**UNITED        STATES**

**SECURITIES        AND EXCHANGE COMMISSION**

**Washington,        DC 20549**

**Form        10-Q**

| [X]                        | QUARTERLY                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                  ACT OF                  1934 for the quarterly period ended June                  30, 2006             |
|----------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                       | 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 StreetAllentown,                  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 StreetAllentown,                  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 StreetAllentown,                  PA 18101-1179(610)                  774-5151 | 23-0959590                                                       |
|   |                                   |                                                                                                                                                                                                                                                        |                                                             |
|   |                                   |                                                                                                                                                                                                                                                        |                                                             |

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

|   |                                                | Large                  accelerated filer | Accelerated                  filer | Non-accelerated                  filer  |
|--------|-----------------------------------------------------|------------------------------------------|------------------------------------|-----------------------------------------|
|   | PPL                  Corporation                    | [                  X                  ]  | [     ]   | [     ]        |
|   | PPL                  Energy Supply, LLC             | [     ]         | [     ]   | [                  X                  ] |
|   | PPL                  Electric Utilities Corporation | [     ]         | [     ]   | [                  X                  ] |

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

|   | PPL                  Corporation                    | Common                  stock, $.01 par value, 380,987,067 shares outstanding at                  July 31, 2006.                                     |
|--------|-----------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                |                                                                                                                                                           |
|   | PPL                  Energy Supply, LLC             | PPL                  Corporation indirectly holds all of the membership interests in                  PPL Energy                  Supply, LLC.                 |
|   |                                                |                                                                                                                                                           |
|   | PPL                  Electric Utilities Corporation | Common                  stock, no par value, 66,368,056 shares outstanding and all held                  by PPL                  Corporation at July 31, 2006. |
|   |                                                |                                                                                                                                                           |

**This        document is available free of charge at the Investor Center on PPL's Web        site at        www.pplweb.com. However, information on this Web site does not constitute        a part        of this Form 10-Q.**

----

**PPL        CORPORATION**

**PPL        ENERGY SUPPLY, LLC**

**PPL        ELECTRIC UTILITIES CORPORATION**

|                                                                                                                                                                                     | Page                                                                                                                                             |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                     |                                                                                                                                             |
| GLOSSARY                  OF TERMS AND ABBREVIATIONS                                                                                                                                     | i                                                                                                                                                |
|                                                                                                                                                                                     |                                                                                                                                             |
| FORWARD-LOOKING                  INFORMATION                                                                                                                                             | 1                                                                                                                                                |
|                                                                                                                                                                                     |                                                                                                                                             |
| PART                  I. FINANCIAL INFORMATION                                                                                                                                           |                                                                                                                                             |
|                                                                                                                                                                                     | Item                  1. Financial Statements                                                                                                    |   |
|                                                                                                                                                                                     |                                                                                                                                             | **PPL                  Corporation and Subsidiaries** |   |
|                                                                                                                                                                                     |                                                                                                                                             |   | Condensed                  Consolidated                  Statements                  of Income | 2 |
|                                                                                                                                                                                     |                                                                                                                                             |   | Condensed Consolidated                  Statements of Cash Flows | 3 |
|                                                                                                                                                                                     |                                                                                                                                             |   | Condensed                  Consolidated                  Balance Sheets | 4 |
|                                                                                                                                                                                     |                                                                                                                                             | **PPL                  Energy Supply, LLC and Subsidiaries** |   |
|                                                                                                                                                                                     |                                                                                                                                             |   | Condensed Consolidated                  Statements of Income | 6 |
|                                                                                                                                                                                     |                                                                                                                                             |   | Condensed                  Consolidated                  Statements of Cash Flows | 7 |
|                                                                                                                                                                                     |                                                                                                                                             |   | Condensed                  Consolidated                  Balance Sheets | 8 |
|                                                                                                                                                                                     |                                                                                                                                             | **PPL                  Electric Utilities Corporation and Subsidiaries** |   |
|                                                                                                                                                                                     |                                                                                                                                             |   | Condensed                  Consolidated                  Statements of Income | 10 |
|                                                                                                                                                                                     |                                                                                                                                             |   | Condensed                  Consolidated                  Statements                  of Cash Flows | 11 |
|                                                                                                                                                                                     |                                                                                                                                             |   | Condensed                  Consolidated                  Balance Sheets | 12 |
|                                                                                                                                                                                     |                                                                                                                                             | **Combi****ned****N****otes**** ****t****o****C****o****nd****e****n****s****ed****C****o****nsolidated                  Financial Statements** | 14 |
|                                                                                                                                                                                     | Item                  2. Management's Discussion and Analysis of Financial Condition                  and Results                  of Operations |   |
|                                                                                                                                                                                     |                                                                                                                                             |   | PPL                  Corporation                  and Subsidiaries | 42 |
|                                                                                                                                                                                     |                                                                                                                                             |   | PPL                  Energy                  Supply,                  LLC and Subsidiaries | 55 |
|                                                                                                                                                                                     |                                                                                                                                             |   | PPL                  Electric Utilities                  Corporation                  and Subsidiaries | 66 |
|                                                                                                                                                                                     | Item                  3. Quantitative                  and Qualitative                  Disclosures About Market Risk                       | 70 |
|                                                                                                                                                                                     | Item                  4. Controls                  and                  Procedures                                                               | 70 |
|                                                                                                                                                                                     |                                                                                                                                             |
| PART                  II. OTHER INFORMATION                                                                                                                                              |                                                                                                                                             |
|                                                                                                                                                                                     | Item                  1.  Legal                  Proceedings                                                                           | 70 |
|                                                                                                                                                                                     | Item                  1A. Risk Factors                                                                                                           | 70 |
|                                                                                                                                                                                     | Item                  4. Submission of Matters to a Vote of Security Holders                                                                     | 71 |
|                                                                                                                                                                                     | Item                  6.                  Exhibits                                                                                               | 71 |
|                                                                                                                                                                                     |                                                                                                                                             |
| SIGNATURES                                                                                                                                                                               | 73                                                                                                                                               |
|                                                                                                                                                                                     |                                                                                                                                             |
| COMPUTATION                  OF RATIO OF EARNINGS TO FIXED CHARGES                                                                                                                       |                                                                                                                                             |
|                                                                                                                                                                                     |                                                                                                                                             |   | PPL                  Corporation                  and                  Subsidiaries | 74 |
|                                                                                                                                                                                     |                                                                                                                                             |   | PPL                  Energy Supply,                  LLC and Subsidiaries | 75 |
|                                                                                                                                                                                     |                                                                                                                                             |   | PPL                  Electric Utilities Corporation and                  Subsidiaries | 76 |
|                                                                                                                                                                                     |                                                                                                                                             |
| CERTIFICATES                  OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER                  PURSUANT                  TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 |                                                                                                                                             |
|                                                                                                                                                                                     |                                                                                                                                             |   | PPL                  Corporation | 77 |
|                                                                                                                                                                                     |                                                                                                                                             |   | PPL                  Energy Supply,                  LLC | 79 |
|                                                                                                                                                                                     |                                                                                                                                             |   | PPL                  Electric Utilities                  Corporation | 81 |
|                                                                                                                                                                                     |                                                                                                                                             |
| CERTIFICATES                  OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER                  PURSUANT                  TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 |                                                                                                                                             |
|                                                                                                                                                                                     |                                                                                                                                             |   | PPL                  Corporation | 83 |
|                                                                                                                                                                                     |                                                                                                                                             |   | PPL                  Energy                  Supply, LLC | 85 |
|                                                                                                                                                                                     |                                                                                                                                             |   | PPL                  Electric                  Utilities Corporation | 87 |

----

**GLOSSARY        OF TERMS AND ABBREVIATIONS**

***PPL        Corporation and its current and former        subsidiaries***

***Elfec***

***Emel***

***Hyder***

***PPL***
*** ***

***PPL        Capital Funding***

***PPL        Electric***
*** ***

***PPL        Energy Funding***

***PPL        EnergyPlus***

***PPL        Energy Supply***

***PPL        Gas Utilities***

***PPL        Generation***

***PPL        Global***

***PPL        Maine***

***PPL        Martins Creek***

***PPL        Montana***

***PPL        Services***

***PPL        Susquehanna***

***PPL        Transition Bond Company***

***SIUK        Capital Trust I***

***WPD***

***WPD        LLP***

***WPD***
**(South        Wales)**

***WPD***
**(South        West)**

***WPDH        Limited***

***WPDL***

***Other        terms and abbreviations***

**£**

***2005        Form 10-K***

***AFUDC***

***APA***

***ARO***

***Bcf***

***Clean        Air Act***

***CTC***

***Customer        Choice Act***
*** ***

***DEP***

***DOE***

***EITF***

***EMF***

***EPA***

***EPS***

***FASB***
** **

***FERC***

***FIN***

***Fitch***

***FSP***

***GWh***

***IRS***
*** ***

***ISO***

***ITC***

***LIBOR***
** **
** **

***Montana        Power***

***Moody's***

***MW***

***MWh***

***NorthWestern***

***NRC***

***NUGs***
* *

***NYMEX***

***PCB***

***PJM***
*** ***

***PLR***

***PP&E***
*** ***

***PUC***
*** ***

***PUC        Final Order***

***PUHCA***

***PURPA***
*** ***

***Regulation        S-X***

***SEC***

***SFAS***

***S&P***

***Superfund***

***Synfuel        projects***

***Tolling        agreement***
*** ***

----

**FORWARD-LOOKING        INFORMATION**

| · | market                  demand and prices for energy, capacity and fuel;                                                                                                                                                                                                       |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | market                  prices for crude oil and the potential impact on synthetic fuel                  operations, synthetic fuel purchases from third parties and the                  phase-out                  of synthetic fuel tax credits;                            |
| · | weather                  conditions affecting generation production, customer energy usage                  and                  operating costs;                                                                                                                              |
| · | competition                  in retail and wholesale power markets;                                                                                                                                                                                                            |
| · | liquidity                  of wholesale power markets;                                                                                                                                                                                                                         |
| · | the                  effect of any business or industry restructuring;                                                                                                                                                                                                         |
| · | the                  profitability and liquidity, including access to capital markets                  and                  credit facilities, of PPL and its subsidiaries;                                                                                                    |
| · | new                  accounting requirements or new interpretations or applications                  of existing                  requirements;                                                                                                                                |
| · | operation                  and availability of existing generation facilities and operating                  costs;                                                                                                                                                            |
| · | transmission                  and distribution system conditions and operating costs;                                                                                                                                                                                          |
| · | current                  and future environmental conditions and requirements and the related                  costs                  of compliance, including environmental capital expenditures and                  emission                  allowance and other expenses; |
| · | significant                  delays in the planned installation of pollution control equipment                  at                  certain coal-fired generating units in Pennsylvania due to weather                  conditions, contractor performance or other reasons;   |
| · | market                  prices of commodity inputs for ongoing capital                  expenditures;                                                                                                                                                                          |

| · | collective                  labor bargaining negotiations;                                                                                                                                                            |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | development                  of new projects, markets and technologies;                                                                                                                                               |
| · | performance                  of new ventures;                                                                                                                                                                         |
| · | asset                  acquisitions and dispositions;                                                                                                                                                                 |
| · | political,                  regulatory or economic conditions in states, regions or countries                  where                  PPL or its subsidiaries conduct business;                                       |
| · | any                  impact of hurricanes or other severe weather on PPL and its subsidiaries,                  including any impact on fuel prices;                                                                  |
| · | receipt                  of necessary governmental permits, approvals and rate relief;                                                                                                                                |
| · | new                  state, federal or foreign legislation, including new tax legislation;                                                                                                                            |
| · | state,                  federal and foreign regulatory developments;                                                                                                                                                  |
| · | any                  impact of state, federal or foreign investigations applicable to                  PPL and                  its subsidiaries and the energy industry;                                             |
| · | capital                  market conditions, including changes in interest rates, and decisions                  regarding capital structure;                                                                          |
| · | stock                  price performance of PPL;                                                                                                                                                                      |
| · | the                  market prices of equity securities and the impact on pension costs                  and                  resultant cash funding requirements for defined benefit pension                  plans; |
| · | securities                  and credit ratings;                                                                                                                                                                       |
| · | foreign                  currency exchange rates;                                                                                                                                                                     |
| · | the                  outcome of litigation against PPL and its subsidiaries;                                                                                                                                          |
| · | potential                  effects of threatened or actual terrorism or war or other hostilities;                  and                                                                                                |
| · | the                  commitments and liabilities of PPL and its                  subsidiaries.                                                                                                                        |

----

| **Part                  I. FINANCIAL INFORMATION**                                                                                                                                    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Item                  1. Financial Statements**                                                                                                                                     |
|                                                                                                                                                                                  |
| **CONDENSED                  CONSOLIDATED STATEMENTS OF INCOME**                                                                                                                      |
| **PPL                  Corporation and Subsidiaries**                                                                                                                                 |
| (Unaudited)                                                                                                                                                                           |
| *(Millions                  of Dollars, except per share data)*                                                                                                                       |
|                                                                                                                                                                                  |   | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June                  30,** |
|                                                                                                                                                                                  |   | **2006** |   | **2005** |   | **2006** |   | **2005** |
| **Operating                  Revenues**                                                                                                                                               |   |   |   |   |   |   |   |   |
| Utility                                                                                                                                                                               |   | **$** | **1,071** |   |   | $ | 1,016 |   |   | **$** | **2,303** |   |   | $ | 2,167 |   |
| Unregulated                  retail electric                                                                                                                                          |   |   | **20** |   |   |   | 23 |   |   |   | **45** |   |   |   | 48 |   |
| Wholesale                  energy marketing                                                                                                                                           |   |   | **383** |   |   |   | 263 |   |   |   | **718** |   |   |   | 529 |   |
| Net                  energy trading margins                                                                                                                                           |   |   | **1** |   |   |   | (2 | ) |   |   | **11** |   |   |   | 14 |   |
| Energy                  related businesses                                                                                                                                            |   |   | **167** |   |   |   | 167 |   |   |   | **346** |   |   |   | 307 |   |
| Total                                                                                                                                                                                 |   |   | **1,642** |   |   |   | 1,467 |   |   |   | **3,423** |   |   |   | 3,065 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Operating                  Expenses**                                                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operation                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fuel                                                                                                                                                                                  |   |   | **212** |   |   |   | 164 |   |   |   | **453** |   |   |   | 409 |   |
| Energy                  purchases                                                                                                                                                     |   |   | **314** |   |   |   | 234 |   |   |   | **618** |   |   |   | 495 |   |
| Other                  operation and maintenance                                                                                                                                      |   |   | **351** |   |   |   | 334 |   |   |   | **684** |   |   |   | 699 |   |
| Amortization                  of recoverable transition costs                                                                                                                         |   |   | **63** |   |   |   | 59 |   |   |   | **135** |   |   |   | 128 |   |
| Depreciation                                                                                                                                                                          |   |   | **111** |   |   |   | 104 |   |   |   | **219** |   |   |   | 207 |   |
| Taxes,                  other than income                                                                                                                                             |   |   | **69** |   |   |   | 68 |   |   |   | **140** |   |   |   | 141 |   |
| Energy                  related businesses                                                                                                                                            |   |   | **145** |   |   |   | 170 |   |   |   | **308** |   |   |   | 316 |   |
| Total                                                                                                                                                                                 |   |   | **1,265** |   |   |   | 1,133 |   |   |   | **2,557** |   |   |   | 2,395 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Operating                  Income**                                                                                                                                                 |   |   | **377** |   |   |   | 334 |   |   |   | **866** |   |   |   | 670 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                  Income - net                                                                                                                                                   |   |   | **33** |   |   |   | 11 |   |   |   | **42** |   |   |   | 18 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  Expense                                                                                                                                                     |   |   | **121** |   |   |   | 125 |   |   |   | **240** |   |   |   | 260 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Income                  from Continuing Operations Before Income Taxes, Minority Interest                  and                  Dividends on Preferred Securities of a Subsidiary** |   |   | **289** |   |   |   | 220 |   |   |   | **668** |   |   |   | 428 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  Taxes                                                                                                                                                         |   |   | **83** |   |   |   | 40 |   |   |   | **178** |   |   |   | 74 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Minority                  Interest                                                                                                                                                    |   |   | **2** |   |   |   | 2 |   |   |   | **4** |   |   |   | 4 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends                  on Preferred Securities of a Subsidiary                                                                                                                    |   |   | **4** |   |   |   |   |   |   |   | **5** |   |   |   | 1 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Income                  from Continuing Operations**                                                                                                                                |   |   | **200** |   |   |   | 178 |   |   |   | **481** |   |   |   | 349 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss                  from Discontinued Operations (net of income taxes)                                                                                                              |   |   | **19** |   |   |   | 50 |   |   |   | **20** |   |   |   | 53 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Net                  Income**                                                                                                                                                       |   | **$** | **181** |   |   | $ | 128 |   |   | **$** | **461** |   |   | $ | 296 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Earnings                  Per Share of Common Stock: (a)**                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  from Continuing Operations:                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                                                                                                 |   | **$** | **0.53** |   |   | $ | 0.47 |   |   | **$** | **1.27** |   |   | $ | 0.92 |   |
| Diluted                                                                                                                                                                               |   |   | **0.52** |   |   |   | 0.46 |   |   |   | **1.25** |   |   |   | 0.91 |   |
| Net                  income:                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                                                                                                 |   | **$** | **0.48** |   |   | $ | 0.34 |   |   | **$** | **1.21** |   |   | $ | 0.78 |   |
| Diluted                                                                                                                                                                               |   |   | **0.47** |   |   |   | 0.33 |   |   |   | **1.19** |   |   |   | 0.77 |   |
|                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Dividends                  Declared per Share of Common Stock (a)**                                                                                                                 |   | **$** | **0.275** |   |   | $ | 0.23 |   |   | **$** | **0.55** |   |   | $ | 0.46 |   |
|                                                                                                                                                                                  |

| (a) |   | Data                  for 2005 have been adjusted to reflect PPL's 2-for-1 common stock                  split                  completed in August 2005. See Note 4 to the Financial                  Statements. |
|-----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

----

| **CONDENSED                  CONSOLIDATED STATEMENTS OF CASH FLOWS**                                                                                                                          |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PPL                  Corporation and Subsidiaries**                                                                                                                                         |
| (Unaudited)                                                                                                                                                                                   |
| *(Millions                  of Dollars)*                                                                                                                                                      |
|                                                                                                                                                                                          |   | **Six                  Months Ended****June                  30,** |
|                                                                                                                                                                                          |   | **2006** |   | **2005** |
| **Cash                  Flows from Operating Activities**                                                                                                                                     |   |   |   |   |   |   |   |   |
| Net                  income                                                                                                                                                                   |   | **$** | **461** |   |   | $ | 296 |   |
| Adjustments                  to reconcile net income to net cash provided by operating                  activities                                                                            |   |   |   |   |   |   |   |   |
| Pre-tax                  loss from the sale of the Sundance plant                                                                                                                             |   |   |   |   |   |   | 72 |   |
| Pre-tax                  loss from the sale of interest in the Griffith plant                                                                                                                 |   |   | **40** |   |   |   |   |   |
| Depreciation                                                                                                                                                                                  |   |   | **219** |   |   |   | 211 |   |
| Stock                  compensation expense                                                                                                                                                   |   |   | **19** |   |   |   | 27 |   |
| Amortization                  - recoverable transition costs and other                                                                                                                        |   |   | **151** |   |   |   | 136 |   |
| Pension                  expense                                                                                                                                                              |   |   | **23** |   |   |   | 14 |   |
| Pension                  funding                                                                                                                                                              |   |   | **(41** | **)** |   |   | (19 | ) |
| Deferred                  income tax benefits and investment tax credits                                                                                                                      |   |   | **(51** | **)** |   |   | (31 | ) |
| Accrual                  for PJM billing dispute                                                                                                                                              |   |   |   |   |   |   | 47 |   |
| Unrealized                  gain on derivatives and other hedging activities                                                                                                                  |   |   | **(53** | **)** |   |   | (6 | ) |
| Other                                                                                                                                                                                         |   |   | **6** |   |   |   | 12 |   |
| Change                  in current assets and current liabilities                                                                                                                             |   |   |   |   |   |   |   |   |
| Accounts                  receivable                                                                                                                                                          |   |   | **(22** | **)** |   |   | (85 | ) |
| Accounts                  payable                                                                                                                                                             |   |   | **(44** | **)** |   |   | 23 |   |
| Fuel,                  materials and supplies                                                                                                                                                 |   |   | **(27** | **)** |   |   | 12 |   |
| Other                                                                                                                                                                                         |   |   | **(5** | **)** |   |   | (36 | ) |
| Other                  operating activities                                                                                                                                                   |   |   |   |   |   |   |   |   |
| Other                  assets                                                                                                                                                                 |   |   | **(13** | **)** |   |   | 3 |   |
| Other                  liabilities                                                                                                                                                            |   |   | **32** |   |   |   | (25 | ) |
| Net                  cash provided by operating activities                                                                                                                                    |   |   | **695** |   |   |   | 651 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Cash                  Flows from Investing Activities**                                                                                                                                     |   |   |   |   |   |   |   |   |
| Expenditures                  for property, plant and equipment                                                                                                                               |   |   | **(478** | **)** |   |   | (359 | ) |
| Proceeds                  from the sale of the Sundance plant                                                                                                                                 |   |   |   |   |   |   | 190 |   |
| Proceeds                  from the sale of interest in the Griffith plant                                                                                                                     |   |   | **115** |   |   |   |   |   |
| Purchases                  of emission allowances                                                                                                                                             |   |   | **(60** | **)** |   |   | (82 | ) |
| Proceeds                  from the sale of emission allowances                                                                                                                                |   |   | **35** |   |   |   | 49 |   |
| Purchases                  of nuclear decommissioning trust investments                                                                                                                       |   |   | **(133** | **)** |   |   | (96 | ) |
| Proceeds                  from the sale of nuclear decommissioning trust investments                                                                                                          |   |   | **125** |   |   |   | 88 |   |
| Purchases                  of other marketable securities                                                                                                                                     |   |   | **(167** | **)** |   |   |   |   |
| Proceeds                  from the sale of other marketable securities                                                                                                                        |   |   | **158** |   |   |   | 66 |   |
| Net                  increase in restricted cash                                                                                                                                              |   |   | **(5** | **)** |   |   | (49 | ) |
| Other                  investing activities                                                                                                                                                   |   |   | **13** |   |   |   | (7 | ) |
| Net                  cash used in investing activities                                                                                                                                        |   |   | **(397** | **)** |   |   | (200 | ) |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Cash                  Flows from Financing Activities**                                                                                                                                     |   |   |   |   |   |   |   |   |
| Issuance                  of common stock                                                                                                                                                     |   |   | **7** |   |   |   | 33 |   |
| Issuance                  of long-term debt                                                                                                                                                   |   |   | **300** |   |   |   | 224 |   |
| Issuance                  of preference stock, net of issuance costs                                                                                                                          |   |   | **245** |   |   |   |   |   |
| Retirement                  of long-term debt                                                                                                                                                 |   |   | **(563** | **)** |   |   | (907 | ) |
| Payment                  of common stock dividends                                                                                                                                            |   |   | **(200** | **)** |   |   | (165 | ) |
| Net                  (decrease) increase in short-term debt                                                                                                                                   |   |   | **(171** | **)** |   |   | 128 |   |
| Other                  financing activities                                                                                                                                                   |   |   | **(4** | **)** |   |   | (17 | ) |
| Net                  cash used in financing activities                                                                                                                                        |   |   | **(386** | **)** |   |   | (704 | ) |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Effect                  of Exchange Rates on Cash and Cash Equivalents**                                                                                                                    |   |   | **1** |   |   |   | 3 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Net                  Decrease in Cash and Cash Equivalents**                                                                                                                                |   |   | **(87** | **)** |   |   | (250 | ) |
| Cash                  and Cash Equivalents at Beginning of Period                                                                                                                             |   |   | **555** |   |   |   | 616 |   |
| Cash                  and Cash Equivalents at End of Period                                                                                                                                   |   | **$** | **468** |   |   | $ | 366 |   |
|                                                                                                                                                                                          |
| *The                  accompanying Notes to Condensed Consolidated Financial Statements                  are an                  integral part of the financial                  statements.* |

----

| **CONDENSED                  CONSOLIDATED BALANCE SHEETS**                                                                                                                                    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PPL                  Corporation and Subsidiaries**                                                                                                                                         |
| (Unaudited)                                                                                                                                                                                   |
| *(Millions                  of Dollars)*                                                                                                                                                      |
|                                                                                                                                                                                          |   | **June                  30,****2006** |   | **December                  31,****2005** |
| **Assets**                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Current                  Assets**                                                                                                                                                           |   |   |   |   |   |   |   |   |
| Cash                  and cash equivalents                                                                                                                                                    |   | **$** | **468** |   |   | $ | 555 |   |
| Restricted                  cash                                                                                                                                                              |   |   | **101** |   |   |   | 93 |   |
| Accounts                  receivable (less reserve: 2006, $73; 2005, $87)                                                                                                                     |   |   | **579** |   |   |   | 544 |   |
| Unbilled                  revenues                                                                                                                                                            |   |   | **436** |   |   |   | 479 |   |
| Fuel,                  materials and supplies                                                                                                                                                 |   |   | **373** |   |   |   | 346 |   |
| Prepayments                                                                                                                                                                                   |   |   | **117** |   |   |   | 53 |   |
| Deferred                  income taxes                                                                                                                                                        |   |   | **186** |   |   |   | 192 |   |
| Price                  risk management assets                                                                                                                                                 |   |   | **537** |   |   |   | 488 |   |
| Other                  acquired intangibles                                                                                                                                                   |   |   | **146** |   |   |   | 50 |   |
| Other                                                                                                                                                                                         |   |   | **96** |   |   |   | 110 |   |
| Total                  Current Assets                                                                                                                                                         |   |   | **3,039** |   |   |   | 2,910 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Investments**                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Investment                  in unconsolidated affiliates - at equity                                                                                                                          |   |   | **48** |   |   |   | 56 |   |
| Nuclear                  plant decommissioning trust funds                                                                                                                                    |   |   | **460** |   |   |   | 444 |   |
| Other                                                                                                                                                                                         |   |   | **8** |   |   |   | 8 |   |
| Total                  Investments                                                                                                                                                            |   |   | **516** |   |   |   | 508 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Property,                  Plant and Equipment**                                                                                                                                            |   |   |   |   |   |   |   |   |
| Electric                  plant in service                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Transmission                  and distribution                                                                                                                                                |   |   | **8,403** |   |   |   | 7,984 |   |
| Generation                                                                                                                                                                                    |   |   | **8,671** |   |   |   | 8,761 |   |
| General                                                                                                                                                                                       |   |   | **663** |   |   |   | 646 |   |
|                                                                                                                                                                                          |   |   | **17,737** |   |   |   | 17,391 |   |
| Construction                  work in progress                                                                                                                                                |   |   | **391** |   |   |   | 259 |   |
| Nuclear                  fuel                                                                                                                                                                 |   |   | **307** |   |   |   | 327 |   |
| Electric                  plant                                                                                                                                                               |   |   | **18,435** |   |   |   | 17,977 |   |
| Gas                  and oil plant                                                                                                                                                            |   |   | **357** |   |   |   | 349 |   |
| Other                  property                                                                                                                                                               |   |   | **299** |   |   |   | 289 |   |
|                                                                                                                                                                                          |   |   | **19,091** |   |   |   | 18,615 |   |
| Less:                  accumulated depreciation                                                                                                                                               |   |   | **7,858** |   |   |   | 7,699 |   |
| Total                  Property, Plant and Equipment                                                                                                                                          |   |   | **11,233** |   |   |   | 10,916 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Regulatory                  and Other Noncurrent Assets**                                                                                                                                   |   |   |   |   |   |   |   |   |
| Recoverable                  transition costs                                                                                                                                                 |   |   | **1,030** |   |   |   | 1,165 |   |
| Goodwill                                                                                                                                                                                      |   |   | **1,110** |   |   |   | 1,070 |   |
| Other                  acquired intangibles                                                                                                                                                   |   |   | **346** |   |   |   | 412 |   |
| Price                  risk management assets                                                                                                                                                 |   |   | **203** |   |   |   | 84 |   |
| Other                                                                                                                                                                                         |   |   | **862** |   |   |   | 861 |   |
| Total                  Regulatory and Other Noncurrent Assets                                                                                                                                 |   |   | **3,551** |   |   |   | 3,592 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Total                  Assets**                                                                                                                                                             |   | **$** | **18,339** |   |   | $ | 17,926 |   |
|                                                                                                                                                                                          |
| *The                  accompanying Notes to Condensed Consolidated Financial Statements                  are an                  integral part of the financial                  statements.* |

