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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549



Form 10-Q

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|[X] | QUARTERLY REPORT PURSUANT TO SECTION
        13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the period ended
        September 30, 2002
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OR



|[  ] | TRANSITION REPORT PURSUANT TO SECTION
        13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition
        period from _________ to ___________
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| | Commission FileNumber | Registrant; State of Incorporation;
        Address and Telephone Number                                                                                                                                        | IRS EmployerIdentification No.
| | --------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------
| |                       |                                                                                                                                                                                                                 |                               
| | 1-11459               | PPL Corporation
        (Exact name of Registrant as specified in its charter)
        (Pennsylvania)
        Two North Ninth Street
        Allentown, PA 18101-1179
        (610) 774-5151                    | 23-2758192                    
| |                       |                                                                                                                                                                                                                 |                               
| | 333-74794             | PPL Energy Supply, LLC
        (Exact name of Registrant as specified in its charter)
        (Delaware)
        Two North Ninth Street
        Allentown, PA 18101-1179
        (610) 774-5151                 | 23-3074920                    
| |                       |                                                                                                                                                                                                                 |                               
| | 1-905                 | PPL Electric Utilities Corporation
        (Exact name of Registrant as specified in its charter)
        (Pennsylvania)
        Two North Ninth Street
        Allentown, PA 18101-1179
        (610) 774-5151 | 23-0959590                    
| |                       |                                                                                                                                                                                                                 |                               
| | 333-50350             | PPL Montana, LLC
        (Exact name of Registrant as specified in its charter)
        (Delaware)
        303 North Broadway - Suite 400
        Billings, MT 59101
        (406) 237-6900                     | 54-1928759                    





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



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







Indicate the number of shares outstanding of each of the issuer's
  classes of common stock, as of the latest practicable date:





| | PPL Corporation                    | Common stock, $.01 par value, 164,452,555
        shares outstanding at October 31, 2002, excluding
        30,993,637 shares held as treasury stock                                      
| | ---------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                    |                                                                                                                                                                                           
| | PPL Energy Supply, LLC             | PPL Corporation indirectly holds all of the
        
        member interests in PPL Energy Supply, LLC.                                                                                  
| |                                    |                                                                                                                                                                                           
| | PPL Electric Utilities Corporation | Common stock, no par value, 78,029,863
        shares outstanding and all held by PPL 
        Corporation at October 31, 2002, excluding
        79,270,519 shares held as treasury stock
| |                                    |                                                                                                                                                                                           
| | PPL Montana, LLC                   | PPL Corporation indirectly holds all of the
        
        member interests in PPL Montana, LLC.                                                                                        



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



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

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PPL CORPORATION
  PPL ENERGY SUPPLY, LLC
  PPL ELECTRIC UTILITIES CORPORATION
  PPL MONTANA, LLC

FORM 10-Q
  FOR THE QUARTER ENDED SEPTEMBER 30, 2002Table of Contents

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|GLOSSARY OF TERMS AND ABBREVIATIONS                                                                                                                |                                                                                                    
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|FORWARD-LOOKING INFORMATION                                                                                                                        | 1                                                                                                  
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|PART I. FINANCIAL INFORMATION                                                                                                                      |                                                                                                    
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|                                                                                                                                                   | Item 1. Financial Statements                                                                       
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|                                                                                                                                                   | Item 2. Management's Discussion
      and Analysis of Financial Condition and Results of Operations
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|                                                                                                                                                   | Item 3. Quantitative and
      Qualitative Disclosures About Market Risk                           
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|                                                                                                                                                   | Item 4. Controls and Procedures                                                                    
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|PART II. OTHER INFORMATION                                                                                                                         |                                                                                                    
|                                                                                                                                                   |                                                                                                    
|                                                                                                                                                   | Item 1. Legal Proceedings                                                                          
|                                                                                                                                                   | Item 5. Other Information                                                                          
|                                                                                                                                                   | Item 6. Exhibits and Reports
      on Form 8-K                                                     
|                                                                                                                                                   |                                                                                                    
|SIGNATURES                                                                                                                                         | 73                                                                                                 
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|CERTIFICATIONS                                                                                                                                     |                                                                                                    
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|COMPUTATION OF RATIO OF
      EARNINGS TO FIXED CHARGES                                                                                            |                                                                                                    
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|CERTIFICATES OF PRINCIPAL
      EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER 
      PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 |                                                                                                    
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GLOSSARY OF TERMS AND ABBREVIATIONS

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

APA - Asset Purchase Agreement.

APB - Accounting Principles Board.

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

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

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

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

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

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

1. It has (1) one or more underlyings and (2) one or more notional amounts
    or payment provisions or both. Those terms determine the amount of the settlement
    or settlements, and, in some cases, whether or not a settlement is required.
2. If it is an option-based contract, it has an initial net investment equal
    to the fair value of the option component. If it is not an option-based contract,
    it requires an initial net investment that is less than five percent of the
    fully prepaid amount.
3. Its terms require or permit net settlement, it can readily be settled net
    by a means outside the contract, or it provides for delivery of an asset that
    puts the recipient in a position not substantially different from net settlement.

DIG - Derivatives Implementation Group.

DRIP - Dividend Reinvestment Plan.

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

EMF - electric and magnetic fields.

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

EPS - earnings (loss) per share.

ESOP - Employee Stock Ownership Plan.

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

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

Griffith Energy - Griffith Energy LLC, which owns and operates
  a 600 MW gas-fired station in Kingman, Arizona, and which is jointly owned by
  subsidiaries of PPL Generation and Duke Energy Corporation.

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

ICP - Incentive Compensation Plan.

ICPKE - Incentive Compensation Plan for Key Employees.

ISO - Independent System Operator.

ITC - intangible transition charge on customer bills to recover
  intangible transition costs associated with securitizing stranded costs under
  the Customer Choice Act.

kWh - kilowatthour, basic unit of electrical energy.

Mirant - Mirant Corporation, a diversified energy company based
  in Atlanta. PPL Global and Mirant jointly owned WPD until September 6, 2002.

Montana Power - The Montana Power Company, a Montana-based company
  that sold its generating assets to PPL Montana in December 1999. Through a series
  of transactions consummated during the first quarter of 2002, Montana Power
  sold its electricity delivery business to NorthWestern Energy.

MPSC - Montana Public Service Commission.

MW - megawatt.

MWh - megawatthour.

NorthWestern Energy - NorthWestern Energy, L.L.C., a Montana
  limited liability company that acquired Montana Power's electricity delivery
  business in the first quarter of 2002, including Montana Power's rights and
  obligations under existing contracts with PPL Montana.

NPDES - National Pollutant Discharge Elimination System.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

PPL Global - PPL Global, LLC, a subsidiary of PPL Energy Supply,
  which acquires and develops domestic generation projects, and acquires and holds
  international energy projects that are primarily focused on the distribution
  of electricity.

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

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

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

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

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

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

PPL Wallingford - PPL Wallingford Energy LLC, a subsidiary of
  PPL Generation, which owns and operates a 225 MW gas-fired station in Wallingford,
  Connecticut.

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

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

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

SCR - selective catalytic reduction, a pollution control process.

SEC - Securities and Exchange Commission.

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

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

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

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

WPD - refers collectively to Western Power Distribution Holdings
  Limited and WPD Investment Holdings Limited. PPL Global purchased Mirant's 49%
  ownership interest in these entities on September 6, 2002, thereby achieving
  100% ownership and operational control.

WPD (South Wales) - Western Power Distribution (South Wales)
  plc, a British regional electric utility company.

WPD (South West) - Western Power Distribution (South West) plc,
  a British regional electric utility company.

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

WPDL - WPD Investment Holdings Limited, an indirect wholly-owned
  subsidiary of PPL Global. WPDL owns 100% of the common shares of Hyder.

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FORWARD-LOOKING INFORMATION

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

- market demand and prices for energy, capacity and fuel;
- weather variations affecting customer energy usage;
- competition in retail and wholesale power markets;
- the effect of any business or industry restructuring;
- the profitability and liquidity of PPL and its subsidiaries;
- new accounting requirements or new interpretations or applications of existing
    requirements;
- operation of existing facilities and operating costs;
- environmental conditions and requirements;
- transmission and distribution system conditions and operating costs;
- development of new projects, markets and technologies;
- performance of new ventures;
- political, regulatory or economic conditions in states, regions or countries
    where PPL or its subsidiaries conduct business;
- receipt and renewals of necessary governmental permits and approvals;
- impact of state or federal investigations applicable to PPL and its subsidiaries
    and the energy industry;
- the outcome of litigation against PPL and its subsidiaries;
- capital market conditions and decisions regarding capital structure;
- stock price performance;
- securities and credit ratings;
- foreign exchange rates;
- new state or federal legislation;
- national or regional economic conditions, including any potential effects
    arising from the September 11, 2001 terrorist attacks in the U.S. and any
    consequential hostilities; and
- the commitments and liabilities of PPL and its subsidiaries.

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

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

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|PPL
      CORPORATION AND SUBSIDIARIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|Part I. FINANCIAL INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Item 1. Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|In the opinion of PPL, the unaudited financial
      statements that follow reflect all adjustments necessary to present fairly
      the Condensed Consolidated Balance Sheet as of September 30, 2002 and December
      31, 2001, and the Condensed Consolidated Statement of Income, the Condensed
      Consolidated Statement of Cash Flows and the Condensed Consolidated Statement
      of Shareowners' Common Equity and Comprehensive Income for the periods ended
      September 30, 2002 and 2001. These financial statements have been impacted
      by the acquisition of a controlling interest in WPD on September 6, 2002,
      and the resulting consolidation of WPD's accounts. See Note 8 to the Financial
      Statements for additional information.
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|CONDENSED CONSOLIDATED STATEMENT OF INCOME                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|PPL Corporation and Subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(Millions of Dollars, except per share
      data)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|Operating Revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|Operating Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|Operating Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Other Income - net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Interest Expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|Income Before Income Taxes and

        Minority Interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Minority Interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|Income Before Cumulative Effect
      of a   Change in Accounting Principle                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Cumulative Effect of a Change in
        Accounting Principle                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Income Before Dividends and

        Distributions Preferred Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Dividends and Distributions - Preferred
        Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Net Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Earnings Per Share of Common
      Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Dividends Declared per Share
      of   Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|The accompanying Notes to Condensed
        Consolidated Financial Statements are an integral part of the financial
        statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

---

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

---

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

---

|CONDENSED CONSOLIDATED BALANCE SHEET                                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Corporation and Subsidiaries                                                                                                       
|(Unaudited)                                                                                                                            
|(Millions of Dollars)                                                                                                                  
|                                                                                                                                       
|                                                                                                                                       
|Liabilities and Equity                                                                                                                 
|                                                                                                                                       
|Current Liabilities                                                                                                                    
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Long-term Debt                                                                                                                         
|                                                                                                                                       
|Deferred Credits and Other Noncurrent
      Liabilities                                                                                
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Commitments and Contingent Liabilities                                                                                                 
|                                                                                                                                       
|Minority Interest                                                                                                                      
|                                                                                                                                       
|Company-obligated Mandatorily
      Redeemable Preferred Securities   of Subsidiary Trusts Holding Solely Company Debentures           
|                                                                                                                                       
|Preferred Stock                                                                                                                        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Shareowners' Common Equity                                                                                                             
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|The accompanying Notes to Condensed
        Consolidated Financial Statements are an integral part of the financial
        statements.

---

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

---

(THIS PAGE LEFT BLANK INTENTIONALLY.)

---

|PPL ENERGY
      SUPPLY, LLC AND SUBSIDIARIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Part I. FINANCIAL INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Item 1. Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|In the opinion of PPL Energy Supply, the unaudited
      financial statements that follow reflect all adjustments necessary to present
      fairly the Condensed Consolidated Balance Sheet as of September 30, 2002
      and December 31, 2001, and the Condensed Consolidated Statement of Income,
      the Condensed Consolidated Statement of Cash Flows and the Condensed Consolidated
      Statement of Member's Equity and Comprehensive Income for the periods ended
      September 30, 2002 and 2001. These financial statements have been impacted
      by the acquisition of a controlling interest in WPD on September 6, 2002,
      and the resulting consolidation of WPD's accounts. See Note 8 to the Financial
      Statements for additional information.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|CONDENSED CONSOLIDATED STATEMENT OF INCOME                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|PPL Energy Supply, LLC and Subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(Millions of Dollars)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Operating Revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Operating Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Operating Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Other Income - net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Interest Expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Interest Expense with Affiliate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Income Before Income Taxes and
      Minority   Interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Minority Interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Income Before Cumulative Effect
      of a Change inAccounting Principle                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Cumulative Effect of a Change in
      Accounting   Principle                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Income Before Distributions
      on Preferred   Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Distributions - Preferred Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Net Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|The accompanying Notes to Condensed
        Consolidated Financial Statements are an integral part of the financial
        statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

---

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

---

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

---

|CONDENSED CONSOLIDATED BALANCE SHEET                                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Energy Supply, LLC and Subsidiaries                                                                                                
|(Unaudited)                                                                                                                            
|(Millions of Dollars)                                                                                                                  
|                                                                                                                                       
|                                                                                                                                       
|Liabilities and Equity                                                                                                                 
|                                                                                                                                       
|Current Liabilities                                                                                                                    
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Long-term Debt                                                                                                                         
|                                                                                                                                       
|Deferred Credits and Other Noncurrent
      Liabilities                                                                                
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Commitments and Contingent Liabilities                                                                                                 
|                                                                                                                                       
|Minority Interest                                                                                                                      
|                                                                                                                                       
|Company-obligated Mandatorily
      Redeemable Preferred   Securities of Subsidiary Trusts Holding Solely Company   Debentures         
|                                                                                                                                       
|Member's Equity                                                                                                                        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|The accompanying Notes to Condensed
        Consolidated Financial Statements are an integral part of the financial
        statements.

---

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

---

(THIS PAGE LEFT BLANK INTENTIONALLY.)

---

|PPL
      ELECTRIC UTILITIES CORPORATION AND SUBSIDIARIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Part I. FINANCIAL INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Item 1. Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|In the opinion of PPL Electric, the unaudited
      financial statements that follow reflect all adjustments necessary to present
      fairly the Condensed Consolidated Balance Sheet as of September 30, 2002
      and December 31, 2001, and the Condensed Consolidated Statement of Income,
      the Condensed Consolidated Statement of Cash Flows and the Condensed Consolidated
      Statement of Shareowner's Common Equity and Comprehensive Income for the
      periods ended September 30, 2002 and 2001.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|CONDENSED CONSOLIDATED STATEMENT OF INCOME                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|PPL Electric Utilities Corporation and
      Subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(Millions of Dollars)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Operating Revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Operating Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Operating Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Other Income - net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Interest Expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Income Before Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Income Before Dividends on Preferred
      Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Dividends - Preferred Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Net Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|The accompanying Notes to Condensed
        Consolidated Financial Statements are an integral part of the financial
        statements.                                                                                                                                                                                                                                                                                                                                                                                  

---

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

---

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

---

|CONDENSED CONSOLIDATED BALANCE SHEET                                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Electric Utilities Corporation and
      Subsidiaries                                                                              
|(Unaudited)                                                                                                                            
|(Millions of Dollars)                                                                                                                  
|                                                                                                                                       
|                                                                                                                                       
|Liabilities and Equity                                                                                                                 
|                                                                                                                                       
|Current Liabilities                                                                                                                    
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Long-term Debt                                                                                                                         
|                                                                                                                                       
|Deferred Credits and Other Noncurrent
      Liabilities                                                                                
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Commitments and Contingent Liabilities                                                                                                 
|                                                                                                                                       
|Company-obligated Mandatorily
      Redeemable Preferred   Securities of Subsidiary Trusts Holding Solely
        Company Debentures   
|                                                                                                                                       
|Preferred Stock                                                                                                                        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Shareowner's Common Equity                                                                                                             
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|The accompanying Notes to Condensed
        Consolidated Financial Statements are an integral part of the financial
        statements.

---

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

---

|PPL
      MONTANA, LLC AND SUBSIDIARIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Part I. FINANCIAL INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Item 1. Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|In the opinion of PPL Montana, the unaudited
      financial statements that follow reflect all adjustments necessary to present
      fairly the Condensed Consolidated Balance Sheet as of September 30, 2002
      and December 31, 2001, and the Condensed Consolidated Statement of Income,
      the Condensed Consolidated Statement of Cash Flows and the Condensed Consolidated
      Statement of Member's Equity and Comprehensive Income for the periods ended
      September 30, 2002 and 2001.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|CONDENSED CONSOLIDATED STATEMENT OF INCOME                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|PPL Montana, LLC and Subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(Millions of Dollars)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Operating Revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Operating Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Operating Income (Loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Other Income - net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Interest Expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Income (Loss) Before Income
      Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Income Taxes (Benefit)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Net Income (Loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|The accompanying Notes to Condensed
        Consolidated Financial Statements are an integral part of the financial
        statements.                                                                                                                                                                                                                                                                                                                                                                      

---

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

---

|CONDENSED
      CONSOLIDATED BALANCE SHEET                                                                                             
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Montana, LLC and Subsidiaries                                                                                                      
|(Unaudited)                                                                                                                            
|(Millions of Dollars)                                                                                                                  
|                                                                                                                                       
|                                                                                                                                       
|Assets                                                                                                                                 
|                                                                                                                                       
|Current Assets                                                                                                                         
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Noncurrent Assets                                                                                                                      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Liabilities and Equity                                                                                                                 
|                                                                                                                                       
|Current Liabilities                                                                                                                    
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Noncurrent Liabilities                                                                                                                 
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Commitments and Contingent Liabilities                                                                                                 
|                                                                                                                                       
|                                                                                                                                       
|Member's Equity                                                                                                                        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|The accompanying Notes to Condensed
        Consolidated Financial Statements are an integral part of the financial
        statements.

---

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

---

Combined Notes to Condensed Consolidated
  Financial Statements

Terms and abbreviations appearing in Combined Notes to Condensed Consolidated
  Financial Statements are explained in the glossary. Dollars are in millions,
  except per share data, unless otherwise noted.

1. Interim Financial Statements 
    (PPL, PPL Energy Supply, PPL Electric and PPL Montana)
    Certain information in footnote disclosures, normally included in financial
      statements prepared in accordance with accounting principles generally accepted
      in the U.S., has been condensed or omitted in this Form 10-Q under the rules
      and regulations of the SEC. These financial statements should be read in
      conjunction with the financial statements and notes included in each company's
      Annual Report to the SEC on Form 10-K for the year ended December 31, 2001.
    Certain amounts in the September 30, 2001 and December 31, 2001 financial
      statements have been reclassified to conform to the presentation in the
      September 30, 2002 financial statements. The required reclassification of
      energy trading activity to a net basis, as described in Note 12, is the
      most significant reclassification.
2. Summary of Significant Accounting Policies
    The following accounting policy disclosures represent updates to the "Summary
      of Significant Accounting Policies" footnote in each company's Annual Report
      to the SEC on Form 10-K for the year ended December 31, 2001.
    Utility Revenue

    (PPL and PPL Energy Supply)

    The Statement of Income "Utility" line item contains revenues from domestic
      and international rate-regulated delivery operations. These revenues were
      previously reported as "Retail electric and gas" and "Wholesale energy marketing
      and trading" by PPL and as "Retail electric and gas" by PPL Energy Supply.

    (PPL Electric)

    Since most of PPL Electric's operations are regulated, it is not meaningful
      to use a "Utility" caption. Therefore, the revenues
      of PPL Electric are presented according to specific types of revenue.
    Net Energy Trading Margins

    (PPL, PPL Energy Supply and PPL Montana)

    In accordance with the accounting requirements under EITF 02-3, "Accounting
      for Contracts Involved in Energy Trading and Risk Management Activities,"
      PPL now reflects its realized and unrealized gains and losses associated
      with all energy trading activities that qualify as derivatives as a net
      number in the "Operating Revenues - Net energy trading margins" line on
      the Statement of Income. Through September 30, 2002, energy trading activities
      include derivative and non-derivative contractual arrangements. See Note
      12 for additional information.
    Prior to the issuance of EITF 02-3, which became effective in the third
      quarter of 2002, all gains and losses from changes in market prices of energy
      sales contracts were accounted for in "Wholesale energy marketing and trading"
      revenues, and gains and losses from changes in market prices of energy purchase
      contracts were accounted for in "Energy purchases" on the Statement of Income.
      Gains and losses associated with non-trading activities, primarily changes
      in fair value hedges, have been reclassified and are now netted in "Energy purchases"
      on the Statement of Income.
    Stock-Based Compensation

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

    Beginning January 1, 2003, PPL will adopt the fair value method of accounting
      for restricted stock and stock options, as defined in SFAS 123, "Accounting
      for Stock-Based Compensation." PPL presently applies the intrinsic value
      method, permitted under SFAS 123 and defined in APB Opinion No. 25, "Accounting
      for Stock Issued to Employees" and related interpretations.
    The FASB issued an exposure draft in October 2002, which would amend the transition
      and disclosure requirements of SFAS 123. The exposure draft lists three
      acceptable methods to report the change in accounting principle. PPL intends
      to apply the method that is consistent with the transition provision of
      SFAS 123, which requires the recognition of expense for all options granted,
      modified or settled after the beginning of the fiscal year in which the recognition
      provisions are first applied.
    Independent System Operator

    (PPL, PPL Energy Supply and PPL Electric)

    Certain PPL subsidiaries participate in the PJM in several roles. Certain
      PPL subsidiaries also participate in the New England Power Pool (NEPOOL)
      and the New York ISO (NYISO) in a less significant way. In PJM, PPL EnergyPlus
      is a marketer, a load-serving entity to its customer-choice customers, and
      a seller for PPL's Pennsylvania generation subsidiaries. PPL Electric is
      a transmission owner and provider of last resort load in PJM. In NEPOOL,
      PPL EnergyPlus is a marketer and a seller for PPL's New England generating
      assets. In the NYISO, PPL EnergyPlus acts as a marketer. PPL Electric does
      not participate in NEPOOL or NYISO.
    A function of interchange accounting is to match participants' MWh entitlements
      (generation plus scheduled bilateral purchases) against their MWh obligations
      (load plus scheduled bilateral sales) during every hour of every day. If
      the net result during any given hour is an entitlement, the participant
      is credited with a spot market sale to the ISO at the respective market
      price for that hour; if the net result is an obligation, the participant
      is charged with a spot market purchase from the ISO at the respective market
      price for that hour. ISO purchases and sales are not allocated to individual
      customers.
    PPL records the hourly net sales and purchases in its financial statements
      as sales to and purchases from the respective ISOs, in accordance with FERC
      and industry accounting.
3. Segment and Related Information
    (PPL and PPL Energy Supply)

    PPL's reportable segments are Supply, Delivery and International. The Supply
      segment primarily consists of the domestic energy marketing, domestic generation
      and domestic development operations of PPL Energy Supply. The Delivery segment
      includes the regulated electric and gas delivery operations of PPL Electric
      and PPL Gas Utilities. The International segment includes PPL Global's responsibility
      for the acquisition and holding of international energy projects. The majority
      of PPL Global's international investments are located in the U.K., Chile
      and El Salvador.
    PPL Energy Supply's reportable segments are Supply and International. The
      International segment at the PPL Energy Supply level is consistent with
      the International segment at the PPL level. The Supply segment information
      reported at the PPL Energy Supply level will not agree with the Supply segment
      information reported at the PPL level. Additional Supply segment functions,
      including telecommunications, exist at PPL that are outside of PPL Energy
      Supply. Furthermore, certain income items, including PLR revenue and certain
      interest income, exist at the PPL Energy Supply level, but are eliminated
      in consolidation at the PPL level. Finally, certain expense items are fully
      allocated to the segments at the PPL level only.
    Segments include direct charges, as well as an allocation of indirect corporate
      costs, for services provided by PPL Services. These service costs include
      functions such as financial, legal, human resources and information services.
    See Note 10 for a discussion of the PLR contracts between PPL Electric
      and PPL EnergyPlus. PPL EnergyPlus' sales to PPL Electric, to meet PPL Electric's
      PLR load, are included in the Supply segment of PPL Energy Supply. PPL Electric's
      sales of this electricity to its PLR customers are included in the Delivery
      segment of PPL. There are no intersegment revenues for PPL or PPL Energy
      Supply.
    Previously reported information has been reclassified to conform to the
      current presentation. Changes from previous reports include the allocation
      of interest expense to segments, and the reporting of PLR revenues at PPL
      in the Delivery segment rather than in the Supply segment. Financial data
      for the segments are as follows:

    (PPL)

    Three Months
            Ended September 30,
        
        
        Nine Months
            Ended September 30,2002
        
        
        2001
        
        
        2002
        
        
        2001Income Statement DataRevenues from external customersSupply
        $
        499
        
        
        $
        365
        
        
        $
        1,193
        
        
        $
        1,198International (a)
        
        276
        
        
        
        151
        
        
        
        836
        
        
        
        454Delivery
        
        687
        
        
        
        709
        
        
        
        2,026
        
        
        
        2,1441,462
        
        
        
        1,225
        
        
        
        4,055
        
        
        
        3,796Net IncomeSupply
        
        112
        
        
        
        131
        
        
        
        286
        
        
        
        370International (b)
        
        (12
        )
        
        
        (2
        )
        
        
        (234
        )
        
        
        36Delivery
        
        22
        
        
        
        23
        
        
        
        40
        
        
        
        85$
        122
        
        
        $
        152
        
        
        $
        92
        
        
        $
        491September 30,
            2002
        
        
        December 31,
            2001Balance Sheet DataTotal assetsSupply
        
        $
        4,888
        
        
        $
        4,720International (c)
        
        
        5,025
        
        
        
        1,749Delivery
        
        
        5,789
        
        
        
        6,097$
        15,702
        
        
        $
        12,566(PPL Energy Supply)

    Three Months
            Ended September 30,
        
        
        Nine Months
            Ended September 30,2002
        
        
        2001
        
        
        2002
        
        
        2001Income Statement DataRevenues from external customersSupply
        $
        872
        
        
        $
        769
        
        
        $
        2,274
        
        
        $
        2,348International (a)
        
        276
        
        
        
        151
        
        
        
        836
        
        
        
        4541,148
        
        
        
        920
        
        
        
        3,110
        
        
        
        2,802Net IncomeSupply
        
        153
        
        
        
        167
        
        
        
        379
        
        
        
        454International (b)
        
        (12
        )
        
        
        (2
        )
        
        
        (234
        )
        
        
        36$
        141
        
        
        $
        165
        
        
        $
        145
        
        
        $
        490September 30,
            2002
        
        
        December 31,
            2001Balance Sheet DataTotal assetsSupply
        
        $
        5,348
        
        
        $
        5,412International (c)
        
        
        5,025
        
        
        
        1,749$
        10,373
        
        
        $
        7,161(a)
        The three and nine month periods ended September
          30, 2002, contain the results of WPD corresponding to those periods.
          See Note 8 for additional information on the acquisition of WPD.(b)
        The International segment includes the "Cumulative
          Effect of a Change in Accounting Principle" recorded in March 2002.
          See Note 13 for additional information. The International segment also
          includes the write-downs of the CEMAR investment described in Note 8.(c)
        The September 30, 2002 balance sheet includes
          the consolidation of the accounts of WPD. See Note 8 for additional
          information on the acquisition of WPD.
4. Investment in Unconsolidated Affiliates - at Equity
    (PPL and PPL Energy Supply)

    Investments in unconsolidated affiliates accounted for under the equity
      method by both PPL and PPL Energy Supply were $238 million and $586 million
      at September 30, 2002 and December 31, 2001. The December 31, 2001 balance
      included PPL Global's investment in WPDH Limited, which was $328 million.
      In the third quarter 2002, PPL Global acquired a controlling interest in
      WPDH Limited and WPD Investment Holdings Limited. As a result, PPL Global
      fully consolidated the financial results of WPD at September 30, 2002. See
      Note 8 for additional information.
    Summarized below is information from the financial statements of unconsolidated
      affiliates accounted for under the equity method, underlying the amounts
      included in PPL's and PPL Energy Supply's consolidated financial statements:
    Three Months
            Ended September 30,
        
        
        Nine Months
            Ended September 30,2002
        
        
        2001
        
        
        2002
        
        
        2001Income Statement Data
          (a)Revenues
        $
        24
        
        
        $
        26
        
        
        $
        74
        
        
        $
        79Operating Income (Loss)
        
        (2
        )
        
        
        8
        
        
        
        
        
        
        
        30Net Income (Loss)
        
        (1
        )
        
        
        39
        
        
        
        (29
        )
        
        
        52September 30,
            2002
        
        
        December 31,
            2001Balance Sheet Data (a)Current Assets
        
        $
        110
        
        
        $
        144Noncurrent Assets
        
        
        842
        
        
        
        865Current Liabilities
        
        
        37
        
        
        
        37Noncurrent Liabilities
        
        
        302
        
        
        
        310(a)
        For purpose of comparability, the summarized
          information of WPD is excluded from all periods.
5. Earnings Per Share
    (PPL)

    Basic EPS is calculated by dividing "Net Income" on the Statement of Income
      by the weighted average number of common shares outstanding during the period.
      In the calculation of diluted EPS, weighted average shares outstanding are
      increased for additional shares that would be outstanding if potentially
      dilutive securities were converted to common stock. Potentially dilutive
      securities consist of stock options granted under the incentive compensation
      plans, stock units representing common stock granted under directors compensation
      programs and PEPS Units.
    Dividends and distributions on preferred securities are included in net
      income in the computation of basic and diluted EPS.
    The basic and diluted EPS calculations, and the reconciliation of the shares
      (in thousands) used in the calculations, are shown below:
    Three Months
            Ended September 30,
        
        
        Nine Months
            Ended September 30,2002
        
        2001
        
        
        2002
        
        
        2001Income (Numerator)Net Income - before cumulative
          effect of a change in accounting principle
        $
        122
        
        
        $
        152
        
        
        $
        242
        
        
        $
        491Cumulative effect of a change in accounting
          principle
        
        
        
        
        
        
        
        
        
        (150
        )Net Income
        $
        122
        
        
        $
        152
        
        
        $
        92
        
        
        $
        491Shares (Denominator)Shares for Basic EPS
        
        151,565
        
        
        
        146,241
        
        
        
        148,758
        
        
        
        145,818Add: Incremental shares:Stock options
        
        212
        
        
        
        441
        
        
        
        254
        
        
        
        676Stock units
        
        71
        
        
        
        71
        
        
        
        72
        
        
        
        70Shares for Diluted EPS
        
        151,848
        
        
        
        146,753
        
        
        
        149,084
        
        
        
        146,564Basic EPSNet Income - before cumulative
          effect of a change in accounting principle
        $
        0.81
        
        
        $
        1.04
        
        
        $
        1.63
        
        
        $
        3.37Cumulative effect of a change in accounting
          principle
        
        
        
        
        
        
        
        
        
        (1.01
        )Net Income
        $
        0.81
        
        
        $
        1.04
        
        
        $
        0.62
        
        
        $
        3.37Diluted EPSNet Income - before cumulative
          effect of a change in accounting principle
        $
        0.80
        
        
        $
        1.04
        
        
        $
        1.63
        
        
        $
        3.35Cumulative effect of a change in accounting
          principle
        
        
        
        
        
        
        
        
        
        (1.01
        )Net Income
        $
        0.80
        
        
        $
        1.04
        
        
        $
        0.62
        
        
        $
        3.35In May 2001, PPL issued 23 million PEPS Units that contain a purchase contract
      component for PPL's common stock. The PEPS Units will only be dilutive if
      the average price of PPL's common stock exceeds $65.03 for any period. Therefore,
      they were excluded from the diluted EPS calculations for the three and nine
      months ended September 30, 2002 and September 30, 2001.
    Stock options to purchase 1,715,590 and 1,158,163 PPL common shares for
      the three and nine months ended September 30, 2002 were not included in
      those periods' computation of diluted EPS because the exercise price of
      the options was greater than the average market price of the common shares.
      Therefore, the effect would have been antidilutive.
6. Credit Arrangements and Financing Activities

Credit Arrangements

(PPL, PPL Energy Supply and PPL Electric)

In order to enhance liquidity, and as a credit back-stop to their respective
  commercial paper programs, PPL Electric maintains a $400 million 364-day credit
  facility maturing in June 2003 (replacing a similar facility that had expired
  in June 2002) and PPL Energy Supply maintains three credit facilities: a $300
  million 364-day credit facility maturing in June 2003, a $500 million three-year
  credit facility maturing in June 2004, and a $300 million three-year credit
  facility maturing in June 2005 (the two $300 million credit facilities replace
  a $600 million 364-day credit facility which expired in June 2002). At September
  30, 2002, no borrowings were outstanding under any of these facilities. Both
  PPL Electric and PPL Energy Supply have the ability to cause the lenders to
  issue letters of credit under their respective facilities. At September 30,
  2002, PPL Electric had $40 million of letters of credit outstanding under its
  facility and PPL Energy Supply had $17 million of letters of credit outstanding
  under its $500 million facility.

