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 March 31, 2005           
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | OR                                                                                                                                                              
|[  ] | TRANSITION REPORT PURSUANT TO SECTION
        13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition
        period from _________ to ___________



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



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



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

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, 189,753,784
        shares outstanding at April 29, 2005, excluding 31,056,521 shares held
        as treasury stock                             
| | ---------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                    |                                                                                                                                                                                
| | 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, 78,029,863 shares
        outstanding and all held by PPL Corporation at April 29, 2005, excluding
        79,270,519 shares held as treasury stock
| |                                    |                                                                                                                                                                                

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 MARCH 31, 2005

Table of Contents



|                                                                                                                                                      | Page                                                                                                          
|----------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------
|                                                                                                                                                      |                                                                                                               
|GLOSSARY OF TERMS AND
        ABBREVIATIONS                                                                                                           | i                                                                                                             
|                                                                                                                                                      |                                                                                                               
|FORWARD-LOOKING INFORMATION                                                                                                                           | 1                                                                                                             
|                                                                                                                                                      |                                                                                                               
|PART I. FINANCIAL INFORMATION                                                                                                                         |                                                                                                               
|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      | Item 1. Financial Statements                                                                                  
|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      |                                                                                                               
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|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      | Item 2. Management's
        Discussion and Analysis of Financial Condition and Results 
        of Operations
|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      | Item
        3. Quantitative and Qualitative Disclosures About Market Risk                                    
|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      | Item
        4. Controls and Procedures                                                                       
|                                                                                                                                                      |                                                                                                               
|PART II. OTHER INFORMATION                                                                                                                            |                                                                                                               
|                                                                                                                                                      | Item
        1. Legal Proceedings                                                                             
|                                                                                                                                                      | Item
        2. Unregistered Sales of Equity Securities and Use of Proceeds                                   
|                                                                                                                                                      | Item
        6. Exhibits                                                                                      
|                                                                                                                                                      |                                                                                                               
|SIGNATURES                                                                                                                                            | 62                                                                                                            
|                                                                                                                                                      |                                                                                                               
|COMPUTATION OF RATIO
        OF EARNINGS TO FIXED CHARGES                                                                                             |                                                                                                               
|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      |                                                                                                               
|CERTIFICATES OF PRINCIPAL
        EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL
        OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 |                                                                                                               
|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      |                                                                                                               
|CERTIFICATES OF PRINCIPAL
        EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL
        OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 |                                                                                                               
|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      |                                                                                                               
|                                                                                                                                                      |                                                                                                               







---







£ - British pounds sterling.

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

2004 Form 10-K - Annual Report to the SEC on Form 10-K for the
  year ended December 31, 2004.

APA - Asset Purchase Agreement.

ARO - asset retirement obligation.

Bcf - billion cubic feet.

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

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

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

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

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

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

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

DIG- Derivatives Implementation Group.



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.

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

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

FIN- FASB Interpretation.

Fitch- Fitch Ratings.

FSP - FASB Staff Position.

GAAP - generally accepted accounting principles.

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

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

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.

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.

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

NPDES - National Pollutant Discharge Elimination System.

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

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

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

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

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

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

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

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

PP&E- property, plant and equipment.

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

PPL Capital Funding - PPL Capital Funding, Inc., a wholly owned
  financing subsidiary of PPL.

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



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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

PURTA - the Pennsylvania Public Utility Realty Tax Act.

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.

SCR - selective catalytic reduction, a pollution control process.

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

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

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

S&P - Standard & Poor's Ratings Services.

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



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

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

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.

---

FORWARD-LOOKING INFORMATION

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

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

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

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

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|PART
        I. FINANCIAL INFORMATION                                                                                                  
|---------------------------------------------------------------------------------------------------------------------------------------
|Item 1. Financial Statements                                                                                                           
|                                                                                                                                       
|CONDENSED CONSOLIDATED STATEMENT OF
        INCOME                                                                                     
|PPL Corporation and Subsidiaries                                                                                                       
|(Unaudited)                                                                                                                            
|(Millions of Dollars, except per share
        data)                                                                                   
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|Operating Revenues                                                                                                                     
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|Operating Expenses                                                                                                                     
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|Operating Income                                                                                                                       
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|Other Income - net                                                                                                                     
|                                                                                                                                       
|Interest Expense                                                                                                                       
|                                                                                                                                       
|Income from Continuing Operations
        Before Income Taxes, Minority Interest
          and Dividends on Preferred Stock            
|                                                                                                                                       
|Income Taxes                                                                                                                           
|                                                                                                                                       
|Minority Interest                                                                                                                      
|                                                                                                                                       
|Dividends on Preferred Stock                                                                                                           
|                                                                                                                                       
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|Income from Continuing Operations                                                                                                      
|                                                                                                                                       
|Loss from Discontinued Operations
        (net of income taxes)                                                                        
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|Net Income                                                                                                                             
|                                                                                                                                       
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|Earnings Per Share of Common
        Stock:                                                                                            
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|Dividends Declared Per Share
        of Common Stock                                                                                   
|                                                                                                                                       
|The accompanying
        Notes to Condensed Consolidated Financial Statements are an integral part
        of the financial statements.

---

|CONDENSED
        CONSOLIDATED STATEMENT OF CASH FLOWS                                                                                 
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Corporation and Subsidiaries                                                                                                       
|(Unaudited)                                                                                                                            
|(Millions of Dollars)                                                                                                                  
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Net Cash Provided
        by Operating Activities                                                                                      
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|Cash Flows From
        Investing Activities                                                                                           
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|Cash Flows From
        Financing Activities                                                                                           
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|Effect of Exchange
        Rates on Cash and Cash Equivalents                                                                          
|                                                                                                                                       
|                                                                                                                                       
|Net Increase in
        Cash and Cash Equivalents                                                                                      
|Cash and Cash Equivalents
        at Beginning of Period                                                                               
|                                                                                                                                       
|Cash and Cash Equivalents
        at End of Period                                                                                     
|                                                                                                                                       
|                                                                                                                                       
|The
        accompanying Notes to Condensed Consolidated Financial Statements are
        an integral part of the financial statements.

---

|CONDENSED
        CONSOLIDATED BALANCE SHEET                                                                                           
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Corporation and Subsidiaries                                                                                                       
|(Unaudited)                                                                                                                            
|(Millions of Dollars)                                                                                                                  
|                                                                                                                                       
|                                                                                                                                       
|Assets                                                                                                                                 
|                                                                                                                                       
|Current Assets                                                                                                                         
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|Investments                                                                                                                            
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|Property, Plant and Equipment - net                                                                                                    
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|Regulatory and Other Noncurrent Assets                                                                                                 
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|                                                                                                                                       
|The accompanying
        Notes to Condensed Consolidated Financial Statements are an integral part
        of the financial statements.

---

|CONDENSED CONSOLIDATED BALANCE SHEET                                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Corporation and Subsidiaries                                                                                                       
|(Unaudited)                                                                                                                            
|(Millions of Dollars)                                                                                                                  
|                                                                                                                                       
|                                                                                                                                       
|Liabilities and Equity                                                                                                                 
|                                                                                                                                       
|Current Liabilities                                                                                                                    
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|Long-term Debt                                                                                                                         
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|Long-term Debt with Affiliate
        Trust                                                                                            
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|Deferred Credits and Other
        Noncurrent Liabilities                                                                              
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|Commitments and Contingent
        Liabilities                                                                                         
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|Minority Interest                                                                                                                      
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|Preferred Stock without Sinking
        Fund Requirements                                                                              
|                                                                                                                                       
|Shareowners' Common Equity                                                                                                             
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
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|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|The accompanying
        Notes to Condensed Consolidated Financial Statements are an integral part
        of the financial statements.

---



|CONDENSED
        CONSOLIDATED STATEMENT OF INCOME                                                                                     
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Energy Supply, LLC and Subsidiaries                                                                                                
|(Unaudited)                                                                                                                            
|(Millions of Dollars)                                                                                                                  
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Operating Revenues                                                                                                                     
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Operating Expenses                                                                                                                     
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Operating Income                                                                                                                       
|                                                                                                                                       
|Other Income - net                                                                                                                     
|                                                                                                                                       
|Interest Expense                                                                                                                       
|                                                                                                                                       
|Interest Expense with Affiliate                                                                                                        
|                                                                                                                                       
|Income from Continuing Operations
        Before Income Taxes and Minority Interest                                                    
|                                                                                                                                       
|Income Taxes                                                                                                                           
|                                                                                                                                       
|Minority Interest                                                                                                                      
|                                                                                                                                       
|Income from Continuing Operations                                                                                                      
|                                                                                                                                       
|Loss from Discontinued Operations
        (net of income taxes)                                                                        
|                                                                                                                                       
|Net Income                                                                                                                             
|                                                                                                                                       
|                                                                                                                                       
|The accompanying
        Notes to Condensed Consolidated Financial Statements are an integral part
        of the financial statements.

---

|CONDENSED
        CONSOLIDATED STATEMENT OF CASH FLOWS                                                                                 
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Energy Supply, LLC and Subsidiaries                                                                                                
|(Unaudited)                                                                                                                            
|(Millions of Dollars)                                                                                                                  
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Net Cash Provided by Operating
        Activities                                                                                      
|                                                                                                                                       
|                                                                                                                                       
|Cash Flows From Investing
        Activities                                                                                           
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Cash Flows From Financing
        Activities                                                                                           
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Effect of Exchange Rates
        on Cash and Cash Equivalents                                                                          
|                                                                                                                                       
|                                                                                                                                       
|Net Increase in Cash and
        Cash Equivalents                                                                                      
|Cash and Cash Equivalents at
        Beginning of Period                                                                               
|                                                                                                                                       
|Cash and Cash Equivalents at
        End of Period                                                                                     
|                                                                                                                                       
|                                                                                                                                       
|The accompanying
        Notes to Condensed Consolidated Financial Statements are an integral part
        of the financial statements.

---

|CONDENSED
        CONSOLIDATED BALANCE SHEET                                                                                           
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Energy Supply, LLC and Subsidiaries                                                                                                
|(Unaudited)                                                                                                                            
|(Millions of Dollars)                                                                                                                  
|                                                                                                                                       
|                                                                                                                                       
|Assets                                                                                                                                 
|                                                                                                                                       
|Current Assets                                                                                                                         
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Investments                                                                                                                            
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Property, Plant and Equipment
        - net                                                                                            
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
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|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Other Noncurrent Assets                                                                                                                
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|The accompanying
        Notes to Condensed Consolidated Financial Statements are an integral part
        of the financial statements.

---

|CONDENSED CONSOLIDATED BALANCE SHEET                                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Energy Supply, LLC and Subsidiaries                                                                                                
|(Unaudited)                                                                                                                            
|(Millions of Dollars)                                                                                                                  
|                                                                                                                                       
|                                                                                                                                       
|Liabilities and Equity                                                                                                                 
|                                                                                                                                       
|Current Liabilities                                                                                                                    
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Long-term Debt                                                                                                                         
|                                                                                                                                       
|                                                                                                                                       
|Note Payable to
        Affiliate                                                                                                      
|                                                                                                                                       
|                                                                                                                                       
|Long-term Debt
        with Affiliate Trust                                                                                            
|                                                                                                                                       
|                                                                                                                                       
|Deferred Credits and Other
        Noncurrent Liabilities                                                                              
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Commitments and Contingent
        Liabilities                                                                                         
|                                                                                                                                       
|                                                                                                                                       
|Minority Interest                                                                                                                      
|                                                                                                                                       
|                                                                                                                                       
|Member's Equity                                                                                                                        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|The accompanying
        Notes to Condensed Consolidated Financial Statements are an integral part
        of the financial statements.

---

|CONDENSED
        CONSOLIDATED STATEMENT OF INCOME                                                                                     
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Electric Utilities Corporation and
        Subsidiaries                                                                            
|(Unaudited)                                                                                                                            
|(Millions of Dollars)                                                                                                                  
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Operating Revenues                                                                                                                     
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Operating Expenses                                                                                                                     
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Operating Income                                                                                                                       
|                                                                                                                                       
|Other Income - net                                                                                                                     
|                                                                                                                                       
|Interest Expense                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Income Before Income Taxes                                                                                                             
|                                                                                                                                       
|Income Taxes                                                                                                                           
|                                                                                                                                       
|                                                                                                                                       
|Income Before Dividends on
        Preferred Stock                                                                                     
|                                                                                                                                       
|Dividends on Preferred Stock                                                                                                           
|                                                                                                                                       
|                                                                                                                                       
|Income Available to PPL Corporation                                                                                                    
|                                                                                                                                       
|                                                                                                                                       
|The accompanying
        Notes to Condensed Consolidated Financial Statements are an integral part
        of the financial statements.

---

|CONDENSED
        CONSOLIDATED STATEMENT OF CASH FLOWS                                                                                 
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Electric Utilities Corporation and
        Subsidiaries                                                                            
|(Unaudited)                                                                                                                            
|(Millions of Dollars)                                                                                                                  
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Net Cash Provided by Operating
        Activities                                                                                      
|                                                                                                                                       
|                                                                                                                                       
|Cash Flows From Investing
        Activities                                                                                           
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Cash Flows From Financing
        Activities                                                                                           
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Net Decrease in Cash and
        Cash Equivalents                                                                                      
|Cash and Cash Equivalents at
        Beginning of Period                                                                               
|                                                                                                                                       
|Cash and Cash Equivalents at
        End of Period                                                                                     
|                                                                                                                                       
|                                                                                                                                       
|The accompanying
        Notes to Condensed Consolidated Financial Statements are an integral part
        of the financial statements.

---

|CONDENSED
        CONSOLIDATED BALANCE SHEET                                                                                           
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Electric Utilities Corporation and
        Subsidiaries                                                                            
|(Unaudited)                                                                                                                            
|(Millions of Dollars)                                                                                                                  
|                                                                                                                                       
|                                                                                                                                       
|Assets                                                                                                                                 
|                                                                                                                                       
|Current Assets                                                                                                                         
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Property, Plant and Equipment
        - net                                                                                            
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Regulatory and Other Noncurrent
        Assets                                                                                         
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|The accompanying
        Notes to Condensed Consolidated Financial Statements are an integral part
        of the financial statements.

---

|CONDENSED CONSOLIDATED BALANCE SHEET                                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Electric Utilities Corporation and
        Subsidiaries                                                                            
|(Unaudited)                                                                                                                            
|(Millions of Dollars)                                                                                                                  
|                                                                                                                                       
|                                                                                                                                       
|Liabilities and Equity                                                                                                                 
|                                                                                                                                       
|Current Liabilities                                                                                                                    
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Long-term Debt                                                                                                                         
|                                                                                                                                       
|                                                                                                                                       
|Deferred Credits
        and Other Noncurrent Liabilities                                                                              
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Commitments and
        Contingent Liabilities                                                                                         
|                                                                                                                                       
|                                                                                                                                       
|Preferred Stock
        without Sinking Fund Requirements                                                                              
|                                                                                                                                       
|                                                                                                                                       
|Shareowner's Common
        Equity                                                                                                     
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|The
        accompanying Notes to Condensed Consolidated Financial Statements are
        an integral part of the financial statements.





---



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 (including normal, recurring accruals) 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. The Balance Sheet as of December 31, 2004, is derived
      from each Registrant's 2004 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 2004 Form 10-K. The results of
      operations for the three months ended March 31, 2005, are not necessarily
      indicative of the results to be expected for the full year ending December
      31, 2005, or other future periods, because results for interim periods can
      be disproportionately influenced by various factors and developments and
      seasonal variations.
    Certain amounts in the March 31, 2004, and December 31, 2004, financial
      statements have been reclassified to conform to the presentation in the
      March 31, 2005, financial statements.
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 2004 Form
      10-K.
    (PPL and PPL Energy Supply)
    Depreciation
    PPL subsidiaries periodically review the depreciable lives of their fixed
      assets. In light of significant planned environmental capital expenditures,
      PPL Generation conducted studies of depreciable lives of Montour Units 1
      and 2 and Brunner Island Unit 3 during the first quarter of 2005. Based
      on these studies, management determined that the useful lives for these
      units should be extended from 2025 to 2035. Therefore, effective January
      1, 2005, PPL Generation revised the useful lives of these fossil units.
      The effect of this change for the first quarter of 2005 was to increase
      net income by approximately $2 million, as a result of lower depreciation.
    Goodwill
    The change in the carrying amount of "Goodwill," as shown on the Balance
      Sheet, was due to the effect of foreign exchange rates.
    (PPL, PPL Energy Supply and PPL Electric)
    Stock-Based Compensation
    Effective January 1, 2003, PPL and its subsidiaries prospectively adopted
      the fair value method of accounting for stock-based compensation. If the
      fair value method had been used to account for all outstanding stock-based
      compensation awards in both periods, there would not have been a material
      impact on reported net income and EPS.
    See Note 16 for a discussion of SFAS 123 (revised 2004), "Share-Based Payment."
    In SFAS 123 (revised 2004) the FASB provided additional guidance on the
      requirement to accelerate expense recognition for employees who are at or
      near retirement age and who are under a plan that allows for accelerated
      vesting upon an employee's retirement which is relevant to prior accounting
      for stock-based compensation. PPL's plans allow for accelerated vesting
      upon an employee's retirement. Thus, for employees who are retirement eligible
      when stock-based awards are granted, PPL will recognize the expense immediately.
      For employees who are not retirement eligible when stock-based awards are
      granted, PPL will amortize the awards over the shorter of the vesting period
      or the period up to the employee's attainment of retirement age. Retirement
      eligible has been defined as the early retirement age of 55 under PPL's
      primary pension plans.
    (PPL)
    In the first quarter of 2005, PPL recorded an adjustment of approximately
      $10 million after tax, or $0.06 per share, to accelerate stock-based compensation
      expense for retirement-eligible employees. Approximately $5 million of the
      total, or $0.03 per share, was related to prior periods. The prior period
      amounts were not material to previously issued financial statements.
    (PPL Energy Supply)
    In the first quarter of 2005, PPL Energy Supply recorded a charge of approximately
      $7 million after tax to accelerate stock-based compensation expense for
      retirement-eligible employees. Approximately $4 million of the after-tax
      total was related to prior periods. The prior period amounts were not material
      to previously issued financial statements.
    (PPL Electric)
    In the first quarter of 2005, PPL Electric recorded a charge of approximately
      $3 million after tax to accelerate stock-based compensation expense for
      retirement-eligible employees. Approximately $1 million of the after-tax
      total was related to prior periods. The prior period amounts were not material
      to previously issued financial statements.
    New Accounting Standards
    See Note 16 for information on 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 2004
      Form 10-K for a discussion of reportable segments. As of March 31, 2005,
      there were no changes to the reportable segments except that the segments
      were renamed to more specifically describe their businesses. The reportable
      segments are now Supply, International Delivery (formerly International)
      and Pennsylvania Delivery (formerly Delivery).
    Financial data for the segments are as follows:
    Three
            Months Ended March 31,PPL
        
        
        PPL Energy
            Supply2005
        
        
        2004
        
        
        2005
        
        
        2004Income Statement DataRevenues from external customersSupply
        
        $
        434
        
        
        $
        417
        
        
        $
        843
        
        
        $
        823International Delivery
        
        
        310
        
        
        
        295
        
        
        
        310
        
        
        
        295Pennsylvania Delivery (a)
        
        
        858
        
        
        
        8071,602
        
        
        
        1,519
        
        
        
        1,153
        
        
        
        1,118Intersegment revenuesSupply
        
        
        416
        
        
        
        410Pennsylvania Delivery (a)
        
        
        38
        
        
        
        38Net IncomeSupply
        
        
        86
        
        
        
        89
        
        
        
        93
        
        
        
        98International Delivery (b)
        
        
        62
        
        
        
        48
        
        
        
        62
        
        
        
        48Pennsylvania Delivery (a)
        
        
        20
        
        
        
        40$
        168
        
        
        $
        177
        
        
        $
        155
        
        
        $
        146PPL
        
        
        PPL
            Energy SupplyMarch
            31,
            2005
        
        
        December
            31,
            2004
        
        
        March
            31,
            2005
        
        
        December
            31,
            2004Balance Sheet DataTotal assetsSupply
        
        $
        7,009
        
        
        $
        6,673
        
        
        $
        7,389
        
        
        $
        7,094International Delivery
        
        
        5,406
        
        
        
        5,390
        
        
        
        5,406
        
        
        
        5,390Pennsylvania Delivery (a)
        
        
        5,763
        
        
        
        5,698$
        18,178
        
        
        $
        17,761
        
        
        $
        12,795
        
        
        $
        12,484(a)
        
        The Pennsylvania Delivery segment is
            not a component of PPL Energy Supply.(b)
        
        2004 includes the "Loss from Discontinued
            Operations." See Note 8 for additional information.
4. Earnings Per Share
    (PPL)
    Basic EPS is calculated using the weighted-average number of common shares
      outstanding during the period. Diluted EPS is calculated using weighted-average
      shares outstanding that are increased for additional shares that would be
      outstanding if potentially dilutive securities were converted to common
      stock. Potentially dilutive securities consist of:
    
        stock options, restricted stock and restricted
            stock units granted under the incentive compensation plans;
        stock units representing common stock
            granted under the directors compensation programs;
        common stock purchase contracts that
            were a component of the PEPS Units and PEPS Units, Series B; and
        convertible senior notes.The basic and diluted EPS calculations, and the reconciliation of the shares
      (in thousands) used in the calculations, are shown below:
    Three
            Months
            Ended March 31,2005
        
        
        2004Income (Numerator)Income from continuing operations
        
        $
        168
        
        
        $
        178Loss from discontinued operations
            (net of income taxes)
        
        
        
        
        
        
        1Net Income
        
        $
        168
        
        
        $
        177Shares (Denominator)Shares for Basic EPS
        
        
        189,060
        
        
        
        177,150Add incremental shares:Convertible Senior Notes
        
        
        584Stock options and other share-based
            awards
        
        
        1,031
        
        
        
        607Shares for Diluted EPS
        
        
        190,675
        
        
        
        177,757Basic EPSIncome from continuing operations
        
        $
        0.89
        
        
        $
        1.00Loss from discontinued operations
            (net of income taxes)Net Income
        
        $
        0.89
        
        
        $
        1.00Diluted EPSIncome from continuing operations
        
        $
        0.88
        
        
        $
        0.99Loss from discontinued operations
            (net of income taxes)Net Income
        
        $
        0.88
        
        
        $
        0.99In May 2001, PPL and PPL Capital Funding Trust I issued 23 million PEPS
      Units that contained a purchase contract component for PPL's common stock.
      The purchase contracts were only dilutive if the average price of PPL's
      common stock exceeded a threshold appreciation price, which was adjusted
      for cash distributions on PPL common stock. The threshold appreciation price
      was initially set at $65.03 and was adjusted to $63.38 as of April 1, 2004,
      based on dividends paid on PPL's common stock since issuance. The purchase
      contracts were settled in May 2004. Since the average price did not exceed
      the threshold appreciation price, the purchase contracts were excluded from
      the diluted EPS calculation for 2004.
    In January 2004, PPL completed an exchange offer resulting in the exchange
      of approximately four million PEPS Units for PEPS Units, Series B. The primary
      difference in the units related to the debt component. The purchase contract
      components of both units, which were potentially dilutive, were identical.
      The threshold appreciation price for the purchase contract component of
      the PEPS Units, Series B was adjusted in the same manner as that of the
      PEPS Units and was $63.38 as a result of the adjustment as of April 1, 2004.
      These purchase contracts were settled in May 2004. Since the average price
      did not exceed the threshold appreciation price, the purchase contracts
      were excluded from the diluted EPS calculation for 2004.
    In May 2003, PPL Energy Supply issued $400 million of 2.625% Convertible
      Senior Notes due 2023. Based on the terms at the time of issuance, the Convertible
      Senior Notes could be settled entirely in cash or shares of PPL common stock.
      The notes were modified in November 2004 to require cash settlement of the
      principal amount, permit settlement of any conversion premium in cash or
      stock and eliminate a provision that required settlement in stock in the
      event of default. These modifications were made in response to the FASB's
      ratification in October 2004 of EITF Issue 04-8, "The Effect of Contingently
      Convertible Instruments on Diluted Earnings per Share," as well as other
      anticipated rules relating to EPS. EITF Issue 04-8 requires contingently
      convertible instruments to be included in diluted EPS. It also requires
      restatement of prior-period diluted EPS, in certain circumstances, based
      upon the terms of the contingently convertible instruments as of the date
      of adoption, which was December 31, 2004, for PPL.
    Based upon the current conversion rate of 20.1106 shares per $1,000 principal
      of notes, the Convertible Senior Notes will have a dilutive impact when
      the average market price of PPL common stock exceeds the conversion price
      of $49.73. The Convertible Senior Notes did not have a dilutive impact on
      EPS for the three months ended March 31, 2004.
    The maximum number of shares that could potentially be issued to settle
      the conversion premium, based upon the current conversion rate, is 8,044,240
      shares. Based on PPL's common stock price at March 31, 2005, the conversion
      premium equated to 635,461 shares, or approximately $34 million.
    The following number of stock options to purchase PPL common shares were
      excluded in the periods' computations of diluted EPS because the effect
      would have been antidilutive.
    
