<PAGE>

================================================================================

                          PP&L CAPITAL FUNDING, INC.,
                                    Issuer

                                      and

                             PP&L RESOURCES, INC.,
                                   Guarantor


                                      TO


                           THE CHASE MANHATTAN BANK,
                                    Trustee


                                   _________


                         Supplemental Indenture No. 2

                           Dated as of March 1, 1999



                         Supplemental to the Indenture
                         dated as of November 1, 1997



                Establishing a series of Securities designated
                          Medium Term Notes, Series B
             limited in aggregate principal amount to $400,000,000

================================================================================

<PAGE>

          SUPPLEMENTAL INDENTURE No. 2, dated as of March 1, 1999 among PP&L
CAPITAL FUNDING, INC., a corporation duly organized and existing under the laws
of the State of Delaware (herein called the "Company"), PP&L RESOURCES, INC., a
corporation duly organized and existing under the laws of the Commonwealth of
Pennsylvania (herein called the "Guarantor"), and THE CHASE MANHATTAN BANK, a
New York banking corporation, as Trustee (herein called the "Trustee), under the
Indenture dated as of November 1, 1997 (hereinafter called the "Original
Indenture"), this Supplemental Indenture No. 2 being supplemental thereto. The
Original Indenture and any and all indentures and instruments supplemental
thereto are hereinafter sometimes collectively called the "Indenture."

                   Recitals of the Company and the Guarantor

          The Original Indenture was authorized, executed and delivered by the
Company and the Guarantor to provide for the issuance by the Company from time
to time of its Securities (such term and all other capitalized terms used herein
without definition having the meanings assigned to them in the Original
Indenture), to be issued in one or more series as contemplated therein, and for
the Guarantee by the Guarantor of the payment of the principal, premium, if any,
and interest, if any, on such Securities.

          As contemplated by Sections 301 and 1201(f) of the Original Indenture,
the Company wishes to establish a series of Securities to be designated "Medium-
Term Notes, Series B" to be limited in aggregate principal amount (except as
contemplated in Section 301(b) of the Original Indenture) to $400,000,000, such
series of Securities to be hereinafter sometimes called "Series No. 2."

          As contemplated by Section 201 and 1402 of the Original Indenture, the
Guarantor wishes to establish the form and terms of the Guarantees to be
endorsed on the Securities of Series No. 2.

          The Company has duly authorized the execution and delivery of this
Supplemental Indenture No. 2 to establish the Securities of Series No. 2 and has
duly authorized the issuance of such Securities; the Guarantor has duly
authorized the execution and delivery of this Supplemental Indenture No. 2 and
has duly authorized its Guarantees of the Securities of Series No. 2; and all
acts necessary to make this Supplemental Indenture No. 2 a valid agreement of
the Company and the Guarantor, to make the Securities of Series No. 2 valid
obligations of the Company, and to make the Guarantees valid obligations of the
Guarantor, have been performed.

          NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE No. 2 WITNESSETH:

          For and in consideration of the premises and of the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities of Series No.
2, as follows:
<PAGE>

                                  ARTICLE ONE

                          Second Series of Securities

          Section 1.  There is hereby created a series of Securities designated
"Medium-Term Notes, Series B" and limited in aggregate principal amount (except
as contemplated in Section 301(b) of the Original Indenture) to $400,000,000.
The forms and terms of the Securities of Series No. 2 shall be established in an
Officer's Certificate of the Company, as contemplated by Section 301 of the
Original Indenture.

          Section 2.  The Company hereby agrees that, if the Company shall make
any deposit of money and/or Eligible Obligations with respect to any Securities
of Series No. 2, or any portion of the principal amount thereof, as contemplated
by Section 701 of the Indenture, the Company shall not deliver an Officer's
Certificate described in clause (z) in the first paragraph of said Section 701
unless the Company shall also deliver to the Trustee, together with such
Officer's Certificate, either:

          (A)  an instrument wherein the Company, notwithstanding the
     satisfaction and discharge of its indebtedness in respect of such
     Securities, shall assume the obligation (which shall be absolute and
     unconditional) to irrevocably deposit with the Trustee or Paying Agent such
     additional sums of money, if any, or additional Eligible Obligations
     (meeting the requirements of Section 701), if any, or any combination
     thereof, at such time or times, as shall be necessary, together with the
     money and/or Eligible Obligations theretofore so deposited, to pay when due
     the principal of and premium, if any, and interest due and to become due on
     such Securities or portions thereof, all in accordance with and subject to
     the provisions of said Section 701; provided, however, that such instrument
     may state that the obligation of the Company to make additional deposits as
     aforesaid shall be subject to the delivery to the Company by the Trustee of
     a notice asserting the deficiency accompanied by an opinion of an
     independent public accountant of nationally recognized standing, selected
     by the Trustee, showing the calculation thereof (which opinion shall be
     obtained at the expense of the Company); or

          (B)  an Opinion of Counsel to the effect that the Holders of such
     Securities, or portions of the principal amount thereof, will not recognize
     income, gain or loss for United States federal income tax purposes as a
     result of the satisfaction and discharge of the Company's indebtedness in
     respect thereof and will be subject to United States federal income tax on
     the same amounts, at the same times and in the same manner as if such
     satisfaction and discharge had not been effected.

                                       2
<PAGE>

                                  ARTICLE TWO

                               Form of Guarantee

          Guarantees to be endorsed on the Securities of Series No. 2 shall be
in substantially the form set forth below:

                              [FORM OF GUARANTEE]

               PP&L Resources, Inc., a corporation organized under the laws of
     the Commonwealth of Pennsylvania (the "Guarantor", which term includes any
     successor under the Indenture (the "Indenture") referred to in the Security
     upon which this Guarantee is endorsed), for value received, hereby
     unconditionally guarantees to the Holder of the Security upon which this
     Guarantee is endorsed, the due and punctual payment of the principal of,
     and premium, if any, and interest, if any, on such Security when and as the
     same shall become due and payable, whether at the Stated Maturity, by
     declaration of acceleration, call for redemption, or otherwise, in
     accordance with the terms of such Security and of the Indenture. In case of
     the failure of PP&L Capital Funding, Inc., a corporation organized under
     the laws of the State of Delaware (the "Company", which term includes any
     successor under the Indenture), punctually to make any such payment, the
     Guarantor hereby agrees to cause such payment to be made punctually when
     and as the same shall become due and payable, whether at the Stated
     Maturity or by declaration of acceleration, call for redemption or
     otherwise, and as if such payment were made by the Company.

               The Guarantor hereby agrees that its obligations hereunder shall
     be absolute and unconditional irrespective of, and shall be unaffected by,
     any invalidity, irregularity or unenforceability of such Security or the
     Indenture, any failure to enforce the provisions of such Security or the
     Indenture, or any waiver, modification or indulgence granted to the Company
     with respect thereto, by the Holder of such Security or the Trustee or any
     other circumstance which may otherwise constitute a legal or equitable
     discharge or defense of a surety or guarantor; provided, however, that
     notwithstanding the foregoing, no such waiver, modification or indulgence
     shall, without the consent of the Guarantor, increase the principal amount
     of such Security, or increase the interest rate thereon, or change any
     redemption provisions thereof (including any change to increase any premium
     payable upon redemption thereof) or change the Stated Maturity thereof.

               The Guarantor hereby waives the benefits of diligence,
     presentment, demand for payment, any requirement that the Trustee or the
     Holder of such Security exhaust any right or take any action against the
     Company or any

                                       3
<PAGE>

     other Person, filing of claims with a court in the event of insolvency or
     bankruptcy of the Company, any right to require a proceeding first against
     the Company, protest or notice with respect to such Security or the
     indebtedness evidenced thereby and all demands whatsoever, and covenants
     that this Guarantee will not be discharged in respect of such Security
     except by complete performance of the obligations contained in such
     Security and in this Guarantee. This Guarantee shall constitute a guaranty
     of payment and not of collection. The Guarantor hereby agrees that, in the
     event of a default in payment of principal, or premium, if any, or
     interest, if any, on such Security, whether at its Stated Maturity, by
     declaration of acceleration, call for redemption, or otherwise, legal
     proceedings may be instituted by the Trustee on behalf of, or by, the
     Holder of such Security, subject to the terms and conditions set forth in
     the Indenture, directly against the Guarantor to enforce this Guarantee
     without first proceeding against the Company.

