UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549



Form 10-Q





|[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934 for the period ended March 31, 2002
|--- | -------------------------------------------------------------------------------------------------------------------------------------
|    | 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                    
|                      |                                                                                                                                                                                                                                     |                               
|333-50350             | PPL Montana, LLC
            (Exact name of Registrant as specified in its charter)
            (Delaware)
            303 North Broadway - Suite 400
            Billings, MT 59101
            (406) 237-6900                     | 54-1928759                    



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

|PPL Corporation                    | YesX | No
|---------------------------------- | ---- | --
|PPL Energy Supply, LLC             | YesX | No
|PPL Electric Utilities Corporation | YesX | No
|PPL Montana, LLC                   | YesX | No

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, 147,142,007
              
              shares outstanding at April 30, 2002, excluding
              30,993,637 shares held as treasury stock                                            
|---------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                   |                                                                                                                                                                                                                          
|PPL Energy Supply, LLC             | PPL Corporation indirectly holds all
              of the 
              member 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 30, 2002, excluding
              79,270,519 shares held as treasury stock
|                                   |                                                                                                                                                                                                                          
|PPL Montana, LLC                   | PPL Corporation indirectly holds all
              of the 
              member interests in PPL Montana, LLC.                                                                                                           

PPL Energy Supply, LLC and PPL Montana, LLC meet
          the conditions set forth in General Instruction (H)(1)(a) and (b) of
          Form 10-Q and are therefore filing this form with the reduced disclosure
          format.

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PPL CORPORATIONPPL ENERGY SUPPLY, LLCPPL ELECTRIC UTILITIES CORPORATIONPPL MONTANA, LLC

FORM 10-Q
  FOR THE QUARTER ENDED MARCH 31, 2002Table of Contents

|                                                        | Page                                                                                               
|------------------------------------------------------- | ---------------------------------------------------------------------------------------------------
|GLOSSARY
      OF TERMS AND ABBREVIATIONS               |                                                                                                    
|                                                        |                                                                                                    
|FORWARD-LOOKING
      INFORMATION                       | 1                                                                                                  
|                                                        |                                                                                                    
|PART I. FINANCIAL INFORMATION                           |                                                                                                    
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|                                                        | Item 1. Financial Statements                                                                       
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|                                                        | Item 2. Management's Discussion
      and Analysis of Financial Condition and Results of Operations
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|                                                        | Item 3. Quantitative and
      Qualitative Disclosures About Market Risk                           
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|PART II. OTHER INFORMATION                              |                                                                                                    
|                                                        |                                                                                                    
|                                                        | Item 1.
      Legal Proceedings                                                                    
|                                                        | Item 6.
      Exhibits and Reports on Form 8-K                                                     
|                                                        |                                                                                                    
|SIGNATURES                                              | 54                                                                                                 
|                                                        |                                                                                                    
|COMPUTATION OF RATIO OF
      EARNINGS TO FIXED CHARGES |                                                                                                    
|                                                        |                                                                                                    
|                                                        |                                                                                                    
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|                                                        |                                                                                                    
|                                                        |                                                                                                    

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GLOSSARY OF TERMS AND ABBREVIATIONS



1945 First Mortgage Bond Indenture
  - PPL Electric's Mortgage and Deed of Trust, dated as of October 1, 1945, to
  Bankers Trust Company, as trustee, as supplemented.



APA - Asset Purchase Agreement.



APB - Accounting Principles Board.



CEMAR - Companhia Energética do Maranhão,
  a Brazilian electric distribution company in which PPL Global has a majority
  ownership interest.



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



CO2 - carbon dioxide.



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



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



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.



DRIP - Dividend Reinvestment Plan.



EITF(Emerging Issues Task Force) - an
  organization that assists the FASB in improving financial reporting through
  the identification, discussion and resolution of financial issues within the
  framework of existing authoritative literature.

EPA - Environmental Protection Agency, a U.S.
  government agency.



EPS - earnings (loss) per share.



ESOP - Employee Stock Ownership Plan.



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



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



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



ICP - Incentive Compensation Plan.



ICPKE - Incentive Compensation Plan for Key Employees.



IRS - Internal Revenue Service, in the U.S. Department
  of Treasury.



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.



kWh - kilowatthours.



LIBOR - London Interbank Offered Rate.



Mirant - Mirant Corporation, formerly Southern
  Energy Inc., a diversified energy company based in Atlanta. PPL Global and Mirant
  jointly own WPDH Limited.



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
  Energy.



MPSC - Montana Public Service Commission.



MW - megawatts.





NOx - nitrogen oxide.



NPDES - National Pollutant Discharge Elimination
  System.



NRC (Nuclear Regulatory Commission) - federal
  agency that regulates 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.



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



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



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



PLR (Provider of Last Resort) - PPL Electric
  providing electricity to retail customers within its delivery territory who
  have chosen not to shop for electricity under the Customer Choice Act.



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



PPL Capital Funding - PPL Capital Funding, Inc.,
  a PPL financing subsidiary.



PPL Capital Funding Trust I - a Delaware statutory
  business trust created to issue PEPS Units, whose common securities are held
  by PPL.



PPL Capital Trust - a Delaware statutorybusiness
  trust created to issue Preferred Securities, whose common securities are held
  by PPL Electric.



PPL Capital Trust II - a Delaware statutory business
  trust created to issue Preferred Securities, whose common securities are held
  by PPL Electric.



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,
  which is a subsidiary of PPL and the parent company of PPL Energy Supply.



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



PPL Energy Supply - PPL Energy Supply, LLC, the
  parent company of PPL Generation, PPL EnergyPlus, PPL Global and other subsidiaries.
  Formed in November 2000, PPL Energy Supply is a subsidiary of PPL Energy Funding.



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



PPL Generation - PPL Generation, LLC, a subsidiary
  of PPL Energy Supply which, effective July 1, 2000, owns and operates U.S. generating
  facilities through various subsidiaries.



PPL Global - PPL Global, LLC, a subsidiary of
  PPL Energy Supply, which invests in and develops domestic and international
  power projects, and owns and operates international power projects.



PPL Holtwood - PPL Holtwood, LLC, a subsidiary
  of PPL Generation which owns PPL's hydroelectric generating operations in Pennsylvania.



PPL Martins Creek - PPL Martins Creek, LLC, a
  fossil generating subsidiary of PPL Generation.



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



PPL Montour - PPL Montour, LLC, a fossil generating
  subsidiary of PPL Generation.



PPL Services - PPL Services Corporation, a subsidiary
  of PPL which 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 wholly-owned subsidiary of PPL Electric, formed to issue
  transition bonds under the Customer Choice Act.



Preferred Securities - Company-obligated mandatorily
  redeemable preferred securities issued by PPL Capital Trust, PPL Capital Trust
  II and PPL Capital Funding Trust I, holding solely debentures of PPL Electric,
  in the case of PPL Capital Trust and PPL Capital Trust II, and solely debentures
  of PPL Capital Funding in the case of PPL Capital Funding Trust I.



PUC (Pennsylvania Public Utility Commission)
  - 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.



RMC - Risk Management Committee.



SCR - selective catalytic reduction, a pollution
  control process.



SEC - Securities and Exchange Commission.



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



SNCR - selective non-catalytic reduction, a
  pollution control process.



SO2 - sulfur dioxide.



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



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



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



WPD (South Wales) - Western Power Distribution
  (South Wales) plc, a Welsh 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, formerly WPD 1953 Limited, a jointly-owned subsidiary of PPL Global
  and Mirant. WPDH Limited owns WPD Holdings U.K., which owns WPD (South West)
  and WPD (South Wales).



WPDL - Western Power Distribution Limited, a
  wholly-owned subsidiary of WPD Investment Holdings Limited which is a jointly-owned
  subsidiary of PPL Global and Mirant. WPDL owns 100% of the common shares of
  Hyder.

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FORWARD-LOOKING INFORMATION

Certain statements contained in this Form 10-Q concerning expectations,
  beliefs, plans, objectives, goals, strategies, future events or performance
  and underlying assumptions and other statements which are other than statements
  of historical facts are "forward-looking statements" within the meaning of the
  federal securities laws. Although PPL, PPL Energy Supply, PPL Electric and PPL
  Montana believe that the expectations and assumptions reflected in these statements
  are reasonable, there can be no assurance that these expectations will prove
  to have been correct. These forward-looking statements involve a number of risks
  and uncertainties, and actual results may differ materially from the results
  discussed in the forward-looking statements. In addition to the specific factors
  discussed in the Management's Discussion and Analysis of the 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
  variations affecting customer energy usage; 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 of existing
  facilitiesand operating costs; environmental conditions and requirements;
  system conditions and operating costs; development of new projects, markets
  and technologies; performance of new ventures; political, regulatory or economic
  conditions in states, regions or countries where PPL or its subsidiaries conduct
  business; receipt and renewalsof necessary governmental permits andapprovals; capital market conditions and decisions regarding capital structure;
  stock price performance; credit ratings; foreign exchange rates; state and federal
  regulatory developments; new state or federal legislation; national or regional
  economic conditions, including any potential effects arising from the September
  11, 2001 terrorist attacks in the U.S. and consequential 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, PPL Electric and PPL Montana
  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, PPL Electric or PPL Montana
  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, PPL Electric and PPL Montana
  undertake no obligations to update the information contained in such statement
  to reflect subsequent developments or information.



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|PPL CORPORATION AND SUBSIDIARIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|PART I. FINANCIAL INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Item 1. Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|In the opinion of PPL, the unaudited financial
      statements that follow reflect all adjustments necessary to present fairly
      the Condensed Consolidated Balance Sheet as of March 31, 2002 and December
      31, 2001, and the Condensed Consolidated Statement of Income, the Condensed
      Consolidated Statement of Cash Flows and the Condensed Consolidated Statement
      of Shareowners' Common Equity and Comprehensive Income for the periods ended
      March 31, 2002 and 2001.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|CONDENSED CONSOLIDATED STATEMENT OF INCOME                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|PPL Corporation and Subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(Millions
      of Dollars, except per share data)                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Operating Revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Operating Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Operating Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Other Income - net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Interest Expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Income Before Income Taxes and
      Minority Interest                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Minority Interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Income Before Cumulative Effect
      of a Change in Accounting Principle                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Cumulative Effect of a Change in
      Accounting Principle                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Income Before Dividends on Preferred
      Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Dividends - Preferred Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Net Income (Loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Earnings (Loss) Per Share of
      Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Dividends Declared per Share
      of Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|The accompanying Notes to Condensed
        Consolidated Financial Statements are an integral part of the financial
        statements.                                                                                                                                                                                                                                                                                                                                                                 

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|CONDENSED
      CONSOLIDATED STATEMENT OF CASH FLOWS                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Corporation and
      Subsidiaries                                                                                                 
|(Unaudited)                                                                                                                            
|(Millions
      of Dollars)                                                                                                            
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Net Cash Provided
      by (Used in) 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.

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|CONDENSED
      CONSOLIDATED BALANCE SHEET                                                                                              |                                                                  |                               |   |        |                  |  |   |       
|--------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ----------------------------- | - | ------ | ---------------- |  | - | ------
|PPL Corporation and
      Subsidiaries                                                                                                  |                                                                  |                               |   |        |                  |  |   |       
|(Unaudited)                                                                                                                             |                                                                  |                               |   |        |                  |  |   |       
|(Millions
      of Dollars)                                                                                                             |                                                                  |                               |   |        |                  |  |   |       
|                                                                                                                                        |                                                                  |                               |   |        |                  |  |   |       
|                                                                                                                                        |                                                                  | March 31,2002                 |   |        | December 31,2001 | 
|                                                                                                                                        |                                                                  |                               |   |        |                  | 
|Assets                                                                                                                                  |                                                                  |                               |   |        |                  |  |   |       
|                                                                                                                                        |                                                                  |                               |   |        |                  |  |   |       
|Current Assets                                                                                                                          |                                                                  |                               |   |        |                  |  |   |       
|                                                                                                                                        | Cash and cash equivalents                                        |                               | $ | 486    |                  |  | $ | 950   
|                                                                                                                                        | Accounts receivable (less
      reserve: 2002, $122; 2001, $121) |                               |   | 609    |                  |  |   | 535   
|                                                                                                                                        | Unbilled revenues                                                |                               |   | 199    |                  |  |   | 248   
|                                                                                                                                        | Fuel, materials and supplies
      - at average cost             |                               |   | 243    |                  |  |   | 251   
|                                                                                                                                        | Prepayments                                                      |                               |   | 197    |                  |  |   | 51    
|                                                                                                                                        | Deferred income taxes                                            |                               |   | 85     |                  |  |   | 77    
|                                                                                                                                        | Price risk management
      assets                               |                               |   | 138    |                  |  |   | 124   
|                                                                                                                                        | Other                                                            |                               |   | 117    |                  |  |   | 102   
|                                                                                                                                        |                                                                  |                               |   |        |                  | 
|                                                                                                                                        |                                                                  |                               |   |        | 2,074            |  |   |       
|                                                                                                                                        |                                                                  |                               |   |        |                  | 
|Investments                                                                                                                             |                                                                  |                               |   |        |                  |  |   |       
|                                                                                                                                        | Investment in unconsolidated
      affiliates - at equity        |                               |   | 586    |                  |  |   | 586   
|                                                                                                                                        | Investment in unconsolidated
      affiliates - at cost          |                               |   | 117    |                  |  |   | 114   
|                                                                                                                                        | Nuclear plant decommissioning
      trust fund                   |                               |   | 289    |                  |  |   | 276   
|                                                                                                                                        | Other                                                            |                               |   | 49     |                  |  |   | 55    
|                                                                                                                                        |                                                                  |                               |   |        |                  | 
|                                                                                                                                        |                                                                  |                               |   |        | 1,041            |  |   |       
|                                                                                                                                        |                                                                  |                               |   |        |                  | 
|Property, Plant and
      Equipment - net                                                                                               |                                                                  |                               |   |        |                  |  |   |       
|                                                                                                                                        | Electric plant in service                                        |                               |   |        |                  |  |   |       
|                                                                                                                                        |                                                                  | Transmission and distribution |   |        | 2,633            |  |   |       
|                                                                                                                                        |                                                                  | Generation                    |   |        | 2,466            |  |   |       
|                                                                                                                                        |                                                                  | General                       |   |        | 312              |  |   |       
|                                                                                                                                        |                                                                  |                               |   |        |                  | 
|                                                                                                                                        |                                                                  |                               |   |        | 5,411            |  |   |       
|                                                                                                                                        | Construction work in
      progress                              |                               |   | 262    |                  |  |   | 181   
|                                                                                                                                        | Nuclear fuel                                                     |                               |   | 116    |                  |  |   | 127   
|                                                                                                                                        |                                                                  |                               |   |        |                  | 
|                                                                                                                                        |                                                                  | Electric plant                |   |        | 5,789            |  |   |       
|                                                                                                                                        | Gas and oil plant                                                |                               |   | 199    |                  |  |   | 197   
|                                                                                                                                        | Other property                                                   |                               |   | 104    |                  |  |   | 103   
|                                                                                                                                        |                                                                  |                               |   |        |                  | 
|                                                                                                                                        |                                                                  |                               |   | 6,092  |                  |  |   | 5,947 
|                                                                                                                                        |                                                                  |                               |   |        |                  | 
|Regulatory and Other
      Noncurrent Assets                                                                                            |                                                                  |                               |   |        |                  |  |   |       
|                                                                                                                                        | Recoverable transition
      costs                               |                               |   | 2,119  |                  |  |   | 2,172 
|                                                                                                                                        | Other                                                            |                               |   | 1,042  |                  |  |   | 1,086 
|                                                                                                                                        |                                                                  |                               |   |        |                  | 
|                                                                                                                                        |                                                                  |                               |   | 3,161  |                  |  |   | 3,258 
|                                                                                                                                        |                                                                  |                               |   |        |                  | 
|                                                                                                                                        |                                                                  |                               | $ | 12,368 |                  |  | $ | 12,574
|                                                                                                                                        |                                                                  |                               |   |        |                  | 
|                                                                                                                                        |                                                                  |                               |   |        |                  |  |   |       
|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                                                                                                                    
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Long-term Debt                                                                                                                         
|                                                                                                                                       
|Deferred Credits and Other Noncurrent
      Liabilities                                                                                
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Commitments and Contingent Liabilities                                                                                                 
|                                                                                                                                       
|Minority Interest                                                                                                                      
|                                                                                                                                       
|Company-obligated Mandatorily
      Redeemable Preferred Securitiesof Subsidiary Trusts Holding Solely Company Debentures              
|                                                                                                                                       
|Preferred Stock                                                                                                                        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Shareowners' Common Equity                                                                                                             
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|The accompanying Notes to Condensed
        Consolidated Financial Statements are an integral part of the financial
        statements.

---

|CONDENSED
      CONSOLIDATED STATEMENT OF SHAREOWNERS' COMMON EQUITYAND COMPREHENSIVE INCOME                                           
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Corporation and Subsidiaries                                                                                                       
|(Unaudited)                                                                                                                            
|(Millions of
      Dollars)                                                                                                            
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Common stock at beginning of period                                                                                                    
|                                                                                                                                       
|Common stock at end of period                                                                                                          
|                                                                                                                                       
|Capital in excess of par value
      at beginning of period                                                                            
|                                                                                                                                       
|                                                                                                                                       
|Capital in excess of par value
      at end of period                                                                                  
|                                                                                                                                       
|Treasury stock at beginning of
      period                                                                                            
|                                                                                                                                       
|Treasury stock at end of period                                                                                                        
|                                                                                                                                       
|Earnings reinvested at beginning
      of period                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Earnings reinvested at end of period                                                                                                   
|                                                                                                                                       
|Accumulated other comprehensive
      loss at beginning of period                                                                      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Accumulated other comprehensive
      loss at end of period                                                                            
|                                                                                                                                       
|Capital stock expense and other
      at beginning of period                                                                           
|                                                                                                                                       
|                                                                                                                                       
|Capital stock expense and other
      at end of period                                                                                 
|                                                                                                                                       
|Total Shareowners' Common Equity                                                                                                       
|                                                                                                                                       
|Common stock shares at beginning
      of period (a)                                                                                   
|                                                                                                                                       
|                                                                                                                                       
|Common stock shares at end of period                                                                                                   
|                                                                                                                                       
|(a)                                                                                                                                    
|(b)                                                                                                                                    
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|(c)                                                                                                                                    
|                                                                                                                                       
|The accompanying Notes to Condensed
        Consolidated Financial Statements are an integral part of the financial
        statements.

---

(THIS PAGE LEFT BLANK INTENTIONALLY.)