    Three
            Months
            Ended March 31,(Thousands of Shares)
        
        2005
        
        
        2004Antidilutive stock options
        
        804
        
        
        747
5. Income Taxes
    (PPL, PPL Energy Supply and PPL Electric)
    Reconciliations of effective income tax rates are as follows:
    Three
            Months
            Ended March 31,PPL
        
        2005
        
        
        2004Reconciliation of Income
            Tax ExpenseIndicated federal income tax on pre-tax
            income at statutory tax rate - 35%
        
        $
        71
        
        
        $
        89Increase (decrease) due
            to:State income taxes
        
        
        (2
        )
        
        
        4Amortization of investment tax credit
        
        
        (3
        )
        
        
        (3
        )Difference related to income recognition
            of foreign affiliates (net of foreign income taxes)
        
        
        (10
        )
        
        
        (3
        )Federal income tax credits
        
        
        (24
        )
        
        
        (14
        )Other
        
        
        
        
        
        
        (1
        )(39
        )
        
        
        (17
        )Total income tax expense
        
        $
        32
        
        
        $
        72Effective income tax
            rate
        
        
        15.8%
        
        
        
        28.5%PPL Energy SupplyReconciliation of Income
            Tax ExpenseIndicated federal income tax on pre-tax
            income at statutory tax rate - 35%
        
        $
        64
        
        
        $
        70Increase (decrease) due
            to:State income taxes
        
        
        (1
        )
        
        
        1Amortization of investment tax credit
        
        
        (2
        )
        
        
        (2
        )Difference related to income recognition
            of foreign affiliates (net of foreign income taxes)
        
        
        (10
        )
        
        
        (3
        )Federal income tax credits
        
        
        (24
        )
        
        
        (14
        )Other
        
        
        (1
        )(38
        )
        
        
        (18
        )Total income tax expense
        
        $
        26
        
        
        $
        52Effective income tax
            rate
        
        
        14.2%
        
        
        
        25.9%PPL ElectricReconciliation of Income
            Tax ExpenseIndicated federal income tax on pre-tax
            income at statutory tax rate - 35%
        
        $
        6
        
        
        $
        19Increase (decrease) due
            to:State income taxes
        
        
        
        
        
        
        3Amortization of investment tax credit
        
        
        (1
        )
        
        
        (1
        )Release of tax reserves
        
        
        (2
        )Other
        
        
        
        
        
        
        (1
        )(3
        )
        
        
        1Total income tax expense
        
        $
        3
        
        
        $
        20Effective income tax
            rate
        
        
        15.8%
        
        
        
        37.0%(PPL and PPL Energy Supply)
    In October 2004, President Bush signed the American Jobs Creation Act of
      2004 (the Act). The Act creates a temporary incentive for U.S. corporations
      to repatriate accumulated income earned abroad by providing an 85% dividends
      received deduction for certain dividends from controlled foreign corporations.
      The deduction is subject to a number of limitations, and uncertainty remains
      as to how to interpret numerous provisions in the Act. As such, PPL Energy
      Supply is not in a position to decide on whether, and to what extent, it
      might repatriate foreign earnings that have not yet been remitted to the
      U.S. based on its analysis to date. However, it is reasonably possible that
      PPL Energy Supply may repatriate some amount between zero and $500 million,
      with the respective tax liability ranging from zero to $27 million. PPL
      Energy Supply expects to be in a position to finalize its assessment by
      December 31, 2005.
    The Act also provides, beginning in 2005, a tax deduction from income for
      certain qualified domestic production activities. FSP FAS 109-1, "Application
      of FASB Statement No. 109, 'Accounting for Income Taxes', to the Tax Deduction
      on Qualified Production Activities Provided by the American Jobs Creation
      Act of 2004," specifies that this tax deduction will be treated as a special
      deduction and not as a tax rate reduction. During the first quarter of 2005,
      the Treasury Department and the IRS issued interim guidance related to the
      tax deduction. Based on the interim guidance, PPL and PPL Energy Supply
      estimate an annual tax benefit for the year 2005 of approximately $3 million.
6. Comprehensive Income
    (PPL and PPL Energy Supply)
    The after-tax components of comprehensive income are:
    Three
            Months Ended March 31,PPL
        
        
        PPL Energy
            Supply2005
        
        
        2004
        
        
        2005
        
        
        2004Net Income
        
        $
        168
        
        
        $
        177
        
        
        $
        155
        
        
        $
        146Other comprehensive income
            (loss):Foreign currency translation adjustments
        
        
        16
        
        
        
        79
        
        
        
        16
        
        
        
        79Disposition of investment in CGE -
            foreign currency translation adjustment 
            (Note 8)
        
        
        
        
        
        
        10
        
        
        
        
        
        
        
        10Unrealized loss on available-for-sale
            securities
        
        
        (5
        )
        
        
        (3
        )
        
        
        (5
        )
        
        
        (3
        )Unrealized loss on qualifying derivatives
        
        
        (66
        )
        
        
        (36
        )
        
        
        (66
        )
        
        
        (33
        )Total other comprehensive income (loss)
        
        
        (55
        )
        
        
        50
        
        
        
        (55
        )
        
        
        53Comprehensive Income
        
        $
        113
        
        
        $
        227
        
        
        $
        100
        
        
        $
        199(PPL Electric)
    PPL Electric's comprehensive income approximates net income.
7. Credit Arrangements and Financing Activities
    Credit Arrangements
    (PPL, PPL Energy Supply and PPL Electric)
    PPL Energy Supply and PPL Electric maintain credit facilities in order
      to enhance liquidity, and as a credit back-stop to their respective commercial
      paper programs. PPL Electric maintains two credit facilities: a $100 million
      three-year credit facility maturing in June 2006 and a $200 million five-year
      credit facility maturing in June 2009. PPL Energy Supply also maintains
      two credit facilities: a $300 million three-year credit facility maturing
      in June 2006 and an $800 million five-year credit facility maturing in June
      2009. At March 31, 2005, no cash borrowings were outstanding under any credit
      facilities of PPL Electric or PPL Energy Supply. Both PPL Electric and PPL
      Energy Supply have the ability to cause the lenders under their respective
      facilities to issue letters of credit. At March 31, 2005, PPL Electric
      had no letters of credit outstanding under its credit facilities, and PPL
      Energy Supply had $396 million of letters of credit outstanding under its
      credit facilities.
    (PPL and PPL Energy Supply)
    WPD (South West) maintains three credit facilities: a £100 million
      364-day credit facility expiring in October 2005, a £150 million three-year
      credit facility expiring in October 2007, and a £150 million five-year
      credit facility expiring in October 2009. In December 2004, WPD (South West)
      borrowed £108 million (approximately $208 million at December 2004
      exchange rates) under its credit facilities. This borrowing was recorded
      in January 2005 due to the one-month reporting lag. The balance outstanding
      under the WPD (South West) credit facilities at March 31, 2005, was £85
      million (approximately $164 million at current exchange rates).
    WPD also has a £2.5 million uncommitted borrowing line, which has
      £1.25 million (approximately $2 million at current exchange rates)
      of letters of credit outstanding.
    In March 2005, PPL Energy Supply entered into a 364-day bilateral reimbursement
      agreement with a bank for the purpose of issuing letters of credit. Under
      the agreement, PPL Energy Supply can cause the bank to issue up to $200
      million of letters of credit. As of March 31, 2005, there were no letters
      of credit outstanding under this agreement.
    (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 April 2005, PPL Capital Funding retired all $320 million of its 7-3/4%
      Medium-term Notes due April 2005 at par value. The funds for the retirement
      were obtained from PPL Energy Supply's August 2004 issuance of $300 million
      of 5.40% Senior Notes maturing in August 2014.
    (PPL and PPL Energy Supply)
    In December 2004, WPD borrowed £108 million (approximately $208 million
      at December 2004 exchange rates) under its credit facilities to retire $178
      million of 6.75% Unsecured Bonds due December 2004 and settle the related
      $30 million cross currency swap. The total amount is included on the Statement
      of Cash Flows as "Retirement of long-term debt." This bond retirement was
      recorded in January 2005 due to the one-month reporting lag.
    At March 31, 2005, PPL Energy Supply had no commercial paper outstanding
      under its commercial paper program, but plans to access the commercial paper
      market in the second quarter of 2005.
    During the three months ended March 31, 2005, PPL Energy Supply distributed
      $58 million to its parent company.
    (PPL and PPL Electric)
    At March 31, 2005, $113 million of accounts receivable and $115 million
      of unbilled revenue were pledged under the credit agreement related to PPL
      Electric's asset-backed commercial paper program. Also at this date, there
      was $42 million of short-term debt outstanding under the credit agreement
      at an interest rate of 2.79%, with such debt being used to cash collateralize
      letters of credit issued on PPL Electric's behalf. At March 31, 2005, based
      on the accounts receivable and unbilled revenue pledged, an additional $103
      million was available for borrowing. 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.
    In the first quarter of 2005, PPL Transition Bond Company made principal
      payments on transition bonds totaling $73 million.
    At March 31, 2005, PPL Electric had $100 million of commercial paper outstanding
      under its commercial paper program that had an average interest rate of
      2.90%.
    In February 2005, the Lehigh County Industrial Development Authority (LCIDA)
      issued $116 million of 4.70% Pollution Control Revenue Refunding Bonds due
      2029 on behalf of PPL Electric. The proceeds of the LCIDA bonds were used
      in March 2005 to refund the LCIDA's $116 million of 6.40% Pollution Control
      Revenue Refunding Bonds due 2029. PPL Electric has entered into a loan agreement
      with the LCIDA pursuant to which the LCIDA has loaned to PPL Electric the
      proceeds of the LCIDA bonds on payment terms that correspond to the LCIDA
      bonds. The scheduled principal and interest payments on the LCIDA bonds
      are insured. In order to secure its obligations to the insurance provider,
      PPL Electric issued $116 million aggregate principal amount of its Senior
      Secured Bonds (under its 2001 Senior Secured Bond Indenture), which also
      have payment terms that correspond to the LCIDA bonds.
    In April 2005, PPL Electric retired all $69 million of its 6-1/2% First
      Mortgage Bonds due April 2005 at par value.
    Dividends(PPL)
    In February 2005, PPL announced an increase to its quarterly common stock
      dividend, payable April 1, 2005, to 46 cents per share (equivalent
      to $1.84 per annum). Future dividends, declared at the discretion of the
      Board of Directors, will be dependent upon future earnings, cash flows,
      financial requirements and other factors.
8. Acquisitions, Development and Divestitures
    (PPL and PPL Energy Supply)
    Domestic Generation Projects
    In 2003, PPL Maine entered into an agreement in principle with a coalition
      of government agencies and private groups to sell three of its nine hydroelectric
      dams in Maine.  The parties reached a final agreement in 2004 and submitted
      the plan to the FERC for approval. Under the agreement, a non-profit organization
      designated by the coalition would have a five-year option to purchase the
      dams for approximately $25 million, and PPL Maine would receive rights to
      increase energy output at its other hydroelectric dams in Maine. The coalition
      has announced plans to remove or bypass the dams subject to the agreement
      in order to restore runs of Atlantic salmon and other migratory fish to
      the Penobscot River. The agreement requires several approvals by the FERC,
      and PPL cannot predict whether or when these regulatory approvals will be
      obtained.
    In 2004, a subsidiary of PPL Generation agreed to sell the 450 MW Sundance
      power plant located in Pinal County, Arizona, to Arizona Public Service
      Company for approximately $190 million in cash, subject to the receipt of
      various state and federal regulatory approvals and customary closing conditions.
      In January 2005, each party waived the remaining contractual obligation
      for approval by the state regulator, the Arizona Corporation Commission.
      The sale still requires approvals by the FERC under the Federal Power Act.
      PPL estimates that a loss on sale or impairment charge of about $47 million
      after tax, or $0.25 per share, could be recorded in 2005 depending on the
      timing and likelihood of obtaining FERC approvals. PPL cannot predict whether
      or when the FERC approvals for this transaction will be obtained.
    International Energy Projects
    Discontinued Operations
    In December 2003, PPL Global's Board of Managers authorized PPL Global
      to sell its investment in a Latin American telecommunications company, and
      approved a plan of sale. It was determined that this non-strategic business
      was not economically viable. PPL Global sold this investment to local management
      for a nominal amount in June 2004. The operating results of the Latin American
      telecommunications company, which were a loss of approximately $1 million
      for the three months ended March 31, 2004, are reflected as "Loss from
      Discontinued Operations" on the Statement of Income.
    Sale of CGE
    In March 2004, PPL Global completed the sale of its minority interest in
      shares of CGE for approximately $123 million.  The sale resulted in
      a charge of approximately $15 million pre-tax, which is included in operating
      expenses, as "Energy related businesses," on the Statement of Income. This
      charge was due to the write-off of the associated cumulative translation
      adjustment, primarily as a result of the devaluation of the Chilean peso
      since the original acquisition in 2000.
9. Commitments and Contingent Liabilities
    Energy Purchases and Sales Commitments
    Energy Purchase Commitments (PPL, PPL Energy Supply and PPL Electric)
    
    PPL and PPL Energy Supply enter into long-term purchase contracts to supply
      the fuel requirements for generation facilities. These include contracts
      to purchase coal, natural gas, oil and uranium. These contracts extend for
      terms through 2019. PPL and PPL Energy Supply also enter into long-term
      contracts for the storage and transport of natural gas. These contracts
      extend through 2014 and 2032, respectively. Additionally, PPL Energy Supply
      enters into long-term contracts to purchase power to meet load requirements
      and emissions allowances for its generation facilities. These contracts
      extend for terms through 2010.
    PPL Energy Supply entered into long-term power purchase agreements with
      two wind project developers to purchase the full output of their facilities
      when they begin commercial operation, which is expected by the end of 2005.
      One of the power purchase agreements is for 100 MW and extends for a term
      of 15 years, while the other is for 20 MW and extends for a term of 20 years.
    
    As part of the purchase of generation assets from Montana Power, PPL Montana
      assumed a power purchase agreement, which was still in effect at March 31,
      2005. In accordance with purchase accounting guidelines, PPL Montana recorded
      a liability of $58 million as the estimated fair value of the agreement
      at the acquisition date. The liability is being reduced over the term of
      the agreement, through 2010, as an adjustment to "Energy purchases" on the
      Statement of Income. The unamortized balance of the liability related to
      the agreement at March 31, 2005, was $51 million and is included in
      "Deferred Credits and Other Noncurrent Liabilities - Other" on the Balance
      Sheet.
    
    Liability for Above Market NUG Contracts
    In 1998, PPL Electric recorded a loss accrual for above market contracts
      with NUGs of $854 million, due to its generation business being deregulated.
      Effective January 1999, PPL Electric began reducing this liability as an
      offset to "Energy purchases" on the Statement of Income. This reduction
      is based on the estimated timing of the purchases from the NUGs and projected
      market prices for this generation. The final existing NUG contract expires
      in 2014. In connection with the corporate realignment in 2000, the remaining
      balance of this liability was transferred to PPL EnergyPlus. At March 31,
      2005, the remaining liability associated with the above market NUG contracts
      was $260 million.
    Energy Sales Commitments (PPL and PPL Energy Supply)
    PPL Energy Supply enters into long-term power sales contracts in connection
      with its load-serving activities or associated with certain of its power
      plants. These power sales contracts extend for terms through 2017. All long-term
      contracts were executed at pricing that approximated market rates, including
      profit margin, at the time of execution.
    As part of the purchase of generation assets from Montana Power, PPL Montana
      assumed a power sales agreement, which is still in effect at March 31,
      2005. In accordance with purchase accounting guidelines, PPL Montana recorded
      a liability of $7 million as the estimated difference between the fair value
      and the market value of the agreement at the acquisition date. The agreement
      was re-evaluated under DIG Issue C20, "Scope Exceptions: Interpretation
      of the Meaning of Not Clearly and Closely Related in Paragraph 10(b) Regarding
      Contracts with a Price Adjustment Feature," which changed its fair value
      and reclassified it as a derivative instrument. The current liability balance
      is $6 million as of March 31, 2005.
    On July 1, 2002, PPL EnergyPlus began to sell to NorthWestern an aggregate
      of 450 MW of energy supplied by PPL Montana. Under two five-year agreements,
      PPL EnergyPlus is supplying 300 MW of around-the-clock electricity and 150
      MW of unit-contingent on-peak electricity. PPL Montana also makes short-term
      energy sales to NorthWestern.
    In April 2003, the Maryland Public Service Commission authorized the competitive
      provision of the Standard Offer Service (SOS) to allow utilities to procure
      SOS for customers through the competitive selection of wholesale supply.
      In March 2004, PPL EnergyPlus was awarded an 11-month fixed-price SOS contract
      for customer load (approximately 60 MW) for Potomac Electric Power Company.
      This contract commenced in July 2004.
    As a result of New Jersey's Electric Discount and Energy Competition Act,
      the New Jersey Board of Public Utilities authorized and made available to
      power suppliers, on a competitive basis, the opportunity to provide Basic
      Generation Service (BGS) to all non-shopping New Jersey customers. In February
      2003, PPL EnergyPlus was awarded a 34-month fixed-price BGS contract for
      a fixed percentage of customer load (approximately 1,000 MW) for Atlantic
      City Electric Company, Jersey Central Power & Light Company and Public
      Service Electric & Gas Company. This contract commenced in August 2003.
      In February 2004, PPL EnergyPlus was awarded a 12-month hourly energy price
      supply BGS contract for a fixed percentage of customer load (approximately
      450 MW) for Atlantic City Electric Company, Jersey Central Power & Light
      Company and Public Service Electric & Gas Company. These contracts commenced
      in June 2004. In the first quarter of 2005, PPL EnergyPlus was awarded a
      portion of the Commercial Industrial Energy Pricing tranche, which will
      amount to approximately 85 MW after expected shopping. These contracts will
      commence in June 2005.
    In April 2003, PPL EnergyPlus entered into an agreement with Arizona Public
      Service Company to provide capacity and associated electricity. The remaining
      commitment is to provide 150 MW from June through September of 2005. See
      Note 8 for information regarding the possible sale of the Sundance power
      plant to Arizona Public Service Company.
    In January 2004, PPL EnergyPlus began supplying 12.5% of Connecticut Light
      & Power Company's Transitional Standard Offer load, under a three-year
      fixed-price contract. During peak hours, PPL EnergyPlus' obligation to supply
      the Transitional Standard Offer load may reach 625 MW.
    Legal Matters
    (PPL, PPL Energy Supply and PPL Electric)
    PPL and its subsidiaries are involved in numerous legal proceedings, claims
      and litigation in the ordinary course of business. PPL and its subsidiaries
      cannot predict the outcome of such matters, or whether such matters may
      result in material liabilities.
    Montana Power Shareholders' Litigation(PPL and PPL Energy
      Supply)
    In August 2001, a purported class-action lawsuit was filed by a group of
      shareholders of Montana Power against Montana Power, the directors of Montana
      Power, certain advisors and consultants of Montana Power and PPL Montana.
      The plaintiffs allege, among other things, that Montana Power was required
      to, and did not, obtain shareholder approval of the sale of Montana Power's
      generation assets to PPL Montana in 1999. Although most of the claims in
      the complaint are against Montana Power, its board of directors, and its
      consultants and advisors, two claims are asserted against PPL Montana. In
      the first claim, plaintiffs seek a declaration that because Montana Power
      shareholders did not vote on the 1999 sale of generating assets to PPL Montana,
      that sale "was null and void ab initio." The second claim alleges that PPL
      Montana was privy to and participated in a strategy whereby Montana Power
      would sell its generation assets to PPL Montana without first obtaining
      Montana Power shareholder approval, and that PPL Montana has made net profits
      in excess of $100 million as the result of this alleged illegal sale. In
      the second claim, plaintiffs request that the court impose a "resulting
      and/or constructive trust" on both the generation assets themselves and
      all profits, plus interest on the amounts subject to the trust. This lawsuit
      is currently pending in the U.S. District Court of Montana, Butte Division.
      In July 2004, the plaintiffs notified the District Court that the parties
      had reached an oral partial settlement of the case that would result in
      the dismissal of PPL Montana as a defendant, and in January 2005 a global
      settlement agreement was filed with the District Court along with a motion
      to approve the agreement. Under the terms of the global settlement agreement,
      the plaintiffs' claims against PPL Montana would be dismissed and PPL Montana
      would not have to pay any amounts to the plaintiffs. The global settlement
      agreement must still be approved by the District Court. PPL and PPL Energy
      Supply cannot predict whether the global settlement agreement will be approved
      or the outcome of this matter if it is not approved.
    NorthWestern Corporation Litigation(PPL and PPL Energy
      Supply)
    
    In connection with the acquisition of the Montana generation assets, the
      Montana Power APA, which was previously assigned to PPL Montana by PPL Global,
      includes a provision concerning the proposed purchase by PPL Montana of
      a portion of NorthWestern's interest in the 500-kilovolt Colstrip Transmission
      System (CTS) for $97 million. During 2002, PPL Montana had been in discussions
      with NorthWestern regarding the proposed purchase of the CTS and the claims
      that PPL Montana believes it has against NorthWestern arising from the Montana
      Power APA and related agreements. Notwithstanding such discussions, in September
      2002, NorthWestern filed a lawsuit against PPL Montana in Montana state
      court seeking specific performance of PPL Montana's purchase of the CTS
      or, alternatively, damages for breach of contract. Pursuant to PPL Montana's
      application, the matter was removed to the U.S. District Court of Montana,
      Butte Division. Following removal, NorthWestern asserted additional claims
      for damages against PPL Montana, including a claim for punitive damages.
      PPL Montana filed defenses denying liability for NorthWestern's claims as
      well as counterclaims against NorthWestern seeking damages PPL Montana believes
      it has suffered under the Montana Power APA and related agreements.
    In October 2004, the federal district court in Delaware, where NorthWestern's
      bankruptcy proceeding had been pending, approved a joint stipulation between
      PPL Montana and NorthWestern under which NorthWestern agreed to establish
      a segregated reserve to be used for any distributions to be made to satisfy
      any final judgment that PPL Montana may be awarded pursuant to PPL Montana's
      counterclaims. This segregated reserve has been funded with shares of NorthWestern
      common stock equal to $50 million, valued as of the effective date of NorthWestern's
      plan of reorganization. Also in October, the federal district court in Delaware
      confirmed NorthWestern's plan of reorganization, and in November 2004, NorthWestern
      announced that it had officially emerged from bankruptcy protection.
    In May 2005, PPL Montana and NorthWestern reached an agreement in principle
      pursuant to which each of the parties will withdraw its claims in this litigation.
      Under the terms of this agreement, NorthWestern will retain the CTS and
      PPL Montana will pay NorthWestern $9 million. The settlement of this matter
      is subject to the parties' execution of a final agreement and the
      satisfaction of the terms and conditions of any such agreement, and PPL
      cannot be certain whether or when the parties will reach a final agreement.
      PPL and PPL Energy Supply recognized an after-tax charge of approximately
      $6 million (or $0.03 per share for PPL) in the first quarter of 2005 for
      a loss contingency related to this matter.
    If a final agreement between the parties is not reached, the trial for
      this matter is expected to commence in the Montana federal district court
      in the last half of 2005. PPL and PPL Energy Supply cannot be certain of
      the outcome of this matter.
    Montana Hydroelectric Litigation (PPL and PPL Energy Supply)
    In October 2003, a lawsuit was filed against PPL Montana, PPL Services,
      Avista Corporation, PacifiCorp and nine John Doe defendants in the U.S.
      District Court of Montana, Missoula Division, by two residents allegedly
      acting in a representative capacity on behalf of the State of Montana. In
      January 2004, the complaint was amended to, among other things, include
      the Great Falls school districts as additional plaintiffs. In May 2004,
      the Montana Attorney General filed a motion to allow the State of Montana
      to intervene as an additional plaintiff in the litigation. This motion was
      granted without objection. The individual plaintiffs, the school districts
      and the State sought declaratory judgment, compensatory damages and attorneys
      fees and costs for use of state and/or "school trust" lands by hydropower
      facilities and to require the defendants to adequately compensate the State
      and/or the State School Trust fund for full market value of lands occupied.
      Generally, the suit is founded on allegations that the bed of navigable
      rivers became state-owned property upon Montana's admission to statehood,
      and that the use thereof for placement of dam structures, affiliated structures
      and reservoirs should, under an existing regulatory scheme, trigger lease
      payments for use of land underneath. The plaintiffs also sought relief on
      theories of unjust enrichment, trespass and negligence. No specific amount
      of damages or future rental value has been claimed by the plaintiffs. The
      defendants filed separate motions to dismiss the individual plaintiffs'
      and school district's complaint, as well as the complaint of the State of
      Montana. In September 2004, the federal court granted the motions to dismiss
      the individual plaintiffs' and school districts' complaint but denied the
      similar motions as to the State of Montana's complaint. Following the federal
      court's September decision, PPL Montana and the other defendants filed a
      motion to dismiss the State of Montana's complaint for lack of diversity
      jurisdiction and also filed a motion to vacate certain portions of the decision.
      The federal court has not yet ruled on these motions.
    In November 2004, PPL Montana, Avista Corporation and PacifiCorp commenced
      an action for declaratory judgment in Montana First Judicial District Court
      seeking a determination that no lease payments or other compensation for
      the hydropower facilities' use and occupancy of streambeds can be collected
      by the State of Montana. The State subsequently filed counterclaims and
      a motion for summary judgment. In February 2005, the individual plaintiffs
      and school districts who were dismissed from the federal court proceeding,
      along with a state teachers' union, filed a motion to intervene as additional
      defendants in this state court proceeding, and also filed a proposed answer
      and counterclaims to be used if their motion to intervene is granted. The
      state court denied this motion to intervene, but has not yet ruled on any
      of the other above-described motions. PPL and PPL Energy Supply cannot predict
      the outcome of either the federal or the state court proceeding.
    Regulatory Issues
    California ISO and Western Markets (PPL and PPL Energy Supply)
    Through its subsidiaries, PPL made approximately $18 million of sales to
      the California ISO during the period from October 2000 through June 2001,
      of which $17 million has not been paid to PPL subsidiaries. Given the myriad
      of electricity supply problems presently faced by the California electric
      utilities and the California ISO, PPL cannot predict whether or when it
      will receive payment. As of March 31, 2005, PPL has fully reserved
      for possible underrecoveries of payments for these sales.
    Regulatory proceedings arising out of the California electricity supply
      situation have been filed at the FERC. The FERC has determined that all
      sellers of energy into markets operated by the California ISO and the California
      Power Exchange, including PPL Montana, should be subject to refund liability
      for the period beginning October 2, 2000, through June 20, 2001, and initiated
      an evidentiary hearing concerning refund amounts. In April 2003, the FERC
      changed the manner in which this refund liability is to be computed and
      ordered further proceedings to determine the exact amounts that the sellers,
      including PPL Montana, would be required to refund. In September 2004, the
      U.S. Court of Appeals for the Ninth Circuit held that the FERC had the additional
      legal authority to order refunds for periods prior to October 2, 2000, and
      ordered the FERC to determine whether or not it would be appropriate to
      grant such additional refunds.
    In June 2003, the FERC took several actions as a result of a number of
      related investigations. The FERC terminated proceedings pursuant to which
      it had been considering whether to order refunds for spot market bilateral
      sales made in the Pacific Northwest, including sales made by PPL Montana,
      during the period December 2000 through June 2001. The FERC explained that
      the totality of the circumstances made refunds unfeasible and inequitable,
      and that it had provided adequate relief by adopting a price cap throughout
      the western U.S. The FERC also denied pending complaints against long-term
      contracts in the western U.S. In these complaints, various power buyers
      had challenged selected long-term contracts that they entered into during
      2000 and 2001, complaining that the power prices were too high and reflected
      manipulation of those energy markets. The FERC found that the complainants
      had not met their burden of showing that changing or canceling the contracts
      was "in the public interest" and that the dysfunction in the California
      markets did not justify changing these long-term contracts. These orders
      have been appealed to the U.S. Court of Appeals for the Ninth Circuit. In
      two separate orders, the FERC also ordered 65 different companies, agencies
      or municipalities to show cause why they should not be ordered to disgorge
      profits for "gaming" or anomalous market behavior during 2000 and 2001.
      These orders to show cause address both unilateral and joint conduct identified
      as the "Enron trading strategies." Neither PPL EnergyPlus nor PPL Montana
      was included in these orders to show cause, and they previously have explained
      in responses to data requests from the FERC that they have not engaged in
      such trading strategies. Finally, the FERC issued a new investigation order
      directing its staff to investigate any bids made into the California markets
      in excess of $250/MWh during the period from May 2000 to October 2000, a
      period of time prior to the period examined in connection with most of the
      proceedings described above. To their knowledge, neither PPL EnergyPlus
      nor PPL Montana is being investigated by the FERC under this new order.
    Litigation arising out of the California electricity supply situation has
      been filed in California courts against sellers of energy to the California
      ISO. The plaintiffs and intervenors in these legal proceedings allege, among
      other things, abuse of market power, manipulation of market prices, unfair
      trade practices and violations of state antitrust laws, and seek other relief,
      including treble damages and attorneys' fees. While PPL's subsidiaries have
      not been named by the plaintiffs in these legal proceedings, PPL Montana
      was named by a defendant in its cross-complaint in a consolidated court
      proceeding, which combined into one master proceeding several of the lawsuits
      alleging antitrust violations and unfair trade practices. This generator
      denies that any unlawful, unfair or fraudulent conduct occurred but asserts
      that, if it is found liable, the other generators and power marketers, including
      PPL Montana, caused, contributed to and/or participated in the plaintiffs'
      alleged losses.
    In February 2004, the Montana Public Service Commission initiated a limited
      investigation of the Montana retail electricity market for the years 2000
      and 2001, focusing on how that market was affected by transactions involving
      the possible manipulation of the electricity grid in the western U.S. The
      investigation includes all public utilities and licensed electricity suppliers
      in Montana, as well as other entities that may possess relevant information.
      Through its subsidiaries, PPL is a licensed electricity supplier in Montana
      and a wholesale supplier in the western U.S. In June 2004, the Montana Attorney
      General served PPL Montana and more than 20 other companies with subpoenas
      requesting documents, and PPL Montana has provided responsive documents
      to the Montana Attorney General. As with the other investigations taking
      place as a result of the issues arising out of the electricity supply situation
      in California and other western states, PPL and its subsidiaries believe
      that they have not engaged in any improper trading or marketing practices
      affecting the Montana retail electricity market.
    While PPL and its subsidiaries believe that they have not engaged in any
      improper trading practices, they cannot predict whether, or the extent to
      which, any PPL subsidiaries will be the target of any additional governmental
      investigations or named in other lawsuits or refund proceedings, the outcome
      of any such lawsuits or proceedings or whether the ultimate impact on them
      of the electricity supply situation in California and other western states
      will be material.
    PJM Capacity Litigation(PPL, PPL Energy Supply and PPL
      Electric)
    In December 2002, PPL was served with a complaint against PPL, PPL EnergyPlus
      and PPL Electric filed in the U.S. District Court for the Eastern District
      of Pennsylvania by a group of 14 Pennsylvania boroughs that apparently alleges,
      among other things, violations of the federal antitrust laws in connection
      with the pricing of installed capacity in the PJM daily market during the
      first quarter of 2001. These boroughs were wholesale customers of PPL Electric.
      The claims of the boroughs are similar to those previously alleged by a
      single borough in litigation brought in the same court that is still pending.
      In addition, in November 2003, PPL and PPL EnergyPlus were served with a
      complaint which was filed in the same court by Joseph Martorano, III (d/b/a
      ENERCO), that also alleges violations of the federal antitrust laws in early
      2001. The complaint indicates that ENERCO provides consulting and energy
      procurement services to clients in Pennsylvania and New Jersey. In September
      2004, this complaint was dismissed by the District Court and the plaintiff
      has appealed the dismissal to the U.S. Court of Appeals for the Third Circuit.
    Each of the U.S. Department of Justice - Antitrust Division, the FERC and
      the Pennsylvania Attorney General conducted investigations regarding PPL's
      PJM capacity market transactions in early 2001 and did not find any reason
      to take action against PPL.
    Although PPL, PPL Energy Supply and PPL Electric believe the claims in
      these complaints are without merit, they cannot predict the outcome of these
      matters.
    New England Investigation (PPL and PPL Energy Supply)
    In January 2004, PPL became aware of an investigation by the Connecticut
      Attorney General and the FERC's Office of Market Oversight and Investigation
      (OMOI) regarding allegations that natural gas-fired generators located in
      New England illegally sold natural gas instead of generating electricity
      during the week of January 12, 2004. Subsequently, PPL and other generators
      were served with a data request by OMOI. The data request indicated that
      PPL was not under suspicion of a regulatory violation, but that OMOI was
      conducting an initial investigation. PPL has responded to this data request.
      PPL also has responded to data requests of ISO - New England and data requests
      served by subpoena from the Connecticut Attorney General. Both OMOI and
      ISO - New England have issued preliminary reports finding no regulatory
      or other violations concerning these matters. While PPL does not believe
      that it committed any regulatory or other violations concerning the subject
      matter of these investigations, PPL cannot predict the outcome of these
      investigations.
    PJM Billing (PPL, PPL Energy Supply and PPL Electric)
    