(PPL, PPL Energy Supply and PPL Montana)

PPL Montana maintains a $100 million three-year credit facility maturing in
  November 2002 to meet its liquidity needs and to provide for the issuance of
  up to $75 million in letters of credit. At September 30, 2002, PPL Montana had
  outstanding borrowings of $35 million and letters of credit of $24 million under
  this facility. This facility was terminated in November 2002. Additionally,
  PPL Montana had maintained a $150 million credit facility which matured in April
  2002, designed for the sole purpose of issuing letters of credit. This facility
  was not renewed. PPL expects that PPL Montana's future liquidity and collateral
  requirements will be provided by its affiliates on market terms.

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

The subsidiaries of PPL are separate legal entities. PPL's subsidiaries are
  not liable for the debts of PPL. Accordingly, creditors of PPL may not satisfy
  their debts from the assets of the subsidiaries absent a specific contractual
  undertaking by a subsidiary to pay PPL's creditors or as required by applicable
  law or regulation. Similarly, absent a specific contractual undertaking or as
  required by applicable law or regulation, PPL is not liable for the debts of
  its subsidiaries. Accordingly, creditors of PPL's subsidiaries may not satisfy
  their debts from the assets of PPL absent a specific contractual undertaking
  by PPL to pay the creditors of its subsidiaries or as required by applicable
  law or regulation.
Similarly, the subsidiaries of PPL Energy Supply, PPL Electric and PPL Montana
  are separate legal entities. These subsidiaries are not liable for the debts
  of PPL Energy Supply, PPL Electric and PPL Montana. Accordingly, creditors of
  PPL Energy Supply, PPL Electric and PPL Montana may not satisfy their debts
  from the assets of their subsidiaries absent a specific contractual undertaking
  by a subsidiary to pay the creditors or as required by applicable law or regulation.
  In addition, absent a specific contractual undertaking or as required by applicable
  law or regulation, PPL Energy Supply, PPL Electric and PPL Montana are not liable
  for the debts of their subsidiaries. Accordingly, creditors of these subsidiaries
  may not satisfy their debts from the assets of PPL Energy Supply, PPL Electric
  or PPL Montana absent a specific contractual undertaking by that parent to pay
  the creditors of its subsidiaries or as required by applicable law or regulation.
Financing Activities

(PPL)

In February 2002, PPL Capital Funding repurchased $10 million, par value, of
  its medium-term notes, 7.75% Series due 2005, at a market value of $11 million.
  In October 2002, it repurchased an additional $100 million, par value, of these
  notes at a market value of $104 million.
In September 2002, PPL Capital Funding retired $175 million of its medium-term
  notes, floating rate Series B due 2002, and $25 million of its medium-term notes,
  7.75% Series due 2002, both at par value.
In September 2002, PPL Capital Funding cancelled the remarketing agreement
  on its 7.7% Reset Put Securities due 2007. This agreement
  would have permitted a third party to remarket the securities at an above-market
  coupon in November 2002. This action required PPL Capital Funding to pay a $30
  million termination fee to the third party in September and results in requiring
  PPL Capital Funding to repurchase the principal amount ($200 million) of securities
  in November 2002. A $24 million charge (the payment to the third party net of
  hedge income and the unamortized balance of the original option premium) was
  included in "Interest Expense" on the Statement of Income.
In October 2002, PPL Capital Funding repurchased $15 million, par value, of
  its medium-term notes, 8-3/8% Series due 2007, at a market value of $16 million.
In September 2002, PPL issued 16.7 million shares of common stock for $30.50
  per share, resulting in gross proceeds of approximately $509 million. PPL received
  net proceeds of $493 million, which were used to redeem all of the $150 million
  outstanding 8.10% Preferred Securities issued by PPL Capital Trust II, and to
  repay short-term debt.
During the first quarter of 2002, PPL issued $13 million of common stock in
  small amounts on a periodic basis under its Structured Equity Shelf Program.


(PPL and PPL Energy Supply)

At September 30, 2002, PPL Energy Supply had $213 million of commercial paper
  outstanding.
In September 2002, PPL's and PPL Energy Supply's short-term debt increased
  by $494 million due to the consolidation of WPD's accounts as a result of the
  acquisition of the controlling interest in WPD. See Note 8 for additional information.

(PPL and PPL Electric)

In May 2002, PPL Electric:

    retired $11 million of its outstanding First Mortgage Bonds,
      8-1/2% Series due 2022, at par value, through the maintenance and replacement
      fund provisions of the 1945 First Mortgage Bond Indenture;
    retired $28 million of its outstanding First Mortgage Bonds,
      7-3/4% Series due May 2002, at par value; and
    instructed the property trustee of PPL Capital Trust to redeem,
      at par value, all of the $100 million of outstanding 8.20% Preferred Securities
      due 2027 that were previously issued by PPL Capital Trust.In the third quarter of 2002, PPL Electric instructed the property trustee
  for the 8.10% Preferred Securities due 2027 to redeem, at par value, all of
  the $150 million of outstanding preferred securities issued by PPL Capital Trust
  II. This redemption occurred in September 2002.
During the nine months ended September 30, 2002, PPL Transition Bond Company
  made principal payments on bonds totaling $189 million.
In September 2002, PPL Electric received a capital contribution of $240 million
  from PPL.
At September 30, 2002, there was no commercial paper or bank borrowings outstanding
  for PPL Electric.

(PPL Energy Supply)

During the nine months ended September 2002, PPL Energy Supply distributed
  $667 million to its parent company, PPL Energy Funding. Also during this time,
  PPL Energy Supply received $158 million in capital contributions from PPL Energy
  Funding.
Dividend Restrictions

(PPL, PPL Energy Supply and PPL Montana)

The PPL Montana Colstrip lease places certain restrictions on PPL Montana's
  ability to declare dividends. At this time, PPL believes that these covenants
  will not limit PPL Montana's ability to operate as desired and will not affect
  PPL's ability to meet any of its cash obligations. Certain of PPL Global's international
  subsidiaries also have financing arrangements which limit their ability to pay
  dividends. However, PPL does not, at this time, expect that any of such limitations
  would significantly impact its ability to meet its cash obligations.

(PPL and PPL Electric)

PPL Electric has financing arrangements which include dividend restrictions
  based on interest coverage ratios. PPL Electric does not, at this time, expect
  that any of such limitations would significantly impact its ability to declare
  dividends.
7. Leases
    (PPL, PPL Energy Supply and PPL Montana)

    Colstrip Generating Plant
    In July 2000, PPL Montana sold its interest in the Colstrip generating
      plant to owner lessors who are leasing the assets back to PPL Montana under
      four 36-year operating leases. PPL Montana leases a 50% interest in Colstrip
      Units 1 and 2 and a 30% interest in Unit 3, through four non-cancelable
      operating leases. These leases provide two renewal options based on the
      economic useful life of the generation assets. The amount outstanding under
      these leases at September 30, 2002 was $314 million. There are no residual
      value guarantees in these leases. However, upon an event of default or an
      event of loss, the lessee could be required to pay a termination value of
      amounts sufficient to allow the lessor to repay amounts owing on the lessor
      notes and make the lessor whole for its equity investment and anticipated
      return on investment. The events of default include payment defaults, breaches
      of representations or covenants, acceleration of other indebtedness of PPL
      Montana, change in control of PPL Montana and certain bankruptcy events.

    (PPL and PPL Energy Supply)

    University Park and Sundance
    In May 2001, a PPL Global subsidiary entered into a $1.06 billion operating
      lease arrangement, as lessee, for the development, construction and operation
      of several commercial power generation facilities. In February 2002, in
      connection with the December 2001 decision to cancel several development
      projects, the available commitment under this lease was reduced to $700
      million to cover only the University Park project near University Park,
      Illinois, and the Sundance project near Coolidge, Arizona. In July 2002,
      these facilities were substantially completed and the initial lease term
      commenced. The first lease payment was made in August 2002. The commitment
      under this lease was further reduced to $660 million in September 2002.
      The lease terminates in June 2008. At the end of the lease term, the lessee
      has the option to extend the lease or purchase the facilities. If the lessee
      does not choose either of these options, then it will guarantee a residual
      value of up to $545 million based on an estimated total lessors' investment
      of $657 million for both projects combined. If the financing is terminated
      early as a result of significant environmental damage, or an event of default,
      the lessee could be obligated to pay up to 100% of the lessors' investment
      in the facilities. These events of default include, subject to certain exceptions,
      payment or judgment defaults, breach of representations or covenants, defaults
      in other indebtedness, termination of the financing documents or loss of
      a required approval. The obligations of the lessee under this lease, including
      payment obligations, have been guaranteed by PPL Energy Supply.
    Lower Mt. Bethel
    In December 2001, a PPL Global subsidiary entered into a $455 million operating
      lease arrangement, as lessee, for the development, construction and operation
      of a 600 MW gas-fired combined-cycle generation facility located in Lower
      Mt. Bethel Township, Northampton County, Pennsylvania. The initial lease
      term is approximately 10 years, beginning on the date of commercial operation
      which is expected to occur by early 2004. At the end of the lease term,
      the lessee has the option to extend the lease or purchase the facility.
      If the lessee does not choose either of these options, then it will guarantee
      a residual value estimated to be up to $321 million. The lessee could be
      obligated to pay up to 100% of the lessors' investment and other obligations
      in the facilities if the financing is terminated early as a result of a
      loss, destruction or condemnation of the project, or upon an event of default.
      These events of default during the construction period include a violation
      of environmental law, material environmental damage, revocation or failure
      to obtain environmental approval, defaults arising out of any fraudulent
      act, illegal act, misapplication of funds or willful misconduct, or if a
      bankruptcy event occurs. These events of default during the lease term include,
      subject to certain exceptions, payment or judgment defaults, breach of representations
      or covenants, defaults in other indebtedness, termination of the financing
      documents, or violations of environmental law, material environmental damage
      or loss of a required environmental approval. The total exposure as a result
      of any of these events of default occurring is estimated to be up to $540
      million as of September 30, 2002. The maximum exposure is estimated to be
      up to $610 million as of the commencement of the lease based on current
      market conditions. The obligations of the lessee under this lease, including
      payment obligations, have been guaranteed by PPL Energy Supply.
    The Air Quality Plan Approval issued by the Pennsylvania DEP for construction
      of the Lower Mt. Bethel facility has been appealed by the New Jersey DEP
      to the Pennsylvania DEP Environmental Hearing Board. The subsidiary involved
      in this lease financing has joined with the Pennsylvania DEP in opposing
      this appeal. In addition, in August 2002, the Northampton County Court of
      Common Pleas issued a decision concerning the permissible noise levels from
      the Lower Mt. Bethel facility when it becomes operational. Specifically,
      the court's decision addressed the noise measurement criteria and the point
      at which the noise levels are to be measured. PPL has appealed the court's
      decision to the Pennsylvania Commonwealth Court. PPL cannot predict the
      outcome of these matters or their ultimate impact on the development of
      the Lower Mt. Bethel facility, on PPL or on PPL Energy Supply, but such
      impact may be material.
    Cancellation of Lease for Turbine Generator Units and Related Equipment
    In November 2000, a PPL Global subsidiary entered into a $555 million operating
      lease arrangement for turbine generator units and related equipment (SCRs,
      transformers and spare engines). In June 2002, this operating lease was
      cancelled in connection with the December 2001 decision to cancel several
      development projects. Prior to terminating the lease, certain equipment
      under this lease was either purchased by a PPL Global subsidiary or sold
      to another lessor.
8. Acquisitions, Development and Divestitures
    (PPL and PPL Energy Supply)

    Domestic Generation Projects
    In December 2001, PPL Global made a decision to cancel approximately 2,100
      MW of previously planned generation development in Pennsylvania and Washington
      state. These projects were in the early stage of development and would have
      had an estimated capital cost of approximately $1.3 billion. The charge
      for cancellation of these generation projects, which was primarily due to
      cancellation fees under turbine purchase contracts, was approximately $150
      million, and was reported on the 2001 Statement of Income as "Cancellation
      of generation projects," a component of "Other Charges." At June 30, 2002,
      PPL Global had completed payment of the cancellation fees.
    In November 2002, PPL Global announced that it was canceling the development
      of a 44 MW electricity-generating facility at Freeport, Long Island due
      to scheduling delays in the development process and increased project costs.
      As a result of this cancellation, PPL's capital expenditure program will
      be reduced by approximately $65 million over 2003 and 2004. PPL and PPL
      Energy Supply do not expect to make any charges to earnings as a result of this
      cancellation.
    See Note 7 for a discussion of the Lower Mt. Bethel project.
    International Energy Projects
    WPD Acquisition
    On September 6, 2002, PPL Global acquired the remaining 49% equity interest in WPDH Limited and WPD Investment Holdings Limited from
Mirant, for approximately $236 million, including acquisition costs.  Mirant announced its decision to exit the investment earlier in
the year. The acquisition of Mirant's 49% interest provides PPL Global with complete control of WPD.  WPD operates
two electric distribution companies in the U.K., which together serve approximately 2.5 million end-users and have about 2,500
employees.  The acquisition was initially funded by the issuance of commercial paper by PPL Energy Supply.  The commercial paper was
paid off with proceeds of the common stock sale by PPL.
    Prior to the acquisition, PPL Global held 51% of the equity interest in
      WPD but shared control with Mirant pursuant to a shareholders' agreement.
      The shareholders' agreement was terminated in connection with the closing
      of the acquisition. No regulatory approvals were required for this transaction.
    The purchase of Mirant's interest in WPD was accounted for as a step-acquisition and resulted in the consolidation
      of WPD's results of operation into PPL's and PPL Energy Supply's statement
      of income as of January 1, 2002, on a one-month lag, consistent with PPL
      Global's current consolidation policy. The three and nine month income statement
      periods ended September 30, 2002, contain the results of WPD corresponding
      to those periods. The acquisition also resulted in the addition of $3.5
      billion of assets and $2.1 billion of WPD's debt to the balance sheet. However,
      the non-recourse nature of WPD's debt to PPL and PPL Energy Supply will
      not change.
    Although subject to price-cap regulation (as discussed in Note 9), WPD
      is not subject to SFAS 71, "Accounting for the Effects of Certain Types
      of Regulation."
    The assets acquired and liabilities assumed were recorded at estimated fair values as determined by management based on information
currently available.  PPL Global is in the process of obtaining an independent appraisal of the fair value of acquired property,
plant and equipment and actuarial valuations of the pension plans.  Management is also completing its review and determination of
fair value of other assets acquired and liabilities assumed, including pre-acquisition contingencies.  Accordingly, the preliminary
allocation of purchase price is subject to revision based on the final determination of
appraised and other fair values.  The following table summarizes the preliminary allocation of purchase price based on estimated fair
values of the assets acquired and liabilities assumed at the date of acquisition, plus the book value of assets and liabilities
underlying PPL Global's previous 51% equity ownership:
    Current assets
        
        $
        228Investments (a)
        
        
        (451
        )Property, plant and equipment
        
        
        3,429Goodwill
        
        
        170Other
        
        
        356Total assets acquired
        
        
        3,732Current liabilities
        
        
        797Long-term debt
        
        
        1,587Deferred income taxes
        
        
        991Other
        
        
        121Total liabilities assumed
        
        
        3,496Net assets acquired
        
        $
        236(a)
        Includes the reversal of PPL Global's equity
          investment.The goodwill reflected above is the remaining value of PPL Global's 51%
      share of the goodwill recognized by WPD on its acquisition of Hyder.
    The unaudited pro forma information that follows is presented to give effect
      to the acquisition on the statements of income of PPL and PPL Energy Supply.
      The pro forma adjustments assume that the transaction was consummated at
      the beginning of the income statement period.

    (PPL)

    For the Three Months ended September 30,
    As
            Reported
        
        
        Pro Forma
            Adjustments
        
        
        As
            Adjusted2002Operating revenue
        $
        1,462
        
        
        
        
        
        
        $
        1,462Income from continuing operations
          (before cumulative effect of a change in accounting principle)
        
        122
        
        
        $
        19
        
        
        
        141Net income
        
        122
        
        
        
        19
        
        
        
        141Earnings per share
        
        0.81
        
        
        
        0.13
        
        
        
        0.942001Operating revenue
        $
        1,225
        
        
        $
        115
        
        
        $
        1,340Income from continuing operations
          (before cumulative effect of a change in accounting principle)
        
        152
        
        
        
        11
        
        
        
        163Net income
        
        152
        
        
        
        11
        
        
        
        163Earnings per share
        
        1.04
        
        
        
        0.08
        
        
        
        1.12For the Nine Months ended September 30,
    As
            Reported
        
        
        Pro Forma
            Adjustments
        
        
        As
            Adjusted2002Operating revenue
        $
        4,055
        
        
        
        
        
        
        $
        4,055Income from continuing operations
          (before cumulative effect of a change in accounting principle)
        
        242
        
        
        $
        72
        
        
        
        314Net income
        
        92
        
        
        
        72
        
        
        
        164Earnings per share
        
        0.62
        
        
        
        0.48
        
        
        
        1.102001Operating revenue
        $
        3,796
        
        
        $
        356
        
        
        $
        4,152Income from continuing operations
          (before cumulative effect of a change in accounting principle)
        
        491
        
        
        
        67
        
        
        
        558Net income
        
        491
        
        
        
        67
        
        
        
        558Earnings per share
        
        3.37
        
        
        
        0.46
        
        
        
        3.83(PPL Energy Supply)

    For the Three Months ended September 30,
    As
            Reported
        
        
        Pro Forma
            Adjustments
        
        
        As
            Adjusted2002Operating revenue
        $
        1,148
        
        
        
        
        
        
        $
        1,148Income from continuing operations
          (before cumulative effect of a change in accounting principle)
        
        141
        
        
        $
        19
        
        
        
        160Net income
        
        141
        
        
        
        19
        
        
        
        1602001Operating revenue
        $
        920
        
        
        $
        115
        
        
        $
        1,035Income from continuing operations
          (before cumulative effect of a change in accounting principle)
        
        165
        
        
        
        11
        
        
        
        176Net income
        
        165
        
        
        
        11
        
        
        
        176For the Nine Months ended September 30,

    As
            Reported
        
        
        Pro Forma
            Adjustments
        
        
        As
            Adjusted2002Operating revenue
        $
        3,110
        
        
        
        
        
        
        $
        3,110Income from continuing operations
          (before cumulative effect of a change in accounting principle)
        
        295
        
        
        $
        72
        
        
        
        367Net income
        
        145
        
        
        
        72
        
        
        
        2172001Operating revenue
        $
        2,802
        
        
        $
        356
        
        
        $
        3,158Income from continuing operations
          (before cumulative effect of a change in accounting principle)
        
        490
        
        
        
        67
        
        
        
        557Net income
        
        490
        
        
        
        67
        
        
        
        557Write-down of International Energy Projects
    
    At December 31, 2001, PPL Global estimated that the long-term viability
      of its CEMAR investment was jeopardized and that there was minimal probability
      of positive future cash flows. See PPL's Note 22 and PPL Energy Supply's
      Note 21 to the Financial Statements included in each company's Annual Report
      to the SEC on Form 10-K for the year ended December 31, 2001 for additional
      information. At that time, PPL Global recorded an impairment loss in the
      carrying value of its net assets in CEMAR, an increase in its valuation
      allowance in deferred tax assets, and a credit to "Minority Interest" on
      the Statement of Income. The net result of these transactions was a $217
      million charge to earnings.
    As a result of its financial difficulties, CEMAR has failed to pay certain
      of its creditors for obligations when due. In addition, CEMAR is not in
      compliance with the financial covenants in its 150 million Brazilian reais
      (approximately $56 million) debenture indenture for the year ended December
      31, 2001, and for the quarter ended March 31, 2002. CEMAR has reached agreement
      with the required majority of debenture holders on a waiver for the failure
      to meet certain financial covenants through measurement periods ending September
      30, 2002.
    At March 31, 2002, PPL Global recorded a further impairment loss in the
      carrying value of its net assets in CEMAR of approximately $4 million, after-tax.
      The pre-tax charge was $6 million, and was recorded as a charge to "Write-down
      of international energy projects" on the Statement of Income.
    PPL had been working with governmental authorities in Brazil and CEMAR's
      creditors on a plan to return the company to financial stability. That plan
      included CEMAR's request for a rate-increase review, which Brazilian regulators
      denied in June 2002. PPL viewed the rate-increase review as a critical step
      in restoring CEMAR to financial stability. Given the regulator's denial
      of the rate-increase review and the financial condition of CEMAR, PPL made
      a decision in June 2002 to exit the investment. PPL Global's remaining portion
      of its CEMAR investment, primarily related to its foreign currency translation
      adjustments balance, was written-off as of June 30, 2002. The $94 million
      charge was recorded in "Write-down of international energy projects" on
      the Statement of Income.
    In July 2002, PPL announced a proposal to sell all of its 90% equity interest
      in CEMAR to Franklin Park Energy, LLC. The sale was subject to approval
      by Brazil's National Electric Energy Agency (ANEEL) and other customary
      conditions. On August 21, ANEEL denied the request for transfer of PPL's
      equity interest in CEMAR to Franklin Park Energy. The purchase and sale
      agreement was terminated by Franklin Park Energy on August 26.
    On August 21, CEMAR filed a concordata preventiva, the Brazilian equivalent
      of a U.S. Chapter 11 bankruptcy work-out proceeding. Also on August 21,
      ANEEL authorized an administrative intervention in CEMAR and fully assumed
      operational and financial control of the company. In its public announcement
      relating to the intervention, ANEEL said that its intervention and control
      of CEMAR would last for an initial term of 180 days. On August 29, at the
      request of the intervenor appointed by ANEEL, the bankruptcy judge dismissed
      the concordata preventiva filing without prejudice.
The intervenor appointed by ANEEL has issued
      a public statement and schedule for the transfer of the ownership interest
      in CEMAR to a new owner. Pursuant to that schedule, ANEEL announced its
      approval in early November 2002 of three bidders (all Brazilian) that submitted pre-qualification
      documents. Also in November, a federal court in Brazil granted a preliminary injunction
requested by a Maranhão labor union suspending the process to transfer the ownership interest in CEMAR.  Although the schedule
announced by the intervenor reflects a closing for the transfer of
      control of CEMAR to a third party on December 20, 2002, there is no guarantee
      that a closing will occur by year-end.
    On August 20, the trustee for CEMAR's debenture holders and three bank
      lenders to CEMAR filed an injunction with a state court in Brazil, enjoining
      CEMAR's officers and the board of directors of Brisk Participacoes Ltda.
      (Brisk), a wholly-owned subsidiary of PPL Global and CEMAR's controlling
      shareholder, from taking actions that would result in the equivalent of
      a U.S. Chapter 7 liquidation proceeding or liquidating event for CEMAR.
      PPL filed objections to the injunction with the state court on September
      4. On September 18, certain creditors and bondholders of CEMAR filed
      a complaint before Brazilian Courts against Brisk, requesting that the shares
      representing the controlling interest in CEMAR be transferred to a third party recommended
      by the creditors representing two-thirds of CEMAR's debt. Brisk has not
      yet been served with this complaint. PPL and PPL Global cannot predict the
      outcome of these proceedings.
    Because PPL Global no longer controls CEMAR, PPL Global has deconsolidated
      the financial assets and liabilities of CEMAR from its financial statements.
      The CEMAR investment is now accounted for using the cost method. As a result,
      in the third quarter of 2002, PPL Global recorded approximately $23 million
      of operating losses of CEMAR through August 21, the day ANEEL assumed control.
      PPL Global will no longer record operating results after that date. PPL
      Global is currently evaluating the accounting treatment if control is returned
      in the future. At September 30, 2002, the negative investment was included
      in "Deferred Credits and Other Noncurrent Liabilities - Other." Any negative
      carrying value of the investment in CEMAR, which includes the third quarter
      losses, will be reversed upon the final sale or other disposition of the
      company.
    The following major reductions in consolidated assets and liabilities resulted
      from the deconsolidation and recording of the cost investment of CEMAR:
    AssetsCurrent assets
        
        $
        71Property, plant and equipment
          - net
        
        
        255Regulatory and other noncurrent
          assets
        
        
        12338Liabilities and EquityCurrent liabilities
        
        
        194Long-term debt
        
        
        84Deferred credits and other
          noncurrent liabilities
        
        
        65Shareowners' common equity
        
        
        11354Accumulated loss in excess
          of investment
        
        $
        (16
        )
9. Commitments and Contingent Liabilities

Energy Purchases and Sales Commitments
Liability for Above Market NUG Contracts(PPL, PPL Energy
  Supply and PPL Electric)
In 1998, PPL Electric recorded a loss accrual for above market contracts with
  NUGs of $854 million, due to its generation business being deregulated. Effective
  January 1999, PPL Electric began reducing this liability as an offset to "Energy
  purchases" on the Statement of Income. This reduction is based on the estimated
  timing of the purchases from the NUGs and projected market prices for this generation.
  The final existing NUG contract expires in 2014. In connection with the corporate
  realignment, effective July 1, 2000, the remaining balance of this liability
  was transferred to PPL EnergyPlus. At September 30, 2002, the remaining liability
  associated with the above market NUG contracts was $447 million.
In the first quarter of 2002, PPL Energy Supply paid $50 million to terminate
  the liability outstanding under an energy contract with one of the NUGs. The
  liability associated with this NUG contract was $75 million. The excess of the
  liability over the payment resulted in a $25 million credit to "Energy purchases"
  on the Statement of Income.

