of
      Income
                8Condensed Consolidated Statements of Cash
      Flows
                9Condensed Consolidated Balance
      Sheets
                10Condensed Consolidated Statements of
      Equity
                12Condensed Consolidated Statements of Comprehensive
      Income
                13PPL
      Electric Utilities Corporation and SubsidiariesCondensed Consolidated Statements of
      Income
                14Condensed Consolidated Statements of Cash
      Flows
                15Condensed Consolidated Balance
      Sheets
                16Combined Notes to Condensed Consolidated Financial
      Statements
                18Item
      2.  Management's Discussion and Analysis of Financial Condition
      and Results of OperationsPPL Corporation and Subsidiaries
                70PPL Energy Supply, LLC and
Subsidiaries
                84PPL Electric Utilities Corporation and
      Subsidiaries
                97Item 3.  Quantitative and Qualitative
      Disclosures About Market Risk
                102Item 4.  Controls and
      Procedures
                102Item 4T.  Controls and
      Procedures
                102PART
      II.  OTHER INFORMATIONItem 1.  Legal Proceedings
                103Item 1A.  Risk Factors
                103Item 4.  Submission of Matters to a Vote of
      Security Holders
                103Item 6.  Exhibits
                104SIGNATURES
                105COMPUTATION
      OF RATIO OF EARNINGS TO FIXED CHARGESPPL Corporation and Subsidiaries
                106PPL Energy Supply, LLC and
      Subsidiaries
                107PPL Electric Utilities Corporation and
      Subsidiaries
                108CERTIFICATES
      OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL
OFFICER
                  PURSUANT
      TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002PPL Corporation
                109PPL Energy Supply, LLC
                111PPL Electric Utilities Corporation
                113CERTIFICATES
      OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL
OFFICER
                  PURSUANT
      TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002PPL Corporation
                115PPL Energy Supply, LLC
                117PPL Electric Utilities Corporation
                119
 
 GLOSSARY
OF TERMS AND ABBREVIATIONS
  PPL
Corporation and its current and former subsidiaries
  Hyder
- Hyder Limited, a subsidiary of WPDL that was the previous owner of South Wales
Electricity plc.  In March 2001, South Wales Electricity plc was
acquired by WPDH Limited and renamed WPD (South Wales).  The Hyder
non-electricity delivery businesses are substantially
liquidated.
  PPL-
PPL Corporation, the parent holding company of PPL Electric, PPL Energy Funding
and other subsidiaries.
  PPL
Capital Funding - PPL Capital Funding, Inc., a wholly owned financing
subsidiary of PPL.
  PPL
Electric-
PPL Electric Utilities Corporation, a regulated utility subsidiary of PPL that
transmits and distributes electricity in its service territory and provides
electric supply to retail customers in this territory as a
PLR.
  PPL
Energy Funding - PPL Energy Funding Corporation, a subsidiary of PPL and
the parent company of PPL Energy Supply.
  PPL
EnergyPlus - PPL EnergyPlus, LLC, a subsidiary of PPL Energy Supply that
markets and trades wholesale and retail electricity and gas, and supplies energy
and energy services in deregulated markets.
  PPL
Energy Supply - PPL Energy Supply, LLC, a subsidiary of PPL Energy
Funding and the parent company of PPL Generation, PPL EnergyPlus, PPL Global and
other subsidiaries.
  PPL
Gas Utilities - PPL Gas Utilities Corporation, a regulated utility that
provided natural gas distribution, transmission and storage services, and the
competitive sale of propane, which was a subsidiary of PPL until its sale in
October 2008.
  PPL
Generation - PPL Generation, LLC, a subsidiary of PPL Energy Supply that
owns and operates U.S. generating facilities through various
subsidiaries.
  PPL
Global - PPL Global, LLC, a subsidiary of PPL Energy Supply that
primarily owns and operates a business in the U.K. that is focused on the
regulated distribution of electricity.
  PPL
Investment Corp.-PPL Investment Corporation, a subsidiary of PPL Energy
Supply.
  PPL
Maine - PPL Maine, LLC, a subsidiary of PPL Generation that owns
generating operations in Maine.
  PPL
Martins Creek - PPL Martins Creek, LLC, a subsidiary of PPL Generation
that owns generating operations in Pennsylvania.
  PPL
Montana - PPL Montana, LLC, an indirect subsidiary of PPL Generation that
generates electricity for wholesale sales in Montana and the Pacific
Northwest.
  PPL
Services - PPL Services Corporation, a subsidiary of PPL that provides
shared services for PPL and its subsidiaries.
  PPL
Susquehanna - PPL Susquehanna, LLC, a nuclear generating subsidiary of
PPL Generation.
  WPD
- refers collectively to WPDH Limited and WPDL.
  WPD
LLP - Western Power Distribution LLP, a wholly owned subsidiary of WPDH
Limited, which owns WPD (South West) and WPD (South
Wales).
  WPD(South
Wales) - Western Power Distribution (South Wales) plc, a British regional
electric utility company.
  WPD(South
West) - Western Power Distribution (South West) plc, a British regional
electric utility company.
  WPDH
Limited - Western Power Distribution Holdings Limited, an indirect,
wholly owned subsidiary of PPL Global.  WPDH Limited owns WPD
LLP.
  WPDL
- WPD Investment Holdings Limited, an indirect wholly owned subsidiary of PPL
Global.  WPDL owns 100% of the common shares of
Hyder.
  Other
terms and abbreviations
  £
- British pounds sterling.
  2008
Form 10-K - Annual Report to the SEC on Form 10-K for the year ended
December 31, 2008.
  A.M.
Best - A.M. Best Company, a company that reports on the financial
condition of insurance companies.
  AMT- alternative minimum tax.
  AOCI
- accumulated other comprehensive income or loss.
  APB- Accounting Principles Board.
  ARB-
Accounting Research Bulletin.
  ARO
- asset retirement obligation.
  Baseload
generation-includes the output provided by PPL's nuclear, coal, hydroelectric and
qualifying facilities.
  Basis- the commodity price differential between two locations, products or
time periods.
  Bcf
- billion cubic feet.
  CAIR-
the EPA's Clean Air Interstate Rule.
  Clean
Air Act - federal legislation enacted to address certain environmental
issues related to air emissions, including acid rain, ozone and toxic air
emissions.
  COLA
- license application for a combined construction permit and operating license
from the NRC.
  CTC
- competitive transition charge on customer bills to recover allowable
transition costs under the Customer Choice Act.
  Customer
Choice Act-
the Pennsylvania Electricity Generation Customer Choice and Competition Act,
legislation enacted to restructure the state's electric utility industry to
create retail access to a competitive market for generation of
electricity.
  DDCP
- Directors Deferred Compensation Plan.
  DEP
- Department of Environmental Protection, a state government
agency.
  DOE
- Department of Energy, a U.S. government agency.
  DRIP
- Dividend Reinvestment Plan.
  Economic
Stimulus Package - The American Recovery and Reinvestment Act of 2009,
generally referred to as the federal economic stimulus package, which was signed
into law in February 2009.
  EITF
- Emerging Issues Task Force, an organization that assists the FASB in improving
financial reporting through the identification, discussion and resolution of
financial accounting issues within the framework of existing authoritative
literature.
  EMF
- electric and magnetic fields.
  EPA
- Environmental Protection Agency, a U.S. government
agency.
  EPS
- earnings per share.
  ESOP
- Employee Stock Ownership Plan.
  FASB-
Financial Accounting Standards Board, a rulemaking organization that establishes
financial accounting and reporting standards.
  FERC
- Federal Energy Regulatory Commission, the federal agency that regulates, among
other things, interstate transmission and wholesale sales of electricity,
hydroelectric power projects and related matters.
  FIN- FASB Interpretation.
  Fitch- Fitch, Inc.
  FSP-FASB Staff Position.
  FTR-financial transmission rights, which are financial instruments
established to manage price risk related to electricity transmission
congestion.  They entitle the holder to receive compensation or
require the holder to remit payment for certain congestion-related transmission
charges that arise when the transmission grid is
congested.
  GAAP
- generally accepted accounting principles in the
U.S.
  GWh
- gigawatt-hour, one million kilowatt-hours.
  ICP
- Incentive Compensation Plan.
  ICPKE
- Incentive Compensation Plan for Key Employees.
  Intermediate
and peaking generation- includes the output provided by PPL Energy
Supply's oil- and natural gas-fired units.
  IRS-
Internal Revenue Service, a U.S. government agency.
  ISO
- Independent System Operator.
  ITC
- intangible transition charge on customer bills to recover intangible
transition costs associated with securitizing stranded costs under the Customer
Choice Act.
  LIBOR-London
Interbank Offered Rate.
  MACT
- maximum achievable control technology.
  Montana
Power - The Montana Power Company, a Montana-based company that sold its
generating assets to PPL Montana in December 1999.  Through a series
of transactions consummated during the first quarter of 2002, Montana Power sold
its electricity delivery business to NorthWestern.
  Moody's
- Moody's Investors Service, Inc.
  MW
- megawatt, one thousand kilowatts.
  MWh
- megawatt-hour, one thousand kilowatt-hours.
  NDT
- nuclear plant decommissioning trust.
  NERC
- North American Electric Reliability Corporation.
  NorthWestern- NorthWestern Corporation, a Delaware corporation, and successor in
interest to Montana Power's electricity delivery business, including Montana
Power's rights and obligations under contracts with PPL
Montana.
  NPDES
- National Pollutant Discharge Elimination System.
  NPNS
- the normal purchases and normal sales exception as permitted by derivative
accounting rules.
  NRC
- Nuclear Regulatory Commission, the federal agency that regulates nuclear power
facilities.
  NUGs(Non-Utility
Generators) - generating plants not owned by public utilities, whose electrical
output must be purchased by utilities under the PURPA if the plant meets certain
criteria.
  OCI
- other comprehensive income or loss.
  Ofgem-
Office of Gas and Electricity Markets, the British agency that regulates
transmission, distribution and wholesale sales of electricity and related
matters.
  PEDFA-
Pennsylvania Economic Development Financing
Authority.
  PJM(PJM
Interconnection, L.L.C.) - operator of the electric transmission network and
electric energy market in all or parts of Delaware, Illinois, Indiana, Kentucky,
Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee,
Virginia, West Virginia and the District of Columbia.
  PLR
(Provider of Last Resort) - the role of PPL Electric in providing default
electricity supply to retail customers within its delivery territory who have
not chosen to select an alternative electricity supplier under the Customer
Choice Act.
  PP&E-
property, plant and equipment.
  PUC-
Pennsylvania Public Utility Commission, the state agency that regulates certain
ratemaking, services, accounting and operations of Pennsylvania
utilities.
  PUC
Final Order - final order issued by the PUC on August 27, 1998,
approving the settlement of PPL Electric's restructuring
proceeding.
  PURPA-Public
Utility Regulatory Policies Act of 1978, legislation passed by the U.S. Congress
to encourage energy conservation, efficient use of resources and equitable
rates.
  Regulation
S-X - SEC regulation governing the form and content of and requirements
for financial statements required to be filed pursuant to the federal securities
laws.
   RFC-
ReliabilityFirst Corporation (the regional reliability entity that replaced the
Mid-Atlantic Area Coordination Council).
  RMC
- Risk Management Committee.
  Sarbanes-Oxley
Act of 2002-
sets requirements for management's assessment of internal controls for financial
reporting.  It also requires an independent auditor to make its own
assessment.
  SCR
- selective catalytic reduction, a pollution control
process.
  Scrubber
- an air pollution control device that can remove particulates and/or gases
(such as sulfur dioxide) from exhaust gases.
  SEC
- Securities and Exchange Commission, a U.S. government agency whose primary
mission is to protect investors and maintain the integrity of the securities
markets.
  SFAS
- Statement of Financial Accounting Standards, the accounting and financial
reporting rules issued by the FASB.
  S&P
- Standard & Poor's Ratings Services.
  Smart
grid-an electricity distribution system that allows information to flow from a
customer's electric meter in two directions.  The goal of a smart grid
is to use technologies to increase power grid efficiency, reliability, and
flexibility.
  Smart
meter-an electric meter that utilizes smart metering
technology.
  Smart
metering technology- technology that can measure, among other things,
time of electricity consumption to permit offering rate incentives for usage
during lower cost or demand intervals.
  Superfund
- federal environmental legislation that addresses remediation of contaminated
sites; states also have similar statutes.
  Tolling
agreement-
agreement whereby the owner of an electric generating facility agrees to use
that facility to convert fuel provided by a third party into electric energy for
delivery back to the third party.
  VaR
- value-at-risk.
  Accounting
Pronouncements
  EITF
08-5 - Issuer's Accounting for Liabilities Measured at Fair Value with a
Third-Party Credit Enhancement.
  FIN
46(R) - Consolidation of Variable Interest Entities, an Interpretation of
ARB No. 51.
  FSP
APB 14-1-Accounting for Convertible Debt Instruments That May Be Settled in Cash
upon Conversion (Including Partial Cash Settlement).
  FSPEITF03-6-1-Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities.
  FSP
FAS 107-1 and APB 28-1 - Interim Disclosures about Fair Value of
Financial Instruments.
  FSP
FAS 115-2 and FAS 124-2 - Recognition and Presentation of
Other-Than-Temporary Impairments.
  FSP
FAS 132(R)-1 - Employers' Disclosures about Postretirement Benefit Plan
Assets.
  FSP
FAS 157-4-
Determining Fair Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That Are Not
Orderly.
  Topic
5M-Other Than Temporary Impairment of Certain Investments in Equity
Securities, previously entitled Other Than Temporary Impairment of Certain
Investments in Debt and Equity Securities.
  SFAS
107-
Disclosures about Fair Value of Financial
Instruments.
  SFAS
132(R)- Employers' Disclosures about Pensions and Other Postretirement
Benefits.
  SFAS
133 - Accounting for Derivative Instruments and Hedging Activities, as
amended and interpreted.
  SFAS
141(R) - Business Combinations (revised 2007).
  SFAS
157 - Fair Value Measurements, as amended.
  SFAS
160 - Noncontrolling Interests in Consolidated Financial Statements, an
amendment of ARB No. 51.
  SFAS
161 - Disclosures about Derivative Instruments and Hedging Activities, an
amendment of FASB Statement No. 133.
  SFAS
165 - Subsequent Events.
  SFAS
166 - Accounting for Transfers of Financial Assets - an amendment of FASB
Statement No. 140.
  SFAS
167 - Amendments to FASB Interpretation No.
46(R).
  SFAS
168 - The FASB Accounting Standards Codification TM and the Hierarchy of
Generally Accepted Accounting Principles - a replacement of FASB Statement No.
162.
 
 FORWARD-LOOKING
INFORMATION
  Statements
contained in this Form 10-Q report concerning expectations, beliefs, plans,
objectives, goals, strategies, future events or performance and underlying
assumptions and other statements which are other than statements of historical
fact are "forward-looking statements" within the meaning of the federal
securities laws.  Although PPL, PPL Energy Supply and PPL Electric
believe that the expectations and assumptions reflected in these statements are
reasonable, there can be no assurance that these expectations will prove to be
correct.  Forward-looking statements involve a number of risks and
uncertainties, and actual results may differ materially from the results
discussed in forward-looking statements.  In addition to the specific
factors discussed in "Item 1A. Risk Factors" in the companies' 2008 Form 10-K
and in "Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations" in this Form 10-Q report, the following are among the
important factors that could cause actual results to differ materially from the
forward-looking statements.
 ·
                fuel
      supply availability;·
                weather
      conditions affecting generation, customer energy use and operating
      costs;·
                operation,
      availability and operating costs of existing generation
      facilities;·
                transmission
      and distribution system conditions and operating costs;·
                collective
      labor bargaining negotiations;·
                the
      outcome of litigation against PPL and its subsidiaries;·
                potential
      effects of threatened or actual terrorism, war or other
      hostilities;·
                the
      commitments and liabilities of PPL and its
subsidiaries;·
                market
      demand and prices for energy, capacity, emission allowances and delivered
      fuel;·
                competition
      in retail and wholesale power markets;·
                liquidity
      of wholesale power markets;·
                defaults
      by counterparties under energy, fuel or other power product
      contracts;·
                market
      prices of commodity inputs for ongoing capital
    expenditures;·
                capital
      market conditions, including the availability of capital or credit,
      changes in interest rates, and decisions regarding capital
      structure;·
                stock
      price performance of PPL;·
                the
      fair value of debt and equity securities and the impact on defined benefit
      costs and resultant cash funding requirements for defined benefit
      plans;
 ·
                interest
      rates and their effect on pension, retiree medical and nuclear
      decommissioning liabilities;·
                the
      impact of the current financial and economic downturn;·
                the
      profitability and liquidity, including access to capital markets and
      credit facilities, of PPL and its subsidiaries;·
                new
      accounting requirements or new interpretations or applications of existing
      requirements;·
                securities
      and credit ratings;·
                foreign
      currency exchange rates;·
                current
      and future environmental conditions and requirements and the related costs
      of compliance, including environmental capital expenditures, emission
      allowance costs and other expenses;·
                political,
      regulatory or economic conditions in states, regions or countries where
      PPL or its subsidiaries conduct business;·
                receipt
      of necessary governmental permits, approvals and rate
    relief;·
                new
      state, federal or foreign legislation, including new tax
      legislation;·
                state,
      federal and foreign regulatory developments;·
                the
      impact of any state, federal or foreign investigations applicable to PPL
      and its subsidiaries and the energy industry;·
                the
      effect of any business or industry restructuring;·
                development
      of new projects, markets and technologies;·
                performance
      of new ventures; and·
                asset
      acquisitions and
dispositions.
  Any such
forward-looking statements should be considered in light of such important
factors and in conjunction with other documents of PPL, PPL Energy Supply and
PPL Electric on file with the SEC.
  New
factors that could cause actual results to differ materially from those
described in forward-looking statements emerge from time to time, and it is not
possible for PPL, PPL Energy Supply or PPL Electric to predict all such factors,
or the extent to which any such factor or combination of factors may cause
actual results to differ from those contained in any forward-looking
statement.  Any forward-looking statement speaks only as of the date
on which such statement is made, and PPL, PPL Energy Supply and PPL Electric
undertake no obligation to update the information contained in such statement to
reflect subsequent developments or information.
 
 PartI.FINANCIAL
      INFORMATIONItem
      1. Financial StatementsCONDENSED
      CONSOLIDATED STATEMENTS OF INCOMEPPL
      Corporation and Subsidiaries(Unaudited)(Millions
      of Dollars, except share data)Three
      Months Ended
                  June 30,
                
                Six
      Months Ended
                  June 30,2009
                
                2008
                
                2009
                
                2008Operating
      RevenuesUtility
                
                $
                881
                
                
                $
                981
                
                
                $
                1,946
                
                
                $
                2,101Unregulated
      retail electric and gas
                
                
                32
                
                
                
                33
                
                
                
                74
                
                
                
                67Wholesale
      energy marketingRealized
                
                
                760
                
                
                
                434
                
                
                
                1,565
                
                
                
                862Unrealized
      economic activity (Note 14)
                
                
                (112
                )
                
                
                (616
                )
                
                
                240
                
                
                
                (796
                )Net
      energy trading margins
                
                
                7
                
                
                
                52
                
                
                
                (5
                )
                
                
                50Energy-related
      businesses
                
                
                105
                
                
                
                130
                
                
                
                204
                
                
                
                246Total
      Operating Revenues
                
                
                1,673
                
                
                
                1,014
                
                
                
                4,024
                
                
                
                2,530Operating
      ExpensesOperationFuel
                
                
                186
                
                
                
                189
                
                
                
                444
                
                
                
                429Energy
      purchasesRealized
                
                
                615
                
                
                
                309
                
                
                
                1,299
                
                
                
                626Unrealized
      economic activity (Note 14)
                
                
                65
                
                
                
                (604
                )
                
                
                334
                
                
                
                (863
                )Other
      operation and maintenance
                
                
                354
                
                
                
                358
                
                
                
                726
                
                
                
                734Amortization
      of recoverable transition costs
                
                
                70
                
                
                
                68
                
                
                
                154
                
                
                
                144Depreciation
                
                
                114
                
                
                
                117
                
                
                
                223
                
                
                
                228Taxes,
      other than income
                
                
                67
                
                
                
                72
                
                
                
                139
                
                
                
                147Energy-related
      businesses
                
                
                98
                
                
                
                120
                
                
                
                189
                
                
                
                227Total
      Operating Expenses
                
                
                1,569
                
                
                
                629
                
                
                
                3,508
                
                
                
                1,672Operating
      Income
                
                
                104
                
                
                
                385
                
                
                
                516
                
                
                
                858Other
      Income (Expense) - net
                
                
                (6
                )
                
                
                13
                
                
                
                29
                
                
                
                24Other-Than-Temporary
      Impairments
                
                
                1
                
                
                
                7
                
                
                
                18
                
                
                
                10Interest
      Expense
                
                
                99
                
                
                
                108
                
                
                
                188
                
                
                
                216Income
      (Loss) from Continuing Operations Before Income Taxes
                
                
                (2
                )
                
                
                283
                
                
                
                339
                
                
                
                656Income
      Taxes
                
                
                (31
                )
                
                
                94
                
                
                
                67
                
                
                
                220Income
      from Continuing Operations After Income Taxes
                
                
                29
                
                
                
                189
                
                
                
                272
                
                
                
                436Income
      (Loss) from Discontinued Operations (net of income taxes) (Note
      8)
                
                
                (32
                )
                
                
                6
                
                
                
                (29
                )
                
                
                24Net
      Income (Loss)
                
                
                (3
                )
                
                
                195
                
                
                
                243
                
                
                
                460Net
      Income Attributable to Noncontrolling Interests
                
                
                4
                
                
                
                5
                
                
                
                9
                
                
                
                10Net
      Income (Loss) Attributable to PPL Corporation
                
                $
                (7
                )
                
                $
                190
                
                
                $
                234
                
                
                $
                450Amounts
      Attributable to PPL Corporation:Income
      from Continuing Operations After Income Taxes
                
                $
                25
                
                
                $
                184
                
                
                $
                263
                
                
                $
                426Income
      (Loss) from Discontinued Operations (net of income taxes)
                
                
                (32
                )
                
                
                6
                
                
                
                (29
                )
                
                
                24Net
      Income (Loss)
                
                $
                (7
                )
                
                $
                190
                
                
                $
                234
                
                
                $
                450Earnings
      Per Share of Common Stock:Income
      from Continuing Operations After Income Taxes Available to PPL
      Corporation Common Shareowners:Basic
                
                $
                0.07
                
                
                $
                0.49
                
                
                $
                0.70
                
                
                $
                1.14Diluted
                
                $
                0.07
                
                
                $
                0.49
                
                
                $
                0.70
                
                
                $
                1.13Net
      Income (Loss) Available to PPL Corporation Common
    Shareowners:Basic
                
                $
                (0.02
                )
                
                $
                0.50
                
                
                $
                0.62
                
                
                $
                1.20Diluted
                
                $
                (0.02
                )
                
                $
                0.50
                
                
                $
                0.62
                
                
                $
                1.19Dividends
      Declared Per Share of Common Stock
                
                $
                0.345
                
                
                $
                0.335
                
                
                $
                0.69
                
                
                $
                0.67Weighted-Average
      Shares of Common Stock Outstanding
                  (in
      thousands)Basic
                
                
                375,881
                
                
                
                373,158
                
                
                
                375,493
                
                
                
                373,009Diluted
                
                
                376,206
                
                
                
                374,902
                
                
                
                375,805
                
                
                
                374,990
  The
      accompanying Notes to Condensed Consolidated Financial Statements are an
      integral part of the financial
statements.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH
      FLOWSPPL
      Corporation and Subsidiaries(Unaudited)(Millions
      of Dollars)Six
      Months Ended
                            June 30,2009
                          
                          2008Cash
      Flows from Operating ActivitiesNet
      income
                          
                          $
                          243
                          
                          
                          $
                          460Adjustments
      to reconcile net income to net cash provided by operating
      activitiesDepreciation
                          
                          
                          225
                          
                          
                          
                          230Amortization
      of recoverable transition costs and other
                          
                          
                          182
                          
                          
                          
                          178Deferred
      income taxes and investment tax credits
                          
                          
                          (86
                          )
                          
                          
                          (38
                          )Gains
      related to the extinguishment of notes
                          
                          
                          (29
                          )Impairment
      of assets
                          
                          
                          104
                          
                          
                          
                          11Unrealized
      (gains) losses on derivatives and other hedging
      activities
                          
                          
                          40
                          
                          
                          
                          (84
                          )Other
                          
                          
                          19
                          
                          
                          
                          18Change
      in current assets and current liabilitiesAccounts
      receivable
                          
                          
                          71
                          
                          
                          
                          53Accounts
      payable
                          
                          
                          (184
                          )
                          
                          
                          114Unbilled
      revenue
                          
                          
                          94
                          
                          
                          
                          (174
                          )Fuel,
      materials and supplies
                          
                          
                          (45
                          )
                          
                          
                          (3
                          )Prepayments
                          
                          
                          (85
                          )
                          
                          
                          (68
                          )Taxes
                          
                          
                          (15
                          )
                          
                          
                          6Counterparty
      collateral deposits
                          
                          
                          201
                          
                          
                          
                          304Price
      risk management assets and liabilities
                          
                          
                          (192
                          )
                          
                          
                          (26
                          )Other
                          
                          
                          21
                          
                          
                          
                          (42
                          )Other
      operating activitiesOther
      assets
                          
                          
                          (5
                          )
                          
                          
                          17Other
      liabilities
                          
                          
                          9
                          
                          
                          
                          (23
                          )Net
      cash provided by operating activities
                          
                          
                          568
                          
                          
                          
                          933Cash
      Flows from Investing ActivitiesExpenditures
      for property, plant and equipment
                          
                          
                          (524
                          )
                          
                          
                          (661
                          )Expenditures
      for intangible assets
                          
                          
                          (48
                          )
                          
                          
                          (258
                          )Proceeds
      from the sale of intangible assets
                          
                          
                          8
                          
                          
                          
                          2Purchases
      of nuclear plant decommissioning trust investments
                          
                          
                          (153
                          )
                          
                          
                          (95
                          )Proceeds
      from the sale of nuclear plant decommissioning trust
      investments
                          
                          
                          141
                          
                          
                          
                          82Purchases
      of other investments
                          
                          
                          
                          
                          
                          
                          (50
                          )Proceeds
      from the sale of other investments
                          
                          
                          150
                          
                          
                          
                          36Net
      (increase) decrease in restricted cash and cash
equivalents
                          
                          
                          189
                          
                          
                          
                          (281
                          )Other
      investing activities
                          
                          
                          (3
                          )
                          
                          
                          9Net
      cash used in investing activities
                          
                          
                          (240
                          )
                          
                          
                          (1,216
                          )Cash
      Flows from Financing ActivitiesIssuance
      of long-term debt
                          
                          
                          298
                          
                          
                          
                          399Retirement
      of long-term debt
                          
                          
                          (430
                          )
                          
                          
                          (217
                          )Issuance
      of common stock
                          
                          
                          30
                          
                          
                          
                          17Repurchase
      of common stock due to the repurchase program
                          
                          
                          
                          
                          
                          
                          (38
                          )Payment
      of common stock dividends
                          
                          
                          (256
                          )
                          
                          
                          (239
                          )Net
      increase (decrease) in short-term debt
                          
                          
                          (77
                          )
                          
                          
                          400Other
      financing activities
                          
                          
                          (20
                          )
                          
                          
                          1Net
      cash provided by (used in) financing activities
                          
                          
                          (455
                          )
                          
                          
                          323Effect
      of Exchange Rates on Cash and Cash Equivalents
                          
                          
                          
                          
                          
                          
                          (2
                          )Net
      Increase (Decrease) in Cash and Cash Equivalents
                          
                          
                          (127
                          )
                          
                          
                          38Cash
      and Cash Equivalents at Beginning of Period
                          
                          
                          1,100
                          
                          
                          
                          430Cash
      and Cash Equivalents included in Assets Held for Sale
                          
                          
                          
                          
                          
                          
                          (2
                          )Cash
      and Cash Equivalents at End of Period
                          
                          $
                          973
                          
                          
                          $
                          466
  The
      accompanying Notes to Condensed Consolidated Financial Statements are an
      integral part of the financial
statements.
 
 CONDENSED CONSOLIDATED BALANCE
      SHEETSPPL
      Corporation and Subsidiaries(Unaudited)(Millions
      of Dollars)June 30,
                  2009
                
                December 31,
                  2008AssetsCurrent
      AssetsCash
      and cash equivalents
                
                $
                973
                
                
                $
                1,100Short-term
      investments
                
                
                
                
                
                
                150Restricted
      cash and cash equivalents
                
                
                131
                
                
                
                320Accounts
      receivable (less reserve:  2009, $38; 2008, $36)Customer
                
                
                411
                
                
                
                456Other
                
                
                39
                
                
                
                77Unbilled
      revenues
                
                
                507
                
                
                
                599Fuel,
      materials and supplies
                
                
                382
                
                
                
                337Prepayments
                
                
                169
                
                
                
                84Price
      risk management assets
                
                
                1,966
                
                
                
                1,224Other
      intangibles
                
                
                27
                
                
                
                17Assets
      held for sale
                
                
                182Other
                
                
                8
                
                
                
                19Total
      Current Assets
                
                
                4,795
                
                
                
                4,383InvestmentsEquity
      method investments
                
                
                32
                
                
                
                47Nuclear
      plant decommissioning trust funds
                
                
                468
                
                
                
                446Other
                
                
                22
                
                
                
                29Total
      Investments
                
                
                522
                
                
                
                522Property,
      Plant and EquipmentElectric
      plantTransmission
      and distribution
                
                
                8,394
                
                
                
                8,046Generation
                
                
                10,134
                
                
                
                9,588General
                
                
                872
                
                
                
                840Electric
      plant in service
                
                
                19,400
                
                
                
                18,474Construction
      work in progress
                
                
                647
                
                
                
                1,131Nuclear
      fuel
                
                
                397
                
                
                
                428Electric
      plant
                
                
                20,444
                
                
                
                20,033Gas
      and oil plant
                
                
                68
                
                
                
                68Other
      property
                
                
                161
                
                
                
                156Property,
      plant and equipment, gross
                
                
                20,673
                
                
                
                20,257Less:  accumulated
      depreciation
                
                
                7,991
                
                
                
                7,882Property,
      Plant and Equipment, net
                
                
                12,682
                
                
                
                12,375Regulatory
      and Other Noncurrent AssetsRegulatory
      assets
                
                
                571
                
                
                
                737Goodwill
                
                
                796
                
                
                
                763Other
      intangibles
                
                
                617
                
                
                
                637Price
      risk management assets
                
                
                1,986
                
                
                
                1,392Other
                
                
                441
                
                
                
                596Total
      Regulatory and Other Noncurrent Assets
                
                
                4,411
                
                
                
                4,125Total
      Assets
                
                $
                22,410
                
                
                $
                21,405
  The
      accompanying Notes to Condensed Consolidated Financial Statements are an
      integral part of the financial
statements.
 
 CONDENSED
      CONSOLIDATED BALANCE SHEETSPPL
      Corporation and Subsidiaries(Unaudited)(Millions
      of Dollars)June 30,
                  2009
                
                December 31,
                  2008Liabilities
      and EquityCurrent
      LiabilitiesShort-term
      debt
                
                $
                611
                
                
                $
                679Long-term
      debt
                
                
                486
                
                
                
                696Accounts
      payable
                
                
                585
                
                
                
                766Taxes
                
                
                62
                
                
                
                77Interest
                
                
                116
                
                
                
                130Dividends
                
                
                135
                
                
                
                131Price
      risk management liabilities
                
                
                1,768
                
                
                
                1,324Other
                
                
                753
                
                
                
                499Total
      Current Liabilities
                
                
                4,516
                
                
                
                4,302Long-term
      Debt
                
                
                7,224
                
                
                
                7,142Deferred
      Credits and Other Noncurrent LiabilitiesDeferred
      income taxes and investment tax credits
                
                
                1,940
                
                
                
                1,764Price
      risk management liabilities
                
                
                1,072
                
                
                
                836Accrued
      pension obligations
                
                
                873
                
                
                
                899Asset
      retirement obligations
                
                
                394
                
                
                
                389Other
                
                
                553
                
                
                
                677Total
      Deferred Credits and Other Noncurrent Liabilities
                
                
                4,832
                
                
                
                4,565Commitments
      and Contingent Liabilities (Note 10)EquityPPL
      Corporation Shareowners' Common EquityCommon
      stock - $0.01 par value (a)
                
                
                4
                
                
                
                4Capital
      in excess of par value
                
                
                2,246
                
                
                
                2,196Earnings
      reinvested
                
                
                3,837
                
                
                
                3,862Accumulated
      other comprehensive loss
                
                
                (568
                )
                
                
                (985
                )Total
      PPL Corporation Shareowners' Common Equity
                
                
                5,519
                
                
                
                5,077Noncontrolling
      Interests
                
                
                319
                
                
                
                319Total
      Equity
                
                
                5,838
                
                
                
                5,396Total
      Liabilities and Equity
                
                $
                22,410
                
                
                $
                21,405
  (a)
              
              780
      million shares authorized; 376 million and 375 million shares issued and
      outstanding at June 30, 2009 and December 31,
      2008.The
      accompanying Notes to Condensed Consolidated Financial Statements are an
      integral part of the financial
statements.
 
 CONDENSED CONSOLIDATED STATEMENTS OF
      EQUITYPPL
      Corporation and Subsidiaries(Unaudited)(Millions
      of Dollars, shares in thousands)PPL
      Corporation ShareownersCommon
      stock shares outstanding
                
                Common
      stock
                
                Capital
      in excess of par value
                
                Earnings
      reinvested
                
                Accumulated
      other comprehensive loss
                
                Non-controlling
      interests
                
                TotalMarch
      31, 2009
                
                375,597
                
                
                $
                4
                
                
                $
                2,228
                
                
                $
                3,973
                
                
                $
                (968
                )
                
                $
                319
                
                
                $
                5,556Common
      stock issued (b)
                
                547
                
                
                
                
                
                
                
                15
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                15Stock-based
      compensation
                
                
                
                
                
                
                
                
                
                3
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                3Net
      income (loss)
                
                
                
                
                
                
                
                
                
                
                
                
                
                (7
                )
                
                
                
                
                
                
                4
                
                
                
                (3
                )Dividends,
      dividend equivalents and distributions (c)
                
                
                
                
                
                
                
                
                
                
                
                
                
                (130
                )
                
                
                
                
                
                
                (4
                )
                
                
                (134
                )Other
      comprehensive income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                401
                
                
                
                
                
                
                
                401Cumulative
      effect adjustment (d)
                
                
                
                
                
                
                
                
                
                
                
                
                
                1
                
                
                
                (1
                )June 30,
      2009
                
                376,144
                
                
                $
                4
                
                
                $
                2,246
                
                
                $
                3,837
                
                
                $
                (568
                )
                
                $
                319
                
                
                $
                5,838December 31,
      2008 (a)
                
                374,581
                
                
                $
                4
                
                
                $
                2,196
                
                
                $
                3,862
                
                
                $
                (985
                )
                
                $
                319
                
                
                $
                5,396Common
      stock issued (b)
                
                1,597
                
                
                
                
                
                
                
                49
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                49Common
      stock repurchased
                
                (34
                )
                
                
                
                
                
                
                (1
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (1
                )Stock-based
      compensation
                
                
                
                
                
                
                
                
                
                2
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                2Net
      income
                
                
                
                
                
                
                
                
                
                
                
                
                
                234
                
                
                
                
                
                
                
                9
                
                
                
                243Dividends,
      dividend equivalents and distributions (c)
                
                
                
                
                
                
                
                
                
                
                
                
                
                (260
                )
                
                
                
                
                
                
                (9
                )
                
                
                (269
                )Other
      comprehensive income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                418
                
                
                
                
                
                
                
                418Cumulative
      effect adjustment (d)
                
                
                
                
                
                
                
                
                
                
                
                
                
                1
                
                
                
                (1
                )June 30,
      2009
                
                376,144
                
                
                $
                4
                
                
                $
                2,246
                
                
                $
                3,837
                
                
                $
                (568
                )
                
                $
                319
                
                
                $
                5,838March
      31, 2008 (a)
                
                372,981
                
                
                $
                4
                
                
                $
                2,170
                
                
                $
                3,570
                
                
                $
                (160
                )
                
                $
                320
                
                
                $
                5,904Common
      stock issued (b)
                
                1,538
                
                
                
                
                
                
                
                18
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                18Stock-based
      compensation
                
                
                
                
                
                
                
                
                
                5
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                5Net
      income
                
                
                
                
                
                
                
                
                
                
                
                
                
                190
                
                
                
                
                
                
                
                5
                
                
                
                195Dividends,
      dividend equivalents and distributions (c)
                
                
                
                
                
                
                
                
                
                
                
                
                
                (126
                )
                
                
                
                
                
                
                (5
                )
                
                
                (131
                )Other
      comprehensive loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (488
                )
                
                
                
                
                
                
                (488
                )June 30,
      2008
                
                374,519
                
                
                $
                4
                
                
                $
                2,193
                
                
                $
                3,634
                
                
                $
                (648
                )
                
                $
                320
                
                
                $
                5,503December 31,
      2007 (a)
                
                373,271
                
                
                $
                4
                
                
                $
                2,185
                
                
                $
                3,435
                
                
                $
                (68
                )
                
                $
                320
                
                
                $
                5,876Common
      stock issued (b)
                
                2,072
                
                
                
                
                
                
                
                25
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                25Common
      stock repurchased
                
                (824
                )
                
                
                
                
                
                
                (39
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (39
                )Stock-based
      compensation
                
                
                
                
                
                
                
                
                
                22
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                22Net
      income
                
                
                
                
                
                
                
                
                
                
                
                
                
                450
                
                
                
                
                
                
                
                10
                
                
                
                460Dividends,
      dividend equivalents and distributions (c)
                
                
                
                
                
                
                
                
                
                
                
                
                
                (251
                )
                
                
                
                
                
                
                (10
                )
                
                
                (261
                )Other
      comprehensive loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (580
                )
                
                
                
                
                
                
                (580
                )June 30,
      2008
                
                374,519
                
                
                $
                4
                
                
                $
                2,193
                
                
                $
                3,634
                
                
                $
                (648
                )
                
                $
                320
                
                
                $
                5,503
  (a)
              
              "Capital
      in excess of par value" and "Earnings reinvested" have been adjusted by
      $13 million in accordance with FSP APB 14-1.  See Note 2 for
      additional information.(b)
              
              The
      three months ended June 30, 2009, includes common stock shares issued
      through the ICP, ICPKE, and DRIP.  The six months ended
      June 30, 2009, includes common stock shares issued through the ICP,
      ICPKE, DRIP, ESOP and DDCP.  The three months ended
      June 30, 2008, includes common stock shares issued through the ICP,
      ICPKE, and the 2-5/8% Convertible Senior Notes.  The six months
      ended June 30, 2008, includes common stock shares issued through the
      ICP, ICPKE and the 2-5/8% Convertible Senior Notes.  "Capital in
      excess of par value" for the six months ended June 30, 2009, includes
      $7 million for a company contribution to the ESOP.(c)
              
              "Earnings
      reinvested" includes dividends and dividend equivalents on PPL Corporation
      common stock and restricted stock units.  "Noncontrolling
      interests" includes dividends and distributions to noncontrolling
      interests.(d)
              
              Adjustment
      made in accordance with FSP FAS 115-2 and FAS 124-2.  See Note 2
      for additional information.The
      accompanying Notes to Condensed Consolidated Financial Statements are an
      integral part of the financial
statements.
 
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
      INCOMEPPL
      Corporation and Subsidiaries(Unaudited)(Millions
      of Dollars)Three
      Months Ended
                                                                June 30,
                                                              
                                                              
                                                              Six
      Months Ended
                                                                June 30,2009
                                                              
                                                              
                                                              2008
                                                              
                                                              
                                                              2009
                                                              
                                                              
                                                              2008Net
      income (loss)
                                                              
                                                              $
                                                              (3
                                                              )
                                                              
                                                              $
                                                              195
                                                              
                                                              
                                                              $
                                                              243
                                                              
                                                              
                                                              $
                                                              460Other
      comprehensive income (loss):Amounts
      arising during the period - gains (losses), net of tax (expense)
      benefit:Foreign
      currency translation adjustments, net of tax of $4, $1, $4,
    $0
                                                              
                                                              
                                                              162
                                                              
                                                              
                                                              
                                                              (13
                                                              )
                                                              
                                                              
                                                              70
                                                              
                                                              
                                                              
                                                              (72
                                                              )Available-for-sale
      securities, net of tax of $(17), $7, $(11), $22
                                                              
                                                              
                                                              16
                                                              
                                                              
                                                              
                                                              (7
                                                              )
                                                              
                                                              
                                                              10
                                                              
                                                              
                                                              
                                                              (21
                                                              )Qualifying
      derivatives, net of tax of $(49), $315, $(172), $348
                                                              
                                                              
                                                              50
                                                              
                                                              
                                                              
                                                              (456
                                                              )
                                                              
                                                              
                                                              232
                                                              
                                                              
                                                              
                                                              (499
                                                              )Equity
      investee's other comprehensive loss
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              (1
                                                              )
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              (1
                                                              )Reclassifications
      to net income - (gains) losses, net of tax expense
    (benefit):Available-for-sale
      securities, net of tax of $1, $1
                                                              
                                                              
                                                              (1
                                                              )
                                                              
                                                              
                                                              (1
                                                              )Qualifying
      derivatives, net of tax of $(110), $12, $(67), $(2)
                                                              
                                                              
                                                              170
                                                              
                                                              
                                                              
                                                              (18
                                                              )
                                                              
                                                              
                                                              97
                                                              
                                                              
                                                              
                                                              (1
                                                              )Defined
      benefit plans:Prior
      service costs, net of tax of $(2), $(3), $(4), $(5)
                                                              
                                                              
                                                              2
                                                              
                                                              
                                                              
                                                              3
                                                              
                                                              
                                                              
                                                              6
                                                              
                                                              
                                                              
                                                              7Net
      actuarial loss, net of tax of $(1), $(1), $(2), $(3)
                                                              
                                                              
                                                              1
                                                              
                                                              
                                                              
                                                              4
                                                              
                                                              
                                                              
                                                              2
                                                              
                                                              
                                                              
                                                              6Transition
      obligation
                                                              
                                                              
                                                              1
                                                              
                                                              
                                                              
                                                              1
                                                              
                                                              
                                                              
                                                              1
                                                              
                                                              
                                                              
                                                              1Total
      other comprehensive income (loss) attributable to PPL
      Corporation
                                                              
                                                              
                                                              401
                                                              
                                                              
                                                              
                                                              (488
                                                              )
                                                              
                                                              
                                                              418
                                                              
                                                              
                                                              
                                                              (580
                                                              )Comprehensive
      income (loss)
                                                              
                                                              
                                                              398
                                                              
                                                              
                                                              
                                                              (293
                                                              )
                                                              
                                                              
                                                              661
                                                              
                                                              
                                                              
                                                              (120
                                                              )Comprehensive
      income attributable to noncontrolling interests
                                                              
                                                              
                                                              4
                                                              
                                                              
                                                              
                                                              5
                                                              
                                                              
                                                              
                                                              9
                                                              
                                                              
                                                              
                                                              10Comprehensive
      income (loss) attributable to PPL Corporation
                                                              
                                                              $
                                                              394
                                                              
                                                              
                                                              $
                                                              (298
                                                              )
                                                              
                                                              $
                                                              652
                                                              
                                                              
                                                              $
                                                              (130
                                                              )
  The
      accompanying Notes to Condensed Consolidated Financial Statements are an
      integral part of the financial
statements.
 CONDENSED CONSOLIDATED STATEMENTS OF
      INCOMEPPL
      Energy Supply, LLC and Subsidiaries(Unaudited)(Millions
      of Dollars)Three
      Months Ended
                  June 30,
                
                Six
      Months Ended
                  June 30,2009
                
                2008
                
                2009
                
                2008Operating
      RevenuesWholesale
      energy marketingRealized
                
                $
                760
                
                
                $
                434
                
                
                $
                1,565
                
                
                $
                862Unrealized
      economic activity (Note 14)
                
                
                (112
                )
                
                
                (616
                )
                
                
                240
                
                
                
                (796
                )Wholesale
      energy marketing to affiliate
                
                
                411
                
                
                
                428
                
                
                
                908
                
                
                
                917Utility
                
                
                155
                
                
                
                211
                
                
                
                331
                
                
                
                452Unregulated
      retail electric and gas
                
                
                32
                
                
                
                33
                
                
                
                74
                
                
                
                67Net
      energy trading margins
                
                
                7
                
                
                
                52
                
                
                
                (5
                )
                
                
                50Energy-related
      businesses
                
                
                103
                
                
                
                129
                
                
                
                199
                
                
                
                243Total
      Operating Revenues
                
                
                1,356
                
                
                
                671
                
                
                
                3,312
                
                
                
                1,795Operating
      ExpensesOperationFuel
                
                
                186
                
                
                
                189
                
                
                
                444
                
                
                
                429Energy
      purchasesRealized
                
                
                583
                
                
                
                264
                
                
                
                1,235
                
                
                
                540Unrealized
      economic activity (Note 14)
                
                
                65
                
                
                
                (604
                )
                
                
                334
                
                
                
                (863
                )Energy
      purchases from affiliate
                
                
                20
                
                
                
                30
                
                
                
                40
                
                
                
                58Other
      operation and maintenance
                
                
                270
                
                
                
                265
                
                
                
                550
                
                
                
                547Depreciation
                
                
                80
                
                
                
                82
                
                
                
                153
                
                
                
                158Taxes,
      other than income
                
                
                21
                
                
                
                25
                
                
                
                41
                
                
                
                44Energy-related
      businesses
                
                
                97
                
                
                
                118
                
                
                
                186
                
                
                
                224Total
      Operating Expenses
                
                
                1,322
                
                
                
                369
                
                
                
                2,983
                
                
                
                1,137Operating
      Income
                
                
                34
                
                
                
                302
                
                
                
                329
                
                
                
                658Other
      Income (Expense) - net
                
                
                (6
                )
                
                
                10
                
                
                
                23
                
                
                
                19Other-Than-Temporary
      Impairments
                
                
                1
                
                
                
                7
                
                
                
                18
                
                
                
                10Interest
      Income from Affiliates
                
                
                1
                
                
                
                2
                
                
                
                2
                
                
                
                7Interest
      Expense
                
                
                67
                
                
                
                76
                
                
                
                122
                
                
                
                146Interest
      Expense with Affiliate
                
                
                1
                
                
                
                
                
                
                
                1Income
      (Loss) from Continuing Operations Before Income Taxes
                
                
                (40
                )
                
                
                231
                
                
                
                213
                
                
                
                528Income
      Taxes
                
                
                (41
                )
                
                
                78
                
                
                
                24
                
                
                
                180Income
      from Continuing Operations After Income Taxes
                
                
                1
                
                
                
                153
                
                
                
                189
                
                
                
                348Income
      (Loss) from Discontinued Operations (net of income taxes) (Note
      8)
                
                
                (32
                )
                
                
                5
                
                
                
                (29
                )
                
                
                14Net
      Income (Loss)
                
                
                (31
                )
                
                
                158
                
                
                
                160
                
                
                
                362Net
      Income Attributable to Noncontrolling Interests
                
                
                
                
                
                
                1
                
                
                
                
                
                
                
                1Net
      Income (Loss) Attributable to PPL Energy Supply
                
                $
                (31
                )
                
                $
                157
                
                
                $
                160
                
                
                $
                361Amounts
      Attributable to PPL Energy Supply:Income
      from Continuing Operations After Income Taxes
                
                $
                1
                
                
                $
                152
                
                
                $
                189
                
                
                $
                347Income
      (Loss) from Discontinued Operations (net of income taxes)
                
                
                (32
                )
                
                
                5
                
                
                
                (29
                )
                
                
                14Net
      Income (Loss)
                
                $
                (31
                )
                
                $
                157
                
                
                $
                160
                
                
                $
                361
  The
      accompanying Notes to Condensed Consolidated Financial Statements are an
      integral part of the financial
statements.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH
      FLOWSPPL
      Energy Supply, LLC and Subsidiaries(Unaudited)(Millions
      of Dollars)Six
      Months Ended
                            June 30,2009
                          
                          2008Cash
      Flows from Operating ActivitiesNet
      income
                          
                          $
                          160
                          
                          
                          $
                          362Adjustments
      to reconcile net income to net cash provided by operating
      activitiesDepreciation
                          
                          
                          154
                          
                          
                          
                          159Deferred
      income taxes and investment tax credits
                          
                          
                          6
                          
                          
                          
                          33Impairment
      of assets
                          
                          
                          100
                          
                          
                          
                          10Unrealized
      (gains) losses on derivatives and other hedging activities
                          
                          
                          41
                          
                          
                          
                          (86
                          )Other
                          
                          
                          (17
                          )
                          
                          
                          26Change
      in current assets and current liabilitiesAccounts
      receivable
                          
                          
                          121
                          
                          
                          
                          105Accounts
      payable
                          
                          
                          (203
                          )
                          
                          
                          92Unbilled
      revenue
                          
                          
                          50
                          
                          
                          
                          (201
                          )Fuel,
      materials and supplies
                          
                          
                          (45
                          )
                          
                          
                          (9
                          )Collateral
      on PLR energy supply to affiliate
                          
                          
                          221Counterparty
      collateral deposits
                          
                          
                          201
                          
                          
                          
                          304Price
      risk management assets and liabilities
                          
                          
                          (191
                          )
                          
                          
                          (25
                          )Other
                          
                          
                          11
                          
                          
                          
                          46Other
      operating activitiesOther
      assets
                          
                          
                          (6
                          )
                          
                          
                          5Other
      liabilities
                          
                          
                          (35
                          )
                          
                          
                          (22
                          )Net
      cash provided by operating activities
                          
                          
                          568
                          
                          
                          
                          799Cash
      Flows from Investing ActivitiesExpenditures
      for property, plant and equipment
                          
                          
                          (391
                          )
                          
                          
                          (516
                          )Expenditures
      for intangible assets
                          
                          
                          (42
                          )
                          
                          
                          (256
                          )Proceeds
      from the sale of intangible assets
                          
                          
                          8
                          
                          
                          
                          2Purchases
      of nuclear plant decommissioning trust investments
                          
                          
                          (153
                          )
                          
                          
                          (95
                          )Proceeds
      from the sale of nuclear plant decommissioning trust
      investments
                          
                          
                          141
                          
                          
                          
                          82Purchases
      of other investments
                          
                          
                          
                          
                          
                          
                          (47
                          )Proceeds
      from the sale of other investments
                          
                          
                          150
                          
                          
                          
                          33Net
      (increase) decrease in restricted cash and cash
equivalents
                          
                          
                          190
                          
                          
                          
                          (275
                          )Net
      increase in note receivable from affiliate
                          
                          
                          (47
                          )Other
      investing activities
                          
                          
                          (3
                          )
                          
                          
                          7Net
      cash used in investing activities
                          
                          
                          (147
                          )
                          
                          
                          (1,065
                          )Cash
      Flows from Financing ActivitiesIssuance
      of long-term debt
                          
                          
                          
                          
                          
                          
                          399Retirement
      of long-term debt
                          
                          
                          (220
                          )
                          
                          
                          (57
                          )Distributions
      to Member
                          
                          
                          (373
                          )
                          
                          
                          (567
                          )Contributions
      from Member
                          
                          
                          
                          
                          
                          
                          95Net
      increase in short-term debt
                          
                          
                          142
                          
                          
                          
                          400Other
      financing activities
                          
                          
                          (5
                          )
                          
                          
                          (2
                          )Net
      cash provided by (used in) financing activities
                          
                          
                          (456
                          )
                          
                          
                          268Effect
      of Exchange Rates on Cash and Cash Equivalents
                          
                          
                          
                          
                          
                          
                          (2
                          )Net
      Decrease in Cash and Cash Equivalents
                          
                          
                          (35
                          )Cash
      and Cash Equivalents at Beginning of Period
                          
                          
                          464
                          
                          
                          
                          355Cash
      and Cash Equivalents at End of Period
                          
                          $
                          429
                          
                          
                          $
                          355
  The
      accompanying Notes to Condensed Consolidated Financial Statements are an
      integral part of the financial
statements.
 
 CONDENSED CONSOLIDATED BALANCE
    SHEETSPPL
      Energy Supply, LLC and Subsidiaries(Unaudited)(Millions
      of Dollars)June 30,
                  2009
                
                December 31,
                  2008AssetsCurrent
      AssetsCash
      and cash equivalents
                
                $
                429
                
                
                $
                464Short-term
      investments
                
                
                
                
                
                
                150Restricted
      cash and cash equivalents
                
                
                126
                
                
                
                315Accounts
      receivable (less reserve:  2009, $23; 2008, $21)Customer
                
                
                160
                
                
                
                220Other
                
                
                31
                
                
                
                66Unbilled
      revenues
                
                
                360
                
                
                
                408Accounts
      receivable from affiliates
                
                
                121
                
                
                
                159Note
      receivable from affiliate
                
                
                47Collateral
      on PLR energy supply to affiliate
                
                
                79
                
                
                
                300Fuel,
      materials and supplies
                
                
                346
                
                
                
                301Prepayments
                
                
                32
                
                
                
                71Price
      risk management assets
                
                
                1,959
                
                
                
                1,221Assets
      held for sale
                
                
                182Other
      intangibles
                
                
                27
                
                
                
                17Other
                
                
                5
                
                
                
                6Total
      Current Assets
                
                
                3,904
                
                
                
                3,698InvestmentsEquity
      method investments
                
                
                32
                
                
                
                47Nuclear
      plant decommissioning trust funds
                
                
                468
                
                
                
                446Other
                
                
                17
                
                
                
                21Total
      Investments
                
                
                517
                
                
                
                514Property,
      Plant and EquipmentElectric
      plantTransmission
      and distribution
                
                
                3,822
                
                
                
                3,540Generation
                
                
                10,134
                
                
                
                9,588General
                
                
                278
                
                
                
                286Electric
      plant in service
                
                
                14,234
                
                
                
                13,414Construction
      work in progress
                
                
                548
                
                
                
                1,031Nuclear
      fuel
                
                
                397
                
                
                
                428Electric
      plant
                
                
                15,179
                
                
                
                14,873Gas
      and oil plant
                
                
                68
                
                
                
                68Other
      property
                
                
                159
                
                
                
                154Property,
      plant and equipment, gross
                
                
                15,406
                
                
                
                15,095Less:  accumulated
      depreciation
                
                
                5,995
                
                
                
                5,935Property,
      Plant and Equipment, net
                
                
                9,411
                
                
                
                9,160Other
      Noncurrent AssetsGoodwill
                
                
                796
                
                
                
                763Other
      intangibles
                
                
                483
                
                
                
                507Price
      risk management assets
                
                
                1,956
                
                
                
                1,346Other
                
                
                325
                
                
                
                481Total
      Other Noncurrent Assets
                
                
                3,560
                
                
                
                3,097Total
      Assets
                
                $
                17,392
                
                
                $
                16,469
  The
      accompanying Notes to Condensed Consolidated Financial Statements are an
      integral part of the financial
statements.
 
 CONDENSED
      CONSOLIDATED BALANCE SHEETSPPL
      Energy Supply, LLC and Subsidiaries(Unaudited)(Millions
      of Dollars)June 30,
                  2009
                
                December 31,
                  2008Liabilities
      and EquityCurrent
      LiabilitiesShort-term
      debt
                
                $
                611
                
                
                $
                584Short-term
      debt with affiliate
                
                
                124Accounts
      payable
                
                
                523
                
                
                
                684Accounts
      payable to affiliates
                
                
                35
                
                
                
                62Taxes
                
                
                27
                
                
                
                31Interest
                
                
                77
                
                
                
                88Deferred
      revenue on PLR energy supply to affiliate
                
                
                6
                
                
                
                12Price
      risk management liabilities
                
                
                1,768
                
                
                
                1,313Other
                
                
                612
                
                
                
                382Total
      Current Liabilities
                
                
                3,783
                
                
                
                3,156Long-term
      Debt
                
                
                5,000
                
                
                
                5,196Deferred
      Credits and Other Noncurrent LiabilitiesDeferred
      income taxes and investment tax credits
                
                
                1,352
                
                
                
                1,110Price
      risk management liabilities
                
                
                1,072
                
                
                
                836Accrued
      pension obligations
                
                
                512
                
                
                
                556Asset
      retirement obligations
                
                
                394
                
                
                
                389Other
                
                
                287
                
                
                
                414Total
      Deferred Credits and Other Noncurrent Liabilities
                
                
                3,617
                
                
                
                3,305Commitments
      and Contingent Liabilities (Note 10)EquityMember's
      equity
                
                
                4,974
                
                
                
                4,794Noncontrolling
      interests
                
                
                18
                
                
                
                18Total
      Equity
                
                
                4,992
                
                
                
                4,812Total
      Liabilities and Equity
                
                $
                17,392
                
                
                $
                16,469
  The
      accompanying Notes to Condensed Consolidated Financial Statements are an
      integral part of the financial
statements.
 
 CONDENSED CONSOLIDATED STATEMENTS OF
    EQUITYPPL
      Energy Supply, LLC and Subsidiaries(Unaudited)(Millions
      of Dollars)Member's
      equity
                
                Non-controlling
      interests
                
                TotalMarch
      31, 2009
                
                $
                4,696
                
                
                $
                18
                
                
                $
                4,714Net
      loss
                
                
                (31
                )
                
                
                
                
                
                
                (31
                )Other
      comprehensive income
                
                
                386
                
                
                
                
                
                
                
                386Distributions
                
                
                (77
                )
                
                
                
                
                
                
                (77
                )June 30,
      2009
                
                $
                4,974
                
                
                $
                18
                
                
                $
                4,992December 31,
      2008
                
                $
                4,794
                
                
                $
                18
                
                
                $
                4,812Net
      income
                
                
                160
                
                
                
                
                
                
                
                160Other
      comprehensive income
                
                
                393
                
                
                
                
                
                
                
                393Distributions
                
                
                (373
                )
                
                
                
                
                
                
                (373
                )June 30,
      2009
                
                $
                4,974
                
                
                $
                18
                
                
                $
                4,992March
      31, 2008
                
                $
                4,830
                
                
                $
                19
                
                
                $
                4,849Net
      income
                
                
                157
                
                
                
                1
                
                
                
                158Other
      comprehensive loss
                
                
                (493
                )
                
                
                
                
                
                
                (493
                )Contributions
      from member
                
                
                95
                
                
                
                
                
                
                
                95Distributions
                
                
                (75
                )
                
                
                (1
                )
                
                
                (76
                )June 30,
      2008
                
                $
                4,514
                
                
                $
                19
                
                
                $
                4,533December 31,
      2007
                
                $
                5,205
                
                
                $
                19
                
                
                $
                5,224Net
      income
                
                
                361
                
                
                
                1
                
                
                
                362Other
      comprehensive loss
                
                
                (580
                )
                
                
                
                
                
                
                (580
                )Contributions
      from member
                
                
                95
                
                
                
                
                
                
                
                95Distributions
                
                
                (567
                )
                
                
                (1
                )
                
                
                (568
                )June 30,
      2008
                
                $
                4,514
                
                
                $
                19
                
                
                $
                4,533
  The
      accompanying Notes to Condensed Consolidated Financial Statements are an
      integral part of the financial
statements.
 
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
      INCOMEPPL
      Energy Supply, LLC and Subsidiaries(Unaudited)(Millions
      of Dollars)Three
      Months Ended
                  June 30,
                
                
                Six
      Months Ended
                  June 30,2009
                
                
                2008
                
                
                2009
                
                
                2008Net
      income (loss)
                
                $
                (31
                )
                
                $
                158
                
                
                $
                160
                
                
                $
                362Other
      comprehensive income (loss):Amounts
      arising during the period - gains (losses), net of tax (expense)
      benefit:Foreign
      currency translation adjustments, net of tax of $4, $1, $4,
    $0
                
                
                162
                
                
                
                (13
                )
                
                
                70
                
                
                
                (72
                )Available-for-sale
      securities, net of tax of $(18), $7, $(12), $22
                
                
                16
                
                
                
                (6
                )
                
                
                10
                
                
                
                (20
                )Qualifying
      derivatives, net of tax of $(39), $318, $(154), $349
                
                
                36
                
                
                
                (460
                )
                
                
                207
                
                
                
                (501
                )Equity
      investee's other comprehensive loss
                
                
                
                
                
                
                (1
                )
                
                
                
                
                
                
                (1
                )Reclassifications
      to net income - (gains) losses, net of tax expense
    (benefit):Available-for-sale
      securities, net of tax of $1, $1
                
                
                (1
                )
                
                
                (1
                )Qualifying
      derivatives, net of tax of $(111), $12, $(68), $(3)
                
                
                169
                
                
                
                (19
                )
                
                
                98
                
                
                
                1Defined
      benefit plans:Prior
      service costs, net of tax of $(1), $(1), $(3), $(3)
                
                
                3
                
                
                
                3
                
                
                
                6
                
                
                
                6Net
      actuarial loss, net of tax of $0, $(2), $(1), $(3)
                
                
                1
                
                
                
                3
                
                
                
                2
                
                
                
                6Transition
      obligation
                
                
                
                
                
                
                1
                
                
                
                
                
                
                
                1Total
      other comprehensive income (loss) attributable to
      PPL Energy Supply
                
                
                386
                
                
                
                (493
                )
                
                
                393
                
                
                
                (580
                )Comprehensive
      income (loss)
                
                
                355
                
                
                
                (335
                )
                
                
                553
                
                
                
                (218
                )Comprehensive
      income attributable to noncontrolling interests
                
                
                
                
                
                
                1
                
                
                
                
                
                
                
                1Comprehensive
      income (loss) attributable to PPL Energy Supply
                
                $
                355
                
                
                $
                (336
                )
                
                $
                553
                
                
                $
                (219
                )
 The
      accompanying Notes to Condensed Consolidated Financial Statements are an
      integral part of the financial
statements.
 CONDENSED CONSOLIDATED STATEMENTS OF
      INCOMEPPL
      Electric Utilities Corporation and Subsidiaries(Unaudited)(Millions
      of Dollars)Three
      Months Ended
                  June 30,
                
                Six
      Months Ended
                  June 30,2009
                
                2008
                
                2009
                
                2008Operating
      RevenuesRetail
      electric
                
                $
                727
                
                
                $
                770
                
                
                $
                1,617
                
                
                $
                1,650Wholesale
      electric to affiliate
                
                
                20
                
                
                
                30
                
                
                
                40
                
                
                
                58Total
      Operating Revenues
                
                
                747
                
                
                
                800
                
                
                
                1,657
                
                
                
                1,708Operating
      ExpensesOperationEnergy
      purchases
                
                
                31
                
                
                
                44
                
                
                
                63
                
                
                
                85Energy
      purchases from affiliate
                
                
                411
                
                
                
                428
                
                
                
                908
                
                
                
                917Other
      operation and maintenance
                
                
                98
                
                
                
                101
                
                
                
                204
                
                
                
                204Amortization
      of recoverable transition costs
                
                
                70
                
                
                
                68
                
                
                
                154
                
                
                
                144Depreciation
                
                
                30
                
                
                
                33
                
                
                
                63
                
                
                
                65Taxes,
      other than income
                
                
                46
                
                
                
                48
                
                
                
                98
                
                
                
                104Total
      Operating Expenses
                
                
                686
                
                
                
                722
                
                
                
                1,490
                
                
                
                1,519Operating
      Income
                
                
                61
                
                
                
                78
                
                
                
                167
                
                
                
                189Other
      Income (Expense) - net
                
                
                
                
                
                
                2
                
                
                
                2
                
                
                
                4Interest
      Income from Affiliate
                
                
                1
                
                
                
                1
                
                
                
                3
                
                
                
                4Interest
      Expense
                
                
                31
                
                
                
                24
                
                
                
                59
                
                
                
                50Interest
      Expense with Affiliate
                
                
                
                
                
                
                2
                
                
                
                1
                
                
                
                5Income
      Before Income Taxes
                
                
                31
                
                
                
                55
                
                
                
                112
                
                
                
                142Income
      Taxes
                
                
                10
                
                
                
                19
                
                
                
                37
                
                
                
                50Net
      Income (a)
                
                
                21
                
                
                
                36
                
                
                
                75
                
                
                
                92Dividends
      on Preferred Securities
                
                
                4
                
                
                
                4
                
                
                
                9
                
                
                
                9Net
      Income Available to PPL Corporation
                
                $
                17
                
                
                $
                32
                
                
                $
                66
                
                
                $
                83
  (a)
              
              Comprehensive
      income approximates net income.
  The
      accompanying Notes to Condensed Consolidated Financial Statements are an
      integral part of the financial
statements.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH
      FLOWSPPL
      Electric Utilities Corporation and Subsidiaries(Unaudited)(Millions
      of Dollars)Six
      Months Ended
                  June 30,2009
                
                2008Cash
      Flows from Operating ActivitiesNet
      income
                
                $
                75
                
                
                $
                92Adjustments
      to reconcile net income to net cash (used in) provided by operating
      activitiesDepreciation
                
                
                63
                
                
                
                65Amortization
      of recoverable transition costs and other
                
                
                163
                
                
                
                154Deferred
      income taxes and investment tax credits
                
                
                (82
                )
                
                
                (14
                )Other
                
                
                17
                
                
                
                12Change
      in current assets and current liabilitiesAccounts
      receivable
                
                
                (7
                )
                
                
                (30
                )Accounts
      payable
                
                
                (61
                )
                
                
                (42
                )Prepayments
                
                
                (108
                )
                
                
                (83
                )Unbilled
      revenue
                
                
                44
                
                
                
                24Collateral
      on PLR energy supply from affiliate
                
                
                (221
                )Other
                
                
                12
                
                
                
                (8
                )Other
      operating activitiesOther
      assets
                
                
                1
                
                
                
                1Other
      liabilities
                
                
                13
                
                
                
                16Net
      cash provided by (used in) operating activities
                
                
                (91
                )
                
                
                187Cash
      Flows from Investing ActivitiesExpenditures
      for property, plant and equipment
                
                
                (125
                )
                
                
                (131
                )Net
      decrease in note receivable from affiliate
                
                
                221
                
                
                
                202Net
      increase in restricted cash and cash equivalents
                
                
                
                
                
                
                (11
                )Other
      investing activities
                
                
                
                
                
                
                2Net
      cash provided by investing activities
                
                
                96
                
                
                
                62Cash
      Flows from Financing ActivitiesIssuance
      of long-term debt
                
                
                298Retirement
      of long-term debt
                
                
                (9
                )
                
                
                (160
                )Payment
      of common stock dividends to PPL
                
                
                (148
                )
                
                
                (48
                )Net
      decrease in short-term debt
                
                
                (95
                )Payment
      of dividends on preferred securities
                
                
                (9
                )
                
                
                (9
                )Other
      financing activities
                
                
                (5
                )Net
      cash provided by (used in) financing activities
                
                
                32
                
                
                
                (217
                )Net
      Increase in Cash and Cash Equivalents
                
                
                37
                
                
                
                32Cash
      and Cash Equivalents at Beginning of Period
                
                
                483
                
                
                
                33Cash
      and Cash Equivalents at End of Period
                
                $
                520
                
                
                $
                65
  The
      accompanying Notes to Condensed Consolidated Financial Statements are an
      integral part of the financial
statements.
 