    In December 2004, Exelon Corporation, on behalf of its subsidiary, PECO
      Energy, Inc. (PECO), filed a complaint against PJM and PPL Electric with
      the FERC alleging that PJM had overcharged PECO from April 1998 through
      May 2003 as a result of an error by PJM in the State Estimator Model used
      in connection with billing all PJM customers for certain transmission, spot
      market energy and ancillary services charges. Specifically, the complaint
      alleges that PJM mistakenly identified PPL Electric's Elroy substation transformer
      as belonging to PECO and that, as a consequence, during times of congestion,
      PECO's bills for transmission congestion from PJM erroneously reflected
      energy that PPL Electric took from the Elroy substation and used to serve
      PPL Electric's load. The complaint requests the FERC, among other things,
      to direct PPL Electric to refund to PJM $39 million, plus interest of approximately
      $8 million, and for PJM to refund these same amounts to PECO. In February
      2005, PPL Electric filed its response with the FERC stating that neither
      PPL Electric nor any of its affiliates should be held financially responsible
      or liable to PJM or PECO as a result of PJM's error.
    In April 2005, the FERC issued an Order Establishing Hearing and Settlement
      Judge Proceedings (the Order). In the Order, the FERC determined that PECO
      is entitled to reimbursement for the transmission congestion charges that
      PECO asserts PJM erroneously billed to it at the Elroy substation. The FERC
      set for additional proceedings before a judge the determination of the amount
      of the overcharge to PECO and which PJM market participants were undercharged
      and therefore are responsible for reimbursement to PECO. The FERC also ordered
      procedures before a judge to attempt to reach a settlement of the dispute.
    PPL and PPL Electric recognized an after-tax charge of approximately $27
      million (or $0.14 per share for PPL) in the first quarter of 2005 for a
      loss contingency related to this matter. The pre-tax accrual was approximately
      $47 million, with $39 million included in "Energy purchases" on the Statement
      of Income, and $8 million in "Interest Expense."
    PPL, PPL Electric and PPL Energy Supply cannot be certain of the outcome
      of this matter or the impact on PPL and its subsidiaries. Some or all of
      the first quarter 2005 charges for this matter may be reversed in a future
      period depending on the outcome of this matter, the potential for recovery
      of any amounts paid as a result of the additional FERC proceedings, the
      application of the relevant provisions of the energy supply agreements between
      PPL Electric and PPL EnergyPlus and other factors. Depending on these factors,
      PPL Energy Supply, the parent company of PPL EnergyPlus, may incur some
      or all of the costs associated with this matter in a future period.
    FERC Market-Based Rate Authority (PPL and PPL Energy Supply)
    In December 1998, the FERC issued an order authorizing PPL EnergyPlus to
      make wholesale sales of electric power and related products at market-based
      rates. In that order, the FERC directed PPL EnergyPlus to file an updated
      market analysis within three years of the date of the order, and every three
      years thereafter. PPL EnergyPlus filed its initial updated market analysis
      in December 2001. Several parties thereafter filed interventions and protests
      requesting that PPL EnergyPlus be required to provide additional information
      demonstrating that it has met the FERC's market power tests necessary for
      PPL EnergyPlus to continue its market-based rate authority. PPL EnergyPlus
      has responded that the FERC does not require the economic test suggested
      by the intervenors and that, in any event, it would meet such economic test
      if required by the FERC.
    In June 2004, FERC approved certain changes to its standards for granting
      market-based rate authority. As a result of the schedule adopted by the
      FERC, PPL EnergyPlus, PPL Electric, PPL Montana and most of PPL Generation's
      subsidiaries were required to file in November 2004 updated analyses demonstrating
      that they should continue to maintain market-based rate authority under
      the new standards. PPL made two filings, one for PPL Montana and one for
      most of the other PPL subsidiaries. The Montana Public Service Commission
      and the Montana Consumer Counsel filed pleadings opposing the filing by
      PPL Montana. The Montana Public Service Commission requested that the FERC
      hold a hearing on the market-based rate renewal application, while the Montana
      Consumer Counsel suggested applying an altered version of the FERC's tests
      for assessing market power in reviewing the renewal application. The PJM
      Industrial Customer Coalition, the PP&L Industrial Customer Alliance
      and the consumer advocates of Maryland and Pennsylvania filed pleadings
      opposing the filings by the other PPL subsidiaries. These parties challenge
      the FERC's continued reliance on market-based rates to yield just and reasonable
      prices for wholesale electric transactions and suggest that the FERC change
      its tests for market power to include capacity and ancillary services markets.
      While PPL believes its filings demonstrate that all PPL subsidiaries pass
      the new tests established by the FERC in June 2004, PPL cannot predict the
      outcome of these proceedings.
    FERC Proposed Rules (PPL, PPL Energy Supply and PPL Electric)
    In July 2002, the FERC issued a Notice of Proposed Rulemaking entitled
      "Remedying Undue Discrimination through Open Access Transmission Service
      and Standard Electricity Market Design." The proposed rule contained a proposed
      implementation date of July 31, 2003. However, since the issuance of the
      proposed rule, the FERC has delayed the implementation date. This far-reaching
      proposed rule purported to establish uniform transmission rules and a standard
      market design by, among other things:
    
        enacting standard transmission tariffs
            and uniform market mechanisms,
        monitoring and mitigating "market power,"
        managing transmission congestion through
            pricing and tradable financial rights,
        requiring independent operational control
            over transmission facilities,
        forming state advisory committees on
            regional transmission organizations and resource adequacy, and
        exercising FERC jurisdiction over all
            transmission service.In April 2003, the FERC issued a white paper describing certain modifications
      to the proposed rule. The FERC requested comments and held numerous public
      comment sessions concerning the white paper.
    If adopted, this proposed rule may have a significant impact on PPL and
      its subsidiaries, which cannot be predicted at this time.
    In November 2003, the FERC adopted a proposed rule to require all existing
      and new electric market-based tariffs and authorizations to include provisions
      prohibiting the seller from engaging in anticompetitive behavior or the
      exercise of market power. The FERC order adopts a list of market behavior
      rules that apply to all electric market-based rate tariffs and authorizations,
      including those of PPL EnergyPlus and any other PPL subsidiaries that hold
      market-based rate authority. PPL does not expect this rule to have a significant
      impact on its subsidiaries.
    Montana Hydroelectric License Contingencies(PPL and PPL
      Energy Supply)
    PPL Montana has 11 hydroelectric facilities and one storage reservoir licensed
      by the FERC pursuant to the Federal Power Act under long-term licenses which
      expire on varying dates from 2009 through 2040. 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 APA.
    The Kerr Dam Project license 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 the Kerr Dam from Montana Power, to continue
      to implement a plan to mitigate the impact of the Kerr Dam on fish, wildlife
      and the habitat. Under this arrangement, PPL Montana has a remaining commitment
      to spend approximately $67 million between 2005 and 2035.
    PPL Montana entered into a Memorandum of Understanding (MOU) 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
      MOU requires PPL Montana to implement plans to mitigate the impact of its
      projects on fish, wildlife and the habitat, and to increase recreational
      opportunities. The MOU was created to maximize collaboration between the
      parties and possibilities for matching funds from relevant federal agencies.
      Under this arrangement, PPL Montana has a remaining commitment to spend
      approximately $26 million between 2005 and 2040.
    Wallingford Deactivation (PPL and PPL Energy Supply)
    In January 2003, PPL negotiated an agreement with ISO - New England that
      would declare that four of the five units at PPL's Wallingford, Connecticut
      facility are "reliability must run" units and put those units under cost-based
      rates. This agreement and the cost-based rates are subject to the FERC's
      approval, and PPL filed a request with the FERC for such approval. PPL requested
      authority for cost-based rates because the current and anticipated wholesale
      prices in New England are insufficient to cover the costs of keeping these
      units available for operation. In March 2003, PPL filed an application with
      the New England Power Pool to temporarily deactivate these four units. In
      May 2003, the FERC denied PPL's request for cost-based rates in light of
      the FERC's changes to the market and bid mitigation rules of ISO - New England
      made in a similar case involving generating units owned by NRG Energy, Inc.
      PPL subsequently has explained to the FERC that its changes to the market
      and bid mitigation rules of ISO - New England will not provide sufficient
      revenues to PPL, and PPL continues to seek approval of its cost-based rates.
      However, PPL has informed the New England Power Pool that it will not pursue
      its request to temporarily deactivate certain Wallingford units. In February
      2004, PPL appealed the FERC's denial of its request for cost-based rates
      to the U.S. Court of Appeals for the District of Columbia Circuit. PPL cannot
      predict the outcome of this matter.
    IRS Synthetic Fuels Tax Credits (PPL and PPL Energy Supply)
    PPL, through its subsidiaries, has interests in two synthetic fuel production
      facilities: the Somerset facility located in Pennsylvania and the Tyrone
      facility located in Kentucky. PPL receives tax credits pursuant to Section
      29 of the Internal Revenue Code based on the sale of synthetic fuel from
      these facilities to unaffiliatedthird-party purchasers. Section
      29 of the Internal Revenue Code provides tax credits for the production
      and sale of solid synthetic fuels produced from coal. Section 29 tax credits
      are currently scheduled to expire at the end of 2007.
    To qualify for the Section 29 tax credits, the synthetic fuel must meet
      three primary conditions: (i) there must be a significant chemical change
      in the coal feedstock, (ii) the product must be sold to an unaffiliated
      entity, and (iii) the production facility must have been placed in service
      before July 1, 1998.
    In addition, Section 29 provides for the phase-out of the synthetic fuel
      tax credit when the reference price for crude oil, as adjusted for inflation,
      exceeds a certain threshold. The reference price is published by the IRS
      annually in April for the prior year and is calculated based on the annual
      average wellhead price per barrel for all unregulated domestic crude oil.
      The average reference price for crude oil in 2004 was $36.75 per barrel,
      significantly below the phase-out level. Accordingly, the tax credit phase-out
      did not impact results in 2004. Accounting for inflation, PPL estimates
      that the 2005 tax credit phase-out would start at about $52 per barrel and
      the tax credit would be totally eliminated at about $65 per barrel. Based
      on market conditions at April 30, 2005, PPL currently does not expect any
      significant phase-out of the synfuel tax credit for 2005. However, given
      the recent increases in and volatility of crude oil prices, PPL cannot predict
      the final average reference price for 2005 and a significant increase in
      oil prices could reduce the synfuel tax credit and adversely impact PPL's
      2005 earnings. For 2006 and 2007, PPL has taken measures to mitigate the
      impact of a phase-out of the synfuel tax credit due to high oil prices.
    A PPL subsidiary owns and operates the Somerset facility. In November 2001,
      PPL received a private letter ruling from the IRS pursuant to which, among
      other things, the IRS concluded that the synthetic fuel produced at the
      Somerset facility qualifies for Section 29 tax credits. The Somerset facility
      uses the Covol technology to produce synthetic fuel, and the IRS issued
      the private letter ruling after its review and approval of that technology.
      In reliance on this private letter ruling, PPL has sold synthetic fuel produced
      at the Somerset facility resulting in an aggregate of approximately $220 million
      of tax credits as of March 31, 2005.
    PPL owns a limited partnership interest in the entity that owns and operates
      the Tyrone facility. In April 2004, this entity received a private letter
      ruling from the IRS. Similar to its conclusions relating to the Somerset
      facility, the IRS concluded that the synthetic fuel to be produced at the
      Tyrone facility qualifies for Section 29 tax credits. In reliance on this
      private letter ruling, this entity has sold synthetic fuel produced at the
      Tyrone facility resulting in an aggregate of approximately $24 million of
      tax credits as of March 31, 2005. The Tyrone facility began commercial operation
      in the third quarter of 2004, after being relocated to Kentucky from Pennsylvania.
    PPL also purchases synthetic fuel from unaffiliated third parties, at prices
      below the market price of coal, for use at its coal-fired power plants.
    In June 2003, the IRS announced that it had reason to question the scientific
      validity of certain test procedures and results that have been presented
      to it by taxpayers with interests in synthetic fuel operations as evidence
      that the required significant chemical change has occurred, and that it
      was reviewing information regarding these test procedures and practices.
      In October 2003, the IRS announced that it had completed its review and
      determined that the test procedures and results used by taxpayers are scientifically
      valid, if the procedures are applied in a consistent and unbiased manner.
      The IRS indicated that it would require taxpayers to comply with certain
      sampling and data/record retention practices to obtain or maintain a ruling
      on significant chemical change.
    PPL believes that the October 2003 IRS announcement and its receipt of
      the private letter ruling for the Tyrone facility following this announcement
      confirms that PPL is justified in its reliance on the private letter rulings
      for the Somerset and Tyrone facilities, and that the test results that PPL
      presented to the IRS in connection with its private letter rulings are scientifically
      valid. In addition, PPL believes that the Somerset facility and the Tyrone
      facility have been operated in compliance with their respective private
      letter rulings and Section 29 of the Internal Revenue Code.
    In October 2003, following the IRS announcement, it was reported that the
      U.S. Senate Permanent Subcommittee on Investigations, of the Committee on
      Governmental Affairs, had begun an investigation of the synthetic fuel industry
      and its producers. That investigation is ongoing. PPL cannot predict when
      the investigation will be completed or the potential results of the investigation.
    During 2004, certain other owners or operators of synthetic fuel facilities
      reported that the IRS had questioned whether their facilities were placed
      in service before July 1, 1998. Whether or not a facility meets the "placed-in
      service" requirement is based on the particular facts and circumstances
      relating to the operation of that facility. PPL is not aware of the facts
      and circumstances relating to the operation of the facilities being questioned
      by the IRS or the specific IRS position in these other matters. PPL believes
      that the Tyrone and Somerset facilities meet the in-service requirement.
      However, PPL cannot predict the outcome of the IRS's inquiries or the impact
      of those inquiries on PPL.
    Environmental Matters - Domestic
    (PPL, PPL Energy Supply and PPL Electric)
    Due to the environmental issues discussed below or other environmental
      matters, PPL subsidiaries may be required to modify, replace or cease operating
      certain facilities to comply with statutes, regulations and actions by regulatory
      bodies or courts. In this regard, PPL subsidiaries also may incur capital
      expenditures or operating expenses in amounts which are not now determinable,
      but which could be significant.
    Air(PPL and PPL Energy Supply)
    The Clean Air Act deals, in part, with acid rain, attainment of federal
      ambient ozone standards, fine particulate matter standards and toxic air
      emissions in the U.S. PPL's subsidiaries are in substantial compliance with
      the Clean Air Act. The Bush administration's Clear Skies Initiative and
      proposals of certain members of Congress would amend the Clean Air Act.
      These amendments could require significant further reductions in emissions
      of nitrogen oxide and sulfur dioxide and reductions in emission of mercury.
    Although the Bush administration's Clear Skies Initiative does not include
      limits on carbon dioxide emissions, rising concerns about global warming
      have prompted several states to pass legislation capping carbon dioxide
      emissions and other bills have been introduced at the federal level proposing
      mandatory carbon dioxide reductions. However, the Bush administration is
      promoting a voluntary carbon dioxide reduction program. In support of this
      voluntary Climate VISION program, the electric power industry has committed
      to reducing its greenhouse gas emission intensity levels (measured as tons
      of carbon dioxide equivalent against electric power production in MWh) by
      3% to 5% by the 2010 to 2012 period. Furthermore, an initiative is underway
      in nine Northeast states to propose a cap-and-trade program, the details
      of which are expected to be released in mid-2005 for carbon dioxide emissions
      from fossil fuel-fired power plants. Increased pressure for carbon dioxide
      emissions reduction is also coming from investor organizations and the international
      community. Pennsylvania and Montana have not, at this time, established
      any formal programs to address carbon dioxide and other greenhouse gases.
      As a result of the national and international concerns, PPL has conducted
      an inventory of its carbon dioxide emissions and is continuing to evaluate
      various options for reducing, avoiding, off-setting or sequestering its
      emissions.
    If the above-described initiatives or other legislative or regulatory initiatives
      result in mandatory reductions being imposed or if PPL adopts voluntary
      measures to reduce its carbon dioxide emissions, the cost of such reductions
      could be significant.
    The EPA has developed new standards for ambient levels of ozone and fine
      particulates in the U.S. These standards have been upheld following court
      challenges. To facilitate attainment of these standards, the EPA has finalized
      a rule (now called the Clean Air Interstate Rule - CAIR) for 28 midwestern
      and eastern states, including Pennsylvania, to reduce national sulfur dioxide
      emissions by 40% (about 50% in the CAIR region) by 2010 and to extend the
      current seasonal program for nitrogen oxide emission reductions to a year-round
      program (in the CAIR region) starting in 2009. Starting in 2015, the final
      rule requires further reductions in sulfur dioxide and nitrogen oxide of
      30% and 20%, respectively, from 2010 levels. The final rule allows these
      reductions to be achieved through cap-and-trade programs, and is consistent
      with the Bush administration's proposed amendments to the Clean Air Act,
      except that it applies to only the 28 states. PPL expects the rule to be
      challenged by several states and environmental groups.
    In order to continue meeting existing sulfur dioxide reduction requirements
      of the Clean Air Act, PPL will need to use its banked sulfur dioxide allowances
      and to purchase additional allowances. Currently, PPL has enough sulfur
      dioxide allowances to cover expected consumption through 2006, but will
      experience shortfalls in some years after 2006. As a result and based on
      projected allowance prices, PPL plans to complete the installation of sulfur
      dioxide scrubbers at its Montour Units 1 and 2 and Brunner Island Unit 3
      by 2008. PPL also is evaluating under CAIR the possible installation of
      SCR technology to reduce nitrogen oxide emissions at Brunner Island Unit
      3 at a later date. PPL's current plan reflects a cost of approximately $730
      million for the combined cost of the scrubbers at Montour and Brunner Island
      and of the SCR at Brunner Island. PPL currently is in the process of evaluating
      vendor proposals for this equipment and will provide updated costs estimates,
      which are expected to increase, after the completion of that process.
    The EPA has finalized mercury regulations that affect coal-fired plants.
      These regulations establish an emission trading program to take effect beginning
      January 2010, with a second phase to take effect in 2018. At the same time
      that it finalized these mercury regulations, the EPA determined that it
      currently does not need to regulate nickel emissions from oil-fired units.
      PPL is still assessing what measures it will need to take to comply with
      the mercury regulations. PPL believes that it may be possible to comply
      with the 2010 requirements with the mercury removal co-benefits that are
      expected to be achieved from the installation of the scrubbers at Montour
      and Brunner Island. However, PPL may need to take additional measures to
      comply with the 2010 requirements, and it expects to need to take additional
      measures to comply with the 2018 requirements. The costs to PPL of complying
      with any such additional measures are not now determinable, but could be
      significant.
    Pennsylvania and about eight other states have indicated that they will
      challenge the EPA's new mercury regulations as being inadequate. The Pennsylvania
      Environmental Quality Board (PEQB) is also reviewing a petition filed by
      PennFuture, an environmental organization, requesting the PEQB to develop
      significantly more stringent mercury rules than those proposed by the EPA.
      The costs to PPL of complying with any such new mercury rules are not now
      determinable, but could be significant.
    The Ozone Transport Commission (consisting of Pennsylvania and 11 other
      states and the District of Columbia) has passed a resolution calling for
      reductions in sulfur dioxide, nitrogen oxide and mercury emissions that
      are more stringent than those proposed by the EPA or contemplated by the
      Clear Skies Initiative. Should Pennsylvania implement such reductions, the
      cost to PPL is not now determinable but could be significant.
    In 1999, the EPA initiated enforcement actions against several utilities,
      asserting that older, coal-fired power plants operated by those utilities
      have, over the years, been modified in ways that subject them to more stringent
      "New Source" requirements under the Clean Air Act. The EPA has since issued
      notices of violation and commenced enforcement activities against other
      utilities. The future direction of the EPA's enforcement initiative is presently
      unclear. However, states and environmental groups have also been bringing
      enforcement actions alleging violations of "New Source" requirements by
      coal-fired plants. At this time, PPL is unable to predict whether such EPA,
      state or citizens enforcement actions will be brought with respect to any
      of its affiliates' plants. However, the EPA regional offices that regulate
      plants in Pennsylvania (Region III) and Montana (Region VIII) have indicated
      an intention to issue information requests to all utilities in their jurisdiction.
      The Region VIII office issued such a request to PPL Montana's Corette plant
      in 2000 and the Colstrip plant in 2003. The Region III office issued such
      a request to PPL Generation's Martins Creek plant in 2002. PPL and its subsidiaries
      have responded to the Corette and Martins Creek information requests and
      began responding to the Colstrip information request. The EPA has stayed
      further production of Colstrip documents pending discussion among the Colstrip
      owners and the EPA. The EPA has taken no further action following the Martins
      Creek and Corette submittals. PPL cannot presently predict what, if any,
      action the EPA might take in this regard. Should the EPA or any state or
      citizens group initiate one or more enforcement actions against PPL or its
      subsidiaries, compliance with any such enforcement actions could result
      in additional capital and operating expenses which are not now determinable,
      but could be significant.
    In 2003, the EPA issued changes to its "New Source" regulations that clarify
      what projects are exempt from "New Source" requirements as routine maintenance
      and repair. Under these clarifications, any project to replace existing
      equipment with functionally equivalent equipment would be considered routine
      maintenance and excluded from "New Source" review if the cost of the replaced
      equipment does not exceed 20% of the replacement cost of the entire process
      unit, the basic design is not changed and no permit limit is exceeded. These
      clarifications would substantially reduce the uncertainties under the prior
      "New Source" regulations; however, they have been stayed by the U.S. Court
      of Appeals for the District of Columbia Circuit. PPL is therefore continuing
      to operate under the "New Source" regulations as they existed prior to the
      EPA's 2003 clarifications.
    The New Jersey DEP and some New Jersey residents raised environmental concerns
      with respect to the Martins Creek plant, particularly with respect to sulfur
      dioxide emissions and the opacity of the plant's plume. These issues were
      raised in the context of an appeal by the New Jersey DEP of the Air Quality
      Plan Approval issued by the Pennsylvania DEP to PPL's Lower Mt. Bethel generating
      plant. In October 2003, PPL finalized an agreement with the New Jersey DEP
      and the Pennsylvania DEP pursuant to which PPL will reduce sulfur dioxide
      emissions from its Martins Creek power plant. Under the agreement, PPL Martins
      Creek will shut down the plant's two coal-fired generating units by September
      2007 and may repower them any time after shutting them down so long as it
      follows all applicable state and federal requirements, including installing
      the best available pollution control technology. Pursuant to the agreement,
      PPL Martins Creek began reducing the fuel sulfur content for the coal units
      as well as the plant's two oil-fired units in June 2004. The agreement also
      calls for PPL to donate to a non-profit organization 70% of the excess emission
      allowances and emission reduction credits that result from shutting down
      or repowering the coal units. Some of these donations have already been
      made to the Pennsylvania Environmental Council. As a result of the agreement,
      the New Jersey DEP withdrew its challenge to the Air Quality Plan Approval
      for the Lower Mt. Bethel facility. The agreement will not result in material
      costs to PPL. The agreement does not address the issues raised by the New
      Jersey DEP regarding the visible opacity of emissions from the oil-fired
      units at the Martins Creek plant. If it is determined that actions must
      be taken to address the visible opacity of these emissions, such actions
      could result in costs that are not now determinable, but could be significant.
    In addition to the opacity concerns raised by the New Jersey DEP, the Pennsylvania
      DEP also has raised concerns about the opacity of emissions from the Martins
      Creek plant, and the Pennsylvania DEP and PPL are litigating issues relating
      to the opacity of emissions from the Montour plant. PPL is continuing to
      discuss these matters with the Pennsylvania DEP. If it is determined that
      actions must be taken to address the Pennsylvania DEP's concerns, such actions
      could result in costs that are not now determinable, but could be significant.
    