----

| **CONDENSED                  CONSOLIDATED BALANCE SHEETS**                                                                                                                                    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PPL                  Corporation and Subsidiaries**                                                                                                                                         |
| (Unaudited)                                                                                                                                                                                   |
| *(Millions                  of Dollars)*                                                                                                                                                      |
|                                                                                                                                                                                          |   | **June                  30,****2006** |   | **December                  31,****2005** |
| **Liabilities                  and Equity**                                                                                                                                                   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Current                  Liabilities**                                                                                                                                                      |   |   |   |   |   |   |   |   |
| Short-term                  debt                                                                                                                                                              |   | **$** | **44** |   |   | $ | 214 |   |
| Long-term                  debt                                                                                                                                                               |   |   | **931** |   |   |   | 1,126 |   |
| Accounts                  payable                                                                                                                                                             |   |   | **505** |   |   |   | 542 |   |
| Above                  market NUG contracts                                                                                                                                                   |   |   | **67** |   |   |   | 70 |   |
| Taxes                                                                                                                                                                                         |   |   | **221** |   |   |   | 168 |   |
| Interest                                                                                                                                                                                      |   |   | **113** |   |   |   | 112 |   |
| Dividends                                                                                                                                                                                     |   |   | **110** |   |   |   | 96 |   |
| Price                  risk management liabilities                                                                                                                                            |   |   | **543** |   |   |   | 533 |   |
| Other                                                                                                                                                                                         |   |   | **433** |   |   |   | 479 |   |
| Total                  Current Liabilities                                                                                                                                                    |   |   | **2,967** |   |   |   | 3,340 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Long-term                  Debt**                                                                                                                                                           |   |   | **5,919** |   |   |   | 5,955 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Long-term                  Debt with Affiliate Trust**                                                                                                                                      |   |   | **89** |   |   |   | 89 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Deferred                  Credits and Other Noncurrent Liabilities**                                                                                                                        |   |   |   |   |   |   |   |   |
| Deferred                  income taxes and investment tax credits                                                                                                                             |   |   | **2,272** |   |   |   | 2,197 |   |
| Price                  risk management liabilities                                                                                                                                            |   |   | **564** |   |   |   | 541 |   |
| Accrued                  pension obligations                                                                                                                                                  |   |   | **377** |   |   |   | 374 |   |
| Asset                  retirement obligations                                                                                                                                                 |   |   | **309** |   |   |   | 298 |   |
| Above                  market NUG contracts                                                                                                                                                   |   |   | **103** |   |   |   | 136 |   |
| Other                                                                                                                                                                                         |   |   | **492** |   |   |   | 471 |   |
| Total                  Deferred Credits and Other Noncurrent Liabilities                                                                                                                      |   |   | **4,117** |   |   |   | 4,017 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Commitments                  and Contingent Liabilities (Note 11)**                                                                                                                         |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Minority                  Interest**                                                                                                                                                        |   |   | **56** |   |   |   | 56 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Preferred                  Securities of a Subsidiary**                                                                                                                                     |   |   | **301** |   |   |   | 51 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Shareowners'                  Common Equity**                                                                                                                                               |   |   |   |   |   |   |   |   |
| Common                  stock - $0.01 par value (a)                                                                                                                                           |   |   | **4** |   |   |   | 4 |   |
| Capital                  in excess of par value (b)                                                                                                                                           |   |   | **2,786** |   |   |   | 3,602 |   |
| Treasury                  stock (a) (b)                                                                                                                                                       |   |   |   |   |   |   | (838 | ) |
| Earnings                  reinvested                                                                                                                                                          |   |   | **2,433** |   |   |   | 2,182 |   |
| Accumulated                  other comprehensive loss                                                                                                                                         |   |   | **(333** | **)** |   |   | (532 | ) |
| Total                  Shareowners' Common Equity                                                                                                                                             |   |   | **4,890** |   |   |   | 4,418 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Total                  Liabilities and Equity**                                                                                                                                             |   | **$** | **18,339** |   |   | $ | 17,926 |   |
|                                                                                                                                                                                          |
| (a)                                                                                                                                                                                           |   | 780                  million shares authorized; 381 million shares issued and outstanding                  at                  June 30, 2006, and 380 million shares issued and outstanding, excluding                  62                  million shares held as treasury stock, at December 31,                  2005. |
| (b)                                                                                                                                                                                           |   | See                  Note 2 for additional information on the retirement of all treasury                  stock                  in 2006. |
|                                                                                                                                                                                          |
| *The                  accompanying Notes to Condensed Consolidated Financial Statements                  are an                  integral part of the financial                  statements.* |

----

| **CONDENSED                  CONSOLIDATED STATEMENTS OF INCOME**                                                                                                                              |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PPL                  Energy Supply, LLC and Subsidiaries**                                                                                                                                  |
| (Unaudited)                                                                                                                                                                                   |
| *(Millions                  of Dollars)*                                                                                                                                                      |
|                                                                                                                                                                                          |   | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June                  30,** |
|                                                                                                                                                                                          |   | **2006** |   | **2005** |   | **2006** |   | **2005** |
| **Operating                  Revenues**                                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Wholesale                  energy marketing                                                                                                                                                   |   | **$** | **383** |   |   | $ | 263 |   |   | **$** | **718** |   |   | $ | 529 |   |
| Wholesale                  energy marketing to affiliate                                                                                                                                      |   |   | **395** |   |   |   | 364 |   |   |   | **841** |   |   |   | 779 |   |
| Utility                                                                                                                                                                                       |   |   | **310** |   |   |   | 284 |   |   |   | **633** |   |   |   | 577 |   |
| Unregulated                  retail electric                                                                                                                                                  |   |   | **20** |   |   |   | 23 |   |   |   | **45** |   |   |   | 48 |   |
| Net                  energy trading margins                                                                                                                                                   |   |   | **1** |   |   |   | (2 | ) |   |   | **11** |   |   |   | 14 |   |
| Energy                  related businesses                                                                                                                                                    |   |   | **158** |   |   |   | 161 |   |   |   | **329** |   |   |   | 295 |   |
| Total                                                                                                                                                                                         |   |   | **1,267** |   |   |   | 1,093 |   |   |   | **2,577** |   |   |   | 2,242 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Operating                  Expenses**                                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operation                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fuel                                                                                                                                                                                          |   |   | **184** |   |   |   | 142 |   |   |   | **352** |   |   |   | 334 |   |
| Energy                  purchases                                                                                                                                                             |   |   | **266** |   |   |   | 184 |   |   |   | **517** |   |   |   | 357 |   |
| Energy                  purchases from affiliate                                                                                                                                              |   |   | **39** |   |   |   | 32 |   |   |   | **78** |   |   |   | 70 |   |
| Other                  operation and maintenance                                                                                                                                              |   |   | **255** |   |   |   | 242 |   |   |   | **499** |   |   |   | 502 |   |
| Depreciation                                                                                                                                                                                  |   |   | **76** |   |   |   | 73 |   |   |   | **151** |   |   |   | 144 |   |
| Taxes,                  other than income                                                                                                                                                     |   |   | **25** |   |   |   | 25 |   |   |   | **46** |   |   |   | 50 |   |
| Energy                  related businesses                                                                                                                                                    |   |   | **137** |   |   |   | 163 |   |   |   | **293** |   |   |   | 301 |   |
| Total                                                                                                                                                                                         |   |   | **982** |   |   |   | 861 |   |   |   | **1,936** |   |   |   | 1,758 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Operating                  Income**                                                                                                                                                         |   |   | **285** |   |   |   | 232 |   |   |   | **641** |   |   |   | 484 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                  Income - net                                                                                                                                                           |   |   | **35** |   |   |   | 11 |   |   |   | **45** |   |   |   | 19 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  Expense                                                                                                                                                             |   |   | **66** |   |   |   | 65 |   |   |   | **127** |   |   |   | 130 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  Expense with Affiliates                                                                                                                                             |   |   | **3** |   |   |   | 6 |   |   |   | **6** |   |   |   | 13 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Income                  from Continuing Operations Before****Income****Taxes and Minority Interest**                                                                                        |   |   | **251** |   |   |   | 172 |   |   |   | **553** |   |   |   | 360 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  Taxes                                                                                                                                                                 |   |   | **72** |   |   |   | 16 |   |   |   | **141** |   |   |   | 44 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Minority                  Interest                                                                                                                                                            |   |   | **2** |   |   |   | 2 |   |   |   | **4** |   |   |   | 4 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Income                  from Continuing Operations**                                                                                                                                        |   |   | **177** |   |   |   | 154 |   |   |   | **408** |   |   |   | 312 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss                  from Discontinued Operations (net of income taxes)                                                                                                                      |   |   | **19** |   |   |   | 50 |   |   |   | **20** |   |   |   | 53 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Net                  Income**                                                                                                                                                               |   | **$** | **158** |   |   | $ | 104 |   |   | **$** | **388** |   |   | $ | 259 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *The                  accompanying Notes to Condensed Consolidated Financial Statements                  are an                  integral part of the financial                  statements.* |

----

| **CONDENSED                  CONSOLIDATED STATEMENTS OF CASH FLOWS**                                                                                                                          |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PPL                  Energy Supply, LLC and Subsidiaries**                                                                                                                                  |
| (Unaudited)                                                                                                                                                                                   |
| *(Millions                  of Dollars)*                                                                                                                                                      |
|                                                                                                                                                                                          |   | **Six                  Months Ended****June                  30,** |
|                                                                                                                                                                                          |   | **2006** |   | **2005** |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Cash                  Flows from Operating Activities**                                                                                                                                     |   |   |   |   |   |   |   |   |
| Net                  income                                                                                                                                                                   |   | **$** | **388** |   |   | $ | 259 |   |
| Adjustments                  to reconcile net income to net cash provided by operating                  activities                                                                            |   |   |   |   |   |   |   |   |
| Pre-tax                  loss from the sale of the Sundance plant                                                                                                                             |   |   |   |   |   |   | 72 |   |
| Pre-tax                  loss from the sale of interest in the Griffith plant                                                                                                                 |   |   | **40** |   |   |   |   |   |
| Depreciation                                                                                                                                                                                  |   |   | **151** |   |   |   | 147 |   |
| Stock                  compensation expense                                                                                                                                                   |   |   | **13** |   |   |   | 18 |   |
| Amortization                  - energy commitments and other                                                                                                                                  |   |   | **3** |   |   |   | (6 | ) |
| Pension                  expense                                                                                                                                                              |   |   | **14** |   |   |   | 9 |   |
| Pension                  funding                                                                                                                                                              |   |   | **(41** | **)** |   |   | (19 | ) |
| Deferred                  income taxes and investment tax credits                                                                                                                             |   |   | **27** |   |   |   | 45 |   |
| Unrealized                  gain on derivatives and other hedging activities                                                                                                                  |   |   | **(58** | **)** |   |   | (5 | ) |
| Other                                                                                                                                                                                         |   |   | **2** |   |   |   | 11 |   |
| Change                  in current assets and current liabilities                                                                                                                             |   |   |   |   |   |   |   |   |
| Accounts                  receivable                                                                                                                                                          |   |   | **(26** | **)** |   |   | (61 | ) |
| Accounts                  payable                                                                                                                                                             |   |   | **(24** | **)** |   |   |   |   |
| Fuel,                  materials and supplies                                                                                                                                                 |   |   | **(35** | **)** |   |   | 2 |   |
| Other                                                                                                                                                                                         |   |   | **56** |   |   |   | (38 | ) |
| Other                  operating activities                                                                                                                                                   |   |   |   |   |   |   |   |   |
| Other                  assets                                                                                                                                                                 |   |   | **(15** | **)** |   |   | 4 |   |
| Other                  liabilities                                                                                                                                                            |   |   | **3** |   |   |   | (27 | ) |
| Net                  cash provided by operating activities                                                                                                                                    |   |   | **498** |   |   |   | 411 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Cash                  Flows from Investing Activities**                                                                                                                                     |   |   |   |   |   |   |   |   |
| Expenditures                  for property, plant and equipment                                                                                                                               |   |   | **(360** | **)** |   |   | (258 | ) |
| Proceeds                  from the sale of the Sundance plant                                                                                                                                 |   |   |   |   |   |   | 190 |   |
| Proceeds                  from the sale of interest in the Griffith plant                                                                                                                     |   |   | **115** |   |   |   |   |   |
| Purchases                  of emission allowances                                                                                                                                             |   |   | **(60** | **)** |   |   | (82 | ) |
| Proceeds                  from the sale of emission allowances                                                                                                                                |   |   | **35** |   |   |   | 49 |   |
| Purchases                  of nuclear decommissioning trust investments                                                                                                                       |   |   | **(133** | **)** |   |   | (96 | ) |
| Proceeds                  from the sale of nuclear decommissioning trust investments                                                                                                          |   |   | **125** |   |   |   | 88 |   |
| Purchases                  of other marketable securities                                                                                                                                     |   |   | **(66** | **)** |   |   |   |   |
| Proceeds                  from the sale of other marketable securities                                                                                                                        |   |   | **57** |   |   |   | 51 |   |
| Net                  (increase) decrease in restricted cash                                                                                                                                   |   |   | **(13** | **)** |   |   | 12 |   |
| Other                  investing activities                                                                                                                                                   |   |   | **10** |   |   |   | (11 | ) |
| Net                  cash used in investing activities                                                                                                                                        |   |   | **(290** | **)** |   |   | (57 | ) |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Cash                  Flows from Financing Activities**                                                                                                                                     |   |   |   |   |   |   |   |   |
| Issuance                  of long-term debt                                                                                                                                                   |   |   | **300** |   |   |   |   |   |
| Retirement                  of long-term debt                                                                                                                                                 |   |   | **(19** | **)** |   |   | (208 | ) |
| Distributions                  to Member                                                                                                                                                      |   |   | **(366** | **)** |   |   | (119 | ) |
| Contributions                  from Member                                                                                                                                                    |   |   | **116** |   |   |   |   |   |
| Net                  (decrease) increase in short-term debt                                                                                                                                   |   |   | **(171** | **)** |   |   | 83 |   |
| Net                  decrease in note payable to affiliate                                                                                                                                    |   |   | **(8** | **)** |   |   | (300 | ) |
| Other                  financing activities                                                                                                                                                   |   |   | **(6** | **)** |   |   | (3 | ) |
| Net                  cash used in financing activities                                                                                                                                        |   |   | **(154** | **)** |   |   | (547 | ) |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Effect                  of Exchange Rates on Cash and Cash Equivalents**                                                                                                                    |   |   | **1** |   |   |   | 3 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Net                  Increase (Decrease) in Cash and Cash Equivalents**                                                                                                                     |   |   | **55** |   |   |   | (190 | ) |
| Cash                  and Cash Equivalents at Beginning of Period                                                                                                                             |   |   | **227** |   |   |   | 357 |   |
| Cash                  and Cash Equivalents at End of Period                                                                                                                                   |   | **$** | **282** |   |   | $ | 167 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| *The                  accompanying Notes to Condensed Consolidated Financial Statements                  are an                  integral part of the financial                  statements.* |

----

| **CONDENSED****CONSOLIDATED                  BALANCE SHEETS**                                                                                                                                 |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PPL                  Energy Supply, LLC and Subsidiaries**                                                                                                                                  |
| (Unaudited)                                                                                                                                                                                   |
| *(Millions                  of Dollars)*                                                                                                                                                      |
|                                                                                                                                                                                          |   | **June                  30,****2006** |   | **December                  31,****2005** |
| **Assets**                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Current                  Assets**                                                                                                                                                           |   |   |   |   |   |   |   |   |
| Cash                  and cash equivalents                                                                                                                                                    |   | **$** | **282** |   |   | $ | 227 |   |
| Restricted                  cash                                                                                                                                                              |   |   | **50** |   |   |   | 39 |   |
| Accounts                  receivable (less reserve: 2006, $48; 2005, $65)                                                                                                                     |   |   | **334** |   |   |   | 291 |   |
| Unbilled                  revenues                                                                                                                                                            |   |   | **283** |   |   |   | 300 |   |
| Accounts                  receivable from affiliates                                                                                                                                          |   |   | **145** |   |   |   | 149 |   |
| Collateral                  on PLR energy supply to affiliate                                                                                                                                 |   |   | **300** |   |   |   | 300 |   |
| Fuel,                  materials and supplies                                                                                                                                                 |   |   | **330** |   |   |   | 295 |   |
| Prepayments                                                                                                                                                                                   |   |   | **34** |   |   |   | 39 |   |
| Deferred                  income taxes                                                                                                                                                        |   |   | **142** |   |   |   | 166 |   |
| Price                  risk management assets                                                                                                                                                 |   |   | **536** |   |   |   | 487 |   |
| Other                  acquired intangibles                                                                                                                                                   |   |   | **146** |   |   |   | 50 |   |
| Other                                                                                                                                                                                         |   |   | **48** |   |   |   | 41 |   |
| Total                  Current Assets                                                                                                                                                         |   |   | **2,630** |   |   |   | 2,384 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Investments**                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Investment                  in unconsolidated affiliates - at equity                                                                                                                          |   |   | **48** |   |   |   | 56 |   |
| Nuclear                  plant decommissioning trust funds                                                                                                                                    |   |   | **460** |   |   |   | 444 |   |
| Other                                                                                                                                                                                         |   |   | **4** |   |   |   | 3 |   |
| Total                  Investments                                                                                                                                                            |   |   | **512** |   |   |   | 503 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Property,                  Plant and Equipment**                                                                                                                                            |   |   |   |   |   |   |   |   |
| Electric                  plant in service                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Transmission                  and distribution                                                                                                                                                |   |   | **4,300** |   |   |   | 3,950 |   |
| Generation                                                                                                                                                                                    |   |   | **8,671** |   |   |   | 8,761 |   |
| General                                                                                                                                                                                       |   |   | **272** |   |   |   | 272 |   |
|                                                                                                                                                                                          |   |   | **13,243** |   |   |   | 12,983 |   |
| Construction                  work in progress                                                                                                                                                |   |   | **346** |   |   |   | 210 |   |
| Nuclear                  fuel                                                                                                                                                                 |   |   | **307** |   |   |   | 327 |   |
| Electric                  plant                                                                                                                                                               |   |   | **13,896** |   |   |   | 13,520 |   |
| Gas                  and oil plant                                                                                                                                                            |   |   | **63** |   |   |   | 64 |   |
| Other                  property                                                                                                                                                               |   |   | **203** |   |   |   | 198 |   |
|                                                                                                                                                                                          |   |   | **14,162** |   |   |   | 13,782 |   |
| Less:                  accumulated depreciation                                                                                                                                               |   |   | **5,985** |   |   |   | 5,871 |   |
| Total                  Property, Plant and Equipment                                                                                                                                          |   |   | **8,177** |   |   |   | 7,911 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Other                  Noncurrent Assets**                                                                                                                                                  |   |   |   |   |   |   |   |   |
| Goodwill                                                                                                                                                                                      |   |   | **1,055** |   |   |   | 1,015 |   |
| Other                  acquired intangibles                                                                                                                                                   |   |   | **214** |   |   |   | 283 |   |
| Price                  risk management assets                                                                                                                                                 |   |   | **186** |   |   |   | 80 |   |
| Other                                                                                                                                                                                         |   |   | **497** |   |   |   | 488 |   |
| Total                  Other Noncurrent Assets                                                                                                                                                |   |   | **1,952** |   |   |   | 1,866 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Total                  Assets**                                                                                                                                                             |   | **$** | **13,271** |   |   | $ | 12,664 |   |
|                                                                                                                                                                                          |
| *The                  accompanying Notes to Condensed Consolidated Financial Statements                  are an                  integral part of the financial                  statements.* |

----

| **CONDENSED****CONSOLIDATED                  BALANCE SHEETS**                                                                                                                                 |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PPL                  Energy Supply, LLC and Subsidiaries**                                                                                                                                  |
| (Unaudited)                                                                                                                                                                                   |
| *(Millions                  of Dollars)*                                                                                                                                                      |
|                                                                                                                                                                                          |   | **June                  30,****2006** |   | **December                  31,****2005** |
| **Liabilities                  and Equity**                                                                                                                                                   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Current                  Liabilities**                                                                                                                                                      |   |   |   |   |   |   |   |   |
| Short-term                  debt                                                                                                                                                              |   | **$** | **2** |   |   | $ | 172 |   |
| Note                  payable to affiliate                                                                                                                                                    |   |   |   |   |   |   | 8 |   |
| Long-term                  debt                                                                                                                                                               |   |   | **356** |   |   |   | 445 |   |
| Accounts                  payable                                                                                                                                                             |   |   | **439** |   |   |   | 445 |   |
| Accounts                  payable to affiliates                                                                                                                                               |   |   | **29** |   |   |   | 27 |   |
| Above                  market NUG contracts                                                                                                                                                   |   |   | **67** |   |   |   | 70 |   |
| Taxes                                                                                                                                                                                         |   |   | **147** |   |   |   | 72 |   |
| Interest                                                                                                                                                                                      |   |   | **85** |   |   |   | 79 |   |
| Deferred                  revenue on PLR energy supply to affiliate                                                                                                                           |   |   | **12** |   |   |   | 12 |   |
| Price                  risk management liabilities                                                                                                                                            |   |   | **523** |   |   |   | 519 |   |
| Other                                                                                                                                                                                         |   |   | **275** |   |   |   | 313 |   |
| Total                  Current Liabilities                                                                                                                                                    |   |   | **1,935** |   |   |   | 2,162 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Long-term                  Debt**                                                                                                                                                           |   |   | **3,926** |   |   |   | 3,506 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Long-term                  Debt with Affiliate Trust**                                                                                                                                      |   |   | **89** |   |   |   | 89 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Deferred                  Credits and Other Noncurrent Liabilities**                                                                                                                        |   |   |   |   |   |   |   |   |
| Deferred                  income taxes and investment tax credits                                                                                                                             |   |   | **1,278** |   |   |   | 1,157 |   |
| Price                  risk management liabilities                                                                                                                                            |   |   | **533** |   |   |   | 523 |   |
| Accrued                  pension obligations                                                                                                                                                  |   |   | **225** |   |   |   | 232 |   |
| Asset                  retirement obligations                                                                                                                                                 |   |   | **309** |   |   |   | 298 |   |
| Above                  market NUG contracts                                                                                                                                                   |   |   | **103** |   |   |   | 136 |   |
| Deferred                  revenue on PLR energy supply to affiliate                                                                                                                           |   |   | **29** |   |   |   | 35 |   |
| Other                                                                                                                                                                                         |   |   | **319** |   |   |   | 321 |   |
| Total                  Deferred Credits and Other Noncurrent Liabilities                                                                                                                      |   |   | **2,796** |   |   |   | 2,702 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Commitments                  and Contingent Liabilities (Note 11)**                                                                                                                         |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Minority                  Interest**                                                                                                                                                        |   |   | **56** |   |   |   | 56 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Member's                  Equity**                                                                                                                                                          |   |   | **4,469** |   |   |   | 4,149 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Total                  Liabilities and Equity**                                                                                                                                             |   | **$** | **13,271** |   |   | $ | 12,664 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| *The                  accompanying Notes to Condensed Consolidated Financial Statements                  are an                  integral part of the financial                  statements.* |

----

| **CONDENSED                  CONSOLIDATED STATEMENTS OF INCOME**                                                                                                                              |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PPL                  Electric Utilities Corporation and                  Subsidiaries**                                                                                                     |
| (Unaudited)                                                                                                                                                                                   |
| *(Millions                  of Dollars)*                                                                                                                                                      |
|                                                                                                                                                                                          |   | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June                  30,** |
|                                                                                                                                                                                          |   | **2006** |   | **2005** |   | **2006** |   | **2005** |
| **Operating                  Revenues**                                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Retail                  electric                                                                                                                                                              |   | **$** | **719** |   |   | $ | 696 |   |   | **$** | **1,531** |   |   | $ | 1,476 |   |
| Wholesale                  electric                                                                                                                                                           |   |   | **1** |   |   |   | 1 |   |   |   | **2** |   |   |   | 2 |   |
| Wholesale                  electric to affiliate                                                                                                                                              |   |   | **39** |   |   |   | 32 |   |   |   | **78** |   |   |   | 70 |   |
| Total                                                                                                                                                                                         |   |   | **759** |   |   |   | 729 |   |   |   | **1,611** |   |   |   | 1,548 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Operating                  Expenses**                                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operation                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Energy                  purchases                                                                                                                                                             |   |   | **49** |   |   |   | 50 |   |   |   | **102** |   |   |   | 138 |   |
| Energy                  purchases from affiliate                                                                                                                                              |   |   | **395** |   |   |   | 364 |   |   |   | **841** |   |   |   | 779 |   |
| Other                  operation and maintenance                                                                                                                                              |   |   | **96** |   |   |   | 87 |   |   |   | **185** |   |   |   | 191 |   |
| Amortization                  of recoverable transition costs                                                                                                                                 |   |   | **63** |   |   |   | 59 |   |   |   | **135** |   |   |   | 128 |   |
| Depreciation                                                                                                                                                                                  |   |   | **28** |   |   |   | 27 |   |   |   | **57** |   |   |   | 55 |   |
| Taxes,                  other than income                                                                                                                                                     |   |   | **45** |   |   |   | 43 |   |   |   | **94** |   |   |   | 90 |   |
| Total                                                                                                                                                                                         |   |   | **676** |   |   |   | 630 |   |   |   | **1,414** |   |   |   | 1,381 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Operating                  Income**                                                                                                                                                         |   |   | **83** |   |   |   | 99 |   |   |   | **197** |   |   |   | 167 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                  Income - net                                                                                                                                                           |   |   | **7** |   |   |   | 6 |   |   |   | **16** |   |   |   | 10 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  Expense                                                                                                                                                             |   |   | **36** |   |   |   | 42 |   |   |   | **74** |   |   |   | 93 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  Expense with Affiliate                                                                                                                                              |   |   | **4** |   |   |   | 3 |   |   |   | **8** |   |   |   | 5 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Income                  Before Income Taxes**                                                                                                                                               |   |   | **50** |   |   |   | 60 |   |   |   | **131** |   |   |   | 79 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  Taxes                                                                                                                                                                 |   |   | **16** |   |   |   | 24 |   |   |   | **45** |   |   |   | 27 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Net                  Income**                                                                                                                                                               |   |   | **34** |   |   |   | 36 |   |   |   | **86** |   |   |   | 52 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends                  on Preferred Securities                                                                                                                                            |   |   | **4** |   |   |   |   |   |   |   | **5** |   |   |   | 1 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Income                  Available to PPL**                                                                                                                                                  |   | **$** | **30** |   |   | $ | 36 |   |   | **$** | **81** |   |   | $ | 51 |   |
|                                                                                                                                                                                          |
| *The                  accompanying Notes to Condensed Consolidated Financial Statements                  are an                  integral part of the financial                  statements.* |