 CONDENSED CONSOLIDATED BALANCE
    SHEETSPPL
      Electric Utilities Corporation and Subsidiaries(Unaudited)(Millions
      of Dollars)June 30,
                  2009
                
                December 31,
                  2008AssetsCurrent
      AssetsCash
      and cash equivalents
                
                $
                520
                
                
                $
                483Restricted
      cash and cash equivalents
                
                
                1
                
                
                
                1Accounts
      receivable (less reserve:  2009, $15; 2008, $14)Customer
                
                
                248
                
                
                
                233Other
                
                
                3
                
                
                
                11Unbilled
      revenues
                
                
                146
                
                
                
                190Accounts
      receivable from affiliates
                
                
                8
                
                
                
                8Note
      receivable from affiliate
                
                
                79
                
                
                
                300Prepayments
                
                
                115
                
                
                
                7Prepayment
      on PLR energy supply from affiliate
                
                
                6
                
                
                
                12Other
                
                
                49
                
                
                
                50Total
      Current Assets
                
                
                1,175
                
                
                
                1,295Property,
      Plant and EquipmentElectric
      plantTransmission
      and distribution
                
                
                4,572
                
                
                
                4,506General
                
                
                519
                
                
                
                489Electric
      plant in service
                
                
                5,091
                
                
                
                4,995Construction
      work in progress
                
                
                83
                
                
                
                79Electric
      plant
                
                
                5,174
                
                
                
                5,074Other
      property
                
                
                2
                
                
                
                2Property,
      plant and equipment, gross
                
                
                5,176
                
                
                
                5,076Less:  accumulated
      depreciation
                
                
                1,967
                
                
                
                1,924Property,
      Plant and Equipment, net
                
                
                3,209
                
                
                
                3,152Regulatory
      and Other Noncurrent AssetsRecoverable
      transition costs
                
                
                120
                
                
                
                281Intangibles
                
                
                134
                
                
                
                130Taxes
      recoverable through future rates
                
                
                252
                
                
                
                250Recoverable
      costs of defined benefit plans
                
                
                186
                
                
                
                192Other
                
                
                116
                
                
                
                116Total
      Regulatory and Other Noncurrent Assets
                
                
                808
                
                
                
                969Total
      Assets
                
                $
                5,192
                
                
                $
                5,416
  The
      accompanying Notes to Condensed Consolidated Financial Statements are an
      integral part of the financial
statements.
 
 CONDENSED
      CONSOLIDATED BALANCE SHEETSPPL
      Electric Utilities Corporation and Subsidiaries(Unaudited)(Millions
      of Dollars)June 30,
                  2009
                
                December 31,
                  2008Liabilities
      and EquityCurrent
      LiabilitiesShort-term
      debt
                
                
                
                
                
                $
                95Long-term
      debt
                
                $
                486
                
                
                
                495Accounts
      payable
                
                
                43
                
                
                
                57Accounts
      payable to affiliates
                
                
                143
                
                
                
                186Taxes
                
                
                48
                
                
                
                65Collateral
      on PLR energy supply from affiliate
                
                
                79
                
                
                
                300Other
                
                
                151
                
                
                
                124Total
      Current Liabilities
                
                
                950
                
                
                
                1,322Long-term
      Debt
                
                
                1,572
                
                
                
                1,274Deferred
      Credits and Other Noncurrent LiabilitiesDeferred
      income taxes and investment tax credits
                
                
                696
                
                
                
                767Accrued
      pension obligations
                
                
                217
                
                
                
                209Other
                
                
                193
                
                
                
                198Total
      Deferred Credits and Other Noncurrent Liabilities
                
                
                1,106
                
                
                
                1,174Commitments
      and Contingent Liabilities (Note 10)Shareowners'
      EquityPreferred
      securities
                
                
                301
                
                
                
                301Common
      stock - no par value (a)
                
                
                364
                
                
                
                364Additional
      paid-in capital
                
                
                424
                
                
                
                424Earnings
      reinvested
                
                
                475
                
                
                
                557Total
      Shareowners' Equity
                
                
                1,564
                
                
                
                1,646Total
      Liabilities and Equity
                
                $
                5,192
                
                
                $
                5,416
  (a)
              
              170
      million shares authorized; 66 million shares issued and outstanding at
      June 30, 2009 and December 31,
2008.
  The
      accompanying Notes to Condensed Consolidated Financial Statements are an
      integral part of the financial
statements.
 
 Combined
Notes to Condensed Consolidated Financial Statements
(Unaudited)
  Terms and
abbreviations appearing in Combined Notes to Condensed Consolidated Financial
Statements are explained in the glossary.  Dollars are in millions,
except per share data, unless otherwise noted.
 1.
                Interim Financial
Statements
   (PPL,
PPL Energy Supply and PPL Electric)
  The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the U.S.
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X and, therefore, do not include all of the
information and footnotes required by accounting principles generally accepted
in the U.S. for complete financial statements.  In the opinion of
management, all adjustments considered necessary for a fair presentation in
accordance with accounting principles generally accepted in the U.S. are
reflected in the condensed consolidated financial statements.  All
adjustments are of a normal recurring nature, except as otherwise
disclosed.  Each Registrant's Balance Sheet as of December 31,
2008 is derived from that Registrant's 2008 audited Balance
Sheet.  The financial statements and notes thereto should be read in
conjunction with the financial statements and notes contained in each
Registrant's 2008 Form 10-K.  The results of operations for the six
months ended June 30, 2009 are not necessarily indicative of the results to
be expected for the full year ending December 31, 2009, or other future
periods, because results for interim periods can be disproportionately
influenced by various factors and developments and seasonal
variations.
  The
classification of certain prior period amounts has been changed to conform to
the presentation in the June 30, 2009 financial statements.  For
PPL and PPL Energy Supply, these changes include the impact of new accounting
standards adopted.  See Note 2 for additional
information.
  (PPL)
  Discontinued
Operations for the three and six months ended June 30, 2008, includes the
operating activity of PPL's natural gas distribution and propane businesses that
were sold in October 2008.  See Note 8 for additional
information.  The Statements of Cash Flows do not separately report
the cash flows of the Discontinued Operations.
  (PPL
and PPL Energy Supply)
  Discontinued
Operations for the six months ended June 30, 2008 includes activity related
to the Latin American businesses that were dissolved in 2008.
  In May
2009, PPL Generation signed a definitive agreement to sell its Long Island
generation business and related tolling agreements.  In July 2009, PPL
Maine signed a definitive agreement to sell the majority of its hydroelectric
generation business.  PPL expects both sales to close in
2009.  The results of operations for the three and six months ended
June 30, 2009 and 2008 are classified as Discontinued
Operations.  The assets and liabilities of the Long Island generation
business and the majority of the Maine hydroelectric generation business
expected to be sold are classified as held for sale on the Balance Sheet at
June 30, 2009.
  See Note
8 for additional information on the Discontinued Operations and the anticipated
sales.  The Statements of Cash Flows do not separately report the cash
flows of the Discontinued Operations.
 2.
                Summary of Significant Accounting
  Policies
   The
following accounting policy disclosures represent updates to the "Summary of
Significant Accounting Policies" Note in each Registrant's 2008 Form 10-K and
should be read in conjunction with that discussion.
  Revenue
(PPL
and PPL Electric)
  Revenue
Recognition
  Beginning
November 1, 2008, PPL Electric's transmission revenues are billed in accordance
with a tariff pending FERC-approval that utilizes a formula rate recovery
mechanism.  The tariff allows for recovery of actual transmission
costs incurred, a return on transmission plant placed in service and an
incentive return on construction work in progress for FERC-approved regional
transmission expansion projects.  The tariff utilizes estimated costs
for the current year billing to customers and requires a true-up to adjust for
actual costs in the subsequent year's rate.  Once PPL Electric's
formula rate recovery mechanism is approved by the FERC, the annual update of
the rate is implemented automatically without specific approval by the FERC
required before going into effect.
  During
the three months ended June 30, 2009, a true-up was recorded for the FERC
formula-based transmission revenues that had been billed for the period November
1, 2008 through May 31, 2009 based on a calculation of the amounts that
will be returned to customers in future rates for the required true-up to actual
costs.  This amount is reflected on the Statement of Income in
"Utility" revenue for PPL and in "Retail electric" for PPL Electric, and reduced
revenue by $11 million and net income by $7 million for the three and six months
ended June 30, 2009.  The overcollected revenue and an
insignificant amount of interest will be returned to customers in monthly rates
between June 1, 2009 and May 31, 2010.
  The $7
million after-tax true-up recorded in the three months ended June 30, 2009
includes $5 million related to prior periods ($2 million related to 2008 and $3
million related to the three months ended March 31, 2009).  The
true-up, reflected in the Pennsylvania Delivery segment for PPL, is not
considered by management as material to the financial statements of PPL and PPL
Electric for the year ended December 31, 2008 or the quarter ended
March 31, 2009 and it is not expected to be material to the financial
statements for the full year 2009.
  Investments
in Debt and Equity Securities (PPL,
PPL Energy Supply and PPL Electric)
  Investments
in debt securities are classified as held-to-maturity and measured at amortized
cost, when there is an intent and ability to hold the securities to
maturity.  Debt securities and equity securities that are acquired and
held principally for the purpose of selling them in the near-term are classified
as trading.  Trading securities are generally held to capitalize on
fluctuations in their value.  All other investments in debt and equity
securities are classified as available-for-sale.  Both trading and
available-for-sale securities are carried at fair value.  The specific
identification method is used to calculate realized gains and losses on debt and
equity securities.  Any unrealized gains and losses on trading
securities are included in earnings.  Through March 31, 2009,
unrealized gains and losses on all available-for-sale securities were reported,
net of tax, in OCI or recognized in earnings when the decline in fair value
below amortized cost was determined to be an other-than-temporary
impairment.
  As
described in "New Accounting Standards Adopted," FSP FAS 115-2 and FAS 124-2
modifies the criteria for determining whether a decline in fair value of a debt
security is other than temporary and whether the other than temporary impairment
is recognized in earnings or reported in OCI.  Beginning April 1,
2009, when a debt security is in an unrealized loss position:
  ·
              if
      there is an intent to sell the security or a requirement to sell the
      security before recovery, the other-than-temporary impairment is
      recognized currently in earnings; or·
              if
      there is no intent to sell the security or requirement to sell the
      security before recovery, the portion of the other-than-temporary
      impairment that is considered a credit loss is recognized currently in
      earnings and the remainder of the other-than-temporary impairment is
      reported in OCI, net of tax; or·
              if
      there is no intent to sell the security or requirement to sell the
      security before recovery and there is no credit loss, the unrealized loss
      is reported in OCI, net of tax.
  Equity
securities were not impacted by the FSP; therefore, unrealized gains and losses
on available-for-sale equity securities continue to be reported, net of tax, in
OCI or recognized in earnings when a decline in fair value below amortized cost
is determined to be an other-than-temporary impairment.  See Notes 13
and 18 for additional information on investments in debt and equity
securities.
  New
Accounting Standards Adopted(PPL,
PPL Energy Supply and PPL Electric)
  EITF
08-5
  EITF 08-5
applies to liabilities issued with an inseparable third-party credit enhancement
when the liability is measured or disclosed at fair value on a recurring
basis.  An issuer shall disclose the existence of a third-party credit
enhancement, and the fair value measurement of the liability shall not include
the effect of this third-party credit enhancement.
  PPL and
its subsidiaries adopted EITF 08-5, prospectively, effective January 1,
2009.  The initial adoption of EITF 08-5 did not have a material
impact on PPL and its subsidiaries' financial statements, as this guidance
currently only impacts the fair value disclosure of certain credit-enhanced debt
instruments.  See "Financial Instruments Not Recorded at Fair
Value-Other" within Note 13 for these disclosures.
  FSP
APB 14-1
  FSP APB
14-1 requires an issuer to separately account for the liability and equity
components of convertible debt instruments that may be settled in cash (or other
assets) upon conversion in a manner that reflects the issuer's nonconvertible
debt borrowing rate when interest cost is recognized in subsequent
periods.  The discount that results from separating the liability and
equity components will be amortized over the life of the debt and recognized as
interest expense.  PPL and its subsidiaries adopted FSP APB 14-1
effective January 1, 2009, which required retrospective application to all prior
periods presented.
  FSP APB
14-1 was applicable to PPL Energy Supply's 2-5/8% Convertible Senior Notes due
2023 (Convertible Senior Notes), which upon conversion required cash settlement
of the principal amount and permitted settlement of any conversion premium in
cash or PPL common stock.  During 2008, all of the Convertible Senior
Notes were either converted at the election of the holders or redeemed at par as
a result of PPL Energy Supply calling the notes for redemption.  FSP
APB 14-1 required only retrospective application with regard to the Convertible
Senior Notes, as none of these notes were outstanding at the effective
date.  The retrospective application of this FSP impacted PPL in
periods prior to 2006.  As such, PPL reduced the opening balance of
"Earnings reinvested" by $13 million with a corresponding increase to "Capital
in excess of par value."
  FSP
EITF 03-6-1
  FSP EITF
03-6-1 requires that unvested share-based payment awards that contain
nonforfeitable rights to dividends or dividend equivalents be considered
participating securities and be included in the computation of EPS under the
two-class method.  The two-class method treats share-based payment
awards that pay nonforfeitable dividends as a separate class of stock for
purposes of computing EPS.
  PPL and
its subsidiaries adopted FSP EITF 03-6-1, retrospectively, effective January 1,
2009.  The adoption did not have a material impact on PPL and its
subsidiaries.  As a result of the application of this FSP, PPL's
restricted stock, restricted stock units, and stock units granted to directors
are now considered participating securities; therefore, PPL is required to
compute EPS under the two-class method.  The retrospective application
of this FSP caused PPL's basic EPS for income from continuing operations after
income taxes available to PPL Corporation common shareowners to decrease by
$0.01 for the three months ended June 30, 2008, and basic EPS for net income
available to PPL Corporation common shareowners to decrease by $0.01 for the six
months ended June 30, 2008.  See Note 4 for additional
information.
  FSP
FAS 107-1 and APB 28-1
  FSP FAS
107-1 and APB 28-1 applies to all financial instruments within the scope of SFAS
107 and requires a publicly traded company to include disclosures about the fair
value of its financial instruments in interim reporting periods.
  PPL and
its subsidiaries adopted FSP FAS 107-1 and APB 28-1, prospectively, effective
April 1, 2009.  This FSP does not require disclosures for earlier
periods presented for comparative purposes at initial adoption. In periods after
initial adoption, this FSP requires comparative disclosures only for periods
ending after initial adoption.  The adoption of FSP FAS 107-1 and APB
28-1 did not have a material impact on PPL and its subsidiaries' financial
statements, as this guidance only impacts disclosures about the fair value of
financial instruments.  See "Financial Instruments Not Recorded at
Fair Value-Other" within Note 13 for these disclosures.
  FSP
FAS 115-2 and FAS 124-2
  FSP FAS
115-2 and FAS 124-2 modifies the existing requirement that an entity have the
intent and ability to hold an impaired debt security to recovery in order to
conclude an impairment was temporary.  Instead, an impairment of a
debt security is other than temporary if (1) an entity has the intent to sell
the security, (2) it is more likely than not that an entity will be required to
sell the security before recovery, or (3) an entity does not expect to recover
the entire amortized cost basis of the security, referred to as a credit
loss.
  In
addition, the FSP changes the recording of an other-than-temporary impairment on
a debt security if the reason for the other-than-temporary impairment is the
recognition of a credit loss.  In this situation, the
other-than-temporary impairment will be separated into the credit loss
component, which is recognized in earnings, and the remainder of the
other-than-temporary impairment, which is recorded in OCI.
  For a
debt security held at the beginning of the period of adoption for which an
other-than-temporary impairment was previously recognized, if an entity does not
intend to sell the debt security and it is not more likely than not that the
entity will be required to sell the debt security before recovery of its
amortized cost basis, the cumulative effect of applying this FSP will be
recognized as an adjustment to the opening balance of retained earnings with a
corresponding adjustment to AOCI.
  The FSP
affects the accounting for PPL's and PPL Energy Supply's investments in debt
securities in the NDT funds.  Prior to the application of this FSP,
PPL and PPL Energy Supply were unable to demonstrate the ability to hold an
impaired debt security in the NDT funds until recovery; therefore, an unrealized
loss on a debt security always represented an other-than-temporary impairment
that required a current period charge to earnings.  Based on the
application of this FSP, certain unrealized losses on investments in debt
securities are no longer considered other-than-temporary impairments and will be
recorded to OCI.
  PPL and
its subsidiaries adopted FSP FAS 115-2 and FAS 124-2, effective April 1,
2009.  Related SEC guidance, Topic 5M, was also amended to no longer
apply to debt securities.  As a result of the adoption, PPL and PPL
Energy Supply recorded an immaterial cumulative effect adjustment to the opening
balance of retained earnings with a corresponding reduction to
AOCI.
  FSP
FAS 157-4
  FSP FAS
157-4, which supersedes FSP FAS 157-3, provides additional guidance for
estimating fair value when the volume and level of activity for the asset or
liability have significantly decreased.  It also includes guidance on
identifying circumstances that indicate a transaction is not
orderly.  This FSP emphasizes that the objective of a fair value
measurement remains the same; that is, fair value is the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date under current
market conditions.
  PPL and
its subsidiaries adopted FSP FAS 157-4, prospectively, effective April 1,
2009.  This FSP does not require disclosures for earlier periods
presented for comparative purposes at initial adoption. In periods after initial
adoption, this FSP requires comparative disclosures only for periods ending
after initial adoption.  The adoption of FSP FAS 157-4 did not have a
material impact on PPL and its subsidiaries' financial statements.
  SFAS
141(R)
  SFAS
141(R) changes the accounting and reporting for business combinations occurring
after its adoption.  In addition, SFAS 141(R) requires entities to
recognize changes in unrecognized tax benefits acquired in a business
combination, including business combinations that occurred prior to January 1,
2009, in income tax expense rather than in goodwill.  PPL and its
subsidiaries adopted SFAS 141(R), prospectively, effective January 1,
2009.  The January 1, 2009 adoption of SFAS 141(R) did not have a
significant impact on PPL and its subsidiaries; however, the impact in future
periods could be material.
  In the
first quarter of 2009, PPL and PPL Energy Supply recorded an income tax benefit
of $14 million as a result of settling an income tax dispute.  Prior
to the adoption of SFAS 141(R), $7 million of this income tax benefit would have
been recorded as a reduction to goodwill.
  SFAS
157
  Effective
January 1, 2009, PPL and its subsidiaries fully applied SFAS 157 to fair value
measurement concepts used within their financial statements where
applicable.
  SFAS
160
  The FASB
issued SFAS 160 to improve the relevancy, comparability, and transparency of the
financial information an entity provides when it has a noncontrolling interest
in a subsidiary and when it changes its ownership interest in a
subsidiary.  SFAS 160 requires that the ownership interests in
subsidiaries held by parties other than the parent be presented in the
consolidated statement of financial position within equity, but separate from
the parent's equity, and that the amount of consolidated net income attributable
to the parent and to the noncontrolling interest be presented on the face of the
consolidated statement of income.  SFAS 160 modifies the accounting
for both changes in a parent's ownership interest while the parent retains its
controlling financial interest in its subsidiary and for the deconsolidation of
a subsidiary.  SFAS 160 also requires enhanced disclosures relating to
noncontrolling interests.
  PPL and
its subsidiaries adopted SFAS 160, prospectively, effective January 1, 2009,
concurrent with the adoption of SFAS 141(R), except for the presentation and
disclosure requirements, which required retrospective
application.  The adoption of SFAS 160 did not have a material impact
on PPL and its subsidiaries' financial statements.
  At
June 30, 2009 and December 31, 2008, PPL reflected PPL Electric's preferred
securities of $301 million within "Noncontrolling interests" on the Balance
Sheets.  Dividend requirements of $4 million and $9 million were
included in "Net Income Attributable to Noncontrolling Interests" on the
Statements of Income for the three and six months ended June 30, 2009 and
2008.
  SFAS
161
  SFAS 161
applies to all derivative instruments, including bifurcated derivative
instruments and nonderivative instruments that are designated and qualify as
hedging instruments pursuant to SFAS 133, as well as related hedged items
accounted for under SFAS 133.  SFAS 161 requires an entity to expand
disclosures to provide greater transparency about (a) how and why it uses
derivative instruments, (b) how derivative instruments and related hedged items
are accounted for under SFAS 133 and (c) how derivative instruments and related
hedged items affect its financial position, results of operations and cash
flows.
  PPL and
its subsidiaries adopted SFAS 161, prospectively, effective January 1,
2009.  The enhanced disclosures required by SFAS 161 are presented in
Note 14.  SFAS 161 was issued to provide greater transparency by
enhancing existing disclosures; therefore, the adoption did not have a material
impact on PPL and its subsidiaries' financial statements.
  SFAS
165
  SFAS 165
sets forth the period after the balance sheet date during which management of a
reporting entity shall evaluate events or transactions that may occur for
potential recognition or disclosure in the financial
statements.  Additionally, SFAS 165 sets forth recognition and
disclosure requirements for events or transactions that occur after the balance
sheet date, including a requirement to disclose the date through which
subsequent events have been evaluated.  SFAS 165 shall be applied to
the accounting for and disclosure of subsequent events that are not within the
scope of other GAAP.
  PPL and
its subsidiaries adopted SFAS 165, prospectively, for the interim periods ended
June 30, 2009.  The initial adoption of SFAS 165 did not have a
material impact on PPL and its subsidiaries' financial
statements.  See Note 21 for the disclosures required by SFAS
165.
  New
Accounting Standards Pending Adoption
  See Note
20 for a discussion of new accounting standards pending adoption.
 3.
                Segment and Related
Information
   (PPL
and PPL Energy Supply)
  See the
"Segment and Related Information" Note in each Registrant's 2008 Form 10-K for a
discussion of reportable segments.  The Supply segment of PPL and PPL
Energy Supply includes the elimination of intersegment
transactions.
  Financial
data for the segments are:
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,PPL
                
                2009
                
                2008
                
                2009
                
                2008Income
      Statement DataRevenues
      from external customersSupply
      (a)
                
                $
                783
                
                
                $
                24
                
                
                $
                2,061
                
                
                $
                410International
      Delivery
                
                
                163
                
                
                
                220
                
                
                
                346
                
                
                
                470Pennsylvania
      Delivery (b)
                
                
                727
                
                
                
                770
                
                
                
                1,617
                
                
                
                1,650$
                1,673
                
                
                $
                1,014
                
                
                $
                4,024
                
                
                $
                2,530Intersegment
      revenuesSupply
                
                $
                411
                
                
                $
                428
                
                
                $
                908
                
                
                $
                917Pennsylvania
      Delivery
                
                
                20
                
                
                
                30
                
                
                
                40
                
                
                
                58Net
      Income (Loss) Attributable to PPLSupply
      (c)
                
                $
                (86
                )
                
                $
                97
                
                
                $
                19
                
                
                $
                199International
      Delivery (d)
                
                
                62
                
                
                
                62
                
                
                
                149
                
                
                
                160Pennsylvania
      Delivery (b) (e)
                
                
                17
                
                
                
                31
                
                
                
                66
                
                
                
                91$
                (7
                )
                
                $
                190
                
                
                $
                234
                
                
                $
                450
  June 30,
      2009
                  
                  December 31,
      2008Balance
      Sheet DataTotal
      assetsSupply
                  
                  $
                  12,841
                  
                  
                  $
                  11,790International
      Delivery
                  
                  
                  4,377
                  
                  
                  
                  4,199Pennsylvania
      Delivery
                  
                  
                  5,192
                  
                  
                  
                  5,416$
                  22,410
                  
                  
                  $
                  21,405
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,PPLEnergy
      Supply
                
                2009
                
                2008
                
                2009
                
                2008Income
      Statement DataRevenues
      from external customersSupply
      (a)
                
                $
                1,193
                
                
                $
                451
                
                
                $
                2,966
                
                
                $
                1,325International
      Delivery
                
                
                163
                
                
                
                220
                
                
                
                346
                
                
                
                470$
                1,356
                
                
                $
                671
                
                
                $
                3,312
                
                
                $
                1,795Net
      Income (Loss) Attributable to PPL Energy SupplySupply
      (c)
                
                $
                (93
                )
                
                $
                95
                
                
                $
                11
                
                
                $
                201International
      Delivery (d)
                
                
                62
                
                
                
                62
                
                
                
                149
                
                
                
                160$
                (31
                )
                
                $
                157
                
                
                $
                160
                
                
                $
                361
  June 30,
      2009
                
                December 31,
      2008Balance
      Sheet DataTotal
      assetsSupply
                
                $
                13,015
                
                
                $
                12,270International
      Delivery
                
                
                4,377
                
                
                
                4,199$
                17,392
                
                
                $
                16,469
  (a)
              
              Includes
      unrealized gains and losses from economic activity.  See
      "Commodity Price Risk (Non-trading) - Economic Activity" in Note 14 for
      additional information.(b)
              
              2009
      includes an unfavorable true-up to operating revenue of $11 million and to
      net income (loss) of $7 million related to the FERC formula-based
      transmission revenues.  See Note 2 for additional
      information.(c)
              
              2009
      and 2008 include the results of Discontinued Operations of the Long Island
      generation business and the majority of the Maine hydroelectric generation
      business.  See Note 8 for additional
  information.(d)
              
              The
      six months ended June 30, 2008, includes the results of Discontinued
      Operations of the Latin American businesses.  See Note 8 for
      additional information.(e)
              
              2008
      includes the results of Discontinued Operations of
      PPL's natural gas distribution and propane businesses.  See Note
      8 for additional information.
  4.
              Earnings Per Share
  (PPL)
  EPS is
computed using the two-class method, which is an earnings allocation method for
computing EPS that treats a participating security as having rights to earnings
that would otherwise have been available to common
shareowners.  Share-based payment awards that provide recipients a
non-forfeitable right to dividends or dividend equivalents are considered
participating securities.
  Basic EPS
is computed by dividing income available to common shareowners by the
weighted-average number of common shares outstanding during the
period.  Diluted EPS is computed by dividing income available to
common shareowners by the weighted-average number of shares outstanding that are
increased for additional shares that would be outstanding if potentially
dilutive non-participating securities were converted to common
shares.  In 2009 and 2008, these securities consisted of stock options
and performance units granted under the incentive compensation
plans.  In 2008, these securities also included PPL Energy Supply's
2-5/8% Convertible Senior Notes (Convertible Senior Notes).
  The basic
and diluted EPS computations and reconciliations of the amounts of income and
shares (in thousands) of common stock used in the calculations are:
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008Income
      (Numerator)Income
      from continuing operations after income taxes attributable to
      PPL
                
                $
                25
                
                
                $
                184
                
                
                $
                263
                
                
                $
                426Less
      amounts allocated to participating securities
                
                
                
                
                
                
                1
                
                
                
                1
                
                
                
                2Income
      from continuing operations after income taxes available to PPL common
      shareowners
                
                $
                25
                
                
                $
                183
                
                
                $
                262
                
                
                $
                424Income
      (loss) from discontinued operations (net of income taxes) available to PPL
      common shareowners
                
                $
                (32
                )
                
                $
                6
                
                
                $
                (29
                )
                
                $
                24Net
      income (loss) attributable to PPL
                
                $
                (7
                )
                
                $
                190
                
                
                $
                234
                
                
                $
                450Less
      amounts allocated to participating securities
                
                
                
                
                
                
                1
                
                
                
                1
                
                
                
                2Net
      income (loss) available to PPL common shareowners
                
                $
                (7
                )
                
                $
                189
                
                
                $
                233
                
                
                $
                448Shares
      of Common Stock (Denominator)Weighted-average
      shares - Basic EPS
                
                
                375,881
                
                
                
                373,158
                
                
                
                375,493
                
                
                
                373,009Add incremental
      non-participating securities:Stock
      options and performance units
                
                
                325
                
                
                
                1,073
                
                
                
                312
                
                
                
                1,104Convertible
      Senior Notes
                
                
                
                
                
                
                671
                
                
                
                
                
                
                
                877Weighted-average
      shares - Diluted EPS
                
                
                376,206
                
                
                
                374,902
                
                
                
                375,805
                
                
                
                374,990Basic
      EPSAvailable
      to PPL common shareowners:Income
      from continuing operations after income taxes
                
                $
                0.07
                
                
                $
                0.49
                
                
                $
                0.70
                
                
                $
                1.14Income
      (loss) from discontinued operations (net of income taxes)
                
                
                (0.09
                )
                
                
                0.01
                
                
                
                (0.08
                )
                
                
                0.06Net
      Income (Loss)
                
                $
                (0.02
                )
                
                $
                0.50
                
                
                $
                0.62
                
                
                $
                1.20
 Diluted
      EPSAvailable
      to PPL common shareowners:Income
      from continuing operations after income taxes
                    
                    $
                    0.07
                    
                    
                    $
                    0.49
                    
                    
                    $
                    0.70
                    
                    
                    $
                    1.13Income
      (loss) from discontinued operations (net of income taxes)
                    
                    
                    (0.09
                    )
                    
                    
                    0.01
                    
                    
                    
                    (0.08
                    )
                    
                    
                    0.06Net
      Income (Loss)
                    
                    $
                    (0.02
                    )
                    
                    $
                    0.50
                    
                    
                    $
                    0.62
                    
                    
                    $
                    1.19
  For the
three and six months ended June 30, 2009, there were 1,636,390 and
2,143,289 stock options and performance units excluded from the computation of
diluted EPS because the effect would have been antidilutive.
  During
the six months ended June 30, 2008, all then outstanding Convertible Senior
Notes were either converted at the election of the holders or redeemed at par by
PPL Energy Supply.  No Convertible Senior Notes were outstanding at
June 30, 2008.
  During
the six months ended June 30, 2009, PPL issued 419,746 shares of common
stock under its stock-based compensation plans.  In addition, PPL
issued 235,013 and 942,016 shares of common stock related
to its ESOP and its DRIP.
  5.
              Income
      Taxes
  (PPL,
PPL Energy Supply and PPL Electric)
  Reconciliations
of effective income tax rates are:
  Three
      Months Ended June 30,
                  
                  Six
      Months Ended June 30,PPL
                  
                  2009
                  
                  2008
                  
                  2009
                  
                  2008Reconciliation of Income TaxesFederal
      income tax on Income (Loss) from Continuing Operations Before Income
      Taxes at statutory tax rate - 35%
                  
                  
                  
                  
                  
                  $
                  99
                  
                  
                  $
                  119
                  
                  
                  $
                  230
 Increase
      (decrease) due to:State
      income taxes (a)
                    
                    $
                    (7
                    )
                    
                    $
                    8
                    
                    
                    
                    
                    
                    
                    $
                    16Amortization
      of investment tax credit
                    
                    
                    (3
                    )
                    
                    
                    (2
                    )
                    
                    $
                    (5
                    )
                    
                    
                    (5
                    )Difference
      related to income recognition of foreign affiliates (net of foreign income
      taxes)
                    
                    
                    (8
                    )
                    
                    
                    (9
                    )
                    
                    
                    (19
                    )
                    
                    
                    (17
                    )Change
      in foreign tax reserves (a)
                    
                    
                    (15
                    )
                    
                    
                    17
                    
                    
                    
                    (29
                    )
                    
                    
                    5Foreign
      income tax return adjustments (b)
                    
                    
                    
                    
                    
                    
                    (17
                    )
                    
                    
                    1
                    
                    
                    
                    (17
                    )Change
      in federal tax reserves (a)
                    
                    
                    
                    
                    
                    
                    3
                    
                    
                    
                    10
                    
                    
                    
                    6Stranded
      cost securitization (a)
                    
                    
                    (2
                    )
                    
                    
                    (2
                    )
                    
                    
                    (3
                    )
                    
                    
                    (3
                    )Domestic
      manufacturing deduction
                    
                    
                    (4
                    )
                    
                    
                    (3
                    )
                    
                    
                    (7
                    )
                    
                    
                    (7
                    )Federal
      income tax credits (c)
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    13Other
                    
                    
                    8
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (1
                    )(31
                    )
                    
                    
                    (5
                    )
                    
                    
                    (52
                    )
                    
                    
                    (10
                    )Total
      income taxes from continuing operations
                    
                    $
                    (31
                    )
                    
                    $
                    94
                    
                    
                    $
                    67
                    
                    
                    $
                    220
  (a)
              
              For
      the three months ended June 30, 2009, PPL recorded a $17 million benefit
      related to federal, state and foreign income tax reserves, which consisted
      primarily of a $15 million benefit reflected in "Change in foreign tax
      reserves," and a $2 million benefit reflected in "Stranded cost
      securitization."For
      the three months ended June 30, 2008, PPL recorded an $18 million tax
      expense related to federal, state and foreign income tax reserves, which
      consisted primarily of a $17 million expense reflected in "Change in
      foreign tax reserves" and a $3 million expense reflected in "Change in
      federal tax reserves," offset by a $2 million benefit reflected in
      "Stranded cost securitization."For
      the six months ended June 30, 2009, PPL recorded a $23 million benefit
      related to federal, state and foreign income tax reserves, which consisted
      primarily of a $29 million benefit reflected in "Change in foreign tax
      reserves," a $3 million benefit reflected in "Stranded cost
      securitization" and a $1 million benefit reflected in "Other," offset by a
      $10 million expense reflected in "Change in federal tax
      reserves."For
      the six months ended June 30, 2008, PPL recorded an $8 million expense
      related to federal, state and foreign income tax reserves, which consisted
      primarily of a $5 million expense reflected in "Change in foreign tax
      reserves" and a $6 million expense reflected in "Change in federal tax
      reserves," offset by a $3 million benefit reflected in "Stranded cost
      securitization."(b)
              
              For
      the six months ended June 30, 2009, PPL recorded a $1 million foreign
      income tax expense as a result of filing the 2008 income tax returns,
      which is reflected in "Foreign income tax return
    adjustments."For
      the three and six months ended June 30, 2008, PPL recorded a $17 million
      foreign income tax benefit as a result of filing the 2007 income tax
      returns, which is reflected in "Foreign income tax return
      adjustments."(c)
              
              In
      March 2008, PPL Energy Supply recorded a $13 million expense to adjust the
      amount of synthetic fuel tax credits recorded during 2007.  See
      Note 10 for additional information.
  PPL has
evaluated the impact of the change in earnings estimates on its projected annual
effective tax rate.  The result of the change in estimate reduced
income tax expense for the three months ended June 30, 2009 by $9 million ($0.02
per share, basic and diluted).
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,PPLEnergy
      Supply
                
                2009
                
                2008
                
                2009
                
                2008Reconciliation
      of Income TaxesFederal
      income tax on Income (Loss) from Continuing Operations Before Income
      Taxes at statutory tax rate - 35%
                
                $
                (14
                )
                
                $
                81
                
                
                $
                75
                
                
                $
                185Increase
      (decrease) due to:State
      income taxes (a)
                
                
                (8
                )
                
                
                8
                
                
                
                (2
                )
                
                
                14Amortization
      of investment tax credit
                
                
                (2
                )
                
                
                (2
                )
                
                
                (4
                )
                
                
                (4
                )Difference
      related to income recognition of foreign affiliates (net of foreign income
      taxes)
                
                
                (8
                )
                
                
                (9
                )
                
                
                (19
                )
                
                
                (17
                )Change
      in foreign tax reserves (a)
                
                
                (15
                )
                
                
                17
                
                
                
                (29
                )
                
                
                5Foreign
      income tax return adjustments (b)
                
                
                
                
                
                
                (17
                )
                
                
                1
                
                
                
                (17
                )Change
      in federal tax reserves (a)
                
                
                
                
                
                
                2
                
                
                
                3
                
                
                
                6Domestic
      manufacturing deduction
                
                
                (4
                )
                
                
                (3
                )
                
                
                (7
                )
                
                
                (7
                )Federal
      income tax credits (c)
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                13Other
                
                
                10
                
                
                
                1
                
                
                
                6
                
                
                
                2(27
                )
                
                
                (3
                )
                
                
                (51
                )
                
                
                (5
                )Total
      income taxes
                
                $
                (41
                )
                
                $
                78
                
                
                $
                24
                
                
                $
                180
  (a)
              
              For
      the three months ended June 30, 2009, PPL Energy Supply recorded a $15
      million benefit in foreign income tax reserves reflected in "Change in
      foreign tax reserves."For
      the three months ended June 30, 2008, PPL Energy Supply recorded a $20
      million expense related to federal, state and foreign income tax reserves,
      which consisted primarily of a $17 million expense reflected in "Change in
      foreign tax reserves," a $2 million expense reflected in "Change in
      federal tax reserves" and a $1 million expense reflected in "State income
      taxes."For
      the six months ended June 30, 2009, PPL Energy Supply recorded a $26
      million benefit related to federal, state and foreign income tax reserves,
      which consisted primarily of a $29 million benefit reflected in "Change in
      foreign tax reserves," offset by a $3 million expense reflected in "Change
      in federal tax reserves."For
      the six months ended June 30, 2008, PPL Energy Supply recorded an $11
      million expense related to federal, state and foreign income tax reserves,
      which consisted primarily of a $5 million expense reflected in "Change in
      foreign tax reserves" and a $6 million expense reflected in "Change in
      federal tax reserves."(b)
              
              For
      the six months ended June 30, 2009, PPL Energy Supply recorded a $1
      million foreign income tax expense as a result of filing the 2008 income
      tax returns, which is reflected in "Foreign income tax return
      adjustments."For
      the three and six months ended June 30, 2008, PPL Energy Supply recorded a
      $17 million foreign income tax benefit as a result of filing the 2007
      income tax returns, which is reflected in "Foreign income tax return
      adjustments."(c)
              
              In
      March 2008, PPL Energy Supply recorded a $13 million expense to adjust the
      amount of synthetic fuel tax credits recorded during 2007.  See
      Note 10 for additional information.
  PPL
Energy Supply has evaluated the impact of the change in earnings estimates on
its projected annual effective tax rate.  The result of the change in
estimate reduced income tax expense for the three months ended June 30, 2009 by
$10 million.
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,PPLElectric
                
                2009
                
                2008
                
                2009
                
                2008Reconciliation
      of Income TaxesFederal
      income tax on Income Before Income Taxes at statutory tax rate -
      35%
                
                $
                11
                
                
                $
                20
                
                
                $
                39
                
                
                $
                50Increase
      (decrease) due to:State
      income taxes
                
                
                1
                
                
                
                2
                
                
                
                4
                
                
                
                6Amortization
      of investment tax credit
                
                
                
                
                
                
                
                
                
                
                (1
                )
                
                
                (1
                )Stranded
      cost securitization (a)
                
                
                (2
                )
                
                
                (2
                )
                
                
                (3
                )
                
                
                (3
                )Other
      (a)
                
                
                
                
                
                
                (1
                )
                
                
                (2
                )
                
                
                (2
                )(1
                )
                
                
                (1
                )
                
                
                (2
                )Total
      income taxes
                
                $
                10
                
                
                $
                19
                
                
                $
                37
                
                
                $
                50
  (a)
              
              For
      the three months ended June 30, 2009, PPL Electric recorded a $1 million
      benefit related to federal and state income tax reserves, which consisted
      of a $2 million benefit reflected in "Stranded cost securitization, "
      offset by a $1 million expense reflected in "Other."For
      the three months ended June 30, 2008, PPL Electric recorded a $2 million
      benefit in state income tax reserves reflected in "Stranded cost
      securitization."For
      the six months ended June 30, 2009 and 2008, PPL Electric recorded a $3
      million benefit in state income tax reserves reflected in "Stranded cost
      securitization."
  Unrecognized
Tax Benefits
  Changes
to unrecognized tax benefits were as follows:
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008PPLBeginning
      of period (a)
                
                $
                187
                
                
                $
                200
                
                
                $
                202
                
                
                $
                204Additions
      based on tax positions of prior years
                
                
                
                
                
                
                17
                
                
                
                14
                
                
                
                34Reductions
      based on tax positions of prior years
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (10
                )Additions
      based on tax positions related to the current year
                
                
                
                
                
                
                2
                
                
                
                3
                
                
                
                7Settlements
                
                
                (14
                )
                
                
                
                
                
                
                (40
                )
                
                
                (12
                )Lapse
      of applicable statutes of limitations
                
                
                (2
                )
                
                
                (2
                )
                
                
                (4
                )
                
                
                (4
                )Effects
      of foreign currency translation
                
                
                2
                
                
                
                
                
                
                
                (2
                )
                
                
                (2
                )End
      of period
                
                $
                173
                
                
                $
                217
                
                
                $
                173
                
                
                $
                217PPL
      Energy SupplyBeginning
      of period (a)
                
                $
                94
                
                
                $
                111
                
                
                $
                119
                
                
                $
                130Additions
      based on tax positions of prior years
                
                
                
                
                
                
                17
                
                
                
                2
                
                
                
                17Reductions
      based on tax positions of prior years
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (7
                )Additions
      based on tax positions related to the current year
                
                
                
                
                
                
                2
                
                
                
                3
                
                
                
                4Settlements
                
                
                (14
                )
                
                
                
                
                
                
                (40
                )
                
                
                (12
                )Effects
      of foreign currency translation
                
                
                2
                
                
                
                
                
                
                
                (2
                )
                
                
                (2
                )End
      of period
                
                $
                82
                
                
                $
                130
                
                
                $
                82
                
                
                $
                130
 PPLElectricBeginning
      of period
                        
                        $
                        82
                        
                        
                        $
                        83
                        
                        
                        $
                        77
                        
                        
                        $
                        68Additions
      based on tax positions of prior years
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        7
                        
                        
                        
                        17Reductions
      based on tax positions of prior years
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (3
                        )Additions
      based on tax positions related to the current year
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        3Lapse
      of applicable statutes of limitations
                        
                        
                        (2
                        )
                        
                        
                        (2
                        )
                        
                        
                        (4
                        )
                        
                        
                        (4
                        )End
      of period
                        
                        $
                        80
                        
                        
                        $
                        81
                        
                        
                        $
                        80
                        
                        
                        $
                        81
  (a)
              
              The
      beginning of period balance for the six months ended June 30, 2008
      includes a $15 million adjustment to exclude recognized uncertain tax
      positions from unrecognized tax
benefits.
  At
June 30, 2009, the total unrecognized tax benefits and related indirect
effects that, if recognized, would decrease the effective tax rate
were:
  PPL
                
                PPL
      Energy Supply
                
                PPL
      ElectricTotal
      unrecognized tax benefits
                
                $
                173
                
                
                $
                82
                
                
                $
                80Unrecognized
      tax benefits associated with taxable or deductible temporary
      differences
                
                
                (18
                )
                
                
                19
                
                
                
                (37
                )Total
      indirect effect of unrecognized tax benefits on other tax
      jurisdictions
                
                
                (41
                )
                
                
                (13
                )
                
                
                (25
                )Total
      unrecognized tax benefits and related indirect effects that, if
      recognized, would decrease the effective tax rate
                
                $
                114
                
                
                $
                88
                
                
                $
                18
  At June
30, 2009, it was reasonably possible that during the next 12 months the total
amount of unrecognized tax benefits could increase by as much as $11 million or
decrease by up to $106 million for PPL, increase by as much as $11 million or
decrease by up to $86 million for PPL Energy Supply and decrease by up to $9
million for PPL Electric.  These increases and decreases could result from
subsequent recognition, derecognition and/or changes in measurement of uncertain
tax positions related to the creditability of foreign taxes, the timing and
utilization of foreign tax credits and the related impact on AMT and other
credits, the timing and/or valuation of certain deductions, intercompany
transactions and unitary filing groups.  The events that could cause
these changes are direct settlements with taxing authorities, litigation, legal
or administrative guidance by relevant taxing authorities and the lapse of an
applicable statute of limitation.
  At June
30, 2009, PPL, PPL Energy Supply and PPL Electric had accrued interest related
to tax positions of $37 million, $28 million and $6 million.  At
December 31, 2008, PPL, PPL Energy Supply and PPL Electric had accrued interest
of $35 million, $28 million and $7 million.
  PPL and
its subsidiaries recognize interest in "Income Taxes" on their Statements of
Income.  The following amounts were recognized.
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008PPL
                
                $
                (2
                )
                
                $
                2
                
                
                $
                2
                
                
                $
                1PPL
      Energy Supply
                
                
                (2
                )
                
                
                3PPL
      Electric
                
                
                
                
                
                
                (1
                )
                
                
                (1
                )
                
                
                1
  The net
expense (benefit) recognized during the three and six months ended June 30, 2009
and June 30, 2008 for PPL and PPL Energy Supply were primarily the result of
additional interest accrued or reversed related to tax positions of prior
years and the lapse of applicable statutes of limitations, with
respect to certain issues.
  6.
              Workforce
Reduction
  (PPL,
PPL Energy Supply and PPL Electric)
  In
February 2009, PPL announced workforce reductions that resulted in the
elimination of approximately 200 management and staff positions across PPL's
domestic operations, or approximately 6% of PPL's non-union, domestic
workforce.  The majority of the affected employees were separated
during the first quarter of 2009.  The charges noted below consisted
primarily of enhanced pension and severance benefits under PPL's Pension Plan
and Separation Policy and were recorded to "Other operation and maintenance"
expense on the Statement of Income.
  As a
result of the workforce reductions, PPL recorded a one-time charge of $22
million ($13 million after tax) in the first quarter of
2009.
  PPL
Energy Supply eliminated approximately 50 management and staff positions
and recorded a one-time charge of $13 million ($8 million after tax) in the
first quarter of 2009.  Included in this charge was $8 million ($4 million
after tax) of allocated costs associated with the elimination of employees of
PPL Services.
  PPL
Electric eliminated approximately 50 management and staff positions and
recorded a one-time charge of $9 million ($5 million after tax) in the first
quarter of 2009.  Included in this charge was $3 million ($1 million after
tax) of allocated costs associated with the elimination of employees of PPL
Services.
  7.
              Credit Arrangements and Financing
    Activities
  Credit
Arrangements
  (PPL
and PPL Energy Supply)
  PPL
Energy Supply had the following credit facilities in place at June 30,
2009:
  Expiration
      Date
                
                Capacity
                
                Borrowed
                
                Letters
      of Credit Issued
                
                Unused
      CapacityPPL
      Energy Supply Domestic Credit Facilities364-day
      Syndicated Credit Facility (a)
                
                Sept-09
                
                
                $
                385
                
                
                
                
                
                
                
                
                
                
                $
                385364-day
      Bilateral Credit Facility (b)
                
                Mar-10
                
                
                
                200
                
                
                
                n/a
                
                
                $
                2
                
                
                
                1985-year
      Structured Credit Facility (c)
                
                Mar-11
                
                
                
                300
                
                
                
                n/a
                
                
                
                236
                
                
                
                645-year
      Syndicated Credit Facility (d)
                
                June-12
                
                
                
                3,225
                
                
                $
                285
                
                
                
                588
                
                
                
                2,352Total
      PPL Energy Supply Domestic Credit Facilities
                
                
                
                
                $
                4,110
                
                
                $
                285
                
                
                $
                826
                
                
                $
                2,999WPD
      Credit FacilitiesWPDH
      Limited 5-year Syndicated Credit Facility (e)
                
                Jan-13
                
                
                £
                150
                
                
                £
                145
                
                
                
                n/a
                
                
                £
                5WPD
      (South West) 5-year Syndicated Credit Facility (f)
                
                Oct-09
                
                
                
                150
                
                
                
                65
                
                
                
                n/a
                
                
                
                85WPD
      (South West) Uncommitted Credit Facilities (g)
                
                
                
                
                
                65
                
                
                
                5
                
                
                
                n/a
                
                
                
                60WPD
      (South West) Letter of Credit Facility
                
                Mar-10
                
                
                
                3
                
                
                
                n/a
                
                
                £
                3Total
      WPD Credit Facilities (h)
                
                
                
                
                £
                368
                
                
                £
                215
                
                
                £
                3
                
                
                £
                150
  (a)
              
              Under
      this facility, PPL Energy Supply has the ability to make cash borrowings
      and to cause the lenders to issue letters of credit.  Borrowings
      generally bear interest at LIBOR-based rates plus a spread, depending upon
      the company's public debt rating.(b)
              
              In
      March 2009, PPL Energy Supply's 364-day bilateral credit facility was
      amended.  The amendment included extending the expiration date
      from March 2009 to March 2010 and reducing the capacity from $300 million
      to $200 million.  Under this facility, PPL Energy Supply can
      cause the bank to issue letters of credit but cannot make cash
      borrowings.(c)
              
              Under
      this facility, PPL Energy Supply has the ability to cause the lenders to
      issue letters of credit but cannot make cash borrowings.  PPL
      Energy Supply's obligations under this facility are supported by a $300
      million letter of credit issued on PPL Energy Supply's behalf under a
      separate, but related, $300 million five-year credit agreement, also
      expiring in March 2011.(d)
              
              Under
      this facility, PPL Energy Supply has the ability to make cash borrowings
      and to cause the lenders to issue letters of credit.  Borrowings
      generally bear interest at LIBOR-based rates plus a spread, depending upon
      the company's public debt rating.  The borrowing outstanding at
      June 30, 2009 bears interest at 2.14%.(e)
              
              Borrowings
      under this facility bear interest at LIBOR-based rates plus a spread,
      depending on the company's public debt rating.  The cash
      borrowings outstanding at June 30, 2009 were comprised of a
      USD-denominated borrowing of $181 million, which equated to £125 million
      at the time of borrowing and bears interest at approximately 2.43%, and a
      GBP-denominated borrowing of £20 million, which bears interest at
      approximately 1.99%.(f)
              
              Borrowings
      under this facility bear interest at LIBOR-based rates plus a spread,
      depending on the company's public debt rating.  The
      weighted-average interest rate on the borrowings outstanding at
      June 30, 2009 was 1.22%.
                
                In
      July 2009, this facility was terminated and replaced with a new £210
      million three-year syndicated credit facility expiring in July
      2012.  Under the new facility, WPD (South West) has the ability
      to make cash borrowings but cannot cause the lenders to issue letters of
      credit.  Borrowings under this facility bear interest at
      LIBOR-based rates plus a margin.  The new facility contains
      financial covenants that require WPD (South West) to maintain an interest
      coverage ratio of not less than 3.0 times consolidated earnings before
      income taxes, depreciation and amortization and total net debt not in
      excess of 85% of its regulatory asset base, in each case calculated in
      accordance with the credit facility.(g)
              
              The
      weighted-average interest rate on the borrowings outstanding under these
      facilities at June 30, 2009 was 1.21%.(h)
              
              At
      June 30, 2009, the unused capacity of the WPD credit facilities was
      approximately $241 million.
  PPL
Energy Supply closed its commercial paper program in January 2009.
  (PPL
and PPL Electric)
  PPL
Electric had the following credit facilities in place at June 30, 2009: 
 Expiration
      Date
                  
                  
                  Capacity
                  
                  
                  Borrowed
                  
                  
                  Letters
      of Credit Issued
                  
                  
                  Unused
      Capacity5-year
      Syndicated Credit Facility (a)
                  
                  May-12
                  
                  $
                  190
                  
                  
                  
                  
                  $
                  1
                  
                  $
                  189Asset-backed
      Credit Facility (b)
                  
                  Jul-09
                  
                  
                  150
                  
                  
                  
                  
                  
                  n/a
                  
                  
                  150Total
      PPL Electric Credit Facilities
                  
                  
                  
                  $
                  340
                  
                  
                  
                  
                  $
                  1
                  
                  $
                  339
 
  (a)
              
              Under
      this facility, PPL Electric has the ability to make cash borrowings and to
      cause the lenders to issue letters of credit.  Borrowings
      generally bear interest at LIBOR-based rates plus a spread, depending upon
      the company's public debt rating.(b)
              
              PPL
      Electric participates in an asset-backed commercial paper program through
      which PPL Electric obtains financing by selling and contributing its
      eligible accounts receivable and unbilled revenue to a special purpose,
      wholly-owned subsidiary on an ongoing basis.  The subsidiary has
      pledged these assets to secure loans from a commercial paper conduit
      sponsored by a financial institution.  The subsidiary's
      borrowing costs under the credit facility vary based on the commercial
      paper conduit's actual cost to issue commercial paper that supports the
      debt.At
      June 30, 2009 and December 31, 2008, $226 million and $76
      million of accounts receivable and $144 million and $170 million of
      unbilled revenue were pledged by the subsidiary under the credit agreement
      related to PPL Electric's and the subsidiary's participation in the
      asset-backed commercial paper program.  Based on the accounts
      receivable and unbilled revenue pledged, $150 million was available for
      borrowing at June 30, 2009. PPL Electric's sale to its subsidiary of
      the accounts receivable and unbilled revenue is an absolute sale of the
      assets, and PPL Electric does not retain an interest in these
      assets.  However, for financial reporting purposes, the
      subsidiary's financial results are consolidated in PPL Electric's
      financial statements.  PPL Electric performs certain
      record-keeping and cash collection functions with respect to the assets in
      return for a servicing fee from the subsidiary.
                