    In December 2003, PPL Montana, as operator of the Colstrip facility, received
      an Administrative Compliance Order (ACO) from the EPA pursuant to the Clean
      Air Act. The ACO alleges that Units 3 and 4 of the facility have been in
      violation of the Clean Air Act permit at Colstrip since 1980. The permit
      required Colstrip to submit for review and approval by the EPA an analysis
      and proposal for reducing emissions of nitrogen oxide to address visibility
      concerns if and when the EPA promulgates Best Available Retrofit Technology
      requirements for nitrogen oxide emissions. The EPA is asserting that regulations
      it promulgated in 1980 triggered this requirement. PPL believes that the
      ACO is unfounded and is discussing the matter with the EPA. PPL is engaged
      in settlement negotiations on these matters with the EPA, the Montana Department
      of Environmental Quality (DEQ) and the Northern Cheyenne Tribe. In addition,
      the Montana DEQ is questioning whether the permit limits for sulfur dioxide
      emissions from Colstrip Units 3 and 4 are too high under provisions of the
      Clean Air Act that limit allowable emissions from sources built after 1978.
      PPL Montana completed an ambient air quality modeling demonstration and,
      based on that study, voluntarily proposed to the Montana DEQ that the permit
      include restrictions related to sulfur dioxide emissions. The Montana DEQ
      has accepted PPL Montana's proposal and has issued an amended operating
      permit to PPL and issued an amended air permit, which PPL expects will resolve
      this matter.
    Water/Waste(PPL and PPL Energy Supply)
    Seepages have been detected at one of the wastewater basins at the Montour
      station, and PPL is working with the Pennsylvania DEP to assess the seepage
      and develop an abatement plan. PPL is assessing impacted groundwater at
      two closed wastewater basins at the Brunner Island station to determine
      what abatement actions may be needed. PPL plans to comprehensively address
      issues related to wastewater basins at all of its Pennsylvania plants as
      part of the process to renew the residual waste permits for these basins
      which expire within the next three years. The cost of addressing seepages
      at PPL's Pennsylvania plants is not now determinable, but could be significant.
    PPL Montana continues to undertake certain groundwater investigation and
      remediation measures at its Colstrip plant to address groundwater contamination.
      These measures include offering to extend city water to certain residents
      who live near the plant. In addition, in May 2003, approximately 50 plaintiffs
      brought an action now pending at the Montana Sixteenth Judicial District
      Court, Rosebud County, against PPL Montana and the other owners of the Colstrip
      plant alleging property damage from seepage from the freshwater and wastewater
      ponds at Colstrip. This action could result in PPL Montana and the other
      Colstrip owners being liable for damages and being required to take additional
      remedial measures beyond those noted above. Beyond estimated costs of approximately
      $1 million (PPL Montana's share of the estimated costs, for which PPL has
      recorded a contingency reserve) for the proposed settlement of these property
      damage claims and for extending city water, PPL Montana may incur further
      costs based on its additional groundwater investigations and any related
      remedial measures, which costs are not now determinable, but could be significant.
    Brunner Island's NPDES permit contains a provision requiring further studies
      on the thermal impact of the cooling water discharge from the plant. These
      studies are underway and are expected to be completed in 2006. The Pennsylvania
      DEP has stated that it believes the studies to date show that the temperature
      of the discharge must be lowered. The Pennsylvania DEP has also stated that
      it believes the plant is in violation of a permit condition prohibiting
      the discharge from changing the river temperature by more than two degrees
      per hour. PPL is discussing these matters with the agency. Depending on
      the outcome of these discussions, the plant could be subject to additional
      capital and operating costs that are not now determinable, but could be
      significant.
    The EPA has significantly tightened the water quality standard for arsenic.
      The revised standard becomes effective in 2006. The revised standard may
      result in action by individual states that could require several PPL subsidiaries
      to either further treat wastewater or take abatement action at their power
      plants, or both. The cost of complying with any such requirements is not
      now determinable, but could be significant.
    The EPA finalized requirements in 2004 for new or modified water intake
      structures. These requirements affect where generating facilities are built,
      establish intake design standards, and could lead to requirements for cooling
      towers at new and modified power plants. Another new rule that was finalized
      in 2004 addresses existing structures. PPL does not believe that either
      of these rules will impose material costs on PPL subsidiaries. However,
      six northeastern states have challenged the new rules for existing structures
      as being inadequate. If this challenge is successful, it could result in
      the EPA establishing stricter standards for existing structures that could
      impose significant costs on PPL subsidiaries.
    Superfund and Other Remediation
    (PPL, PPL Energy Supply and PPL Electric)
    In 1995, PPL Electric and PPL Generation, and in 1996, PPL Gas Utilities
      entered into consent orders with the Pennsylvania DEP to address a number
      of sites that were not being addressed under another regulatory program
      such as Superfund, but for which PPL Electric, PPL Generation or PPL Gas
      Utilities may be liable for remediation. This may include potential PCB
      contamination at certain PPL Electric substations and pole sites; potential
      contamination at a number of coal gas manufacturing facilities formerly
      owned or operated by PPL Electric; oil or other contamination which may
      exist at some of PPL Electric's former generating facilities; and potential
      contamination at abandoned power plant sites owned by PPL Generation. This
      may also include former coal gas manufacturing facilities and potential
      mercury contamination from gas meters and regulators at PPL Gas Utilities'
      sites.
    Since the PPL Electric Consent Order expired on January 31, 2005, and since
      only four sites remained, PPL has negotiated a new consent order and agreement
      (COA) with the Pennsylvania DEP that combines both PPL Electric's and PPL
      Gas Utilities' consent orders into one single agreement. As of March 31,
      2005, PPL Electric and PPL Gas Utilities have 178 sites to address under
      the new combined COA. Additional sites formerly owned or operated by PPL
      Electric, PPL Generation or PPL Gas Utilities are added to the consent orders
      on a case-by-case basis.
    At March 31, 2005, PPL Electric and PPL Gas Utilities had accrued
      approximately $3 million and $7 million, representing the estimated amounts
      each will have to spend for site remediation, including those sites covered
      by each company's consent orders mentioned above. Depending on the outcome
      of investigations at sites where investigations have not begun or have not
      been completed, the costs of remediation and other liabilities could be
      substantial. PPL 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 operations. As a result of the EPA's
      evaluation, individual states may establish stricter standards for water
      quality and soil clean-up. 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 measures to prevent potential acid mine drainage
      at previously capped refuse piles. One PPL Generation subsidiary is pumping
      and treating mine water at two mine sites. Another PPL Generation subsidiary
      is installing passive wetlands treatment at a third site, and the Pennsylvania
      DEP has suggested that it may require that PPL Generation subsidiary to
      pump and treat the mine water at that third site. At March 31, 2005,
      a PPL Energy Supply subsidiary had accrued $28 million to cover the costs
      of pumping and treating groundwater at the two mine sites for 50 years and
      for operating and maintaining passive wetlands treatment at the third site.
    In 1999, the Montana Supreme Court held in favor of several citizens' groups
      that the right to a clean and healthful environment is a fundamental right
      guaranteed by the Montana Constitution. The court's ruling could result
      in significantly more stringent environmental laws and regulations, as well
      as an increase in citizens' suits under Montana's environmental laws. The
      effect on PPL Montana of any such changes in laws or regulations or any
      such increase in legal actions is not currently determinable, but could
      be significant.
    (PPL, PPL Energy Supply and PPL Electric)
    Future cleanup or remediation work at sites currently under review, or
      at sites not currently identified, may result in material additional operating
      costs for PPL subsidiaries that cannot be estimated at this time.
    Asbestos (PPL and PPL Energy Supply)
    There have been increasing litigation claims throughout the U.S. based
      on exposure to asbestos against companies that manufacture or distribute
      asbestos products or that have these products on their premises. Certain
      of PPL's generation subsidiaries and certain of its energy services subsidiaries,
      such as those that have supplied, may have supplied or installed asbestos
      material in connection with the repair or installation of process piping
      and heating, ventilating and air conditioning systems, have been named as
      defendants in asbestos-related lawsuits. PPL cannot predict the outcome
      of these lawsuits or whether additional claims may be asserted against its
      subsidiaries in the future. PPL does not expect that the resolution of the
      current lawsuits will have a material adverse effect on its results of operations.
    Electric and Magnetic Fields (PPL, PPL Energy Supply and PPL
      Electric)
    Concerns have been expressed by some members of the public regarding potential
      health effects of power frequency electric and/or magnetic fields (EMFs),
      which are emitted by all devices carrying electricity, including electric
      transmission and distribution lines and substation equipment. Government
      officials in the U.S. and the U.K. have reviewed this issue. The U.S. National
      Institute of Environmental Health Sciences concluded in 2002 that, for most
      health outcomes, there is no evidence of EMFs causing adverse effects. The
      agency further noted that there is some epidemiological evidence of an association
      with childhood leukemia, but that this evidence is difficult to interpret
      without supporting laboratory evidence. The U.K. National Radiological Protection
      Board concluded in 2004 that, while the research on EMFs does not provide
      a basis to find that EMFs cause any illness, there is a basis to consider
      precautionary measures beyond existing exposure guidelines. PPL and its
      subsidiaries believe the current efforts to determine whether EMFs cause
      adverse health effects should continue and are taking steps to reduce EMFs,
      where practical, in the design of new transmission and distribution facilities.
      PPL 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 abroad, and the associated cost, or what, if any, liabilities they might
      incur related to the EMF issue.
    Lower Mt. Bethel (PPL and PPL Energy Supply)
    In August 2002, the Northampton County Court of Common Pleas issued a decision
      setting the permissible noise levels for operation of the Lower Mt. Bethel
      facility. PPL appealed the court's decision to the Commonwealth Court, and
      an intervenor in the lawsuit cross-appealed the court's decision. In May
      2003, the Commonwealth Court remanded the case to the Court of Common Pleas
      for further findings of fact concerning the zoning application relating
      to the construction of the facility. In September 2003, the Court of Common
      Pleas ruled in PPL's favor while also reaffirming its decision on the noise
      levels, and the intervenor appealed this ruling to the Commonwealth Court.
      In April 2004, the Commonwealth Court affirmed the decision of the Court
      of Common Pleas, and the Supreme Court of Pennsylvania has denied the intervenor's
      Petition for Allowance of Appeal.
    The certificate of occupancy for the Lower Mt. Bethel facility was issued
      by the local township zoning officer in April 2004, and the facility was
      placed in service in May 2004. In May 2004, the intervenor in the legal
      proceedings regarding the facility's permissible noise levels filed an appeal
      with the township zoning board regarding the issuance of the certificate
      of occupancy. The hearing on the appeal was held in December 2004, and the
      intervenor's appeal was denied. The intervenor appealed the zoning board's
      decision to the Northampton County Court of Common Pleas in February 2005.
    Environmental Matters - International(PPL and PPL Energy Supply)
    U.K.
    WPD's distribution businesses are subject to numerous regulatory and statutory
      requirements with respect to environmental matters. PPL believes that WPD
      has taken and continues to take measures to comply with the applicable laws
      and governmental regulations for the protection of the environment. There
      are no material legal or administrative proceedings pending against WPD
      with respect to environmental matters. See "Environmental Matters - Domestic
      - Electric and Magnetic Fields" for a discussion of EMFs.
    Latin America
    Certain of PPL's affiliates have electric distribution operations in Latin
      America. PPL believes that these affiliates have taken and continue to take
      measures to comply with the applicable laws and governmental regulations
      for the protection of the environment. There are no material legal or administrative
      proceedings pending against PPL's affiliates in Latin America with respect
      to environmental matters.
    Other
    Nuclear Insurance(PPL and PPL Energy Supply)
    PPL Susquehanna is a member of certain insurance programs which provide
      coverage for property damage to members' nuclear generating stations. Facilities
      at the Susquehanna station are insured against property damage losses up
      to $2.75 billion under these programs. PPL Susquehanna is also a member
      of an insurance program which provides insurance coverage for the cost of
      replacement power during prolonged outages of nuclear units caused by certain
      specified conditions. Under the property and replacement power insurance
      programs, PPL Susquehanna could be assessed retroactive premiums in the
      event of the insurers' adverse loss experience. At March 31, 2005, this
      maximum assessment was about $38 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 about $10.8 billion under provisions of The Price Anderson Amendments
      Act of 1988. PPL Susquehanna is protected against this liability by a combination
      of commercial insurance and an industry assessment program. In the event
      of a nuclear incident at any of the reactors covered by The Price Anderson
      Amendments Act of 1988, PPL Susquehanna could be assessed up to $201 million
      per incident, payable at $20 million per year.
    Guarantees and Other Assurances
    (PPL)
    PPL 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 FIN 45, "Guarantor's Accounting and Disclosure Requirements
      for Guarantees, Including Indirect Guarantees of Indebtedness of Others,
      an Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of
      FASB Interpretation No. 34," and are specifically disclosed in Note 14 to
      the Financial Statements contained in each Registrant's 2004 Form 10-K.
    
    Recorded
            Liability at
        
        Exposure
            atMarch 31, 2005
        
        December 31, 2004
        
        March 31, 2005 (a)
        
        Expiration
            DatePPLResidual value guarantees of leased
            equipment
        
        
        
        
        
        
        
        $
        7
        
        
        2006
        (b)PPL Energy Supply (c)WPD LLP guarantee of obligations under
            SIUK Capital Trust I preferred securities
        
        
        
        
        
        
        
        
        82
        (d)
        2027Letters of credit issued on behalf
            of affiliates
        
        
        
        
        
        
        
        
        5
        (e)
        2006Support agreements to guarantee partnerships'
            obligations for the sale of coal
        
        
        
        
        
        
        
        
        9
        
        
        2007Retroactive premiums under nuclear
            insurance programs
        
        
        
        
        
        
        
        
        38Nuclear claims under The Price Anderson
            Amendments Act of 1988
        
        
        
        
        
        
        
        
        201
        (f)Contingent purchase price payments
            to former owners of synfuel projects
        
        $
        12
        
        $
        11
        
        
        53
        
        2007Residual value guarantees of leased
            equipment
        
        
        
        
        
        
        
        
        3
        
        2006
        (b)WPD guarantee of pension and other
            obligations of unconsolidated entities (g)
        
        
        4
        
        
        
        
        
        46
        
        2017WPD guarantee related to a contract
            assigned as part of a sale of one of its businesses
        
        
        
        
        
        
        
        
        20
        
        2005Indemnifications for entities in liquidation
        
        
        
        
        
        
        
        
        288
        
        2008 to 2012WPD guarantee of an unconsolidated
            entity's lease obligations
        
        
        
        
        
        
        
        
        1
        
        2008PPL Electric(c)Guarantee of a portion of an unconsolidated
            entity's debt
        
        
        
        
        
        
        
        
        7
        (d)
        2008Residual value guarantees of leased
            equipment
        
        
        1
        
        
        1
        
        
        81
        
        
        2006
        (b)(a)
        
        Represents the estimated maximum potential
            amount of future payments that could be required to be made under
            the guarantee.(b)
        
        Although the expiration date noted is
            2006, equipment of similar value is generally leased and guaranteed
            on an on-going basis.(c)
        
        Other than the exceptions noted in (e)
            below, all guarantees of PPL Energy Supply and PPL Electric also apply
            to PPL on a consolidated basis.(d)
        
        Reflects principal payments only.(e)
        
        Represents letters of credit issued at
            the direction of PPL Energy Supply for the benefit of third parties
            for assurance against nonperformance by PPL and PPL Gas Utilities.
            This is not a guarantee by PPL on a consolidated basis.(f)
        
        Amount is per incident.(g)
        
        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 March 31, 2005,
            WPD has recorded an estimated discounted liability based on its current
            allocated percentage of the total expected costs. Neither the expiration
            date nor the maximum amount of potential payments for certain obligations
            is explicitly stated in the related agreements and, therefore, have
            been estimated based on the types of obligations.
10. Related Party Transactions
    Affiliate Trust(PPL and PPL Energy Supply)
    At both March 31, 2005, and December 31, 2004, PPL and PPL Energy Supply's
      Balance Sheets reflect $89 million of "Long-term Debt with Affiliate Trust."
      This debt represents obligations of PPL Energy Supply under 8.23% subordinated
      debentures maturing in February 2027 that are held by SIUK Capital Trust
      I, which is a variable interest entity whose common securities are owned
      by PPL Energy Supply but which is not consolidated by PPL Energy Supply.
      Interest expense on this obligation was $3 million for the three months
      ended March 31, 2005 and 2004, and is reflected in "Interest Expense" for
      PPL and "Interest Expense with Affiliate" for PPL Energy Supply on the Statement
      of Income. See Note 22 in each Registrant's 2004 Form 10-K for additional
      information.
    PLR Contracts(PPL Energy Supply and PPL Electric)
    PPL Electric has power sales agreements with PPL EnergyPlus, effective
      January 1, 2002, to supply all of PPL Electric's PLR load through 2009.
      Under these contracts, PPL EnergyPlus provides electricity at the predetermined
      capped prices that PPL Electric is authorized to charge its PLR customers.
      For the three months ended March 31, 2005 and 2004, these purchases totaled
      $415 million and $410 million, including nuclear decommissioning recovery
      and amortization of an up-front contract payment. These purchases are included
      in the Statement of Income as "Energy purchases from affiliate" by PPL Electric,
      and as "Wholesale energy marketing to affiliate" revenues by PPL Energy
      Supply.
    Under one of the PLR contracts, PPL Electric is required to make performance
      assurance deposits with PPL EnergyPlus when the market price of electricity
      is less than the contract price by more than its contract collateral threshold.
      Conversely, PPL EnergyPlus is required to make performance assurance deposits
      with PPL Electric when the market price of electricity is greater than the
      contract price by more than its contract collateral threshold. PPL Electric
      estimates that, at March 31, 2005, the market price of electricity would
      exceed the contract price by approximately $2.3 billion. Accordingly, at
      March 31, 2005, PPL Energy Supply was required to provide PPL Electric with
      performance assurance of $300 million, the maximum amount required under
      the contract. PPL Energy Supply's deposit with PPL Electric was $300 million
      at March 31, 2005, and December 31, 2004. This deposit is shown on
      the Balance Sheet as "Collateral on PLR energy supply to/from affiliate,"
      a current asset of PPL Energy Supply and a current liability of PPL Electric.
      PPL Electric pays interest equal to the one-month LIBOR plus 0.5% on this
      deposit, which is included in "Interest Expense" on the Statement of Income.
    In 2001, PPL Electric made a $90 million up-front payment to PPL EnergyPlus
      in connection with the PLR contracts. The up-front payment is being amortized
      by both parties over the term of the PLR contracts. The unamortized balance
      of this payment, and other payments under the contract, was $55 million
      at March 31, 2005, and $58 million at December 31, 2004. This
      balance is reported on the Balance Sheet as "Prepayment on PLR energy supply
      from affiliate" by PPL Electric and as "Deferred revenue on PLR energy supply
      to affiliate" by PPL Energy Supply.
    NUG Purchases(PPL Energy Supply and PPL Electric)
    PPL Electric has a reciprocal contract with PPL EnergyPlus to sell electricity
      purchased under contracts with NUGs. PPL Electric purchases electricity
      from the NUGs at contractual rates and then sells the electricity at the
      same prices to PPL EnergyPlus. For the three months ended March 31, 2005
      and 2004, these NUG purchases totaled $38 million and $37 million, and are
      included in the Statement of Income as "Wholesale electric to affiliate"
      revenues by PPL Electric, and as "Energy purchases from affiliate" by PPL
      Energy Supply.
    Allocations of Corporate Service Costs(PPL Energy Supply and
      PPL Electric)
    PPL Services provides corporate functions such as financial, legal, human
      resources and information services. PPL Services bills the respective PPL
      subsidiaries for the cost of such services when they can be specifically
      identified. The cost of these services that is not directly charged to PPL
      subsidiaries is allocated to certain of the subsidiaries based on an average
      of the subsidiaries' relative invested capital, operation and maintenance
      expenses, and number of employees. PPL Services allocated the following
      charges to PPL Energy Supply and PPL Electric:
    Three
            Months Ended March 31,PPL Energy
            Supply
        
        PPL Electric2005
        
        2004
        
        2005
        
        2004Direct expenses
        $
        25
        
        $
        24
        
        $
        14
        
        $
        14Overhead costs
        
        19
        
        
        14
        
        
        7
        
        
        6Intercompany Borrowings
    (PPL Energy Supply)
    PPL Energy Supply had no notes receivable from affiliates at March 31,
      2005, and December 31, 2004. Interest earned on cash collateral and loans
      to affiliates, included in "Other Income - net" on the Statement of Income,
      was $2 million for the three months ended March 31, 2005, and insignificant
      for the same period in 2004.
    In May 2004, PPL Energy Supply issued a $495 million note payable to an
      affiliate, which is shown on the Balance Sheet as "Note Payable to Affiliate."
      The note matures in May 2006 with interest payable monthly in arrears at
      LIBOR plus 1%. Interest expense on this note was $4 million for the three
      months ended March 31, 2005, and is reflected in "Interest Expense
      with Affiliate" on the Statement of Income.
    (PPL Electric)
    In August 2004, a PPL Electric subsidiary made a $300 million demand loan
      to an affiliate, with interest due quarterly at a rate equal to the 3-month
      LIBOR plus 1.25%. This loan is shown on the Balance Sheet as "Note receivable
      from affiliate." Interest earned on loans to affiliates, included in "Other
      Income - net" on the Statement of Income, was $3 million for the three months
      ended March 31, 2005, and insignificant for the same period in 2004.
    Trademark Royalties(PPL Energy Supply)
    A PPL subsidiary owns PPL trademarks and bills certain affiliates for their
      use. PPL Energy Supply was allocated $8 million of this license fee for
      both the three months ended March 31, 2005 and 2004, which is primarily
      included in "Other operation and maintenance" on the Statement of Income.
11. Other Income - Net
    (PPL, PPL Energy Supply and PPL Electric)
    The breakdown of "Other Income - net" was as follows:
    Three
            Months Ended
            March 31,PPL
        2005
        
        
        2004Other IncomeInterest income
        $
        6
        
        
        $
        3Equity earnings
        
        1
        
        
        
        1Realized earnings on nuclear decommissioning
            trust
        
        1
        
        
        
        4Hyder-related activity
        
        
        
        
        
        2Gain by WPD on the disposition of
            property
        
        1
        
        
        
        1Miscellaneous - International
        
        3
        
        
        
        3Miscellaneous - Domestic
        
        1
        
        
        
        2Total
        
        13
        
        
        
        16Other DeductionsCharitable contributions
        
        2
        
        
        
        2Miscellaneous - International
        
        
        
        
        
        1Miscellaneous - Domestic
        
        2
        
        
        
        2Other Income - net
        $
        9
        
        
        $
        11PPL Energy SupplyOther IncomeInterest income
        $
        4
        
        
        $
        2Affiliated interest income
        
        2Equity earnings
        
        1
        
        
        
        1Realized earnings on nuclear decommissioning
            trust
        
        1
        
        
        
        4Hyder-related activity
        
        
        
        
        
        2Gain by WPD on the disposition of
            property
        
        1
        
        
        
        1Miscellaneous - International
        
        3
        
        
        
        3Miscellaneous - Domestic
        
        1
        
        
        
        1Total
        
        13
        
        
        
        14Other DeductionsLoss on hedge activity
        
        1Miscellaneous - International
        
        
        
        
        
        1Miscellaneous - Domestic
        
        2
        
        
        
        2Other Income - net
        $
        10
        
        
        $
        11PPL ElectricOther IncomeInterest income
        $
        2
        
        
        $
        1Affiliated interest income
        
        3Miscellaneous
        
        
        
        
        
        1Total
        
        5
        
        
        
        2Other Deductions
        
        1
        
        
        
        1Other Income - net
        $
        4
        
        
        $
        1
12. Derivative Instruments and Hedging Activities
    (PPL and PPL Energy Supply)
    Fair Value Hedges
    PPL and PPL Energy Supply enter into financial or physical contracts to
      hedge a portion of the fair value of firm commitments of forward electricity
      sales. These contracts range in maturity through 2006. Additionally, PPL
      and PPL Energy Supply enter into financial contracts to hedge fluctuations
      in market value of existing debt issuances. These contracts range in maturity
      through 2029.
    PPL and PPL Energy Supply did not recognize significant gains or losses
      resulting from hedges of firm commitments that no longer qualified as fair
      value hedges for the three months ended March 31, 2005 or 2004.
    During the three months ended March 31, 2005, PPL Electric redeemed
      the $116 million of 6.40% Pollution Control Revenue Refunding Bonds due
      2029. Consequently, PPL recognized a gain of $3 million related to accelerating
      the amortization of the fair value hedges related to these bonds.
    