Wholesale Energy Commitments(PPL, PPL Energy Supply and PPL
  Montana)
As part of the purchase of generation assets from Montana Power, PPL Montana
  agreed to supply electricity under two wholesale transition service agreements
  with Montana Power to serve its retail load not served by other providers or
  provided by Montana Power's remaining generation. The first agreement expired
  in December 2001, and the second agreement expired in June 2002. In addition,
  as part of its purchase of the generation assets from Montana Power, PPL Montana
  assumed a power purchase agreement and another power sales agreement. In accordance
  with purchase accounting guidelines, PPL Montana recorded a liability of $118
  million as the estimated fair value of these agreements at the acquisition date.
  The liability is being amortized over the terms of the agreements as adjustments
  to "Wholesale energy marketing" revenues and "Energy purchases" on the Statement
  of Income. The unamortized balance of the liability at September 30, 2002 was
  $65 million and is included on the Balance Sheet in "Deferred Credits and Other
  Noncurrent Liabilities - Other" for PPL, in "Current Liabilities - Other" and
  "Deferred Credits and Other Noncurrent Liabilities - Other" for PPL Energy Supply
  and in "Wholesale energy commitments" for PPL Montana.
On July 1, 2002, PPL EnergyPlus began to sell to NorthWestern Energy an aggregate
  of 450 MW of energy to be supplied by PPL Montana. Under two five-year agreements,
  PPL EnergyPlus will supply 300 MW of around-the-clock electricity and 150 MW
  of unit-contingent on-peak electricity.
Legal Matters

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

PPL and its subsidiaries are involved in numerous legal proceedings, claims
  and litigation in the ordinary course of business. PPL and its subsidiaries
  cannot predict the ultimate outcome of such matters, or whether such matters
  may result in material liabilities.
Montana Power Shareholders' Litigation(PPL, PPL Energy Supply
  and PPL Montana)
In August 2001, a purported class-action lawsuit was filed by a group of shareholders
  of Montana Power against Montana Power, the directors of Montana Power, certain
  unnamed advisors and consultants of Montana Power and PPL Montana. The plaintiffs
  allege, among other things, that Montana Power was required to, and did not,
  obtain shareholder approval of the sale of Montana Power's generation assets
  to PPL Montana in 1999. Although most of the claims in the complaint are against
  Montana Power, its board of directors, and its consultants and advisors, two
  claims are asserted against PPL Montana. In the first claim, plaintiffs seek
  a declaration that because Montana Power shareholders did not vote on the 1999
  sale of generating assets to PPL Montana, that sale "was null and void ab initio."
  The second claim alleges that PPL Montana was privy to and participated in a
  strategy whereby Montana Power would sell its generation assets to PPL Montana
  without first obtaining Montana Power shareholder approval, and that PPL Montana
  has made net profits in excess of $100 million as the result of this alleged
  illegal sale. In the second claim, plaintiffs request that the court impose
  a "resulting and/or constructive trust" on both the generation assets themselves
  and all profits, plus interest on the amounts subject to the trust. In November
  2001, PPL Montana and the other defendants filed a motion to dismiss the plaintiffs'
  complaint on the basis that it fails to state a claim upon which relief may
  be granted, and the plaintiffs filed a motion for the lawsuit to be certified
  by the court as a class-action. In August 2002, the court denied this motion
  to dismiss, except as to certain matters not relating to PPL Montana, and granted
  the plaintiffs' motion for the certification of the lawsuit as a class-action.
  PPL Montana cannot predict the outcome of this matter.
Montana Hydroelectric Initiative(PPL, PPL Energy Supply and
  PPL Montana)
    On November 5, 2002, a proposed Montana Hydroelectric Security Act initiative
      was defeated on a statewide ballot by a better than 2 to 1 margin, based
      on the unofficial results. Among the stated purposes of the initiative was
      to create an elected Montana public power commission to determine whether
      purchasing hydroelectric dams in Montana would be in the public interest.
      Such a commission could have decided to acquire any or all of the hydroelectric
      dams owned by PPL Montana either pursuant to a negotiated purchase or an
      acquisition at fair market value through the power of condemnation. PPL
      Montana had vigorously opposed the initiative along with several other Montana
      groups and individuals.
Colstrip Transmission System(PPL, PPL Energy Supply and PPL
  Montana)
In connection with the acquisition of the Montana generation assets, the Montana
  Power APA, which was previously assigned to PPL Montana by PPL Global, includes
  a provision concerning the proposed purchase by PPL Montana of a portion of
  NorthWestern Energy's interest in the 500-kilovolt Colstrip Transmission System
  (CTS) for $97 million. PPL Montana had been in discussions with NorthWestern
  Energy regarding the proposed purchase of the CTS and the claims that PPL Montana
  believes it has against NorthWestern Energy arising from the Montana Power APA
  and related agreements. Notwithstanding such discussions, in September 2002,
  NorthWestern Energy filed a lawsuit against PPL Montana in Montana state court
  seeking specific performance of PPL Montana's purchase of the CTS or, alternatively,
  damages for breach of contract. Pursuant to PPL Montana's motion, the matter
  was removed to federal court in Montana. Following the removal of the matter
  to the federal court, PPL Montana moved to dismiss NorthWestern Energy's claim
  for specific performance of PPL Montana's purchase of the CTS. NorthWestern
  Energy subsequently asserted additional claims against PPL Montana arising from
  the Montana Power APA. The federal court has not yet ruled on PPL Montana's
  motion to dismiss. PPL Energy Supply and PPL Montana cannot predict the outcome
  of this litigation.


Regulatory Issues

Sales to California Independent System Operator and to Other Pacific Northwest
  Purchasers(PPL, PPL Energy Supply and PPL Montana)
Through its subsidiaries, PPL has made approximately $18 million of sales to
  the California ISO, of which $17 million has not been paid to PPL subsidiaries.
  Given the myriad of electricity supply problems presently faced by the California
  electric utilities and the California ISO, PPL cannot predict whether or when
  it will receive payment. As of September 30, 2002, PPL has fully reserved for
  possible underrecoveries of payments for these sales.
Litigation arising out of the California electricity supply situation has been
  filed at the FERC and in California courts against sellers of energy to the
  California ISO. The plaintiffs and intervenors in these proceedings allege abuses
  of market power, manipulation of market prices, unfair trade practices and violations
  of state antitrust laws, among other things, and seek price caps on wholesale
  sales in California and other western power markets, refunds of excess profits
  allegedly earned on these sales of energy, and other relief, including treble
  damages and attorneys' fees. Certain of PPL's subsidiaries have intervened in
  the FERC proceedings in order to protect their interests, but have not been
  named by any plaintiffs in any of the court actions alleging abuses of market
  power, manipulation of market prices, unfair trade practices and violations
  of state antitrust laws. However, in April 2002, PPL Montana was named by a
  defendant in a consolidated court proceeding, which combined into one master
  proceeding several of the lawsuits alleging antitrust violations and unfair
  trade practices. Specifically, one of the original generators being sued by
  the various plaintiffs in the consolidated court proceeding filed a cross-complaint
  against 30 other generators and power marketers, including PPL Montana. This
  generator denies that any unlawful, unfair or fraudulent conduct occurred or
  caused any harm to the plaintiffs, and explains that the plaintiffs' claims
  are completely barred by federal law. Nonetheless, this generator alleges that
  it filed its complaint against the other generators and power marketers in order
  to assist the court in resolving the proceeding and asserts that if it is found
  liable, the other generators and power marketers, including PPL Montana, caused,
  contributed to and/or participated in the plaintiffs' alleged losses. This litigation,
  originally brought in state court in California, has been removed to federal
  court in California.
In addition, PPL Montana has been named as a defendant in a declaratory judgment
  action initiated by the State of California to prevent certain members of the
  California Power Exchange from seeking compensation for the state's seizure
  of certain energy contracts. PPL Montana is a member of the California Power
  Exchange, but it has no energy contracts with or through the California Power
  Exchange and has not sought compensation in connection with the state's seizure.
Attorneys general in several western states, including California, have begun
  investigations related to the electricity supply situation in California and
  other western states. The FERC has determined that all sellers of energy into
  markets operated by the California ISO and the California Power Exchange, including
  PPL Montana, should be subject to refund liability for the period beginning
  October 2, 2000 through June 20, 2001 and has initiated an evidentiary hearing
  concerning refund amounts. The FERC also is considering whether to order refunds
  for spot market bilateral sales made in the Pacific Northwest, including sales
  made by PPL Montana during the period December 2000 through June 2001. The FERC
  Administrative Law Judge assigned to the Pacific Northwest proceeding has recommended
  that no refunds be ordered for such sales into the Pacific Northwest. The FERC
  presently is considering this recommendation. The FERC has been conducting an
  additional investigation of alleged price manipulation in power markets in California
  and the western U.S. In connection with this investigation, the FERC has served
  several sets of data requests on sellers of energy in those markets, including
  PPL Montana. PPL Montana sold only a small amount of electricity into the California
  market during 2000 and 2001 and currently is not selling into that market. In
  its response to a FERC data request concerning PPL Montana's California trading
  strategies, PPL Montana explained that it did not engage in the type of California
  trading strategies that have been attributed to Enron. In responses to FERC
  data requests concerning whether PPL Montana and PPL EnergyPlus engaged in so-called
  "wash trades" in the western U.S., PPL Montana and PPL EnergyPlus explained
  that they have not, and do not, engage in such trades.
While PPL believes that it has not engaged in any improper trading practices,
  PPL cannot predict whether, or the extent to which, any of its subsidiaries
  will be the target of any additional governmental investigations or named in
  other lawsuits or refund proceedings, the outcome of any such lawsuits or proceedings
  or whether the ultimate impact on PPL of the electricity supply situation in
  California and other western states will be material.
MPSC Order(PPL, PPL Energy Supply and PPL Montana)
In June 2001, the MPSC issued an order (MPSC Order) in which it found that
  Montana Power must continue to provide electric service to its customers at
  tariffed rates until its transition plan under the Montana Electricity Utility
  Industry Restructuring and Customer Choice Act is finally approved, and that
  purchasers of generating assets from Montana Power must provide electricity
  to meet Montana Power's full load requirements at prices to Montana Power that
  reflect costs calculated as if the generating assets had not been sold. PPL
  Montana purchased Montana Power's interests in two coal-fired plants and 11
  hydroelectric units in 1999, and NorthWestern Energy purchased Montana Power's
  electricity delivery business in the first quarter of 2002.
In July 2001, PPL Montana filed a complaint against the MPSC with the U.S.
  District Court in Helena, Montana, challenging the MPSC Order. In its complaint,
  PPL Montana asserted, among other things, that the Federal Power Act preempts
  states from exercising regulatory authority over the sale of electricity in
  wholesale markets, and requested the court to declare the MPSC action preempted,
  unconstitutional and void. In addition, the complaint requested that the MPSC
  be enjoined from seeking to exercise any authority, control or regulation of
  wholesale sales from PPL Montana's generating assets. In March 2002, the District
  Court dismissed PPL Montana's lawsuit on procedural grounds, ruling that the
  Eleventh Amendment to the U.S. Constitution prevented PPL Montana from bringing
  the action in federal court. The District Court noted that the action could
  be filed in a state court in Montana. PPL Montana appealed the District Court's
  ruling to the United States Court of Appeals for the Ninth Circuit. In July
  2002, the MPSC filed an unopposed motion for summary disposition of the appeal,
  requesting the Ninth Circuit to reverse the District Court's ruling and send
  the case back to the District Court in light of a recent Eleventh Amendment
  decision by the U.S. Supreme Court. In October 2002, the Ninth Circuit granted
  the MPSC's unopposed motion, vacated the District Court's ruling and sent the
  case back to the District Court.
At this time, PPL Montana cannot predict the outcome of the proceedings related
  to the MPSC Order, what actions the MPSC, the Montana Legislature or any other
  governmental authority may take on these or related matters, or the ultimate
  impact on PPL, PPL Energy Supply and PPL Montana of any of these matters.
PJM Market Monitor Report(PPL, PPL Energy Supply and PPL
  Electric)
In November 2001, the PJM Market Monitor publicly released a report prepared
  for the PUC entitled "Capacity Market Questions" relating to the pricing of
  installed capacity in the PJM daily market during the first quarter of 2001.
  The report concludes that PPL EnergyPlus (identified in the report as "Entity
  1") was able to exercise market power to raise the market-clearing price above
  the competitive level during that period. PPL EnergyPlus does not agree with
  the Market Monitor's conclusions that it exercised market power; in addition,
  the Market Monitor acknowledged in his report that PJM's standards and rules
  did not prohibit PPL EnergyPlus' conduct. In November 2001, the PUC issued an
  Investigation Order directing its Law Bureau to conduct an investigation into
  the PJM capacity market and the allegations in the Market Monitor's report.
  In June 2002, the PUC issued an investigation report alleging, among other things,
  that PPL had "unfairly manipulated electricity markets in early 2001," and that
  "there was an unlawful exercise of market power and market rules gaming by PPL"
  that was damaging to wholesale and retail electricity markets in Pennsylvania.
  The PUC stated that it was not authorized to, and was not attempting to, adjudicate
  the merits of PPL's defenses to these charges, but has referred the matter to
  the U.S. Department of Justice -- Antitrust Division, or DOJ, the FERC and the
  Pennsylvania Attorney General. PPL had previously responded to certain information
  requests of the DOJ in connection with a civil investigative demand regarding
  capacity transactions in the PJM, and PPL has agreed to provide the Office of
  the Pennsylvania Attorney General with any information that it provided to the
  DOJ. In addition, in July 2002, PPL appealed the PUC order to the Commonwealth
  Court of Pennsylvania. Since the PUC clarified that its report has no precedential
  value and should be given no weight in any future proceedings, PPL consented
  to having its appeal dismissed by the Commonwealth Court. Accordingly, the Commonwealth
  Court dismissed the appeal in September 2002. Although PPL believes that the
  PUC's report is inaccurate, that its conclusions are groundless, and that PPL
  acted ethically and legally, in compliance with all applicable laws and regulations,
  PPL cannot predict the outcome or extent of any investigations, litigation or
  other proceedings related to this matter.
In September 2002, PPL received a copy of a complaint filed by Utilimax.com,
  Inc., which was a member of PJM, in the U.S. District Court for the Eastern
  District of Pennsylvania against PPL and PPL EnergyPlus alleging, among other
  things, violations of the federal antitrust laws in connection with the capacity
  transactions described in the PJM Market Monitor report. In addition, in October
  2002, PPL received a copy of a complaint against PPL, PPL EnergyPlus and PPL
  Electric filed in the same court by a group of 14 Pennsylvania boroughs that
  apparently alleges, in broad terms, similar violations of the federal antitrust
  laws. Although PPL and PPL EnergyPlus believe the claims under both complaints
  are without merit and intend to defend the actions vigorously, they cannot predict
  the outcome of these matters.
FERC Market-based Rates (PPL and PPL Energy Supply)
In December 1998, the FERC issued an order authorizing PPL EnergyPlus to make
  wholesale sales of electric power and related products at market-based rates.
  In that order, the FERC directed PPL EnergyPlus to file an updated market analysis
  within three years of the date of the order, and every three years thereafter.
  PPL EnergyPlus filed its initial updated market analysis in December 2001. Several
  parties thereafter filed interventions and protests requesting that, in light
  of the PJM Market Monitor's report described above, PPL EnergyPlus be required
  to provide additional information demonstrating that it has met the FERC's market
  power tests necessary for PPL EnergyPlus to continue its market-based rate authority.
  PPL EnergyPlus has responded that the FERC does not require the economic test
  suggested by the intervenors and that, in any event, it would meet such economic
  test if required by the FERC. PPL EnergyPlus cannot predict the outcome of this
  matter.
FERC Notice of Proposed Rulemaking(PPL, PPL Energy Supply,
  PPL Electric and PPL Montana)
In July 2002, the FERC issued a Notice of Proposed Rulemaking entitled "Remedying
  Undue Discrimination through Open Access Transmission Service and Standard Electricity
  Market Design." The proposed rule is currently available for public comment,
  with a final rule expected in late 2003. The proposed rule contains a proposed
  implementation date of July 31, 2003. However, since the issuance of the proposed
  rule, the FERC has announced several delays in the comment deadlines. Thus,
  any implementation dates are likely to be later than originally projected. This
  far-reaching proposed rule, in its current form, purports to establish uniform
  transmission rules and establish a standard market design by, among other things:


    enacting standard transmission tariffs and uniform market
      mechanisms,

    monitoring and mitigating "market power,"

    managing transmission congestion through pricing and tradable
      financial rights,

    requiring independent operational control over transmission
      facilities,

    forming state advisory committees on regional transmission
      organizations and resource adequacy, and

    exercising FERC jurisdiction over all transmission service.If adopted, this proposed rule may have a significant impact on PPL and its
  subsidiaries. PPL is evaluating this new proposal, but cannot predict, at this
  time, what impact any final rule will have on PPL.
Montana Hydroelectric License Contingencies(PPL Montana)
PPL Montana has 11 hydroelectric facilities and one storage reservoir licensed
  by the FERC pursuant to the Federal Power Act under long-term licenses which
  expire on varying dates from 2009 through 2040. Pursuant to Section 8(e) of
  the Federal Power Act, the FERC approved the transfer from Montana Power to
  PPL Montana of all pertinent licenses and any amendments in connection with
  the Montana APA.
The Kerr Dam Project license was jointly issued by the FERC to Montana Power
  and the Confederated Salish and Kootenai Tribes of the Flathead Reservation
  in 1985, and required Montana Power to hold and operate the project for 30 years.
  The license required Montana Power, and subsequently PPL Montana as a result
  of the purchase of the Kerr Dam from Montana Power, to continue to implement
  a plan to mitigate the impact of the Kerr Dam on fish, wildlife and the habitat.
  Such implementation will require payments totaling approximately $6 million
  between 2002 and 2020.
PPL Montana entered into a Memorandum of Understanding (MOU) with state, federal
  and private entities related to the issuance in 2000 of the FERC renewal license
  for the nine dams for the Missouri-Madison project. The MOU requires PPL Montana
  to implement plans to mitigate the impact of its projects on fish, wildlife,
  habitat and to increase recreational opportunities. The MOU was created to maximize
  collaboration between the parties and possibilities for matching funds. Such
  implementation will require payments by PPL Montana totaling $20 million between
  2002 and 2010.
U.K. Electricity Regulation(PPL and PPL Energy Supply)
The principal legislation governing the structure of the electricity industry
  in Great Britain is the Electricity Act 1989 (the "Electricity Act"), as amended
  by the Utilities Act 2000 (the "Utilities Act").
The provisions in the Utilities Act include the replacement of individual gas
  and electricity regulators with the Gas and Electricity Markets Authority (the
  "Regulator"). The principal objective of the Regulator is to protect the interests
  of consumers, wherever appropriate, by promoting effective competition in electricity
  generation and supply. There is no competition in electricity distribution.
Each distribution business constitutes a natural regional monopoly and is subject
  to control on the prices it can charge and the quality of supply it must provide.
  The operations of WPD are regulated under its distribution licenses, pursuant
  to which income generated is subject to an allowed revenue regulatory framework
  that provides economic incentives to minimize operating, capital and financing
  costs. Under the Electricity Act, WPD is under a statutory duty to connect any
  customer requiring electricity within their area and to maintain that connection.
The allowed revenue that is recovered from electricity supply businesses through
  charges by the Distribution Network Operator ("DNO") made for the use of the
  distribution network is regulated on the basis of the Retail Price Index ("RPI")
  minus X formula. The allowed revenue is increased by RPI minus X during the
  tenure of each price control period. (RPI is a measure of inflation and equals
  the percentage change in the U.K. RPI between the six-month period of July to
  December in the previous year. The X factor is established by the Regulator
  following review and represents an annual efficiency factor.) The Regulator
  currently sets the Distribution Price Control Formula for five-year periods.
The current Distribution Price Control Formula permits DNOs, within a review
  period, to partially retain additional revenues due to increased distribution
  of units and to retain all increases in operating profit due to efficient operations
  and the reduction of expenses (including financing costs).
Distribution businesses must also meet the Guaranteed and Overall Standards
  of Performance, which are set by the Regulator to ensure an appropriate level
  of quality of supply. If a company fails to provide the level of service specified,
  it must make a fixed payment to the retail customer affected.
In December 1999, the Regulator published final price proposals for distribution
  price control for the 12 DNOs in England and Wales. These proposals represented
  a reduction to distribution prices of 20% for WPD (South West) and 26% for WPD
  (South Wales) effective April 2000, followed by a reduction in real terms (i.e.,
  before inflation is taken into account) of 3% each year from April 2001. This
  price control is scheduled to operate until March 2005.

Improvements in quality of supply form an important part of the final proposals.
  Revised targets for system performance, in terms of the security and availability
  of supply, were proposed with new targets for reductions in minutes lost and
  interruptions.
The Regulator has introduced a quality of service incentive plan for the period
  from April 2002 to March 2005. Companies will be penalized annually up to 2%
  of revenue for failing to meet their quality of supply targets for the incentive
  plan. The plan includes a mechanism for rewarding companies which exceed their
  targets based on their rate of improvement of performance during the period
  and a process for rewarding exceptional performance by specifying how the targets
  will be reset.
Environmental Matters - Domestic

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

Due to the environmental issues discussed below or other environmental matters,
  PPL subsidiaries may be required to modify, replace or cease operating certain
  facilities to comply with statutes, regulations and actions by regulatory bodies
  or courts. In this regard, PPL subsidiaries also may incur capital expenditures
  or operating expenses in amounts which are not now determinable, but which could
  be significant.
Air(PPL, PPL Energy Supply and PPL Montana)
The Clean Air Act deals, in part, with acid rain, attainment of federal ambient
  ozone standards and toxic air emissions in the U.S. PPL's subsidiaries are in
  substantial compliance with the Clean Air Act.
The Bush administration and certain members of Congress have made proposals
  regarding possible amendments to the Clean Air Act. These amendments could require
  significant further reductions in nitrogen oxide, sulfur dioxide and mercury
  and could possibly require measures to limit carbon dioxide.
The Pennsylvania DEP has finalized regulations requiring further seasonal (May-June)
  nitrogen oxide reductions to 80% from 1990 levels starting in 2003. These further
  reductions are based on the requirements of the Northeast Ozone Transport Region
  Memorandum of Understanding and two EPA ambient ozone initiatives: the September
  1998 EPA State Implementation Plan (SIP) call (i.e., EPA's requirement for states
  to revise their SIPs) issued under Section 110 of the Clean Air Act, requiring
  reductions from 22 eastern states, including Pennsylvania; and the EPA's approval
  of petitions filed by Northeastern states, requiring reductions from sources
  in 12 Northeastern states and Washington D.C., including PPL sources. The EPA's
  SIP-call was substantially upheld by the D.C. Circuit Court of Appeals on challenge.
  Although the Court extended the implementation deadline to May 2004, the Pennsylvania
  DEP has not changed its rules accordingly. PPL expects to achieve the 2003 nitrogen
  oxide reductions with the recent installation of SCR technology on the Montour
  units, and may install SCR technology on one or more Brunner Island units at
  a later date.
The EPA has also developed new standards for ambient levels of ozone and fine
  particulates in the U.S. These standards have been upheld following court challenges.
  The new particulates standard may require further reductions in sulfur dioxide
  and year-round nitrogen oxide reductions commencing in 2010-2012 at SIP-call
  levels in Pennsylvania for certain PPL subsidiaries, and at slightly less stringent
  levels in Montana. The revised ozone standard is not expected to have a material
  effect on facilities of PPL subsidiaries.
Under the Clean Air Act, the EPA has been studying the health effects of hazardous
  air emissions from power plants and other sources in order to determine what
  emissions should be regulated, and has determined that mercury emissions must
  be regulated. The EPA may determine that other hazardous air emissions from
  power plants should be regulated. In this regard, the EPA is expected to develop
  mercury regulations by 2004.
In 1999, the EPA initiated enforcement actions against several utilities, asserting
  that older, coal-fired power plants operated by those utilities have, over the
  years, been modified in ways that subject them to more stringent "New Source"
  requirements under the Clean Air Act. The EPA has since issued notices of violation
  and commenced enforcement activities against other utilities. Although the EPA
  has threatened to continue expanding its enforcement actions, the future direction
  of the "New Source" requirements is presently unclear. Therefore, at this time,
  PPL is unable to predict whether such EPA enforcement actions will be brought
  with respect to any of its affiliates' plants. However, the EPA regional offices
  that regulate plants in Pennsylvania (Region III) and Montana (Region VIII)
  have indicated an intention to issue information requests to all utilities in
  their jurisdiction. The Region VIII office issued such a request to PPL Montana's
  Corette plant in 2000 and the Region III office issued such a request to PPL
  Generation's Martins Creek plant in 2002. PPL and its subsidiaries have responded
  to both of these information requests. PPL cannot presently predict what, if
  any, action the EPA might take in this regard. Should the EPA or any state initiate
  one or more enforcement actions against PPL or its subsidiaries, compliance
  with any such enforcement actions could result in additional capital and operating
  expenses in amounts which are not now determinable, but which could be significant.
The EPA is also proposing to revise its regulations in a way that will require
  power plants to meet "New Source" performance standards and/or undergo "New
  Source" review for many maintenance and repair activities that are currently
  exempt.
The New Jersey DEP and some New Jersey residents have raised environmental
  concerns with respect to the Martins Creek plant, particularly with respect
  to sulfur dioxide emissions. PPL Martins Creek is discussing these concerns
  with the New Jersey DEP. The cost of addressing New Jersey's sulfur dioxide
  concerns and opacity issues is not now determinable but could be significant.
Water/Waste(PPL, PPL Energy Supply and PPL Montana)
The final NPDES permit for the Montour plant contains stringent limits for
  iron discharges. The results of a toxic reduction study show that additional
  water treatment facilities or operational changes are needed at this station.
  A plan for these changes was submitted and has been approved by the Pennsylvania
  DEP. PPL Energy Supply estimates that the cost of the treatment facilities will
  be under $3 million.
A final NPDES permit has been issued to the Brunner Island generating plant.
  The permit contains a provision requiring further studies on the thermal impact
  of the cooling water discharge from the plant. Depending on the outcome of these
  studies, the plant could be subject to capital and operating costs that are
  not now determinable, but which could be significant.
The EPA has significantly tightened the water quality standard for arsenic.
  The revised standard may require several PPL subsidiaries to further treat wastewater
  and/or take abatement action at their power plants, the cost of which is not
  now determinable, but which could be significant.
The EPA recently finalized requirements for new or modified water intake structures.
  These requirements will affect where generating facilities are built, will establish
  intake design standards, and could lead to requirements for cooling towers at
  new and modified power plants. Another new rule, expected to be finalized in
  2003, will address existing structures. Each of these rules could impose significant
  operating costs on PPL subsidiaries, which are not now determinable, but which
  could be significant.

Superfund and Other Remediation

(PPL and PPL Electric)

In 1995, PPL Electric entered into a consent order with the Pennsylvania DEP
  to address a number of sites where it may be liable for remediation. This may
  include potential PCB contamination at certain PPL Electric substations and
  pole sites; potential contamination at a number of coal gas manufacturing facilities
  formerly owned or operated by PPL Electric; and oil or other contamination which
  may exist at some of PPL Electric's former generating facilities. As of September
  30, 2002, work has been completed on over 85% of the sites included in the consent
  order.
In 1996, PPL Gas Utilities entered into a similar consent order with the Pennsylvania
  DEP to address a number of sites where subsidiaries of PPL Gas Utilities may
  be liable for remediation. The sites primarily include former coal gas manufacturing
  facilities. Subsidiaries of PPL Gas Utilities are also investigating the potential
  for any mercury contamination from gas meters and regulators. Accordingly, PPL
  Gas Utilities and Pennsylvania DEP have agreed to add 72 meter/regulation sites
  to the consent order and PPL Gas Utilities had addressed nine of these sites
  by September 30, 2002.
At September 30, 2002, PPL Electric and PPL Gas Utilities had accrued approximately
  $5 million and $10 million, representing the estimated amounts they will have
  to spend for site remediation, including those sites covered by each company's
  consent orders mentioned above. Depending on the outcome of investigations at
  sites where investigations have not been completed, the costs of remediation
  and other liabilities could be substantial.