----

| **CONDENSED                  CONSOLIDATED STATEMENTS OF CASH FLOWS**                                                                                                                          |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PPL                  Electric Utilities Corporation and                  Subsidiaries**                                                                                                     |
| (Unaudited)                                                                                                                                                                                   |
| *(Millions                  of Dollars)*                                                                                                                                                      |
|                                                                                                                                                                                          |   | **Six                  Months Ended****June                  30,** |
|                                                                                                                                                                                          |   | **2006** |   | **2005** |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Cash                  Flows from Operating Activities**                                                                                                                                     |   |   |   |   |   |   |   |   |
| Net                  income                                                                                                                                                                   |   | **$** | **86** |   |   | $ | 52 |   |
| Adjustments                  to                  reconcile net income to net cash provided by operating                  activities                                                           |   |   |   |   |   |   |   |   |
| Depreciation                                                                                                                                                                                  |   |   | **57** |   |   |   | 55 |   |
| Stock                  compensation expense                                                                                                                                                   |   |   | **4** |   |   |   | 7 |   |
| Amortization                  - recoverable transition costs and other                                                                                                                        |   |   | **146** |   |   |   | 139 |   |
| Deferred                  income tax benefits and investment tax credits                                                                                                                      |   |   | **(6** | **)** |   |   | (14 | ) |
| Accrual                  for PJM billing dispute                                                                                                                                              |   |   |   |   |   |   | 47 |   |
| Change                  in current assets and current liabilities                                                                                                                             |   |   |   |   |   |   |   |   |
| Accounts                  receivable                                                                                                                                                          |   |   | **7** |   |   |   | (18 | ) |
| Accounts                  payable                                                                                                                                                             |   |   | **(36** | **)** |   |   | (42 | ) |
| Other                                                                                                                                                                                         |   |   | **(71** | **)** |   |   | (70 | ) |
| Other                  operating activities                                                                                                                                                   |   |   |   |   |   |   |   |   |
| Other                  assets                                                                                                                                                                 |   |   |   |   |   |   | (5 | ) |
| Other                  liabilities                                                                                                                                                            |   |   | **13** |   |   |   | 23 |   |
| Net                  cash provided by operating activities                                                                                                                                    |   |   | **200** |   |   |   | 174 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Cash                  Flows from Investing Activities**                                                                                                                                     |   |   |   |   |   |   |   |   |
| Expenditures                  for property, plant and equipment                                                                                                                               |   |   | **(97** | **)** |   |   | (85 | ) |
| Purchases                  of other marketable securities                                                                                                                                     |   |   | **(96** | **)** |   |   |   |   |
| Proceeds                  from the sale of other marketable securities                                                                                                                        |   |   | **96** |   |   |   | 10 |   |
| Net                  decrease (increase) in restricted cash                                                                                                                                   |   |   | **5** |   |   |   | (53 | ) |
| Other                  investing activities                                                                                                                                                   |   |   | **3** |   |   |   | 2 |   |
| Net                  cash used in investing activities                                                                                                                                        |   |   | **(89** | **)** |   |   | (126 | ) |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Cash                  Flows from Financing Activities**                                                                                                                                     |   |   |   |   |   |   |   |   |
| Issuance                  of preference stock, net of issuance costs                                                                                                                          |   |   | **245** |   |   |   |   |   |
| Issuance                  of long-term debt                                                                                                                                                   |   |   |   |   |   |   | 224 |   |
| Retirement                  of long-term debt                                                                                                                                                 |   |   | **(297** | **)** |   |   | (380 | ) |
| Repurchase                  of common stock from PPL                                                                                                                                          |   |   | **(200** | **)** |   |   |   |   |
| Payment                  of common stock dividends to PPL                                                                                                                                     |   |   | **(69** | **)** |   |   | (26 | ) |
| Net                  increase in short-term debt                                                                                                                                              |   |   |   |   |   |   | 45 |   |
| Other                  financing activities                                                                                                                                                   |   |   | **(1** | **)** |   |   | (7 | ) |
| Net                  cash used in financing activities                                                                                                                                        |   |   | **(322** | **)** |   |   | (144 | ) |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Net                  Decrease in Cash and Cash Equivalents**                                                                                                                                |   |   | **(211** | **)** |   |   | (96 | ) |
| Cash                  and Cash Equivalents at Beginning of Period                                                                                                                             |   |   | **298** |   |   |   | 151 |   |
| Cash                  and Cash Equivalents at End of Period                                                                                                                                   |   | **$** | **87** |   |   | $ | 55 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| *The                  accompanying Notes to Condensed Consolidated Financial Statements                  are an                  integral part of the financial                  statements.* |

----

| **CONDENSED                  CONSOLIDATED BALANCE SHEETS**                                                                                                                                    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PPL                  Electric Utilities Corporation and                  Subsidiaries**                                                                                                     |
| (Unaudited)                                                                                                                                                                                   |
| *(Millions                  of Dollars)*                                                                                                                                                      |
|                                                                                                                                                                                          |   | **June                  30,****2006** |   | **December                  31,****2005** |
| **Assets**                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Current                  Assets**                                                                                                                                                           |   |   |   |   |   |   |   |   |
| Cash                  and cash equivalents                                                                                                                                                    |   | **$** | **87** |   |   | $ | 298 |   |
| Restricted                  cash                                                                                                                                                              |   |   | **42** |   |   |   | 42 |   |
| Accounts                  receivable (less reserve: 2006, $22; 2005, $20)                                                                                                                     |   |   | **216** |   |   |   | 224 |   |
| Unbilled                  revenues                                                                                                                                                            |   |   | **150** |   |   |   | 174 |   |
| Accounts                  receivable from affiliates                                                                                                                                          |   |   | **8** |   |   |   | 10 |   |
| Note                  receivable from affiliate                                                                                                                                               |   |   | **300** |   |   |   | 300 |   |
| Prepayments                                                                                                                                                                                   |   |   | **70** |   |   |   | 4 |   |
| Prepayment                  on PLR energy supply from affiliate                                                                                                                               |   |   | **12** |   |   |   | 12 |   |
| Other                                                                                                                                                                                         |   |   | **100** |   |   |   | 87 |   |
| Total                  Current Assets                                                                                                                                                         |   |   | **985** |   |   |   | 1,151 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Property,                  Plant and Equipment**                                                                                                                                            |   |   |   |   |   |   |   |   |
| Electric                  plant in service                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Transmission                  and distribution                                                                                                                                                |   |   | **4,103** |   |   |   | 4,034 |   |
| General                                                                                                                                                                                       |   |   | **363** |   |   |   | 356 |   |
|                                                                                                                                                                                          |   |   | **4,466** |   |   |   | 4,390 |   |
| Construction                  work in progress                                                                                                                                                |   |   | **42** |   |   |   | 43 |   |
| Electric                  plant                                                                                                                                                               |   |   | **4,508** |   |   |   | 4,433 |   |
| Other                  property                                                                                                                                                               |   |   | **3** |   |   |   | 3 |   |
|                                                                                                                                                                                          |   |   | **4,511** |   |   |   | 4,436 |   |
| Less:                  accumulated depreciation                                                                                                                                               |   |   | **1,756** |   |   |   | 1,720 |   |
| Total                  Property, Plant and Equipment                                                                                                                                          |   |   | **2,755** |   |   |   | 2,716 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Regulatory                  and Other Noncurrent Assets**                                                                                                                                   |   |   |   |   |   |   |   |   |
| Recoverable                  transition costs                                                                                                                                                 |   |   | **1,030** |   |   |   | 1,165 |   |
| Acquired                  intangibles                                                                                                                                                         |   |   | **112** |   |   |   | 114 |   |
| Prepayment                  on PLR energy supply from affiliate                                                                                                                               |   |   | **29** |   |   |   | 35 |   |
| Other                                                                                                                                                                                         |   |   | **346** |   |   |   | 356 |   |
| Total                  Regulatory and Other Noncurrent Assets                                                                                                                                 |   |   | **1,517** |   |   |   | 1,670 |   |
|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| **Total                  Assets**                                                                                                                                                             |   | **$** | **5,257** |   |   | $ | 5,537 |   |
|                                                                                                                                                                                          |
| *The                  accompanying Notes to Condensed Consolidated Financial Statements                  are an                  integral part of the financial                  statements.* |

----

| **CONDENSED                  CONSOLIDATED BALANCE SHEETS**                                |
|-------------------------------------------------------------------------------------------|
| **PPL                  Electric Utilities Corporation and                  Subsidiaries** |
| (Unaudited)                                                                               |
| *(Millions                  of Dollars)*                                                  |
|                                                                                      |   | **June                  30,****2006** |   | **December                  31,****2005** |
| **Liabilities                  and Equity**                                               |   |   |   |   |   |   |   |   |
|                                                                                      |   |   |   |   |   |   |   |   |
| **Current                  Liabilities**                                                  |   |   |   |   |   |   |   |   |
| Short-term                  debt                                                          |   | **$** | **42** |   |   | $ | 42 |   |
| Long-term                  debt                                                           |   |   | **295** |   |   |   | 434 |   |
| Accounts                  payable                                                         |   |   | **38** |   |   |   | 42 |   |
| Accounts                  payable to affiliates                                           |   |   | **152** |   |   |   | 183 |   |
| Taxes                                                                                     |   |   | **61** |   |   |   | 76 |   |
| Collateral                  on PLR energy supply from affiliate                           |   |   | **300** |   |   |   | 300 |   |
| Other                                                                                     |   |   | **140** |   |   |   | 147 |   |
| Total                  Current Liabilities                                                |   |   | **1,028** |   |   |   | 1,224 |   |
|                                                                                      |   |   |   |   |   |   |   |   |
| **Long-term                  Debt**                                                       |   |   | **1,820** |   |   |   | 1,977 |   |
|                                                                                      |   |   |   |   |   |   |   |   |
| **Deferred                  Credits and Other Noncurrent Liabilities**                    |   |   |   |   |   |   |   |   |
| Deferred                  income taxes and investment tax credits                         |   |   | **774** |   |   |   | 771 |   |
| Other                                                                                     |   |   | **202** |   |   |   | 190 |   |
| Total                  Deferred Credits and Other Noncurrent Liabilities                  |   |   | **976** |   |   |   | 961 |   |
|                                                                                      |   |   |   |   |   |   |   |   |
| **Commitments                  and Contingent Liabilities (Note 11)**                     |   |   |   |   |   |   |   |   |
|                                                                                      |   |   |   |   |   |   |   |   |
| **Shareowners'                  Equity**                                                  |   |   |   |   |   |   |   |   |
| Preferred                  securities                                                     |   |   | **301** |   |   |   | 51 |   |
| Common                  stock - no par value (a)                                          |   |   | **364** |   |   |   | 1,476 |   |
| Additional                  paid-in capital                                               |   |   | **349** |   |   |   | 354 |   |
| Treasury                  stock (a)                                                       |   |   |   |   |   |   | (912 | ) |
| Earnings                  reinvested                                                      |   |   | **419** |   |   |   | 406 |   |
| Total                  Shareowners' Equity                                                |   |   | **1,433** |   |   |   | 1,375 |   |
|                                                                                      |   |   |   |   |   |   |   |   |
| **Total                  Liabilities and Equity**                                         |   | **$** | **5,257** |   |   | $ | 5,537 |   |

| (a)                                                                                                                                                                                           |   | 170                  million shares authorized; 66 million shares issued and outstanding                  at                  June 30, 2006, and 78 million shares issued and outstanding, excluding                  79                  million shares held as treasury stock, at December 31, 2005. See                  Note 2                  for additional information on the retirement of all treasury stock                  in                  2006. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                          |
| *The                  accompanying Notes to Condensed Consolidated Financial Statements                  are an                  integral part of the financial                  statements.* |

----

**Combined        Notes to Condensed Consolidated Financial Statements        (Unaudited)**
| **1.  ** | **Interim                Financial Statements** |
|--------------------|-------------------------------------------------|

*(PPL,        PPL Energy Supply and PPL Electric)*

*(PPL        and PPL Electric)*

*(PPL        and PPL Energy Supply)*

| **2.  ** | **Summary                of Significant Accounting                Policies** |
|--------------------|------------------------------------------------------------------------------|

**Allowance        for Doubtful Accounts **
*(PPL        and PPL Energy Supply)*

**Treasury        Stock **

*(PPL)*

*(PPL        Electric)*

**New        Accounting Standards **
*(PPL,        PPL Energy Supply and PPL Electric)*

| **3.  ** | **Segment                and Related Information** |
|--------------------|----------------------------------------------------|

*(PPL        and PPL Energy Supply)*

|                                              |                                    | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June                  30,** |
|---------------------------------------------------|-----------------------------------------|----------------------------------------------------------------------|--------|--------------------------------------------------------------------|
| **PPL**                                           |                                    | **2006**                                                             |   | **2005**                                                           |   | **2006** |   | **2005** |
| **Income                  Statement Data**        |                                    |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues                  from external customers |                                    |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |
|                                              | Supply                                  |                                                                 | $      | 548                                                                |   |   | $ | 438 |   |   | $ | 1,076 |   |   | $ | 867 |   |
|                                              | International                  Delivery |                                                                 |   | 334                                                                |   |   |   | 303 |   |   |   | 678 |   |   |   | 614 |   |
|                                              | Pennsylvania                  Delivery  |                                                                 |   | 760                                                                |   |   |   | 726 |   |   |   | 1,669 |   |   |   | 1,584 |   |
|                                              |                                    |                                                                 |   | 1,642                                                              |   |   |   | 1,467 |   |   |   | 3,423 |   |   |   | 3,065 |   |
| Intersegment                  revenues            |
|                                              | Supply                                  |                                                                 |   | 395                                                                |   |   |   | 363 |   |   |   | 841 |   |   |   | 779 |   |
|                                              | Pennsylvania                  Delivery  |                                                                 |   | 39                                                                 |   |   |   | 34 |   |   |   | 80 |   |   |   | 72 |   |
|                                              |                                    |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  Income                       |                                    |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
|                                              | Supply                  (a)             |                                                                 |   | 74                                                                 |   |   |   | 40 |   |   |   | 217 |   |   |   | 126 |   |
|                                              | International                  Delivery |                                                                 |   | 79                                                                 |   |   |   | 54 |   |   |   | 160 |   |   |   | 116 |   |
|                                              | Pennsylvania                  Delivery  |                                                                 |   | 28                                                                 |   |   |   | 34 |   |   |   | 84 |   |   |   | 54 |   |
|                                              |                                    |                                                                 | $      | 181                                                                |   |   | $ | 128 |   |   | $ | 461 |   |   | $ | 296 |   |

| **PPL**                                 |                                    | **June                  30,****2006** |   | **December                  31,****2005** |
|-----------------------------------------|-----------------------------------------|---------------------------------------|--------|-------------------------------------------|
| **Balance                  Sheet Data** |                                    |                                  |   |                                      |   |   |   |   |
| Total                  assets           |                                    |                                  |   |                                      |   |   |   |   |
|                                    | Supply                                  |                                  | $      | 7,402                                     |   |   | $ | 7,118 |   |
|                                    | International                  Delivery |                                  |   | 5,503                                     |   |   |   | 5,089 |   |
|                                    | Pennsylvania                  Delivery  |                                  |   | 5,434                                     |   |   |   | 5,719 |   |
|                                    |                                    | $                                     | 18,339 |                                      |   | $ | 17,926 |   |

|                                              |                                    | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June                  30,** |
|---------------------------------------------------|-----------------------------------------|----------------------------------------------------------------------|--------|--------------------------------------------------------------------|
| **PPL                  Energy Supply**            |                                    | **2006**                                                             |   | **2005**                                                           |   | **2006** |   | **2005** |
| **Income                  Statement Data**        |                                    |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues                  from external customers |                                    |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |
|                                              | Supply                                  |                                                                 | $      | 933                                                                |   |   | $ | 790 |   |   | $ | 1,899 |   |   | $ | 1,628 |   |
|                                              | International                  Delivery |                                                                 |   | 334                                                                |   |   |   | 303 |   |   |   | 678 |   |   |   | 614 |   |
|                                              |                                    |                                                                 |   | 1,267                                                              |   |   |   | 1,093 |   |   |   | 2,577 |   |   |   | 2,242 |   |
| Net                  Income                       |                                    |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
|                                              | Supply                  (a)             |                                                                 |   | 79                                                                 |   |   |   | 50 |   |   |   | 228 |   |   |   | 143 |   |
|                                              | International                  Delivery |                                                                 |   | 79                                                                 |   |   |   | 54 |   |   |   | 160 |   |   |   | 116 |   |
|                                              |                                    | $                                                                    | 158    |                                                               |   | $ | 104 |   |   | $ | 388 |   |   | $ | 259 |   |

| **PPL                  Energy Supply**  |                                    | **June                  30,****2006** |   | **December                  31,****2005** |
|-----------------------------------------|-----------------------------------------|---------------------------------------|--------|-------------------------------------------|
| **Balance                  Sheet Data** |                                    |                                  |   |                                      |   |   |   |   |
| Total                  assets           |                                    |                                  |   |                                      |   |   |   |   |
|                                    | Supply                                  |                                  | $      | 7,768                                     |   |   | $ | 7,575 |   |
|                                    | International                  Delivery |                                  |   | 5,503                                     |   |   |   | 5,089 |   |
|                                    |                                    | $                                     | 13,271 |                                      |   | $ | 12,664 |   |

| (a) |   | 2006                  and 2005 include the "Loss from Discontinued Operations" associated                  with                  the Griffith plant and 2005 also includes the "Loss from Discontinued                  Operations" associated with the Sundance plant. See Note 8 for                  additional                  information. |
|-----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **4.  ** | **Earnings                Per Share** |
|--------------------|---------------------------------------|

*(PPL)*

| · | stock                  options, restricted stock and restricted stock units granted under                  the                  incentive compensation plans; |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | stock                  units representing common stock granted under the directors compensation                  programs; and                                |
| · | convertible                  senior notes.                                                                                                                    |

|                                               |                                                                     | **Three                  Months Ended****June                  30,** |    | **Six                  Months Ended****June                  30,** |
|----------------------------------------------------|--------------------------------------------------------------------------|----------------------------------------------------------------------|---------|--------------------------------------------------------------------|
|                                               |                                                                     | **2006**                                                             |    | **2005**                                                           |   | **2006** |   | **2005** |
| **Income                  (Numerator)**            |                                                                     |                                                                 |    |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  from continuing operations |                                                                     | $                                                                    | 200     |                                                               |   | $ | 178 |   |   | $ | 481 |   |   | $ | 349 |   |
|                                               | Loss                  from discontinued operations (net of income taxes) |                                                                 |    | 19                                                                 |   |   |   | 50 |   |   |   | 20 |   |   |   | 53 |   |
| Net                  Income                        |                                                                     | $                                                                    | 181     |                                                               |   | $ | 128 |   |   | $ | 461 |   |   | $ | 296 |   |
|                                               |                                                                     |                                                                 |    |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| **Shares                  (Denominator)**          |                                                                     |                                                                 |    |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares                  for Basic EPS              |                                                                     |                                                                 | 380,141 |                                                               |   |   | 379,252 |   |   |   | 379,981 |   |   |   | 378,634 |   |
| Add                  incremental shares:           |                                                                     |                                                                 |    |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
|                                               | Convertible                  Senior Notes                                |                                                                 |    | 2,735                                                              |   |   |   | 1,822 |   |   |   | 2,857 |   |   |   | 1,496 |   |
|                                               | Stock                  options and other share-based awards              |                                                                 |    | 2,714                                                              |   |   |   | 2,280 |   |   |   | 2,751 |   |   |   | 2,170 |   |
| Shares                  for Diluted EPS            |                                                                     |                                                                 | 385,590 |                                                               |   |   | 383,354 |   |   |   | 385,589 |   |   |   | 382,300 |   |
|                                               |                                                                     |                                                                 |    |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| **Basic                  EPS**                     |                                                                     |                                                                 |    |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  from continuing operations |                                                                     | $                                                                    | 0.53    |                                                               |   | $ | 0.47 |   |   | $ | 1.27 |   |   | $ | 0.92 |   |
|                                               | Loss                  from discontinued operations (net of income taxes) |                                                                 |    | 0.05                                                               |   |   |   | 0.13 |   |   |   | 0.06 |   |   |   | 0.14 |   |
| Net                  Income                        |                                                                     | $                                                                    | 0.48    |                                                               |   | $ | 0.34 |   |   | $ | 1.21 |   |   | $ | 0.78 |   |
|                                               |                                                                     |                                                                 |    |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| **Diluted                  EPS**                   |                                                                     |                                                                 |    |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  from continuing operations |                                                                     | $                                                                    | 0.52    |                                                               |   | $ | 0.46 |   |   | $ | 1.25 |   |   | $ | 0.91 |   |
|                                               | Loss                  from discontinued operations (net of income taxes) |                                                                 |    | 0.05                                                               |   |   |   | 0.13 |   |   |   | 0.06 |   |   |   | 0.14 |   |
| Net                  Income                        |                                                                     | $                                                                    | 0.47    |                                                               |   | $ | 0.33 |   |   | $ | 1.19 |   |   | $ | 0.77 |   |

|                                        |   | **Three                  Months Ended****June                  30,** |   |   |   | **Six                  Months Ended****June                  30,** |   |
|---------------------------------------------|--------|----------------------------------------------------------------------|--------|--------|--------|--------------------------------------------------------------------|--------|
| *(Thousands                  of Shares)*    |   | **2006**                                                             |   |   |   | **2005**                                                           |   |   |   | **2006** |   |   |   | **2005** |   |
| Antidilutive                  stock options |   |                                                                 |   |   |   |                                                               |   |   |   | 668 |   |   |   | 805 |   |

| **5.  ** | **Income                Taxes** |
|--------------------|---------------------------------|

*(PPL        and PPL Energy Supply)*

|                                                                          |                                                                                                                                                                                                                                                                            | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June                  30,** |
|-------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------|--------|--------------------------------------------------------------------|
| **PPL**                                                                       |                                                                                                                                                                                                                                                                            | **2006**                                                             |   | **2005**                                                           |   | **2006** |   | **2005** |
| **Reconciliation                  of****Income                  Tax Expense** |                                                                                                                                                                                                                                                                            |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                          | Indicated                  federal income tax on Income from Continuing Operations Before                  Income                  Taxes, Minority Interest and Dividends on Preferred Securities                  of a                  Subsidiary at statutory tax rate - 35% |                                                                 | $      | 101                                                                |   |   | $ | 77 |   |   | $ | 234 |   |   | $ | 150 |   |
| Increase                  (decrease) due to:                                  |                                                                                                                                                                                                                                                                            |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                          | State                  income taxes                                                                                                                                                                                                                                             |                                                                 |   | 1                                                                  |   |   |   | 4 |   |   |   | 10 |   |   |   | 2 |   |
|                                                                          | Amortization                  of investment tax credit                                                                                                                                                                                                                          |                                                                 |   | (2                                                                 | ) |   |   | (2 | ) |   |   | (5 | ) |   |   | (5 | ) |
|                                                                          | Difference                  related to income recognition of foreign affiliates (net of foreign                  income                  taxes)                                                                                                                                 |                                                                 |   | (19                                                                | ) |   |   | (10 | ) |   |   | (22 | ) |   |   | (20 | ) |
|                                                                          | Transfer                  of WPD tax items                                                                                                                                                                                                                                      |                                                                 |   |                                                               |   |   |   |   |   |   |   | (20 | ) |   |   |   |   |
|                                                                          | Stranded                  cost securitization                                                                                                                                                                                                                                   |                                                                 |   | (2                                                                 | ) |   |   |   |   |   |   | (3 | ) |   |   |   |   |
|                                                                          | Federal                  income tax credits                                                                                                                                                                                                                                     |                                                                 |   | 2                                                                  |   |   |   | (30 | ) |   |   | (14 | ) |   |   | (54 | ) |
|                                                                          | Other                                                                                                                                                                                                                                                                           |                                                                 |   | 2                                                                  |   |   |   | 1 |   |   |   | (2 | ) |   |   | 1 |   |
|                                                                          |                                                                                                                                                                                                                                                                            |                                                                 | (18    | )                                                                  |   |   | (37 | ) |   |   | (56 | ) |   |   | (76 | ) |
| **Total                  income tax expense**                                 |                                                                                                                                                                                                                                                                            | $                                                                    | 83     |                                                               |   | $ | 40 |   |   | $ | 178 |   |   | $ | 74 |   |
| **Effective                  income tax rate**                                |                                                                                                                                                                                                                                                                            |                                                                 | 28.7%  |                                                               |   |   | 18.2% |   |   |   | 26.6% |   |   |   | 17.3% |   |

| **PPL                  Energy Supply**                                        |                                                                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|-------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| **Reconciliation                  of****Income                  Tax Expense** |                                                                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                          | Indicated                  federal income tax on Income from Continuing Operations Before                  Income                  Taxes and Minority Interest at statutory tax rate - 35% |   | $      | 88     |   |   | $      | 60     |   |   | $      | 194    |   |   | $      | 126    |   |
| Increase                  (decrease) due to:                                  |                                                                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                          | State                  income taxes                                                                                                                                                        |   |   | 4      |   |   |   | (3     | )      |   |   | 12     |   |   |   | (4     | ) |
|                                                                          | Amortization                  of investment tax credit                                                                                                                                     |   |   | (2     | )      |   |   | (2     | )      |   |   | (4     | )      |   |   | (4     | ) |
|                                                                          | Difference                  related to income recognition of foreign affiliates (net of foreign                  income                  taxes)                                            |   |   | (19    | )      |   |   | (10    | )      |   |   | (22    | )      |   |   | (20    | ) |
|                                                                          | Transfer                  of WPD tax items                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   | (20    | )      |   |   |   |   |
|                                                                          | Federal                  income tax credits                                                                                                                                                |   |   | 2      |   |   |   | (30    | )      |   |   | (14    | )      |   |   | (54    | ) |
|                                                                          | Other                                                                                                                                                                                      |   |   | (1     | )      |   |   | 1      |   |   |   | (5     | )      |   |   |   |   |
|                                                                          |                                                                                                                                                                                       |   | (16    | )      |   |   | (44    | )      |   |   | (53    | )      |   |   | (82    | )      |
| **Total                  income tax expense**                                 |                                                                                                                                                                                       | $      | 72     |   |   | $      | 16     |   |   | $      | 141    |   |   | $      | 44     |   |
| **Effective                  income tax rate**                                |                                                                                                                                                                                       |   | 28.7%  |   |   |   | 9.3%   |   |   |   | 25.5%  |   |   |   | 12.2%  |   |

*(PPL        Electric)*

|                                                                          |                                                                                                                                      | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June                  30,** |
|-------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------|--------|--------------------------------------------------------------------|
| **PPL                  Electric**                                             |                                                                                                                                      | **2006**                                                             |   | **2005**                                                           |   | **2006** |   | **2005** |
| **Reconciliation                  of****Income                  Tax Expense** |                                                                                                                                      |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                          | Indicated                  federal income tax on Income Before Income Taxes at statutory tax                  rate -                  35% |                                                                 | $      | 18                                                                 |   |   | $ | 22 |   |   | $ | 46 |   |   | $ | 28 |   |
| Increase                  (decrease) due to:                                  |                                                                                                                                      |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                          | State                  income taxes                                                                                                       |                                                                 |   | (1                                                                 | ) |   |   |   |   |   |   | 1 |   |   |   |   |   |
|                                                                          | Amortization                  of investment tax credit                                                                                    |                                                                 |   |                                                               |   |   |   |   |   |   |   | (1 | ) |   |   | (1 | ) |
|                                                                          | Stranded                  cost securitization                                                                                             |                                                                 |   | (2                                                                 | ) |   |   |   |   |   |   | (3 | ) |   |   |   |   |
|                                                                          | Deficiency                  reserves                                                                                                      |                                                                 |   | 1                                                                  |   |   |   | 1 |   |   |   | 1 |   |   |   | (1 | ) |
|                                                                          | Other                                                                                                                                     |                                                                 |   |                                                               |   |   |   | 1 |   |   |   | 1 |   |   |   | 1 |   |
|                                                                          |                                                                                                                                      |                                                                 | (2     | )                                                                  |   |   | 2 |   |   |   | (1 | ) |   |   | (1 | ) |
| **Total                  income tax expense**                                 |                                                                                                                                      | $                                                                    | 16     |                                                               |   | $ | 24 |   |   | $ | 45 |   |   | $ | 27 |   |
| **Effective                  income tax rate**                                |                                                                                                                                      |                                                                 | 32.0%  |                                                               |   |   | 40.0% |   |   |   | 34.4% |   |   |   | 34.2% |   |

| **6.  ** | **Comprehensive                Income** |
|--------------------|-----------------------------------------|