    PPL and PPL Energy Supply did not recognize any gains or losses resulting
      from the ineffective portion of fair value hedges for the three months ended
      March 31, 2005 or 2004.
    Cash Flow Hedges
    PPL and PPL Energy Supply enter into financial and physical contracts,
      including forwards, futures and swaps, to hedge the price risk associated
      with electric, gas and oil commodities. These contracts range in maturity
      through 2010. Additionally, PPL and PPL Energy Supply enter into financial
      interest rate swap contracts to hedge interest expense associated with both
      existing and anticipated debt issuances. The current contract matures in
      2006. PPL and PPL Energy Supply also enter into foreign currency forward
      contracts to hedge the cash flows associated with foreign currency-denominated
      debt, the exchange rates associated with firm commitments denominated in
      foreign currencies and the net investment of foreign operations. These forward
      contracts range in maturity through 2028.
    Net investment hedge activity is reported in the foreign currency translation
      adjustments component of other comprehensive income. PPL recorded net investment
      hedge losses, after tax, of $7 million and $4 million as of March 31,
      2005 and 2004.
    Cash flow hedges may be discontinued if it is probable that the original
      forecasted transaction will not occur by the end of the originally specified
      time period. PPL and PPL Energy Supply did not discontinue any cash flow
      hedges during the three months ended March 31, 2005 or 2004.
    Due to hedge ineffectiveness, PPL and PPL Energy Supply reclassified losses,
      after tax, of $2 million from other comprehensive income (reported in "Wholesale
      energy marketing" revenues and "Energy purchases" on the Statement of Income)
      for the three months ended March 31, 2005. For the same period in 2004,
      the amount was insignificant.
    As of March 31, 2005, the deferred net loss, after tax, on derivative instruments
      in "Accumulated other comprehensive income" expected to be reclassified
      into earnings during the next twelve months was $52 million for PPL and
      $47 million for PPL Energy Supply.
    The following table shows the change in accumulated unrealized gains or
      losses on derivatives, after tax, in accumulated other comprehensive income
      for the following periods:
    
    Three
            Months Ended
            March 31,2005
        
        
        2004PPLBeginning accumulated derivative
            gain (loss)
        
        $
        (63)
        
        
        $
        41Net change associated with current
            period hedging activities and other
        
        
        (79
        )
        
        
        (99
        )Net change from reclassification into
            earnings
        
        
        13
        
        
        
        63Ending accumulated derivative gain
            (loss)
        
        $
        (129
        )
        
        $
        5PPL Energy SupplyBeginning accumulated derivative
            gain (loss)
        
        $
        (45)
        
        
        $
        60Net change associated with current
            period hedging activities and other
        
        
        (78
        )
        
        
        (94
        )Net change from reclassification into
            earnings
        
        
        12
        
        
        
        61Ending accumulated derivative gain
            (loss)
        
        $
        (111
        )
        
        $
        27Credit Concentration
    PPL and PPL Energy Supply enter into contracts with many entities for the
      purchase and sale of energy. Many of these contracts are considered a normal
      part of doing business and, as such, the mark-to-market value of these contracts
      is not reflected in the financial statements. However, the mark-to-market
      value of these contracts is considered when committing to new business from
      a credit perspective.
    PPL and PPL Energy Supply have credit exposures to energy trading partners.
      The majority of these exposures are the mark-to-market value of multi-year
      contracts for energy sales and purchases. Therefore, if these counterparties
      fail to perform their obligations under such contracts, PPL and PPL Energy
      Supply would not experience an immediate financial loss, but would experience
      lower revenues or higher costs in future years to the extent that replacement
      sales or purchases could not be made at the same prices as those under the
      defaulted contracts.
    At March 31, 2005, PPL had a credit exposure of $348 million to energy
      trading partners. Ten counterparties accounted for 70% of this exposure.
      No other individual counterparty accounted for more than 3% of the exposure.
      Nine of the ten counterparties had an investment grade credit rating from
      S&P. The non-investment grade counterparty has remained current on obligations
      under its contracts, and has supplied a letter of credit as collateral against
      its obligations.
    At March 31, 2005, PPL Energy Supply had a credit exposure of $342 million
      to energy trading partners. Ten counterparties accounted for 71% of this
      exposure. No other individual counterparty accounted for more than 3% of
      the exposure. Nine of the ten counterparties had an investment grade credit
      rating from S&P. The non-investment grade counterparty has remained
      current on obligations under its contracts, and has supplied a letter of
      credit as collateral against its obligations.
    PPL and PPL Energy Supply generally have the right to request collateral
      from their counterparties in the event that the counterparties' credit ratings
      fall below investment grade. It is also the policy of PPL and PPL Energy
      Supply to enter into netting agreements with all of their counterparties
      to minimize credit exposure.
    (PPL Energy Supply and PPL Electric)
    In past years, PPL Energy Supply has had an exposure to PPL Electric under
      the long-term contract for PPL EnergyPlus to provide PPL Electric's PLR
      load. However, beginning in 2004, increases in electricity prices have reversed
      this position. PPL Electric estimates that, at March 31, 2005, the market
      price of electricity would exceed the contract price by approximately $2.3
      billion. In accordance with the terms of one of the PLR contracts, PPL Energy
      Supply provided PPL Electric with cash collateral in the amount of $300
      million, the maximum amount required under the contract. This is the only
      credit exposure for PPL Electric that has a mark-to-market element. No other
      counterparty accounts for more than 1% of PPL Electric's total exposure.
13. Pension and Other Postretirement Benefits
    (PPL and PPL Energy Supply)
    The components of net pension and other postretirement benefit cost (credit)
      were as follows:
    
    Pension
            Benefits
        
        
        Other
            Postretirement
            BenefitsThree
            Months Ended
            March 31,
        
        
        Three
            Months Ended
            March 31,2005
        
        
        2004
        
        
        2005
        
        
        2004Domestic
        
        
        International
        
        
        Domestic
        
        
        InternationalPPLService cost
        
        $
        14
        
        
        $
        4
        
        
        $
        12
        
        
        $
        4
        
        
        $
        2
        
        
        $
        1Interest cost
        
        
        29
        
        
        
        38
        
        
        
        28
        
        
        
        36
        
        
        
        7
        
        
        
        6Expected return on plan assets
        
        
        (40
        )
        
        
        (52
        )
        
        
        (38
        )
        
        
        (53
        )
        
        
        (5
        )
        
        
        (4
        )Amortization of transition
            obligation
        
        
        (1
        )
        
        
        
        
        
        
        (1
        )
        
        
        
        
        
        
        2
        
        
        
        2Amortization of prior service
            cost
        
        
        4
        
        
        
        1
        
        
        
        4
        
        
        
        1
        
        
        
        1Amortization of (gain) loss
        
        
        
        
        
        
        6
        
        
        
        (2
        )
        
        
        2
        
        
        
        2
        
        
        
        2Net periodic pension and
            other postretirement benefit cost (credit) prior to termination benefits
        
        
        6
        
        
        
        (3
        )
        
        
        3
        
        
        
        (10
        )
        
        
        9
        
        
        
        7Termination benefits
        
        
        
        
        
        
        5Net periodic pension and other postretirement
            benefit cost (credit)
        
        $
        6
        
        
        $
        2
        
        
        $
        3
        
        
        $
        (10
        )
        
        $
        9
        
        
        $
        7PPL Energy SupplyService cost
        
        $
        1
        
        
        $
        4
        
        
        $
        1
        
        
        $
        4Interest cost
        
        
        1
        
        
        
        38
        
        
        
        1
        
        
        
        36Expected return on plan assets
        
        
        (1
        )
        
        
        (52
        )
        
        
        (1
        )
        
        
        (53
        )Amortization of prior service
            cost
        
        
        
        
        
        
        1
        
        
        
        
        
        
        
        1Amortization of loss
        
        
        
        
        
        
        6
        
        
        
        
        
        
        
        2Net periodic pension and
            other postretirement benefit cost (credit) prior to termination benefits
        
        
        1
        
        
        
        (3
        )
        
        
        1
        
        
        
        (10
        )Termination benefits
        
        
        
        
        
        
        5Net periodic pension and other postretirement
            benefit cost (credit)
        
        $
        1
        
        
        $
        2
        
        
        $
        1
        
        
        $
        (10
        )
14. Restricted Cash
    (PPL, PPL Energy Supply and PPL Electric)
    The following table details the components of restricted cash by reporting
      entity and by type:
    March
            31, 2005PPL
        
        
        PPL Energy
            Supply
        
        
        PPL ElectricCurrent:Collateral for letters of
            credit (a)
        $
        42
        
        
        
        
        
        
        $
        42Miscellaneous
        
        11
        
        
        $
        3Restricted cash - current
        
        53
        
        
        
        3
        
        
        
        42Noncurrent:Required deposit of WPD's
            insurance subsidiary
        
        20
        
        
        
        20PPL Transition Bond Company
            Indenture reserves (b)
        
        20
        
        
        
        
        
        
        
        20Restricted cash - noncurrent
        
        40
        
        
        
        20
        
        
        
        20Total restricted cash
        $
        93
        
        
        $
        23
        
        
        $
        62
    December
            31, 2004PPL
        
        
        PPL Energy
            Supply
        
        
        PPL ElectricCurrent:Collateral for letters of
            credit (a)
        $
        42
        
        
        
        
        
        
        $
        42Miscellaneous
        
        8
        
        
        $
        3Restricted cash - current
        
        50
        
        
        
        3
        
        
        
        42Noncurrent:Required deposit of WPD's
            insurance subsidiary
        
        37
        
        
        
        37PPL Transition Bond Company
            Indenture reserves (b)
        
        22
        
        
        
        
        
        
        
        22Restricted cash - noncurrent
        
        59
        
        
        
        37
        
        
        
        22Total restricted cash
        $
        109
        
        
        $
        40
        
        
        $
        64(a)
        
        A deposit with a financial institution
            of funds from the asset-backed commercial paper program to fully collateralize
            $42 million of letters of credit. See Note 7 for further discussion
            on the asset-backed commercial paper program.(b)
        
        Credit enhancement for PPL Transition
            Bond Company's $2.4 billion Series 1999-1 Bonds to protect against
            losses or delays in scheduled payments.
15. Asset Retirement Obligations
    (PPL and PPL Energy Supply)
    The change in the carrying amounts of the AROs was as follows:
    ARO at December 31, 2004
        
        $
        257Add: Accretion expense
        
        
        5ARO at March 31, 2005
        
        $
        262Funds in the nuclear decommissioning trust are legally restricted for purposes
      of settling PPL's and PPL Energy Supply's ARO related to the decommissioning
      of the Susquehanna station. PPL Electric collects authorized nuclear decommissioning
      costs through the CTC. These revenues are passed on to PPL EnergyPlus under
      the power supply agreements between PPL Electric and PPL EnergyPlus. Similarly,
      these revenues are passed on to PPL Susquehanna under a power supply agreement
      between PPL EnergyPlus and PPL Susquehanna. These revenues, less applicable
      taxes, are used to fund the nuclear decommissioning trust and can only be
      used for future decommissioning costs. The fair value of the nuclear plant
      decommissioning trust fund was $405 million as of March 31, 2005, and $409
      million as of December 31, 2004.
    See Note 16 for a discussion of FASB Interpretation No. 47, "Accounting
      for Conditional Asset Retirement Obligations, an Interpretation of FASB
      Statement No. 143," and its potential impact on PPL and its subsidiaries.
16. New Accounting Standards
    (PPL, PPL Energy Supply and PPL Electric)
    SFAS 123(R)
    In December 2004, the FASB issued SFAS 123 (revised 2004), "Share-Based
      Payment," which is known as SFAS 123(R) and replaces SFAS 123, "Accounting
      for Stock-Based Compensation," as amended by SFAS 148, "Accounting for Stock-Based
      Compensation-Transition and Disclosure." Among other things, SFAS 123(R)
      eliminates the alternative to use the intrinsic value method of accounting
      for stock-based compensation. SFAS 123(R) requires public entities to recognize
      compensation expense for awards of equity instruments to employees based
      on the grant-date fair value of the awards. SFAS 123(R) was originally effective
      for public entities that do not file as small business issuers as of the
      beginning of the first interim or annual reporting period that begins after
      June 15, 2005. However, in April 2005, the SEC issued a rule that amended
      Regulation S-X to change this effective date to the beginning of an entity's
      fiscal year that begins on or after June 15, 2005.
    SFAS 123(R) requires public entities to apply the modified prospective
      application transition method of adoption. Under this application, entities
      must recognize compensation expense based on the grant-date fair value for
      new awards granted or modified after the effective date and for unvested
      awards outstanding on the effective date. Additionally, public entities
      may choose to apply modified retrospective application to periods before
      the effective date of SFAS 123(R). This application may be applied either
      to all prior years for which SFAS 123 was effective or only to prior interim
      periods in the year of initial adoption of SFAS 123(R). Under modified retrospective
      application, prior periods would be adjusted to recognize compensation expense
      as though stock-based awards granted, modified or settled in cash in fiscal
      years beginning after December 15, 1994, had been accounted for under SFAS
      123.
    PPL and its subsidiaries must adopt SFAS 123(R) no later than January 1,
      2006. PPL and its subsidiaries do not plan to apply modified retrospective
      application to any periods prior to the date of adoption. In addition, PPL
      and its subsidiaries adopted the fair-value method of accounting for stock-based
      compensation under SFAS 123 effective January 1, 2003. Therefore, the adoption
      of SFAS 123(R) is not expected to have a material impact on PPL and its
      subsidiaries.
    FIN 47
    In March 2005, the FASB issued Interpretation No. 47, "Accounting for Conditional
      Asset Retirement Obligations, an Interpretation of FASB Statement No. 143."
      FIN 47 clarifies that an entity is required to recognize a liability for
      the fair value of a conditional asset retirement obligation when incurred
      if the liability's fair value can be reasonably estimated. FIN 47 also clarifies
      when an entity would be expected to have sufficient information to reasonably
      estimate the fair value of an asset retirement obligation. FIN 47 is effective
      for fiscal years ending after December 15, 2005. The impact of initially
      applying FIN 47 is required to be recognized as a cumulative effect of a
      change in accounting principle. Retrospective application of interim financial
      information is permitted but not required.
    PPL and its subsidiaries are currently in the process of reviewing (i)
      certain obligations to perform asset retirement activities that are conditional
      upon a future event occurring and (ii) certain legal retirement obligations
      that were identified but are not measurable at this time due to indeterminable
      dates of retirement. The potential impact of applying the guidance in FIN
      47 to these items is not yet determinable, but could be material.

---



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,
  PA. In PPL's 2004 Form 10-K, descriptions of its major segments are found in
  "Item 1. Business - Background" and the current corporate organizational structure
  is shown in Exhibit 99. Through its subsidiaries, PPL is primarily engaged in
  the generation and marketing of electricity in two key markets - the northeastern
  and western U.S. - and in the delivery of electricity in Pennsylvania, the U.K.
  and Latin America. See "Item 7. Management's Discussion and Analysis of Financial
  Condition and Results of Operations," in PPL's 2004 Form 10-K for an overview
  of PPL's strategy and the risks and the challenges that it faces in its business.

PPL's reportable segments are Supply, International Delivery and Pennsylvania
  Delivery. See Note 3 to the Financial Statements for further segment information.

The following information should be read in conjunction with PPL's Condensed
  Consolidated Financial Statements and the accompanying Notes.

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

Results of Operations

The following discussion begins with a review of PPL's earnings and a description
  of key factors by segment that management expects may impact future earnings.
  "Results of Operations" continues with a summary of results by reportable segment
  and ends with explanations of significant changes in principal items on PPL's
  Statement of Income, comparing the three months ended March 31, 2005, to the
  comparable period in 2004.

WPD's results, as consolidated in PPL's Statement of Income, are impacted by
  changes in foreign currency exchange rates. For the three months ended March
  31, 2005, as compared with the same period in 2004, changes in foreign exchange
  rates increased WPD's portion of revenue and expense line items by about 5%.

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



Earnings

Net income and the related EPS were as follows:

|              |  | Three Months Ended 
        March 31, |     
|------------- |  | ------------------------------------- | ----
|              |  |                                       |     
|              |  | 2005                                  |     
|              |  |                                       |     
|Net income    |  | $                                     | 168 
|              |  |                                       |     
|EPS - basic   |  | $                                     | 0.89
|              |  |                                       |     
|EPS - diluted |  | $                                     | 0.88

The after-tax change in net income was due to:

|               | Three Months
        EndedMarch 31, 2005 vs. March 31, 2004                                                        
|-------------- | -------------------------------------------------------------------------------------------------------------------
|               |                                                                                                                    
|Domestic:      |                                                                                                                    
|               |                                                                                                                    
|               | Eastern U.S. non-trading margins                                                                                   
|               |                                                                                                                    
|               | Northwestern U.S. non-trading
        margins                                                                      
|               |                                                                                                                    
|               | Net energy trading margins                                                                                         
|               |                                                                                                                    
|               | Delivery revenues (net of CTC/ITC
        amortization, interest expense on transition bonds and ancillary charges)
|               |                                                                                                                    
|               | Operation and maintenance expenses                                                                                 
|               |                                                                                                                    
|               | Depreciation                                                                                                       
|               |                                                                                                                    
|               | Taxes, other than income (excluding
        gross receipts tax)                                                    
|               |                                                                                                                    
|               | Synfuel earnings                                                                                                   
|               |                                                                                                                    
|               | Interest expense                                                                                                   
|               |                                                                                                                    
|               | Other                                                                                                              
|               |                                                                                                                    
|               |                                                                                                                    
|               |                                                                                                                    
|International: |                                                                                                                    
|               |                                                                                                                    
|               | U.K.:                                                                                                              
|               |                                                                                                                    
|               |                                                                                                                    
|               |                                                                                                                    
|               |                                                                                                                    
|               |                                                                                                                    
|               | Latin America                                                                                                      
|               |                                                                                                                    
|               | U.S. income taxes                                                                                                  
|               |                                                                                                                    
|               | Interest expense                                                                                                   
|               |                                                                                                                    
|               |                                                                                                                    
|               |                                                                                                                    
|Unusual items: |                                                                                                                    
|               |                                                                                                                    
|               | Sale of CGE (Note 8)                                                                                               
|               |                                                                                                                    
|               | PJM billing dispute (Note 9)                                                                                       
|               |                                                                                                                    
|               | NorthWestern litigation (Note
        9)                                                                           
|               |                                                                                                                    
|               |                                                                                                                    
|               |                                                                                                                    

The period-to-period changes in earnings components, including domestic gross
  energy margins by region and income statement line items, are discussed following
  the future earnings factors and segment results.

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

Supply Segment:

- PPL's future energy margins and, consequently, its future earnings, will
    be impacted by changes in market prices for electricity, as well as fluctuations
    in fuel prices, fuel transportation costs and emission allowance expenses.
    For instance, although PPL expects market prices for electricity in 2005 to
    be higher than in 2004, PPL is not expecting an increase in its 2005 energy
    margins due to expected increases in the cost of fuel, fuel transportation
    and emissions allowances. See Note 9 to the Financial Statements for a discussion
    of the status of PPL's sulfur dioxide emission allowances.

- A key part of PPL's overall strategy is to enter into long-term and intermediate-term
    energy supply agreements in order to mitigate market price and supply risk.
    PPL's ability to continue to enter into such agreements, and to renew existing
    energy supply agreements, may affect its future earnings. See Note 9 to the
    Financial Statements for more information regarding PPL's wholesale energy
    commitments and Note 10 for more information regarding the PLR contracts.

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

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

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

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

- To comply with existing and future environmental requirements and as a result
    of voluntary pollution control measures it may take, PPL expects to spend
    significant amounts on environmental control and compliance in the future.
    The costs of such measures, in most cases, are not now determinable with certainty.
    For instance, PPL's current cost estimates for sulfur dioxide reduction at
    its generating plants are preliminary and PPL could incur significantly higher
    capital and operating expenses due to more stringent environmental requirements,
    changing market conditions with respect to the cost of pollution control equipment
    or emissions allowances, delays in the installation of pollution control equipment
    or other factors. See Note 9 to the Financial Statements for more information
    regarding current environmental requirements and initiatives, including those
    relating to air emissions, and PPL's anticipated capital expenditure program
    to meet the sulfur dioxide reduction requirements of the Clean Air Act.

International Delivery Segment:

- Earnings in 2005 and beyond are expected to continue to be adversely affected
    by increased pension costs. Specifically, WPD will experience increased pension
    costs due to a recent actuarial valuation of WPD's plans that reflects higher
    pension obligations. The increase in pension costs in 2005 is forecasted to
    be approximately $24 million, after tax, and the increase in pension costs
    is expected to continue to be significant in 2006. An additional $4 million
    of expense, after tax, was recognized in the first quarter related to termination
    benefits.

Pennsylvania Delivery Segment:

- In December 2004, the PUC approved an increase in PPL Electric's distribution
    rates of approximately $137 million (based on a return on equity of 10.7%),
    and approved PPL Electric's proposed mechanism for collecting an additional
    $57 million in transmission-related charges, for a total increase of approximately
    $194 million, effective January 1, 2005.

- PPL Electric has agreed to provide electricity supply to its PLR customers
    at predetermined rates through 2009 and has entered into PUC-approved, full
    requirements energy supply agreements with PPL EnergyPlus to fulfill its PLR
    obligation. The predetermined charges for generation supply which PPL Electric
    collects from its PLR customers and pays to PPL EnergyPlus under the energy
    supply agreements provide for annual increases in each year commencing in
    2006 and continuing through 2009. PPL Electric's PLR obligation after 2009
    will be determined by the PUC pursuant to rules that have not yet been promulgated.
    See Note 10 to the Financial Statements for more information regarding the
    PLR contracts.

- In January 2005, severe ice storms hit PPL Electric's service territory.
    PPL Electric had to restore service to about 238,000 customers. Although the
    actual cost of these storms and the specific allocation of such cost between
    operation and maintenance expense and capital costs is not yet finalized,
    PPL Electric currently estimates a total cost of $22 million, with approximately
    $19 million, or $0.06 per share, being recorded as an expense on PPL Electric's
    income statement for the first quarter of 2005.

On February 11, 2005, PPL Electric filed a petition with the PUC for authority
  to defer and amortize for regulatory accounting and reporting purposes its actual
  cost of these storms, excluding capitalized costs of approximately $3 million
  and regular payroll expenses of approximately $2 million (pursuant to PUC precedent
  on this issue). If the PUC grants this petition, PPL Electric's management will
  assess the recoverability of these costs in PPL Electric's next general rate
  increase proceeding, in accordance with SFAS 71, "Accounting for the Effects
  of Certain Types of Regulation." Depending on the likelihood of such recovery
  based on this assessment, most of the first quarter expense could be reversed
  in that future period. At this time, PPL Electric cannot predict the outcome
  of its deferral petition or the likelihood of recovery of these storm costs.

All Segments:

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

- From time to time, PPL and its subsidiaries are involved in negotiations
    with third parties regarding acquisitions and dispositions of businesses and
    assets. Any such transactions may impact future earnings.

- See Note 9 to the Financial Statements for potential commitments and contingent
    liabilities that may impact future earnings.

- See Note 16 to the Financial Statements for new accounting standards that
    have been issued but not yet adopted by PPL that may impact future earnings.

Segment Results

Net income by segment was as follows:

| |                        | Three Months
        Ended March 31, |  
| | ---------------------- | ------------------------------------ | -
| |                        |                                      |  
| |                        | 2005                                 |  
| |                        |                                      |  
| | Supply                 |                                      | $
| |                        |                                      |  
| | International Delivery |                                      |  
| |                        |                                      |  
| | Pennsylvania Delivery  |                                      |  
| |                        |                                      |  
| | Total                  |                                      | $
| |                        |                                      |  

Supply Segment

The Supply segment owns and operates power plants to generate electricity,
  markets this electricity and other power purchases to deregulated wholesale
  and retail markets and acquires and develops domestic generation projects. The
  Supply segment primarily consists of the activities of PPL Generation and PPL
  EnergyPlus.