---

|PPL
      ENERGY SUPPLY, LLC AND SUBSIDIARIES                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|PART I. FINANCIAL INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Item 1. Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|In the opinion of PPL Energy Supply, the unaudited
      financial statements that follow reflect all adjustments necessary to present
      fairly the Condensed Consolidated Balance Sheet as of March 31, 2002 and
      December 31, 2001, and the Condensed Consolidated Statement of Income, the
      Condensed Consolidated Statement of Cash Flows and the Condensed Consolidated
      Statement of Member's Equity and Comprehensive Income for the periods ended
      March 31, 2002 and 2001.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Income Before Income Taxes and
      Minority Interest                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Minority Interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Income Before Cumulative Effect
      of a Change in Accounting Principle                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Cumulative Effect of a Change in
      Accounting Principle                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Net Income (Loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|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                                                                                                   
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Net Increase (Decrease) in Cash
      and Cash Equivalents                                                                             
|Cash and Cash Equivalents at Beginning
      of Period                                                                                 
|                                                                                                                                       
|Cash and Cash Equivalents at End
      of Period                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Non-Cash Contributions from
      Member                                                                                               
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|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)                                                                                                             |                                                                  |                               |     |       |                  |       |     |      
|                                                                                                                                        |                                                                  |                               |     |       |                  |       |     |      
|                                                                                                                                        |                                                                  | March 31,2002                 |     |       | December 31,2001
|                                                                                                                                        |                                                                  |                               |     |       |                  |      
|Assets                                                                                                                                  |                                                                  |                               |     |       |                  |       |     |      
|                                                                                                                                        |                                                                  |                               |     |       |                  |       |     |      
|Current Assets                                                                                                                          |                                                                  |                               |     |       |                  |       |     |      
|                                                                                                                                        | Cash and cash equivalents                                        |                               | $   | 285   |                  |       | $   | 832  
|                                                                                                                                        | Accounts receivable (less reserve:
      2002, $102; 2001, $100) |                               |     | 355   |                  |       |     | 341  
|                                                                                                                                        | Unbilled revenues                                                |                               |     | 91    |                  |       |     | 114  
|                                                                                                                                        | Accounts receivable from affiliated
      companies              |                               |     | 103   |                  |       |     | 113  
|                                                                                                                                        | Notes receivable from affiliated
      companies                 |                               |     | 449   |                  |       |     | 305  
|                                                                                                                                        | Fuel, materials and supplies -
      at average cost             |                               |     | 209   |                  |       |     | 209  
|                                                                                                                                        | Prepayments                                                      |                               |     | 62    |                  |       |     | 39   
|                                                                                                                                        | Price risk management assets                                     |                               |     | 134   |                  |       |     | 123  
|                                                                                                                                        | Deferred income taxes                                            |                               |     | 21    |                  |       |     | 17   
|                                                                                                                                        | Other                                                            |                               |     | 49    |                  |       |     | 37   
|                                                                                                                                        |                                                                  |                               |     |       |                  |      
|                                                                                                                                        |                                                                  |                               |     |       |                  | 1,758 |     |      
|                                                                                                                                        |                                                                  |                               |     |       |                  |      
|Investments                                                                                                                             |                                                                  |                               |     |       |                  |       |     |      
|                                                                                                                                        | Investment in unconsolidated affiliates
      - at equity        |                               |     | 586   |                  |       |     | 586  
|                                                                                                                                        | Investment in unconsolidated affiliates
      - at cost          |                               |     | 117   |                  |       |     | 114  
|                                                                                                                                        | Note receivable from affiliated
      companies                  |                               |     | 90    |                  |       |     | 90   
|                                                                                                                                        | Nuclear plant decommissioning trust
      fund                   |                               |     | 289   |                  |       |     | 276  
|                                                                                                                                        | Other                                                            |                               |     | 5     |                  |       |     | 7    
|                                                                                                                                        |                                                                  |                               |     |       |                  |      
|                                                                                                                                        |                                                                  |                               |     | 1,087 |                  |       |     | 1,073
|                                                                                                                                        |                                                                  |                               |     |       |                  |      
|Property, Plant and Equipment
      - net                                                                                               |                                                                  |                               |     |       |                  |       |     |      
|                                                                                                                                        | Electric plant in service                                        |                               |     |       |                  |       |     |      
|                                                                                                                                        |                                                                  | Transmission and distribution |     |       | 521              |       |     |      
|                                                                                                                                        |                                                                  | Generation                    |     |       | 2,466            |       |     |      
|                                                                                                                                        |                                                                  | General                       |     |       | 120              |       |     |      
|                                                                                                                                        |                                                                  |                               |     |       |                  |      
|                                                                                                                                        |                                                                  |                               |     |       |                  | 3,107 |     |      
|                                                                                                                                        | Construction work in progress                                    |                               |     | 228   |                  |       |     | 146  
|                                                                                                                                        | Nuclear fuel                                                     |                               |     | 116   |                  |       |     | 127  
|                                                                                                                                        |                                                                  |                               |     |       |                  |      
|                                                                                                                                        |                                                                  | Electric plant                |     |       | 3,451            |       |     |      
|                                                                                                                                        | Gas and oil plant                                                |                               |     | 24    |                  |       |     | 24   
|                                                                                                                                        | Other property                                                   |                               |     | 71    |                  |       |     | 71   
|                                                                                                                                        |                                                                  |                               |     |       |                  |      
|                                                                                                                                        |                                                                  |                               |     |       |                  | 3,546 |     |      
|                                                                                                                                        |                                                                  |                               |     |       |                  |      
|Other Noncurrent Assets                                                                                                                 |                                                                  |                               | 503 |       |                  |       | 547 |      
|                                                                                                                                        |                                                                  |                               |     |       |                  |      
|                                                                                                                                        |                                                                  |                               |     |       | $                | 6,894 |     |      
|                                                                                                                                        |                                                                  |                               |     |       |                  |      
|                                                                                                                                        |                                                                  |                               |     |       |                  |       |     |      
|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)                                                                                                             |                                                          |               |       |     |                  |       |       |    
|                                                                                                                                        |                                                          |               |       |     |                  |       |       |    
|                                                                                                                                        |                                                          | March 31,2002 |       |     | December 31,2001
|                                                                                                                                        |                                                          |               |       |     |                  |      
|Liabilities and Equity                                                                                                                  |                                                          |               |       |     |                  |       |       |    
|                                                                                                                                        |                                                          |               |       |     |                  |       |       |    
|Current Liabilities                                                                                                                     |                                                          |               |       |     |                  |       |       |    
|                                                                                                                                        | Short-term debt                                          |               | $     | 112 |                  |       | $     | 118
|                                                                                                                                        | Long-term debt                                           |               |       | 24  |                  |       |       | 24 
|                                                                                                                                        | Accounts payable                                         |               |       | 422 |                  |       |       | 493
|                                                                                                                                        | Accounts payable to affiliated
      companies           |               |       | 23  |                  |       |       | 47 
|                                                                                                                                        | Above market NUG contracts                               |               |       | 76  |                  |       |       | 87 
|                                                                                                                                        | Wholesale energy commitments                             |               |       | 7   |                  |       |       | 13 
|                                                                                                                                        | Taxes                                                    |               |       | 89  |                  |       |       | 102
|                                                                                                                                        | Collateral on PLR energy supply
      to affiliate       |               |       | 56  |                  |       |       |    
|                                                                                                                                        | Deferred revenue on PLR energy
      supply to affiliate |               |       | 12  |                  |       |       | 11 
|                                                                                                                                        | Price risk management liabilities                        |               |       | 129 |                  |       |       | 97 
|                                                                                                                                        | Other                                                    |               |       | 147 |                  |       |       | 152
|                                                                                                                                        |                                                          |               |       |     |                  |      
|                                                                                                                                        |                                                          |               |       |     |                  | 1,097 |       |    
|                                                                                                                                        |                                                          |               |       |     |                  |      
|Long-term Debt                                                                                                                          |                                                          |               | 755   |     |                  |       | 737   |    
|                                                                                                                                        |                                                          |               |       |     |                  |      
|Deferred Credits and Other Noncurrent
      Liabilities                                                                                 |                                                          |               |       |     |                  |       |       |    
|                                                                                                                                        | Deferred income taxes and investment
      tax credits   |               |       | 130 |                  |       |       | 55 
|                                                                                                                                        | Above market NUG contracts                               |               |       | 409 |                  |       |       | 493
|                                                                                                                                        | Wholesale energy commitments                             |               |       | 63  |                  |       |       | 65 
|                                                                                                                                        | Nuclear plant decommissioning                            |               |       | 299 |                  |       |       | 294
|                                                                                                                                        | Deferred revenue on PLR energy
      supply to affiliate |               |       | 78  |                  |       |       | 79 
|                                                                                                                                        | Other                                                    |               |       | 282 |                  |       |       | 292
|                                                                                                                                        |                                                          |               |       |     |                  |      
|                                                                                                                                        |                                                          |               |       |     |                  | 1,261 |       |    
|                                                                                                                                        |                                                          |               |       |     |                  |      
|                                                                                                                                        |                                                          |               |       |     |                  |       |       |    
|Commitments and Contingent Liabilities                                                                                                  |                                                          |               |       |     |                  |       |       |    
|                                                                                                                                        |                                                          |               |       |     |                  |       |       |    
|Minority Interest                                                                                                                       |                                                          |               | 39    |     |                  |       | 38    |    
|                                                                                                                                        |                                                          |               |       |     |                  |      
|Member's Equity                                                                                                                         |                                                          |               | 3,742 |     |                  |       | 3,972 |    
|                                                                                                                                        |                                                          |               |       |     |                  |      
|                                                                                                                                        |                                                          |               |       |     | $                | 6,894 |       |    
|                                                                                                                                        |                                                          |               |       |     |                  |      
|                                                                                                                                        |                                                          |               |       |     |                  |       |       |    
|The accompanying Notes to Condensed
        Consolidated Financial Statements are an integral part of the financial
        statements.

---

|CONDENSED CONSOLIDATED
      STATEMENT OF MEMBER'S EQUITY ANDCOMPREHENSIVE INCOME                                                      
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Energy Supply, LLC and Subsidiaries                                                                                                
|(Unaudited)                                                                                                                            
|(Millions of
      Dollars)                                                                                                            
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Member's Equity at beginning of
      period                                                                                           
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Member's Equity at end of period                                                                                                       
|                                                                                                                                       
|(a) Statement of Comprehensive
      Income:                                                                                           
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|(b)                                                                                                                                    
|                                                                                                                                       
|The accompanying Notes to Condensed
        Consolidated Financial Statements are an integral part of the financial
        statements.

---

(THIS PAGE LEFT BLANK INTENTIONALLY.)

---

|PPL
      ELECTRIC UTILITIES CORPORATION AND SUBSIDIARIES                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                          
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------
|PART I. FINANCIAL INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                          
|Item 1. Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|In the opinion of PPL Electric, the unaudited
      financial statements that follow reflect all adjustments necessary to present
      fairly the Condensed Consolidated Balance Sheet as of March 31, 2002 and
      December 31, 2001, and the Condensed Consolidated Statement of Income, the
      Condensed Consolidated Statement of Cash Flows and the Condensed Consolidated
      Statement of Shareowner's Common Equity and Comprehensive Income for the
      periods ended March 31, 2002 and 2001.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|CONDENSED CONSOLIDATED STATEMENT
      OF INCOME                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|PPL Electric Utilities Corporation
      and Subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                          
|(Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                          
|(Millions of
      Dollars)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|Operating Revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Retail electric          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Wholesale electric       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Energy related businesses
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Total                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|Operating Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Operation                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Maintenance              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Depreciation             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Taxes, other than income 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Energy related businesses
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Total                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|Operating Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|Other Income - net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|Interest Expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|Income Before Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|Income Before Dividends on Preferred
      Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|Dividends - Preferred Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                          
|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 Electric Utilities Corporation
      and Subsidiaries                                                                               |                                                                  
|(Unaudited)                                                                                                                             |                                                                  
|(Millions of
      Dollars)                                                                                                             |                                                                  
|                                                                                                                                        |                                                                  
|                                                                                                                                        |                                                                  
|                                                                                                                                        |                                                                  
|                                                                                                                                        |                                                                  
|Net Cash Provided by (Used in)
      Operating Activities                                                                               |                                                                  
|                                                                                                                                        |                                                                  
|Cash Flows From Investing Activities                                                                                                    |                                                                  
|                                                                                                                                        | Expenditures for property, plant
      and equipment             
|                                                                                                                                        | Net (increase) decrease in notes
      receivable from affiliates
|                                                                                                                                        | Other investing activities - net                                 
|                                                                                                                                        |                                                                  
|                                                                                                                                        |                                                                  
|                                                                                                                                        |                                                                  
|Cash Flows From Financing Activities                                                                                                    |                                                                  
|                                                                                                                                        | Retirement of long-term debt                                     
|                                                                                                                                        | Deposit of funds for the retirement
      of long-term debt      
|                                                                                                                                        | Payment of common and preferred
      dividends                  
|                                                                                                                                        | Net decrease in short-term debt                                  
|                                                                                                                                        |                                                                  
|                                                                                                                                        |                                                                  
|                                                                                                                                        |                                                                  
|Net Increase (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)                                                                                                             |                                                                |                               |    |       |                  |       |    |      
|                                                                                                                                        |                                                                |                               |    |       |                  |       |    |      
|                                                                                                                                        |                                                                | March 31,2002                 |    |       | December 31,2001
|                                                                                                                                        |                                                                |                               |    |       |                  |      
|Assets                                                                                                                                  |                                                                |                               |    |       |                  |       |    |      
|                                                                                                                                        |                                                                |                               |    |       |                  |       |    |      
|Current Assets                                                                                                                          |                                                                |                               |    |       |                  |       |    |      
|                                                                                                                                        | Cash and cash equivalents                                      |                               | $  | 112   |                  |       | $  | 79   
|                                                                                                                                        | Accounts receivable (less reserve:
      2002, $19; 2001, $19) |                               |    | 210   |                  |       |    | 178  
|                                                                                                                                        | Unbilled revenues                                              |                               |    | 105   |                  |       |    | 131  
|                                                                                                                                        | Accounts receivable from affiliated
      companies            |                               |    | 31    |                  |       |    | 18   
|                                                                                                                                        | Notes receivable from affiliated
      companies               |                               |    | 75    |                  |       |    | 350  
|                                                                                                                                        | Income tax receivable                                          |                               |    | 37    |                  |       |    | 36   
|                                                                                                                                        | Fuel, materials and supplies -
      at average cost           |                               |    | 27    |                  |       |    | 27   
|                                                                                                                                        | Prepayments                                                    |                               |    | 125   |                  |       |    | 4    
|                                                                                                                                        | Prepayment on PLR energy supply
      from affiliate           |                               |    | 12    |                  |       |    | 11   
|                                                                                                                                        | Deferred income taxes                                          |                               |    | 41    |                  |       |    | 41   
|                                                                                                                                        | Collateral on PLR energy supply
      from affiliate           |                               |    | 56    |                  |       |    |      
|                                                                                                                                        | Other                                                          |                               |    | 23    |                  |       |    | 8    
|                                                                                                                                        |                                                                |                               |    |       |                  |      
|                                                                                                                                        |                                                                |                               |    |       |                  | 854   |    |      
|                                                                                                                                        |                                                                |                               |    |       |                  |      
|                                                                                                                                        |                                                                |                               |    |       |                  |       |    |      
|Investments                                                                                                                             |                                                                |                               | 32 |       |                  |       | 35 |      
|                                                                                                                                        |                                                                |                               |    |       |                  |      
|Property, Plant and Equipment
      - net                                                                                               |                                                                |                               |    |       |                  |       |    |      
|                                                                                                                                        | Electric plant in service                                      |                               |    |       |                  |       |    |      
|                                                                                                                                        |                                                                | Transmission and distribution |    |       | 2,112            |       |    |      
|                                                                                                                                        |                                                                | General                       |    |       | 186              |       |    |      
|                                                                                                                                        |                                                                |                               |    |       |                  |      
|                                                                                                                                        |                                                                |                               |    |       |                  | 2,298 |    |      
|                                                                                                                                        | Construction work in progress                                  |                               |    | 32    |                  |       |    | 32   
|                                                                                                                                        |                                                                |                               |    |       |                  |      
|                                                                                                                                        |                                                                | Electric plant                |    |       | 2,330            |       |    |      
|                                                                                                                                        | Other property                                                 |                               |    | 4     |                  |       |    | 4    
|                                                                                                                                        |                                                                |                               |    |       |                  |      
|                                                                                                                                        |                                                                |                               |    |       |                  | 2,334 |    |      
|                                                                                                                                        |                                                                |                               |    |       |                  |      
|Regulatory and Other Noncurrent
      Assets                                                                                            |                                                                |                               |    |       |                  |       |    |      
|                                                                                                                                        | Recoverable transition costs                                   |                               |    | 2,119 |                  |       |    | 2,172
|                                                                                                                                        | Prepayment on PLR energy supply
      from affiliate           |                               |    | 78    |                  |       |    | 79   
|                                                                                                                                        | Other                                                          |                               |    | 433   |                  |       |    | 434  
|                                                                                                                                        |                                                                |                               |    |       |                  |      
|                                                                                                                                        |                                                                |                               |    |       |                  | 2,630 |    |      
|                                                                                                                                        |                                                                |                               |    |       |                  |      
|                                                                                                                                        |                                                                |                               |    |       | $                | 5,850 |    |      
|                                                                                                                                        |                                                                |                               |    |       |                  |      
|                                                                                                                                        |                                                                |                               |    |       |                  |       |    |      
|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)                                                                                                             |                                                              |               |       |       |                  |       |       |      
|                                                                                                                                        |                                                              |               |       |       |                  |       |       |      
|                                                                                                                                        |                                                              | March 31,2002 |       |       | December 31,2001
|                                                                                                                                        |                                                              |               |       |       |                  |      
|Liabilities and Equity                                                                                                                  |                                                              |               |       |       |                  |       |       |      
|                                                                                                                                        |                                                              |               |       |       |                  |       |       |      
|Current Liabilities                                                                                                                     |                                                              |               |       |       |                  |       |       |      
|                                                                                                                                        | Long-term debt                                               |               | $     | 294   |                  |       | $     | 274  
|                                                                                                                                        | Accounts payable                                             |               |       | 30    |                  |       |       | 34   
|                                                                                                                                        | Accounts payable to affiliated
      companies               |               |       | 124   |                  |       |       | 122  
|                                                                                                                                        | Taxes                                                        |               |       | 101   |                  |       |       | 74   
|                                                                                                                                        | Interest                                                     |               |       | 20    |                  |       |       | 34   
|                                                                                                                                        | Dividends                                                    |               |       | 6     |                  |       |       | 6    
|                                                                                                                                        | Other                                                        |               |       | 40    |                  |       |       | 40   
|                                                                                                                                        |                                                              |               |       |       |                  |      
|                                                                                                                                        |                                                              |               |       |       |                  | 615   |       |      
|                                                                                                                                        |                                                              |               |       |       |                  |      
|Long-term Debt                                                                                                                          |                                                              |               | 3,097 |       |                  |       | 3,185 |      
|                                                                                                                                        |                                                              |               |       |       |                  |      
|Deferred Credits and Other Noncurrent
      Liabilities                                                                                 |                                                              |               |       |       |                  |       |       |      
|                                                                                                                                        | Deferred income taxes and investment
      tax credits       |               |       | 759   |                  |       |       | 757  
|                                                                                                                                        | Other                                                        |               |       | 115   |                  |       |       | 132  
|                                                                                                                                        |                                                              |               |       |       |                  |      
|                                                                                                                                        |                                                              |               |       |       |                  | 874   |       |      
|                                                                                                                                        |                                                              |               |       |       |                  |      
|                                                                                                                                        |                                                              |               |       |       |                  |       |       |      
|Commitments and Contingent Liabilities                                                                                                  |                                                              |               |       |       |                  |       |       |      
|                                                                                                                                        |                                                              |               |       |       |                  |      
|Company-obligated Mandatorily
      Redeemable Preferred Securities                                                                     |                                                              |               |       |       |                  |       |       |      
|                                                                                                                                        | of Subsidiary Trusts Holding Solely
      Company Debentures |               |       | 250   |                  |       |       | 250  
|                                                                                                                                        |                                                              |               |       |       |                  |      
|Preferred Stock                                                                                                                         |                                                              |               |       |       |                  |       |       |      
|                                                                                                                                        | With sinking fund requirements                               |               |       | 31    |                  |       |       | 31   
|                                                                                                                                        | Without sinking fund requirements                            |               |       | 51    |                  |       |       | 51   
|                                                                                                                                        |                                                              |               |       |       |                  |      
|                                                                                                                                        |                                                              |               |       |       |                  | 82    |       |      
|                                                                                                                                        |                                                              |               |       |       |                  |      
|Shareowner's Common Equity                                                                                                              |                                                              |               |       |       |                  |       |       |      
|                                                                                                                                        | Common stock                                                 |               |       | 1,476 |                  |       |       | 1,476
|                                                                                                                                        | Additional paid-in capital                                   |               |       | 51    |                  |       |       | 51   
|                                                                                                                                        | Treasury stock                                               |               |       | (912  | )                |       |       | (912 
|                                                                                                                                        | Earnings reinvested                                          |               |       | 333   |                  |       |       | 332  
|                                                                                                                                        | Capital stock expense and other                              |               |       | (16   | )                |       |       | (16  
|                                                                                                                                        |                                                              |               |       |       |                  |      
|                                                                                                                                        |                                                              |               |       |       |                  | 932   |       |      
|                                                                                                                                        |                                                              |               |       |       |                  |      
|                                                                                                                                        |                                                              |               |       |       | $                | 5,850 |       |      
|                                                                                                                                        |                                                              |               |       |       |                  |      
|                                                                                                                                        |                                                              |               |       |       |                  |       |       |      
|The accompanying Notes to Condensed
        Consolidated Financial Statements are an integral part of the financial
        statements.

