UNITED STATES
  SECURITIES AND EXCHANGE COMMISSION
  Washington, DC 20549



Form 10-Q



|[X]  | QUARTERLY REPORT PURSUANT TO SECTION
        13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period
        ended March 31, 2004           
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | OR                                                                                                                                                              
|[  ] | TRANSITION REPORT PURSUANT TO SECTION
        13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition
        period from _________ to ___________



| | Commission FileNumber | Registrant; State of Incorporation;Address and Telephone Number                                                                                                                                                 | IRS EmployerIdentification No.
| | --------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------
| |                       |                                                                                                                                                                                                                 |                               
| | 1-11459               | PPL Corporation
        (Exact name of Registrant as specified in its charter)
        (Pennsylvania)
        Two North Ninth Street
        Allentown, PA 18101-1179
        (610) 774-5151                    | 23-2758192                    
| |                       |                                                                                                                                                                                                                 |                               
| | 333-74794             | PPL Energy Supply, LLC
        (Exact name of Registrant as specified in its charter)
        (Delaware)
        Two North Ninth Street
        Allentown, PA 18101-1179
        (610) 774-5151                 | 23-3074920                    
| |                       |                                                                                                                                                                                                                 |                               
| | 1-905                 | PPL Electric Utilities Corporation
        (Exact name of Registrant as specified in its charter)
        (Pennsylvania)
        Two North Ninth Street
        Allentown, PA 18101-1179
        (610) 774-5151 | 23-0959590                    
| |                       |                                                                                                                                                                                                                 |                               
| |                       |                                                                                                                                                                                                                 |                               

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



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

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



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

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



| | PPL Corporation                    | Common stock, $.01 par value, 177,820,831
        shares outstanding at April 30, 2004, excluding 31,033,738 shares held
        as treasury stock                             
| | ---------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                    |                                                                                                                                                                                
| | PPL Energy Supply, LLC             | PPL Corporation indirectly holds all of the
        member interests in PPL Energy Supply, LLC.                                                                                
| |                                    |                                                                                                                                                                                
| | PPL Electric Utilities Corporation | Common stock, no par value, 78,029,863 shares
        outstanding and all held by PPL Corporation at April 30, 2004, excluding
        79,270,519 shares held as treasury stock
| |                                    |                                                                                                                                                                                

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.



---

PPL CORPORATION
  PPL ENERGY SUPPLY, LLC
  PPL ELECTRIC UTILITIES CORPORATION

FORM 10-Q
  FOR THE QUARTER ENDED MARCH 31, 2004

Table of Contents



|                                                                                                                                                       | Page                                                                                                    
|------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------
|GLOSSARY OF TERMS AND
        ABBREVIATIONS                                                                                                            |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|FORWARD-LOOKING INFORMATION                                                                                                                            | 1                                                                                                       
|                                                                                                                                                       |                                                                                                         
|PART I. FINANCIAL INFORMATION                                                                                                                          |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       | Item 1. Financial Statements                                                                            
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       | Item 2. Management's
        Discussion and Analysis of Financial Condition and Results of Operations   
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       | Item
        3. Quantitative and Qualitative Disclosures About Market Risk                              
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       | Item
        4. Controls and Procedures                                                                 
|                                                                                                                                                       |                                                                                                         
|PART II. OTHER INFORMATION                                                                                                                             |                                                                                                         
|                                                                                                                                                       | Item
        1. Legal Proceedings                                                                       
|                                                                                                                                                       | Item
        2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
        Securities
|                                                                                                                                                       | Item
        6. Exhibits and Reports on Form 8-K                                                        
|                                                                                                                                                       |                                                                                                         
|SIGNATURES                                                                                                                                             | 59                                                                                                      
|                                                                                                                                                       |                                                                                                         
|COMPUTATION OF RATIO
        OF EARNINGS TO FIXED CHARGES                                                                                              |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|CERTIFICATES OF PRINCIPAL
        EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER 
        PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|CERTIFICATES OF PRINCIPAL
        EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER 
        PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         
|                                                                                                                                                       |                                                                                                         







---

GLOSSARY OF TERMS AND ABBREVIATIONS





£ - British pounds sterling.

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.

ANEEL - National Electric Energy Agency, Brazil's agency that
  regulates the transmission and distribution of electricity.

APA - Asset Purchase Agreement.

ARB- Accounting Research Bulletin.

ARO - asset retirement obligation.

Bcf - billion cubic feet.

CEMAR - Companhia Energética do Maranhão, a Brazilian
  electric distribution company in which PPL Global had a majority ownership interest until
  the transfer of this interest in April 2004.

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

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

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

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

DelSur-Distribuidora de Electricidad Del Sur,
  S.A. de C.V., an electric distribution company in El Salvador, a majority of
  which is owned by EC.

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

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

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

DIG- Derivatives Implementation Group.

EC - Electricidad de Centroamerica, S.A. de C.V., an El Salvadoran
  holding company and the majority owner of DelSur and El Salvador Telecom, S.A.
  de C.V. PPL Global has 100% ownership of EC.

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 per share.

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

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

FIN - FASB Interpretation.

FSP - FASB Staff Position.

GAAP - generally accepted accounting principles.

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

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

IRS- Internal Revenue Service, a U.S. government agency.

ISO - Independent System Operator.

LIBOR - London Interbank Offered Rate.

Mirant - Mirant Corporation, a diversified energy company based
  in Atlanta. PPL Global and Mirant jointly owned WPD from 1996 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.

MW - megawatt, one thousand kilowatts.

MWh - megawatt-hour, one thousand kilowatt-hours.

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

NPDES - National Pollutant Discharge Elimination System.

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

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

PCB - polychlorinated biphenyl, an 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, or PEPSSM
  Units) - securities issued by PPL and PPL Capital Funding Trust I, consisting
  of a Preferred Security and a forward contract to purchase PPL common stock.

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

PJM(PJM Interconnection, L.L.C.) - operates 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.

PP&E- property, plant and equipment.

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

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

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

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

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

PPL Gas Utilities - PPL Gas Utilities Corporation, a regulated
  utility subsidiary of PPL 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 Martins Creek - PPL Martins Creek, LLC, a 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 that was formed to issue transition
  bonds under the Customer Choice Act.

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

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

PUC Final Order - final order issued by the PUC on August 27,
  1998, approving the settlement of PPL Electric's restructuring proceeding.

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

PURTA - the Pennsylvania Public Utility Realty Tax Act.

SCR - selective catalytic reduction, a pollution control process.

SEC - Securities and Exchange Commission, a U.S. government agency.

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

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

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.

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

WPD LLP - Western Power Distribution LLP, a wholly-owned subsidiary
  of WPDH Limited, which owns WPD (South West) and WPD (South Wales).

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

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

WPDH Limited - Western Power Distribution Holdings Limited, an
  indirect wholly-owned subsidiary of PPL Global. WPDH Limited owns WPD LLP.

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

---

Forward-looking Information

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

- market demand and prices for energy, capacity and fuel;
- weather 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;
- asset acquisitions and dispositions;
- political, regulatory or economic conditions in states, regions or countries
    where PPL or its subsidiaries conduct business;
- receipt of necessary governmental permits, approvals and rate relief;
- impact of state 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;
- the market prices of equity securities and resultant cash funding requirements
    for defined benefit pension plans;
- securities and credit ratings;
- state and federal regulatory developments;
- foreign exchange rates;
- new state or federal legislation, including new tax legislation;
- national or regional economic conditions, including any potential effects
    arising from the September 11, 2001 terrorist attacks in the U.S., the situation
    in Iraq and any consequential hostilities or other hostilities; and
- the commitments and liabilities of PPL and its subsidiaries.

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

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

---

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

---

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

---

|CONDENSED
        CONSOLIDATED BALANCE SHEET                                                                                           
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Corporation and Subsidiaries                                                                                                       
|(Unaudited)                                                                                                                            
|(Millions of Dollars)                                                                                                                  
|                                                                                                                                       
|                                                                                                                                       
|Assets                                                                                                                                 
|                                                                                                                                       
|Current Assets                                                                                                                         
|                                                                                                                                       
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|Investments                                                                                                                            
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|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
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|                                                                                                                                       
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|Property, Plant and Equipment
        - net                                                                                            
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|                                                                                                                                       
|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                                                                                                                    
|                                                                                                                                       
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|Long-term Debt (Note 6)                                                                                                                
|                                                                                                                                       
|                                                                                                                                       
|Long-term Debt with Affiliate
        Trusts (Note 6)                                                                                  
|                                                                                                                                       
|                                                                                                                                       
|Deferred Credits and Other
        Noncurrent Liabilities                                                                              
|                                                                                                                                       
|                                                                                                                                       
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|Commitments and Contingent
        Liabilities                                                                                         
|                                                                                                                                       
|                                                                                                                                       
|Minority Interest                                                                                                                      
|                                                                                                                                       
|                                                                                                                                       
|Preferred Stock without Sinking
        Fund Requirements                                                                              
|                                                                                                                                       
|Shareowners' Common Equity                                                                                                             
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|The accompanying
        Notes to Condensed Consolidated Financial Statements are an integral part
        of the financial statements.

---

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

---

|CONDENSED
        CONSOLIDATED STATEMENT OF CASH FLOWS                                                                                 
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Energy Supply, LLC and Subsidiaries                                                                                                
|(Unaudited)                                                                                                                            
|(Millions of Dollars)                                                                                                                  
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Net Cash Provided by Operating
        Activities                                                                                      
|                                                                                                                                       
|                                                                                                                                       
|Cash Flows from Investing
        Activities                                                                                           
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Cash Flows from Financing
        Activities                                                                                           
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Effect of Exchange Rates
        on Cash and Cash Equivalents                                                                          
|                                                                                                                                       
|                                                                                                                                       
|Net Increase (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 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                                                                                                                         
|                                                                                                                                       
|                                                                                                                                       
|Long-term Debt
        with Affiliate Trust                                                                                            
|                                                                                                                                       
|                                                                                                                                       
|Deferred Credits and Other
        Noncurrent Liabilities                                                                              
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Commitments and Contingent
        Liabilities                                                                                         
|                                                                                                                                       
|                                                                                                                                       
|Minority Interest                                                                                                                      
|                                                                                                                                       
|                                                                                                                                       
|Member's Equity                                                                                                                        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|The accompanying
        Notes to Condensed Consolidated Financial Statements are an integral part
        of the financial statements.

---

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

---

|CONDENSED
        CONSOLIDATED STATEMENT OF CASH FLOWS                                                                                 
|---------------------------------------------------------------------------------------------------------------------------------------
|PPL Electric Utilities Corporation and
        Subsidiaries                                                                            
|(Unaudited)                                                                                                                            
|(Millions of Dollars)                                                                                                                  
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Net Cash Provided by Operating
        Activities                                                                                      
|                                                                                                                                       
|                                                                                                                                       
|Cash Flows from Investing
        Activities                                                                                           
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Cash Flows from Financing
        Activities                                                                                           
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Net 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                                                                                         
|                                                                                                                                       
|                                                                                                                                       
|Preferred Stock
        without Sinking Fund Requirements                                                                              
|                                                                                                                                       
|                                                                                                                                       
|Shareowner's Common
        Equity                                                                                                     
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|The
        accompanying Notes to Condensed Consolidated Financial Statements are
        an integral part of the financial statements.

---

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 and PPL Electric)
    The accompanying unaudited condensed consolidated financial statements
      have been prepared in accordance with accounting principles generally accepted
      in the U.S. for interim financial information and with the instructions
      to Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include
      all of the information and footnotes required by accounting principles generally
      accepted in the U.S. for complete financial statements. In the opinion of
      management, all adjustments (including normal, recurring accruals) considered
      necessary for a fair presentation in accordance with accounting principles
      generally accepted in the U.S. are reflected in the condensed consolidated
      financial statements. The Balance Sheet as of December 31, 2003 is derived
      from each Registrant's 2003 audited Balance Sheet. The financial statements
      and notes thereto should be read in conjunction with the financial statements
      and notes contained in each Registrant's Annual Report to the SEC on Form
      10-K for the year ended December 31, 2003. The results of operations for
      the three months ended March 31, 2004 are not necessarily indicative of
      the results to be expected for the full year ending December 31, 2004 or
      other future periods, because results for interim periods can be disproportionately
      influenced by various factors and developments and seasonal variations.
    Certain amounts in the March 31, 2003 and December 31, 2003 financial statements
      have been reclassified to conform to the presentation in the March 31, 2004
      financial statements.
2. Summary of Significant Accounting Policies
    The following accounting policy disclosures represent updates to the "Summary
      of Significant Accounting Policies" Note in each Registrant's Annual Report
      to the SEC on Form 10-K for the year ended December 31, 2003.
    Goodwill(PPL and PPL Energy Supply)
    The change in the carrying amount of "Goodwill," as shown on the Balance
      Sheet, was due to the effect of foreign exchange rates.
    Stock-Based Compensation(PPL, PPL Energy Supply and PPL Electric)
    Stock-based compensation expense, including awards granted to employees
      and an allocation of costs of awards granted to employees of PPL Services,
      was insignificant to net income and EPS under both the intrinsic value and
      fair value methods of accounting for stock-based compensation for the three
      months ended March 31, 2004 and 2003. Also, there would not have been a
      material impact on reported net income and EPS had the fair value method
      been used to account for all outstanding stock-based compensation awards
      in both periods.
    New Accounting Standards(PPL, PPL Energy Supply and PPL Electric)
    See Note 15 for a discussion of new accounting standards adopted in 2004
      or pending adoption.
3. Segment and Related Information
    (PPL and PPL Energy Supply)
    See the "Segment and Related Information" Note in each Registrant's Annual
      Report to the SEC on Form 10-K for the year ended December 31, 2003 for
      a discussion of reportable segments.
    Financial data for the segments are as follows:
    PPL
        
        
        PPL Energy
            SupplyThree
            Months
            Ended March 31,
        
        
        Three
            Months
            Ended March 31,2004
        
        
        2003
        
        
        2004
        
        
        2003Income Statement DataRevenues from external customersSupply
        
        $
        419
        
        
        $
        450
        
        
        $
        824
        
        
        $
        837International
        
        
        295
        
        
        
        260
        
        
        
        295
        
        
        
        260Delivery (a)
        
        
        806
        
        
        
        7781,520
        
        
        
        1,488
        
        
        
        1,119
        
        
        
        1,097Intersegment revenuesSupply
        
        
        410
        
        
        
        389Delivery
        
        
        38
        
        
        
        43Net IncomeSupply (b)
        
        
        89
        
        
        
        151
        
        
        
        98
        
        
        
        165International (c)
        
        
        48
        
        
        
        51
        
        
        
        48
        
        
        
        51Delivery (a)
        
        
        40
        
        
        
        37$
        177
        
        
        $
        239
        
        
        $
        146
        
        
        $
        216PPL
        
        
        PPL
            Energy SupplyMarch
            31,
            2004
        
        
        December
            31,
            2003
        
        
        March
            31,
            2004
        
        
        December
            31,
            2003Balance Sheet DataTotal assetsSupply
        
        $
        6,623
        
        
        $
        6,491
        
        
        $
        6,487
        
        
        $
        6,308International
        
        
        5,273
        
        
        
        4,942
        
        
        
        5,279
        
        
        
        4,942Delivery (a)
        
        
        5,687
        
        
        
        5,690$
        17,583
        
        
        $
        17,123
        
        
        $
        11,766
        
        
        $
        11,250(a)
        
        The Delivery segment is not a component
            of PPL Energy Supply.(b)
        
        2003 includes the "Cumulative Effect
            of a Change in Accounting Principle" recorded in January 2003. See
            Note 13 for additional information.(c)
        
        2004 includes the "Loss from Discontinued
            Operations." See Note 7 for additional information.
4. 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.
      Diluted EPS is calculated similarly, except that 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, restricted stock and restricted
            stock units granted under the incentive compensation plans,
        stock units representing common stock
            granted under the directors compensation programs,
        common stock purchase contracts that
            are a component of the PEPS Units and PEPS Units, Series B, and
        convertible senior notes.The basic and diluted EPS calculations, and the reconciliation of the shares
      (in thousands) used in the calculations, are shown below:
    Three
            Months
            Ended March 31,2004
        
        
        2003Income (Numerator)Income from continuing operations
        
        $
        178
        
        
        $
        176Loss from discontinued operations
            (net of tax)
        
        
        1Cumulative effect of a change in accounting
            principle (net of tax)
        
        
        
        
        
        
        63Net Income
        
        $
        177
        
        
        $
        239Shares (Denominator)Shares for Basic EPS
        
        
        177,150
        
        
        
        166,506Add: Incremental sharesStock options and other share-based
            awards
        
        
        607
        
        
        
        510Shares for Diluted EPS
        
        
        177,757
        
        
        
        167,016Basic EPSIncome from continuing operations
        
        $
        1.00
        
        
        $
        1.06Cumulative effect of a change in accounting
            principle (net of tax)
        
        
        
        
        
        
        0.37Net Income
        
        $
        1.00
        
        
        $
        1.43Three
            Months
            Ended March 31,2004
        
        
        2003Diluted EPSIncome from continuing operations
        
        $
        0.99
        
        
        $
        1.06Cumulative effect of a change in accounting
            principle (net of tax)
        
        
        
        
        
        
        0.37Net Income
        
        $
        0.99
        
        
        $
        1.43In May 2001, PPL and PPL Capital Funding Trust I issued 23 million PEPS
      Units that contain a purchase contract component for PPL's common stock.
      The purchase contracts will only be dilutive if the average price of PPL's
      common stock exceeds a threshold appreciation price, which is adjusted for
      cash distributions on PPL common stock. The threshold appreciation price
      was initially set at $65.03 and has been adjusted to $63.38 as of April
      1, 2004, based on dividends paid on PPL's common stock since issuance. Since
      the average price has not exceeded the threshold appreciation price, the
      purchase contracts were excluded from the diluted EPS calculations.
    In January 2004, PPL completed an exchange offer resulting in the exchange
      of approximately 4 million PEPS Units for PEPS Units, Series B. The primary
      difference in the units relates to the debt component. The purchase contract
      components of both units, which are potentially dilutive, are identical.
      The threshold appreciation price for the purchase contract component of
      the PEPS Units, Series B is adjusted in the same manner as that of the PEPS
      Units and currently is $63.38 as a result of the adjustment as of April
      1, 2004. See Note 6 for a more detailed discussion of the exchange offer.
    In May 2003, PPL Energy Supply issued $400 million of 2.625% Convertible
      Senior Notes due 2023. The notes are guaranteed by PPL and can be converted
      into shares of PPL common stock if:
    
        during any fiscal quarter starting after
            June 30, 2003, the market price of PPL's common stock trades at or
            above $59.67 per share over a certain period during the preceding
            fiscal quarter;
        PPL calls the debt for redemption;
        the holder exercises its right to put
            the debt on any five-year anniversary of the offering;
        the long-term credit rating assigned
            to the notes by Moody's and Standard & Poor's falls below Ba2
            and BB or the notes are not rated; or
        certain specified corporate transactions
            occur, e.g., change in control and certain distributions to the holders
            of PPL common stock.The initial conversion rate is 20.1106 shares per $1,000 principal amount
       of notes. It will be adjusted if certain specified distributions,
      whether in the form of cash, stock, other equity interests, evidence of
      indebtedness or assets, are made to holders of PPL common stock. Additionally,
      the conversion rate can be increased by PPL if its board of directors has
      made a determination that to do so would be in the best interests of either
      PPL or holders of PPL common stock.
    Depending upon which of the conversion events identified above occurs,
      the Notes can be settled in cash or shares. As none of these events has
      occurred, the Convertible Senior Notes were excluded from the diluted EPS
      calculations.
    The following number of stock options to purchase PPL common shares and
      unvested restricted stock awards were excluded in the periods' computations
      of diluted EPS because the effect would have been antidilutive.
    Three
            Months
            Ended March 31,(Thousands of Shares)
        