(PPL, PPL Energy Supply and PPL Montana)

In conjunction with its 1999 sale of generating assets to PPL Montana, Montana
  Power prepared a Phase I and Phase II Environmental Site Assessment. The assessment
  identifies approximately $7 million of future capital expenditures through the
  year 2020 related to various groundwater remediation issues. Additional capital
  expenditures could be required in amounts which are not now determinable, but
  which could be significant.
In 1999, the Montana Supreme Court held in favor of several citizens' groups
  that the right to a clean and healthful environment is a fundamental right guaranteed
  by the Montana Constitution. The court's ruling could result in significantly
  more stringent environmental laws and regulations, as well as an increase in
  citizens' suits under Montana's environmental laws. The effect on PPL Montana
  of any such changes in laws or regulations or any such increase in legal actions
  is not currently determinable, but it could be significant.
Under the Montana Power APA, PPL Montana is indemnified by Montana Power for
  any pre-acquisition environmental liabilities. However, this indemnification
  is conditioned on certain circumstances and subject to certain limitations set
  forth in the Montana Power APA, including circumstances under which PPL Montana
  and Montana Power would share in certain costs. As a result of the acquisition
  by NorthWestern Energy of Montana Power's electricity delivery business, PPL
  Montana will pursue any such indemnification claims against NorthWestern Energy.
Future cleanup or remediation work at sites currently under review, or at sites
  not currently identified, may result in material additional operating costs
  for PPL subsidiaries that cannot be estimated at this time.
Asbestos (PPL and PPL Energy Supply)

There have been increasing litigation claims throughout the U.S. based on exposure
  to asbestos against companies that manufacture or distribute asbestos products
  or that have these products on their premises. Certain of PPL's generation subsidiaries
  and certain of its energy services subsidiaries, such as those that have supplied
  or installed asbestos material in connection with the repair or installation
  of heating, ventilating and air conditioning systems, have been named as defendants
  in asbestos-related lawsuits. PPL cannot predict the outcome of these lawsuits
  or whether additional claims may be asserted against its subsidiaries in the
  future. PPL does not expect that the ultimate resolution of the current lawsuits
  will have a material adverse effect on its financial condition.
Electric and Magnetic Fields (PPL, PPL Energy Supply and PPL Electric)
Concerns have been expressed by some members of the scientific community and
  others regarding the potential health effects of EMFs. These fields are emitted
  by all devices carrying electricity, including electric transmission and distribution
  lines and substation equipment. Government officials at all levels in the U.S.
  and government officials in the U.K. have focused attention on this issue. PPL
  and its subsidiaries support the current efforts to determine whether EMFs cause
  any human health problems and are taking low cost or no cost steps to reduce
  EMFs, where practical, in the design of new transmission and distribution facilities.
  PPL is unable to predict what effect, if any, the EMF issue might have on its
  operations and facilities either in the U.S. or abroad, and the associated cost,
  or what, if any, liabilities it might incur related to the EMF issue.
Lower Mt. Bethel (PPL and PPL Energy Supply)
See Note 7 for a discussion of air and noise issues associated with the development
  of the Lower Mt. Bethel project.
Environmental Matters - International
U.K. (PPL and PPL Energy Supply)

WPD's distribution businesses are subject to numerous regulatory and statutory
  requirements with respect to environmental matters. WPD believes it has taken
  and continues to take measures to comply with the applicable laws and governmental
  regulations for the protection of the environment. There are no material legal
  or administrative proceedings pending against WPD with respect to any environmental
  matter. See "Environmental Matters-Domestic-Electric and Magnetic Fields" for
  a discussion of EMFs.
Latin America(PPL and PPL Energy Supply)
Certain of PPL's affiliates have electric distribution operations in Latin
  America. PPL believes that these operations are in compliance in all material
  respects with all applicable laws and government regulations to protect the
  environment. PPL is not aware of any material administrative proceeding against
  these companies with respect to any environmental matter.
Other
Commitments - Acquisitions, Development and Lease Activities(PPL
  and PPL Energy Supply)

At September 30, 2002, PPL Global and its subsidiaries had approximately $6
  million of outstanding purchase commitments related to domestic construction
  projects. In addition, a lessor had $68 million of purchase commitments for
  domestic construction projects for which a PPL subsidiary is the construction
  agent. PPL's exposure is limited to the guarantees under the operating lease.
  See Note 7 for additional information on guarantees under operating lease arrangements.

Nuclear Insurance(PPL and PPL Energy Supply)
PPL Susquehanna is a member of certain insurance programs which provide coverage
  for property damage to members' nuclear generating stations. Facilities at the
  Susquehanna station are insured against property damage losses up to $2.75 billion
  under these programs. PPL Susquehanna is also a member of an insurance program
  which provides insurance coverage for the cost of replacement power during prolonged
  outages of nuclear units caused by certain specified conditions. Under the property
  and replacement power insurance programs, PPL Susquehanna could be assessed
  retroactive premiums in the event of the insurers' adverse loss experience.
  Effective April 1, 2002, this maximum assessment increased from $20 million
  to $40 million, to increase the insurer's capacity to cover catastrophic losses.
PPL Susquehanna's public liability for claims resulting from a nuclear incident
  at the Susquehanna station is limited to about $9.45 billion under provisions
  of The Price Anderson Amendments Act of 1988. PPL Susquehanna is protected against
  this liability by a combination of commercial insurance and an industry assessment
  program. In the event of a nuclear incident at any of the reactors covered by
  The Price Anderson Amendments Act of 1988, PPL Susquehanna could be assessed
  up to $176 million per incident, payable at $20 million per year.


Credit Support

(PPL and PPL Energy Supply)

    PPL and PPL Energy Supply provide certain guarantees for their subsidiaries.
      PPL has guaranteed fully and unconditionally all of the debt of its wholly-owned
      subsidiary, PPL Capital Funding, which at September 30, 2002, consisted
      of $1.1 billion of medium-term notes. At September 30, 2002, PPL has guaranteed
      certain obligations under power purchase and sales agreements of PPL EnergyPlus
      for $10 million and certain obligations of other subsidiaries, totaling
      $30 million. As of September 30, 2002, PPL Energy Supply had guaranteed
      certain obligations of its subsidiaries totaling $850 million.

(PPL Electric)

At September 30, 2002, PPL Electric provided a guarantee in the amount of $7
  million in support of Safe Harbor Water Power Corporation, in which PPL Electric
  had an ownership interest prior to the corporate realignment. PPL Holtwood now
  has this ownership interest.
10. Related Party Transactions
    PLR Contracts(PPL Energy Supply and PPL Electric)
    PPL Electric has power sales agreements with PPL EnergyPlus, effective
      January 1, 2002, to supply all of PPL Electric's PLR load through 2009.
      Under these contracts, PPL EnergyPlus will provide electricity at the pre-determined
      capped prices that PPL Electric is authorized to charge its PLR customers.
      For the three and nine months ended September 30, 2002, these sales totaled
      $371 million and $1.1 billion, including nuclear decommissioning recovery
      and amortization of an up-front contract payment. For the three and nine
      months ended September 30, 2001, these sales totaled $352 million and $986
      million, including nuclear decommissioning recovery, under the previous
      PLR contract. These sales are included in the Statement of Income as "Energy
      purchases from affiliate" by PPL Electric and as "Wholesale energy marketing
      to affiliates" revenues by PPL Energy Supply.
    Under the current PLR contracts, PPL Electric is required to make performance
      assurance deposits with PPL EnergyPlus when the market price of electricity
      is less than the contract price by more than its contract collateral threshold.
      Conversely, PPL EnergyPlus is required to make performance assurance deposits
      with PPL Electric when the market price of electricity is greater than the
      contract price by more than its contract collateral threshold. PPL Electric's
      deposit with PPL EnergyPlus was $137 million at September 30, 2002. This
      deposit is shown on the Balance Sheets as "Collateral on PLR energy supply
      to/from affiliate," a current asset of PPL Electric and a current liability
      of PPL Energy Supply. PPL Energy Supply pays interest equal to the three-month
      London Interbank Offered Rate plus 3% on this deposit, which is included
      in the Statement of Income as "Interest Expense with Affiliate."
    NUG Purchases(PPL Energy Supply and PPL Electric)
    PPL Electric has a reciprocal contract with PPL EnergyPlus to sell electricity
      purchased under contracts with NUGs. PPL Electric purchases electricity
      from the NUGs at contractual rates and then sells the electricity at the
      same price to PPL EnergyPlus. For the three months ended September 30, 2002
      and 2001, these NUG purchases totaled $40 million and $44 million. For the
      nine months ended September 30, 2002 and 2001, these NUG purchases were
      $122 million and $132 million. These amounts are included in the Statement
      of Income as "Wholesale electric to affiliate" revenues by PPL Electric,
      and as "Energy purchases from affiliates" by PPL Energy Supply.
    Montana Retail Supply(PPL Montana)
    PPL Montana has a MOU with PPL EnergyPlus regarding the supply of energy
      to satisfy PPL EnergyPlus' obligations under its retail contracts, which
      expires on December 31, 2002. Under the MOU, energy sales to PPL EnergyPlus
      for the three months ended September 30, 2002 and 2001 were $21 million
      and $16 million and for the nine months ended September 30, 2002 and 2001
      were $51 million and $71 million. These amounts are included in "Wholesale
      energy marketing to affiliate" revenues on the Statement of Income.
    Brokering and Contract Management Agreement(PPL Montana)
    Under a wholesale sales brokering and contract management agreement between
      PPL Montana and PPL EnergyPlus, PPL Montana paid PPL EnergyPlus $2 million
      and $1 million for the three months ended September 30, 2002 and 2001. For
      the nine months ended September 30, 2002 and 2001, the payments were $5
      million and $3 million. PPL Montana records this expense as "Other operation
      and maintenance" on the Statement of Income.
    Allocations of Corporate Service Costs(PPL Energy Supply, PPL
      Electric and PPL Montana)
    Corporate functions such as financial, legal, human resources and information
      services were transferred to PPL Services in the corporate realignment.
      PPL Services bills the respective PPL subsidiaries for the cost of such
      services when they can be specifically identified. The cost of these services
      that is not directly charged to PPL subsidiaries is allocated to certain
      of the subsidiaries based on the relative capital invested by PPL in these
      subsidiaries. PPL Services allocated the following charges to PPL Energy
      Supply, PPL Electric and PPL Montana:
    
    Three Months
            Ended September 30,
        
        
        Nine Months
            Ended September 30,2002
        
        
        2001
        
        
        2002
        
        
        2001Direct expensesPPL Energy Supply
        $
        22
        
        
        $
        23
        
        
        $
        65
        
        
        $
        59PPL Electric
        
        13
        
        
        
        17
        
        
        
        41
        
        
        
        51PPL Montana
        
        4
        
        
        
        2
        
        
        
        8
        
        
        
        4Overhead costsPPL Energy Supply
        
        8
        
        
        
        10
        
        
        
        26
        
        
        
        23PPL Electric
        
        7
        
        
        
        6
        
        
        
        21
        
        
        
        17PPL Montana
        
        2
        
        
        
        1
        
        
        
        6
        
        
        
        3Intercompany Borrowings

    (PPL Energy Supply)

    PPL Energy Supply, through its financing subsidiary PPL Investment Corporation,
      had notes receivable from affiliates totaling $319 million and $395 million
      at September 30, 2002 and December 31, 2001. Interest earned on loans to
      affiliates was $5 million and $19 million for the three months ended September
      30, 2002 and 2001, and was $16 million and $38 million for the nine months
      ended September 30, 2002 and 2001.

    (PPL Electric)

    In December 2001, PPL Electric made two loans from excess cash to PPL Energy
      Funding in the aggregate principal amount of $350 million. One loan was
      a demand promissory note in the original principal amount of $150 million
      requiring interest to be paid monthly at an annual interest rate of 4.0%.
      The other loan was a one-year term promissory note in the original principal
      amount of $200 million requiring interest to be paid monthly at an annual
      interest rate of 6.5%. The outstanding balance of these loans at September
      30, 2002 was $90 million. Intercompany interest income was $1 million for
      the three months ended September 30, 2002, and was $7 million and $5 million
      for the nine months ended September 30, 2002 and 2001.
11. Derivative Instruments and Hedging Activities
    (PPL, PPL Energy Supply and PPL Montana)

    Fair Value Hedges
    PPL Energy Supply and PPL Montana enter into financial or physical contracts
      to hedge a portion of the fair value of firm commitments of forward electricity
      sales. These contracts range in maturity through 2006. Additionally, PPL
      and PPL Energy Supply enter into financial contracts to hedge fluctuations
      in the market value of existing debt issuances.
    For the three and nine months ended September 30, 2002, PPL and PPL Energy
      Supply recognized an immaterial amount from the ineffective portion of fair
      value hedges and did not recognize any gains or losses from firm commitments
      that no longer qualified as fair value hedges. For these same periods, PPL
      Montana did not recognize any gains or losses from the ineffective portion
      of fair value hedges or from firm commitments that no longer qualified as
      fair value hedges.
    For the three and nine months ended September 30, 2001, PPL and PPL Energy
      Supply recognized an after-tax gain of $7 million from firm commitments
      that no longer qualified as fair value hedges. PPL, PPL Energy Supply and
      PPL Montana did not recognize any gains or losses from the ineffective portion
      of fair value hedges.
    Cash Flow Hedges
    PPL Energy Supply and PPL Montana enter into financial and physical contracts,
      including forwards, futures and swaps, to hedge the price risk associated
      with electric, gas and oil commodities. Additionally, PPL and PPL Energy
      Supply enter into financial interest rate swap contracts to hedge interest
      expense associated with both existing and anticipated debt issuances. These
      contracts and swaps, excluding those forecasted transactions related to
      the payment of variable interest on existing financial instruments, range
      in maturity through 2024. PPL and PPL Energy Supply also enter into foreign
      currency forward contracts to hedge exchange rates associated with firm
      commitments denominated in foreign currencies and to hedge the net investment
      of foreign operations. These forward contracts range in maturity through
      2028.
    The after-tax impact on the financial statements of PPL and PPL Energy
      Supply resulting from cash flow hedge ineffectiveness was a loss of $2 million
      for the three and nine months ended September 30, 2002, and was a gain of
      $3 million for the nine months ended September 30, 2001. The impact was
      immaterial for the three months ended September 30, 2001.
    Cash flow hedges may be discontinued because it is probable that the original
      forecasted transaction will not occur by the end of the originally specified
      time period. Reclassifications for the three and nine months ended September
      30, 2002 were insignificant. As a result of an unplanned outage in 2001
      and changes in economic conditions, PPL Energy Supply and PPL Montana discontinued
      certain cash flow hedges, resulting in the following gain/(loss) reclassifications:
    Three Months
            Ended September 30,
            2001
        
        Nine Months
            Ended September 30,
            2001PPL
        
        $
        
        
        
        $
        (10
        )PPL Energy Supply
        
        
        
        
        
        
        (10
        )PPL Montana
        
        
        
        
        
        
        7As of September 30, 2002, the deferred net gain, after-tax, on derivative
      instruments in accumulated other comprehensive income expected to be reclassified
      into earnings during the next twelve months (excluding derivative activities
      of equity investments) was $10 million, $8 million, and $4 million for PPL,
      PPL Energy Supply and PPL Montana, respectively.
    The following table shows the change in accumulated unrealized gains or
      losses on derivatives in other comprehensive income for the following periods:
    Three Months
            Ended September 30,
            2002
        
        Nine Months
            Ended September 30,
            2002PPLBeginning accumulated derivative gain
        
        $
        12
        
        
        $
        23Net change associated with current period
          hedging activities and other
        
        
        5
        
        
        
        (3
        )Net change associated with C15 accounting
          change (a)
        
        
        2
        
        
        
        (5
        )Net change from reclassification into
          earnings
        
        
        (2
        )
        
        
        2Ending accumulated derivative gain
        
        $
        17
        
        
        $
        17PPL Energy SupplyBeginning accumulated derivative gain
        
        $
        33
        
        
        $
        47Net change associated with current period
          hedging activities and other
        
        
        10Net change associated with C15 accounting
          change (a)
        
        
        2
        
        
        
        (4
        )Net change from reclassification into
          earnings
        
        
        (2
        )Ending accumulated derivative gain
        
        $
        43
        
        
        $
        43PPL MontanaBeginning accumulated derivative gain
        
        $
        20
        
        
        $
        33Net change associated with current period
          hedging activities and other
        
        
        (1
        )
        
        
        (14
        )Net change from reclassification into
          earnings
        
        
        (4
        )
        
        
        (4
        )Ending accumulated derivative gain
        
        $
        15
        
        
        $
        15(a)
        In June 2001, the FASB cleared
          DIG Issue C15, "Scope Exceptions: Normal Purchases and Normal Sales
          Exception for Option-Type Contracts and Forward Contracts in Electricity,"
          which extends the normal purchases and normal sales exception to electricity
          purchase and sale agreements meeting certain criteria. The mark-to-market
          value recorded in accumulated other comprehensive income as of September
          30, 2001 is being amortized through the original delivery term of the
          contracts.Implementation Issues
    In December 2001, the FASB revised guidance on DIG Issue C16, "Scope Exceptions:
      Applying the Normal Purchases and Normal Sales Exception to Contracts that
      Combine a Forward Contract and a Purchased Option Contract." Issue C16 provides
      additional guidance on the classification and application of SFAS 133, "Accounting
      for Derivative Instruments and Hedging Activities," relating to purchases
      and sales of electricity utilizing forward contracts and options, as well
      as the eligibility of fuel contracts for the normal purchases and normal
      sales exception. The revised guidance was effective April 1, 2002. PPL had
      no financial statement impact from the revised guidance on fuel contracts
      classified as normal.
    Credit Concentration
    PPL, PPL Energy Supply and PPL Montana enter into contracts with many entities
      for the purchase and sale of energy. Most of these contracts are considered
      a normal part of doing business and, as such, the mark-to-market value of
      these contracts is not reflected in the financial statements. However, the
      mark-to-market value of these contracts is considered when committing to
      a new business from a credit perspective.
    PPL, PPL Energy Supply and PPL Montana have credit exposures to energy
      trading partners. The majority of these exposures were the mark-to-market
      value of multi-year contracts for energy sales. Therefore, if these counterparties
      fail to perform their obligations under such contracts, the companies would
      not experience an immediate financial loss, but would experience lower revenues
      in future years to the extent that replacement sales could not be made at
      the same prices as sales under the defaulted contracts.
    At September 30, 2002, PPL had a credit exposure of $259 million to energy
      trading partners. Four counterparties accounted for 62% of this exposure.
      No other individual counterparty accounted for more than 3% of the exposure.
      Each of the four primary counterparties has an investment grade credit rating
      from Standard & Poor's.
    At September 30, 2002, PPL Energy Supply had a credit exposure of $751
      million to energy trading partners. Five counterparties accounted for 87%
      of this exposure. No other individual counterparty accounted for more than
      1% of the exposure. The largest exposure, $492 million, was to PPL Electric,
      under the long-term contract to provide PPL Electric's PLR load. PPL Electric
      has posted collateral in an amount of $137 million related to this exposure
      in accordance with its contract with PPL Energy Supply. The other four counterparties
      have an investment grade credit rating from Standard & Poor's.
    At September 30, 2002, PPL Montana had a credit exposure of $124 million
      to energy trading partners. Three counterparties accounted for 93% of this
      exposure. No other individual counterparty accounted for more than 2% of
      the exposure. Each of the three primary counterparties has an investment
      grade credit rating from Standard & Poor's.
    PPL, PPL Energy Supply and PPL Montana have the right to request collateral
      from each of these counterparties, except for one government agency, in
      the event their credit rating falls below investment grade. It is also the
      policy of PPL, PPL Energy Supply and PPL Montana to enter into netting agreements
      with all of their counterparties to minimize credit exposure.
    Enron Bankruptcy
    In connection with the December 2001 bankruptcy filings by Enron Corporation
      and its affiliates (collectively "Enron"), certain PPL subsidiaries terminated
      certain electricity, gas and other trading agreements with Enron. In October
      2002, certain PPL subsidiaries filed proofs of claim in Enron's bankruptcy
      proceedings, in an aggregate amount of approximately $50 million. PPL and
      its subsidiaries cannot predict the amounts, if any, that they will recover
      as a result of their claims in the Enron bankruptcy proceedings.
12. Energy Trading Activities
    (PPL, PPL Energy Supply and PPL Montana)

    In June 2002, the FASB's EITF adopted the position in EITF 02-3, "Accounting
      for Contracts Involved in Energy Trading and Risk Management Activities,"
      that revenues from energy trading contracts must be reported "net" in financial
      statements for periods ending after June 30, 2002. The EITF requires that
      all comparative financial statements for interim periods or years should
      be reclassified to conform to this net presentation. Although this new accounting
      guidance required changes to certain line items in the financial statements,
      it does not impact PPL's overall financial position or earnings. Rather,
      the portion of PPL's revenues from energy trading activities are netted
      against expenses from energy trading activities.
    The financial statement impact of netting energy trading activities is
      as follows:
    Three Months
            Ended September 30,
        
        
        Nine Months
            Ended September 30,2002
        
        
        2001
        
        
        2002
        
        
        2001PPL and PPL Energy SupplyPrior classificationWholesale energy marketing
        $
        222
        
        
        $
        251
        
        
        $
        493
        
        
        $
        691Energy purchases
        
        222
        
        
        
        214
        
        
        
        472
        
        
        
        621Net energy trading margins
        
        
        
        
        $
        37
        
        
        $
        21
        
        
        $
        70Three Months
            Ended September 30,
        
        
        Nine Months
            Ended September 30,2002
        
        
        2001
        
        
        2002
        
        
        2001PPL MontanaPrior classificationWholesale energy marketing
        
        
        
        
        $
        21
        
        
        
        
        
        
        $
        33Energy purchases
        
        
        
        
        
        20
        
        
        $
        1
        
        
        
        26Net energy trading margins
        
        
        
        
        $
        1
        
        
        $
        (1
        )
        
        $
        7PPL's and PPL Energy Supply's trading contracts mature at various times
      through 2005, and PPL Montana's trading contracts, which are not material,
      mature at various times through 2003. The following chart sets forth the
      gains/(losses) in the net fair market value of PPL's and PPL Energy Supply's
      trading contracts for the following periods:

    September 30, 2002Three
            Months
            Ended
        
        
        Nine
            Months
            EndedPPL and PPL Energy SupplyFair value of contracts outstanding
          at the beginning of the period
        
        $
        1Contracts realized or otherwise
          settled during the period
        
        
        (1
        )
        
        $
        (2
        )Fair value of new contracts
          when entered into during the period
        
        
        (5
        )
        
        
        (12
        )Other changes in fair values
        
        
        1
        
        
        
        10Fair value of contracts outstanding
          at the end of the period
        
        $
        (4
        )
        
        $
        (4
        )During the nine months ended September 30, 2002, PPL and PPL Energy Supply
      reversed net gains of approximately $2 million. These amounts do not reflect
      contracts that were entered into and settled in the same quarter.
    As of September 30, 2002, the net loss on PPL's and PPL Energy Supply's
      trading activities expected to be realized in earnings during the next three
      months is approximately $2 million.
    The following chart segregates estimated fair values of PPL's and PPL Energy
      Supply's trading portfolio at September 30, 2002 based on whether the fair
      values are determined by quoted market prices or other more subjective means:
    Fair Value of Contracts at September 30, 2002Gains (Losses)Maturity
            less than
            1 year
        
        
        Maturity
            1-3 years
        
        
        Maturity
            4-5 years
        
        
        Maturity
            in excess 
            of 5 years
        
        
        Total fair 
            valuePPL and PPL Energy SupplySource of Fair ValuePrices actively quotedPrices provided by other external sources
        
        $
        3
        
        
        $
        1
        
        
        
        
        
        
        
        
        
        
        $
        4Prices based on models and other valuation
          methods
        
        
        (7
        )
        
        
        (1
        )
        
        
        
        
        
        
        
        
        
        
        (8
        )Fair value of contracts outstanding at
          the end of the period
        
        $
        (4
        )
        
        
        
        
        
        
        
        
        
        
        
        
        
        $
        (4
        )
13. Goodwill and Other Intangible Assets
    In June 2001, the FASB issued SFAS 142, "Goodwill and Other Intangible
      Assets," which eliminates the amortization of goodwill and other acquired
      intangible assets with indefinite economic useful lives. SFAS 142 requires
      an annual impairment test of goodwill at the reporting unit level. A reporting
      unit is a segment or one level below a segment (referred to as a component).
      Intangible assets other than goodwill that are not subject to amortization
      are also required to undergo an annual impairment test. PPL and its subsidiaries
      adopted SFAS 142 on January 1, 2002. Previously reported information has
      been restated to conform to the current presentation. The following information
      is disclosed in accordance with SFAS 142.


    Acquired Intangible Assets

    (PPL)

    The carrying amount and the accumulated amortization of acquired intangible
      assets were as follows:
    September 30, 2002
        
        
        December 31, 2001Carrying 
            Amount
        
        
        Accumulated
            Amortization
        
        
        Carrying
            Amount
        
        
        Accumulated
            AmortizationLand and transmission rights
        $
        242
        
        
        $
        88
        
        
        $
        247
        
        
        $
        86Emission allowances
        
        43
        
        
        
        
        
        
        
        36Licenses and other
        
        38
        
        
        
        5
        
        
        
        31
        
        
        
        4$
        323
        
        
        $
        93
        
        
        $
        314
        
        
        $
        90Current intangible assets are included in "Current Assets - Other," and
      long-term intangible assets are included in "Regulatory and Other Noncurrent
      Assets - Other" on the Balance Sheet.
    Amortization expense was approximately $1 million and $3 million for the
      three and nine months ended September 30, 2002. Amortization expense is
      estimated at $4 million per year for 2003 through 2007.

    (PPL Energy Supply)

    The carrying amount and the accumulated amortization of acquired intangible
      assets were as follows:
    September 30, 2002
        
        
        December 31, 2001Carrying 
            Amount
        
        
        Accumulated
            Amortization
        
        
        Carrying
            Amount
        
        
        Accumulated
            AmortizationLand and transmission rights
        $
        49
        
        
        $
        14
        
        
        $
        49
        
        
        $
        13Emission allowances
        
        43
        
        
        
        
        
        
        
        36Licenses and other
        
        38
        
        
        
        5
        
        
        
        31
        
        
        
        4$
        130
        
        
        $
        19
        
        
        $
        116
        
        
        $
        17Current intangible assets are included in "Current Assets - Other," and
      long-term intangible assets are included in "Other Noncurrent Assets" on
      the Balance Sheet.
    Amortization expense was approximately $1 million for the three and nine
      months ended September 30, 2002. Amortization expense is estimated at $2
      million per year for 2003 through 2007.

    (PPL Electric)

    The carrying amount and the accumulated amortization of acquired intangible
      assets were as follows:

    September 30, 2002
        
        
        December 31, 2001Carrying 
            Amount
        
        
        Accumulated
            Amortization
        
        
        Carrying
            Amount
        
        
        Accumulated
            AmortizationLand and transmission rights
        $
        192
        
        
        $
        73
        
        
        $
        197
        
        
        $
        72Intangible assets are included in "Regulatory and Other Noncurrent Assets
      - Other" on the Balance Sheet.
    Amortization expense was approximately $1 million and $2 million for the
      three and nine months ended September 30, 2002. Amortization expense is
      estimated at $2 million per year for 2003 through 2007.

    (PPL Montana)

    The carrying amount and the accumulated amortization of acquired intangible
      assets were as follows:
    September 30, 2002
        
        
        December 31, 2001Carrying 
            Amount
        
        
        Accumulated
            Amortization
        
        
        Carrying
            Amount
        
        
        Accumulated
            AmortizationEmission allowances
        $
        19
        
        
        
        
        
        
        $
        19Licenses and other
        
        20
        
        
        
        
        
        
        
        15$
        39
        
        
        
        
        
        
        $
        34Current intangible assets are included in "Prepayments and other," and
      long-term intangible assets are included in "Noncurrent Assets - Other"
      on the Balance Sheet.
    Amortization expense was immaterial for the three and nine months ended
      September 30, 2002. Amortization expense is expected to be immaterial for
      the years 2003 through 2007.
    Goodwill

    (PPL and PPL Energy Supply)

    The changes in the carrying amounts of goodwill by segment were as follows:
    PPL Energy Supply
        
        
        
        
        
        PPLSupply
        
        
        International
        
        
        Total
        
        
        Delivery(a)
        
        
        TotalBalance as of January 1, 2002
        
        $
        72
        
        
        $
        257
        
        
        $
        329
        
        
        $
        55
        
        
        $
        384Goodwill acquired
        
        
        12
        
        
        
        5
        
        
        
        17
        
        
        
        
        
        
        
        17Interest in WPD goodwill (b)
        
        
        
        
        
        
        170
        
        
        
        170
        
        
        
        
        
        
        
        170Effect of foreign exchange
          rates
        
        
        
        
        
        
        (4
        )
        
        
        (4
        )
        
        
        
        
        
        
        (4
        )Impairment losses
        
        
        
        
        
        
        (150
        )
        
        
        (150
        )
        
        
        
        
        
        
        (150
        )Balance as of September 30,
          2002
        
        $
        84
        
        
        $
        278
        
        
        $
        362
        
        
        $
        55
        
        
        $
        417(a)
        The Delivery segment is not part
          of PPL Energy Supply.(b)
        See Note 8 for additional information.Goodwill is included in other noncurrent assets on the Balance Sheet.
    The reporting units of the Supply, Delivery and International segments
      completed the transition impairment test in the first quarter of 2002. A
      transition goodwill impairment loss of $150 million was recognized in the
      Latin American reporting unit within the International segment, and is reported
      as a "Cumulative Effect of a Change in Accounting Principle" on the Statement
      of Income. The fair value of the reporting unit was estimated using the
      expected present value of future cash flows.
    The following table reconciles reported earnings from prior periods to
      earnings adjusted to exclude the amortization expense related to goodwill
      and equity method goodwill that will no longer be recorded in accordance
      with SFAS 142.