---

|CONDENSED CONSOLIDATED
      STATEMENT OF SHAREOWNER'S COMMON EQUITYAND COMPREHENSIVE INCOME                                           
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Electric Utilities Corporation
      and Subsidiaries                                                                              
|(Unaudited)                                                                                                                            
|(Millions of
      Dollars)                                                                                                            
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Common stock at beginning of period                                                                                                    
|                                                                                                                                       
|Common stock at end of period                                                                                                          
|                                                                                                                                       
|Additional paid-in capital at beginning
      of period                                                                                
|                                                                                                                                       
|Additional paid-in capital at end
      of period                                                                                      
|                                                                                                                                       
|Treasury stock at beginning of
      period                                                                                            
|                                                                                                                                       
|Treasury stock at end of period                                                                                                        
|                                                                                                                                       
|Earnings reinvested at beginning
      of period                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Earnings reinvested at end of period                                                                                                   
|                                                                                                                                       
|Capital stock expense and other
      at beginning of period                                                                           
|                                                                                                                                       
|Capital stock expense and other
      at end of period                                                                                 
|                                                                                                                                       
|Total Shareowner's Common Equity                                                                                                       
|                                                                                                                                       
|Common stock shares at beginning
      of period (a)                                                                                   
|                                                                                                                                       
|Common stock shares at end of period                                                                                                   
|                                                                                                                                       
|(a)                                                                                                                                    
|(b)                                                                                                                                    
|                                                                                                                                       
|                                                                                                                                       
|The accompanying Notes to Condensed
        Consolidated Financial Statements are an integral part of the financial
        statements.

---

|PPL
      MONTANA, LLC AND SUBSIDIARIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|PART I. FINANCIAL INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Item 1. Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|In the opinion of PPL Montana, the unaudited
      financial statements that follow reflect all adjustments
      necessary to present fairly the Condensed Consolidated Balance Sheet as
      of March 31, 2002 and December 31, 2001,
      and the Condensed Consolidated Statement of Income, the Condensed Consolidated
      Statement of Cash Flows and the Condensed Consolidated Statement of Member's
      Equity and Comprehensive Income for the periods ended March 31, 2002 and
      2001.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|CONDENSED CONSOLIDATED
      STATEMENT OF INCOME                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|PPL Montana, LLC and
      Subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(Millions
      of Dollars)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Operating Revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Operating Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Operating Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Other Income - net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Interest Expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Income Before Income
      Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|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 Montana, LLC and Subsidiaries                                                                                                       |                                                     
|(Unaudited)                                                                                                                             |                                                     
|(Millions of
      Dollars)                                                                                                             |                                                     
|                                                                                                                                        |                                                     
|                                                                                                                                        |                                                     
|                                                                                                                                        |                                                     
|                                                                                                                                        |                                                     
|                                                                                                                                        |                                                     
|Net Cash Provided by Operating
      Activities                                                                                         |                                                     
|                                                                                                                                        |                                                     
|Cash Flows From Investing Activities                                                                                                    |                                                     
|                                                                                                                                        | Expenditures for property, plant
      and equipment
|                                                                                                                                        |                                                     
|                                                                                                                                        |                                                     
|                                                                                                                                        |                                                     
|Cash Flows From Financing Activities                                                                                                    |                                                     
|                                                                                                                                        | Repayments on revolving line of
      credit        
|                                                                                                                                        | Distribution to Member                              
|                                                                                                                                        |                                                     
|                                                                                                                                        |                                                     
|                                                                                                                                        |                                                     
|Net Increase (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 Montana, LLC and Subsidiaries                                                                                                       |                                                                |               |     |     |                  |   |     |    
|(Unaudited)                                                                                                                             |                                                                |               |     |     |                  |   |     |    
|(Millions of
      Dollars)                                                                                                             |                                                                |               |     |     |                  |   |     |    
|                                                                                                                                        |                                                                | March 31,2002 |     |     | December 31,2001
|                                                                                                                                        |                                                                |               |     |     |                 
|Assets                                                                                                                                  |                                                                |               |     |     |                  |   |     |    
|                                                                                                                                        |                                                                |               |     |     |                  |   |     |    
|Current Assets                                                                                                                          |                                                                |               |     |     |                  |   |     |    
|                                                                                                                                        | Cash and cash equivalents                                      |               | $   | 17  |                  |   | $   | 24 
|                                                                                                                                        | Accounts receivable (less reserve: 2002,
      $47; 2001, $47) |               |     | 26  |                  |   |     | 22 
|                                                                                                                                        | Accounts receivable from joint owners                          |               |     | 5   |                  |   |     | 6  
|                                                                                                                                        | Accounts receivable from affiliated companies                  |               |     | 2   |                  |   |     | 4  
|                                                                                                                                        | Fuel, materials and supplies - at average
      cost           |               |     | 6   |                  |   |     | 6  
|                                                                                                                                        | Price risk management assets                                   |               |     | 8   |                  |   |     | 14 
|                                                                                                                                        | Deferred income taxes                                          |               |     | 10  |                  |   |     | 4  
|                                                                                                                                        | Prepayments and other                                          |               |     | 6   |                  |   |     | 4  
|                                                                                                                                        |                                                                |               |     |     |                  |  
|                                                                                                                                        |                                                                |               | 80  |     |                  |   | 84  |    
|                                                                                                                                        |                                                                |               |     |     |                  |  
|Noncurrent Assets                                                                                                                       |                                                                |               |     |     |                  |   |     |    
|                                                                                                                                        | Property, plant and equipment - net                            |               |     | 426 |                  |   |     | 425
|                                                                                                                                        | Deferred income taxes                                          |               |     | 17  |                  |   |     | 20 
|                                                                                                                                        | Other                                                          |               |     | 108 |                  |   |     | 122
|                                                                                                                                        |                                                                |               |     |     |                  |  
|                                                                                                                                        |                                                                |               |     | 551 |                  |   |     | 567
|                                                                                                                                        |                                                                |               |     |     |                  |  
|                                                                                                                                        |                                                                |               | $   | 631 |                  |   | $   | 651
|                                                                                                                                        |                                                                |               |     |     |                  |  
|Liabilities and Equity                                                                                                                  |                                                                |               |     |     |                  |   |     |    
|                                                                                                                                        |                                                                |               |     |     |                  |   |     |    
|Current Liabilities                                                                                                                     |                                                                |               |     |     |                  |   |     |    
|                                                                                                                                        | Accounts payable                                               |               | $   | 32  |                  |   | $   | 36 
|                                                                                                                                        | Accounts payable to Member                                     |               |     | 16  |                  |   |     | 11 
|                                                                                                                                        | Revolving line of credit                                       |               |     | 30  |                  |   |     | 44 
|                                                                                                                                        | Accrued expenses                                               |               |     | 15  |                  |   |     | 14 
|                                                                                                                                        | Price risk management liabilities                              |               |     | 3   |                  |   |     | 4  
|                                                                                                                                        | Wholesale energy commitments                                   |               |     | 7   |                  |   |     | 13 
|                                                                                                                                        |                                                                |               |     |     |                  |  
|                                                                                                                                        |                                                                |               | 103 |     |                  |   | 122 |    
|                                                                                                                                        |                                                                |               |     |     |                  |  
|Noncurrent Liabilities                                                                                                                  |                                                                |               |     |     |                  |   |     |    
|                                                                                                                                        | Employee benefit obligations                                   |               |     | 17  |                  |   |     | 16 
|                                                                                                                                        | Wholesale energy commitments                                   |               |     | 63  |                  |   |     | 65 
|                                                                                                                                        | Other                                                          |               |     | 28  |                  |   |     | 27 
|                                                                                                                                        |                                                                |               |     |     |                  |  
|                                                                                                                                        |                                                                |               |     | 108 |                  |   |     | 108
|                                                                                                                                        |                                                                |               |     |     |                  |  
|Commitments and Contingent Liabilities                                                                                                  |                                                                |               |     |     |                  |   |     |    
|                                                                                                                                        |                                                                |               |     |     |                  |   |     |    
|Member's Equity                                                                                                                         |                                                                |               | 420 |     |                  |   | 421 |    
|                                                                                                                                        |                                                                |               |     |     |                  |  
|                                                                                                                                        |                                                                | $             | 631 |     |                  | $ | 651 |    
|                                                                                                                                        |                                                                |               |     |     |                  |  
|                                                                                                                                       
|The accompanying Notes to Condensed
        Consolidated Financial Statements are an integral part of the financial
        statements.

---

|CONDENSED
      CONSOLIDATED STATEMENT OF MEMBER'S EQUITY AND COMPREHENSIVE INCOME                                                     
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Montana, LLC and Subsidiaries                                                                                                      
|(Unaudited)                                                                                                                            
|(Millions of
      Dollars)                                                                                                            
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Member's Equity at beginning of
      period                                                                                           
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Member's Equity at end of period                                                                                                       
|                                                                                                                                       
|(a) Statement of Comprehensive
      Income:                                                                                           
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|(b)                                                                                                                                    
|                                                                                                                                       
|                                                                                                                                       
|The accompanying Notes to Condensed
        Consolidated Financial Statements are an integral part of the financial
        statements.

---

Combined Notes to Condensed Consolidated
  Financial Statements



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

1. Interim Financial Statements
    (PPL, PPL Energy Supply, PPL Electric and PPL Montana)

    
    Certain information in footnote disclosures, normally included
      in financial statements prepared in accordance with accounting principles
      generally accepted in the U.S., has been condensed or omitted in this Form
      10-Q under the rules and regulations of the SEC. These financial statements
      should be read in conjunction with the financial statements and notes included
      in each company's Annual Report to the SEC on Form 10-K for the year ended
      December 31, 2001.
    
    Certain amounts in the March 31, 2001 and December 31,
      2001 financial statements have been reclassified to conform to the presentation
      in the March 31, 2002 financial statements.
2. Segment and Related Information
    (PPL and PPL Energy Supply)
    
    PPL's reportable segments are Supply, Delivery and International.
      The Supply segment primarily consists of the domestic energy marketing,
      domestic generation and domestic development operations of PPL Energy Supply.
      The Delivery segment includes the regulated electric and gas delivery operations
      of PPL Electric and PPL Gas Utilities. The International segment includes
      PPL Global's responsibility for the acquisition, development, ownership
      and operation of international energy projects. The majority of PPL Global's
      international investments are located in the U.K., Chile, El Salvador and
      Brazil.
    
    PPL Energy Supply's reportable segments are Supply and
      International. The International segment at the PPL Energy Supply level
      is consistent with the International segment at the PPL level. The Supply
      segment information reported at the PPL Energy Supply level will not be
      consistent with the Supply segment information reported at the PPL level.
      Additional Supply segment functions, including telecommunications, exist
      at PPL that are outside of PPL Energy Supply. Furthermore, certain income
      items, including PLR revenue and certain interest income, exist at the PPL
      Energy Supply level, but are eliminated in consolidation at the PPL level.
      Finally, certain expense items are fully allocated to the segments at the
      PPL level only.
    
    Segments include direct charges, as well as an allocation
      of indirect corporate costs, for services provided by PPL Services. These
      service costs include functions such as financial, legal, human resources
      and information services.
    
    See Note 8 for a discussion of the PLR contract between
      PPL Electric and PPL EnergyPlus. PPL EnergyPlus' sales to PPL Electric,
      to meet PPL Electric's PLR load, are included in the Supply segment of PPL
      Energy Supply. PPL Electric's sales of this electricity to its PLR customers
      are included in the Delivery segment of PPL. There are no intersegment revenues
      for PPL or PPL Energy Supply.
    
    Previously reported information has been reclassified to
      conform to the current presentation. Changes from previous reports include
      the allocation of interest expense to segments, and the reporting of PLR
      revenues at PPL in the Delivery segment rather than in the Supply segment.
      Financial data for the segments are as follows (millions of dollars):
    
    PPL
        
        PPL Energy SupplyThree Months
        
        Three MonthsEnded March 31,
        
        Ended March 31,2002
        
        2001
        
        2002
        
        2001Income Statement DataRevenues from external customersSupply
        $
        429
        
        $
        632
        
        $
        799
        
        $
        1,014International
        
        141
        
        
        163
        
        
        141
        
        
        163Delivery (a)
        
        705
        
        
        7711,275
        
        
        1,566
        
        
        940
        
        
        1,177Net Income (Loss)Supply
        
        116
        
        
        161
        
        
        140
        
        
        181International (b)
        
        (145
        )
        
        20
        
        
        (145
        )
        
        20Delivery (a)
        
        26
        
        
        41$
        (3
        )
        $
        222
        
        $
        (5
        )
        $
        201PPL
        
        PPL Energy SupplyMarch 31,
        December 31,
        
        March 31,
        December 31,2002
        
        2001
        
        2002
        
        2001Balance Sheet DataTotal assetsSupply
        $
        4,852
        
        $
        5,038
        
        $
        5,398
        
        $
        5,730International
        
        1,496
        
        
        1,439
        
        
        1,496
        
        
        1,439Delivery (a)
        
        6,020
        
        
        6,097$
        12,368
        
        $
        12,574
        
        $
        6,894
        
        $
        7,169(a)
        The Delivery segment is not a component of PPL Energy Supply.(b)
        The International segment includes the "Cumulative Effect
          of a Change in Accounting Principle" recorded in March 2002. See Note
          10 for additional information.
3. Investment in Unconsolidated Affiliates - at Equity

    

    (PPL and PPL Energy Supply)

    
    Investments in unconsolidated affiliates accounted for
      under the equity method by PPL and PPL Energy Supply were $586 million at
      both March 31, 2002 and December 31, 2001. The most significant investment
      was PPL Global's investment in WPDH Limited, which was $345 million at March
      31, 2002 and $328 million at December 31, 2001. At March 31, 2002, PPL Global
      had a 51% equity ownership interest in WPDH Limited, but shared joint control
      with Mirant. Accordingly, PPL Global accounts for its investment in WPDH
      Limited (and other investments where it has majority ownership but lacks
      voting control) under the equity method of accounting.
    
    Summarized below is information from the financial statements
      of unconsolidated affiliates accounted for under the equity method, underlying
      the amounts included in PPL and PPL Energy Supply's consolidated financial
      statements (millions of dollars):
    
    Three MonthsEnded March 31,2002
        
        
        
        2001Income Statement DataRevenues
        $
        178
        
        
        $
        176Operating Income
        
        97
        
        
        
        87Net Income
        
        29
        
        
        
        79March 31,
        
        December 31,2002
        
        
        
        2001Balance Sheet DataCurrent Assets
        $
        1,224
        
        
        $
        612Noncurrent Assets
        
        4,656
        
        
        
        5,517Current Liabilities
        
        448
        
        
        
        502Noncurrent Liabilities
        
        3,885
        
        
        
        3,955
4. Earnings Per Share

    
    (PPL)

    

    Basic EPS is calculated by dividing "Net Income (Loss)"
      on the Statement of Income by the weighted average number of common shares
      outstanding during the period. In the calculation of diluted EPS, weighted
      average shares outstanding are increased for additional shares that would
      be outstanding if potentially dilutive securities were converted to common
      stock.
    
    Potentially dilutive securities consist of stock options
      granted under the incentive compensation plans, stock units representing
      common stock granted under directors compensation programs and PEPS Units.
    
    Preferred dividends are included in net income in the computation
      of basic and diluted EPS.
    
    The basic and diluted EPS calculations, and the reconciliation
      of the shares used in the calculations, are shown below:
    
    Three MonthsEnded March 31,2002
        
        
        
        2001(Millions of Dollars or
            Thousands of Shares)Income (Numerator)Net Income - before cumulative
          effect
            of a change in accounting principle
        $
        147
        
        
        $
        222Cumulative effect of a change in 
            accounting principle
        
        (150
        )Net Income (Loss)
        $
        (3
        )
        
        $
        222Shares (Denominator)Shares for Basic EPS
        
        146,753
        
        
        
        145,317Add: Incremental sharesStock options
        
        259
        
        
        
        858Stock units
        
        79
        
        
        
        69Shares for Diluted EPS
        
        147,091
        
        
        
        146,244Basic EPSNet Income - before cumulative
          effect
            of a change in accounting principle
        $
        1.00
        
        
        $
        1.53Cumulative effect of a change in 
            accounting principle
        
        (1.02
        )Net Income (Loss)
        $
        (0.02
        )
        
        $
        1.53Diluted EPSNet Income - before cumulative
          effect
            of a change in accounting principle
        $
        1.00
        
        
        $
        1.52Cumulative effect of a change in 
            accounting principle
        
        (1.02
        )Net Income (Loss)
        $
        (0.02
        )
        
        $
        1.52
    In May 2001, PPL issued 23 million PEPS Units that contain
      a purchase contract component for PPL's common stock. The PEPS Units will
      only be dilutive if the average price of PPL's common stock exceeds $65.03
      for any period. Therefore, they were excluded from the diluted EPS calculations
      for the three months ended March 31, 2002.
    
    Stock options to purchase 879,000 PPL common shares for
      the three months ended March 31, 2002 were not included in that period's
      computation of diluted EPS because the exercise price of the options was
      greater than the average market price of the common shares. Therefore, the
      effect would have been antidilutive.
5. Credit Arrangements and Financing Activities

    
    Credit Arrangements
    

    (PPL, PPL Energy Supply and PPL Electric)

    
    In order to enhance liquidity, and as a credit back-stop
      to their respective commercial paper programs, PPL Electric maintains a
      $400 million 364-day credit facility maturing in June 2002 and PPL Energy
      Supply maintains two credit facilities: a $600 million 364-day credit facility
      maturing in June 2002 and a $500 million three-year credit facility maturing
      in June 2004. At March 31, 2002, no borrowings were outstanding under any
      of these facilities. PPL Electric and PPL Energy Supply have the ability
      to cause the lenders to issue letters of credit under these facilities.
      At March 31, 2002, $1 million of letters of credit were outstanding under
      PPL Electric's facility and $30 million of letters of credit were outstanding
      under PPL Energy Supply's $500 million facility.
    