        2004
        
        
        2003Antidilutive stock options
        
        
        747
        
        
        
        1,673Antidilutive restricted stock
        
        
        
        
        
        
        42
5. Comprehensive Income
    (PPL and PPL Energy Supply)
    The following tables show the after-tax components of comprehensive income:
    PPL
        
        
        PPL Energy
            SupplyThree
            Months Ended
            March 31,
        
        
        Three
            Months Ended
            March 31,2004
        
        
        2003
        
        
        2004
        
        
        2003Net Income
        $
        177
        
        
        $
        239
        
        
        $
        146
        
        
        $
        216Other comprehensive income:Foreign currency translation adjustments
        
        78
        
        
        
        (15
        )
        
        
        78
        
        
        
        (15
        )Disposition of investment in CGE -
            currency translation adjustment
        
        10
        
        
        
        
        
        
        
        10Unrealized loss on available-for-sale
            securities
        
        (3
        )
        
        
        (3
        )
        
        
        (3
        )
        
        
        (3
        )Unrealized gain (loss) on qualifying
            derivatives
        
        (35
        )
        
        
        27
        
        
        
        (32
        )
        
        
        29Total other comprehensive income
        
        50
        
        
        
        9
        
        
        
        53
        
        
        
        11Comprehensive Income
        $
        227
        
        
        $
        248
        
        
        $
        199
        
        
        $
        227(PPL Electric)
    PPL Electric's comprehensive income approximates net income.
6. Credit Arrangements and Financing Activities
    Credit Arrangements
    (PPL, PPL Energy Supply and PPL Electric)
    In February 2004, PPL Energy Supply reduced the size of its $500 million
      three-year credit facility expiring in June 2004 to $200 million. At March
      31, 2004, no cash borrowings were outstanding under any credit facilities
      of PPL Electric or PPL Energy Supply. Both PPL Electric and PPL Energy Supply
      have the ability to cause the lenders to issue letters of credit under their
      respective facilities. At March 31, 2004, PPL Electric had $42 million
      of letters of credit outstanding under its $100 million three-year facility
      expiring in June 2006, and PPL Energy Supply had $59 million of letters
      of credit outstanding under its $200 million three-year facility expiring
      in June 2004 and $64 million of letters of credit under its $300 million
      three-year facility expiring in June 2006. In April 2004, PPL Energy Supply
      issued a letter of credit in the amount of $300 million to PPL Electric
      under its $300 million three-year facility expiring June 2005. The $300
      million letter of credit was provided to PPL Electric to satisfy the performance
      assurance provisions under one of the PLR contracts. See Note 9 for additional
      information.
    (PPL and PPL Energy Supply)
    At March 31, 2004, WPD (South West) had £4.1 million (approximately
      $8 million based on current exchange rates) of outstanding borrowings under
      its £100 million 364-day credit facility expiring in October 2004
      and no outstanding borrowings under its £150 million five-year credit
      facility expiring in October 2008.
    (PPL, PPL Energy Supply and PPL Electric)
    The subsidiaries of PPL are separate legal entities. PPL's subsidiaries
      are not liable for the debts of PPL. Accordingly, creditors of PPL may not
      satisfy their debts from the assets of the subsidiaries absent a specific
      contractual undertaking by a subsidiary to pay PPL's creditors or as required
      by applicable law or regulation. Similarly, absent a specific contractual
      undertaking or as required by applicable law or regulation, PPL is not liable
      for the debts of its subsidiaries. Accordingly, creditors of PPL's subsidiaries
      may not satisfy their debts from the assets of PPL absent a specific contractual
      undertaking by PPL to pay the creditors of its subsidiaries or as required
      by applicable law or regulation.
    Similarly, the subsidiaries of PPL Energy Supply and PPL Electric are separate
      legal entities. These subsidiaries are not liable for the debts of PPL Energy
      Supply and PPL Electric. Accordingly, creditors of PPL Energy Supply and
      PPL Electric may not satisfy their debts from the assets of their subsidiaries
      absent a specific contractual undertaking by a subsidiary to pay the creditors
      or as required by applicable law or regulation. In addition, absent a specific
      contractual undertaking or as required by applicable law or regulation,
      PPL Energy Supply and PPL Electric are not liable for the debts of their
      subsidiaries. Accordingly, creditors of these subsidiaries may not satisfy
      their debts from the assets of PPL Energy Supply or PPL Electric absent
      a specific contractual undertaking by that parent to pay the creditors of
      its subsidiaries or as required by applicable law or regulation.
    Financing Activities
    (PPL)
    In November 2003, PPL initiated an offer to exchange up to $573 million
      of its outstanding PEPS Units for up to $573 million of its PEPS Units,
      Series B and a cash payment by PPL of $0.375 for each validly tendered and
      accepted outstanding PEPS Unit. The exchange offer, which closed in January
      2004, resulted in $99 million, or 17.28%, of the outstanding PEPS Units,
      being exchanged.
    In February 2004, pursuant to the terms of the PEPS Units, PPL remarketed
      $257 million of the PPL Capital Funding Trust I trust preferred securities
      that were a component of the PEPS Units. The trust preferred securities
      were remarketed at a price of 107.284% of their aggregate stated liquidation
      amount, resulting in a yield to maturity of 3.912% based on the reset distribution
      rate of 7.29% per annum. Under the terms of the PEPS Units, holders were
      entitled to surrender their trust preferred securities for remarketing in
      order to settle the purchase contract component of the PEPS Units in May
      2004. Holders of an aggregate of $218 million of the trust preferred securities
      elected not to participate in the remarketing. Those holders retained their
      trust preferred securities at a distribution rate of 7.29% per annum.
    Additionally, in February 2004, PPL Capital Funding issued $201 million
      of senior unsecured notes guaranteed by PPL in exchange for $185 million
      of the trust preferred securities of PPL Capital Funding Trust I and a payment
      of $400,000 in cash. The senior notes bear interest at a rate of 4.33% per
      year that is payable semi-annually on March 1 and September 1 of each year,
      from September 1, 2004 through the maturity date of March 1, 2009. The senior
      notes are not redeemable by PPL or PPL Capital Funding, and the holders
      will not be entitled to require PPL or PPL Capital Funding to repurchase
      the senior notes before maturity. The senior notes were issued in an SEC
      Rule 144A private offering to qualified institutional buyers. Pursuant to
      a registration rights agreement with the initial purchasers, PPL and PPL
      Capital Funding intend to consummate an exchange offer for the notes to
      register them with the SEC for resale.
    The January and February 2004 exchanges resulted in the cancellation of
      an aggregate of $284 million of the trust preferred securities and an aggregate
      of $9 million of PPL Capital Funding Trust I's common securities held by
      PPL Capital Funding, as well as a corresponding cancellation of the $293
      million of PPL Capital Funding 7.29% subordinated notes due 2006 underlying
      these trust securities. The cancellation of the underlying PPL Capital Funding
      subordinate notes together with the issuance of the new PPL Capital Funding
      debt, as a result of the exchanges, resulted in a net decrease of $9 million
      of long-term debt, including "Long-term Debt with Affiliate Trusts," as
      reflected in the Balance Sheet. Following these exchanges, there remained
      outstanding $290 million of trust preferred securities and $9 million of
      trust common securities, as well as $299 million of underlying PPL Capital
      Funding 7.29% subordinated notes due 2006.
    In March 2004, PPL liquidated PPL Capital Funding Trust I, resulting in
      the cancellation of all of the outstanding trust preferred securities and
      the trust common securities. In exchange for the cancellation of the trust
      securities, PPL Capital Funding Trust I caused $290 million of underlying
      PPL Capital Funding 7.29% subordinated notes due 2006 to be distributed
      to the holders of the trust preferred securities and $9 million of PPL Capital
      Funding 7.29% subordinated notes due 2006, held by the trust, to be cancelled.
      The impact to PPL Capital Funding as a result of these cancellations was
      an additional net decrease of $9 million of long-term debt, including "Long-term
      Debt with Affiliate Trusts," as reflected in the Balance Sheet.
    In April 2004, PPL Capital Funding repurchased $4 million of its 8-3/8%
      Medium-term Notes due 2007 at a market value of approximately $5 million.
    (PPL and PPL Energy Supply)
    During the three months ended March 31, 2004, a Bolivian subsidiary of
      PPL Global issued $12 million of bonds with interest rates varying from
      6.8% to 7.4% and serial maturities from December 2005 to December 2008.
      In addition, the PPL Global subsidiary issued bonds denominated in UFVs
      (inflation-indexed bolivianos) totaling 13.5 million bolivianos (approximately
      $2 million at current exchange rates) maturing in December 2007. The proceeds
      of both issuances were used to repay intercompany and short-term bank borrowings.
    At March 31, 2004, PPL Energy Supply had no commercial paper outstanding.
    During the three months ended March 31, 2004, PPL Energy Supply distributed
      approximately $63 million to its parent company, PPL Energy Funding, and
      received capital contributions of $8 million.
    (PPL and PPL Electric)
    In March 2004, PPL Electric retired approximately $25 million of its outstanding
      First Mortgage Bonds, 6.875% Series due March 2004, at par value. Also in
      March, PPL Electric redeemed approximately $6 million aggregate principal
      amount of its First Mortgage Bonds, 7.30% Series due 2024, at par value,
      through the application of cash deposited with the trustee to release certain
      transmission lines and other equipment from the lien of the 1945 First Mortgage
      Bond Indenture.
    In March 2004, PPL Transition Bond Company made principal payments on transition
      bonds totaling approximately $72 million.
    At March 31, 2004, PPL Electric had $45 million of commercial paper outstanding.
    In April 2004, PPL Electric completed an offer to repurchase its outstanding
      First Mortgage Bonds, 6-1/2% Series due 2005. Pursuant to the offer, PPL
      Electric repurchased approximately $40 million of the bonds at a market
      value of $43 million. PPL Electric also repurchased in the open market $45 million of outstanding
      5-7/8% Senior Secured Bonds and $14 million of outstanding 6-1/4% Senior
      Secured Bonds at market values of $48 million and $16 million, respectively.
      Approximately $53 million of these open market purchases settled in May 2004.
      The purpose of the repurchases was to reduce future interest expense.
    Dividends and Dividend Restrictions
    (PPL)
    In February 2004, PPL announced an increase to its quarterly common stock
      dividend, payable April 1, 2004, from 38.5 cents per share to 41 cents per
      share (equivalent to $1.64 per annum). Future dividends, declared at the
      discretion of the Board of Directors, will be dependent upon future earnings,
      cash flows, financial requirements and other factors.
7. Acquisitions, Development and Divestitures
    Domestic Generation Projects(PPL and PPL Energy Supply)
    In February 2004, a subsidiary of PPL Generation sold a spare gas combustion
      turbine generator and related equipment for approximately $10 million. There
      was an insignificant gain on the sale.
    The turbine upgrade for PPL Susquehanna Unit 1 was completed in April 2004.
      This project provides a nominal power increase of 50 MW of generation capacity,
      of which PPL Susquehanna has a 90% undivided interest. Through March 31,
      2004, a total of approximately $62 million had been incurred on the Unit
      1 upgrade.
    The 600 MW Lower Mt. Bethel facility is expected to be in-service in the
      second quarter of 2004.
    International Energy Projects (PPL and PPL Energy Supply)
    Write-down of International Energy Projects
    In 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. At that time, PPL Global recorded an impairment loss
      in the carrying value of its net assets in CEMAR. In March 2002, PPL Global
      recorded a further impairment loss. In June 2002, PPL made a decision to
      exit the investment. At that time, PPL Global's remaining portion of its
      CEMAR investment, which related to foreign currency translation adjustments
      (CTA), was written-off. Accounting guidance prohibited the inclusion of
      CTA in impairment calculations prior to designating such assets as held
      for disposal.
    On August 21, 2002, ANEEL authorized an administrative intervention in
      CEMAR and fully assumed operational and financial control of the company.
      The intervener appointed by ANEEL initiated efforts to transfer the ownership
      interest in CEMAR to a new owner. As of February 11, 2003, due to the inability
      to discharge their obligations under the continuing intervention, PPL-related
      officers and directors of CEMAR resigned from their respective positions.
    In April 2004, PPL Global transferred its interest in CEMAR to two companies
      controlled by a private equity fund managed by GP Investimentos, a Brazilian
      private equity firm. The sale resulted in a credit of approximately $22
      million, which will be included in the second quarter 2004 results. This
      credit is a result of the reversal of the negative carrying value, created
      by previous consolidated operating losses for this investment, and the associated
      CTA. At March 31, 2004, the negative investment in CEMAR of $18 million
      was included in "Deferred Credits and Other Noncurrent Liabilities - Other."
    PPL Global no longer controlled or managed CEMAR, and PPL Global had deconsolidated
      the assets and liabilities of CEMAR from its financial statements after
      ANEEL assumed control of the company. Consistent with the cost method of
      accounting, PPL Global had not been recording CEMAR's operating results
      since such time.
    Discontinued Operations
    In December 2003, PPL Global's Board of Managers authorized PPL Global
      to sell its investment in a Latin American telecommunications company, and
      approved a plan of sale. It was determined that the viability of this non-strategic
      business was not economical. PPL Global plans to sell the telecommunications
      company in 2004.
    As a result, PPL Global recorded a write-down in the carrying value of
      the company's net assets to their estimated fair value of approximately
      $1 million. The operating results of the Latin American telecommunications
      company, a loss of approximately $1 million and an insignificant amount
      for the three months ended March 31, 2004 and 2003, are reflected as
      "Loss from Discontinued Operations" on the Statement of Income. The assets
      and liabilities of the discontinued operation totaled $5 million and $4
      million at March 31, 2004, and are included in "Current Assets - Other"
      and "Current Liabilities - Other" on the Balance Sheet.
    Sale of CGE
    In March 2004, PPL Global completed the sale of its minority interest in
      shares of CGE for approximately $123 million. The sale resulted in a charge
      of approximately $15 million pre-tax, which is included in operating expenses,
      as "Energy related businesses," on the Statement of Income. This charge
      was due primarily to a currency translation adjustment tied to the devaluation
      of the Chilean peso since the original acquisition in 2000.
    DelSur Tender Offer
    In April 2004, EC, a wholly owned subsidiary of PPL Global, launched a
      tender offer for outstanding shares of DelSur for up to an aggregate purchase
      price of $17 million. PPL currently owns approximately 80.5% of DelSur.
      The closing of the offer is expected to occur in May 2004. EC reserves the
      right to cancel the offer if a minimum of 12.53% of the outstanding shares
      are not tendered.
8. 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 in 2000, the remaining
      balance of this liability was transferred to PPL EnergyPlus. At March 31,
      2004, the remaining liability associated with the above market NUG contracts
      was $334 million.
    Wholesale Energy Commitments
    (PPL and PPL Energy Supply)
    As part of the purchase of generation assets from Montana Power, PPL Montana
      assumed a power purchase agreement and a power sales agreement (for the
      Flathead Irrigation Project), which were still in effect at March 31, 2004.
      In accordance with purchase accounting guidelines, PPL Montana recorded
      liabilities of $66 million as the estimated fair value of these agreements
      at the acquisition date. These liabilities are being reduced over the terms
      of the agreements, through 2010, as adjustments to "Wholesale energy marketing"
      revenues and "Energy purchases" on the Statement of Income. The unamortized
      balance of the liability related to the power purchase agreement at March
      31, 2004 was $55 million and is included in "Deferred Credits and Other
      Noncurrent Liabilities - Other" on the Balance Sheet.
    On July 1, 2002, PPL EnergyPlus began to sell to NorthWestern an aggregate
      of 450 MW of energy to be supplied by PPL Montana. Under two five-year agreements,
      PPL EnergyPlus is supplying 300 MW of around-the-clock electricity and 150
      MW of unit-contingent on-peak electricity. PPL Montana also makes short-term
      energy sales to NorthWestern. Following NorthWestern's credit downgrades
      to below investment grade in late-2002, PPL Montana and NorthWestern agreed
      to modify the payment provisions of the energy contracts such that NorthWestern
      would pay PPL Montana on a weekly basis, in arrears.
    In September 2003, NorthWestern filed a voluntary petition for relief seeking
      to reorganize under Chapter 11 of the U.S. Bankruptcy Code. NorthWestern
      made its filing in federal bankruptcy court in Delaware. Between the time
      of NorthWestern's last weekly payment and the bankruptcy filing date, PPL
      Montana made approximately $1.6 million of energy sales to NorthWestern.
    Following the date that NorthWestern filed for bankruptcy, PPL Montana
      and NorthWestern agreed to amend the power supply agreements to, among other
      things, eliminate the weekly payment arrangements and resume more typical
      monthly invoicing and payment arrangements. The amendments were contingent
      on NorthWestern's assumption of the power supply agreements in its bankruptcy
      proceeding.
    In September 2003, NorthWestern filed a motion with the bankruptcy court
      seeking, among other things, to assume the two five-year power supply agreements
      (as amended) and to pay PPL Montana for the approximately $1.6 million of
      energy sales made immediately prior to the time of the bankruptcy filing.
      In October 2003, the bankruptcy court entered an order granting NorthWestern's
      motion. NorthWestern has, in accordance with the terms of the judge's order,
      paid PPL Montana for the pre-filing energy sales, and the parties have resumed
      monthly invoicing and payment arrangements.
    In April 2003, the Maryland Public Service Commission authorized the competitive
      provision of the Standard Offer Service (SOS) to allow utilities to procure
      SOS for customers through the competitive selection of wholesale supply.
      In March 2004, PPL EnergyPlus was awarded an 11-month fixed-price SOS contract
      for customer load (approximately 60 MW) for Potomac Electric Power Company.
      This contract commences in July 2004.
    As a result of New Jersey's Electric Discount and Energy Competition Act,
      its Board of Public Utilities authorized and made available to power suppliers,
      on a competitive basis, the opportunity to provide Basic Generation Service
      (BGS) to all non-shopping New Jersey customers. In February 2003, PPL EnergyPlus
      was awarded a 34-month fixed-price BGS contract for a fixed percentage of
      customer load (approximately 1,000 MW) for Atlantic City Electric Company,
      Jersey Central Power & Light Company and Public Service Electric &
      Gas Company. In February 2003, PPL EnergyPlus was also awarded about 500
      MW for a 10-month hourly energy price supply. These contracts commenced
      in August 2003. Additionally, in February 2004, PPL EnergyPlus was awarded
      a 12-month hourly energy price supply BGS contract for a fixed percentage
      of customer load (approximately 450 MW) for Atlantic City Electric Company,
      Jersey Central Power & Light Company and Public Service Electric &
      Gas Company. These contracts commence in June 2004.
    Legal Matters
    (PPL, PPL Energy Supply and PPL Electric)
    PPL and its subsidiaries are involved in numerous legal proceedings, claims
      and litigation in the ordinary course of business. PPL and its subsidiaries
      cannot predict the ultimate outcome of such matters, or whether such matters
      may result in material liabilities.
    Montana Power Shareholders' Litigation(PPL and PPL Energy
      Supply)
    In August 2001, a purported class-action lawsuit was filed by a group of
      shareholders of Montana Power against Montana Power, the directors of Montana
      Power, certain advisors and consultants of Montana Power and PPL Montana.
      The plaintiffs allege, among other things, that Montana Power was required
      to, and did not, obtain shareholder approval of the sale of Montana Power's
      generation assets to PPL Montana in 1999. Although most of the claims in
      the complaint are against Montana Power, its board of directors, and its
      consultants and advisors, two claims are asserted against PPL Montana. In
      the first claim, plaintiffs seek a declaration that because Montana Power
      shareholders did not vote on the 1999 sale of generating assets to PPL Montana,
      that sale "was null and void ab initio." The second claim alleges that PPL
      Montana was privy to and participated in a strategy whereby Montana Power
      would sell its generation assets to PPL Montana without first obtaining
      Montana Power shareholder approval, and that PPL Montana has made net profits
      in excess of $100 million as the result of this alleged illegal sale. In
      the second claim, plaintiffs request that the court impose a "resulting
      and/or constructive trust" on both the generation assets themselves and
      all profits, plus interest on the amounts subject to the trust. This lawsuit
      is currently pending in the U.S. District Court of Montana, Butte Division.
      PPL and PPL Energy Supply cannot predict the outcome of this matter.
    NorthWestern Corporation Litigation(PPL and PPL Energy
      Supply)
    In connection with the acquisition of the Montana generation assets, the
      Montana Power APA, which was previously assigned to PPL Montana by PPL Global,
      includes a provision concerning the proposed purchase by PPL Montana of
      a portion of NorthWestern's interest in the 500-kilovolt Colstrip Transmission
      System (CTS) for $97 million. During 2002, PPL Montana had been in discussions
      with NorthWestern regarding the proposed purchase of the CTS and the claims
      that PPL Montana believes it has against NorthWestern arising from the Montana
      Power APA and related agreements. Notwithstanding such discussions, in September
      2002, NorthWestern filed a lawsuit against PPL Montana in Montana state
      court seeking specific performance of PPL Montana's purchase of the CTS
      or, alternatively, damages for breach of contract. Pursuant to PPL Montana's
      application, the matter was removed to the U.S. District Court of Montana,
      Butte Division. Following removal, NorthWestern asserted additional claims
      for damages against PPL Montana, and PPL Montana filed defenses denying
      liability for NorthWestern's claims as well as counterclaims against NorthWestern
      seeking damages PPL Montana believes it has suffered under the Montana Power
      APA and related agreements. This matter currently is scheduled for trial
      in the Montana federal district court in mid-2005.
    In September 2003, NorthWestern filed a petition in Delaware for reorganization
      under the U.S. Bankruptcy Code, which resulted in an automatic stay of PPL
      Montana's counterclaims against NorthWestern. In December 2003, NorthWestern
      filed a motion to transfer this litigation from the Montana federal district
      court to the federal district court in Delaware where NorthWestern's bankruptcy
      proceeding is pending. In March 2004, the Montana federal district court
      denied this motion to transfer. As a result of the court's decision and
      a prior stipulation of NorthWestern and PPL Montana in NorthWestern's bankruptcy
      proceeding, the automatic stay of PPL Montana's counterclaims has been lifted.
      PPL and PPL Energy Supply cannot predict the outcome of this litigation.
    Montana Hydroelectric Litigation (PPL and PPL Energy Supply)
    In October 2003, a lawsuit was filed against PPL Montana, PPL Services,
      Avista Corporation, PacifiCorp and nine John Doe defendants in the U.S.
      District Court of Montana, Missoula Division, by two residents allegedly
      acting in a representative capacity on behalf of the State of Montana. In
      January 2004, the complaint was amended to, among other things, include
      the Great Falls school districts as additional plaintiffs. The action seeks
      a declaratory judgment, compensatory damages for unjust enrichment, trespass
      and negligence, and attorneys fees on a "private attorney general" theory
      for use of state and/or "school trust" lands without the compensation required
      by law and to require defendants to adequately compensate the state and/or
      the State School Trust fund for full market value of lands occupied. Generally,
      the suit is founded on allegations that the bed of navigable rivers is state-owned
      property following admission to statehood, and that the use thereof for
      placement of dam structures, affiliated structures and reservoirs should
      trigger lease payments for use of land underneath. The plaintiffs allege
      that the State Land Board and Department of Natural Resources and Conservation
      failed to exercise their duty to administer riverbeds for the maximum benefit
      of public education and/or the state. No specific amount of damages or future
      rental value has been claimed. PPL Montana and PPL Services cannot predict the
      outcome of this litigation.
Proposed Montana Energy Security Initiative (PPL and PPL Energy Supply)
On April 30, 2004, the Montana Secretary of State certified, in accordance with
applicable statutes, that it had approved the form of a proposed "Montana Energy
Security Act" initiative. The proposed initiative may be placed on the November
2004 statewide ballot if the Montana Attorney General determines that the initiative
is legally sufficient and if sufficient signatures are obtained prior to June
18, 2004. Among the stated purposes of the proposed initiative is to create a
Montana public power board appointed by the governor to determine whether it is
in the public interest to purchase electric and natural gas generation, transmission
and distribution facilities in Montana on behalf of the state. The proposed initiative
would permit the board to purchase such facilities, including any or all of PPL
Montana's hydroelectric dams or coal-fired facilities,
at fair market value. However, the proposed initiative does not provide
the power of condemnation to acquire generation facilities. At this time, PPL and PPL
Energy Supply cannot predict whether the Attorney General will determine that
the initiative is legally sufficient, whether the proposed initiative will garner
enough signatures for placement on the November 2004 statewide ballot, whether
there might be a successful legal challenge to the initiative, whether it would
pass if on the ballot or what impact, if any, the measure might ultimately have
upon PPL Montana or its generation operations. PPL intends to oppose
the initiative, if it qualifies for the November ballot.
    Regulatory Issues
    California ISO and Western Markets (PPL and PPL Energy Supply)
    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 March 31, 2004, PPL has fully reserved
      for possible underrecoveries of payments for these sales.
    Regulatory proceedings arising out of the California electricity supply
      situation have been filed at the FERC. The FERC has determined that all
      sellers of energy into markets operated by the California ISO and the California
      Power Exchange, including PPL Montana, should be subject to refund liability
      for the period beginning October 2, 2000 through June 20, 2001 and initiated
      an evidentiary hearing concerning refund amounts. In April 2003, the FERC
      changed the manner in which this refund liability is to be computed and
      ordered further proceedings to determine the exact amounts that the sellers,
      including PPL Montana, would be required to refund.
    In June 2003, the FERC took several actions as a result of a number of
      related investigations. The FERC terminated proceedings pursuant to which
      it had been considering whether to order refunds for spot market bilateral
      sales made in the Pacific Northwest, including sales made by PPL Montana,
      during the period December 2000 through June 2001. The FERC explained that
      the totality of the circumstances made refunds unfeasible and inequitable,
      and that it had provided adequate relief by adopting a price cap throughout
      the western U.S. The FERC also denied pending complaints against long-term
      contracts in the western U.S. In these complaints, various power buyers
      challenged selected long-term contracts that they entered into during 2000
      and 2001, complaining that the power prices were too high and reflected
      manipulation of those energy markets. The FERC found that the complainants
      had not met their burden of showing that changing or canceling the contracts
      was "in the public interest" and that the dysfunction in the California
      markets did not justify changing these long-term contracts. In two separate
      orders, the FERC also ordered 65 different companies, agencies or municipalities
      to show cause why they should not be ordered to disgorge profits for "gaming"
      or anomalous market behavior during 2000 and 2001. These orders to show
      cause address both unilateral and joint conduct identified as the "Enron
      trading strategies." Neither PPL EnergyPlus nor PPL Montana was included
      in these orders to show cause, and they previously have explained in responses
      to data requests from the FERC that they have not engaged in such trading
      strategies. Finally, the FERC issued a new investigation order directing
      its staff to investigate any bids made into the California markets in excess
      of $250/MWh during the period from May 2000 to October 2000, a period of
      time prior to the period examined in connection with most of the proceedings
      described above. To their knowledge, neither PPL EnergyPlus nor PPL Montana
      is being investigated by the FERC under this new order.
    Litigation arising out of the California electricity supply situation has
      been filed in California courts against sellers of energy to the California
      ISO. The plaintiffs and interveners in these legal proceedings allege, among
      other things, abuse of market power, manipulation of market prices, unfair
      trade practices and violations of state antitrust laws, and seek other relief,
      including treble damages and attorneys' fees. While PPL's subsidiaries have
      not been named by the plaintiffs in these legal proceedings, PPL Montana
      was named by a defendant in its cross-complaint in a consolidated court
      proceeding, which combined into one master proceeding several of the lawsuits
      alleging antitrust violations and unfair trade practices. This generator
      denies that any unlawful, unfair or fraudulent conduct occurred but asserts
      that, if it is found liable, the other generators and power marketers, including
      PPL Montana, caused, contributed to and/or participated in the plaintiffs'
      alleged losses.
    In May 2003, the Port of Seattle filed a lawsuit in the U.S. District Court
      for the Western District of Washington against eighteen defendants, including
      PPL Montana. The lawsuit asserts claims against all defendants under the
      federal and state antitrust laws, the federal Racketeer Influenced and Corrupt
      Organizations Act and for common law fraud. The complaint centers on many
      of the same alleged activities that are the basis for the litigation arising
      out of the California electricity supply situation described above. The
      Port of Seattle is seeking actual, trebled and punitive damages, as well
      as attorneys' fees. PPL Montana and several other defendants have filed
      a motion to dismiss this complaint that has not been ruled on by the court.
      In December 2003, this matter was transferred to the U.S. District Court
      for the Southern District of California for inclusion with proceedings already
      centralized and pending in that court.
    In February 2004, the Montana Public Service Commission initiated a limited
      investigation of the Montana retail electricity market for the years 2000
      and 2001, focusing on how that market was affected by transactions involving
      the possible manipulation of the electricity grid in the western U.S. The
      investigation includes all public utilities and licensed electricity suppliers
      in Montana, as well as other entities that may possess relevant information.
      Through its subsidiaries, PPL is a licensed electricity supplier in Montana
      and a wholesale supplier in the western U.S. As with the other investigations
      taking place as a result of the issues arising out of the electricity supply
      situation in California and other western states, PPL and its subsidiaries
      believe that they have not engaged in any improper trading or marketing
      practices affecting the Montana retail electricity market.
    While PPL and its subsidiaries believe that they have not engaged in any
      improper trading practices, they cannot predict whether, or the extent to
      which, any PPL subsidiaries will be the target of any additional governmental
      investigations or named in other lawsuits or refund proceedings, the outcome
      of any such lawsuits or proceedings or whether the ultimate impact on them
      of the electricity supply situation in California and other western states
      will be material.
    PJM Capacity Transactions(PPL, PPL Energy Supply and
      PPL Electric)
    In September 2002, PPL was served with 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 pricing of installed capacity in the PJM daily market during the first
      quarter of 2001. The court dismissed the complaint with prejudice in July
      2003, and Utilimax has appealed the court's dismissal to the U.S. Court
      of Appeals for the Third Circuit.
    In December 2002, PPL was served with a complaint against PPL, PPL EnergyPlus
      and PPL Electric filed in the U.S. District Court for the Eastern District
      of Pennsylvania by a group of 14 Pennsylvania boroughs that apparently alleges,
      in broad terms, similar violations of the federal antitrust laws. These
      boroughs were wholesale customers of PPL Electric. The claims of the boroughs
      are similar to those previously alleged by a single borough in litigation
      that is still pending in the same court. In addition, in November 2003, PPL and PPL EnergyPlus
      were served with a complaint which was filed in the same court by Joseph
      Martorano, III (d/b/a ENERCO), that also alleges violations of the federal
      antitrust laws in early 2001. The complaint indicates that ENERCO provides
      consulting and energy procurement services to clients in Pennsylvania and
      New Jersey.
    Each of the U.S. Department of Justice - Antitrust Division, the FERC and
      the Pennsylvania Attorney General conducted investigations regarding PPL's
      PJM capacity market transactions in early 2001 and did not find any reason
      to take action against PPL.
    Although PPL, PPL EnergyPlus and PPL Electric believe the claims in these
      complaints are without merit, they cannot predict the outcome of these matters.
    New England Investigation (PPL and PPL Energy Supply)
    In January 2004, PPL became aware of an investigation by the Connecticut
      Attorney General and the FERC's Office of Market Oversight and Investigation
      (OMOI) regarding allegations that natural gas-fired generators located in
      New England illegally sold natural gas instead of generating electricity
      during the week of January 12, 2004. Subsequently, PPL and other generators
      were served with a data request by OMOI. The data request indicated that
      PPL was not under suspicion of a regulatory violation, but that OMOI was
      conducting an initial investigation. PPL has responded to this data request.
      PPL also has responded to data requests of the ISO - New England and data
      requests served by subpoena from the Connecticut Attorney General. While
      PPL does not believe that it committed any regulatory or other violations
      concerning the subject matter of these investigations, PPL cannot predict
      the outcome of these investigations.
    PJM Billing (PPL, PPL Energy Supply and PPL Electric)
    