    (PPL)

    Three Months
            Ended September 30,
        
        
        Nine Months
            Ended September 30,2002
        
        
        2001
        
        
        2002
        
        
        2001Reported net income
        $
        122
        
        
        $
        152
        
        
        $
        92
        
        
        $
        491Add back: Goodwill amortization
        
        
        
        
        
        4
        
        
        
        
        
        
        
        11Add back: Equity method goodwill amortization
        
        
        
        
        
        1
        
        
        
        
        
        
        
        2Adjusted net income
        $
        122
        
        
        $
        157
        
        
        $
        92
        
        
        $
        504Basic EPS:Reported net income
        $
        0.81
        
        
        $
        1.04
        
        
        $
        0.62
        
        
        $
        3.37Goodwill amortization
        
        
        
        
        
        0.03
        
        
        
        
        
        
        
        0.07Equity method goodwill amortization
        
        
        
        
        
        0.01
        
        
        
        
        
        
        
        0.02Adjusted net income
        $
        0.81
        
        
        $
        1.08
        
        
        $
        0.62
        
        
        $
        3.46Diluted EPS:Reported net income
        $
        0.80
        
        
        $
        1.04
        
        
        $
        0.62
        
        
        $
        3.35Goodwill amortization
        
        
        
        
        
        0.03
        
        
        
        
        
        
        
        0.07Equity method goodwill amortization
        
        
        
        
        
        0.01
        
        
        
        
        
        
        
        0.02Adjusted net income
        $
        0.80
        
        
        $
        1.08
        
        
        $
        0.62
        
        
        $
        3.44(PPL Energy Supply)

    Three Months
            Ended September 30,
        
        
        Nine Months
            Ended September 30,2002
        
        
        2001
        
        
        2002
        
        
        2001Reported net income
        $
        141
        
        
        $
        165
        
        
        $
        145
        
        
        $
        490Add back: Goodwill amortization
        
        
        
        
        
        3
        
        
        
        
        
        
        
        10Add back: Equity method goodwill amortization
        
        
        
        
        
        1
        
        
        
        
        
        
        
        2Adjusted net income
        $
        141
        
        
        $
        169
        
        
        $
        145
        
        
        $
        502(PPL Electric and PPL Montana)

    PPL Electric and PPL Montana had no goodwill at September 30, 2002 and
      December 31, 2001. The adoption of SFAS 142 would not have affected prior
      period earnings of PPL Electric and PPL Montana.


    Reconciliation of Prior Annual Periods to Exclude Amortization

    (PPL and PPL Energy Supply)

    The following table reconciles reported earnings from prior annual periods
      to earnings adjusted to exclude the amortization expense related to goodwill
      and equity method goodwill that will no longer be recorded in accordance
      with SFAS 142. PPL and PPL Energy Supply were not affected by changes in
      amortization periods for other intangible assets.
    PPLFor the Years Ended 
            December 31,2001
        
        2000
        
        1999Reported net income before
          extraordinary items and cumulative effect of a change in accounting
          principle
        $
        169
        
        $
        487
        
        $
        478Add back: Goodwill amortization
        
        13
        
        
        11
        
        
        8Add back: Equity method goodwill
          amortization
        
        3
        
        
        3
        
        
        5Adjusted net income before
          extraordinary items and cumulative effect of a change in accounting
          principle
        $
        185
        
        $
        501
        
        $
        491Reported net income
        $
        179
        
        $
        498
        
        $
        432Add back: Goodwill amortization
        
        13
        
        
        11
        
        
        8Add back: Equity method goodwill
          amortization
        
        3
        
        
        3
        
        
        5Adjusted net income
        $
        195
        
        $
        512
        
        $
        445Basic EPS:Reported net income before
          extraordinary items and cumulative effect of a change in accounting
          principle
        $
        1.16
        
        $
        3.38
        
        $
        3.14Goodwill amortization
        
        0.09
        
        
        0.07
        
        
        0.06Equity method goodwill amortization
        
        0.02
        
        
        0.02
        
        
        0.03Adjusted net income before
          extraordinary items and cumulative effect of a change in accounting
          principle
        $
        1.27
        
        $
        3.47
        
        $
        3.23Reported net income
        $
        1.23
        
        $
        3.45
        
        $
        2.84Goodwill amortization
        
        0.09
        
        
        0.07
        
        
        0.06Equity method goodwill amortization
        
        0.02
        
        
        0.02
        
        
        0.03Adjusted net income
        $
        1.34
        
        $
        3.54
        
        $
        2.93Diluted EPS:Reported net income before
          extraordinary items and cumulative effect of a change in accounting
          principle
        $
        1.15
        
        $
        3.37
        
        $
        3.14Goodwill amortization
        
        0.09
        
        
        0.07
        
        
        0.06Equity method goodwill amortization
        
        0.02
        
        
        0.02
        
        
        0.03Adjusted net income before
          extraordinary items and cumulative effect of a change in accounting
          principle
        $
        1.26
        
        $
        3.46
        
        $
        3.23Reported net income
        $
        1.22
        
        $
        3.44
        
        $
        2.84Goodwill amortization
        
        0.09
        
        
        0.07
        
        
        0.06Equity method goodwill amortization
        
        0.02
        
        
        0.02
        
        
        0.03Adjusted net income
        $
        1.33
        
        $
        3.53
        
        $
        2.93PPL Energy SupplyFor the Years Ended 
            December 31,2001
        
        2000
        
        1999Reported net income (loss)
          before extraordinary items and cumulative effect of a change in accounting
          principle
        $
        171
        
        $
        242
        
        $
        (35
        )Add back: Goodwill amortization
        
        12
        
        
        9
        
        
        7Add back: Equity method goodwill
          amortization
        
        3
        
        
        3
        
        
        5Adjusted net income (loss)
          before extraordinary items and cumulative effect of a change in accounting
          principle
        $
        186
        
        $
        254
        
        $
        (23
        )Reported net income (loss)
        $
        174
        
        $
        242
        
        $
        (35
        )Add back: Goodwill amortization
        
        12
        
        
        9
        
        
        7Add back: Equity method goodwill
          amortization
        
        3
        
        
        3
        
        
        5Adjusted net income (loss)
        $
        189
        
        $
        254
        
        $
        (23
        )(PPL Electric and PPL Montana)

    PPL Electric and PPL Montana had no goodwill at December 31, 2001, 2000
      and 1999. The adoption of SFAS 142 would not have affected prior period
      earnings of PPL Electric and PPL Montana.
14. Other Income - Net
    (PPL)

    The breakdown of PPL's Other Income was as follows:
   Three Months
        Ended September 30,
    
    
    Nine Months
        Ended September 30,2002
    
    
    2001
    
    
    2002
    
    
    2001Other IncomeInterest income
    $
    9
    
    
    $
    3
    
    
    $
    19
    
    
    $
    9Equity earnings
    
    1
    
    
    
    
    
    
    
    2
    
    
    
    (1
    )Gain by WPD on the disposition of property
    
    
    
    
    
    
    
    
    
    5Miscellaneous
    
    
    
    
    
    7
    
    
    
    7
    
    
    
    24Total
    
    10
    
    
    
    10
    
    
    
    33
    
    
    
    32Other DeductionsMiscellaneous
    
    6
    
    
    
    1
    
    
    
    15
    
    
    
    11Other Income - net
    $
    4
    
    
    $
    9
    
    
    $
    18
    
    
    $
    21(PPL Energy Supply)
The breakdown of PPL Energy Supply's Other Income was as follows:
Three Months
        Ended September 30,
    
    
    Nine Months
        Ended September 30,2002
    
    
    2001
    
    
    2002
    
    
    2001Other IncomeAffiliated interest income
    $
    5
    
    
    $
    19
    
    
    $
    16
    
    
    $
    38Interest income
    
    4
    
    
    
    1
    
    
    
    11
    
    
    
    5Gain by WPD on the disposition of property
    
    
    
    
    
    
    
    
    
    5Equity earnings
    
    1
    
    
    
    1
    
    
    
    3
    
    
    
    2Miscellaneous
    
    5
    
    
    
    7
    
    
    
    11
    
    
    
    22Total
    
    15
    
    
    
    28
    
    
    
    46
    
    
    
    67Other DeductionsMiscellaneous
    
    11
    
    
    
    2
    
    
    
    18
    
    
    
    9Other Income - net
    $
    4
    
    
    $
    26
    
    
    $
    28
    
    
    $
    58(PPL Electric)
The breakdown of PPL Electric's Other Income was as follows:
Three Months
        Ended September 30,
    
    
    Nine Months
        Ended September 30,2002
    
    
    2001
    
    
    2002
    
    
    2001Other IncomeAffiliated interest income
    $
    1
    
    
    
    
    
    
    $
    7
    
    
    $
    5Interest income
    
    5
    
    
    $
    2
    
    
    
    7
    
    
    
    3Non-operating income - affiliates
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5Miscellaneous
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    2Total
    
    6
    
    
    
    8
    
    
    
    15
    
    
    
    15Other DeductionsMiscellaneous
    
    
    
    
    
    2
    
    
    
    2
    
    
    
    4Other Income - net
    $
    6
    
    
    $
    6
    
    
    $
    13
    
    
    $
    11
15. Workforce Reduction
    (PPL, PPL Energy Supply, PPL Electric and PPL Montana)

    In an effort to improve operational efficiency and reduce costs, PPL and
      its subsidiaries completed a workforce reduction in June 2002 that will
      eliminate up to 598 employees, or about 7% of PPL's U.S. workforce, at a
      cost of $74 million. The program was broad-based and impacted all employee
      groups except certain positions that are key to providing high-quality service
      to PPL's electricity delivery customers. Linemen, electricians and line
      foremen, for example, were not affected by the reductions. In September
      2002, an additional $1 million was recorded as workforce reductions when
      plans were finalized specific to PPL Global and PPL Montana subsidiaries
      which are expected to impact 23 employees. These additional reductions increased
      PPL's total charge for workforce reductions to $75 million for the elimination
      of up to 621 positions. Annual savings in operating expenses associated
      with the workforce reduction are estimated to be approximately $50 million.
    PPL recorded the cost of the program as a one-time charge of $75 million
      included in the Statement of Income as "Workforce reduction." This charge
      reduced net income by $44 million after taxes, or 29 cents per share of
      common stock. The program provides primarily for enhanced early retirement
      benefits and/or one-time special pension separation allowances based on
      an employee's age and years of service. These features of the program will
      be paid from the PPL Retirement Plan pension trust and increased PPL's pension
      liability by $65 million. The remaining $10 million of costs relate primarily
      to severance payments and outplacement costs which will be paid by PPL,
      and are included on the Balance Sheet under "Current Liabilities."
    As of September 30, 2002, 260 PPL employees were terminated and have received
      $5 million of non-pension benefits. The remaining $5 million liability for
      non-pension benefits will be paid over the next nine months.
    PPL Energy Supply will eliminate up to 218 employees and recorded a one-time
      charge of $41 million, which after taxes reduced net income by $24 million.
      Included in the charge was a $10 million allocation of the costs associated
      with the elimination of employees of PPL Services.
    PPL Electric will eliminate up to 260 employees and recorded a one-time
      charge of $33 million, which after taxes reduced net income by $19 million.
      Included in the charge was a $6 million allocation of the costs associated
      with the elimination of employees of PPL Services.
    PPL Montana plans to eliminate up to six employees and recorded an immaterial
      one-time charge in September 2002.
16. New Accounting Standards(PPL, PPL Energy Supply, PPL Electric and PPL Montana)

SFAS 143
In June 2001, the FASB issued SFAS 143, "Accounting for Asset Retirement Obligations,"
  on the accounting for obligations associated with the retirement of long-lived
  assets. SFAS 143 requires a liability to be recognized in the financial statements
  for retirement obligations meeting specific criteria. Measurement of the initial
  obligation is to approximate fair value, with an equivalent amount recorded
  as an increase in the value of the capitalized asset. The asset will be depreciated
  in accordance with normal depreciation policy and the liability will be increased,
  with a charge to the income statement, until the obligation is settled. SFAS
  143 is effective for fiscal years beginning after June 15, 2002. PPL and its
  subsidiaries are currently in the process of measuring identified asset retirement
  obligations. The impact of adopting SFAS 143 is not yet determinable, but it
  is not expected to have an adverse material impact on the financial statements.
SFAS 144
In August 2001, the FASB issued SFAS 144, "Accounting for the Impairment or
  Disposal of Long-Lived Assets," that replaces SFAS 121, "Accounting for the
  Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
  For long-lived assets to be held and used, SFAS 144 retains the requirements
  of SFAS 121 to recognize an impairment loss only if the carrying amount is not
  recoverable from undiscounted cash flows and measure an impairment loss as the
  difference between the carrying amount and fair value of the asset. For long-lived
  assets to be disposed of, SFAS 144 establishes a single accounting model based
  on the framework established in SFAS 121. The accounting model for long-lived
  assets to be disposed of by sale applies to all long-lived assets, including
  discontinued operations, and replaces the provisions of APB Opinion No. 30,
  "Reporting the Results of Operations - Reporting the Effects of Disposal of
  a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
  Events and Transactions," for the disposal of segments of a business. SFAS 144
  also broadens the reporting of discontinued operations. PPL and its subsidiaries
  adopted SFAS 144 on January 1, 2002, with no material impact on the financial
  statements.
SFAS 145
In April 2002, the FASB issued SFAS 145, "Rescission of FASB Statements No.
  4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
  The most relevant provision of SFAS 145 is the rescission of SFAS 4, "Reporting
  Gains and Losses from Extinguishment of Debt - An Amendment of APB Opinion No.
  30," which required all gains and losses from extinguishment of debt to be aggregated
  and, if material, classified as an extraordinary item, net of related income
  tax effect. As a result of the rescission, the criteria in APB Opinion No. 30
  will now be used to classify those gains and losses. The provisions of SFAS
  145 related to the rescission of SFAS 4 shall be applied in fiscal years beginning
  after May 15, 2002, with early application encouraged. The adoption of SFAS
  145 will not have a material impact on PPL or its subsidiaries.
SFAS 146
In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with
  Exit or Disposal Activities." SFAS 146 addresses financial accounting and reporting
  for costs associated with exit or disposal activities and replaces EITF 94-3,
  "Liability Recognition for Certain Employee Termination Benefits and Other Costs
  to Exit an Activity (including Certain Costs Incurred in a Restructuring)."
  SFAS 146 requires the recognition of costs associated with exit or disposal
  activities when they are incurred rather than at the date of a commitment to
  an exit or disposal plan. The provisions of SFAS 146 are effective for exit
  or disposal activities initiated after December 31, 2002, with earlier application
  encouraged. The adoption of SFAS 146 will not have a material impact on PPL
  or its subsidiaries, but may impact future disposal or exit activities.
EITF 02-3
See Note 12 for a discussion of EITF 02-3 and the impact of adoption.

---

PPL CORPORATION AND SUBSIDIARIES



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

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

Results of Operations

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

The Statement of Income for the three and nine months ended September 30, 2002
  has been impacted by the acquisition of a controlling interest in WPD on September
  6, 2002, and the resulting consolidation, as described in Note 8 to the Financial
  Statements. Therefore, the comparison of reported income statement line items
  is not meaningful without eliminating the impact of the WPD consolidation. The
  following table shows the Statement of Income as reported, the adjustments to
  eliminate the impact of the WPD consolidation, and as adjusted to exclude the
  WPD consolidation. The following discussion, that explains significant changes
  in principal items on the Statement of Income, compares the three and nine months
  ended September 30, 2002, as adjusted to exclude the WPD consolidation, to the
  comparable periods in 2001.

PPL Corporation and Subsidiaries 
  Condensed Consolidated Statement of Income
  Adjusted to Eliminate WPD Consolidation

|                                                                              | Three Months Ended 
        September 30, 2002              |       |     | Nine Months Ended 
        September 30, 2002 |  
|----------------------------------------------------------------------------- | ----------------------------------------------------------- | ----- | --- | --------------------------------------------- | -
|                                                                              |                                                             |       |     |                                               |  
|                                                                              | As Reported                                                 |       |     | Adjustments                                   |  
|                                                                              |                                                             |       |     |                                               |  
|Operating
     Revenues                                                       |                                                             |       |     |                                               |  
|Utility                                                                       | $                                                           | 935   |     |                                               | $
|Unregulated retail
      electric
         and gas                            |                                                             | 46    |     |                                               |  
|Wholesale energy
      marketing                                              |                                                             | 344   |     |                                               |  
|Net energy trading
      margins                                              |                                                             |       |     |                                               |  
|Energy related businesses                                                     |                                                             | 137   |     |                                               |  
|                                                                              |                                                             |       |     |                                               |  
|Total                                                                         |                                                             | 1,462 |     |                                               |  
|                                                                              |                                                             |       |     |                                               |  
|Operating Expenses                                                            |                                                             |       |     |                                               |  
|Operation                                                                     |                                                             |       |     |                                               |  
|                                                                              | Fuel                                                        |       | 161 |                                               |  
|                                                                              | Energy purchases                                            |       | 267 |                                               |  
|                                                                              | Other                                                       |       | 222 |                                               |  
|                                                                              | Amortization of recoverable
      
        transition costs |       | 61  |                                               |  
|Maintenance                                                                   |                                                             | 64    |     |                                               |  
|Depreciation                                                                  |                                                             | 93    |     |                                               |  
|Taxes, other than
      income                                                |                                                             | 54    |     |                                               |  
|Energy related businesses                                                     |                                                             | 145   |     |                                               |  
|Other charges                                                                 |                                                             |       |     |                                               |  
|                                                                              | Write-down of international
        energy projects         |       |     |                                               |  
|                                                                              | Workforce reduction                                         |       | 1   |                                               |  
|                                                                              |                                                             |       |     |                                               |  
|Total                                                                         |                                                             | 1,068 |     |                                               |  
|                                                                              |                                                             |       |     |                                               |  
|Operating Income                                                              |                                                             | 394   |     |                                               |  
|Other Income - net                                                            |                                                             | 4     |     |                                               |  
|Interest Expense                                                              |                                                             | 161   |     |                                               |  
|Income Taxes                                                                  |                                                             | 78    |     |                                               |  
|Minority Interest                                                             |                                                             | 21    |     |                                               |  
|Cumulative Effect
      of a 
        Change in Accounting 
        Principle |                                                             |       |     |                                               |  
|Dividends and Distributions
      - 
        Preferred Securities             |                                                             | 16    |     |                                               |  
|                                                                              |                                                             |       |     |                                               |  
|Net Income                                                                    | $                                                           | 122   |     |                                               | $
|                                                                              |                                                             |       |     |                                               |  

Earnings

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

|                                | Three MonthsEnded September 30,                  |     |     | Nine MonthsEnded September 30, |  
|------------------------------- | ------------------------------------------------ | --- | --- | ------------------------------ | -
|                                | 2002                                             |     |     | 2001                           |  
|                                |                                                  |     |     |                                |  
|Net income - actual             | $                                                | 122 |     |                                | $
|                                |                                                  |     |     |                                |  
|Unusual items (net of tax):     |                                                  |     |     |                                |  
|                                |                                                  |     |     |                                |  
|                                | SFAS 142 goodwill 
      impairment (Note 13)    |     |     |                                |  
|                                |                                                  |     |     |                                |  
|                                | Write-down of investment
      in CEMAR (Note 8) |     |     |                                |  
|                                |                                                  |     |     |                                |  
|                                | Workforce reduction
      (Note 15)              |     |     |                                |  
|                                |                                                  |     |     |                                |  
|                                | CEMAR operating losses
      (Note 8)            |     | (23 | )                              |  
|                                |                                                  |     |     |                                |  
|                                |                                                  |     |     |                                |  
|Net income from core operations | $                                                | 145 |     |                                | $
|                                |                                                  |     |     |                                |  

The after-tax changes in core earnings were primarily due to:

|                                                |  | September 30, 2002 vs. September 30, 2001 |    
|----------------------------------------------- |  | ----------------------------------------- | ---
|                                                |  | Three MonthsEnded                         |    
|                                                |  |                                           |    
|Wholesale energy margins                        |  | $                                         | 34 
|                                                |  |                                           |    
|Net energy trading margins                      |  |                                           | (22
|                                                |  |                                           |    
|Lower unregulated retail energy margins         |  |                                           | (3 
|                                                |  |                                           |    
|Regulated retail energy margins                 |  |                                           | (13
|                                                |  |                                           |    
|Delivery revenues (net of CTC/ITC amortization) |  |                                           | 5  
|                                                |  |                                           |    
|Higher PPL Global 
      earnings (a)           |  |                                           | 13 
|                                                |  |                                           |    
|Higher earnings from synfuel projects (b)       |  |                                           | 5  
|                                                |  |                                           |    
|Higher operating costs                          |  |                                           | (10
|                                                |  |                                           |    
|Higher financing costs                          |  |                                           | (16
|                                                |  |                                           |    
|Other - net                                     |  |                                           |    
|                                                |  |                                           |    
|                                                |  |                                           |    
|                                                |  | $                                         | (7 
|                                                |  |                                           |    

|(a) | The increase for the three months ended was
      due to higher equity earnings from WPD, the discontinuance of goodwill amortization
      and lower development spending. The increase for the nine months ended was
      due to lower spending on development and the discontinuance of goodwill
      amortization, offset by lower earnings from Latin America.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | The increase for both periods was due to higher
      sales volumes.                                                                                                                                                                                                                                                                                                 

PPL expects that the current low level of wholesale energy prices will adversely
  impact margins for the remainder of this year, and could continue to do so beyond
  2002. Based upon current energy price levels, there is a risk that PPL may be
  unable to recover its investment in new gas-fired generation facilities. Under
  generally accepted accounting principles, PPL does not believe that there is
  an impairment charge to be recorded at this time. PPL is unable to predict the
  ultimate earnings impact of this issue, based upon energy price levels, applicable
  accounting rules and other factors, but such impact may be material.

Also, in July 2002, the FASB issued an Exposure Draft of a proposed interpretation
  entitled "Consolidation of Certain Special-Purpose Entities - an interpretation
  of ARB No. 51." The FASB accepted comments from interested parties on this proposed
  interpretation until August 30, 2002. The FASB is currently in the process of
  redeliberating its preliminary decisions based on the comments received, and
  is expected to issue a final interpretation by December 2002. The rule as proposed
  would require the consolidation of certain Special-Purpose Entities (SPEs) by
  the entity that is determined to be the primary beneficiary as of April 1, 2003.
  This proposed rule would apply to PPL's leases for its Sundance, University
  Park and Lower Mt. Bethel generating facilities. See Note 7 to the Financial
  Statements for additional information on these leases. PPL is currently evaluating
  the restructuring of these leases. If PPL elects not to restructure these leases,
  its consolidated balance sheet would include these generating facilities as
  assets and the lease debt as liabilities. PPL is currently evaluating this proposed
  rule and cannot quantify its potential impact at this
  time, but its impact could be material.

Domestic Energy Margins

The following tables provide summary data regarding changes in the components
  of domestic gross margins of wholesale and retail energy for the three and nine
  months ended September 30, 2002, compared with the same periods in 2001:

|                                                   |                     | September 30, 2002 vs. September 30, 2001 |    
|-------------------------------------------------- | ------------------- | ----------------------------------------- | ---
|                                                   |                     | Three MonthsEnded                         |    
|                                                   |                     |                                           |    
|                                                   |                     |                                           |    
|Utility revenues                                   |                     | $                                         | 34 
|                                                   |                     |                                           |    
|Unregulated retail electric and
      gas revenues |                     |                                           | (13
|                                                   |                     |                                           |    
|Wholesale energy marketing revenues                |                     |                                           | 149
|                                                   |                     |                                           |    
|Net energy trading margins                         |                     |                                           | (37
|                                                   |                     |                                           |    
|Other revenue adjustments (a)                      |                     |                                           | (19
|                                                   |                     |                                           |    
|                                                   |                     |                                           |    
|                                                   | Total revenues      |                                           |    
|                                                   |                     |                                           |    
|                                                   |                     |                                           |    
|Fuel                                               |                     |                                           | 22 
|                                                   |                     |                                           |    
|Purchased power                                    |                     |                                           | 91 
|                                                   |                     |                                           |    
|Other cost adjustments (a)                         |                     |                                           | 8  
|                                                   |                     |                                           |    
|                                                   |                     |                                           |    
|                                                   | Total cost of sales |                                           |    
|                                                   |                     |                                           |    
|                                                   |                     |                                           |    
|                                                   |                     | Domestic gross energy margins             |    
|                                                   |                     |                                           |    

|(a) | Adjusted to exclude the impact of any revenues
      and costs not associated with domestic energy margins, in particular, revenues
      and costs related to the international operations of PPL Global and the
      domestic delivery operations of PPL Electric and PPL Gas Utilities.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Changes in Gross Domestic Energy Margins By Activity

Gross margin calculations are dependent on the allocation of fuel and purchased
  power costs to the activities. That allocation is based on hourly MWh consumption
  levels compared to hourly MWh supply costs. Any costs specific to an activity
  are charged to that activity.

|                         |                               | September 30, 2002 vs. September 30, 2001 |    
|------------------------ | ----------------------------- | ----------------------------------------- | ---
|                         |                               | Three MonthsEnded                         |    
|                         |                               |                                           |    
|Wholesale - Eastern U.S. |                               | $                                         | 34 
|                         |                               |                                           |    
|Wholesale - Western U.S. |                               |                                           | 24 
|                         |                               |                                           |    
|Net energy trading       |                               |                                           | (37
|                         |                               |                                           |    
|Unregulated retail       |                               |                                           | (5 
|                         |                               |                                           |    
|Regulated retail         |                               |                                           | (23
|                         |                               |                                           |    
|                         |                               |                                           |    
|                         | Domestic gross energy margins |                                           | $  
|                         |                               |                                           |    

Wholesale - Eastern U.S.

Eastern wholesale margins were higher for the three months ended September
  30, 2002, compared to the same period in 2001, primarily due to higher volumes,
  which increased 240% over the same period last year. The higher volumes were
  driven primarily by increased availability of generation, market opportunities
  to optimize the value of generating assets and the desire to eliminate or reduce
  credit risk associated with certain counterparties. Lower prices, however, partially
  offset the increase in volumes. Specifically, average wholesale prices for the
  three months ended September 30, 2002 were significantly lower than the same
  period last year. In PJM, where the majority of PPL's Eastern wholesale activity
  occurs, on-peak prices averaged $13/MWh less, a decline of 22%, for the three
  months ended September 30, 2002 than the same period last year.

Generally, Eastern wholesale margins were lower for the nine months ended September
  30, 2002 compared to the same period in 2001, despite a buyout of a NUG contract
  in February 2002 that reduced purchased power costs by $25 million. The decline
  in margins was primarily attributable to the decline in wholesale prices for
  energy and capacity. On-peak prices in PJM averaged $11/MWh less, a decline
  of 24%, for the nine months ended September 30, 2002 than the same period last
  year. Additionally, because of new generating capability that has come on-line
  within PJM in 2002, the prices for the PJM monthly auctions for unforced capacity
  credits have also fallen from an average of $100/MW-month in 2001 to an average
  of $38/MW-month in 2002. However, higher volumes of energy sales, primarily
  in the third quarter, partially offset the decline in prices, as wholesale transactions
  for the nine months ended September 30, 2002 increased by about 50% over the
  same period last year.

Wholesale - Western U.S.

Western wholesale margins consist of margins in the Northwest and in the Southwest.

In the Northwest, margins were $26 million higher for the three months ended
  September 30, 2002, compared to the same period in 2001, primarily due to significantly
  lower supply costs. Margins were $78 million lower for the nine months ended
  September 30, 2002, compared to the same period in 2001, primarily due to lower
  wholesale prices, partially offset by a 14% increase in volumes. Average realized
  wholesale prices in the Northwest region for the three and nine months ended
  September 30, 2002, were $23/MWh and $66/MWh lower than those for the same periods
  in 2001.

In the Southwest region, margins were lower by $2 million for the three months
  ended September 30, 2002, compared to the same period in 2001, primarily due
  to lower prices. Average realized wholesale prices in the Southwest region experienced
  a drop from $119/MWh to about $45/MWh for both periods. These lower prices were
  substantially offset by increased sales which were two and five times higher
  for the three and nine months ended September 30, 2002, compared to the same
  periods in 2001. The large increases are due to the Griffith Energy and Sundance
  facilities coming on-line in 2002.

Net Energy Trading Margins

PPL enters into certain contractual arrangements that meet the criteria of
  energy trading contracts as defined by EITF 02-3. These physical and financial
  contracts cover electricity, gas, capacity, transmission congestion and emission
  allowances. The decrease for the three month period was primarily due to unrealized,
  mark-to-market electricity gains in 2001 and lower capacity and energy margins.
  The decrease for the nine month period was primarily due to unrealized, mark-to-market
  gains in 2001 and lower capacity and congestion margins.

Unregulated Retail

Unregulated retail margins were lower for the nine months ended September 30,
  2002, compared to the same period in 2001. This decline in unregulated retail
  margins was primarily due to lower revenues resulting from the expiration of
  contracts which were not renewed in the East and to significantly lower retail
  prices in the West. However, the decline was partially offset by an increase
  in the number of customers in the West.

Regulated Retail

Regulated retail margins in the East were lower for the three months ended
  September 30, 2002, compared to the same period in 2001. For the three months
  ended September 30, 2002, a prolonged heatwave resulted in higher purchased
  power costs during this period.

For the nine months ended September 30, 2002, sales volumes were about 5% higher
  than that realized for the same period in 2001. Higher sales volumes and higher
  average prices, caused by changes in usage among customer classes, provided
  the improved margins. In addition, lower supply costs in 2002, due to lower
  fuel costs and increased generating unit availability, improved margins by $4
  million.

Utility Revenues

The increase (decrease) in utility revenues was attributable to the following:

|                 |                   | September 30, 2002 vs. September 30, 2001 |   
|---------------- | ----------------- | ----------------------------------------- | --
|                 |                   | Three MonthsEnded                         |   
|                 |                   |                                           |   
|Electric Revenue |                   |                                           |   
|                 | PPL Electric:     |                                           |   
|                 |                   | Electric delivery                         |   
|                 |                   |                                           |   
|                 |                   | PLR electric generation supply (a)        |   
|                 |                   |                                           |   
|                 |                   | Other                                     |   
|                 |                   |                                           |   
|                 | PPL Global:       |                                           |   
|                 |                   | Electric delivery                         |   
|                 |                   |                                           |   
|                 | Other             |                                           |   
|                 |                   |                                           |   
|                 |                   |                                           | 36
|                 |                   |                                           |   
|Gas Revenue      |                   |                                           |   
|                 | PPL Gas Utilities |                                           |   
|                 |                   |                                           |   
|                 |                   | $                                         | 34
|                 |                   |                                           |   

|(a) | See the "Regulated Retail" section in "Domestic
      Energy Margins" for a discussion of PPL Electric generation supply revenues
      as a PLR.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------

PPL Electric's delivery revenues were higher in the three months ended September
  30, 2002, compared with the same period in 2001. This was due to higher delivery
  volumes of 4.5% due to warmer weather in the third quarter of 2002. PPL Electric's
  delivery revenues were lower in the nine months ended September 30, 2002, compared
  with the same period in 2001. The PPL Electric delivery revenue decrease reflects
  a 0.7% decline in deliveries of electricity, primarily due to milder winter
  weather in the first quarter of 2002 and adverse economic conditions.