    (PPL, PPL Energy Supply and PPL Montana)
    
    PPL Montana maintains a $100 million three-year credit
      facility maturing in November 2002 to meet its liquidity needs and to provide
      for the issuance of up to $75 million in letters of credit. The maturity
      date of this facility may be extended with the consent of the lenders. At
      March 31, 2002, PPL Montana had outstanding borrowings of $30 million and
      had outstanding letters of credit of $35 million under this facility. PPL
      Montana's $150 million credit facility was terminated in April 2002.
    
    (PPL and PPL Electric)
    
    PPL and PPL Electric also maintain letter of credit agreements
      for $4 million and $2 million, respectively, for the purpose of meeting
      minor letter of credit needs. At March 31, 2002, $2 million in letters of
      credit were outstanding for PPL and its subsidiaries. No letters of credit
      were outstanding for PPL Electric at March 31, 2002 under its agreement.
    
    (PPL, PPL Energy Supply, PPL Electric and PPL Montana)
    
    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, 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, PPL Electric
      and PPL Montana are separate legal entities. These subsidiaries are not
      liable for the debts of PPL Energy Supply, PPL Electric and PPL Montana.
      Accordingly, creditors of PPL Energy Supply, PPL Electric and PPL Montana
      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, PPL Energy
      Supply, PPL Electric and PPL Montana 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, PPL Electric or PPL Montana
      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 February 2002, PPL Capital Funding repurchased $10 million,
      par value, of its medium-term notes, 7.75% Series due 2005, at a market
      value of $11 million.
    
    During the first quarter of 2002, PPL issued $13 million
      of common stock in small amounts on a periodic basis under its Structured
      Equity Shelf Program. As of March 31, 2002, PPL had issued $29 million of
      common stock under this program since its inception in December 2000.
    
    In April 2002, PPL filed a universal shelf registration
      statement with the SEC for the issuance of up to $750 million in various
      securities. Subject to SEC registration of the securities and market conditions,
      PPL currently plans to issue approximately $200 million of PPL common stock
      during the second quarter of 2002 under this registration statement. PPL
      expects to use the proceeds of this issuance to retire other securities
      and to provide liquidity in support of its and its subsidiaries' general
      corporate activities.
    
     (PPL and PPL Energy Supply)
     At March 31, 2002 there was no commercial paper outstanding
     for PPL Energy Supply.  Some foreign subsidiaries of PPL Energy Supply had short-term,
     non-recourse borrowings from banks of $82 million as of March 31, 2002.

    
    (PPL and PPL Electric)
    
    In March 2002, PPL Electric deposited $11 million with
      its Mortgage Trustee for the purpose of retiring on May 1, 2002, all of
      its outstanding First Mortgage Bonds, 8-1/2% Series due 2022, at par value,
      through the maintenance and replacement fund provisions of the 1945 First
      Mortgage Bond Indenture.
    
    During the first quarter of 2002, PPL Transition Bond Company
      made principal payments on bonds totaling $68 million.
At March 31, 2002, there was no commercial paper
      or bank borrowings outstanding for PPL Electric.


     In May 2002, pursuant to PPL Electric's instructions, the
      property trustee of PPL Capital Trust redeemed, at par value, all of the
      $100 million outstanding of the 8.20% Preferred Securities due 2027 that
      was previously issued by PPL Capital Trust.
6. Acquisitions, Development and Divestitures

    

    (PPL and PPL Energy Supply)

    
    Domestic Generation Project
    
    In February 2002, PPL reached an agreement in principle
      with the Village of Freeport, New York, pursuant to which they would together
      construct a two-unit 88 MW combustion turbine power facility on Freeport
      property, part of which property would be leased to PPL by Freeport. The
      facility is projected to begin commercial operation in the summer of 2003.
      PPL and Freeport would each own one unit. The cost of PPL's unit is estimated
      to be approximately $50-$55 million. PPL also reached an agreement in principle
      in April 2002 with the Long Island Power Authority (LIPA) regarding a joint
      energy sales arrangement associated with the PPL unit for the first seven
      years of operation. These transactions are subject to approval of the respective
      governing boards, various regulatory approvals, and agreement on satisfactory
      definitive documentation.
    
    In December 2001, PPL Global made a decision to cancel
      approximately 2,100 MW of previously planned generation development in Pennsylvania
      and Washington state. These projects were in the early stage of development
      and would have had an estimated capital cost of approximately $1.3 billion.
      The charge for cancellation of these generation projects, which was primarily
      due to cancellation fees under turbine purchase contracts, was approximately
      $150 million, and was reported on the 2001 Statement of Income as "Cancellation
      of generation projects," a component of "Other Charges." Through April 30,
      2002, PPL Global made payments totaling $59 million related to the cancellation
      fees. PPL Global is currently in negotiations to reduce certain of the cancellation
      fees but cannot predict whether there will be any such reduction. Accordingly,
      at this time, PPL Global believes that the original estimate of the
      loss and the associated charges are still appropriate.
7. Commitments and Contingent Liabilities

    
    (PPL, PPL Energy Supply, PPL Electric and PPL Montana)
    
    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 ultimate outcome of such matters,
      or whether such matters may result in material liabilities.
    
    Wholesale Energy Commitments(PPL, PPL Energy
      Supply and PPL Montana)
    
    As part of the purchase of generation assets from Montana
      Power, PPL Montana agreed to supply electricity under two wholesale transition
      service agreements with Montana Power to serve its retail load not served
      by other providers or provided by Montana Power's remaining generation.
      The first agreement expired in December 2001. As a result of NorthWestern
      Energy's acquisition of Montana Power's electricity delivery business in
      the first quarter of 2002, the second agreement is now between PPL Montana
      and NorthWestern Energy. The second agreement requires PPL Montana to supply
      NorthWestern Energy's actual remaining customer load. This agreement will
      expire on the earlier of June 30, 2002 or when NorthWestern Energy's remaining
      customer load is zero. In addition, as part of its purchase of the generation
      assets from Montana Power, PPL Montana assumed a power purchase agreement
      and another power sales agreement. In accordance with purchase accounting
      guidelines, PPL Montana recorded a liability of $118 million as the estimated
      fair value of these agreements at the acquisition date. The liability is
      being amortized over the terms of the agreements as adjustments to "Wholesale
      energy marketing and trading" revenues and "Energy purchases" on the Statement
      of Income. The unamortized balance of the liability at March 31, 2002 was
      $70 million and is included on the Balance Sheet in "Deferred Credits and
      Other Noncurrent Liabilities - Other" for PPL and in "Wholesale energy
      commitments" for PPL Energy Supply and PPL Montana.
    
    Beginning July 1, 2002, PPL EnergyPlus will sell NorthWestern
      Energy an aggregate of 450 MW of energy to be supplied by PPL Montana. Under
      this five-year agreement, PPL EnergyPlus will supply 300 MW of around-the-clock
      electricity and 150 MW of on-peak electricity.
    
    Liability for Above Market NUG Contracts(PPL,
      PPL Energy Supply and PPL Electric)
    
    In 1998, PPL Electric recorded a loss accrual for above
      market contracts with NUGs of $854 million, when its generation business
      was 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,
      effective July 1, 2000, the remaining balance of this liability was transferred
      to PPL EnergyPlus.
    
    In the first quarter of 2002, PPL Energy Supply paid approximately
      $50 million to terminate an energy contract with one of the NUGs. The liability
      associated with this NUG contract was $75 million. The excess of the liability
      over the payment resulted in a $25 million credit to "Energy purchases."
      At March 31, 2002, the remaining liability associated with these above market
      NUG contracts was $485 million.
    
    Commitments - Acquisitions and Development Activities(PPL and PPL Energy Supply)
    
    PPL Global and its subsidiaries have committed additional
      capital and extended loans to certain affiliates, joint ventures and partnerships
      in which they have an interest. At March 31, 2002, PPL Global and its subsidiaries
      had approximately $611 million of such commitments. The majority of these
      commitments were for the purchase of LM-6000 turbine generators from General
      Electric.
    
    Sales to California Independent System Operator and
      to Other Pacific Northwest Purchasers(PPL, PPL Energy Supply and
      PPL Montana)
    
    Through its subsidiaries, PPL has made approximately $18
      million of sales to the California ISO, for which PPL has not yet been paid
      in full. 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, 2002, PPL
      has fully reserved for possible underrecoveries of payments for these sales.
    
    Litigation arising out of the California electricity supply
      situation has been filed at the FERC and in California courts against sellers
      of energy to the California ISO. The plaintiffs and intervenors in these
      proceedings allege abuses of market power, manipulation of market prices,
      unfair trade practices and violations of state antitrust laws, among other
      things, and seek price caps on wholesale sales in California and other western
      power markets, refunds of excess profits allegedly earned on these sales
      of energy, and other relief, including treble damages and attorneys' fees.
      Certain of PPL's subsidiaries have intervened in the FERC proceedings in
      order to protect their interests, but have not been named by any plaintiffs
      in any of the court actions alleging abuses of market power, manipulation
      of market prices, unfair trade practices and violations of state antitrust
      laws. However, in April 2002, PPL Montana was named by a defendant in a
      consolidated court proceeding, which combined into one master proceeding
      several of the lawsuits alleging antitrust violations and unfair trade practices.
      Specifically, one of the original generators being sued by the various plaintiffs
      in the consolidated court proceeding filed a cross-complaint against 30
      other generators and power marketers, including PPL Montana. This generator
      denies that any unlawful, unfair or fraudulent conduct occurred or caused
      any harm to the plaintiffs, and explains that the plaintiffs' claims are
      completely barred by federal law. Nonetheless, this generator alleges that
      it filed its complaint against the other generators and power marketers
      in order to assist the court in resolving the proceeding and 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 addition, PPL Montana has been named as a defendant
      in a declaratory judgment action initiated by the State of California to
      prevent certain members of the California Power Exchange from seeking compensation
      for the state's seizure of certain energy contracts. PPL Montana is a member
      of the California Power Exchange, but it has no energy contracts with or
      through the California Power Exchange and has not sought compensation in
      connection with the state's seizure.
    
    Attorneys general in several western states, including
      California, have begun investigations related to the electricity supply
      situation in California and other western states. The FERC has determined
      that all sellers of energy in the California markets, including PPL Montana,
      should be subject to refund liability for the period beginning October 2,
      2000 through June 20, 2001 and has initiated an evidentiary hearing concerning
      refund amounts. The FERC also is considering whether to order refunds for
      sales made in the Pacific Northwest, including sales made by PPL Montana.
      The FERC Administrative Law Judge assigned to this proceeding has recommended
      that no refunds be ordered for sales into the Pacific Northwest. The FERC
      presently is considering this recommendation.
    
    PPL cannot predict whether, or the extent to which, any
      of its subsidiaries will be the target of any governmental investigation
      or named in other lawsuits or refund proceedings, the outcome of any such
      lawsuits or proceedings or whether the ultimate impact on PPL of the electricity
      supply situation in California and other western states will be material.
    
    MPSC Order(PPL, PPL Energy Supply and PPL Montana)
    
    In June 2001, the MPSC issued an order (MPSC Order) in
      which it found that Montana Power must continue to provide electric service
      to its customers at tariffed rates until its transition plan under the Montana
      Electricity Utility Industry Restructuring and Customer Choice Act is finally
      approved, and that purchasers of generating assets from Montana Power must
      provide electricity to meet Montana Power's full load requirements at prices
      to Montana Power that reflect costs calculated as if the generating assets
      had not been sold. PPL Montana purchased Montana Power's interests in two
      coal-fired plants and 11 hydroelectric units in 1999, and NorthWestern Energy
      purchased Montana Power's electricity delivery business in the first quarter
      of 2002.
    
    In July 2001, PPL Montana filed a complaint against the
      MPSC with the U.S. District Court in Helena, Montana, challenging the MPSC
      Order. In its complaint, PPL Montana asserted, among other things, that
      the Federal Power Act preempts states from exercising regulatory authority
      over the sale of electricity in wholesale markets, and requested the court
      to declare the MPSC action preempted, unconstitutional and void. In addition,
      the complaint requested that the MPSC be enjoined from seeking to exercise
      any authority, control or regulation of wholesale sales from PPL Montana's
      generating assets. In March 2002, the District Court dismissed PPL Montana's
      lawsuit on procedural grounds, ruling that the Eleventh Amendment to the
      U.S. Constitution prevented PPL Montana from bringing the action in federal
      court. The District Court noted that the action could be filed in a state
      court in Montana. PPL Montana has appealed the District Court's ruling to
      the United States Court of Appeals for the Ninth Circuit.
    
    At this time, PPL Montana cannot predict the outcome of
      the proceedings related to the MPSC Order, what actions the MPSC, the Montana
      Legislature or any other governmental authority may take on these or related
      matters, or the ultimate impact on PPL, PPL Energy Supply and PPL Montana
      of any of these matters.
    
    Montana Power Shareholders' Litigation(PPL,
      PPL Energy Supply and PPL Montana)
    
    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 unnamed 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. PPL Montana
      cannot predict the outcome of this matter.
    
    
    Employee Litigation(PPL Energy Supply and PPL
      Montana)
    
    In April 2000, three employees at PPL Montana's Colstrip
      facility were burned when an equipment fault in Colstrip Unit 1 caused electrical
      arcing. In May 2000, the injured employees and their spouses filed litigation
      for their injuries in Montana district court against Montana Power. PPL
      Montana was subsequently named as a party defendant to the litigation. In
      April 2002, PPL Montana filed a pleading, naming Montana Power, seeking
      indemnification for any damages assessed against PPL Montana. A trial has
      been scheduled for June 2002. At this time, PPL Montana cannot predict the
      ultimate outcome of this matter.
    
    PJM Market Monitor Report(PPL, PPL Energy Supply
      and PPL Electric)
    
    In November 2001, the PJM Market Monitor publicly released
      a report prepared for the PUC entitled "Capacity Market Questions" relating
      to the pricing of installed capacity in the PJM daily market during the
      first quarter of 2001. The report concludes that PPL EnergyPlus (identified
      in the report as "Entity 1") was able to exercise market power to raise
      the market-clearing price above the competitive level during that period.
      PPL EnergyPlus does not agree with the Market Monitor's conclusions that
      it exercised market power; in addition, the Market Monitor acknowledged
      in his report that PJM's standards and rules did not prohibit PPL EnergyPlus'
      conduct. In November 2001, the PUC issued an Investigation Order directing
      its Law Bureau to conduct an investigation into the PJM capacity market
      and the allegations in the Market Monitor's report. In January 2002, PPL
      filed comments as requested by the Investigation Order. The Order does not
      suggest what, if any, action the PUC may take as a result of the investigation,
      other than considering possible changes to its competitive safeguards. While
      PPL EnergyPlus and PPL Electric have filed comments with the PUC as part
      of the investigation, they have taken the position that the PUC does not
      have jurisdiction to regulate the PJM capacity markets as those markets
      are for wholesale electricity transactions and, accordingly, are within
      the exclusive jurisdiction of the FERC. In addition, PPL EnergyPlus and
      PPL Electric believe that PPL EnergyPlus' actions under review were at all
      times lawful and consistent with the rules of the market. At this time,
      neither PPL EnergyPlus nor PPL Electric can predict the ultimate outcome
      of the proceedings related to the Market Monitor report or what action the
      PUC or other agencies or courts may take in this regard.
    FERC Market-based Rates(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, in light of the PJM Market Monitor's report
      described above, 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. PPL EnergyPlus cannot predict the outcome of this
      matter.
    
    Energy Supply to Energy West Resources, Inc.(PPL
      Energy Supply and PPL Montana)
    
    In July 2001, PPL Montana filed an action in state court
      and a responsive pleading in federal court, both related to a breach of
      contract by Energy West Resources, Inc. (Energy West), a Great Falls, Montana-based
      energy aggregator. PPL Montana is seeking a judgment that Energy West violated
      the terms of the contract under which it supplies energy to Energy West
      and should pay damages of at least $7.5 million. All litigation in this
      matter has been consolidated in the U. S. District Court for the District
      of Montana, Great Falls Division, and is proceeding in that forum. PPL Montana
      cannot predict the ultimate outcome of these proceedings.
    
    Proposed Montana Hydroelectric Initiative(PPL,
      PPL Energy Supply and PPL Montana)
    
    In January 2002, the Montana Secretary of State certified,
      in accordance with applicable statutes, that it had approved the form of
      a proposed Montana "Hydroelectric Security Act" initiative. The
      proposed initiative may be placed on the November 2002 statewide ballot
      if sufficient signatures are obtained prior to June 21, 2002. Among the
      stated purposes of the proposed initiative is to create an elected Montana
      public power commission to determine whether purchasing hydroelectric dams
      in Montana is in the public interest. Such a commission could decide to
      acquire PPL Montana's hydroelectric dams either pursuant to a negotiated
      purchase or an acquisition at fair market value through the power of condemnation.
      At this time, PPL, PPL Energy Supply and PPL Montana cannot predict whether
      the proposed initiative will garner enough signatures for placement on the
      November 2002 statewide ballot, whether there will be a successful legal
      challenge to the initiative, whether it would pass if on the ballot or what
      impact, if any, the measure might ultimately have upon PPL Montana or its
      hydroelectric operations. PPL Montana has declared its opposition to, and
      intends to vigorously oppose, the initiative.
    
    Montana Hydroelectric License Contingencies(PPL
      Energy Supply and PPL Montana)
    
    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 of all pertinent licenses, and any amendments thereto,
      for the ownership and operation of these facilities purchased by PPL Montana.
    
    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. Such implementation will
      require payments totaling approximately $6 million between 2002 to 2020.
    
    Colstrip Transmission System(PPL, PPL Energy
      Supply and PPL Montana)
    
    PPL Global was party to separate APAs with Portland General
      Electric Company (PGE) and Puget Sound Energy, Inc. (PSE) to purchase their
      respective interests in the Colstrip Units and certain related transmission
      assets and rights. The interested parties mutually agreed to terminate the
      APAs.
    
    The Montana Power APA, previously assigned to PPL Montana
      by PPL Global, includes a provision concerning the purchase by PPL Montana
      of a portion of NorthWestern Energy's interest in the 500-kilovolt Colstrip Transmission
      System (CTS) for $97 million. PPL Montana is currently in discussions with
      NorthWestern Energy regarding the purchase of the CTS.
    
    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. Effective
      April 1, 2002, this maximum assessment increased from $20 million to $40
      million, to increase the insurer's capacity to cover catastrophic losses.
    
    PPL Susquehanna's public liability for claims resulting
      from a nuclear incident at the Susquehanna station is limited to about $9.5
      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 $176 million per incident,
      payable at $20 million per year.
    
    Environmental Matters
    
    Air(PPL, PPL Energy Supply and PPL Montana)
    
    The Clean Air Act deals, in part, with acid rain, attainment
      of federal ambient ozone standards and toxic air emissions in the U.S. PPL's
      subsidiaries are in substantial compliance with the Clean Air Act.
    