*(PPL        and PPL Energy Supply)*

|                                                |                                                                         | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June                  30,** |
|-----------------------------------------------------|------------------------------------------------------------------------------|----------------------------------------------------------------------|--------|--------------------------------------------------------------------|
| **PPL**                                             |                                                                         | **2006**                                                             |   | **2005**                                                           |   | **2006** |   | **2005** |
| Net                  Income                         |                                                                         | $                                                                    | 181    |                                                               |   | $ | 128 |   |   | $ | 461 |   |   | $ | 296 |   |
| Other                  comprehensive income (loss): |                                                                         |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                | Foreign                  currency translation adjustments                    |                                                                 |   | 70                                                                 |   |   |   | (55 | ) |   |   | 82 |   |   |   | (39 | ) |
|                                                | Net                  unrealized gain (loss) on available-for-sale securities |                                                                 |   | (4                                                                 | ) |   |   | 5 |   |   |   | (9 | ) |   |   |   |   |
|                                                | Net                  unrealized gain (loss) on qualifying derivatives        |                                                                 |   | 24                                                                 |   |   |   | (14 | ) |   |   | 126 |   |   |   | (80 | ) |
|                                                | Total                  other comprehensive income (loss)                     |                                                                 |   | 90                                                                 |   |   |   | (64 | ) |   |   | 199 |   |   |   | (119 | ) |
| Comprehensive                  Income               |                                                                         | $                                                                    | 271    |                                                               |   | $ | 64 |   |   | $ | 660 |   |   | $ | 177 |   |
|                                                |                                                                         |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |

| **PPL                  Energy Supply**              |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|-----------------------------------------------------|------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Net                  Income                         |                                                                         | $      | 158    |   |   | $      | 104    |   |   | $      | 388    |   |   | $      | 259    |   |
| Other                  comprehensive income (loss): |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                | Foreign                  currency translation adjustments                    |   |   | 70     |   |   |   | (55    | )      |   |   | 82     |   |   |   | (39    | ) |
|                                                | Net                  unrealized gain (loss) on available-for-sale securities |   |   | (4     | )      |   |   | 4      |   |   |   | (9     | )      |   |   | (1     | ) |
|                                                | Net                  unrealized gain (loss) on qualifying derivatives        |   |   | 14     |   |   |   | (13    | )      |   |   | 108    |   |   |   | (79    | ) |
|                                                | Total                  other comprehensive income (loss)                     |   |   | 80     |   |   |   | (64    | )      |   |   | 181    |   |   |   | (119   | ) |
| Comprehensive                  Income               |                                                                         | $      | 238    |   |   | $      | 40     |   |   | $      | 569    |   |   | $      | 140    |   |

*(PPL        Electric)*

| **7.  ** | **Credit                Arrangements and Financing                Activities** |
|--------------------|--------------------------------------------------------------------------------|

**Credit        Arrangements**

*(PPL        and PPL Electric)*

*(PPL        and PPL Energy Supply)*

*(PPL,        PPL Energy Supply and PPL Electric)*

**Financing        Activities**

*(PPL)*

*(PPL        and PPL Electric)*

*(PPL        Electric)*

*(PPL        and PPL Energy Supply)*

*(PPL        Energy Supply)*

**Dividends        **

*(PPL)*

*(PPL        and PPL Electric)*

| **8.  ** | **Acquisitions,                Development and Divestitures** |
|--------------------|---------------------------------------------------------------|

*(PPL        and PPL Energy Supply)*

**Discontinued        Operations**

|                                                                                                                                                                |   | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June                  30,** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|--------------------------------------------------------------------|
|                                                                                                                                                                |   | **2006**                                                             |   | **2005**                                                           |   | **2006** |   | **2005** |
| Operating                  revenues                                                                                                                                 |   | $                                                                    | 3      |                                                               |   | $ | 12 |   |   | $ | 5 |   |   | $ | 14 |   |
| Operating                  expenses                                                                                                                                 |   |                                                                 | 7      |                                                               |   |   | 15 |   |   |   | 10 |   |   |   | 18 |   |
| Loss                  from operations before income taxes                                                                                                           |   |                                                                 | (4     | )                                                                  |   |   | (3 | ) |   |   | (5 | ) |   |   | (4 | ) |
| Income                  tax benefit                                                                                                                                 |   |                                                                 | 2      |                                                               |   |   | 2 |   |   |   | 2 |   |   |   | 2 |   |
| Loss                  from operations after income taxes                                                                                                            |   |                                                                 | (2     | )                                                                  |   |   | (1 | ) |   |   | (3 | ) |   |   | (2 | ) |
| Loss                  on sale of interest (net of tax benefit of $16 million)                                                                                       |   |                                                                 | (24    | )                                                                  |   |   |   |   |   |   | (24 | ) |   |   |   |   |
| Acceleration                  of net unrealized gains on derivatives associated with the plant                  (net of                  tax expense of $4 million) |   |                                                                 | 7      |                                                               |   |   |   |   |   |   | 7 |   |   |   |   |   |
| Loss                  from Discontinued Operations (net of income taxes)                                                                                            |   | $                                                                    | (19    | )                                                                  |   | $ | (1 | ) |   | $ | (20 | ) |   | $ | (2 | ) |

|                                                                       |   | **June                    30, 2005**      |
|----------------------------------------------------------------------------|--------|-------------------------------------------|
|                                                                       |   | **Three                    Months Ended** |   | **Six                    Months Ended** |
| Operating                    revenues                                      |   | $                                         | 1 |   |   | $ | 4 |   |
| Operating                    expenses                                      |   |                                      | 3 |   |   |   | 10 |   |
| Loss                    from operations before income taxes                |   |                                      | (2 | ) |   |   | (6 | ) |
| Income                    tax benefit                                      |   |                                      |   |   |   |   | 2 |   |
| Loss                    from operations after income taxes                 |   |                                      | (2 | ) |   |   | (4 | ) |
| Loss                    on disposal (net of tax benefit of $26 million)    |   |                                      | (47 | ) |   |   | (47 | ) |
| Loss                    from Discontinued Operations (net of income taxes) |   | $                                         | (49 | ) |   | $ | (51 | ) |

**International**

**Other**

| **9.  ** | **Stock-Based                Compensation** |
|--------------------|---------------------------------------------|

*(PPL,        PPL Energy Supply and PPL Electric)*

*(PPL)*

*(PPL        Energy Supply)*

*(PPL        Electric)*

**Restricted        Stock and Restricted Stock Units **
*(PPL,        PPL Energy Supply and PPL Electric)*

|                                          |   | **Restricted****Shares** |      | **Weighted-****Average****Grant                  Date****Fair****Value** |
|-----------------------------------------------|--------|--------------------------|-----------|--------------------------------------------------------------------------|
| **PPL**                                       |   |                     |      |                                                                     |   |   |   |   |
| Nonvested                  at January 1, 2006 |   |                     | 1,557,123 |                                                                     |   |   | $21.23 |   |
| Granted                                       |   |                     | 789,925   |                                                                     |   |   | 30.83 |   |
| Vested                                        |   |                     | (321,946  | )                                                                        |   |   | 18.36 |   |
| Forfeited                                     |   |                     | (48,672   | )                                                                        |   |   | 25.41 |   |
| Nonvested                  at June 30, 2006   |   |                     | 1,976,430 |                                                                     |   |   | 25.41 |   |
|                                          |   |                     |      |                                                                     |   |   |   |   |
| **PPL                  Energy Supply**        |   |                     |      |                                                                     |   |   |   |   |
| Nonvested                  at January 1, 2006 |   |                     | 671,901   |                                                                     |   |   | $19.67 |   |
| Granted                                       |   |                     | 297,970   |                                                                     |   |   | 31.10 |   |
| Vested                                        |   |                     | (126,886  | )                                                                        |   |   | 17.60 |   |
| Forfeited                                     |   |                     | (45,560   | )                                                                        |   |   | 25.32 |   |
| Nonvested                  at June 30, 2006   |   |                     | 797,425   |                                                                     |   |   | 23.93 |   |
|                                          |   |                     |      |                                                                     |   |   |   |   |
| **PPL                  Electric**             |   |                     |      |                                                                     |   |   |   |   |
| Nonvested                  at January 1, 2006 |   |                     | 116,260   |                                                                     |   |   | $23.09 |   |
| Granted                                       |   |                     | 58,550    |                                                                     |   |   | 31.17 |   |
| Vested                                        |   |                     | (32,420   | )                                                                        |   |   | 17.53 |   |
| Nonvested                  at June 30, 2006   |   |                     | 142,390   |                                                                     |   |   | 27.65 |   |

|                               |   | **Unrecognized                  Compensation Cost** |   | **Weighted-Average****Period                  for Recognition** |
|------------------------------------|--------|-----------------------------------------------------|--------|-----------------------------------------------------------------|
|                               |   |                                                |   |                                                            |   |   |   |   |
| PPL                                |   | $                                                   | 14     |                                                            |   |   | 3.5                  years |   |
| PPL                  Energy Supply |   |                                                | 12     |                                                            |   |   | 2.9                  years |   |
| PPL                  Electric      |   |                                                | 2      |                                                            |   |   | 1.7                  years |   |

|                               |   | **June                  30,****2006** |   | **June                  30,****2005** |
|------------------------------------|--------|---------------------------------------|--------|---------------------------------------|
|                               |   |                                  |   |                                  |   |   |   |   |
| PPL                                |   | $                                     | 10     |                                  |   | $ | 9 |   |
| PPL                  Energy Supply |   |                                  | 4      |                                  |   |   | 4 |   |
| PPL                  Electric      |   |                                  | 1      |                                  |   |   | 1 |   |

**Stock        Options **
*(PPL,        PPL Energy Supply and PPL Electric)*

|                                                            |      | **Number                  of Options** |      | **Weighted-Average                  Exercise Price** |   | **Weighted-Average                  Remaining Contractual Term** |   | **Aggregate                  Intrinsic Value** |
|-----------------------------------------------------------------|-----------|----------------------------------------|-----------|------------------------------------------------------|--------|------------------------------------------------------------------|--------|------------------------------------------------|
| **PPL**                                                         |      |                                   |      |                                                 |   |                                                             |   |                                           |   |   |   |   |   |   |   |   |
| Outstanding                  at January 1, 2006                 |      |                                   | 5,586,072 |                                                 |   | $                                                                | 21.81  |                                           |   |   |   |   |   |   |   |   |
|                                                            | Granted   |                                   |      | 1,335,420                                            |   |                                                             |   | 30.14                                          |   |   |   |   |   |   |   |   |   |
|                                                            | Exercised |                                   |      | (410,420                                             | )      |                                                             |   | 20.39                                          |   |   |   |   |   |   |   |   |   |
| Outstanding                  at June 30, 2006                   |      |                                   | 6,511,072 |                                                 |   |                                                             | 23.60  |                                           |   |   | 7.4                  years |   |   | $ | 55 |   |
| Options                  exercisable at June 30, 2006           |      |                                   | 3,774,769 |                                                 |   |                                                             | 20.46  |                                           |   |   | 6.3                  years |   |   |   | 44 |   |
| Weighted-average                  fair value of options granted |      | $                                      | 4.86      |                                                 |   |                                                             |   |                                           |   |   |   |   |   |   |   |   |
|                                                            |      |                                   |      |                                                 |   |                                                             |   |                                           |   |   |   |   |   |   |   |   |
| **PPL                  Energy Supply**                          |      |                                   |      |                                                 |   |                                                             |   |                                           |   |   |   |   |   |   |   |   |
| Outstanding                  at January 1, 2006                 |      |                                   | 1,225,502 |                                                 |   | $                                                                | 21.72  |                                           |   |   |   |   |   |   |   |   |
|                                                            | Granted   |                                   |      | 494,660                                              |   |                                                             |   | 30.14                                          |   |   |   |   |   |   |   |   |   |
|                                                            | Exercised |                                   |      | (132,400                                             | )      |                                                             |   | 19.46                                          |   |   |   |   |   |   |   |   |   |
| Outstanding                  at June 30, 2006                   |      |                                   | 1,587,762 |                                                 |   |                                                             | 24.53  |                                           |   |   | 7.7                  years |   |   | $ | 12 |   |
| Options                  exercisable at June 30, 2006           |      |                                   | 738,362   |                                                 |   |                                                             | 19.97  |                                           |   |   | 6.2                  years |   |   |   | 9 |   |
| Weighted-average                  fair value of options granted |      | $                                      | 4.86      |                                                 |   |                                                             |   |                                           |   |   |   |   |   |   |   |   |
|                                                            |      |                                   |      |                                                 |   |                                                             |   |                                           |   |   |   |   |   |   |   |   |
| **PPL                  Electric**                               |      |                                   |      |                                                 |   |                                                             |   |                                           |   |   |   |   |   |   |   |   |
| Outstanding                  at January 1, 2006                 |      |                                   | 285,372   |                                                 |   | $                                                                | 22.95  |                                           |   |   |   |   |   |   |   |   |
|                                                            | Granted   |                                   |      | 88,540                                               |   |                                                             |   | 30.14                                          |   |   |   |   |   |   |   |   |   |
| Outstanding                  at June 30, 2006                   |      |                                   | 373,912   |                                                 |   |                                                             | 24.65  |                                           |   |   | 7.4                  years |   |   | $ | 3 |   |
| Options                  exercisable at June 30, 2006           |      |                                   | 204,000   |                                                 |   |                                                             | 21.95  |                                           |   |   | 6.0                  years |   |   |   | 2 |   |
| Weighted-average                  fair value of options granted |      | $                                      | 4.86      |                                                 |   |                                                             |   |                                           |   |   |   |   |   |   |   |   |

|                               |   | **Six                  Months Ended****June                  30,** |
|------------------------------------|--------|--------------------------------------------------------------------|
|                               |   | **2006**                                                           |   | **2005** |
|                               |   |                                                               |   |   |   |   |   |   |
| PPL                                |   | $                                                                  | 4 |   |   | $ | 17 |   |
| PPL                  Energy Supply |   |                                                               | 1 |   |   |   | 3 |   |
| PPL                  Electric      |   |                                                               |   |   |   |   | 2 |   |

|                               |   | **Unrecognized                  Compensation Cost** |   | **Weighted-Average****Period                  for Recognition** |
|------------------------------------|--------|-----------------------------------------------------|--------|-----------------------------------------------------------------|
|                               |   |                                                |   |                                                            |   |   |   |   |
| PPL                                |   | $                                                   | 3      |                                                            |   |   | 2.1                  years |   |
| PPL                  Energy Supply |   |                                                | 2      |                                                            |   |   | 2.1                  years |   |

|                                       |   | **2006**                   |   | **2005**                   |   |
|--------------------------------------------|--------|----------------------------|--------|----------------------------|--------|
|                                       |   |                       |   |                       |   |
| Risk-free                  interest rate   |   | 4.06%                      |   | 4.09%                      |   |
| Expected                  option life      |   | 6.25                  yrs. |   | 7.00                  yrs. |   |
| Expected                  stock volatility |   | 19.86%                     |   | 18.09%                     |   |
| Dividend                  yield            |   | 3.76%                      |   | 3.88%                      |   |

**Directors        Stock Units**
*(PPL)*

**Stock        Appreciation Rights**
*(PPL        and PPL Energy Supply)*

| **10.  ** | **Pension                and Other Postretirement                Benefits** |
|---------------------|-----------------------------------------------------------------------------|

*(PPL        and PPL Energy Supply)*

|                                                                                                         |   | **Pension                  Benefits**            |
|--------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|
|                                                                                                         |   | **Three                  Months Ended June 30,** |   | **Six                  Months Ended June 30,** |
|                                                                                                         |   | **Domestic**                                     |   | **International** |   | **Domestic** |   | **International** |
|                                                                                                         |   | **2006**                                         |   | **2005** |   | **2006** |   | **2005** |   | **2006** |   | **2005** |   | **2006** |   | **2005** |
| **PPL**                                                                                                      |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service                  cost                                                                                |   | $                                                | 16 |   |   | $ | 14 |   |   | $ | 5 |   |   | $ | 5 |   |   | $ | 31 |   |   | $ | 28 |   |   | $ | 10 |   |   | $ | 9 |   |
| Interest                  cost                                                                               |   |                                             | 30 |   |   |   | 28 |   |   |   | 35 |   |   |   | 39 |   |   |   | 62 |   |   |   | 58 |   |   |   | 69 |   |   |   | 77 |   |
| Expected                  return on plan assets                                                              |   |                                             | (41 | ) |   |   | (40 | ) |   |   | (49 | ) |   |   | (52 | ) |   |   | (82 | ) |   |   | (79 | ) |   |   | (97 | ) |   |   | (105 | ) |
| Amortization                  of transition obligation                                                       |   |                                             | (1 | ) |   |   | (1 | ) |   |   |   |   |   |   |   |   |   |   | (2 | ) |   |   | (2 | ) |   |   |   |   |   |   |   |   |
| Amortization                  of prior service cost                                                          |   |                                             | 4 |   |   |   | 4 |   |   |   | 1 |   |   |   | 1 |   |   |   | 7 |   |   |   | 7 |   |   |   | 2 |   |   |   | 2 |   |
| Amortization                  of loss                                                                        |   |                                             | 1 |   |   |   | 1 |   |   |   | 13 |   |   |   | 8 |   |   |   | 2 |   |   |   | 1 |   |   |   | 24 |   |   |   | 14 |   |
| Net                  periodic pension costs (credits) prior to special termination                  benefits |   |                                             | 9 |   |   |   | 6 |   |   |   | 5 |   |   |   | 1 |   |   |   | 18 |   |   |   | 13 |   |   |   | 8 |   |   |   | (3 | ) |
| Special                  termination benefits (a)                                                            |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   | 1 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 6 |   |
| Net                  periodic pension costs                                                                  |   | $                                                | 9 |   |   | $ | 6 |   |   | $ | 5 |   |   | $ | 2 |   |   | $ | 18 |   |   | $ | 13 |   |   | $ | 8 |   |   | $ | 3 |   |
|                                                                                                         |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **PPL                  Energy Supply**                                                                       |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service                  cost                                                                                |   | $                                                | 1 |   |   | $ | 1 |   |   | $ | 5 |   |   | $ | 5 |   |   | $ | 2 |   |   | $ | 2 |   |   | $ | 10 |   |   | $ | 9 |   |
| Interest                  cost                                                                               |   |                                             | 1 |   |   |   | 1 |   |   |   | 35 |   |   |   | 39 |   |   |   | 3 |   |   |   | 2 |   |   |   | 69 |   |   |   | 77 |   |
| Expected                  return on plan assets                                                              |   |                                             | (1 | ) |   |   | (1 | ) |   |   | (49 | ) |   |   | (52 | ) |   |   | (4 | ) |   |   | (3 | ) |   |   | (97 | ) |   |   | (105 | ) |
| Amortization                  of prior service cost                                                          |   |                                             |   |   |   |   |   |   |   |   | 1 |   |   |   | 1 |   |   |   |   |   |   |   |   |   |   |   | 2 |   |   |   | 2 |   |
| Amortization                  of loss                                                                        |   |                                             |   |   |   |   |   |   |   |   | 13 |   |   |   | 8 |   |   |   |   |   |   |   | 1 |   |   |   | 24 |   |   |   | 14 |   |
| Net                  periodic pension costs (credits) prior to special termination                  benefits |   |                                             | 1 |   |   |   | 1 |   |   |   | 5 |   |   |   | 1 |   |   |   | 1 |   |   |   | 2 |   |   |   | 8 |   |   |   | (3 | ) |
| Special                  termination benefits (a)                                                            |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   | 1 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 6 |   |
| Net                  periodic pension costs                                                                  |   | $                                                | 1 |   |   | $ | 1 |   |   | $ | 5 |   |   | $ | 2 |   |   | $ | 1 |   |   | $ | 2 |   |   | $ | 8 |   |   | $ | 3 |   |

| (a) |   | The                  2005 amounts are related to a WPD-approved staff reduction plan                  as a                  result of the merger of its two control rooms, metering reorganization                  and                  other staff efficiencies. Additional pension costs were recognized                  due to                  early retirement and pension enhancement provisions granted to                  the                  employees. |
|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                    |   | **Other                  Postretirement Benefits**                   |
|---------------------------------------------------------|--------|----------------------------------------------------------------------|
|                                                    |   | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June****30,** |
|                                                    |   | **2006**                                                             |   | **2005** |   | **2006** |   | **2005** |
| **PPL**                                                 |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service                  cost                           |   | $                                                                    | 2 |   |   | $ | 2 |   |   | $ | 4 |   |   | $ | 4 |   |
| Interest                  cost                          |   |                                                                 | 7 |   |   |   | 7 |   |   |   | 14 |   |   |   | 14 |   |
| Expected                  return on plan assets         |   |                                                                 | (5 | ) |   |   | (5 | ) |   |   | (10 | ) |   |   | (10 | ) |
| Amortization                  of transition obligation  |   |                                                                 | 2 |   |   |   | 2 |   |   |   | 4 |   |   |   | 4 |   |
| Amortization                  of prior service cost     |   |                                                                 | 2 |   |   |   | 1 |   |   |   | 3 |   |   |   | 2 |   |
| Amortization                  of loss                   |   |                                                                 | 2 |   |   |   | 2 |   |   |   | 5 |   |   |   | 3 |   |
| Net                  other postretirement benefits cost |   | $                                                                    | 10 |   |   | $ | 9 |   |   | $ | 20 |   |   | $ | 17 |   |

| **11.  ** | **Commitments                and Contingent Liabilities** |
|---------------------|-----------------------------------------------------------|

**Energy        Purchases, Energy Sales and Other Commitments**

*(PPL,        PPL Energy Supply and PPL Electric)*

*(PPL        and PPL Energy Supply)*

| Period                                |   | On-Peak                  Supply |                    |   | Off-Peak                  Supply |   |
|---------------------------------------|--------|---------------------------------|-------------------------|--------|----------------------------------|--------|
|                                  |   |                            |                    |   |                             |   |   |   |
| 7/1/2007                  - 6/30/2010 |   |                            | 325                  MW |   |                             |   | 175                  MW |   |
| 7/1/2010                  - 6/30/2012 |   |                            | 275                  MW |   |                             |   | 150                  MW |   |
| 7/1/2012                  - 6/30/2014 |   |                            | 200                  MW |   |                             |   | 125                  MW |   |

** **
*(PPL        and PPL Energy Supply)*

**Legal        Matters**

*(PPL,        PPL Energy Supply and PPL Electric)*

** **
*(PPL        and PPL Energy Supply)*

*(PPL        and PPL Energy Supply)*

**Regulatory        Issues**

*(PPL        and PPL Energy Supply)*

** **
*(PPL,        PPL Energy Supply and PPL Electric)*

*(PPL        and PPL Energy Supply)*

*(PPL,        PPL Energy Supply and PPL Electric)*

*(PPL        and PPL Energy Supply)*

*PPL        and PPL Energy Supply)*

*(PPL        and PPL Energy Supply)*

*(PPL        and PPL Energy Supply)*

*(PPL,        PPL Energy Supply and PPL Electric)*

| · | The                  Public Utility Holding Company Act of 1935 has been repealed. PUHCA                  significantly restricted mergers and acquisitions in the electric                  utility                  sector.                                                                                            |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | The                  FERC will appoint and oversee an electric reliability organization                  to                  establish and enforce mandatory reliability rules regarding the                  bulk power                  system.                                                                        |
| · | The                  FERC will establish incentives for transmission companies, such                  as                  performance-based rates, recovery of the costs to comply with reliability                  rules and accelerated depreciation for investments in transmission                  infrastructure. |
| · | The                  Price Anderson Amendments                  Act of 1988,                  which provides the framework for nuclear liability protection,                  will be                  extended by twenty years to 2025.                                                                                 |
| · | Federal                  support will be available for certain clean coal power initiatives,                  nuclear power projects and renewable energy technologies.                                                                                                                                                  |

**Environmental        Matters - Domestic**

*(PPL,        PPL Energy Supply and PPL Electric)*

*        (PPL        and PPL Energy Supply)*

*        (PPL        and PPL Energy Supply)*

*(PPL,        PPL Energy Supply and PPL Electric)*

*(PPL        and PPL Energy Supply)*

*(PPL,        PPL Energy Supply and PPL Electric)*

*(PPL,        PPL Energy Supply and PPL Electric)*

**Environmental        Matters - International **
*(PPL        and PPL Energy Supply)*

**Other**

** **
*(PPL        and PPL Energy Supply)*

*(PPL)*

*(PPL,        PPL Energy Supply and PPL Electric)*

|                                                                                                                                          |   |   | **Recorded                  Liability at** |   | **Exposure                  at**       |   |                                   |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------------------------------------------|--------|----------------------------------------|--------|----------------------------------------|
|                                                                                                                                          |   |   | **June                  30, 2006**         |   | **December                  31, 2005** |   | **June                  30, 2006 (a)** |   | **Expiration                  Date** |
| **PPL**                                                                                                                                       |   |   |                                       |   |                                   |   |                                   |   |   |   |   |   |   |
| Residual                  value guarantees of leased equipment                                                                                |   |   |                                       |   |                                   |   |                                   | $ | 9 |   |   | 2007 | (b) |
|                                                                                                                                          |   |   |                                       |   |                                   |   |                                   |   |   |   |   |   |   |
| **PPL                  Energy Supply**                  (c)                                                                                   |   |   |                                       |   |                                   |   |                                   |   |   |   |   |   |   |
| WPD                  LLP guarantee of obligations under SIUK Capital Trust I preferred                  securities                            |   |   |                                       |   |                                   |   |                                   |   | 82 |  (d) |   | 2027 |   |
| Letters                  of credit issued on behalf of affiliates                                                                             |   |   |                                       |   |                                   |   |                                   |   | 7 |  (e) |   | 2007 |   |
| Support                  agreements to guarantee partnerships' obligations for the sale                  of                  coal             |   |   |                                       |   |                                   |   |                                   |   | 9 |   |   | 2007 |   |
| Retroactive                  premiums under nuclear insurance programs                                                                        |   |   |                                       |   |                                   |   |                                   |   | 38 |   |   |   |   |
| Nuclear                  claims under The Price-Anderson Act Amendments under The Energy                  Policy Act                  of 2005 |   |   |                                       |   |                                   |   |                                   |   | 201 |  (f) |   |   |   |
| Contingent                  purchase price payments to former owners of synfuel projects (g)                                                  |   |   |                                       |   |                                   |   |                                   |   | 29 |   |   | 2007 |   |
| Residual                  value guarantees of leased equipment                                                                                |   |   |                                       |   |                                   |   |                                   |   | 2 |   |   | 2007 | (b) |
| WPD                  guarantee of pension and other obligations of unconsolidated                  entities                  (h)              |   | $      | 4                                          |   | $                                      | 4      |                                   |   | 42 |   |   | 2017 |   |
| WPD                  guarantee of an unconsolidated entity's lease obligations                                                                |   |   |                                       |   |                                   |   |                                   |   | 1 |   |   | 2008 |   |
| Tax                  indemnification related to unconsolidated WPD affiliates                                                                 |   |   |                                       |   |                                   |   |                                   |   | 10 |   |   | 2012 |   |
| Indemnifications                  for entities in liquidation and sales of assets                                                             |   |   | 7                                          |   |                                   | 1      |                                   |   | 291 |  (i) |   | 2008                  to 2012 | (i) |
|                                                                                                                                          |   |   |                                       |   |                                   |   |                                   |   |   |   |   |   |   |
| **PPL                  Electric**** **(c)                                                                                                |   |   |                                       |   |                                   |   |                                   |   |   |   |   |   |   |
| Guarantee                  of a portion of an unconsolidated entity's debt                                                                    |   |   |                                       |   |                                   |   |                                   |   | 7 |  (d) |   | 2008 |   |
| Residual                  value guarantees of leased equipment                                                                                |   |   |                                       |   |                                   |   |                                   |   | 70 |   |   | 2007 | (b) |

| (a) |   | Represents                  the estimated maximum potential amount of future payments that                  could be                  required to be made under the guarantee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) |   | Although                  the expiration date noted is 2007, equipment of similar value is                  generally                  leased and guaranteed on an on-going basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (c) |   | Other                  than the exceptions noted in (e) below, all guarantees of PPL Energy                  Supply and PPL Electric also apply to PPL on a consolidated                  basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| (d) |   | Reflects                  principal payments only.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (e) |   | Represents                  letters of credit issued at the direction of PPL Energy Supply                  for the                  benefit of third parties for assurance against nonperformance by                  PPL and                  PPL Gas Utilities. This is not a guarantee by PPL on a consolidated                  basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| (f) |   | Amount                  is per incident.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (g) |   | Actual                  payments are based upon production at the synfuel facilities. Future                  production levels are uncertain. See "IRS Synthetic Fuels Tax Credits"                  within this note for further discussion.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (h) |   | Neither                  the expiration date nor the maximum amount of potential payments                  for                  certain obligations is explicitly stated in the related agreements                  and,                  therefore, have been estimated based on the types of                  obligations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (i) |   | PPL                    Energy Supply's maximum exposure with respect to guarantees and                    the                    expiration of the guarantees cannot be estimated because, in                    the case of                    certain of the indemnification provisions, the maximum potential                    liability                    is not capped by the transaction documents and the expiration                    date is                    based on the applicable statute of limitations.In                    connection with the liquidation of wholly owned subsidiaries                    that have                    been deconsolidated upon turning the entities over to the liquidators,                    certain affiliates of PPL Global have agreed to indemnify the                    liquidators,                    directors and/or the entities themselves for any liabilities                    or expenses                    arising during the liquidation process, including liabilities                    and expenses                    of the entities placed into liquidation. In some cases, the                    indemnifications are limited to a maximum amount that is based                    on                    distributions made from the subsidiary to its parent either prior                    or                    subsequent to being placed into liquidation. In other cases,                    the maximum                    amount of the indemnifications is not explicitly stated in the                    agreements.                    The indemnifications generally expire two to seven years subsequent                    to the                    date of dissolution of the entities. The exposure noted is only                    for those                    cases in which the agreements provide for a specific limit on                    the amount                    of the indemnification, and the expiration date was based on                    an estimate                    of the dissolution date of the entities.Certain                    of the indemnifications provided to the purchaser of the Sundance                    plant                    are triggered only if the purchaser's losses reach $1 million                    in the                    aggregate, are capped at 50% of the purchase price (or $95 million),                    and                    survive for a period of only 24 months after the May 13, 2005                    transaction                    closing. The indemnification provision for unknown environmental                    and tort                    liabilities related to periods prior to PPL Energy Supply's ownership                    of                    the real property on which the Sundance plant is located are                    capped at $4                    million in the aggregate and survive for a maximum period of                    five years                    after the transaction closing.PPL                    Energy Supply indemnified the purchaser of its interest in the                    Griffith                    plant for one-half of the total cost of repairing a damaged steam                    turbine                    at the plant. The maximum exposure for this indemnification is                    equal to an                    insurance deductible of $2 million. PPL Energy Supply also agreed                    to                    guarantee payment of a variable amount to the purchaser for each                    day until                    completion of repair of the turbine. The maximum amount of exposure                    associated with this guarantee cannot be estimated because the                    amount is                    not capped by the transaction documents and the expiration of                    the                    guarantee depends on a determination that the turbine has been                    repaired                    and is available for dispatch and scheduling. Although PPL Energy                    Supply                    believes that the turbine repair was complete and that the turbine                    was                    available for dispatch and scheduling on July 12, 2006, PPL Energy                    Supply                    is continuing to discuss this issue with the purchaser. At this                    time, PPL                    Energy Supply believes that it has adequately reserved its exposure                    under                    the contract. |

| **12.  ** | **Related                Party Transactions** |
|---------------------|-----------------------------------------------|