The increases in PPL Global's revenue in both periods was due to an increase
  in the volume of deliveries.

The PPL Gas Utilities' decrease was primarily due to lower sales volumes of
  1.3 million dekatherms, or 16%, due in part to milder winter weather.
  This decrease also reflects the decrease in the fuel cost component of customer
  rates.

Energy Related Businesses

The increase (decrease) in operating income from energy related businesses
  was attributable to the following:

|                                               | September 30, 2002 vs. September 30, 2001
|---------------------------------------------- | -----------------------------------------
|                                               |                                          
|                                               |                                          
|PPL Southwest Generation Holdings,
      LLC   |                                          
|                                               |                                          
|PPL Global project development
      expenses  |                                          
|                                               |                                          
|Mechanical contractors                         |                                          
|                                               |                                          
|Synfuel projects (excluding tax
      credits) |                                          
|                                               |                                          
|Other                                          |                                          
|                                               |                                          
|                                               |                                          
|                                               |                                          

The decrease in PPL Southwest Generation Holdings, LLC's income was due to
  a full year of operations of Griffith Energy in 2002, and that 2001 benefited
  from forward electricity contracts, executed prior to commercial operation.
  (PPL Southwest Generation Holdings, LLC has a 50% interest in the Griffith Energy
  facility.) The decrease in PPL Global's expenses was due to lower spending on
  development projects, including a favorable settlement on the cancellation of
  the Starbuck project.

Other Operation Expenses

Other operation expenses increased by $17 million for the three months ended
  September 30, 2002, compared to the same period in 2001. This increase was primarily
  because, in conjunction with the workforce reduction (see Note 15 to the Financial
  Statements), PPL revised its estimated vacation liability by $15 million. Additionally,
  there were $5 million of expenses relating to the operating lease on the University
  Park and Sundance facilities, which began operation in July 2002.

During the second quarter of 2002, the workforce reduction and union-negotiated
  benefit enhancements had a significant impact on PPL's primary pension plan,
  increasing the benefit obligation by $140 million. As a result of these changes,
  PPL remeasured its net periodic pension cost for that plan, which included recognition
  of asset losses totaling $153 million as of June 30, 2002 due to weakened financial
  markets. These combined events decreased the funded status of PPL's pension
  plan by approximately $290 million.

Through September 30, 2002, PPL recorded approximately $24 million of pension
  income. As a result of the events and remeasurements previously discussed, PPL
  expects to continue to record pension income, but at lower levels. PPL will
  record approximately $5 million of pension income in the fourth quarter of 2002,
  for a total of $29 million in 2002. PPL expects to continue to record pension
  income in 2003, but at lower levels due to the above events and continued weakness
  in the financial markets.

Amortization of Recoverable Transition Costs

Amortization of recoverable transition costs decreased by $26 million for the
  nine months ended September 30, 2002, compared with the same period in 2001.
  This decrease was primarily due to $22 million of lower ITC amortization in
  2002 as a result of lower billed ITC revenues. Billed ITC revenues were lower
  as a result of lower ITC rates, reflecting the decrease in interest expense
  on the transition bonds.

Taxes, Other Than Income

Taxes, other than income, increased by $21 million during the nine months ended
  September 30, 2002, compared with the same period in 2001, primarily due to
  a $33 million increase in gross receipts tax, offset by an $11 million decrease
  in capital stock tax.

The gross receipts tax increase was due to an increase in the revenue-neutral
  reconciliation (RNR) tax component of the effective Pennsylvania gross receipts
  tax rate in January 2002. The RNR, which adjusts the base gross receipts tax
  rate of 4.4%, was enacted as part of the Customer Choice Act as a tax revenue
  replacement component to recoup losses to the Commonwealth of Pennsylvania that
  may result from the restructuring of the electric industry.

The settlement of prior years' capital stock tax refund claims and a lower
  capital stock tax rate in 2002 resulted in the decrease.

Changes in gross receipts and capital stock taxes do not significantly affect
  earnings as they are substantially recovered through customer rate revenues.

Write-down of International Energy Projects

See Note 8 to the Financial Statements for additional information on the write-down
  of PPL Global's investment in CEMAR.

Workforce Reduction

See Note 15 to the Financial Statements for information regarding the $75 million
  charge recorded in 2002.

Other Income - net

See Note 14 to the Financial Statements for details of other income.

Financing Costs

Interest expense increased by $38 million for the three months ended September
  30, 2002, compared with the same period in 2001 primarily due to:

- a $24 million charge to cancel the remarketing agreement on the 7.7% Reset
    Put Securities, as described in Note 6 to the Financial Statements;
- an $8 million increase in long-term debt interest from the issuance of $500
    million of senior unsecured notes in October 2001; and
- a $6 million decrease in capitalized interest.

Interest expense increased by $43 million for the nine months ended September
  30, 2002, compared with the same period in 2001 primarily due to:

- a $24 million charge to cancel the remarketing agreement on the 7.7% Reset
    Put Securities;
- a $29 million net increase in long-term debt interest from the issuance
    of $800 million of senior secured bonds by PPL Electric, $500 million of senior
    unsecured notes by PPL Energy Supply, the issuance of debt by PPL Global's
    consolidated subsidiaries, along with some bond retirements; and
- a $6 million decrease in capitalized interest; offset by
- a $25 million decrease in short-term debt interest as a portion of the proceeds
    from the issuance of long-term debt was used to pay down commercial paper.

Dividends and distributions on preferred securities increased by $11 million
  for the nine months ended September 30, 2002, compared with the same period
  in 2001. This increase was due to a $15 million increase in distributions on
  the PEPS Units, issued in the second quarter of 2001, offset by a $4 million
  decrease in dividends and distributions due to retirements and redemptions of
  preferred securities and preferred stock.

Income Taxes

Income taxes decreased by $27 million for the three months ended September
  30, 2002, compared to the same period in 2001. The change was primarily due
  to lower pre-tax book income, resulting in a $20 million reduction in income
  taxes, and a $5 million increase in the amount of federal synfuel tax credits
  recognized.

Income taxes decreased by $121 million for the nine months ended September
  30, 2002, compared to the same period in 2001. The change was primarily due
  to lower pre-tax book income, resulting in a $146 million reduction in income
  taxes, and a $9 million increase in the amount of federal synfuel tax credits
  recognized. These decreases were offset by $33 million of deferred income tax
  valuation allowances recorded on PPL's investment in CEMAR.

Change in Accounting Principles

PPL adopted SFAS 142, "Goodwill and Other Intangible Assets," on January 1,
  2002. SFAS 142 requires an annual impairment test of goodwill and other intangible
  assets that are not subject to amortization. PPL conducted a transition impairment
  analysis in the first quarter of 2002 and recorded a transition goodwill impairment
  charge of $150 million, which was reported as a "Cumulative Effect of a Change
  in Accounting Principle" on the Statement of Income. See Note 13 to the Financial
  Statements for additional information on the adoption of SFAS 142.

In October 2002, PPL announced that beginning January 1, 2003, it will expense
  the value of any new stock options granted to PPL employees. Pursuant to guidance
  provided by SFAS 123, "Accounting for Stock-Based Compensation," which is considered
  the preferred method of accounting for stock-based employee compensation, PPL
  will expense any new options granted, utilizing the widely used Black-Scholes
  valuation model. Because the actual value of stock options cannot be known at
  the time the option is granted, it is necessary to make a number of assumptions
  to determine their value. The Black-Scholes formula, which takes into account
  a number of factors including the historic performance of the stock on which
  the option is offered, will be used to establish an estimated value for the
  options at the time they are granted.

PPL expects minimal financial impact from the adoption of this methodology.
  If the number of options granted in future periods are similar to levels in
  2002, the expected impact would be approximately $0.01 per share for 2003. The
  impact per share is expected to increase by $0.01 per share in 2004 and 2005
  and remain at $0.03 per share beyond 2005. This estimate assumes the number
  of options granted and the fair value of options granted is similar for all
  years. The actual impact per share would be different if the number of options
  granted or the fair value of options increases or decreases from the current
  estimate, or if the current accounting guidance changes. Historically, PPL had
  applied the intrinsic value method permitted under SFAS 123 and defined in APB
  Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations,
  in accounting for stock options. Accordingly, no compensation cost has been
  recognized for stock options in the past.

Financial Condition

Liquidity

At September 30, 2002, PPL had $339 million in cash and cash equivalents and
  $745 million of short-term debt. At December 31, 2001, PPL had $933 million
  in cash and cash equivalents and $118 million of short-term debt. The increase
  in short-term debt at September 30, 2002 resulted primarily from the consolidation
  of $494 million of WPD's short-term debt as a result of the acquisition of the
  controlling interest in WPD. There are plans to refinance this short-term debt
  at a WPD entity during the first quarter of 2003 with a debt offering in the
  U.K. Cash from operations also reflects the effect of $150 million
  of turbine cancellation payments, a $50 million payment to terminate an outstanding
  liability under an energy purchase contract with a NUG and milder weather during
  the first half of the year. Regarding the decrease in cash, PPL incurred one-time acquisition costs
  of approximately $105 million for certain generation equipment it purchased
  from two lessor trusts in the first half of 2002, and $156 million of additional
  project development costs. PPL and its subsidiaries also retired $699 million
  of securities in the first nine months of 2002.

In the second quarter of 2002, PPL filed a universal shelf registration statement
  with the SEC for the issuance of up to $950 million in various securities. During
  the third quarter, PPL received net proceeds of $493 million from the sale of
  16.7 million shares of common stock under this registration statement. These
  proceeds were used to redeem all of the $150 million outstanding 8.10% Preferred
  Securities issued by PPL Capital Trust II, and to repay short-term debt.

In May 2002, Standard & Poor's ("S&P") lowered its corporate credit
  rating on PPL from BBB+ to BBB, lowered the senior unsecured debt rating on
  PPL Capital Funding from BBB+ to BBB and lowered the rating on the trust
  preferred securities issued by PPL Capital Funding Trust I as part of the PEPS
  Units from BBB- to BB+. The BBB corporate credit rating of PPL Energy Supply
  and the BBB senior secured debt rating of PPL Montana were affirmed. The A-2
  short-term credit ratings on PPL Energy Supply and PPL Electric remained unchanged.
  The outlook on all ratings was stable.

S&P indicated that the rating action was based on the consolidated credit
  profile of PPL after deconsolidation of PPL Electric from the parent and reflected
  a weakening in PPL's credit profile due to setbacks faced in international operations.
  S&P noted that PPL Electric, which has a senior secured debt rating at A-,
  is structurally insulated from the rest of PPL (see Note 23 in PPL's Form 10-K
  for the year ended December 31, 2001) and that PPL ratings reflect only the
  amount of dividend distributions expected to be made by PPL Electric to PPL.

In September 2002, S&P revised its outlook on PPL and all of its rated
  subsidiaries, except PPL Electric, from a stable outlook to a negative outlook.
  PPL Electric's outlook remains at stable.

S&P's rating action reflects its view of a weakened credit profile that
  has resulted primarily from declining wholesale electricity prices and also
  from setbacks in PPL's international operations, particularly in Brazil. As part of its September 2002 review,
  S&P affirmed its ratings on PPL and PPL Energy Supply following
  the acquisition of a controlling interest in WPD.

In September 2002, S&P lowered the long-term corporate credit
  ratings on WPD from A- to BBB+.
S&P also lowered the long-term senior unsecured debt ratings on WPD by
  one notch. The A-2 short-term corporate credit ratings on WPD were affirmed.
  The outlook on WPD remains negative.

Also in September 2002, Moody's Investors Service affirmed its ratings on PPL
  and PPL Energy Supply, following the acquisition of the controlling interest in WPD.

Credit ratings reflect the agencies' opinion of overall financial strength.
  Various credit ratings impact companies' access to the capital markets and affect
  the costs related to these securities. Credit ratings are not a recommendation
  to buy, sell or hold any securities of PPL or its subsidiaries, and may be subject
  to revisions or withdrawal by the agencies at any time. These credit ratings
  should be evaluated independently of each other and any other rating that may
  be assigned to PPL's or its subsidiaries' securities.

Other Factors

WPD's cost of providing pension and benefit plans are dependent upon a number of factors, such as the rates of return on pension plan
assets and the discount rate used for the cost and investment assumptions.  The market value of plan assets has been affected by
sharp declines in the equity markets over recent quarters and, in particular, the third quarter of 2002.  While WPD's defined benefit
plans currently meet minimum funding requirements, based on WPD's plan assets as of October 31, 2002, PPL believes that
there is a likelihood that WPD's accumulated benefit obligation at year-end 2002 could exceed the market value of the plan assets.
Based on estimates of these calculations as of October 31, an
after-tax reduction to common equity of approximately $300 million would be recorded at year-end.  However, PPL currently
cannot estimate with certainty the amount of any potential adjustment to equity due to uncertainty about the factors impacting these
computations, including the performance of plan investments over the remainder of the year, the impact of any changes in actuarial
assumptions used to determine the accumulated benefit obligation and any contributions made to the plans.  This accounting is prescribed by SFAS No. 87 "Employers'
Accounting for Pensions" and SFAS No. 132 "Employers' Disclosures about Pensions and Postretirement Benefits."  The recording of a
reduction to common equity would not affect net income or cash flow in 2002, and the equity would be restored to the balance sheet in future periods
if, and at such times as, the fair value of the plan assets exceed the accumulated benefit obligation.

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

Energy Marketing and Trading Activities

Through PPL EnergyPlus, PPL subsidiaries sell and purchase physical energy
  at the wholesale level under FERC market-based tariffs throughout the U.S. Because
  of the generating assets PPL owns or controls, the majority of PPL's energy
  transactions qualify for accrual or hedge accounting. In addition, PPL enters
  into financial contracts to hedge the price risk associated with its electricity,
  gas and oil positions. At September 30, 2002, PPL had net assets of $24 million
  related to its energy hedging activities.

Certain transactions, however, meet the definition of trading activities as
  defined by EITF 98-10, "Accounting for Contracts Involved in Energy Trading
  and Risk Management Activities." These trading activities include physical and
  financial energy contracts, such as forwards, futures, options, and swaps that
  do not qualify for hedge accounting or were entered into to profit from market
  fluctuations. Through September 30, 2002, trading activities also include certain
  non-derivative transactions for capacity and ancillary products, such as transmission
  congestion credits (TCCs) and fixed transmission rights (FTRs).

In June 2002, the FASB's EITF adopted the position in EITF 02-3, which addresses
  accounting for contracts involved in trading and risk management activities,
  that revenues from energy trading contracts must be reported "net" in financial
  statements for periods ending after June 30, 2002. The EITF requires that all
  comparative financial statements should be reclassified to conform to this net
  presentation. Although this new accounting guidance required changes to certain
  line items in the financial statements, it does not impact PPL's overall financial
  position or earnings. Rather, the portion of PPL's revenues from energy trading
  are netted against expenses from energy trading activities. See Note 12 to the
  Financial Statements for the financial statement impact from this revised guidance.

In October 2002, EITF 02-3 was amended to exclude non-derivative contracts
  from the definition of energy trading activities. All contracts entered into
  after October 25, 2002 that would have been under the scope of EITF 98-10 and
  are not within the scope of SFAS 133, "Accounting for Derivative Instruments
  and Hedging Activities," must be accounted for on an accrual basis. In addition,
  non-derivative contracts that have been marked to market through earnings as
  energy trading activities will no longer be recognized at fair value, through
  a cumulative effect of a change in accounting principle in accordance with APB
  Opinion No. 20, "Accounting Changes." The effective date of the change will
  be the first fiscal period after December 15, 2002. PPL expects that any cumulative
  effect adjustment will be immaterial.

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

Related Party Transactions

PPL is not aware of any material ownership interests or operating responsibility
  by senior management of PPL or its subsidiaries in outside partnerships, including
  leasing transactions with special-purpose entities, or other entities doing
  business with PPL.

Acquisitions and Development

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

With the cancellation of the Freeport project, PPL Global had domestic generation
  projects, either announced or under development, which would provide about 990
  MW of additional generation.

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

Financing Activities

See Note 6 to the Financial Statements for a discussion of financing activities.

Cash Flow

Cash and cash equivalents decreased by $944 million more during the nine months
  ended September 30, 2002, compared with the same period in 2001. The reasons
  for this change were:

- a $147 million decrease in cash provided by operating activities, primarily
    due to a decrease in operating income, $150 million of turbine cancellation
    payments, and a $50 million payment to terminate an energy purchase contract
    with a NUG;
- a $432 million increase in cash used in investing activities, in part due
    to the acquisition of the controlling interest in WPD for $211 million, net
    of cash acquired. Also, there were no repayments of loans by affiliated companies
    in 2002; and
- a $365 million increase in cash used in financing activities, reflecting
    a $340 million net increase in cash outflows for debt, preferred securities
    and equity compared with 2001.

Environmental Matters

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

Critical Accounting Policies

PPL's financial condition and results of operations are necessarily impacted
  by the methods, assumptions and estimates used in the application of critical
  accounting policies. The following accounting policies are particularly important
  to the financial condition or results of operations of PPL and require estimates
  or other judgments of matters inherently uncertain: price risk management, pension
  and other postretirement benefits, asset impairment, leasing and contingencies.
  See Item 7, "Review of the Financial Condition and Results of Operations," in
  PPL's Annual Report to the SEC on Form 10-K for the year ended December 31,
  2001 for a discussion of each critical accounting policy. For an additional
  discussion of the impact of the workforce reduction on pension and other postretirement
  benefits, see Note 15 to the Financial Statements and "Other Operation Expenses"
  in Results of Operations. For an additional discussion of the impact of the
  CEMAR write-down on asset impairment, see Note 8 to the Financial Statements.

---

PPL ENERGY SUPPLY, LLC AND SUBSIDIARIES

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



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

Results of Operations

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

The Statement of Income for the three and nine months ended September 30, 2002
  has been impacted by the acquisition of a controlling interest in WPD on September
  6, 2002, and the resulting consolidation, as described in Note 8 to the Financial
  Statements. Therefore, the comparison of reported income statement line items
  is not meaningful without eliminating the impact of the WPD consolidation. The
  following table shows the Statement of Income as reported, the adjustments to
  eliminate the impact of the WPD consolidation, and as adjusted to exclude the
  WPD consolidation. The following discussion, that explains significant changes
  in principal items on the Statement of Income, compares the three and nine months
  ended September 30, 2002, as adjusted to exclude the WPD consolidation, to the
  comparable periods in 2001.

|                                                         | Three Months Ended 
        September 30, 2002  |       |     | Nine Months Ended 
        September 30, 2002 |  
|-------------------------------------------------------- | ----------------------------------------------- | ----- | --- | --------------------------------------------- | -
|                                                         |                                                 |       |     |                                               |  
|                                                         | As Reported                                     |       |     | Adjustments                                   |  
|                                                         |                                                 |       |     |                                               |  
|Operating Revenues                                       |                                                 |       |     |                                               |  
|Wholesale energy   marketing                             | $                                               | 344   |     |                                               |  
|Wholesale energy   marketing to affiliates               |                                                 | 373   |     |                                               |  
|Utility                                                  |                                                 | 251   |     |                                               | $
|Unregulated retail electric  and
      gas               |                                                 | 46    |     |                                               |  
|Net energy trading margins                               |                                                 |       |     |                                               |  
|Energy related businesses                                |                                                 | 134   |     |                                               |  
|                                                         |                                                 |       |     |                                               |  
|Total                                                    |                                                 | 1,148 |     |                                               |  
|                                                         |                                                 |       |     |                                               |  
|                                                         |                                                 |       |     |                                               |  
|Operating Expenses                                       |                                                 |       |     |                                               |  
|Operation                                                |                                                 |       |     |                                               |  
|                                                         | Fuel                                            |       | 155 |                                               |  
|                                                         | Energy purchases                                |       | 208 |                                               |  
|                                                         | Energy purchases from   affiliates              |       | 43  |                                               |  
|                                                         | Other operation and  maintenance                |       | 209 |                                               |  
|                                                         | Transmission                                    |       | 5   |                                               |  
|Depreciation                                             |                                                 | 67    |     |                                               |  
|Taxes, other than income                                 |                                                 | 21    |     |                                               |  
|Energy related businesses                                |                                                 | 129   |     |                                               |  
|Other charges                                            |                                                 |       |     |                                               |  
|                                                         | Write-down of   international energy   projects |       |     |                                               |  
|                                                         | Workforce reduction                             |       | 1   |                                               |  
|                                                         |                                                 |       |     |                                               |  
|Total                                                    |                                                 | 838   |     |                                               |  
|                                                         |                                                 |       |     |                                               |  
|                                                         |                                                 |       |     |                                               |  
|Operating Income                                         |                                                 | 310   |     |                                               |  
|Other Income - net                                       |                                                 | 4     |     |                                               |  
|Interest Expense                                         |                                                 | 59    |     |                                               |  
|Interest Expense with   Affiliate                        |                                                 | 1     |     |                                               |  
|Income Taxes                                             |                                                 | 90    |     |                                               |  
|Minority Interest                                        |                                                 | 21    |     |                                               |  
|Cumulative Effect of a
  Change in Accounting  Principle |                                                 |       |     |                                               |  
|Distributions on Preferred   Securities                  |                                                 | 2     |     |                                               |  
|                                                         |                                                 |       |     |                                               |  
|                                                         |                                                 |       |     |                                               |  
|Net Income                                               | $                                               | 141   |     |                                               | $
|                                                         |                                                 |       |     |                                               |  

Earnings

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

|                                | Three MonthsEnded September 30,              |     |     | Nine MonthsEnded September 30, |  
|------------------------------- | -------------------------------------------- | --- | --- | ------------------------------ | -
|                                |                                              |     |     |                                |  
|                                | 2002                                         |     |     | 2001                           |  
|                                |                                              |     |     |                                |  
|Net income - actual             | $                                            | 141 |     |                                | $
|                                |                                              |     |     |                                |  
|Unusual items (net of tax):     |                                              |     |     |                                |  
|                                | SFAS 142 goodwill impairment
      (Note 13) |     |     |                                |  
|                                |                                              |     |     |                                |  
|                                | Write-down of investment in CEMAR (Note 8)   |     |     |                                |  
|                                |                                              |     |     |                                |  
|                                | Workforce reduction (Note 15)                |     |     |                                |  
|                                |                                              |     |     |                                |  
|                                | CEMAR operating losses (Note 8)              |     | (23 | )                              |  
|                                |                                              |     |     |                                |  
|                                |                                              |     |     |                                |  
|Net income from core operations | $                                            | 164 |     |                                | $
|                                |                                              |     |     |                                |  

The after-tax changes in core earnings were primarily due to:

|                                          | September 30, 2002 vs. September 30, 2001
|----------------------------------------- | -----------------------------------------
|                                          |                                          
|                                          |                                          
|Wholesale energy margins                  |                                          
|                                          |                                          
|Net energy trading margins                |                                          
|                                          |                                          
|Lower unregulated retail energy margins   |                                          
|                                          |                                          
|Regulated retail energy margins           |                                          
|                                          |                                          
|Higher PPL Global earnings (a)            |                                          
|                                          |                                          
|Higher earnings from synfuel projects (b) |                                          
|                                          |                                          
|Higher operating costs                    |                                          
|                                          |                                          
|Other - net                               |                                          
|                                          |                                          
|                                          |                                          
|                                          |                                          

|(a) | The increase for the three months ended was
      due to higher equity earnings from WPD, the discontinuance of goodwill amortization
      and lower development spending. The increase for the nine months ended was
      due to lower spending on development and the discontinuance of goodwill
      amortization, offset by lower earnings from Latin America.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | The increase for both periods was due to higher
      sales volumes.                                                                                                                                                                                                                                                                                                 

PPL Energy Supply expects that the current low level of wholesale energy prices
  will adversely impact margins for the remainder of this year, and could continue
  to do so beyond 2002. Based upon current energy price levels, there is a risk
  that PPL Energy Supply may be unable to recover its investment in new gas-fired
  generation facilities. Under generally accepted accounting principles, PPL Energy
  Supply does not believe that there is an impairment charge to be recorded at
  this time. PPL Energy Supply is unable to predict the ultimate earnings impact
  of this issue, based upon energy price levels, applicable accounting rules and
  other factors, but such impact may be material.

Also, in July 2002, the FASB issued an Exposure Draft of a proposed interpretation
  entitled "Consolidation of Certain Special-Purpose Entities - an interpretation
  of ARB No. 51." The FASB accepted comments from interested parties on this proposed
  interpretation until August 30, 2002. The FASB is currently in the process of
  redeliberating its preliminary decisions based on the comments received, and
  is expected to issue a final interpretation by December 2002. The rule as proposed
  would require the consolidation of certain Special-Purpose Entities (SPEs) by
  the entity that is determined to be the primary beneficiary as of April 1, 2003.
  This proposed rule would apply to PPL Energy Supply's leases for its Sundance,
  University Park and Lower Mt. Bethel generating facilities. See Note 7 to the
  Financial Statements for additional information on these leases. PPL Energy
  Supply is currently evaluating the restructuring of these leases. If PPL Energy
  Supply elects not to restructure these leases, its consolidated balance sheet
  would include these generating facilities as assets and the lease debt as liabilities.
  PPL Energy Supply is currently evaluating this proposed rule and cannot quantify
  its potential impact at this time, but its impact
  could be material.

In the fourth quarter of 2002, a PPL subsidiary that owns PPL trademarks will
  begin billing certain affiliates who use these trademarks. PPL Energy Supply
  and its subsidiaries will be allocated a portion of this license fee, retroactive
  for all of 2002. PPL Energy Supply estimates that this fee could approximate
  $30 million annually.

Domestic Energy Margins

The following tables provide summary data regarding changes in the components
  of domestic gross margins of wholesale and retail energy for the three and nine
  months ended September 30, 2002, compared with the same periods in 2001:

|                                                   |                | September 30, 2002 vs. September 30, 2001 |    
|-------------------------------------------------- | -------------- | ----------------------------------------- | ---
|                                                   |                | Three MonthsEnded                         |    
|                                                   |                |                                           |    
|Wholesale energy marketing revenues                |                | $                                         | 149
|                                                   |                |                                           |    
|Wholesale energy marketing to affiliates           |                |                                           | 20 
|                                                   |                |                                           |    
|Unregulated retail electric and
      gas revenues |                |                                           | (13
|                                                   |                |                                           |    
|Net energy trading margins                         |                |                                           | (37
|                                                   |                |                                           |    
|                                                   |                |                                           |    
|                                                   | Total revenues |                                           |    
|                                                   |                |                                           |    
|                                                   |                |                                           |    

|                                |                     | September 30, 2002 vs. September 30, 2001 |   
|------------------------------- | ------------------- | ----------------------------------------- | --
|                                |                     | Three MonthsEnded                         |   
|                                |                     |                                           |   
|                                |                     |                                           |   
|Fuel                            |                     |                                           | 27
|                                |                     |                                           |   
|Purchased power                 |                     |                                           | 81
|                                |                     |                                           |   
|Purchased power from affiliates |                     |                                           | (3
|                                |                     |                                           |   
|Transmission                    |                     |                                           | (2
|                                |                     |                                           |   
|Other cost adjustments (a)      |                     |                                           | 23
|                                |                     |                                           |   
|                                |                     |                                           |   
|                                | Total cost of sales |                                           |   
|                                |                     |                                           |   
|                                |                     |                                           |   
|                                |                     | Domestic gross energy margins             |   
|                                |                     |                                           |   

|(a) | Adjusted to exclude the impact of any costs
      not associated with domestic energy margins, in particular, costs related
      to the international operations of PPL Global.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Changes in Gross Domestic Energy Margins By Activity

Gross margin calculations are dependent on the allocation of fuel and purchased
  power costs to the activities. That allocation is based on hourly MWh consumption
  levels compared to hourly MWh supply costs. Any costs specific to an activity
  are charged to that activity.

|                         |                                        | September 30, 2002 vs. September 30, 2001 |    
|------------------------ | -------------------------------------- | ----------------------------------------- | ---
|                         |                                        | Three MonthsEnded                         |    
|                         |                                        |                                           |    
|Wholesale - Eastern U.S. |                                        | $                                         | 34 
|                         |                                        |                                           |    
|Wholesale - Western U.S. |                                        |                                           | 24 
|                         |                                        |                                           |    
|Net energy trading       |                                        |                                           | (37
|                         |                                        |                                           |    
|Unregulated retail       |                                        |                                           | (5 
|                         |                                        |                                           |    
|Regulated retail         |                                        |                                           | (23
|                         |                                        |                                           |    
|                         |                                        |                                           |    
|                         | Domestic gross energy 
        margins |                                           | $  
|                         |                                        |                                           |    

Wholesale - Eastern U.S.