    The Bush administration and certain members of Congress
      have made proposals regarding possible amendments to the Clean Air Act.
      These amendments could require significant further reductions in NOx,
      SO2 and mercury and could possibly require measures to limit
      CO2.
    
    The Pennsylvania DEP has finalized regulations requiring
      further seasonal (May-June) NOx reductions to 80% from 1990 levels
      starting in 2003. These further reductions are based on the requirements
      of the Northeast Ozone Transport Region Memorandum of Understanding and
      two EPA ambient ozone initiatives: the September 1998 EPA State Implementation
      Plan (SIP) call (i.e., EPA's requirement for states to revise their SIPs)
      issued under Section 110 of the Clean Air Act, requiring reductions from
      22 eastern states, including Pennsylvania; and the EPA's approval of petitions
      filed by Northeastern states, requiring reductions from sources in 12 Northeastern
      states and Washington D.C., including PPL sources. The EPA's SIP-call was
      substantially upheld by the D.C. Circuit Court of Appeals on challenge.
      Although the Court extended the implementation deadline to May 2004, the
      Pennsylvania DEP has not changed its rules accordingly. PPL expects to achieve
      the 2003 NOx reductions with the recent installation of SCR technology
      on the Montour units and the possible use of SCR or SNCR technology on a
      Brunner Island unit.
    
    The EPA has also developed new standards for ambient levels
      of ozone and fine particulates in the U.S. These standards have been upheld
      following court challenges. The new particulates standard may require further
      reductions in SO2 and year-round NOx reductions commencing
      in 2010-2012 at SIP-call levels in Pennsylvania for certain PPL subsidiaries,
      and at slightly less stringent levels in Montana. The revised ozone standard
      is not expected to have a material effect on facilities of PPL subsidiaries.
    
    Under the Clean Air Act, the EPA has been studying the
      health effects of hazardous air emissions from power plants and other sources
      in order to determine what emissions should be regulated, and has determined
      that mercury emissions must be regulated. In this regard, the EPA is expected
      to develop regulations by 2004.
    
    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. Although the EPA has threatened to continue
      expanding its enforcement actions, the future direction of the "New Source"
      requirements is presently unclear. Therefore, at this time, PPL is unable
      to predict whether such EPA 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, and the Region VIII office has issued such a request
      to PPL Montana's Corette plant. PPL and its subsidiaries have responded
      to the information request. PPL cannot presently predict what, if any, action
      the EPA might take in this regard. Should the EPA or any state 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 in amounts which are not now determinable, but which
      could be significant.
    
    The EPA is also proposing to revise its regulations in
      a way that will require power plants to meet "New Source" performance standards
      and/or undergo "New Source" review for many maintenance and repair activities
      that are currently exempt.
    The New Jersey DEP and some New Jersey residents have raised
      environmental concerns with respect to the Martins Creek Plant, particularly
      with respect to SO2 emissions. PPL Martins Creek is discussing
      these concerns with the New Jersey DEP. The cost of addressing New Jersey's
      SO2 concerns and opacity issues is not now determinable but
      could be significant. In addition, in December 2001, a PPL Global subsidiary
      entered into a synthetic lease financing transaction for the development,
      construction and operation of its Lower Mt. Bethel combined cycle generating
      facility. The Air Quality Plan Approval issued by the Pennsylvania DEP for
      construction of the Lower Mt. Bethel facility has been appealed by the New
      Jersey DEP. The PPL Global subsidiary has joined with the Pennsylvania DEP
      in opposing this appeal.
    
    Water/Waste(PPL, PPL Energy Supply and PPL Montana)
    
    The final NPDES permit for the Montour plant contains stringent
      limits for iron discharges. The results of a toxic reduction study show
      that additional water treatment facilities or operational changes are needed
      at this station. A plan for these changes was submitted and has been approved
      by the Pennsylvania DEP. PPL Energy Supply estimates that the cost of the
      treatment facilities will be under $3 million.
    
    A final NPDES permit has been issued to the Brunner Island
      generating plant. The permit contains a provision requiring further studies
      on the thermal impact of the cooling water discharge from the plant. Depending
      on the outcome of these studies, the plant could be subject to capital and
      operating costs that are not now determinable, but which could be significant.
    
    The EPA has significantly tightened the water quality standard
      for arsenic. The lowered standard may require several PPL subsidiaries to
      further treat wastewater and/or take abatement action at their power plants,
      the cost of which is not now determinable, but which could be significant.
    
    The EPA recently finalized requirements for new or modified
      water intake structures. These requirements will affect where generating
      facilities are built, will establish intake design standards, and could
      lead to requirements for cooling towers at new and modified power plants.
      Another new rule, expected to be finalized in 2003, will address existing
      structures. Each of these rules could impose significant operating costs
      on PPL subsidiaries, which are not now determinable, but which could be
      significant.
    

    Superfund and Other Remediation

    
    (PPL and PPL Electric)
    
    In 1995, PPL Electric entered into a consent order with
      the Pennsylvania DEP to address a number of sites where it 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;
      and oil or other contamination which may exist at some of PPL Electric's
      former generating facilities. In connection with the July 1, 2000 corporate
      realignment, PPL Electric's generation facilities were transferred to subsidiaries
      of PPL Generation. As of March 31, 2002, work has been completed on over
      80% of the sites included in the consent order.
    
    In 1996, PPL Gas Utilities entered into a similar consent
      order with the Pennsylvania DEP to address a number of sites where subsidiaries
      of PPL Gas Utilities may be liable for remediation. The sites primarily
      include former coal gas manufacturing facilities. Subsidiaries of PPL Gas
      Utilities are also investigating the potential for any mercury contamination
      from gas meters and regulators. Accordingly, PPL Gas Utilities and Pennsylvania
      DEP have agreed to add 72 meter/regulation sites to the consent order and
      had addressed five of these sites by March 31, 2002.
    
    At March 31, 2002, PPL Electric and PPL Gas Utilities had
      accrued approximately $5 million and $11 million, representing the estimated
      amounts they will have to spend for site remediation, including those sites
      covered by each company's consent orders mentioned above.
    
    (PPL, PPL Energy Supply and PPL Montana)
    
    In conjunction with its 1999 sale of generating assets
      to PPL Montana, Montana Power prepared a Phase I and Phase II Environmental
      Site Assessment. The assessment identifies approximately $7 million of future
      capital expenditures through the year 2020 related to various groundwater
      remediation issues. Additional capital expenditures could be required in
      amounts which are not now determinable, but which could be significant.
    
    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
      it could be significant.
    
    Under the Montana Power APA, PPL Montana is indemnified
      by Montana Power for any pre-acquisition environmental liabilities. However,
      this indemnification is conditioned on certain circumstances and subject to
      certain limitatons set forth in the Montana Power APA, including circumstances
      under which PPL Montana and Montana Power would share in certain costs.
      As a result of the acquisition by NorthWestern
      Energy of Montana Power's electricity delivery business, PPL Montana may
      need to pursue any such indemnification claims against NorthWestern Energy.
    
    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.
    
    General
    
    (PPL and PPL Energy Supply)
    
    Certain of PPL's affiliates have electric distribution
      operations in the U.K. and Latin America. PPL believes that these operations
      are in compliance with all applicable laws and government regulations to
      protect the environment. PPL is not aware of any material administrative
      proceeding against these companies with respect to any environmental matter.
    

    (PPL, PPL Energy Supply and PPL Montana)

    
    Due to the environmental issues discussed above 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, operating expenses and other costs
      in amounts which are not now determinable, but which could be significant.
    
    Credit Support
    
    (PPL and PPL Energy Supply)
    
    PPL and PPL Energy Supply provide certain guarantees for
      their subsidiaries. PPL has guaranteed fully and unconditionally all of the
      debt of its wholly-owned financing subsidiary, PPL Capital Funding,
      which at March 31, 2002, consisted of $1.3 billion of medium-term notes.
      At March 31, 2002, PPL has guaranteed certain obligations
      under power purchase and sales agreements of PPL EnergyPlus ($61 million)
      and certain obligations of other subsidiaries ($127 million). As of March
      31, 2002, PPL Energy Supply had guaranteed certain obligations under power
      purchase and sales agreements of PPL EnergyPlus ($2 million) and certain
      obligations of other subsidiaries ($671 million).
    
    (PPL Electric)
    
    At March 31, 2002, PPL Electric provided a guarantee in
      the amount of $7 million in support of Safe Harbor Water Power Corporation,
      in which PPL Electric had an ownership interest prior to the corporate realignment.
      PPL Holtwood now has this ownership interest.
8. Related Party Transactions

    
    PLR Contract(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 will provide electricity at
      the pre-determined capped prices that PPL Electric is authorized to charge
      its PLR customers. For the three months ended March 31, 2002, these purchases
      totaled $369 million, including nuclear decommissioning recovery and amortization
      of an up-front contract payment. For the three months ended March 31, 2001,
      these purchases totaled $334 million, including nuclear decommissioning
      recovery, under the previous PLR contract. These purchases are included
      in the Statement of Income as "Energy purchases" by PPL Electric and as
      "Wholesale energy marketing and trading" revenues by PPL Energy Supply.
    
    Under the current PLR contracts, PPL Electric is required
      to make performance assurance deposits with PPL EnergyPlus when market prices
      exceed the contract collateral threshold. In January 2002, PPL Electric
      was required to tender a $56 million performance assurance deposit to PPL
      EnergyPlus. This payment is shown on the Balance Sheets as "Collateral
      on PLR energy supply to/from affiliate," a current asset of PPL Electric
      and a current liability of PPL Energy Supply. PPL Electric will earn interest
      equal to the three-month LIBOR plus 3% on this deposit.
    
    NUG Purchases(PPL Energy Supply and PPL Electric)
    
    PPL Electric has a reciprocal contract with PPL EnergyPlus
      to sell electricity purchased under contracts with NUGs. PPL Electric purchases
      electricity from the NUGs at contractual rates and then sells the electricity
      at the same price to PPL EnergyPlus. For the three months ended March 31,
      2002 and 2001, these NUG purchases totaled $43 million and $45 million,
      and are included in the Statement of Income as "Wholesale electric" revenues
      by PPL Electric, and as "Energy purchases" by PPL Energy Supply.
    
    Brokering and Contract Management Agreement(PPL
      Montana)

    

    Under a brokering and contract management agreement between
      PPL Montana and PPL EnergyPlus, PPL Montana paid PPL EnergyPlus $2 million
      and $1 million for the three months ended March 31, 2002 and 2001.
    
    Montana Retail Supply(PPL Montana)

    

    PPL Montana has a memorandum of understanding (MOU) with
      PPL EnergyPlus regarding the supply of energy to satisfy PPL EnergyPlus'
      obligations under its retail contracts, which expires on December 31, 2002.
      Under the MOU, energy sales to PPL EnergyPlus for the three months ended
      March 31, 2002 and 2001 were $10 million and $32 million and are included
      in "Wholesale energy marketing and trading" revenues on the Statement
      of Income.
    
    Allocations of Corporate Service Costs(PPL Energy
      Supply, PPL Electric and PPL Montana)
    
    Corporate functions such as financial, legal, human resources
      and information services were transferred to PPL Services in the corporate
      realignment. 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 the relative capital invested by
      PPL in these subsidiaries. During the three months ended March 31, PPL Services
      allocated the following charges to PPL Energy Supply, PPL Electric and PPL
      Montana (in millions):
    
    PPL EnergySupply
        
        PPL Electric
        
        PPL Montana2002
        
        
        2001
        
        
        2002
        
        
        2001
        
        
        2002
        
        
        2001Direct expenses
        $
        20
        
        $
        16
        
        $
        14
        
        $
        17
        
        $
        1
        
        $
        1Overhead costs
        
        6
        
        
        8
        
        
        6
        
        
        5
        
        
        2
        
        
        1
    Intercompany Borrowings
    

    (PPL Energy Supply)

    
    PPL, through PPL Capital Funding and other subsidiaries,
      provides certain funding and credit support for PPL Energy Supply and its
      subsidiaries. Such funding includes loans that are due on demand with interest
      charged at a rate based on PPL Capital Funding's short-term borrowing rate.
      PPL Energy Supply had no notes payable to affiliated companies at March
      31, 2002 or December 31, 2001 and consequently had no intercompany interest
      in the first quarter of 2002. Intercompany interest, including capitalized
      interest, was $27 million for the three months ended March 31, 2001.
    
    PPL Energy Supply, through its financing subsidiary PPL
      Investment Corporation, had notes receivable from affiliates of PPL totaling
      $539 million and $395 million at March 31, 2002 and December 31, 2001. Interest
      earned on loans to affiliated companies was $5 million and $8 million for
      the three months ended March 31, 2002 and 2001.
    
    (PPL Electric)
    
    In December 2001, PPL Electric made two loans from excess
      cash to PPL Energy Funding in the aggregate principal amount of $350 million.
      One loan was a demand promissory note in the original principal amount of
      $150 million requiring interest to be paid monthly at an annual interest
      rate of 4.0%. The other loan was a one-year term promissory note in the
      original principal amount of $200 million requiring interest to be paid
      monthly at an annual interest rate of 6.5%. The outstanding balance of these
      loans at March 31, 2002 was $75 million. Intercompany interest income was
      $4 million for the three months ended March 31, 2002 and 2001.
9. Derivative Instruments and Hedging Activities
    
    (PPL, PPL Energy Supply and PPL Montana)
    
    Fair Value Hedges
    
    PPL Energy Supply and PPL Montana enter into financial
      or physical contracts to hedge a portion of the fair value of firm commitments
      of forward electricity sales. Additionally, PPL enters into financial contracts
      to hedge fluctuations in the market value of existing debt issuances. These
      contracts range in maturity through 2006. For the three months ended March
      31, 2002 and 2001, PPL did not recognize any gains or losses from the ineffective
      portion of fair value hedges. For the three months ended March 31, 2002,
      PPL Energy Supply recognized an immaterial amount from firm commitments
      that no longer qualified as fair value hedges.
    
    Cash Flow Hedges
    
    PPL Energy Supply and PPL Montana enter into financial
      and physical contracts, including forwards, futures and swaps, to hedge
      the price risk associated with electric, gas and oil commodities. Additionally,
      PPL enters into financial interest rate swap contracts to hedge interest
      expense associated with both existing and anticipated debt issuances. These
      contracts and swaps range in maturity through 2005. PPL also enters into
      foreign currency forward contracts to hedge exchange rates associated with
      firm commitments denominated in foreign currencies and to hedge the net
      investment of foreign operations. These forward contracts, excluding those
      forecasted transactions related to the payment of variable interest on existing
      financial instruments, range in maturity through 2003.
    
    At March 31, 2002, PPL's unrealized gain on qualifying
      derivatives included in accumulated other comprehensive income was $12 million,
      an $11 million decrease from the December 31, 2001 unrealized gain on qualifying
      derivatives of $23 million. Also, at March 31, 2002, PPL Energy Supply's
      unrealized gain on qualifying derivatives included in accumulated other
      comprehensive income was $33 million, a $13 million decrease from the December
      31, 2001 unrealized gain on qualifying derivatives of $46 million. Finally
      at March 31, 2002, PPL Montana's unrealized gain on qualifying derivatives
      included in accumulated other comprehensive income was $19 million, a $14
      million decrease from the December 31, 2001 unrealized gain on qualifying
      derivatives of $33 million.
    
    The after-tax impact on the financial statements of PPL
      and PPL Energy Supply resulting from cash flow hedge ineffectiveness for
      the three months ended March 31, 2002 was a loss of $2 million and was insignificant
      for the three months ended March 31, 2001.
    
    As a result of an unplanned outage in 2001 and changes
      in economic conditions, certain cash flow hedges were discontinued, resulting
      in the following financial statement impact (millions of dollars):
    
    Three MonthsEnded March 31,2002
        
        
        
        2001PPL
        $
        1
        
        
        $
        (29
        )PPL Energy Supply
        
        1
        
        
        
        (29
        )
    As of March 31, 2002, the deferred net gain, after-tax,
      on derivative instruments in accumulated other comprehensive income expected
      to be reclassified into earnings during the next twelve months (excluding
      derivative activities of equity investments) was $1 million, $4 million,
      and $4 million for PPL, PPL Energy Supply and PPL Montana, respectively.
    
    Implementation Issues
    
    In December 2001, the FASB revised guidance on DIG Issue
      C16: "Scope Exceptions: Applying the Normal Purchases and Normal Sales Exception
      to Contracts that Combine a Forward Contract and a Purchased Option Contract."
      Issue C16 provides additional guidance on the classification and application
      of SFAS 133 relating to purchases and sales of electricity utilizing forward
      contracts and options, as well as the eligibility of fuel contracts for
      the normal purchases and normal sales exception. The revised guidance is
      effective April 1, 2002. PPL has determined that there will be no financial
      statement impact of the revised guidance on fuel contracts classified as
      normal.
10. Goodwill and Other Intangible Assets
    
    In June 2001, the FASB issued SFAS 142, "Goodwill and Other
      Intangible Assets," which eliminates the amortization of goodwill and other
      acquired intangible assets with indefinite economic useful lives. SFAS 142
      requires an annual impairment test of goodwill at the reporting unit level.
      A reporting unit is a segment or one level below a segment (referred to
      as a component). Intangible assets other than goodwill that are not subject
      to amortization are also required to undergo an annual impairment test.
      PPL and its subsidiaries adopted SFAS 142 on January 1, 2002. The following
      information is disclosed in accordance with SFAS 142.
    
    Acquired Intangible Assets
    
    (PPL)

    

    The carrying amount and the accumulated amortization of
      acquired intangible assets were as follows (millions of dollars):
    
    March 31, 2002
        
        December 31, 2001CarryingAmount
        
        AccumulatedAmortization
        
        CarryingAmount
        
        AccumulatedAmortizationEmission allowances
        $
        48
        
        
        
        
        $
        36Land and transmission
             rights
        
        245
        
        $
        87
        
        
        247
        
        $
        86Licenses and other
        
        32
        
        
        4
        
        
        31
        
        
        4Total
        $
        325
        
        $
        91
        
        $
        314
        
        $
        90
    Current intangible assets are included in "Current
      Assets - Other," and long-term intangible assets are included in "Regulatory
      and Other Noncurrent Assets - Other" on the Balance Sheet.
    
    Amortization expense was approximately $1 million for the
      three months ended March 31, 2002. Estimated amortization expense for the
      years 2003 through 2007 is $4 million per year.
    

    (PPL Energy Supply)

    
    The carrying amount and the accumulated amortization of
      acquired intangible assets were as follows (millions of dollars):
    March 31, 2002
        
        December 31, 2001CarryingAmount
        
        AccumulatedAmortization
        
        CarryingAmount
        
        AccumulatedAmortizationEmission allowances
        $
        48
        
        
        
        
        $
        36Land and transmission 
              rights
        
        44
        
        $
        10
        
        
        44
        
        $
        10Licenses and other
        
        32
        
        
        4
        
        
        31
        
        
        4Total
        $
        124
        
        $
        14
        
        $
        111
        
        $
        14
    Current intangible assets are included in "Current
      Assets - Other," and long-term intangible assets are included in "Other
      Noncurrent Assets" on the Balance Sheet.
    