Segment net income was as follows:

|                                |                          | Three Months
        Ended March 31, |    
|------------------------------- | ------------------------ | ------------------------------------ | ---
|                                |                          |                                      |    
|                                |                          | 2005                                 |    
|                                |                          |                                      |    
|Energy revenues                 |                          |                                      |    
|                                |                          |                                      |    
|                                | External                 |                                      | $  
|                                |                          |                                      |    
|                                | Intersegment             |                                      |    
|                                |                          |                                      |    
|Energy related businesses       |                          |                                      | 122
|                                |                          |                                      |    
|                                | Total operating revenues |                                      |    
|                                |                          |                                      |    
|Fuel and energy purchases       |                          |                                      |    
|                                |                          |                                      |    
|                                | External                 |                                      |    
|                                |                          |                                      |    
|                                | Intersegment             |                                      |    
|                                |                          |                                      |    
|Other operation and maintenance |                          |                                      | 191
|                                |                          |                                      |    
|Depreciation                    |                          |                                      | 38 
|                                |                          |                                      |    
|Taxes, other than income        |                          |                                      | 12 
|                                |                          |                                      |    
|Energy related businesses       |                          |                                      | 142
|                                |                          |                                      |    
|                                | Total operating expenses |                                      |    
|                                |                          |                                      |    
|Other Income - net              |                          |                                      |    
|                                |                          |                                      |    
|Interest Expense                |                          |                                      | 30 
|                                |                          |                                      |    
|Income Taxes                    |                          |                                      | 6  
|                                |                          |                                      |    
|                                | Total                    |                                      | $  
|                                |                          |                                      |    

The after-tax change in net income was due to the following factors:

|                                                        | Three Months
        EndedMarch 31, 2005 vs. March 31, 2004
|------------------------------------------------------- | -----------------------------------------------------------
|                                                        |                                                            
|Eastern U.S. non-trading margins                        |                                                            
|                                                        |                                                            
|Northwestern U.S. non-trading
        margins           |                                                            
|                                                        |                                                            
|Net energy trading margins                              |                                                            
|                                                        |                                                            
|Operation and maintenance expenses                      |                                                            
|                                                        |                                                            
|Synfuel earnings                                        |                                                            
|                                                        |                                                            
|Depreciation                                            |                                                            
|                                                        |                                                            
|Interest expense                                        |                                                            
|                                                        |                                                            
|Other                                                   |                                                            
|                                                        |                                                            
|                                                        | Total                                                      
|                                                        |                                                            
|Unusual item - NorthWestern
        litigation (Note 9) |                                                            
|                                                        |                                                            
|                                                        |                                                            
|                                                        |                                                            

- See "Domestic Gross Energy Margins" for an explanation of non-trading margins
    by geographic region and for an explanation on net energy trading margins.

- Higher operation and maintenance expenses were primarily due to accelerated
    amortization of stock-based compensation for retirement-eligible employees,
    which resulted from additional accounting guidance. See Note 2 to the Financial
    Statements for additional information.

- The improved earnings contribution from synfuel operations resulted from
    the Tyrone facility that began commercial operation during the third quarter
    of 2004.

The change in net income was also attributable to an accrual of approximately
  $6 million after tax for the loss contingency related to the NorthWestern litigation.
  See Note 9 to the Financial Statements for additional information on the accrual.

International Delivery Segment

The International Delivery segment owns and operates international energy businesses
  that are focused on the distribution of electricity. The segment primarily consists
  of the operations of the regulated international energy businesses of PPL Global.
  The majority of PPL Global's international businesses are located in the U.K.,
  Chile, El Salvador and Bolivia.

Segment net income was as follows:

|                                  |                          | Three Months
        Ended March 31, |    
|--------------------------------- | ------------------------ | ------------------------------------ | ---
|                                  |                          |                                      |    
|                                  |                          | 2005                                 |    
|                                  |                          |                                      |    
|Energy revenues                   |                          | $                                    | 293
|                                  |                          |                                      |    
|Energy related businesses         |                          |                                      | 17 
|                                  |                          |                                      |    
|                                  | Total operating revenues |                                      |    
|                                  |                          |                                      |    
|Fuel and energy purchases         |                          |                                      | 63 
|                                  |                          |                                      |    
|Other operation and maintenance   |                          |                                      | 62 
|                                  |                          |                                      |    
|Depreciation                      |                          |                                      | 38 
|                                  |                          |                                      |    
|Taxes, other than income          |                          |                                      | 14 
|                                  |                          |                                      |    
|Energy related businesses         |                          |                                      | 6  
|                                  |                          |                                      |    
|                                  | Total operating expenses |                                      |    
|                                  |                          |                                      |    
|Other Income - net                |                          |                                      | 5  
|                                  |                          |                                      |    
|Interest Expense                  |                          |                                      | 50 
|                                  |                          |                                      |    
|Income Taxes                      |                          |                                      | 18 
|                                  |                          |                                      |    
|Minority Interest                 |                          |                                      | 2  
|                                  |                          |                                      |    
|Loss from Discontinued Operations |                          |                                      |    
|                                  |                          |                                      |    
|                                  | Total                    |                                      | $  
|                                  |                          |                                      |    

The after-tax change in net income was due to the following factors:

|                                            | Three Months
        EndedMarch 31, 2005 vs. March 31, 2004 
|------------------------------------------- | ------------------------------------------------------------
|                                            |                                                             
|U.K.:                                       |                                                             
|                                            |                                                             
|                                            | Operation and maintenance expenses                          
|                                            |                                                             
|                                            | Impact of changes in foreign currency
        exchange rates
|                                            |                                                             
|Latin America                               |                                                             
|                                            |                                                             
|U.S. income taxes                           |                                                             
|                                            |                                                             
|Interest expense                            |                                                             
|                                            |                                                             
|                                            | Total                                                       
|                                            |                                                             
|Unusual item - Sale of CGE (Note
        8) |                                                             
|                                            |                                                             
|                                            |                                                             
|                                            |                                                             

- The U.K.'s earnings were negatively impacted by higher operation and maintenance
    expenses, primarily due to increased pension costs and termination benefit
    expenses.

- U.S. income taxes on dividends from WPD decreased primarily due to greater
    utilization of foreign tax credits.

- Lower interest expense was due to lower affiliate debt.

Pennsylvania Delivery Segment

The Pennsylvania Delivery segment includes the regulated electric and gas delivery
  operations of PPL Electric and PPL Gas Utilities.

Segment net income was as follows:

|                                                     |                          | Three Months
        Ended March 31, |    
|---------------------------------------------------- | ------------------------ | ------------------------------------ | ---
|                                                     |                          |                                      |    
|                                                     |                          | 2005                                 |    
|                                                     |                          |                                      |    
|Operating revenues                                   |                          |                                      |    
|                                                     |                          |                                      |    
|                                                     | External                 |                                      | $  
|                                                     |                          |                                      |    
|                                                     | Intersegment             |                                      |    
|                                                     |                          |                                      |    
|                                                     | Total operating revenues |                                      |    
|                                                     |                          |                                      |    
|Fuel and energy purchases                            |                          |                                      |    
|                                                     |                          |                                      |    
|                                                     | External                 |                                      |    
|                                                     |                          |                                      |    
|                                                     | Intersegment             |                                      |    
|                                                     |                          |                                      |    
|Other operation and maintenance                      |                          |                                      | 111
|                                                     |                          |                                      |    
|Amortization of recoverable
        transition costs |                          |                                      | 69 
|                                                     |                          |                                      |    
|Depreciation                                         |                          |                                      | 29 
|                                                     |                          |                                      |    
|Taxes, other than income                             |                          |                                      | 47 
|                                                     |                          |                                      |    
|                                                     | Total operating expenses |                                      |    
|                                                     |                          |                                      |    
|Other Income - net                                   |                          |                                      | 4  
|                                                     |                          |                                      |    
|Interest Expense                                     |                          |                                      | 55 
|                                                     |                          |                                      |    
|Income Taxes                                         |                          |                                      | 8  
|                                                     |                          |                                      |    
|Dividends on Preferred Stock                         |                          |                                      | 1  
|                                                     |                          |                                      |    
|                                                     | Total                    |                                      | $  
|                                                     |                          |                                      |    

The after-tax change in net income was due to the following factors:

|                                                                                                                    | Three Months
        EndedMarch 31, 2005 vs. March 31, 2004
|------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------
|                                                                                                                    |                                                            
|Delivery revenues (net of CTC/ITC
        amortization, interest expense on transition bonds and ancillary charges) |                                                            
|                                                                                                                    |                                                            
|Operation and maintenance expenses                                                                                  |                                                            
|                                                                                                                    |                                                            
|Taxes, other than income (excluding
        gross receipts tax)                                                     |                                                            
|                                                                                                                    |                                                            
|                                                                                                                    | Total                                                      
|                                                                                                                    |                                                            
|Unusual item - PJM billing dispute
        
        (Note 9)                                                        |                                                            
|                                                                                                                    |                                                            
|                                                                                                                    |                                                            
|                                                                                                                    |                                                            

- Delivery revenues increased as a result of higher transmission and distribution
    customer rates effective January 1, 2005, and a 3.7% increase in electricity
    delivery sales volumes.

- The increase in operation and maintenance expenses was primarily due to
    the costs incurred in January 2005 to restore electric service to customers
    as a result of severe ice storms that affected portions of PPL Electric's
    service territory. The increase was also due to accelerated amortization of
    stock-based compensation for retirement-eligible employees, which resulted
    from additional accounting guidance. See Note 2 to the Financial Statements
    for additional information on stock-based compensation.

- Taxes, other than income, benefited in 2004 from the reversal of 1998 and
    1999 PURTA tax accruals related to the PPL Susquehanna tax appeals.

The change in net income was also attributable to an accrual of approximately
  $27 million after tax for the loss contingency related to the PJM billing dispute.
  See Note 9 to the Financial Statements for additional information on the accrual.

Domestic Gross Energy Margins

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

|                                            | Three Months
        EndedMarch 31, 2005 vs. March 31, 2004
|------------------------------------------- | -----------------------------------------------------------
|                                            |                                                            
|Utility                                     |                                                            
|                                            |                                                            
|Unregulated retail electric
        and gas |                                                            
|                                            |                                                            
|Wholesale energy marketing                  |                                                            
|                                            |                                                            
|Net energy trading margins                  |                                                            
|                                            |                                                            
|Other revenue adjustments (a)               |                                                            
|                                            |                                                            
|                                            | Total revenues                                             
|                                            |                                                            
|Fuel                                        |                                                            
|                                            |                                                            
|Energy purchases                            |                                                            
|                                            |                                                            
|Other cost adjustments (a)                  |                                                            
|                                            |                                                            
|                                            | Total cost of sales                                        
|                                            |                                                            
|                                            |                                                            
|                                            |                                                            

|(a) |  | Adjusted to exclude the impact of any revenues
        and costs not associated with domestic gross energy margins, in particular,
        revenues and energy costs related to the international operations of PPL
        Global, the domestic delivery operations of PPL Electric and PPL Gas Utilities
        and an accrual for the loss contingency related to the PJM billing dispute
        (see Note 9 to the Financial Statements for additional information). Also
        adjusted to include gains or losses on sales of emission allowances, which
        are included in "Other operation and maintenance" expenses on the Statement
        of Income.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Changes in Domestic Gross Energy Margins By Region

Domestic gross energy margins are generated through PPL's normal hedging (non-trading)
  activities, as well as trading activities. PPL manages its non-trading energy
  business on a geographic basis that is aligned with its generation assets.

|                   | Three Months
        EndedMarch 31, 2005 vs. March 31, 2004
|------------------ | -----------------------------------------------------------
|                   |                                                            
|Eastern U.S.       |                                                            
|                   |                                                            
|Northwestern U.S.  |                                                            
|                   |                                                            
|Southwestern U.S.  |                                                            
|                   |                                                            
|Net energy trading |                                                            
|                   |                                                            
|                   | Domestic gross energy margins                              
|                   |                                                            

Eastern U.S.

Eastern U.S. non-trading margins were higher primarily because a greater portion
  of PPL's supply came from its own generation, instead of purchased power. This
  was due to the timing of plant outages as well as the operation of the Lower
  Mt. Bethel plant, which began commercial operation in May 2004. The increase
  was achieved despite higher supply costs, which were driven by increased fossil
  fuel and power purchase prices. Power purchase prices increased by 4% primarily
  due to higher market prices for fossil fuel; however, this increase was more
  than offset by a 10% increase in the average sales price for wholesale transactions.
  Fuel costs increased 23% due to a 6% increase in generation across a diverse
  mix of low-cost coal-fired, nuclear and hydroelectric plants and a 17% increase
  in the average consumed cost of fossil fuels. In addition, PPL also benefited
  from favorable transmission congestion positions, and gains on sales of emission
  allowances.

Northwestern U.S.

Northwestern U.S. non-trading margins were lower primarily due to an 8% reduction
  in coal and hydroelectric generation output. Generation was adversely affected
  by outages and reduced river flows. Additionally, the average consumed cost
  of coal increased by 10% primarily due to an unfavorable arbitration ruling
  effective April 2004.

Net Energy Trading

PPL enters into certain energy contracts that meet the criteria of trading
  derivatives as defined by EITF Issue 02-3, "Issues Involved in Accounting for
  Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy
  Trading and Risk Management Activities." These physical and financial contracts
  cover trading activity associated with electricity, gas and oil. The $10 million
  increase was primarily due to an increase in realized gains on electricity positions
  as well as an increase in wholesale physical gas trading. The physical volumes
  associated with energy trading for the three months ended March 31, 2005, were
  1,066 GWh and 4.5 Bcf, compared with 994 GWh and 2.4 Bcf for the three months
  ended March 31, 2004.

Utility Revenues

The increase in utility revenues was attributable to the following:

|               | Three Months
        EndedMarch 31, 2005 vs. March 31, 2004
|-------------- | -----------------------------------------------------------
|               |                                                            
|Domestic:      |                                                            
|               |                                                            
|               | Retail electric revenue (PPL
        Electric)             
|               |                                                            
|               |                                                            
|               |                                                            
|               |                                                            
|               |                                                            
|               | Gas revenue (PPL Gas Utilities)                            
|               |                                                            
|               | Wholesale electric revenue (PPL
        Electric)          
|               |                                                            
|International: |                                                            
|               |                                                            
|               | Retail electric delivery (PPL
        Global)              
|               |                                                            
|               |                                                            
|               |                                                            
|               |                                                            
|               |                                                            
|               |                                                            
|               |                                                            
|               |                                                            

The increase in utility revenues was primarily due to:

- higher delivery revenues resulting from higher transmission and distribution
    customer rates effective January 1, 2005, and a 3.7% increase in sales volumes;
- higher PPL Electric PLR revenues due to higher energy and capacity rates,
    and a 5.6% increase in volumes, in part due to the return of customers previously
    served by alternate suppliers;
- higher PPL Gas Utilities revenues, primarily due to the increase in natural
    gas prices which are a pass-through to customer rates;
- higher revenues in Chile, primarily due to a 7.3% increase in sales volumes,
    primarily attributable to regulated customers;
- higher WPD revenues, primarily due to the change in foreign currency exchange
    rates, partially offset by a reduction in certain charges which had been a
    pass-through to customer rates; and
- higher revenues in El Salvador, due to a 5.3% increase in sales volumes
    of all customer types.

Energy Related Businesses

Energy related businesses contributed $10 million more to operating income
  for the three months ended March 31, 2005, compared with the same period in
  2004. The increase was attributable to:

- a $15 million pre-tax loss in 2004, related to the sale of CGE (see Note
    8 to the Financial Statements); and
- a $2 million increase from mechanical contracting and engineering subsidiaries
    due to a favorable closeout on a major project; partially offset by
- a $6 million higher pre-tax operating loss from synfuel projects due to
    increased production levels which improve after-tax earnings.

Other Operation and Maintenance

The increase in other operation and maintenance expenses was due to:

|                                                                         | Three Months
        EndedMarch 31, 2005 vs. March 31, 2004
|------------------------------------------------------------------------ | -----------------------------------------------------------
|                                                                         |                                                            
|Costs associated with severe ice storms
        in January 2005          |                                                            
|                                                                         |                                                            
|Accelerated amortization of stock-based
        compensation (Note 2)    |                                                            
|                                                                         |                                                            
|Increase in domestic and international
        pension costs             |                                                            
|                                                                         |                                                            
|NorthWestern litigation accrual (Note
        9)                         |                                                            
|                                                                         |                                                            
|Increase in foreign currency exchange
        rates                      |                                                            
|                                                                         |                                                            
|Gains on sales of emission allowances                                    |                                                            
|                                                                         |                                                            
|Reduction in WPD costs that are a pass-through
        to customer rates |                                                            
|                                                                         |                                                            
|Other                                                                    |                                                            
|                                                                         |                                                            
|                                                                         |                                                            
|                                                                         |                                                            

The $14 million increase in net pension costs was primarily attributable to
  a reduction in the discount rate assumptions for PPL's domestic pension plans
  at December 31, 2004, and increased amortization of prior year actuarial losses
  for WPD's pension plans. These events will result in PPL's recognition of increased
  net pension costs in 2005. See Note 13 to the Financial Statements for details
  of the costs of PPL's pension plans.

Depreciation

The increase in depreciation expense was due to:

|                                                                                           | Three Months
        EndedMarch 31, 2005 vs. March 31, 2004
|------------------------------------------------------------------------------------------ | -----------------------------------------------------------
|                                                                                           |                                                            
|Lower Mt. Bethel generation facility,
        which began commercial operation in May 2004 |                                                            
|                                                                                           |                                                            
|Other additions to PP&E                                                                    |                                                            
|                                                                                           |                                                            
|Foreign currency exchange rates                                                            |                                                            
|                                                                                           |                                                            
|Extension of useful lives of certain fossil
        generation assets (Note 2)             |                                                            
|                                                                                           |                                                            
|                                                                                           |                                                            
|                                                                                           |                                                            

Taxes, Other Than Income

In the first quarter of 2004, PPL Electric reversed a $14 million accrued liability
  for 1998 and 1999 PURTA taxes that had been accrued based on potential exposure
  in the proceedings regarding the Susquehanna nuclear station tax assessment.
  The rights of third-party intervenors to further appeal expired in 2004. The
  reversal is the primary reason for the $16 million increase in taxes, other
  than income.

Other Income - net

See Note 11 to the Financial Statements for details of other income.

Interest Expense

The increase in interest expense was due to:

|                                                                                                                                                                  | Three Months
        EndedMarch 31, 2005 vs. March 31, 2004
|----------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------
|                                                                                                                                                                  |                                                            
|Interest expense related to the Lower
        Mt. Bethel generation facility, which began commercial operation in May
        2004 (a)                            |                                                            
|                                                                                                                                                                  |                                                            
|Interest accrued for PJM billing dispute
        (Note 9)                                                                                                         |                                                            
|                                                                                                                                                                  |                                                            
|Increase in short-term debt interest expense                                                                                                                      |                                                            
|                                                                                                                                                                  |                                                            
|Decrease in interest expense due to the
        repayment in June 2004 of financing related to the Sundance and University
        Park generation facilities (b) |                                                            
|                                                                                                                                                                  |                                                            
|Decrease in other long-term debt interest
        expense                                                                                                         |                                                            
|                                                                                                                                                                  |                                                            
|Other                                                                                                                                                             |                                                            
|                                                                                                                                                                  |                                                            
|                                                                                                                                                                  |                                                            
|                                                                                                                                                                  |                                                            

|(a) |  | Prior to commercial operation, interest related
        to the Lower Mt. Bethel financing was capitalized as part of the cost
        of the facility.                                                                                                                                                                                                                                                      
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | In June 2004, subsidiaries of PPL Energy
        Supply purchased the Sundance and University Park generation facilities
        from the lessor that was consolidated by PPL Energy Supply under FIN 46
        (revised December 2003), "Consolidation of Variable Interest Entities,
        an Interpretation of ARB No. 51." In connection with the purchase, the
        related financing was repaid.

Income Taxes

Income taxes decreased by $40 million. The decrease was primarily attributable
  to:

- a $10 million tax benefit recognized in 2005 related to additional nonconventional
    fuel tax credits in excess of credits recognized in 2004;
- a $7 million decrease in tax expense on foreign earnings in 2005 relative
    to 2004; and
- a $22 million decrease in income tax expense due to lower pre-tax book income.

Discontinued Operations

See "Discontinued Operations" in Note 8 to the Financial Statements for information
  regarding the loss of $1 million recorded in the first quarter of 2004 related
  to PPL Global's plan of sale of its investment in a Latin American telecommunications
  company.



Financial Condition

Liquidity

At March 31, 2005, PPL had $754 million of cash and short-term investments
  and $306 million of short-term debt. At December 31, 2004, PPL had $682
  million in cash and short-term investments and $42 million of short-term debt.
  The increase in PPL's cash and short-term investment position was primarily
  the net result of:

- $309 million of cash provided by operating activities;
- the issuance of $116 million of tax-exempt long-term debt at PPL Electric;
- the issuance of $24 million of common stock; and
- an increase in short-term debt of $265 million; offset by
- the retirement of $396 million of long-term debt;
- the payment of $78 million of common and preferred dividends; and
- $169 million of capital expenditures.

Rating Agency Decisions

S&P, Moody's and Fitch periodically review the credit ratings on the debt
  and preferred securities of PPL and its subsidiaries. Based on their respective
  reviews, the rating agencies may make certain ratings revisions.

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

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

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

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

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

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

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

For additional information on PPL's liquidity, see "Item 7. Management's Discussion
  and Analysis of Financial Condition and Results of Operations," in PPL's 2004
  Form 10-K.

Risk Management - Energy Marketing & Trading and Other

Market Risk

Commodity Price Risk (Non-trading)

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

|                                                                           |  | Three Months
        Ended March 31, |     
|-------------------------------------------------------------------------- |  | ------------------------------------ | ----
|                                                                           |  |                                      |     
|                                                                           |  | 2005                                 |     
|                                                                           |  |                                      |     
|Fair value of contracts outstanding at
        the beginning of the period |  | $                                    | (11 
|                                                                           |  |                                      |     
|Contracts realized or otherwise settled
        during the period          |  |                                      | (7  
|                                                                           |  |                                      |     
|Fair value of new contracts at inception                                   |  |                                      |     
|                                                                           |  |                                      |     
|Other changes in fair values                                               |  |                                      | (88 
|                                                                           |  |                                      |     
|Fair value of contracts outstanding at
        the end of the period       |  | $                                    | (106
|                                                                           |  |                                      |     

The following chart segregates estimated fair values of PPL's commodity derivative
  contracts that qualify for hedge accounting treatment at March 31, 2005, based
  on whether the fair values are determined by quoted market prices or other more
  subjective means:



|                                                                     |  | Fair Value
        of Contracts at Period-End
        Gains (Losses) |    
|-------------------------------------------------------------------- |  | -------------------------------------------------------------------- | ---
|                                                                     |  |                                                                      |    
|                                                                     |  | Maturity
        Less Than
        1 Year                            |    
|                                                                     |  |                                                                      |    
|Source of Fair Value                                                 |  |                                                                      |    
|                                                                     |  |                                                                      |    
|Prices actively quoted                                               |  | $                                                                    | 15 
|                                                                     |  |                                                                      |    
|Prices provided by other external sources                            |  |                                                                      | (17
|                                                                     |  |                                                                      |    
|Prices based on models and other valuation
        methods           |  |                                                                      |    
|                                                                     |  |                                                                      |    
|Fair value of contracts outstanding at
        the end of the period |  | $                                                                    | (2 
|                                                                     |  |                                                                      |    
|                                                                     |  |                                                                      |    

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

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

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

As of March 31, 2005, PPL estimated that a 10% adverse movement in market prices
  of both electricity and fuel across all geographic areas and time periods would
  have decreased the value of the commodity contracts in its non-trading portfolio
  by approximately $202 million. For purposes of this calculation, an increase
  in the market price for electricity is considered an adverse movement because
  PPL's electricity portfolio is generally in a net sales position, and a decrease
  in the market price for fuel is considered an adverse movement because PPL's
  commodity fuels portfolio is generally in a net purchase position. PPL enters
  into these commodity contracts to reduce the market risk inherent in the generation
  of electricity.

In accordance with its marketing strategy, PPL does not completely hedge its
  generation output or fuel requirements. PPL estimates that for its entire portfolio,
  including all generation and physical and financial energy positions, a 10%
  adverse change in power prices across all geographic zones and time periods
  would not have a material impact on expected 2005 gross margins. Similarly,
  a 10% adverse movement in all fossil fuel prices would decrease 2005 gross margins
  by $14 million.

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

Commodity Price Risk (Trading)

PPL's trading contracts mature at various times through 2008. The following
  chart sets forth PPL's net fair value of trading contracts:

|                                                                           |  | Three Months
        Ended 
        March 31, |   
|-------------------------------------------------------------------------- |  | --------------------------------------------- | --
|                                                                           |  |                                               |   
|                                                                           |  | 2005                                          |   
|                                                                           |  |                                               |   
|Fair value of contracts outstanding
        at the beginning of the period |  | $                                             | 10
|                                                                           |  |                                               |   
|Contracts realized or otherwise
        settled during the period          |  |                                               | (4
|                                                                           |  |                                               |   
|Fair value of new contracts
        at inception                           |  |                                               | 3 
|                                                                           |  |                                               |   
|Other changes in fair values                                               |  |                                               | 7 
|                                                                           |  |                                               |   
|Fair value of contracts outstanding
        at the end of the period       |  | $                                             | 16
|                                                                           |  |                                               |   

PPL will reverse approximately $1 million of the $16 million unrealized trading
  gains over the next three months of 2005 as the transactions are realized.