Eastern wholesale margins were higher for the three months ended September
  30, 2002, compared to the same period in 2001, primarily due to higher volumes,
  which increased 240% over the same period last year. The higher volumes were
  driven primarily by increased availability of generation, market opportunities
  to optimize the value of generating assets and the desire to eliminate or reduce
  credit risk associated with certain counterparties. Lower prices, however, partially
  offset the increase in volumes. Specifically, average wholesale prices for the
  three months ended September 30, 2002 were significantly lower than the same
  period last year. In PJM, where the majority of PPL's Eastern wholesale activity
  occurs, on-peak prices averaged $13/MWh less, a decline of 22%, for the three
  months ended September 30, 2002 than the same period last year.

Generally, Eastern wholesale margins were lower for the nine months ended September
  30, 2002 compared to the same period in 2001, despite a buyout of a NUG contract
  in February 2002 that reduced purchased power costs by $25 million. The decline
  in margins was primarily attributable to the decline in wholesale prices for
  energy and capacity. On-peak prices in PJM averaged $11/MWh less, a decline
  of 24%, for the nine months ended September 30, 2002 than the same period last
  year. Additionally, because of new generating capability that has come on-line
  within PJM in 2002, the prices for the PJM monthly auctions for unforced capacity
  credits have also fallen from an average of $100/MW-month in 2001 to an average
  of $38/MW-month in 2002. However, higher volumes of energy sales, primarily
  in the third quarter, partially offset the decline in prices, as wholesale transactions
  for the nine months ended September 30, 2002 increased by about 50% over the
  same period last year.

Wholesale - Western U.S.

Western wholesale margins consist of margins in the Northwest and in the Southwest.

In the Northwest, margins were $26 million higher for the three months ended
  September 30, 2002, compared to the same period in 2001, primarily due to significantly
  lower supply costs. Margins were $78 million lower for the nine months ended
  September 30, 2002, compared to the same period in 2001, primarily due to lower
  wholesale prices, partially offset by a 14% increase in volumes. Average realized
  wholesale prices in the Northwest region for the three and nine months ended
  September 30, 2002, were $23/MWh and $66/MWh lower than those for the same periods
  in 2001.

In the Southwest region, margins were lower by $2 million for the three months
  ended September 30, 2002, compared to the same period in 2001, primarily due
  to lower prices. Average realized wholesale prices in the Southwest region experienced
  a drop from $119/MWh to about $45/MWh for both periods. These lower prices were
  substantially offset by increased sales which were two and five times higher
  for the three and nine months ended September 30, 2002, compared to the same
  periods in 2001. The large increases are due to the Griffith Energy and Sundance
  facilities coming on-line in 2002.

Net Energy Trading Margins

PPL enters into certain contractual arrangements that meet the criteria of
  energy trading contracts as defined by EITF 02-3. These physical and financial
  contracts cover electricity, gas, capacity, transmission congestion and emission
  allowances. The decrease for the three month period was primarily due to unrealized,
  mark-to-market electricity gains in 2001 and lower capacity and energy margins.
  The decrease for the nine month period was primarily due to unrealized, mark-to-market
  gains in 2001 and lower capacity and congestion margins.

Unregulated Retail

Unregulated retail margins were lower for the nine months ended September 30,
  2002, compared to the same period in 2001. This decline in unregulated retail
  margins was primarily due to lower revenues resulting from the expiration of
  contracts which were not renewed in the East and to significantly lower retail
  prices in the West. However, the decline was partially offset by an increase
  in the number of customers in the West.

Regulated Retail

Regulated retail margins in the East were lower for the three months ended
  September 30, 2002, compared to the same period in 2001. For the three months
  ended September 30, 2002, a prolonged heatwave resulted in higher purchased
  power costs during this period.

For the nine months ended September 30, 2002, sales volumes were about 5% higher
  than that realized for the same period in 2001. Higher sales volumes and higher
  average prices, caused by changes in usage among customer classes, provided
  the improved margins. In addition, lower supply costs in 2002, due to lower
  fuel costs and increased generating unit availability, improved margins by $4
  million.

Utility Revenues

PPL Energy Supply's utility operations consist of the delivery of electricity
  by PPL Global subsidiaries. Utility revenue increased by $7 million and $8 million
  for the three and nine months ended September 30, 2002, compared to the same
  periods in 2001, due to increased volume of deliveries.

Energy Related Businesses

The increase (decrease) in operating income from energy related businesses
  was attributable to the following:

|                                               | September 30, 2002 vs. September 30, 2001
|---------------------------------------------- | -----------------------------------------
|                                               |                                          
|                                               |                                          
|PPL Southwest Generation Holdings,
      LLC   |                                          
|                                               |                                          
|PPL Global project development
      expenses  |                                          
|                                               |                                          
|Mechanical contractors                         |                                          
|                                               |                                          
|Synfuel projects (excluding tax
      credits) |                                          
|                                               |                                          
|Other                                          |                                          
|                                               |                                          
|                                               |                                          
|                                               |                                          

The decrease in PPL Southwest Generation Holdings, LLC's income was due to
  a full year of operations of Griffith Energy in 2002, and that 2001 benefited
  from forward electricity contracts, executed prior to commercial operation.
  (PPL Southwest Generation Holdings, LLC has a 50% interest in the Griffith Energy
  facility.) The decrease in PPL Global's expenses was due to lower spending on
  development projects, including a favorable settlement on the cancellation of
  the Starbuck project.

Other Operation and Maintenance

Other operation and maintenance expenses increased by $14 million and $11 million
  for the three and nine months ended September 30, 2002, compared with the same
  periods in 2001. These increases were primarily because, in conjunction with
  the workforce reduction (see Note 15 to the Financial Statements), PPL revised
  its estimated vacation liability by $15 million. PPL Energy Supply's portion
  of this revision was approximately $6 million. Additionally, there were $5 million
  of expenses relating to the operating lease on the University Park and Sundance
  facilities, which began operation in July 2002.

PPL Energy Supply's expenses were impacted by PPL's pension plan. During the
  second quarter of 2002, the workforce reduction and union-negotiated benefit
  enhancements had a significant impact on PPL's primary pension plan, increasing
  the benefit obligation by $140 million. As a result of these changes, PPL remeasured
  its net periodic pension cost for that plan, which included recognition of asset
  losses totaling $153 million as of June 30, 2002 due to weakened financial markets.
  These combined events decreased the funded status of PPL's pension plan by approximately
  $290 million. PPL Energy Supply participates in that plan and is allocated approximately
  34% of the obligations of that plan.

Through September 30, 2002, PPL Energy Supply was allocated approximately $10
  million of pension income. As a result of the events and remeasurements previously
  discussed, PPL Energy Supply expects to be allocated a lower level of pension
  income. The allocation is expected to be approximately $2 million in the fourth
  quarter of 2002, for a total of $12 million in 2002. PPL expects to continue
  to record pension income in 2003, but at lower levels due to the above events
  and continued weakness in the financial markets.

Transmission

Transmission expense decreased by $2 million and $23 million for the three
  and nine months ended September 30, 2002, compared with the same periods in
  2001. The decrease for the three-month period resulted from lower transmission
  of wholesale energy purchases needed to meet wholesale energy activity. The
  decrease for the nine-month period was due to $14 million in lower wholesale
  energy purchases needed to meet wholesale energy activity, in part due to the
  expansion of the PJM, and $8 million in lower energy purchases due to a decrease
  in retail sales by PPL EnergyPlus.

Depreciation

Depreciation decreased by $12 million for the nine months ended September 30,
  2002, compared with the same period in 2001. This decrease was primarily the
  result of:

- $11 million due to extension of the Susquehanna station's depreciable life;
- $8 million due to no longer recording goodwill amortization; and
- $4 million due to PPL Global's write-down of CEMAR assets in 2001, resulting
    in no depreciation on these assets in 2002.

These decreases were partially offset by an increase of $10 million due to
  depreciation of the PPL Wallingford facility and plant upgrades and installation
  of SCR technology at several facilities.

Taxes, Other Than Income

Taxes, other than income, decreased by $5 million during the nine months ended
  September 30, 2002, compared with the same period in 2001, primarily due to
  a $3 million decrease in gross receipts tax, and a $2 million decrease in local
  real estate taxes.

The decrease in gross receipts tax is primarily due to the lower unregulated
  retail electric and gas revenues. This decrease is partially offset by an increase
  in the revenue-neutral reconciliation (RNR) tax component of the effective Pennsylvania
  gross receipts tax rate in January 2002. The RNR, which adjusts the base gross
  receipts tax rate of 4.4%, was enacted as part of the Customer Choice Act as
  a tax revenue replacement component to recoup losses to the Commonwealth of
  Pennsylvania that may result from the restructuring of the electric industry.

Changes in gross receipts tax do not significantly affect earnings as they
  are substantially recovered through customer rate revenues.

Write-down of International Energy Projects

See Note 8 to the Financial Statements for additional information on the write-down
  of PPL Global's investment in CEMAR.

Workforce Reduction

See Note 15 to the Financial Statements for information regarding the $41 million
  charge recorded in 2002.

Other Income - net

See Note 14 to the Financial Statements for details of other income.

Interest Expense

Interest expense increased by $22 million for the three months ended September
  30, 2002, compared with the same period in 2001 primarily due to:

- an $8 million increase in long-term debt interest from the issuance of $500
    million of senior unsecured notes in October 2001;
- a $5 million increase in long-term debt interest from debt issued by PPL
    Global's consolidated subsidiaries; and
- a $6 million decrease in capitalized interest.

Interest expense increased by $31 million for the nine months ended September
  30, 2002, compared with the same period in 2001 primarily due to:

- a $24 million increase in long-term debt interest from the issuance of $500
    million of senior unsecured notes;
- a $21 million increase in long-term debt interest from debt issued by PPL
    Global's consolidated subsidiaries; and
- a $6 million decrease in capitalized interest; offset by
- a $21 million decrease in short-term debt interest from a decrease in short-term
    borrowings from affiliates.

Income Taxes

Income taxes decreased by $27 million for the three months ended September
  30, 2002, compared to the same period in 2001. The change was primarily due
  to lower pre-tax book income, resulting in a $20 million reduction in income
  taxes, and a $5 million increase in the amount of federal synfuel tax credits
  recognized.

Income taxes decreased by $81 million for the nine months ended September 30,
  2002, compared to the same period in 2001. The change was primarily due to lower
  pre-tax book income, resulting in a $111 million reduction in income taxes,
  and a $9 million increase in the amount of federal synfuel tax credits recognized.
  These decreases were offset by $33 million of deferred income tax valuation
  allowances recorded on PPL Energy Supply's investment in CEMAR.

Change in Accounting Principle

PPL Energy Supply adopted SFAS 142, "Goodwill and Other Intangible Assets,"
  on January 1, 2002. SFAS 142 requires an annual impairment test of goodwill
  and other intangible assets that are not subject to amortization. PPL Energy
  Supply conducted a transition impairment analysis in the first quarter of 2002
  and recorded a transition goodwill impairment charge of $150 million, which
  was reported as a "Cumulative Effect of a Change in Accounting Principle" on
  the Statement of Income. See Note 13 to the Financial Statements for additional
  information on the adoption of SFAS 142.

In October 2002, PPL announced that beginning January 1, 2003, it will expense
  the value of any new stock options granted to PPL employees. Pursuant to guidance
  provided by SFAS 123, "Accounting for Stock-Based Compensation," which is considered
  the preferred method of accounting for stock-based employee compensation, PPL
  will expense any new options granted, utilizing the widely used Black-Scholes
  valuation model. Because the actual value of stock options cannot be known at
  the time the option is granted, it is necessary to make a number of assumptions
  to determine their value. The Black-Scholes formula, which takes into account
  a number of factors including the historic performance of the stock on which
  the option is offered, will be used to establish an estimated value for the
  options at the time they are granted.

PPL Energy Supply expects minimal financial impact from the adoption of this
  methodology. If the number of options granted in future periods are similar
  to levels in 2002, the expected impact would be approximately $1 million in
  2003, $3 million in 2004, and $4 million for 2005 and future years. These estimates
  include charges for stock options granted to officers of PPL Energy Supply as
  well as an allocation of charges for stock options granted to officers of PPL
  Services Corporation. These estimates also assume the number of options granted
  and the fair value of options granted is similar for all years. The actual impact
  would be different if the number of options granted or the fair value of options
  increases or decreases from the current estimate, or if the current accounting
  guidance changes. Historically, PPL had applied the intrinsic value method permitted
  under SFAS 123 and defined in APB Opinion No. 25, "Accounting for Stock Issued
  to Employees" and related interpretations, in accounting for stock options.
  Accordingly, no compensation cost has been recognized for stock options in the
  past.

Acquisitions and Development

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

With the cancellation of the Freeport project, PPL Global had domestic generation
  projects, either announced or under development, which would provide about 990
  MW of additional generation.

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

Other Matters

Rating Agency Developments

In September 2002, Standard & Poor's ("S&P") revised its outlook on
  PPL Energy Supply from a stable outlook to a negative outlook.

S&P's rating action reflects its view of a weakened credit profile that
  has resulted primarily from declining wholesale electricity prices and also
  from setbacks in PPL Energy Supply's international operations, particularly
  in Brazil. As part of its September 2002 review, S&P affirmed its ratings on PPL Energy Supply following
  the acquisition of a controlling interest in WPD.

In September 2002, S&P lowered the long-term corporate credit
  ratings on WPD from A- to BBB+.
S&P also lowered the long-term senior unsecured debt ratings on WPD by
  one notch. The A-2 short-term corporate credit ratings on WPD were affirmed.
  The outlook on WPD remains negative.

Also in September 2002, Moody's Investors Service affirmed its rating on PPL
  Energy Supply following the acquisition of a controlling interest in WPD.

Credit ratings reflect the agencies' opinion of overall financial strength.
  Various credit ratings impact companies' access to the capital markets and affect
  the costs related to these securities. Credit ratings are not a recommendation
  to buy, sell or hold any securities of PPL Energy Supply and may be subject
  to revisions or withdrawal by the agencies at any time. These credit ratings
  should be evaluated independently of each other and any other rating that may
  be assigned to PPL Energy Supply's securities.

WPD Pension Plan

WPD's cost of providing pension and benefit plans are dependent upon a number of factors, such as the rates of return on pension plan
assets and the discount rate used for the cost and investment assumptions.  The market value of plan assets has been affected by
sharp declines in the equity markets over recent quarters and, in particular, the third quarter of 2002.  While WPD's defined benefit
plans currently meet minimum funding requirements, based on WPD's plan assets as of October 31, 2002, PPL Energy Supply believes that
there is a likelihood that WPD's accumulated benefit obligation at year-end 2002 could exceed the market value of the plan assets.
Based on estimates of these calculations as of October 31, an
after-tax reduction to common equity of approximately $300 million would be recorded at year-end.  However, PPL Energy Supply currently
cannot estimate with certainty the amount of any potential adjustment to equity due to uncertainty about the factors impacting these
computations, including the performance of plan investments over the remainder of the year, the impact of any changes in actuarial
assumptions used to determine the accumulated benefit obligation and any contributions made to the plans.  This accounting is prescribed by SFAS No. 87 "Employers'
Accounting for Pensions" and SFAS No. 132 "Employers' Disclosures about Pensions and Postretirement Benefits."  The recording of a
reduction to common equity would not affect net income or cash flow in 2002, and the equity would be restored to the balance sheet in future periods
if, and at such times as, the fair value of the plan assets exceed the accumulated benefit obligation.

Critical Accounting Policies

PPL Energy Supply's financial condition and results of operations are necessarily
  impacted by the methods, assumptions and estimates used in the application of
  critical accounting policies. The following accounting policies are particularly
  important to the financial condition or results of operations of PPL Energy
  Supply and require estimates or other judgments of matters inherently uncertain:
  price risk management, pension and other postretirement benefits, asset impairment,
  leasing and contingencies. See Item 7, "Review of the Financial Condition and
  Results of Operations," in PPL Energy Supply's Annual Report to the SEC on Form
  10-K for the year ended December 31, 2001 for a discussion of each critical
  accounting policy. For an additional discussion of the impact of the workforce reduction on pension and other postretirement
  benefits, see Note 15 to the Financial Statements and "Other Operation and Maintenance"
  in Results of Operations. For an additional discussion of the impact of the
  CEMAR write-down on asset impairment, see Note 8 to the Financial Statements.

---

PPL ELECTRIC UTILITIES CORPORATION
  AND SUBSIDIARIES



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

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

Results of Operations

The following discussion explains significant changes in principal items on
  the Statement of Income, comparing the three and nine months ended September
  30, 2002, to the comparable periods in 2001.

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

Earnings

Net income in 2002 was impacted by the workforce reduction charge, as described
  in Note 15 to the Financial Statements.

|                                        | Three MonthsEnded September 30, |    |  | Nine MonthsEnded September 30, |  
|--------------------------------------- | ------------------------------- | -- |  | ------------------------------ | -
|                                        | 2002                            |    |  | 2001                           |  
|                                        |                                 |    |  |                                |  
|Net income - actual                     | $                               | 24 |  |                                | $
|                                        |                                 |    |  |                                |  
|Unusual item (net of tax):              |                                 |    |  |                                |  
|                                        | Workforce reduction             |    |  |                                |  
|                                        |                                 |    |  |                                |  
|                                        |                                 |    |  |                                |  
|Net income from core
        operations | $                               | 24 |  |                                | $
|                                        |                                 |    |  |                                |  

The after-tax changes in core earnings were primarily due to:

|                                                                                              |  | September 30, 2002 vs. September 30, 2001 |   
|--------------------------------------------------------------------------------------------- |  | ----------------------------------------- | --
|                                                                                              |  | Three MonthsEnded                         |   
|                                                                                              |  |                                           |   
|Higher energy purchase costs including amortization
      of up-front payment on PLR contract |  | $                                         | (2
|                                                                                              |  |                                           |   
|PJM ancillary service expense                                                                 |  |                                           | (8
|                                                                                              |  |                                           |   
|Delivery revenues (net of CTC/ITC amortization)                                               |  |                                           | 5 
|                                                                                              |  |                                           |   
|Lower dividends on preferred securities                                                       |  |                                           | 2 
|                                                                                              |  |                                           |   
|Other - net                                                                                   |  |                                           | 1 
|                                                                                              |  |                                           |   
|                                                                                              |  | $                                         | (2
|                                                                                              |  |                                           |   

Operating Revenues

Retail Electric

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

|                               |  | September 30, 2002 vs. September 30, 2001 |   
|------------------------------ |  | ----------------------------------------- | --
|                               |  | Three MonthsEnded                         |   
|                               |  |                                           |   
|Electric delivery              |  | $                                         | 11
|                               |  |                                           |   
|PLR electric generation supply |  |                                           | 17
|                               |  |                                           |   
|Other                          |  |                                           | 2 
|                               |  |                                           |   
|                               |  |                                           |   
|                               |  |                                           |   

The increase in operating revenues from retail electric operations in both
  periods was primarily due to higher revenues from providing electric generation
  supply as a PLR. Since June 2001, about 80% to 90% of kWh in PPL Electric's
  service territory that had been served by alternate suppliers under the Customer
  Choice Act have returned to PPL Electric as the supplier.

Revenues from delivery of electricity increased for the three months ended
  September 30, 2002, compared to the same period in 2001. This reflected a 4.5%
  increase in deliveries of electricity, primarily due to warmer weather in the
  third quarter of 2002. Revenues from delivery of electricity decreased for the
  nine months ended September 30, 2002, compared to the same period in 2001. This
  reflected a 0.7% decrease in deliveries of electricity, primarily due to milder
  winter weather in the first quarter of 2002 and adverse economic conditions.

Wholesale Electric to Affiliate

PPL Electric has a contract to sell to PPL EnergyPlus the electricity that
  PPL Electric purchases under contracts with NUGs. With the termination in February
  2002 of its NUG contract with Foster Wheeler, PPL Electric purchased less NUG
  energy, and therefore had less electricity to sell to PPL EnergyPlus.

Energy Purchases

Effective January 1, 2002, PPL Electric began incurring the costs of certain
  ancillary services, such as area regulation and operating reserves, in connection
  with its power supply contract with PPL EnergyPlus. Energy purchases increased
  by $11 million for the three months ended September 30, 2002 compared with the
  same period in 2001, including $14 million in ancillary service costs. These
  costs were offset by a $4 million decrease in NUG purchases due to the termination
  of an energy purchase contract with a NUG in February 2002.

Energy purchases increased by $26 million for the nine months ended September
  30, 2002, compared with the same period in 2001, including $36 million in ancillary
  service costs from PJM. These costs were offset by a $10 million decrease in
  NUG purchases due to the termination of an energy purchase contract with a NUG
  in February 2002.

Energy Purchases from Affiliate

Energy purchases from affiliate increased by $19 million and $92 million for
  the three and nine months ended September 30, 2002, compared with the same periods
  in 2001. These increases reflect higher purchases under the power supply contract
  with PPL EnergyPlus needed to support a higher PLR load, due to the return of
  customers to PPL Electric as their PLR. See Note 10 to the Financial Statements
  for a discussion of the power supply contract.

Other Operation Expenses

There were no significant changes in other operation expenses for the three
  and nine months ended September 30, 2002, compared with the same period in 2001.
  However, these expenses were impacted by PPL's pension plan.

During the second quarter of 2002, the workforce reduction (see Note 15 to
  the Financial Statements) and union-negotiated benefit enhancements had a significant
  impact on PPL's primary pension plan, increasing the benefit obligation by $140
  million. As a result of these changes, PPL remeasured its net periodic pension
  cost for that plan, which included recognition of asset losses totaling $153
  million as of June 30, 2002 due to weakened financial markets. These combined
  events decreased the funded status of PPL's pension plan by approximately $290
  million. PPL Electric participates in that plan and is allocated approximately
  46% of the obligations of that plan.

Through September 30, 2002, PPL Electric was allocated approximately $13 million
  of pension income. As a result of the events and remeasurements previously discussed,
  PPL Electric expects to be allocated a lower level of pension income. The allocation
  is expected to be approximately $3 million in the fourth quarter of 2002, for
  a total of $16 million in 2002. PPL expects to continue to record pension income
  in 2003, but at lower levels due to the above events and continued weakness
  in the financial markets.

Amortization of Recoverable Transition Costs

Amortization of recoverable transition costs decreased by $26 million for the
  nine months ended September 30, 2002, compared with the same period in 2001.
  This decrease was primarily due to $22 million of lower ITC amortization in
  2002 as a result of lower billed ITC revenues. Billed ITC revenues were lower
  as a result of lower ITC rates, reflecting the decrease in interest expense
  on the transition bonds.

Taxes, Other Than Income

Taxes, other than income, increased by $26 million during the nine months ended
  September 30, 2002, compared with the same period in 2001, primarily due to
  a $36 million increase in gross receipts tax, offset by a $10 million decrease
  in capital stock tax.

The gross receipts tax increase was due to an increase in the revenue-neutral
  reconciliation (RNR) tax component of the effective Pennsylvania gross receipts
  tax rate in January 2002. The RNR, which adjusts the base gross receipts tax
  rate of 4.4%, was enacted as part of the Customer Choice Act as a tax revenue
  replacement component to recoup losses to the Commonwealth of Pennsylvania that
  may result from the restructuring of the electric industry.

The settlement of prior years' capital stock tax refund claims and a lower
  capital stock tax rate in 2002 resulted in the decrease.

Changes in gross receipts and capital stock taxes do not significantly affect
  earnings as they are substantially recovered through customer rate revenues.

Workforce Reduction

See Note 15 to the Financial Statements for information regarding the $33 million
  charge recorded in June 2002.

Financing Costs

Decreases in interest on long-term debt accounted for the $3 million and $8
  million decreases in interest expense for the three and nine months ended September
  30, 2002, compared with the same periods in 2001. These decreases were the net
  impact of retirements of mortgage bonds and transition bonds, partially offset
  by the issuance of $800 million of senior secured bonds in August 2001.

Dividends on preferred securities decreased by $2 million and $4 million for
  the three and nine months ended September 30, 2002, compared with the same periods
  in 2001. These decreases were due to retirements and redemptions of preferred
  securities and preferred stock.

Income Taxes

Income taxes decreased by $2 and $34 million for the three and nine months
  ended September 30, 2002, compared to the same periods in 2001, as a result
  of lower pre-tax book income.

Change in Accounting Principle

In October 2002, PPL announced that beginning January 1, 2003, it will expense
  the value of any new stock options granted to PPL employees. Pursuant to guidance
  provided by SFAS 123, "Accounting for Stock-Based Compensation," which is considered
  the preferred method of accounting for stock-based employee compensation, PPL
  will expense any new options granted, utilizing the widely used Black-Scholes
  valuation model. Because the actual value of stock options cannot be known at
  the time the option is granted, it is necessary to make a number of assumptions
  to determine their value. The Black-Scholes formula, which takes into account
  a number of factors including the historic performance of the stock on which
  the option is offered, will be used to establish an estimated value for the
  options at the time they are granted.

PPL Electric expects minimal financial impact from the adoption of this methodology.
  If the number of options granted in future periods are similar to levels in
  2002, the expected impact would be approximately $1 million in 2003, $1 million
  in 2004, and $2 million for 2005 and future years. These estimates include charges
  for stock options granted to officers of PPL Electric as well as an allocation
  of charges for stock options granted to officers of PPL Services Corporation.
  These estimates assume the number of options granted and the fair value of options
  granted is similar for all years. The actual impact would be different if the
  number of options granted or the fair value of options increases or decreases
  from the current estimate, or if the current accounting guidance changes. Historically,
  PPL had applied the intrinsic value method permitted under SFAS 123 and defined
  in APB Opinion No. 25, "Accounting for Stock Issued to Employees" and related
  interpretations, in accounting for stock options. Accordingly, no compensation
  cost has been recognized for stock options in the past.

Financial Condition

Liquidity

At September 30, 2002, PPL Electric had $78 million of cash and cash equivalents
  and no short-term debt. At December 31, 2001, PPL Electric had $79 million of
  cash and cash equivalents and no short-term debt. The relatively unchanged cash
  position was the net result of the retirement of $478 million of long-term debt
  and preferred securities and capital expenditures of $147 million, partially
  offset by a $260 million repayment of a notes receivable from an affiliate,
  capital contributed from PPL of $240 million, funded from the common stock sale
  at PPL, and cash provided from operating activities.

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

Related Party Transactions

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

For information on related party accounting transactions, see Note 10 to the
  Financial Statements.

Cash Flow

Cash and cash equivalents decreased by $127 million more during the nine months
  ended September 30, 2002, compared with the same period in 2001. The reasons
  for this change were:

- a $29 million decrease in cash provided by operating activities, primarily
    due to the payment of collateral to PPL EnergyPlus under the power supply
    contract;

- a $161 million increase in cash provided by investing activities, primarily
    due to the repayment of notes receivable from parent and affiliates which
    was $190 million greater during the nine months ended September 30, 2002;
    and
- a $259 million increase in cash used in financing activities, primarily
    due a $294 million net increase in cash outflows for debt, preferred securities
    and equity.

Environmental Matters

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

Critical Accounting Policies

PPL Electric's financial condition and results of operations are necessarily
  impacted by the methods, assumptions and estimates used in the application of
  critical accounting policies. Accounting policies for pensions and other postretirement
  benefits and for contingencies are particularly important to the financial condition
  or results of operations of PPL Electric, and require estimates or other judgments
  of matters inherently uncertain. See Item 7, "Review of the Financial Condition
  and Results of Operations," in PPL Electric's Annual Report to the SEC on Form
  10-K for the year ended December 31, 2001 for a discussion of each critical
  accounting policy. For an additional discussion of the impact of the workforce
  reduction on pension and other postretirement benefits, see Note 15 to the Financial
  Statements and "Other Operation Expenses" in Results of Operations.

---

PPL MONTANA, LLC AND SUBSIDIARIES



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

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

Results of Operations

The following discussion explains significant changes in principal items on
  the Statement of Income, comparing the nine months ended September 30, 2002,
  to the comparable period in 2001.

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

Earnings

Net income decreased by $62 million for the nine months ended September 30,
  2002, compared with the same period in 2001. The decrease was primarily due
  to lower wholesale prices in the western U.S.

Operating Revenues

Operating revenues decreased by $144 million for the nine months ended September
  30, 2002, compared with the same period in 2001. The decrease was primarily
  due to a decline in wholesale energy prices from the high prices experienced
  in the first half of 2001, resulting from an energy supply shortage in the western
  U.S. The decrease in power prices resulted in a decrease in revenues of $184
  million, while an increase in volume sold resulted in an increase in revenues
  of $40 million.

In June 2001, the FERC instituted a series of price controls designed to mitigate
  (or cap) prices in the entire western U.S. as a result of the California energy
  crisis. These price controls have had the effect of significantly lowering spot
  and forward energy prices in the western U.S. See Note 9 to the Financial Statements
  for further discussion on the California situation.

Operating Expense

Operating expenses decreased by $42 million during the nine months ended September
  30, 2002, compared with the same period in 2001. Operating expenses consist
  mainly of expenses for fuel, energy purchases, transmission tariffs, plant operations
  and maintenance, lease rental payments, and general and administrative expenses.
  The decrease was primarily due to a $46 million decrease in energy purchases,
  related to the decreased power costs in the western U.S. during the first half
  of 2002. The decrease in power prices resulted in a $60 million decrease in
  energy purchases, while an increase in volumes purchased resulted in an increase
  in energy purchases of $14 million.