    In March 2004, an Exelon Corporation subsidiary, PECO Energy, Inc. (PECO),
      alleged that PJM overcharged PECO by approximately $45 million, exclusive
      of interest, from April 1998 through May 2003 as a result of an error
      by PJM in the State Estimator Program used in connection with billing all
      PJM customers for certain transmission, spot market energy and ancillary
      services charges. PECO further alleged that PPL Electric or other PPL subsidiaries
      should be responsible for all these overcharges, plus interest. PPL, PECO
      and PJM have begun discussions under the dispute resolution procedures of
      the PJM Operating Agreement. Although participating in the discussions,
      PPL Electric and PPL Energy Supply do not believe that they or any PPL subsidiaries
      have any financial responsibility or liability to PJM or PECO as a result
      of PJM's alleged error. PJM has not taken a position on this matter. PPL
      Electric and PPL Energy Supply cannot predict the outcome of these discussions,
      whether any legal proceedings may result from these allegations, the outcome
      of such proceedings, or the ultimate impact on any PPL subsidiary.
    FERC Market-Based Rate Authority (PPL and PPL Energy Supply)
    In December 1998, the FERC issued an order authorizing PPL EnergyPlus to
      make wholesale sales of electric power and related products at market-based
      rates. In that order, the FERC directed PPL EnergyPlus to file an updated
      market analysis within three years of the date of the order, and every three
      years thereafter. PPL EnergyPlus filed its initial updated market analysis
      in December 2001. Several parties thereafter filed interventions and protests
      requesting that PPL EnergyPlus be required to provide additional information
      demonstrating that it has met the FERC's market power tests necessary for
      PPL EnergyPlus to continue its market-based rate authority. PPL EnergyPlus
      has responded that the FERC does not require the economic test suggested
      by the interveners 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 Proposed Rules (PPL, PPL Energy Supply and PPL Electric)
    In July 2002, the FERC issued a Notice of Proposed Rulemaking entitled
      "Remedying Undue Discrimination through Open Access Transmission Service
      and Standard Electricity Market Design." The proposed rule is currently
      available for public comment and contains a proposed implementation date
      of July 31, 2003. However, since the issuance of the proposed rule, the
      FERC has delayed the implementation date. This far-reaching proposed rule,
      in its current form, purports to establish uniform transmission rules and
      a standard market design by, among other things:
    