    Amortization expense was approximately $1 million for the
      three months ended March 31, 2002. Estimated amortization expense for the
      years 2003 through 2007 is $2 million per year.
    (PPL Electric)
    
    The carrying amount and the accumulated amortization of
      acquired intangible assets were as follows (millions of dollars):
    March 31, 2002
        
        December 31, 2001CarryingAmount
        
        AccumulatedAmortization
        
        CarryingAmount
        
        AccumulatedAmortizationLand and
            transmission rights
        $
        200
        
        $
        76
        
        $
        202
        
        $
        75
    Intangible assets are included in "Regulatory and
      Other Noncurrent Assets - Other" on the Balance Sheet.
    
    Amortization expense was approximately $1 million for the
      three months ended March 31, 2002. Estimated amortization expense for the
      years 2003 through 2007 is $2 million per year.
    
    (PPL Montana)
    
    The carrying amount and the accumulated amortization of
      acquired intangible assets were as follows (millions of dollars):
    March 31, 2002
        
        December 31, 2001CarryingAmount
        
        AccumulatedAmortization
        
        CarryingAmount
        
        AccumulatedAmortizationEmission allowances
        $
        19
        
        
        
        
        $
        19Licenses and other
        
        15
        
        
        
        
        
        15$
        34
        
        
        
        
        $
        34
    Current intangible assets are included in "Prepayments
      and Other," and long-term intangible assets are included in "Noncurrent
      Assets - Other" on the Balance Sheet.
    
    Amortization expense was immaterial for the three months
      ended March 31, 2002. Estimated amortization expense is immaterial for each
      of the years 2003 through 2007.
    
    Goodwill
    
    (PPL and PPL Energy Supply)
    
    The changes in the carrying amounts of goodwill by segment
      were as follows:
    
    PPL Energy Supply
        
        
        
        
        
        PPL(Millions of Dollars)
        Supply
        
        
        International
        
        
        Total
        
        
        Delivery(a)
        
        
        TotalBalance as of 
            January 1, 2002
        $
        72
        
        
        $
        257
        
        
        $
        329
        
        
        $
        55
        
        
        $
        384Goodwill acquired
        
        12
        
        
        
        5
        
        
        
        17
        
        
        
        
        
        
        
        17Effect of foreign 
            exchange rates
        
        
        
        
        
        3
        
        
        
        3
        
        
        
        
        
        
        
        3Impairment losses
        
        
        
        
        
        (150
        )
        
        
        (150
        )
        
        
        
        
        
        
        (150
        )Balance as of 
            March 31, 2002
        $
        84
        
        
        $
        115
        
        
        $
        199
        
        
        $
        55
        
        
        $
        254(a)
        The Delivery segment is not
          part of PPL Energy Supply.
    
    Goodwill is included in "Noncurrent Assets - Other"
      on the Balance Sheet.
    
    The reporting units of the Supply, Delivery and International
      segments completed the transition impairment test in the first quarter of
      2002. A transition goodwill impairment loss of $150 million was recognized
      in the Latin American reporting unit within the International segment, and
      is reported as a "Cumulative Effect of a Change in Accounting Principle"
      on the Statement of Income. The fair value of the reporting unit was estimated
      using the expected present value of future cash flows.
    
    The following table reconciles reported earnings from prior
      periods to earnings adjusted to exclude the amortization expense related
      to goodwill and equity method goodwill that will no longer be recorded in
      accordance with SFAS 142.
    
    PPL
        
        PPL Energy SupplyThree MonthsEnded March 31,
        
        Three MonthsEnded March 31,(Millions of Dollars, 
            except per share data)
        2002
        
        
        2001
        
        
        2002
        
        
        2001Reported net income
            (loss)
        $
        (3
        )
        $
        222
        
        $
        (5
        )
        $
        201Add back: Goodwill
            amortization
        
        
        
        
        3
        
        
        
        
        
        3Add back: Equity 
            method goodwill
            amortization
        
        
        
        
        1
        
        
        
        
        
        1Adjusted net income
          (loss)
        $
        (3
        )
        $
        226
        
        $
        (5
        )
        $
        205Basic EPS:Reported net income
            (loss)
        $
        (0.02
        )
        $
        1.53Goodwill amortization
        
        
        
        
        0.02Equity method 
            goodwill 
            amortization
        
        
        
        
        0.01Adjusted net income
          (loss)
        $
        (0.02
        )
        $
        1.56Diluted EPS:Reported net income
            (loss)
        $
        (0.02
        )
        $
        1.52Goodwill amortization
        
        
        
        
        0.02Equity method 
            goodwill 
            amortization
        
        
        
        
        0.01Adjusted net income
            (loss)
        $
        (0.02
        )
        $
        1.55
    (PPL Electric and PPL Montana)

    

    PPL Electric and PPL Montana had no goodwill at March 31,
      2002 and December 31, 2001. The adoption of SFAS 142 would not have affected
      prior period earnings of PPL Electric and PPL Montana.

1. New Accounting Standards

    
    (PPL, PPL Energy Supply, PPL Electric and PPL Montana)
    
    SFAS 144
    
    In August 2001, the FASB issued SFAS 144, "Accounting for
      the Impairment or Disposal of Long-Lived Assets," that replaces SFAS 121,
      "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
      to Be Disposed Of." For long-lived assets to be held and used, SFAS 144
      retains the requirements of SFAS 121 to (a) recognize an impairment loss
      only if the carrying amount is not recoverable from undiscounted cash flows
      and (b) measure an impairment loss as the difference between the carrying
      amount and fair value of the asset. For long-lived assets to be disposed
      of, SFAS 144 establishes a single accounting model based on the framework
      established in SFAS 121. The accounting model for long-lived assets to be
      disposed of by sale applies to all long-lived assets, including discontinued
      operations, and replaces the provisions of APB Opinion No. 30, "Reporting
      the Results of Operations - Reporting the Effects of Disposal of a Segment
      of a Business, and Extraordinary, Unusual and Infrequently Occurring Events
      and Transactions,"for the disposal of segments of a business. SFAS
      144 also broadens the reporting of discontinued operations. PPL and its
      subsidiaries adopted SFAS 144 on January 1, 2002, with no material impact
      on the financial statements.
    
    SFAS 145
    
    In April 2002, the FASB issued SFAS 145, "Rescission of
      FASB Statement 4, 44, and 64." The most relevant provision of SFAS 145 is
      the rescission of SFAS 4, which required all gains and losses from extinguishment
      of debt to be aggregated and, if material, classified as an extraordinary
      item, net of related income tax effect. As a result of the rescission, the
      criteria in APB Opinion No. 30 will now be used to classify those gains
      and losses. The provisions of SFAS 145 related to the rescission of SFAS
      4 shall be applied in fiscal years beginning after May 15, 2002, with early
      application encouraged. The adoption of SFAS 145 will not have a material
      impact on PPL or its subsidiaries.
2. Write-down of International Energy Projects



(PPL and PPL Energy Supply)

At December 31, 2001, PPL Global estimated that the long-term
  viability of its CEMAR investment was jeopardized and that there was minimal
  probability of positive future cash flows. See PPL's Note 22 and PPL Energy
  Supply's Note 21 to the Financial Statements included in each company's Annual
  Report to the SEC on Form 10-K for the year ended December 31, 2001 for additional
  information. At that time, PPL Global recorded an impairment loss in the carrying
  value of its net assets in CEMAR, an increase in its valuation allowance in
  deferred tax assets, and a credit to "Minority Interest" on the Statement of
  Income. The net result of these transactions was a $217 million charge to earnings.

At March 31, 2002, PPL Global recorded a further impairment
  loss in the carrying value of its net assets in CEMAR of approximately $4 million,
  after-tax. The pre-tax charge was $6 million, and was recorded as a charge to
  "Write-down of international energy projects" on the Statement of Income. PPL
  Global's remaining portion of its CEMAR investment, primarily related to its
  foreign currency translation adjustments (CTA) balance of $94 million, was not
  written-off as of March 31, 2002, because accounting guidance prohibits the
  inclusion of CTA in an impairment calculation where the assets are not held
  for disposal. PPL is working with CEMAR's creditors and governmental authorities
  in Brazil on a plan that could result in returning the company to financial
  stability. That plan includes a rate-increase request that is now being reviewed
  by regulators, and PPL expects that the process for the rate-increase request
  will reach conclusion in the third quarter of 2002. Because PPL has not exhausted
  all available avenues, including the pending rate request, to maximize the value
  of CEMAR, it has not yet made a decision to exit the investment. Should a decision
  be made to exit the investment, PPL would again assess impairment of the investment
  and would, most likely, record an additional impairment for the CTA balance,
  reduced by any operating losses recorded through the date of the impairment.

As a result of its financial difficulties, CEMAR has failed
  to pay certain of its creditors for obligations when due. In addition, CEMAR
  is not in compliance with the financial covenants in its 150 million Brazilian
  reals (approximately $56 million) debenture indenture for the year ended December
  31, 2001. Consequently, CEMAR has notified the indenture agent, and in accordance
  with the indenture, the agent is expected to call a meeting of the holders of
  the debentures to hold a vote regarding the acceleration of the debentures.
  Unless three-fourths of the holders vote against acceleration, the agent will
  be obligated under the indenture to accelerate the debentures.

---

PPL CORPORATION AND SUBSIDIARIES

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



This discussion should be read in conjunction with the Financial
  Statements and Combined Notes to Condensed Consolidated Financial Statements
  included in Item 1 above, and with the section entitled "Review of the Financial
  Condition and Results of Operations" in PPL's Annual Report to the SEC on Form
  10-K for the year ended December 31, 2001. Terms and abbreviations appearing
  in Management's Discussion and Analysis of Financial Condition and Results of
  Operations are explained in the glossary.



Results of Operations



The following discussion explains significant changes in principal
  items on the Statement of Income, comparing the three months ended March 31,
  2002, to the comparable period in 2001.



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 are not necessarily indicative of results
  or trends for the year.



Earnings



Net income (loss) and the related EPS were as follows:



|                                                       | Three Months Ended March
      31,
|------------------------------------------------------ | ----------------------------------
|                                                       |                                   
|Net income (loss) (millions of
      
        dollars) |                                   
|EPS - basic                                            |                                   
|EPS - diluted                                          |                                   



Net income in 2002 was impacted by two unusual items as shown
  below. Refer to specific Notes to the Financial Statements for discussion of
  these items.



|                                | Three Months Ended March
      31,                  
|------------------------------- | ----------------------------------------------------
|(Millions of dollars)           |                                                     
|Net income (loss) - actual      |                                                     
|Unusual items (net of tax):     |                                                     
|                                | SFAS 142 goodwill impairment
        (Note 10)      
|                                | Write-down of investment in 
        CEMAR (Note 12)
|                                |                                                     
|Net income from core operations |                                                     
|                                |                                                     





The earnings decline was primarily due to:



- lower wholesale energy prices, particularly in the western
      U.S.;
- lower earnings from international operations; and
- lower electricity delivery sales, in part due to milder
      weather in the first quarter of 2002.



These earnings declines were partially offset by increased
  volume of wholesale energy sales in the western U.S., and improved earnings
  contributions from synfuel projects and mechanical contractor and engineering
  subsidiaries. Earnings also benefited from the termination of an energy purchase
  contract with a NUG. See Note 7 to the Financial Statements for additional information.



PPL expects that lower wholesale energy prices will adversely
  impact core earnings for the remainder of 2002. In addition, PPL expects that
  it will continue to incur quarterly operating losses from CEMAR, as it continues
  to consider ways to maximize the value of CEMAR. See Note 12 to the Financial
  Statements for information on PPL Global's investment in CEMAR.



Operating Revenues



Retail Electric and Gas



The increase (decrease) in retail revenues from electric and
  gas operations was attributable to the following (millions of dollars):



|                                 | Three Months EndedMarch 31, 2002 vs. March 31, 2001
|-------------------------------- | ---------------------------------------------------
|Retail Electric Revenue          |                                                    
|                                 | PPL Electric                                       
|                                 | Electric
      delivery                            
|                                 | PLR
      electric generation supply               
|                                 | PPL EnergyPlus                                     
|                                 | Electric
      generation supply                   
|                                 | PPL Global                                         
|                                 | Electric
      delivery                            
|                                 | Other                                              
|                                 |                                                    
|                                 |                                                    
|                                 |                                                    
|Retail Gas Revenue               |                                                    
|                                 | PPL Gas Utilities                                  
|                                 | PPL EnergyPlus                                     
|                                 |                                                    
|                                 |                                                    
|                                 |                                                    
|Retail Electric and Gas Revenues |                                                    
|                                 |                                                    



The decrease in operating revenues from retail electric operations
  was primarily due to:



- lower net supply revenues (caused by the expiration of
      certain PPL EnergyPlus retail contracts, partially offset by increased revenues
      by PPL Electric as a PLR);
- lower domestic delivery revenues, due to a decrease in
      deliveries of electricity, impacted by milder weather; and
- decreased PPL Global international electric delivery revenues,
      primarily due to lower CEMAR revenues.



Both PPL Gas Utilities and PPL EnergyPlus experienced lower
  retail gas revenues in the three months ended March 31, 2002 compared with the
  same period in 2001. These decreases were primarily due to milder weather.



Wholesale Energy Marketing and Trading



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



|                     | Three Months EndedMarch 31, 2002 vs. March 31, 2001
|-------------------- | ---------------------------------------------------
|Eastern U.S. markets |                                                    
|                     | Bilateral/Spot market                              
|                     | Cost-based                                         
|                     | Gas & oil                                          
|                     |                                                    
|                     |                                                    
|Western U.S. markets |                                                    
|                     |                                                    
|                     |                                                    
|                     |                                                    



The decrease in eastern U.S. markets was primarily due to lower
  bilateral/spot market sales and lower gas and oil trading activity. (Energy
  purchases also decreased in 2002 compared with 2001. Refer to "Energy Purchases"
  for more information.)



The decrease in western U.S. markets was due to a decline in
  wholesale energy prices from the high prices experienced during the energy supply
  shortage in the western U.S. in the first half of 2001. In June 2001, the FERC
  instituted a series of price controls designed to mitigate (or cap) prices in
  the entire western U.S. as a result of the California energy crisis. These price
  controls have had the effect of significantly lowering spot and forward energy
  prices in the western U.S. See Note 7 to the Financial Statements for further
  discussion on the California situation.



Fuel



Fuel costs decreased by $41 million for the three months ended
  March 31, 2002, compared with the same period in 2001.



Electric fuel costs decreased by $28 million in the first quarter
  of 2002 compared with the same period in 2001. This decrease was attributable
  to lower generation by oil/gas-fired and coal-fired stations, resulting from
  a decrease in electricity sales because of milder weather, the expiration of
  certain PPL EnergyPlus retail contracts and accelerated timing of annual overhaul
  work at the Montour generating station.



The cost of natural gas and propane decreased by $13 million
  for the three months ended March 31, 2002, compared with the same period in
  2001. The decrease reflects lower volumes due to milder weather, as well as
  lower off-system gas prices.



Energy Purchases



The increase (decrease) in energy purchases was attributable
  to the following (millions of dollars):



|              | Three Months EndedMarch 31, 2002 vs. March 31, 2001
|------------- | ---------------------------------------------------
|Domestic      |                                                    
|              | Eastern U.S. markets                               
|              | Western U.S. markets                               
|International |                                                    
|              |                                                    
|              |                                                    
|              |                                                    



The decrease in eastern U.S. markets was attributable to lower
  purchases of gas, due to lower volumes of gas trading activity, and lower wholesale
  prices for electric energy purchases. Eastern U.S. market energy purchases also
  reflect a $25 million benefit from the termination of an energy purchase contract
  with a NUG. See Note 7 to the Financial Statements for additional information.
  The decrease in western U.S. markets was due to lower wholesale prices for electric
  energy purchases.



Other Operation Expenses



Other operation expenses increased by $7 million for the three
  months ended March 31, 2002, compared to the same period in 2001. This increase
  was primarily due to higher administrative and general expenses, offset by a
  payment made in March 2001 to Duke Energy Trading and Marketing, to release
  their obligation to perform certain services related to the purchase and sale
  of gas and energy during commercial operation of the Griffith plant.



Amortization of Recoverable Transition Costs



Amortization of recoverable transition costs decreased by $18
  million during the three months ended March 31, 2002, compared with the same
  period in 2001. This decrease was primarily due to lower ITC amortization in
  2002 as a result of lower billed ITC revenues. Billed ITC revenues were lower
  as a result of the decrease in electricity delivery sales and lower ITC rates.
  Also contributing to the decrease were lower billed CTC revenues in 2002 and
  changes in amortization of CTC deferrals.



Maintenance Expenses



Maintenance expenses increased by $8 million for the three
  months ended March 31, 2002, compared with the same period in 2001. This increase
  was primarily due to higher refueling outage and non-outage costs at the Susquehanna
  generating station, as well as accelerated timing of annual overhaul work at
  the Montour generating station.



Taxes, Other Than Income



Taxes, other than income, increased by $10 million during the
  three months ended March 31, 2002, compared with the same period in 2001. This
  change was primarily due to an increase in the revenue-neutral reconciliation
  (RNR) tax component of the effective Pennsylvania gross receipts tax rate in
  January 2002. The RNR, which adjusts the base gross receipts tax rate of 4.4%,
  was enacted as part of the Customer Choice Act as a tax revenue replacement
  component to recoup losses to the Commonwealth of Pennsylvania that may result
  from the restructuring of the electric industry. Changes in gross receipts tax
  do not significantly affect earnings as they are substantially recovered through
  customer rate revenues.



Write-down of International Energy Projects



See Note 12 to the Financial Statements for additional information
  on a $6 million charge in the three months ended March 31, 2002 to reflect an
  additional write-down of PPL Global's investment in CEMAR.



Financing Costs



Interest expense decreased by $7 million during the three months
  ended March 31, 2002, compared with the same period in 2001. This decrease was
  primarily due to lower levels of short-term debt and retirements of mortgage
  bonds, transition bonds and medium-term notes, partially offset by interest
  paid on senior secured bonds, senior unsecured notes and other long-term debt
  issued after March 2001. The decrease also reflects a charge in 2001 to buy
  back a call option to re-market securities.



Dividends on preferred securities increased by $11 million
  during the three months ended March 31, 2002, compared with the same period
  in 2001. This increase was primarily due to dividends paid on the PEPS Units,
  issued in the second quarter of 2001.



Income Taxes



Income taxes decreased by $64 million for the three months
  ended March 31, 2002, compared to the same period in 2001, primarily due to
  a decrease in pre-tax book income and an increase in the amount of federal synfuel
  tax credits recognized.



Change in Accounting Principle



PPL adopted SFAS 142, "Goodwill and Other Intangible Assets,"
  on January 1, 2002. SFAS 142 requires an annual impairment test of goodwill
  and other intangible assets that are not subject to amortization. PPL conducted
  a transition impairment analysis in the first quarter of 2002 and recorded a
  transition goodwill impairment charge of $150 million, which was reported as
  a "Cumulative Effect of a Change in Accounting Principle" on the Statement of
  Income. See Note 10 to the Financial Statements for additional information on
  the adoption of SFAS 142.