Generation increased by 305 million kWh during the nine months ended September
  30, 2002, compared with the same period in 2001. This increase was primarily
  the result of higher hydroelectric generation caused by improved water flows
  in the first half of 2002.

Other Matters

In September 2002, Standard & Poor's ("S&P") revised its outlook on
  PPL Montana from a stable outlook to a negative outlook.

S&P's rating action reflects its view of a weakened credit profile that
  has resulted primarily from declining wholesale electricity prices.

Credit ratings reflect the agencies' opinion of overall financial strength.
  Various credit ratings impact companies' access to the capital markets and affect
  the costs related to these securities. Credit ratings are not a recommendation
  to buy, sell or hold any securities of PPL Montana and may be subject to revisions
  or withdrawal by the agencies at any time. These credit ratings should be evaluated
  independently of each other and any other rating that may be assigned to PPL
  Montana's securities.

Critical Accounting Policies

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

---

PPL CORPORATION AND SUBSIDIARIES



Item 3. Quantitative and Qualitative Disclosures About
  Market Risk



Market Risk-Sensitive Instruments

PPL actively manages the market risk inherent in its commodity, debt, and foreign
  currency and equity positions, as detailed in Note 11 to the Financial Statements.
  PPL has a comprehensive risk management policy to manage the risk exposures
  related to counterparty credit, energy prices, interest rates and foreign currency
  exchange rates. A Risk Management Committee comprised of senior officers oversees
  the risk management function. Nonetheless, adverse changes in commodity prices,
  interest rates, foreign currency exchange rates and equity prices may result
  in losses in earnings, cash flows and/or fair values. The forward-looking information
  presented below provides estimates of what may occur in the future, assuming
  certain adverse market conditions, due to reliance on model assumptions. Actual
  future results may differ materially from those presented. These disclosures
  are not precise indicators of expected future losses, but only indicators of
  reasonably possible losses.

Commodity Price Risk

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

As of September 30, 2002, PPL estimated that a 10% adverse movement in market
  prices across all geographic areas and time periods would have decreased the
  value of the commodity contracts in its non-hedge portfolio by $3 million. A
  similar adverse movement in market prices would have decreased the value of
  the commodity contracts in its hedge portfolio by approximately $122 million
  at September 30, 2002. However, the change in the value of the hedge portfolio
  would have been substantially offset by an increase in the value of the underlying
  commodity, the electricity generated, because these contracts serve to reduce
  the market risk inherent in the generation of electricity. Additionally, the
  value of PPL's unsold generation would be improved. Because PPL's electricity
  portfolio is generally in a net sales position, the adverse movement in prices
  is usually an increase in prices. Conversely, because PPL's commodity fuels
  portfolio is generally in a net purchase position, the adverse movement in prices
  is usually a decrease in prices. If both of these scenarios happened, the implied
  margins for the unsold generation would increase.

In addition to commodity price risk associated with PPL's trading portfolio
  and any unhedged positions in its non-trading portfolio, PPL's commodity positions
  are also subject to operational and event risks including, among others, changes
  in load demand, decreases in hydro availability and forced outages at power
  plants.

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

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

Interest Rate Risk

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

At September 30, 2002, PPL's potential annual exposure to increased interest
  expense, based on a 10% increase in interest rates, was estimated at $3 million.

PPL is also exposed to changes in the fair value of its debt portfolio. At
  September 30, 2002, PPL estimated that its potential exposure to a change in
  the fair value of its debt portfolio, through a 10% adverse movement in interest
  rates, was $237 million.

PPL utilizes various risk management instruments to reduce its exposure to
  adverse interest rate movements for future anticipated financings. While PPL
  is exposed to changes in the fair value of these instruments, they are designed
  such that an economic loss in value should generally be offset by interest rate
  savings at the time the future anticipated financing is completed. At September
  30, 2002, PPL estimated that its potential exposure to a change in the fair
  value of these instruments, through a 10% adverse movement in interest rates,
  was approximately $15 million.

See Note 11 to the Financial Statements for a discussion of financial derivative
  instruments outstanding at September 30, 2002.

Foreign Currency Risk

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

PPL has adopted a foreign currency risk management program designed to hedge
  certain foreign currency exposures, including firm commitments, recognized assets
  or liabilities and net investments.

During the first quarter of 2001, PPL entered into contracts for the forward
  purchase of 51 million euros to pay for certain equipment in 2002 and 2003.
  The estimated value of these forward purchases as of September 30, 2002, being
  the amount PPL would receive to terminate them, was insignificant.

During the second and third quarters of 2002, PPL executed forward sale transactions,
  maturing in December 2002, for 50 million British pounds sterling to hedge the
  net investment in WPDH Limited. The estimated value of these agreements as of
  September 30, 2002, being the amount PPL would have to pay to terminate them,
  was $1 million.

Nuclear Decommissioning Fund - Securities Price Risk

In connection with certain Nuclear Regulatory Commission requirements, PPL
  Susquehanna maintains trust funds to fund certain costs of decommissioning the
  Susquehanna station. As of September 30, 2002, these funds were invested primarily
  in domestic equity securities and fixed-rate, fixed-income securities and are
  reflected at fair value on PPL's Balance Sheet. The mix of securities is designed
  to provide returns to be used to fund Susquehanna's decommissioning and to compensate
  for inflationary increases in decommissioning costs. However, the equity securities
  included in the trusts are exposed to price fluctuation in equity markets, and
  the values of fixed-rate, fixed-income securities are exposed to changes in
  interest rates. PPL Susquehanna actively monitors the investment performance
  and periodically reviews asset allocation in accordance with its nuclear decommissioning
  trust policy statement. At September 30, 2002, a hypothetical 10% increase in
  interest rates and a 10% decrease in equity prices would have resulted in an
  estimated $14 million reduction in the fair value of the trust assets.

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

---

PPL ENERGY SUPPLY, LLC AND SUBSIDIARIES

Item 3. Quantitative and Qualitative Disclosures About Market
  Risk

Market Risk Sensitive Instruments

PPL Energy Supply actively manages the market risk inherent in its commodity,
  debt, and foreign currency and equity positions as detailed in Note 11 to the
  Financial Statements. PPL Energy Supply has a comprehensive risk management
  policy to manage the risk exposures related to counterparty credit, energy prices,
  interest rates and foreign currency exchange rates. A Risk Management Committee
  comprised of senior officers of PPL oversees the risk management function. Nonetheless,
  adverse changes in commodity prices, interest rates, foreign currency exchange
  rates and equity prices may result in losses in earnings, cash flows and/or
  fair values. The forward-looking information presented below provides estimates
  of what may occur in the future, assuming certain adverse market conditions,
  due to reliance on model assumptions. Actual future results may differ materially
  from those presented. These disclosures are not precise indicators of expected
  future losses, but only indicators of reasonably possible losses.

Commodity Price Risk

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

As of September 30, 2002, PPL Energy Supply estimated that a 10% adverse movement
  in market prices across all geographic areas and time periods would have decreased
  the value of the commodity contracts in its non-hedge portfolio by $3 million.
  A similar adverse movement in market prices would have decreased the value of
  the commodity contracts in its hedge portfolio by approximately $122 million
  at September 30, 2002. However, the change in the value of the hedge portfolio
  would have been substantially offset by an increase in the value of the underlying
  commodity, the electricity generated, because these contracts serve to reduce
  the market risk inherent in the generation of electricity. Additionally, the
  value of PPL Energy Supply 's unsold generation would be improved. Because PPL
  Energy Supply's electricity portfolio is generally in a net sales position,
  the adverse movement in prices is usually an increase in prices. Conversely,
  because PPL Energy Supply's commodity fuels portfolio is generally in a net
  purchase position, the adverse movement in prices is usually a decrease in prices.
  If both of these scenarios happened, the implied margins for the unsold generation
  would increase.

In addition to commodity price risk associated with PPL Energy Supply's trading
  portfolio and any unhedged positions in its non-trading portfolio, PPL Energy
  Supply's commodity positions are also subject to operational and event risks
  including, among others, changes in load demand, decreases in hydro availability
  and forced outages at power plants.

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

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

Commodity Price Risk - PLR Contracts

PPL Electric and PPL EnergyPlus have power supply agreements under which PPL
  EnergyPlus sells to PPL Electric (under a predetermined pricing arrangement)
  energy and capacity to fulfill PPL Electric's PLR obligation through 2009. As
  a result, PPL Electric has shifted any electric price risk relating to its PLR
  obligation to PPL EnergyPlus for 2002 through 2009. See Note 10 to the Financial
  Statements for information on the PLR contracts.

Interest Rate Risk

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

At September 30, 2002, PPL Energy Supply's potential annual exposure to increased
  interest expense, based on a 10% increase in interest rates, was estimated at
  $2 million.

PPL Energy Supply is also exposed to changes in the fair value of its debt
  portfolio. At September 30, 2002, PPL Energy Supply estimated that its potential
  exposure to a change in the fair value of its debt portfolio, through a 10%
  adverse movement in interest rates, was $80 million.

PPL utilizes various risk management instruments to reduce PPL Energy Supply's
  exposure to adverse interest rate movements for future anticipated financings.
  While PPL Energy Supply is exposed to changes in the fair value of these instruments,
  they are designed such that any economic loss in value should be offset by interest
  rate savings at the time the future anticipated financing is completed. At September
  30, 2002, PPL Energy Supply had not entered into any such instruments.

See Note 11 to the Financial Statements for a discussion of financial derivative
  instruments outstanding at September 30, 2002.

Foreign Currency Risk

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

PPL has adopted a foreign currency risk management program designed to hedge
  certain foreign currency exposures, including firm commitments, recognized assets
  or liabilities and net investments.

During the first quarter of 2001, PPL entered into contracts for the forward
  purchase of 51 million euros to pay for certain equipment in 2002 and 2003.
  The estimated value of these forward purchases as of September 30, 2002, being
  the amount PPL would receive to terminate them, was insignificant.

During the second and third quarters of 2002, PPL executed forward sale transactions,
  maturing in December 2002, for 50 million British pounds sterling to hedge the
  net investment in WPDH Limited. The estimated value of these agreements as of
  September 30, 2002, being the amount PPL would have to pay to terminate them,
  was $1 million.

Nuclear Decommissioning Fund - Securities Price Risk

In connection with certain Nuclear Regulatory Commission requirements, PPL
  Susquehanna maintains trust funds to fund certain costs of decommissioning the
  Susquehanna station. As of September 30, 2002, these funds were invested primarily
  in domestic equity securities and fixed-rate, fixed-income securities and are
  reflected at fair value on PPL Energy Supply's Balance Sheet. The mix of securities
  is designed to provide returns to be used to fund Susquehanna's decommissioning
  and to compensate for inflationary increases in decommissioning costs. However,
  the equity securities included in the trusts are exposed to price fluctuation
  in equity markets, and the values of fixed-rate, fixed-income securities are
  exposed to changes in interest rates. PPL Susquehanna actively monitors the
  investment performance and periodically reviews asset allocation in accordance
  with its nuclear decommissioning trust policy statement. At September 30, 2002,
  a hypothetical 10% increase in interest rates and a 10% decrease in equity prices
  would have resulted in an estimated $14 million reduction in the fair value
  of the trust assets.

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

---

PPL ELECTRIC UTILITIES CORPORATION
  AND SUBSIDIARIES



Item 3. Quantitative and Qualitative Disclosures About
  Market Risk



Market Risk Sensitive Instruments

Commodity Price Risk - PLR Contracts

PPL Electric and PPL EnergyPlus have power supply agreements under which PPL
  EnergyPlus sells to PPL Electric (under a predetermined pricing arrangement)
  energy and capacity to fulfill PPL Electric's PLR obligation through 2009. As
  a result, PPL Electric has shifted any electric price risk relating to its PLR
  obligation to PPL EnergyPlus for 2002 through 2009. See Note 10 to the Financial
  Statements for information on the PLR contracts.

Interest Rate Risk

PPL Electric has issued debt to finance its operations, which increases its
  interest rate risk. At September 30, 2002, PPL Electric's potential annual exposure
  to increased interest expense, based on a 10% increase in interest rates, was
  not significant.

PPL Electric is also exposed to changes in the fair value of its debt portfolio.
  At September 30, 2002 PPL Electric estimated that its potential exposure to
  a change in the fair value of its debt portfolio, through a 10% adverse movement
  in interest rates, was approximately $65 million.

---

PPL MONTANA, LLC AND SUBSIDIARIES



Item 3. Quantitative and Qualitative Disclosures About Market
  Risk

Market Risk Sensitive Instruments

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

Commodity Price Risk

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

PPL Montana estimated that a 10% adverse movement in market prices across the
  markets PPL Montana operates in, and across all time periods, would have decreased
  the value of the hedge portfolio by approximately $68 million at September 30,
  2002. A similar adverse movement in market prices would have decreased the value
  of the non-hedge portfolio by an insignificant amount at September 30, 2002.
  However, the change in the value of the hedge portfolio would have been substantially
  offset by an increase in the value of the underlying commodity, the electricity
  generated, because these contracts serve to reduce the market risk inherent
  in the generation of electricity. In addition to commodity price risk associated
  with PPL Montana's trading portfolio and any unhedged positions in its non-trading
  portfolio, PPL Montana's commodity positions are also subject to operational
  and event risks including, among others, changes in load demand, decreases in
  hydro availability and forced outages at generating plants.

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

Interest Rate Risk

PPL Montana may use borrowings to provide funds for its operations. PPL Montana
  may utilize various financial derivative products and risk management techniques
  to adjust the mix of fixed and floating-rate interest rates in its debt portfolio
  and thereby reduce its exposure to adverse interest rate movements. PPL Montana
  had $35 million in borrowings outstanding as of September 30, 2002, and its
  interest rate risk was not significant.

---

PPL CORPORATION
  PPL ENERGY SUPPLY, LLC
  PPL ELECTRIC UTILITIES CORPORATION
  PPL MONTANA, LLC AND SUBSIDIARIES

|Item 4.
      Controls and Procedures
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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, PPL Electric's
    and PPL Montana's Annual Report to the SEC on Form 10-K for the year ended
    December 31, 2001;
- Part II. "OTHER INFORMATION," Item 1 "Legal Proceedings" in PPL's, PPL Energy
    Supply's, PPL Electric's and PPL Montana's Quarterly Report to the SEC on
    Form 10-Q for the quarter ended June 30, 2002; and
- Note 9 of the registrants' "Combined Notes to Condensed Consolidated Financial
    Statements" in Part I of this report.

Item 5. Other Information

As contemplated by the Sarbanes-Oxley Act of 2002 (Sarbanes Act) relating to "Preapproval Requirements," the Audit Committee has
 approved the independent auditor to provide the following audit and non-audit services:

- Base audit services (including Employee Benefit Plan Audits and Internal Accounting Control Reviews);
- Certain tax consulting and advisory services for projects commenced prior to December 31, 2002; and,
- Other non-audit services permitted by the Sarbanes Act, including the review of offering documents and registration statements.

|Item 6.
      Exhibits and Reports on Form 8-K
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants
  have duly caused this report to be signed on their behalf by the undersigned
  thereunto duly authorized. The signature for each undersigned company shall
  be deemed to relate only to matters having reference to such company or its
  subsidiaries.

|                        | PPL Corporation                      | 
|----------------------- | ------------------------------------ | 
|                        | (Registrant)                         | 
|                        |                                      | 
|                        | PPL Energy Supply, LLC               | 
|                        | (Registrant)                         | 
|                        |                                      | 
|                        | PPL Electric Utilities Corporation   | 
|                        | (Registrant)                         | 
|                        |                                      | 
|                        | PPL Montana, LLC                     | 
|                        | (Registrant)                         | 
|                        |                                      | 
|                        |                                      | 
|                        |                                      | 
|                        |                                      | 
|Date: November 12, 2002 | /s/  John R. Biggar                  | 
|                        | John R. Biggar                       | 
|                        | Executive Vice President and         | 
|                        | Chief Financial Officer              | 
|                        | (PPL Corporation)                    | 
|                        | (principal financial officer)        | 
|                        |                                      | 
|                        |                                      | 
|                        |                                      | 
|                        |                                      | 
|                        | /s/  James E. Abel                   | 
|                        | James E. Abel                        | 
|                        | Treasurer                            | 
|                        | (PPL Energy Supply, LLC)             | 
|                        | (PPL Montana, LLC)                   | 
|                        | (principal financial officer)        | 
|                        |                                      | 
|                        |                                      | 
|                        |                                      | 
|                        |                                      | 
|                        | /s/  Joseph J. McCabe                | 
|                        | Joseph J. McCabe                     | 
|                        | Vice President and Controller        | 
|                        | (PPL Electric Utilities Corporation) | 
|                        | (principal accounting officer)       | 

---

CERTIFICATION

I, WILLIAM F. HECHT, the principal executive officer of PPL
    Corporation (the "registrant"), certify that:

|1. | I have reviewed this quarterly report
      on Form 10-Q of the registrant for the quarter ended September 30, 2002;                                                                                                                                                                                                                                                                                                   
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|2. | Based on my knowledge, this quarterly
      report does not contain any untrue statement of a material fact or omit
      to state a material fact necessary to make the statements made, in light
      of the circumstances under which such statements were made, not misleading
      with respect to the period covered by this quarterly report;                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|3. | Based on my knowledge, the financial
      statements, and other financial information included in this quarterly report,
      fairly present in all material respects the financial condition, results
      of operations and cash flows of the registrant as of, and for, the periods
      presented in this quarterly report;                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|4. | The registrant's other certifying
      officers and I are responsible for establishing and maintaining disclosure
      controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
      for the registrant and we have:                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | a.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | b.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | c.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|5. | The registrant's other certifying
      officers and I have disclosed, based on our most recent evaluation, to the
      registrant's auditors and the audit committee of registrant's board of directors
      (or persons performing the equivalent function):                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | a.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | b.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|6. | The registrant's other certifying
      officers and I have indicated in this quarterly report whether or not there
      were significant changes in internal controls or in other factors that could
      significantly affect internal controls subsequent to the date of our most
      recent evaluation, including any corrective actions with regard to significant
      deficiencies and material weaknesses.







|Date: November 12, 2002 | /s/  William F. Hecht                                                                           
|----------------------- | ------------------------------------------------------------------------------------------------
|                        | William F. Hecht
        Chairman, President and Chief Executive Officer
        PPL Corporation

---

CERTIFICATION

I, JOHN R. BIGGAR, the principal financial officer of PPL Corporation
    (the "registrant"), certify that:




|1. | I have reviewed this quarterly report
      on Form 10-Q of the registrant for the quarter ended September 30, 2002;                                                                                                                                                                                                                                                                                                   
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|2. | Based on my knowledge, this quarterly
      report does not contain any untrue statement of a material fact or omit
      to state a material fact necessary to make the statements made, in light
      of the circumstances under which such statements were made, not misleading
      with respect to the period covered by this quarterly report;                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|3. | Based on my knowledge, the financial
      statements, and other financial information included in this quarterly report,
      fairly present in all material respects the financial condition, results
      of operations and cash flows of the registrant as of, and for, the periods
      presented in this quarterly report;                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|4. | The registrant's other certifying
      officers and I are responsible for establishing and maintaining disclosure
      controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
      for the registrant and we have:                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | a.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | b.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | c.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|5. | The registrant's other certifying
      officers and I have disclosed, based on our most recent evaluation, to the
      registrant's auditors and the audit committee of registrant's board of directors
      (or persons performing the equivalent function):                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | a.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | b.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|6. | The registrant's other certifying
      officers and I have indicated in this quarterly report whether or not there
      were significant changes in internal controls or in other factors that could
      significantly affect internal controls subsequent to the date of our most
      recent evaluation, including any corrective actions with regard to significant
      deficiencies and material weaknesses.







|Date: November 12, 2002 | /s/  John R. Biggar                                                                                
|----------------------- | ---------------------------------------------------------------------------------------------------
|                        | John R. Biggar
        Executive Vice President and Chief Financial Officer
        PPL Corporation

---

CERTIFICATION

I, WILLIAM F. HECHT, the principal executive officer of PPL
    Energy Supply, LLC (the "registrant"), certify that:

|1. | I have reviewed this quarterly report
      on Form 10-Q of the registrant for the quarter ended September 30, 2002;                                                                                                                                                                                                                                                                                                   
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|2. | Based on my knowledge, this quarterly
      report does not contain any untrue statement of a material fact or omit
      to state a material fact necessary to make the statements made, in light
      of the circumstances under which such statements were made, not misleading
      with respect to the period covered by this quarterly report;                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|3. | Based on my knowledge, the financial
      statements, and other financial information included in this quarterly report,
      fairly present in all material respects the financial condition, results
      of operations and cash flows of the registrant as of, and for, the periods
      presented in this quarterly report;                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|4. | The registrant's other certifying
      officers and I are responsible for establishing and maintaining disclosure
      controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
      for the registrant and we have:                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | a.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | b.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | c.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|5. | The registrant's other certifying
      officers and I have disclosed, based on our most recent evaluation, to the
      registrant's auditors and the audit committee of registrant's board of directors
      (or persons performing the equivalent function):                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | a.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | b.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|6. | The registrant's other certifying
      officers and I have indicated in this quarterly report whether or not there
      were significant changes in internal controls or in other factors that could
      significantly affect internal controls subsequent to the date of our most
      recent evaluation, including any corrective actions with regard to significant
      deficiencies and material weaknesses.







|Date: November 12, 2002 | /s/  William F. Hecht                                            
|----------------------- | -----------------------------------------------------------------
|                        | William F. Hecht
        President
        PPL Energy Supply, LLC

---

CERTIFICATION

I, JAMES E. ABEL, the principal financial officer of PPL Energy
    Supply, LLC (the "registrant"), certify that:

|1. | I have reviewed this quarterly report
      on Form 10-Q of the registrant for the quarter ended September 30, 2002;                                                                                                                                                                                                                                                                                                   
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|2. | Based on my knowledge, this quarterly
      report does not contain any untrue statement of a material fact or omit
      to state a material fact necessary to make the statements made, in light
      of the circumstances under which such statements were made, not misleading
      with respect to the period covered by this quarterly report;                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|3. | Based on my knowledge, the financial
      statements, and other financial information included in this quarterly report,
      fairly present in all material respects the financial condition, results
      of operations and cash flows of the registrant as of, and for, the periods
      presented in this quarterly report;                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|4. | The registrant's other certifying
      officers and I are responsible for establishing and maintaining disclosure
      controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
      for the registrant and we have:                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | a.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | b.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | c.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|5. | The registrant's other certifying
      officers and I have disclosed, based on our most recent evaluation, to the
      registrant's auditors and the audit committee of registrant's board of directors
      (or persons performing the equivalent function):                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | a.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | b.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|6. | The registrant's other certifying
      officers and I have indicated in this quarterly report whether or not there
      were significant changes in internal controls or in other factors that could
      significantly affect internal controls subsequent to the date of our most
      recent evaluation, including any corrective actions with regard to significant
      deficiencies and material weaknesses.







|Date: November 12, 2002 | /s/  James E. Abel                                            
|----------------------- | --------------------------------------------------------------
|                        | James E. Abel
        Treasurer
        PPL Energy Supply, LLC

---

CERTIFICATION

I, MICHAEL E. BRAY, the principal executive officer of PPL Electric
    Utilities Corporation (the "registrant"), certify that:

|1. | I have reviewed this quarterly report
      on Form 10-Q of the registrant for the quarter ended September 30, 2002;                                                                                                                                                                                                                                                                                                   
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|2. | Based on my knowledge, this quarterly
      report does not contain any untrue statement of a material fact or omit
      to state a material fact necessary to make the statements made, in light
      of the circumstances under which such statements were made, not misleading
      with respect to the period covered by this quarterly report;                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|3. | Based on my knowledge, the financial
      statements, and other financial information included in this quarterly report,
      fairly present in all material respects the financial condition, results
      of operations and cash flows of the registrant as of, and for, the periods
      presented in this quarterly report;                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|4. | The registrant's other certifying
      officers and I are responsible for establishing and maintaining disclosure
      controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
      for the registrant and we have:                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | a.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | b.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | c.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|5. | The registrant's other certifying
      officers and I have disclosed, based on our most recent evaluation, to the
      registrant's auditors and the audit committee of registrant's board of directors
      (or persons performing the equivalent function):                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | a.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | b.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|6. | The registrant's other certifying
      officers and I have indicated in this quarterly report whether or not there
      were significant changes in internal controls or in other factors that could
      significantly affect internal controls subsequent to the date of our most
      recent evaluation, including any corrective actions with regard to significant
      deficiencies and material weaknesses.







|Date: November 12, 2002 | /s/  Michael E. Bray                                                        
|----------------------- | ----------------------------------------------------------------------------
|                        | Michael E. Bray
        President
        PPL Electric Utilities Corporation

---

CERTIFICATION

I, JAMES E. ABEL, the principal financial officer of PPL Electric
    Utilities Corporation (the "registrant"), certify that:

|1. | I have reviewed this quarterly report
      on Form 10-Q of the registrant for the quarter ended September 30, 2002;                                                                                                                                                                                                                                                                                                   
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|2. | Based on my knowledge, this quarterly
      report does not contain any untrue statement of a material fact or omit
      to state a material fact necessary to make the statements made, in light
      of the circumstances under which such statements were made, not misleading
      with respect to the period covered by this quarterly report;                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|3. | Based on my knowledge, the financial
      statements, and other financial information included in this quarterly report,
      fairly present in all material respects the financial condition, results
      of operations and cash flows of the registrant as of, and for, the periods
      presented in this quarterly report;                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|4. | The registrant's other certifying
      officers and I are responsible for establishing and maintaining disclosure
      controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
      for the registrant and we have:                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | a.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | b.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | c.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|5. | The registrant's other certifying
      officers and I have disclosed, based on our most recent evaluation, to the
      registrant's auditors and the audit committee of registrant's board of directors
      (or persons performing the equivalent function):                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | a.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | b.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|6. | The registrant's other certifying
      officers and I have indicated in this quarterly report whether or not there
      were significant changes in internal controls or in other factors that could
      significantly affect internal controls subsequent to the date of our most
      recent evaluation, including any corrective actions with regard to significant
      deficiencies and material weaknesses.







|Date: November 12, 2002 | /s/  James E. Abel                                                        
|----------------------- | --------------------------------------------------------------------------
|                        | James E. Abel
        Treasurer
        PPL Electric Utilities Corporation

---

CERTIFICATION

I, JAMES H. MILLER, the principal executive officer of PPL
      Montana, LLC (the "registrant"), certify that:

|1. | I have reviewed this quarterly report
      on Form 10-Q of the registrant for the quarter ended September 30, 2002;                                                                                                                                                                                                                                                                                                   
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|2. | Based on my knowledge, this quarterly
      report does not contain any untrue statement of a material fact or omit
      to state a material fact necessary to make the statements made, in light
      of the circumstances under which such statements were made, not misleading
      with respect to the period covered by this quarterly report;                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|3. | Based on my knowledge, the financial
      statements, and other financial information included in this quarterly report,
      fairly present in all material respects the financial condition, results
      of operations and cash flows of the registrant as of, and for, the periods
      presented in this quarterly report;                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|4. | The registrant's other certifying
      officers and I are responsible for establishing and maintaining disclosure
      controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
      for the registrant and we have:                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | a.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | b.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | c.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|5. | The registrant's other certifying
      officers and I have disclosed, based on our most recent evaluation, to the
      registrant's auditors and the audit committee of registrant's board of directors
      (or persons performing the equivalent function):                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | a.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | b.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|6. | The registrant's other certifying
      officers and I have indicated in this quarterly report whether or not there
      were significant changes in internal controls or in other factors that could
      significantly affect internal controls subsequent to the date of our most
      recent evaluation, including any corrective actions with regard to significant
      deficiencies and material weaknesses.









|Date: November 12, 2002 | /s/  James H. Miller                                      
|----------------------- | ----------------------------------------------------------
|                        | James H. Miller
        President
        PPL Montana, LLC

---

CERTIFICATION

I, JAMES E. ABEL, the principal financial officer of PPL Montana,
    LLC (the "registrant"), certify that:

|1. | I have reviewed this quarterly report
      on Form 10-Q of the registrant for the quarter ended September 30, 2002;                                                                                                                                                                                                                                                                                                   
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|2. | Based on my knowledge, this quarterly
      report does not contain any untrue statement of a material fact or omit
      to state a material fact necessary to make the statements made, in light
      of the circumstances under which such statements were made, not misleading
      with respect to the period covered by this quarterly report;                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|3. | Based on my knowledge, the financial
      statements, and other financial information included in this quarterly report,
      fairly present in all material respects the financial condition, results
      of operations and cash flows of the registrant as of, and for, the periods
      presented in this quarterly report;                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|4. | The registrant's other certifying
      officers and I are responsible for establishing and maintaining disclosure
      controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
      for the registrant and we have:                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | a.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | b.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | c.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|5. | The registrant's other certifying
      officers and I have disclosed, based on our most recent evaluation, to the
      registrant's auditors and the audit committee of registrant's board of directors
      (or persons performing the equivalent function):                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | a.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | b.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                        
|6. | The registrant's other certifying
      officers and I have indicated in this quarterly report whether or not there
      were significant changes in internal controls or in other factors that could
      significantly affect internal controls subsequent to the date of our most
      recent evaluation, including any corrective actions with regard to significant
      deficiencies and material weaknesses.









|Date: November 12, 2002 | /s/  James E. Abel                                      
|----------------------- | --------------------------------------------------------
|                        | James E. Abel
        Treasurer
        PPL Montana, LLC

---