        enacting standard transmission tariffs
            and uniform market mechanisms,
        monitoring and mitigating "market power,"
        managing transmission congestion through
            pricing and tradable financial rights,
        requiring independent operational control
            over transmission facilities,
        forming state advisory committees on
            regional transmission organizations and resource adequacy, and
        exercising FERC jurisdiction over all
            transmission service.In April 2003, the FERC issued a white paper describing certain modifications
      to the proposed rule. The FERC has requested comments and is holding numerous
      public comment sessions concerning the white paper.
    If adopted, this proposed rule may have a significant impact on PPL and
      its subsidiaries, which cannot be predicted at this time.
    In November 2003, the FERC adopted a proposed rule to require all existing
      and new electric market-based tariffs and authorizations to include provisions
      prohibiting the seller from engaging in anticompetitive behavior or the
      exercise of market power. The FERC order adopts a list of market behavior
      rules that apply to all electric market-based rate tariffs and authorizations,
      including those of PPL EnergyPlus and any other PPL subsidiaries that hold
      market-based rate authority. PPL does not expect this rule to have a significant
      impact on its subsidiaries.
    Wallingford Deactivation (PPL and PPL Energy Supply)
    In January 2003, PPL negotiated an agreement with the ISO - New England
      that would declare that four of the five units at PPL's Wallingford, Connecticut
      facility are "reliability must run" units and put those units under cost-based
      rates. This agreement and the cost-based rates are subject to the FERC's
      approval, and PPL filed a request with the FERC for such approval. PPL requested
      authority for cost-based rates because the current and anticipated wholesale
      prices in New England are insufficient to cover the costs of keeping these
      units available for operation. In March 2003, PPL filed an application with
      the New England Power Pool to temporarily deactivate these four units. In
      May 2003, the FERC denied PPL's request for cost-based rates in light of
      the FERC's changes to the market and bid mitigation rules of the ISO - New
      England made in a similar case involving generating units owned by NRG Energy,
      Inc. PPL subsequently has explained to the FERC that its changes to the
      market and bid mitigation rules of ISO - New England will not provide sufficient
      revenues to PPL, and PPL continues to seek approval of its cost-based rates.
      However, PPL has informed the New England Power Pool that it will not pursue
      its request to temporarily deactivate certain Wallingford units. In February
      2004, PPL appealed the FERC's denial of its request for cost-based rates
      to the U.S. Court of Appeals for the D.C. Circuit. PPL cannot predict the
      outcome of this matter.
    IRS Synthetic Fuels Tax Credits (PPL and PPL Energy Supply)
    PPL, through its subsidiaries, has interests in two synthetic
      fuel production facilities: the Somerset facility located in Pennsylvania
      and the Tyrone facility to be relocated to Kentucky. PPL receives
      tax credits pursuant to Section 29 of the Internal Revenue Code based on
      the sale of synfuel from these facilities to unaffiliatedthird-party
      purchasers. Section 29 of the Internal Revenue Code provides tax credits
      for the production and sale of solid synthetic fuels produced from coal.
      To qualify for the Section 29 tax credits, the synthetic fuel must meet
      three primary conditions: (i) there must be a significant chemical change
      in the coal feedstock, (ii) the product must be sold to an unaffiliated
      entity, and (iii) the production facility must have been placed in service
      before July 1, 1998. Section 29 tax credits are currently scheduled to expire
      at the end of 2007.
    A PPL subsidiary owns and operates the Somerset facility. In November 2001, PPL
received a private letter ruling from the IRS pursuant to which, among other things,
the IRS concluded that the synthetic fuel produced at the Somerset facility qualifies
for Section 29 tax credits. The Somerset facility uses the Covol technology to
produce synfuel, and the IRS issued the private letter ruling after its review
and approval of that technology. In reliance on this private letter ruling, PPL
has sold synfuel produced at the Somerset facility resulting in an aggregate of
approximately $161 million of tax credits as of March 31, 2004. PPL owns a limited
partnership interest in the entity that owns and plans to operate the Tyrone facility.
In April 2004, this entity received a private letter ruling from the IRS. Similar
to its conclusions relating to the Somerset facility, the IRS concluded that the
synfuel to be produced at the Tyrone facility qualifies for Section 29 tax credits.
The Tyrone facility currently is being relocated from Pennsylvania to a site in
Kentucky. PPL anticipates that the Tyrone facility will commence commercial operations
in mid-2004. PPL also purchases synfuel from unaffiliated third parties, at prices
below the market price of coal, for use at its coal-fired power plants.
    In June 2003, the IRS announced that it had reason to question the scientific
      validity of certain test procedures and results that have been presented
      to it by taxpayers with interests in synfuel operations as evidence that
      the required significant chemical change has occurred, and that it was reviewing
      information regarding these test procedures and practices. In conjunction
      with such review, the IRS suspended the issuance of private letter rulings
      concerning whether a significant chemical change has occurred for requests
      relying on the procedures and results being reviewed. In addition, the IRS
      indicated that it might revoke existing private letter rulings that relied
      on the procedures and results under review if it determined that those test
      procedures and results do not demonstrate that a significant chemical change
      has occurred.
    In October 2003, the IRS announced that it had completed its review of
      the scientific validity of test procedures and results presented by taxpayers
      as evidence of significant chemical change and determined that the test
      procedures and results used by taxpayers are scientifically valid, if the
      procedures are applied in a consistent and unbiased manner. Further, the
      IRS announced that it will continue to issue rulings on significant chemical
      change under applicable IRS guidelines, despite some question by the IRS
      as to whether those processes result in the level of significant chemical
      change required by Section 29 of the Internal Revenue Code and IRS revenue
      rulings. Finally, the IRS indicated that it would require taxpayers to comply
      with certain sampling and data/record retention practices to obtain or maintain
      a ruling on significant chemical change.
    PPL believes that the October IRS announcement and its receipt of the private
letter ruling for the Tyrone facility following this announcement confirms that
PPL is justified in its reliance on the private letter rulings for the Somerset
and Tyrone facilities and that the test results that PPL presented to the IRS
in connection with its private letter rulings are scientifically valid. In addition,
PPL believes that it has operated the Somerset facility in compliance with the
private letter ruling and Section 29 of the Internal Revenue Code.
    In October 2003, following the IRS announcement, it was reported that the
      U.S. Senate Permanent Subcommittee on Investigations, of the Committee on
      Governmental Affairs, had begun an investigation of the synthetic fuel industry
      and its producers. That investigation is ongoing. PPL cannot
      predict when the investigation will be completed or the potential results
      of the investigation.
    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 currently is no
      competition in electricity distribution, but recently a small operator has
      applied to the Regulator for a license to operate in Great Britain.
    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 offer terms 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). The
      Regulator may reduce this increase in operating profit through a one-off
      price reduction in the first year of the new pricing regime, if the Regulator
      determines that it is not a function of efficiency savings, or if genuine
      efficiency savings have been made and the Regulator determines that customers
      should benefit through lower prices.
    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 implemented 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.
    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 June 2003, the Regulator published a report on the quality of supply
      from April 2001 through March 2002. The report confirms that WPD (South
      West) and WPD (South Wales) met or exceeded such standards and that no payments
      were required to be made by either company.
    Any significant lowering of rates implemented by the Regulator after the
      current price control ends in March 2005 could lower the amount of revenue
      WPD generates in relation to its operational cost and could materially lower
      the income of WPD.
    Environmental Matters - Domestic
    (PPL, PPL Energy Supply and PPL Electric)
    Due to the environmental issues discussed below or other environmental
      matters, PPL subsidiaries may be required to modify, replace or cease operating
      certain facilities to comply with statutes, regulations and actions by regulatory
      bodies or courts. In this regard, PPL subsidiaries also may incur capital
      expenditures or operating expenses in amounts which are not now determinable,
      but which could be significant.
    Air(PPL and PPL Energy Supply)
    The Clean Air Act deals, in part, with acid rain, attainment of federal
      ambient ozone standards 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 cost of these reductions could
      be substantial. The federal government is seeking commitments from many
      major industries to voluntarily reduce carbon dioxide emissions. In addition,
      several states have taken their own actions requiring mandatory carbon dioxide
      emission reductions. Pennsylvania and Montana have not, at this time, established
      any formal programs to address carbon dioxide and other greenhouse gases.
    Pennsylvania began requiring further seasonal (May-June) nitrogen oxide
      reductions to 80% from 1990 levels starting in 2003. This requirement is
      pursuant to EPA's 1998 State Implementation Plan (SIP) call to 22 eastern
      states, including Pennsylvania, to revise their state implementation plans.
      PPL achieved the 2003 nitrogen oxide reductions with the installation of
      SCR technology on the Montour units, and may install SCR or other additional
      nitrogen oxide reduction 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. To facilitate attainment of these standards, the EPA has
      also proposed a rule (called the Interstate Air Quality Rule) for 28 midwest and eastern states, including Pennsylvania, to reduce
      sulfur dioxide emissions by 40% and nitrogen oxide emissions by 55% from
      today's levels, starting in 2010. Starting in 2015, the proposed rule requires
      reductions in sulfur dioxide and nitrogen oxide of 70% and 65%, respectively,
      from today's levels. The proposed rule allows these reductions to be achieved
      through cap and trade programs, and is consistent with the Bush administration's
      proposed amendments to the Clean Air Act, except that it applies to only
      the 28 states.
    The EPA has proposed mercury and nickel regulations and is expected to finalize
these regulations in 2004. The proposed mercury regulations affect coal-fired
plants. With respect to mercury, the EPA has proposed two alternative approaches:
an emission trading program to take effect beginning January 2010 or a requirement
to take effect in 2007 that every unit install maximum achievable control technology
(MACT). The proposed nickel regulations impose MACT requirements on oil-fired
units to take effect in 2007. The nickel regulations would affect Martins Creek
Units 3 and 4. The cost of complying with these regulations is not now determinable,
but could be significant.
    In 1999, the EPA initiated enforcement actions against several utilities,
      asserting that older, coal-fired power plants operated by those utilities
      have, over the years, been modified in ways that subject them to more stringent
      "New Source" requirements under the Clean Air Act. The EPA has since issued
      notices of violation and commenced enforcement activities against other
      utilities. The future direction of the EPA's enforcement initiative is presently
      unclear. 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 Colstrip plant in 2003. The Region III office issued such a request
      to PPL Generation's Martins Creek plant in 2002. PPL and its subsidiaries
      have responded to the Corette and Martins Creek information requests and
      are in the process of responding to the Colstrip information request. The
      EPA has taken no further action following the Martins Creek and Corette
      submittals. PPL cannot presently predict what, if any, action the EPA might
      take in this regard. Should the EPA or any state 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.
    In 2003, the EPA issued changes to its "New Source" regulations that clarify
      what projects are exempt from "New Source" requirements as routine maintenance
      and repair. Under these clarifications, any project to replace existing
      equipment with functionally equivalent equipment would be considered routine
      maintenance and excluded from "New Source" review if the cost of the replaced
      equipment does not exceed 20% of the replacement cost of the entire process
      unit, the basic design is not changed and no permit limit is exceeded. These
      clarifications would substantially reduce the uncertainties under the prior
      "New Source" regulations; however, they have been stayed by the U.S. Court
      of Appeals for the District of Columbia Circuit. PPL is therefore continuing
      to operate under the "New Source" regulations as they existed prior to the
      EPA's clarifications.
    The New Jersey DEP and some New Jersey residents raised environmental concerns
      with respect to the Martins Creek plant, particularly with respect to sulfur
      dioxide emissions and the opacity of the plant's plume. These issues were
      raised in the context of an appeal by the New Jersey DEP of the Air Quality
      Plan Approval issued by the Pennsylvania DEP to the adjacent Lower Mt. Bethel
      facility. In October 2003, PPL finalized an agreement with the New Jersey
      DEP and the Pennsylvania DEP pursuant to which it will reduce sulfur dioxide
      emissions from its Martins Creek power plant. Under the agreement, PPL Martins
      Creek will shut down the plant's two coal-fired generating units by September
      2007 and may repower them any time after shutting them down so long as it
      follows all applicable state and federal requirements, including installing
      the best available pollution control technology. PPL Martins Creek also
      will reduce the fuel sulfur content for those units as well as the plant's
      two oil-fired units beginning in 2004. In addition, PPL will donate to a
      non-profit organization 70% of the excess emission allowances and emission
      reduction credits that result from shutting down or repowering the coal
      units. As a result of the agreement, the New Jersey DEP withdrew its challenge
      to the Air Quality Plan Approval for the Lower Mt. Bethel facility. The
      agreement will not result in material costs to PPL. The agreement does not
      address the issues raised by the New Jersey DEP regarding the visible opacity
      of emissions from the Martins Creek plant. If it is determined that actions
      must be taken to address the visible opacity of these emissions, such actions
      could result in costs that are not now determinable, but which could be
      significant.
    In addition to the opacity concerns raised by the New Jersey DEP, the Pennsylvania
      DEP also has raised concerns about the opacity of emissions from the Martins
      Creek and Montour plants. PPL is discussing these concerns with the Pennsylvania
      DEP. If it is determined that actions must be taken to address the Pennsylvania
      DEP's concerns, such actions could result in costs that are not now determinable,
      but which could be significant.
    
    In December 2003, PPL Montana, as operator of the Colstrip facility, received
an Administrative Compliance Order (ACO) from the EPA pursuant to the Clean Air
Act. The ACO alleges that Units 3 and 4 of the facility have been in violation
of the Clean Air Act permit at Colstrip since 1980. The permit required Colstrip
to submit for review and approval by the EPA an analysis and proposal for reducing
emissions of nitrogen oxide to address visibility concerns if and when EPA promulgates
Best Available Retrofit Technology requirements for nitrogen oxide. The EPA is
asserting that regulations it promulgated in 1980 triggered this requirement.
PPL believes that the ACO is unfounded and is discussing the matter with the EPA.
The ACO does not expressly seek penalties, and it is unclear at this time what,
if any, additional control technology the EPA may consider to be required. Accordingly,
the costs to install any additional controls for nitrogen oxide, if required,
are not now determinable, but could be significant. In addition, the Montana Department
of Environmental Quality is questioning whether the permit limits for sulfur dioxide
emissions from Colstrip Units 3 and 4 are too high under provisions of the Clean
Air Act that limit allowable emissions from sources built after 1978. PPL cannot
 predict the outcome of this matter.
    Water/Waste(PPL and PPL Energy Supply)
    Brunner Island's NPDES permit contains a provision requiring further studies
      on the thermal impact of the cooling water discharge from the plant. These
      studies are underway and are expected to be completed in 2006. The Pennsylvania
      DEP has stated that it believes the studies to date show that the temperature
      of the discharge must be lowered. The Pennsylvania DEP has also stated that
      it believes the plant is in violation of a permit condition prohibiting
      the discharge from changing the river temperature by more than two degrees
      per hour. PPL is discussing these matters with the agency. Depending on
      the outcome of these discussions, the plant could be subject to additional
      capital and operating costs that are not now determinable, but which could
      be significant.
    The Pennsylvania DEP has issued a water quality certification and NPDES
      permit to PPL Holtwood, LLC in the FERC license renewal proceeding for its
      Lake Wallenpaupack hydroelectric facility. PPL has appealed both the certification
      and the NPDES permit. The parties are discussing settlement. If these discussions
      are unsuccessful, then depending on the outcome of these appeals, each of
      the certification and the NPDES permit could impose additional costs on
      PPL, which 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 either further
      treat wastewater or take abatement action at their power plants, or both.
      The cost of complying with the revised standard is not now determinable,
      but could be significant.
    The EPA recently finalized requirements for new or modified water intake structures.
These requirements affect where generating facilities are built, establish intake
design standards, and could lead to requirements for cooling towers at new and
modified power plants. Another new rule expected to be finalized in 2004 addresses
existing structures. Based on PPL's preliminary analyses, PPL does not believe
that these rules will impose material costs on PPL subsidiaries.
    Superfund and Other Remediation
    (PPL and PPL Energy Supply)
    Under the Pennsylvania Clean Streams Law, subsidiaries of PPL Generation
      are obligated to remediate acid mine drainage at former mine sites and may
      be required to take additional measures to prevent potential acid mine drainage
      at previously capped refuse piles. One PPL Generation subsidiary is pumping
      and treating mine water at two mine sites. Another PPL Generation subsidiary
      plans to install passive wetlands treatment at a third site, and the Pennsylvania
      DEP has suggested that it may require that PPL Generation subsidiary to
      pump and treat the mine water at that third site. At March 31, 2004,
      a PPL Energy Supply subsidiary had accrued $29 million to cover the costs
      of pumping and treating groundwater at two mine sites for 50 years and for
      installing passive wetlands treatment at the third site.
    (PPL, PPL Energy Supply and PPL Electric)
    In 1995, PPL Electric and PPL Generation entered into a consent order with
      the Pennsylvania DEP to address a number of sites that were not being addressed
      under another regulatory program such as Superfund, but for which PPL Electric
      or PPL Generation may be liable for remediation. This may include potential
      PCB contamination at certain PPL Electric substations and pole sites; potential
      contamination at a number of coal gas manufacturing facilities formerly
      owned or operated by PPL Electric; oil or other contamination which may
      exist at some of PPL Electric's former generating facilities; and potential
      contamination at abandoned power plant sites owned by PPL Generation. As
      of March 31, 2004, work has been completed for 96% of the sites included
      in the consent order. Additional sites formerly owned or operated by PPL
      Electric are added to the consent order on a case-by-case basis.
    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 the Pennsylvania
      DEP have agreed to add 72 meter/regulation sites to the consent order. As
      of March 31, 2004, PPL Gas Utilities had addressed 34% of the sites
      under its consent order.
    At March 31, 2004, PPL Electric and PPL Gas Utilities had accrued approximately
      $3 million and $8 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 begun or have not been completed,
      the costs of remediation and other liabilities could be substantial. PPL
      also could face other non-remediation liabilities at sites included in the
      consent order or other contaminated sites, the costs of which are not now
      determinable, but which could be significant.
    (PPL and PPL Energy Supply)
    In conjunction with its 1999 acquisition of generating assets from Montana
      Power, PPL Montana required Montana Power to prepare a Phase I and Phase
      II Environmental Site Assessment. The assessment identified various groundwater
      remediation issues. Based upon subsequent assessments and actions taken
      by PPL Montana, the costs to PPL Montana of the groundwater remediation
      measures identified in those assessments are expected to be approximately
      $3 million. However, additional expenditures could be required in amounts
      which are not now determinable, but which could be significant.
    In May 2003, approximately 40 plaintiffs brought an action in the Montana
      Second Judicial District Court, Butte-Silver Bow County, against PPL Montana
      and the other owners of the Colstrip plant alleging property damage from
      freshwater pond seepage and contamination from wastewater ponds at the plant.
      This action has been moved to the Montana Sixteenth Judicial District Court,
      Rosebud County. This action could result in PPL Montana and the other Colstrip
      owners being liable for damages and being required to take additional remedial
      measures. The cost to PPL Montana of any such damages and remedial measures is not
      now determinable but 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.
    Future cleanup or remediation work at sites currently under review, or
      at sites not currently identified, may result in material additional operating
      costs for PPL subsidiaries that cannot be estimated at this time.
    Asbestos (PPL and PPL Energy Supply)
    There have been increasing litigation claims throughout the U.S. based
      on exposure to asbestos against companies that manufacture or distribute
      asbestos products or that have these products on their premises. Certain
      of PPL's generation subsidiaries and certain of its energy services subsidiaries,
      such as those that have supplied, may have supplied or installed asbestos
      material in connection with the repair or installation of process piping
      and heating, ventilating and air conditioning systems, have been named as
      defendants in asbestos-related lawsuits. PPL cannot predict the outcome
      of these lawsuits or whether additional claims may be asserted against its
      subsidiaries in the future. PPL does not expect that the ultimate resolution
      of the current lawsuits will have a material adverse effect on its results
      of operations.
    Electric and Magnetic Fields (PPL, PPL Energy Supply and PPL
      Electric)
    Concerns have been expressed by some members of the public regarding 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 in the U.S. and 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 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)
    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 sets certain
      permissible noise levels required for plant operation. PPL appealed the
      court's decision to the Commonwealth Court, and an intervener in the lawsuit
      cross-appealed the court's decision. In May 2003, the Commonwealth Court
      remanded the case to the Court of Common Pleas for further findings of fact
      concerning the zoning application relating to the construction of the facility.
      In September 2003, the Court of Common Pleas ruled in PPL's favor while
      also reaffirming its decision on the noise levels, and the intervener appealed
      this ruling to the Commonwealth Court. In April 2004, the Commonwealth Court
      affirmed the decision of the Court of Common Pleas. The Lower Mt. Bethel
      facility is expected to be operational in the second quarter of 2004.
    Environmental Matters - International(PPL and PPL Energy Supply)
    U.K.
    WPD's distribution businesses are subject to numerous regulatory and statutory
      requirements with respect to environmental matters. PPL believes that WPD
      has taken and continues to take measures to comply with the applicable laws
      and governmental regulations for the protection of the environment. There
      are no material legal or administrative proceedings pending against WPD
      with respect to environmental matters. See "Environmental Matters - Domestic
      - Electric and Magnetic Fields" for a discussion of EMFs.
    Latin America
    Certain of PPL's affiliates have electric distribution operations in Latin
      America. PPL believes that these affiliates have taken and continue to take
      measures to comply with the applicable laws and governmental regulations
      for the protection of the environment. There are no material legal or administrative
      proceedings pending against PPL's affiliates in Latin America with respect
      to environmental matters.
    Other
    Nuclear Insurance(PPL and PPL Energy Supply)
    PPL Susquehanna is a member of certain insurance programs which provide
      coverage for property damage to members' nuclear generating stations. Facilities
      at the Susquehanna station are insured against property damage losses up
      to $2.75 billion under these programs. PPL Susquehanna is also a member
      of an insurance program which provides insurance coverage for the cost of
      replacement power during prolonged outages of nuclear units caused by certain
      specified conditions. Under the property and replacement power insurance
      programs, PPL Susquehanna could be assessed retroactive premiums in the
      event of the insurers' adverse loss experience. At March 31, 2004, this
      maximum assessment was about $40 million.
    PPL Susquehanna's public liability for claims resulting from a nuclear
      incident at the Susquehanna station is limited to about $10.8 billion under
      provisions of The Price Anderson Amendments Act of 1988. PPL Susquehanna
      is protected against this liability by a combination of commercial insurance
      and an industry assessment program. In the event of a nuclear incident at
      any of the reactors covered by The Price Anderson Amendments Act of 1988,
      PPL Susquehanna could be assessed up to $201 million per incident, payable
      at $20 million per year.
    Guarantees and Other Assurances
    (PPL)
    PPL fully and unconditionally guarantees all of the debt securities of
      PPL Capital Funding, a wholly-owned financing subsidiary of PPL.
    (PPL, PPL Energy Supply and PPL Electric)
    The table below provides an update to those guarantees specifically disclosed
      in Note 14 to the Financial Statements contained in each Registrant's Annual
      Report to the SEC on Form 10-K for the year ended December 31, 2003. Not
      reflected in the table below is the guarantee by PPL of all of the obligations
      of PPL Capital Funding Trust I under its trust preferred securities that
      were a component of the PEPS Units. PPL was released from this guarantee upon cancellation
      of the trust preferred securities as discussed in Note 6.
    PPLPPL Energy
        Supply
    
    PPL ElectricRecorded
        Liability at
    
    Exposure
        at
    
    
    
    Recorded
        Liability at
    
    Exposure
        atMarch
        31,
        2004
    
    December
        31,
        2003
    
    March
        31,
        2004
    (a)
    Expiration
        
        Date
    
    March
        31,
        2004
    
    December
        31,
        2003
    
    March
        31,
        2004
    (a)
    Expiration
        
        DateWPD LLP guarantee of obligations under
        SIUK Capital Trust I preferred securities
    
    
    
    
    
    
    
    
    $    82
    (b)
    
    2027Letters of credit issued on behalf of
        affiliates
    
    
    
    
    
    
    
    
    8
    (c)
    
    2004Support agreements to guarantee partnerships'
        obligations for the sale of coal
    
    
    
    
    
    
    
    
    9
    
    
    2007Potential retroactive premiums under nuclear
        insurance programs
    
    
    
    
    
    
    
    
    40Nuclear claims under the Price Anderson
        Amendments Act of 1988
    
    
    
    
    
    
    