The following chart segregates estimated fair values of PPL's trading portfolio
  at March 31, 2005, based on whether the fair values are determined by quoted
  market prices or other more subjective means:

|                                                                     |  | Fair Value
        of Contracts at Period-End
        Gains (Losses) |   
|-------------------------------------------------------------------- |  | -------------------------------------------------------------------- | --
|                                                                     |  |                                                                      |   
|                                                                     |  | Maturity
        Less Than
        1 Year                            |   
|                                                                     |  |                                                                      |   
|Source of Fair Value                                                 |  |                                                                      |   
|                                                                     |  |                                                                      |   
|Prices actively quoted                                               |  | $                                                                    | 3 
|                                                                     |  |                                                                      |   
|Prices provided by other external sources                            |  |                                                                      | 9 
|                                                                     |  |                                                                      |   
|Prices based on models and other valuation
        methods           |  |                                                                      | (1
|                                                                     |  |                                                                      |   
|Fair value of contracts outstanding at
        the end of the period |  | $                                                                    | 11
|                                                                     |  |                                                                      |   
|                                                                     |  |                                                                      |   

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

As of March 31, 2005, PPL estimated that a 10% adverse movement in market prices
  across all geographic areas and time periods would have decreased the value
  of the commodity contracts in its trading portfolio by $10 million.

Interest Rate Risk

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

At March 31, 2005, PPL's potential annual exposure to increased interest expense,
  based on a 10% increase in interest rates, was estimated at $5 million.

PPL is also exposed to changes in the fair value of its domestic and international
  debt portfolios. At March 31, 2005, PPL estimated that its potential exposure
  to a change in the fair value of its debt portfolio, through a 10% adverse movement
  in interest rates, was approximately $212 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 into equity and then reclassified into earnings in
  the same period during which the item being hedged affects earnings. At March 31,
  2005, the market value of these instruments, representing the amount PPL would
  pay upon their termination, was approximately $1 million. At March 31,
  2005, PPL estimated that its potential exposure to a change in the fair value
  of these instruments, through a 10% adverse movement in the hedged exposure,
  was insignificant.

PPL also utilizes various risk management instruments to adjust the mix of
  fixed and floating interest rates in its debt portfolio. While PPL is exposed
  to changes in the fair value of these instruments, any change in market value
  is recorded with an equal and offsetting change in the value of the debt being
  hedged. At March 31, 2005, PPL estimated that its potential exposure to
  a change in the fair value of these instruments, through a 10% adverse movement
  in interest rates, was approximately $18 million.

Foreign Currency Risk

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

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

To protect expected income denominated in British pounds sterling, PPL entered
  into average rate options for £32 million. At March 31, 2005, the market
  value of these positions, representing the amount PPL would receive upon their
  termination, was approximately $1 million.

To protect expected income in Chilean pesos, PPL entered into average rate
  options for 4 billion Chilean pesos. At March 31, 2005, the market value
  of these positions, representing the amount PPL would receive upon their termination,
  was insignificant.

PPL executed net forward sale transactions for £10 million to hedge a
  portion of its net investment in WPDH Limited. The estimated value of these
  agreements as of March 31, 2005, was $1 million, being the amount PPL would
  pay to terminate the transactions.

WPDH Limited held a net position in cross-currency swaps totaling $1.1 billion
  to hedge the interest payments and value of its U.S. dollar-denominated bonds.
  The estimated value of this position at March 31, 2005, being the amount PPL
  would pay to terminate it, including accrued interest, was $255 million.

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

Nuclear Decommissioning Fund - Securities Price Risk

In connection with certain NRC requirements, PPL Susquehanna maintains trust
  funds to fund certain costs of decommissioning the Susquehanna station. As of
  March 31, 2005, these funds were invested primarily in domestic equity securities
  and fixed-rate, fixed-income securities and are reflected at fair value on PPL's
  Balance Sheet. The mix of securities is designed to provide returns to be used
  to fund Susquehanna's decommissioning and to compensate for inflationary increases
  in decommissioning costs. However, the equity securities included in the trusts
  are exposed to price fluctuation in equity markets, and the values of fixed-rate,
  fixed-income securities in the trusts are exposed to changes in interest rates.
  PPL Susquehanna actively monitors the investment performance and periodically
  reviews asset allocation in accordance with its nuclear decommissioning trust
  policy statement. At March 31, 2005, a hypothetical 10% increase in interest
  rates and a 10% decrease in equity prices would have resulted in an estimated
  $30 million reduction in the fair value of the trust assets. See the "Nuclear
  Decommissioning" Note in the 2004 Form 10-K for more information regarding the
  nuclear decommissioning trust funds.

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 10 to the
  Financial Statements.

Acquisitions, Development and Divestitures

From time to time, PPL and its subsidiaries are involved in negotiations with
  third parties regarding acquisitions, joint ventures and other arrangements
  which may or may not result in definitive agreements. See Note 8 to the Financial
  Statements for information regarding recent development and divestiture activities.

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

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

Environmental Matters

See Note 9 to the Financial Statements for a discussion of environmental matters.

New Accounting Standards

See Note 16 to the Financial Statements for information on new accounting standards
  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, pension and other postretirement
  benefits, asset impairment, leasing, loss contingencies and asset retirement
  obligations.

See "Item 7. Management's Discussion and Analysis of Financial Condition and
  Results of Operations," in PPL's 2004 Form 10-K for a discussion of each critical
  accounting policy. PPL's senior management has reviewed these critical accounting
  policies, and the estimates and assumptions regarding them, with its Audit Committee.
  In addition, PPL's senior management reviewed the Form 10-K disclosures regarding
  the application of these critical accounting policies with the Audit Committee.

---

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, PA.
  In PPL Energy Supply's 2004 Form 10-K, a description of PPL Energy Supply's
  domestic and international businesses is found in "Item 1. Business - Background"
  and a listing of its principal subsidiaries is shown in Exhibit 99. Through
  its subsidiaries, PPL Energy Supply is primarily engaged in the generation and
  marketing of electricity in two key markets - the northeastern and western U.S.
  - and in the delivery of electricity in the U.K. and Latin America. See "Item
  7. Management's Discussion and Analysis of Financial Condition and Results of
  Operations," in PPL Energy Supply's 2004 Form 10-K for an overview of PPL Energy
  Supply's strategy and the risks and the challenges that it faces in its business.

PPL Energy Supply's reportable segments are Supply and International Delivery.
  See Note 3 to the Financial Statements for further segment information.

The following information should be read in conjunction with PPL Energy Supply's
  Condensed Consolidated Financial Statements and the accompanying Notes.

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

Results of Operations

The following discussion begins with a review of PPL Energy Supply's earnings
  and a description of key factors by segment that management expects may impact
  future earnings. "Results of Operations" continues with a summary of results
  by reportable segment and ends with explanations of significant changes in principal
  items on PPL Energy Supply's Statement of Income, comparing the three months
  ended March 31, 2005, to the comparable period in 2004.

WPD's results, as consolidated in PPL Energy Supply's Statement of Income,
  are impacted by changes in foreign currency exchange rates. For the three months
  ended March 31, 2005, as compared with the same period in 2004, changes
  in foreign exchange rates increased WPD's portion of revenue and expense line
  items by about 5%.

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

Earnings

Net income was $155 million for the three months ended March 31, 2005, and
  $146 million for the same period in 2004. The after-tax change in net income
  was due to:

|               | Three Months
        EndedMarch 31, 2005 vs. March 31, 2004
|-------------- | -----------------------------------------------------------
|               |                                                            
|Domestic:      |                                                            
|               |                                                            
|               | Eastern U.S. non-trading margins                           
|               |                                                            
|               | Northwestern U.S. non-trading
        margins              
|               |                                                            
|               | Net energy trading margins                                 
|               |                                                            
|               | Operation and maintenance expenses                         
|               |                                                            
|               | Interest expense                                           
|               |                                                            
|               | Synfuel earnings                                           
|               |                                                            
|               | Other                                                      
|               |                                                            
|               |                                                            
|               |                                                            
|International: |                                                            
|               |                                                            
|               | U.K.:                                                      
|               |                                                            
|               |                                                            
|               |                                                            
|               |                                                            
|               |                                                            
|               | Latin America                                              
|               |                                                            
|               | U.S. income taxes                                          
|               |                                                            
|               | Interest expense                                           
|               |                                                            
|               |                                                            
|               |                                                            
|Unusual items: |                                                            
|               |                                                            
|               | Sale of CGE (Note 8)                                       
|               |                                                            
|               | NorthWestern litigation (Note
        9)                   
|               |                                                            
|               |                                                            
|               |                                                            

The period-to-period changes in earnings components, including domestic gross
  energy margins by region and income statement line items, are discussed following
  the future earnings factors and segment results.

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

Supply Segment:

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

- A key part of PPL Energy Supply's overall strategy is to enter into long-term
    and intermediate-term energy supply agreements in order to mitigate market
    price and supply risk. PPL Energy Supply's ability to continue to enter into
    such agreements, and to renew existing energy supply agreements, may affect
    its future earnings. See Note 9 to the Financial Statements for more information
    regarding PPL Energy Supply's wholesale energy commitments and Note 10 for
    more information regarding the PLR contracts.

- PPL Electric has agreed to provide electricity supply to its PLR customers
    at predetermined rates through 2009 and has entered into PUC-approved, full
    requirements energy supply agreements with PPL EnergyPlus to fulfill its PLR
    obligation. The predetermined charges for generation supply which PPL Electric
    collects from its PLR customers and pays to PPL EnergyPlus under the energy
    supply agreements provide for annual increases in each year commencing in
    2006 and continuing through 2009. PPL Electric's PLR obligation after 2009
    will be determined by the PUC pursuant to rules that have not yet been promulgated.
    See Note 10 to the Financial Statements for more information regarding the
    PLR contracts.

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

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

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

- PPL Energy Supply has interests in two synthetic fuel facilities and receives
    tax credits pursuant to Section 29 of the Internal Revenue Code based on its
    sale of synthetic fuel to unaffiliated third-party purchasers. PPL Energy
    Supply has estimated that these facilities will contribute approximately $40
    million per year to earnings through 2007, when the availability of such tax
    credits is scheduled to expire. See Note 9 to the Financial Statements for
    a discussion of the requirements to receive the Section 29 tax credits, the
    IRS review of synthetic fuel production procedures and the impact of higher
    oil prices on the Section 29 tax credits.

- To comply with existing and future environmental requirements and as a result
    of voluntary pollution control measures it may take, PPL Energy Supply expects
    to spend significant amounts on environmental control and compliance in the
    future. The costs of such measures, in most cases, are not now determinable
    with certainty. For instance, PPL Energy Supply's current cost estimates for
    sulfur dioxide reduction at its generating plants are preliminary and PPL
    Energy Supply could incur significantly higher capital and operating expenses
    due to more stringent environmental requirements, changing market conditions
    with respect to the cost of pollution control equipment or emissions allowances,
    delays in the installation of pollution control equipment or other factors.
    See Note 9 to the Financial Statements for more information regarding current
    environmental requirements and initiatives, including those relating to air
    emissions, and PPL Energy Supply's anticipated capital expenditure program
    to meet the sulfur dioxide reduction requirements of the Clean Air Act.

International Delivery Segment:

- Earnings in 2005 and beyond are expected to continue to be adversely affected
    by increased pension costs. Specifically, WPD will experience increased pension
    costs due to a recent actuarial valuation of WPD's plans that reflects higher
    pension obligations. The increase in pension costs in 2005 is forecasted to
    be approximately $24 million, after tax, and the increase in pension costs
    is expected to continue to be significant in 2006. An additional $4 million
    of expense, after tax, was recognized in the first quarter related to termination
    benefits.

All Segments:

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

- 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. Any such transactions may impact future earnings.

- See Note 9 to the Financial Statements for potential commitments and contingent
    liabilities that may impact future earnings.

- See Note 16 to the Financial Statements for new accounting standards that
    have been issued but not yet adopted by PPL Energy Supply that may impact
    future earnings.

Segment Results

Net income by segment was as follows:

|                       |       | Three Months
        Ended March 31, |   
|---------------------- | ----- | ------------------------------------ | --
|                       |       |                                      |   
|                       |       | 2005                                 |   
|                       |       |                                      |   
|Supply                 |       | $                                    | 93
|                       |       |                                      |   
|International Delivery |       |                                      | 62
|                       |       |                                      |   
|                       | Total |                                      | $ 
|                       |       |                                      |   

Supply Segment

The Supply segment owns and operates power plants to generate electricity,
  markets this electricity and other power purchases to deregulated wholesale
  and retail markets and acquires and develops domestic generation projects. The
  Supply segment primarily consists of the activities of PPL Generation and PPL
  EnergyPlus.

Segment net income was as follows:

|                                |                          | Three Months
        Ended March 31, |    
|------------------------------- | ------------------------ | ------------------------------------ | ---
|                                |                          |                                      |    
|                                |                          | 2005                                 |    
|                                |                          |                                      |    
|Energy revenues                 |                          | $                                    | 727
|                                |                          |                                      |    
|Energy related businesses       |                          |                                      | 116
|                                |                          |                                      |    
|                                | Total operating revenues |                                      |    
|                                |                          |                                      |    
|Fuel and energy purchases       |                          |                                      | 345
|                                |                          |                                      |    
|Other operation and maintenance |                          |                                      | 200
|                                |                          |                                      |    
|Depreciation                    |                          |                                      | 36 
|                                |                          |                                      |    
|Taxes, other than income        |                          |                                      | 11 
|                                |                          |                                      |    
|Energy related businesses       |                          |                                      | 133
|                                |                          |                                      |    
|                                | Total operating expenses |                                      |    
|                                |                          |                                      |    
|Other Income - net              |                          |                                      | 5  
|                                |                          |                                      |    
|Interest Expense                |                          |                                      | 22 
|                                |                          |                                      |    
|Income Taxes                    |                          |                                      | 8  
|                                |                          |                                      |    
|                                | Total                    |                                      | $  
|                                |                          |                                      |    

The after-tax change in net income was due to the following factors:

|                                                        | Three Months
        EndedMarch 31, 2005 vs. March 31, 2004
|------------------------------------------------------- | -----------------------------------------------------------
|                                                        |                                                            
|Eastern U.S. non-trading margins                        |                                                            
|                                                        |                                                            
|Northwestern U.S. non-trading
        margins           |                                                            
|                                                        |                                                            
|Net energy trading margins                              |                                                            
|                                                        |                                                            
|Operation and maintenance expenses                      |                                                            
|                                                        |                                                            
|Interest expense                                        |                                                            
|                                                        |                                                            
|Synfuel earnings                                        |                                                            
|                                                        |                                                            
|Other                                                   |                                                            
|                                                        |                                                            
|                                                        | Total                                                      
|                                                        |                                                            
|Unusual item - NorthWestern
        litigation (Note 9) |                                                            
|                                                        |                                                            
|                                                        |                                                            
|                                                        |                                                            

- See "Domestic Gross Energy Margins" for an explanation of non-trading margins
    by geographic region and for an explanation on net energy trading margins.

- Higher operation and maintenance expenses were primarily due to accelerated
    amortization of stock-based compensation for retirement-eligible employees,
    which resulted from additional accounting guidance. See Note 2 to the Financial
    Statements for additional information.

- The improved earnings contribution from synfuel operations resulted from
    the Tyrone facility that began commercial operation during the third quarter
    of 2004.

- Higher interest expense was incurred in the first quarter of 2005 due to
    the issuance of additional debt, interest associated with Lower Mt. Bethel
    that is no longer being capitalized since commercial operation commenced in
    May 2004 and interest on loans from affiliated companies.

The change in net income was also attributable to an accrual of approximately
  $6 million after tax for the loss contingency related to the NorthWestern litigation.
  See Note 9 to the Financial Statements for additional information on the accrual.

International Delivery Segment

The International Delivery segment owns and operates international energy businesses
  that are focused on the distribution of electricity. The segment primarily consists
  of the operations of the regulated international energy businesses of PPL Global.
  The majority of PPL Global's international businesses are located in the U.K.,
  Chile, El Salvador and Bolivia.

Segment net income was as follows:

|                                  |                          | Three Months
        Ended March 31, |    
|--------------------------------- | ------------------------ | ------------------------------------ | ---
|                                  |                          |                                      |    
|                                  |                          | 2005                                 |    
|                                  |                          |                                      |    
|Energy revenues                   |                          | $                                    | 293
|                                  |                          |                                      |    
|Energy related businesses         |                          |                                      | 17 
|                                  |                          |                                      |    
|                                  | Total operating revenues |                                      |    
|                                  |                          |                                      |    
|Fuel and energy purchases         |                          |                                      | 63 
|                                  |                          |                                      |    
|Other operation and maintenance   |                          |                                      | 62 
|                                  |                          |                                      |    
|Depreciation                      |                          |                                      | 38 
|                                  |                          |                                      |    
|Taxes, other than income          |                          |                                      | 14 
|                                  |                          |                                      |    
|Energy related businesses         |                          |                                      | 6  
|                                  |                          |                                      |    
|                                  | Total operating expenses |                                      |    
|                                  |                          |                                      |    
|Other Income - net                |                          |                                      | 5  
|                                  |                          |                                      |    
|Interest Expense                  |                          |                                      | 50 
|                                  |                          |                                      |    
|Income Taxes                      |                          |                                      | 18 
|                                  |                          |                                      |    
|Minority Interest                 |                          |                                      | 2  
|                                  |                          |                                      |    
|Loss from Discontinued Operations |                          |                                      |    
|                                  |                          |                                      |    
|                                  | Total                    |                                      | $  
|                                  |                          |                                      |    

The after-tax change in net income was due to the following factors:

|                                            | Three Months
        EndedMarch 31, 2005 vs. March 31, 2004 
|------------------------------------------- | ------------------------------------------------------------
|                                            |                                                             
|U.K.:                                       |                                                             
|                                            |                                                             
|                                            | Operation and maintenance expenses                          
|                                            |                                                             
|                                            | Impact of changes in foreign currency
        exchange rates
|                                            |                                                             
|Latin America                               |                                                             
|                                            |                                                             
|U.S. income taxes                           |                                                             
|                                            |                                                             
|Interest expense                            |                                                             
|                                            |                                                             
|                                            | Total                                                       
|                                            |                                                             
|Unusual item - Sale of CGE (Note
        8) |                                                             
|                                            |                                                             
|                                            |                                                             
|                                            |                                                             

- The U.K.'s earnings were negatively impacted by higher operation and maintenance
    expenses, primarily due to increased pension costs and termination benefit
    expenses.

- U.S. income taxes on dividends from WPD decreased primarily due to greater
    utilization of foreign tax credits.

- Lower interest expense was due to lower affiliate debt.

Domestic Gross Energy Margins

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

|                                                | Three Months
        EndedMarch 31, 2005 vs. March 31, 2004
|----------------------------------------------- | -----------------------------------------------------------
|                                                |                                                            
|Wholesale energy marketing                      |                                                            
|                                                |                                                            
|Wholesale energy marketing to
        affiliate |                                                            
|                                                |                                                            
|Unregulated retail electric
        and gas     |                                                            
|                                                |                                                            
|Net energy trading margins                      |                                                            
|                                                |                                                            
|Other revenue adjustments (a)                   |                                                            
|                                                |                                                            
|                                                | Total revenues                                             
|                                                |                                                            
|Fuel                                            |                                                            
|                                                |                                                            
|Energy purchases                                |                                                            
|                                                |                                                            
|Energy purchases from affiliate                 |                                                            
|                                                |                                                            
|Other cost adjustments (a)                      |                                                            
|                                                |                                                            
|                                                | Total cost of sales                                        
|                                                |                                                            
|                                                |                                                            
|                                                |                                                            

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

Changes in Domestic Gross Energy Margins By Region

Domestic gross energy margins are generated through PPL Energy Supply's normal
  hedging (non-trading) activities, as well as trading activities. PPL Energy
  Supply manages its non-trading energy business on a geographic basis that is
  aligned with its generation assets.

|                   | Three Months
        EndedMarch 31, 2005 vs. March 31, 2004
|------------------ | -----------------------------------------------------------
|                   |                                                            
|Eastern U.S.       |                                                            
|                   |                                                            
|Northwestern U.S.  |                                                            
|                   |                                                            
|Southwestern U.S.  |                                                            
|                   |                                                            
|Net energy trading |                                                            
|                   |                                                            
|                   | Domestic gross energy margins                              
|                   |                                                            

Eastern U.S.

Eastern U.S. non-trading margins were higher primarily because a greater portion
  of PPL Energy Supply's supply came from its own generation, instead of purchased
  power. This was due to the timing of plant outages as well as the operation
  of the Lower Mt. Bethel plant, which began commercial operation in May 2004.
  The increase was achieved despite higher supply costs, which were driven by
  increased fossil fuel and power purchase prices. Power purchase prices increased
  by 4% primarily due to higher market prices for fossil fuel; however, this increase
  was more than offset by a 10% increase in the average sales price for wholesale
  transactions. Fuel costs increased 23% due to a 6% increase in generation across
  a diverse mix of low-cost coal-fired, nuclear and hydroelectric plants and a
  17% increase in the average consumed cost of fossil fuels. In addition, PPL
  Energy Supply also benefited from favorable transmission congestion positions,
  and gains on sales of emission allowances.

Northwestern U.S.

Northwestern U.S. non-trading margins were lower primarily due to an 8% reduction
  in coal and hydroelectric generation output. Generation was adversely affected
  by outages and reduced river flows. Additionally, the average consumed cost
  of coal increased by 10% primarily due to an unfavorable arbitration ruling
  effective April 2004.

Net Energy Trading

PPL Energy Supply enters into certain energy contracts that meet the criteria
  of trading derivatives as defined by EITF Issue 02-3, "Issues Involved in Accounting
  for Derivative Contracts Held for Trading Purposes and Contracts Involved in
  Energy Trading and Risk Management Activities." These physical and financial
  contracts cover trading activity associated with electricity, gas and oil. The
  $10 million increase was primarily due to an increase in realized gains on electricity
  positions as well as an increase in wholesale physical gas trading. The physical
  volumes associated with energy trading for the three months ended March 31,
  2005, were 1,066 GWh and 4.5 Bcf, compared with 994 GWh and 2.4 Bcf for the
  three months ended March 31, 2004.

Utility Revenues

The increase in utility revenues was attributable to the following:

|                                              | Three Months
        EndedMarch 31, 2005 vs. March 31, 2004
|--------------------------------------------- | -----------------------------------------------------------
|                                              |                                                            
|International:                                |                                                            
|                                              |                                                            
|Retail electric delivery (PPL
        Global) |                                                            
|                                              |                                                            
|                                              | Chile                                                      
|                                              |                                                            
|                                              | U.K.                                                       
|                                              |                                                            
|                                              | El Salvador                                                
|                                              |                                                            
|                                              |                                                            
|                                              |                                                            

The increase in utility revenues was primarily due to:

- higher revenues in Chile, primarily due to a 7.3% increase in sales volumes,
    primarily attributable to regulated customers;
- higher WPD revenues, primarily due to the change in foreign currency exchange
    rates, partially offset by a reduction in certain charges which had been a
    pass-through to customer rates; and
- higher revenues in El Salvador, due to a 5.3% increase in sales volumes
    of all customer types.

Energy Related Businesses

Energy related businesses contributed $11 million more to operating income
  for the three months ended March 31, 2005, compared with the same period in
  2004. The increase was attributable to:

- a $15 million pre-tax loss in 2004, related to the sale of CGE (see Note
    8 to the Financial Statements); and
- a $2 million increase from mechanical contracting and engineering subsidiaries
    due to a favorable closeout on a major project; partially offset by
- a $6 million higher pre-tax operating loss from synfuel projects due to
    increased production levels which improve after-tax earnings.

Other Operation and Maintenance

The increase in other operation and maintenance expenses was due to:



|                                                                         | Three Months
        EndedMarch 31, 2005 vs. March 31, 2004
|------------------------------------------------------------------------ | -----------------------------------------------------------
|                                                                         |                                                            
|Increase in domestic and international
        pension costs             |                                                            
|                                                                         |                                                            
|Accelerated amortization of stock-based
        compensation (Note 2)    |                                                            
|                                                                         |                                                            
|Increase in allocation of corporate service
        cost (Note 10)       |                                                            
|                                                                         |                                                            
|NorthWestern litigation accrual (Note 9)                                 |                                                            
|                                                                         |                                                            
|Increase in foreign currency exchange
        rates                      |                                                            
|                                                                         |                                                            
|Gains on sales of emission allowances                                    |                                                            
|                                                                         |                                                            
|Reduction in WPD costs that are a pass-through
        to customer rates |                                                            
|                                                                         |                                                            
|Other                                                                    |                                                            
|                                                                         |                                                            
|                                                                         |                                                            
|                                                                         |                                                            

The $13 million increase in net pension costs was primarily attributable to
  a reduction in the discount rate assumptions for PPL Energy Supply's domestic
  pension plans at December 31, 2004, and increased amortization of prior year
  actuarial losses for WPD's pension plans. These events will result in PPL Energy
  Supply's recognition of increased net pension costs in 2005. See Note 13 to
  the Financial Statements for details of the costs of PPL Energy Supply's pension
  plans.

Depreciation

The increase in depreciation expense was due to:

|                                                                                           | Three Months
        EndedMarch 31, 2005 vs. March 31, 2004
|------------------------------------------------------------------------------------------ | -----------------------------------------------------------
|                                                                                           |                                                            
|Lower Mt. Bethel generation facility,
        which began commercial operation in May 2004 |                                                            
|                                                                                           |                                                            
|Other additions to PP&E                                                                    |                                                            
|                                                                                           |                                                            
|Foreign currency exchange rates                                                            |                                                            
|                                                                                           |                                                            
|Extension of useful lives of certain fossil
        generation assets (Note 2)             |                                                            
|                                                                                           |                                                            
|                                                                                           |                                                            
|                                                                                           |                                                            

Other Income - net

See Note 11 to the Financial Statements for details of other income.