                In
      July 2009, PPL Electric and the subsidiary extended the expiration date of
      the credit agreement to July 2010.
  PPL
Electric maintains a commercial paper program for up to $200 million to provide
an additional financing source to fund its short-term liquidity needs, if and
when necessary.  Commercial paper issuances are supported by PPL
Electric's five-year syndicated credit facility that expires in May 2012 based
on available capacity.  PPL Electric had no commercial paper
outstanding at June 30, 2009.
  (PPL,
PPL Energy Supply and PPL Electric)
  The
subsidiaries of PPL are separate legal entities.  PPL's subsidiaries
are not liable for the debts of PPL.  Accordingly, creditors of PPL
may not satisfy their debts from the assets of the subsidiaries absent a
specific contractual undertaking by a subsidiary to pay PPL's creditors or as
required by applicable law or regulation.  Similarly, absent a
specific contractual undertaking or as required by applicable law or regulation,
PPL is not liable for the debts of its subsidiaries.  Accordingly,
creditors of PPL's subsidiaries may not satisfy their debts from the assets of
PPL absent a specific contractual undertaking by PPL to pay the creditors of its
subsidiaries or as required by applicable law or regulation.
  Similarly,
the subsidiaries of PPL Energy Supply and PPL Electric are separate legal
entities.  These subsidiaries are not liable for the debts of PPL
Energy Supply and PPL Electric.  Accordingly, creditors of PPL Energy
Supply and PPL Electric may not satisfy their debts from the assets of their
subsidiaries absent a specific contractual undertaking by a subsidiary to pay
the creditors or as required by applicable law or regulation.  In
addition, absent a specific contractual undertaking or as required by applicable
law or regulation, PPL Energy Supply and PPL Electric are not liable for the
debts of their subsidiaries.  Accordingly, creditors of these
subsidiaries may not satisfy their debts from the assets of PPL Energy Supply or
PPL Electric absent a specific contractual undertaking by that parent to pay the
creditors of its subsidiaries or as required by applicable law or
regulation.
  Financing
Activities
  (PPL)
  In March
2009, PPL Capital Funding retired the entire $201 million of its 4.33% Notes
Exchange Series A upon maturity.
  (PPL
and PPL Energy Supply)
  In March
2009, PPL Energy Supply completed tender offers to purchase up to $250 million
aggregate principal amount of certain of its outstanding senior notes in order
to reduce future interest expense. Pursuant to the offers, PPL Energy Supply
purchased approximately $100 million aggregate principal amount of its 6.00%
Senior Notes due 2036 for $77 million, plus accrued interest, and approximately
$150 million aggregate principal amount of its 6.20% Senior Notes due 2016 for
$143 million, plus accrued interest.  In connection with the
extinguishment of these notes, PPL and PPL Energy Supply recorded a net gain of
$25 million, which is reflected in "Other Income (Expense) - net" on the
Statement of Income for the six months ended June 30, 2009.  PPL
recorded an additional net gain of $4 million in "Other Income (Expense) - net"
as a result of reclassifying gains and losses on related cash flow hedges from
AOCI into earnings.
  In April 2009, the PEDFA
issued $231 million aggregate principal amount of Exempt Facilities Revenue
Refunding Bonds, Series 2009A and 2009B due 2038 and Series 2009C due 2037 (PPL
Energy Supply, LLC Project), on behalf of PPL Energy Supply.  The
Series 2009A bonds, in an aggregate principal amount of $100 million, and the
Series 2009B bonds, in an aggregate principal amount of $50 million, were issued
by the PEDFA in order to refund $150 million aggregate principal amount of
Exempt Facilities Revenue Bonds, Series 2008A and 2008B (PPL Energy Supply, LLC
Project) due 2038 that were issued by the PEDFA in December 2008 on behalf of
PPL Energy Supply, and for which PPL Investment Corp. acted as initial
purchaser.  The Series 2009C bonds, in an aggregate principal amount
of $81 million, were issued in order to refund $81 million aggregate principal
amount of Exempt Facilities Revenue Bonds, Series 2007 (PPL Energy Supply, LLC
Project) due 2037 that were issued by the PEDFA in December 2007 on behalf of
PPL Energy Supply.  Among other things, the completed refundings were
able to take advantage of provisions in the Economic Stimulus Package that
eliminated the application of the AMT to interest payable on the refinanced
indebtedness.  The refundings of the bonds were effected by the
ultimate distribution of $231 million by the PEDFA to the bond holders,
including PPL Investment Corp.  As a result of the refundings of the
bonds, PPL Investment Corp. received proceeds of $150 million, which
is reflected as a cash flow from investing activities on the Statement of Cash
Flows for PPL and PPL Energy Supply for the six months ended June 30,
2009.
  The
Series 2009A, 2009B and 2009C bonds are structured as variable-rate remarketable
bonds.  PPL Energy Supply may convert the interest rate mode on the
bonds from time to time to a commercial paper rate, daily rate, weekly rate or a
term rate of at least one year.  The bonds are subject to mandatory
purchase under certain circumstances, including upon conversion to a different
interest rate mode, and are subject to mandatory redemption upon a determination
that the interest on the bonds would be included in the holders' gross income
for federal tax purposes.  The Series 2009A bonds bore interest at an
initial rate of 0.90% through June 30, 2009.  The Series 2009B bonds
bear interest at an initial rate of 1.25% through September 30,
2009.  The Series 2009C bonds are in a weekly interest rate mode,
bearing interest at 0.30% at June 30, 2009.
  In
connection with the issuance of each series of bonds by the PEDFA, PPL Energy
Supply entered into separate loan agreements with the PEDFA pursuant to which
the PEDFA loaned to PPL Energy Supply the proceeds of the Series 2009A, Series
2009B and Series 2009C bonds on payment terms that correspond to those of the
bonds.  PPL Energy Supply issued separate promissory notes to the
PEDFA to evidence its obligations under each of the loan
agreements.  These loan agreements and promissory notes replaced those
associated with the refunded 2007 and 2008 PEDFA bonds in a non-cash transaction
that is excluded from the Statement of Cash Flows.
  Concurrent
with the issuance of each series of bonds, separate letters of credit, totaling
$237 million, were issued under PPL Energy Supply's $3.2 billion five-year
syndicated credit facility to the trustee in support of each series of
bonds.  The letters of credit permit the trustee to draw amounts to
pay principal of and interest on, and the purchase price of, the Series 2009A,
Series 2009B and Series 2009C bonds when due.  PPL Energy Supply is
required to reimburse any draws on the letters of credit within one business day
of such draw.
  PPL
Energy Supply elected to change the interest rate mode on the Series 2009A bonds
to a commercial paper rate mode upon expiration of the initial rate
period.  As such, in July 2009, the Series 2009A bonds were remarketed
in a commercial paper rate mode and bear interest at 0.90% through December 9,
2009, at which time the bonds will be remarketed based upon an interest rate
mode elected by PPL Energy Supply.  In connection with this change,
the letter of credit supporting the Series 2009A bonds was modified
accordingly.
  (PPL
and PPL Electric)
  In May
2009, PPL Electric issued $300 million of 6.25% First Mortgage Bonds due 2039
(6.25% Bonds).  The 6.25% Bonds may be redeemed any time prior to
maturity at PPL Electric's option at make-whole redemption
prices.  PPL Electric received proceeds of $296 million, net of a
discount and underwriting fees, from the issuance of the 6.25%
Bonds.  Approximately $86 million of the proceeds will be used to
partially fund the repayment at maturity of $486 million outstanding aggregate
principal amount of PPL Electric's Senior Secured Bonds, 6-1/4% Series, due
August 2009.  The balance of such repayment will be funded from the
issuance in October 2008 of $400 million of 7.125% Senior Secured Bonds due
2013.  The balance of the proceeds from the issuance of the 6.25%
Bonds is being used for general corporate purposes, including capital
expenditures.
  In June
2009, PPL Electric repaid its $9 million obligation under a Variable Rate
Pollution Control Facilities Note in connection with the early redemption in
full of the underlying pollution control revenue bonds that were issued by the
Indiana County Industrial Development Authority and due in June
2027.
  Distributions
and Capital Contributions
  (PPL)
  In
February 2009, PPL announced an increase to its quarterly common stock dividend,
effective April 1, 2009, to 34.5 cents per share (equivalent to $1.38 per
annum).  Future dividends, declared at the discretion of the Board of
Directors, will be dependent upon future earnings, cash flows, financial
requirements and other factors.
  (PPL
Energy Supply)
  During
the six months ended June 30, 2009, PPL Energy Supply distributed $373 million
to its parent company, PPL Energy Funding.
  (PPL
Electric)
  During
the six months ended June 30, 2009, PPL Electric paid common stock dividends of
$148 million to PPL.
  8.
              Acquisitions, Development and
    Divestitures
  (PPL,
PPL Energy Supply and PPL Electric)
  PPL and
its subsidiaries continuously evaluate strategic options and, from time to time,
PPL and its subsidiaries are involved in negotiations with third parties
regarding acquisitions and dispositions of businesses and assets, joint ventures
and development projects, which may or may not result in definitive
agreements.  Any such transactions may impact future financial
results.
  Domestic
  (PPL
and PPL Energy Supply)
  License
Renewals
  In 2006,
PPL Susquehanna applied to the NRC for 20-year license renewals for each of the
Susquehanna units to extend their expiration dates to 2042 for Unit 1 and to
2044 for Unit 2.  A final decision on the license renewal is expected
to be issued in December 2009.  Through June 30, 2009, PPL and
PPL Energy Supply capitalized $16 million of license renewal costs, which are
included in "Other intangibles" within "Other Noncurrent Assets" on the Balance
Sheets.
  Development
  In April
2009, PPL announced that it filed a new application with the FERC for approval
to expand the capacity of its Holtwood hydroelectric plant by 125
MW.  The previous application had been withdrawn in December 2008 due
to economic conditions at the time.  PPL reconsidered this project in
light of the availability of tax incentives and potential federal loan
guarantees under the Economic Stimulus Package.  The expansion project
has an expected capital cost of approximately $440 million.  PPL could
begin construction in 2010, with generation operations scheduled to start in
2013.  PPL's ability and decision whether to proceed with the Holtwood
facility expansion is subject to government approvals in addition to the FERC
license amendment, the availability of certain federal economic stimulus
incentives, as well as negotiation of acceptable construction and other related
contracts.  PPL cannot predict whether the Holtwood facility expansion
will ultimately proceed to completion.  In July 2009, a PPL subsidiary
submitted an application to the DOE for a federal loan guarantee for the
Holtwood expansion project.
  In March
2009, PPL Montana received FERC approval for its request to redevelop the
Rainbow hydroelectric facility, near Great Falls, Montana, for a total plant
capacity of 60 MW (representing an increase of 28 MW).  The
redevelopment project has an expected capital cost of $230
million.  In July 2009, a PPL subsidiary submitted an application to
the DOE for a federal loan guarantee for the Rainbow redevelopment
project.
  In
January 2008, PPL Susquehanna received NRC approval for its request to increase
the generation capacity of the Susquehanna nuclear plant.  The total
expected capacity increase is 159 MW, of which PPL Susquehanna's 90%
ownership share is 143 MW.  The first uprate for Unit 1 totaling
50 MW was completed in May 2008.  The second uprate for Unit 1
will be completed in 2010.  The first uprate for Unit 2 totaling
60 MW was completed in 2009 and the second uprate will be completed in
2011.  PPL Susquehanna's share of the remaining total increase is
44 MW.  PPL Susquehanna's share of the expected capital cost for
all these uprates is $345 million.
  In
October 2008, PPL submitted a COLA to the NRC for the proposed Bell Bend nuclear
generating unit (Bell Bend) to be built adjacent to PPL's Susquehanna
plant.  The COLA was formally docketed and accepted for review by the
NRC in December 2008.  The NRC is now reviewing the COLA and issuing
numerous and detailed requests for additional information that Bell Bend must
respond to on a strict timetable.  In May 2009, the NRC published its
official review schedule that culminates with the issuance of Bell Bend's final
safety evaluation report in March 2012, after which public hearings will be held
that are expected to take up to a year before Bell Bend's license can be
issued.
  In
September 2008, a PPL subsidiary submitted Part I of an application to the DOE
for a federal loan guarantee for Bell Bend.  The subsidiary submitted
Part II of the loan guarantee application in December 2008.  There is
considerable uncertainty about the likelihood of DOE financial support for the
project due to the current level of appropriations available to the DOE for this
purpose ($18.5 billion appropriated by the U.S. Congress at June 30, 2009) and
the number of projects competing for those resources.  In June 2009,
the DOE announced that it is working to finalize loan guarantees with four
applicants, none of which was the PPL subsidiary.  None of the ten
applicants who submitted Part II applications have been formally eliminated by
the DOE; however, the DOE noted that the available funds would not likely be
enough for more than four applicants.
  PPL's
subsidiary submits quarterly application updates for Bell Bend to the DOE in
order to remain active in the process.  PPL cannot predict whether
additional appropriations will be made for the DOE loan guarantee program, which
proposed nuclear projects will ultimately be granted DOE loan guarantees, or the
specific impact of these and other factors on the potential construction of the
Bell Bend project.
  PPL has
made no decision to proceed with construction of Bell Bend and expects that such
decision will not be made for several years given the anticipated lengthy NRC
license approval process.  Additionally, PPL has announced that it
does not expect to proceed to construction absent a joint arrangement with other
interested parties and without a federal loan guarantee or other acceptable
financing structures.  PPL and its subsidiaries are currently
authorized by PPL's Board of Directors to spend up to $90 million on the COLA
and other permits necessary for construction.  Through June 30,
2009, $65 million of costs associated with the licensing effort were capitalized
and are included in "Other intangibles" within "Other Noncurrent Assets" on the
Balance Sheets.
  Discontinued
Operations
  (PPL
and PPL Energy Supply)
  Anticipated
Sale of Long Island Generation Business
  As a
result of management's ongoing strategic review of PPL's non-core asset
portfolio, in May 2009, PPL Generation signed a definitive agreement to sell its
Long Island generation business for approximately $135 million in cash, adjusted
for working capital at the sale date and subject to reduction monthly if the
sale does not close by September 1, 2009.  This business includes a
79.9 MW gas-fired plant in the Edgewood section of Brentwood, New York and a
79.9 MW oil-fired plant in Shoreham, New York.  The Long Island Power
Authority has contracted with PPL Energy Supply subsidiaries to purchase all of
the Long Island generation business' capacity and ancillary services as part of
tolling agreements that expire in 2017 and 2018.  Each agreement is
considered to contain a lease for accounting purposes.  The Shoreham
plant lease is classified as a direct-financing lease and the Edgewood plant
lease is classified as an operating lease.  These tolling agreements
will be transferred to the new owner upon completion of the sale.
  The Long
Island generation business met the held for sale criteria in the second quarter
of 2009.  As a result, net assets held for sale with a carrying amount
of $189 million were written down to their estimated fair value less cost to
sell of $137 million at June 30, 2009, resulting in a pre-tax impairment
charge of $52 million ($34 million after tax).  This charge, recorded
in the Supply segment for PPL and PPL Energy Supply, is included in "Income
(Loss) from Discontinued Operations (net of income taxes)" on the Statements of
Income for the three and six months ended June 30, 2009.  Closing of
the sale is subject to the receipt of various state and federal regulatory
approvals and third-party consents, and is expected to occur later in
2009.
  The
results of operations for the three and six months ended June 30, 2009 and
2008 have been classified as Discontinued Operations on the Statements of
Income.  The assets and liabilities at June 30, 2009 are classified on
the Balance Sheet as held for sale.
  Following
are the components of Discontinued Operations on the Statements of
Income.
  Three
      Months Ended June 30,
                  
                  Six
      Months Ended June 30,2009
                  
                  2008
                  
                  2009
                  
                  2008Operating
      revenues
                  
                  $
                  5
                  
                  
                  $
                  6
                  
                  
                  $
                  11
                  
                  
                  $
                  13Operating
      expenses (a)
                  
                  
                  54
                  
                  
                  
                  
                  
                  
                  
                  55
                  
                  
                  
                  3Operating
      income (loss)
                  
                  
                  (49
                  )
                  
                  
                  6
                  
                  
                  
                  (44
                  )
                  
                  
                  10Interest
      expense (b)
                  
                  
                  1
                  
                  
                  
                  1
                  
                  
                  
                  2
                  
                  
                  
                  1Income
      (loss) before income taxes
                  
                  
                  (50
                  )
                  
                  
                  5
                  
                  
                  
                  (46
                  )
                  
                  
                  9Income
      taxes
                  
                  
                  (18
                  )
                  
                  
                  1
                  
                  
                  
                  (16
                  )
                  
                  
                  3Income
      (Loss) from Discontinued Operations
                  
                  $
                  (32
                  )
                  
                  $
                  4
                  
                  
                  $
                  (30
                  )
                  
                  $
                  6
 
 (a)
                
                2009
      includes the impairment to the carrying value of the Long Island
      generation business.(b)
                
                Represents
      allocated interest expense based upon debt attributable to PPL's Long
      Island generation business.
  The major
classes of assets and liabilities held for sale on the Balance Sheet at June 30,
2009, related to the anticipated sale of the Long Island generation business,
were $43 million of PP&E and a $94 million net investment in a
direct-financing lease (corresponding amounts at December 31, 2008 were $88
million of PP&E and a $104 million net investment in a direct-financing
lease, which have not been reclassified on the Balance Sheet as of that
period).
  Anticipated
Sale of Maine Hydroelectric Generation Business
  In 2004,
PPL Maine entered into an agreement with a coalition of government agencies and
private groups to sell three of its nine hydroelectric dams in
Maine.  Under the agreement, a non-profit organization designated by
the coalition received a five-year option to purchase the dams for $25 million,
and if the option was exercised PPL Maine would receive rights to increase
energy output at its other Maine hydroelectric dams.  The coalition
has announced plans to remove or bypass the dams subject to the agreement in
order to restore runs of Atlantic salmon and other migratory fish to the
Penobscot River.  In June 2008, the coalition notified PPL Maine of
its intent to exercise the purchase option.  The agreement requires
updates to the representations and warranties in the purchase and sale
agreement, and several approvals by the FERC and other regulatory
agencies.  In November 2008, PPL Maine and the coalition filed a
request with FERC, the U.S. Army Corps of Engineers and the Maine DEP to approve
the transfer of ownership for the three dams.  Certain of these
required regulatory approvals have been obtained, but PPL cannot predict whether
or when all of them will be obtained.  As a result, these three Maine
hydroelectric dams had not met the held for sale criteria at June 30,
2009.
  In July
2009, indirectly related to the above potential sale and as a result of
management's ongoing strategic review of PPL's non-core asset portfolio, PPL
Maine signed a definitive agreement to sell the majority of its hydroelectric
generation business for approximately $95 million in cash.  The
portion of the business being sold includes five hydroelectric facilities and
PPL's 50% equity interest in the owner of a sixth hydroelectric facility, which
has been accounted for as an equity investment, as well as the rights to
increase energy output at these facilities if the potential sale discussed above
is completed.  PPL's interest in these six facilities represents a
total of 30 MW of electric generating capacity.  Of the sales price,
$14 million is contingent consideration that would be realized upon completion
of the potential sale of PPL Maine's three other hydroelectric facilities noted
above.  PPL expects the sale of the majority of the Maine generation
business to close in 2009 and expects to record a gain on the
transaction.
  These
Maine hydroelectric facilities met the held for sale criteria in the second
quarter and at June 30, 2009 are classified on the Balance Sheet as held for
sale.  The results of operations for the three and six months ended
June 30, 2009 and 2008 have been classified as Discontinued Operations on
the Statements of Income and are included in the Supply segment for PPL and PPL
Energy Supply.  An insignificant amount of interest expense was
allocated based upon debt attributable to the Maine hydroelectric generation
business being sold.
  Following
are the components of Discontinued Operations on the Statements of
Income.
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008Operating
      revenues
                
                $
                1
                
                
                $
                3
                
                
                $
                3
                
                
                $
                6Operating
      expenses
                
                
                1
                
                
                
                1
                
                
                
                2
                
                
                
                2Operating
      income
                
                
                
                
                
                
                2
                
                
                
                1
                
                
                
                4Other
      income-net
                
                
                
                
                
                
                
                
                
                
                1
                
                
                
                1Income
      before income taxes
                
                
                
                
                
                
                2
                
                
                
                2
                
                
                
                5Income
      taxes
                
                
                
                
                
                
                1
                
                
                
                1
                
                
                
                2Income
      from Discontinued Operations
                
                $
                
                
                
                $
                1
                
                
                $
                1
                
                
                $
                3
  The major
classes of assets held for sale on the Balance Sheet at June 30, 2009, related
to the anticipated sale of the majority of the Maine hydroelectric generation
business, were $22 million of PP&E and a $19 million equity method
investment (corresponding amounts at December 31, 2008 were substantially
the same, but have not been reclassified on the Balance Sheet as of that
period).
  Sale
of Latin American Businesses
  In 2007,
PPL completed the sale of its regulated electricity delivery businesses in
Chile, El Salvador and Bolivia, which were included in the International
Delivery segment.  In 2008, PPL Global recognized income tax benefits
and miscellaneous expenses in Discontinued Operations in connection with the
dissolution of the remaining Latin American holding companies.  This
process was substantially completed in 2008.  Following are the
components of Discontinued Operations on the Statements of Income.
  Six
      Months Ended June 30, 2008Operating
      expenses
                        
                        $
                        2Operating
      loss
                        
                        
                        (2
                        )Other
      income (expense) - net
                        
                        
                        (1
                        )Loss
      before income taxes
                        
                        
                        (3
                        )Income
      taxes (a)
                        
                        
                        (8
                        )Income
      from Discontinued Operations
                        
                        $
                        5
  (a)
              
              Includes
      $6 million from the recognition of a previously unrecognized tax benefit
      associated with a prior period tax
position.
  (PPL)
  Sale
of Gas and Propane Businesses
  In
October 2008, PPL completed the sale of its natural gas distribution and propane
businesses, which were included in the Pennsylvania Delivery
segment.  In February 2009, PPL recognized an insignificant charge in
Discontinued Operations in connection with the settlement of a working capital
adjustment.  Following are the components of Discontinued Operations
on the Statements of Income.
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2008
                
                2008Operating
      revenues
                
                $
                42
                
                
                $
                136Operating
      expenses
                
                
                40
                
                
                
                116Operating
      income
                
                
                2
                
                
                
                20Interest
      expense (a)
                
                
                1
                
                
                
                3Income
      before income taxes
                
                
                1
                
                
                
                17Income
      taxes
                
                
                
                
                
                
                7Income
      from Discontinued Operations
                
                $
                1
                
                
                $
                10
  (a)
              
              The
      three and six months ended June 30, 2008 include $1 million and $2
      million of allocated interest expense based upon debt attributable to
      PPL's natural gas distribution and propane
  businesses.
  9.
              Defined Benefits
  (PPL
and PPL Energy Supply)
  Net
periodic defined benefit costs (credits) were:
  Pension
      BenefitsThree
      Months Ended June 30,
                    
                    Six
      Months Ended June 30,Domestic
                    
                    WPD
                    
                    Domestic
                    
                    WPD2009
                    
                    2008
                    
                    2009
                    
                    2008
                    
                    2009
                    
                    2008
                    
                    2009
                    
                    2008PPLService
      cost
                    
                    $
                    15
                    
                    
                    $
                    15
                    
                    
                    $
                    2
                    
                    
                    $
                    4
                    
                    
                    $
                    30
                    
                    
                    $
                    30
                    
                    
                    $
                    4
                    
                    
                    $
                    8Interest
      cost
                    
                    
                    36
                    
                    
                    
                    34
                    
                    
                    
                    37
                    
                    
                    
                    49
                    
                    
                    
                    72
                    
                    
                    
                    69
                    
                    
                    
                    74
                    
                    
                    
                    98Expected
      return on plan assets
                    
                    
                    (42
                    )
                    
                    
                    (44
                    )
                    
                    
                    (45
                    )
                    
                    
                    (60
                    )
                    
                    
                    (84
                    )
                    
                    
                    (89
                    )
                    
                    
                    (90
                    )
                    
                    
                    (120
                    )Amortization
      of:Transition
      asset
                    
                    
                    (1
                    )
                    
                    
                    (1
                    )
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (2
                    )
                    
                    
                    (2
                    )Prior
      service cost
                    
                    
                    5
                    
                    
                    
                    5
                    
                    
                    
                    1
                    
                    
                    
                    1
                    
                    
                    
                    10
                    
                    
                    
                    10
                    
                    
                    
                    2
                    
                    
                    
                    2Actuarial
      (gain) loss
                    
                    
                    1
                    
                    
                    
                    (2
                    )
                    
                    
                    1
                    
                    
                    
                    5
                    
                    
                    
                    2
                    
                    
                    
                    (4
                    )
                    
                    
                    2
                    
                    
                    
                    10Net
      periodic defined benefit costs (credits) prior to special termination
      benefits
                    
                    
                    14
                    
                    
                    
                    7
                    
                    
                    
                    (4
                    )
                    
                    
                    (1
                    )
                    
                    
                    28
                    
                    
                    
                    14
                    
                    
                    
                    (8
                    )
                    
                    
                    (2
                    )Special
      termination benefits (a)
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    9Net
      periodic defined benefit costs (credits)
                    
                    $
                    14
                    
                    
                    $
                    7
                    
                    
                    $
                    (4
                    )
                    
                    $
                    (1
                    )
                    
                    $
                    37
                    
                    
                    $
                    14
                    
                    
                    $
                    (8
                    )
                    
                    $
                    (2
                    )  PPLEnergy
      SupplyService
      cost
                    
                    $
                    1
                    
                    
                    $
                    1
                    
                    
                    $
                    2
                    
                    
                    $
                    4
                    
                    
                    $
                    2
                    
                    
                    $
                    2
                    
                    
                    $
                    4
                    
                    
                    $
                    8Interest
      cost
                    
                    
                    1
                    
                    
                    
                    1
                    
                    
                    
                    37
                    
                    
                    
                    49
                    
                    
                    
                    3
                    
                    
                    
                    3
                    
                    
                    
                    74
                    
                    
                    
                    98Expected
      return on plan assets
                    
                    
                    (1
                    )
                    
                    
                    (2
                    )
                    
                    
                    (45
                    )
                    
                    
                    (60
                    )
                    
                    
                    (3
                    )
                    
                    
                    (4
                    )
                    
                    
                    (90
                    )
                    
                    
                    (120
                    )Amortization
      of:Prior
      service cost
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    1
                    
                    
                    
                    1
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    2
                    
                    
                    
                    2Actuarial
      loss
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    1
                    
                    
                    
                    5
                    
                    
                    
                    1
                    
                    
                    
                    
                    
                    
                    
                    2
                    
                    
                    
                    10Net
      periodic defined benefit costs (credits)
                    
                    $
                    1
                    
                    
                    $
                    
                    
                    
                    $
                    (4
                    )
                    
                    $
                    (1
                    )
                    
                    $
                    3
                    
                    
                    $
                    1
                    
                    
                    $
                    (8
                    )
                    
                    $
                    (2
                    )
  (a)
              
              Relates
      to the 2009 workforce reduction.  See Note 6 for additional
      information.
  Other
      Postretirement BenefitsThree
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008PPLService
      cost
                
                $
                2
                
                
                $
                2
                
                
                $
                3
                
                
                $
                4Interest
      cost
                
                
                7
                
                
                
                8
                
                
                
                14
                
                
                
                16Expected
      return on plan assets
                
                
                (4
                )
                
                
                (5
                )
                
                
                (8
                )
                
                
                (10
                )Amortization
      of:Transition
      obligation
                
                
                2
                
                
                
                2
                
                
                
                4
                
                
                
                4Prior
      service cost
                
                
                2
                
                
                
                2
                
                
                
                4
                
                
                
                5Actuarial
      loss
                
                
                
                
                
                
                1
                
                
                
                1
                
                
                
                2Net
      periodic defined benefit costs
                
                $
                9
                
                
                $
                10
                
                
                $
                18
                
                
                $
                21
  10.
              Commitments and
Contingencies
  Energy
Purchases, Energy Sales and Other Commitments
  Energy
Purchase Commitments
  (PPL
and PPL Energy Supply)
  PPL and
PPL Energy Supply enter into long-term purchase contracts to supply the fuel
requirements for generation facilities.  These contracts include
commitments to purchase coal, emission allowances, limestone, natural gas, oil
and nuclear fuel and extend through 2019.  PPL and PPL Energy Supply
also enter into long-term contracts for the storage and transportation of
natural gas.  The long-term natural gas storage contracts extend
through 2012, and the long-term natural gas transportation contracts extend
through 2032.  Additionally, PPL and PPL Energy Supply have entered
into long-term contracts to purchase power that extend through 2017, excluding
long-term power purchase agreements for the full output of two wind
farms.  These wind farm contracts extend through 2027.
  (PPL
and PPL Electric)
  In 2007,
PPL Electric began to conduct competitive solicitations to purchase electricity
generation supply in 2010, after its existing PLR contract expires, for
customers who do not choose a competitive supplier.  A total of six
auctions were planned.  Each solicitation is for 850 MW of expected
generation supply.  Average generation supply prices (per MWh),
including Pennsylvania gross receipts tax and an adjustment for line losses, for
the first five solicitations are as follows:
  Residential
                
                Small
      Commercial and Small IndustrialJuly
      2007
                
                
                $
                101.77
                
                
                
                $
                105.11October
      2007
                
                
                
                105.08
                
                
                
                
                105.75March
      2008
                
                
                
                108.80
                
                
                
                
                108.76October
      2008
                
                
                
                112.51
                
                
                
                
                111.94April
      2009
                
                
                
                86.74
                
                
                
                
                87.59Average
                
                
                
                102.98
                
                
                
                
                103.84
  The fifth
competitive solicitation occurred in March 2009 and was approved by the PUC in
April 2009.  The sixth competitive solicitation is scheduled for
October 2009.
  In August
2008, PPL Electric filed a request with the PUC to approve its plan to purchase
the PLR electricity supply that PPL Electric will need for January 2011 through
May 2014.  Under the plan, PPL Electric proposed to buy this
electricity four times a year, beginning in the third quarter of 2009, for 12-
and 24- month periods.  PPL Electric also would seek bids from other
companies to manage its hourly purchases in the competitive electricity
market.  For residential and small-business customers, 90% of the
supply would be acquired through fixed-price contracts of 12 or 24 months, and
10% through hourly purchases in the open market.  All of the power for
large commercial and industrial customers would be purchased on an hourly basis
in the open market.  An independent third party would administer the
process of securing power supply contracts and, with PUC oversight, select the
suppliers that would provide generation supply at the lowest cost to PPL
Electric's customers.
  In
November 2008, PPL Electric proposed several amendments to its plan to reflect
passage of Pennsylvania Act 129 (Act 129).  Act 129, among other
things, adopts new PLR electricity supply procurement rules.  PPL
Electric added provisions to purchase 5% of its default service supply through
five-year contracts and an additional 5% through ten-year
contracts.  It reduced the term of its plan by one year, proposing
that the plan end in May 2013, rather than in May 2014.  Finally, PPL
Electric provided support for several findings that the PUC was required to make
under Act 129.  In June 2009, PPL Electric received approval from the
PUC on its purchase plan.
  (PPL
Energy Supply and PPL Electric)
  See Note
11 for information on the power supply agreements between PPL EnergyPlus and PPL
Electric.
  Energy
Sales Commitments
  (PPL
and PPL Energy Supply)
  In
connection with its marketing activities or hedging strategyfor
certain of its power plants, PPL Energy Supply has entered into long-term power
sales contracts that extend through 2023.  All long-term contracts
were executed at prices that approximated market prices at the time of
execution.  Also, PPL Energy Supply has entered into full-requirement
and retail sales contracts with various counterparties.  These
contracts extend through 2019.
  (PPL
Energy Supply and PPL Electric)
  See Note
11 for information on the power supply agreements between PPL EnergyPlus and PPL
Electric.
  PPL
Montana Hydroelectric License Commitments(PPL
and PPL Energy Supply)
  PPL
Montana owns and operates 11 hydroelectric facilities and one storage reservoir
licensed by the FERC under long-term licenses pursuant to the Federal Power
Act.  Pursuant to Section 8(e) of the Federal Power Act, the FERC
approved the transfer from Montana Power to PPL Montana of all pertinent
licenses and any amendments in connection with the Montana Asset Purchase
Agreement.
  The Kerr
Dam Project license (50-year term) was jointly issued by the FERC to Montana
Power and the Confederated Salish and Kootenai Tribes of the Flathead
Reservation in 1985, and required Montana Power to hold and operate the project
for 30 years.  The license required Montana Power, and subsequently
PPL Montana as a result of the purchase of its Kerr Dam from Montana Power, to
continue to implement a plan to mitigate the impact of the Kerr Dam on fish,
wildlife and their habitat.  Under this arrangement, PPL Montana has a
remaining commitment to spend $12 million between 2009 and 2015, in addition to
the annual rent it pays to the tribes.  Between 2015 and 2025, the
tribes have the option to purchase, hold and operate the project for the
remainder of the license term, which expires in 2035.
  PPL
Montana entered into two Memoranda of Understanding (MOUs) with state, federal
and private entities related to the issuance in 2000 of the FERC renewal license
for the nine dams for the Missouri-Madison project.  The MOUs are
periodically updated and renewed and require PPL Montana to implement plans to
mitigate the impact of its projects on fish, wildlife and their habitat, and to
increase recreational opportunities.  The MOUs were created to
maximize collaboration between the parties and enhance the possibility to
receive matching funds from relevant federal agencies.  Under these
arrangements, PPL Montana has a remaining commitment to spend $37 million
between 2009 and 2040.
  Legal
Matters
  (PPL,
PPL Energy Supply and PPL Electric)
  PPL and
its subsidiaries are involved in legal proceedings, claims and litigation in the
ordinary course of business.  PPL and its subsidiaries cannot predict
the outcome of such matters, or whether such matters may result in material
liabilities.
  (PPL
and PPL Energy Supply)
  Montana
Power Shareholders' Litigation
  In August
2001, a purported class-action lawsuit was filed by a group of Montana Power
shareholders against Montana Power, the directors of Montana Power, certain
advisors and consultants of Montana Power, and PPL Montana.  The
plaintiffs allege, among other things, that Montana Power failed to obtain
shareholder approval for the sale of Montana Power's generation assets to PPL
Montana in 1999, and that the sale "was null and void ab
initio."  Among the remedies sought by the plaintiffs is the
establishment of a "resulting and/or constructive trust" on both the generation
assets and all profits earned by PPL Montana from the generation assets, plus
interest on the amounts subject to the trust.  This lawsuit is pending
in the U.S. District Court of Montana, Butte Division, and the judge placed this
proceeding on hold pending the outcome of certain motions currently before the
U.S. Bankruptcy Court for the District of Delaware, the resolution of which may
impact this proceeding.  The judge in this case has not established a
schedule to resume the proceeding.  Settlement discussions resumed in
June 2009.  PPL and PPL Energy Supply cannot predict the outcome of
this matter.
  Montana
Hydroelectric Litigation
  In
November 2004, PPL Montana, Avista Corporation (Avista) and PacifiCorp commenced
an action for declaratory judgment in Montana First Judicial District Court
seeking a determination that no lease payments or other compensation for their
hydroelectric facilities' use and occupancy of streambeds in Montana can be
collected by the State of Montana.  This request was brought following
the dismissal of the State of Montana's federal lawsuit seeking such payments or
compensation in the U.S. District Court of Montana, Missoula Division, on
jurisdictional grounds.  The State's federal lawsuit was founded on
allegations that the beds of Montana's navigable rivers became state-owned trust
property upon Montana's admission to statehood, and that the use of them for
placement of dam structures, affiliated structures and reservoirs should, under
a 1931 regulatory scheme enacted after all but one of the dams in question were
constructed, trigger lease payments for use of land beneath.  In July
2006, the Montana state court approved a stipulation by the State of Montana
that it is not seeking lease payments or other compensation from PPL Montana for
the period prior to PPL Montana's acquisition of the hydroelectric facilities in
December 1999.
  In June
and October 2007, Pacificorp and Avista, respectively, entered into settlement
agreements with the State of Montana providing, in pertinent part, that each
company would make prospective lease payments of $50,000 and $4 million per year
for use of the State's navigable streambed (adjusted annually for inflation and
subject to other future adjustments).  Under these settlement
agreements, the future annual payments resolved the State's claims for both past
and future compensation.
  In the
October 2007 trial of this matter, the State of Montana asserted that PPL
Montana should make a prospective lease payment for use of the State's
streambeds of $6 million per year (adjusted annually for inflation) and a
retroactive payment of compensation for the 2000-2006 period (including
interest) of $41 million.  PPL Montana vigorously contested both such
assertions.
  In June
2008, the District Court issued a decision awarding compensation of
approximately $34 million for prior years and approximately $6 million for 2007
compensation.  The Court also deferred the determination of
compensation for 2008 and future years to the Montana State Land
Board.
  PPL
Montana believes that the District Court's decision and a number of its pretrial
rulings are erroneous.  In October 2008, PPL Montana filed an appeal
of the decision to the Montana Supreme Court and a stay of judgment, including a
stay of the Land Board's authority to assess compensation against PPL Montana
for 2008 and future periods.  Oral argument of the case before the
Montana Supreme Court is scheduled for September 2009.  PPL Montana
cannot predict the outcome of this matter.
  PPL
Montana believes it is reasonably possible that a liability for prior use and
occupancy of certain Montana streambeds may ultimately be incurred for the
periods 2000 through 2006, and the amount awarded by the District Court
represents the maximum exposure.  PPL Montana has not recorded a loss
accrual for this portion of the State's claim.
  For 2007
and subsequent years, PPL Montana believes it is probable that its hydroelectric
projects will be subject to annual estimated compensation ranging from $300,000
to $6 million.  Given that there was no single amount within that
range more likely than any other, PPL Montana is annually accruing
$300,000.
  PPL
Montana will continue to assess the loss exposure for the Montana hydroelectric
litigation in future periods.
  Regulatory
Issues
  Pennsylvania
Activities (PPL
and PPL Electric)
  In May
2007, the PUC approved final regulations regarding the obligation of
Pennsylvania electric utilities to provide default electricity supply in 2011
and beyond.  The regulations provide that default service providers
will acquire electricity supply at prevailing market prices pursuant to
procurement and implementation plans approved by the PUC.  The
regulations also address the utilities' recovery of electricity supply
costs.  The final regulations became effective in September
2007.  See "Energy Purchase Commitments" for details of PPL Electric's
competitive solicitations under the PUC regulations.
  For
several years, PPL and PPL Electric have been working with Pennsylvania
legislators, regulators and other stakeholders to develop constructive measures
to help customers transition to market rates after 2009, including a variety of
rate mitigation, educational and energy conservation programs, consistent with
several initiatives being developed by the State Administration and
legislature.  In this regard, in November 2007, PPL Electric requested
the PUC to approve a plan under which its residential and small commercial
customers could phase-in the impact of price increases when generation rate caps
expire in 2010.  Under the phase-in plan approved by the PUC and
implemented in October 2008, customers can pay additional amounts with their
electric bills beginning in mid-2008 and continuing through 2009, and such
additional amounts, plus accrued interest of 6%, will be applied to their 2010
and 2011 electric bills, mitigating the impact of the rate cap
expiration.  The phase-in plan is available on an "opt-in" basis
(i.e., customers must affirmatively enroll) and is available to customers
enrolled in budget billing.  Over 140,000 customers enrolled in the
program.  Customers can continue to enroll in this program through the
end of 2009.  At June 30, 2009, PPL Electric has recorded a liability
of $21 million related to this activity.
  In
February 2009, PPL Electric asked the PUC for permission to offer customers a
second option for reducing the potential initial impact of higher electricity
prices resulting from expiration of generation rate caps.  This option
will enable eligible residential and eligible small-business customers to defer
payment of any increase greater than 25% in their 2010 electric
bills.  The 25% will be calculated on an average rate schedule usage
basis, and will be based on a comparison of currently estimated 2009 bills to
currently estimated 2010 bills.  Deferred amounts, plus interest of
6%, would be repaid by customers over a one- or two-year period, depending on
their level of electricity use.  All deferrals would be repaid by the
end of 2012.  Like the phase-in plan, the deferral option will be
available on an "opt-in" basis.  In July 2009, the PUC approved the
deferral option.  Customers may enroll in the program until December
15, 2009.
  Also, the
General Assembly passed and the Governor signed into law Act 129 in October
2008.  The law creates an energy efficiency and conservation program
and smart metering technology requirements, adopts new PLR electricity supply
procurement rules, provides remedies for market misconduct, and makes changes to
the existing Alternative Energy Portfolio Standard.
  Under Act
129, Electric Distribution Companies (EDCs) must develop and file an energy
efficiency and conservation plan with the PUC.  EDCs must contract
with a conservation service provider to implement all or a portion of the
plan.  Act 129 requires reduction in consumption of 1% by 2011 and 3%
by 2013, and a reduction in peak demand of 4.5% by 2013.  EDCs will be
able to recover the costs of implementing an energy efficiency and conservation
plan.  These costs are capped at 2% of the EDC's 2006
revenue.
  Act 129
also requires installation of smart meters under the following
conditions:  for new construction, upon the request of consumers at
their cost, or on a depreciation schedule not exceeding 15 years.  PPL
Electric's current advanced metering technology generally meets the definition
of smart metering technology in Act 129 and does not need to be
replaced.  Under Act 129, EDCs will be able to recover the costs of
providing smart metering technology.
  Act 129
also requires the default service provider (DSP) to provide electric generation
supply service to customers pursuant to a PUC-approved competitive procurement
plan through auctions, requests for proposal and bilateral contracts at the sole
discretion of the DSP.  Act 129 requires a mix of spot market
purchases, short-term contracts and long-term contracts (4 to 20 years, with
long-term contracts limited to up to 25% of the load unless otherwise approved
by the PUC).  The DSP will be able to recover the costs associated
with a competitive procurement plan.
  Under Act
129, the DSP competitive procurement plan must ensure adequate and reliable
service "at least cost to customers" over time.  Act 129 also grants
the PUC authority to extend long-term power contracts up to 20 years, if
necessary, to achieve the "least cost" standard.
  Act 129
does not address rate mitigation.  Legislation has been introduced
that would allow eligible customers to defer payment of certain increases at the
time that rate caps expire and allow the EDC to recover these deferred amounts
following the expiration of rate caps.  There are several bills that
address such a phase-in.  The provisions of the bills differ as to the
permitted level of increases in customer bills (ranging from 0% to 25%) and the
inclusion of language specifically authorizing the EDC to recover associated
carrying costs.  PPL and PPL Electric have expressed strong concern
regarding the potential adverse consequences of some of these measures on the
financial health and credit quality of PPL Electric.
  In July
2009, PPL Electric filed its proposed energy efficiency and conservation
(EE&C) Plan with the PUC.  PPL Electric's EE&C Plan includes
14 programs.  All programs are voluntary for customers.  As
required by Act 129, at least one conservation program and one peak demand
reduction program will be available for each customer class.  The
filing also includes a proposed rate mechanism for recovery of all costs
incurred by PPL Electric to implement its EE&C Plan.  Act 129
requires the PUC to act on each EE&C Plan within 120 days of submission,
which in PPL Electric's case will be November 1, 2009.  PPL Electric
cannot predict the outcome of this matter.
  Certain
Pennsylvania legislators have introduced legislation to extend generation rate
caps or otherwise limit cost recovery through rates for Pennsylvania utilities
beyond their transition periods, which in PPL Electric's case would be
December 31, 2009.  PPL and PPL Electric have expressed strong
concern regarding the severe potential consequences of such legislation on
customer service, system reliability, adequate future generation supply and PPL
Electric's financial viability.  If such legislation or similar
legislation were ultimately enacted, PPL Electric could experience substantial
operating losses, cash flow shortfalls and other adverse financial
impacts.  In addition, continuing uncertainty concerning PPL
Electric's ability to recover its market supply and other costs of operation
after 2009 could adversely impact its credit quality, financing costs and
availability of credit facilities necessary to operate its
business.  PPL and PPL Electric believe that such an extension of rate
caps, if enacted into law, would violate federal law and the U.S.
Constitution.  At this time, PPL and PPL Electric cannot predict the
final outcome or impact of this legislative and regulatory process.
  FERC
Transmission Rates (PPL
and PPL Electric)
  In August
2008, PPL Electric asked the FERC to change the method for calculating its
transmission rates to formula-based rates to support continued investment in its
transmission system.  Under formula-based rates, a fixed earnings
level is set for the utility, and the utility annually adjusts its transmission
rates, subject to FERC review, to reflect changes in costs.  The
process offers an opportunity for public input.  The proposed rate
design would ensure that there is no over-recovery or under-recovery of the
actual costs of providing transmission delivery service.  The rate
change request, if approved, would result in a monthly increase of $0.74 for an
average PPL Electric residential customer.  This request would not
affect generation charges or distribution rates.  PPL Electric
requested that the proposed rate take effect November 1, 2008.
  In
October 2008, the FERC accepted the proposed rate for filing, effective November
1, 2008, subject to refund.  The FERC did not adjust the requested
return on equity of 12.84%, which included 50 basis points for membership in
PJM.  Finally, the FERC set the matter for hearing, but held the
hearings in abeyance to provide time to establish settlement judge
procedures.  In May 2009, a settlement was reached by all of the
parties to the proceeding and PPL Electric was granted approval to implement the
formula rate as filed in the settlement, effective June 1, 2009, until final
resolution of the proceeding.  Rates under this element were permitted
to go into effect on June 1, 2009, subject to final FERC
approval.  PPL Electric cannot predict the outcome of this
matter.  See Note 2 for information on a true-up of these
revenues.
  California
ISO and Western Markets(PPL
and PPL Energy Supply)
  Through
its subsidiaries, PPL made $18 million of sales to the California ISO during the
period October 2000 through June 2001, of which $17 million has not been paid to
PPL subsidiaries.  Given the myriad of electricity supply problems
faced by the California electric utilities and the California ISO, PPL cannot
predict whether or when it will receive payment.  At June 30,
2009, PPL continues to be fully reserved for non-payment for these
sales.
  Regulatory
proceedings arising out of the California electricity supply situation have been
filed at the FERC.  The FERC has determined that all sellers of energy
into markets operated by the California ISO and the California Power Exchange,
including PPL Montana, should be subject to refund liability for the period
beginning October 2, 2000 through June 20, 2001, but the FERC has not yet ruled
on the exact amounts that the sellers, including PPL Montana, would be required
to refund.  In decisions in September 2004 and August 2006, the U.S.
Court of Appeals for the Ninth Circuit held that the FERC had the additional
legal authority to order refunds for periods prior to October 2, 2000, and
ordered the FERC to determine whether or not it would be appropriate to grant
such additional refunds.  In February 2008, the FERC initiated
proceedings to determine whether it would be appropriate to grant additional
refunds.  The FERC also instituted settlement proceedings to explore
whether a settlement is possible.
  In June
2003, the FERC took several actions as a result of a number of related
investigations.  The FERC terminated proceedings to consider whether
to order refunds for spot market bilateral sales made in the Pacific Northwest,
including sales made by PPL Montana, during the period December 2000 through
June 2001.  In August 2007, the U.S. Court of Appeals for the Ninth
Circuit reversed the FERC's decision and ordered the FERC to consider additional
evidence.  The FERC also commenced additional investigations relating
to "gaming" and bidding practices during 2000 and 2001, but neither PPL
EnergyPlus nor PPL Montana believes it is a subject of these
investigations.
  In
February 2004, the Montana Public Service Commission initiated a limited
investigation of the Montana retail electricity market for the years 2000 and
2001, focusing on how that market was affected by transactions involving the
possible manipulation of the electricity grid in the western U.S.  The
investigation includes all public utilities and licensed electricity suppliers
in Montana, including PPL Montana, as well as other entities that may possess
relevant information.  In June 2004, the Montana Attorney General
served PPL Montana and more than 20 other companies with subpoenas requesting
documents, and PPL Montana has provided responsive documents to the Montana
Attorney General.
  While PPL
and its subsidiaries believe that they have not engaged in any improper trading
or marketing practices affecting the California and western markets, PPL cannot
predict the outcome of the above-described investigations, lawsuits and
proceedings or whether any PPL subsidiaries will be the target of any additional
governmental investigations or named in other lawsuits or refund
proceedings.
  PJM
RPM Litigation (PPL,
PPL Energy Supply and PPL Electric)
  In May
2008, a group of state public utility commissions, state consumer advocates,
municipal entities and electric cooperatives, industrial end-use customers and a
single electric distribution company (collectively, the RPM Buyers) filed a
complaint before the FERC objecting to the prices for capacity under the PJM
Reliability Pricing Model (RPM) that were set in the 2008-09, 2009-10 and
2010-11 RPM base residual auctions.  The RPM Buyers requested that the
FERC reset the rates paid to generators for capacity in those periods to a
significantly lower level.  Thus, the complaint requests that
generators be paid less for those periods through refunds and/or prospective
changes in rates.  The relief requested in the complaint, if granted,
could have a material effect on PPL, PPL Energy Supply and PPL
Electric.  PJM, PPL and numerous other parties have responded to the
complaint, strongly opposing the relief sought by the RPM Buyers.  In
September 2008, the FERC entered an order denying the complaint.  PPL
cannot predict the outcome of this proceeding.
  In
December 2008, the PJM submitted amendments to certain provisions governing its
RPM capacity market.  The amendments were intended to permit the
compensation available to suppliers that provide capacity, like PPL Energy
Supply, to increase.  The PJM sought approval of the amendments in
time for them to be implemented for the May 2009 capacity auction (for service
in June 2012 through May 2013).  Numerous parties, including PPL,
protested the PJM's filing.  Certain of the protesting parties
proposed changes to the capacity market auction that would result in a reduction
in compensation to capacity suppliers.  The changes proposed by the
PJM and by other parties in response to the PJM proposals could significantly
affect the compensation available to suppliers of capacity participating in
future RPM auctions.  In April 2009, the FERC entered an order
approving in part and disapproving in part the changes proposed by
PJM.  The FERC's order is subject to timely rehearing petitions and
appeals.  Rights to appeal this decision expire during August
2009.  PPL cannot predict the outcome of this proceeding.
  FERC
Market-Based Rate Authority(PPL
and PPL Energy Supply)
  In
December 1998, the FERC issued an order authorizing PPL EnergyPlus to make
wholesale sales of electric power and related products at market-based
rates.  In that order, the FERC directed PPL EnergyPlus to file an
updated market analysis within three years of the date of the order, and every
three years thereafter.  Market-based rate filings with the FERC were
made in November 2004 by PPL EnergyPlus, PPL Electric, PPL Montana and most of
PPL Generation's subsidiaries.  These filings consisted of a Western
market-based rate filing for PPL Montana and an Eastern market-based rate filing
for most of the other PPL subsidiaries in the PJM region.
  In
September 2005, the FERC issued an order conditionally approving the Eastern
market-based rate filing, subject to PPL subsidiaries making a compliance filing
providing further support that they cannot erect other non-transmission barriers
to entry into the generation market.  The PPL subsidiaries made this
compliance filing in October 2005, which the FERC accepted.
  In May
2006, the FERC issued an order rejecting the claims of the various parties in
the proceeding regarding PPL's Western market-based rate filing and granting PPL
Montana market-based rate authority in NorthWestern's control
area.  In July 2007, the FERC denied two outstanding requests for
rehearing of its 2006 order.  Subsequently, various parties in this
proceeding filed appeals of the order with the U.S. Court of Appeals for the
Ninth Circuit.  In September 2007, a party also filed a complaint with
the FERC seeking additional refunds in the event that the U.S. Court of Appeals
overturns or reverses the FERC order.  In June 2009, the U.S. Court of
Appeals denied the appeal.  While PPL Montana continues to believe
that it does not have market power in NorthWestern's control area and that it
has no obligations to make additional sales of power to NorthWestern regardless
of the outcome of this proceeding, it cannot predict the outcome of these
proceedings.
  In
January 2008, pursuant to the schedule established by FERC orders, PPL's
subsidiaries made another market-based rate renewal filing for all Eastern
subsidiaries in the PJM, New England and New York regions, including PPL
Electric, PPL EnergyPlus and most of PPL Generation's
subsidiaries.  In October 2008, the FERC renewed these subsidiaries'
market-based rate authority as requested.
  Currently,
if a seller is granted market-based rate authority by the FERC, it may enter
into power contracts during the time period for which such authority has been
granted.  If the FERC determines that the market is not workably
competitive or that the seller possesses market power or is not charging "just
and reasonable" rates, the FERC institutes prospective action.  Any
contracts entered into pursuant to the FERC's market-based rate authority remain
in effect and are generally subject to a high standard of review before the FERC
can order any changes.  Recent court decisions by the U.S. Court of
Appeals for the Ninth Circuit have raised issues that may make it more difficult
for the FERC to continue its program of promoting wholesale electricity
competition through market-based rate authority.  These court
decisions permit retroactive refunds and a lower standard of review by the FERC
for changing power contracts, and could have the effect of requiring the FERC to
review in advance most, if not all, power contracts.  In June 2008,
the U.S. Supreme Court reversed one of the decisions of the U.S. Court of
Appeals for the Ninth Circuit, thus upholding the higher standard of review for
modifying contracts.  The FERC has not yet taken action in response to
these recent court decisions.  At this time, PPL cannot predict the
impact of these court decisions on the FERC's future market-based rate authority
program or on PPL's business.
  IRS
Synthetic Fuels Tax Credits(PPL
and PPL Energy Supply)
  PPL,
through its subsidiaries, had interests in two synthetic fuel production
facilities:  the Somerset facility, which was located in Pennsylvania,
and the Tyrone facility, which was located in Kentucky.  PPL received
tax credits pursuant to Section 29/45K of the Internal Revenue Code based on the
sale of synthetic fuel from these facilities.  The Section 29/45K tax
credit program expired at the end of 2007, and production of synthetic fuel at
these facilities and all other synthetic fuel operations ceased as of
December 31, 2007.  The facilities were dismantled and retired in
2008.
  In April
2008, the IRS published the domestic first purchase price (DFPP) for the prior
year indicating that the DFPP reference price increased above PPL's estimated
price levels for 2007 and the inflation-adjusted phase-out range decreased from
PPL's estimate for 2007.  Therefore, PPL recorded an expense of $13
million ($0.04 per share, basic and diluted, for PPL) in the first quarter of
2008, to "Income Taxes" on the Statement of Income to account for this
difference.
  Energy
Policy Act of 2005 - Reliability Standards(PPL,
PPL Energy Supply and PPL Electric)
  In August
2005, the Energy Policy Act of 2005 (the 2005 Energy Act) was signed into
law.  The 2005 Energy Act is comprehensive legislation that
substantially affects the regulation of energy companies, amends federal energy
laws and provides the FERC with new oversight responsibilities.  Among
the important changes implemented under this legislation is the appointment
of the NERC to establish and enforce mandatory reliability standards
(Reliability Standards) regarding the bulk power system.  The FERC
will oversee this process and independently enforce the Reliability
Standards.
  The
Reliability Standards have the force and effect of law and apply to certain
users of the bulk power electricity system, including electric utility
companies, generators and marketers.  The FERC has indicated it
intends to enforce vigorously the Reliability Standards using, among other
means, civil penalty authority.  Under the Federal Power Act, the FERC
may assess civil penalties of up to $1 million per day, per violation, for
certain violations.  The first group of Reliability Standards approved
by the FERC became effective in June 2007.
  In
September 2007, PPL Electric self-reported to the RFC that PPL Electric had
identified a potential violation of certain reliability requirements and
submitted an accompanying mitigation plan.  In February 2008, the RFC
notified PPL Electric that it had completed its investigation, accepted PPL
Electric's mitigation plan and issued a Notice of Alleged
Violation.  In September 2008, the RFC issued its Notice of Confirmed
Violation concerning this matter.  Any RFC determination remains
subject to the approval of the NERC and the FERC.  At this time, PPL
Electric cannot predict the outcome of this matter.
  In the
course of implementing its program to ensure compliance with the Reliability
Standards by those PPL affiliates subject to the standards, PPL anticipates that
certain other instances of potential non-compliance may be identified from time
to time.  PPL cannot predict the fines or penalties that may be
imposed.
  U.K.
Overhead Electricity Networks(PPL
and PPL Energy Supply)
  In 2002
and for safety reasons, the U.K. Government issued guidance that low voltage
overhead electricity networks within three meters horizontal clearance of a
building should either be insulated or relocated.  This imposed a
retroactive requirement on existing assets that were built with lower
clearances.  In 2008, following extensive discussion, the U.K.
Government determined that the U.K. electricity network should comply with the
guidance issued.  WPD estimates that the cost of compliance will be
approximately $91 million and is expected to be allowed to be recovered through
rates.  The Government has determined that WPD (South Wales) should
comply by 2015 and WPD (South West) by 2018.
  To
improve network reliability, in January 2009 the U.K. Government enforced a
regulation requiring network operators to implement a risk-based program over 25
years to clear trees within falling distance of key high-voltage overhead lines.
WPD estimates that the cost of compliance will be approximately $105 million
over the 25-year period and is expected to be allowed to be recovered through
rates.
  U.K.
Electricity Regulation (PPL
and PPL Energy Supply)
  WPD
operates under distribution licenses granted, and price controls set, by the
Ofgem.  The price control formula that governs WPD's allowed revenue
is normally determined every five years, with the next distribution price
control review (DPCR) to be completed by the end of 2009, effective April 1,
2010.  An initial proposals paper has been issued by the
Ofgem.  Earnings in 2010 and beyond may be affected by the
DPCR.  WPD cannot predict the ultimate outcome of the
DPCR.
  Environmental
Matters - Domestic
  (PPL,
PPL Energy Supply and PPL Electric)
  Due to
the environmental issues discussed below or other environmental matters, PPL
subsidiaries may be required to modify, curtail, replace or cease operating
certain facilities to comply with statutes, regulations and actions by
regulatory bodies or courts.  In this regard, PPL subsidiaries also
may incur capital expenditures or operating expenses in amounts which are not
now determinable, but could be significant.
  Air(PPL
and PPL Energy Supply)
  The Clean
Air Act deals, in part, with emissions causing acid deposition, attainment of
federal ambient air quality standards and toxic air emissions and visibility
standards in the U.S.  Amendments to the Clean Air Act requiring
additional emission reductions are likely to continue to be proposed in the U.S.
Congress.  The Clean Air Act allows states to develop more stringent
regulations and in some instances, as discussed below, Pennsylvania and Montana
have chosen to do so.
  Clean
Air Interstate Rule (CAIR)
  Citing
its authority under the Clean Air Act, in 1997, the EPA developed new standards
for ambient levels of ozone and fine particulates in the U.S.  To
facilitate attainment of these standards, the EPA promulgated the CAIR for 28
midwestern and eastern states, including Pennsylvania, to reduce sulfur dioxide
emissions by about 50% by 2010 and to extend the current seasonal program for
reduction in nitrogen oxides emissions to a year-round program starting in
2009.  Starting in 2015, the CAIR requires further reductions in the
CAIR region, in sulfur dioxide of 30% from 2010 levels, and nitrogen oxides
during the ozone season of 17% from 2009 levels.  The CAIR allowed
these reductions to be achieved through cap-and-trade programs.
  In July
2008, the United States Court of Appeals for the D.C. Circuit (the U.S. Circuit
Court) issued a ruling that invalidated CAIR in its entirety, including its
cap-and-trade program.  The U.S. Circuit Court did not overturn the
previously existing cap-and-trade program for sulfur dioxide reductions under
the acid rain program or the previously existing cap-and-trade program for
reductions in nitrogen oxides during the ozone season.
  In
December 2008, the U.S. Circuit Court remanded CAIR back to the EPA without
vacating the cap-and-trade program, effectively reinstating, at least
temporarily, CAIR and its requirements for annual-reduction for nitrogen oxides
beginning in 2009 and for further reduction in sulfur dioxide by requiring the
surrender of two acid rain allowances for every ton of sulfur dioxide emitted
beginning in 2010.
  PPL
expects to meet the annual nitrogen oxide reductions required by CAIR in
2009.  However, the ultimate disposition of CAIR's cap-and-trade
program and the value of annual nitrogen oxide allowances as well as sulfur
dioxide allowances, remain uncertain.  If the EPA revises CAIR to
require more stringent emission reductions or revises CAIR to eliminate the
regional cap-and-trade program, the costs of compliance are not now
determinable, but could be significant.
  In 2006,
the EPA revised the ambient air quality standard for fine particulates and in
2008 the EPA tightened the ambient air quality standard for
ozone.  These more stringent standards could result in requirements to
reduce emissions of sulfur dioxide and nitrogen oxides beyond those required
under the CAIR.  If additional reductions were to be required, the
costs are not now determinable, but could be significant.  In
addition, the EPA is expected to propose this year and finalize next year a new
one hour ambient air quality standard for nitrogen dioxide.  The level
of the standard and the effects on PPL power plants are not yet
determinable.
  To
continue meeting the sulfur dioxide reduction requirements under the acid rain
provisions of the Clean Air Act, and the reductions required by CAIR (remanded
by the U.S. Circuit Court, but currently in place), PPL has installed scrubbers
at its Montour plant that are now in service.  PPL is continuing with
installation of scrubbers at its Brunner Island plant.  The
Unit 3 scrubber was placed in-service in the second quarter of 2009, and
the scrubber for Units 1 and 2 is scheduled to be placed in-service in late fall
of 2009.  In addition, with respect to compliance with annual and
ozone season nitrogen oxide reduction requirements, PPL's plan is to operate the
SCRs at Montour Units 1 and 2, to utilize the existing combustion controls and
to purchase any needed emission allowances on the open market.
  Mercury
  Also
citing its authority under the Clean Air Act, in May 2005, the EPA issued the
Clean Air Mercury Regulations (CAMR) that affect coal-fired
plants.  These regulations established a cap-and-trade program to take
effect in two phases, with a first phase to begin in January 2010, and a second
phase with more stringent requirements to begin in January
2018.  However, in February 2008, the U.S. Circuit Court overturned
the EPA's rule.  Under this decision, the EPA must either properly
remove mercury from regulation under the hazardous air pollutant provisions of
the Clean Air Act or develop standards imposing MACT for electric generating
units.  In January 2009, the EPA stated that it will proceed with
developing MACT standards for mercury emissions from electric generating
units.  The costs of complying with such standards are not now
determinable, but could be significant.
  Pennsylvania
adopted mercury rules more stringent than CAMR.  Pennsylvania's rules
establish mercury emission limits for each coal-fired generating facility
beginning in 2010, and require that mercury emission allowances under the EPA's
cap-and-trade program under CAMR be met at each unit without the benefit of an
emissions trading program, and that tighter emission limits based on the second
phase of the CAMR requirements be accelerated to begin in 2015.  In
light of the U.S. Circuit Court decision overturning CAMR, in September 2008,
PPL filed a complaint with the Pennsylvania Commonwealth Court (Commonwealth
Court) seeking to have the Pennsylvania mercury rule rescinded on the basis that
it is unlawful, invalid and unenforceable under the provisions of the
Pennsylvania Air Pollution Control Act.  In January 2009, the
Pennsylvania Commonwealth Court ruled in PPL's favor.  The decision is
on appeal to the Pennsylvania Supreme Court.  Pending final resolution
of this matter, PPL is evaluating its mercury control plans and what steps it
needs to take at this time.
  If the
Pennsylvania mercury rule is ultimately upheld, PPL may need to install chemical
injection systems on its Brunner Island units to achieve the Phase 1 mercury
reduction requirements.  PPL estimates that the capital cost of such
chemical injection systems at Brunner Island will be approximately $40
million.  For Montour, PPL would need to operate the SCRs (already in
place) year-round along with the scrubbers to achieve compliance with Phase
1.  There is, however, the possibility that these actions would not be
sufficient to meet Pennsylvania's new mercury requirements, and additional
injection systems could be required at an estimated cost of approximately $32
million.
  To meet
Pennsylvania's 2015 mercury requirements, if the rule is upheld, and/or any
similarly stringent MACT rule adopted by the EPA, adsorption/absorption
technology with fabric filters may be required at most of PPL's Pennsylvania
coal-fired generating units.  Based on current analysis and industry
estimates, PPL estimates that if this technology were required at every one of
its Pennsylvania coal-fired generating units, the aggregate capital cost of
compliance would be approximately $530 million.
  Montana
also has finalized mercury emission rules that require, by 2010, every
coal-fired generating plant in that state to achieve reduction levels more
stringent than the CAMR's 2018 requirements.  PPL is installing
chemical injection systems to meet these requirements.  PPL estimates
that its share of the capital cost for these systems in Montana will be
approximately $15 million.  Because enhanced chemical injection
technologies may not be sufficiently developed to meet this level of reductions
by 2010, there is a risk that adsorption/absorption technology with fabric
filters at both Colstrip and Corette would be required.  Based on
current analysis and industry estimates, PPL estimates that if this technology
were required, its share of the capital cost to achieve compliance at its
Montana units would be approximately $140 million.
  Regional
Haze and Visibility
  In
addition to the above rules, the Clean Air Visibility Rule was issued by the EPA
in June 2005, to address regional haze or regionally-impaired visibility caused
by multiple sources over a wide area.  The rule defines Best Available
Retrofit Technology (BART) requirements for electric generating units, including
presumptive limits for sulfur dioxide and nitrogen oxides controls for large
units.  Under the BART rule, PPL submitted to the Pennsylvania DEP its
analyses of the visibility impacts of particulate matter emissions from Martins
Creek Units 3 and 4, Brunner Island Units 2 and 3 and Montour Units 1 and
2.  The EPA had determined that meeting the requirements for CAIR also
met the BART requirements for sulfur dioxide and nitrogen
dioxide.  PPL's analyses have shown that because PPL had already
upgraded its particulate emissions controls at Montour Units 1 and 2 and Brunner
Island Unit 3, and was in the process of upgrading its particulate emissions
controls on Brunner Island Unit 2 in 2009 (presently being installed), that
further controls were not justified as there would be little corresponding
visibility improvement.  PPL has not received comments from the
Pennsylvania DEP on these submissions.
  Also
under the BART rule, PPL submitted to the EPA its analyses of the visibility
impacts of sulfur dioxide, nitrogen oxides and particulate matter emissions for
Colstrip Units 1 and 2 and Corette.  PPL's analyses have shown that
further reductions are not needed.  The EPA has responded to PPL's
reports for Colstrip and Corette and requested further information and
analysis.  PPL completed further analysis and submitted addendums to
its initial reports for Colstrip and Corette.  In February 2009, PPL
received an information request for additional data related to the Colstrip
generating station non-BART affected emission sources.  PPL responded
to this request in March 2009.  PPL has not received comments from the
EPA on these submissions.
  PPL
cannot predict whether any additional reductions will be required in
Pennsylvania or Montana.  If additional reductions are required, the
costs are not now determinable, but could be significant.
  New
Source Review (NSR)
  In 1999,
the EPA initiated enforcement actions against several electric generators,
asserting that older, coal-fired power plants operated by those generators have,
over time, been modified in ways that increased their emissions and subjected
them to more stringent NSR requirements under the Clean Air Act.  The
EPA subsequently issued information requests and notices of violation, and
commenced enforcement actions against other generators.  PPL received
such information requests for its Colstrip, Corette and Martins Creek
plants.  Although the EPA announced in 2005 that it would not bring
new enforcement actions under these NSR rules, the Justice Department recently
declared that it is now considering bringing such actions.  In April
2009, PPL received information requests for its Montour and Brunner Island
plants.  PPL has met with the EPA regarding this
matter.  PPL's response to the request is currently on hold pending
evaluation by PPL and the EPA as to whether to engage in pre-litigation
settlement discussions.  The EPA has sent PPL a proposed term sheet as
a starting point for any such settlement discussions.  PPL is
evaluating the feasibility and costs of achieving those terms.
  In
January 2009, PPL received a notice of violation from the EPA for projects
undertaken at the Keystone plant at which PPL is part owner.  The EPA
alleges that the projects were undertaken without proper NSR
compliance.  PPL cannot predict the outcome of this
proceeding.
  States
and environmental groups also have brought enforcement actions alleging
violations of the NSR regulations by coal-fired plants, and PPL is unable to
predict whether such state or citizen enforcement actions will be brought with
respect to any of PPL affiliates' plants.
  If PPL's
past activities are found to have violated the NSR regulations, then PPL must
install best available control technology for any pollutant found to have
significantly increased due to a major modification.  The costs to
install and operate such technology are not now determinable, but could be
significant.
  Finally,
if the EPA regulates carbon dioxide emissions pursuant to the 2007 U.S. Supreme
Court decision on global climate change (as discussed below), carbon dioxide
emissions could become subject to the NSR provisions of the Clean Air
Act.  The implications are uncertain, as PPL is not aware of any
permitting authorities having implemented the NSR regulations for carbon dioxide
emissions.
  Opacity
  The New
Jersey DEP and certain New Jersey residents have raised environmental concerns
with respect to the visible opacity of emissions from the oil-fired units at the
Martins Creek plant.  Similar issues also are being raised by the
Pennsylvania DEP.  PPL studied the issue and as a result installed
chemical injection systems to reduce visible emissions.  If it is
determined that further actions must be taken to address the visible opacity of
these emissions, such actions could result in costs that are not now
determinable, but could be significant.
  Global
Climate Change
  There is
concern nationally and internationally about global climate change and the
contribution of greenhouse gas emissions including, most significantly, carbon
dioxide from the combustion of fossil fuels.  This concern has led to
increased federal legislative proposals, actions at regional, state and local
levels, as well as litigation relating to greenhouse gas emissions, including an
April 2007 U.S. Supreme Court decision holding that the EPA has the authority to
regulate greenhouse gas emissions from new motor vehicles under the Clean Air
Act.  As a result of this decision, in July 2008 the EPA issued an
"Advance Notice of Proposed Rulemaking," proposing alternative approaches to
regulate carbon dioxide emissions.  Upon taking office in January
2009, President Obama reaffirmed statements he made during the presidential
campaign about his support for mandatory regulation of greenhouse gas emissions,
including a cap-and-trade system.  The new Administrator of the EPA
has indicated that the EPA is moving forward with regulation of greenhouse gas
emissions under the Clean Air Act, though the exact form of such regulation
remains unclear.  In April 2009, the EPA proposed a rule to
require economy-wide reporting of greenhouse gas emissions and the EPA issued a
proposed finding that greenhouse gases contribute to air pollution and may
endanger public health or welfare.  Also, increased pressure for
carbon dioxide emissions reduction is being initiated by investor and
environmental organizations, and the international community.  The
construction and operation of coal-fired power plants have received particularly
intense scrutiny.
  PPL
believes future legislation and regulations that affect carbon dioxide emissions
from power plants are likely, although technology to efficiently capture, remove
and sequester carbon dioxide emissions is not presently available on a
commercial scale.  In June 2009, the U.S. House of Representatives
passed H.R. 2454, the American Clean Energy and Security Act of
2009.  A key element affecting PPL includes a declining cap on carbon
emissions beginning in 2012, which requires a three percent reduction in
greenhouse gas emissions (below 2005 levels) by 2012, increasing to 17% by 2020,
42% by 2030 and 83% by 2050.  The legislation also would require that
electric utilities meet a mandatory 20% renewable energy supply and energy
efficiency requirement by 2020.  The Senate plans to begin to address
climate change legislation in the fall.  Renewable electricity
standards are currently included in a separate bill, S.1462, the American Clean
Energy Leadership Act of 2009, which passed in the Senate Energy Committee in
June 2009.  Under this bill, electric utilities would be required to
meet a 15% standard through renewable sources of energy and energy efficiency by
2021.
  PPL is
currently evaluating H.R.2454 and S.1462.  PPL management believes
there are financial, regulatory and logistical uncertainties related to
implementing renewable energy mandates that will need to be resolved before the
impact to PPL of implementing renewable energy legislation can be meaningfully
estimated.  Such uncertainties, among others, relate to the need to
provide back-up supply to augment intermittent renewable generation, potential
generation oversupply that could result from such renewable generation and
back-up, impacts to the PJM capacity market and the need for substantial changes
to transmission and distribution systems to accommodate renewable energy, which
challenges and uncertainties are not directly addressed by the proposed
legislation.  Because of the uncertainties as to the final outcome of
federal climate change and energy legislation and regulation, PPL cannot at this
time predict the effect on its future competitive position, results of
operation, cash flows and financial position, of any greenhouse gas emission,
renewable energy mandate or other global climate change requirements that may be
adopted, although the costs to implement and comply with any such requirements
could be material.
 At the
regional level, ten northeastern states signed a Memorandum of Understanding
(MOU) agreeing to establish a greenhouse gas emission cap-and-trade program,
called the Regional Greenhouse Gas Initiative (RGGI).  The program
commenced in January 2009 and calls for stabilization of carbon dioxide
emissions, at base levels established in 2005, from electric power plants larger
than 25 MW in capacity.  The MOU also provides for a 10% reduction in
carbon dioxide emissions from base levels by 2019.
  Pennsylvania
has not stated an intention to join RGGI, but has enacted the Pennsylvania
Climate Change Act of 2008 (Act).  That Act established a Climate
Change Advisory Committee to advise the DEP on the development of a Climate
Change Action Plan.  PPL is participating on that Advisory
Committee.  Legislation has been introduced in the Pennsylvania House
of Representatives that would, if enacted, significantly increase renewable and
solar supply requirements.
  In the
Western U.S., 11 states, including Montana, and Canadian provinces are members
of the Western Climate Initiative (WCI).  The WCI has established a
goal of reducing carbon dioxide emissions 15% below the 2005 levels by 2020 and
is currently developing greenhouse gas emission allocations, offsets, and
reporting recommendations.
  PPL has
conducted an inventory of its carbon dioxide emissions and is continuing to
evaluate options for reducing, avoiding, off-setting or sequestering its carbon
dioxide emissions.  In 2008, PPL estimates that its power plants
emitted approximately 28 million tons of carbon dioxide (based on PPL's equity
share of these assets).
  PPL
believes that the regulation of greenhouse gas emissions may have a material
impact on its future capital expenditures and operations, but the costs are not
now determinable.  Furthermore, PPL believes that the imposition of
mandatory renewable energy and energy efficiency requirements could have a
material impact on PPL.
  Water/Waste(PPL
and PPL Energy Supply)
  Martins
Creek Fly Ash Release
  In August
2005, there was a release of approximately 100 million gallons of water
containing fly ash from a disposal basin at the Martins Creek plant used in
connection with the operation of the two 150 MW coal-fired generating units
at the plant.  This resulted in ash being deposited onto adjacent
roadways and fields, and into a nearby creek and the Delaware
River.  The leak was stopped, and PPL has determined that the problem
was caused by a failure in the disposal basin's discharge
structure.  PPL has conducted extensive clean-up and completed
studies, in conjunction with a group of natural resource trustees and the
Delaware River Basin Commission, evaluating the effects of the release on the
river's sediment, water quality and ecosystem.
  The
Pennsylvania DEP filed a complaint in Pennsylvania Commonwealth Court against
PPL Martins Creek and PPL Generation, alleging violations of various state laws
and regulations and seeking penalties and injunctive relief.  The
Delaware Riverside Conservancy and several citizens were granted the right,
without objection from PPL, to intervene in the Pennsylvania DEP's
action.  PPL and the Pennsylvania DEP have settled this
matter.  The settlement required a payment of $1.5 million in
penalties and reimbursement of the DEP's costs.  PPL made this payment
in the second quarter of 2008.  The settlement also requires PPL to
submit a report on the completed studies of possible natural resource
damages.  PPL submitted the assessment report to the agencies in June
2007.  PPL met with the agencies in January 2009 to discuss the status
of their natural resource damage assessment and their review of the June 2007
report.  In March 2009, the agencies provided some limited information
on their projection of damages to the Delaware River resources from this release
and cleanup.  PPL has requested that the agencies provide further
details.  At this point, PPL is not certain whether the agencies will
require additional studies, but PPL does expect the trustees and the Delaware
River Basin Commission will seek to recover their costs and/or restoration costs
for damages that they can demonstrate were caused by the release.
  Through
June 30, 2009, PPL Energy Supply spent $28 million for remediation and
related costs and an immaterial remediation liability remained.  PPL
and PPL Energy Supply cannot be certain of the outcome of the natural resource
damage assessment or associated costs, the outcome of any lawsuit brought by the
citizens and businesses or the exact nature of any other regulatory or other
legal actions that may be initiated against PPL, PPL Energy Supply or their
subsidiaries as a result of the disposal basin release.
  Basin
Seepage - Pennsylvania
  Seepages
have been detected at active and retired wastewater basins at various PPL
plants, including the Montour, Brunner Island and Martins Creek generating
facilities.  PPL has completed an assessment of some of the seepages
at the Montour and Brunner Island facilities and is working with the
Pennsylvania DEP to implement abatement measures for those
seepages.  PPL is continuing to conduct assessments of other seepages
at the Montour and Brunner Island facilities as well as seepages at the Martins
Creek facility to determine the appropriate abatement actions.  PPL
currently plans to spend up to $50 million to upgrade and/or replace certain
wastewater facilities in response to the seepages and for other facility
changes.  The potential additional cost to address the identified
seepages or other seepages at all of PPL's Pennsylvania plants is not now
determinable, but could be significant.
  Basin
Seepage - Montana
  In May
2003, approximately 50 plaintiffs brought an action against PPL Montana and the
other owners of the Colstrip plant alleging property damage from seepage from
the freshwater and wastewater ponds at Colstrip.  In the first quarter
of 2008, PPL Montana recorded an additional reserve of $7 million ($0.01 per
share, basic and diluted, for PPL) to "Other operation and maintenance" on the
Statement of Income.  In July 2008, the plaintiffs and the remaining
owner-defendants remaining after dismissal of NorthWestern due to its bankruptcy
executed a settlement agreement.  PPL Montana and the other remaining
owner-defendants funded the settlement, concluding the matter.  PPL
Montana's share of the settlement was approximately $8 million.  In
June 2008, PPL Montana recorded an insignificant reserve for its share of
potential additional settlements with three property owners living near the
original plaintiffs but who were not parties to the lawsuit.  PPL
Montana may incur additional costs related to the potential claims, including
additional groundwater investigations and any related remedial measures, which
are not now determinable, but could be significant.
  In
February 2007, six plaintiffs filed a separate lawsuit in the Montana Sixteenth
Judicial District Court against the Colstrip plant owners asserting similar
property damage claims as were asserted by the plaintiffs to the May 2003
complaint.  The lawsuit is in its initial stages of discovery and
investigation, and PPL Montana is unable to predict the outcome of these
proceedings.  PPL Montana has undertaken certain groundwater
investigations and remediation at the Colstrip plant to address groundwater
contamination alleged by the plaintiffs as well as other groundwater
contamination at the plant.  PPL Montana may incur further costs based
on the outcome of this lawsuit and its additional groundwater investigations and
any related remedial measures, which are not now determinable, but could be
significant.
  Other
Issues
  In
January 2006, the EPA significantly increased the drinking water standard
related to arsenic.  The revised standard, 10 parts per billion (ppb),
may result in individual states taking action that could require several PPL
subsidiaries to further treat wastewater and/or take abatement action at their
power plants.  In Pennsylvania, this arsenic standard has been
incorporated into the state's water quality standards and could result in more
stringent limits to PPL's NPDES permits for its Pennsylvania
plants.  Recently, the EPA has developed a draft risk assessment of
arsenic that increases the cancer risk exposure by more than 20 times, which
would further lower the current standard of 10 ppb to 0.1 ppb.  If
required, a change to this lower level would involve very expensive treatment
and, at this time, there are no assurances that it could even be
attained.
  The EPA
finalized requirements in 2004 for new or modified cooling water intake
structures.  These requirements affect where generating facilities are
built, establish intake design standards and could lead to requirements for
cooling towers at new and modified power plants.  Another rule
finalized in 2004 that addressed existing structures has been withdrawn
following a January 2007 decision by the U.S. Court of Appeals for the Second
Circuit.  In April 2008, the U.S. Supreme Court granted petitions for
writs of certiorari filed by Utility Water Act Group, Public Service Enterprise
Group, Inc. and Entergy Corporation, and subsequently ruled that the EPA has
discretion to use cost-benefit analysis in determining the best technology
available for minimizing adverse environmental impact.  It is expected
that the EPA will incorporate this option in its revisions of the
rule.  How the cost-benefit analysis will be employed, other issues
raised by the Second Circuit Court (that were not reviewed by the U.S. Supreme
Court), and actions the states may take on their own, could result in stricter
standards for existing structures that could impose significant costs on PPL
subsidiaries.
  The EPA
released its 2008 Effluent Guidelines Plan and has chosen not to revise the
steam electric effluent guidelines.  Instead, the EPA plans to
continue to study the industry's wastewater discharges, with a focus on
coal-fired plants and "particular interest" in Flue Gas Desulfurization
wastewater treatment, ash sluice water management and water reuse
opportunities.  The EPA plans to continue to study the industry
through 2009 and 2010 annual reviews, including sampling at selected
plants.
  PPL has
signed a consent order with the Pennsylvania DEP under which it will take
further actions to minimize the possibility of fish kills at its Brunner Island
plant.  Fish are attracted to warm water in power plant discharge
channels, especially during cold weather.  In the past, fish kills
have occurred at Brunner Island when debris at intake pumps resulted in a unit
trip or reduction in load, causing a sudden change in water temperature in the
discharge channel when fish were present.
  PPL paid
a nominal penalty to the DEP for fish kills that occurred in October 2007 and
March 2008.  In addition, PPL had committed to construct a barrier to
prevent debris from entering the intake area.  However, due to
potential impacts in the floodplain, PPL was not able to obtain the necessary
authorization from local townships and an alternative plan is being
developed.  PPL has also committed to investigate alternatives to
completely exclude fish from the discharge area.  PPL will need to
implement one of these alternatives if a fish kill occurs after construction of
the cooling towers at Brunner Island is completed in 2010.  The costs
of these measures are not now determinable, but could be
significant.
  The EPA
and several states, including Montana, are considering establishing regulations
under the Resource Conservation and Recovery Act (RCRA) that could impact the
disposal and management of coal combustion products (CCPs), including ash and
scrubber wastes and other by-products.  Following the large ash
release at a Tennessee Valley Authority site in Tennessee in December 2008 and
subsequent widespread media coverage the EPA, under pressure from a variety of
environmental groups and some legislators, has committed to proposing CCP
regulations by the end of 2009 and has been seeking information from the power
industry as it considers whether or not to regulate CCPs as hazardous
waste.  As a precursor to developing regulations, the EPA issued
letters in March 2009 to power plant owners, including PPL subsidiaries,
requesting information on the structural integrity of their CCP disposal and
associated water treatment impoundments.  PPL has responded to the
requests and the EPA conducted a follow-up inspection of PPL Montana's Colstrip
plant.  In June 2009, the EPA's Office of Enforcement and Compliance
Assurance issued a much broader information request to Colstrip and 18 other
non-affiliated plants, seeking information under the RCRA, the Clean Water Act
and the Emergency Planning and Community Right-to-Know Act.  Although
the EPA's enforcement office issued the request, the EPA has not necessarily
concluded that the plants are in violation of any EPA
requirements.  PPL cannot predict at this time the outcome of these
matters or what the EPA's regulations may require and what impact, if any, they
would have on PPL's facilities.
  Superfund
and Other Remediation
  (PPL,
PPL Energy Supply and PPL Electric)
  PPL
Electric is a potentially responsible party at several sites listed by the EPA
under the federal Superfund program, including the Columbia Gas Plant Site, the
Metal Bank site and the Ward Transformer site.  Clean-up actions have
been or are being undertaken at all of these sites, the costs of which have not
been significant to PPL.  However, should the EPA require different or
additional measures in the future, or should PPL's share of costs at multi-party
sites increase significantly more than currently expected, the costs to PPL
could be significant.
  PPL
Electric has been remediating several sites that were not being addressed under
another regulatory program such as Superfund, but for which PPL Electric may be
liable for remediation.  These include a number of coal gas
manufacturing facilities formerly owned or operated by a predecessor to PPL
Electric.
  Depending
on the outcome of investigations at sites where investigations have not begun or
have not been completed, the costs of remediation and other liabilities could be
substantial.  PPL and its subsidiaries also could incur other
non-remediation costs at sites included in the consent orders or other
contaminated sites, the costs of which are not now determinable, but could be
significant.
  The EPA
is evaluating the risks associated with naphthalene, a chemical by-product of
coal gas manufacturing.  As a result of the EPA's evaluation,
individual states may establish stricter standards for water quality and soil
cleanup.  This could require several PPL subsidiaries to take more
extensive assessment and remedial actions at former coal gas manufacturing
facilities.  The costs to PPL of complying with any such requirements
are not now determinable, but could be significant.
  (PPL
and PPL Energy Supply)
  Under the
Pennsylvania Clean Streams Law, subsidiaries of PPL Generation are obligated to
remediate acid mine drainage at former mine sites and may be required to take
additional steps to prevent potential acid mine drainage at previously capped
refuse piles.  One PPL Generation subsidiary is pumping mine water at
two mine sites and treating water at one of these sites.  Another PPL
Generation subsidiary has installed a passive wetlands treatment system at a
third site.  At June 30, 2009, PPL Energy Supply had accrued a
discounted liability of $25 million to cover the costs of pumping and treating
groundwater at the two mine sites for 50 years and for operating and maintaining
passive wetlands treatment at the third site.  PPL Energy Supply
discounted this liability based on risk-free rates at the time of the mine
closures.  The weighted average rate used was
8.18%.  Expected undiscounted payments are estimated at $1 million for
each of the years from 2009 through 2013, and the expected payments for the work
after 2013 are $144 million.
  (PPL,
PPL Energy Supply and PPL Electric)
  Future
cleanup or remediation work at sites currently under review, or at sites not
currently identified, may result in material additional operating costs for PPL
subsidiaries that cannot be estimated at this time.
  Electric
and Magnetic Fields (PPL,
PPL Energy Supply and PPL Electric)
  Concerns
have been expressed by some members of the public regarding potential health
effects of power frequency EMFs, which are emitted by all devices carrying
electricity, including electric transmission and distribution lines and
substation equipment.  Government officials in the U.S. and the U.K.
have reviewed this issue.  The U.S. National Institute of
Environmental Health Sciences concluded in 2002 that, for most health outcomes,
there is no evidence that EMFs cause adverse effects.  The agency
further noted that there is some epidemiological evidence of an association with
childhood leukemia, but that the evidence is difficult to interpret without
supporting laboratory evidence.  The U.K. National Radiological
Protection Board (part of the U.K. Health Protection Agency) concluded in 2004
that, while the research on EMFs does not provide a basis to find that EMFs
cause any illness, there is a basis to consider precautionary measures beyond
existing exposure guidelines.  In April 2007, the Stakeholder Group on
Extremely Low Frequency EMF, set up by the U.K. Government, issued its interim
assessment which describes a number of options for reducing public exposure to
EMFs.  This assessment is being considered by the U.K.
Government.  PPL and its subsidiaries believe the current efforts to
determine whether EMFs cause adverse health effects should continue and are
taking steps to reduce EMFs, where practical, in the design of new transmission
and distribution facilities.  PPL and its subsidiaries are unable to
predict what effect, if any, the EMF issue might have on their operations and
facilities either in the U.S. or the U.K., and the associated cost, or what, if
any, liabilities they might incur related to the EMF issue.
  Environmental
Matters - WPD(PPL
and PPL Energy Supply)
  WPD's
distribution businesses are subject to environmental regulatory and statutory
requirements.  PPL believes that WPD has taken and continues to take
measures to comply with the applicable laws and governmental regulations for the
protection of the environment.
  The U.K.
government has implemented a project to determine the impact of flooding on the
U.K. utility infrastructure, including major electricity
substations.  WPD estimates a cost of $35 million to comply with the
anticipated requirements and expects to be allowed to recover costs through
rates.
  There are
no other material legal or administrative proceedings pending against or related
to WPD with respect to environmental matters.  See "Environmental
Matters - Domestic - Superfund and Other Remediation - Electric and
Magnetic Fields" for a discussion of EMFs.
  Other
  Nuclear
Insurance(PPL
and PPL Energy Supply)
  PPL
Susquehanna is a member of certain insurance programs that provide coverage for
property damage to members' nuclear generating stations.  Facilities
at the Susquehanna station are insured against property damage losses up to
$2.75 billion under these programs.  PPL Susquehanna is also a member
of an insurance program that provides insurance coverage for the cost of
replacement power during prolonged outages of nuclear units caused by certain
specified conditions.  Under the property and replacement power
insurance programs, PPL Susquehanna could be assessed retroactive premiums in
the event of the insurers' adverse loss experience.  This maximum
assessment was $37 million.
  In the
event of a nuclear incident at the Susquehanna station, PPL Susquehanna's public
liability for claims resulting from such incident would be limited to $12.5
billion under provisions of The Price-Anderson Act Amendments under the Energy
Policy Act of 2005.  PPL Susquehanna is protected against this
liability by a combination of commercial insurance and an industry assessment
program.  In the event of a nuclear incident at any of the reactors
covered by The Price-Anderson Act Amendments under the Energy Policy Act of
2005, PPL Susquehanna could be assessed up to $235 million per incident, payable
at $35 million per year.
  At
June 30, 2009, the property, replacement power and nuclear incident
insurers maintained an A.M. Best financial strength rating of A
("Excellent").
  Guarantees
and Other Assurances
  (PPL,
PPL Energy Supply and PPL Electric)
  In the
normal course of business, PPL, PPL Energy Supply and PPL Electric enter into
agreements that provide financial performance assurance to third parties on
behalf of certain subsidiaries.  Such agreements include, for example,
guarantees, stand-by letters of credit issued by financial institutions and
surety bonds issued by insurance companies.  These agreements are
entered into primarily to support or enhance the creditworthiness attributed to
a subsidiary on a stand-alone basis or to facilitate the commercial activities
in which these subsidiaries enter.
  (PPL)
  PPL fully
and unconditionally guarantees all of the debt securities of PPL Capital
Funding.
  (PPL,
PPL Energy Supply and PPL Electric)
  The table
below provides an update to those guarantees that are within the scope of
accounting guidance on guarantees and are specifically disclosed in Note 15
to the Financial Statements contained in each Registrant's 2008 Form
10-K.  Other than noted in footnote (i), the probability of expected
payment/performance under each of these guarantees is remote.
  Recorded
      Liability atJune 30,
      2009
                