    
    201
    (d)Obligation to purchase commodities under
        option contracts
    
    
    
    
    
    
    
    
    6
    
    
    2004Contingent purchase price payments to
        former owners of synfuel projects
    
    
    $    4
    
    
    $    4
    
    
    60
    
    
    2007Guarantee of a portion of an unconsolidated
        entity's debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $    7
    (b)
    
    2008Residual value guarantees of leased equipment
    
    
    
    
    
    
    
    
    4
    
    
    2005
    (e)
    
    $    14
    
    
    $    16
    
    
    89
    
    
    2005(e)WPD guarantee related to a contract assigned
        as part of a sale of one of its businesses
    
    
    
    
    
    
    
    
    35
    
    
    2005(a)
        Represents the estimated maximum potential
            amount of future payments that could be required to be made under
            the guarantee.(b)
        Reflects principal payments only.(c)
        Represents letters of credit issued at the direction of
            PPL Energy Supply for the benefit of third parties for assurance against
            nonperformance by PPL and PPL Gas Utilities. This is not a guarantee
            by PPL on a consolidated basis.(d)
        Amount is per incident.(e)
        Although the expiration date noted is 2005,
            equipment of similar value is generally leased and guaranteed on an on-going basis.
9. Related Party Transactions
    Affiliate Trust(PPL)
    See Note 6 for a discussion of various transactions involving PPL Capital
      Funding subordinated notes that were held by PPL Capital Funding Trust I.
    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 months ended March 31, 2004 and 2003, these purchases totaled
      $410 million and $387 million, including nuclear decommissioning recovery
      and amortization of an up-front contract payment. These purchases are included
      in the Statement of Income as "Energy purchases from affiliate" by PPL Electric
      and as "Wholesale energy marketing to affiliates" revenues by PPL Energy
      Supply.
    Under the PLR contracts, PPL Electric is required to make performance assurance
      deposits with PPL EnergyPlus when the market price of electricity is less
      than the contract price by more than its contract collateral threshold.
      Conversely, PPL EnergyPlus is required to make performance assurance deposits
      with PPL Electric when the market price of electricity is greater than the
      contract price by more than its contract collateral threshold. At March
      31, 2004, PPL Energy Supply was required to provide PPL Electric with performance
      assurance of $300 million, the maximum amount required under the contract.
      PPL Energy Supply caused a $300 million letter of credit to be issued under
      its bank credit facilities to satisfy the requirements.
    In 2001, PPL Electric made a $90 million up-front payment to PPL EnergyPlus
      in connection with the PLR contracts. The up-front payment is being amortized
      by both parties over the term of the PLR contracts. The unamortized balance
      of this payment and other payments under the contract was $67 million at
      March 31, 2004 and $70 million at December 31, 2003. This balance is reported
      on the Balance Sheet as "Prepayment on PLR energy supply from affiliate"
      by PPL Electric and as "Deferred revenue on PLR energy supply to affiliate"
      by PPL Energy Supply.
    NUG Purchases(PPL Energy Supply and PPL Electric)
    PPL Electric has a reciprocal contract with PPL EnergyPlus to sell electricity
      purchased under contracts with NUGs. PPL Electric purchases electricity
      from the NUGs at contractual rates and then sells the electricity at the
      same price to PPL EnergyPlus. For the three months ended March 31, 2004
      and 2003, these NUG purchases totaled $37 million and $39 million and 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.
    Allocations of Corporate Service Costs(PPL Energy Supply and
      PPL Electric)
    PPL Services provides corporate functions such as financial, legal, human
      resources and information services. PPL Services bills the respective PPL
      subsidiaries for the cost of such services when they can be specifically
      identified. The cost of these services that is not directly charged to PPL
      subsidiaries is allocated to certain of the subsidiaries based on an average
      of the subsidiaries' relative invested capital, operation and maintenance
      expenses, and number of employees. PPL Services allocated the following
      charges to PPL Energy Supply and PPL Electric:
    PPL Energy
            Supply
        
        PPL ElectricThree
            Months Ended
            March 31,
        
        Three
            Months Ended
            March 31,2004
        
        2003
        
        2004
        
        2003Direct expenses
        $
        24
        
        $
        21
        
        $
        20
        
        $
        14Overhead costs
        
        14
        
        
        14
        
        
        6
        
        
        6Intercompany Borrowings(PPL Energy Supply)
    PPL Energy Supply, primarily through its financing subsidiary, PPL Investment
      Corporation, had a note receivable from PPL Energy Funding totaling $6 million
      and $2 million at March 31, 2004 and December 31, 2003, with interest equal
      to the one-month LIBOR plus 3%. Interest earned on loans to affiliates,
      included in "Other Income - net" on the Statement of Income, was insignificant
      for the three months ended March 31, 2004 and $7 million for the same
      period in 2003.
    Trademark Royalties(PPL Energy Supply)
    In the fourth quarter of 2002, a PPL subsidiary that owns PPL trademarks
      began billing certain affiliates which use these trademarks. PPL Energy
      Supply was allocated $8 million and $11 million of this license fee for
      the three months ended March 31, 2004 and 2003, which is primarily included
      in "Other operation and maintenance" on the Statement of Income.
10. Other Income - Net
    (PPL)
    The breakdown of PPL's "Other Income - net" was as follows:
    Three
            Months Ended
            March 31,2004
        
        
        2003Other IncomeInterest income
        $
        3
        
        
        $
        3Equity earnings (loss)
        
        1
        
        
        
        (1
        )Realized earnings on nuclear decommissioning
            trust
        
        4
        
        
        
        2Hyder-related activity
        
        2
        
        
        
        1Gain by WPD on the disposition of
            property
        
        1Legal claims
        
        
        
        
        
        2Profit on redemption of investment
        
        
        
        
        
        1Miscellaneous - International
        
        3
        
        
        
        4Miscellaneous - Domestic
        
        4
        
        
        
        1Total
        
        18
        
        
        
        13Other DeductionsCharitable contributions
        
        2
        
        
        
        1Miscellaneous - International
        
        1
        
        
        
        3Miscellaneous - Domestic
        
        3
        
        
        
        1Other Income - net
        $
        12
        
        
        $
        8
    (PPL Energy Supply)
    The breakdown of PPL Energy Supply's "Other Income - net" was as follows:
    Three
            Months Ended
            March 31,2004
        
        
        2003Other IncomeAffiliated interest income
        
        
        
        
        $
        7Interest income
        $
        2
        
        
        
        1Equity earnings
        
        1
        
        
        
        1Realized earnings on nuclear decommissioning
            trust
        
        4
        
        
        
        2Hyder-related activity
        
        2
        
        
        
        1Gain by WPD on the disposition of
            property
        
        1Legal claims
        
        
        
        
        
        2Profit on redemption of investment
        
        
        
        
        
        1Miscellaneous - International
        
        3
        
        
        
        5Miscellaneous - Domestic
        
        1
        
        
        
        (1
        )Total
        
        14
        
        
        
        19Other DeductionsMiscellaneous - International
        
        1
        
        
        
        3Miscellaneous - Domestic
        
        2Other Income - net
        $
        11
        
        
        $
        16
11. Derivative Instruments and Hedging Activities
    Fair Value Hedges(PPL and PPL Energy Supply)
    PPL and PPL Energy Supply enter into financial or physical contracts to
      hedge a portion of the fair value of firm commitments of forward electricity
      sales. These contracts range in maturity through 2006. Additionally, PPL
      and PPL Energy Supply enter into financial contracts to hedge fluctuations
      in market value of existing debt issuances. These contracts range in maturity
      through 2029.
    PPL and PPL Energy Supply did not recognize any net gains or losses resulting
      from hedges of firm commitments that no longer qualified as fair value hedges
      for the three months ended March 31, 2004 or 2003.
    PPL and PPL Energy Supply did not recognize any gains or losses resulting
      from the ineffective portion of fair value hedges for the three months ended
      March 31, 2004 or 2003.
    Cash Flow Hedges (PPL and PPL Energy Supply)
    PPL and PPL Energy Supply enter into financial and physical contracts,
      including forwards, futures and swaps, to hedge the price risk associated
      with electric, gas and oil commodities. These contracts range in maturity
      through 2010. Additionally, PPL and PPL Energy Supply enter into financial
      interest rate swap contracts to hedge interest expense associated with both
      existing and anticipated debt issuances. These swaps range in maturity through
      2014. 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.
    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. PPL and PPL Energy Supply did not discontinue any cash flow
      hedges during the three months ended March 31, 2004 or 2003.
    Due to hedge ineffectiveness, PPL and PPL Energy Supply reclassified amounts
      that were not significant from other comprehensive income (reported in "Wholesale
      energy marketing" revenues and "Energy purchases" on the Statement of Income)
      for the three months ended March 31, 2004 and 2003.
    As of March 31, 2004, the deferred net loss, after tax, on derivative instruments
      in "Accumulated other comprehensive loss" expected to be reclassified into
      earnings during the next twelve months was $11 million and $6 million for
      PPL and PPL Energy Supply.
    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 
March 31,2004


2003PPLBeginning accumulated derivative gain

$
36


$
7Net change associated with current period hedging activities and other


40



49Net change associated with net investment hedges


1Net change from reclassification into earnings


(76
)


(22
)Ending accumulated derivative gain

$
1


$
34
Three Months Ended 
March 31,2004


2003PPL Energy SupplyBeginning accumulated derivative gain

$
55


$
23Net change associated with current period hedging activities and other


44



47Net change associated with net investment hedges


1Net change from reclassification into earnings


(77
)


(18
)Ending accumulated derivative gain

$
23


$
52
    Related Implementation Issues(PPL and PPL Energy Supply)
    In June 2001, the FASB issued definitive guidance on DIG Issue C15, "Scope
      Exceptions: Normal Purchases and Normal Sales Exception for Certain Option-Type
      Contracts and Forward Contracts in Electricity." DIG Issue C15 provides
      additional guidance on the classification and application of derivative
      accounting rules relating to purchases and sales of electricity utilizing
      forward and option contracts. This guidance became effective as of July
      1, 2001. In December 2001, the FASB revised the guidance in DIG Issue C15,
      principally related to the eligibility of options for the normal purchases
      and normal sales exception. The revised guidance was effective April 1,
      2002. In November 2003, the FASB again revised the guidance in DIG Issue
      C15 to clarify the application of derivative accounting rules for contracts
      that may involve capacity. The guidance was effective January 1, 2004 for
      PPL. PPL had no financial statement impact from this revised guidance.
    PPL Energy Supply adopted the final provisions of EITF 03-11, "Reporting
      Realized Gains and Losses on Derivative Instruments That Are Subject to
      FASB Statement No. 133 and Not 'Held for Trading Purposes' as Defined in
      Issue No. 02-3," prospectively as of October 1, 2003. As a result of the
      adoption, non-trading bilateral sales of electricity at major market delivery
      points are netted with purchases that offset the sales at those same delivery
      points. A major market delivery point is any delivery point with liquid
      pricing available. The impact of applying EITF 03-11 for the first quarter
      of 2004 was a reduction in both "Wholesale energy marketing" revenues and
      "Energy purchases" of $81 million in PPL's and PPL Energy Supply's Statement
      of Income.
    Credit Concentration(PPL, PPL Energy Supply and PPL Electric)
    PPL and PPL Energy Supply 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 new business from
      a credit perspective.
    PPL and PPL Energy Supply 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 March 31, 2004, PPL had a credit exposure of $243 million to energy
      trading partners. Eleven counterparties accounted for 59% of this exposure.
      No other individual counterparty accounted for more than 3% of the exposure.
      With two exceptions, each of the eleven primary counterparties had an investment
      grade credit rating from Standard & Poor's Ratings Services (S&P).
      One non-investment grade counterparty, NorthWestern, has filed for Chapter
      11 bankruptcy protection. This contract has been affirmed by the bankruptcy
      court, and PPL Montana has been granted critical vendor status. NorthWestern
      has assumed the power supply agreements in its bankruptcy proceeding. NorthWestern
      has remained current on all post-bankruptcy obligations with PPL Montana.
      See Note 8 under "Wholesale Energy Commitments" for additional information
      regarding the NorthWestern bankruptcy proceeding. The other non-investment
      grade counterparty is also current on its obligations under the existing
      contract.
    At March 31, 2004, PPL Energy Supply had a credit exposure of $237 million
      to energy trading partners. Eleven counterparties accounted for 61% of this
      exposure. No other individual counterparty accounted for more than 3% of
      the exposure. With two exceptions, each of the eleven counterparties had
      an investment grade credit rating from S&P. One non-investment grade
      counterparty, NorthWestern, has filed for Chapter 11 bankruptcy protection,
      as discussed above. The other non-investment grade counterparty is also
      current on its obligations under the existing contract.
    PPL and PPL Energy Supply have the right to request collateral from each
      of these counterparties, except for one government agency, in the event
      their credit ratings fall below investment grade. PPL Montana and NorthWestern
      have mutually agreed not to request collateral from each other while NorthWestern's
      Chapter 11 bankruptcy proceeding is pending. It is also the policy of PPL
      and PPL Energy Supply to enter into netting agreements with all of their
      counterparties to minimize credit exposure.
    In past periods, PPL Energy Supply has had an exposure to PPL Electric
      under the long-term contract to provide PPL Electric's PLR load. However,
      increases in electricity prices during the quarter have reversed this position.
      At March 31, 2004, PPL Electric had a mark-to-market exposure to PPL Energy
      Supply of $800 million. In accordance with the terms of one of the PLR contracts,
      PPL Energy Supply provided PPL Electric with performance assurance in the
      amount of $300 million, the maximum amount required under the contract.
      This is the only credit exposure for PPL Electric that has a mark-to-market
      element. No other counterparty accounts for more than 1% of PPL Electric's
      total exposure.
12. Pension and Other Postretirement Benefits
    (PPL and PPL Energy Supply)
    The components of net pension and other postretirement benefit costs (credits)
      were as follows:
    Pension
            Benefits
        
        
        
        Other
            Postretirement
            BenefitsThree
            MonthsEnded
            March 31,
        
        
        
        Three
            MonthsEnded
            March 31,2004
        
        
        2003
        
        
        
        2004
        
        
        2003Domestic
        
        
        International
        
        
        Domestic
        
        
        InternationalPPLService cost
        
        $
        12
        
        
        $
        4
        
        
        $
        10
        
        
        $
        3
        
        
        $
        1
        
        
        $
        2Interest cost
        
        
        28
        
        
        
        36
        
        
        
        26
        
        
        
        31
        
        
        
        6
        
        
        
        7Expected return on plan assets
        
        
        (38
        )
        
        
        (53
        )
        
        
        (36
        )
        
        
        (47
        )
        
        
        (4
        )
        
        
        (3
        )Amortization of transition
            obligation
        
        
        (1
        )
        
        
        
        
        
        
        (1
        )
        
        
        
        
        
        
        2
        
        
        
        2Amortization of prior service
            cost
        
        
        4
        
        
        
        1
        
        
        
        4
        
        
        
        1
        
        
        
        
        
        
        
        2Amortization of (gain)/loss
        
        
        (2
        )
        
        
        2
        
        
        
        (4
        )
        
        
        
        
        
        
        2
        
        
        
        1Net periodic pension and other postretirement
            benefit cost/(credit)
        
        $
        3
        
        
        $
        (10
        )
        
        $
        (1
        )
        
        $
        (12
        )
        
        $
        7
        
        
        $
        11PPL Energy SupplyService cost
        
        $
        1
        
        
        $
        4
        
        
        $
        1
        
        
        $
        3Interest cost
        
        
        1
        
        
        
        36
        
        
        
        1
        
        
        
        31Expected return on plan assets
        
        
        (1
        )
        
        
        (53
        )
        
        
        (1
        )
        
        
        (47
        )Amortization of prior service
            cost
        
        
        
        
        
        
        1
        
        
        
        
        
        
        
        1Amortization of loss
        
        
        
        
        
        
        2Net periodic pension and other postretirement
            benefit cost/(credit)
        
        $
        1
        
        
        $
        (10
        )
        
        $
        1
        
        
        $
        (12
        )
    Medicare Prescription Drug, Improvement and Modernization Act of 2003(PPL, PPL Energy Supply and PPL Electric)
    In December 2003, the Medicare Prescription Drug, Improvement and Modernization
      Act of 2003 (the Act) was signed into law. The Act introduces a prescription
      drug benefit under Medicare and also provides for a federal subsidy to sponsors
      of retiree health care benefit plans that provide an actuarially equivalent
      level of prescription drug benefits. The subsidy would be 28% of eligible
      drug costs for retirees that are over age 65 and covered under PPL's other
      postretirement benefit plans.
    The impact of the Act on the provisions of SFAS 106, "Employers' Accounting
      for Postretirement Benefits Other Than Pensions," has yet to be determined
      by the FASB. PPL has elected to defer recognition of the potential impact
      of the Act, as allowed under FSP FAS 106-1, "Accounting and Disclosure Requirements
      Related to the Medicare Prescription Drug, Improvement and Modernization
      Act of 2003," which was issued by the FASB in January 2004. Thus, the measures
      of PPL's accumulated postretirement benefit obligations and net postretirement
      benefit costs in the financial statements and accompanying notes do not
      reflect the effects of the Act. PPL could be required to change previously
      reported information upon issuance of final accounting guidance related
      to the Act, as PPL's other postretirement benefit plans provide prescription
      drug coverage to retirees that may be eligible for the federal subsidy.
13. Asset Retirement Obligations
    (PPL and PPL Energy Supply)
    PPL and PPL Energy Supply adopted SFAS 143, "Accounting for Asset Retirement
      Obligations," effective January 1, 2003. SFAS 143 addresses the accounting
      for obligations associated with the retirement of tangible long-lived assets.
      In connection with the adoption of SFAS 143, PPL and PPL Energy Supply recorded
      a cumulative effect of adoption that increased net income by $63 million.
    Amounts collected from PPL Electric's customers for decommissioning, less
      applicable taxes, are deposited in external trust funds for investment and
      can only be used for future decommissioning costs. The fair value of the
      nuclear decommissioning trust was $370 million as of March 31, 2004 and
      $357 million as of December 31, 2003.
    PPL and PPL Energy Supply's AROs are included in "Deferred Credits and
      Other Noncurrent Liabilities - Other" on the Balance Sheet. The changes
      in the carrying amounts of the AROs were as follows:
    