               The obligations of the Guarantor hereunder with respect to such
     Security shall be continuing and irrevocable until the date upon which the
     entire principal of, premium, if any, and interest, if any, on such
     Security has been, or has been deemed pursuant to the provisions of Article
     Seven of the Indenture to have been, paid in full or otherwise discharged.

               The Guarantor shall be subrogated to all rights of the Holder of
     such Security upon which this Guarantee is endorsed against the Company in
     respect of any amounts paid by the Guarantor on account of such Security
     pursuant to the provisions of this Guarantee or the Indenture; provided,
     however, that the Guarantor shall not be entitled to enforce or to receive
     any payments arising out of, or based upon, such right of subrogation until
     the principal of, and premium, if any, and interest, if any, on all
     Securities issued under the Indenture shall have been paid in full.

               This Guarantee shall remain in full force and effect and continue
     notwithstanding any petition filed by or against the Company for
     liquidation or reorganization, the Company becoming insolvent or making an
     assignment for the benefit of creditors or a receiver or trustee being
     appointed for all or any significant part of the Company's assets, and
     shall, to the fullest extent permitted by law, continue to be effective or
     reinstated, as the case may be, if at any time payment of the Security upon
     which this Guarantee is endorsed, is, pursuant to applicable law, rescinded
     or reduced in amount, or must otherwise be restored or returned by the
     Holder of such Security, whether as a "voidable preference," "fraudulent
     transfer," or otherwise, all as though such payment or performance had not
     been made. In the event that any payment, or any part thereof, is
     rescinded, reduced, restored or returned on such Security, such Security
     shall, to the fullest extent permitted by law, be reinstated and deemed
     paid only by such amount paid and not so rescinded, reduced, restored or
     returned.

                                       4
<PAGE>

               This Guarantee shall not be valid or obligatory for any purpose
     until the certificate of authentication of the Security upon which this
     Guarantee is endorsed shall have been manually executed by or on behalf of
     the Trustee under the Indenture.

               All terms used in this Guarantee which are defined in the
     Indenture shall have the meanings assigned to them in such Indenture.

               This Guarantee shall be deemed to be a contract made under the
     laws of the State of New York, and for all purposes shall be governed by
     and construed in accordance with the laws of the State of New York.

               IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be
     executed as of the date first written above.

                                        PP&L RESOURCES, INC.


                                        By:_________________________________


                                 [END OF FORM]

                                 ARTICLE THREE

                           Miscellaneous Provisions

          Section 1.  This Supplemental Indenture No. 2 is a supplement to the
Original Indenture. As supplemented by this Supplemental Indenture No. 2, the
Indenture is in all respects ratified, approved and confirmed, and the Original
Indenture and this Supplemental Indenture No. 2 shall together constitute one
and the same instrument.

          Section 2.  The recitals contained in this Supplemental Indenture No.
2 shall be taken as the statements of the Company and the Guarantor, and the
Trustee assumes no responsibility for their correctness and makes no
representations as to the validity or sufficiency of this Supplemental Indenture
No. 2.

          Section 3.  This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same instrument.

                                       5
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture No. 2 to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first written above.


                                    PP&L CAPITAL FUNDING, INC.



                                    By: /s/ James E. Abel
                                       ----------------------------
                                       Name: James E. Abel
                                       Title: Treasurer
[SEAL]

ATTEST:


/s/ Diane M. Koch
-------------------


                                    PP&L RESOURCES, INC.



                                    By: /s/ John R. Biggar
                                       ----------------------------
                                       Name: John R. Biggar
                                       Title:  Senior Vice President and
                                       Chief Financial Officer
[SEAL]

ATTEST:

/s/ Diane M. Koch
-------------------


                                    THE CHASE MANHATTAN BANK,
                                     as Trustee


                                    By: /s/ Francine Springer
                                       ----------------------------
                                       Name: Francine Springer
[SEAL]                                 Title: Assistant Vice President

ATTEST:

/s/ Yvonne Robinson
-------------------

                                       6