                December 31,
      2008
                
                Exposure
      atJune 30, 2009 (a)
                
                Expiration
      DatePPLIndemnifications
      for sale of PPL Gas Utilities
                
                
                
                
                
                
                
                $
                300
                (b)PPLEnergy
      Supply(c)Letters
      of credit issued on behalf of affiliates
                
                
                
                
                
                
                
                
                17
                (d)
                
                2009
      to 2011Retroactive
      premiums under nuclear insurance programs
                
                
                
                
                
                
                
                
                37
                (e)Nuclear
      claims under The Price-Anderson Act Amendments under The Energy Policy Act
      of 2005
                
                
                
                
                
                
                
                
                235
                (f)Indemnifications
      for entities in liquidation and sales of assets
                
                $
                1
                
                $
                1
                
                
                10
                (g)
                
                2010
      to 2012Indemnification
      to operators of jointly owned facilities
                
                
                
                
                
                
                
                
                6
                (h)WPD
      guarantee of pension and other obligations of unconsolidated
      entities
                
                
                1
                
                
                2
                
                
                32
                (i)
                
                2017Tax
      indemnification related to unconsolidated WPD affiliates
                
                
                
                
                
                
                
                
                9
                (j)
                
                2012Guarantee
      of a portion of an unconsolidated entity's debt
                
                
                1
                
                
                1
                
                
                22
                (k)
                
                2018
  (a)
                      
                      Represents
      the estimated maximum potential amount of future payments that could be
      required to be made under the guarantee.(b)
                      
                      PPL
      has provided indemnification to the purchaser of PPL Gas Utilities and
      Penn Fuel Propane, LLC for damages arising out of any breach of the
      representations, warranties and covenants under the related transaction
      agreement and for damages arising out of certain other matters, including
      certain pre-closing unknown environmental liabilities relating to former
      manufactured gas plant properties or off-site disposal sites, if any,
      outside of Pennsylvania.  The indemnification provisions for
      most representations and warranties, including tax and environmental
      matters, are capped at 15% of the purchase price ($45.0 million), in the
      aggregate, and are triggered (i) only if the individual claim exceeds
      $50,000, and (ii) only if, and only to the extent that, in the aggregate,
      total claims exceed 1.5% of the purchase price ($4.5
      million).  The indemnification provisions for most
      representations and warranties survive for a period of one year after the
      closing.  Certain representations and warranties, including
      those having to do with transaction authorization and title, survive
      indefinitely, are capped at the purchase price and are not subject to the
      above threshold or deductible.  The indemnification provision
      for the tax matters representations survives for the duration of the
      applicable statute of limitations, and the indemnification provision for
      the environmental matters representations survives for a period of three
      years after the transaction closing.  The indemnification
      relating to unknown environmental liabilities for manufactured gas plants
      and disposal sites outside of Pennsylvania could survive more than three
      years, but only with respect to applicable property or sites identified by
      the purchaser prior to the third anniversary of the transaction
      closing.  The indemnification for covenants survives until the
      applicable covenant is performed and is not subject to any
      cap.(c)
                      
                      Other
      than the letters of credit, all guarantees of PPL Energy Supply also apply
      to PPL on a consolidated basis.(d)
                      
                      Standby
      letter of credit arrangements under PPL Energy Supply's $300 million
      five-year credit facility for the purposes of protecting various third
      parties against nonperformance by PPL.  This is not a guarantee
      by PPL on a consolidated basis.(e)
                      
                      PPL
      Susquehanna is contingently obligated to pay this amount related to
      potential retroactive premiums that could be assessed under its nuclear
      insurance programs.  See "Nuclear Insurance" for additional
      information.(f)
                      
                      This
      is the maximum amount PPL Susquehanna could be assessed for each incident
      at any of the nuclear reactors covered by this Act.  See
      "Nuclear Insurance" for additional information.(g)
                      
                      PPL
      Energy Supply's maximum exposure with respect to certain indemnifications
      and the expiration of the indemnifications cannot be estimated because, in
      the case of certain indemnification provisions, the maximum potential
      liability is not capped by the transaction documents and the expiration
      date is based on the applicable statute of limitations.  The
      exposure noted is only for those cases in which the agreements provide for
      a specific limit on the amount of the indemnification.In
      connection with the liquidation of wholly owned subsidiaries that have
      been deconsolidated upon turning the entities over to the liquidators,
      certain affiliates of PPL Global have agreed to indemnify the liquidators,
      directors and/or the entities themselves for any liabilities or expenses
      arising during the liquidation process, including liabilities and expenses
      of the entities placed into liquidation.  In some cases, the
      indemnifications are limited to a maximum amount that is based on
      distributions made from the subsidiary to its parent either prior or
      subsequent to being placed into liquidation.  In other cases,
      the maximum amount of the indemnifications is not explicitly stated in the
      agreements.  The indemnifications generally expire two to seven
      years subsequent to the date of dissolution of the
      entities.  The exposure noted only includes those cases in which
      the agreements provide for a specific limit on the amount of the
      indemnification, and the expiration date was based on an estimate of the
      dissolution date of the entities.  In 2009, $212 million of
      previously disclosed exposure expired.In
      addition to the $10 million exposure disclosed above, PPL Energy Supply
      has provided indemnification to the purchaser of a generating facility for
      losses arising out of any breach of the representations, warranties and
      covenants under the related transaction documents and for losses arising
      with respect to liabilities not specifically assumed by the purchaser,
      including certain pre-closing environmental and tort
      liabilities.  The indemnification other than for pre-closing
      environmental and tort liabilities is triggered only if the purchaser's
      losses reach $1 million in the aggregate, capped at 50% of the purchase
      price (or $95 million), and either expired in May 2007 or will expire
      pursuant to applicable statutes of limitations.  The
      indemnification provision for unknown environmental and tort liabilities
      related to periods prior to PPL Energy Supply's ownership of the real
      property on which the facility is located is capped at $4 million in the
      aggregate and survives for a maximum period of five years after the
      transaction closing.(h)
                      
                      In
      December 2007, a subsidiary of PPL Energy Supply executed revised owners
      agreements for two jointly owned facilities, the Keystone and Conemaugh
      generating stations.  The agreements require that in the event
      of any default by an owner, the other owners fund contributions for the
      operation of the generating stations, based upon their ownership
      percentages.  The maximum obligation among all owners, for each
      station, is currently $20 million.  The non-defaulting owners,
      who make up the defaulting owner's obligations, are entitled to the
      generation entitlement of the defaulting owner, based upon their ownership
      percentage.  The agreements do not have an expiration
      date.(i)
                      
                      As
      a result of the privatization of the utility industry in the U.K., certain
      electric associations' roles and responsibilities were discontinued or
      modified.  As a result, certain obligations, primarily
      pension-related, associated with these organizations have been guaranteed
      by the participating members.  Costs are allocated to the
      members based on predetermined percentages as outlined in specific
      agreements.  However, if a member becomes insolvent, costs can
      be reallocated to and are guaranteed by the remaining
      members.  At June 30, 2009, WPD has recorded an estimated
      discounted liability based on its current allocated percentage of the
      total expected costs for which the expected payment/performance is
      probable.  Neither the expiration date nor the maximum amount of
      potential payments for certain obligations is explicitly stated in the
      related agreements.  Therefore, they have been estimated based
      on the types of obligations.(j)
                      
                      Two
      WPD unconsolidated affiliates were refinanced during
      2005.  Under the terms of the refinancing, WPD has indemnified
      the lender against certain tax and other liabilities.(k)
                      
                      Reflects
      principal payments
only.
  PPL, PPL
Energy Supply and PPL Electric and their subsidiaries provide other
miscellaneous guarantees through contracts entered into in the normal course of
business.  These guarantees are primarily in the form of
indemnification or warranties related to services or equipment and vary in
duration.  The amounts of these guarantees often are not explicitly
stated, and the overall maximum amount of the obligation under such guarantees
cannot be reasonably estimated.  Historically, PPL, PPL Energy Supply
and PPL Electric and their subsidiaries have not made any significant payments
with respect to these types of guarantees and the probability of
payment/performance under these guarantees is remote.  At
June 30, 2009, the aggregate fair value of the indemnities related to
arrangements entered into subsequent to December 31, 2002 was
insignificant.
  11.
              Related Party
Transactions
  PLR
Contracts(PPL
Energy Supply and PPL Electric)
  PPL
Electric has power purchase agreements with PPL EnergyPlus, effective July 2000
and January 2002, under which PPL EnergyPlus will supply PPL Electric's entire
PLR load through December 31, 2009.  Under these contracts, PPL
EnergyPlus provides electricity at the predetermined capped prices that PPL
Electric is authorized to charge its PLR customers.  For the three
months ended June 30, 2009 and 2008, these purchases totaled $411 million
and $428 million.  For the six months ended June 30, 2009 and
2008, these purchases totaled $908 million and $917 million.  These
purchases include nuclear decommissioning recovery and amortization of an
up-front contract payment and are included in the Statements of Income as
"Wholesale energy marketing to affiliate" by PPL Energy Supply, and as "Energy
purchases from affiliate" by PPL Electric.
  Under one
of the PLR contracts, PPL Electric is required to make performance assurance
deposits with PPL EnergyPlus when the market price of electricity is less than
the contract price by more than its contract collateral
threshold.  Conversely, PPL EnergyPlus is required to make performance
assurance deposits with PPL Electric when the market price of electricity is
greater than the contract price by more than its contract collateral
threshold.  PPL Electric estimated that at June 30, 2009 and
December 31, 2008, the fair value of the contract was approximately $312 million
and $917 million.  Accordingly, at June 30, 2009 and December 31,
2008, PPL Energy Supply was required to provide PPL Electric with performance
assurance of $79 million and $300 million.  These deposits are shown
on the Balance Sheets as "Collateral on PLR energy supply to/from affiliate," a
current asset of PPL Energy Supply and a current liability of PPL
Electric.  PPL Electric pays interest equal to the one-month LIBOR
plus 0.5% on this deposit, which is included in "Interest Expense with
Affiliate" on the Statements of Income.  PPL Energy Supply records the
receipt of the interest as affiliated interest income, which is included in
"Interest Income from Affiliates" on the Statements of Income.  For
the three months ended June 30, 2009 and 2008, interest related to these
deposits was insignificant and $2 million.  For the six months ended
June 30, 2009 and 2008, interest related to these deposits was $1 million
and $5 million.
  In 2001,
PPL Electric made a $90 million up-front payment to PPL EnergyPlus in connection
with the PLR contracts.  The up-front payment is being amortized by
both parties over the term of the PLR contracts.  The unamortized
balance of this payment and other payments under the contracts was $6 million
and $12 million at June 30, 2009 and December 31,
2008.  These balances are reflected on the Balance Sheets as "Deferred
revenue on PLR energy supply to affiliate" by PPL Energy Supply, and as
"Prepayment on PLR energy supply from affiliate" by PPL Electric.  The
prepayment will be fully amortized during 2009.
  Under
Pennsylvania law and PUC regulations, PPL Electric is required to buy
electricity generation supply for customers who do not choose a competitive
supplier.  PPL Electric has conducted five of its six planned
competitive solicitations for generation supply in 2010, after its existing PLR
contract expires.  Competitive bids have been solicited for 4,250 MW,
or 83%, of PPL Electric's expected generation supply requirements for these
customers in 2010.  An independent company, NERA Economic Consulting
(NERA), is managing this competitive solicitation process.  NERA
compiles the results and presents them to the PUC.  See Note 10
for additional information on the results of the completed
solicitations.  The sixth competitive solicitation is scheduled for
October 2009.
  PPL
EnergyPlus was one of the successful bidders in the first competitive
solicitation process and has entered into an agreement with PPL Electric to
supply up to 671 MW of total peak load in 2010, at an average price of $91.42
per MWh.
  Under the
standard Supply Master Agreement for the bid solicitation process, PPL Electric
requires all suppliers to post collateral once credit exposures exceed defined
credit limits.  In no instance is PPL Electric required to post
collateral to suppliers under these supply contracts.  PPL EnergyPlus
is required to post collateral with PPL Electric:  (a) when the market
price of electricity to be delivered by PPL EnergyPlus exceeds the contract
price for the forecasted quantity of electricity to be delivered and (b) this
market price exposure exceeds a contractual credit limit.  Based on
the current credit rating of PPL Energy Supply, as guarantor, this credit limit
is $35 million.  At June 30, 2009, PPL Energy Supply provided PPL
Electric with an insignificant letter of credit as performance
assurance.
  At
June 30, 2009, PPL Electric had credit exposure to PPL EnergyPlus under the
PLR contracts and its solicitations for generation supply in 2010 of $312
million,
excluding the effects of netting and collateral arrangements.As a
result of netting and collateral arrangements, PPL Electric's credit exposure
was reduced to $51 million.
  PPL
Energy Supply has credit exposure to PPL Electric under the PLR contracts and
the solicitations for generation supply in 2010.  At June 30,
2009, PPL Energy Supply's credit exposure with PPL Electric was $261 million,
excluding the effects of netting arrangements.  As a result of netting
arrangements, PPL Energy Supply's credit exposure was reduced to
zero.
  NUG
Purchases(PPL
Energy Supply and PPL Electric)
  PPL
Electric has a reciprocal contract with PPL EnergyPlus to sell electricity
purchased under contracts with NUGs.  PPL Electric purchases
electricity from the NUGs at contractual rates and then sells the electricity at
the same price to PPL EnergyPlus.  For the three months ended
June 30, 2009 and 2008, these NUG purchases totaled $20 million and $30
million.  For the six months ended June 30, 2009 and 2008, these
NUG purchases totaled $40 million and $58 million.  These amounts are
included in the Statements of Income as "Wholesale electric to affiliate" by PPL
Electric, and as "Energy purchases from affiliate" by PPL Energy
Supply.
  Allocations
of Corporate Service Costs(PPL
Energy Supply and PPL Electric)
  PPL
Services provides corporate functions such as financial, legal, human resources
and information services.  PPL Services charges the respective PPL
subsidiaries for the cost of such services when they can be specifically
identified.  The cost of these services that is not directly charged
to PPL subsidiaries is allocated to certain subsidiaries based on an average of
the subsidiaries' relative invested capital, operation and maintenance expenses,
and number of employees.  PPL Services allocated the following
amounts, which PPL management believes are reasonable, to PPL Energy Supply and
PPL Electric, including amounts applied to accounts that are further distributed
between capital and expense.
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
      (a)
                
                2008PPL
      Energy Supply
                
                $
                53
                
                $
                54
                
                $
                108
                
                $
                105PPL
      Electric
                
                
                28
                
                
                32
                
                
                60
                
                
                59
  (a)
              
              Excludes
      allocated costs associated with the February 2009 workforce
      reduction.  See Note 6 for additional
    information.
  Intercompany
Borrowings
  (PPL
Energy Supply)
  PPL
Energy Supply had a $47 million balance outstanding on a note receivable from an
affiliate at June 30, 2009 and no such notes were outstanding at
December 31, 2008.  Interest is due quarterly at a rate equal to
1-month LIBOR plus 1%.  The note is shown on the Balance Sheet as
"Note receivable from affiliate."  Interest earned on this note is
included in "Interest Income from Affiliates" on the Statements of Income and
was $1 million and insignificant for the three months ended June 30, 2009
and 2008.  Interest earned for the six months ended June 30, 2009
and 2008 was $1 million and $2 million.
  PPL
Energy Supply had a $124 million balance outstanding on short-term debt with an
affiliate at June 30, 2009 and no such debt was outstanding at
December 31, 2008.  Interest is due quarterly at a rate equal to
1-month LIBOR plus 2.25%.  The balance is shown on the Balance Sheet
as "Short-term debt with affiliate."  Interest accrued on this debt is
included in "Interest Expense with Affiliates" on the Statements of Income and
was $1 million for the three and six months ended June 30,
2009.  No such interest was incurred during the same periods in
2008.
  (PPL
Electric)
  In August
2004, a PPL Electric subsidiary issued a $300 million demand note to an
affiliate.  There was a $79 million balance outstanding at
June 30, 2009 and a $300 million balance outstanding at December 31,
2008.  Interest is due quarterly at a rate equal to 3-month LIBOR plus
1%.  This note is shown on the Balance Sheet as "Note receivable from
affiliate."  Interest earned on the note is included in "Interest
Income from Affiliate" on the Statements of Income, and was $1 million for each
of the three months ended June 30, 2009 and 2008.  For the six
months ended June 30, 2009 and 2008, interest earned was $3 million and $4
million.
  Intercompany
Derivatives(PPL
Energy Supply)
  In 2009
and 2008, PPL Energy Supply entered into a combination of average rate forwards
and average rate options with PPL to sell British pounds
sterling.  These hedging instruments have terms identical to average
rate forwards and average rate options entered into by PPL with third parties to
protect the translation of expected income denominated in British pounds
sterling to U.S. dollars.  At June 30, 2009, the total exposure
hedged was £61 million and the fair value of these positions was a net liability
of $9 million, which is reflected in "Current Liabilities - Price risk
management liabilities" on the Balance Sheet.  No similar hedging
instruments were outstanding at December 31, 2008.  Gains and
losses, both realized and unrealized, on these types of hedging instruments are
included in "Other Income (Expense) - net" on the Statements of
Income.  PPL Energy Supply recorded net losses of $11 million for both
the three and six months ended June 30, 2009.  PPL Energy Supply
recorded net losses of $1 million and $2 million for the three and six months
ended June 30, 2008 related to similar average rates forwards and average
rate options.
  PPL
Energy Supply is also party to forward contracts with PPL to sell British pounds
sterling to protect the value of a portion of its net investment in
WPD.  These hedging instruments have terms identical to forward sales
contracts entered into by PPL with third parties.  The total notional
amount of the contracts outstanding at June 30, 2009 was £55 million
(approximately $108 million based on contracted rates).  The fair
value of these positions was a net asset of $17 million and $34 million at
June 30, 2009 and December 31, 2008, which is reflected in the foreign
currency translation adjustment component of AOCI on the Balance
Sheets.  Additionally, $10 million and $16 million was reflected in
"Current Assets - Price risk management assets" on the Balance Sheets at
June 30, 2009 and December 31, 2008 and $7 million and $18 million was
reflected in "Other Noncurrent Assets - Price risk management assets" on the
Balance Sheets at June 30, 2009 and December 31, 2008.
  Trademark
Royalties(PPL
Energy Supply)
  A PPL
subsidiary owns PPL trademarks and bills certain affiliates for their
use.  PPL Energy Supply was allocated $11 million and $5 million of
this license fee for the three months ended June 30, 2009 and 2008, and $22
million and $14 million for the six months ended June 30, 2009 and
2008.  These allocations are primarily included in "Other operation
and maintenance" on the Statements of Income.
  Intercompany
Insurance(PPL
Energy Supply and PPL Electric)
  PPL Power
Insurance Ltd. (PPL Power Insurance) is a subsidiary of PPL that provides
insurance coverage to PPL and its subsidiaries for property damage,
general/public liability and workers' compensation.
  PPL Power
Insurance charged premiums as follows:
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008PPL
      Energy Supply
                
                $
                1
                
                $
                1
                
                $
                2
                
                $
                2PPL
      Electric
                
                
                2
                
                
                2
                
                
                5
                
                
                4Other
      (a)
                
                
                1
                
                
                1
                
                
                1
                
                
                1Total
                
                $
                4
                
                $
                4
                
                $
                8
                
                $
                7
  (a)
              
              Primarily
      worker's compensation
  Recoveries
on various insurance claims with PPL Power Insurance, which were primarily
included as offsets to "Other operation and maintenance" on the Statements of
Income, were recorded as follows:
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008PPL
      Energy Supply
                
                $
                3
                
                
                
                
                $
                4PPL
      Electric
                
                
                
                
                
                
                
                
                3
                
                $
                6Total
                
                $
                3
                
                
                
                
                $
                7
                
                $
                6
  12.
              Other Income (Expense) -
net
  (PPL,
PPL Energy Supply and PPL Electric)
  The
breakdown of "Other Income (Expense) - net" was:
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008PPLOther
      IncomeGains
      related to the extinguishment of notes (Note 7)
                
                
                
                
                
                
                
                
                
                $
                29Interest
      income
                
                $
                1
                
                
                $
                7
                
                
                
                8
                
                
                $
                17Earnings
      on securities in the NDT funds
                
                
                5
                
                
                
                3
                
                
                
                6
                
                
                
                5Equity
      earnings
                
                
                1
                
                
                
                1
                
                
                
                1
                
                
                
                1Hyder
      liquidation distributions
                
                
                
                
                
                
                1
                
                
                
                
                
                
                
                3Gain
      on sale of PP&E
                
                
                
                
                
                
                2
                
                
                
                
                
                
                
                2Miscellaneous
      - Domestic
                
                
                1
                
                
                
                2
                
                
                
                3
                
                
                
                3Miscellaneous
      - International
                
                
                1
                
                
                
                1
                
                
                
                1
                
                
                
                1Total
                
                
                9
                
                
                
                17
                
                
                
                48
                
                
                
                32Other
      ExpenseEconomic
      foreign currency hedges
                
                
                11
                
                
                
                1
                
                
                
                11
                
                
                
                1Charitable
      contributions
                
                
                1
                
                
                
                
                
                
                
                2
                
                
                
                1Miscellaneous
      - Domestic
                
                
                2
                
                
                
                1
                
                
                
                5
                
                
                
                3Miscellaneous
      - International
                
                
                1
                
                
                
                2
                
                
                
                1
                
                
                
                3Other
      Income (Expense) - net
                
                $
                (6
                )
                
                $
                13
                
                
                $
                29
                
                
                $
                24
 PPLEnergy
      SupplyOther
      IncomeGains
      related to the extinguishment of notes (Note 7)
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                $
                                25Earnings
      on securities in the NDT funds
                                
                                $
                                5
                                
                                
                                $
                                3
                                
                                
                                
                                6
                                
                                
                                $
                                5Interest
      income
                                
                                
                                1
                                
                                
                                
                                6
                                
                                
                                
                                5
                                
                                
                                
                                13Equity
      earnings
                                
                                
                                1
                                
                                
                                
                                1
                                
                                
                                
                                1
                                
                                
                                
                                1Hyder
      liquidation distributions
                                
                                
                                
                                
                                
                                
                                1
                                
                                
                                
                                
                                
                                
                                
                                3Gain
      on sale of PP&E
                                
                                
                                
                                
                                
                                
                                2
                                
                                
                                
                                
                                
                                
                                
                                2Miscellaneous
      - Domestic
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                2
                                
                                
                                
                                1Miscellaneous
      - International
                                
                                
                                1
                                
                                
                                
                                1
                                
                                
                                
                                1
                                
                                
                                
                                1Total
                                
                                
                                8
                                
                                
                                
                                14
                                
                                
                                
                                40
                                
                                
                                
                                26Other
      ExpenseEconomic
      foreign currency hedges
                                
                                
                                11
                                
                                
                                
                                2
                                
                                
                                
                                11
                                
                                
                                
                                2Miscellaneous
      - Domestic
                                
                                
                                2
                                
                                
                                
                                
                                
                                
                                
                                5
                                
                                
                                
                                2Miscellaneous
      - International
                                
                                
                                1
                                
                                
                                
                                2
                                
                                
                                
                                1
                                
                                
                                
                                3Other
      Income (Expense) - net
                                
                                $
                                (6
                                )
                                
                                $
                                10
                                
                                
                                $
                                23
                                
                                
                                $
                                19PPLElectricOther
      IncomeInterest
      income
                                
                                $
                                1
                                
                                
                                $
                                2
                                
                                
                                $
                                3
                                
                                
                                $
                                4Other
      Expense
                                
                                
                                1
                                
                                
                                
                                
                                
                                
                                
                                1Other
      Income (Expense) - net
                                
                                $
                                
                                
                                
                                $
                                2
                                
                                
                                $
                                2
                                
                                
                                $
                                4
  13.
              Fair Value Measurements and Credit
      Concentration
  (PPL,
PPL Energy Supply and PPL Electric)
  Fair
value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date (an exit price).  PPL and its subsidiaries use, as
appropriate, a market approach (generally, data from market transactions), an
income approach (generally, present value techniques and option-pricing models),
and/or a cost approach (generally, replacement cost) to measure the fair value
of an asset or liability.  These valuation approaches incorporate
inputs such as observable, independent market data and/or unobservable data that
management believes are predicated on the assumptions market participants would
use to price an asset or liability.  These inputs may incorporate, as
applicable, certain risks such as nonperformance risk, which includes credit
risk.
  Recurring
Fair Value Measurements
  June 30,
      2009
                
                December 31,
      2008Fair
      Value Measurements Using
                
                
                
                Fair
      Value Measurements UsingTotal
                
                Level
      1
                
                Level
      2
                
                Level
      3
                
                Total
                
                Level
      1
                
                Level
      2
                
                Level
      3PPLAssetsCash
      and cash equivalents
                
                $
                973
                
                
                $
                973
                
                
                
                
                
                
                
                
                
                
                $
                1,100
                
                
                $
                1,100Short-term
      investments-
      municipal debt securities
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                150
                
                
                
                150Restricted
      cash and cash equivalents
                
                
                159
                
                
                
                159
                
                
                
                
                
                
                
                
                
                
                
                347
                
                
                
                347Price
      risk management assets:Energy
      commodities
                
                
                3,878
                
                
                
                15
                
                
                $
                3,685
                
                
                $
                178
                
                
                
                2,460
                
                
                
                19
                
                
                $
                2,143
                
                
                $
                298Interest
      rate/foreign exchange
                
                
                74
                
                
                
                
                
                
                
                72
                
                
                
                2
                
                
                
                156
                
                
                
                
                
                
                
                152
                
                
                
                43,952
                
                
                
                15
                
                
                
                3,757
                
                
                
                180
                
                
                
                2,616
                
                
                
                19
                
                
                
                2,295
                
                
                
                302NDT
      funds:Cash
      and cash equivalents
                
                
                5
                
                
                
                5
                
                
                
                
                
                
                
                
                
                
                
                7
                
                
                
                7Equity
      securities: (a)U.S.
      large-cap
                
                
                216
                
                
                
                148
                
                
                
                68
                
                
                
                
                
                
                
                182
                
                
                
                116
                
                
                
                66U.S.
      mid/small-cap
                
                
                84
                
                
                
                63
                
                
                
                21
                
                
                
                
                
                
                
                69
                
                
                
                50
                
                
                
                19Debt
      securities:U.S.
      Treasury
                
                
                59
                
                
                
                59
                
                
                
                
                
                
                
                
                
                
                
                77
                
                
                
                77U.S.
      government agency
                
                
                11
                
                
                
                
                
                
                
                11
                
                
                
                
                
                
                
                14
                
                
                
                
                
                
                
                14Municipality
                
                
                64
                
                
                
                
                
                
                
                64
                
                
                
                
                
                
                
                61
                
                
                
                
                
                
                
                61Investment-grade
      corporate
                
                
                27
                
                
                
                
                
                
                
                27
                
                
                
                
                
                
                
                33
                
                
                
                
                
                
                
                33Residential
      mortgage-backed securities
                
                
                1
                
                
                
                
                
                
                
                1
                
                
                
                
                
                
                
                2
                
                
                
                
                
                
                
                2Other
                
                
                1
                
                
                
                
                
                
                
                1
                
                
                
                
                
                
                
                1
                
                
                
                
                
                
                
                1468
                
                
                
                275
                
                
                
                193
                
                
                
                
                
                
                
                446
                
                
                
                250
                
                
                
                196Auction
      rate securities
                
                
                18
                
                
                
                
                
                
                
                
                
                
                
                18
                
                
                
                24
                
                
                
                
                
                
                
                
                
                
                
                24$
                5,570
                
                
                $
                1,422
                
                
                $
                3,950
                
                
                $
                198
                
                
                $
                4,683
                
                
                $
                1,866
                
                
                $
                2,491
                
                
                $
                326LiabilitiesPrice
      risk management liabilities:Energy
      commodities
                
                $
                2,826
                
                
                $
                9
                
                
                $
                2,778
                
                
                $
                39
                
                
                $
                2,133
                
                
                $
                15
                
                
                $
                2,008
                
                
                $
                110Interest
      rate/foreign exchange
                
                
                14
                
                
                
                
                
                
                
                14
                
                
                
                
                
                
                
                27
                
                
                
                
                
                
                
                27$
                2,840
                
                
                $
                9
                
                
                $
                2,792
                
                
                $
                39
                
                
                $
                2,160
                
                
                $
                15
                
                
                $
                2,035
                
                
                $
                110
 PPLEnergy
      SupplyAssetsCash
      and cash equivalents
                      
                      $
                      429
                      
                      
                      $
                      429
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      $
                      464
                      
                      
                      $
                      464Short-term
      investments-
      municipal debt securities
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      150
                      
                      
                      
                      150Restricted
      cash and cash equivalents
                      
                      
                      140
                      
                      
                      
                      140
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      328
                      
                      
                      
                      328Price
      risk management assets:Energy
      commodities
                      
                      
                      3,878
                      
                      
                      
                      15
                      
                      
                      $
                      3,685
                      
                      
                      $
                      178
                      
                      
                      
                      2,460
                      
                      
                      
                      19
                      
                      
                      $
                      2,143
                      
                      
                      $
                      298Interest
      rate/foreign exchange
                      
                      
                      37
                      
                      
                      
                      
                      
                      
                      
                      35
                      
                      
                      
                      2
                      
                      
                      
                      107
                      
                      
                      
                      
                      
                      
                      
                      103
                      
                      
                      
                      43,915
                      
                      
                      
                      15
                      
                      
                      
                      3,720
                      
                      
                      
                      180
                      
                      
                      
                      2,567
                      
                      
                      
                      19
                      
                      
                      
                      2,246
                      
                      
                      
                      302NDT
      funds:Cash
      and cash equivalents
                      
                      
                      5
                      
                      
                      
                      5
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      7
                      
                      
                      
                      7Equity
      securities: (a)U.S.
      large-cap
                      
                      
                      216
                      
                      
                      
                      148
                      
                      
                      
                      68
                      
                      
                      
                      
                      
                      
                      
                      182
                      
                      
                      
                      116
                      
                      
                      
                      66U.S.
      mid/small-cap
                      
                      
                      84
                      
                      
                      
                      63
                      
                      
                      
                      21
                      
                      
                      
                      
                      
                      
                      
                      69
                      
                      
                      
                      50
                      
                      
                      
                      19Debt
      securities:U.S.
      Treasury
                      
                      
                      59
                      
                      
                      
                      59
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      77
                      
                      
                      
                      77U.S.
      government agency
                      
                      
                      11
                      
                      
                      
                      
                      
                      
                      
                      11
                      
                      
                      
                      
                      
                      
                      
                      14
                      
                      
                      
                      
                      
                      
                      
                      14Municipality
                      
                      
                      64
                      
                      
                      
                      
                      
                      
                      
                      64
                      
                      
                      
                      
                      
                      
                      
                      61
                      
                      
                      
                      
                      
                      
                      
                      61Investment-grade
      corporate
                      
                      
                      27
                      
                      
                      
                      
                      
                      
                      
                      27
                      
                      
                      
                      
                      
                      
                      
                      33
                      
                      
                      
                      
                      
                      
                      
                      33Residential
      mortgage-backed securities
                      
                      
                      1
                      
                      
                      
                      
                      
                      
                      
                      1
                      
                      
                      
                      
                      
                      
                      
                      2
                      
                      
                      
                      
                      
                      
                      
                      2Other
                      
                      
                      1
                      
                      
                      
                      
                      
                      
                      
                      1
                      
                      
                      
                      
                      
                      
                      
                      1
                      
                      
                      
                      
                      
                      
                      
                      1468
                      
                      
                      
                      275
                      
                      
                      
                      193
                      
                      
                      
                      
                      
                      
                      
                      446
                      
                      
                      
                      250
                      
                      
                      
                      196Auction
      rate securities
                      
                      
                      15
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      15
                      
                      
                      
                      19
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      19$
                      4,967
                      
                      
                      $
                      859
                      
                      
                      $
                      3,913
                      
                      
                      $
                      195
                      
                      
                      $
                      3,974
                      
                      
                      $
                      1,211
                      
                      
                      $
                      2,442
                      
                      
                      $
                      321LiabilitiesPrice
      risk management liabilities:Energy
      commodities
                      
                      $
                      2,826
                      
                      
                      $
                      9
                      
                      
                      $
                      2,778
                      
                      
                      $
                      39
                      
                      
                      $
                      2,133
                      
                      
                      $
                      15
                      
                      
                      $
                      2,008
                      
                      
                      $
                      110Interest
      rate/foreign exchange
                      
                      
                      14
                      
                      
                      
                      
                      
                      
                      
                      14
                      
                      
                      
                      
                      
                      
                      
                      16
                      
                      
                      
                      
                      
                      
                      
                      16$
                      2,840
                      
                      
                      $
                      9
                      
                      
                      $
                      2,792
                      
                      
                      $
                      39
                      
                      
                      $
                      2,149
                      
                      
                      $
                      15
                      
                      
                      $
                      2,024
                      
                      
                      $
                      110PPLElectricAssetsCash
      and cash equivalents
                      
                      $
                      520
                      
                      
                      $
                      520
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      $
                      483
                      
                      
                      $
                      483Restricted
      cash and cash equivalents
                      
                      
                      15
                      
                      
                      
                      15
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      15
                      
                      
                      
                      15$
                      535
                      
                      
                      $
                      535
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      $
                      498
                      
                      
                      $
                      498
  (a)
              
              Level
      1 is comprised of securities that track the Wilshire 5000 index, which is
      invested in approximately 70% large-cap stocks and 30% mid/small-cap
      stocks.  U.S. large-cap equity securities classified as Level 2
      represent investments in commingled equity funds that track the S&P
      500 index.  U.S. mid/small-cap equity securities classified as
      Level 2 represent investments in commingled equity funds that track the
      Wilshire 4500 index.
  A
reconciliation of assets and liabilities classified as Level 3 at June 30,
2009 is as follows:
  Fair
      Value Measurements Using Significant Unobservable Inputs (Level
      3)Three
      Months Ended
                                
                                Six
      Months EndedEnergy
      Commodities, net
                                
                                Interest
      Rate/ Foreign Exchange
                                
                                Auction
      Rate Securities
                                
                                Total
                                
                                Energy
      Commodities, net
                                
                                Interest
      Rate/ Foreign Exchange
                                
                                Auction
      Rate Securities
                                
                                TotalPPLBalance
      at beginning of period
                                
                                $
                                116
                                
                                
                                $
                                45
                                
                                
                                $
                                22
                                
                                
                                $
                                183
                                
                                
                                $
                                188
                                
                                
                                $
                                4
                                
                                
                                $
                                24
                                
                                
                                $
                                216Total
      realized/unrealized gains (losses)Included
      in earnings
                                
                                
                                (55
                                )
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                (55
                                )
                                
                                
                                (76
                                )
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                (76
                                )Included
      in OCI
                                
                                
                                13
                                
                                
                                
                                (31
                                )
                                
                                
                                (4
                                )
                                
                                
                                (22
                                )
                                
                                
                                3
                                
                                
                                
                                (28
                                )
                                
                                
                                (6
                                )
                                
                                
                                (31
                                )Purchases,
      sales, issuances and settlements, net
                                
                                
                                49
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                49
                                
                                
                                
                                85
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                85Transfers
      (out of) and/or into Level 3
                                
                                
                                16
                                
                                
                                
                                (12
                                )
                                
                                
                                
                                
                                
                                
                                4
                                
                                
                                
                                (61
                                )
                                
                                
                                26
                                
                                
                                
                                
                                
                                
                                
                                (35
                                )Balance
      at end of period
                                
                                $
                                139
                                
                                
                                $
                                2
                                
                                
                                $
                                18
                                
                                
                                $
                                159
                                
                                
                                $
                                139
                                
                                
                                $
                                2
                                
                                
                                $
                                18
                                
                                
                                $
                                159PPLEnergy
      SupplyBalance
      at beginning of period
                                
                                $
                                116
                                
                                
                                $
                                45
                                
                                
                                $
                                17
                                
                                
                                $
                                178
                                
                                
                                $
                                188
                                
                                
                                $
                                4
                                
                                
                                $
                                19
                                
                                
                                $
                                211Total
      realized/unrealized gains (losses)Included
      in earnings
                                
                                
                                (55
                                )
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                (55
                                )
                                
                                
                                (76
                                )
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                (76
                                )Included
      in OCI
                                
                                
                                13
                                
                                
                                
                                (31
                                )
                                
                                
                                (2
                                )
                                
                                
                                (20
                                )
                                
                                
                                3
                                
                                
                                
                                (28
                                )
                                
                                
                                (4
                                )
                                
                                
                                (29
                                )Purchases,
      sales, issuances and settlements, net
                                
                                
                                49
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                49
                                
                                
                                
                                85
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                85Transfers
      (out of) and/or into Level 3
                                
                                
                                16
                                
                                
                                
                                (12
                                )
                                
                                
                                
                                
                                
                                
                                4
                                
                                
                                
                                (61
                                )
                                
                                
                                26
                                
                                
                                
                                
                                
                                
                                
                                (35
                                )Balance
      at end of period
                                
                                $
                                139
                                
                                
                                $
                                2
                                
                                
                                $
                                15
                                
                                
                                $
                                156
                                
                                
                                $
                                139
                                
                                
                                $
                                2
                                
                                
                                $
                                15
                                
                                
                                $
                                156
  Gains and
losses on assets and liabilities classified as Level 3 and included in earnings
for the three and six months ended June 30, 2009 are reported in the
Statement of Income as follows:
  Three
      Months Ended
                
                Six
      Months EndedEnergy
      Commodities, net
                
                Energy
      Commodities, netWholesale
      Energy Marketing
                
                Net
      Energy Trading Margins
                
                Energy
      Purchases
                
                Wholesale
      Energy Marketing
                
                Net
      Energy Trading Margins
                
                Energy
      PurchasesPPLandPPLEnergy
      SupplyTotal
      gains (losses) included in earnings for the period
                
                $
                11
                
                
                $
                (9
                )
                
                $
                (57
                )
                
                $
                15
                
                
                $
                (18
                )
                
                $
                (73
                )Change
      in unrealized gains (losses) relating to positions still held at the
      reporting date
                
                
                11
                
                
                
                
                
                
                
                (38
                )
                
                
                13
                
                
                
                (1
                )
                
                
                (39
                )
  A
reconciliation of assets and liabilities classified as Level 3 at June 30,
2008 is as follows:
  Fair
      Value Measurements Using Significant Unobservable Inputs (Level
      3)Three
      Months Ended
                
                Six
      Months EndedEnergy
      Commodities, net
                
                Auction
      Rate Securities
                
                Total
                
                Energy
      Commodities, net
                
                Auction
      Rate Securities
                
                TotalPPLBalance
      at beginning of period
                
                $
                207
                
                
                $
                40
                
                
                $
                247
                
                
                $
                134
                
                
                
                
                
                
                $
                134Total
      realized/unrealized gains (losses)Included
      in earnings
                
                
                (1
                )
                
                
                
                
                
                
                (1
                )
                
                
                (1
                )
                
                
                
                
                
                
                (1
                )Included
      in OCI
                
                
                67
                
                
                
                (8
                )
                
                
                59
                
                
                
                140
                
                
                $
                (8
                )
                
                
                132Purchases,
      sales, issuances and settlements, net
                
                
                1
                
                
                
                (11
                )
                
                
                (10
                )
                
                
                1
                
                
                
                (11
                )
                
                
                (10
                )Transfers
      (out of) and/or into Level 3
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                40
                
                
                
                40Balance
      at end of period
                
                $
                274
                
                
                $
                21
                
                
                $
                295
                
                
                $
                274
                
                
                $
                21
                
                
                $
                295PPLEnergy
      SupplyBalance
      at beginning of period
                
                $
                207
                
                
                $
                35
                
                
                $
                242
                
                
                $
                134
                
                
                
                
                
                
                $
                134Total
      realized/unrealized gains (losses)Included
      in earnings
                
                
                (1
                )
                
                
                
                
                
                
                (1
                )
                
                
                (1
                )
                
                
                
                
                
                
                (1
                )Included
      in OCI
                
                
                67
                
                
                
                (7
                )
                
                
                60
                
                
                
                140
                
                
                $
                (7
                )
                
                
                133Purchases,
      sales, issuances and settlements, net
                
                
                1
                
                
                
                (11
                )
                
                
                (10
                )
                
                
                1
                
                
                
                (11
                )
                
                
                (10
                )Transfers
      (out of) and/or into Level 3
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                35
                
                
                
                35Balance
      at end of period
                
                $
                274
                
                
                $
                17
                
                
                $
                291
                
                
                $
                274
                
                
                $
                17
                
                
                $
                291
  Losses on
assets and liabilities classified as Level 3 and included in earnings for both
the three and six months ended June 30, 2008 are reported in the Statement
of Income as follows:
  Energy
      Commodities, netNet
      Energy Trading MarginsPPLandPPLEnergy
      SupplyTotal
      losses included in earnings for the period
                    
                    $
                    (1
                    )Change
      in unrealized losses relating to positions still held at the reporting
      date
                    
                    
                    (1
                    )
  Cash
and Cash Equivalents, Short-term Investments, and Restricted Cash and Cash
Equivalents
  PPL and
its subsidiaries use the market approach to determine the fair value of cash and
cash equivalents, short-term investments, and restricted cash and cash
equivalents.  The fair value measurements of short-term investments
are based on quoted prices.
  Price
Risk Management Assets/Liabilities - Energy
Commodities
  The only
energy commodity contracts classified as Level 1 are exchange-traded derivative
gas and oil contracts.  When observable inputs are used to measure all
or most of the value of a contract, the contract is classified as Level
2.  Over-the-counter (OTC) contracts are valued by traders using
quotes obtained from an exchange, binding and non-binding broker quotes, prices
posted by ISOs or published tariff rates.  PPL's risk management group
obtains quotes from the market to validate the forward price
curves.  OTC contracts include forwards, swaps, options and structured
deals for electricity, gas, oil, and/or emission allowances and may be offset
with similar positions in exchange-traded markets.  To the extent
possible, fair value measurements utilize various inputs that include quoted
prices for similar contracts or market-corroborated inputs.  In
certain instances, these instruments may be valued using models, including
standard option valuation models and standard industry models.  For
example, the fair value of a structured deal that delivers power to an illiquid
delivery point may be measured by valuing the nearest liquid trading point plus
the value of the basis between the two points.  The basis input may be
from market quotes, FTR prices, or historical prices.
  When
unobservable inputs are significant to the fair value measurement, a contract is
classified as Level 3.  Additionally, Level 2 and Level 3 fair value
measurements include adjustments for credit risk based on PPL's own
creditworthiness (for net liabilities) and its counterparties' creditworthiness
(for net assets).  PPL's credit department assesses all reasonably
available market information and uses probabilities of default to calculate the
credit adjustment.  PPL assumes that observable market prices include
sufficient adjustments for liquidity and modeling risks, but for Level 3 fair
value measurements, PPL also assesses the need for additional adjustments for
liquidity or modeling risks.  The contracts classified as Level 3 represent
contracts for which the delivery dates are beyond the dates for which
independent prices are available or for power basis, which PPL generally values
using historical prices.
  Price
Risk Management Assets/Liabilities -Interest
Rate/Foreign Exchange
  To manage
its interest rate and foreign exchange risk, PPL and PPL Energy Supply generally
use interest rate contracts such as forward-starting swaps and fixed-to-floating
swaps, foreign exchange contracts such as forwards and options, and
cross-currency swaps that contain characteristics of both interest rate and
foreign exchange instruments.  PPL and PPL Energy Supply use an income
approach to measure the fair value of these instruments, utilizing observable
inputs such as forward interest rates and foreign exchange rates, and credit
valuation adjustments, which may not be observable.  Given the duration of
some of these contracts, PPL and PPL Energy Supply often cannot practicably
obtain market information to value credit risk and therefore rely on their own
models.  These models use projected probabilities of default based on
historical observances.  When the credit valuation adjustment is
significant to the overall valuation, the contracts are classified as Level
3.
  NDT
Funds
  PPL and
PPL Energy Supply generally use the market approach to measure the fair value of
the securities held in the NDT funds.  The fair value measurements of
cash and cash equivalents and equity securities are based on quoted prices in
active markets.  The fair value measurements of commingled equity
index funds are based on firm quotes of net asset values per share, which are
not obtained from a quoted price in an active market.  The fair value
measurements of debt securities are generally based on evaluated prices that
reflect observable market information, such as actual trade information for
identical securities or for similar securities, adjusted for observable
differences.  When this information is not available, the fair value
of debt securities is measured using present value techniques, which incorporate
other observable inputs including interest rates for debt securities with credit
ratings and terms to maturity similar to the debt securities being
measured.
  Auction
Rate Securities
  PPL's and
PPL Energy Supply's auction rate securities are recorded in "Investments -
Other" on the Balance Sheet and include Federal Family Education Loan Program
guaranteed student loan revenue bonds as well as various municipal bond
issues.  Auction rate securities are classified as Level 3 because
failed auctions limit the amount of observable market data that is available for
measuring the fair value of these securities.
  At
June 30, 2009 and December 31, 2008, the par value of these auction
rate securities totaled $29 million for PPL and $24 million for PPL Energy
Supply.  Contractual maturities for these auction rate securities are
a weighted average of approximately 27 years.  Despite failed auctions
in 2008 and 2009, PPL and PPL Energy Supply continued to earn interest on these
investments at contractually prescribed interest rates.  During the
second quarter of 2009, PPL Energy Supply liquidated an insignificant amount of
securities at par.
  At June
30, 2009 and December 31, 2008, PPL concluded that the fair value of its auction
rate securities was $18 million and $24 million.  PPL Energy Supply
concluded that the fair value of its auction rate securities was $15 million and
$19 million at these same periods.  At June 30, 2009 and December 31,
2008, the temporary declines from par value were $11 million and $5 million for
PPL, and $9 million and $5 million for PPL Energy Supply, and have been recorded
in OCI.
  PPL and
PPL Energy Supply estimated the fair value of auction rate securities based on
the following criteria:  (i) the underlying structure and credit
quality of each security; (ii) the present value of future estimated interest
and principal payments discounted using interest rates for bonds with a credit
rating and remaining term to maturity similar to the stated maturity of the
auction rate securities; and (iii) consideration of the impact of auction
failures or redemption at par.  Based upon the evaluation of available
information, PPL and PPL Energy Supply believe these investments continue to be
of high credit quality and they do not have significant exposure to realize
losses on these securities.  The estimated fair value of these
securities could change significantly based on future market
conditions.
  Nonrecurring
Fair Value Measurements(PPL
and PPL Energy Supply)
  Fair
      Value Measurements UsingTotal
                