    PPL and PPL
            Energy SupplyARO at December 31, 2003
        
        $
        242Accretion expense
        
        
        5Settlement
        
        
        (3
        )ARO at March 31, 2004
        
        $
        244
14. Workforce Reduction
    (PPL, PPL Energy Supply and PPL Electric)
    In an effort to improve operational efficiency and reduce costs, PPL and
      its subsidiaries commenced a workforce reduction assessment in June 2002.
      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.
    During 2002 and 2003, PPL recorded total charges of $84 million. PPL Energy
      Supply recorded charges of $41 million in 2002. During 2002 and 2003, PPL
      Electric recorded total charges of $42 million, including the charges associated
      with implementation of the Automated Meter Reading project. There was no
      impact to earnings for the periods ended March 31, 2004 and 2003.
    As of March 31, 2004, 514 employees of PPL subsidiaries were terminated.
     Additional positions, which are primarily bargaining unit and are currently estimated at 97, are being
      evaluated for termination over the next six months, due to the timing of
      PPL Electric's Automated Meter Reading project and the displacement program
      under the bargaining unit contract. 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
      are paid from the PPL Retirement Plan pension trust and increased PPL's
      pension liabilities in 2002 and 2003 when recorded. Substantially all of
      the accrued non-pension benefits have been paid.
15. New Accounting Standards
    FIN 46(R)(PPL, PPL Energy Supply and PPL Electric)
    In December 2003, the FASB issued Interpretation No. 46 (revised December
      2003), "Consolidation of Variable Interest Entities, an Interpretation of
      ARB No. 51," which is known as FIN 46(R) and replaces FIN 46, "Consolidation
      of Variable Interest Entities, an Interpretation of ARB No. 51." See Note
      22 to the Financial Statements contained in each Registrants' Annual Report
      to the SEC on Form 10-K for the year ended December 31, 2003 for a discussion
      of FIN 46 and the impact of its adoption for certain entities. FIN 46(R)
      does not change the general consolidation concepts of FIN 46. Among other
      things, FIN 46(R) clarifies certain provisions of FIN 46 and provides additional
      scope exceptions for certain types of businesses. FIN 46(R) provides that
      a public entity that is not a small business issuer should apply the provisions
      of FIN 46(R) to all entities no later than the end of the first reporting
      period that ends after March 15, 2004. PPL and its subsidiaries adopted
      FIN 46(R) for all entities effective March 31, 2004. This adoption did not
      have a material impact on the results of PPL and its subsidiaries.
    EITF 03-1 (PPL, PPL Energy Supply and PPL Electric)
    In March 2004, the FASB ratified certain consensus in EITF 03-1, "The
      Meaning of Other-Than-Temporary Impairment and Its Application to Certain
      Investments." EITF 03-1 provides guidance for determining when an investment
      in certain debt and equity securities is considered impaired, whether that
      impairment is other than temporary and the measurement of an impairment
      loss. EITF 03-1 also contains disclosure requirements related to information
      about impairments that have not been recognized as other than temporary
      as well as disclosure requirements for investments accounted for under the
      cost method. The recognition and measurement provisions of EITF 03-1 are
      required to be applied to other-than-temporary impairment evaluations in
      reporting periods beginning after June 15, 2004. The disclosure provisions
      related to cost method investments are effective for annual financial statements
      for fiscal years ending after June 15, 2004, while all other disclosure
      provisions were effective for annual financial statements for fiscal years
      ending after December 15, 2003. PPL and its subsidiaries are in the process
      of evaluating the impact of adopting the recognition and measurement provisions
      of EITF 03-1 effective July 1, 2004. The potential impact of adopting EITF
      03-1 is not yet determinable, but could be material.
    EITF 03-6(PPL)

    In March 2004, the FASB ratified EITF 03-6, "Participating Securities and
      the Two-Class Method under FASB Statement No. 128, 'Earnings per Share'."
      EITF 03-6 addresses a number of issues regarding the calculation of basic
      EPS by companies that have issued securities other than common stock that
      participate in dividends and earnings, which are known as participating
      securities. EITF 03-6 requires participating securities to be included
      in the calculation of basic EPS using the two-class method and provides
      guidance in applying the two-class method. EITF 03-6 is effective for reporting
      periods beginning after March 31, 2004, and it requires restatement of prior
      periods. PPL is in the process of evaluating the impact of adopting EITF 03-6.
The potential impact of  adopting EITF 03-6 is not yet
determinable, but could be material.
    EITF 03-16(PPL, PPL Energy Supply and PPL Electric)
    
    In March 2004, the FASB ratified EITF 03-16, "Accounting for Investments
      in Limited Liability Companies." EITF 03-16 provides that an investment
      in a limited liability company (LLC) that maintains a specific ownership
      account for each investor should be viewed similarly to an investment in
      a limited partnership for purposes of determining whether a noncontrolling
      interest in the LLC should be accounted for using the cost or equity method.
      EITF 03-16 is effective for reporting periods beginning after June 15, 2004
      and is required to be applied as a change in accounting principle with a
      cumulative effect adjustment reflected in the period of adoption. PPL and
      its subsidiaries are in the process of evaluating the impact of adopting
      EITF 03-16 effective July 1, 2004. The potential impact of adopting EITF
      03-16 is not yet determinable, but could be material.
    FSP FAS 106-1(PPL, PPL Energy Supply and PPL Electric)
    See Note 12 for a discussion of FSP FAS 106-1, "Accounting and Disclosure
      Requirements Related to the Medicare Prescription Drug, Improvement and
      Modernization Act of 2003."

---





PPL CORPORATION AND SUBSIDIARIES



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



Overview



PPL is an energy and utility holding company with headquarters in Allentown,
  PA. See Item 1, "Business - Background" in PPL's Annual Report to the SEC on
  Form 10-K for the year ended December 31, 2003 for descriptions of PPL's major
  segments. See Exhibit 99 in Item 15 in PPL's Form 10-K for the current corporate
  organization structure. Through its subsidiaries, PPL is primarily engaged in
  the generation and marketing of electricity in two key markets - the northeastern
  and western U.S. - and in the delivery of electricity in Pennsylvania, the U.K.
  and Latin America. See Item 7, "Management's Discussion and Analysis of Financial
  Condition and Results of Operations," in PPL's Annual Report to the SEC on Form
  10-K for the year ended December 31, 2003 for an overview of PPL's strategy
  and the risks and the challenges that it faces in its business.

The information provided in this "Management's Discussion and Analysis of Financial
  Condition and Results of Operations" should be read in conjunction with PPL's
  Condensed Consolidated Financial Statements and the accompanying Notes.

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

Results of Operations

The following discussion, which explains significant changes in principal items
  on the Statement of Income, compares the three months ended March 31, 2004 to
  the comparable period in 2003.

WPD's results, as consolidated in PPL's Statement of Income, are impacted by
  changes in foreign currency exchange rates. For the three months ended March
  31, 2004, as compared to the same period in 2003, changes in foreign exchange
  rates increased WPD's portion of revenue and expense line items by about 13%.

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



Earnings

Net income and the related EPS, were as follows:

|              |  | Three Months
        Ended 
        March 31, |     
|------------- |  | --------------------------------------------- | ----
|              |  |                                               |     
|              |  | 2004                                          |     
|              |  |                                               |     
|Net income    |  | $                                             | 177 
|              |  |                                               |     
|EPS - basic   |  | $                                             | 1.00
|              |  |                                               |     
|EPS - diluted |  | $                                             | 0.99

The after-tax changes in net income were primarily due to:

|               | Three Months
        EndedMarch 31, 2004 vs. March 31, 2003    
|-------------- | ---------------------------------------------------------------
|               |                                                                
|Domestic:      |                                                                
|               |                                                                
|               | Eastern U.S. margins                                           
|               |                                                                
|               | Net energy trading margins                                     
|               |                                                                
|               | Northwestern U.S. margins                                      
|               |                                                                
|               | Southwestern U.S. margins                                      
|               |                                                                
|               | Operation and maintenance expenses                             
|               |                                                                
|               | Depreciation                                                   
|               |                                                                
|               | Taxes, other than income (excluding
        gross receipts tax)
|               |                                                                
|               | Energy related businesses                                      
|               |                                                                
|               | Interest expense and preferred
        distributions           
|               |                                                                
|               | Other                                                          
|               |                                                                
|               |                                                                
|               |                                                                
|International: |                                                                
|               |                                                                
|               | U.K.:                                                          
|               |                                                                
|               |                                                                
|               |                                                                
|               |                                                                
|               |                                                                
|               | Latin America                                                  
|               |                                                                
|               | Other                                                          
|               |                                                                
|               |                                                                
|               |                                                                
|Unusual items  |                                                                
|               |                                                                
|               |                                                                
|               |                                                                

The changes in net income from period to period were, in part, attributable
  to two unusual items with significant earnings impacts. The after-tax impacts
  of these unusual items are shown below.

|                     |               | Three Months
        Ended
        March 31, |   
|-------------------- | ------------- | -------------------------------------------- | --
|                     |               |                                              |   
|                     |               | 2004                                         |   
|                     |               |                                              |   
|Accounting change:   |               |                                              |   
|                     |               |                                              |   
|                     | ARO (Note 13) |                                              |   
|                     |               |                                              |   
|Sale of CGE (Note 7) |               | $                                            | (8
|                     |               |                                              |   
|Total                |               | $                                            | (8
|                     |               |                                              |   

The period to period changes in earnings components, including margins by region
  and income statement line items, are discussed in the balance of the discussion
  in "Results of Operations."

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

- Due to current electricity and natural gas price levels, there is a risk
    that PPL may be unable to recover its investment in new gas-fired generation
    facilities. Under GAAP, PPL does not believe that there is an impairment charge
    to be recorded for these facilities at this time. PPL is unable to predict
    the ultimate earnings impact of this issue, based upon future energy price
    levels, applicable accounting rules and other factors, but such impact may
    be material.
- Market prices for electricity and fuel may negatively impact energy margins
    and earnings.
- PPL is unable to predict whether future impairments of goodwill may be required
    for its domestic and international investments. While no goodwill impairments
    were required based on the annual review performed in the fourth quarter of
    2003, future impairments may occur due to determinations of carrying value
    exceeding the fair value of these investments.
- In March 2004, PPL Electric filed a proposal with the PUC to increase distribution
rates by approximately $164 million and to pass through to customers approximately $57 million in increased
transmission charges that PPL Electric pays to PJM for transmission services.
The PUC's review of the distribution rate request is expected to take about nine
months. Transmission services are provided under the PJM Open Access Transmission
Tariff, a rate schedule filed with and approved by the FERC. Under the federal
"filed rate doctrine," such FERC-approved rates may be recovered from retail customers
without a review of those rates by a state agency such as the PUC. In addition,
PPL Electric's PUC-approved retail tariff permits the automatic pass-through of
transmission charges. PPL Electric agreed to a cap on both of these charges until
December 31, 2004 as part of its 1998 settlement under the PUC Final Order. Generation
charges for customers who do not select an alternative energy supplier are fixed
through 2009 and are not affected by these changes. The combination of the proposed
distribution rate increase and transmission charge pass-through would result in
an 8.1% increase over PPL Electric's present rates effective January 1, 2005.
PPL Electric cannot predict the outcome of this proceeding.
- Earnings in 2005 and beyond are expected to be negatively impacted by a
    rate review of the delivery business of WPD (South West) and WPD (South Wales).
    PPL cannot predict the ultimate outcome of the rate review. See Note 8 to
    the Financial Statements for additional information.
- PPL has interests in two synfuel facilities and receives tax credits pursuant
    to Section 29 of the Internal Revenue Code based on its sale of synfuel to
    unaffiliated third-party purchasers. PPL has estimated that these facilities
    will contribute approximately $0.13 to its EPS in 2004, approximately $0.16
    to its EPS in 2005 and 2006 and approximately $0.17 to its EPS in 2007. See Note 8 to the
    Financial Statements for a discussion of the IRS review of synfuel production
    procedures.

Domestic Gross Energy Margins

The following table provides changes in income statement line items that compose
  domestic gross energy margins:

|                                                     | Three Months
        EndedMarch 31, 2004 vs. March 31, 2003
|---------------------------------------------------- | -----------------------------------------------------------
|                                                     |                                                            
|Utility revenues                                     |                                                            
|                                                     |                                                            
|Unregulated retail electric
        and gas revenues |                                                            
|                                                     |                                                            
|Wholesale energy marketing revenues                  |                                                            
|                                                     |                                                            
|Net energy trading margins                           |                                                            
|                                                     |                                                            
|Other revenue adjustments (a)                        |                                                            
|                                                     |                                                            
|                                                     | Total revenues                                             
|                                                     |                                                            
|Fuel                                                 |                                                            
|                                                     |                                                            
|Energy purchases                                     |                                                            
|                                                     |                                                            
|Other cost adjustments (a)                           |                                                            
|                                                     |                                                            
|                                                     | Total cost of sales                                        
|                                                     |                                                            
|                                                     |                                                            
|                                                     |                                                            

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

Changes in Gross Domestic Energy Margins By Region

Domestic energy margins are generated through PPL's normal and hedge activities
  (non-trading), as well as trading activities. Non-trading margins are now discussed
  on a geographic basis rather than on an activity basis, as previously provided.
  A regional perspective more closely matches the internal view of how PPL's energy
  business is managed.

|                   | Three Months
        EndedMarch 31, 2004 vs. March 31, 2003
|------------------ | -----------------------------------------------------------
|                   |                                                            
|Eastern U.S.       |                                                            
|                   |                                                            
|Northwestern U.S.  |                                                            
|                   |                                                            
|Southwestern U.S.  |                                                            
|                   |                                                            
|Net energy trading |                                                            
|                   |                                                            
|                   | Domestic gross energy margins                              
|                   |                                                            

Eastern U.S.

Eastern U.S. non-trading margins were higher for the three months ended March
  31, 2004, compared to the same period in 2003, due to higher prices and volumes,
  as well as a lower-cost mix of generation. Wholesale sale prices increased 5%
  and volumes increased 4%, primarily due to serving new competitive load obligations
  in Connecticut and New Jersey. Retail energy prices increased about 1% in accordance
  with the schedule established by the PUC's Final Order, and retail volumes increased
  4% primarily due to the return of customers who previously shopped for energy
  in the competitive market in Pennsylvania. Finally, supply costs did not increase
  proportionally because increased generation from coal units displaced marginal-cost
  oil units. These coal units had improved performance in 2004 over 2003 because
  of differences in planned outage schedules and the elimination of transmission
  constraints.

Northwestern U.S.

Northwestern U.S. non-trading margins were higher for the three months ended
  March 31, 2004, compared to the same period in 2003, primarily due to higher
  sales prices combined with improved generation production. Sales prices rose
  8% for the three months ended March 31, 2004, compared to the same period in
  2003. Hydro generation production rose 12% due to more precipitation, and coal
  generation production rose 6% due to operational improvements.

Southwestern U.S.

Southwestern U.S. non-trading margins increased by $1 million for the three
  months ended March 31, 2004, compared to the same period in 2003, because of
  lower market prices for purchased power.

Net Energy Trading

PPL enters into certain energy contracts that meet the criteria of trading
  derivatives as defined by EITF 02-3, "Issues Involved in Accounting for Derivative
  Contracts Held for Trading Purposes and Contracts Involved in Energy Trading
  and Risk Management Activities." These physical and financial contracts cover
  trading activity associated with electricity, gas and oil. The $14 million increase
  for the three months ended March 31, 2004, compared to the same period in 2003,
  was primarily due to unrealized gas derivative gains from increases in natural
  gas prices for the three months ended March 31, 2004, and realized and unrealized
  electric swap losses for the three months ended March 31, 2003. The physical
  volumes associated with energy trading were 994 GWh and 2.4 Bcf for the three
  months ended March 31, 2004, compared to 1,213 GWh and no Bcf for the three
  months ended March 31, 2003.

Utility Revenues

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



|               | Three Months
        EndedMarch 31, 2004 vs. March 31, 2003
|-------------- | -----------------------------------------------------------
|               |                                                            
|Domestic:      |                                                            
|               |                                                            
|               | Retail electric revenue (PPL
        Electric)             
|               |                                                            
|               |                                                            
|               |                                                            
|               |                                                            
|               | Wholesale electric revenue (PPL
        Electric)          
|               |                                                            
|               | Gas revenue (PPL Gas Utilities)                            
|               |                                                            
|International: |                                                            
|               |                                                            
|               | Retail electric delivery (PPL
        Global)              
|               |                                                            
|               |                                                            
|               |                                                            
|               |                                                            
|               |                                                            
|               |                                                            

The increase in utility revenues for the three months ended March 31, 2004,
  compared with the same period in 2003, was primarily due to:

- higher PLR revenues due to higher energy and capacity rates in 2004 compared
    with 2003, and a 4% increase in volumes, in part due to return of customers
    previously served by alternate suppliers;
- higher PPL Gas Utilities revenues, primarily due to the increase in natural
    gas prices which are a pass-through to customer rates;
- higher WPD revenues in the U.K., primarily due to the change in foreign
    currency exchange rates from period to period; and
- higher revenues in Chile, primarily due to higher energy prices, which are
    a pass-through to customer rates.

Energy Related Businesses

Energy related businesses contributed $25 million less to operating income
  for the three months ended March 31, 2004, compared to the same period in 2003.
  The decrease resulted primarily from a $15 million loss on the sale of PPL Global's
  minority interest in CGE (see Note 7 to the Financial Statements), a $4 million
  decrease in WPD net revenues due largely to contract terminations in 2003 and
  2004, and a $2 million decrease in contributions from mechanical contracting
  and engineering subsidiaries due to the continued decline in capital spending
  in commercial and industrial markets and lower margins experienced in those
  markets.

Other Operation and Maintenance

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



|                                                                                                                                                              | Three Months
        EndedMarch 31, 2004 vs. March 31, 2003
|------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------
|                                                                                                                                                              |                                                            
|Timing of outage costs associated
        with the planned refueling and inspection at the Susquehanna station,
        and of other nuclear-related expenses |                                                            
|                                                                                                                                                              |                                                            
|Insurance settlements - property
        damage and environmental which were recorded in 2003                                                                 |                                                            
|                                                                                                                                                              |                                                            
|Increase in foreign currency
        exchange rates                                                                                                           |                                                            
|                                                                                                                                                              |                                                            
|Decrease in domestic and international
        pension income                                                                                                 |                                                            
|                                                                                                                                                              |                                                            
|Outage costs associated with
        planned maintenance at the Montour plant                                                                                 |                                                            
|                                                                                                                                                              |                                                            
|Lease expense on office building
        and parking garage                                                                                                   |                                                            
|                                                                                                                                                              |                                                            
|Decrease in other postretirement
        benefit expense                                                                                                      |                                                            
|                                                                                                                                                              |                                                            
|Gains on sales of emission allowances                                                                                                                         |                                                            
|                                                                                                                                                              |                                                            
|Other                                                                                                                                                         |                                                            
|                                                                                                                                                              |                                                            
|                                                                                                                                                              |                                                            
|                                                                                                                                                              |                                                            

The $4 million decrease in net pension income was attributable to a reduction
  in the discount rate assumptions for PPL's domestic and international pension
  plans. Although financial markets have improved and PPL's domestic and international
  pension plans have experienced significant asset gains, interest rates on fixed-income
  obligations have continued to fall, requiring a further reduction in the discount
  rate assumption as of December 31, 2003. The reduction in the discount rate
  assumption has a significant impact on the measurement of plan obligations and
  net pension costs, which will result in PPL's recognition of lower levels of
  net pension income in 2004. See Note 12 to the Financial Statements for details
  of the costs of PPL's pension plans.

Depreciation

The increase in depreciation expense was primarily due to:

|                                                                                                            | Three Months
        EndedMarch 31, 2004 vs. March 31, 2003
|----------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------
|                                                                                                            |                                                            
|Additions to PP&E                                                                                           |                                                            
|                                                                                                            |                                                            
|Foreign currency exchange rates                                                                             |                                                            
|                                                                                                            |                                                            
|2003 purchase accounting adjustments
        to WPD assets                                                  |                                                            
|                                                                                                            |                                                            
|Consolidation of the lessor
        of the Sundance and University Park generation facilities due to FIN 46 |                                                            
|                                                                                                            |                                                            
|                                                                                                            |                                                            
|                                                                                                            |                                                            

Taxes, Other Than Income

Taxes, other than income, decreased by $8 million during the three months ended
  March 31, 2004, compared with the same period in 2003. In the first quarter
  of 2004, PPL Electric reversed $14 million of accrued 1998 and 1999 PURTA taxes
  that had been previously accrued based on potential exposure of third-party
  intervention in the proceedings regarding the Susquehanna nuclear station tax
  assessment. The rights of these third parties to further appeal expired in 2004.
  This decrease was partially offset by increases in WPD's property taxes, primarily
  related to the impact of changes in foreign currency exchange rates and adjustments
  recorded in 2003, as well as increases in domestic gross receipts tax and capital
  stock tax.

Other Income - net

See Note 10 to the Financial Statements for details of other income.