**Affiliate        Trust **
*(PPL        and PPL Energy Supply)*

**PLR        Contracts **
*(PPL        Energy Supply and PPL Electric)*

**NUG        Purchases **
*(PPL        Energy Supply and PPL Electric)*

**Allocations        of Corporate Service Costs**
** **
*(PPL        Energy Supply and PPL Electric*

|                                 |                               | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June                  30,** |   |
|--------------------------------------|------------------------------------|----------------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|
|                                 |                               | **2006**                                                             |   | **2005**                                                           |   | **2006** |   | **2005** |   |
| **Direct                  costs**    |                               |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |
|                                 | PPL                  Energy Supply |                                                                 | $      | 31                                                                 |   | $ | 26 |   | $ | 62 |   | $ | 51 |   |
|                                 | PPL                  Electric      |                                                                 |   | 22                                                                 |   |   | 21 |   |   | 45 |   |   | 43 |   |
| **Allocated                  costs** |                               |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |
|                                 | PPL                  Energy Supply |                                                                 |   | 14                                                                 |   |   | 14 |   |   | 34 |   |   | 38 |   |
|                                 | PPL                  Electric      |                                                                 |   | 7                                                                  |   |   | 7 |   |   | 16 |   |   | 20 |   |

**Intercompany        Borrowings**

*(PPL        Energy Supply)*

*PPL        Electric)*

**Intercompany        Derivatives **
*(*
*PPL        Energy Supply)*

**Trademark        Royalties **
*(*
*PPL        Energy Supply)*

| **13.  ** | **Other                Income - Net** |
|---------------------|---------------------------------------|

*(PPL,        PPL Energy Supply and PPL Electric)*

|                                    |                                                                                                 | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June                  30,** |
|-----------------------------------------|------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------|--------|--------------------------------------------------------------------|
|                                    |                                                                                                 | **2006**                                                             |   | **2005**                                                           |   | **2006** |   | **2005** |
| **PPL**                                 |                                                                                                 |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| **Other                  Income**       |                                                                                                 |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
|                                    | Hyder                  liquidation distribution (Note 8)                                             |                                                                 | $      | 24                                                                 |   |   |   |   |   |   | $ | 24 |   |   |   |   |   |
|                                    | Interest                  income                                                                     |                                                                 |   | 9                                                                  |   |   | $ | 6 |   |   |   | 17 |   |   | $ | 12 |   |
|                                    | Equity                  earnings                                                                     |                                                                 |   | 1                                                                  |   |   |   | 1 |   |   |   | 2 |   |   |   | 2 |   |
|                                    | Realized                  earnings on nuclear decommissioning trust                                  |                                                                 |   | 2                                                                  |   |   |   | 2 |   |   |   | 5 |   |   |   | 3 |   |
|                                    | Gain                  on sale of investment in an unconsolidated affiliate (Note                  8) |                                                                 |   | (1                                                                 | ) |   |   |   |   |   |   | 3 |   |   |   |   |   |
|                                    | Miscellaneous                  - International                                                       |                                                                 |   | 1                                                                  |   |   |   | 1 |   |   |   | 3 |   |   |   | 3 |   |
|                                    | Miscellaneous                  - Domestic                                                            |                                                                 |   | 2                                                                  |   |   |   | 3 |   |   |   | 6 |   |   |   | 4 |   |
|                                    | Total                                                                                                |                                                                 |   | 38                                                                 |   |   |   | 13 |   |   |   | 60 |   |   |   | 24 |   |
|                                    |                                                                                                 |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Other                  Deductions**   |                                                                                                 |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
|                                    | Impairment                  of investment in U.K. real estate (Note                  8)              |                                                                 |   |                                                               |   |   |   |   |   |   |   | 8 |   |   |   |   |   |
|                                    | Taxes,                  other than income                                                            |                                                                 |   | 1                                                                  |   |   |   | 1 |   |   |   | 1 |   |   |   | 1 |   |
|                                    | Charitable                  contributions                                                            |                                                                 |   |                                                               |   |   |   |   |   |   |   | 2 |   |   |   | 2 |   |
|                                    | Miscellaneous                  - International                                                       |                                                                 |   | 1                                                                  |   |   |   | 1 |   |   |   | 1 |   |   |   | 1 |   |
|                                    | Miscellaneous                  - Domestic                                                            |                                                                 |   | 3                                                                  |   |   |   |   |   |   |   | 6 |   |   |   | 2 |   |
| **Other                  Income - net** |                                                                                                 | $                                                                    | 33     |                                                               |   | $ | 11 |   |   | $ | 42 |   |   | $ | 18 |   |
|                                    |                                                                                                 |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| **PPL                  Energy Supply**  |                                                                                                 |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| **Other                  Income**       |                                                                                                 |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
|                                    | Hyder                  liquidation distribution (Note 8)                                             |                                                                 | $      | 24                                                                 |   |   |   |   |   |   | $ | 24 |   |   |   |   |   |
|                                    | Interest                  income                                                                     |                                                                 |   | 5                                                                  |   |   | $ | 4 |   |   |   | 9 |   |   | $ | 8 |   |
|                                    | Affiliated                  interest income                                                          |                                                                 |   | 6                                                                  |   |   |   | 3 |   |   |   | 11 |   |   |   | 5 |   |
|                                    | Equity                  earnings                                                                     |                                                                 |   | 1                                                                  |   |   |   | 1 |   |   |   | 2 |   |   |   | 2 |   |
|                                    | Realized                  earnings on nuclear decommissioning trust                                  |                                                                 |   | 2                                                                  |   |   |   | 2 |   |   |   | 5 |   |   |   | 3 |   |
|                                    | Gain                  on sale of investment in an unconsolidated affiliate (Note                  8) |                                                                 |   | (1                                                                 | ) |   |   |   |   |   |   | 3 |   |   |   |   |   |
|                                    | Miscellaneous                  - International                                                       |                                                                 |   | 1                                                                  |   |   |   | 1 |   |   |   | 3 |   |   |   | 3 |   |
|                                    | Miscellaneous                  - Domestic                                                            |                                                                 |   |                                                               |   |   |   | 1 |   |   |   | 2 |   |   |   | 2 |   |
|                                    | Total                                                                                                |                                                                 |   | 38                                                                 |   |   |   | 12 |   |   |   | 59 |   |   |   | 23 |   |
| **Other                  Deductions**   |                                                                                                 |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
|                                    | Impairment                  of investment in U.K. real estate (Note                  8)              |                                                                 |   |                                                               |   |   |   |   |   |   |   | 8 |   |   |   |   |   |
|                                    | Taxes,                  other than income                                                            |                                                                 |   | 1                                                                  |   |   |   |   |   |   |   | 1 |   |   |   |   |   |
|                                    | Miscellaneous                  - International                                                       |                                                                 |   | 1                                                                  |   |   |   | 1 |   |   |   | 1 |   |   |   | 1 |   |
|                                    | Miscellaneous                  - Domestic                                                            |                                                                 |   | 1                                                                  |   |   |   |   |   |   |   | 4 |   |   |   | 3 |   |
| **Other                  Income - net** |                                                                                                 | $                                                                    | 35     |                                                               |   | $ | 11 |   |   | $ | 45 |   |   | $ | 19 |   |
|                                    |                                                                                                 |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| **PPL                  Electric**       |                                                                                                 |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| **Other                  Income**       |                                                                                                 |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
|                                    | Interest                  income                                                                     |                                                                 | $      | 2                                                                  |   |   | $ | 1 |   |   | $ | 5 |   |   | $ | 3 |   |
|                                    | Affiliated                  interest income                                                          |                                                                 |   | 5                                                                  |   |   |   | 3 |   |   |   | 10 |   |   |   | 6 |   |
|                                    | Miscellaneous                                                                                        |                                                                 |   |                                                               |   |   |   | 2 |   |   |   | 1 |   |   |   | 2 |   |
|                                    | Total                                                                                                |                                                                 |   | 7                                                                  |   |   |   | 6 |   |   |   | 16 |   |   |   | 11 |   |
| **Other                  Deductions**   |                                                                                                 |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   | 1 |   |
| **Other                  Income - net** |                                                                                                 | $                                                                    | 7      |                                                               |   | $ | 6 |   |   | $ | 16 |   |   | $ | 10 |   |

| **14.  ** | **Derivative                Instruments and Hedging                Activities** |
|---------------------|---------------------------------------------------------------------------------|

*(PPL        and PPL Energy Supply)*

**Sale        of Interest in Griffith Plant**

**Fair        Value Hedges**

**Cash        Flow Hedges**

|                                   |                                                                                                     | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June                  30,** |
|----------------------------------------|----------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------|--------|--------------------------------------------------------------------|
|                                   |                                                                                                     | **2006**                                                             |   | **2005**                                                           |   | **2006** |   | **2005** |
| **PPL**                                |                                                                                                     |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
|                                   | Beginning                  accumulated derivative loss                                                   |                                                                 | $      | (144                                                               | ) |   | $ | (129 | ) |   | $ | (246 | ) |   | $ | (63 | ) |
|                                   | Net                  change associated with current period hedging activities and                  other |                                                                 |   | (32                                                                | ) |   |   | 30 |   |   |   | 46 |   |   |   | (49 | ) |
|                                   | Net                  change from reclassification into earnings (a)                                      |                                                                 |   | 56                                                                 |   |   |   | (44 | ) |   |   | 80 |   |   |   | (31 | ) |
|                                   | Ending                  accumulated derivative loss                                                      |                                                                 | $      | (120                                                               | ) |   | $ | (143 | ) |   | $ | (120 | ) |   | $ | (143 | ) |
|                                   |                                                                                                     |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **PPL                  Energy Supply** |                                                                                                     |                                                                 |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
|                                   | Beginning                  accumulated derivative loss                                                   |                                                                 | $      | (143                                                               | ) |   | $ | (111 | ) |   | $ | (237 | ) |   | $ | (45 | ) |
|                                   | Net                  change associated with current period hedging activities and                  other |                                                                 |   | (40                                                                | ) |   |   | 32 |   |   |   | 31 |   |   |   | (45 | ) |
|                                   | Net                  change from reclassification into earnings (a)                                      |                                                                 |   | 54                                                                 |   |   |   | (45 | ) |   |   | 77 |   |   |   | (34 | ) |
|                                   | Ending                  accumulated derivative loss                                                      |                                                                 | $      | (129                                                               | ) |   | $ | (124 | ) |   | $ | (129 | ) |   | $ | (124 | ) |

| (a) |   | The                  three and six months ended June 30, 2006, include $7 million for                  the                  acceleration of unrealized gains associated with the Griffith plant                  that                  have been recorded as a component of "Loss from Discontinued                  Operations." |
|-----|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Other        Hedging Activities**

**Credit        Concentration**

*(PPL        and PPL Energy Supply)*

*(PPL        Electric)*

| **15.  ** | **Restricted                Cash** |
|---------------------|------------------------------------|

*(PPL,        PPL Energy Supply and PPL Electric)*

|                                                                |                                          | **June                  30, 2006** |
|---------------------------------------------------------------------|-----------------------------------------------|------------------------------------|
|                                                                |                                          | **PPL**                            |   | **PPL                  Energy Supply** |   | **PPL                  Electric** |
| **Current:**                                                        |                                          |                               |   |   |   |   |   |   |   |   |   |   |
| Collateral                  for letters of credit (a)               |                                          | $                                  | 42 |   |   |   |   |   |   | $ | 42 |   |
| Deposits                  for trading purposes with NYMEX broker    |                                          |                               | 47 |   |   | $ | 47 |   |   |   |   |   |
| Counterparty                  collateral                            |                                          |                               | 1 |   |   |   | 1 |   |   |   |   |   |
| Client                  deposits                                    |                                          |                               | 9 |   |   |   |   |   |   |   |   |   |
| Miscellaneous                                                       |                                          |                               | 2 |   |   |   | 2 |   |   |   |   |   |
|                                                                | Restricted                  cash - current    |                               |   | 101 |   |   |   | 50 |   |   |   | 42 |   |
| **Noncurrent:**                                                     |                                          |                               |   |   |   |   |   |   |   |   |   |   |
| Required                  deposits of WPD (b)                       |                                          |                               | 20 |   |   |   | 20 |   |   |   |   |   |
| PPL                  Transition Bond Company Indenture reserves (c) |                                          |                               | 27 |   |   |   |   |   |   |   | 27 |   |
|                                                                | Restricted                  cash - noncurrent |                               |   | 47 |   |   |   | 20 |   |   |   | 27 |   |
|                                                                | Total                  restricted cash        |                               | $ | 148 |   |   | $ | 70 |   |   | $ | 69 |   |

|                                                                |                                          | **December                  31, 2005** |
|---------------------------------------------------------------------|-----------------------------------------------|----------------------------------------|
|                                                                |                                          | **PPL**                                |   | **PPL                  Energy Supply** |   | **PPL                  Electric** |
| **Current:**                                                        |                                          |                                   |   |   |   |   |   |   |   |   |   |   |
| Collateral                  for letters of credit (a)               |                                          | $                                      | 42 |   |   |   |   |   |   | $ | 42 |   |
| Deposits                  for trading purposes with NYMEX broker    |                                          |                                   | 29 |   |   | $ | 29 |   |   |   |   |   |
| Counterparty                  collateral                            |                                          |                                   | 9 |   |   |   | 9 |   |   |   |   |   |
| Client                  deposits                                    |                                          |                                   | 12 |   |   |   |   |   |   |   |   |   |
| Miscellaneous                                                       |                                          |                                   | 1 |   |   |   | 1 |   |   |   |   |   |
|                                                                | Restricted                  cash - current    |                                   |   | 93 |   |   |   | 39 |   |   |   | 42 |   |
| **Noncurrent:**                                                     |                                          |                                   |   |   |   |   |   |   |   |   |   |   |
| Required                  deposits of WPD (b)                       |                                          |                                   | 16 |   |   |   | 16 |   |   |   |   |   |
| PPL                  Transition Bond Company Indenture reserves (c) |                                          |                                   | 32 |   |   |   |   |   |   |   | 32 |   |
|                                                                | Restricted                  cash - noncurrent |                                   |   | 48 |   |   |   | 16 |   |   |   | 32 |   |
|                                                                | Total                  restricted cash        |                                   | $ | 141 |   |   | $ | 55 |   |   | $ | 74 |   |

| (a) |   | A                  deposit with a financial institution of funds from the asset-backed                  commercial paper program to fully collateralize $42 million of                  letters of                  credit. See Note 7 for further discussion on the asset-backed commercial                  paper program. |
|-----|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) |   | Includes                  insurance reserves of $19 million and $15 million at June 30, 2006,                  and December 31, 2005.                                                                                                                                                                                   |
| (c) |   | Credit                  enhancement for PPL Transition Bond Company's $2.4 billion Series                  1999-1                  Bonds to protect against losses or delays in scheduled                  payments.                                                                                                         |

| **16.  ** | **Goodwill** |
|---------------------|--------------|

*(PPL        and PPL Energy Supply)*

|                                                       |   | **PPL                  Energy Supply** |   |                          |   | **PPL**   |
|------------------------------------------------------------|--------|----------------------------------------|--------|-------------------------------|--------|-----------|
|                                                       |   | **Supply**                             |   | **International****Delivery** |   | **Total** |   | **Pennsylvania                  Delivery** |   | **Total** |
|                                                       |   |                                   |   |                          |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                  at December 31, 2005         |   | $                                      | 94     |                          |   | $         | 921 |   |   | $ | 1,015 |   |   | $ | 55 |   |   | $ | 1,070 |   |
| Effect                  of foreign currency exchange rates |   |                                   |   |                          |   |      | 57 |   |   |   | 57 |   |   |   |   |   |   |   | 57 |   |
| Purchase                  accounting adjustments (a)       |   |                                   |   |                          |   |      | (17 | ) |   |   | (17 | ) |   |   |   |   |   |   | (17 | ) |
| Balance                  at June 30, 2006        |   | $                                      | 94     |                          |   | $         | 961 |   |   | $ | 1,055 |   |   | $ | 55 |   |   | $ | 1,110 |   |

| (a) |   | Adjustments                  pursuant to EITF Issue 93-7, "Uncertainties Related to Income Taxes                  in a                  Purchase Business Combination." See Note 5 for a discussion of                  a $12                  million goodwill adjustment related to the transfer of WPD tax                  items. |
|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **17.  ** | **Asset                Retirement Obligations** |
|---------------------|-------------------------------------------------|

*(PPL        and PPL Energy Supply)*

| AROs                  at December 31, 2005              |   | $      | 298 |   |   |
|---------------------------------------------------------|--------|--------|-----|--------|--------|
| Accretion                  expense                      |   |   | 12  |   |   |
| Obligations                  settled                    |   |   | (1  | )      |   |
| AROs                  at                  June 30, 2006 |   | $      | 309 |   |   |

| **18.  ** | **New                Accounting Standards** |
|---------------------|---------------------------------------------|

*(PPL,        PPL Energy Supply and PPL Electric)*

**FIN        48**

**FSP        No. FIN 46(R)-6**

**SFAS        123(R) **

**SFAS        155**

----

**PPL        CORPORATION AND SUBSIDIARIES**

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

**Overview**

**Results        of Operations**

**Earnings**

|                           |   | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June****30,** |
|--------------------------------|--------|----------------------------------------------------------------------|--------|------------------------------------------------------|
|                           |   | **2006**                                                             |   | **2005**                                             |   | **2006** |   | **2005** |
| Net                  income    |   | $                                                                    | 181    |                                                 |   | $ | 128 |   |   | $ | 461 |   |   | $ | 296 |   |
| EPS                  - basic   |   | $                                                                    | 0.48   |                                                 |   | $ | 0.34 |   |   | $ | 1.21 |   |   | $ | 0.78 |   |
| EPS                  - diluted |   | $                                                                    | 0.47   |                                                 |   | $ | 0.33 |   |   | $ | 1.19 |   |   | $ | 0.77 |   |

**Segment        Results **

|                                    |   | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June****30,** |
|-----------------------------------------|--------|----------------------------------------------------------------------|--------|------------------------------------------------------|
|                                    |   | **2006**                                                             |   | **2005**                                             |   | **2006** |   | **2005** |
| Supply                                  |   | $                                                                    | 74     |                                                 |   | $ | 40 |   |   | $ | 217 |   |   | $ | 126 |   |
| International                  Delivery |   |                                                                 | 79     |                                                 |   |   | 54 |   |   |   | 160 |   |   |   | 116 |   |
| Pennsylvania                  Delivery  |   |                                                                 | 28     |                                                 |   |   | 34 |   |   |   | 84 |   |   |   | 54 |   |
|                                    | Total  |                                                                 | $      | 181                                                  |   |   | $ | 128 |   |   | $ | 461 |   |   | $ | 296 |   |

|                                               |                                      | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June****30,** |
|----------------------------------------------------|-------------------------------------------|----------------------------------------------------------------------|--------|------------------------------------------------------|
|                                               |                                      | **2006**                                                             |   | **2005**                                             |   | **2006** |   | **2005** |
| Energy                  revenues                   |                                      |                                                                 |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|                                               | External                                  |                                                                 | $      | 405                                                  |   |   | $ | 290 |   |   | $ | 775 |   |   | $ | 597 |   |
|                                               | Intersegment                              |                                                                 |   | 395                                                  |   |   |   | 363 |   |   |   | 841 |   |   |   | 779 |   |
| Energy-related                  businesses         |                                      |                                                                 | 143    |                                                 |   |   | 148 |   |   |   | 301 |   |   |   | 270 |   |
|                                               | Total                  operating revenues |                                                                 |   | 943                                                  |   |   |   | 801 |   |   |   | 1,917 |   |   |   | 1,646 |   |
| Fuel                  and energy purchases         |                                      |                                                                 |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|                                               | External                                  |                                                                 |   | 366                                                  |   |   |   | 264 |   |   |   | 704 |   |   |   | 567 |   |
|                                               | Intersegment                              |                                                                 |   | 39                                                   |   |   |   | 34 |   |   |   | 80 |   |   |   | 72 |   |
| Other                  operation and maintenance   |                                      |                                                                 | 177    |                                                 |   |   | 170 |   |   |   | 341 |   |   |   | 359 |   |
| Depreciation                                       |                                      |                                                                 | 39     |                                                 |   |   | 36 |   |   |   | 76 |   |   |   | 72 |   |
| Taxes,                  other than income          |                                      |                                                                 | 10     |                                                 |   |   | 11 |   |   |   | 19 |   |   |   | 22 |   |
| Energy-related                  businesses         |                                      |                                                                 | 135    |                                                 |   |   | 163 |   |   |   | 289 |   |   |   | 303 |   |
|                                               | Total                  operating expenses |                                                                 |   | 766                                                  |   |   |   | 678 |   |   |   | 1,509 |   |   |   | 1,395 |   |
| Other                  Income - net                |                                      |                                                                 | 1      |                                                 |   |   | 1 |   |   |   | 1 |   |   |   | 1 |   |
| Interest                  Expense                  |                                      |                                                                 | 29     |                                                 |   |   | 27 |   |   |   | 56 |   |   |   | 57 |   |
| Income                  Taxes                      |                                      |                                                                 | 55     |                                                 |   |   | 6 |   |   |   | 115 |   |   |   | 15 |   |
| Minority                  Interest                 |                                      |                                                                 | 1      |                                                 |   |   | 1 |   |   |   | 1 |   |   |   | 1 |   |
| Loss                  from Discontinued Operations |                                      |                                                                 | 19     |                                                 |   |   | 50 |   |   |   | 20 |   |   |   | 53 |   |
|                                               | Total                                     |                                                                 | $      | 74                                                   |   |   | $ | 40 |   |   | $ | 217 |   |   | $ | 126 |   |

|                                                   |   | **June                  30, 2006 vs. June 30, 2005** |
|--------------------------------------------------------|--------|------------------------------------------------------|
|                                                   |   | **Three                  Months Ended**              |   | **Six                  Months Ended** |
|                                                   |   |                                                 |   |   |   |   |   |   |
| Eastern                  U.S. non-trading margins      |   | $                                                    | 13 |   |   | $ | 39 |   |
| Northwestern                  U.S. non-trading margins |   |                                                 | 6 |   |   |   | 19 |   |
| Southwestern                  U.S. non-trading margins |   |                                                 | (1 | ) |   |   | 1 |   |
| Net                  energy trading margins            |   |                                                 | 2 |   |   |   | (1 | ) |
| Operation                  and maintenance expenses    |   |                                                 | (8 | ) |   |   | (16 | ) |
| Earnings                  from synfuel projects        |   |                                                 | (15 | ) |   |   | (12 | ) |
| Energy-related                  businesses             |   |                                                 |   |   |   |   | 2 |   |
| Taxes,                  other than income              |   |                                                 | 1 |   |   |   | 2 |   |
| Other                                                  |   |                                                 | 5 |   |   |   | 7 |   |
| Unusual                  items                         |   |                                                 | 31 |   |   |   | 50 |   |
|                                                   |   | $                                                    | 34 |   |   | $ | 91 |   |

|                                                                                                                       |   | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June****30,** |
|----------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|------------------------------------------------------|
|                                                                                                                       |   | **2006**                                                             |   | **2005**                                             |   | **2006** |   | **2005** |
|                                                                                                                       |   |                                                                 |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Sale                  of Sundance plant (Note 8)                                                                           |   |                                                                 |   |                                                 |   | $ | (47 | ) |   |   |   |   |   | $ | (47 | ) |
| Loss                  related to sale of interest in the Griffith plant                  (Note 8)                     |   | $                                                                    | (17    | )                                                    |   |   |   |   |   | $ | (17 | ) |   |   |   |   |
| Reduction                  in Enron reserve (Note 2)                                                                       |   |                                                                 | 2      |                                                 |   |   |   |   |   |   | 11 |   |   |   |   |   |
| Off-site                  remediation of ash basin leak (Note 11)                                                     |   |                                                                 | 5      |                                                 |   |   |   |   |   |   | 6 |   |   |   |   |   |
| Settlement                  of NorthWestern litigation                                                                     |   |                                                                 |   |                                                 |   |   |   |   |   |   |   |   |   |   | (6 | ) |
| Impairment                  of synfuel-related assets (Note 11)                                                            |   |                                                                 | (6     | )                                                    |   |   |   |   |   |   | (6 | ) |   |   |   |   |
| Acceleration                  of stock-based compensation expense for periods prior to 2005                  (Note 9) |   |                                                                 |   |                                                 |   |   |   |   |   |   |   |   |   |   | (3 | ) |
|                                                                                                                       | Total  |                                                                 | $      | (16                                                  | ) |   | $ | (47 | ) |   | $ | (6 | ) |   | $ | (56 | ) |

| · | See                  "Domestic Gross Energy Margins" for an explanation of non-trading                  margins                  by geographic region and for an explanation of net energy trading                  margins.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| · | Higher                  operation and maintenance expenses in both periods were primarily                  due to                  the nuclear refueling outage, inspection costs at the Susquehanna                  station                  and outages at the Brunner Island and Martins Creek plants in 2006.                  The                  costs of these outages exceeded the costs of the 2005 planned outage                  at                  Montour and a short-duration outage at the Susquehanna                  station.                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| · | In                  May 2005, a subsidiary of PPL Energy Supply completed the sale                  of its 450                  MW Sundance power plant located in Pinal County, Arizona to Arizona                  Public                  Service Company for $190 million in cash. The subsidiary recorded                  a loss                  on the sale of $47 million after tax (or $0.12 per                  share).                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| · | In                  June 2006, a subsidiary of PPL Energy Supply completed the sale                  of its 50%                  ownership in the 600 MW Griffith power plant located in Kingman,                  Arizona,                  for $115 million in cash. The subsidiary recorded a loss on the                  sale of                  $24 million after tax (or $0.07 per share). Another subsidiary of PPL                  Energy Supply recorded the acceleration of net unrealized gains                  on                  derivatives associated with the plant of $7 million after tax (or                  $0.02                  per share).                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| · | In                  June 2006, PPL reduced its estimate of the costs for the remediation                  of                  the Martins Creek ash basin leak. This adjustment increased earnings                  by $5                  million after tax (or $0.01 per share) in the second quarter. Most                  of this                  reduction was related to an insurance claim settlement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| · | The                  decline in earnings contribution from synfuel projects resulted                  from lower                  recognition of synthetic fuel tax credits due to the anticipated                  phase-out                  of synthetic fuel tax credits starting in 2006, partially offset                  by                  unrealized gains on options purchased to hedge a portion of the                  risk                  associated with the phase-out of the synthetic fuel tax credits                  for 2006                  and 2007. In June 2006, based upon observed and forecasted higher                  crude                  oil prices and projected cash flows, PPL fully impaired its                  synfuel-related assets. This adjustment decreased earnings by $6                  million                  after tax (or $0.01 per share). |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| · | In                  2006, PPL decreased its reserve on claims related to the Enron                  bankruptcy.                  These adjustments increased earnings by $11 million after tax (or                  $0.03                  per share).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| · | In                  the first quarter of 2005, PPL recognized a charge of $6 million                  after tax                  (or $0.02 per share) for a loss contingency related to litigation                  with                  NorthWestern. In September 2005, PPL and NorthWestern reached a                  final                  agreement to settle this litigation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