                Level
      1
                
                Level
      2
                
                Level
      3
                
                LossSulfur
      dioxide emission allowances (a)
                
                $
                15
                
                
                
                
                
                
                
                
                
                
                $
                15
                
                
                $
                (30
                )Long
      Island generation business (b)
                
                
                138
                
                
                
                
                
                
                $
                138
                
                
                
                
                
                
                
                (52
                )
  (a)
              
              Current
      and long-term sulfur dioxide emission allowances are included in "Other
      intangibles" in their respective areas on the Balance
    Sheet.(b)
              
              Assets
      of the Long Island generation business disposal group are included in
      "Assets held for sale" on the Balance
Sheet.
  Sulfur
Dioxide Emission Allowances
  Due to a
significant decline in market prices at March 31, 2009, PPL Energy Supply
assessed the recoverability of certain sulfur dioxide emission
allowances.  As a result, sulfur dioxide emission allowances with a
carrying amount of $45 million were written down to their estimated fair value
of $15 million, resulting in an impairment charge of $30 million being recorded
during the first quarter of 2009.  This charge, recorded in the Supply
segment for PPL and PPL Energy Supply, is included in "Other operation and
maintenance" on the Statement of Income.
  When
available, observable market prices were used to value the sulfur dioxide
emission allowances.  When observable market prices were not
available, fair value was modeled using prices from observable transactions and
appropriate discount rates.  The modeled values were significant to
the overall fair value measurement.
  Long
Island Generation Business
  The Long
Island generation business met the held for sale criteria at June 30,
2009.  As a result, net assets held for sale with a carrying amount of
$189 million were written down to their estimated fair value less cost to sell
of $137 million.  See Note 8 for additional information on the
anticipated sale.
  The fair
value was modeled using valuations obtained from third parties and appropriate
discount rates.  The fair value of $138 million, which excludes $1
million of estimated costs to sell, was corroborated by the negotiated sales
price adjusted for the additional anticipated cash flows from operations prior
to the sale date.
  Financial
Instruments Not Recorded at Fair Value
  (PPL,
PPL Energy Supply and PPL Electric)
  NPNS
  PPL and
PPL Energy Supply enter into full-requirement sales contracts, power purchase
agreements, certain retail energy and physical capacity contracts and certain
contracts to purchase emission allowances expected to be
consumed.  These contracts range in maturity through 2023 and qualify
for NPNS.  PPL Electric has also entered into contracts that qualify
for NPNS.  See "Energy Purchase Commitments" within Note 10 for
information about PPL Electric's competitive solicitations.  All of
these contracts are accounted for using the accrual method of accounting;
therefore, there were no amounts recorded on the Balance Sheets at June 30,
2009 and December 31, 2008.  The estimated fair value of these
contracts was:
  Net
      Asset (Liability)June 30,
      2009
                
                December 31,
      2008PPL
                
                $
                155
                
                
                $
                136PPL
      Energy Supply
                
                
                449
                
                
                
                239PPL
      Electric
                
                
                (294
                )
                
                
                (103
                )
  Other
  Financial
instruments for which the carrying amount on the Balance Sheets and the
estimated fair value (based on quoted market prices for the securities where
available and estimates based on current rates where quoted market prices are
not available) are different, are set forth below and include debt with
third-party credit enhancements.  The
carrying value of PLR energy supply to/from affiliate and short-term debt
represented or approximated fair value due to the liquid nature of the
instruments or variable interest rates associated with the financial
instruments.
  June 30,
      2009 (a)
                
                December
      31, 2008Carrying
      Amount
                
                Fair
      Value
                
                Carrying
      Amount
                
                Fair
      ValuePPLLong-term
      debt
                
                $
                7,710
                
                
                $
                7,370
                
                
                $
                7,838
                
                
                $
                6,785PPL
      Energy SupplyLong-term
      debt
                
                
                5,000
                
                
                
                4,833
                
                
                
                5,196
                
                
                
                4,507PPL
      ElectricLong-term
      debt
                
                
                2,058
                
                
                
                2,080
                
                
                
                1,769
                
                
                
                1,682
  (a)
              
              The
      effect of credit enhancements is not included in the fair value
      measurement.  See "EITF 08-5" under "New Accounting Standards
      Adopted" within Note 2 for additional
  information.
  Credit
Concentration Associated with Financial Instruments
  (PPL,
PPL Energy Supply and PPL Electric)
  PPL and
its subsidiaries enter into contracts with many entities for the purchase and
sale of energy.  Many of these contracts are considered a normal part
of doing business and, as such, the fair value of these contracts is not
reflected in the financial statements.  However, the fair value of
these contracts is considered when committing to new business from a credit
perspective.
  (PPL)
  At June
30, 2009, PPL had credit exposure of $4.0 billion to energy trading partners,
excluding the effects of netting arrangements and collateral.  As a
result of netting arrangements and collateral, PPL's credit exposure was reduced
to $1.6 billion.  One of the counterparties accounted for 29% of this
exposure, and no other individual counterparty accounted for more than 14% of
the exposure.  Ten counterparties accounted for $1.3 billion, or 84%,
of the total exposure.  Nine of these counterparties had an investment
grade credit rating from S&P and accounted for 97% of the top 10
exposure.  The one counterparty that is not rated investment grade has
posted collateral as per the terms and conditions of the contract and is current
on its obligations.
  (PPL
Energy Supply)
  At June
30, 2009, PPL Energy Supply had credit exposure of $4.1 billion to energy
trading partners, excluding the effects of netting arrangements and
collateral.  As a result of netting arrangements and collateral, PPL
Energy Supply's credit exposure was reduced to $1.6 billion.  One of
the counterparties accounted for 28% of this exposure, and no other individual
counterparty accounted for more than 14% of the exposure.  Ten
counterparties accounted for $1.3 billion, or 82%, of the total
exposure.  These counterparties had an investment grade credit rating
from S&P and accounted for 100% of the top 10 exposure.
  Additionally,
PPL Energy Supply has credit exposure to PPL Electric under the
PLRcontracts.  This exposure is excluded from the exposure discussed
above.  See Note 11 for additional information on the related-party
credit exposure.
  (PPL
Electric)
  At June
30, 2009, PPL Electric had no credit exposure as a result of its solicitations
for the 2010 PLR supply.  There were nine successful bidders, all of
which had an investment grade credit rating from S&P.  In the
first competitive solicitation process, PPL EnergyPlus was awarded a significant
portion of the solicitation.
  PPL
Electric has credit exposure to PPL Energy Supply under the current PLR
contracts.  See Note 11 for additional information on the related
party credit exposure.
  14.
              Derivative Instruments and Hedging
    Activities
  Risk
Management Objectives
  (PPL,
PPL Energy Supply and PPL Electric)
  PPL has a
risk management policy approved by the Board of Directors to manage market risk
and counterparty credit risk.  The RMC, comprised of senior management
and chaired by the Vice President-Risk Management, oversees the risk management
function.  Key risk control activities designed to ensure compliance
with the risk policy and detailed programs include, but are not limited to,
credit review and approval, validation of transactions and market prices,
verification of risk and transaction limits, VaR analyses, sensitivity analyses,
and daily portfolio reporting, including open positions, determinations of fair
value, and other risk management metrics.
  Market
risk is the potential loss PPL and its subsidiaries may incur as a result of
price changes associated with a particular financial or commodity
instrument.
  PPL and
PPL Energy Supply are exposed to market risk from:
  ·
              commodity
      price risk for energy and energy-related products associated with the sale
      of electricity from its generating assets and other electricity marketing
      activities and the purchase of fuel and fuel-related commodities for
      generating assets, as well as for proprietary trading
      activities;·
              interest
      rate and price risk associated with debt used to finance operations, as
      well as debt and equity securities in NDT funds and defined benefit plans;
      and·
              foreign
      currency exchange rate risk associated with investments in U.K.
      affiliates, as well as purchases of equipment in currencies other than
      U.S. dollars.
  PPL and
PPL Energy Supply utilize forward contracts, futures contracts, options, swaps
and structured deals such as tolling agreements as part of the risk management
strategy to minimize unanticipated fluctuations in earnings caused by changes in
commodity prices, interest rates and foreign currency exchange
rates.  All derivatives are recognized on the balance sheet at their
fair value, unless they qualify for NPNS.
  PPL
Electric is exposed to market risk from its obligation as the PLR to its
customers.  It has mitigated that risk with the fixed-price PLR
agreement with PPL EnergyPlus, which expires at the end of 2009, and by entering
into fixed-price load-following supply agreements for its customers for
2010.
  Credit
risk is the potential loss PPL and its subsidiaries may incur due to a
counterparty's non-performance, including defaults on payments and energy
commodity deliveries.
  PPL and
PPL Energy Supply are exposed to credit risk from:
  ·
              commodity
      derivatives with its energy trading partners, which include other energy
      companies, fuel suppliers, and financial institutions;·
              interest
      rate derivatives with financial institutions; and·
              foreign
      currency derivatives with financial
  institutions.
  PPL
Electric is exposed to credit risk from its load-following supply agreements for
its customers in 2010.
  The
majority of the credit risk stems from PPL Energy Supply's and PPL Electric's
commodity derivatives for multi-year contracts for energy sales and
purchases.  If the counterparties fail to perform their obligations
under such contracts and PPL and its subsidiaries could not replace the sales or
purchases at the same prices as those under the defaulted contracts, PPL would
incur financial losses.  Those losses would be recognized immediately
or through lower revenues or higher costs in future years, depending on the
accounting treatment for the defaulted contracts.
  PPL and
its subsidiaries have credit policies to manage their credit risk,
including the use of an established credit approval process, daily monitoring of
counterparty positions, and the use of master netting
agreements.  These agreements generally include credit mitigation
provisions, such as margin, prepayment or collateral
requirements.  PPL and its subsidiaries may request the additional
credit assurance, in certain circumstances, in the event that the
counterparties' credit ratings fall below investment grade or their exposures
exceed an established credit limit.  See Note 13 for credit
concentration associated with financial instruments.
  PPL's and
PPL Energy Supply's obligation to return counterparty cash collateral under
master netting arrangements was $221 million at June 30, 2009 and $22
million at December 31, 2008.
  PPL
Electric's obligation to return cash collateral to PPL Energy Supply under
master netting arrangements was $79 million at June 30, 2009 and $300
million at December 31, 2008.  See Note 11 for additional
information.
  PPL and
PPL Electric have not posted any cash collateral under master netting
arrangements.  See Note 17 for additional information on deposits for
trading purposes.
  Commodity
Price Risk (Non-trading)
  (PPL
and PPL Energy Supply)
  Commodity
price risk is one of PPL's and PPL Energy Supply's most significant risks due to
the level of investment that PPL and PPL Energy Supply maintain in their
generation assets, as well as the extent of their marketing and proprietary
trading activities.  Several factors influence price levels and
volatilities.  These factors include, but are not limited to, seasonal
changes in demand, weather conditions, available generating assets within
regions, transportation availability and reliability within and between regions,
market liquidity, and the nature and extent of current and potential federal and
state regulations.
  To hedge
the impact of market price fluctuations on PPL's and PPL Energy Supply's
energy-related assets, liabilities and other contractual arrangements, PPL
EnergyPlus sells and purchases physical energy at the wholesale level under FERC
market-based tariffs throughout the U.S. and enters into financial
exchange-traded and over-the-counter contracts.  Certain contracts
qualify for NPNS or are non-derivatives and are therefore not reflected in the
financial statements until delivery.  See Note 13 for additional
information on NPNS.  PPL and PPL Energy Supply segregate their
remaining non-trading activities into two categories:  cash flow hedge
activity and economic activity.
  Cash
Flow Hedges
  PPL and
PPL Energy Supply enter into financial and physical derivative contracts,
including forwards, futures, swaps and options, to hedge the price risk
associated with electric, gas, oil and other commodities.  Many of
these contracts have qualified for hedge accounting.  These contracts
range in maturity through 2014.  Cash flow hedges are discontinued if
it is no longer probable that the original forecasted transaction will occur by
the end of the originally specified time periods.  In certain
instances, amounts previously recorded in AOCI are reclassified to
earnings.  There
were no such reclassifications during the three and six months ended
June 30, 2009 and 2008.
  For the
three months ended June 30, 2009 and 2008, hedge ineffectiveness associated
with energy derivatives was, after tax, a gain of $39 million and
insignificant.  For the six months ended June 30, 2009 and 2008,
hedge ineffectiveness associated with energy derivatives was, after tax, a gain
of $55 million and $2 million.
  Additionally,
during the past twelve months certain power and gas cash flow hedges failed
hedge effectiveness testing.  Hedge accounting is not permitted for
the quarter in which this occurs and, accordingly, the entire change in fair
value for the periods that failed was recorded to the income
statement.  These transactions were not dedesignated as hedges, since
prospective regression analysis demonstrates that these hedges are expected to
be highly effective over their term.  During the second quarter of
2009, fewer power and gas cash flow hedges failed hedge effectiveness testing as
compared to the previous three quarters.  Therefore, the previously
recognized unrealized gains associated with these hedges were
reversed.  For the three and six months ended June 30, 2009, after-tax
losses of $160 million and $92 million were recognized in
earnings.  No such amounts were recorded in 2008.
  At
June 30, 2009, the accumulated net unrealized after-tax gains on qualifying
derivatives that are expected to be reclassified into earnings during the next
12 months were $17 million for PPL and $16 million for PPL Energy
Supply.
  Economic
Activity
  PPL
Energy Supply also uses derivative contracts to economically hedge the impact of
market price fluctuations on its energy-related assets, liabilities and other
contractual arrangements that do not receive hedge accounting
treatment.  PPL Energy Supply refers to these transactions as economic
activity.  The economic activity category includes energy derivative
transactions that have previously qualified or could potentially qualify for
hedge accounting; however, these transactions have either been disqualified from
hedge accounting or management has not elected to designate them as accounting
hedges.  This category also includes transactions entered into to
optimize the economic value of PPL Energy Supply's generation assets or to hedge
its wholesale or retail load obligations.  These contracts range in
maturity through 2017.  Additionally, the ineffective portion of
qualifying cash flow hedges, including the entire change in fair value for
certain cash flow hedges that failed effectiveness testing during the current
period as discussed in the preceding "Cash Flow Hedges" section, is also
included when PPL Energy Supply reports its economic activity.
  Examples
of transactions represented in this category include certain purchase contracts
used to supply full-requirement sales contracts; FTRs or basis swaps used to
hedge basis risk associated with the sale of generation or supplying
full-requirement sales contracts; spark spreads (sale of electricity with the
simultaneous purchase of fuel); retail gas activities; hedges of the fair value
of fuel inventory; and fuel oil swaps used to hedge price escalation clauses in
coal transportation and other fuel-related contracts.  PPL Energy
Supply also uses options, which include the sale of call options and the
purchase of put options tied to a particular generating unit.  Since
PPL Energy Supply owns the physical generating capacity, its price exposure is
limited to the cost of the particular generating unit and does not expose PPL
Energy Supply to uncovered market price risk.  PPL Energy Supply also
purchases call options or sells put options to create a net purchase position to
cover an overall short position in its non-trading portfolio.
  The
unrealized gains (losses) for this activity are reflected in the Statements of
Income as follows:
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008Operating
      RevenuesUnregulated
      retail electric and gas
                
                $
                1
                
                
                $
                (1
                )
                
                $
                2
                
                
                $
                (1
                )Wholesale
      energy marketing
                
                
                (112
                )
                
                
                (616
                )
                
                
                240
                
                
                
                (796
                )Operating
      ExpensesFuel
                
                
                26
                
                
                
                17
                
                
                
                28
                
                
                
                24Energy
      purchases
                
                
                (65
                )
                
                
                604
                
                
                
                (334
                )
                
                
                863
  The net
unrealized gains (losses) recorded in "Wholesale energy marketing" for the three
and six months ended June 30, 2009 resulted primarily from certain
full-requirement sales contracts in which PPL Energy Supply did not elect NPNS
and from hedge ineffectiveness as discussed in the "Cash Flow Hedges" section
above.  The net unrealized gains (losses) recorded in "Energy
purchases" for the three and six months ended June 30, 2009 resulted
primarily from certain purchase contracts to supply the full-requirement sales
contracts noted above for which PPL Energy Supply did not elect hedge treatment
and from hedge ineffectiveness.  Since power prices have decreased
significantly during the period, these fixed-price contracts have resulted in
unrealized gains and losses.
  Commodity
Price Risk (Trading)
  (PPL
and PPL Energy Supply)
  PPL
Energy Supply also executes energy contracts to take advantage of market
opportunities.  As a result, PPL Energy Supply may at times create a
net open position in its portfolio that could result in significant losses if
prices do not move in the manner or direction anticipated.
  Commodity
Volumetric Activity
  (PPL
and PPL Energy Supply)
  PPL
Energy Supply currently employs four primary strategies to maximize the value of
its wholesale energy portfolio.  As further discussed below, these
strategies include the sales of baseload generation, optimization of
intermediate and peaking generation, marketing activities, and proprietary
trading activities.
  Sales
of Baseload Generation
  PPL
Energy Supply has a formal hedging program for its baseload generation fleet,
which includes 7,600 MW of generating capacity.  The objective of this
program is to provide a reasonable level of near-term cash flow and earnings
certainty for the next three years; however, in certain instances, PPL Energy
Supply will sell power and purchase fuel beyond this three-year
period.  PPL Energy Supply sells its expected generation output on a
forward basis using both derivative and non-derivative
instruments.  Both are included in the following tables.
  The
following table presents the expected sales, in GWh, of baseload generation
based on current forecasted assumptions for 2009-2013.  These expected
sales could be impacted by several factors, including plant
availability.
  2009 (a)
                
                2010
                
                2011
                
                2012
                
                2013 - 2014 (b)27,687
                
                
                51,869
                
                
                51,705
                
                
                52,859
                
                
                104,949
  (a)
              
              Represents
      expected sales from July 1, 2009 to December 31,
  2009.(b)
              
              Amount
      based on 2013 volumes with no assumed change for
  2014.
  The
following table presents the percentage of expected baseload generation sales
shown above that has been sold forward under fixed-price contracts and the
related percentage of fuel that has been purchased or committed at June 30,
2009:
  Fuel
      Purchases % (c)Year
                
                Derivative
      Sales % (a)
                
                Total
      Power Sales % (b)
                
                Coal
                
                Nuclear2009
      (d)
                
                
                20%
                (e)
                97%
                
                
                
                100%
                
                
                
                100%2010
                
                
                85%
                
                
                
                98%
                
                
                
                98%
                
                
                
                100%2011
                
                
                72%
                
                
                
                80%
                
                
                
                81%
                
                
                
                100%2012
                
                
                46%
                
                
                
                53%
                
                
                
                63%
                
                
                
                100%2013-2014
                
                
                1%
                
                
                
                7%
                
                
                
                48%
                
                
                
                100%
  (a)
              
              Excludes
      non-derivative contracts and contracts that qualify for
      NPNS.  Volumes for option contracts factor in the probability of
      an option being exercised and may be less than the notional amount of the
      option.  Percentages are based on fixed-price contracts
      only.(b)
              
              Amount
      represents derivative and non-derivative contracts. Volumes for option
      contracts factor in the probability of an option being exercised and may
      be less than the notional amount of the option.  Percentages are
      based on fixed-price contracts only.(c)
              
              Coal
      and nuclear contracts receive accrual accounting treatment, as they are
      not derivative contracts.Percentages
      are based on both fixed- and variable-priced contracts.(d)
              
              Represents
      the time period from July 1, 2009 to December 31,
    2009.(e)
              
              The
      majority of PPL Energy Supply's baseload generation for 2009 is allocated
      to supplying the PLR contract with PPL Electric.  This contract
      is not a derivative contract.  The PLR contract expires on
      December 31, 2009.
  In
addition to the fuel purchases above, PPL Energy Supply attempts to economically
hedge the fuel price risk that is within its fuel-related contracts and coal
transportation contracts, which are tied to changes in crude oil or diesel
prices.  The following table presents the volumes (in thousands of
barrels) of derivative contracts used in support of this strategy at
June 30, 2009:
  Contract
      Type
                
                2009
      (a)
                
                2010
                
                2011
                
                2012Oil
      Swaps
                
                
                270
                
                
                420
                
                
                408
                
                180
  (a)
              
              Represents
      the time period from July 1, 2009 to December 31,
    2009.
  Optimization
of Intermediate and Peaking Generation
  In
addition to its baseload generation activities, PPL Energy Supply attempts to
optimize the overall value of its intermediate and peaking fleet, which includes
4,402 MW of gas and oil-fired generation.  PPL Energy Supply uses both
option and non-option contracts to support this strategy.  The
following table presents the volumes of derivative contracts used in support of
this strategy at June 30, 2009:
  Units
                
                2009
      (a)
                
                2010Net
      Power Sales:Options
      (b)
                
                
                GWh
                
                
                59
                
                
                260Non-option
      contracts
                
                
                GWh
                
                
                1,870
                
                
                510Net
      Power/Fuel Purchases:Options
      (b)
                
                
                GWh
                
                
                34Non-option
      contracts
                
                
                GWh
                
                
                37Non-option
      contracts
                
                
                Bcf
                
                
                15.0
                
                
                5.4
  (a)
              
              Represents
      the time period from July 1, 2009 to December 31,
    2009.(b)
              
              Volumes
      for option contracts factor in the probability of an option being
      exercised and may be less than the notional amount of the
      option.
  Marketing
Activities
  PPL
Energy Supply's marketing portfolio is comprised of full-requirement sales
contracts and their related supply contracts, retail gas and electricity sales
contracts and other marketing activities.  The full-requirement sales
contracts and their related supply contracts make up a significant component of
the marketing portfolio.  The obligations under the full-requirement
sales contracts include supplying a bundled product of energy, capacity,
renewable energy credits (RECs), and other ancillary products.  PPL
Energy Supply uses a variety of strategies to hedge its full-requirement sales
contracts, including purchasing energy at a liquid trading hub or directly at
the load delivery zone, purchasing capacity and RECs in the market and supplying
the energy, capacity and RECs with its generation.  RECs are not
derivatives and therefore are excluded from the table below.  The
following table presents the volumes of (sales)/purchase contracts, excluding
FTRs, basis and capacity contracts, used in support of these activities at
June 30, 2009:
  Units
                  
                  2009
      (a)
                  
                  2010
                  
                  2011
                  
                  2012
                  
                  2013
      - 2019Energy
      sales contracts (b)
                  
                  
                  GWh
                  
                  
                  (12,318
                  )
                  
                  (29,834
                  )
                  
                  (13,106
                  )
                  
                  (4,982
                  )
                  
                  (17,700
                  )Related
      energy supply contractsEnergy
      purchases
                  
                  
                  GWh
                  
                  
                  11,467
                  
                  
                  25,835
                  
                  
                  11,083
                  
                  
                  3,991
                  
                  
                  11,663Volumetric
      hedges (c)
                  
                  
                  GWh
                  
                  
                  (36
                  )
                  
                  (261
                  )
                  
                  196Volumetric
      hedges (c)
                  
                  
                  Bcf
                  
                  
                  (2.1
                  )
                  
                  (0.5
                  )Generation
      supply
                  
                  
                  GWh
                  
                  
                  403
                  
                  
                  3,870
                  
                  
                  2,001
                  
                  
                  2,173
                  
                  
                  12,257
  (a)
              
              Represents
      the time period from July 1, 2009 to December 31,
    2009.(b)
              
              The
      majority of PPL Energy Supply's full-requirement sales contracts receive
      accrual accounting as they qualify for NPNS or are not derivative
      contracts.  Also included in these volumes are the sales from
      PPL EnergyPlus to PPL Electric to supply PPL Electric's 2009 and 2010 load
      obligation.(c)
              
              PPL
      Energy Supply uses power and gas options, swaps and futures to hedge the
      volumetric risk associated with full-requirement sales contracts since the
      demand for power varies hourly.
  As noted
above, PPL Energy Supply's marketing activities also include its retail gas
portfolio.  PPL Energy Supply has sold a total of 5.1 Bcf of gas to
retail customers through 2012, which has been hedged with 5.1 Bcf of gas
purchases.
  FTRs
and Other Basis Positions
  PPL
Energy Supply buys and sells FTRs and other basis positions to mitigate the
basis risk between delivery points related to the sales of its
generation, the supply of its full-requirement sales contracts and retail
contracts, as well as for proprietary trading purposes.  The following
table presents the volumes of FTR and basis (sales)/purchase contracts at
June 30, 2009:
  Commodity
                
                
                Units
                
                2009
      (a)
                
                2010
                
                2011
                
                2012FTRs
                
                
                GWh
                
                
                46,041
                
                
                38,116
                
                
                192Power
      Basis Positions
                
                
                GWh
                
                
                (1,710
                )
                
                (9,191
                )
                
                (1,664
                )
                
                (878
                )Gas
      Basis Positions
                
                
                Bcf
                
                
                14.6
                
                
                7.4
                
                
                (0.6
                )
                
                (1.5
                )
  (a)
              
              Represents
      the time period from July 1, 2009 to December 31,
    2009.
  Capacity
Positions
  PPL
Energy Supply buys and sells capacity related to the sales of its generation and
the supply of its full-requirement sales contracts, as well as for proprietary
trading purposes.  The following table presents the volumes of
derivative capacity (sales)/purchase contracts (in MW-months) at June 30,
2009:
  2009
      (a)
                
                2010
                
                2011
                
                2012
                
                2013
      - 2016
                
                2017
      - 2023Capacity
                
                
                (24,470
                )
                
                (70,200
                )
                
                (34,253
                )
                
                (8,410
                )
                
                11,898
                
                
                (252
                )
  (a)
              
              Represents
      the time period from July 1, 2009 to December 31,
    2009.
  Proprietary
Trading Activity
  At
June 30, 2009, PPL Energy Supply's proprietary trading positions, excluding
FTRs, basis and capacity contracts, were not significant.
  Interest
Rate Risk
  (PPL
and PPL Energy Supply)
  PPL and
its subsidiaries have issued debt to finance its operations, which results in an
exposure to interest rate risk.  PPL and its subsidiaries utilize
various financial derivative instruments to adjust the mix of fixed and floating
interest rates in its debt portfolio, adjust the duration of its debt portfolio
and lock in benchmark interest rates in anticipation of future financing, when
appropriate.  Risk limits under the risk management program are
designed to balance risk exposure to volatility in interest expense and changes
in the fair value of PPL's and its subsidiaries' debt portfolio due to changes
in benchmark interest rates.
  Cash
Flow Hedges
  Interest
rate risks include exposure to adverse interest rate movements for outstanding
variable rate debt and for future anticipated financings.  PPL and PPL
Energy Supply may enter into financial interest rate swap contracts that qualify
as cash flow hedges to hedge floating interest rate risk associated with both
existing and anticipated debt issuances.  For PPL, these interest rate
swap contracts range in maturity through 2020 and had a notional value of $100
million at June 30, 2009.  For the three and six months ended
June 30, 2009 and 2008, hedge ineffectiveness associated with these
derivatives was not significant.  No contracts were outstanding at PPL
Energy Supply at June 30, 2009.
  WPDH
Limited holds a net notional position in cross-currency swaps totaling $302
million to hedge the interest payments and principal of its U.S.
dollar-denominated senior notes with maturity dates ranging from December 2017
to December 2028.  For the three and six months ended June 30,
2009 and 2008, hedge ineffectiveness was not significant.
  Cash flow
hedges are discontinued if it is no longer probable that the original forecasted
transaction will occur by the end of the originally specified time
periods.  In certain instances, amounts previously recorded in AOCI
are reclassified to earnings.  PPL had no such reclassification for
the three months ended June 30, 2009, but reclassified a net after-tax gain of
$2 million for the six months ended June 30, 2009.  PPL had no such
classifications in 2008.  PPL Energy Supply had no such
reclassifications in 2009 or 2008.
 At
June 30, 2009, the accumulated net unrealized after-tax gains on qualifying
derivatives that are expected to be reclassified into earnings during the next
12 months were $4 million for PPL and $3 million for PPL Energy
Supply.  Amounts are reclassified as the hedged interest payments are
made.
  Fair
Value Hedges
  PPL and
PPL Energy Supply are exposed to changes in the fair value of their domestic and
international debt portfolios.  To manage this risk, PPL and PPL
Energy Supply may enter into financial contracts to hedge fluctuations in the
fair value of existing debt issuances due to changes in benchmark interest
rates.  At June 30, 2009, PPL held contracts that range in
maturity through 2047 and had a notional value of $850 million.  PPL
Energy Supply did not hold any such contracts at June 30,
2009.  PPL and PPL Energy Supply did not recognize any gains or losses
resulting from the ineffective portion of fair value hedges or from a portion of
the hedging instrument being excluded from the assessment of hedge effectiveness
for the three and six months ended June 30, 2009.  For the three
and six months ended June 30, 2008, hedge ineffectiveness associated with
interest rate derivatives was insignificant.  Additionally, PPL and
PPL Energy Supply did not recognize any gains or losses resulting from hedges of
debt issuances that no longer qualified as fair value hedges for the three and
six months ended June 30, 2009 and 2008.
  Foreign
Currency Risk
  (PPL
and PPL Energy Supply)
  PPL and
PPL Energy Supply are exposed to foreign currency risk, primarily through
investments in U.K. affiliates.  In addition, PPL's and PPL Energy
Supply's domestic operations may make purchases of equipment in currencies other
than U.S. dollars.
  PPL and
PPL Energy Supply have adopted a foreign currency risk management program
designed to hedge certain foreign currency exposures, including firm
commitments, recognized assets or liabilities, anticipated transactions and net
investments.  In addition, PPL and PPL Energy Supply enter into
financial instruments to protect against foreign currency translation risk of
expected earnings.
  Cash
Flow Hedges
  PPL and
PPL Energy Supply may enter into foreign currency derivatives associated with
foreign currency-denominated debt and the exchange rate associated with firm
commitments denominated in foreign currencies; however, at June 30, 2009,
there were no existing contracts of this nature.  Amounts previously
classified in AOCI are reclassified as the hedged interest payments are made and
as the related equipment is depreciated.
  Cash flow
hedges are discontinued if it is no longer probable that the original forecasted
transaction will occur by the end of the originally specified time
periods.  In certain instances, amounts previously recorded in AOCI
are reclassified to earnings.  There were no such reclassifications
during the three and six months ended June 30, 2009 and 2008.
  Fair
Value Hedges
  PPL and
PPL Energy Supply enter into foreign currency forward contracts to hedge the
exchange rates associated with firm commitments denominated in foreign
currencies; however, at June 30, 2009, there were no existing contracts of
this nature.  PPL and PPL Energy Supply did not recognize any gains or
losses resulting from the ineffective portion of fair value hedges or from a
portion of the hedging instrument being excluded from the assessment of hedge
effectiveness for the three and six months ended June 30, 2009 and
2008.  Additionally, PPL and PPL Energy Supply did not recognize any
gains or losses resulting from hedges of firm commitments that no longer
qualified as fair value hedges for the three and six months ended June 30,
2009 and 2008.
  Net
Investment Hedges
  PPL and
PPL Energy Supply may enter into foreign currency contracts to protect the value
of a portion of their net investment in WPD.  The total notional
amount of the contracts outstanding at June 30, 2009 was £55
million.  The settlement dates of these contracts range from September
2009 through June 2011.  At June 30, 2009, the fair value of
these positions was a net asset of $17 million.  For the three months
ended June 30, 2009 and 2008, PPL and PPL Energy Supply recognized net
investment hedge losses, after tax, of $8 million and $1 million in the foreign
currency translation adjustment component of OCI.  For the six months
ended June 30, 2009 and 2008, PPL and PPL Energy Supply recognized net
investment hedge gains (losses), after tax, of $(7) million and $1 million in
the foreign currency translation adjustment component of OCI.  At
June 30, 2009, $9 million of accumulated net investment hedge gains, after
tax, were included in the foreign currency translation adjustment component of
AOCI compared with $16 million of gains at December 31,
2008.  See Note 11 for additional information.
  Economic
Activity
  PPL and
PPL Energy Supply may enter into foreign currency contracts as an economic hedge
of anticipated earnings valued in British pounds sterling.  At
June 30, 2009, the total exposure hedged was £61 million and the net fair
value of these positions was a net liability of $9 million.  These
contracts have termination dates ranging from July 2009 to December
2009.  No similar hedging instruments were outstanding at
December 31, 2008.  Gains and losses, both realized and
unrealized, on these contracts are included in "Other Income (Expense) - net" on
the Statements of Income.  For both the three and six months ended
June 30, 2009, PPL and PPL Energy Supply recorded net losses of $11
million.  For the three and six months ended June 30, 2008, PPL
and PPL Energy Supply recorded net losses of $1 million and $2
million.  See Note 11 for additional information.
  Accounting
and Reporting
  (PPL,
PPL Energy Supply and PPL Electric)
  All
derivative instruments are recorded at fair value on the balance sheet as an
asset or liability (unless they qualify for NPNS), and changes in the
derivatives' fair value are recognized currently in earnings unless specific
hedge accounting criteria are met.  See Note 13 for additional
information on NPNS.
  PPL and
its subsidiaries have elected not to offset net derivative positions in the
financial statements.  Accordingly, PPL and its subsidiaries do not
offset such derivative positions against the fair value of amounts (or amounts
that approximate fair value) recognized for the right to reclaim cash collateral
(a receivable) or the obligation to return cash collateral (a payable) under
master netting arrangements.
  Gains and
losses associated with non-trading bilateral sales of electricity at major
market delivery points are netted with purchases that offset the sales at those
same delivery points.  A major market delivery point is any delivery
point with liquid pricing available.
  PPL and
PPL Energy Supply reflect their net realized and unrealized gains and losses
associated with all derivatives that are held for trading purposes in the "Net
energy trading margins" line on the Statements of Income.
  The
circumstances and intent existing at the time that derivative contracts are
entered into are used to determine their accounting designation, which is
subsequently verified by an independent internal group on a daily
basis.  The following summarizes the guidelines that have been
provided to the marketers who are responsible for contract designation for
derivative energy contracts.
  ·
              Any
      wholesale and retail contracts to sell electricity and the related
      capacity that do not meet the definition of a derivative receive accrual
      accounting.·
              Physical
      electricity-only transactions can receive cash flow hedge treatment if all
      of the qualifications are met.·
              Physical
      capacity-only transactions to sell excess capacity from PPL's generation
      qualify for NPNS.  The forward value of these transactions is
      not recorded in the financial statements and has no earnings impact until
      delivery.·
              Any
      physical energy sale or purchase not intended to hedge an economic
      exposure is considered speculative, with unrealized gains or losses
      recorded immediately through earnings.·
              Financial
      transactions, which can be settled in cash, do not qualify for NPNS
      because they do not require physical delivery.  These
      transactions can receive cash flow hedge treatment if they lock in the
      cash flows PPL will receive or pay for energy expected to be sold or
      purchased in the spot market.·
              PPL
      purchases FTRs for both proprietary trading activities and hedging
      purposes.  FTRs, although economically effective as electricity
      basis hedges, do not currently qualify for hedge accounting
      treatment.  Unrealized and realized gains and losses from FTRs
      that were entered into for trading purposes are recorded in "Net energy
      trading margins" on the Statements of Income.  Unrealized and
      realized gains and losses from FTRs that were entered into to offset
      probable transmission congestion expenses are recorded in "Energy
      purchases" on the Statements of Income.·
              Physical
      and financial transactions for gas and oil to meet fuel and retail
      requirements can receive cash flow hedge treatment if they lock in the
      price PPL will pay and meet the definition of a
  derivative.·
              Certain
      option contracts may receive hedge accounting treatment.  Those
      that are not eligible are marked to fair value through
      earnings.
  Unrealized
gains or losses on cash flow hedges are recorded in OCI, excluding
ineffectiveness that is recognized immediately in earnings.  These
unrealized gains and losses become realized when the contracts settle and are
recognized in earnings when the hedged transactions occur.
  The
following is a summary of certain guidelines that have been provided to PPL's
Finance Department, which is responsible for contract designation for interest
rate and foreign currency derivatives.
  ·
                  Transactions
      to lock in an interest rate prior to a debt issuance can be designated as
      cash flow hedges.  Any unrealized gains or losses on
      transactions receiving cash flow hedge treatment are recorded in OCI and
      are amortized as a component of interest expense when the hedged
      transactions occur.·
                  Transactions
      entered into to hedge fluctuations in the fair value of existing debt can
      be designated as fair value hedges.  To the extent that the
      change in the fair value of the derivative offsets the change in the fair
      value of the existing debt, there is no earnings impact, as both changes
      are reflected in interest expense.  Realized gains and losses
      over the life of the hedge are reflected in interest
    expense.·
                  Transactions
      entered into to hedge the value of a net investment of foreign operations
      can be designated as net investment hedges.  To the extent that
      the derivatives are highly effective at hedging the value of the net
      investment, gains and losses are recorded in the foreign currency
      translation adjustment component of OCI and will not be recorded in
      earnings until the investment is substantially
  liquidated.·
                  Derivative
      transactions that do not qualify for hedge accounting treatment are marked
      to fair value through earnings.  These transactions generally
      include hedges of earnings translation risk associated with subsidiaries
      that report their financial statements in a currency other than the U.S.
      dollar.  As such, these transactions eliminate earnings
      volatility due solely to changes in foreign currency exchange
      rates.
  (PPL)
  The
following table presents the fair value and location of derivative instruments
recorded on the Balance Sheet at June 30, 2009:
  Assets
                
                LiabilitiesBalance
      Sheet Location
                
                Fair
      Value
                
                Balance
      Sheet Location
                
                Fair
      ValueDerivatives
      designated as hedging instrumentsInterest
      rate swaps
                
                Price
      risk management assets - current
                
                $
                7
                
                
                Price
      risk management liabilities - currentPrice
      risk management assets - noncurrent
                
                
                30
                
                
                Price
      risk management liabilities - noncurrentCross-currency
      swaps contracts
                
                Price
      risk management assets - current
                
                
                1
                
                
                Price
      risk management liabilities - currentPrice
      risk management assets - noncurrent
                
                
                18
                
                
                Price
      risk management liabilities - noncurrent
                
                $
                5Foreign
      exchange contracts
                
                Price
      risk management assets - current
                
                
                11
                
                
                Price
      risk management liabilities - currentPrice
      risk management assets - noncurrent
                
                
                7
                
                
                Price
      risk management liabilities - noncurrentCommodity
      contracts
                
                Price
      risk management assets - current
                
                
                393
                
                
                Price
      risk management liabilities - current
                
                
                233Price
      risk management assets - noncurrent
                
                
                896
                
                
                Price
      risk management liabilities - noncurrent
                
                
                238Total
      derivatives designated as hedging instruments
                
                
                
                
                1,363
                
                
                
                
                
                476Derivatives
      not designated as hedging instruments (a)Commodity
      contracts
                
                Price
      risk management assets - current
                
                
                1,554
                
                
                Price
      risk management liabilities - current
                
                
                1,526Price
      risk management assets - noncurrent
                
                
                1,035
                
                
                Price
      risk management liabilities - noncurrent
                
                
                8292,589
                
                
                
                
                
                2,355Foreign
      exchange contracts
                
                Price
      risk management assets - current
                
                
                
                
                
                Price
      risk management liabilities - current
                
                
                9Total
      derivatives not designated as hedging instruments
                
                
                
                
                2,589
                
                
                
                
                
                2,364Total
      derivatives
                
                
                
                $
                3,952
                
                
                
                
                $
                2,840
  (a)
              
              $254
      million of net gains associated with derivatives that were no longer
      designated as hedging instruments are recorded in AOCI at June 30,
      2009.
  The
after-tax balances of accumulated net unrealized gains (losses) (excluding net
investment hedges) in AOCI were $308 million and $(21) million at June 30,
2009 and December 31, 2008.  The after-tax balances of
accumulated net unrealized losses (excluding net investment hedges) in AOCI were
$692 million and $192 million at June 30, 2008 and December 31,
2007.
  The
following table presents the pre-tax effect of derivative instruments recognized
in income or OCI for the three months ended June 30,
2009:
  Derivatives
      in Fair Value Hedging Relationships
                  
                  Location
      of Gain (Loss) Recognized in Income on Derivative
                  
                  Amount
      of Gain (Loss) Recognized in Income on Derivative
                  
                  Hedged
      Items in Fair Value Hedging Relationships
                  
                  Location
      of Gain (Loss) Recognized in Income on Related Hedged Item
                  
                  Amount
      of Gain (Loss) Recognized in Income on Related Hedged
  ItemInterest
      rate swaps
                  
                  Interest
      expense
                  
                  $
                  (7
                  )
                  
                  Fixed
      rate debt
                  
                  Interest
      expense
                  
                  $
                  17
  Derivatives
      in Cash Flow Hedging Relationships
                        
                        Amount
      of Gain (Loss) Recognized in OCI on Derivative (Effective
      Portion)
                        
                        Location
      of Gain (Loss) Reclassified from AOCI into Income
                          (Effective
      Portion)
                        
                        Amount
      of Gain (Loss) Reclassified from AOCI into Income
                        
                        Location
      of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and
      Amount Excluded from Effectiveness Testing)
                        
                        Amount
      of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and
      Amount Excluded from Effectiveness Testing)Interest
      rate swaps
                        
                        $
                        24
                        
                        
                        Interest
      expense
                        
                        
                        
                        
                        
                        Interest
      expenseCross-currency
      swaps
                        
                        
                        (49
                        )
                        
                        Interest
      expense
                        
                        
                        
                        
                        
                        Interest
      expenseOther
      income (expense) - net
                        
                        $
                        (37
                        )
                        
                        Other
      income (expense) - netCommodity
      contracts
                        
                        
                        124Wholesale
      energy marketing
                        
                        
                        (174
                        )
                        
                        Wholesale
      energy marketing
                        
                        $
                        68Fuel
                        
                        
                        (10
                        )
                        
                        FuelEnergy
      purchases
                        
                        
                        (126
                        )
                        
                        Energy
      purchases
                        
                        
                        (1
                        )Total
      commodity
                        
                        
                        124
                        
                        
                        
                        
                        
                        (310
                        )
                        
                        
                        
                        
                        67Total
                        
                        $
                        99
                        
                        
                        
                        
                        $
                        (347
                        )
                        
                        
                        
                        $
                        67
  Derivatives
      in Net Investment Hedging Relationships
                
                Amount
      of Gain (Loss) Recognized in OCI on Derivative
                  (Effective
      Portion)
                
                Location
      of Gain (Loss) Reclassified from AOCI into Income
                  (Effective
      Portion)
                
                Amount
      of Gain (Loss) Reclassified from AOCI into Income
                
                Location
      of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and
      Amount Excluded from Effectiveness Testing)
                
                Amount
      of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and
      Amount Excluded from Effectiveness Testing)Foreign
      exchange contracts
                
                $
                (12
                )
   Derivatives
      Not Designated as Hedging Instruments
                
                Location
      of Gain (Loss) Recognized in Income on Derivative
                
                Amount
      of Gain (Loss) Recognized in Income on DerivativeForeign
      exchange contracts
                
                Other
      income (expense) - net
                
                $
                (11
                )Commodity
      contracts
                
                Unregulated
      retail electric and gas
                
                
                3Wholesale
      energy marketing
                
                
                216Net
      energy trading margins (a)
                
                
                9Fuel
                
                
                13Energy
      purchases
                
                
                (258
                )Total
                
                
                
                $
                (28
                )
  (a)
              
              Differs
      from statement of income due to intra-month transactions which PPL defines
      as spot activity.
  The
following table presents the pre-tax effect of derivative instruments recognized
in income or OCI for the six months ended June 30, 2009:
   Derivatives
      in Fair Value Hedging Relationships
                  
                  Location
      of Gain (Loss) Recognized in Income on Derivative
                  
                  Amount
      of Gain (Loss) Recognized in Income on Derivative
                  
                  Hedged
      Items in Fair Value Hedging Relationships
                  
                  Location
      of Gain (Loss) Recognized in Income on Related Hedged Item
                  
                  Amount
      of Gain (Loss) Recognized in Income on Related Hedged
  ItemInterest
      rate swaps
                  
                  Interest
      expense
                  
                  $
                  (5
                  )
                  
                  Fixed
      rate debt
                  
                  Interest
      expense
                  
                  $
                  23
   Derivatives
      in Cash Flow Hedging Relationships
                      
                      Amount
      of Gain (Loss) Recognized in OCI on Derivative (Effective
      Portion)
                      
                      Location
      of Gain (Loss) Reclassified from AOCI into Income
                        (Effective
      Portion)
                      
                      Amount
      of Gain (Loss) Reclassified from AOCI into Income
                      
                      Location
      of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and
      Amount Excluded from Effectiveness Testing)
                      
                      Amount
      of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and
      Amount Excluded from Effectiveness Testing)Interest
      rate swaps
                      
                      $
                      43
                      
                      
                      Interest
      expense
                      
                      $
                      (2
                      )
                      
                      Interest
      expenseOther
      income (expense) - net
                      
                      
                      4
                      
                      
                      Other
      income (expense) - netCross-currency
      swaps
                      
                      
                      (39
                      )
                      
                      Interest
      expense
                      
                      
                      1
                      
                      
                      Interest
      expenseOther
      income (expense) - net
                      
                      
                      (15
                      )
                      
                      Other
      income (expense) - netCommodity
      contracts
                      
                      
                      400Wholesale
      energy marketing
                      
                      
                      (8
                      )
                      
                      Wholesale
      energy marketing
                      
                      $
                      98Fuel
                      
                      
                      (9
                      )
                      
                      FuelDepreciation
                      
                      
                      1
                      
                      
                      DepreciationEnergy
      purchases
                      
                      
                      (230
                      )
                      
                      Energy
      purchases
                      
                      
                      (4
                      )Total
      commodity
                      
                      
                      400
                      
                      
                      
                      
                      
                      (246
                      )
                      
                      
                      
                      
                      94Total
                      
                      $
                      404
                      
                      
                      
                      
                      $
                      (258
                      )
                      
                      
                      
                      $
                      94
   Derivatives
      in Net Investment Hedging Relationships
                
                Amount
      of Gain (Loss) Recognized in OCI on Derivative
                  (Effective
      Portion)
                
                Location
      of Gain (Loss) Reclassified from AOCI into Income
                  (Effective
      Portion)
                
                Amount
      of Gain (Loss) Reclassified from AOCI into Income
                
                Location
      of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and
      Amount Excluded from Effectiveness Testing)
                
                Amount
      of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and
      Amount Excluded from Effectiveness Testing)Foreign
      exchange contracts
                
                $
                (11
                )
   Derivatives
      Not Designated as Hedging Instruments
                
                Location
      of Gain (Loss) Recognized in Income on Derivative
                
                Amount
      of Gain (Loss) Recognized in Income on DerivativeForeign
      exchange contracts
                
                Other
      income (expense) - net
                
                $
                (11
                )Commodity
      contracts
                
                Unregulated
      retail electric and gas
                
                
                6Wholesale
      energy marketing
                
                
                500Net
      energy trading margins (a)
                
                
                (4
                )Fuel
                
                
                5Energy
      purchases
                
                
                (642
                )Total
                
                
                
                $
                (146
                )
  (a)
              
              Differs
      from statement of income due to intra-month transactions which PPL defines
      as spot activity.
  (PPL
Energy Supply)
  The
following table presents the fair value and location of derivative instruments
recorded on the Balance Sheet at June 30, 2009:
  Assets
                
                LiabilitiesBalance
      Sheet Location
                
                Fair
      Value
                
                Balance
      Sheet Location
                
                Fair
      ValueDerivatives
      designated as hedging instrumentsCross-currency
      swaps contracts
                
                Price
      risk management assets - current
                
                $
                1
                
                
                Price
      risk management liabilities - currentPrice
      risk management assets - noncurrent
                
                
                18
                
                
                Price
      risk management liabilities - noncurrent
                
                $
                5Foreign
      exchange contracts
                
                Price
      risk management assets - current
                
                
                11
                
                
                Price
      risk management liabilities - currentPrice
      risk management assets - noncurrent
                
                
                7
                
                
                Price
      risk management liabilities - noncurrentCommodity
      contracts
                
                Price
      risk management assets - current
                
                
                393
                
                
                Price
      risk management liabilities - current
                
                
                233Price
      risk management assets - noncurrent
                
                
                896
                
                
                Price
      risk management liabilities - noncurrent
                
                
                238Total
      derivatives designated as hedging instruments
                
                
                
                
                1,326
                
                
                
                
                
                476Derivatives
      not designated as hedging instruments (a)Commodity
      contracts
                
                Price
      risk management assets - current
                
                
                1,554
                
                
                Price
      risk management liabilities - current
                
                
                1,526Price
      risk management assets - noncurrent
                
                
                1,035
                
                
                Price
      risk management liabilities - noncurrent
                
                
                8292,589
                
                
                
                
                
                2,355Foreign
      exchange contracts
                
                Price
      risk management assets - current
                
                
                
                
                
                Price
      risk management liabilities - current
                
                
                9Total
      derivatives not designated as hedging instruments
                
                
                
                
                2,589
                
                
                
                
                
                2,364Total
      derivatives
                
                
                
                $
                3,915
                
                
                
                
                $
                2,840
  (a)
              
              $254
      million of net gains associated with derivatives that were no longer
      designated as hedging instruments are recorded in AOCI at June 30,
      2009.
  The
after-tax balances of accumulated net unrealized gains (losses) (excluding net
investment hedges) in AOCI were $293 million and $(12) million at June 30,
2009 and December 31, 2008.  The after-tax balances of
accumulated net unrealized losses (excluding net investment hedges) in AOCI were
$688 million and $188 million at June 30, 2008 and December 31,
2007.
  The
pre-tax effect of derivative instruments recognized in income or OCI for the
three months ended June 30, 2009:
  Derivatives
      in Cash Flow Hedging Relationships
                                                            
                                                            Amount
      of Gain (Loss) Recognized in OCI on Derivative (Effective
      Portion)
                                                            
                                                            Location
      of Gain (Loss) Reclassified from AOCI into Income
                                                              (Effective
      Portion)
                                                            
                                                            Amount
      of Gain (Loss) Reclassified from AOCI into Income
                                                            
                                                            Location
      of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and
      Amount Excluded from Effectiveness Testing)
                                                            
                                                            Amount
      of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and
      Amount Excluded from Effectiveness Testing)Cross-currency
      swaps
                                                            
                                                            $
                                                            (49
                                                            )
                                                            
                                                            Interest
      expense
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            Interest
      expenseOther
      income (expense) - net
                                                            
                                                            $
                                                            (37
                                                            )
                                                            
                                                            Other
      income (expense) - netCommodity
      contracts
                                                            
                                                            
                                                            124Wholesale
      energy marketing
                                                            
                                                            
                                                            (174
                                                            )
                                                            
                                                            Wholesale
      energy marketing
                                                            
                                                            $
                                                            68Fuel
                                                            
                                                            
                                                            (10
                                                            )
                                                            
                                                            FuelEnergy
      purchases
                                                            
                                                            
                                                            (126
                                                            )
                                                            
                                                            Energy
      purchases
                                                            
                                                            
                                                            (1
                                                            )Total
      commodity
                                                            
                                                            
                                                            124
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            (310
                                                            )
                                                            
                                                            
                                                            
                                                            
                                                            67Total
                                                            
                                                            $
                                                            75
                                                            
                                                            
                                                            
                                                            
                                                            $
                                                            (347
                                                            )
                                                            
                                                            
                                                            
                                                            $
                                                            67
  Derivatives
      in
                  Net
      Investment
                  Hedging
                  Relationships
                
                Amount of Gain (Loss) Recognized in OCI on
      Derivative
                  (Effective
      Portion)
                
                Location
      of Gain (Loss) Reclassified from AOCI into Income
                  (Effective
      Portion)
                
                Amount
      of Gain (Loss) Reclassified from AOCI into Income
                
                Location
      of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and
      Amount Excluded from Effectiveness Testing)
                
                Amount
      of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and
      Amount Excluded from Effectiveness Testing)Foreign
      exchange contracts
                
                $
                (12
                )
   Derivatives
      Not Designated as Hedging Instruments
                
                Location
      of Gain (Loss) Recognized in Income on Derivative
                
                Amount
      of Gain (Loss) Recognized in Income on DerivativeForeign
      exchange contracts
                
                Other
      income (expense) - net
                
                $
                (11
                )Commodity
      contracts
                
                Wholesale
      energy marketing
                
                
                216Unregulated
      retail electric and gas
                
                
                3Net
      energy trading margins (a)
                
                
                9Fuel
                
                
                13Energy
      purchases
                
                
                (258
                )Total
                
                
                
                $
                (28
                )
  (a)
              
              Differs
      from statement of income due to intra-month transactions which PPL Energy
      Supply defines as spot activity.
  The
following table presents the pre-tax effect of derivative instruments recognized
in income or OCI for the six months ended June 30, 2009:
  Derivatives
      in Cash Flow Hedging Relationships
                                                  
                                                  Amount
      of Gain (Loss) Recognized in OCI on Derivative (Effective
      Portion)
                                                  
                                                  Location
      of Gain (Loss) Reclassified from AOCI into Income
                                                    (Effective
      Portion)
                                                  
                                                  Amount
      of Gain (Loss) Reclassified from AOCI into Income
                                                  
                                                  Location
      of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and
      Amount Excluded from Effectiveness Testing)
                                                  
                                                  Amount
      of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and
      Amount Excluded from Effectiveness Testing)Cross-currency
      swaps
                                                  
                                                  $
                                                  (39
                                                  )
                                                  
                                                  Interest
      expense
                                                  
                                                  $
                                                  1
                                                  
                                                  
                                                  Interest
      expenseOther
      income (expense) - net
                                                  
                                                  
                                                  (15
                                                  )
                                                  
                                                  Other
      income (expense) - netCommodity
      contracts
                                                  
                                                  
                                                  400Wholesale
      energy marketing
                                                  
                                                  
                                                  (8
                                                  )
                                                  
                                                  Wholesale
      energy marketing
                                                  
                                                  $
                                                  98Fuel
                                                  
                                                  
                                                  (9
                                                  )
                                                  
                                                  FuelDepreciation
                                                  
                                                  
                                                  1
                                                  
                                                  
                                                  DepreciationEnergy
      purchases
                                                  
                                                  
                                                  (230
                                                  )
                                                  
                                                  Energy
      purchases
                                                  
                                                  
                                                  (4
                                                  )Total
      commodity
                                                  
                                                  
                                                  400
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (246
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  94Total
                                                  
                                                  $
                                                  361
                                                  
                                                  
                                                  
                                                  
                                                  $
                                                  (260
                                                  )
                                                  
                                                  
                                                  
                                                  $
                                                  94
   Derivatives
      in
                  Net
      Investment
                  Hedging
                  Relationships
                
                Amount
      of Gain (Loss) Recognized in OCI on Derivative
                  (Effective
      Portion)
                
                Location
      of Gain (Loss) Reclassified from AOCI into Income
                  (Effective
      Portion)
                
                Amount
      of Gain (Loss) Reclassified from AOCI into Income
                
                Location
      of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and
      Amount Excluded from Effectiveness Testing)
                
                Amount
      of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and
      Amount Excluded from Effectiveness Testing)Foreign
      exchange contracts
                
                $
                (11
                )
   Derivatives
      Not Designated as Hedging Instruments
                
                Location
      of Gain (Loss) Recognized in Income on Derivative
                
                Amount
      of Gain (Loss) Recognized in Income on DerivativeForeign
      exchange contracts
                
                Other
      income (expense) - net
                
                $
                (11
                )Commodity
      contracts
                
                Wholesale
      energy marketing
                
                
                500Unregulated
      retail electric and gas
                
                
                6Net
      energy trading margins (a)
                
                
                (4
                )Fuel
                
                
                5Energy
      purchases
                
                
                (642
                )Total
                
                
                
                $
                (146
                )
  (a)
              
              Differs
      from statement of income due to intra-month transactions which PPL Energy
      Supply defines as spot activity.
  Credit
Risk-Related Contingent Features
  (PPL
and PPL Energy Supply)
  Certain
of PPL's and PPL Energy Supply's derivative contracts contain credit contingent
provisions which would permit the counterparties with which PPL or PPL Energy
Supply is in a net liability position to require the transfer of additional
collateral upon a decrease in PPL's or PPL Energy Supply's credit
rating.  Most of these provisions would require PPL or PPL Energy
Supply to transfer additional collateral or permit the counterparty to terminate
the contract if PPL's or PPL Energy Supply's credit rating were to fall below
investment grade.  Some of these provisions also would allow the
counterparty to require additional collateral upon each decrease in the credit
rating at levels that remain above investment grade.  In either case,
if PPL's or PPL Energy Supply's credit rating were to fall below investment
grade (i.e., below BBB- for S&P or Fitch, or Baa3 for Moody's), and assuming
no assignment to an investment grade affiliate where allowed, most of these
credit contingent provisions require either immediate payment of the net
liability as a termination payment or immediate and ongoing full
collateralization by PPL or PPL Energy Supply on derivative instruments in net
liability positions.
  Additionally,
certain of PPL's and PPL Energy Supply's derivative contracts contain credit
contingent provisions that require PPL or PPL Energy Supply to provide "adequate
assurance" of performance if the other party has reasonable grounds for
insecurity regarding PPL's or PPL Energy Supply's performance of its obligation
under the contract.  A counterparty demanding adequate assurance could
require a transfer of additional collateral or other security, including letters
of credit, cash and guarantees from a creditworthy entity.  This would
typically involve negotiations among the parties.  However, amounts
disclosed below represent assumed immediate payment or immediate and ongoing
full collateralization for derivative instruments in net liability positions
with "adequate assurance" provisions.
  To
determine net liability positions, PPL and PPL Energy Supply use the fair value
of each agreement, such as an International Swaps and Derivatives Association,
Inc. contract.  The aggregate fair value of all derivative instruments
with the credit contingent provisions described above that were in a net
liability position at June 30, 2009 was $311 million for PPL and $309
million for PPL Energy Supply of which both had posted collateral of $255
million in the normal course of business.  At June 30, 2009, if
the credit contingent provisions underlying these derivative instruments were
triggered due to a credit downgrade below investment grade, PPL and PPL Energy
Supply would have been required to post an additional $132 million and $130
million of collateral to their counterparties.
  15.
              Goodwill
  (PPL
and PPL Energy Supply)
  The
changes in the carrying amounts of goodwill by segment were:
  Supply
                
                International
      Delivery
                
                TotalBalance
      at December 31, 2008
                $
                94
                
                
                $
                669
                
                
                $
                763Effect
      of foreign currency exchange rates
                
                
                
                
                
                33
                
                
                
                33Balance
      at June 30, 2009
                $
                94
                
                
                $
                702
                
                
                $
                796
  16.
              Asset Retirement
Obligations
  (PPL
and PPL Energy Supply)
  The
change in the carrying amounts of the AROs was:
  AROs
      at December 31, 2008
                
                $
                389Accretion
      expense
                
                
                15Revisions
      to estimates
                
                
                1Obligations
      settled
                
                
                (11
                )AROs
      at June 30, 2009
                
                $
                394
  The most
significant ARO recorded by PPL and PPL Energy Supply relates to the
decommissioning of the Susquehanna nuclear station.  The accrued
nuclear decommissioning obligation was $335 million and $322 million at
June 30, 2009 and December 31, 2008.
  Assets in
the NDT funds are legally restricted for purposes of settling PPL's and PPL
Energy Supply's ARO related to the decommissioning of the Susquehanna
station.  The aggregate fair value of these assets was $468 million
and $446 million at June 30, 2009 and December 31,
2008.  See Notes 13 and 18 for additional information on the fair
value of these assets.
  17.
              Restricted Cash and Cash
  Equivalents
  (PPL,
PPL Energy Supply and PPL Electric)
  The
following table details the components of restricted cash and cash equivalents
by reporting entity and by type.
  June 30,
      2009PPL
                
                PPL
      Energy Supply
                
                PPL
      ElectricCurrent:Funds
      deposited with trustee to defease First Mortgage
      Bonds (a)
                
                $
                1
                
                
                
                
                
                
                $
                1Deposits
      for trading purposes (b)
                
                
                31
                
                
                $
                31Counterparty
      collateral
                
                
                92
                
                
                
                92Client
      deposits
                
                
                4Miscellaneous
                
                
                3
                
                
                
                3Total
      current
                
                
                131
                
                
                
                126
                
                
                
                1Noncurrent:Required
      deposits of WPD (c)
                
                
                14
                
                
                
                14Funds
      deposited with Trustee to defease First Mortgage
      Bonds (a)
                
                
                13
                
                
                
                
                
                
                
                13Other
                
                
                1
                
                
                
                
                
                
                
                1Total
      noncurrent
                
                
                28
                
                
                
                14
                
                
                
                14$
                159
                
                
                $
                140
                
                
                $
                15
  December 31,
      2008PPL
                
                PPL
      Energy Supply
                
                PPL
      ElectricCurrent:Funds
      deposited with Trustee to defease First Mortgage
      Bonds (a)
                
                $
                1
                
                
                
                
                
                
                $
                1Deposits
      for trading purposes (b)
                
                
                301
                
                
                $
                301Counterparty
      collateral
                
                
                12
                
                
                
                12Client
      deposits
                
                
                4Miscellaneous
                
                
                2
                
                
                
                2Total
      current
                
                
                320
                
                
                
                315
                
                
                
                1Noncurrent:Required
      deposits of WPD (c)
                
                
                13
                
                
                
                13Funds
      deposited with Trustee to defease First Mortgage
      Bonds (a)
                
                
                14
                
                
                
                
                
                
                
                14Total
      noncurrent
                
                
                27
                
                
                
                13
                
                
                
                14$
                347
                
                
                $
                328
                
                
                $
                15
  (a)
              
              The
      carrying amount of related First Mortgage Bonds was $10 million at
      June 30, 2009 and December 31, 2008.(b)
              
              Represents
      margin posted by PPL Energy Supply in connection with trading
      activities.  The decrease from December 31, 2008 relates
      primarily to decreases in market prices and the realization of certain
      transactions.(c)
              
              Primarily
      consists of insurance reserves.
  18.
              Available-for-Sale
Securities
  (PPL
and PPL Energy Supply)
  The
following table shows the amortized cost of available-for-sale securities and
the gross unrealized gains and losses recorded in AOCI.  See Note 13
for information regarding the fair value of these securities.
 