Financing Costs

Financing costs, which include "Interest Expense" and "Distributions on Preferred
  Securities," increased by $5 million during the three months ended March 31,
  2004, compared with the same period in 2003, primarily due to:

- $14 million of additional long-term debt interest from WPD's additional
    debt issuances in March and May 2003;
- $6 million of additional interest due to the consolidation of the lessor
    of the Sundance and University Park generation facilities on December 31,
    2003 in accordance with FIN 46, "Consolidation of Variable Interest Entities,
    an Interpretation of ARB No. 51;" and
- $2 million of additional long-term debt interest due to PPL Energy Supply's
    issuance of Convertible Senior Notes in May 2003; offset by
- $7 million of lower interest on short-term debt due to less commercial paper
    and WPD short-term debt outstanding;
- a $6 million decrease in long-term interest due to debt retirements in 2003;
    and
- a $3 million decrease in amortization expense.

Discontinued Operations

See "Discontinued Operations" in Note 7 to the Financial Statements for information
  regarding the loss of $1 million recorded in the first quarter of 2004 related
  to PPL Global's plan of sale of its investment in a Latin American telecommunications
  company.

Cumulative Effect of a Change in Accounting Principle

PPL adopted SFAS 143, "Accounting for Asset Retirement Obligations," effective
  January 1, 2003. SFAS 143 addresses the accounting for obligations associated
  with the retirement of tangible long-lived assets. Application of the new rules
  resulted in a cumulative effect of adoption that increased net income by $63
  million in 2003. See Note 21 to the Financial Statements in PPL's Annual Report
  to the SEC on Form 10-K for the year ended December 31, 2003 for additional
  information.



Financial Condition

Liquidity

At March 31, 2004, PPL had $572 million of cash and cash equivalents and $53
  million of short-term debt. At December 31, 2003, PPL had $476 million in cash
  and cash equivalents and $56 million of short-term debt. The increase in PPL's
  cash position was the net result of:

- $318 million of cash provided by operating activities;
- proceeds of $123 million from the sale of CGE;
- the issuance of $14 million of long-term debt; and
- the issuance of $12 million of common stock; offset by
- the retirement of $107 million of long-term debt;
- payment of $70 million of common and preferred dividends; and
- $192 million of capital expenditures.

Rating Agency Decisions

Standard & Poor's Ratings Services (S&P), Moody's Investors Service,
  Inc. (Moody's) and Fitch Ratings (Fitch) periodically review the credit ratings
  on the debt and preferred securities of PPL and its subsidiaries. Based on their
  respective reviews, the rating agencies may make certain ratings revisions.

Management does not expect these ratings decisions to limit PPL's or its subsidiaries'
  ability to fund their short-term liquidity needs through the issuance of commercial
  paper or borrowing under the subsidiaries' revolving credit facilities. In addition,
  management does not expect these ratings decisions to impact PPL's or its subsidiaries'
  ability to raise new long-term debt. These ratings decisions will have an immaterial
  impact on the cost for PPL's subsidiaries to maintain their credit facilities,
  as well as on the cost of any new long-term debt.

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

In September 2003, Moody's announced that it was placing PPL Montana's 8.903%
  Pass-Through Certificates due 2020 under review for possible downgrade. During
  the first quarter of 2004, Moody's affirmed its stable outlook on these securities
  which are currently rated 'Baa3'.

For additional information on PPL's Liquidity, see Item 7, "Management's Discussion
  and Analysis of Financial Condition and Results of Operations," in PPL's Annual
  Report to the SEC on Form 10-K for the year ended December 31, 2003.

Risk Management - Energy Marketing & Trading and Other

Market Risk

Commodity Price Risk (Non-trading)

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

|                                                                           |  | Three Months
        Ended
        March 31, |    
|-------------------------------------------------------------------------- |  | -------------------------------------------- | ---
|                                                                           |  |                                              |    
|                                                                           |  | 2004                                         |    
|                                                                           |  |                                              |    
|Fair value of contracts outstanding
        at the beginning of the period |  | $                                            | 86 
|                                                                           |  |                                              |    
|Contracts realized or otherwise
        settled during the period          |  |                                              | (24
|                                                                           |  |                                              |    
|Fair value of new contracts at
        inception                           |  |                                              |    
|                                                                           |  |                                              |    
|Other changes in fair values                                               |  |                                              | 23 
|                                                                           |  |                                              |    
|Fair value of contracts outstanding
        at the end of the period       |  | $                                            | 85 
|                                                                           |  |                                              |    

During the three months ended March 31, 2004 and 2003, PPL realized or otherwise
  settled net gains of approximately $24 million and $7 million related to contracts
  entered into prior to January 1 of the previous year. These amounts do not reflect
  intra-quarter contracts that were entered into and settled during the periods.

"Other changes in fair values," a gain of approximately $23 million and $77
  million, represents changes in the market value that occurred during the three
  months ended March 31, 2004 and 2003 for contracts that were outstanding at
  the end of each period.

The following chart segregates estimated fair values of PPL's commodity derivative
  contracts that qualify for hedge accounting treatment at March 31, 2004 based
  on whether the fair values are determined by quoted market prices or other more
  subjective means.

|                                                                     |  | Fair Value
        of Contracts at Period-End
        Gains/(Losses) |   
|-------------------------------------------------------------------- |  | -------------------------------------------------------------------- | --
|                                                                     |  |                                                                      |   
|                                                                     |  | Maturity
        Less
        Than
        1 Year                    |   
|                                                                     |  |                                                                      |   
|Source of Fair Value                                                 |  |                                                                      |   
|                                                                     |  |                                                                      |   
|Prices actively quoted                                               |  | $                                                                    | 9 
|                                                                     |  |                                                                      |   
|Prices provided by other external sources                            |  |                                                                      | 51
|                                                                     |  |                                                                      |   
|Prices based on models and other valuation
        methods           |  |                                                                      |   
|                                                                     |  |                                                                      |   
|Fair value of contracts outstanding at
        the end of the period |  | $                                                                    | 60
|                                                                     |  |                                                                      |   

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

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

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

As of March 31, 2004, 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-trading portfolio by approximately $170
  million, compared to a decrease of $196 million at March 31, 2003. However,
  the change in the value of the non-trading 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 accordance with its marketing strategy, PPL does not completely hedge its
  generation output or fuel requirements. PPL estimates that for its entire portfolio,
  including all generation and physical and financial energy positions, a 10%
  adverse change in power prices across all geographic zones and time periods
  would decrease expected 2004 gross margins by about $6 million. Similarly, a
  10% adverse movement in all fossil fuel prices would decrease 2004 gross margins
  by $4 million.

Commodity Price Risk (Trading)

PPL's trading contracts mature at various times through 2006. The following
  chart sets forth PPL's net fair market value of trading contracts:



|                                                                           |  | Three
        Months Ended
        March 31,
|-------------------------------------------------------------------------- |  | --------------------------------------------
|                                                                           |  |                                             
|                                                                           |  | 2004                                        
|                                                                           |  |                                             
|                                                                           |  |                                             
|Fair value of contracts outstanding
        at the beginning of the period |  | $                                           
|                                                                           |  |                                             
|Contracts realized or otherwise
        settled during the period          |  |                                             
|                                                                           |  |                                             
|Fair value of new contracts at
        inception                           |  |                                             
|                                                                           |  |                                             
|Other changes in fair values                                               |  |                                             
|                                                                           |  |                                             
|Fair value of contracts outstanding
        at the end of the period       |  | $                                           
|                                                                           |  |                                             

During the three months ended March 31, 2004 and 2003, PPL realized or otherwise
settled net gains of approximately $3 million and $1 million related to trading
contracts entered into prior to January 1 of the previous year. These amounts
do not reflect intra-year contracts that were entered into and settled during
the periods.

The fair value of new contracts at inception is usually zero, because they
  are entered into at current market prices. However, when PPL enters into an
  option contract, a premium is paid or received. PPL paid a net of $4 million
  during the three months ended March 31, 2004 for these option contracts.

"Other changes in fair values," a gain/(loss) of approximately $7 million and
  $(9) million, represents changes in the market value that occurred during the
  three months ended March 31, 2004 and 2003 for contracts that were outstanding
  at the end of each period.

As of March 31, 2004, the net loss on PPL's trading activities expected to
  be recognized in earnings during the next three months is approximately $2 million.

The following chart segregates estimated fair values of PPL's trading portfolio
  at March 31, 2004 based on whether the fair values are determined by quoted
  market prices or other more subjective means.

|                                                                     |  | Fair Value
        of Contracts at Period-End
        Gains/(Losses) |  
|-------------------------------------------------------------------- |  | -------------------------------------------------------------------- | -
|                                                                     |  |                                                                      |  
|                                                                     |  | Maturity
        Less
        Than
        1 Year                    |  
|                                                                     |  |                                                                      |  
|Source of Fair Value                                                 |  |                                                                      |  
|                                                                     |  |                                                                      |  
|Prices actively quoted                                               |  | $                                                                    | 1
|                                                                     |  |                                                                      |  
|Prices provided by other external sources                            |  |                                                                      |  
|                                                                     |  |                                                                      |  
|Prices based on models and other valuation
        methods           |  |                                                                      | 4
|                                                                     |  |                                                                      |  
|Fair value of contracts outstanding at
        the end of the period |  | $                                                                    | 5
|                                                                     |  |                                                                      |  

As of March 31, 2004, PPL estimated that a 10% adverse movement in market prices
  across all geographic areas and time periods would have decreased the value
  of the commodity contracts in its trading portfolio by $10 million, compared
  to a decrease of $6 million at March 31, 2003.

Interest Rate Risk

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

At March 31, 2004, 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 U.S. and international
  debt portfolios. At March 31, 2004, 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 $160 million.

PPL utilizes various risk management instruments to reduce its exposure to
  adverse interest rate movements for future anticipated financing. While PPL
  is exposed to changes in the fair value of these instruments, they are designed
  such that an economic loss in value should generally be offset by interest rate
  savings at the time the future anticipated financing is completed. At March
  31, 2004, 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 $3 million.

Foreign Currency Risk

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

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

PPL executed forward sale transactions for £21.4 million to hedge a portion
  of its net investment in WPDH Limited. The estimated value of these agreements
  as of March 31, 2004 was $5 million, being the amount PPL would pay to terminate
  the transactions.

PPL executed forward sale transactions for 79.6 billion Chilean pesos to hedge
a portion of its net investment in its subsidiary that owned the investment in
CGE. The estimated value of these agreements as of March 31, 2004, being the amount
PPL would receive to terminate the transactions, was $2 million.

To protect expected income in British pounds sterling, PPL entered into average
  rate options for £44 million. At March 31, 2004, the market value
  of these positions, representing the amount PPL would pay to terminate them,
  was insignificant.

To protect expected income in Chilean pesos, PPL entered into average rate
  options for 4.1 billion Chilean pesos. At March 31, 2004, the market value
  of these positions, representing the amount PPL would pay to terminate them,
  was insignificant.

WPDH Limited executed cross-currency swaps totaling $1.5 billion to hedge the
  interest payments and value of its U.S. dollar-denominated bonds. The estimated
  value of this position on March 31, 2004, being the amount PPL would pay to
  terminate them, including accrued interest, was $204 million.

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

Nuclear Decommissioning Fund - Securities Price Risk

In connection with certain NRC requirements, PPL Susquehanna maintains trust
  funds to fund certain costs of decommissioning the Susquehanna station. As of
  March 31, 2004, these funds were invested primarily in domestic equity securities
  and fixed-rate, fixed-income securities and are reflected at fair value on PPL's
  Balance Sheet. The mix of securities is designed to provide returns to be used
  to fund Susquehanna's decommissioning and to compensate for inflationary increases
  in decommissioning costs. However, the equity securities included in the trusts
  are exposed to price fluctuation in equity markets, and the values of fixed-rate,
  fixed-income securities are exposed to changes in interest rates. PPL Susquehanna
  actively monitors the investment performance and periodically reviews asset
  allocation in accordance with its nuclear decommissioning trust policy statement.
  At March 31, 2004, a hypothetical 10% increase in interest rates and a 10% decrease
  in equity prices would have resulted in an estimated $26 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.

Credit Risk

Credit risk relates to the risk of loss that PPL would incur as a result of
  non-performance by counterparties of their contractual obligations. PPL maintains
  credit policies and procedures with respect to counterparties (including requirements
  that counterparties maintain certain credit ratings criteria) and requires other
  assurances in the form of credit support or collateral in certain circumstances
  in order to limit counterparty credit risk. However, PPL has concentrations
  of suppliers and customers among electric utilities, natural gas distribution
  companies and other energy marketing and trading companies. These concentrations
  of counterparties may impact PPL's overall exposure to credit risk, either positively
  or negatively, in that counterparties may be similarly affected by changes in
  economic, regulatory or other conditions. PPL records certain non-performance
  reserves to reflect the probability that a counterparty with contracts that
  are out of the money (from the counterparty's standpoint) will default in its
  performance, in which case PPL would have to sell into a lower-priced market
  or purchase from a higher-priced market. These reserves are reflected in the
  fair value of assets recorded in "Price risk management assets" on the Balance
  Sheet. PPL also records reserves to reflect the probability that a counterparty
  will not make payments for deliveries PPL has made but not yet billed. These
  reserves are reflected in "Unbilled revenues" on the Balance Sheet. PPL has
  also established a reserve with respect to certain sales to the California ISO
  for which PPL has not yet been paid, as well as a reserve related to PPL's exposure
  as a result of the Enron bankruptcy, which are reflected in "Accounts receivable"
  on the Balance Sheet. See Note 8 to the Financial Statements for additional
  information on the sales to the California ISO.

Related Party Transactions

PPL is not aware of any material ownership interests or operating responsibility
  by senior management of PPL, PPL Energy Supply or PPL Electric in outside partnerships,
  including leasing transactions with variable interest entities, or other entities
  doing business with PPL.

Acquisitions, Development and Divestitures

From time to time, PPL and its subsidiaries are involved in negotiations with
  third parties regarding acquisitions, joint ventures and other arrangements
  which may or may not result in definitive agreements. See Note 7 to the Financial
  Statements for information regarding recent acquisitions and development activities.

At March 31, 2004, PPL had domestic generation projects under development which
  will provide 863 MW of additional generation. In April 2004, the turbine upgrade
  for PPL Susquehanna Unit 1 was completed. This project provides a nominal power
  increase of 50 MW of generation capacity, of which PPL Susquehanna has a 90%
  undivided interest.

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

Environmental Matters

See Note 8 to the Financial Statements for a discussion of environmental matters.

New Accounting Standards

See Note 15 to the Financial Statements for information on new accounting standards
  adopted in 2004 or pending adoption.

Application of Critical Accounting Policies

PPL's financial condition and results of operations are impacted by the methods,
  assumptions and estimates used in the application of critical accounting policies.
  The following accounting policies are particularly important to the financial
  condition or results of operations of PPL, and require estimates or other judgments
  of matters inherently uncertain: price risk management, pension and other postretirement
  benefits, asset impairment, leasing, loss contingencies and asset retirement
  obligations.

See Item 7, "Management's Discussion and Analysis of Financial Condition and
  Results of Operations," in PPL's Annual Report to the SEC on Form 10-K for the
  year ended December 31, 2003 for a discussion of each critical accounting policy.
  PPL's senior management has reviewed these critical accounting policies, and
  the estimates and assumptions regarding them, with its Audit Committee. In addition,
  PPL's senior management reviewed the Form 10-K disclosures regarding the application
  of these critical accounting policies with the Audit Committee.

---

PPL ENERGY SUPPLY, LLC AND SUBSIDIARIES



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

Overview

PPL Energy Supply is an energy company with headquarters in Allentown, PA.
  See Item 1, "Business - Background" in PPL Energy Supply's Annual Report to
  the SEC on Form 10-K for the year ended December 31, 2003 for a description
  of PPL Energy Supply's domestic and international businesses. See Exhibit 99
  in Item 15 in PPL Energy Supply's Form 10-K for a listing of its principal subsidiaries.
  Through its subsidiaries, PPL Energy Supply is primarily engaged in the generation
  and marketing of electricity in two key markets - the northeastern and western
  U.S. - and in the delivery of electricity in the U.K. and Latin America. See
  Item 7, "Management's Discussion and Analysis of Financial Condition and Results
  of Operations," in PPL Energy Supply's Annual Report to the SEC on Form 10-K
  for the year ended December 31, 2003 for an overview of PPL Energy Supply's
  strategy and the risks and the challenges that it faces in its business.

The information provided in this "Management's Discussion and Analysis of Financial
  Condition and Results of Operations" should be read in conjunction with PPL
  Energy Supply's Condensed Consolidated Financial Statements and the accompanying
  Notes.

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

Results of Operations

The following discussion, which explains significant changes in principal items
  on the Statement of Income, compares the three months ended March 31, 2004 to
  the comparable period in 2003.

WPD's results, as consolidated in PPL Energy Supply's Statement of Income,
  are impacted by changes in foreign currency exchange rates. For the three months
  ended March 31, 2004, as compared to the same period in 2003, changes in
  foreign exchange rates increased WPD's portion of revenue and expense line items
  by about 13%.

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

Earnings

Net income was as follows:

| |  | Three Months
        Ended 
        March 31, |    
| |  | --------------------------------------------- | ---
| |  |                                               |    
| |  | 2004                                          |    
| |  |                                               |    
| |  | $                                             | 146
| |  |                                               |    
| |  |                                               |    

The after-tax changes in net income were primarily due to:

|               | Three Months
        EndedMarch 31, 2004 vs. March 31, 2003
|-------------- | -----------------------------------------------------------
|               |                                                            
|Domestic:      |                                                            
|               |                                                            
|               | Eastern U.S. margins                                       
|               |                                                            
|               | Net energy trading margins                                 
|               |                                                            
|               | Northwestern U.S. margins                                  
|               |                                                            
|               | Southwestern U.S. margins                                  
|               |                                                            
|               | Depreciation                                               
|               |                                                            
|               | Interest expense                                           
|               |                                                            
|               | Operation and maintenance expenses                         
|               |                                                            
|               | Other income - affiliated interest                         
|               |                                                            
|               | Energy related businesses                                  
|               |                                                            
|               | Other                                                      
|               |                                                            
|               |                                                            
|               |                                                            
|               |                                                            
|International: |                                                            
|               |                                                            
|               | U.K.:                                                      
|               |                                                            
|               |                                                            
|               |                                                            
|               |                                                            
|               |                                                            
|               | Latin America                                              
|               |                                                            
|               | Other                                                      
|               |                                                            
|               |                                                            
|               |                                                            
|Unusual items  |                                                            
|               |                                                            
|               |                                                            
|               |                                                            

The changes in net income from period to period were, in part, attributable
  to two unusual items with significant earnings impacts. The after-tax impacts
  of these unusual items are shown below.

|                     |               |   | Three Months
        Ended 
        March 31, |  
|-------------------- | ------------- | - | --------------------------------------------- | -
|                     |               |   |                                               |  
|                     |               |   | 2004                                          |  
|                     |               |   |                                               |  
|Accounting change:   |               |   |                                               |  
|                     |               |   |                                               |  
|                     | ARO (Note 13) |   |                                               |  
|                     |               |   |                                               |  
|Sale of CGE (Note 7) |               | $ | (8                                            | )
|                     |               |   |                                               |  
|Total                |               | $ | (8                                            | )
|                     |               |   |                                               |  

The period to period changes in earnings components, including margins by region
  and income statement line items, are discussed in the balance of the discussion
  in "Results of Operations."