Interest Expense

The increase in interest expense was due to:



|                                                                                                                                                                 | Three Months
        EndedMarch 31, 2005 vs. March 31, 2004
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------
|                                                                                                                                                                 |                                                            
|Interest expense related to the Lower
        Mt. Bethel generation facility, which began commercial operation in May
        2004 (a)                           |                                                            
|                                                                                                                                                                 |                                                            
|Increase in other long-term debt interest
        expense                                                                                                        |                                                            
|                                                                                                                                                                 |                                                            
|Increase in interest expense with affiliate                                                                                                                      |                                                            
|                                                                                                                                                                 |                                                            
|Increase in short-term debt interest expense                                                                                                                     |                                                            
|                                                                                                                                                                 |                                                            
|Decrease in interest expense due to the
        repayment in June 2004 of financing related to the Sundance and University
        Park generation facilities(b) |                                                            
|                                                                                                                                                                 |                                                            
|Other                                                                                                                                                            |                                                            
|                                                                                                                                                                 |                                                            
|                                                                                                                                                                 |                                                            
|                                                                                                                                                                 |                                                            

|(a) |  | Prior to commercial operation, interest related
        to the Lower Mt. Bethel financing was capitalized as part of the cost
        of the facility.                                                                                                                                                                                                                                                      
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | In June 2004, subsidiaries of PPL Energy
        Supply purchased the Sundance and University Park generation facilities
        from the lessor that was consolidated by PPL Energy Supply under FIN 46
        (revised December 2003), "Consolidation of Variable Interest Entities,
        an Interpretation of ARB No. 51." In connection with the purchase, the
        related financing was repaid.

Income Taxes

The $26 million decrease in income taxes was primarily attributable to:

- a $10 million tax benefit recognized in 2005 related to additional nonconventional
    fuel tax credits in excess of credits recognized in 2004;
- a $7 million decrease in tax expense on foreign earnings in 2005 relative
    to 2004; and
- an $8 million decrease in income tax expense due to lower pre-tax book income.

Discontinued Operations

See "Discontinued Operations" in Note 8 to the Financial Statements for information
  regarding the loss of $1 million recorded in the first quarter of 2004 related
  to PPL Global's plan of sale of its investment in a Latin American telecommunications
  company.

Financial Condition

Liquidity

At March 31, 2005, PPL Energy Supply had $494 million of cash and short-term
  investments and $164 million of short-term debt. At December 31, 2004, PPL Energy
  Supply had $408 million in cash and short-term investments and no short-term
  debt. The increase in PPL Energy Supply's cash and short-term investment position
  was primarily the net result of:

- $299 million of cash provided by operating activities; and
- a $165 million increase in short-term debt; offset by
- distributions to Member of $58 million;
- the retirement of $208 million of long-term debt; and
- $123 million of capital expenditures.

Rating Agency Decisions

S&P, Moody's and Fitch periodically review the credit ratings on the debt
  and preferred securities of PPL Energy Supply and its subsidiaries. Based on
  their respective reviews, the rating agencies may make certain ratings revisions.

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

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

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

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

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

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

For additional information on PPL Energy Supply's liquidity, see "Item 7. Management's
  Discussion and Analysis of Financial Condition and Results of Operations," in
  PPL Energy Supply's 2004 Form 10-K.

Risk Management - Energy Marketing & Trading and Other

Market Risk

Commodity Price Risk (Non-Trading)

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

|                                                                           |  | Three Months
        Ended 
        March 31, |     
|-------------------------------------------------------------------------- |  | --------------------------------------------- | ----
|                                                                           |  |                                               |     
|                                                                           |  | 2005                                          |     
|                                                                           |  |                                               |     
|Fair value of contracts outstanding at
        the beginning of the period |  | $                                             | (9  
|                                                                           |  |                                               |     
|Contracts realized or otherwise settled
        during the period          |  |                                               | (9  
|                                                                           |  |                                               |     
|Fair value of new contracts at inception                                   |  |                                               |     
|                                                                           |  |                                               |     
|Other changes in fair values                                               |  |                                               | (88 
|                                                                           |  |                                               |     
|Fair value of contracts outstanding at
        the end of the period       |  | $                                             | (106
|                                                                           |  |                                               |     

The following chart segregates estimated fair values of PPL Energy Supply's
  commodity derivative contracts that qualify for hedge accounting treatment at
  March 31, 2005, based on whether the fair values are determined by quoted market
  prices or other more subjective means:

|                                                                     |  | Fair Value
        of Contracts at Period-End
        Gains (Losses) |    
|-------------------------------------------------------------------- |  | -------------------------------------------------------------------- | ---
|                                                                     |  |                                                                      |    
|                                                                     |  | Maturity
        Less Than
        1 Year                            |    
|                                                                     |  |                                                                      |    
|Source of Fair Value                                                 |  |                                                                      |    
|                                                                     |  |                                                                      |    
|Prices actively quoted                                               |  | $                                                                    | 15 
|                                                                     |  |                                                                      |    
|Prices provided by other external sources                            |  |                                                                      | (17
|                                                                     |  |                                                                      |    
|Prices based on models and other valuation
        methods           |  |                                                                      |    
|                                                                     |  |                                                                      |    
|Fair value of contracts outstanding at
        the end of the period |  | $                                                                    | (2)
|                                                                     |  |                                                                      |    
|                                                                     |  |                                                                      |    

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

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

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

As of March 31, 2005, PPL Energy Supply estimated that a 10% adverse movement
  in market prices of both electricity and fuel across all geographic areas and
  time periods would have decreased the value of the commodity contracts in its
  non-trading portfolio by approximately $202 million. For purposes of this calculation,
  an increase in the market price for electricity is considered an adverse movement
  because PPL Energy Supply's electricity portfolio is generally in a net sales
  position, and a decrease in the market price for fuel is considered an adverse
  movement because PPL Energy Supply's commodity fuels portfolio is generally
  in a net purchase position. PPL Energy Supply enters into these commodity contracts
  to reduce the market risk inherent in the generation of electricity.

In accordance with its marketing strategy, PPL Energy Supply does not completely
  hedge its generation output or fuel requirements. PPL Energy Supply estimates
  that for its entire portfolio, including all generation and physical and financial
  energy positions, a 10% adverse change in power prices across all geographic
  zones and time periods would not have a material impact on expected 2005 gross
  margins. Similarly, a 10% adverse movement in all fossil fuel prices would decrease
  2005 gross margins by $14 million.

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

Commodity Price Risk (Trading)

PPL Energy Supply's trading contracts mature at various times through 2008.
  The following chart sets forth PPL Energy Supply's net fair value of trading
  contracts:



|                                                                           |  | Three Months
        Ended 
        March 31, |   
|-------------------------------------------------------------------------- |  | --------------------------------------------- | --
|                                                                           |  |                                               |   
|                                                                           |  | 2005                                          |   
|                                                                           |  |                                               |   
|Fair value of contracts outstanding at
        the beginning of the period |  | $                                             | 9 
|                                                                           |  |                                               |   
|Contracts realized or otherwise settled
        during the period          |  |                                               | (3
|                                                                           |  |                                               |   
|Fair value of new contracts at inception                                   |  |                                               | 3 
|                                                                           |  |                                               |   
|Other changes in fair values                                               |  |                                               | 7 
|                                                                           |  |                                               |   
|Fair value of contracts outstanding at
        the end of the period       |  | $                                             | 16
|                                                                           |  |                                               |   

PPL Energy Supply will reverse approximately $1 million of the $16 million
  unrealized trading gains over the next three months of 2005 as the transactions
  are realized.

The following chart segregates estimated fair values of PPL Energy Supply's
  trading portfolio at March 31, 2005, based on whether the fair values are determined
  by quoted market prices or other more subjective means:

|                                                                     |  | Fair Value
        of Contracts at Period-End
        Gains (Losses) |   
|-------------------------------------------------------------------- |  | -------------------------------------------------------------------- | --
|                                                                     |  |                                                                      |   
|                                                                     |  | Maturity
        Less Than
        1 year                            |   
|                                                                     |  |                                                                      |   
|Source of Fair Value                                                 |  |                                                                      |   
|                                                                     |  |                                                                      |   
|Prices actively quoted                                               |  | $                                                                    | 3 
|                                                                     |  |                                                                      |   
|Prices provided by other external sources                            |  |                                                                      | 9 
|                                                                     |  |                                                                      |   
|Prices based on models and other valuation
        methods           |  |                                                                      | (1
|                                                                     |  |                                                                      |   
|Fair value of contracts outstanding at
        the end of the period |  | $                                                                    | 11
|                                                                     |  |                                                                      |   
|                                                                     |  |                                                                      |   

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

As of March 31, 2005, PPL Energy Supply estimated that a 10% adverse movement
  in market prices across all geographic areas and time periods would have decreased
  the value of the commodity contracts in its trading portfolio by $10 million.

Interest Rate Risk

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

At March 31, 2005, PPL Energy Supply's potential annual exposure to increased
  interest expense, based on a 10% increase in interest rates, was estimated at
  $1 million.

PPL Energy Supply is also exposed to changes in the fair value of its domestic
  and international debt portfolios. At March 31, 2005, PPL Energy Supply
  estimated that its potential exposure to a change in the fair value of its debt
  portfolio, through a 10% adverse movement in interest rates, was approximately
  $157 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 into equity and then reclassified into earnings in
  the same period during which the item being hedged affects earnings. At March 31,
  2005, the market value of these instruments, representing the amount PPL would
  pay upon their termination, was approximately $1 million. At March 31,
  2005, PPL estimated that its potential exposure to a change in the fair value
  of these instruments, through a 10% adverse movement in the hedged exposure,
  was insignificant.

PPL and PPL Energy Supply also utilize various risk management instruments
  to adjust the mix of fixed and floating interest rates in PPL Energy Supply's
  debt portfolio. While PPL Energy Supply is exposed to changes in the fair value
  of these instruments, any change in market value is recorded with an equal and
  offsetting change in the value of the debt being hedged. At March 31, 2005,
  PPL Energy Supply estimated that its potential exposure to a change in the fair
  value of these instruments, through a 10% adverse movement in interest rates,
  was approximately $1 million.

Foreign Currency Risk

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

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

To protect expected income denominated in British pounds sterling, PPL entered
  into average rate options for £32 million. At March 31, 2005, the market
  value of these positions, representing the amount PPL would receive upon their
  termination, was approximately $1 million.

To protect expected income in Chilean pesos, PPL Energy Supply entered into
  average rate options for 4 billion Chilean pesos. At March 31, 2005, the
  market value of these positions, representing the amount PPL would receive upon
  their termination, was insignificant.

PPL executed net forward sale transactions for £10 million to hedge a
  portion of its net investment in WPDH Limited. The estimated value of these
  agreements as of March 31, 2005, was $1 million, being the amount PPL would
  pay to terminate the transactions.

WPDH Limited held a net position in cross-currency swaps totaling $1.1 billion
  to hedge the interest payments and value of its U.S. dollar-denominated bonds.
  The estimated value of this position at March 31, 2005, being the amount PPL
  and PPL Energy Supply would pay to terminate it, including accrued interest,
  was $255 million.

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

Nuclear Decommissioning Fund - Securities Price Risk

In connection with certain NRC requirements, PPL Susquehanna maintains trust
  funds to fund certain costs of decommissioning the Susquehanna station. As of
  March 31, 2005, these funds were invested primarily in domestic equity securities
  and fixed-rate, fixed-income securities and are reflected at fair value on PPL
  Energy Supply's Balance Sheet. The mix of securities is designed to provide
  returns to be used to fund Susquehanna's decommissioning and to compensate for
  inflationary increases in decommissioning costs. However, the equity securities
  included in the trusts are exposed to price fluctuation in equity markets, and
  the values of fixed-rate, fixed-income securities in the trusts are exposed
  to changes in interest rates. PPL Susquehanna actively monitors the investment
  performance and periodically reviews asset allocation in accordance with its
  nuclear decommissioning trust policy statement. At March 31, 2005, a hypothetical
  10% increase in interest rates and a 10% decrease in equity prices would have
  resulted in an estimated $30 million reduction in the fair value of the trust
  assets. See the "Nuclear Decommissioning" Note in the 2004 Form 10-K for more
  information regarding the nuclear decommissioning trust funds.

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 10 to the
  Financial Statements.

Acquisitions, Development and Divestitures

From time to time, PPL Energy Supply
  and its subsidiaries are involved in negotiations with third parties regarding
  acquisitions, joint ventures and other arrangements which may or may not result
  in definitive agreements. See Note 8 to the Financial Statements for information
  regarding recent development and divestiture activities.

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

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

Environmental Matters

See Note 9 to the Financial Statements for a discussion of environmental matters.

New Accounting Standards

See Note 16 to the Financial Statements for information on new accounting standards
  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, pension and other postretirement benefits, asset impairment,
  leasing, loss contingencies and asset retirement obligations.

See "Item 7. Management's Discussion and Analysis of Financial Condition and
  Results of Operations," in PPL Energy Supply's 2004 Form 10-K for a discussion
  of each critical accounting policy. PPL's senior management has reviewed these
  critical accounting policies, and the estimates and assumptions regarding them,
  with its Audit Committee. In addition, PPL's senior management reviewed the
  Form 10-K disclosures regarding the application of these critical accounting
  policies with the Audit Committee.

---

PPL ELECTRIC UTILITIES CORPORATION
  AND SUBSIDIARIES



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

Overview

PPL Electric provides electricity delivery service in eastern and central Pennsylvania.
  Its headquarters are in Allentown, PA. In PPL Electric's 2004 Form 10-K, a description
  of its business is found in "Item 1. Business - Background" and an overview
  of its strategy and the risks and the challenges that it faces in its business
  are discussed in "Item 7. Management's Discussion and Analysis of Financial
  Condition and Results of Operations."

The following information should be read in conjunction with PPL Electric's
  Condensed Consolidated Financial Statements and the accompanying Notes.

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

Results of Operations

The following discussion, which explains significant changes in principal items
  on the Statement of Income, compares the three months ended March 31, 2005,
  with the comparable period in 2004.

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

Earnings

Income available to PPL was $15 million for the three months ended March 31,
  2005, and $33 million for the same period in 2004. The after-tax change in income
  available to PPL was due to:

|                                                                                                                    | Three Months
        EndedMarch 31, 2005 vs. March 31, 2004
|------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------
|                                                                                                                    |                                                            
|Delivery revenues (net of CTC/ITC amortization,
        interest expense on transition bonds and ancillary charges) |                                                            
|                                                                                                                    |                                                            
|Operation and maintenance expenses                                                                                  |                                                            
|                                                                                                                    |                                                            
|Taxes, other than income (excluding gross
        receipts tax)                                                     |                                                            
|                                                                                                                    |                                                            
|Other                                                                                                               |                                                            
|                                                                                                                    |                                                            
|Total                                                                                                               |                                                            
|                                                                                                                    |                                                            
|Unusual item - PJM billing dispute
        (Note 9)                                                                 |                                                            
|                                                                                                                    |                                                            
|                                                                                                                    |                                                            
|                                                                                                                    |                                                            

The period-to-period changes in earnings components are discussed following
  the future earnings factors.

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

- In December 2004, the PUC approved an increase in PPL Electric's distribution
    rates of approximately $137 million (based on a return on equity of 10.7%),
    and approved PPL Electric's proposed mechanism for collecting an additional
    $57 million in transmission-related charges, for a total increase of approximately
    $194 million, effective January 1, 2005.

- PPL Electric has agreed to provide electricity supply to its PLR customers
    at predetermined rates through 2009 and has entered into PUC-approved, full
    requirements energy supply agreements with PPL EnergyPlus to fulfill its PLR
    obligation. The predetermined charges for generation supply which PPL Electric
    collects from its PLR customers and pays to PPL EnergyPlus under the energy
    supply agreements provide for annual increases in each year commencing in
    2006 and continuing through 2009. PPL Electric's PLR obligation after 2009
    will be determined by the PUC pursuant to rules that have not yet been promulgated.
    See Note 10 to the Financial Statements for more information regarding the
    PLR contracts.

- In January 2005, severe ice storms hit PPL Electric's service territory.
    PPL Electric had to restore service to about 238,000 customers. Although the
    actual cost of these storms and the specific allocation of such cost between
    operation and maintenance expense and capital costs is not yet finalized,
    PPL Electric currently estimates a total cost of $22 million, with approximately
    $19 million being recorded as an expense on PPL Electric's income statement
    for the first quarter of 2005.

On February 11, 2005, PPL Electric filed a petition with the PUC for authority
  to defer and amortize for regulatory accounting and reporting purposes its actual
  cost of these storms, excluding capitalized costs of approximately $3 million
  and regular payroll expenses of approximately $2 million (pursuant to PUC precedent
  on this issue). If the PUC grants this petition, PPL Electric's management will
  assess the recoverability of these costs in PPL Electric's next general rate
  increase proceeding, in accordance with SFAS 71, "Accounting for the Effects
  of Certain Types of Regulation." Depending on the likelihood of such recovery
  based on this assessment, most of the first quarter expense could be reversed
  in that future period. At this time, PPL Electric cannot predict the outcome
  of its deferral petition or the likelihood of recovery of these storm costs.

- See Note 9 to the Financial Statements for potential commitments and contingent
    liabilities that may impact future earnings.

- See Note 16 to the Financial Statements for new accounting standards that
    have been issued but not yet adopted by PPL Electric that may impact future
    earnings.

Operating Revenues

The increase in revenues from retail electric operations was attributable to
  the following:

|                               | Three Months
        EndedMarch 31, 2005 vs. March 31, 2004
|------------------------------ | -----------------------------------------------------------
|                               |                                                            
|Electric delivery              |                                                            
|                               |                                                            
|PLR electric generation supply |                                                            
|                               |                                                            
|                               |                                                            
|                               |                                                            

The increase in delivery revenues resulted from higher transmission and distribution
  customer rates effective January 1, 2005, and a 3.7% increase in sales
  volumes. Higher PLR revenues were due to higher energy and capacity rates, and
  a 5.6% increase in volumes, in part due to the return of customers previously
  served by alternate suppliers.

Energy Purchases

Energy purchases increased by $36 million due to a $39 million pre-tax accrual
  for the PJM billing dispute, offset slightly by lower ancillary service costs
  in connection with the power supply contracts with PPL EnergyPlus. See Note
  9 to the Financial Statements for additional information regarding the loss
  accrual recorded for the PJM billing dispute.

Energy Purchases from Affiliate

The increase in energy purchases from affiliate of $5 million reflects an increase
  in PLR load, as well as higher prices for energy purchased under the power supply
  contracts with PPL EnergyPlus needed to support PLR load.

Other Operation and Maintenance

Other operation and maintenance expense increased by $23 million, primarily
  due to $19 million of costs associated with severe ice storms that hit PPL Electric's
  service territory in January 2005 and a $5 million charge for accelerated amortization
  of stock-based compensation for retirement-eligible employees, which resulted
  from additional accounting guidance. See Note 2 to the Financial Statements
  for additional information on stock-based compensation.

Taxes, Other Than Income

In the first quarter of 2004, PPL Electric reversed a $14 million accrued liability
  for 1998 and 1999 PURTA taxes that had been accrued based on potential exposure
  in the proceedings regarding the Susquehanna nuclear station tax assessment.
  The rights of third-party intervenors to further appeal expired in 2004. The
  reversal is the primary reason for the $16 million increase in taxes, other
  than income.

Other Income - net

See Note 11 to the Financial Statements for details of other income.

Interest Expense

Interest expense increased by $4 million, primarily due to $8 million of interest
  accrued for the PJM billing dispute and additional interest paid on collateral
  held by PPL Electric relating to the PLR contract. This increase was partially
  offset by the net impact of long-term debt retirements. Over the last 12 months,
  $480 million of long-term debt retirements have occurred, while new issuances
  over the same period totaled $116 million. See Note 10 to the Financial Statements
  for further discussion of collateral held under the PLR contract.

Income Taxes

Income taxes decreased by $17 million, primarily as a result of lower pre-tax
  book income.

Financial Condition

Liquidity

At March 31, 2005, PPL Electric had $133 million of cash and short-term investments
  and $142 million of short-term debt. At December 31, 2004, PPL Electric had
  $161 million in cash and short-term investments and $42 million of short-term
  debt. The decrease in PPL Electric's cash and short-term investment position
  was primarily the net result of:

- the retirement of $188 million of long-term debt;
- the payment of $17 million of common and preferred dividends; and
- $40 million of capital expenditures; partially offset by
- $4 million of cash provided by operating activities;
- the issuance of $116 million of tax-exempt long-term debt; and
- an increase of $100 million in short-term debt.

Rating Agency Decisions

S&P, Moody's and Fitch periodically review the credit ratings on the debt
  and preferred securities of PPL Electric. Based on their respective reviews,
  the rating agencies may make certain ratings revisions.

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

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

For additional information on PPL Electric's liquidity, see "Item 7. Management's
  Discussion and Analysis of Financial Condition and Results of Operations," in
  PPL Electric's 2004 Form 10-K.

Risk Management

Market Risk

Commodity Price Risk - PLR Contracts

PPL Electric and PPL EnergyPlus have power supply agreements under which PPL
  EnergyPlus sells to PPL Electric (under a predetermined pricing arrangement)
  energy and capacity to fulfill PPL Electric's PLR obligation through 2009. As
  a result, PPL Electric has shifted any electric price risk relating to its PLR
  obligation to PPL EnergyPlus through 2009. See Note 10 to the Financial Statements
  for information on the PLR contracts.

Interest Rate Risk

PPL Electric has issued debt to finance its operations, which increases its
  interest rate risk. At March 31, 2005, PPL Electric's potential annual exposure
  to increased interest expense, based on a 10% increase in interest rates, was
  insignificant.

PPL Electric is also exposed to changes in the fair value of its debt portfolio.
  At March 31, 2005, PPL Electric estimated that its potential exposure to a change
  in the fair value of its debt portfolio, through a 10% adverse movement in interest
  rates, was approximately $45 million.

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 10 to the
  Financial Statements.

Environmental Matters

See Note 9 to the Financial Statements for a discussion of environmental matters.

New Accounting Standards

See Note 16 to the Financial Statements for information on new accounting standards
  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: pension and other postretirement
  benefits and loss contingencies.

See "Item 7. Management's Discussion and Analysis of Financial Condition and
  Results of Operations," in PPL Electric's 2004 Form 10-K for a discussion of
  each critical accounting policy. PPL's senior management has reviewed these
  critical accounting policies, and the estimates and assumptions regarding them,
  with its Audit Committee. In addition, PPL's senior management reviewed the
  Form 10-K disclosures regarding the application of these critical accounting
  policies with the Audit Committee.

---

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
|---------------------------------------
|                                       
|(a)                                    
|                                       
|                                       
|                                       
|(b)                                    
|                                       
|                                       



PART II. OTHER INFORMATION

|Item
        1. Legal Proceedings                                                                                                                                                                                                                 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                  
|For additional information regarding various
        pending administrative and judicial proceedings involving regulatory,
        environmental and other matters, which information is incorporated by
        reference into this Part II, see:
|                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                  

---

Item 2. Unregistered Sales of Equity Securities and
  Use of Proceeds



Issuer Purchases of Equity Securities:





|                                        | (a)                                                             | (b)                                                             | (c)                                                                                                                                      | (d)                                                                                                                                                                  
|--------------------------------------- | --------------------------------------------------------------- | --------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Period                                  | Total Number of
        Shares (or Units)
        Purchased (1) | Average
        Price Paid
        per Share 
        (or Unit) | Total
        Number of
        Shares (or Units) 
        Purchased as Part of
        Publicly Announced
        Plans or Programs (2) | Maximum
        Number (or
        Approximate Dollar Value) of 
        Shares (or Units) that May Yet Be
        Purchased Under the Plans 
        or Programs (2)
|January 1 to January 31, 2005           |                                                                 |                                                                 |                                                                                                                                          |                                                                                                                                                                      
|February 1 to February 28,
        2005 | 9,050                                                           | $52.75                                                          |                                                                                                                                          |                                                                                                                                                                      
|March 1 to March 31, 2005               | 1,618                                                           | $54.69                                                          |                                                                                                                                          |                                                                                                                                                                      
|Total                                   | 10,668                                                          |                                                                 |                                                                                                                                          |                                                                                                                                                                      



|(1) |  | Represents shares of common
        stock withheld by PPL at the request of its executive officers to pay
        taxes upon the vesting of the officers' restricted stock awards, as permitted
        under the terms of PPL's Incentive Compensation Plan and Incentive Compensation
        Plan for Key Employees.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                        
|(2) |  | Not applicable. PPL does not
        currently have in place any publicly announced plans or programs to purchase
        equity securities.                                                                                                                                                                           



|Item 6. Exhibits                                                                                                                                                                                                  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                  
|                                                                                                                                                                                                                  
|10(a) -                                                                                                                                                                                                           
|12(a) -                                                                                                                                                                                                           
|12(b) -                                                                                                                                                                                                           
|12(c) -                                                                                                                                                                                                           
|                                                                                                                                                                                                                  
|Certifications pursuant to Section 302 of
        the Sarbanes-Oxley Act of 2002, for the quarterly period ended 
        March 31, 2005, filed by the following officers for the following companies:            
|31(a) -                                                                                                                                                                                                           
|31(b) -                                                                                                                                                                                                           
|31(c) -                                                                                                                                                                                                           
|31(d) -                                                                                                                                                                                                           
|31(e) -                                                                                                                                                                                                           
|31(f) -                                                                                                                                                                                                           
|                                                                                                                                                                                                                  
|Certifications pursuant to Section 906 of
        the Sarbanes-Oxley Act of 2002, for the quarterly period ended 
        March 31, 2005, furnished by the following officers for the following
        companies:
|32(a) -                                                                                                                                                                                                           
|32(b) -                                                                                                                                                                                                           
|32(c) -                                                                                                                                                                                                           
|32(d) -                                                                                                                                                                                                           
|32(e) -                                                                                                                                                                                                           
|32(f) -                                                                                                                                                                                                           
|                                                                                                                                                                                                                  



---

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:  May 4, 2005 | /s/  John R. Biggar                 
|                   | John R. Biggar                      
|                   | Executive Vice President and        
|                   | Chief Financial Officer             
|                   | (PPL Corporation)                   
|                   | (principal financial officer)       
|                   |                                     
|                   |                                     
|                   |                                     
|                   |                                     
|                   | /s/  James E. Abel                  
|                   | James E. Abel                       
|                   | Vice President and Treasurer        
|                   | (PPL Energy Supply, LLC)            
|                   | (principal financial officer)       
|                   |                                     
|                   |                                     
|                   |                                     
|                   |                                     
|                   | /s/  Paul A. Farr                   
|                   | Paul A. Farr                        
|                   | Vice President and Controller       
|                   | (PPL Electric Utilities Corporation)
|                   | (principal accounting officer)