 June 30,
      2009
                                  
                                  December
      31, 2008Amortized
      Cost
                                  
                                  Gross
      Unrealized Gains
                                  
                                  Gross
      Unrealized  Losses
                                  
                                  Amortized
      Cost
                                  
                                  Gross
      Unrealized Gains
                                  
                                  Gross
      Unrealized  Losses(a)PPLShort-term
      investments – municipal debt securities
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  150NDT
      funds:Cash
      and cash equivalents
                                  
                                  $
                                  5
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  7Equity
      securities:U.S.
      large-cap
                                  
                                  
                                  171
                                  
                                  
                                  $
                                  45
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  160
                                  
                                  
                                  $
                                  22U.S.
      mid/small-cap
                                  
                                  
                                  65
                                  
                                  
                                  
                                  19
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  60
                                  
                                  
                                  
                                  9Debt
      securities:U.S.
      Treasury
                                  
                                  
                                  55
                                  
                                  
                                  
                                  4
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  67
                                  
                                  
                                  
                                  10U.S.
      government agency
                                  
                                  
                                  11
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  13
                                  
                                  
                                  
                                  1Municipality
                                  
                                  
                                  63
                                  
                                  
                                  
                                  3
                                  
                                  
                                  $
                                  (2
                                  )
                                  
                                  
                                  59
                                  
                                  
                                  
                                  2Investment-grade
      corporate
                                  
                                  
                                  26
                                  
                                  
                                  
                                  2
                                  
                                  
                                  
                                  (1
                                  )
                                  
                                  
                                  31
                                  
                                  
                                  
                                  2Residential
      mortgage-backed securities
                                  
                                  
                                  1
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  2Other
                                  
                                  
                                  1
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  1398
                                  
                                  
                                  
                                  73
                                  
                                  
                                  
                                  (3
                                  )
                                  
                                  
                                  400
                                  
                                  
                                  
                                  46Auction
      rate securities
                                  
                                  
                                  29
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (11
                                  )
                                  
                                  
                                  29
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  (5
                                  )Total PPL
                                  
                                  $
                                  427
                                  
                                  
                                  $
                                  73
                                  
                                  
                                  $
                                  (14
                                  )
                                  
                                  $
                                  579
                                  
                                  
                                  $
                                  46
                                  
                                  
                                  $
                                  (5
                                  )PPLEnergy
      SupplyShort-term
      investments – municipal debt securities
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  150NDT
      funds:Cash
      and cash equivalents
                                  
                                  $
                                  5
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  7Equity
      securities:U.S.
      large-cap
                                  
                                  
                                  171
                                  
                                  
                                  $
                                  45
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  160
                                  
                                  
                                  $
                                  22U.S.
      mid/small-cap
                                  
                                  
                                  65
                                  
                                  
                                  
                                  19
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  60
                                  
                                  
                                  
                                  9Debt
      securities:U.S.
      Treasury
                                  
                                  
                                  55
                                  
                                  
                                  
                                  4
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  67
                                  
                                  
                                  
                                  10U.S.
      government agency
                                  
                                  
                                  11
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  13
                                  
                                  
                                  
                                  1Municipality
                                  
                                  
                                  63
                                  
                                  
                                  
                                  3
                                  
                                  
                                  $
                                  (2
                                  )
                                  
                                  
                                  59
                                  
                                  
                                  
                                  2Investment-grade
      corporate
                                  
                                  
                                  26
                                  
                                  
                                  
                                  2
                                  
                                  
                                  
                                  (1
                                  )
                                  
                                  
                                  31
                                  
                                  
                                  
                                  2Residential
      mortgage-backed securities
                                  
                                  
                                  1
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  2Other
                                  
                                  
                                  1
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  1398
                                  
                                  
                                  
                                  73
                                  
                                  
                                  
                                  (3
                                  )
                                  
                                  
                                  400
                                  
                                  
                                  
                                  46Auction
      rate securities
                                  
                                  
                                  24
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (9
                                  )
                                  
                                  
                                  24
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  (5
                                  )Total PPL
      Energy Supply
                                  
                                  $
                                  422
                                  
                                  
                                  $
                                  73
                                  
                                  
                                  $
                                  (12
                                  )
                                  
                                  $
                                  574
                                  
                                  
                                  $
                                  46
                                  
                                  
                                  $
                                  (5
                                  )
  (a)
              
              Prior
      to the adoption of FSP FAS 115-2 and FAS 124-2, there were no unrealized
      losses recorded in AOCI on debt securities in the NDT
      funds.  See Note 2 for additional
  information.
  The
following table shows the gross unrealized losses not recognized in earnings and
the related fair value of investments, aggregated by investment category and
length of time that individual securities have been in an unrealized loss
position as of June 30, 2009.
  Less
      Than 12 Months
                                                                                                                                                                    
                                                                                                                                                                    12
      Months or Greater
                                                                                                                                                                    
                                                                                                                                                                    TotalUnrealized
      Losses
                                                                                                                                                                    
                                                                                                                                                                    Fair
                                                                                                                                                                      Value
                                                                                                                                                                    
                                                                                                                                                                    Unrealized
      Losses
                                                                                                                                                                    
                                                                                                                                                                    Fair
                                                                                                                                                                      Value
                                                                                                                                                                    
                                                                                                                                                                    Unrealized
      Losses
                                                                                                                                                                    
                                                                                                                                                                    Fair
                                                                                                                                                                      ValuePPLNDT
      funds:Debt
      securities:Municipality
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    (2
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    47
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    (2
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    47Investment-grade
      corporate
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    (1
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    7
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    (1
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    7(2
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    47
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    (1
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    7
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    (3
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    54Auction
      rate securities
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    (8
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    11
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    (3
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    7
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    (11
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    18Total
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    (10
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    58
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    (4
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    14
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    (14
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    72PPLEnergy
      SupplyNDT
      funds:Debt
      securities:Municipality
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    (2
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    47
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    (2
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    47Investment-grade
      corporate
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    (1
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    7
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    (1
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    7(2
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    47
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    (1
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    7
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    (3
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    54Auction
      rate securities
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    (6
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    8
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    (3
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    7
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    (9
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    15Total
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    (8
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    55
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    (4
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    14
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    (12
                                                                                                                                                                    )
                                                                                                                                                                    
                                                                                                                                                                    $
                                                                                                                                                                    69
  At
December 31, 2008, the fair value of PPL's and PPL Energy Supply's auction rate
securities in an unrealized loss position for less than 12 months was $21
million and $19 million.  The unrealized losses on these auction rate
securities were $5 million for PPL and PPL Energy Supply.
  The
following table shows the scheduled maturity dates of debt securities held at
June 30, 2009.
  Maturity
                  Less
      Than
                  1
      Year
                
                Maturity
                  1-5
      Years
                
                Maturity
                  5-10
      Years
                
                Maturity
                  in
      Excess
                  of
      10 Years
                
                TotalPPLAmortized
      Cost
                
                $
                4
                
                
                $
                63
                
                
                $
                47
                
                
                $
                72
                
                
                $
                186Fair
      Value
                
                
                5
                
                
                
                65
                
                
                
                48
                
                
                
                63
                
                
                
                181PPL
      Energy SupplyAmortized
      Cost
                
                $
                4
                
                
                $
                63
                
                
                $
                47
                
                
                $
                67
                
                
                $
                181Fair
      Value
                
                
                5
                
                
                
                65
                
                
                
                48
                
                
                
                60
                
                
                
                178
  The
following table shows proceeds from and realized gains (losses) on sales of
available-for-sale securities.
  Three
      Months Ended June 30,
                      
                      Six
      Months Ended June 30,2009
                      
                      2008
                      
                      2009
                      
                      2008PPLProceeds
      from sales in NDT funds (a)
                      
                      $
                      54
                      
                      
                      $
                      42
                      
                      
                      $
                      141
                      
                      
                      $
                      82Other
      proceeds from sales
                      
                      
                      150
                      
                      
                      
                      11
                      
                      
                      
                      150
                      
                      
                      
                      36Gross
      realized gains (b)
                      
                      
                      6
                      
                      
                      
                      2
                      
                      
                      
                      13
                      
                      
                      
                      6Gross
      realized losses (b)
                      
                      
                      (3
                      )
                      
                      
                      (2
                      )
                      
                      
                      (13
                      )
                      
                      
                      (7
                      )PPL
      Energy SupplyProceeds
      from sales in NDT funds (a)
                      
                      $
                      54
                      
                      
                      $
                      42
                      
                      
                      $
                      141
                      
                      
                      $
                      82Other
      proceeds from sales
                      
                      
                      150
                      
                      
                      
                      11
                      
                      
                      
                      150
                      
                      
                      
                      33Gross
      realized gains (b)
                      
                      
                      6
                      
                      
                      
                      2
                      
                      
                      
                      13
                      
                      
                      
                      6Gross
      realized losses (b)
                      
                      
                      (3
                      )
                      
                      
                      (2
                      )
                      
                      
                      (13
                      )
                      
                      
                      (7
                      )
  (a)
                
                These
      proceeds, along with deposits of amounts collected from customers, are
      used to pay income taxes and fees related to managing the
      trust.  Remaining proceeds are reinvested in the
      trust.(b)
                
                Excludes
      the impact of other-than-temporary impairment charges recognized in
      the Statements of Income.
  NDT
Funds
  When the
fair value of a security is less than amortized cost, PPL and PPL Energy Supply
must make certain assertions to avoid recording an other-than-temporary
impairment that requires a current period charge to earnings.  The NRC
requires that nuclear decommissioning trusts be managed by independent
investment managers, with discretion to buy and sell securities in the
trusts.  As a result, PPL and PPL Energy Supply were unable to
demonstrate the ability to hold an impaired security until it recovers its
value; therefore, unrealized losses on debt securities through March 31, 2009,
and unrealized losses on equity securities for all periods presented represented
other-than-temporary impairments that required a current period charge to
earnings.
  As
described in "New Accounting Standards Adopted - FSP FAS 115-2 and FAS 124-2" in
Note 2, effective April 1, 2009, when PPL and PPL Energy Supply intend to sell a
debt security or more likely than not will be required to sell a debt security
before recovery, then the other-than-temporary impairment recognized in earnings
will equal the entire difference between the security's amortized cost basis and
its fair value.  However, if there is no intent to sell a debt
security and it is not more likely than not that they will be required to sell
the security before recovery, but the security has suffered a credit loss,
the other-than-temporary impairment will be separated into the credit loss
component, which is recognized in earnings, and the remainder of the
other-than-temporary impairment, which is recorded in OCI.  Temporary
impairments of debt securities and unrealized gains on both debt and equity
securities are recorded to OCI.  There were no credit losses on debt
securities held in the NDT funds at June 30, 2009.
  Auction
Rate Securities
  At
June 30, 2009 and December 31, 2008, the estimated fair value of the
auction rate securities was $11 million and $5 million lower than par value for
PPL and $9 million and $5 million lower than par value for PPL Energy
Supply.  See Note 13 for additional information on these
securities, including fair value.  Based upon the evaluation of
available information, PPL and PPL Energy Supply believe these investments
continue to be of high credit quality and they do not have significant exposure
to realize losses on these securities.  PPL and PPL Energy Supply have
no current plans to sell these securities until they can be liquidated at par
value and do not anticipate having to sell these securities in order to fund
operations or for any other purpose.  As such, the decline in fair
value was deemed temporary due to general market conditions.  During
the second quarter of 2009, PPL Energy Supply liquidated an insignificant amount
of these securities at par.
  Short-term
Investments
  In
December 2008, the PEDFA issued $150 million aggregate principal amount of
Exempt Facilities Revenue Bonds, Series 2008A and 2008B due 2038 (Series 2008
Bonds) on behalf of PPL Energy Supply.  PPL Investment Corp. acted as
the initial purchaser of the Series 2008 Bonds upon issuance.  At
December 31, 2008, these investments were reflected in "Short-term investments"
on the Balance Sheet.  In April 2009, PPL Investment Corp. received
$150 million for its investment in the Series 2008 bonds when they were refunded
by the PEDFA.  See "Financing Activities" in Note 7 for more
information on the refundings.  No realized or unrealized gains
(losses) were recorded on these securities, as the difference between carrying
value and fair value was insignificant.
  19.
              Leases
  Lessor
Transactions(PPL
and PPL Energy Supply)
  A PPL
Energy Supply subsidiary is the lessor, for accounting purposes, of each of the
Shoreham and Edgewood plants (collectively with related tolling agreements, the
Long Island generation business).  In May 2009, PPL Generation signed
a definitive agreement to sell the Long Island generation
business.  The tolling agreements related to these plants, accounted
for as containing leases, will be transferred to the new owner upon completion
of the sale.  The lease related to the Shoreham plant is classified as
a direct-financing lease.  Future minimum lease payments on this lease
are estimated to be $16 million per year for 2009 through 2013.  The
lease related to the Edgewood plant is classified as an operating
lease.  Minimum future lease rentals are estimated to be $3 million
per year for 2009 through 2013.  At December 31, 2008, total
minimum future rentals under this lease were estimated to be $28
million.  PPL Energy Supply no longer expects to receive these
payments subsequent to completion of the anticipated sale.  See Note 8
for additional information on the anticipated sale.
  20.
              New Accounting Standards Pending
  Adoption
  (PPL,
PPL Energy Supply and PPL Electric)
  FSP
FAS 132(R)-1
  FSP FAS
132(R)-1 amends SFAS 132(R) to provide guidance on an employer's disclosures
about plan assets of defined benefit plans.  The objectives of the
disclosures are to provide users of financial statements with an understanding
of:
  ·
              how
      investment allocation decisions are made, including the factors that are
      pertinent to an understanding of investment policies and
      strategies;·
              the
      major categories of plan assets;·
              the
      inputs and valuation techniques used to measure the fair value of plan
      assets;·
              the
      effect of fair value measurements using significant unobservable inputs
      (Level 3) on changes in plan assets for the period; and·
              significant
      concentrations of risk within plan
assets.
  PPL and
its subsidiaries will adopt FSP FAS 132(R)-1, prospectively, effective December
31, 2009.  FSP FAS 132(R)-1 was issued to provide greater transparency
within disclosures; therefore, the adoption is not expected to have a material
impact on PPL and its subsidiaries' financial statements.
  SFAS
166
  SFAS 166
was issued to revise the accounting for transfers of financial
assets.  SFAS 166 eliminates the concept of a qualifying
special-purpose entity (QSPE); therefore, QSPEs will be subject to consolidation
guidance.  Further, SFAS 166 changes the requirements for the
derecognition of financial assets, establishes new criteria for reporting the
transfer of a portion of a financial asset as a sale and requires transferors to
initially recognize, at fair value, assets obtained and liabilities incurred as
a result of a transfer accounted for as a sale.  Additionally, SFAS
166 requires enhanced disclosures to improve the transparency around transfers
of financial assets and a transferor's continuing involvement.
  PPL and
its subsidiaries will adopt SFAS 166 effective January 1,
2010.  Early adoption is prohibited.  SFAS 166 will be
applied prospectively to new transfers of financial
assets.  Disclosures will be required for all transfers, including
those entered into before the effective date.  Comparative disclosures
are encouraged, but not required, for periods in which these disclosures were
not previously required.  The potential impact of adoption to the
financial statements is not yet determinable but could be material.
  SFAS
167
  SFAS 167
amends FIN 46(R) to replace the quantitative-based risks and rewards calculation
for determining which entity, if any, has a controlling financial interest in a
variable interest entity (VIE) and is the primary beneficiary.  SFAS
167 prescribes a qualitative approach focused on identifying which entity has
the power to direct the activities of a VIE that most significantly impact the
VIE's economic performance and the obligation to absorb losses of or the right
to receive benefits from the VIE that could potentially be significant to the
VIE.  SFAS 167 requires ongoing assessments of whether an entity is
the primary beneficiary of a VIE and requires enhanced disclosures to improve
the transparency about an entity's involvement in a VIE.
  Upon
adoption of SFAS 167, all previous consolidation conclusions must be
reconsidered.  Additionally, with the elimination of the QSPE concept
in SFAS 166, QSPEs need to be evaluated for consolidation.  If the
initial application of SFAS 167 results in consolidation of a VIE, the assets,
liabilities, and noncontrolling interests of the VIE will be measured at their
carrying amounts as if SFAS 167 had been applied from the point in time the
entity became the primary beneficiary of the VIE (unless the fair value option
is elected).  Any difference between the net amounts required to be
recognized and the amount of any previously recognized interest will be
reflected as a cumulative-effect adjustment to retained earnings.  If
initial application of SFAS 167 results in deconsolidation of a VIE, any
retained interest in the VIE will be measured at its carrying value as if SFAS
167 had been applied from the inception of the VIE.
  PPL and
its subsidiaries will adopt SFAS 167, prospectively, effective January 1, 2010.
Early adoption is prohibited.  Comparative disclosures are not
required for periods in which these disclosures were not previously
required.  The potential impact of adoption to the financial
statements is not yet determinable but could be material.
  SFAS
168
  SFAS 168
establishes the FASB Accounting Standards CodificationTM (ASC)
as the primary source of authoritative GAAP, other than guidance issued by the
SEC.  SFAS 168 eliminates the previous GAAP hierarchy of accounting
and reporting guidance and replaces it with two levels of literature:
authoritative and nonauthoritative.  The ASC does not change GAAP;
rather, it organizes GAAP pronouncements in a consistent manner by accounting
topic.  PPL and its subsidiaries will adopt SFAS 168 beginning with
the period ended September 30, 2009, and will update references to
accounting and reporting standards to reflect the nomenclature presented in the
ASC.  The implementation of SFAS 168 will not have a material impact
on PPL and its subsidiaries' financial statements.
  21.
              Subsequent Events
  (PPL,
PPL Energy Supply and PPL Electric)
  Subsequent
events have been evaluated through the time of issuance of these financial
statements on August 4, 2009, and are included in the relevant note
disclosures.
 
 PPL CORPORATION AND SUBSIDIARIES
  Item
2.  Management's Discussion and Analysis of Financial Condition and
Results of Operations
  Overview
  PPL is an
energy and utility holding company with headquarters in Allentown,
Pennsylvania.  Refer to "Item 1. Business - Background" in PPL's 2008
Form 10-K for descriptions of its reportable segments, which are Supply,
International Delivery and Pennsylvania Delivery.  Through its
subsidiaries, PPL is primarily engaged in the generation and marketing of
electricity in two key markets - the northeastern and western U.S. - and in the
delivery of electricity in Pennsylvania and the U.K.  See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Overview" in PPL's 2008 Form 10-K for a discussion of PPL's
strategy and the risks and challenges that it faces in its
business.  See "Forward-Looking Information," Note 10 to the Financial
Statements and the remainder of Item 2 in this Form 10-Q, and "Item 1A. Risk
Factors" and the rest of Item 7 in PPL's 2008 Form 10-K for more information
concerning the material risks and uncertainties that PPL faces in its businesses
and with respect to its future earnings.
  Market
Events
  The
recent conditions in the financial markets have been disruptive to the processes
of managing credit risk, responding to liquidity needs, measuring derivatives
and other financial instruments at fair value, and managing market price
risk.  Bank credit capacity has been reduced and the cost of renewing
or establishing new credit facilities has increased significantly, thereby
making less certain businesses' ability to enter into long-term energy
commitments or reliably estimate the longer-term cost and availability of
credit.
  Commodity
Price Risk
  The
volatility of wholesale energy prices due to recent conditions in the financial
and commodity markets significantly impacted PPL's earnings in
2009.  See "Statement of Income Analysis - Domestic Gross Energy
Margins - Domestic Gross Energy Margins By Region" for further
discussion.
  Credit
Risk
  Credit
risk is the risk that PPL would incur a loss as a result of nonperformance by
counterparties of their contractual obligations.  PPL maintains credit
policies and procedures to limit counterparty credit risk.  The recent
conditions in the financial and commodity markets have generally increased PPL's
exposure to credit risk.  See Notes 13 and 14 to the Financial
Statements and "Risk Management - Energy Marketing & Trading and Other -
Credit Risk" in PPL's 2008 Form 10-K for more information on credit
risk.
  Liquidity
Risk
  Despite
the recent conditions in the financial and capital markets, external financing
activities by domestic electric utilities are being completed, albeit at
higher-than-historical interest rates.  PPL expects to continue to
have access to adequate sources of liquidity through operating cash flows, cash
and cash equivalents, credit facilities and, from time to time, through the
issuance of capital market securities.  See "Financial Condition -
Liquidity and Capital Resources" for an expanded discussion of PPL's liquidity
position and a discussion of financing transactions.
  Valuations
in Inactive Markets
  The
recent conditions in the financial markets have generally made it difficult to
determine the fair value of certain assets and liabilities in inactive
markets.  Management has reviewed the activity in the energy and
financial markets in which PPL transacts, concluding that all of these markets
were active at June 30, 2009, with the exception of the market for auction
rate securities.  See Notes 13 and 18 to the Financial Statements and
"Financial Condition - Liquidity and Capital Resources - Auction Rate
Securities" for a discussion of these investments.
  Securities
Price Risk
  Declines
in the market price of debt and equity securities result in unrealized losses
that reduce the asset values of PPL's investments in its NDT funds and defined
benefit plans.  Both the
pension plan and the NDT funds had positive returns in the second quarter of
2009, thereby recovering a portion of the negative returns incurred in 2008 and
the first quarter of 2009.  PPL actively monitors the
performance of the investments held in its NDT funds and periodically reviews
the funds' investment allocations.  See "Financial Condition - Risk
Management - Energy Marketing & Trading and Other - NDT Funds - Securities
Price Risk" for additional information on securities price risk.
  Determination
of the funded status of defined benefit plans, contribution requirements and net
periodic defined benefit costs for future years are subject to changes in
various assumptions, in addition to the actual performance of the assets in the
plans.  See "Application of Critical Accounting Policies - Defined
Benefits" in PPL's 2008 Form 10-K for a discussion of the assumptions and
sensitivities regarding those assumptions.
  The
Economic Stimulus Package
  The
Economic Stimulus Package is intended to stimulate the U.S. economy through
federal tax relief, expansion of unemployment benefits and other social stimulus
provisions, domestic spending for education, health care and infrastructure,
including the energy sector.  A portion of the benefits included in
the Economic Stimulus Package are offered in the form of loan fee reductions,
expanded loan guarantees and secondary market incentives, including delayed
recognition for tax purposes of income related to the cancellation of certain
types of debt.  See "Financial Condition - Liquidity and Capital
Resources" for a discussion of the applicability to the purchase of notes by PPL
Energy Supply.
  Funds
from the Economic Stimulus Package will be allocated to various federal
agencies, such as the DOE, and will also be provided to state agencies through
block grants.  The DOE plans to use a portion of the funds for smart
grid and other efficiency-related programs, and has initiated a process for that
purpose.  The Commonwealth of Pennsylvania is accepting applications
for funding of certain energy projects including solar projects.  As
discussed in Note 8 to the Financial Statements, PPL has reconsidered its
Holtwood expansion project in view of the tax incentives and potential loan
guarantees for renewable energy projects contained in the Economic Stimulus
Package.  PPL has filed DOE loan guarantee applications for the
Holtwood expansion project and for the Rainbow redevelopment project.In
addition, in July 2009, PPL Electric proposed to the DOE a $38 million project
that would use smart grid technology to strengthen reliability, save energy and
improve electric service for 60,000 Harrisburg, Pennsylvania area
customers.  PPL Electric is requesting a DOE grant to provide half of
the funding for this pilot program.PPL and its subsidiaries
continue to review the Economic Stimulus Package's provisions to determine the
impact on PPL's possible expansion plans, transmission projects and other
business-related activities.
  The
following information should be read in conjunction with PPL's Condensed
Consolidated Financial Statements and the accompanying Notes and with PPL's 2008
Form 10-K.
  Terms and
abbreviations are explained in the glossary.  Dollars are in millions,
except per share data, unless otherwise noted.
  Results
of Operations
  The
following discussion begins with a summary of PPL's
earnings.  "Results of Operations" continues with a review of results
by reportable segment and a description of key factors by segment that
management expects may impact future earnings.  This section ends with
"Statement of Income Analysis," which includes explanations of significant
changes in principal items on PPL's Statements of Income, comparing the three
and six months ended June 30, 2009, with the same periods in
2008.
  The
results for interim periods can be disproportionately influenced by various
factors and developments and by seasonal variations, and as such, the results of
operations for interim periods do not necessarily indicate results or trends for
the year or for future operating results.
  Earnings
  Net
income (loss) attributable to PPL and the related EPS were:
  Three
      Months EndedJune 30,
                
                Six
      Months EndedJune 30,2009
                
                2008
                
                2009
                
                2008Net
      income (loss) attributable to PPL
                
                $
                (7
                )
                
                $
                190
                
                
                $
                234
                
                
                $
                450EPS
      - basic
                
                $
                (0.02
                )
                
                $
                0.50
                
                
                $
                0.62
                
                
                $
                1.20EPS
      - diluted
                
                $
                (0.02
                )
                
                $
                0.50
                
                
                $
                0.62
                
                
                $
                1.19
  The
changes in net income (loss) attributable to PPL from period to period were, in
part, due to several special items that management considers
significant.  Details of these special items are provided within the
review of each segment's earnings.
  Segment
Results
  Net
income (loss) attributable to PPL by segment was:
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008Supply
                
                $
                (86
                )
                
                $
                97
                
                
                $
                19
                
                
                $
                199International
      Delivery
                
                
                62
                
                
                
                62
                
                
                
                149
                
                
                
                160Pennsylvania
      Delivery
                
                
                17
                
                
                
                31
                
                
                
                66
                
                
                
                91Total
                
                $
                (7
                )
                
                $
                190
                
                
                $
                234
                
                
                $
                450
  Supply
Segment
  The
Supply segment primarily consists of the domestic energy marketing, domestic
generation and domestic development operations of PPL Energy
Supply.  In May 2009, PPL announced its intention to sell its Long
Island generation business, and in July 2009, announced its intention to sell
the majority of its Maine hydroelectric generation business.  PPL
expects the sales to close in 2009.  See Note 8 to the Financial
Statements for additional information.
  In 2009
and 2008, the Supply segment results reflect the reclassification of the
revenues and expenses of the Long Island generation business and the majority of
its Maine hydroelectric generation business to Discontinued
Operations.
  Supply
segment net income (loss) attributable to PPL was:
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008Energy
      revenuesExternal
      (a)
                
                $
                686
                
                
                $
                (97
                )
                
                $
                1,872
                
                
                $
                182Intersegment
                
                
                411
                
                
                
                428
                
                
                
                908
                
                
                
                917Energy-related
      businesses
                
                
                97
                
                
                
                121
                
                
                
                189
                
                
                
                228Total
      operating revenues
                
                
                1,194
                
                
                
                452
                
                
                
                2,969
                
                
                
                1,327Fuel
      and energy purchasesExternal
      (a)
                
                
                835
                
                
                
                (150
                )
                
                
                2,014
                
                
                
                107Intersegment
                
                
                20
                
                
                
                30
                
                
                
                40
                
                
                
                58Other
      operation and maintenance
                
                
                225
                
                
                
                205
                
                
                
                457
                
                
                
                431Depreciation
                
                
                57
                
                
                
                49
                
                
                
                107
                
                
                
                92Taxes,
      other than income
                
                
                8
                
                
                
                7
                
                
                
                15
                
                
                
                9Energy-related
      businesses
                
                
                94
                
                
                
                117
                
                
                
                182
                
                
                
                221Total
      operating expenses
                
                
                1,239
                
                
                
                258
                
                
                
                2,815
                
                
                
                918Other
      Income (Expense) - net
                
                
                6
                
                
                
                9
                
                
                
                35
                
                
                
                12Other-Than-Temporary
      Impairments
                
                
                1
                
                
                
                7
                
                
                
                18
                
                
                
                10Interest
      Expense
                
                
                50
                
                
                
                48
                
                
                
                97
                
                
                
                89Income
      Taxes
                
                
                (36
                )
                
                
                55
                
                
                
                26
                
                
                
                131Income
      (Loss) from discontinued operations
                
                
                (32
                )
                
                
                5
                
                
                
                (29
                )
                
                
                9Noncontrolling
      Interest
                
                
                
                
                
                
                1
                
                
                
                
                
                
                
                1Net
      Income (Loss) Attributable to PPL
                
                $
                (86
                )
                
                $
                97
                
                
                $
                19
                
                
                $
                199
  (a)
              
              Includes
      unrealized gains and losses from economic activity.  See
      "Commodity Price Risk (Non-trading) - Economic Activity" in Note 14 for
      additional information.
  The
after-tax changes in net income (loss) attributable to PPL between these periods
were due to the following factors.
  June 30,
      2009 vs. June 30, 2008Three
      Months Ended
                
                Six
      Months EndedDomestic
      gross energy margins
                
                $
                (34
                )
                
                $
                (37
                )Other
      operation and maintenance
                
                
                (11
                )
                
                
                4Depreciation
                
                
                (5
                )
                
                
                (9
                )Taxes,
      other than income
                
                
                (1
                )
                
                
                (4
                )Other
      income (expense) - net
                
                
                (6
                )
                
                
                5Interest
      expense
                
                
                (2
                )
                
                
                (5
                )Income
      taxes and other
                
                
                (3
                )
                
                
                (5
                )Special
      items
                
                
                (121
                )
                
                
                (129
                )$
                (183
                )
                
                $
                (180
                )
  ·
              See
      "Domestic Gross Energy Margins" for further discussion.·
              Higher
      other operation and maintenance for the three months ended June 30,
      2009, compared with the same period in 2008, primarily due to higher
      outage costs at the Susquehanna nuclear plant as a result of the timing of
      the 2009 refueling outage, partially offset by lower outage costs at the
      Eastern and Western U.S. fossil/hydroelectric stations.·
              Higher
      depreciation for the six months ended June 30, 2009, compared with the
      same period in 2008, primarily due to the Montour scrubbers and
      Susquehanna generation uprate projects that were placed in-service in the
      second quarter of 2008 and the Brunner Island scrubber placed in-service
      in the second quarter of 2009.·
              Lower
      other income (expense) - net for the three months ended June 30, 2009,
      compared with the same period in 2008, primarily due to lower interest
      income.
  The
following after-tax amounts, which management considers special items, impacted
the Supply segment earnings.  See the indicated Notes to the Financial
Statements for additional information.
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008Unrealized
      gains (losses) from energy-related economic activity
      (Note 14)
                
                $
                (88
                )
                
                $
                4
                
                
                $
                (38
                )
                
                $
                54Adjustments
      - NDT investments (a)
                
                
                2
                
                
                
                (4
                )
                
                
                (1
                )
                
                
                (4
                )Impairments
      and other impacts - emission allowances (Note 13)
                
                
                
                
                
                
                
                
                
                
                (15
                )Impairments
      - assets held for sale and other (Note 13)
                
                
                (34
                )
                
                
                
                
                
                
                (36
                )Workforce
      reduction charge (Note 6)
                
                
                
                
                
                
                
                
                
                
                (6
                )Off-site
      remediation of ash basin leak (Note 10)
                
                
                
                
                
                
                1
                
                
                
                
                
                
                
                1Montana
      basin seepage litigation (Note 10)
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (5
                )Synthetic
      fuel tax adjustment (Note 10)
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (13
                )Total
                
                $
                (120
                )
                
                $
                1
                
                
                $
                (96
                )
                
                $
                33
  (a)
              
              Represents
      other-than-temporary impairment charges on securities, including reversals
      of previous impairments when securities previously impaired were
      sold.
  Earnings
Outlook
  Excluding
special items, PPL projects higher earnings for its Supply segment in 2009
compared with 2008, driven by higher energy margins as a result of higher
expected baseload generation and margins from marketing and trading activities,
despite higher expected coal expense, partially offset by higher expected
operation and maintenance expenses and depreciation.
  In July
2009, PPL Maine signed a definitive agreement to sell the majority of its
hydroelectric generation business.  The transaction is expected to
result in an after-tax gain in the range of $26 million to $35 million ($0.07 to
$0.09 per share, basic and diluted), including the contingent
consideration that would be realized upon completion of the
anticipated sale of PPL Maine's three other hydroelectric
facilities.  This gain will be classified as a special item, and due
to the contingent consideration, a portion may be recorded beyond 2009 or
ultimately may not be realized.  See Note 8 to the Financial
Statements for additional information.
  International
Delivery Segment
  The
International Delivery segment consists primarily of the electricity
distribution operations in the U.K.  In the first quarter of 2008, the
International Delivery segment recognized income tax benefits and miscellaneous
expenses in Discontinued Operations as the dissolution of the remaining Latin
American holding companies commenced.  See Note 8 to the Financial
Statements for additional information.  International Delivery segment
net income attributable to PPL was:
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008Utility
      revenues
                
                $
                155
                
                
                $
                211
                
                
                $
                331
                
                
                $
                452Energy-related
      businesses
                
                
                8
                
                
                
                9
                
                
                
                15
                
                
                
                18Total
      operating revenues
                
                
                163
                
                
                
                220
                
                
                
                346
                
                
                
                470Other
      operation and maintenance
                
                
                31
                
                
                
                50
                
                
                
                65
                
                
                
                96Depreciation
                
                
                27
                
                
                
                35
                
                
                
                53
                
                
                
                71Taxes,
      other than income
                
                
                13
                
                
                
                17
                
                
                
                26
                
                
                
                34Energy-related
      businesses
                
                
                4
                
                
                
                3
                
                
                
                7
                
                
                
                6Total
      operating expenses
                
                
                75
                
                
                
                105
                
                
                
                151
                
                
                
                207Other
      Income (Expense) - net
                
                
                (13
                )
                
                
                1
                
                
                
                (11
                )
                
                
                4Interest
      Expense
                
                
                18
                
                
                
                34
                
                
                
                31
                
                
                
                72Income
      Taxes
                
                
                (5
                )
                
                
                20
                
                
                
                4
                
                
                
                40Income
      from Discontinued Operations
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                5Net
      Income Attributable to PPL
                
                $
                62
                
                
                $
                62
                
                
                $
                149
                
                
                $
                160
  The
after-tax changes in net income attributable to PPL between these periods were
due to the following factors.
  June 30,
      2009 vs. June 30, 2008Three
      Months Ended
                
                Six
      Months EndedU.K.Delivery
      margins
                $
                (2
                )Other
      operating expenses
                
                6
                
                
                $
                10Interest
      expense
                
                6
                
                
                
                21Income
      taxes
                
                22
                
                
                
                31Foreign
      currency exchange rates
                
                (25
                )
                
                
                (60
                )Hyder
      liquidation distributions
                
                (1
                )
                
                
                (3
                )Other
                
                (3
                )
                
                
                (2
                )U.S.
      Income taxes
                
                4
                
                
                
                6Discontinued
      operations (Note 8)
                
                
                
                
                
                (5
                )Other
                
                (1
                )Special
      items
                
                (6
                )
                
                
                (9
                )$
                
                
                
                $
                (11
                )
  ·
              Lower other
      operating expenses for both periods primarily due to lower pension costs
      resulting from an increase in the discount rate and lower WPD meter
      operator expenses due to the transfer of that activity to a third
      party.·
              Lower
      interest expense for both periods on the index-linked senior unsecured
      notes primarily due to lower inflation rates.·
              Lower
      U.K. income taxes for both periods primarily due to changes in uncertain
      tax positions, partially offset by tax return adjustments in
      2008.  See Note 5 to the Financial Statements for additional
      information.·
              Changes
      in foreign currency exchange rates negatively impacted U.K. earnings for
      both periods.  The weighted-average exchange rate for the
      British pound sterling was approximately $1.46 for the three and six
      months ended June 30, 2009, versus approximately $1.98 for the same
      periods in 2008.
  The
following after-tax amounts, which management considers special items, impacted
the International Delivery segment earnings.
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008Unrealized
      losses from foreign currency economic activity
    (Note 14)
                
                $
                (6
                )
                
                
                
                
                
                $
                (6
                )Asset
      impairments
                
                
                
                
                
                
                
                
                
                
                (1
                )Workforce
      reduction charge (Note 6)
                
                
                
                
                
                
                
                
                
                
                (2
                )Total
                
                $
                (6
                )
                
                
                
                
                
                $
                (9
                )
  Earnings
Outlook
  Excluding
special items, PPL projects lower earnings for its International Delivery
segment in 2009 compared with 2008, primarily as a result of less favorable
foreign currency exchange rates.  See Note 10 to the Financial
Statements for information on the potential impact of the Ofgem's five-year
pricing review and its potential impact on WPD's revenues and earnings for 2010
and beyond.
  Pennsylvania
Delivery Segment
  The
Pennsylvania Delivery segment for both 2009 and 2008 includes the regulated
electric delivery operations of PPL Electric.  The Pennsylvania
Delivery segment results in 2008 also include the revenues and expenses of PPL's
natural gas distribution and propane businesses, which are classified as
Discontinued Operations.  In October 2008, PPL sold its natural gas
distribution and propane businesses.  See Note 8 to the Financial
Statements for additional information.
  Pennsylvania
Delivery segment net income attributable to PPL was:
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008Operating
      revenuesExternal
                
                $
                727
                
                
                $
                770
                
                
                $
                1,617
                
                
                $
                1,650Intersegment
                
                
                20
                
                
                
                30
                
                
                
                40
                
                
                
                58Total
      operating revenues
                
                
                747
                
                
                
                800
                
                
                
                1,657
                
                
                
                1,708Fuel
      and energy purchasesExternal
                
                
                31
                
                
                
                44
                
                
                
                63
                
                
                
                85Intersegment
                
                
                411
                
                
                
                428
                
                
                
                908
                
                
                
                917Other
      operation and maintenance
                
                
                98
                
                
                
                103
                
                
                
                204
                
                
                
                207Amortization
      of recoverable transition costs
                
                
                70
                
                
                
                68
                
                
                
                154
                
                
                
                144Depreciation
                
                
                30
                
                
                
                33
                
                
                
                63
                
                
                
                65Taxes,
      other than income
                
                
                46
                
                
                
                48
                
                
                
                98
                
                
                
                104Total
      operating expenses
                
                
                686
                
                
                
                724
                
                
                
                1,490
                
                
                
                1,522Other
      Income (Expense) - net
                
                
                1
                
                
                
                3
                
                
                
                5
                
                
                
                8Interest
      Expense
                
                
                31
                
                
                
                26
                
                
                
                60
                
                
                
                55Income
      Taxes
                
                
                10
                
                
                
                19
                
                
                
                37
                
                
                
                49Income
      from Discontinued Operations
                
                
                
                
                
                
                1
                
                
                
                
                
                
                
                10Noncontrolling
      Interests
                
                
                4
                
                
                
                4
                
                
                
                9
                
                
                
                9Net
      Income Attributable to PPL
                
                $
                17
                
                
                $
                31
                
                
                $
                66
                
                
                $
                91
  The
after-tax changes in net income attributable to PPL between these periods were
due to the following factors.
  June 30,
      2009 vs. June 30, 2008Three
      Months Ended
                
                Six
      Months EndedDelivery
      revenues (net of CTC/ITC amortization, interest expense on transition
      bonds and ancillary charges)
                $
                (11
                )
                
                $
                (10
                )Other
      operation and maintenance
                
                3
                
                
                
                10Interest
      expense
                
                (6
                )
                
                
                (9
                )Discontinued
      operations, net of special item (Note 8)
                
                (2
                )
                
                
                (11
                )Income
      taxes and other
                
                1Special
      items
                
                1
                
                
                
                (5
                )$
                (14
                )
                
                $
                (25
                )
  ·
              Lower
      delivery revenues for both periods were primarily due to economic
      conditions including industrial customers scaling back on production, and
      a true-up of the FERC formula-based transmission revenues recorded in the
      three months ended June 30, 2009.  See Note 2 to the
      Financial Statements for additional information on the true-up. 
      In
      addition, during the second quarter of 2009, weather had an unfavorable
      impact on sales volumes.·
              Lower
      other operation and maintenance expense for the six months ended June 30,
      2009, compared with the same period in 2008, primarily due to decreased
      contractor expenses in 2009 and higher storm costs in 2008, net of
      insurance recoveries.·
              Higher
      interest expense for both periods, primarily due to $400 million of debt
      issuances in 2008 that prefund a portion of 2009 debt
      maturities.
  The
following after-tax amounts, which management considers special items, also had
an impact on the Pennsylvania Delivery segment earnings.
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008Sale
      of gas and propane businesses
                
                
                
                
                
                $
                (1
                )
                
                
                
                
                
                $
                (1
                )Asset
      impairments
                
                
                
                
                
                
                
                
                
                $
                (1
                )Workforce
      reduction charge (Note 6)
                
                
                
                
                
                
                
                
                
                
                (5
                )Total
                
                
                
                
                
                $
                (1
                )
                
                $
                (6
                )
                
                $
                (1
                )
  Earnings
Outlook
  Excluding
special items, PPL projects lower earnings in its Pennsylvania Delivery segment
in 2009 compared with 2008, primarily due to higher financing costs, lower
electricity delivery revenues, higher operation and maintenance expenses, and
the divestiture of its natural gas distribution and propane
businesses.
  See Note
10 to the Financial Statements for a discussion of items that could impact
earnings beyond 2009, including the PUC-approved plan to procure default
electricity supply for 2010 through May 2013, Pennsylvania legislative updates
and other regulatory activities.
  Statement
of Income Analysis --
  Domestic
Gross Energy Margins
  Non-GAAP
Financial Measure
  The
following discussion includes financial information prepared in accordance with
GAAP, as well as a non-GAAP financial measure, "Domestic Gross Energy
Margins."  The presentation of "Domestic Gross Energy Margins" is
intended to supplement the investor's understanding of PPL's domestic
non-trading and trading activities by combining applicable income statement line
items and related adjustments to calculate a single financial
measure.  PPL believes that "Domestic Gross Energy Margins" are useful
and meaningful to investors because they provide them with the results of PPL's
domestic non-trading and trading activities as another criterion in making their
investment decisions.  PPL's management also uses "Domestic Gross
Energy Margins" in measuring certain corporate performance goals used in
determining variable compensation.  Other companies may use different
measures to present the results of their non-trading and trading
activities.  Additionally, "Domestic Gross Energy Margins" are not
intended to replace "Operating Income," which is determined in accordance with
GAAP, as an indicator of overall operating performance.  The following
table provides a reconciliation between "Operating Income" and "Domestic Gross
Energy Margins" as defined by PPL.
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008Operating
      Income (a)
                
                $
                104
                
                
                $
                385
                
                
                $
                516
                
                
                $
                858Adjustments:Energy-related
      businesses, net (b)
                
                
                (7
                )
                
                
                (10
                )
                
                
                (15
                )
                
                
                (19
                )Other
      operation and maintenance (a)
                
                
                354
                
                
                
                358
                
                
                
                726
                
                
                
                734Amortization
      of recoverable transition costs (a)
                
                
                70
                
                
                
                68
                
                
                
                154
                
                
                
                144Depreciation
      (a)
                
                
                114
                
                
                
                117
                
                
                
                223
                
                
                
                228Taxes,
      other than income (a)
                
                
                67
                
                
                
                72
                
                
                
                139
                
                
                
                147Revenue
      adjustments (c)
                
                
                (337
                )
                
                
                92
                
                
                
                (1,226
                )
                
                
                (324
                )Expense
      adjustments (c)
                
                
                24
                
                
                
                (635
                )
                
                
                267
                
                
                
                (920
                )Domestic
      gross energy margins
                
                $
                389
                
                
                $
                447
                
                
                $
                784
                
                
                $
                848
  (a)
              
              As
      reported on the Statements of Income.(b)
              
              Amount
      represents the net of "Energy-related businesses" revenue and expense as
      reported on the Statements of Income.(c)
              
              The
      components of these adjustments are detailed in the tables
      below.
  The
following tables provide the income statement line items and other adjustments
that comprise domestic gross energy margins.
  Three
      Months Ended June 30,2009
                
                2008
                
                ChangeRevenueUtility
      (a)
                
                $
                881
                
                
                $
                981
                
                
                $
                (100
                )Unregulated
      retail electric and gas (a)
                
                
                32
                
                
                
                33
                
                
                
                (1
                )Wholesale
      energy marketing (a)
                
                
                648
                
                
                
                (182
                )
                
                
                830Net
      energy trading margins (a)
                
                
                7
                
                
                
                52
                
                
                
                (45
                )Revenue
      adjustments (b)WPD
      utility revenue
                
                
                (155
                )
                
                
                (211
                )
                
                
                56Domestic
      delivery component of utility revenue
                
                
                (293
                )
                
                
                (310
                )
                
                
                17Other
      utility revenue
                
                
                (7
                )
                
                
                (14
                )
                
                
                7Unrealized
      gains from economic hedge activity (c)
                
                
                111
                
                
                
                617
                
                
                
                (506
                )Margins
      from Supply segment discontinued operations
                
                
                7
                
                
                
                10
                
                
                
                (3
                )Total
      revenue adjustments
                
                
                (337
                )
                
                
                92
                
                
                
                (429
                )1,231
                
                
                
                976
                
                
                
                255ExpenseFuel
      (a)
                
                
                186
                
                
                
                189
                
                
                
                (3
                )Energy
      purchases (a)
                
                
                680
                
                
                
                (295
                )
                
                
                975Expense
      adjustments (b)Unrealized
      gains (losses) from economic hedge activity (c)
                
                
                (39
                )
                
                
                621
                
                
                
                (660
                )Domestic
      electric ancillaries (e)
                
                
                (11
                )
                
                
                (14
                )
                
                
                3Gross
      receipts tax (f)
                
                
                26
                
                
                
                27
                
                
                
                (1
                )Other
                
                
                
                
                
                
                1
                
                
                
                (1
                )Total
      expense adjustments
                
                
                (24
                )
                
                
                635
                
                
                
                (659
                )842
                
                
                
                529
                
                
                
                313Domestic
      gross energy margins
                
                $
                389
                
                
                $
                447
                
                
                $
                (58
                )
  Six
      Months Ended June 30,2009
                
                2008
                
                ChangeRevenueUtility
      (a)
                
                $
                1,946
                
                
                $
                2,101
                
                
                $
                (155
                )Unregulated
      retail electric and gas (a)
                
                
                74
                
                
                
                67
                
                
                
                7Wholesale
      energy marketing (a)
                
                
                1,805
                
                
                
                66
                
                
                
                1,739Net
      energy trading margins (a)
                
                
                (5
                )
                
                
                50
                
                
                
                (55
                )Revenue
      adjustments (b)WPD
      utility revenue
                
                
                (331
                )
                
                
                (452
                )
                
                
                121Domestic
      delivery component of utility revenue
                
                
                (647
                )
                
                
                (664
                )
                
                
                17Other
      utility revenue
                
                
                (21
                )
                
                
                (26
                )
                
                
                5Unrealized
      gains (losses) from economic hedge activity (c)
                
                
                (242
                )
                
                
                797
                
                
                
                (1,039
                )Gains
      from sale of emission allowances (d)
                
                
                
                
                
                
                1
                
                
                
                (1
                )Margins
      from Supply segment discontinued operations
                
                
                15
                
                
                
                20
                
                
                
                (5
                )Total
      revenue adjustments
                
                
                (1,226
                )
                
                
                (324
                )
                
                
                (902
                )2,594
                
                
                
                1,960
                
                
                
                634ExpenseFuel
      (a)
                
                
                444
                
                
                
                429
                
                
                
                15Energy
      purchases (a)
                
                
                1,633
                
                
                
                (237
                )
                
                
                1,870Expense
      adjustments (b)Unrealized
      gains (losses) from economic hedge activity (c)
                
                
                (306
                )
                
                
                887
                
                
                
                (1,193
                )Domestic
      electric ancillaries (e)
                
                
                (23
                )
                
                
                (26
                )
                
                
                3Gross
      receipts tax (f)
                
                
                57
                
                
                
                57Other
                
                
                5
                
                
                
                2
                
                
                
                3Total
      expense adjustments
                
                
                (267
                )
                
                
                920
                
                
                
                (1,187
                )1,810
                
                
                
                1,112
                
                
                
                698Domestic
      gross energy margins
                
                $
                784
                
                
                $
                848
                
                
                $
                (64
                )
  (a)
              
              As
      reported on the Statements of Income.(b)
              
              To
      include/exclude the impact of any revenues and expenses not associated
      with domestic gross energy margins, consistent with the way management
      reviews domestic gross energy margins internally.(c)
              
              See
      "Commodity Price Risk (Non-trading) - Economic Activity" in Note
      14 to the Financial Statements for additional information regarding
      economic activity.(d)
              
              Included
      in "Other operation and maintenance" on the Statements of
      Income.(e)
              
              Included
      in "Energy purchases" on the Statements of Income.(f)
              
              Included
      in "Taxes, other than income" on the Statements of
  Income.
  Domestic
Gross Energy Margins By Region
  Domestic
gross energy margins are generated through PPL's various strategies to maximize
the value of its wholesale energy portfolio.  The most significant of
these strategies include the sales of baseload generation and optimization of
intermediate and peaking generation, both of which are considered asset-related
margins, and marketing and proprietary trading activities.  PPL also
manages these activities on a geographic basis that is aligned with its
generation assets.
  Three
      Months Ended June 30,2009
                
                2008
                
                ChangeAsset-related
      margins:Eastern
      U.S.
                
                $
                310
                
                
                $
                306
                
                
                $
                4Western
      U.S.
                
                
                77
                
                
                
                68
                
                
                
                9Marketing
      and trading margins:Eastern
      U.S.
                
                
                2
                
                
                
                73
                
                
                
                (71
                )Western
      U.S.Domestic
      gross energy margins
                
                $
                389
                
                
                $
                447
                
                
                $
                (58
                )
  Six
      Months Ended June 30,2009
                
                2008
                
                ChangeAsset-related
      margins:Eastern
      U.S.
                
                $
                607
                
                
                $
                620
                
                
                $
                (13
                )Western
      U.S.
                
                
                160
                
                
                
                140
                
                
                
                20Marketing
      and trading margins:Eastern
      U.S.
                
                
                17
                
                
                
                98
                
                
                
                (81
                )Western
      U.S.
                
                
                
                
                
                
                (10
                )
                
                
                10Domestic
      gross energy margins
                
                $
                784
                
                
                $
                848
                
                
                $
                (64
                )
  Eastern
U.S.
  Eastern
U.S. asset-related margins were $4 million higher and $13 million lower during
the three and six months ended June 30, 2009, compared with the same
periods in 2008.  The increase during the three months ended June 30,
2009 was primarily due to gains resulting from the settlement of economic
positions related to portfolio rebalancing and optimization strategies, higher
capacity revenue and a 2.2% increase in PLR sales prices in accordance with the
PUC Final Order.  Partially offsetting these higher margins was lower
baseload generation of 9% and higher average baseload generation fuel prices of
12%, primarily due to higher coal prices.  The decrease during the six
months ended June 30, 2009 was primarily due to lower baseload generation of 5%
and higher average baseload generation fuel prices of 8%, primarily due to
higher coal prices.  This decrease was partially offset by gains
resulting from the settlement of economic positions related to portfolio
rebalancing and optimization strategies, higher capacity revenue and a 2.2%
increase in PLR sales prices in accordance with the PUC Final
Order.
  Eastern
U.S. marketing and trading margins were $71 million and $81 million lower during
the three and six months ended June 30, 2009, compared with the same periods in
2008.  The decrease for both periods was primarily due to lower FTR
results, primarily due to lower congestion prices as a result of lower
electricity prices, and lower margins on full-requirement sales contracts,
primarily due to mild weather and the economic downturn.  Partially
offsetting these decreases were increased margins in the power, gas, and oil
trading positions.
  Western
U.S.
  Western
U.S. asset-related margins were $9 million and $20 million higher during the
three and six months ended June 30, 2009, compared with the same periods in
2008.  The increase for both periods was primarily due to higher
wholesale volumes of 18% and increased generation from the hydroelectric units
of 18%.
  Western
U.S. marketing and trading margins were $10 million higher during the six months
ended June 30, 2009, compared with the same period in 2008, consisting of
$5 million of both higher realized trading margins and unrealized trading
margins.
  Utility
Revenues
  The
decreases in utility revenues were attributable to:
  June 30,
      2009 vs. June 30, 2008Three
      Months Ended
                
                Six
      Months EndedDomestic:Retail
      electric revenue (PPL Electric)PLR
                
                $
                (17
                )
                
                $
                (8
                )Delivery
                
                
                (28
                )
                
                
                (28
                )Other
                
                
                1
                
                
                
                2U.K.:Electric
      delivery revenue
                
                
                (3
                )
                
                
                (4
                )Foreign
      currency exchange rates
                
                
                (53
                )
                
                
                (117
                )$
                (100
                )
                
                $
                (155
                )
  Domestic
utility revenues for both periods were negatively impacted by economic
conditions including industrial customers scaling back on production, and a
true-up of the FERC formula-based transmission revenues.  See
Note 2 to the Financial Statements for additional information on the
true-up.  In addition, during the second quarter of 2009, weather had
an unfavorable impact on sales volumes.  Lower U.K. electric delivery
revenue for both periods was partially due to the transfer of meter operator
activity to a third party in July 2008.
  Energy-related
Businesses
  Energy-related
businesses contributed $3 million less to operating income for the three months
ended June 30, 2009, compared with the same period in 2008.  The
decrease was primarily attributable to:
  ·
              $2
      million less from WPD's energy-related businesses, primarily due to
      changes in foreign currency exchange rates; and·
              $2
      million less from domestic energy-related businesses, primarily due to a
      decline in construction activity caused by the slowdown in the
      economy.
  Energy-related
businesses contributed $4 million less to operating income for the six months
ended June 30, 2009, compared with the same period in
2008.  Contributions from WPD-related businesses decreased by $4
million, primarily related to changes in foreign currency exchange
rates.
  Other
Operation and Maintenance
  The
decreases in other operation and maintenance expenses were due to:
  June 30,
      2009 vs. June 30, 2008Three
      Months Ended
                    
                    Six
      Months EndedImpairment
      of emission allowances (Note 13)
                    
                    
                    
                    
                    
                    $
                    30Workforce
      reduction charge (Note 6)
                    
                    
                    
                    
                    
                    
                    22Defined
      benefit costs - Domestic
                    
                    $
                    5
                    
                    
                    
                    10Outage
      costs at Susquehanna nuclear station
                    
                    
                    27
                    
                    
                    
                    4Outage
      costs at Eastern and Western U.S. fossil/hydroelectric
      stations
                    
                    
                    (6
                    )
                    
                    
                    (2
                    )Contractor
      expenses
                    
                    
                    
                    
                    
                    
                    (2
                    )Storm
      costs
                    
                    
                    
                    
                    
                    
                    (4
                    )Stock-based
      compensation
                    
                    
                    
                    
                    
                    
                    (4
                    )Defined
      benefit costs - U.K.
                    
                    
                    (2
                    )
                    
                    
                    (5
                    )WPD
      meter operator expenses (a)
                    
                    
                    (3
                    )
                    
                    
                    (6
                    )Montana
      basin seepage litigation (Note 10)
                    
                    
                    (1
                    )
                    
                    
                    (8
                    )Uncollectible
      accounts
                    
                    
                    (5
                    )
                    
                    
                    (11
                    )U.K.
      foreign currency exchange rates
                    
                    
                    (9
                    )
                    
                    
                    (17
                    )Other
      - Domestic
                    
                    
                    (9
                    )
                    
                    
                    (12
                    )Other
      - U.K.
                    
                    
                    (1
                    )
                    
                    
                    (3
                    )$
                    (4
                    )
                    
                    $
                    (8
                    )
  (a)
              
              In
      July 2008, WPD transferred its meter operator services to a third
      party.
  Amortization
of Recoverable Transition Costs
  Amortization
of recoverable transition costs increased by $2 million and $10 million for the
three and six months ended June 30, 2009, compared with the same periods in
2008.  The amortization of recoverable transition costs is based on a
PUC amortization schedule, adjusted for ITC and CTC recoveries in customer rates
and related expenses.  Since the amortization substantially matches
the revenue recorded based on recovery in customer rates, there is minimal
impact on earnings.
  Depreciation
  The
decreases in depreciation expense were due to:
  June 30,
      2009 vs. June 30, 2008Three
      Months Ended
                
                Six
      Months EndedAdditions
      to generation PP&E (a)
                
                $
                7
                
                
                $
                13U.K.
      foreign currency exchange rates
                
                
                (9
                )
                
                
                (18
                )Domestic
      delivery
                
                
                (3
                )
                
                
                (2
                )Other
                
                
                2
                
                
                
                2$
                (3
                )
                
                $
                (5
                )
  (a)
              
              Attributable
      to the completion of the Susquehanna generation uprate and the Montour
      scrubber projects in the second quarter of 2008 and the Brunner Island
      Unit 3 scrubber in the second quarter of
  2009.
  Taxes,
Other Than Income
  The
decreases in taxes, other than income were due to:
  June 30,
      2009 vs. June 30, 2008Three
      Months Ended
                
                Six
      Months EndedProperty
      tax expense (a)
                
                $
                (1
                )
                
                $
                6Pennsylvania
      gross receipts tax
                
                
                (2
                )
                
                
                (5
                )U.K.
      foreign currency exchange rates
                
                
                (5
                )
                
                
                (9
                )Other
                
                
                3$
                (5
                )
                
                $
                (8
                )
  (a)
              
              The
      increase for the six months ended June 30, 2009 is primarily due to a
      $7 million property tax credit recorded by PPL Montana in the six months
      ended June 30, 2008.
  Other
Income (Expense) - net
  See Note
12 to the Financial Statements for details of other income.
  Other-Than-Temporary
Impairments
  See Note
18 to the Financial Statements for details of other-than-temporary
impairments.
  Interest
Expense
  The
decreases in interest expense were due to:
  June 30,
      2009 vs. June 30, 2008Three
      Months Ended
                
                Six
      Months EndedLong-term
      debt interest expense
                
                
                
                
                
                $
                8Short-term
      debt interest expense
                
                $
                4
                
                
                
                8Capitalized
      interest
                
                
                3
                
                
                
                4U.K.
      foreign currency exchange rates
                
                
                (6
                )
                
                
                (11
                )Hedging
      activities
                
                
                (5
                )
                
                
                (14
                )Inflation
      adjustment on U.K. Index-linked Senior Unsecured Notes
                
                
                (6
                )
                
                
                (25
                )Other
                
                
                1
                
                
                
                2$
                (9
                )
                
                $
                (28
                )
  Income
Taxes
  The
decreases in income taxes were due to:
  June 30,
      2009 vs. June 30, 2008Three
      Months Ended
                
                Six
      Months EndedForeign
      tax return adjustments
                
                $
                18
                
                
                $
                18Nonconventional
      fuel and other tax credits
                
                
                (1
                )
                
                
                (14
                )Tax
      reserve adjustments
                
                
                (35
                )
                
                
                (31
                )Lower
      pre-tax book income
                
                
                (109
                )
                
                
                (126
                )Other
                
                
                2$
                (125
                )
                
                $
                (153
                )
  See Note
5 to the Financial Statements for additional information on income
taxes.
  Discontinued
Operations
  See
"Discontinued Operations" in Note 8 to the Financial Statements for information
related to the anticipated sales of PPL's Long Island generation business and
the majority of its Maine hydroelectric generation business, PPL's Latin
American businesses that were dissolved in 2008 and PPL's natural gas
distribution and propane businesses that were sold in 2008.
  Financial
Condition
  Liquidity
and Capital Resources
  PPL
continues to focus on maintaining a strong credit profile and liquidity position
during the disruptive conditions in the financial markets and historically
difficult bank and capital market conditions.  PPL expects to continue
to have adequate liquidity available through operating cash flows, cash and cash
equivalents, its credit facilities and, as necessary, the issuance of capital
market securities.
  PPL had
the following at:
  June 30,
      2009
                
                December
      31, 2008Cash
      and cash equivalents
                
                $
                973
                
                
                $
                1,100Short-term
      investments (a)
                
                
                
                
                
                
                150$
                973
                
                
                $
                1,250Short-term
      debt
                
                $
                611
                
                
                $
                679
  (a)
              
              Represents
      tax-exempt bonds issued by the PEDFA in December 2008 on behalf of PPL
      Energy Supply and purchased by a subsidiary of PPL Energy Supply upon
      issuance.  Such bonds were refunded in April
      2009.  See "Financing Activities" below for further
      discussion.
  The $127
million decrease in PPL's cash and cash equivalents position was primarily the
net result of:
  ·
              $524
      million of capital expenditures;·
              the
      payment of $430 million to retire $460 million aggregate principal amount
      of long-term debt;·
              the
      payment of $256 million of common stock dividends;·
              a
      net decrease in short-term debt of $77 million (excluding the impact of
      U.K. foreign currency exchange rates);·
              $40
      million in net expenditures for intangible assets;·
              $568
      million of cash provided by operating activities;·
              proceeds
      of $298 million from the issuance of long-term debt;·
              a
      decrease of $189 million in restricted cash and cash equivalents;
      and·
              proceeds
      of $150 million from the sale of short-term
  investments.
  Auction
Rate Securities
  PPL's
investment in auction rate securities continues to be impacted by auction
failures and the resulting illiquidity in 2009. PPL held auction rate
securities with an aggregate par value of $29 million at June 30, 2009 and
December 31, 2008.  PPL concluded that the fair value of its auction
rate securities was $18 million at June 30, 2009 and $24 million at
December 31, 2008, a temporary decline of $11 million and $5 million from par
value.  Based upon the evaluation of available information, PPL
believes these investments continue to be of high credit quality.  PPL
believes it will not be required to sell these securities, including to fund
operations, and does not intend to sell these securities until they can be
liquidated at par value.  Therefore, PPL believes it does not have
significant exposure to realize losses on these securities, and none of the
decline in fair value is attributable to credit loss and therefore is deemed
temporary due to general market conditions and has not been recognized in
earnings.  During the second quarter of 2009, PPL liquidated an
insignificant amount of these securities at par.  See Notes 13 and 18
to the Financial Statements for further discussion of auction rate
securities.
  Credit
Facilities
  At
June 30, 2009, PPL's total committed borrowing capacity under credit
facilities and the use of this borrowing capacity were:
  Committed
      Capacity
                
                Borrowed
                
                Letters
      of Credit Issued
                
                UnusedCapacityPPL
      Energy Supply Domestic Credit Facilities (a)
                
                $
                4,110
                
                
                $
                285
                
                
                $
                826
                
                
                $
                2,999PPL
      Electric Credit Facilities (b)
                
                
                340
                
                
                
                
                
                
                
                1
                
                
                
                339Total
      Domestic Credit Facilities (c)
                
                $
                4,450
                
                
                $
                285
                
                
                $
                827
                
                
                $
                3,338WPDH
      Limited Credit Facility
                
                ₤
                150
                
                
                ₤
                145
                
                
                
                n/a
                
                
                ₤
                5WPD
      (South West) Credit Facilities (d)
                
                
                153
                
                
                
                65
                
                
                ₤
                3
                
                
                
                85Total
      WPD Credit Facilities (e)
                
                ₤
                303
                
                
                ₤
                210
                
                
                ₤
                3
                
                
                ₤
                90
  (a)
              
              In
      March 2009, PPL Energy Supply's 364-day bilateral credit facility was
      amended.  The amendment included extending the expiration date
      from March 2009 to March 2010 and reducing the capacity from $300 million
      to $200 million.
                