*Outlook*

|                                             |                                      | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June****30,** |
|--------------------------------------------------|-------------------------------------------|----------------------------------------------------------------------|--------|------------------------------------------------------|
|                                             |                                      | **2006**                                                             |   | **2005**                                             |   | **2006** |   | **2005** |
|                                             |                                      |                                                                 |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Utility                  revenues                |                                      | $                                                                    | 310    |                                                 |   | $ | 284 |   |   | $ | 633 |   |   | $ | 577 |   |
| Energy-related                  businesses       |                                      |                                                                 | 24     |                                                 |   |   | 19 |   |   |   | 45 |   |   |   | 37 |   |
|                                             | Total                  operating revenues |                                                                 |   | 334                                                  |   |   |   | 303 |   |   |   | 678 |   |   |   | 614 |   |
| Energy                  purchases                |                                      |                                                                 | 83     |                                                 |   |   | 65 |   |   |   | 164 |   |   |   | 128 |   |
| Other                  operation and maintenance |                                      |                                                                 | 67     |                                                 |   |   | 63 |   |   |   | 134 |   |   |   | 124 |   |
| Depreciation                                     |                                      |                                                                 | 41     |                                                 |   |   | 38 |   |   |   | 82 |   |   |   | 76 |   |
| Taxes,                  other than income        |                                      |                                                                 | 15     |                                                 |   |   | 15 |   |   |   | 27 |   |   |   | 29 |   |
| Energy-related                  businesses       |                                      |                                                                 | 10     |                                                 |   |   | 7 |   |   |   | 19 |   |   |   | 13 |   |
|                                             | Total                  operating expenses |                                                                 |   | 216                                                  |   |   |   | 188 |   |   |   | 426 |   |   |   | 370 |   |
| Other                  Income - net              |                                      |                                                                 | 25     |                                                 |   |   | 4 |   |   |   | 25 |   |   |   | 7 |   |
| Interest                  Expense                |                                      |                                                                 | 51     |                                                 |   |   | 52 |   |   |   | 99 |   |   |   | 102 |   |
| Income                  Taxes                    |                                      |                                                                 | 12     |                                                 |   |   | 12 |   |   |   | 15 |   |   |   | 30 |   |
| Minority                  Interest               |                                      |                                                                 | 1      |                                                 |   |   | 1 |   |   |   | 3 |   |   |   | 3 |   |
|                                             | Total                                     |                                                                 | $      | 79                                                   |   |   | $ | 54 |   |   | $ | 160 |   |   | $ | 116 |   |

|                                                                |                                                                   | **June                  30, 2006 vs. June 30, 2005** |
|---------------------------------------------------------------------|------------------------------------------------------------------------|------------------------------------------------------|
|                                                                |                                                                   | **Three                  Months Ended**              |   | **Six                  Months Ended** |
| U.K.                                                                |                                                                   |                                                 |   |   |   |   |   |   |
|                                                                | Delivery                  margins                                      |                                                 | $ | 7 |   |   | $ | 25 |   |
|                                                                | Operation                  and maintenance expenses                    |                                                 |   | (6 | ) |   |   | (13 | ) |
|                                                                | Income                  taxes                                          |                                                 |   | 1 |   |   |   | 22 |   |
|                                                                | Impact                  of changes in foreign currency exchange rates  |                                                 |   | (4 | ) |   |   | (11 | ) |
|                                                                | Impairment                  of investment in U.K. real estate (Note 8) |                                                 |   |   |   |   |   | (6 | ) |
|                                                                | Hyder                  liquidation distribution (Note 8)               |                                                 |   | 24 |   |   |   | 24 |   |
|                                                                | Other                                                                  |                                                 |   | 2 |   |   |   | 4 |   |
| Latin                  America                                      |                                                                   |                                                 | 3 |   |   |   | 8 |   |
| U.S.                  income taxes                                  |                                                                   |                                                 | (4 | ) |   |   | (10 | ) |
| Other                                                               |                                                                   |                                                 | 2 |   |   |   |   |   |
| Unusual                  item - collection of receivable from Enron |                                                                   |                                                 |   |   |   |   | 1 |   |
|                                                                |                                                                   | $                                                    | 25 |   |   | $ | 44 |   |

| · | The                  U.K.'s earnings were positively impacted by higher margins, primarily                  due                  to price increases and 2% higher sales volumes for the six months                  ended                  June 30, 2006.                                                                                                                                                                                                              |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| · | In                  the second quarter of 2006, WPD received $24 million as an initial                  distribution related to the planned ongoing liquidation of Hyder's                  non-electricity delivery businesses. PPL                  does not expect income from the sale or liquidation of Hyder's                  non-electricity delivery businesses to continue at the same level                  in 2007                  as occurred in 2006. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| · | Lower                  U.K. income taxes in 2006 were due to the transfer of a future                  tax                  liability from WPD and certain surplus tax losses from Hyder to                  a former                  Hyder affiliate. See Note 5 to the Financial Statements for additional                  information.                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| · | Changes                  in foreign exchange rates decreased WPD's portion of revenue and                  expense                  line items by 5% in the three months ended June 30, 2006, and 6%                  in the                  six months ended June 30, 2006, compared with the same periods                  in                  2005.                                                                                                                |

*Outlook*

|                                                          |                                      | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June****30,** |
|---------------------------------------------------------------|-------------------------------------------|----------------------------------------------------------------------|--------|------------------------------------------------------|
|                                                          |                                      | **2006**                                                             |   | **2005**                                             |   | **2006** |   | **2005** |
| Operating                  revenues                           |                                      |                                                                 |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                          | External                                  |                                                                 | $      | 760                                                  |   |   | $ | 726 |   |   | $ | 1,669 |   |   | $ | 1,584 |   |
|                                                          | Intersegment                              |                                                                 |   | 39                                                   |   |   |   | 34 |   |   |   | 80 |   |   |   | 72 |   |
|                                                          | Total                  operating revenues |                                                                 |   | 799                                                  |   |   |   | 760 |   |   |   | 1,749 |   |   |   | 1,656 |   |
| Fuel                  and energy purchases                    |                                      |                                                                 |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                          | External                                  |                                                                 |   | 77                                                   |   |   |   | 69 |   |   |   | 203 |   |   |   | 209 |   |
|                                                          | Intersegment                              |                                                                 |   | 395                                                  |   |   |   | 363 |   |   |   | 841 |   |   |   | 779 |   |
| Other                  operation and maintenance              |                                      |                                                                 | 107    |                                                 |   |   | 101 |   |   |   | 209 |   |   |   | 216 |   |
| Amortization                  of recoverable transition costs |                                      |                                                                 | 63     |                                                 |   |   | 59 |   |   |   | 135 |   |   |   | 128 |   |
| Depreciation                                                  |                                      |                                                                 | 31     |                                                 |   |   | 30 |   |   |   | 61 |   |   |   | 59 |   |
| Taxes,                  other than income                     |                                      |                                                                 | 44     |                                                 |   |   | 42 |   |   |   | 94 |   |   |   | 90 |   |
|                                                          | Total                  operating expenses |                                                                 |   | 717                                                  |   |   |   | 664 |   |   |   | 1,543 |   |   |   | 1,481 |   |
| Other                  Income - net                           |                                      |                                                                 | 7      |                                                 |   |   | 6 |   |   |   | 16 |   |   |   | 10 |   |
| Interest                  Expense                             |                                      |                                                                 | 41     |                                                 |   |   | 46 |   |   |   | 85 |   |   |   | 101 |   |
| Income                  Taxes                                 |                                      |                                                                 | 16     |                                                 |   |   | 22 |   |   |   | 48 |   |   |   | 29 |   |
| Dividends                  on Preferred Securities            |                                      |                                                                 | 4      |                                                 |   |   |   |   |   |   | 5 |   |   |   | 1 |   |
|                                                          | Total                                     |                                                                 | $      | 28                                                   |   |   | $ | 34 |   |   | $ | 84 |   |   | $ | 54 |   |

|                                                                                                                                          |   | **June                  30, 2006 vs. June 30, 2005** |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|
|                                                                                                                                          |   | **Three                  Months Ended**              |   | **Six                  Months Ended** |
|                                                                                                                                          |   |                                                 |   |   |   |   |   |   |
| Delivery                  revenues (net of CTC/ITC amortization, interest expense on transition                  bonds and ancillary charges) |   | $                                                    | 1 |   |   |   |   |   |
| Operation                  and maintenance expenses                                                                                           |   |                                                 | (4 | ) |   | $ | 2 |   |
| Interest                  expense                                                                                                             |   |                                                 | (2 | ) |   |   | (1 | ) |
| Other                                                                                                                                         |   |                                                 | (1 | ) |   |   |   |   |
| Unusual                  items                                                                                                                |   |                                                 |   |   |   |   | 29 |   |
|                                                                                                                                          |   | $                                                    | (6 | ) |   | $ | 30 |   |

|                                                                                                                  |   | **Six                  Months Ended****June                  30,** |
|-----------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|
|                                                                                                                  |   | **2006**                                                           |   | **2005** |
|                                                                                                                  |   |                                                               |   |   |   |   |   |   |
| PJM                  billing dispute                                                                                  |   |                                                               |   |   |   | $ | (27 | ) |
| Acceleration                  of stock-based compensation expense for periods prior to 2005 (Note                  9) |   |                                                               |   |   |   |   | (2 | ) |
|                                                                                                                  | Total  |                                                               |   |   |   |   | $ | (29 | ) |

| · | PPL                  Electric recognized an after-tax charge of $27 million (or $0.07                  per                  share) in the first quarter of 2005 for a loss contingency related                  to the                  PJM billing dispute. See Note 11 to the Financial Statements for                  an update                  on this matter. PPL cannot be certain of the outcome of this matter                  or the                  impact on PPL and its subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| · | Lower                  operation and maintenance expenses in the first six months of 2006                  were                  primarily due to the costs incurred in January 2005 when severe                  ice storms                  hit PPL Electric's service territory. The total cost of restoring                  service                  to 238,000 customers, excluding capitalized costs and regular payroll                  expenses, was $16 million (or $0.02 per share). Partially offsetting                  this                  variance were higher flood-related costs in the second quarter                  of 2006,                  and higher tree trimming costs for the six months ended June 30,                  2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | In                  August 2005, the PUC issued an order granting PPL Electric's petition                  for                  authority to defer and amortize for regulatory accounting and reporting                  purposes a portion of the ice storm costs, subject to certain conditions.                  As a result of the PUC Order and in accordance with SFAS 71, "Accounting                  for the Effects of Certain Types of Regulation," in the third quarter                  of                  2005, PPL Electric deferred $12 million (or $0.02 per share) of                  its                  previously expensed storm costs. The deferral was based on its                  assessment                  of the timing and likelihood of recovering the deferred costs in                  PPL                  Electric's next distribution base rate case. At this time, PPL                  Electric                  cannot be certain that it will recover the storm costs, nor can                  it predict                  whether future incidents of severe weather will cause significant                  facility                  damage and service disruptions that would also result in significant                  costs. |

*Outlook*

**Statement        of Income Analysis -- **

**Domestic        Gross Energy Margins**

|                                           |                                           | **June                  30, 2006 vs. June 30, 2005** |
|------------------------------------------------|------------------------------------------------|------------------------------------------------------|
|                                           |                                           | **Three                  Months Ended**              |   | **Six                  Months Ended** |
|                                           |                                           |                                                 |   |   |   |   |
| Utility                                        |                                           | $                                                    | 55 |   |   | $ | 136 |   |
| Unregulated                  retail electric   |                                           |                                                 | (3 | ) |   |   | (3 | ) |
| Wholesale                  energy marketing    |                                           |                                                 | 120 |   |   |   | 189 |   |
| Net                  energy trading margins    |                                           |                                                 | 3 |   |   |   | (3 | ) |
| Other                  revenue adjustments (a) |                                           |                                                 | (35 | ) |   |   | (76 | ) |
|                                           | Total                  revenues                |                                                 |   | 140 |   |   |   | 243 |   |
| Fuel                                           |                                           |                                                 | 48 |   |   |   | 44 |   |
| Energy                  purchases              |                                           |                                                 | 80 |   |   |   | 123 |   |
| Other                  cost adjustments (a)    |                                           |                                                 | (34 | ) |   |   | (35 | ) |
|                                           | Total                  cost of sales           |                                                 |   | 94 |   |   |   | 132 |   |
|                                           | Domestic                  gross energy margins |                                                 | $ | 46 |   |   | $ | 111 |   |

| (a) |   | Adjusted                  to exclude the impact of any revenues and costs not associated                  with                  domestic gross energy margins; in particular, revenues and energy                  costs                  related to the international operations of PPL Global, the domestic                  delivery operations of PPL Electric and PPL Gas Utilities and an                  accrual                  for the loss contingency related to the PJM billing dispute in                  2005 (see                  Note 11 to the Financial Statements for additional information).                  Also                  adjusted to include the margins of the Griffith and Sundance plants                  prior                  to their sales in June 2006 and May 2005, which are included in                  "Loss from                  Discontinued Operations," and gains or losses on sales of emission                  allowances, which are included in "Other operation and maintenance"                  expenses on the Statements of                  Income. |
|-----|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                | **June                  30, 2006 vs. June 30, 2005** |
|-------------------------------------|------------------------------------------------------|
|                                | **Three                  Months Ended**              |   | **Six                  Months Ended** |
| Non-trading                         |                                                 |   |   |   |   |   |   |
|                                | Eastern                  U.S.                        | $ | 22 |   |   | $ | 67 |   |
|                                | Northwestern                  U.S.                   |   | 10 |   |   |   | 33 |   |
|                                | Southwestern                  U.S.                   |   | (1 | ) |   |   | 2 |   |
| Net                  energy trading |                                                 | 15 |   |   |   | 9 |   |
|                                | Domestic                  gross energy margins       | $ | 46 |   |   | $ | 111 |   |

*Eastern        U.S.*

*Northwestern        U.S.*

*Net        Energy Trading*

**Utility        Revenues**

|               |                                                    | **June                  30, 2006 vs. June 30, 2005** |
|--------------------|---------------------------------------------------------|------------------------------------------------------|
|               |                                                    | **Three                  Months Ended**              |   | **Six                  Months Ended** |
| **Domestic:**      |                                                    |                                                 |   |   |   |   |   |   |
|               | Retail                  electric revenue (PPL Electric) |                                                 |   |   |   |   |   |   |   |
|               | PLR                  electric generation supply         |                                                 | $ | 33 |   |   | $ | 67 |   |
|               | Electric                  delivery                      |                                                 |   | (11 | ) |   |   | (14 | ) |
|               | Gas                  revenue (PPL Gas Utilities)        |                                                 |   | 6 |   |   |   | 25 |   |
|               | Other                                                   |                                                 |   | 1 |   |   |   | 2 |   |
| **International:** |                                                    |                                                 |   |   |   |   |   |   |
|               | Retail                  electric delivery (PPL Global)  |                                                 |   |   |   |   |   |   |   |
|               | U.K.                                                    |                                                 |   | 13 |   |   |   | 38 |   |
|               | Chile                                                   |                                                 |   | 12 |   |   |   | 21 |   |
|               | El                  Salvador                            |                                                 |   | 4 |   |   |   | 7 |   |
|               | Bolivia                                                 |                                                 |   | 1 |   |   |   | 3 |   |
|               | Foreign                  currency exchange rates        |                                                 |   | (4 | ) |   |   | (13 | ) |
|               |                                                    |                                                 | $ | 55 |   |   | $ | 136 |   |

| · | higher                  PLR revenues attributable to an increase of 8.4% in prices and                  an increase                  in commercial and industrial sales volumes, due in part to the                  return of                  customers previously served by alternate suppliers, offset by a                  decrease                  in residential sales volumes, due in part to milder weather in                  2006                  compared with 2005; |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | a                  decrease in electric delivery revenues resulting primarily from                  the impact                  of milder weather on residential sales in 2006 compared with                  2005;                                                                                                                                                                                                                                                                  |
| · | higher                  gas revenues primarily due to the increase in natural gas prices,                  which                  are passed through to customers, offset by a decrease in volumes;                                                                                                                                                                                                                                                                                  |
| · | increases                  of 1% and 2% in sales volumes in the U.K. for the three and six                  months                  ended June 30, 2006, compared with the same periods in 2005, and                  higher                  average prices overall;                                                                                                                                                                                                                |
| · | increases                  of 7% in Chilean electric delivery sales volumes and higher average                  prices                  overall; and                                                                                                                                                                                                                                                                                                                                 |
| · | increases                  of 7% and 8% in electric delivery sales volumes in El Salvador                  for the                  three and six months ended June 30, 2006, compared with the same                  periods                  in 2005, and higher average prices                  overall.                                                                                                                                                                          |

**Energy-related        Businesses**

| · | an                  $18 million net unrealized gain on options purchased to hedge a                  portion of                  the risk associated with the phase-out of the synthetic fuel tax                  credits                  for 2006 and 2007; and |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | $13                  million of lower operating losses due to lower production levels;                  partially offset by                                                                                                                                        |
| · | an                  impairment charge of $10 million on the synfuel-related                  assets.                                                                                                                                                               |

| · | a                  $41 million net unrealized gain on options purchased to hedge a                  portion of                  the risk associated with the phase-out of the synthetic fuel tax                  credits                  for 2006 and 2007; and |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | $10                  million of lower operating losses due to lower production levels;                  partially offset by                                                                                                                                       |
| · | an                  impairment charge of $10 million on the synfuel-related                  assets.                                                                                                                                                              |

**Other        Operation and Maintenance**

|                                                                                                      |   | **June                  30, 2006 vs. June 30, 2005** |
|-----------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|
|                                                                                                      |   | **Three                  Months Ended**              |   | **Six                  Months Ended** |
|                                                                                                      |   |                                                 |   |   |   |   |
| Reduction                  in Enron reserve (Note 2)                                                      |   | $                                                    | (4 | ) |   | $ | (19 | ) |
| Costs                  associated with severe ice storms in January 2005 (Note 1)                         |   |                                                 |   |   |   |   | (16 | ) |
| Martins                  Creek ash basin remediation adjustment (Note 11)                                 |   |                                                 | (8 | ) |   |   | (11 | ) |
| NorthWestern                  litigation accrual in March 2005                                       |   |                                                 |   |   |   |   | (9 | ) |
| Stock-based                  compensation (Note 9)                                                        |   |                                                 | (3 | ) |   |   | (8 | ) |
| Susquehanna                  plant refueling and inspection costs                                         |   |                                                 | 7 |   |   |   | 12 |   |
| Increase                  in domestic and international pension and postretirement                  costs |   |                                                 | 7 |   |   |   | 10 |   |
| Outage                  costs at Martins Creek and Brunner Island plants                                  |   |                                                 | 4 |   |   |   | 8 |   |
| PUC                  reportable storm costs in 2006                                                       |   |                                                 | 3 |   |   |   | 7 |   |
| Increase                  in international operation and maintenance expenses                             |   |                                                 | 2 |   |   |   | 5 |   |
| Lower                  gains on sales of emission allowances                                              |   |                                                 | 8 |   |   |   | 2 |   |
| Other                                                                                                     |   |                                                 | 1 |   |   |   | 4 |   |
|                                                                                                      |   | $                                                    | 17 |   |   | $ | (15 | ) |

**Depreciation**

|                                                                    |   | **June                  30, 2006 vs. June 30, 2005** |
|-------------------------------------------------------------------------|--------|------------------------------------------------------|
|                                                                    |   | **Three                  Months Ended**              |   | **Six                  Months Ended** |
|                                                                    |   |                                                 |   |   |   |   |
| Additions                  to PP&E                                  |   | $                                                    | 8 |   |   | $ | 14 |   |
| Reduction                  of useful lives of certain assets            |   |                                                 | 2 |   |   |   | 4 |   |
| Foreign                  currency exchange rates                        |   |                                                 | (2 | ) |   |   | (4 | ) |
| Extension                  of useful lives of certain generation assets |   |                                                 | (1 | ) |   |   | (2 | ) |
|                                                                    |   | $                                                    | 7 |   |   | $ | 12 |   |

**Other        Income - net**

**Financing        Costs**

|                                                                                                                                                                                                                    |   | **June                  30, 2006 vs. June 30, 2005** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|
|                                                                                                                                                                                                                    |   | **Three                  Months Ended**              |   | **Six                  Months Ended** |
|                                                                                                                                                                                                                    |   |                                                 |   |   |   |   |
| Increase                  in interest expense due to hedging activities accounted for under                  SFAS                  133, "Accounting for Derivative Instruments and Hedging                  Activities" |   | $                                                    | 7 |   |   | $ | 17 |   |
| Dividends                  on 6.25% Series Preference Stock                                                                                                                                                             |   |                                                 | 4 |   |   |   | 4 |   |
| Decrease                  in long-term debt interest expense                                                                                                                                                            |   |                                                 | (5 | ) |   |   | (14 | ) |
| Interest                  accrued in 2005 for PJM billing dispute (Note 11)                                                                                                                                             |   |                                                 |   |   |   |   | (8 | ) |
| Increase                  in capitalized interest                                                                                                                                                                       |   |                                                 | (3 | ) |   |   | (5 | ) |
| Decrease                  in foreign currency exchange rates                                                                                                                                                            |   |                                                 | (1 | ) |   |   | (4 | ) |
| Decrease                  in short-term debt interest expense                                                                                                                                                           |   |                                                 | (1 | ) |   |   | (3 | ) |
| Other                                                                                                                                                                                                                   |   |                                                 | (1 | ) |   |   | (3 | ) |
|                                                                                                                                                                                                                    |   | $                                                    |   |   |   | $ | (16 | ) |

**Income        Taxes**

|                                                                                                    |   | **June                  30, 2006 vs. June 30, 2005** |
|---------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|
|                                                                                                    |   | **Three                  Months Ended**              |   | **Six                  Months Ended** |
|                                                                                                    |   |                                                 |   |   |   |   |
| Higher                  pre-tax book income                                                             |   | $                                                    | 16 |   |   | $ | 81 |   |
| Reduction                  in tax benefits related to nonconventional fuel tax                  credits |   |                                                 | 32 |   |   |   | 40 |   |
| Decrease                  in tax expense on foreign earnings                                            |   |                                                 | (8 | ) |   |   |   |   |
| Transfer                  of WPD tax items in 2006 (Note 5)                                        |   |                                                 |   |   |   |   | (20 | ) |
| Other                                                                                                   |   |                                                 | 3 |   |   |   | 3 |   |
|                                                                                                    |   | $                                                    | 43 |   |   | $ | 104 |   |

**Discontinued        Operations**

**Financial        Condition**

**Liquidity        and Capital Resources**

| · | the                  retirement of $563 million of long-term debt;                                                                                                        |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | a                  net decrease in short-term debt of $171 million (excluding a $1                  million                  impact of currency translation adjustments); |
| · | the                  payment of $200 million of common stock dividends;                                                                                                   |
| · | $478                  million of capital expenditures; and                                                                                                                |
| · | $25                  million of net purchases of emission allowances; offset                  by                                                                          |
| · | $695                  million of cash provided by operating activities;                                                                                                   |
| · | the                  issuance of $300 million of long-term debt;                                                                                                          |
| · | $245                  million of net proceeds from the issuance of preference stock;                  and                                                                 |
| · | $115                  million of proceeds from the sale of PPL's interest in the Griffith                  plant.                                                         |

*Moody's*

| · | PPL                  - assigned a Baa2 issuer rating;                                                                                                                                                                                                                                                 |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | PPL                  Capital Funding - upgraded the ratings of its senior unsecured                  debt and                  Medium Term Notes to Baa2 from Baa3 and subordinated debt to Baa3                  from                  Ba1; and                                                      |
| · | PPL                  Electric - upgraded the issuer rating to Baa1 from Baa2 and upgraded                  the                  ratings of its First Mortgage Bonds and Senior Secured Bonds to                  A3 from                  Baa1 and preferred stock to Baa3 from                  Ba1. |

*S&P*

*Fitch*

| · | WPDH                  Limited IDR of BBB- and senior unsecured rating to BBB from                  BBB-;                                                |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | WPD                  LLP IDR of BBB, senior unsecured rating to BBB+ from BBB and preferred                  stock rating to BBB from BBB-; and         |
| · | WPD                  (South Wales) and WPD (South West) IDR of BBB+ and senior unsecured                  debt                  rating to A- from BBB+. |

|                                           |                                                      | **Projected**                                    |   |
|------------------------------------------------|-----------------------------------------------------------|--------------------------------------------------|--------|
|                                           |                                                      | **2006**                                         |   | **2007** |   | **2008** |   | **2009** |   | **2010** |   |
| Construction                  expenditures (a) |                                                      |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                           | Generating                  facilities                    |                                             | $      | 266 |   | $ | 233 |   | $ | 180 |   | $ | 202 |   | $ | 174 |   |
|                                           | Transmission                  and distribution facilities |                                             |   | 507 |   |   | 529 |   |   | 511 |   |   | 553 |   |   | 615 |   |
|                                           | Environmental                                             |                                             |   | 337 |   |   | 576 |   |   | 375 |   |   | 118 |   |   | 70 |   |
|                                           | Other                                                     |                                             |   | 86 |   |   | 76 |   |   | 37 |   |   | 30 |   |   | 30 |   |
|                                           |                                                      | Total                  Construction Expenditures |   |   | 1,196 |   |   | 1,414 |   |   | 1,103 |   |   | 903 |   |   | 889 |   |
| Nuclear                  fuel                  |                                                      |                                             | 79     |   |   | 92 |   |   | 97 |   |   | 97 |   |   | 99 |   |
|                                           |                                                      | Total                  Capital Expenditures      |   | $ | 1,275 |   | $ | 1,506 |   | $ | 1,200 |   | $ | 1,000 |   | $ | 988 |   |

| (a) |   | Construction                  expenditures include AFUDC and capitalized interest, which are                  expected to                  be $162 million for the 2006-2010                  period. |
|-----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Risk        Management - Energy Marketing & Trading and Other **