Financial Condition



Liquidity



At March 31, 2002, PPL's net cash position was $374 million,
  which reflects $486 million in cash and cash equivalents less $112 million of
  short-term debt. This compares to PPL's net cash position of $832 million at
  December 31, 2001. The decrease in net cash position resulted from less cash
  provided from operating activities due primarily to the net effect of a $59
  million turbine cancellation payment, a $50 million payment to terminate an
  energy purchase contract with a NUG, mild weather and seasonal cash outflows
  that normally occur in the first quarter of each year (such as the prepayment
  of the Pennsylvania gross receipts tax). In addition, PPL incurred one-time
  acquisition costs of approximately $140 million for certain generation equipment
  it purchased from two lessor trusts in the first quarter of 2002. PPL and its
  subsidiaries also retired $78 million of securities in the first quarter of
  2002.



For additional information on PPL's liquidity, see Item 7,
  "Review of the Financial Condition and Results of Operations," in
  PPL's Annual Report to the SEC on Form 10-K for the year ended December 31,
  2001.



Energy Marketing and Trading Activities



PPL, through PPL EnergyPlus, sells and purchases physical energy
  at the wholesale level under FERC market-based tariffs throughout the U.S. Because
  of the generating assets PPL owns or controls, the majority of PPL's energy
  transactions qualify for accrual or hedge accounting. In addition, PPL enters
  into financial contracts to hedge the price risk associated with its electricity,
  gas and oil positions. At March 31, 2002, PPL had net assets of $24 million
  related to its energy hedging activities.



Certain transactions, however, meet the definition of trading
  activities as defined by EITF 98-10, "Accounting for Contracts Involved
  in Energy Trading and Risk Management Activities." These trading activities
  include physical and financial energy contracts, such as forwards, futures,
  options, and swaps that do not qualify for hedge accounting or were entered
  into to profit from market fluctuations. Trading activities also include certain
  transactions for capacity and ancillary products, such as transmission congestion
  credits (TCCs) and fixed transmission rights (FTRs).



PPL's trading contracts mature at various times through 2006.
  The following chart sets forth PPL's net fair market value of trading contracts
  as of March 31, 2002 (millions of dollars):



|                                                                                |  | Gains/(Losses)
|------------------------------------------------------------------------------- |  | --------------
|Fair value of contracts outstanding
      at the
         beginning of the year |  | $             
|Contracts realized or otherwise
      settled 
         during the period       |  |               
|Fair value of new contracts when
      entered
         into during the period  |  |               
|Other changes in fair values                                                    |  |               
|                                                                                |  |               
|Fair value of contracts outstanding
      at
          March 31, 2002           |  | $             
|                                                                                |  |               



During the three months ended March 31, 2002, PPL reversed
  net gains of approximately $3 million related to contracts entered into prior
  to January 1, 2002. This amount does not reflect intra-year contracts that were
  entered into and settled during the period.



As of March 31, 2002, the net loss on PPL's trading activities
  expected to be recognized in earnings during the next three months is approximately
  $1 million.



The following chart segregates estimated fair values of PPL's
  trading portfolio at March 31, 2002 based on whether the fair values are determined
  by quoted market prices or other more subjective means (millions of dollars):



|                                                                       | Fair Value of Contracts at Period-EndGains/(Losses) |   
|---------------------------------------------------------------------- | --------------------------------------------------- | --
|                                                                       | Maturity
        less than
        1 year           |   
|                                                                       |                                                     |   
|Source of Fair Value                                                   |                                                     |   
|Prices actively quoted                                                 | $                                                   | 1 
|Prices provided by other external
          sources                    |                                                     | 8 
|Prices based on models and other
          valuation methods           |                                                     | (3
|                                                                       |                                                     |   
|Fair value of contracts outstanding
          at the end of the period | $                                                   | 6 
|                                                                       |                                                     |   

For additional information on PPL's Energy Marketing and Trading
  Activities, see Item 7, "Review of the Financial Condition and Results
  of Operations," in PPL's Annual Report to the SEC on Form 10-K for the
  year ended December 31, 2001.



Related Party Transactions



PPL is not aware of any material ownership interests or operating
  responsibility by senior management of PPL or its subsidiaries in outside partnerships
  or other entities doing business with PPL.



Acquisitions and Development



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
  6 to the Financial Statements for information regarding recent acquisitions
  and development activities.



In January 2002, construction activities were completed on
  the Griffith project, located near Kingman, Arizona, and the facility began
  commercial operations. Griffith is currently in the process of applying for
  membership in the Southwest Reserve Sharing Group. Acceptance into the Southwest
  Reserve Sharing Group would allow Griffith to sell significantly more of the
  plant's generation at firm prices and require fewer reserves for the firm sales.



At March 31, 2002, PPL Global had domestic generation projects,
  either announced or under development, which would provide more than 2,200 MW
  of additional generation. The Sundance, University Park, Edgewood and Shoreham
  projects are expected to be in commercial operation in the summer of 2002.



PPL Global 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.



Cash Flow



Cash and cash equivalents decreased by $253 million more during
  the three months ended March 31, 2002, than during the same period in 2001.
  The reasons for this change were:



- a $194 million decrease in cash provided by operating activities,
      primarily due to a decrease in operating income, higher prepayment of Pennsylvania
      gross receipts tax, a $59 million turbine cancellation payment, and a $50
      million payment to terminate an energy purchase contract with a NUG;
- a $23 million increase in cash used in investing activities;
      and
- a $36 million increase in cash used in financing activities,
      primarily due to higher retirements of long-term debt and an increase in
      dividend payments.



Environmental Matters



See Note 7 to the Financial Statements for a discussion of
  environmental matters.



Critical Accounting Policies



PPL's financial condition and results of operations are necessarily
  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 and contingencies.
  See Item 7, "Review of the Financial Condition and Results of Operations,"
  in PPL's Annual Report to the SEC on Form 10-K for the year ended December 31,
  2001 for a discussion of each critical accounting policy.

---

PPL ENERGY SUPPLY, LLC AND SUBSIDIARIES

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



The following analysis of the financial condition and results
  of operations of PPL Energy Supply is abbreviated, as PPL Energy Supply meets
  the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q.
  This discussion should be read in conjunction with the Financial Statements
  and Combined Notes to Condensed Consolidated Financial Statements included in
  Item 1 above, and with the section entitled "Review of the Financial Condition
  and Results of Operations" in PPL Energy Supply's Annual Report to the SEC on
  Form 10-K for the year ended December 31, 2001. Terms and abbreviations appearing
  in Management's Discussion and Analysis of Financial Condition and Results of
  Operations are explained in the glossary.



Results of Operations



The following discussion explains significant changes in principal
  items on the Statement of Income, comparing the three months ended March 31,
  2002, to the comparable period in 2001.



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 are not necessarily indicative of results
  or trends for the year.



Earnings



Net income in 2002 was impacted by two unusual items as shown
  below. Refer to specific Notes to the Financial Statements for discussion of
  these items.



|                                | Three Months Ended March
      31,                  
|------------------------------- | ----------------------------------------------------
|(Millions of dollars)           |                                                     
|Net income (loss) - actual      |                                                     
|Unusual items (net of tax):     |                                                     
|                                | SFAS 142 goodwill impairment
        (Note 10)      
|                                | Write-down of investment in 
        CEMAR (Note 12)
|                                |                                                     
|Net income from core operations |                                                     
|                                |                                                     



This earnings decline was primarily due to:



- lower wholesale energy prices, particularly in the western
      U.S.;
- lower earnings from international operations; and
- lower supply revenues due to the expiration of certain
      PPL EnergyPlus retail contracts.



These earnings declines were partially offset by increased
  volume of wholesale energy sales in the western U.S., and improved earnings
  contributions from synfuel projects and mechanical contractor and engineering
  subsidiaries. Earnings also benefited from the termination of an energy purchase
  contract with a NUG. See Note 7 to the Financial Statements for additional information.



PPL Energy Supply expects that lower wholesale energy prices
  will adversely impact core earnings for the remainder of 2002. In addition,
  PPL Energy Supply expects that it will continue to incur quarterly operating
  losses from CEMAR, as it continues to consider ways to maximize the value of
  CEMAR. See Note 12 to the Financial Statements for additional information on
  PPL Global's investment in CEMAR.



Operating Revenues



Wholesale Energy Marketing and Trading



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



| | Three Months EndedMarch 31, 2002 vs. March 31, 2001
| | ---------------------------------------------------

|Domestic |                      |  |   |     
|-------- | -------------------- |  | - | ----
|         | Eastern U.S. markets |  | $ | (57 
|         | Western U.S. markets |  |   | (96 
|         |                      |  |   |     
|         |                      |  | $ | (153
|         |                      |  |   |     



The decrease in wholesale energy marketing revenues was primarily
  due to lower western U.S. market revenues, resulting from a decline in wholesale
  energy prices from the high prices experienced during the energy supply shortage
  in the western U.S. in the first half of 2001. In June 2001, the FERC instituted
  a series of price controls designed to mitigate (or cap) prices in the entire
  western U.S. as a result of the California energy crisis. These price controls
  have had the effect of significantly lowering spot and forward energy prices
  in the western U.S. See Note 7 to the Financial Statements for further discussion
  on the California situation.



Also contributing to the decrease were lower eastern U.S. market
  revenues due to lower gas and oil trading activity.



Retail Electric and Gas



The decrease in revenues from retail electric and gas operations
  was attributable to the following (millions of dollars):



| | Three Months EndedMarch 31, 2002 vs. March 31, 2001
| | ---------------------------------------------------

|Retail Electric Revenue          |                                 |   |     |    
|-------------------------------- | ------------------------------- | - | --- | ---
|                                 | Domestic electric supply        |   | $   | (87
|                                 | International electric delivery |   |     | (8 
|                                 |                                 |   |     |    
|                                 |                                 |   |     | (95
|Retail Gas Revenue               |                                 |   | (4  | )  
|                                 |                                 |   |     |    
|Retail Electric and Gas Revenues |                                 | $ | (99 | )  
|                                 |                                 |   |     |    



The decrease in operating revenues from retail electric operations
  was primarily due to:



- the expiration of certain PPL EnergyPlus retail contracts;
      and
- decreased PPL Global international electric delivery revenues,
      primarily due to lower CEMAR revenues.



PPL EnergyPlus experienced lower retail gas revenues in the
  three months ended March 31, 2002, compared with the same period in 2001 primarily
  due to milder weather.



Energy Related Businesses



Energy related businesses contributed $36 million and $42 million
  to operating income for the three months ended March 31, 2002 and 2001. The
  decrease of $6 million in 2002 from 2001 was primarily due to lower equity earnings,
  including PPL Global's investment in WPDH Limited. This decrease was offset
  by lower project development costs and improved earnings from the mechanical
  contracting and engineering subsidiaries.



Fuel

Fuel costs decreased by $27 million for the three months ended
  March 31, 2002, compared with the same period in 2001. This decrease was attributable
  to lower generation by oil/gas-fired and coal-fired stations resulting from
  a decrease in sales of electricity because of milder weather, the expiration
  of certain PPL EnergyPlus retail contracts and accelerated timing of annual
  overhaul work at the Montour generating station.



Energy Purchases



The increase (decrease) in energy purchases was attributable
  to the following (millions of dollars):





| | Three Months EndedMarch 31, 2002 vs. March 31, 2001
| | ---------------------------------------------------



|Domestic      |                      |   |      |     
|------------- | -------------------- | - | ---- | ----
|              | Eastern U.S. markets |   | $    | (120
|              | Western U.S. markets |   |      | (13 
|International |                      |   | 2    |     
|              |                      |   |     
|              |                      | $ | (131 | )   
|              |                      |   |     



The decrease in eastern U.S. markets was attributable to lower
  purchases of gas, due to lower volumes of gas trading activity and lower wholesale
  prices for electric energy purchases. Eastern U.S. market energy purchases also
  reflect a $25 million benefit from the termination of an energy purchase contract
  with a NUG. See Note 7 to the Financial Statements for additional information.
  The decrease in western U.S. markets was due to lower wholesale prices for electric
  energy purchases.



Other Operation and Maintenance



Other operation and maintenance expenses increased by $17 million
  for the three months ended March 31, 2002, compared to the same period in 2001.
  The increase was primarily due to higher allocations of corporate expenses from
  PPL Services, higher refueling outage and non-outage costs at the Susquehanna
  generating station and accelerated timing of annual overhaul work at the Montour
  generating station. These increases were partially offset by a payment made
  in March 2001 to Duke Energy Trading and Marketing to release their obligation
  to perform certain services related to the purchase and sale of gas and energy
  during commercial operation of the Griffith plant.



Transmission



Transmission expenses decreased by $12 million during the three
  months ended March 31, 2002, compared with the same period in 2001. This change
  was primarily due to a decrease in the unregulated retail sales of PPL EnergyPlus.



Depreciation



Depreciation decreased by $6 million for the three months ended
  March 31, 2002, compared with the same period in 2001. This decrease was primarily
  due to PPL Global's write-down of CEMAR assets in December 2001, resulting in
  lower depreciation on those assets in 2002. In addition, PPL ceased amortization
  of goodwill effective January 1, 2002, in accordance with the adoption of SFAS
  142, as described in Note 10 to the Financial Statements.

Write-down of International Energy Projects



See Note 12 to the Financial Statements for additional information
  on a $6 million charge in the three months ended March 31, 2002 to reflect an
  additional write-down of PPL Global's investment in CEMAR.



Other Income - net



Other income decreased by $5 million during the three months
  ended March 31, 2002, compared with the same period in 2001. This decrease was
  due to a reduction in interest income from affiliated companies.



Interest Expense



Interest expense decreased by $5 million during the three months
  ended March 31, 2002, compared with the same period in 2001, primarily due to
  a decrease in short-term debt payable to affiliates. This decrease was partially
  offset by the interest paid on senior unsecured notes and other long-term debt
  issued after March 2001.



Income Taxes



Income taxes decreased by $45 million for the three months
  ended March 31, 2002, compared to the same period in 2001. This change was primarily
  due to a decrease in pre-tax book income and an increase in the amount of federal
  synfuel tax credits recognized.



Change in Accounting Principle



PPL Energy Supply adopted SFAS 142, "Goodwill and Other
  Intangible Assets," on January 1, 2002. SFAS 142 requires an annual impairment
  test of goodwill and other intangible assets that are not subject to amortization.
  PPL Energy Supply conducted a transition impairment analysis in the first quarter
  of 2002 and recorded a transition goodwill impairment charge of $150 million,
  which was reported as a "Cumulative Effect of a Change in Accounting Principle"
  on the Statement of Income. See Note 10 to the Financial Statements for additional
  information on the adoption of SFAS 142.



Acquisitions and Development



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 6 to the Financial Statements for information regarding recent acquisitions
  and development activities.



In January 2002, construction activities were completed on
  the Griffith project, located near Kingman, Arizona, and the facility began
  commercial operations. Griffith is currently in the process of applying for
  membership in the Southwest Reserve Sharing Group. Acceptance into the Southwest
  Reserve Sharing Group would allow Griffith to sell significantly more of the
  plant's generation at firm prices and require fewer reserves for the firm sales.



At March 31, 2002, PPL Global had domestic generation projects,
  either announced or under development, which would provide more than 2,200 MW
  of additional generation. The Sundance, University Park, Edgewood and Shoreham
  projects are expected to be in commercial operation in the summer of 2002.



PPL Global 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.



Critical Accounting Policies



PPL Energy Supply's financial condition and results of operations
  are necessarily 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 and contingencies. See Item 7, "Review of the
  Financial Condition and Results of Operations," in PPL Energy Supply's
  Annual Report to the SEC on Form 10-K for the year ended December 31, 2001,
  for a discussion of each critical accounting policy.

---

PPL ELECTRIC UTILITIES CORPORATION
  AND SUBSIDIARIES



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



This discussion should be read in conjunction with the Financial
  Statements and Combined Notes to Condensed Consolidated Financial Statements
  included in Item 1 above, and with the section entitled "Review of the Financial
  Condition and Results of Operations" in PPL Electric's Annual Report to the
  SEC on Form 10-K for the year ended December 31, 2001. Terms and abbreviations
  appearing in Management's Discussion and Analysis of Financial Condition and
  Results of Operations are explained in the glossary.



Results of Operations



The following discussion explains significant changes in principal
  items on the Statement of Income, comparing the three months ended March 31,
  2002, to the comparable period in 2001.



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 are not necessarily indicative of results
  or trends for the year.



Earnings



Net income decreased by $14 million for the three months ended
  March 31, 2002, compared with the same period in 2001. This earnings decline
  was primarily due to:



- lower delivery revenues, due to a decrease in delivery
      sales, in part due to milder weather;
- higher energy purchase costs, partially due to the amortization
      of an up-front payment to PPL EnergyPlus under the PLR contract; and
- additional PJM ancillary service expense.



These earnings decreases were partially offset by lower interest
  expense and lower operating costs.



Operating Revenues



Retail Electric



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





| | Three Months Ended               
| | ---------------------------------
| | March 31, 2002 vs. March 31, 2001
| |                                  
| | Electric delivery                
| | PLR electric generation supply   
| | Other                            
| |                                  
| |                                  
| |                                  



The increase in operating revenues from retail electric operations
  was primarily due to:



- higher PPL Electric revenues as a PLR resulting from the
      return of shoppers due to fewer alternate suppliers under the Customer Choice
      Act; partially offset by
- lower delivery revenues, reflecting an 8% decrease in deliveries
      of electricity, in part due to milder weather.



Wholesale Electric



The decrease in revenues from wholesale electric activities
  was attributable to the following (millions of dollars):



| | Three Months Ended                                
| | --------------------------------------------------
| | March 31, 2002 vs. March 31, 2001                 
| |                                                   
| | Sales to municipalities                           
| | NUG purchased power sold to PPL
        EnergyPlus
| |                                                   
| |                                                   
| |                                                   



The decrease in wholesale electric revenues was due to lower
  sales to municipalities and lower sales of power (purchased from NUGs) to PPL
  EnergyPlus.

Energy Purchases



Energy purchases increased by $44 million for the three months
  ended March 31, 2002, compared with the same period in 2001. This increase represents
  additional purchases needed to support a higher PLR load, due to the return
  of customers to PPL Electric as their PLR. In addition, effective January 1,
  2002, PPL Electric began incurring the cost of certain PJM ancillary services
  in connection with its new power supply contract with PPL EnergyPlus.



Amortization of Recoverable Transition Costs



Amortization of recoverable transition costs decreased by $18
  million during the three months ended March 31, 2002, compared with the same
  period in 2001. This decrease was primarily due to lower ITC amortization in
  2002 as a result of lower billed ITC revenues. Billed ITC revenues were lower
  as a result of the decrease in electricity delivery sales and lower ITC rates.
  Also contributing to the decrease were lower billed CTC revenues in 2002 and
  changes in amortization of CTC deferrals.



Taxes, Other Than Income



Taxes, other than income, increased by $13 million during the
  three months ended March 31, 2002, compared with the same period in 2001. The
  change was primarily due to an increase in the revenue-neutral reconciliation
  (RNR) tax component of the effective Pennsylvania gross receipts tax rate in
  January 2002. The RNR, which adjusts the base gross receipts tax rate of 4.4%,
  was enacted as part of the Customer Choice Act as a tax revenue replacement
  component to recoup losses to the Commonwealth of Pennsylvania that may result
  from the restructuring of the electric industry. Changes in gross receipts tax
  do not significantly affect earnings, as they are substantially recovered through
  customer rate revenues.