                PPL
      Energy Supply currently plans to renew its $385 million 364-day syndicated
      credit facility that expires in September 2009.(b)
              
              Committed
      capacity includes a $150 million credit facility related to an
      asset-backed commercial paper program.  At June 30, 2009,
      based on accounts receivable and unbilled revenue pledged, $150 million
      was available for borrowing under the asset-backed credit
      facility.  In July 2009, PPL Electric and a subsidiary extended
      the expiration date of the credit agreement related to the asset-backed
      commercial paper program to July 2010.(c)
              
              The
      commitments under PPL's domestic credit facilities are provided by a
      diverse bank group consisting of 23 banks, with no one bank providing more
      than 14% of the total committed capacity.(d)
              
              In
      July 2009, WPD (South West) terminated its £150 million five-year
      syndicated credit facility, which was to expire in October 2009, and
      replaced it with a new £210 million three-year syndicated credit facility
      expiring in July 2012.  Under the new facility, WPD (South West)
      has the ability to make cash borrowings but cannot cause the lenders to
      issue letters of credit.  Borrowings under this facility bear
      interest at LIBOR-based rates plus a margin.  The new facility
      contains financial covenants that require WPD (South West) to maintain an
      interest coverage ratio of not less than 3.0 times consolidated earnings
      before income taxes, depreciation and amortization and total net debt not
      in excess of 85% of its regulatory asset base, in each case calculated in
      accordance with the credit facility.(e)
              
              At
      June 30, 2009, the unused capacity of WPD's committed credit
      facilities was approximately $145
million.
  See Note
7 to the Financial Statements for further discussion of PPL's credit
facilities.
  Commercial
Paper
  As
discussed below under "Rating Agency Decisions," S&P lowered its rating on
PPL Energy Supply's commercial paper to A-3 from A-2 in January
2009.  Since PPL Energy Supply did not expect to need to issue any
commercial paper during 2009 and there is essentially no liquidity in commercial
paper markets for paper with an A-3 rating, PPL Energy Supply closed its
commercial paper program in January 2009 and requested that Moody's, S&P and
Fitch each withdraw their ratings on its commercial paper program, which each
rating agency subsequently did.
  Market
conditions to issue commercial paper with ratings of P-2, A-2 and F-2 by
Moody's, S&P and Fitch have improved since 2008.  However, they
continue to be impacted by the volatility experienced in the broader financial
markets.  Based on its current cash position and anticipated cash
flows, PPL Electric currently does not expect to need to issue any commercial
paper during 2009, but it may do so from time to time to facilitate short-term
cash flow needs.
  Financing
Activities
  In March
2009, PPL Capital Funding retired the entire $201 million of its 4.33% Notes
Exchange Series A upon maturity.
  In March
2009, PPL Energy Supply completed tender offers to purchase up to $250 million
aggregate principal amount of certain of its outstanding senior notes in order
to reduce future interest expense.  Pursuant to the offers, PPL Energy
Supply purchased approximately $100 million aggregate principal amount of its
6.00% Senior Notes due 2036 for $77 million, plus accrued interest, and
approximately $150 million aggregate principal amount of its 6.20% Senior Notes
due 2016 for $143 million, plus accrued interest.  See Note 7 to the
Financial Statements for further discussion.  Under the Economic
Stimulus Package, PPL will be permitted to defer recognition of income related
to the extinguishment of these notes for tax purposes.  No amounts
will be included in taxable income for the first five
years.  Beginning in 2014, income related to the extinguishment of
these notes will be included in taxable income ratably over five
years.
  In April 2009, the PEDFA
issued $231 million aggregate principal amount of Exempt Facilities Revenue
Refunding Bonds, Series 2009A and 2009B due 2038 and Series 2009C due 2037 (PPL
Energy Supply, LLC Project), on behalf of PPL Energy Supply.  The
Series 2009A bonds, in an aggregate principal amount of $100 million, and the
Series 2009B bonds, in an aggregate principal amount of $50 million, were issued
by the PEDFA in order to refund $150 million aggregate principal amount of
Exempt Facilities Revenue Bonds, Series 2008A and 2008B (PPL Energy Supply, LLC
Project) due 2038 that were issued by the PEDFA in December 2008 on behalf of
PPL Energy Supply, and for which PPL Investment Corp. acted as initial
purchaser.  The Series 2009C bonds, in an aggregate principal amount
of $81 million, were issued in order to refund $81 million aggregate principal
amount of Exempt Facilities Revenue Bonds, Series 2007 (PPL Energy Supply, LLC
Project) due 2037 that were issued by the PEDFA in December 2007 on behalf of
PPL Energy Supply.  Among other things, the completed refundings were
able to take advantage of provisions in the Economic Stimulus Package that
eliminated the application of the AMT to interest payable on the refinanced
indebtedness.  The refundings of the bonds were effected by the
ultimate distribution of $231 million by the PEDFA to the bond holders,
including PPL Investment Corp.  As a result of the refundings of the
bonds, PPL Investment Corp. received proceeds of $150 million,which
is reflected as a cash flow from investing activities on the Statement of Cash
Flows for PPL and PPL Energy Supply for the six months ended June 30,
2009.
  The
Series 2009A, 2009B and 2009C bonds are structured as variable-rate remarketable
bonds.  PPL Energy Supply may convert the interest rate mode on the
bonds from time to time to a commercial paper rate, daily rate, weekly rate or a
term rate of at least one year.  The bonds are subject to mandatory
purchase under certain circumstances, including upon conversion to a different
interest rate mode, and are subject to mandatory redemption upon a determination
that the interest on the bonds would be included in the holders' gross income
for federal tax purposes.  The Series 2009A bonds bore interest at an
initial rate of 0.90% through June 30, 2009.  The Series 2009B bonds
bear interest at an initial rate of 1.25% through September 30,
2009.  The Series 2009C bonds are in a weekly interest rate mode,
bearing interest at 0.30% at June 30, 2009.
  In
connection with the issuance of each series of bonds by the PEDFA, PPL Energy
Supply entered into separate loan agreements with the PEDFA pursuant to which
the PEDFA loaned to PPL Energy Supply the proceeds of the Series 2009A, Series
2009B and Series 2009C bonds on payment terms that correspond to those of the
bonds.  PPL Energy Supply issued separate promissory notes to the
PEDFA to evidence its obligations under each of the loan
agreements.  These loan agreements and promissory notes replaced those
associated with the refunded 2007 and 2008 PEDFA bonds in a non-cash transaction
that is excluded from the Statement of Cash Flows.
  Concurrent
with the issuance of each series of bonds, separate letters of credit, totaling
$237 million, were issued under PPL Energy Supply's $3.2 billion five-year
syndicated credit facility to the trustee in support of each series of
bonds.  The letters of credit permit the trustee to draw amounts to
pay principal of and interest on, and the purchase price of, the Series 2009A,
Series 2009B and Series 2009C bonds when due.  PPL Energy Supply is
required to reimburse any draws on the letters of credit within one business day
of such draw.
  PPL
Energy Supply elected to change the interest rate mode on the Series 2009A bonds
to a commercial paper rate mode upon expiration of the initial rate
period.  As such, in July 2009, the Series 2009A bonds were remarketed
in a commercial paper rate mode and bear interest at 0.90% through December 9,
2009, at which time the bonds will be remarketed based upon an interest rate
mode elected by PPL Energy Supply.  In connection with this change,
the letter of credit supporting the Series 2009A bonds was modified
accordingly.
  In May
2009, PPL Electric issued $300 million of 6.25% First Mortgage Bonds due 2039
(6.25% Bonds).  The 6.25% Bonds may be redeemed any time prior to
maturity at PPL Electric's option at make-whole redemption
prices.  PPL Electric received proceeds of $296 million, net of a
discount and underwriting fees, from the issuance of the 6.25%
Bonds.  Approximately $86 million of the proceeds will be used to
partially fund the repayment at maturity of $486 million outstanding aggregate
principal amount of PPL Electric's Senior Secured Bonds, 6-1/4% Series, due
August 2009.  The balance of such repayment will be funded from the
issuance in October 2008 of $400 million of 7.125% Senior Secured Bonds due
2013.  The balance of the proceeds from the issuance of the 6.25%
Bonds is being used for general corporate purposes, including capital
expenditures.
  In June
2009, PPL Electric repaid its $9 million obligation under a Variable Rate
Pollution Control Facilities Note in connection with the early redemption in
full of the underlying pollution control revenue bonds that were issued by the
Indiana County Industrial Development Authority and due in June
2027.
  Common
Stock Dividends
  In
February 2009, PPL announced an increase to its quarterly common stock dividend,
effective April 1, 2009, to 34.5 cents per share (equivalent to $1.38 per
annum).  Future dividends, declared at the discretion of the Board of
Directors, will be dependent upon future earnings, cash flows, financial
requirements and other factors.
  Rating
Agency Decisions
  Moody's,
S&P and Fitch periodically review the credit ratings on the debt and
preferred securities of PPL and its subsidiaries.  Based on their
respective independent reviews, the rating agencies may make certain ratings
revisions or ratings affirmations.
  A credit
rating reflects an assessment by the rating agency of the creditworthiness
associated with an issuer and particular securities that it
issues.  The credit ratings of PPL and its subsidiaries are based on
information provided by PPL and other sources.  The ratings of
Moody's, S&P and Fitch are not a recommendation to buy, sell or hold any
securities of PPL or its subsidiaries.  Such ratings may be subject to
revisions or withdrawal by the agencies at any time and should be evaluated
independently of each other and any other rating that may be assigned to the
securities.  A downgrade in PPL's or its subsidiaries' credit ratings
could result in higher borrowing costs and reduced access to capital
markets.
  In
January 2009, S&P completed a review of PPL, PPL Energy Supply and PPL
Electric and revised its outlook for all three entities to negative from
stable.  At that time, S&P affirmed the BBB issuer rating of PPL
and PPL Energy Supply and affirmed the A- issuer rating of PPL
Electric.  As a result of the negative outlook at PPL Energy Supply,
S&P lowered the commercial paper rating of PPL Energy Supply to A-3 from
A-2.  S&P stated in its press release regarding PPL and PPL Energy
Supply that the revision in the outlook for PPL and PPL Energy Supply is based
primarily on lower than expected cash flows for 2008 combined with concerns over
further pressure on financial metrics in 2009.  S&P stated in its
press release regarding PPL Electric that the revision in its outlook reflects
the linkage with PPL along with their expectation that PPL Electric's financial
metrics could weaken beginning in 2010.
  At the
request of PPL Energy Supply, Fitch, in January 2009, and Moody's and S&P,
in February 2009, each withdrew their commercial paper rating for PPL Energy
Supply.
  In
February 2009, S&P revised its outlook to negative from stable for each of
WPDH Limited, WPD LLP, WPD (South Wales) and WPD (South West) and affirmed the
issuer and short-term debt ratings of each of the entities.  S&P
stated in its press release that the revision in the outlook is a reflection of
the change to PPL's outlook and is not a result from any change in WPD's
stand-alone credit profile.
  In May
2009, Moody's completed a review of PPL, PPL Energy Supply and PPL
Electric.  As a result of that review, Moody's revised its outlook for
PPL, PPL Capital Funding, and PPL Electric to negative from
stable.  At the same time, Moody's affirmed the Baa2 senior unsecured
rating and stable outlook of PPL Energy Supply.  Moody's stated in its
press release that the revision in the outlook for PPL Electric reflects Moody's
expectation that PPL Electric's financial metrics will deteriorate beyond 2009
and considers the potential for additional pressure on cash
flows.  Moody's also stated that the revision in the outlook for PPL
and PPL Capital Funding reflects the increasing support for corporate earnings
and cash flow anticipated from PPL Energy Supply and the subordinate position of
the unsecured lenders at these entities relative to the unsecured lenders at the
subsidiary levels.
  Ratings
Triggers
  PPL and
PPL Energy Supply have various derivative and non-derivative contracts,
including contracts for the sale and purchase of electricity and fuel, commodity
transportation and storage, tolling agreements, and interest rate and foreign
currency trades, which contain provisions requiring PPL and PPL Energy Supply to
post additional collateral, or permit the counterparty to terminate the
contract, if PPL's or PPL Energy Supply's credit rating were to fall below
investment grade.  See Note 14 to the Financial Statements for a
discussion of "Credit Risk-Related Contingent Features," including a discussion
of the potential additional collateral that would have been required for
derivative contracts in a net liability position at June 30, 2009.  At
June 30, 2009, if PPL's and PPL Energy Supply's credit ratings had been
below investment grade, PPL would have been required to post an additional $305
million of collateral to counterparties for both derivative and non-derivative
commodity and commodity-related contracts used in its generation, marketing and
trading operations and interest rate and foreign currency
contracts.
  Capital
Expenditures
  The
schedule below shows PPL's capital expenditure projections at June 30,
2009.
  Projected2009
                
                2010
                
                2011
                
                2012
                
                2013Construction
      expenditures (a)Generating
      facilities
                
                $
                345
                
                $
                610
                
                $
                628
                
                $
                483
                
                $
                428Transmission
      and distribution facilities
                
                
                524
                
                
                974
                
                
                1,078
                
                
                943
                
                
                992Environmental
                
                
                210
                
                
                68
                
                
                98
                
                
                114
                
                
                6Other
                
                
                69
                
                
                82
                
                
                51
                
                
                52
                
                
                50Total
      Construction Expenditures
                
                
                1,148
                
                
                1,734
                
                
                1,855
                
                
                1,592
                
                
                1,476Nuclear
      fuel
                
                
                151
                
                
                161
                
                
                178
                
                
                181
                
                
                184Total
      Capital Expenditures
                
                $
                1,299
                
                $
                1,895
                
                $
                2,033
                
                $
                1,773
                
                $
                1,660
  (a)
              
              Construction
      expenditures include AFUDC and capitalized interest, which are expected to
      be $291 million for the 2009-2013
period.
  PPL's
capital expenditure projections for the years 2009-2013 total $8.7
billion.  Capital expenditure plans are revised periodically to
reflect changes in operational, market and regulatory conditions.  The
above schedule has been revised from that which was presented in PPL's 2008 Form
10-K, primarily due to PPL's April 2009 announcement that it filed a new
application with the FERC for approval to expand the capacity of its Holtwood
hydroelectric plant by 125 MW.  See Note 8 to the Financial Statements
for additional information.
  For
additional information on PPL's liquidity and capital resources, see "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations," in PPL's 2008 Form 10-K.
  Risk
Management - Energy Marketing & Trading and Other
  Market
Risk
  Commodity
Price Risk (Non-trading)
  PPL
segregates its non-trading activities into two categories:  hedge
activity and economic activity.  Transactions that are accounted for
as hedge activity qualify for hedge accounting treatment.  The
economic activity category includes transactions that address a specific risk,
but were not eligible for hedge accounting or for which hedge accounting was not
elected.  Although they do not receive hedge accounting treatment,
these transactions are considered non-trading activity.  The net fair
value of economic positions at June 30, 2009 and December 31, 2008 was
a net asset of $7 million and a net liability of $52 million.
  To hedge
the impact of market price fluctuations on PPL's energy-related assets,
liabilities and other contractual arrangements discussed above, PPL EnergyPlus
sells and purchases physical energy at the wholesale level under FERC
market-based tariffs throughout the U.S. and enters into financial
exchange-traded and over-the-counter contracts.  PPL's non-trading
commodity derivative contracts mature at various times through
2017.
  The
following table sets forth changes in the net fair value of PPL's non-trading
commodity derivative contracts.  See Notes 13 and 14 to the Financial
Statements for additional information.
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008Fair
      value of contracts outstanding at the beginning of the
    period
                
                $
                728
                
                
                $
                (268
                )
                
                $
                402
                
                
                $
                (305
                )Contracts
      realized or otherwise settled during the period
                
                
                102
                
                
                
                (104
                )
                
                
                201
                
                
                
                (67
                )Fair
      value of new contracts entered into during the period
                
                
                133
                
                
                
                70
                
                
                
                55
                
                
                
                170Changes
      in fair value attributable to changes in valuation techniques
      (a)
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                55Other
      changes in fair value
                
                
                102
                
                
                
                (752
                )
                
                
                407
                
                
                
                (907
                )Fair
      value of contracts outstanding at the end of the period
                
                $
                1,065
                
                
                $
                (1,054
                )
                
                $
                1,065
                
                
                $
                (1,054
                )
  (a)
              
              Amount
      represents the reduction of valuation reserves related to capacity and FTR
      contracts upon the adoption of SFAS
157.
  The
following table segregates the net fair value of PPL's non-trading commodity
derivative contracts at June 30, 2009 based on whether the fair value was
determined by prices quoted in active markets for identical instruments or other
more subjective means.
  Net
      Asset (Liability)Maturity
      Less Than 1 Year
                
                Maturity
      1-3 Years
                
                Maturity
      4-5 Years
                
                Maturity
      in Excess of 5 Years
                
                Total
      Fair ValueSource
      of Fair ValuePrices
      quoted in active markets for identical instruments
                
                $
                4
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                4Prices
      based on significant other observable inputs
                
                
                97
                
                
                $
                631
                
                
                $
                191
                
                
                
                
                
                
                
                919Prices
      based on significant unobservable inputs
                
                
                2
                
                
                
                15
                
                
                
                38
                
                
                $
                87
                
                
                
                142Fair
      value of contracts outstanding at the end of the period
                
                $
                103
                
                
                $
                646
                
                
                $
                229
                
                
                $
                87
                
                
                $
                1,065
  Because
of PPL's efforts to hedge the value of energy from its generation assets, PPL
sells electricity, capacity and related services and buys fuel on a forward
basis, resulting in open contractual positions.  If PPL were unable to
deliver firm capacity and energy or to accept the delivery of fuel under its
agreements, under certain circumstances it could be required to pay
damages.  These damages would be based on the difference between the
market price and the contract price of the commodity.  Depending on
price volatility in the wholesale energy markets, such damages could be
significant.  Extreme weather conditions, unplanned power plant
outages, transmission disruptions, nonperformance by counterparties (or their
own counterparties) with which it has energy contracts and other factors could
affect PPL's ability to meet its obligations, or cause significant increases in
the market price of replacement energy.  Although PPL attempts to
mitigate these risks, there can be no assurance that it will be able to fully
meet its firm obligations, that it will not be required to pay damages for
failure to perform, or that it will not experience counterparty nonperformance
in the future.
  Commodity
Price Risk (Trading)
  PPL's
trading contracts mature at various times through 2015.  The following
table sets forth changes in the net fair value of PPL's trading commodity
derivative contracts.  See Note 13 to the Financial Statements for
additional information.
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008Fair
      value of contracts outstanding at the beginning of the
    period
                
                $
                (37
                )
                
                $
                22
                
                
                $
                (75
                )
                
                $
                16Contracts
      realized or otherwise settled during the period
                
                
                
                
                
                
                (31
                )
                
                
                33
                
                
                
                (31
                )Fair
      value of new contracts entered into during the period
                
                
                9
                
                
                
                31
                
                
                
                35
                
                
                
                23Other
      changes in fair value
                
                
                15
                
                
                
                (6
                )
                
                
                (6
                )
                
                
                8Fair
      value of contracts outstanding at the end of the period
                
                $
                (13
                )
                
                $
                16
                
                
                $
                (13
                )
                
                $
                16
  PPL will
reverse unrealized losses of approximately $1 million over the next three months
as the transactions are realized.
  The
following table segregates the net fair value of PPL's trading commodity
derivative contracts at June 30, 2009 based on whether the fair value was
determined by prices quoted in active markets for identical instruments or other
more subjective means.
  Net
      Asset (Liability)Maturity
      Less Than 1 Year
                
                Maturity
      1-3 Years
                
                Maturity
      4-5 Years
                
                Maturity
      in Excess of 5 Years
                
                Total
      Fair ValueSource
      of Fair ValuePrices
      quoted in active markets for identical instruments
                
                $
                1
                
                
                $
                1
                
                
                
                
                
                
                
                
                
                
                $
                2Prices
      based on significant other observable inputs
                
                
                (1
                )
                
                
                (12
                )
                
                $
                (1
                )
                
                $
                2
                
                
                
                (12
                )Prices
      based on significant unobservable inputs
                
                
                
                
                
                
                (2
                )
                
                
                
                
                
                
                (1
                )
                
                
                (3
                )Fair
      value of contracts outstanding at the end of the period
                
                $
                
                
                
                $
                (13
                )
                
                $
                (1
                )
                
                $
                1
                
                
                $
                (13
                )
  VaR
Models
  PPL
utilizes a VaR model to measure commodity price risk in domestic gross energy
margins for its non-trading and trading portfolios.  This approach is
consistent with how PPL's RMC assesses the market risk of its commodity
business.  VaR is a statistical model that attempts to estimate the
value of potential loss over a given holding period under normal market
conditions at a given confidence level.  PPL calculates VaR using a
Monte Carlo simulation technique based on a five-day holding period at a 95%
confidence level.  On June 30, 2009 and December 31, 2008, the
VaR for PPL's portfolios using end-of-quarter results for the period was as
follows:
  Trading
      VaR
                
                Non-Trading
      VaRJune 30,
                
                Dec.
      31,
                
                June 30,
                
                Dec.
      31,2009
                
                2008
                
                2009
                
                200895%
      Confidence Level, Five-Day Holding PeriodPeriod
      End
                
                $
                4
                
                
                $
                3
                
                
                $
                9
                
                
                $
                10Average
      for the Period
                
                
                2
                
                
                
                10
                
                
                
                11
                
                
                
                14High
                
                
                4
                
                
                
                22
                
                
                
                13
                
                
                
                20Low
                
                
                1
                
                
                
                3
                
                
                
                9
                
                
                
                9
  The
trading portfolio includes all speculative positions, regardless of delivery
period.  All positions not considered speculative are considered
non-trading.  PPL's non-trading portfolio includes PPL's entire
portfolio, including generation, with delivery periods through the next 12
months.  Both the trading and non-trading VaR computations exclude
FTRs due to the absence of liquid spot and forward markets.  The fair
value of the FTR positions at June 30, 2009 was an unrealized loss of $3
million, as follows:
  2009
                
                2010
                
                2011Trading
      (a)
                
                $
                1Non-trading
                
                
                (1
                )
                
                $
                (2
                )
                
                $
                (1
                )Total
                
                $
                
                
                
                $
                (2
                )
                
                $
                (1
                )
  (a)
              
              The
      amount of trading losses expected to be realized in the next three months
      is insignificant.
  Interest
Rate Risk
  PPL and
its subsidiaries have issued debt to finance their operations, which exposes
them to interest rate risk.  PPL utilizes various financial derivative
instruments to adjust the mix of fixed and floating interest rates in its debt
portfolio, adjust the duration of its debt portfolio and lock in benchmark
interest rates in anticipation of future financing, when
appropriate.  Risk limits under the risk management program are
designed to balance risk exposure to volatility in interest expense and changes
in the fair value of PPL's debt portfolio due to changes in the absolute level
of interest rates.
  At
June 30, 2009, PPL's potential annual exposure to increased interest
expense, based on a 10% increase in interest rates, was $1 million.
  PPL is
also exposed to changes in the fair value of its domestic and international debt
portfolios.  PPL estimated that a 10% decrease in interest rates at
June 30, 2009 would increase the fair value of its debt portfolio by $300
million.
  PPL
utilizes various risk management instruments to reduce its exposure to the
expected future cash flow variability of its debt instruments.  These
risks include exposure to adverse interest rate movements for outstanding
variable rate debt and for future anticipated financing.  While PPL is
exposed to changes in the fair value of these instruments, any changes in the
fair value of these instruments are recorded in equity and then reclassified
into earnings in the same period during which the item being hedged affects
earnings.  At June 30, 2009, the fair value of these instruments
was a net asset of $3 million.  PPL estimated that a 10% adverse
movement in interest rates at June 30, 2009 would decrease the net asset by
$3 million.
  PPL also
utilizes various risk management instruments to adjust the mix of fixed and
floating interest rates in its debt portfolio.  The change in fair
value of these instruments, as well as the offsetting change in the value of the
hedged exposure of the debt, is reflected in earnings.  At
June 30, 2009, the fair value of these instruments, including accrued
interest, was an asset of $39 million.  PPL estimated that a 10%
adverse movement in interest rates at June 30, 2009 would decrease the
asset by $13 million.
  WPDH
Limited holds a net notional position in cross-currency swaps totaling $302
million to hedge the interest payments and principal of its U.S.
dollar-denominated senior notes with maturity dates ranging from December 2017
to December 2028.  While PPL is exposed to changes in the fair value
of these instruments, any change in the fair value of these instruments is
recorded in equity and reclassified into earnings in the same period during
which the item being hedged affects earnings.  The estimated fair
value of this position, including accrued interest, at June 30, 2009 was a
net asset of $14 million.  WPDH Limited estimated that a 10% adverse
movement in foreign currency exchange rates and interest rates at June 30,
2009 would decrease the net asset by $40 million.
  Foreign
Currency Risk
  PPL is
exposed to foreign currency risk, primarily through investments in U.K.
affiliates.  In addition, PPL's domestic operations may make purchases
of equipment in currencies other than U.S. dollars.
  PPL has
adopted a foreign currency risk management program designed to hedge certain
foreign currency exposures, including firm commitments, recognized assets or
liabilities, anticipated transactions and net investments.  In
addition, PPL enters into financial instruments to protect against foreign
currency translation risk of expected earnings.
  To
protect the value of a portion of its net investment in WPD, PPL executed
forward contracts to sell British pounds sterling.  The total notional
amount of the contracts outstanding at June 30, 2009 was £55
million.  The settlement dates of these contracts range from September
2009 through June 2011.  At June 30, 2009, the fair value of
these positions was a net asset of $18 million.  PPL estimated that a
10% adverse movement in foreign currency exchange rates at June 30, 2009
would decrease the net asset by $9 million.
  To
economically hedge the translation of 2009 expected income denominated in
British pounds sterling to U.S. dollars, PPL entered into a combination of
average rate forwards and average rate options to sell British pounds
sterling.  At June 30, 2009, the total exposure hedged was £61
million.  These forwards and options have termination dates ranging
from July 2009 through December 2009.  At June 30, 2009, the fair
value of these positions was a net liability of $9 million.  PPL
estimated that a 10% adverse movement in foreign currency exchange rates at
June 30, 2009 would increase the net liability by $8 million.
  NDT
Funds - Securities Price Risk
  In
connection with certain NRC requirements, PPL Susquehanna maintains trust funds
to fund certain costs of decommissioning the Susquehanna nuclear
station.  At June 30, 2009, these funds were invested primarily
in domestic equity securities and fixed-rate, fixed-income
securities.  These securities are reflected at fair value on PPL's
Balance Sheet.  The mix of securities is designed to provide returns
sufficient to fund Susquehanna's decommissioning and to compensate for
inflationary increases in decommissioning costs.  However, the equity
securities included in the trusts are exposed to price fluctuation in equity
markets, and the values of fixed-rate, fixed-income securities are primarily
exposed to changes in interest rates.  PPL actively monitors the
investment performance and periodically reviews asset allocation in accordance
with its NDT policy statement.  At June 30, 2009, a hypothetical
10% increase in interest rates and a 10% decrease in equity prices would have
resulted in an estimated $33 million reduction in the fair value of the trusts'
assets.  See Notes 13 and 18 to the Financial Statements for
additional information regarding the NDT funds.
  Credit
Risk
  See Notes
13 and 14 to the Financial Statements and "Risk Management - Energy Marketing
& Trading and Other - Credit Risk" in PPL's 2008 Form 10-K for information
on credit risk.
  Related
Party Transactions
  PPL is
not aware of any material ownership interests or operating responsibility by
senior management of PPL, PPL Energy Supply or PPL Electric in outside
partnerships, including leasing transactions with variable interest entities, or
other entities doing business with PPL.
  For
additional information on related party transactions, see Note 11 to the
Financial Statements.
  Acquisitions,
Development and Divestitures
  PPL
continuously evaluates strategic options for its business segments and, from
time to time, PPL and its subsidiaries are involved in negotiations with third
parties regarding acquisitions and dispositions of businesses and assets, joint
ventures and development projects, which may or may not result in definitive
agreements.  Any such transactions may impact future financial
results.  See Note 8 to the Financial Statements for information
regarding such recent transactions.
  PPL is
currently planning incremental capacity increases of 208 MW, primarily at its
existing generating facilities.  Offsetting the planned capacity
increases is an expected reduction of 30 MW due to the anticipated sale of the
majority of PPL Maine's hydroelectric generation business, for which PPL Maine
signed a definitive agreement in July 2009.  See Note 8 to the
Financial Statements for additional information.
  PPL
continuously reexamines development projects based on market conditions and
other factors to determine whether to proceed with the projects, sell, cancel or
expand them, execute tolling agreements or pursue other options.
  Environmental
Matters
  See Note
10 to the Financial Statements for a discussion of environmental
matters.
  New
Accounting Standards
  See Notes
2 and 20 to the Financial Statements for a discussion of new accounting
standards adopted and pending adoption.
  Application
of Critical Accounting Policies
  PPL's
financial condition and results of operations are impacted by the methods,
assumptions and estimates used in the application of critical accounting
policies.  The following accounting policies are particularly
important to the financial condition or results of operations of PPL, and
require estimates or other judgments of matters inherently uncertain: price risk
management, defined benefits, asset impairment, leasing, loss accruals, AROs and
income tax uncertainties.  See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations," in PPL's 2008 Form
10-K for a discussion of each critical accounting policy.
 
 PPL ENERGY SUPPLY, LLC AND SUBSIDIARIES
  Item
2.  Management's Discussion and Analysis of Financial Condition and
Results of Operations
  Overview
  PPL
Energy Supply is an energy company with headquarters in Allentown,
Pennsylvania.  Refer to "Item 1. Business - Background" in PPL Energy
Supply's 2008 Form 10-K for descriptions of its reportable segments, which are
Supply and International Delivery.  Through its subsidiaries, PPL
Energy Supply is primarily engaged in the generation and marketing of
electricity in two key markets - the northeastern and western U.S. - and in the
delivery of electricity in the U.K.  See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Overview" in PPL Energy Supply's 2008 Form 10-K for a discussion of PPL Energy
Supply's strategy and the risks and challenges that it faces in its
business.  See "Forward-Looking Information," Note 10 to the Financial
Statements and the remainder of Item 2 in this Form 10-Q, and "Item 1A. Risk
Factors" and the rest of Item 7 in PPL Energy Supply's 2008 Form 10-K for more
information concerning the material risks and uncertainties that PPL Energy
Supply faces in its businesses and with respect to its future
earnings.
  Market
Events
  The
recent conditions in the financial markets have been disruptive to the processes
of managing credit risk, responding to liquidity needs, measuring derivatives
and other financial instruments at fair value, and managing market price
risk.  Bank credit capacity has been reduced and the cost of renewing
or establishing new credit facilities has increased significantly, thereby
making less certain businesses' ability to enter into long-term energy
commitments or reliably estimate the longer-term cost and availability of
credit.
  Commodity
Price Risk
  The
volatility of wholesale energy prices due to recent conditions in the financial
and commodity markets significantly impacted PPL Energy Supply's earnings in
2009.  See "Statement of Income Analysis - Domestic Gross Energy
Margins - Domestic Gross Energy Margins By Region" for further
discussion.
  Credit
Risk
  Credit
risk is the risk that PPL Energy Supply would incur a loss as a result of
nonperformance by counterparties of their contractual
obligations.  PPL Energy Supply maintains credit policies and
procedures to limit counterparty credit risk.  The recent conditions
in the financial and commodity markets have generally increased PPL Energy
Supply's exposure to credit risk.  See Notes 11, 13 and 14 to the
Financial Statements and "Risk Management - Energy Marketing & Trading and
Other - Credit Risk" in PPL Energy Supply's 2008 Form 10-K for more information
on credit risk.
  Liquidity
Risk
  Despite
the recent conditions in the financial and capital markets, external financing
activities by domestic electric utilities are being completed, albeit at
higher-than-historical interest rates.  PPL Energy Supply expects to
continue to have access to adequate sources of liquidity through operating cash
flows, cash and cash equivalents, credit facilities and, from time to time,
through the issuance of capital market securities.  See "Financial
Condition - Liquidity and Capital Resources" for an expanded discussion of PPL
Energy Supply's liquidity position and a discussion of financing
transactions.
  Valuations
in Inactive Markets
  The
recent conditions in the financial markets have generally made it difficult to
determine the fair value of certain assets and liabilities in inactive
markets.  Management has reviewed the activity in the energy and
financial markets in which PPL Energy Supply transacts, concluding that all of
these markets were active at June 30, 2009, with the exception of the
market for auction rate securities.  See Notes 13 and 18 to the
Financial Statements and "Financial Condition - Liquidity and Capital Resources
- Auction Rate Securities" for a discussion of these investments.
  Securities
Price Risk
  Declines
in the market price of debt and equity securities result in unrealized losses
that reduce the asset values of PPL Energy Supply's investments in its NDT funds
and defined benefit plans.  Both the
pension plan and the NDT funds had positive returns in the second quarter of
2009, thereby recovering a portion of the negative returns incurred in 2008 and
the first quarter of 2009.  PPL Energy Supply actively monitors
the performance of the investments held in its NDT funds and periodically
reviews the funds' investment allocations.  See "Financial Condition -
Risk Management - Energy Marketing & Trading and Other - NDT Funds -
Securities Price Risk" for additional information on securities price
risk.
  PPL
Energy Supply's subsidiaries sponsor various defined benefit plans and
participate in and are allocated costs from defined benefit plans sponsored by
PPL.  Determination of the funded status of defined benefit plans,
contribution requirements and net periodic defined benefit costs for future
years are subject to changes in various assumptions, in addition to the actual
performance of the assets in the plans.  See "Application of Critical
Accounting Policies - Defined Benefits" in PPL's 2008 Form 10-K for a discussion
of the assumptions and sensitivities regarding those assumptions.
  The
Economic Stimulus Package
  The
Economic Stimulus Package is intended to stimulate the U.S. economy through
federal tax relief, expansion of unemployment benefits and other social stimulus
provisions, domestic spending for education, health care and infrastructure,
including the energy sector.  A portion of the benefits included in
the Economic Stimulus Package are offered in the form of loan fee reductions,
expanded loan guarantees and secondary market incentives, including delayed
recognition for tax purposes of income related to the cancellation of certain
types of debt.  See "Financial Condition - Liquidity and Capital
Resources" for a discussion of the applicability to the purchase of notes by PPL
Energy Supply.
  Funds
from the Economic Stimulus Package will be allocated to various federal
agencies, such as the DOE, and will also be provided to state agencies through
block grants.  The DOE plans to use a portion of the funds for smart
grid and other efficiency-related programs, and has initiated a process for that
purpose.  The Commonwealth of Pennsylvania is accepting applications
for funding of energy projects including solar projects.  As discussed
in Note 8 to the Financial Statements, PPL Energy Supply has reconsidered its
Holtwood expansion project in view of the tax incentives and potential loan
guarantees for renewable energy projects contained in the Economic Stimulus
Package.  PPL Energy Supply filed DOE loan guarantee applications for
the Holtwood expansion project and for the Rainbow redevelopment
project.  PPL Energy Supply and its subsidiaries continue to review
the Economic Stimulus Package's provisions to determine the impact on PPL Energy
Supply's possible expansion plans and other business-related
activities.
  The
following information should be read in conjunction with PPL Energy Supply's
Condensed Consolidated Financial Statements and the accompanying Notes and with
PPL Energy Supply's 2008 Form 10-K.
  Terms and
abbreviations are explained in the glossary.  Dollars are in millions
unless otherwise noted.
  Results
of Operations
  The
following discussion begins with a summary of PPL Energy Supply's
earnings.  "Results of Operations" continues with a review of results
by reportable segment and a description of key factors by segment that
management expects may impact future earnings.  This section ends with
"Statement of Income Analysis," which includes explanations of significant
changes in principal items on PPL Energy Supply's Statements of Income,
comparing the three and six months ended June 30, 2009, with the same
periods in 2008.
  The
results for interim periods can be disproportionately influenced by various
factors and developments and by seasonal variations, and as such, the results of
operations for interim periods do not necessarily indicate results or trends for
the year or for future operating results.
  Earnings
  Net
income (loss) attributable to PPL Energy Supply
was:
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008$
                (31
                )
                
                $
                157
                
                
                $
                160
                
                
                $
                361
  The
changes in net income (loss) attributable to PPL Energy Supply from period to
period were, in part, attributable to several special items that management
considers significant.  Details of these special items are provided
within the review of each segment's earnings.
  Segment
Results
  Net
income (loss) attributable to PPL Energy Supply by segment was:
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008Supply
                
                $
                (93
                )
                
                $
                95
                
                
                $
                11
                
                
                $
                201International
      Delivery
                
                
                62
                
                
                
                62
                
                
                
                149
                
                
                
                160Total
                
                $
                (31
                )
                
                $
                157
                
                
                $
                160
                
                
                $
                361
  Supply
Segment
  The
Supply segment primarily consists of the domestic energy marketing, domestic
generation and domestic development operations of PPL Energy
Supply.  In May 2009, PPL Energy Supply announced its intention to
sell its Long Island generation business, and in July 2009, announced its
intention to sell the majority of its Maine hydroelectric generation
business.  PPL Energy Supply expects the sales to close in
2009.  See Note 8 to the Financial Statements for additional
information.
  In 2009
and 2008, the Supply segment results reflect the reclassification of the
revenues and expenses of the Long Island generation business and the majority of
its Maine hydroelectric generation business to Discontinued
Operations.
  Supply
segment net income (loss) attributable to PPL Energy Supply
was:
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008Energy
      revenues (a)
                
                $
                1,098
                
                
                $
                331
                
                
                $
                2,782
                
                
                $
                1,100Energy-related
      businesses
                
                
                95
                
                
                
                120
                
                
                
                184
                
                
                
                225Total
      operating revenues
                
                
                1,193
                
                
                
                451
                
                
                
                2,966
                
                
                
                1,325Fuel
      and energy purchases (a)
                
                
                854
                
                
                
                (121
                )
                
                
                2,053
                
                
                
                164Other
      operation and maintenance
                
                
                239
                
                
                
                215
                
                
                
                485
                
                
                
                451Depreciation
                
                
                53
                
                
                
                47
                
                
                
                100
                
                
                
                87Taxes,
      other than income
                
                
                8
                
                
                
                8
                
                
                
                15
                
                
                
                10Energy-related
      businesses
                
                
                93
                
                
                
                115
                
                
                
                179
                
                
                
                218Total
      operating expenses
                
                
                1,247
                
                
                
                264
                
                
                
                2,832
                
                
                
                930Other
      Income (Expense) - net (b)
                
                
                8
                
                
                
                11
                
                
                
                36
                
                
                
                22Other-Than-Temporary
      Impairments
                
                
                1
                
                
                
                7
                
                
                
                18
                
                
                
                10Interest
      Expense (c)
                
                
                50
                
                
                
                42
                
                
                
                92
                
                
                
                74Income
      Taxes
                
                
                (36
                )
                
                
                58
                
                
                
                20
                
                
                
                140Income
      (Loss) from discontinued operations
                
                
                (32
                )
                
                
                5
                
                
                
                (29
                )
                
                
                9Noncontrolling
      Interest
                
                
                
                
                
                
                1
                
                
                
                
                
                
                
                1Net
      Income (Loss) Attributable to PPL Energy Supply
                
                $
                (93
                )
                
                $
                95
                
                
                $
                11
                
                
                $
                201
  (a)
              
              Includes
      unrealized gains and losses from economic activity.  See
      "Commodity Price Risk (Non-trading) - Economic Activity" in Note 14 for
      additional information.(b)
              
              Includes
      interest income from affiliates.(c)
              
              Includes
      interest expense with affiliates.
  The
after-tax changes in net income (loss) attributable to PPL Energy Supply between
these periods were due to the following factors.
  June 30,
      2009 vs. June 30, 2008Three
      Months Ended
                
                Six
      Months EndedDomestic
      gross energy margins
                
                $
                (34
                )
                
                $
                (37
                )Other
      operation and maintenance
                
                
                (14
                )
                
                
                (1
                )Depreciation
                
                
                (4
                )
                
                
                (8
                )Other
      income (expense) - net
                
                
                (6
                )Interest
      expense
                
                
                (5
                )
                
                
                (11
                )Income
      taxes and other
                
                
                (4
                )
                
                
                (4
                )Special
      items
                
                
                (121
                )
                
                
                (129
                )$
                (188
                )
                
                $
                (190
                )
  ·
              See
      "Domestic Gross Energy Margins" for further discussion.·
              Higher
      other operation and maintenance for the three months ended June 30, 2009,
      compared with the same period in 2008, primarily due to higher outage
      costs at the Susquehanna nuclear plant as a result of the timing of the
      2009 refueling outage, partially offset by lower outage costs at the
      Eastern and Western U.S. fossil/hydroelectric stations.·
              Higher
      depreciation for the six months ended June 30, 2009, compared with the
      same period in 2008, primarily due to the Montour scrubbers and
      Susquehanna generation uprate projects that were placed in-service in the
      second quarter of 2008 and the Brunner Island scrubber placed in-service
      in the second quarter of 2009.·
              Lower
      other income (expense) - net for the three months ended June 30, 2009,
      compared with the same period in 2008, primarily due to lower interest
      income.·
              Higher
      interest expense for the six months ended June 30, 2009, compared with the
      same period in 2008, primarily due to interest on debt issued in March
      2008.
  The
following after-tax amounts, which management considers special items, impacted
the Supply segment earnings.  See the indicated Notes to the Financial
Statements for additional information.
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008Unrealized
      gains (losses) from energy-related, economic activity
      (Note 14)
                
                $
                (88
                )
                
                $
                4
                
                
                $
                (38
                )
                
                $
                54Adjustments
      - NDT investments (a)
                
                
                2
                
                
                
                (4
                )
                
                
                (1
                )
                
                
                (4
                )Impairments
      and other impacts - emission allowances (Note 13)
                
                
                
                
                
                
                
                
                
                
                (15
                )Impairments
      - assets held for sale and other (Note 13)
                
                
                (34
                )
                
                
                
                
                
                
                (36
                )Workforce
      reduction charge (Note 6)
                
                
                
                
                
                
                
                
                
                
                (6
                )Off-site
      remediation of ash basin leak (Note 10)
                
                
                
                
                
                
                1
                
                
                
                
                
                
                
                1Montana
      basin seepage litigation (Note 10)
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (5
                )Synthetic
      fuel tax adjustment (Note 10)
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (13
                )Total
                
                $
                (120
                )
                
                $
                1
                
                
                $
                (96
                )
                
                $
                33
  (a)
              
              Represents
      other-than-temporary impairment charges on securities, including reversals
      of previous impairments when securities previously impaired were
      sold.
  Earnings
Outlook
  Excluding
special items, PPL Energy Supply projects higher earnings for its Supply segment
in 2009 compared with 2008, driven by higher energy margins as a result of
higher expected baseload generation and margins from marketing and trading
activities, despite higher expected coal expense, partially offset by higher
expected operation and maintenance expenses and depreciation.
  In July
2009, PPL Maine signed a definitive agreement to sell the majority of its
hydroelectric generation business.  The transaction is expected to
result in an after-tax gain in the range of $26 million to $35 million,
including the contingent consideration that would be realized upon completion of
the anticipated sale of PPL Maine's three other hydroelectric
facilities.  This gain will be classified as a special item, and due
to the contingent consideration, a portion may be recorded beyond 2009 or
ultimately may not be realized.  See Note 8 to the Financial
Statements for additional information.
  International
Delivery Segment
  The
International Delivery segment consists primarily of the electricity
distribution operations in the U.K.  In the first quarter of 2008, the
International Delivery segment recognized income tax benefits and miscellaneous
expenses in Discontinued Operations as the dissolution of the remaining Latin
American holding companies commenced.  See Note 8 to the Financial
Statements for additional information.  International Delivery segment
net income attributable to PPL Energy Supply was:
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008Utility
      revenues
                
                $
                155
                
                
                $
                211
                
                
                $
                331
                
                
                $
                452Energy-related
      businesses
                
                
                8
                
                
                
                9
                
                
                
                15
                
                
                
                18Total
      operating revenues
                
                
                163
                
                
                
                220
                
                
                
                346
                
                
                
                470Other
      operation and maintenance
                
                
                31
                
                
                
                50
                
                
                
                65
                
                
                
                96Depreciation
                
                
                27
                
                
                
                35
                
                
                
                53
                
                
                
                71Taxes,
      other than income
                
                
                13
                
                
                
                17
                
                
                
                26
                
                
                
                34Energy-related
      businesses
                
                
                4
                
                
                
                3
                
                
                
                7
                
                
                
                6Total
      operating expenses
                
                
                75
                
                
                
                105
                
                
                
                151
                
                
                
                207Other
      Income (Expense) - net
                
                
                (13
                )
                
                
                1
                
                
                
                (11
                )
                
                
                4Interest
      Expense
                
                
                18
                
                
                
                34
                
                
                
                31
                
                
                
                72Income
      Taxes
                
                
                (5
                )
                
                
                20
                
                
                
                4
                
                
                
                40Income
      from Discontinued Operations
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                5Net
      Income Attributable to PPL Energy Supply
                
                $
                62
                
                
                $
                62
                
                
                $
                149
                
                
                $
                160
  The
after-tax changes in net income attributable to PPL Energy Supply between these
periods were due to the following factors.
  June 30,
      2009 vs. June 30, 2008Three
      Months Ended
                
                Six
      Months EndedU.K.Delivery
      margins
                $
                (2
                )Other
      operating expenses
                
                6
                
                
                $
                10Interest
      expense
                
                6
                
                
                
                21Income
      taxes
                
                22
                
                
                
                31Foreign
      currency exchange rates
                
                (25
                )
                
                
                (60
                )Hyder
      liquidation distributions
                
                (1
                )
                
                
                (3
                )Other
                
                (3
                )
                
                
                (2
                )U.S.
      Income taxes
                
                4
                
                
                
                6Discontinued
      operations (Note 8)
                
                
                
                
                
                (5
                )Other
                
                (1
                )Special
      items
                
                (6
                )
                
                
                (9
                )$
                
                
                
                $
                (11
                )
  ·
              Lower other
      operating expenses for both periods primarily due to lower pension costs
      resulting from an increase in the discount rate and lower WPD meter
      operator expenses due to the transfer of that activity to a third
      party.·
              Lower
      interest expense for both periods on the index-linked senior unsecured
      notes primarily due to lower inflation rates.·
              Lower
      U.K. income taxes for both periods primarily due to changes in uncertain
      tax positions, partially offset by tax return adjustments in
      2008.  See Note 5 to the Financial Statements for additional
      information.·
              Changes
      in foreign currency exchange rates negatively impacted U.K. earnings for
      both periods.  The weighted-average exchange rate for the
      British pound sterling was approximately $1.46 for the three and six
      months ended June 30, 2009, versus approximately $1.98 for the same
      periods in 2008.
  The
following after-tax amounts, which management considers special items, impacted
the International Delivery segment earnings.
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008Unrealized
      losses from foreign currency economic activity
    (Note 14)
                
                $
                (6
                )
                
                
                
                
                
                $
                (6
                )Asset
      impairments
                
                
                
                
                
                
                
                
                
                
                (1
                )Workforce
      reduction charge (Note 6)
                
                
                
                
                
                
                
                
                
                
                (2
                )Total
                
                $
                (6
                )
                
                
                
                
                
                $
                (9
                )
  Earnings
Outlook
  Excluding
special items, PPL Energy Supply projects lower earnings for its International
Delivery segment in 2009 compared with 2008, primarily as a result of less
favorable foreign currency exchange rates.  See Note 10 to the
Financial Statements for information on the potential impact of the Ofgem's
five-year pricing review and its potential impact on WPD's revenues and earnings
for 2010 and beyond.
  Statement
of Income Analysis --
  Domestic
Gross Energy Margins
  Non-GAAP
Financial Measure
  The
following discussion includes financial information prepared in accordance with
GAAP, as well as a non-GAAP financial measure, "Domestic Gross Energy
Margins."  The presentation of "Domestic Gross Energy Margins" is
intended to supplement the investor's understanding of PPL Energy Supply's
domestic non-trading and trading activities by combining applicable income
statement line items and related adjustments to calculate a single financial
measure.  PPL Energy Supply believes that "Domestic Gross Energy
Margins" are useful and meaningful to investors because they provide them with
the results of PPL Energy Supply's domestic non-trading and trading activities
as another criterion in making their investment decisions.  PPL Energy
Supply's management also uses "Domestic Gross Energy Margins" in measuring
certain corporate performance goals used in determining variable
compensation.  Other companies may use different measures to present
the results of their non-trading and trading
activities.  Additionally, "Domestic Gross Energy Margins" are not
intended to replace "Operating Income," which is determined in accordance with
GAAP, as an indicator of overall operating performance.  The following
table provides a reconciliation between "Operating Income" and "Domestic Gross
Energy Margins" as defined by PPL Energy Supply.
  Three
      Months Ended June 30,
                                                                
                                                                Six
      Months Ended June 30,2009
                                                                
                                                                2008
                                                                
                                                                2009
                                                                
                                                                2008Operating
      Income (a)
                                                                
                                                                $
                                                                34
                                                                
                                                                
                                                                $
                                                                302
                                                                
                                                                
                                                                $
                                                                329
                                                                
                                                                
                                                                $
                                                                658Adjustments:Utility
      (a)
                                                                
                                                                
                                                                (155
                                                                )
                                                                
                                                                
                                                                (211
                                                                )
                                                                
                                                                
                                                                (331
                                                                )
                                                                
                                                                
                                                                (452
                                                                )Energy-related
      businesses, net (b)
                                                                
                                                                
                                                                (6
                                                                )
                                                                
                                                                
                                                                (11
                                                                )
                                                                
                                                                
                                                                (13
                                                                )
                                                                
                                                                
                                                                (19
                                                                )Other
      operation and maintenance (a)
                                                                
                                                                
                                                                270
                                                                
                                                                
                                                                
                                                                265
                                                                
                                                                
                                                                
                                                                550
                                                                
                                                                
                                                                
                                                                547Depreciation
      (a)
                                                                
                                                                
                                                                80
                                                                
                                                                
                                                                
                                                                82
                                                                
                                                                
                                                                
                                                                153
                                                                
                                                                
                                                                
                                                                158Taxes,
      other than income (a)
                                                                
                                                                
                                                                21
                                                                
                                                                
                                                                
                                                                25
                                                                
                                                                
                                                                
                                                                41
                                                                
                                                                
                                                                
                                                                44Revenue
      adjustments (c)
                                                                
                                                                
                                                                115
                                                                
                                                                
                                                                
                                                                623
                                                                
                                                                
                                                                
                                                                (235
                                                                )
                                                                
                                                                
                                                                809Expense
      adjustments (c)
                                                                
                                                                
                                                                30
                                                                
                                                                
                                                                
                                                                (628
                                                                )
                                                                
                                                                
                                                                290
                                                                
                                                                
                                                                
                                                                (897
                                                                )Domestic
      gross energy margins
                                                                
                                                                $
                                                                389
                                                                
                                                                
                                                                $
                                                                447
                                                                
                                                                
                                                                $
                                                                784
                                                                
                                                                
                                                                $
                                                                848
  (a)
              
              As
      reported on the Statements of Income.(b)
              
              Amount
      represents the net of "Energy-related businesses" revenue and expense as
      reported on the Statements of Income.(c)
              
              The
      components of these adjustments are detailed in the tables
      below.
  The
following tables provide the income statement line items and other adjustments
that comprise domestic gross energy margins.
  Three
      Months Ended June 30,2009
                                                          
                                                          2008
                                                          
                                                          ChangeRevenueWholesale
      energy marketing (a)
                                                          
                                                          $
                                                          648
                                                          
                                                          
                                                          $
                                                          (182
                                                          )
                                                          
                                                          $
                                                          830Wholesale
      energy marketing to affiliate (a)
                                                          
                                                          
                                                          411
                                                          
                                                          
                                                          
                                                          428
                                                          
                                                          
                                                          
                                                          (17
                                                          )Unregulated
      retail electric and gas (a)
                                                          
                                                          
                                                          32
                                                          
                                                          
                                                          
                                                          33
                                                          
                                                          
                                                          
                                                          (1
                                                          )Net
      energy trading margins (a)
                                                          
                                                          
                                                          7
                                                          
                                                          
                                                          
                                                          52
                                                          
                                                          
                                                          
                                                          (45
                                                          )Revenue
      adjustments (b)Miscellaneous
      wholesale energy marketing to affiliate
                                                          
                                                          
                                                          (3
                                                          )
                                                          
                                                          
                                                          (3
                                                          )Miscellaneous
      unregulated retail electric and gas
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          (1
                                                          )
                                                          
                                                          
                                                          1Unrealized
      gains from economic hedge activity (c)
                                                          
                                                          
                                                          111
                                                          
                                                          
                                                          
                                                          617
                                                          
                                                          
                                                          
                                                          (506
                                                          )Margins
      from Supply segment discontinued operations
                                                          
                                                          
                                                          7
                                                          
                                                          
                                                          
                                                          10
                                                          
                                                          
                                                          
                                                          (3
                                                          )Total
      revenue adjustments
                                                          
                                                          
                                                          115
                                                          
                                                          
                                                          
                                                          623
                                                          
                                                          
                                                          
                                                          (508
                                                          )1,213
                                                          
                                                          
                                                          
                                                          954
                                                          
                                                          
                                                          
                                                          259ExpenseFuel
      (a)
                                                          
                                                          
                                                          186
                                                          
                                                          
                                                          
                                                          189
                                                          
                                                          
                                                          
                                                          (3
                                                          )Energy
      purchases (a)
                                                          
                                                          
                                                          648
                                                          
                                                          
                                                          
                                                          (340
                                                          )
                                                          
                                                          
                                                          988Energy
      purchases from affiliate (a)
                                                          
                                                          
                                                          20
                                                          
                                                          
                                                          
                                                          30
                                                          
                                                          
                                                          
                                                          (10
                                                          )Expense
      adjustments (b)Unrealized
      gains (losses) from economic hedge activity (c)
                                                          
                                                          
                                                          (39
                                                          )
                                                          
                                                          
                                                          621
                                                          
                                                          
                                                          
                                                          (660
                                                          )Other
                                                          
                                                          
                                                          9
                                                          
                                                          
                                                          
                                                          7
                                                          
                                                          
                                                          
                                                          2Total
      expense adjustments
                                                          
                                                          
                                                          (30
                                                          )
                                                          
                                                          
                                                          628
                                                          
                                                          
                                                          
                                                          (658
                                                          )824
                                                          
                                                          
                                                          
                                                          507
                                                          
                                                          
                                                          
                                                          317Domestic
      gross energy margins
                                                          
                                                          $
                                                          389
                                                          
                                                          
                                                          $
                                                          447
                                                          
                                                          
                                                          $
                                                          (58
                                                          )
  Six
      Months Ended June 30,2009
                                                                                              
                                                                                              2008
                                                                                              
                                                                                              ChangeRevenueWholesale
      energy marketing (a)
                                                                                              
                                                                                              $
                                                                                              1,805
                                                                                              
                                                                                              
                                                                                              $
                                                                                              66
                                                                                              
                                                                                              
                                                                                              $
                                                                                              1,739Wholesale
      energy marketing to affiliate (a)
                                                                                              
                                                                                              
                                                                                              908
                                                                                              
                                                                                              
                                                                                              
                                                                                              917
                                                                                              
                                                                                              
                                                                                              
                                                                                              (9
                                                                                              )Unregulated
      retail electric and gas (a)
                                                                                              
                                                                                              
                                                                                              74
                                                                                              
                                                                                              
                                                                                              
                                                                                              67
                                                                                              
                                                                                              
                                                                                              
                                                                                              7Net
      energy trading margins (a)
                                                                                              
                                                                                              
                                                                                              (5
                                                                                              )
                                                                                              
                                                                                              
                                                                                              50
                                                                                              
                                                                                              
                                                                                              
                                                                                              (55
                                                                                              )Revenue
      adjustments (b)Miscellaneous
      wholesale energy marketing to affiliate
                                                                                              
                                                                                              
                                                                                              (6
                                                                                              )
                                                                                              
                                                                                              
                                                                                              (7
                                                                                              )
                                                                                              
                                                                                              
                                                                                              1Miscellaneous
      unregulated retail electric and gas
                                                                                              
                                                                                              
                                                                                              (1
                                                                                              )
                                                                                              
                                                                                              
                                                                                              (1
                                                                                              )Unrealized
      gains (losses) from economic hedge activity (c)
                                                                                              
                                                                                              
                                                                                              (242
                                                                                              )
                                                                                              
                                                                                              
                                                                                              797
                                                                                              
                                                                                              
                                                                                              
                                                                                              (1,039
                                                                                              )Gains
      from sale of emission allowances (d)
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              1
                                                                                              
                                                                                              
                                                                                              
                                                                                              (1
                                                                                              )Margins
      from Supply segment discontinued operations
                                                                                              
                                                                                              
                                                                                              15
                                                                                              
                                                                                              
                                                                                              
                                                                                              20
                                                                                              
                                                                                              
                                                                                              
                                                                                              (5
                                                                                              )Other
                                                                                              
                                                                                              
                                                                                              (1
                                                                                              )
                                                                                              
                                                                                              
                                                                                              (1
                                                                                              )Total
      revenue adjustments
                                                                                              
                                                                                              
                                                                                              (235
                                                                                              )
                                                                                              
                                                                                              
                                                                                              809
                                                                                              
                                                                                              
                                                                                              
                                                                                              (1,044
                                                                                              )2,547
                                                                                              
                                                                                              
                                                                                              
                                                                                              1,909
                                                                                              
                                                                                              
                                                                                              
                                                                                              638ExpenseFuel
      (a)
                                                                                              
                                                                                              
                                                                                              444
                                                                                              
                                                                                              
                                                                                              
                                                                                              429
                                                                                              
                                                                                              
                                                                                              
                                                                                              15Energy
      purchases (a)
                                                                                              
                                                                                              
                                                                                              1,569
                                                                                              
                                                                                              
                                                                                              
                                                                                              (323
                                                                                              )
                                                                                              
                                                                                              
                                                                                              1,892Energy
      purchases from affiliate (a)
                                                                                              
                                                                                              
                                                                                              40
                                                                                              
                                                                                              
                                                                                              
                                                                                              58
                                                                                              
                                                                                              
                                                                                              
                                                                                              (18
                                                                                              )Expense
      adjustments (b)Unrealized
      gains (losses) from economic hedge activity (c)
                                                                                              
                                                                                              
                                                                                              (306
                                                                                              )
                                                                                              
                                                                                              
                                                                                              887
                                                                                              
                                                                                              
                                                                                              
                                                                                              (1,193
                                                                                              )Other
                                                                                              
                                                                                              
                                                                                              16
                                                                                              
                                                                                              
                                                                                              
                                                                                              10
                                                                                              
                                                                                              
                                                                                              
                                                                                              6Total
      expense adjustments
                                                                                              
                                                                                              
                                                                                              (290
                                                                                              )
                                                                                              
                                                                                              
                                                                                              897
                                                                                              
                                                                                              
                                                                                              
                                                                                              (1,187
                                                                                              )1,763
                                                                                              
                                                                                              
                                                                                              
                                                                                              1,061
                                                                                              
                                                                                              
                                                                                              
                                                                                              702Domestic
      gross energy margins
                                                                                              
                                                                                              $
                                                                                              784
                                                                                              
                                                                                              
                                                                                              $
                                                                                              848
                                                                                              
                                                                                              
                                                                                              $
                                                                                              (64
                                                                                              )
  (a)
              
              As
      reported on the Statements of Income.(b)
              
              To
      include/exclude the impact of any revenues and expenses not associated
      with domestic gross energy margins, consistent with the way management
      reviews domestic gross energy margins internally.(c)
              
              See
      "Commodity Price Risk (Non-trading) - Economic Activity" in Note 14 to the
      Financial Statements for additional information regarding economic
      activity.(d)
              
              Included
      in "Other operation and maintenance" on the Statements of
      Income.
  Domestic
Gross Energy Margins By Region
  Domestic
gross energy margins are generated through PPL Energy Supply's various
strategies to maximize the value of its wholesale energy
portfolio.  The most significant of these strategies include the sales
of baseload generation and optimization of intermediate and peaking generation,
both of which are considered asset-related margins and marketing and proprietary
trading activities.  PPL Energy Supply also manages these activities
on a geographic basis that is aligned with its generation assets.
  Three
      Months Ended June 30,2009
                
                2008
                
                ChangeAsset-related
      margins:Eastern
      U.S.
                
                $
                310
                
                
                $
                306
                
                
                $
                4Western
      U.S.
                
                
                77
                
                
                
                68
                
                
                
                9Marketing
      and trading margins:Eastern
      U.S.
                
                
                2
                
                
                
                73
                
                
                
                (71
                )Western
      U.S.Domestic
      gross energy margins
                
                $
                389
                
                
                $
                447
                
                
                $
                (58
                )
  Six
      Months Ended June 30,2009
                
                2008
                
                ChangeAsset-related
      margins:Eastern
      U.S.
                
                $
                607
                
                
                $
                620
                
                
                $
                (13
                )Western
      U.S.
                
                
                160
                
                
                
                140
                
                
                
                20Marketing
      and trading margins:Eastern
      U.S.
                
                
                17
                
                
                
                98
                
                
                
                (81
                )Western
      U.S.
                
                
                
                
                
                
                (10
                )
                
                
                10Domestic
      gross energy margins
                
                $
                784
                
                
                $
                848
                
                
                $
                (64
                )
  Eastern
U.S.
  Eastern
U.S. asset-related margins were $4 million higher and $13 million lower during
the three and six months ended June 30, 2009, compared with the same
periods in 2008.  The increase during the three months ended June 30,
2009 was primarily due to gains resulting from the settlement of economic
positions related to portfolio rebalancing and optimization strategies, higher
capacity revenue and a 2.2% increase in PLR sales prices in accordance with the
PUC Final Order.  Partially offsetting these higher margins was lower
baseload generation of 9% and higher average baseload generation fuel prices of
12%, primarily due to higher coal prices.  The decrease during the six
months ended June 30, 2009 was primarily due to lower baseload generation of 5%
and higher average baseload generation fuel prices of 8%, primarily due to
higher coal prices.  This decrease was partially offset by gains
resulting from the settlement of economic positions related to portfolio
rebalancing and optimization strategies, higher capacity revenue and a 2.2%
increase in PLR sales prices in accordance with the PUC Final
Order.
  Eastern
U.S. marketing and trading margins were $71 million and $81 million lower during
the three and six months ended June 30, 2009, compared with the same periods in
2008.  The decrease for both periods was primarily due to lower FTR
results, primarily due to lower congestion prices as a result of lower
electricity prices, and lower margins on full-requirement sales contracts,
primarily due to mild weather and the economic downturn.  Partially
offsetting these decreases were increased margins in the power, gas, and oil
trading positions.
  Western
U.S.
  Western
U.S. asset-related margins were $9 million and $20 million higher during the
three and six months ended June 30, 2009, compared with the same periods in
2008.  The increase for both periods was primarily due to higher
wholesale volumes of 18% and increased generation from the hydroelectric units
of 18%.
  Western
U.S. marketing and trading margins were $10 million higher during the six months
ended June 30, 2009, compared with the same period in 2008, consisting of
$5 million of both higher realized trading margins and unrealized trading
margins.
  Utility
Revenues
  The
decreases in utility revenues were attributable to:
  June 30,
      2009 vs. June 30, 2008Three
      Months Ended
                
                Six
      Months EndedU.K. electric
      delivery revenue
                
                $
                (3
                )
                
                $
                (4
                )U.K.
      foreign currency exchange rates
                
                
                (53
                )
                
                
                (117
                )$
                (56
                )
                
                $
                (121
                )
  Lower
U.K. electric delivery revenue for both periods was partially due to the
transfer of meter operator activity to a third party in July 2008.
  Energy-related
Businesses
  Energy-related
businesses contributed $5 million less to operating income for the three months
ended June 30, 2009, compared with the same period in 2008.  The
decrease was primarily attributable to:
  ·
              $2
      million less from WPD's energy-related businesses, primarily due to
      changes in foreign currency exchange rates; and·
              $2
      million less from domestic energy-related businesses, primarily due to a
      decline in construction activity caused by the slowdown in the
      economy.
  Energy-related
businesses contributed $6 million less to operating income for the six months
ended June 30, 2009, compared with the same period in
2008.  Contributions from WPD-related businesses decreased by $4
million, primarily related to changes in foreign currency exchange
rates.
  Other
Operation and Maintenance
  The
increases in other operation and maintenance expenses were due to:
  June 30,
      2009 vs. June 30, 2008Three
      Months Ended
                    
                    Six
      Months EndedImpairment
      of emission allowances (Note 13)
                    
                    
                    
                    
                    
                    $
                    30Workforce
      reduction charge (Note 6)
                    
                    
                    
                    
                    
                    
                    13Trademark
      royalty fees from a PPL subsidiary (Note 11)
                    
                    $
                    6
                    
                    
                    
                    8Defined
      benefit costs - Domestic
                    
                    
                    2
                    
                    
                    
                    5Outage
      costs at Susquehanna nuclear station
                    
                    
                    27
                    
                    
                    
                    4Allocation
      of certain corporate service costs (Note 11)
                    
                    
                    (1
                    )
                    
                    
                    3Outage
      costs at Western and Eastern U.S. fossil/hydroelectric
      stations
                    
                    
                    (6
                    )
                    
                    
                    (2
                    )Insurance
      recoveries
                    
                    
                    (3
                    )
                    
                    
                    (4
                    )Stock-based
      compensation
                    
                    
                    1
                    
                    
                    
                    (4
                    )Defined
      benefit costs - U.K.
                    