*Commodity        Price Risk (Non-trading)*

|                                                                                                 |   | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June****30,** |
|------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|------------------------------------------------------|
|                                                                                                 |   | **2006**                                                             |   | **2005**                                             |   | **2006** |   | **2005** |
|                                                                                                 |   |                                                                 |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Fair                  value of contracts outstanding at the beginning of the                  period |   | $                                                                    | (111   | )                                                    |   | $ | (106 | ) |   | $ | (284 | ) |   | $ | (11 | ) |
| Contracts                  realized or otherwise settled during the period                           |   |                                                                 | 1      |                                                 |   |   | (16 | ) |   |   | 12 |   |   |   | (23 | ) |
| Fair                  value of new contracts at inception                                            |   |                                                                 |   |                                                 |   |   | 13 |   |   |   |   |   |   |   | 13 |   |
| Other                  changes in fair values                                                        |   |                                                                 | 11     |                                                 |   |   | (20 | ) |   |   | 173 |   |   |   | (108 | )  |
| Fair                  value of contracts outstanding at the end of the period                        |   | $                                                                    | (99    | )                                                    |   | $ | (129 | ) |   | $ | (99 | ) |   | $ | (129 | ) |

|                                                                          |   | **Fair                  Value of Contracts at Period-End****Gains                  (Losses)** |
|-------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------|
|                                                                          |   | **Maturity****Less                  Than****1                  Year**                         |   | **Maturity****1-3                  Years** |   | **Maturity****4-5                  Years** |   | **Maturity****in                  Excess****of                  5 Years** |   | **Total                  Fair****Value** |
| **Source                  of Fair Value**                                     |   |                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Prices                  actively quoted                                       |   | $                                                                                             | 7 |   |   | $ | 2 |   |   | $ | 1 |   |   |   |   |   |   | $ | 10 |   |
| Prices                  provided by other external sources                    |   |                                                                                          | (42 | ) |   |   | (159 | ) |   |   | (44 | ) |   | $ | 1 |   |   |   | (244 | ) |
| Prices                  based on models and other valuation methods           |   |                                                                                          | 79 |   |   |   | 56 |   |   |   |   |   |   |   |   |   |   |   | 135 |   |
| Fair                  value of contracts outstanding at the end of the period |   | $                                                                                             | 44 |   |   | $ | (101 | ) |   | $ | (43 | ) |   | $ | 1 |   |   | $ | (99 | ) |

*Commodity        Price Risk (Trading)*

|                                                                                                 |   | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June****30,** |
|------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|------------------------------------------------------|
|                                                                                                 |   | **2006**                                                             |   | **2005**                                             |   | **2006** |   | **2005** |
|                                                                                                 |   |                                                                 |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Fair                  value of contracts outstanding at the beginning of the                  period |   | $                                                                    | 12     |                                                 |   | $ | 16 |   |   | $ | 5 |   |   | $ | 10 |   |
| Contracts                  realized or otherwise settled during the period                           |   |                                                                 | (7     | )                                                    |   |   | (3 | ) |   |   | (18 | ) |   |   | (7 | ) |
| Fair                  value of new contracts at inception                                            |   |                                                                 | (1     | )                                                    |   |   | 1 |   |   |   | 3 |   |   |   | 4 |   |
| Other                  changes in fair values                                                        |   |                                                                 | 15     |                                                 |   |   | (3 | ) |   |   | 29 |   |   |   | 4 |   |
| Fair                  value of contracts outstanding at the end of the period                        |   | $                                                                    | 19     |                                                 |   | $ | 11 |   |   | $ | 19 |   |   | $ | 11 |   |

|                                                                          |   | **Fair                  Value of Contracts at Period-End****Gains                  (Losses)** |
|-------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------|
|                                                                          |   | **Maturity****Less                  Than****1                  Year**                         |   | **Maturity****1-3                  Years** |   | **Maturity****4-5                  Years** |   | **Maturity****in                  Excess****of                  5 Years** |   | **Total                  Fair****Value** |
| **Source                  of Fair Value**                                     |   |                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Prices                  actively quoted                                       |   | $                                                                                             | 5 |   |   | $ | 1 |   |   |   |   |   |   |   |   |   |   | $ | 6 |   |
| Prices                  provided by other external sources                    |   |                                                                                          | 8 |   |   |   | 2 |   |   | $ | 2 |   |   |   |   |   |   |   | 12 |   |
| Prices                  based on models and other valuation methods           |   |                                                                                          |   |   |   |   | 1 |   |   |   |   |   |   |   |   |   |   |   | 1 |   |
| Fair                  value of contracts outstanding at the end of the period |   | $                                                                                             | 13 |   |   | $ | 4 |   |   | $ | 2 |   |   |   |   |   |   | $ | 19 |   |

*Interest        Rate Risk*

*Foreign        Currency Risk*

*Nuclear        Decommissioning Trust Funds - Securities Price Risk*

*Synthetic        Fuel Tax Credit Risk*

**Related        Party Transactions**

**Acquisitions,        Development and Divestitures**

**Environmental        Matters**

**New        Accounting Standards**

**Application        of Critical Accounting Policies**

----

**PPL        ENERGY SUPPLY, LLC AND SUBSIDIARIES**

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

**Overview**

**Results        of Operations**

**Earnings**

|   |   | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June****30,** |
|--------|--------|----------------------------------------------------------------------|--------|------------------------------------------------------|
|   |   | **2006**                                                             |   | **2005**                                             |   | **2006** |   | **2005** |
|   |   |                                                                 |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|   |   | $                                                                    | 158    |                                                 |   | $ | 104 |   |   | $ | 388 |   |   | $ | 259 |   |

**Segment        Results **

|                                    |   | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June****30,** |
|-----------------------------------------|--------|----------------------------------------------------------------------|--------|------------------------------------------------------|
|                                    |   | **2006**                                                             |   | **2005**                                             |   | **2006** |   | **2005** |
| Supply                                  |   | $                                                                    | 79     |                                                 |   | $ | 50 |   |   | $ | 228 |   |   | $ | 143 |   |
| International                  Delivery |   |                                                                 | 79     |                                                 |   |   | 54 |   |   |   | 160 |   |   |   | 116 |   |
|                                    | Total  |                                                                 | $      | 158                                                  |   |   | $ | 104 |   |   | $ | 388 |   |   | $ | 259 |   |

|                                               |                                      | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June****30,** |
|----------------------------------------------------|-------------------------------------------|----------------------------------------------------------------------|--------|------------------------------------------------------|
|                                               |                                      | **2006**                                                             |   | **2005**                                             |   | **2006** |   | **2005** |
|                                               |                                      |                                                                 |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Energy                  revenues                   |                                      | $                                                                    | 799    |                                                 |   | $ | 648 |   |   | $ | 1,615 |   |   | $ | 1,370 |   |
| Energy-related                  businesses         |                                      |                                                                 | 134    |                                                 |   |   | 142 |   |   |   | 284 |   |   |   | 258 |   |
|                                               | Total                  operating revenues |                                                                 |   | 933                                                  |   |   |   | 790 |   |   |   | 1,899 |   |   |   | 1,628 |   |
| Fuel                  and energy purchases         |                                      |                                                                 | 406    |                                                 |   |   | 293 |   |   |   | 783 |   |   |   | 633 |   |
| Other                  operation and maintenance   |                                      |                                                                 | 188    |                                                 |   |   | 179 |   |   |   | 365 |   |   |   | 378 |   |
| Depreciation                                       |                                      |                                                                 | 35     |                                                 |   |   | 35 |   |   |   | 69 |   |   |   | 68 |   |
| Taxes,                  other than income          |                                      |                                                                 | 10     |                                                 |   |   | 10 |   |   |   | 19 |   |   |   | 21 |   |
| Energy-related                  businesses         |                                      |                                                                 | 127    |                                                 |   |   | 156 |   |   |   | 274 |   |   |   | 288 |   |
|                                               | Total                  operating expenses |                                                                 |   | 766                                                  |   |   |   | 673 |   |   |   | 1,510 |   |   |   | 1,388 |   |
| Other                  Income - net                |                                      |                                                                 | 10     |                                                 |   |   | 7 |   |   |   | 20 |   |   |   | 12 |   |
| Interest                  Expense                  |                                      |                                                                 | 18     |                                                 |   |   | 19 |   |   |   | 34 |   |   |   | 41 |   |
| Income                  Taxes                      |                                      |                                                                 | 60     |                                                 |   |   | 4 |   |   |   | 126 |   |   |   | 14 |   |
| Minority                  Interest                 |                                      |                                                                 | 1      |                                                 |   |   | 1 |   |   |   | 1 |   |   |   | 1 |   |
| Loss                  from Discontinued Operations |                                      |                                                                 | 19     |                                                 |   |   | 50 |   |   |   | 20 |   |   |   | 53 |   |
|                                               | Total                                     |                                                                 | $      | 79                                                   |   |   | $ | 50 |   |   | $ | 228 |   |   | $ | 143 |   |

|                                                   |   | **June                  30, 2006 vs. June 30, 2005** |
|--------------------------------------------------------|--------|------------------------------------------------------|
|                                                   |   | **Three                  Months Ended**              |   | **Six                  Months Ended** |
| Eastern                  U.S. non-trading margins      |   | $                                                    | 13 |   |   | $ | 39 |   |
| Northwestern                  U.S. non-trading margins |   |                                                 | 6 |   |   |   | 19 |   |
| Southwestern                  U.S. non-trading margins |   |                                                 | (1 | ) |   |   | 1 |   |
| Net                  energy trading margins            |   |                                                 | 2 |   |   |   | (1 | ) |
| Operation                  and maintenance expenses    |   |                                                 | (12 | ) |   |   | (16 | ) |
| Interest                  expense                      |   |                                                 | 1 |   |   |   | 4 |   |
| Earnings                  from synfuel projects        |   |                                                 | (15 | ) |   |   | (12 | ) |
| Other                                                  |   |                                                 | 4 |   |   |   | 1 |   |
| Unusual                  items                         |   |                                                 | 31 |   |   |   | 50 |   |
|                                                   |   | $                                                    | 29 |   |   | $ | 85 |   |

|                                                                                                                       |   | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June****30,** |
|----------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|------------------------------------------------------|
|                                                                                                                       |   | **2006**                                                             |   | **2005**                                             |   | **2006** |   | **2005** |
| Sale                  of Sundance plant (Note 8)                                                                           |   |                                                                 |   |                                                 |   | $ | (47 | ) |   |   |   |   |   | $ | (47 | ) |
| Loss                  related to sale of interest in the Griffith plant                  (Note 8)                     |   | $                                                                    | (17    | )                                                    |   |   |   |   |   | $ | (17 | ) |   |   |   |   |
| Reduction                  in Enron reserve (Note 2)                                                                       |   |                                                                 | 2      |                                                 |   |   |   |   |   |   | 11 |   |   |   |   |   |
| Off-site                  remediation of ash basin leak (Note 11)                                                     |   |                                                                 | 5      |                                                 |   |   |   |   |   |   | 6 |   |   |   |   |   |
| Settlement                  of NorthWestern litigation                                                                     |   |                                                                 |   |                                                 |   |   |   |   |   |   |   |   |   |   | (6 | ) |
| Impairment                  of synfuel facilities (Note 11)                                                                |   |                                                                 | (6     | )                                                    |   |   |   |   |   |   | (6 | ) |   |   |   |   |
| Acceleration                  of stock-based compensation expense for periods prior to 2005                  (Note 9) |   |                                                                 |   |                                                 |   |   |   |   |   |   |   |   |   |   | (3 | ) |
|                                                                                                                       | Total  |                                                                 | $      | (16                                                  | ) |   | $ | (47 | ) |   | $ | (6 | ) |   | $ | (56 | ) |

| · | See                  "Domestic Gross Energy Margins" for an explanation of non-trading                  margins                  by geographic region and for an explanation of net energy trading                  margins.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| · | Higher                  operation and maintenance expenses in both periods were primarily                  due to                  the nuclear refueling outage, inspection costs at the Susquehanna                  station                  and outages at the Brunner Island and Martins Creek plants in 2006.                  The                  costs of these outages exceeded the costs of the 2005 planned outage                  at                  Montour and a short-duration outage at the Susquehanna station.                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| · | In                  May 2005, a subsidiary of PPL Energy Supply completed the sale                  of its 450                  MW Sundance power plant located in Pinal County, Arizona to Arizona                  Public                  Service Company for $190 million in cash. The subsidiary recorded                  a loss                  on the sale of $47 million after tax.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| · | In                  June 2006, a subsidiary of PPL Energy Supply completed the sale                  of its 50%                  ownership in the 600 MW Griffith power plant located in Kingman,                  Arizona,                  for $115 million in cash. The subsidiary recorded a loss on the                  sale of                  $24 million after tax. Another subsidiary of PPL Energy Supply                  recorded                  the acceleration of net unrealized gains on derivatives associated                  with                  the plant of $7 million after tax.                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| · | In                  June 2006, PPL reduced its estimate of the costs for the remediation                  of                  the Martins Creek ash basin leak. This adjustment increased earnings                  by $5                  million after tax in the second quarter. Most of this reduction                  was                  related to an insurance claim settlement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| · | The                  decline in earnings contribution from synfuel projects resulted                  from lower                  recognition of synthetic fuel tax credits due to the anticipated phase-out                  of synthetic fuel tax credits starting in 2006, partially offset                  by                  unrealized gains on options purchased to hedge a portion of the                  risk                  associated with the phase-out of the synthetic fuel tax credits                  for 2006                  and 2007. In June 2006, based upon observed and forecasted higher                  crude                  oil prices and projected cash flows, PPL Energy Supply fully impaired                  its                  synfuel-related assets. This adjustment decreased earnings by $6                  million                  after tax. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| · | In                  2006, PPL Energy Supply decreased its reserve on claims related                  to the                  Enron bankruptcy. These adjustments increased earnings by $11 million                  after tax.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| · | In                  the first quarter of 2005, PPL Energy Supply recognized a charge                  of $6                  million after tax for a loss contingency related to the litigation                  with                  NorthWestern. In September 2005, PPL Energy Supply and NorthWestern                  reached a final agreement to settle this                  litigation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

*Outlook*

|                                             |                                      | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June****30,** |
|--------------------------------------------------|-------------------------------------------|----------------------------------------------------------------------|--------|------------------------------------------------------|
|                                             |                                      | **2006**                                                             |   | **2005**                                             |   | **2006** |   | **2005** |
|                                             |                                      |                                                                 |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Utility                  revenues                |                                      | $                                                                    | 310    |                                                 |   | $ | 284 |   |   | $ | 633 |   |   | $ | 577 |   |
| Energy-related                  businesses       |                                      |                                                                 | 24     |                                                 |   |   | 19 |   |   |   | 45 |   |   |   | 37 |   |
|                                             | Total                  operating revenues |                                                                 |   | 334                                                  |   |   |   | 303 |   |   |   | 678 |   |   |   | 614 |   |
| Energy                  purchases                |                                      |                                                                 | 83     |                                                 |   |   | 65 |   |   |   | 164 |   |   |   | 128 |   |
| Other                  operation and maintenance |                                      |                                                                 | 67     |                                                 |   |   | 63 |   |   |   | 134 |   |   |   | 124 |   |
| Depreciation                                     |                                      |                                                                 | 41     |                                                 |   |   | 38 |   |   |   | 82 |   |   |   | 76 |   |
| Taxes,                  other than income        |                                      |                                                                 | 15     |                                                 |   |   | 15 |   |   |   | 27 |   |   |   | 29 |   |
| Energy-related                  businesses       |                                      |                                                                 | 10     |                                                 |   |   | 7 |   |   |   | 19 |   |   |   | 13 |   |
|                                             | Total                  operating expenses |                                                                 |   | 216                                                  |   |   |   | 188 |   |   |   | 426 |   |   |   | 370 |   |
| Other                  Income - net              |                                      |                                                                 | 25     |                                                 |   |   | 4 |   |   |   | 25 |   |   |   | 7 |   |
| Interest                  Expense                |                                      |                                                                 | 51     |                                                 |   |   | 52 |   |   |   | 99 |   |   |   | 102 |   |
| Income                  Taxes                    |                                      |                                                                 | 12     |                                                 |   |   | 12 |   |   |   | 15 |   |   |   | 30 |   |
| Minority                  Interest               |                                      |                                                                 | 1      |                                                 |   |   | 1 |   |   |   | 3 |   |   |   | 3 |   |
|                                             | Total                                     |                                                                 | $      | 79                                                   |   |   | $ | 54 |   |   | $ | 160 |   |   | $ | 116 |   |

|                                                                |                                                                   | **June                  30, 2006 vs. June 30, 2005** |
|---------------------------------------------------------------------|------------------------------------------------------------------------|------------------------------------------------------|
|                                                                |                                                                   | **Three                  Months Ended**              |   | **Six                  Months Ended** |
| U.K.                                                                |                                                                   |                                                 |   |   |   |   |   |   |
|                                                                | Delivery                  margins                                      |                                                 | $ | 7 |   |   | $ | 25 |   |
|                                                                | Operation                  and maintenance expenses                    |                                                 |   | (6 | ) |   |   | (13 | ) |
|                                                                | Income                  taxes                                          |                                                 |   | 1 |   |   |   | 22 |   |
|                                                                | Impact                  of changes in foreign currency exchange rates  |                                                 |   | (4 | ) |   |   | (11 | ) |
|                                                                | Impairment                  of investment in U.K. real estate (Note 8) |                                                 |   |   |   |   |   | (6 | ) |
|                                                                | Hyder                  liquidation distribution (Note 8)               |                                                 |   | 24 |   |   |   | 24 |   |
|                                                                | Other                                                                  |                                                 |   | 2 |   |   |   | 4 |   |
| Latin                  America                                      |                                                                   |                                                 | 3 |   |   |   | 8 |   |
| U.S.                  income taxes                                  |                                                                   |                                                 | (4 | ) |   |   | (10 | ) |
| Other                                                               |                                                                   |                                                 | 2 |   |   |   |   |   |
| Unusual                  item - collection of receivable from Enron |                                                                   |                                                 |   |   |   |   | 1 |   |
|                                                                |                                                                   | $                                                    | 25 |   |   | $ | 44 |   |

| · | The                  U.K.'s earnings were positively impacted by higher margins, primarily                  due                  to price increases and 2% higher sales volumes for the six months                  ended                  June 30, 2006.                                                                                                                                                                                                                                             |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| · | In                  the second quarter of 2006, WPD received $24 million as an initial                  distribution related to the planned ongoing liquidation of Hyder's                  non-electricity delivery businesses. PPL                  Energy Supply does not expect income from the sale or liquidation                  of                  Hyder's non-electricity delivery businesses to continue at the                  same level                  in 2007 as occurred in 2006. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| · | Lower                  U.K. income taxes in 2006 were due to the transfer of a future                  tax                  liability from WPD and certain surplus tax losses from Hyder to                  a former                  Hyder affiliate. See Note 5 to the Financial Statements for additional                  information.                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| · | Changes                  in foreign exchange rates decreased WPD's portion of revenue and                  expense                  line items by 5% in the three months ended June 30, 2006, and 6%                  in the                  six months ended June 30, 2006, compared with the same periods                  in                  2005.                                                                                                                                               |

*Outlook*

**Statement        of Income Analysis -- **

**Domestic        Gross Energy Margins**

|                                                     |                                           | **June                  30, 2006 vs. June 30, 2005** |
|----------------------------------------------------------|------------------------------------------------|------------------------------------------------------|
|                                                     |                                           | **Three                  Months Ended**              |   | **Six                  Months Ended** |
|                                                     |                                           |                                                 |   |   |   |   |
| Wholesale                  energy marketing              |                                           | $                                                    | 120 |   |   | $ | 189 |   |
| Wholesale                  energy marketing to affiliate |                                           |                                                 | 31 |   |   |   | 62 |   |
| Unregulated                  retail electric             |                                           |                                                 | (3 | ) |   |   | (3 | ) |
| Net                  energy trading margins              |                                           |                                                 | 3 |   |   |   | (3 | ) |
| Other                  revenue adjustments (a)           |                                           |                                                 | (11 | ) |   |   | (2 | ) |
|                                                     | Total                  revenues                |                                                 |   | 140 |   |   |   | 243 |   |
| Fuel                                                     |                                           |                                                 | 42 |   |   |   | 18 |   |
| Energy                  purchases                        |                                           |                                                 | 82 |   |   |   | 160 |   |
| Energy                  purchases from affiliate         |                                           |                                                 | 7 |   |   |   | 8 |   |
| Other                  cost adjustments (a)              |                                           |                                                 | (37 | ) |   |   | (54 | ) |
|                                                     | Total                  cost of sales           |                                                 |   | 94 |   |   |   | 132 |   |
|                                                     | Domestic                  gross energy margins |                                                 | $ | 46 |   |   | $ | 111 |   |

| (a) |   | Adjusted                  to exclude the impact of any revenues and costs not associated                  with                  domestic gross energy margins; in particular, revenues and energy                  costs                  related to the international operations of PPL Global. Also                  adjusted to include the margins of the Griffith and Sundance plants                  prior                  to their sales in June 2006 and May 2005, which are included in                  "Loss from                  Discontinued Operations," and gains or losses on sales of emission                  allowances, which are included in "Other operation and maintenance"                  expenses on the Statements of                  Income. |
|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                | **June                  30, 2006 vs. June 30, 2005** |
|-------------------------------------|------------------------------------------------------|
|                                | **Three                  Months Ended**              |   | **Six                  Months Ended** |
| Non-trading                         |                                                 |   |   |   |   |   |   |
|                                | Eastern                  U.S.                        | $ | 22 |   |   | $ | 67 |   |
|                                | Northwestern                  U.S.                   |   | 10 |   |   |   | 33 |   |
|                                | Southwestern                  U.S.                   |   | (1 | ) |   |   | 2 |   |
| Net                  energy trading |                                                 | 15 |   |   |   | 9 |   |
|                                | Domestic                  gross energy margins       | $ | 46 |   |   | $ | 111 |   |

*Eastern        U.S.*

*Northwestern        U.S.*

*Net        Energy Trading*

**Utility        Revenues**

|               |                                                   | **June                  30, 2006 vs. June 30, 2005** |
|--------------------|--------------------------------------------------------|------------------------------------------------------|
|               |                                                   | **Three                  Months Ended**              |   | **Six                  Months Ended** |
| **International:** |                                                   |                                                 |   |   |   |   |   |   |
|               | Retail                  electric delivery (PPL Global) |                                                 |   |   |   |   |   |   |   |
|               | U.K.                                                   |                                                 | $ | 13 |   |   | $ | 38 |   |
|               | Chile                                                  |                                                 |   | 12 |   |   |   | 21 |   |
|               | El                  Salvador                           |                                                 |   | 4 |   |   |   | 7 |   |
|               | Bolivia                                                |                                                 |   | 1 |   |   |   | 3 |   |
|               | Foreign                  currency exchange rates       |                                                 |   | (4 | ) |   |   | (13 | ) |
|               |                                                   |                                                 | $ | 26 |   |   | $ | 56 |   |

| · | increases                  of 1% and 2% in sales volumes in the U.K. for the three and six                  months                  ended June 30, 2006, compared with the same periods in 2005, and                  higher                  average prices overall;                                       |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | increases                  of 7% in Chilean electric delivery sales volumes and higher average                  prices                  overall; and                                                                                                                                                        |
| · | increases                  of 7% and 8% in electric delivery sales volumes in El Salvador                  for the                  three and six months ended June 30, 2006, compared with the same                  periods                  in 2005, and higher average prices                  overall. |

**Energy-related        Businesses**

| · | an                  $18 million net unrealized gain on options purchased to hedge a                  portion of                  the risk associated with the phase-out of the synthetic fuel tax                  credits                  for 2006 and 2007; and |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | $13                  million of lower operating losses due to lower production levels;                  partially offset by                                                                                                                                        |
| · | an                  impairment charge of $10 million on the synfuel-related                  assets.                                                                                                                                                               |

| · | a                  $41 million net unrealized gain on options purchased to hedge a                  portion of                  the risk associated with the phase-out of the synthetic fuel tax                  credits                  for 2006 and 2007; and |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | $10                  million of lower operating losses due to lower production levels;                  partially offset by                                                                                                                                       |
| · | an                  impairment charge of $10 million on the synfuel-related                  assets.                                                                                                                                                              |

**Other        Operation and Maintenance**

|                                                                                                      |   | **June                  30, 2006 vs. June 30, 2005** |
|-----------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|
|                                                                                                      |   | **Three                  Months Ended**              |   | **Six                  Months Ended** |
|                                                                                                      |   |                                                 |   |   |   |   |
| Reduction                  in Enron reserve (Note 2)                                                      |   | $                                                    | (4 | ) |   | $ | (19 | ) |
| Martins                  Creek ash basin remediation adjustment (Note 11)                                 |   |                                                 | (8 | ) |   |   | (11 | ) |
| NorthWestern                  litigation accrual in March 2005                                       |   |                                                 |   |   |   |   | (9 | ) |
| Stock-based                  compensation (Note 9)                                                        |   |                                                 | (2 | ) |   |   | (5 | ) |
| Susquehanna                  plant refueling and inspection costs                                         |   |                                                 | 7 |   |   |   | 12 |   |
| Outage                  costs at Martins Creek and Brunner Island plants                                  |   |                                                 | 4 |   |   |   | 8 |   |
| Increase                  in allocation of corporate service costs (Note 12)                              |   |                                                 | 5 |   |   |   | 7 |   |
| Increase                  in domestic and international pension and postretirement                  costs |   |                                                 | 4 |   |   |   | 6 |   |
| Increase                  in international operation and maintenance expenses                             |   |                                                 | 2 |   |   |   | 5 |   |
| Lower                  gains on sales of emission allowances                                              |   |                                                 | 8 |   |   |   | 2 |   |
| Other                                                                                                     |   |                                                 | (3 | ) |   |   | 1 |   |
|                                                                                                      |   | $                                                    | 13 |   |   | $ | (3 | ) |

**Depreciation**

|                                                                    |   | **June                  30, 2006 vs. June 30, 2005** |
|-------------------------------------------------------------------------|--------|------------------------------------------------------|
|                                                                    |   | **Three                  Months Ended**              |   | **Six                  Months Ended** |
|                                                                    |   |                                                 |   |   |   |   |
| Additions                  to PP&E                                  |   | $                                                    | 4 |   |   | $ | 9 |   |
| Reduction                  of useful lives of certain assets            |   |                                                 | 2 |   |   |   | 4 |   |
| Foreign                  currency exchange rates                        |   |                                                 | (2 | ) |   |   | (4 | ) |
| Extension                  of useful lives of certain generation assets |   |                                                 | (1 | ) |   |   | (2 | ) |
|                                                                    |   | $                                                    | 3 |   |   | $ | 7 |   |

**Other        Income - net**

**Interest        Expense**

|                                                          |   | **June                  30, 2006 vs. June 30, 2005** |
|---------------------------------------------------------------|--------|------------------------------------------------------|
|                                                          |   | **Three                  Months Ended**              |   | **Six                  Months Ended** |
|                                                          |   |                                                 |   |   |   |   |
| Increase                  in long-term debt interest expense  |   | $                                                    | 7 |   |   | $ | 11 |   |
| Decrease                  in interest expense with affiliates |   |                                                 | (3 | ) |   |   | (7 | ) |
| Increase                  in capitalized interest             |   |                                                 | (3 | ) |   |   | (5 | ) |
| Decrease                  in foreign currency exchange rates  |   |                                                 | (1 | ) |   |   | (4 | ) |
| Decrease                  in short-term debt interest expense |   |                                                 | (1 | ) |   |   | (3 | ) |
| Other                                                         |   |                                                 | (1 | ) |   |   | (2 | ) |
|                                                          |   | $                                                    | (2 | ) |   | $ | (10 | ) |