Interest Expense



Interest expense decreased by $6 million during the three months
  ended March 31, 2002, compared with the same period in 2001. While interest
  expense increased due to the issuance of senior secured bonds in the third quarter
  of 2001, this was more than offset by the retirements of first mortgage bonds
  and transition bonds, and a charge in 2001 to buy back a call option to re-market
  first mortgage bonds.



Income Taxes



Income taxes decreased by $11 million for the three months
  ended March 31, 2002, compared to the same period in 2001, primarily due to
  a decrease in pre-tax book income.



Financial Condition



Liquidity



At March 31, 2002, PPL Electric's net cash position was $112
  million, consisting entirely of cash and cash equivalents and no short-term
  debt. This compares to PPL Electric's net cash position of $79 million at December
  31, 2001. The increase in net cash position resulted from the net effect of
  a $275 million repayment of a notes receivable from an affiliate, offset by
  less cash provided from operating activities due primarily to mild weather,
  seasonal cash outflows that normally occur in the first quarter of each year
  (such as the prepayment of the Pennsylvania gross receipts tax) and by the retirement
  of $68 million of long-term debt.

For additional information on PPL Electric's liquidity, see
  Item 7, "Review of the Financial Condition and Results of Operations,"
  in PPL Electric's Annual Report to the SEC on Form 10-K for the year ended December
  31, 2001.



Related Party Transactions



PPL Electric is not aware of any material ownership interests
  or operating responsibility by senior management of PPL Electric or its subsidiaries
  in outside partnerships or other entities doing business with PPL Electric.



For additional information on related party transactions, see
  Note 8 to the Financial Statements.



Cash Flow



Cash and cash equivalents increased by $209 million more during
  the three months ended March 31, 2002, compared with the same period in 2001.
  The reasons for this change were:

- a $142 million decrease in cash provided by operating activities,
      primarily due to a decrease in operating income, higher prepayments of Pennsylvania
      gross receipts tax and payment of collateral to PPL EnergyPlus under the
      power supply contract;

- a $359 million increase in cash provided by investing activities,
      primarily due to a net repayment of loans by affiliated companies; and
- an $8 million increase in cash used in financing activities,
      primarily due to retirements of long-term debt.



Environmental Matters



See Note 7 to the Financial Statements for a discussion of
  environmental matters.



Critical Accounting Policies



PPL Electric's financial condition and results of operations
  are necessarily impacted by the methods, assumptions and estimates used in the
  application of critical accounting policies. Accounting policies for pensions
  and other postretirement benefits and for contingencies are particularly important
  to the financial condition or results of operations of PPL Electric, and require
  estimates or other judgments of matters inherently uncertain. See Item 7, "Review
  of the Financial Condition and Results of Operations," in PPL Electric's
  Annual Report to the SEC on Form 10-K for the year ended December 31, 2001,
  for a discussion of each critical accounting policy.

---

PPL MONTANA, LLC AND SUBSIDIARIES



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



The following analysis of the results of operations and financial
  condition of PPL Montana is abbreviated as PPL Montana meets the conditions
  set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q. This discussion
  should be read in conjunction with the Financial Statements and Combined Notes
  to Condensed Consolidated Financial Statements included in Item 1 above, and
  with the section entitled "Review of the Financial Condition and Results of
  Operations" in PPL Montana's Annual Report to the SEC on Form 10-K for
  the year ended December 31, 2001. Terms and abbreviations appearing in Management's
  Discussion and Analysis of Financial Condition and Results of Operations are
  explained in the glossary.



Results of Operations



The following discussion explains significant changes in principal
  items on the Statement of Income, comparing the three months ended March 31,
  2002, to the comparable period in 2001.



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 are not necessarily indicative of results
  or trends for the year.



Earnings



Net income decreased by $64 million for the three months ended
  March 31, 2002, compared with the same period in 2001, primarily due to lower
  wholesale prices in the western U.S. This earnings decline was partially offset
  by the increased volume of wholesale energy sales in the western U.S.



Operating Revenues



Wholesale energy marketing and trading revenues decreased by
  $116 million during the three months ended March 31, 2002, compared with the
  same period in 2001. The decrease was primarily due to a decline in wholesale
  energy prices from the high prices experienced during the energy supply shortage
  in the western U.S. in the first half of 2001.



In June 2001, the FERC instituted a series of price controls
  designed to mitigate (or cap) prices in the entire western U.S. as a result
  of the California energy crisis. These price controls have had the effect of
  significantly lowering spot and forward energy prices in the western U.S. See
  Note 7 to the Financial Statements for further discussion on the California
  situation.



Operating Expense



Operating expenses decreased by $10 million during the three
  months ended March 31, 2002, compared with the same period in 2001. Operating
  expenses consist mainly of expenses for fuel, energy purchases, transmission
  tariffs, plant operations and maintenance, lease rental payments, and general
  and administrative expenses. This change was primarily due to decreased power
  costs in the first quarter of 2002, compared with the same period in 2001.



Generation increased by 57 million kWh during the three months
  ended March 31, 2002, compared with the same period in 2001. This increase was
  primarily the result of higher hydroelectric generation caused by improved water
  flows in the first quarter of 2002.



Critical Accounting Policies



PPL Montana's financial condition and results of operations
  are necessarily 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 or operations
  of PPL Montana, and require estimates or other judgments of matters inherently
  uncertain: price risk management, leasing and contingencies. See Item 7, "Review
  of the Financial Condition and the Results of Operations," in PPL Montana's
  Annual Report to the SEC on Form 10-K for the year ended December 31, 2001,
  for a discussion of each critical accounting policy.

---

PPL CORPORATION AND SUBSIDIARIES



Item 3. Quantitative and Qualitative Disclosures About
  Market Risk



Market Risk-Sensitive Instruments

PPL actively manages the market risk inherent in its commodity,
  debt, and foreign currency and equity positions, as detailed in Note 9 to the
  Financial Statements. PPL has a comprehensive risk management policy to manage
  the risk exposures related to counterparty credit, energy prices, interest rates
  and foreign currency exchange rates. An RMC comprised of senior officers oversees
  the risk management function. Nonetheless, adverse changes in commodity prices,
  interest rates, foreign currency exchange rates and equity prices may result
  in losses in earnings, cash flows and/or fair values. The forward-looking information
  presented below provides estimates of what may occur in the future, assuming
  certain adverse market conditions, due to reliance on model assumptions. Actual
  future results may differ materially from those presented. These disclosures
  are not precise indicators of expected future losses, but only indicators of
  reasonably possible losses.



Commodity Price Risk



PPL uses various methodologies to simulate forward price curves
  in the energy markets to estimate the size and probability of changes in market
  value resulting from commodity price movements. The methodologies require several
  key assumptions, including selection of confidence levels, the holding period
  of the commodity positions and the depth and applicability to future periods
  of historical commodity price information.



As of March 31, 2002, PPL estimated that a 10% adverse movement
  in market prices across all geographic areas and time periods would have decreased
  the value of its non-hedge portfolio by $25 million. A similar adverse movement
  in market prices would have decreased the value of its hedge portfolio by approximately
  $128 million at March 31, 2002. However, the change in the value of the hedge
  portfolio would have been offset by an increase in the value of the underlying
  commodity, the electricity generated. In addition to commodity price risk, PPL's
  commodity positions are also subject to operational and event risks including,
  among others, increases in load demand and forced outages at power plants.



PPL's risk management program is designed to manage the risks
  associated with market fluctuations in the price of electricity, natural gas,
  oil and emission allowances. PPL's risk management policy and programs include
  risk identification and risk limits management, with measurement and controls
  for daily monitoring. PPL has entered into forward, option and tolling contracts
  that require physical delivery of the commodity, as well as futures, exchange-for-physical
  transactions and other financial contracts (such as swap agreements where settlement
  is generally based on the difference between a fixed-price and an index-based
  price for the underlying commodity). PPL expects to continue to use these contracts.



PPL enters into contracts to hedge the impact of market fluctuations
  on PPL's energy-related assets, liabilities and other contractual arrangements.
  PPL also executes these 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.



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-rate interest rates in its debt portfolios, adjusting
  the duration of its debt portfolios and locking 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 losses in the
  fair value of PPL's debt portfolio due to changes in the absolute level of interest
  rates.



At March 31, 2002, PPL's potential annual exposure to increased
  interest expense, based on a 10% increase in interest rates, was estimated at
  $3 million.



PPL is also exposed to changes in the fair value of its debt
  portfolio. At March 31, 2002, 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 $117 million.



PPL utilizes various risk management instruments to reduce
  its exposure to adverse interest rate movements for future anticipated financings.
  While PPL is exposed to changes in the fair value of these instruments, they
  are designed such that an economic loss in value should generally be offset
  by interest rate savings at the time the future anticipated financing is completed.
  At March 31, 2002, 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 $6 million. See Note 9 to the Financial Statements
  for a discussion of financial derivative instruments outstanding at March 31,
  2002.



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.



During the first quarter of 2001, PPL entered into contracts
  for the forward purchase of 51 million euros to pay for certain equipment in
  2002 and 2003. The estimated value of these forward purchases as of March 31,
  2002, being the amount PPL would have to pay to terminate them, was $4 million.



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, 2002, 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 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, 2002, a hypothetical 10% increase in interest
  rates and a 10% decrease in equity prices would have resulted in an estimated
  $18 million reduction in the fair value of the trust assets.



PPL Electric's 1998 restructuring settlement agreement provides
  for the collection of authorized nuclear decommissioning costs through the CTC.
  Additionally, PPL Electric is permitted to seek recovery from customers of up
  to 96% of certain increases in these costs. Under the power supply agreements
  between PPL Electric and PPL EnergyPlus, these revenues are passed on to PPL
  EnergyPlus. Similarly, these revenues are passed on to PPL Susquehanna under
  a power supply agreement between PPL EnergyPlus and PPL Susquehanna. Therefore,
  PPL's securities price risk is expected to remain insignificant.

---

PPL ENERGY SUPPLY, LLC AND SUBSIDIARIES



Item 3. Quantitative and Qualitative Disclosures About
  Market Risk



Market Risk Sensitive Instruments



PPL Energy Supply actively manages the market risk inherent
  in its commodity, debt, and foreign currency and equity positions as detailed
  in Note 9 to the Financial Statements. PPL Energy Supply has a comprehensive
  risk management policy to manage the risk exposures related to counterparty
  credit, energy prices, interest rates and foreign currency exchange rates. An
  RMC comprised of senior officers of PPL oversees the risk management function.
  Nonetheless, adverse changes in commodity prices, interest rates, foreign currency
  exchange rates and equity prices may result in losses in earnings, cash flows
  and/or fair values. The forward-looking information presented below provides
  estimates of what may occur in the future, assuming certain adverse market conditions,
  due to reliance on model assumptions. Actual future results may differ materially
  from those presented. These disclosures are not precise indicators of expected
  future losses, but only indicators of reasonably possible losses.



Commodity Price Risk



PPL Energy Supply uses various methodologies to simulate forward
  price curves in the energy markets to estimate the size and probability of changes
  in market value resulting from commodity price movements. The methodologies
  require several key assumptions, including selection of confidence levels, the
  holding period of the commodity positions, and the depth and applicability to
  future periods of historical commodity price information.



As of March 31, 2002, 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 its non-hedge portfolio by $25 million. A
  similar adverse movement in market prices would have decreased the value of
  its hedge portfolio by approximately $128 million. However, the change in the
  value of the hedge portfolio would have been offset by an increase in the value
  of the underlying commodity, the electricity generated. In addition to commodity
  price risk, PPL Energy Supply's commodity positions are also subject to operational
  and event risks including, among others, increases in load demand and forced
  outages at power plants.



PPL Energy Supply's risk management program is designed to
  manage the risks associated with market fluctuations in the price of electricity,
  natural gas, oil and emission allowances. PPL Energy Supply's risk management
  policy and programs include risk identification and risk limits management,
  with measurement and controls for daily monitoring. PPL Energy Supply has entered
  into forward, option, and tolling contracts that require physical delivery of
  the commodity, as well as futures, exchange-for-physical transactions and other
  financial contracts (such as swap agreements where settlement is generally based
  on the difference between a fixed price and an index-based price for the underlying
  commodity). PPL Energy Supply expects the use of these contracts to be ongoing.



PPL Energy Supply enters into contracts to hedge the impact
  of market fluctuations on PPL Energy Supply's energy-related assets, liabilities
  and other contractual obligations. PPL Energy Supply also executes these contracts
  to take advantage of market opportunities. As a result, PPL Energy Supply may
  at times create a net open position in its portfolio that could result in significant
  losses if prices do not move in the manner or direction anticipated.



Commodity Price Risk - PLR Contract



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 for 2002 through 2009.



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 financial derivative products to adjust the mix of fixed and floating-rate
  interest rates in its debt portfolios, adjusting the duration of its debt portfolios
  and locking 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 losses in the fair value of PPL Energy Supply's debt
  portfolio due to changes in the absolute level of interest rates.



At March 31, 2002, PPL Energy Supply's potential annual exposure
  to increased interest expense, based on a 10% increase in interest rates, was
  estimated at $2 million.



PPL Energy Supply is also exposed to changes in the fair value
  of its debt portfolio. At March 31, 2002, 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 $12 million.



PPL utilizes various risk management instruments to reduce
  PPL Energy Supply's exposure to adverse interest rate movements for future anticipated
  financings. While PPL Energy Supply is exposed to changes in the fair value
  of these instruments, they are designed such that any economic loss in value
  should be offset by interest rate savings at the time the future anticipated
  financing is completed. At March 31, 2002, PPL Energy Supply had not entered
  into any such instruments.



See Note 9 to the Financial Statements for a discussion of
  financial derivative instruments outstanding at March 31, 2002.



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.



During the first quarter of 2001, PPL entered into contracts
  for the forward purchase of 51 million euros to pay for certain equipment in
  2002 and 2003. The estimated value of these forward purchases as of March 31,
  2002, being the amount PPL would have to pay to terminate them, was $4 million.

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, 2002, 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 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, 2002,
  a hypothetical 10% increase in interest rates and a 10% decrease in equity prices
  would have resulted in an estimated $18 million reduction in the fair value
  of the trust assets.



PPL Electric's 1998 restructuring settlement agreement provides
  for the collection of authorized nuclear decommissioning costs through the CTC.
  Additionally, PPL Electric is permitted to seek recovery from customers of up
  to 96% of certain increases in these costs. Under the power supply agreements
  between PPL Electric and PPL EnergyPlus, these revenues are passed on to PPL
  EnergyPlus. Similarly, these revenues are passed on to PPL Susquehanna under
  a power supply agreement between PPL EnergyPlus and PPL Susquehanna. Therefore,
  PPL Energy Supply's securities price risk is expected to remain insignificant.

---

PPL ELECTRIC UTILITIES CORPORATION
  AND SUBSIDIARIES



Item 3. Quantitative and Qualitative Disclosures About
  Market Risk



Market Risk Sensitive Instruments



Commodity Price Risk



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 for 2002 through 2009.



Interest Rate Risk



PPL Electric has issued debt to finance its operations, which
  increases its interest rate risk. PPL Electric's potential annual exposure to
  increased interest expense, based on a 10% increase in interest rates, was an
  insignificant amount at March 31, 2002.



PPL Electric is also exposed to changes in the fair value of
  its debt portfolio. At March 31, 2002 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 $56 million.

---

PPL MONTANA, LLC AND SUBSIDIARIES



Item 3. Quantitative and Qualitative Disclosures About Market
  Risk

Market Risk Sensitive Instruments



PPL Montana actively manages the market risk inherent in its
  business. PPL Montana has adopted a comprehensive risk management policy to
  manage risk exposures related to energy prices, and through PPL, interest rates
  and counterparty credit. An RMC comprised of senior officers of PPL oversees
  the risk management function. Nonetheless, adverse changes in commodity prices
  and interest rates may result in losses in earnings, cash flows and/or fair
  values. The forward-looking information presented below provides estimates of
  what may occur in the future, assuming certain adverse market conditions, due
  to reliance on model assumptions. As a result, actual future results may differ
  materially from those presented. These disclosures are not precise indicators
  of expected future losses, but only indicators of reasonably possible losses.



Commodity Price Risk



PPL Montana uses various methodologies to simulate forward
  price curves in the energy markets to estimate the size and probability of changes
  in market value resulting from commodity price movements. The methodologies
  require several key assumptions, including selection of confidence levels, the
  holding period of the commodity positions and the depth and applicability to
  future periods of historical commodity price information.



PPL Montana estimated that a 10% adverse movement in market
  prices across the markets PPL Montana operates in, and across all time periods,
  would have decreased the value of the hedge portfolio by approximately $68 million
  at March 31, 2002. A similar adverse movement in market prices would have decreased
  the value of the non-hedge portfolio by an insignificant amount at March 31,
  2002. However, the change in the value of the hedge portfolio would have been
  offset by an increase in the value of the underlying commodity, the electricity
  generated. In addition to commodity price risk, PPL Montana's commodity positions
  are also subject to operational and event risks including, among others, increases
  in load demand and forced outages at generating plants.



PPL Montana's risk management program is designed to manage
  the risks associated with market fluctuations in the price of electricity. PPL
  Montana's risk management policy and programs include risk identification and
  risk limits management, with measurement and controls for daily risk monitoring.
  PPL Montana has entered into forward contracts that require physical delivery
  of electricity and derivative financial instruments, consisting mainly of financial
  swaps where settlement is generally based on the difference between a fixed-price
  and an index-based price for the underlying commodity.



Interest Rate Risk



PPL Montana may use borrowings to provide funds for its operations.
  PPL Montana may utilize various financial derivative products and risk management
  techniques to adjust the mix of fixed and floating-rate interest rates in its
  debt portfolio and thereby reduce its exposure to adverse interest rate movements.
  PPL Montana had $30 million in borrowings outstanding as of March 31, 2002,
  and its interest rate risk was not significant.



---

PPL CORPORATIONPPL ENERGY SUPPLY, LLCPPL ELECTRIC UTILITIES CORPORATIONPPL MONTANA, LLC AND SUBSIDIARIES



PART II. OTHER INFORMATION



Item 1. Legal Proceedings



Reference is made to Item 3 "Legal Proceedings" in PPL's,
      PPL Energy Supply's, PPL Electric's and PPL Montana's Annual Report to the
      SEC on Form 10-K for the year ended December 31, 2001 and to the companies'
      "Notes to Condensed Consolidated Financial Statements" for additional
      information regarding various pending administrative and judicial proceedings
      involving regulatory, environmental and other matters.



|Item 6. Exhibits
      and Reports on Form 8-K
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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)                        
|                   |                                     
|                   | PPL Montana, LLC                    
|                   | (Registrant)                        
|                   |                                     
|                   |                                     
|                   |                                     
|                   |                                     
|Date: May 13, 2002 | /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                       
|                   | Treasurer                           
|                   | (PPL Energy Supply, LLC)            
|                   | (principal financial officer)       
|                   |                                     
|                   |                                     
|                   |                                     
|                   |                                     
|                   | /s/  Joseph J. McCabe               
|                   | Joseph J. McCabe                    
|                   | Vice President and Controller       
|                   | (PPL Electric Utilities Corporation)
|                   | (principal accounting officer)      
|                   |                                     
|                   |                                     
|                   |                                     
|                   |                                     
|                   | /s/  Craig D. Bartholomew           
|                   | Craig D. Bartholomew                
|                   | Controller                          
|                   | (PPL Montana, LLC)                  
|                   | (principal accounting officer)