                    
                    (2
                    )
                    
                    
                    (5
                    )WPD
      meter operator expenses (a)
                    
                    
                    (3
                    )
                    
                    
                    (6
                    )Uncollectible
      accounts
                    
                    
                    (2
                    )
                    
                    
                    (8
                    )Montana
      basin seepage litigation (Note 10)
                    
                    
                    (1
                    )
                    
                    
                    (8
                    )U.K.
      foreign currency exchange rates
                    
                    
                    (9
                    )
                    
                    
                    (17
                    )Other
      - Domestic
                    
                    
                    (3
                    )
                    
                    
                    (3
                    )Other
      - U.K.
                    
                    
                    (1
                    )
                    
                    
                    (3
                    )$
                    5
                    
                    
                    $
                    3
  (a)
              
              In
      July 2008, WPD transferred its meter operator services to a third
      party.
  Depreciation
  The
decreases in depreciation expense were due to:
  June 30,
      2009 vs. June 30, 2008Three
      Months Ended
                                            
                                            Six
      Months EndedAdditions
      to generation PP&E (a)
                                            
                                            $
                                            7
                                            
                                            
                                            $
                                            13U.K.
      foreign currency exchange rates
                                            
                                            
                                            (9
                                            )
                                            
                                            
                                            (18
                                            )$
                                            (2
                                            )
                                            
                                            $
                                            (5
                                            )
  (a)
              
              Attributable
      to the completion of the Susquehanna generation uprate and the Montour
      scrubber projects in the second quarter of 2008 and the Brunner Island
      Unit 3 scrubber in the second quarter of
  2009.
  Taxes,
Other Than Income
  The
decreases in taxes, other than income were due to:
  June 30,
      2009 vs. June 30, 2008Three
      Months Ended
                
                Six
      Months EndedProperty
      tax expense (a)
                
                $
                (1
                )
                
                $
                6U.K.
      foreign currency exchange rates
                
                
                (5
                )
                
                
                (9
                )Other
                
                
                2$
                (4
                )
                
                $
                (3
                )
  (a)
              
              The
      increase for the six months ended June 30, 2009 is primarily due to a
      $7 million property tax credit recorded by PPL Montana in the six months
      ended June 30, 2008.
  Other
Income (Expense) - net
  See Note
12 to the Financial Statements for details of other income.
  Other-Than-Temporary
Impairments
  See Note
18 to the Financial Statements for details of other-than-temporary
impairments.
  Interest
Income from Affiliates
  Interest
income from affiliates decreased by $5 million for the six months ended
June 30, 2009, compared with the same period in 2008.  The
decrease was the result of a decline in the average balance and floating
interest rate on a note receivable with an affiliate, and a decline in the
average balance and floating interest rate on the collateral deposit related to
the PLR contract.
  Interest
Expense
  The
decreases in interest expense, which includes "Interest Expense with
Affiliates," were due to:
  June 30,
      2009 vs. June 30, 2008Three
      Months Ended
                
                Six
      Months EndedShort-term
      debt interest expense
                
                $
                4
                
                
                $
                8Capitalized
      interest
                
                
                3
                
                
                
                4Long-term
      debt interest expense
                
                
                (4
                )
                
                
                3U.K.
      foreign currency exchange rates
                
                
                (6
                )
                
                
                (11
                )Inflation
      adjustment on U.K. Index-linked Senior Unsecured Notes
                
                
                (6
                )
                
                
                (25
                )Other
                
                
                1
                
                
                
                (2
                )$
                (8
                )
                
                $
                (23
                )
  Income
Taxes
  The
decreases in income taxes were due to:
  June 30,
      2009 vs. June 30, 2008Three
      Months Ended
                
                Six
      Months EndedForeign
      tax return adjustments
                
                $
                18
                
                
                $
                18Nonconventional
      fuel and other tax credits
                
                
                (1
                )
                
                
                (14
                )Tax
      reserve adjustments
                
                
                (35
                )
                
                
                (37
                )Lower
      pre-tax book income
                
                
                (104
                )
                
                
                (125
                )Other
                
                
                3
                
                
                
                2$
                (119
                )
                
                $
                (156
                )
  See Note
5 to the Financial Statements for additional information on income
taxes.
  Discontinued
Operations
  See
"Discontinued Operations" in Note 8 to the Financial Statements for information
related to the anticipated sales of PPL Energy Supply's Long Island generation
business and the majority of its Maine hydroelectric generation business, and
PPL Energy Supply's Latin American businesses that were dissolved in
2008.
  Financial
Condition
  Liquidity
and Capital Resources
  PPL
Energy Supply continues to focus on maintaining a strong credit profile and
liquidity position during the disruptive conditions in the financial markets and
historically difficult bank and capital market conditions.  PPL Energy
Supply expects to continue to have adequate liquidity available through
operating cash flows, cash and cash equivalents, its credit facilities and, as
necessary, the issuance of capital market securities.
  PPL
Energy Supply had the following at:
  June 30,
      2009
                
                December
      31, 2008Cash
      and cash equivalents
                
                $
                429
                
                
                $
                464Short-term
      investments (a)
                
                
                
                
                
                
                150$
                429
                
                
                $
                614Short-term
      debt (b)
                
                $
                735
                
                
                $
                584
  (a)
              
              Represents
      tax-exempt bonds issued by the PEDFA in December 2008 on behalf of PPL
      Energy Supply and purchased by a subsidiary of PPL Energy Supply upon
      issuance.  Such bonds were refunded in April
      2009.  See "Financing Activities" below for further
      discussion.(b)
              
              Includes
      short-term debt with affiliate.
  The $35
million decrease in PPL Energy Supply's cash and cash equivalents position was
primarily the net result of:
  ·
              $391
      million of capital expenditures;·
              distributions
      to Member of $373 million;·
              the
      payment of $220 million to retire $250 million aggregate principal amount
      of long-term debt;·
              $34
      million in net expenditures for intangible assets;·
              $568
      million of cash provided by operating activities;·
              a
      decrease of $190 million in restricted cash and cash
      equivalents;·
              proceeds
      of $150 million from the sale of short-term investments;
    and·
              an
      increase of $142 million in short-term
debt.
  Auction
Rate Securities
  PPL
Energy Supply's investment in auction rate securities continues to be impacted
by auction failures and the resulting illiquidity in 2009.  PPL Energy
Supply held auction rate securities with an aggregate par value of $24 million
at June 30, 2009 and December 31, 2008.  PPL Energy Supply
concluded that the fair value of its auction rate securities was $15 million at
June 30, 2009 and $19 million at December 31, 2008, a temporary
decline of $9 million and $5 million from par value.  Based upon the
evaluation of available information, PPL Energy Supply believes these
investments continue to be of high credit quality.  PPL Energy Supply
believes it will not be required to sell these securities, including to fund
operations, and does not intend to sell these securities until they can be
liquidated at par value. Therefore, PPL Energy Supply believes it does not have
significant exposure to realize losses on these securities, and none of the
decline in fair value is attributable to credit loss and therefore is deemed
temporary due to general market conditions and has not been recognized in
earnings.  During the second quarter of 2009, PPL Energy Supply
liquidated an insignificant amount of these securities at par.  See
Notes 13 and 18 to the Financial Statements for further discussion of auction
rate securities.
  Credit
Facilities
  At
June 30, 2009, PPL Energy Supply's total committed borrowing capacity under
credit facilities and the use of this borrowing capacity
were:
  Committed
      Capacity
                
                Borrowed
                
                Letters
      of Credit Issued
                
                UnusedCapacityPPL
      Energy Supply Domestic Credit Facilities (a)
                
                $
                4,110
                
                
                $
                285
                
                
                $
                826
                
                
                $
                2,999WPDH
      Limited Credit Facility
                
                ₤
                150
                
                
                ₤
                145
                
                
                
                n/a
                
                
                ₤
                5WPD
      (South West) Credit Facilities (b)
                
                
                153
                
                
                
                65
                
                
                ₤
                3
                
                
                
                85Total
      WPD Credit Facilities (c)
                
                ₤
                303
                
                
                ₤
                210
                
                
                ₤
                3
                
                
                ₤
                90
  (a)
              
              In
      March 2009, PPL Energy Supply's 364-day bilateral credit facility was
      amended.  The amendment included extending the expiration date
      from March 2009 to March 2010 and reducing the capacity from $300 million
      to $200 million.
                
                The
      commitments under PPL Energy Supply's domestic credit facilities are
      provided by a diverse bank group consisting of 23 banks, with no one bank
      providing more than 15% of the total committed capacity.
                
                PPL
      Energy Supply currently plans to renew its $385 million 364-day syndicated
      credit facility that expires in September 2009.(b)
              
              In
      July 2009, WPD (South West) terminated its £150 million five-year
      syndicated credit facility, which was to expire in October 2009, and
      replaced it with a new £210 million three-year syndicated credit facility
      expiring in July 2012.  Under the new facility, WPD (South West)
      has the ability to make cash borrowings but cannot cause the lenders to
      issue letters of credit.  Borrowings under this facility bear
      interest at LIBOR-based rates plus a margin.  The new facility
      contains financial covenants that require WPD (South West) to maintain an
      interest coverage ratio of not less than 3.0 times consolidated earnings
      before income taxes, depreciation and amortization and total net debt not
      in excess of 85% of its regulatory asset base, in each case calculated in
      accordance with the credit facility.(c)
              
              At
      June 30, 2009, the unused capacity of WPD's committed credit facilities
      was approximately $145 million.
  See Note
7 to the Financial Statements for further discussion of PPL Energy Supply's
credit facilities.
  Commercial
Paper
  As
discussed below under "Rating Agency Decisions," S&P lowered its rating on
PPL Energy Supply's commercial paper to A-3 from A-2 in January
2009.  Since PPL Energy Supply did not expect to need to issue any
commercial paper during 2009 and there is essentially no liquidity in commercial
paper markets for paper with an A-3 rating, PPL Energy Supply closed its
commercial paper program in January 2009 and requested that Moody's, S&P and
Fitch each withdraw their ratings on its commercial paper program, which each
rating agency subsequently did.
  Financing
Activities
  In March
2009, PPL Energy Supply completed tender offers to purchase up to $250 million
aggregate principal amount of certain of its outstanding senior notes in order
to reduce future interest expense.  Pursuant to the offers, PPL Energy
Supply purchased approximately $100 million aggregate principal amount of its
6.00% Senior Notes due 2036 for $77 million, plus accrued interest, and
approximately $150 million aggregate principal amount of its 6.20% Senior Notes
due 2016 for $143 million, plus accrued interest.  See Note 7 to the
Financial Statements for further discussion.  Under the Economic
Stimulus Package, PPL Energy Supply will be permitted to defer recognition of
income related to the extinguishment of these notes for tax
purposes.  No amounts will be included in taxable income for the first
five years.  Beginning in 2014, income related to the extinguishment
of these notes will be included in taxable income ratably over five
years.
  In April 2009, the PEDFA
issued $231 million aggregate principal amount of Exempt Facilities Revenue
Refunding Bonds, Series 2009A and 2009B due 2038 and Series 2009C due 2037 (PPL
Energy Supply, LLC Project), on behalf of PPL Energy Supply.  The
Series 2009A bonds, in an aggregate principal amount of $100 million, and the
Series 2009B bonds, in an aggregate principal amount of $50 million, were issued
by the PEDFA in order to refund $150 million aggregate principal amount of
Exempt Facilities Revenue Bonds, Series 2008A and 2008B (PPL Energy Supply, LLC
Project) due 2038 that were issued by the PEDFA in December 2008 on behalf of
PPL Energy Supply, and for which PPL Investment Corp. acted as initial
purchaser.  The Series 2009C bonds, in an aggregate principal amount
of $81 million, were issued in order to refund $81 million aggregate principal
amount of Exempt Facilities Revenue Bonds, Series 2007 (PPL Energy Supply, LLC
Project) due 2037 that were issued by the PEDFA in December 2007 on behalf of
PPL Energy Supply.  Among other things, the completed refundings were
able to take advantage of provisions in the Economic Stimulus Package that
eliminated the application of the AMT to interest payable on the refinanced
indebtedness.  The refundings of the bonds were effected by the
ultimate distribution of $231 million by the PEDFA to the bond holders,
including PPL Investment Corp.  As a result of the refundings of the
bonds, PPL Investment Corp. received proceeds of $150 million, which
is reflected as a cash flow from investing activities on the Statement of Cash
Flows for PPL and PPL Energy Supply for the six months ended June 30,
2009.
  The
Series 2009A, 2009B and 2009C bonds are structured as variable-rate remarketable
bonds.  PPL Energy Supply may convert the interest rate mode on the
bonds from time to time to a commercial paper rate, daily rate, weekly rate or a
term rate of at least one year.  The bonds are subject to mandatory
purchase under certain circumstances, including upon conversion to a different
interest rate mode, and are subject to mandatory redemption upon a determination
that the interest on the bonds would be included in the holders' gross income
for federal tax purposes.  The Series 2009A bonds bore interest at an
initial rate of 0.90% through June 30, 2009.  The Series 2009B bonds
bear interest at an initial rate of 1.25% through September 30,
2009.  The Series 2009C bonds are in a weekly interest rate mode,
bearing interest at 0.30% at June 30, 2009.
  In
connection with the issuance of each series of bonds by the PEDFA, PPL Energy
Supply entered into separate loan agreements with the PEDFA pursuant to which
the PEDFA loaned to PPL Energy Supply the proceeds of the Series 2009A, Series
2009B and Series 2009C bonds on payment terms that correspond to those of the
bonds.  PPL Energy Supply issued separate promissory notes to the
PEDFA to evidence its obligations under each of the loan
agreements.  These loan agreements and promissory notes replaced those
associated with the refunded 2007 and 2008 PEDFA bonds in a non-cash transaction
that is excluded from the Statement of Cash Flows.
  Concurrent
with the issuance of each series of bonds, separate letters of credit, totaling
$237 million, were issued under PPL Energy Supply's $3.2 billion five-year
syndicated credit facility to the trustee in support of each series of
bonds.  The letters of credit permit the trustee to draw amounts to
pay principal of and interest on, and the purchase price of, the Series 2009A,
Series 2009B and Series 2009C bonds when due.  PPL Energy Supply is
required to reimburse any draws on the letters of credit within one business day
of such draw.
  PPL
Energy Supply elected to change the interest rate mode on the Series 2009A bonds
to a commercial paper rate mode upon expiration of the initial rate
period.  As such, in July 2009, the Series 2009A bonds were remarketed
in a commercial paper rate mode and bear interest at 0.90% through December 9,
2009, at which time the bonds will be remarketed based upon an interest rate
mode elected by PPL Energy Supply.  In connection with this change,
the letter of credit supporting the Series 2009A bonds was modified
accordingly.
  Rating
Agency Decisions
  Moody's,
S&P and Fitch periodically review the credit ratings on the debt and
preferred securities of PPL Energy Supply and its subsidiaries.  Based
on their respective independent reviews, the rating agencies may make certain
ratings revisions or ratings affirmations.
  A credit
rating reflects an assessment by the rating agency of the creditworthiness
associated with an issuer and particular securities that it
issues.  The credit ratings of PPL Energy Supply and its subsidiaries
are based on information provided by PPL Energy Supply and other
sources.  The ratings of Moody's, S&P and Fitch are not a
recommendation to buy, sell or hold any securities of PPL Energy Supply or its
subsidiaries.  Such ratings may be subject to revisions or withdrawal
by the agencies at any time and should be evaluated independently of each other
and any other rating that may be assigned to the securities.  A
downgrade in PPL Energy Supply's or its subsidiaries' credit ratings could
result in higher borrowing costs and reduced access to capital
markets.
  In
January 2009, S&P completed a review of PPL Energy Supply, upon which it
revised its outlook to negative from stable and affirmed its BBB issuer
rating.  As a result of the negative outlook, S&P lowered PPL
Energy Supply's commercial paper rating to A-3 from A-2.  S&P
stated in its press release that the revision in the outlook for PPL Energy
Supply is based primarily on lower than expected cash flows for 2008 combined
with concerns over further pressure on financial metrics in 2009.
  At the
request of PPL Energy Supply, Fitch, in January 2009, and Moody's and S&P,
in February 2009, each withdrew their commercial paper rating for PPL Energy
Supply.
  In
February 2009, S&P revised its outlook to negative from stable for each of
WPDH Limited, WPD LLP, WPD (South Wales) and WPD (South West) and affirmed the
issuer and short-term debt ratings of each of the entities.  S&P
stated in its press release that the revision in the outlook is a reflection of
the change to PPL's outlook to negative from stable and is not a result from any
change in WPD's stand-alone credit profile.
  In May
2009, Moody's completed a review of PPL Energy Supply and affirmed the Baa2
senior unsecured rating and stable outlook of PPL Energy Supply.
  Ratings
Triggers
  PPL
Energy Supply has various derivative and non-derivative contracts, including
contracts for the sale and purchase of electricity and fuel, commodity
transportation and storage, and tolling agreements, which contain provisions
requiring PPL Energy Supply to post additional collateral, or permit the
counterparty to terminate the contract, if PPL Energy Supply's credit rating
were to fall below investment grade.  See Note 14 to the Financial
Statements for a discussion of "Credit Risk-Related Contingent Features,"
including a discussion of the potential additional collateral that would have
been required for derivative contracts in a net liability position at June 30,
2009.  At June 30, 2009, if PPL Energy Supply's credit rating had been
below investment grade, PPL Energy Supply would have been required to post an
additional $303 million of collateral to counterparties for both derivative and
non-derivative commodity and commodity-related contracts used in its generation,
marketing and trading operations and interest rate and foreign currency
contracts.
  Capital
Expenditures
  The
schedule below shows PPL Energy Supply's capital expenditure projections at
June 30, 2009.
  Projected2009
                
                2010
                
                2011
                
                2012
                
                2013Construction
      expenditures (a)Generating
      facilities
                
                $
                345
                
                $
                610
                
                $
                628
                
                $
                483
                
                $
                428Transmission
      and distribution facilities
                
                
                251
                
                
                428
                
                
                448
                
                
                460
                
                
                477Environmental
                
                
                210
                
                
                68
                
                
                98
                
                
                114
                
                
                6Other
                
                
                14
                
                
                17
                
                
                6
                
                
                7
                
                
                6Total
      Construction Expenditures
                
                
                820
                
                
                1,123
                
                
                1,180
                
                
                1,064
                
                
                917Nuclear
      fuel
                
                
                151
                
                
                161
                
                
                178
                
                
                181
                
                
                184Total
      Capital Expenditures
                
                $
                971
                
                $
                1,284
                
                $
                1,358
                
                $
                1,245
                
                $
                1,101
  (a)
              
              Construction
      expenditures include AFUDC and capitalized interest, which are expected to
      be $211 million for the 2009-2013
period.
  PPL
Energy Supply's capital expenditure projections for the years 2009-2013 total $6
billion.  Capital expenditure plans are revised periodically to
reflect changes in operational, market and regulatory conditions.  The
above schedule has been revised from that which was presented in PPL Energy
Supply's 2008 Form 10-K, primarily due to PPL's April 2009 announcement that it
filed a new application with the FERC for approval to expand the capacity of its
Holtwood hydroelectric plant by 125 MW.  See Note 8 to the Financial
Statements for additional information.
  For
additional information on PPL Energy Supply's liquidity and capital resources,
see "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations," in PPL Energy Supply's 2008 Form 10-K.
  Risk
Management - Energy Marketing & Trading and Other
  Market
Risk
  Commodity
Price Risk (Non-trading)
  PPL
Energy Supply segregates its non-trading activities into two
categories:  hedge activity and economic
activity.  Transactions that are accounted for as hedge activity
qualify for hedge accounting treatment.  The economic activity
category includes transactions that address a specific risk, but were not
eligible for hedge accounting or for which hedge accounting was not
elected.  Although they do not receive hedge accounting treatment,
these transactions are considered non-trading activity.  The net fair
value of economic positions at June 30, 2009 and December 31, 2008 was
a net asset of $7 million and a net liability of $52 million.
  To hedge
the impact of market price fluctuations on PPL Energy Supply's energy-related
assets, liabilities and other contractual arrangements discussed above, PPL
EnergyPlus sells and purchases physical energy at the wholesale level under FERC
market-based tariffs throughout the U.S. and enters into financial
exchange-traded and over-the-counter contracts.  PPL Energy Supply's
non-trading commodity derivative contracts mature at various times through
2017.
  The
following table sets forth changes in the net fair value of PPL Energy Supply's
non-trading commodity derivative contracts.  See Notes 13 and 14 to
the Financial Statements for additional information.
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008Fair
      value of contracts outstanding at the beginning of the
    period
                
                $
                728
                
                
                $
                (268
                )
                
                $
                402
                
                
                $
                (305
                )Contracts
      realized or otherwise settled during the period
                
                
                102
                
                
                
                (104
                )
                
                
                201
                
                
                
                (67
                )Fair
      value of new contracts entered into during the period
                
                
                133
                
                
                
                70
                
                
                
                55
                
                
                
                170Changes
      in fair value attributable to changes in valuation techniques
      (a)
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                55Other
      changes in fair value
                
                
                102
                
                
                
                (752
                )
                
                
                407
                
                
                
                (907
                )Fair
      value of contracts outstanding at the end of the period
                
                $
                1,065
                
                
                $
                (1,054
                )
                
                $
                1,065
                
                
                $
                (1,054
                )
  (a)
              
              Amount
      represents the reduction of valuation reserves related to capacity and FTR
      contracts upon the adoption of SFAS
157.
  The
following table segregates the net fair value of PPL Energy Supply's non-trading
commodity derivative contracts at June 30, 2009, based on whether the fair
value was determined by prices quoted in active markets for identical
instruments or other more subjective means.
  Net
      Asset (Liability)Maturity
      Less Than 1 Year
                
                Maturity
      1-3 Years
                
                Maturity
      4-5 Years
                
                Maturity
      in Excess of 5 Years
                
                Total
      Fair ValueSource
      of Fair ValuePrices
      quoted in active markets for identical instruments
                
                $
                4
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                4Prices
      based on significant other observable inputs
                
                
                97
                
                
                $
                631
                
                
                $
                191
                
                
                
                
                
                
                
                919Prices
      based on significant unobservable inputs
                
                
                2
                
                
                
                15
                
                
                
                38
                
                
                $
                87
                
                
                
                142Fair
      value of contracts outstanding at the end of the period
                
                $
                103
                
                
                $
                646
                
                
                $
                229
                
                
                $
                87
                
                
                $
                1,065
  Because
of PPL Energy Supply's efforts to hedge the value of energy from its generation
assets, PPL Energy Supply sells electricity, capacity and related services and
buys fuel on a forward basis, resulting in open contractual
positions.  If PPL Energy Supply were unable to deliver firm capacity
and energy or to accept the delivery of fuel under its agreements, under certain
circumstances it could be required to pay damages.  These damages
would be based on the difference between the market price and the contract price
of the commodity.  Depending on price volatility in the wholesale
energy markets, such damages could be significant.  Extreme weather
conditions, unplanned power plant outages, transmission disruptions,
nonperformance by counterparties (or their own counterparties) with which it has
energy contracts and other factors could affect PPL Energy Supply's ability to
meet its obligations, or cause significant increases in the market price of
replacement energy.  Although PPL Energy Supply attempts to mitigate
these risks, there can be no assurance that it will be able to fully meet its
firm obligations, that it will not be required to pay damages for failure to
perform, or that it will not experience counterparty nonperformance in the
future.
  Commodity
Price Risk (Trading)
  PPL
Energy Supply's trading contracts mature at various times through
2015.  The following table sets forth changes in the net fair value of
PPL Energy Supply's trading commodity derivative contracts.  See Note
13 to the Financial Statements for additional information.
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008Fair
      value of contracts outstanding at the beginning of the
    period
                
                $
                (37
                )
                
                $
                22
                
                
                $
                (75
                )
                
                $
                16Contracts
      realized or otherwise settled during the period
                
                
                
                
                
                
                (31
                )
                
                
                33
                
                
                
                (31
                )Fair
      value of new contracts entered into during the period
                
                
                9
                
                
                
                31
                
                
                
                35
                
                
                
                23Other
      changes in fair value
                
                
                15
                
                
                
                (6
                )
                
                
                (6
                )
                
                
                8Fair
      value of contracts outstanding at the end of the period
                
                $
                (13
                )
                
                $
                16
                
                
                $
                (13
                )
                
                $
                16
  PPL
Energy Supply will reverse unrealized losses of approximately $1 million over
the next three months as the transactions are realized.
  The
following table segregates the net fair value of PPL Energy Supply's trading
commodity derivative contracts at June 30, 2009 based on whether the fair
value was determined by prices quoted in active markets for identical
instruments or other more subjective means.
  Net
      Asset (Liability)Maturity
      Less Than 1 Year
                
                Maturity
      1-3 Years
                
                Maturity
      4-5 Years
                
                Maturity
      in Excess of 5 Years
                
                Total
      Fair ValueSource
      of Fair ValuePrices
      quoted in active markets for identical instruments
                
                $
                1
                
                
                $
                1
                
                
                
                
                
                
                
                
                
                
                $
                2Prices
      based on significant other observable inputs
                
                
                (1
                )
                
                
                (12
                )
                
                $
                (1
                )
                
                $
                2
                
                
                
                (12
                )Prices
      based on significant unobservable inputs
                
                
                
                
                
                
                (2
                )
                
                
                
                
                
                
                (1
                )
                
                
                (3
                )Fair
      value of contracts outstanding at the end of the period
                
                $
                
                
                
                $
                (13
                )
                
                $
                (1
                )
                
                $
                1
                
                
                $
                (13
                )
  VaR
Models
  PPL
Energy Supply utilizes a VaR model to measure commodity price risk in domestic
gross energy margins for its non-trading and trading portfolios.  This
approach is consistent with how PPL's RMC assesses the market risk of its
commodity business.  VaR is a statistical model that attempts to
estimate the value of potential loss over a given holding period under normal
market conditions at a given confidence level.  PPL Energy Supply
calculates VaR using a Monte Carlo simulation technique based on a five-day
holding period at a 95% confidence level.  On June 30, 2009 and
December 31, 2008, the VaR for PPL Energy Supply's portfolios using
end-of-quarter results for the period was as follows:
  Trading
      VaR
                
                Non-Trading
      VaRJune 30,
                
                Dec.
      31,
                
                June 30,
                
                Dec.
      31,2009
                
                2008
                
                2009
                
                200895%
      Confidence Level, Five-Day Holding PeriodPeriod
      End
                
                $
                4
                
                
                $
                3
                
                
                $
                9
                
                
                $
                10Average
      for the Period
                
                
                2
                
                
                
                10
                
                
                
                11
                
                
                
                14High
                
                
                4
                
                
                
                22
                
                
                
                13
                
                
                
                20Low
                
                
                1
                
                
                
                3
                
                
                
                9
                
                
                
                9
  The
trading portfolio includes all speculative positions, regardless of delivery
period.  All positions not considered speculative are considered
non-trading.  PPL Energy Supply's non-trading portfolio includes PPL
Energy Supply's entire portfolio, including generation, with delivery periods
through the next 12 months.  Both the trading and non-trading VaR
computations exclude FTRs due to the absence of liquid spot and forward
markets.  The fair value of the FTR positions at June 30, 2009
was an unrealized loss of $3 million, as follows:
  2009
                
                2010
                
                2011Trading
      (a)
                
                $
                1Non-trading
                
                
                (1
                )
                
                $
                (2
                )
                
                $
                (1
                )Total
                
                $
                
                
                
                $
                (2
                )
                
                $
                (1
                )
  (a)
              
              The
      amount of trading losses expected to be realized in the next three months
      is insignificant.
  Interest
Rate Risk
  PPL
Energy Supply and its subsidiaries have issued debt to finance their operations,
which exposes them to interest rate risk.  PPL and PPL Energy Supply
utilize various financial derivative instruments to adjust the mix of fixed and
floating interest rates in PPL Energy Supply's debt portfolio, adjust the
duration of its debt portfolio and lock in benchmark interest rates in
anticipation of future financing, when appropriate.  Risk limits under
the risk management program are designed to balance risk exposure to volatility
in interest expense and changes in the fair value of PPL Energy Supply's debt
portfolio due to changes in the absolute level of interest rates.
  At
June 30, 2009, PPL Energy Supply's potential annual exposure to increased
interest expense, based on a 10% increase in interest rates, was $1
million.
  PPL
Energy Supply is also exposed to changes in the fair value of its domestic and
international debt portfolios.  PPL Energy Supply estimated that a 10%
decrease in interest rates at June 30, 2009 would increase the fair value
of its debt portfolio by $196 million.
  PPL and
PPL Energy Supply utilize various risk management instruments to reduce PPL
Energy Supply's exposure to the expected future cash flow variability of its
debt instruments.  These risks include exposure to adverse interest
rate movements for outstanding variable rate debt and for future anticipated
financing.  While PPL Energy Supply is exposed to changes in the fair
value of these instruments, any changes in the fair value of these instruments
are recorded in equity and then reclassified into earnings in the same period
during which the item being hedged affects earnings.  At June 30,
2009, PPL Energy Supply had none of these instruments outstanding.
  PPL and
PPL Energy Supply also utilize various risk management instruments to adjust the
mix of fixed and floating interest rates in PPL Energy Supply's debt
portfolio.  The change in fair value of these instruments, as well as
the offsetting change in the value of the hedged exposure of the debt, is
reflected in earnings.  At June 30, 2009, PPL Energy Supply had
none of these instruments outstanding.
  WPDH
Limited holds a net notional position in cross-currency swaps totaling $302
million to hedge the interest payments and principal of its U.S.
dollar-denominated senior notes with maturity dates ranging from December 2017
to December 2028.  While PPL Energy Supply is exposed to changes in
the fair value of these instruments, any change in the fair value of these
instruments is recorded in equity and reclassified into earnings in the same
period during which the item being hedged affects earnings.  The
estimated fair value of this position, including accrued interest, at
June 30, 2009 was a net asset of $14 million.  WPDH Limited
estimated that a 10% adverse movement in foreign currency exchange rates and
interest rates at June 30, 2009 would decrease the net asset by $40
million.
  Foreign
Currency Risk
  PPL
Energy Supply is exposed to foreign currency risk, primarily through investments
in U.K. affiliates.  In addition, PPL Energy Supply's domestic
operations may make purchases of equipment in currencies other than U.S.
dollars.
  PPL and
PPL Energy Supply have adopted a foreign currency risk management program
designed to hedge certain foreign currency exposures, including firm
commitments, recognized assets or liabilities, anticipated transactions and net
investments.  In addition, PPL Energy Supply enters into financial
instruments to protect against foreign currency translation risk of expected
earnings.
  To
protect the value of a portion of PPL Energy Supply's net investment in WPD, PPL
executed forward contracts to sell British pounds sterling.  The total
notional amount of the contracts outstanding at June 30, 2009 was £55
million.  The settlement dates of these contracts range from September
2009 through June 2011.  At June 30, 2009, the fair value of
these positions was a net asset of $18 million.  PPL Energy Supply
estimated that a 10% adverse movement in foreign currency exchange rates at
June 30, 2009 would decrease the net asset by $9 million.
  To
economically hedge the translation of 2009 expected income denominated in
British pounds sterling to U.S. dollars, PPL entered into a combination of
average rate forwards and average rate options to sell British pounds
sterling.  At June 30, 2009, the total exposure hedged was £61
million.  These forwards and options have termination dates ranging
from July 2009 through December 2009.  At June 30, 2009, the fair
value of these positions was a net liability of $9 million.  PPL
Energy Supply estimated that a 10% adverse movement in foreign currency exchange
rates at June 30, 2009 would increase the net liability by $8
million.
  NDT
Funds - Securities Price Risk
  In
connection with certain NRC requirements, PPL Susquehanna maintains trust funds
to fund certain costs of decommissioning the Susquehanna nuclear
station.  At June 30, 2009, these funds were invested primarily
in domestic equity securities and fixed-rate, fixed-income
securities.  These securities are reflected at fair value on PPL
Energy Supply's Balance Sheet.  The mix of securities is designed to
provide returns sufficient to fund Susquehanna's decommissioning and to
compensate for inflationary increases in decommissioning
costs.  However, the equity securities included in the trusts are
exposed to price fluctuation in equity markets, and the values of fixed-rate,
fixed-income securities are primarily exposed to changes in interest
rates.  PPL actively monitors the investment performance and
periodically reviews asset allocation in accordance with its NDT policy
statement.  At June 30, 2009, a hypothetical 10% increase in
interest rates and a 10% decrease in equity prices would have resulted in an
estimated $33 million reduction in the fair value of the trusts'
assets.  See Notes 13 and 18 to the Financial Statements for
additional information regarding the NDT funds.
  Credit
Risk
  See Notes
11, 13 and 14 to the Financial Statements and "Risk Management - Energy
Marketing & Trading and Other - Credit Risk" in PPL Energy Supply's 2008
Form 10-K for information on credit risk.
  Related
Party Transactions
  PPL
Energy Supply is not aware of any material ownership interests or operating
responsibility by senior management of PPL Energy Supply in outside
partnerships, including leasing transactions with variable interest entities, or
other entities doing business with PPL Energy Supply.
  For
additional information on related party transactions, see Note 11 to the
Financial Statements.
  Acquisitions,
Development and Divestitures
  PPL
Energy Supply continuously evaluates strategic options for its business segments
and, from time to time, PPL Energy Supply and its subsidiaries are involved in
negotiations with third parties regarding acquisitions and dispositions of
businesses and assets, joint ventures and development projects, which may or may
not result in definitive agreements.  Any such transactions may impact
future financial results.  See Note 8 to the Financial Statements for
information regarding such recent transactions.
  PPL
Energy Supply is currently planning incremental capacity increases of 208 MW,
primarily at its existing generating facilities.  Offsetting the
planned capacity increases is an expected reduction of 30 MW due to the
anticipated sale of the majority of PPL Maine's hydroelectric generation
business, for which PPL Maine signed a definitive agreement in July
2009.  See Note 8 to the Financial Statements for additional
information.
  PPL
Energy Supply continuously reexamines development projects based on market
conditions and other factors to determine whether to proceed with the projects,
sell, cancel or expand them, execute tolling agreements or pursue other
options.
  Environmental
Matters
  See Note
10 to the Financial Statements for a discussion of environmental
matters.
  New
Accounting Standards
  See Notes
2 and 20 to the Financial Statements for a discussion of new accounting
standards adopted and pending adoption.
  Application
of Critical Accounting Policies
  PPL
Energy Supply's financial condition and results of
operations are impacted by the methods, assumptions and estimates used in the
application of critical accounting policies.  The following accounting
policies are particularly important to the financial condition or results of
operations of PPL Energy Supply, and require estimates or other judgments of
matters inherently uncertain: price risk management, defined benefits, asset
impairment, leasing, loss accruals, AROs and income tax
uncertainties.  See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations," in PPL Energy Supply's 2008 Form
10-K for a discussion of each critical accounting policy.
 
 PPL ELECTRIC UTILITIES CORPORATION AND
SUBSIDIARIES
  Item
2.  Management's Discussion and Analysis of Financial Condition and
Results of Operations
  Overview
  PPL
Electric is an electricity delivery service provider in eastern and central
Pennsylvania with headquarters in Allentown, Pennsylvania.  Refer to
"Item 1. Business - Background" and "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Overview" in PPL
Electric's 2008 Form 10-K for a description of its business, discussion of its
strategy, and the risks and challenges that it faces in its
business.  See "Forward-Looking Information," Note 10 to the Financial
Statements and the remainder of Item 2 in this Form 10-Q, and "Item 1A. Risk
Factors" and the rest of Item 7 in PPL Electric's 2008 Form 10-K for more
information concerning the material risks and uncertainties that PPL Electric
faces in its business and with respect to its future earnings.
  Market
Events
  The
recent conditions in the financial markets have been disruptive to the processes
of managing credit risk, responding to liquidity needs, measuring financial
instruments at fair value, and managing market price risk.  Bank
credit capacity has been reduced and the cost of renewing or establishing new
credit facilities has increased significantly, thereby making less certain
businesses' ability to enter into long-term energy commitments or reliably
estimate the longer-term cost and availability of credit.
  Credit
Risk
  Credit
risk is the risk that PPL Electric would incur a loss as a result of
nonperformance by counterparties of their contractual
obligations.  PPL Electric maintains credit policies and procedures to
limit counterparty credit risk.  The recent conditions in the
financial and commodity markets have generally increased PPL Electric's exposure
to credit risk.  See Notes 11, 13 and 14 to the Financial Statements
and "Risk Management - Credit Risk" in PPL Electric's 2008 Form 10-K for more
information on credit risk.
  Liquidity
Risk
  Despite
the recent conditions in the financial and capital markets, external financing
activities by domestic electric utilities are being completed, albeit at
higher-than-historical interest rates.  PPL Electric expects to
continue to have access to adequate sources of liquidity through operating cash
flows, cash and cash equivalents, credit facilities and, from time to time,
through the issuance of capital market securities.  See "Financial
Condition - Liquidity and Capital Resources" for an expanded discussion of PPL
Electric's liquidity position and a discussion of financing
transactions.
  Securities
Price Risk
  PPL
Electric participates in and is allocated costs from defined benefit plans
sponsored by PPL.  Declines in the market price of debt and equity
securities result in unrealized losses that reduce the asset values of PPL's
defined benefit plans.  PPL's pension
plan had positive returns in the second quarter of 2009, thereby recovering a
portion of the negative returns incurred in 2008 and the first quarter of
2009.  Determination of the funded status of defined benefit
plans, contribution requirements and net periodic defined benefit costs for
future years are subject to changes in various assumptions, in addition to the
actual performance of the assets in the plans.  See "Application of
Critical Accounting Policies - Defined Benefits" in PPL Electric's 2008 Form
10-K for a discussion of the assumptions and sensitivities regarding those
assumptions.
  The
Economic Stimulus Package
  The
Economic Stimulus Package is intended to stimulate the U.S. economy through
federal tax relief, expansion of unemployment benefits and other social stimulus
provisions, domestic spending for education, health care and infrastructure,
including the energy sector.  A portion of the benefits included in
the Economic Stimulus Package are offered in the form of loan fee reductions,
expanded loan guarantees and secondary market incentives.  Funds from
the Economic Stimulus Package will be allocated to various federal agencies,
such as the DOE, and will also be provided to state agencies through block
grants.  The DOE plans to use a portion of the funds for smart grid
and other efficiency-related programs, and has initiated a process for that
purpose.In
July 2009, PPL Electric proposed to the DOE a $38 million project that would use
smart grid technology to strengthen reliability, save energy and improve
electric service for 60,000 Harrisburg, Pennsylvania area
customers.  PPL Electric is requesting a DOE grant to provide half of
the funding for this pilot program.PPL Electric and its
subsidiaries continue to review the Economic Stimulus Package's provisions to
determine the impact on PPL Electric's transmission projects and other
business-related activities.
  The
following information should be read in conjunction with PPL Electric's
Condensed Consolidated Financial Statements and the accompanying Notes and with
PPL Electric's 2008 Form 10-K.
  Terms and
abbreviations are explained in the glossary.  Dollars are in millions
unless otherwise noted.
  Results
of Operations
  The
following discussion begins with a summary of PPL Electric's
earnings.  "Results of Operations" continues with a description of key
factors that management expects may impact future earnings.  This
section ends with "Statement of Income Analysis," which includes explanations of
significant changes in principal items on PPL Electric's Statements of Income,
comparing the three and six months ended June 30, 2009, with the same
periods in 2008.
  The
results for interim periods can be disproportionately influenced by various
factors and developments and by seasonal variations, and as such, the results of
operations for interim periods do not necessarily indicate results or trends for
the year or for future operating results.
  Earnings
  Net
income available to PPL was:
  Three
      Months Ended June 30,
                
                Six
      Months Ended June 30,2009
                
                2008
                
                2009
                
                2008$
                17
                
                
                $
                32
                
                
                $
                66
                
                
                $
                83
  The
after-tax changes in net income available to PPL between these periods were due
to the following factors.
  June 30,
      2009 vs. June 30, 2008Three
      Months Ended
                
                Six
      Months EndedDelivery
      revenues (net of CTC/ITC amortization, interest expense on transition
      bonds and ancillary charges)
                
                $
                (11
                )
                
                $
                (10
                )Other
      operation and maintenance
                
                
                2
                
                
                
                8Interest
      expense
                
                
                (6
                )
                
                
                (9
                )Special
      items
                
                
                
                
                
                
                (6
                )$
                (15
                )
                
                $
                (17
                )
  ·
              Lower
      delivery revenues for both periods were primarily due to economic
      conditions including industrial customers scaling back on production and a
      true-up of the FERC formula-based transmission revenues recorded in the
      three months ended June 30, 2009.  See Note 2 to the
      Financial Statements for additional information on the true-up. 
      In
      addition, during the second quarter of 2009, weather had an unfavorable
      impact on sales volumes.·
              Lower
      other operation and maintenance expense for the six months ended June 30,
      2009, compared with the same period in 2008, primarily due to decreased
      contractor expenses in 2009 and higher storm costs in 2008, net of
      insurance recoveries.·
              Higher
      interest expense for both periods, primarily due to $400 million of debt
      issuances in 2008 that prefund a portion of 2009 debt
      maturities.
  The
following after-tax amounts, which management considers special items, also had
an impact on earnings for the six months ended June 30, 2009.
  Asset
      impairments
                
                
                $
                (1
                )Workforce
      reduction charge (Note 6)
                
                
                
                (5
                )Total
                
                
                $
                (6
                )
  Earnings
Outlook
  Excluding
special items, PPL Electric projects lower earnings in 2009 compared with 2008,
primarily due to higher financing costs, lower electricity delivery revenues and
higher operation and maintenance expenses.
  See Note
10 to the Financial Statements for a discussion of items that could impact
earnings beyond 2009, including the PUC-approved plan to procure default
electricity supply for 2010 through May 2013, Pennsylvania legislative updates
and other regulatory activities.
  Statement
of Income Analysis --
  Operating
Revenues
  Retail
Electric
  The
decreases in revenues from retail electric operations were attributable
to:
  June 30,
      2009 vs. June 30, 2008Three
      Months Ended
                    
                    Six
      Months EndedDelivery
                    
                    $
                    (28
                    )
                    
                    $
                    (28
                    )PLR
                    
                    
                    (17
                    )
                    
                    
                    (8
                    )Other
                    
                    
                    2
                    
                    
                    
                    3$
                    (43
                    )
                    
                    $
                    (33
                    )
  Retail
electric revenues for both periods were negatively impacted by economic
conditions including industrial customers scaling back on production, and a
true-up of the FERC formula-based transmission revenues.  See Note 2
to the Financial Statements for additional information on the
true-up.  In addition, during the second quarter of 2009, weather had
an unfavorable impact on sales volumes.
  Wholesale
Electric to Affiliate
  PPL
Electric has a contract to sell to PPL EnergyPlus the electricity that PPL
Electric purchases under contracts with NUGs.  The decreases of $10
million and $18 million in wholesale electric to affiliate for the three and six
months ended June 30, 2009, compared with the same periods in 2008, were
primarily due to the expiration of two NUG contracts during
2008.  Substantially all of the remaining NUG contracts will expire by
2010.
  Energy
Purchases
  The
decreases of $13 million and $22 million in energy purchases for the three and
six months ended June 30, 2009, compared with the same periods in 2008,
were primarily due to the expiration of two NUG contracts in 2008 (substantially
all of the remaining NUG contracts will expire by 2010), as well as lower
ancillary charges, which are primarily the result of lower pricing.
  Energy
Purchases from Affiliate
  Energy
purchases from affiliate decreased by $17 million and $9 million for the three
and six months ended June 30, 2009, compared with the same periods in
2008.  The decreases were attributable to unfavorable weather during
the second quarter of 2009 and the impact of economic conditions primarily on
industrial customers, partially offset by higher prices for energy purchased
under the power supply contracts with PPL EnergyPlus that were needed to support
that load.
  Other
Operation and Maintenance
  The
changes in other operation and maintenance expenses were due to:
  June 30,
      2009 vs. June 30, 2008Three
      Months Ended
                
                Six
      Months EndedWorkforce
      reduction charge (Note 6)
                
                
                
                
                
                $
                9Insurance
      recovery of storm costs (Note 11)
                
                
                
                
                
                
                3Uncollectible
      accounts
                
                $
                2
                
                
                
                2Allocation
      of certain corporate service costs (Note 11)
                
                
                (3
                )
                
                
                1Storm
      costs
                
                
                
                
                
                
                (4
                )Contractor
      expenses
                
                
                
                
                
                
                (2
                )Salary/overhead
      expense
                
                
                (3
                )
                
                
                (6
                )Other
                
                
                1
                
                
                
                (3
                )$
                (3
                )
                
                $
  Amortization
of Recoverable Transition Costs
  Amortization
of recoverable transition costs increased by $2 million and $10 million for the
three and six months ended June 30, 2009, compared with the same periods in
2008.  The amortization of recoverable transition costs is based on a
PUC amortization schedule, adjusted for ITC and CTC recoveries in customer rates
and related expenses.  Since the amortization substantially matches
the revenue recorded based on recovery in customer rates, there is minimal
impact on earnings.
  Taxes,
Other Than Income
  Taxes,
other than income decreased by $2 million and $6 million for the three and six
months ended June 30, 2009, compared with the same periods in
2008.  The decreases were primarily due to a decrease in Pennsylvania
gross receipts tax, which was attributable to the decline in delivery
volumes.
  Other
Income (Expense) - net
  See Note
12 to the Financial Statements for details of other income.
  Financing
Costs
  The
increases in financing costs, which include "Interest Expense" and "Interest
Expense with Affiliate," were due to:
  June 30,
      2009 vs. June 30, 2008Three
      Months Ended
                
                Six
      Months EndedLong-term debt
      interest expense
                
                $
                6
                
                
                $
                8Interest
      on PLR contract collateral (Note 11)
                
                
                (2
                )
                
                
                (4
                )Other
                
                
                1
                
                
                
                1$
                5
                
                
                $
                5
  Income
Taxes
  The
decreases in income taxes were due to:
  June 30,
      2009 vs. June 30, 2008Three
      Months Ended
                                    
                                    Six
      Months EndedTax
      reserve adjustments
                                    
                                    $
                                    1Lower
      pre-tax book income
                                    
                                    
                                    (9
                                    )
                                    
                                    $
                                    (11
                                    )Other
                                    
                                    
                                    (1
                                    )
                                    
                                    
                                    (2
                                    )$
                                    (9
                                    )
                                    
                                    $
                                    (13
                                    )
  See Note
5 to the Financial Statements for additional information on income
taxes.
  Financial
Condition
  Liquidity
and Capital Resources
  PPL
Electric continues to focus on maintaining a strong credit profile and liquidity
position during the disruptive conditions in the financial markets and
historically difficult bank and capital market conditions.  PPL
Electric expects to continue to have adequate liquidity available through
operating cash flows, cash and cash equivalents, its credit facilities and, as
necessary, the issuance of capital market securities.
  PPL
Electric had the following at:
  June 30,
      2009
                
                December
      31, 2008Cash
      and cash equivalents
                
                $
                520
                
                
                $
                483Short-term
      debt
                
                
                
                
                
                
                95
  The $37
million increase in PPL Electric's cash and cash equivalents position was
primarily the net result of:
  ·
              proceeds
      of $298 million from the issuance of long-term debt;·
              the
      net receipt of $221 million under a demand loan with an
      affiliate;·
              the
      payment of $157 million of dividends on common stock and preferred
      securities;·
              $125
      million of capital expenditures;·
              a
      net decrease in short-term debt of $95 million;·
              $91
      million of cash used in operating activities; and·
              the
      retirement of $9 million of long-term
debt.
  Credit
Facilities
  At
June 30, 2009, PPL Electric's total committed borrowing capacity under its
credit facilities and the use of this borrowing capacity were:
  Committed
      Capacity
                
                Borrowed
                
                Letters
      of Credit Issued
                
                UnusedCapacity5-year
      Syndicated Credit Facility (a)
                
                $
                190
                
                
                
                
                
                
                $
                1
                
                
                $
                189Asset-backed
      Credit Facility (b)
                
                
                150
                
                
                
                
                
                
                
                n/a
                
                
                
                150Total
      PPL Electric Credit Facilities
                
                $
                340
                
                
                
                
                
                
                $
                1
                
                
                $
                339
  (a)
              
              The
      commitments under this credit facility are currently provided by a diverse
      bank group consisting of 20 banks, with no one bank providing more than
      18% of the total committed capacity.(b)
              
              At
      June 30, 2009, based on accounts receivable and unbilled revenue
      pledged, $150 million was available for borrowing under the asset-backed
      credit facility.  In July 2009, PPL Electric and a subsidiary
      extended the expiration date of the credit agreement related to the
      asset-backed commercial paper program to July
  2010.
  See Note
7 to the Financial Statements for further discussion of PPL Electric's credit
facilities.
  Commercial
Paper
  Market
conditions to issue commercial paper with ratings of P-2, A-2 and F-2 by
Moody's, S&P and Fitch have improved since 2008.  However, they
continue to be impacted by the volatility experienced in the broader financial
markets.  Based on its current cash position and anticipated cash
flows, PPL Electric currently does not expect to need to issue any commercial
paper during 2009, but it may do so from time to time to facilitate short-term
cash flow needs.
  Financing
Activities
  In May
2009, PPL Electric issued $300 million of 6.25% First Mortgage Bonds due 2039
(6.25% Bonds).  The 6.25% Bonds may be redeemed any time prior to
maturity at PPL Electric's option at make-whole redemption
prices.  PPL Electric received proceeds of $296 million, net of a
discount and underwriting fees, from the issuance of the 6.25%
Bonds.  Approximately $86 million of the proceeds will be used to
partially fund the repayment at maturity of approximately $486 million
outstanding aggregate principal amount of PPL Electric's Senior Secured Bonds,
6-1/4% Series, due August 2009.  The balance of such repayment will be
funded from the issuance in October 2008 of $400 million of 7.125% Senior
Secured Bonds due 2013.  The balance of the proceeds from the issuance
of the 6.25% Bonds is being used for general corporate purposes, including
capital expenditures.
  In June
2009, PPL Electric repaid its $9 million obligation under a Variable Rate
Pollution Control Facilities Note in connection with the early redemption in
full of the underlying pollution control revenue bonds that were issued by the
Indiana County Industrial Development Authority and due in June
2027.
  Rating
Agency Decisions
  Moody's,
S&P and Fitch periodically review the credit ratings on the debt and
preferred securities of PPL Electric.  Based on their respective
independent reviews, the rating agencies may make certain ratings revisions or
ratings affirmations.
  A credit
rating reflects an assessment by the rating agency of the creditworthiness
associated with an issuer and particular securities that it
issues.  The credit ratings of PPL Electric are based on information
provided by PPL Electric and other sources.  The ratings of Moody's,
S&P and Fitch are not a recommendation to buy, sell or hold any securities
of PPL Electric.  Such ratings may be subject to revisions or
withdrawal by the agencies at any time and should be evaluated independently of
each other and any other rating that may be assigned to the
securities.  A downgrade in PPL Electric's credit ratings could result
in higher borrowing costs and reduced access to capital markets.
  In
January 2009, S&P completed a review of PPL Electric, upon which it revised
its outlook to negative from stable and affirmed the A- issuer rating of PPL
Electric.  S&P stated in its press release that the revision in
its outlook reflects the linkage with PPL, whose outlook was also revised to
negative from stable, along with their expectation that PPL Electric's financial
metrics could weaken beginning in 2010.
  In May
2009, Moody's completed a review of PPL Electric.  As a result of that
review, Moody's revised its outlook for PPL Electric to negative from
stable.  Moody's stated in its press release that the revision in the
outlook for PPL Electric reflects Moody's expectation that PPL Electric's
financial metrics will deteriorate beyond 2009 and considers the potential for
additional pressure on cash flows.
  Fitch did
not take any actions related to PPL Electric during the six months ended June
30, 2009.
  For
additional information on PPL Electric's liquidity and capital resources, see
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations," in PPL Electric's 2008 Form 10-K.
  Risk
Management
  Market
Risk
  Commodity
Price Risk - PLR Contracts through 2009
  PPL
Electric and PPL EnergyPlus have power supply agreements under which PPL
EnergyPlus sells to PPL Electric (under a predetermined pricing arrangement)
energy and capacity to fulfill PPL Electric's PLR obligation through
2009.  As a result, PPL Electric has shifted any electric price risk
relating to its PLR obligation to PPL EnergyPlus through 2009.  See
Note 11 to the Financial Statements for information regarding credit risk
associated with the PLR contracts with PPL EnergyPlus.
  Commodity
Price Risk - PLR Contracts Subsequent to 2009
  PPL
Electric will provide PLR service beginning January 1, 2010 under a PUC-approved
plan through which PPL Electric will fully recover all incurred costs including
administrative costs.  The plan covers the period through December 31,
2010.  Under the plan, PPL Electric has entered into various
full-requirement power purchase agreements with multiple wholesale suppliers
that include fixed prices.  As a result, PPL Electric has shifted any
electric price risk relating to its PLR obligation to those wholesale suppliers
through 2010.  In June 2009, PPL Electric received PUC approval of a
plan with a similar structure, including cost recovery, covering the period from
January 1, 2011 through May 31, 2013.  See Note 10 the Financial
Statements for information on the PUC-approved procurement plan and other
ongoing Pennsylvania regulatory and legislative activities.
  Interest
Rate Risk
  PPL
Electric has issued debt to finance its operations, which exposes it to interest
rate risk.  At June 30, 2009, PPL Electric's potential annual
exposure to increased interest expense, based on a 10% increase in interest
rates, was not significant.
  PPL
Electric is also exposed to changes in the fair value of its debt
portfolio.  PPL Electric estimated that a 10% decrease in interest
rates at June 30, 2009, would increase the fair value of its debt portfolio
by $73 million.
  Credit
Risk
  See Notes
11, 13 and 14 to the Financial Statements and "Risk Management - Credit Risk" in
PPL Electric's 2008 Form 10-K for information on credit risk.
  Related
Party Transactions
  PPL
Electric is not aware of any material ownership interests or operating
responsibility by senior management of PPL Electric in outside partnerships,
including leasing transactions with variable interest entities, or other
entities doing business with PPL Electric.
  For
additional information on related party transactions, see Note 11 to the
Financial Statements.
  Environmental
Matters
  See Note
10 to the Financial Statements for a discussion of environmental
matters.
  New
Accounting Standards
  See Notes
2 and 20 to the Financial Statements for a discussion of new accounting
standards adopted and pending adoption.
  Application
of Critical Accounting Policies
  PPL
Electric's financial condition and results of operations are impacted by the
methods, assumptions and estimates used in the application of critical
accounting policies.  The following accounting policies are
particularly important to the financial condition or results of operations of
PPL Electric, and require estimates or other judgments of matters inherently
uncertain: defined benefits, loss accruals, income tax uncertainties and
regulation.  See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations," in PPL Electric's 2008 Form 10-K
for a discussion of each critical accounting policy.
 
 PPL
CORPORATION
 PPL
ENERGY SUPPLY, LLC
 PPL
ELECTRIC UTILITIES CORPORATION
  Item
3.  Quantitative and Qualitative Disclosures About Market
Risk
  Reference
is made to "Risk Management - Energy Marketing & Trading and Other" for PPL
and PPL Energy Supply and "Risk Management" for PPL Electric in Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
  Item
4.  Controls and Procedures
  PPL
      Corporation(a)
              
              Evaluation
      of disclosure controls and procedures.The
      registrant's principal executive officer and principal financial officer,
      based on their evaluation of the registrant's disclosure controls and
      procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
      Exchange Act of 1934) have concluded that, as of June 30, 2009, the
      registrant's disclosure controls and procedures are effective to ensure
      that material information relating to the registrant and its consolidated
      subsidiaries is recorded, processed, summarized and reported within the
      time periods specified by the SEC's rules and forms, particularly during
      the period for which this quarterly report has been
      prepared.  The aforementioned principal officers have concluded
      that the disclosure controls and procedures are also effective to ensure
      that information required to be disclosed in reports filed under the
      Exchange Act is accumulated and communicated to management, including the
      principal executive and principal financial officer, to allow for timely
      decisions regarding required disclosure.(b)
              
              Change
      in internal controls over financial reporting.The
      registrant's principal executive officer and principal financial officer
      have concluded that there were no changes in the registrant's internal
      control over financial reporting during the registrant's second fiscal
      quarter that have materially affected, or are reasonably likely to
      materially affect, the registrant's internal control over financial
      reporting.
  Item
4(T).  Controls and Procedures
  PPL
      Energy Supply, LLC and PPL Electric Utilities
  Corporation(a)
              
              Evaluation
      of disclosure controls and procedures.The
      registrants' principal executive officers and principal financial
      officers, based on their evaluation of the registrants' disclosure
      controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of
      the Securities Exchange Act of 1934) have concluded that, as of
      June 30, 2009, the registrants' disclosure controls and procedures
      are effective to ensure that material information relating to the
      registrants and their consolidated subsidiaries is recorded, processed,
      summarized and reported within the time periods specified by the SEC's
      rules and forms, particularly during the period for which this quarterly
      report has been prepared.  The aforementioned principal officers
      have concluded that the disclosure controls and procedures are also
      effective to ensure that information required to be disclosed in reports
      filed under the Exchange Act is accumulated and communicated to
      management, including the principal executive and principal financial
      officers, to allow for timely decisions regarding required
      disclosure.(b)
              
              Change
      in internal controls over financial reporting.The
      registrants' principal executive officers and principal financial officers
      have concluded that there were no changes in the registrants' internal
      control over financial reporting during the registrants' second fiscal
      quarter that have materially affected, or are reasonably likely to
      materially affect, the registrants' internal control over financial
      reporting.
  PART
II.  OTHER INFORMATION
  Item
      1.  Legal ProceedingsFor
      additional information regarding various pending administrative and
      judicial proceedings involving regulatory, environmental and other
      matters, which information is incorporated by reference into this Part II,
      see:·
              
              "Item
      3. Legal Proceedings" in PPL's, PPL Energy Supply's and PPL Electric's
      2008 Form 10-K; and·
              
              Note
      10 of the registrants' "Combined Notes to Condensed Consolidated Financial
      Statements" in Part I of this
report.
  Item
      1A.  Risk FactorsThere
      have been no material changes in PPL's, PPL Energy Supply's and PPL
      Electric's risk factors from those disclosed in "Item 1A. Risk Factors" of
      the 2008 Form 10-K.
  Item
      4.  Submission of Matters to a Vote of Security
      HoldersAt
      PPL's Annual Meeting of Shareowners held on May 20, 2009, the
      shareowners:(1)
              
              Elected
      the three nominees for the office of director. The votes for individual
      nominees were:Number
      of VotesFor
              
              Withhold
      AuthorityJohn W. Conway
              
              281,439,443
              
              17,379,532E.
      Allen Deaver
              
              290,142,322
              
              8,676,653James H. Miller
              
              289,456,305
              
              9,362,670Directors
      whose terms of office continued were Frederick M. Bernthal, Louise K.
      Goeser, Stuart E. Graham, Stuart Heydt,  Craig A. Rogerson,
      W. Keith Smith and Keith H. Williamson.(2)
              
              Ratified
      the appointment of Ernst & Young LLP as independent registered public
      accounting firm for the year ending December 31, 2009.  The
      vote was 295,308,508 in favor and 2,309,466 against, with 1,201,001
      abstaining and no broker non-votes.(3)
              
              Approved
      a non-binding shareowner proposal for the election of each director
      annually.  The vote was 202,494,314 in favor and 54,374,726
      against, with 2,818,498 abstaining and 39,131,437 broker
      non-votes.At
      PPL Electric's Annual Meeting of Shareowners held on May 21, 2009, the
      shareowners:(1)
              
              Elected
      all six nominees for the office of director.  Dean A.
      Christiansen, David G. DeCampli, Paul A. Farr, Robert J. Grey, James H.
      Miller and William H. Spence were elected with 66,368,056 votes cast for
      each director, no votes cast against and no votes
    abstaining.
 
 Item6.  Exhibits10(a)
              -
              Amendment
      to Form of Severance Agreement entered into between PPL Corporation and
      the Named Executive Officers10(b)
              -
              Employment
      letter dated May 22, 2009 between PPL Services Corporation and Gregory N.
      Dudkin10(c)
              -
              £210
      million Multicurrency Revolving Facility Agreement, dated July 7, 2009,
      between Western Power Distribution (South West) plc and HSBC Bank plc,
      Lloyds TSB Bank plc and Clydesdale Bank plc12(a)
              -
              PPL
      Corporation and Subsidiaries Computation of Ratio of Earnings to Combined
      Fixed Charges and Preferred Stock Dividends12(b)
              -
              PPL
      Energy Supply, LLC and Subsidiaries Computation of Ratio of Earnings to
      Fixed Charges12(c)
              -
              PPL
      Electric Utilities Corporation and Subsidiaries Computation of Ratio of
      Earnings to Combined Fixed Charges and Preferred Stock
      DividendsCertifications
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, for the
      quarterly period ended June 30, 2009, filed by the following officers
      for the following companies:31(a)
              -
              James
      H. Miller for PPL Corporation31(b)
              -
              Paul
      A. Farr for PPL Corporation31(c)
              -
              James
      H. Miller for PPL Energy Supply, LLC31(d)
              -
              Paul
      A. Farr for PPL Energy Supply, LLC31(e)
              -
              David
      G. DeCampli for PPL Electric Utilities Corporation31(f)
              -
              J.
      Matt Simmons, Jr. for PPL Electric Utilities CorporationCertifications
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, for the
      quarterly period ended June 30, 2009, furnished by the following
      officers for the following companies:32(a)
              -
              James
      H. Miller for PPL Corporation32(b)
              -
              Paul
      A. Farr for PPL Corporation32(c)
              -
              James
      H. Miller for PPL Energy Supply, LLC32(d)
              -
              Paul
      A. Farr for PPL Energy Supply, LLC32(e)
              -
              David
      G. DeCampli for PPL Electric Utilities Corporation32(f)
              -
              J.
      Matt Simmons, Jr. for PPL Electric Utilities
  Corporation
 
 SIGNATURES
  Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrants have
duly caused this report to be signed on their behalf by the undersigned
thereunto duly authorized.  The signature for each undersigned company
shall be deemed to relate only to matters having reference to such company or
its subsidiaries.
  PPL
      Corporation(Registrant)PPL
      Energy Supply, LLC(Registrant)PPL
      Electric Utilities Corporation(Registrant)Date:  August
      4, 2009
              /s/  J.
      Matt Simmons, Jr.J.
      Matt Simmons, Jr.Vice
      President and Controller(Principal
      Accounting Officer)