**Income        Taxes**

|                                                                                                    |   | **June                  30, 2006 vs. June 30, 2005** |
|---------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|
|                                                                                                    |   | **Three                  Months Ended**              |   | **Six                  Months Ended** |
|                                                                                                    |   |                                                 |   |   |   |   |
| Higher                  pre-tax book income                                                             |   | $                                                    | 28 |   |   | $ | 75 |   |
| Reduction                  in tax benefits related to nonconventional fuel tax                  credits |   |                                                 | 32 |   |   |   | 40 |   |
| Decrease                  in tax expense on foreign earnings                                            |   |                                                 | (8 | ) |   |   |   |   |
| Transfer                  of WPD tax items in 2006 (Note 5)                                        |   |                                                 |   |   |   |   | (20 | ) |
| Other                                                                                                   |   |                                                 | 4 |   |   |   | 2 |   |
|                                                                                                    |   | $                                                    | 56 |   |   | $ | 97 |   |

**Discontinued        Operations**

**Financial        Condition**

**Liquidity        and Capital Resources**

| · | $498                  million of cash provided by operating activities;                                                                                                                                                               |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | the                  issuance of $300 million of long-term debt;                                                                                                                                                                      |
| · | contributions                  from Member of $116 million; and                                                                                                                                                                       |
| · | $115                  million of proceeds from the sale of PPL Energy Supply's interest                  in the                  Griffith plant; offset by                                                                            |
| · | a                  net decrease in short-term debt (including a note payable to an                  affiliate)                  of $179 million (excluding a $1 million impact of currency translation                  adjustments); |
| · | distributions                  to Member of $366 million;                                                                                                                                                                             |
| · | $360                  million of capital expenditures; and                                                                                                                                                                            |
| · | $25                  million of net purchases of emission                  allowances.                                                                                                                                                |

| · | WPDH                  Limited IDR of BBB- and senior unsecured rating to BBB from                  BBB-;                                                |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | WPD                  LLP IDR of BBB, senior unsecured rating to BBB+ from BBB and preferred                  stock rating to BBB from BBB-; and         |
| · | WPD                  (South Wales) and WPD (South West) IDR of BBB+ and senior unsecured                  debt                  rating to A- from BBB+. |

|                                           |                                                      | **Projected**                                    |   |
|------------------------------------------------|-----------------------------------------------------------|--------------------------------------------------|--------|
|                                           |                                                      | **2006**                                         |   | **2007** |   | **2008** |   | **2009** |   | **2010** |   |
| Construction                  expenditures (a) |                                                      |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                           | Generating                  facilities                    |                                             | $      | 266 |   | $ | 233 |   | $ | 180 |   | $ | 202 |   | $ | 174 |   |
|                                           | Transmission                  and distribution facilities |                                             |   | 291 |   |   | 289 |   |   | 291 |   |   | 298 |   |   | 310 |   |
|                                           | Environmental                                             |                                             |   | 337 |   |   | 576 |   |   | 375 |   |   | 118 |   |   | 70 |   |
|                                           | Other                                                     |                                             |   | 36 |   |   | 37 |   |   | 2 |   |   | 2 |   |   | 2 |   |
|                                           |                                                      | Total                  Construction Expenditures |   |   | 930 |   |   | 1,135 |   |   | 848 |   |   | 620 |   |   | 556 |   |
| Nuclear                  fuel                  |                                                      |                                             | 79     |   |   | 92 |   |   | 97 |   |   | 97 |   |   | 99 |   |
|                                           |                                                      | Total                  Capital Expenditures      |   | $ | 1,009 |   | $ | 1,227 |   | $ | 945 |   | $ | 717 |   | $ | 655 |   |

| (a) |   | Construction                  expenditures include AFUDC and capitalized interest, which are                  expected to                  be $147 million for the 2006-2010                  period. |
|-----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Risk        Management - Energy Marketing & Trading and Other **

*Commodity        Price Risk (Non-Trading)*

|                                                                                                 |   | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June****30,** |
|------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|------------------------------------------------------|
|                                                                                                 |   | **2006**                                                             |   | **2005**                                             |   | **2006** |   | **2005** |
|                                                                                                 |   |                                                                 |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Fair                  value of contracts outstanding at the beginning of the                  period |   | $                                                                    | (96    | )                                                    |   | $ | (106 | ) |   | $ | (278 | ) |   | $ | (9 | ) |
| Contracts                  realized or otherwise settled during the period                           |   |                                                                 | (4     | )                                                    |   |   | (15 | ) |   |   | 5 |   |   |   | (24 | ) |
| Fair                  value of new contracts at inception                                            |   |                                                                 |   |                                                 |   |   | 13 |   |   |   |   |   |   |   | 13 |   |
| Other                  changes in fair values                                                        |   |                                                                 | 5      |                                                 |   |   | (19 | ) |   |   | 178 |   |   |   | (107 | ) |
| Fair                  value of contracts outstanding at the end of the period                        |   | $                                                                    | (95    | )                                                    |   | $ | (127 | ) |   | $ | (95 | ) |   | $ | (127 | ) |

|                                                                          |   | **Fair                  Value of Contracts at Period-End****Gains                  (Losses)** |
|-------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------|
|                                                                          |   | **Maturity****Less                  Than****1                  Year**                         |   | **Maturity****1-3                  Years** |   | **Maturity****4-5                  Years** |   | **Maturity****in                  Excess****of                  5 Years** |   | **Total                  Fair****Value** |
| **Source                  of Fair Value**                                     |   |                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Prices                  actively quoted                                       |   | $                                                                                             | 7 |   |   | $ | 2 |   |   | $ | 1 |   |   |   |   |   |   | $ | 10 |   |
| Prices                  provided by other external sources                    |   |                                                                                          | (40 | ) |   |   | (157 | ) |   |   | (44 | ) |   | $ | 1 |   |   |   | (240 | ) |
| Prices                  based on models and other valuation methods           |   |                                                                                          | 79 |   |   |   | 56 |   |   |   |   |   |   |   |   |   |   |   | 135 |   |
| Fair                  value of contracts outstanding at the end of the period |   | $                                                                                             | 46 |   |   | $ | (99 | ) |   | $ | (43 | ) |   | $ | 1 |   |   | $ | (95 | ) |

*Commodity        Price Risk (Trading)*

|                                                                                                 |   | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June****30,** |
|------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|------------------------------------------------------|
|                                                                                                 |   | **2006**                                                             |   | **2005**                                             |   | **2006** |   | **2005** |
|                                                                                                 |   |                                                                 |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Fair                  value of contracts outstanding at the beginning of the                  period |   | $                                                                    | 12     |                                                 |   | $ | 16 |   |   | $ | 5 |   |   | $ | 9 |   |
| Contracts                  realized or otherwise settled during the period                           |   |                                                                 | (7     | )                                                    |   |   | (3 | ) |   |   | (18 | ) |   |   | (6 | ) |
| Fair                  value of new contracts at inception                                            |   |                                                                 | (1     | )                                                    |   |   | 1 |   |   |   | 3 |   |   |   | 4 |   |
| Other                  changes in fair values                                                        |   |                                                                 | 15     |                                                 |   |   | (3 | ) |   |   | 29 |   |   |   | 4 |   |
| Fair                  value of contracts outstanding at the end of the period                        |   | $                                                                    | 19     |                                                 |   | $ | 11 |   |   | $ | 19 |   |   | $ | 11 |   |

|                                                                          |   | **Fair                  Value of Contracts at Period-End****Gains                  (Losses)** |
|-------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------|
|                                                                          |   | **Maturity****Less                  Than****1                  year**                         |   | **Maturity****1-3                  years** |   | **Maturity****4-5                  years** |   | **Maturity****in                  Excess****of                  5 Years** |   | **Total                  Fair****Value** |
| **Source                  of Fair Value**                                     |   |                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Prices                  actively quoted                                       |   | $                                                                                             | 5 |   |   | $ | 1 |   |   |   |   |   |   |   |   |   |   | $ | 6 |   |
| Prices                  provided by other external sources                    |   |                                                                                          | 8 |   |   |   | 2 |   |   | $ | 2 |   |   |   |   |   |   |   | 12 |   |
| Prices                  based on models and other valuation methods           |   |                                                                                          |   |   |   |   | 1 |   |   |   |   |   |   |   |   |   |   |   | 1 |   |
| Fair                  value of contracts outstanding at the end of the period |   | $                                                                                             | 13 |   |   | $ | 4 |   |   | $ | 2 |   |   |   |   |   |   | $ | 19 |   |

*Interest        Rate Risk*

*Foreign        Currency Risk*

*Nuclear        Decommissioning Trust Funds - Securities Price Risk*

*Synthetic        Fuel Tax Credit Risk*

**Related        Party Transactions**

**Acquisitions,        Development and Divestitures**

**Environmental        Matters**

**New        Accounting Standards**

**Application        of Critical Accounting Policies**

----

**PPL        ELECTRIC UTILITIES CORPORATION AND SUBSIDIARIES**

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

**Overview**

**Results        of Operations**

**Earnings**

|   |   | **Three                  Months Ended****June                  30,** |   | **Six                  Months Ended****June****30,** |
|--------|--------|----------------------------------------------------------------------|--------|------------------------------------------------------|
|   |   | **2006**                                                             |   | **2005**                                             |   | **2006** |   | **2005** |
|   |   |                                                                 |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|   |   | $                                                                    | 30     |                                                 |   | $ | 36 |   |   | $ | 81 |   |   | $ | 51 |   |

|                                                                                                                                          |   | **June                  30, 2006 vs. June 30, 2005** |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|
|                                                                                                                                          |   | **Three                  Months Ended**              |   | **Six                  Months Ended** |
|                                                                                                                                          |   |                                                 |   |   |   |   |   |   |
| Delivery                  revenues (net of CTC/ITC amortization, interest expense on transition                  bonds and ancillary charges) |   | $                                                    | 1 |   |   |   |   |   |
| Operation                  and maintenance expenses                                                                                           |   |                                                 | (5 | ) |   | $ | 2 |   |
| Other                                                                                                                                         |   |                                                 | (2 | ) |   |   | (1 | ) |
| Unusual                  items                                                                                                                |   |                                                 |   |   |   |   | 29 |   |
|                                                                                                                                          |   | $                                                    | (6 | ) |   | $ | 30 |   |

|                                                                                                                  |   | **Six                  Months Ended****June                  30,** |
|-----------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|
|                                                                                                                  |   | **2006**                                                           |   | **2005** |
|                                                                                                                  |   |                                                               |   |   |
| PJM                  billing dispute                                                                                  |   |                                                               |   |   |   | $ | (27 | ) |
| Acceleration                  of stock-based compensation expense for periods prior to 2005 (Note                  9) |   |                                                               |   |   |   |   | (2 | ) |
|                                                                                                                  | Total  |                                                               |   |   |   |   | $ | (29 | ) |

| · | PPL                  Electric recognized an after-tax charge of $27 million in the first                  quarter of 2005 for a loss contingency related to the PJM billing                  dispute.                  See Note 11 to the Financial Statements for an update on this matter.                  PPL                  Electric cannot be certain of the outcome of this matter or the                  impact on                  PPL Electric.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| · | Lower                  operation and maintenance expenses in the first six months of 2006                  were                  primarily due to the costs incurred in January 2005, when severe                  ice                  storms hit PPL Electric's service territory. The total cost of                  restoring                  service to 238,000 customers, excluding capitalized costs and regular                  payroll expenses, was $16 million. Partially offsetting this variance                  were                  higher flood-related costs in the second quarter of 2006, and higher                  tree                  trimming costs for the six months ended June 30,                  2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | In                  August 2005, the PUC issued an order granting PPL Electric's petition                  for                  authority to defer and amortize for regulatory accounting and reporting                  purposes a portion of the ice storm costs, subject to certain conditions.                  As a result of the PUC Order and in accordance with SFAS 71, "Accounting                  for the Effects of Certain Types of Regulation," in the third quarter                  of                  2005, PPL Electric deferred $12 million of its previously expensed                  storm                  costs. The deferral was based on its assessment of the timing and                  likelihood of recovering the deferred costs in PPL Electric's next                  distribution base rate case. At this time, PPL Electric cannot                  be certain                  that it will recover the storm costs, nor can it predict whether                  future                  incidents of severe weather will cause significant facility damage                  and                  service disruptions that would also result in significant costs. |

*Outlook*

**Statement        of Income Analysis -- **

**Operating        Revenues**

|                                            |   | **June                  30, 2006 vs. June 30, 2005** |
|-------------------------------------------------|--------|------------------------------------------------------|
|                                            |   | **Three                  Months Ended**              |   | **Six                  Months Ended** |
| PLR                  electric generation supply |   | $                                                    | 33 |   |   | $ | 67 |   |
| Electric                  delivery              |   |                                                 | (11 | ) |   |   | (14 | ) |
| Other                                           |   |                                                 | 1 |   |   |   | 2 |   |
|                                            |   | $                                                    | 23 |   |   | $ | 55 |   |

**Energy        Purchases**

**Energy        Purchases from Affiliate**

**Other        Operation and Maintenance**

|                                                                              |   | **June                  30, 2006 vs. June 30, 2005** |
|-----------------------------------------------------------------------------------|--------|------------------------------------------------------|
|                                                                              |   | **Three                  Months Ended**              |   | **Six                  Months Ended** |
| Costs                  associated with severe ice storms in January 2005 (Note 1) |   |                                                 |   |   |   | $ | (16 | ) |
| PUC                  reportable storm costs in 2006                               |   | $                                                    | 3 |   |   |   | 7 |   |
| Cost                  escalations                                                 |   |                                                 | 3 |   |   |   | 5 |   |
| Tree                  trimming costs                                              |   |                                                 | 1 |   |   |   | 2 |   |
| Allocation                  of corporate service costs (Note 12)             |   |                                                 | 1 |   |   |   | (2 | ) |
| Stock-based                  compensation (Note 9)                                |   |                                                 |   |   |   |   | (3 | ) |
| Other                                                                             |   |                                                 | 1 |   |   |   | 1 |   |
|                                                                              |   | $                                                    | 9 |   |   | $ | (6 | ) |

**Other        Income - net**

**Financing        Costs**

|                                                                        |   | **June                  30, 2006 vs. June 30, 2005** |
|-----------------------------------------------------------------------------|--------|------------------------------------------------------|
|                                                                        |   | **Three                  Months Ended**              |   | **Six                  Months Ended** |
|                                                                        |   |                                                 |   |   |   |   |
| Dividends                  on 6.25% Series Preference Stock                 |   | $                                                    | 4 |   |   | $ | 4 |   |
| Additional                  interest on PLR contract collateral             |   |                                                 | 1 |   |   |   | 3 |   |
| Decrease                  in long-term debt interest expense                |   |                                                 | (5 | ) |   |   | (10 | ) |
| Interest                  accrued in 2005 for PJM billing dispute (Note 11) |   |                                                 |   |   |   |   | (8 | ) |
| Other                                                                       |   |                                                 | (1 | ) |   |   | (1 | ) |
|                                                                        |   | $                                                    | (1 | ) |   | $ | (12 | ) |

**Income        Taxes**

**Financial        Condition**

**Liquidity        and Capital Resources**

| · | the                  retirement of $297 million of long-term debt;                                        |
|--------|-----------------------------------------------------------------------------------------------------------|
| · | the                  purchase of $200 million of common stock from PPL;                                   |
| · | the                  payment of $69 million of common stock dividends to PPL; and                         |
| · | $97                  million of capital expenditures; offset by                                           |
| · | $245                  million of net proceeds from the issuance of preference stock;                  and |
| · | $200                  million of cash provided by operating                  activities.                  |

|                                           |                                                      | **Projected** |   |
|------------------------------------------------|-----------------------------------------------------------|---------------|--------|
|                                           |                                                      | **2006**      |   | **2007** |   | **2008** |   | **2009** |   | **2010** |   |
| Construction                  expenditures (a) |                                                      |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                           | Transmission                  and distribution facilities |          | $      | 206 |   | $ | 231 |   | $ | 211 |   | $ | 246 |   | $ | 296 |   |
| Other                                          |                                                      |          | 12     |   |   | 13 |   |   | 15 |   |   | 11 |   |   | 13 |   |
|                                           | Total                  Capital Expenditures               |          | $      | 218 |   | $ | 244 |   | $ | 226 |   | $ | 257 |   | $ | 309 |   |

| (a) |   | Construction                  expenditures include AFUDC, which is expected to be $15 million                  for the                  2006-2010 period. |
|-----|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

**Risk        Management**

*Commodity        Price Risk - PLR Contracts*

*Interest        Rate Risk*

**Related        Party Transactions**

**Environmental        Matters**

**New        Accounting Standards**

**Application        of Critical Accounting Policies**

----

**PPL        CORPORATION**

**PPL        ENERGY SUPPLY, LLC **

**PPL        ELECTRIC UTILITIES CORPORATION**

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

**Item        4. Controls and        Procedures**

| (a)    |   | Evaluation                  of disclosure controls and procedures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |   | The                  registrants' principal executive officers and principal financial                  officers, based on their evaluation of the registrants' disclosure                  controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)                  of                  the Securities Exchange Act of 1934) have concluded that, as of                  June 30,                  2006, the registrants' disclosure controls and procedures are effective                  to                  ensure that material information relating to the registrants and                  their                  consolidated subsidiaries is recorded, processed, summarized and                  reported                  within the time periods specified by the SEC's rules and forms,                  particularly during the period for which this quarterly report                  has been                  prepared. The aforementioned principal officers have concluded                  that the                  disclosure controls and procedures are also effective to ensure                  that                  information required to be disclosed in reports filed under the                  Exchange                  Act is accumulated and communicated to management, including the                  principal                  executive and principal financial officers, to allow for timely                  decisions                  regarding required disclosure. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| (b)    |   | Change                  in internal controls over financial reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |   | The                  registrants' principal executive officers and principal financial                  officers                  have concluded that there were no changes in the registrants' internal                  control over financial reporting during the registrants' second                  fiscal                  quarter that have materially affected, or are reasonably likely                  to                  materially affect, the registrants' internal control over financial                  reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

**PART        II. OTHER INFORMATION**

| **Item                  1. Legal Proceedings**                                                                                                                                                                                                                                                                                   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                             |
| For                  additional information regarding various pending administrative                  and                  judicial proceedings involving regulatory, environmental and other                  matters, which information is incorporated by reference into this                  Part II,                  see: |
|                                                                                                                                                                                                                                                                                                                             |   |   |
| ·                                                                                                                                                                                                                                                                                                                           |   | "Item                  3. Legal Proceedings" in PPL's, PPL Energy Supply's and PPL Electric's                  2005 Form 10-K; and |
|                                                                                                                                                                                                                                                                                                                             |   |   |
| ·                                                                                                                                                                                                                                                                                                                           |   | Note                  11 of the registrants' "Combined Notes to Condensed Consolidated                  Financial                  Statements" in Part I of this                  report. |

| **Item                  1A. Risk Factors**                                                                                                                                                                                                                     |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                           |
| There                  have been no material changes in PPL's, PPL Energy Supply's and                  PPL                  Electric's risk factors from those disclosed in "Item 1A . Risk                  Factors"                  of the 2005 Form 10-K. |

| **Item                  4. Submission of Matters to a Vote of Security                  Holders**                 |
|-------------------------------------------------------------------------------------------------------------------|
|                                                                                                              |   |
| At                  PPL's Annual Meeting of Shareowners held on April 28, 2006, the                  shareowners: |
|                                                                                                              |   |   |   |
|                                                                                                              | (1) |   | Elected                  the four nominees for the office of director. The votes for individual                  nominees were: |
|                                                                                                              |   |   | **Number                  of Votes** |   |
|                                                                                                              |   |   | **For** |   | **Withhold                  Authority** |   |
|                                                                                                              |   | John                  W. Conway |   | 309,884,428 |   | 4,967,300 |   |
|                                                                                                              |   | E.                  Allen Deaver |   | 308,546,088 |   | 6,305,640 |   |
|                                                                                                              |   | James                  H. Miller |   | 308,899,798 |   | 5,951,930 |   |
|                                                                                                              |   | Susan                  M. Stalnecker |   | 309,845,119 |   | 5,006,609 |   |

|                                                                                                                                        | (2)    |   | Re-approved                  PPL's Short-Term Incentive Plan for executive officers of PPL and                  its                  affiliates. The vote was 296,516,181 in favor and 13,649,134 against,                  with                  4,686,413 abstaining.                                                                                                                                                                                                      |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                        |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                        | (3)    |   | Ratified                  the appointment of Ernst & Young LLP as independent registered public                  accounting firm for the year ending December 31, 2006. The vote                  was                  310,290,139                  in                  favor and 1,662,358                  against,                  with 2,899,231                  abstaining.                                                                                       |
|                                                                                                                                        |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                        | (4)    |   | Adopted                  a shareowner proposal that the "Board of Directors take each step                  necessary for a simple majority vote to apply on each issue that                  can be                  subject to shareholder vote to the greatest extent possible." The                  vote was                  184,346,790 in favor and 78,458,333 against, with 6,420,761 abstaining                  and                  45,625,844 broker non-votes. |
|                                                                                                                                        |
| At                  PPL Electric's Annual Meeting of Shareowners held on April 26,                  2006, the                  shareowners: |
|                                                                                                                                        |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                        | (1)    |   | Elected                  all seven nominees for the office of director. John R. Biggar,                  Dean A.                  Christiansen, Robert J. Grey, William F. Hecht, Rick L. Klingensmith,                  James H. Miller, and John F. Sipics were elected with 78,029,863                  votes                  cast for each director, no votes cast against and no votes                  abstaining.                                                    |
|                                                                                                                                        |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                        | (2)    |   | Approved                  an amendment to Article V of PPL Electric's Amended and Restated                  Articles                  of Incorporation to increase the authorized amount of Preference                  Stock                  from 5,000,000 to 10,000,000 shares, without nominal or par value.                  The                  vote was 78,029,863 in favor, with no votes cast against and no                  votes                  abstaining.  |

| **Item                  6. Exhibits** |
|---------------------------------------|
|                                  |   |   |
| 4(a)                                  | -  | Supplement,                  dated May 1, 2006, to Indenture, dated October 1, 2001, by PPL                  Energy                  Supply and JPMorgan Chase Bank, N.A., as Trustee |
| 4(b)                                  | -  | Supplement,                  dated July 1, 2006, to Indenture, dated October 1, 2001, by PPL                  Energy                  Supply and JPMorgan Chase Bank, N.A., as Trustee |
| 4(c)                                  | -  | Supplement,                  dated July 1, 2006, to Indenture, dated October 1, 2001, by PPL                  Energy                  Supply and JPMorgan Chase Bank, N.A., as Trustee |
| *10(a)                           | -  | $1.9                  billion Amended and Restated Five-Year Credit Agreement dated as                  of June                  9, 2006, among PPL Energy Supply, LLC, as Borrower, and the banks                  named                  therein (PPL Energy Supply, LLC Form 8-K Report (File No. 333-74794)                  dated                  June 14, 2006)  |
| *10(b)                           | -  | $200                  million Second Amended and Restated Five-Year Credit Agreement                  dated as of                  June 9, 2006, among PPL Electric Utilities Corporation, as Borrower,                  and                  the banks named therein (PPL Electric Utilities Corporation Form                  8-K                  Report (File No. 1-905) dated June 14, 2006)  |
| *10(c)                           | -  | Confirmation                  Letter dated July 5, 2006, between PPL Montana, LLC and NorthWestern                  Corporation (PPL Corporation and PPL Energy Supply, LLC Form 8-K                  Reports                  (File Nos. 1-11459 and 333-74794) dated July 6, 2006)  |
| 10(d)                            | -  | Fourth                  Amendment to Credit and Security Agreement dated as of July 31,                  2006,                  among PPL Receivables Corporation, PPL Electric Utilities Corporation,                  Variable Funding Capital Company, LLC and Wachovia Bank, National                  Association  |
| 12(a)                            | -  | PPL                  Corporation and Subsidiaries Computation of Ratio of Earnings to                  Combined                  Fixed Charges and Preferred Stock Dividends  |
| 12(b)                            | -  | PPL                  Energy Supply, LLC and Subsidiaries Computation of Ratio of Earnings                  to                  Fixed Charges  |
| 12(c)                            | -  | PPL                  Electric Utilities Corporation and Subsidiaries Computation of                  Ratio of                  Earnings to Combined Fixed Charges and Preferred Stock                  Dividends  |
|                                  |   | *                  -                  Previously filed |

| Certifications                  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, for                  the                  quarterly period ended June 30, 2006, filed by the following officers                  for                  the following companies:      |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                |   |   |
| 31(a)                                                                                                                                                                                                                                                                          | -  | William                  F. Hecht for PPL Corporation  |
| 31(b)                                                                                                                                                                                                                                                                          | -  | John                  R. Biggar for PPL Corporation  |
| 31(c)                                                                                                                                                                                                                                                                          | -  | William                  F. Hecht for PPL Energy Supply, LLC  |
| 31(d)                                                                                                                                                                                                                                                                          | -  | Paul                  A. Farr for PPL Energy Supply, LLC  |
| 31(e)                                                                                                                                                                                                                                                                          | -  | John                  F. Sipics for PPL Electric Utilities Corporation  |
| 31(f)                                                                                                                                                                                                                                                                          | -  | Paul                  A. Farr for PPL Electric Utilities Corporation  |
|                                                                                                                                                                                                                                                                                |   |   |
| Certifications                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, for                  the                  quarterly period ended June 30, 2006, furnished by the following                  officers                  for the following companies:  |
|                                                                                                                                                                                                                                                                                |   |   |
| 32(a)                                                                                                                                                                                                                                                                          | -  | William                  F. Hecht for PPL Corporation  |
| 32(b)                                                                                                                                                                                                                                                                          | -  | John                  R. Biggar for PPL Corporation  |
| 32(c)                                                                                                                                                                                                                                                                          | -  | William                  F. Hecht for PPL Energy Supply, LLC  |
| 32(d)                                                                                                                                                                                                                                                                          | -  | Paul                  A. Farr for PPL Energy Supply, LLC  |
| 32(e)                                                                                                                                                                                                                                                                          | -  | John                  F. Sipics for PPL Electric Utilities Corporation  |
| 32(f)                                                                                                                                                                                                                                                                               | - | Paul                  A. Farr for PPL Electric Utilities                  Corporation |

----

SIGNATURES

|                                             | **PPL                  Corporation**                                                                                                                                                                                                                                                               |
|--------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                             | (Registrant)                                                                                                                                                                                                                                                                                       |   |
|                                             |                                                                                                                                                                                                                                                                                               |   |
|                                             | **PPL                  Energy Supply, LLC**                                                                                                                                                                                                                                                        |
|                                             | (Registrant)                                                                                                                                                                                                                                                                                       |   |
|                                             |                                                                                                                                                                                                                                                                                               |   |
|                                             | **PPL                  Electric Utilities Corporation**                                                                                                                                                                                                                                            |
|                                             | (Registrant)                                                                                                                                                                                                                                                                                       |   |
|                                             |                                                                                                                                                                                                                                                                                               |   |
|                                             |                                                                                                                                                                                                                                                                                               |   |
|                                             |                                                                                                                                                                                                                                                                                               |   |
|                                             |                                                                                                                                                                                                                                                                                               |   |
| Date:  August                  3, 2006 | /s/  Matt                  Simmons                                          |
|                                             | Matt                  Simmons                                                                                                                                                                                                                                                                      |   |
|                                             | Vice                  President and Controller                                                                                                                                                                                                                                                     |   |
|                                             | (Principal                  Accounting Officer)                                                                                                                                                                                                                                                    |   |