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

- Due to current electricity and natural gas price levels, there is a risk
    that PPL Energy Supply may be unable to recover its investment in new gas-fired
    generation facilities. Under GAAP, PPL Energy Supply does not believe that
    there is an impairment charge to be recorded for these facilities at this
    time. PPL Energy Supply is unable to predict the ultimate earnings impact
    of this issue, based upon future energy price levels, applicable accounting
    rules and other factors, but such impact may be material.
- Market prices for electricity and fuel may negatively impact energy margins
    and earnings.
- PPL Energy Supply is unable to predict whether future impairments of goodwill
    may be required for its domestic and international investments. While no goodwill
    impairments were required based on the annual review performed in the fourth
    quarter of 2003, future impairments may occur due to determinations of carrying
    value exceeding the fair value of these investments.
- Earnings in 2005 and beyond are expected to be negatively impacted by a
    rate review of the delivery business of WPD (South West) and WPD (South Wales).
    PPL Energy Supply cannot predict the ultimate outcome of the rate review.
    See Note 8 to the Financial Statements for additional information.
- PPL Energy Supply has interests in two synfuel facilities and receives tax
    credits pursuant to Section 29 of the Internal Revenue Code based on its sale
    of synfuel to unaffiliated third-party purchasers. PPL Energy Supply has estimated
    that these facilities will contribute approximately $23 million to earnings in 2004, approximately
    $30 million to earnings in 2005 and 2006 and approximately $32 million to earnings in 2007. See Note 8 to the Financial
    Statements for a discussion of the IRS review of synfuel production procedures.

Domestic Gross Energy Margins

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



|                                                     | Three Months
        EndedMarch 31, 2004 vs. March 31, 2003
|---------------------------------------------------- | -----------------------------------------------------------
|                                                     |                                                            
|Wholesale energy marketing revenues                  |                                                            
|                                                     |                                                            
|Wholesale energy marketing to
        affiliates     |                                                            
|                                                     |                                                            
|Unregulated retail electric
        and gas revenues |                                                            
|                                                     |                                                            
|Net energy trading margins                           |                                                            
|                                                     |                                                            
|Other revenue adjustments (a)                        |                                                            
|                                                     |                                                            
|                                                     | Total revenues                                             
|                                                     |                                                            
|Fuel                                                 |                                                            
|                                                     |                                                            
|Energy purchases                                     |                                                            
|                                                     |                                                            
|Energy purchases from affiliates                     |                                                            
|                                                     |                                                            
|Other cost adjustments (a)                           |                                                            
|                                                     |                                                            
|                                                     | Total cost of sales                                        
|                                                     |                                                            
|                                                     |                                                            
|                                                     |                                                            

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

Changes in Gross Domestic Energy Margins By Region

Domestic energy margins are generated through PPL's normal and hedge activities
  (non-trading), as well as trading activities. Non-trading margins are now discussed
  on a geographic basis rather than on an activity basis, as previously provided.
  A regional perspective more closely matches the internal view of how PPL's energy
  business is managed.

|                   | Three Months
        EndedMarch 31, 2004 vs. March 31, 2003
|------------------ | -----------------------------------------------------------
|                   |                                                            
|Eastern U.S.       |                                                            
|                   |                                                            
|Northwestern U.S.  |                                                            
|                   |                                                            
|Southwestern U.S.  |                                                            
|                   |                                                            
|Net energy trading |                                                            
|                   |                                                            
|                   | Domestic gross energy margins                              
|                   |                                                            

Eastern U.S.

Eastern U.S. non-trading margins were higher for the three months ended March
  31, 2004, compared to the same period in 2003, due to higher prices and volumes,
  as well as a lower-cost mix of generation. Wholesale sale prices increased 5%
  and volumes increased 4%, primarily due to serving new competitive load obligations
  in Connecticut and New Jersey. Retail energy prices increased about 1% in accordance
  with the schedule established by the PUC's Final Order, and retail volumes increased
  4% primarily due to the return of customers who previously shopped for energy
  in the competitive market in Pennsylvania. Finally, supply costs did not increase
  proportionally because increased generation from coal units displaced marginal-cost
  oil units. These coal units had improved performance in 2004 over 2003 because
  of differences in planned outage schedules and the elimination of transmission
  constraints.

Northwestern U.S.

Northwestern U.S. non-trading margins were higher for the three months ended
  March 31, 2004, compared to the same period in 2003, primarily due to higher
  sales prices combined with improved generation production. Sales prices rose
  8% for the three months ended March 31, 2004, compared to the same period in
  2003. Hydro generation production rose 12% due to more precipitation, and coal
  generation production rose 6% due to operational improvements.

Southwestern U.S.

Southwestern U.S. non-trading margins increased by $1 million for the three
  months ended March 31, 2004, compared to the same period in 2003, because of
  lower market prices for purchased power.

Net Energy Trading

PPL enters into certain energy contracts that meet the criteria of trading
  derivatives as defined by EITF 02-3, "Issues Involved in Accounting for Derivative
  Contracts Held for Trading Purposes and Contracts Involved in Energy Trading
  and Risk Management Activities." These physical and financial contracts cover
  trading activity associated with electricity, gas and oil. The $14 million increase
  for the three months ended March 31, 2004, compared to the same period in 2003,
  was primarily due to unrealized gas derivative gains from increases in natural
  gas prices for the three months ended March 31, 2004, and realized and unrealized
  electric swap losses for the three months ended March 31, 2003. The physical
  volumes associated with energy trading were 994 GWh and 2.4 Bcf for the three
  months ended March 31, 2004, compared to 1,213 GWh and no Bcf for the three
  months ended March 31, 2003.

Utility Revenues

The increase in utility revenues was attributable to the following:

|                                              | Three Months
        EndedMarch 31, 2004 vs. March 31, 2003
|--------------------------------------------- | -----------------------------------------------------------
|                                              |                                                            
|International:                                |                                                            
|                                              |                                                            
|Retail electric delivery (PPL
        Global) |                                                            
|                                              |                                                            
|                                              | U.K.                                                       
|                                              |                                                            
|                                              | Chile                                                      
|                                              |                                                            
|                                              |                                                            
|                                              |                                                            

The increase in utility revenues for the three months ended March 31, 2004,
  compared with the same period in 2003, was primarily due to:

- higher WPD revenues in the U.K., primarily due to the change in foreign
    currency exchange rates from period to period; and
- higher revenues in Chile primarily due to higher energy prices, which are
    a pass-through to customer rates.

Energy Related Businesses

Energy related businesses contributed $23 million less to operating income
  for the three months ended March 31, 2004, compared to the same period in 2003.
  The decrease resulted primarily from a $15 million loss on the sale of PPL Global's
  minority interest in CGE (see Note 7 to the Financial Statements), a $4 million
  decrease in WPD net revenues due largely to contract terminations in 2003 and
  2004, and a $2 million decrease in contributions from mechanical contracting
  and engineering subsidiaries due to the continued decline in capital spending
  in commercial and industrial markets and lower margins experienced in those
  markets.

Other Operation and Maintenance

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

|                                                                                                                                                              | Three Months
        EndedMarch 31, 2004 vs. March 31, 2003
|------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------
|                                                                                                                                                              |                                                            
|Timing of outage costs associated
        with the planned refueling and inspection at the Susquehanna station,
        and of other nuclear-related expenses |                                                            
|                                                                                                                                                              |                                                            
|Insurance settlements - property
        damage and environmental which were recorded in 2003                                                                 |                                                            
|                                                                                                                                                              |                                                            
|Increase in foreign currency
        exchange rates                                                                                                           |                                                            
|                                                                                                                                                              |                                                            
|Outage costs associated with
        planned maintenance at the Montour plant                                                                                 |                                                            
|                                                                                                                                                              |                                                            
|Decrease in domestic and international
        pension income                                                                                                 |                                                            
|                                                                                                                                                              |                                                            
|Gains on sales of emission allowances                                                                                                                         |                                                            
|                                                                                                                                                              |                                                            
|Lower trademark license fees
        from a PPL subsidiary (see Note 9)                                                                                       |                                                            
|                                                                                                                                                              |                                                            
|Decrease in other postretirement
        benefit expense                                                                                                      |                                                            
|                                                                                                                                                              |                                                            
|Other                                                                                                                                                         |                                                            
|                                                                                                                                                              |                                                            
|                                                                                                                                                              |                                                            
|                                                                                                                                                              |                                                            

The $2 million decrease in net pension income was attributable to a reduction
  in the discount rate assumptions for PPL Energy Supply's domestic and international
  pension plans. Although financial markets have improved and PPL Energy Supply's
  domestic and international pension plans have experienced significant asset
  gains, interest rates on fixed-income obligations have continued to fall, requiring
  a further reduction in the discount rate assumption as of December 31, 2003.
  The reduction in the discount rate assumption has a significant impact on the
  measurement of plan obligations and net pension costs, which will result in
  PPL Energy Supply's recognition of lower levels of net pension income in 2004.
  See Note 12 to the Financial Statements for details of the costs of PPL Energy
  Supply's pension plans.

Depreciation

Depreciation expense was impacted by the following offsetting items:

|                                                                                                            | Three Months
        EndedMarch 31, 2004 vs. March 31, 2003
|----------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------
|                                                                                                            |                                                            
|Additions to PP&E                                                                                           |                                                            
|                                                                                                            |                                                            
|Foreign currency exchange rates                                                                             |                                                            
|                                                                                                            |                                                            
|2003 purchase accounting adjustments
        to WPD assets                                                  |                                                            
|                                                                                                            |                                                            
|Consolidation of the lessor
        of the Sundance and University Park generation facilities due to FIN 46 |                                                            
|                                                                                                            |                                                            
|                                                                                                            |                                                            
|                                                                                                            |                                                            

Taxes, Other Than Income

Taxes, other than income, increased by $5 million during the three months ended
  March 31, 2004, compared with the same period in 2003, primarily due to an increase
  in capital stock taxes of $2 million and increases in WPD's property taxes of
  $3 million. The increase in property taxes was primarily related to the impact
  of changes of foreign currency exchange rates and adjustments recorded in 2003.

Other Income - net

See Note 10 to the Financial Statements for details of other income.

Financing Costs

Financing costs, including "Interest Expense" and "Distributions on Preferred
  Securities," increased by $12 million during the three months ended March 31,
  2004, compared with the same period in 2003, primarily due to:

- $14 million of additional long-term debt interest from WPD's additional
    debt issuances in March and May 2003;
- $6 million of additional interest due to the consolidation of the lessor
    of the Sundance and University Park generation facilities on December 31,
    2003 in accordance with FIN 46, "Consolidation of Variable Interest Entities,
    an Interpretation of ARB No. 51;" and
- $2 million of additional long-term debt interest due to the issuance of
    Convertible Senior Notes in May 2003; offset by
- $7 million of lower interest on short-term debt due to less commercial paper
    and WPD short-term debt outstanding; and
- a $4 million decrease in amortization expense.

Discontinued Operations

See "Discontinued Operations" in Note 7 to the Financial Statements for information
  regarding the loss of $1 million recorded in the first quarter of 2004 related
  to PPL Global's plan of sale of its investment in a Latin American telecommunications
  company.

Cumulative Effect of a Change in Accounting Principle

PPL Energy Supply adopted SFAS 143, "Accounting for Asset Retirement Obligations,"
  effective January 1, 2003. SFAS 143 addresses the accounting for obligations
  associated with the retirement of tangible long-lived assets. Application of
  the new rules resulted in a cumulative effect of adoption that increased net
  income by $63 million in 2003. See Note 21 to the Financial Statements in PPL
  Energy Supply's Annual Report to the SEC on Form 10-K for the year ended December 31,
  2003 for additional information.

Financial Condition

Liquidity

At March 31, 2004, PPL Energy Supply had $394 million of cash and cash equivalents
  and $8 million of short-term debt. At December 31, 2003, PPL Energy Supply had
  $227 million in cash and cash equivalents and $56 million of short-term debt.
  The increase in PPL Energy Supply's cash position was the net result of:

- $272 million of cash provided by operating activities;
- proceeds of $123 million from the sale of CGE; and
- the issuance of $14 million of long-term debt; offset by
- the distribution to Member of $63 million;
- a decrease of $51 million in short-term debt; and
- $132 million of capital expenditures.

Rating Agency Decisions

Standard & Poor's Ratings Services (S&P), Moody's Investors Service,
  Inc. (Moody's) and Fitch Ratings (Fitch) periodically review the credit ratings
  on the debt and preferred securities of PPL Energy Supply and its subsidiaries.
  Based on their respective reviews, the rating agencies may make certain ratings
  revisions.

Management does not expect these ratings decisions to limit PPL Energy Supply's
  or its subsidiaries' ability to fund their short-term liquidity needs through
  the issuance of commercial paper or borrowing under their revolving credit facilities.
  In addition, management does not expect these ratings decisions to impact PPL
  Energy Supply's or its subsidiaries' ability to raise new long-term debt. These
  ratings decisions will have an immaterial impact on the cost for PPL Energy
  Supply or its subsidiaries to maintain their credit facilities, as well as on
  the cost of any new long-term debt.

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

In September 2003, Moody's announced that it was placing PPL Montana's 8.903%
  Pass-Through Certificates due 2020 under review for possible downgrade. During
  the first quarter 2004, Moody's affirmed its stable outlook on these securities
  which are currently rated 'Baa3'.

For additional information on PPL Energy Supply's Liquidity, see Item 7, "Management's
  Discussion and Analysis of Financial Condition and Results of Operations," in
  PPL Energy Supply's Annual Report to the SEC on Form 10-K for the year ended
  December 31, 2003.

Risk Management - Energy Marketing & Trading and Other

Market Risk

Commodity Price Risk (Non-trading)

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

|                                                                           |  | Three
        Months Ended 
        March 31,
|-------------------------------------------------------------------------- |  | ---------------------------------------------
|                                                                           |  |                                              
|                                                                           |  | 2004                                         
|                                                                           |  |                                              
|Fair value of contracts outstanding
        at the beginning of the period |  | $                                            
|                                                                           |  |                                              
|Contracts realized or otherwise
        settled during the period          |  |                                              
|                                                                           |  |                                              
|Fair value of new contracts
        at inception                           |  |                                              
|                                                                           |  |                                              
|Other changes in fair values                                               |  |                                              
|                                                                           |  |                                              
|Fair value of contracts outstanding
        at the end of the period       |  | $                                            
|                                                                           |  |                                              

During the three months ended March 31, 2004 and 2003, PPL Energy Supply realized
  or otherwise settled net gains of approximately $24 million and $5 million related
  to contracts entered into prior to January 1 of the previous year. These amounts do
  not reflect intra-quarter contracts that were entered into and settled during
  the periods.

"Other changes in fair values," a gain of approximately $22 million and $76
  million, represents changes in the market value that occurred during the three
  months ended March 31, 2004 and 2003 for contracts that were outstanding at
  the end of each period.

The following chart segregates estimated fair values of PPL Energy Supply's
  commodity derivative contracts that qualify for hedge accounting treatment at
  March 31, 2004 based on whether the fair values are determined by quoted market
  prices or other more subjective means.

|                                                                     |  | Fair Value
        of Contracts at Period-End
        Gains/(Losses) |   
|-------------------------------------------------------------------- |  | -------------------------------------------------------------------- | --
|                                                                     |  |                                                                      |   
|                                                                     |  | Maturity
        Less
        Than
        1 Year                    |   
|                                                                     |  |                                                                      |   
|Source of Fair Value                                                 |  |                                                                      |   
|                                                                     |  |                                                                      |   
|Prices actively quoted                                               |  | $                                                                    | 9 
|                                                                     |  |                                                                      |   
|Prices provided by other external sources                            |  |                                                                      | 50
|                                                                     |  |                                                                      |   
|Prices based on models and other valuation
        methods           |  |                                                                      |   
|                                                                     |  |                                                                      |   
|Fair value of contracts outstanding at
        the end of the period |  | $                                                                    | 59
|                                                                     |  |                                                                      |   
|                                                                     |  |                                                                      |   

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

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

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

As of March 31, 2004, 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-trading portfolio by approximately
  $170 million, compared to a decrease of $196 million at March 31, 2003. However,
  the change in the value of the non-trading 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 accordance with its marketing strategy, PPL Energy Supply does not completely
  hedge its generation output or fuel requirements. PPL Energy Supply estimates
  that for its entire portfolio, including all generation and physical and financial
  energy positions, a 10% adverse change in power prices across all geographic
  zones and time periods would decrease expected 2004 gross margins by about $6
  million. Similarly, a 10% adverse movement in all fossil fuel prices would decrease
  2004 gross margins by $4 million.

Commodity Price Risk (Trading)

PPL Energy Supply's trading contracts mature at various times through 2006.
  The following chart sets forth PPL Energy Supply's net fair market value of
  trading contracts:

|                                                                   |  | Three Months Ended 
March 31, |   
|------------------------------------------------------------------ |  | ----------------------------- | --
|                                                                   |  |                               |   
|                                                                   |  | 2004                          |   
|                                                                   |  |                               |   
|Fair value of contracts outstanding at the beginning of the period |  | $                             | 3 
|                                                                   |  |                               |   
|Contracts realized or otherwise settled during the period          |  |                               | (3
|                                                                   |  |                               |   
|Fair value of new contracts at inception                           |  |                               | 4 
|                                                                   |  |                               |   
|Other changes in fair values                                       |  |                               | 7 
|                                                                   |  |                               |   
|Fair value of contracts outstanding at the end of the period       |  | $                             | 11
|                                                                   |  |                               |   

During the three months ended March 31, 2004 and 2003, PPL Energy Supply realized
  or otherwise settled net gains of approximately $3 million and $1 million related
  to trading contracts entered into prior to January 1 of the previous year. These
  amounts do not reflect intra-year contracts that were entered into and settled
  during the periods.

The fair value of new contracts at inception is usually zero, because they
  are entered into at current market prices. However, when PPL Energy Supply enters
  into an option contract, a premium is paid or received. PPL Energy Supply paid
  a net of $4 million during the three months ended March 31, 2004 for these
  option contracts.

"Other changes in fair values," a gain/(loss) of approximately $7 million and
  $(9) million, represents changes in the market value that occurred during the
  three months ended March 31, 2004 and 2003 for contracts that were outstanding
  at the end of each period.

As of March 31, 2004, the net loss on PPL Energy Supply's trading activities
  expected to be recognized in earnings during the next three months is approximately
  $2 million.

The following chart segregates estimated fair values of PPL Energy Supply's
  trading portfolio at March 31, 2004 based on whether the fair values are determined
  by quoted market prices or other more subjective means.



|                                                                     |  | Fair Value
        of Contracts at Period-End
        Gains/(Losses) |  
|-------------------------------------------------------------------- |  | -------------------------------------------------------------------- | -
|                                                                     |  |                                                                      |  
|                                                                     |  | Maturity
        Less
        Than
        1 Year                    |  
|                                                                     |  |                                                                      |  
|Source of Fair Value                                                 |  |                                                                      |  
|                                                                     |  |                                                                      |  
|Prices actively quoted                                               |  | $                                                                    | 1
|                                                                     |  |                                                                      |  
|Prices provided by other external sources                            |  |                                                                      |  
|                                                                     |  |                                                                      |  
|Prices based on models and other valuation
        methods           |  |                                                                      | 4
|                                                                     |  |                                                                      |  
|Fair value of contracts outstanding at
        the end of the period |  | $                                                                    | 5
|                                                                     |  |                                                                      |  
|                                                                     |  |                                                                      |  

As of March 31, 2004, PPL Energy Supply estimated that a 10% adverse movement
  in market prices across all geographic areas and time periods would have decreased
  the value of the commodity contracts in its trading portfolio by $10 million,
  compared to a decrease of $6 million at March 31, 2003.

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 interest rates in its debt
  portfolio, adjusting the duration of its debt portfolio 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
  changes in the fair value of PPL Energy Supply's debt portfolio due to changes
  in the absolute level of interest rates.

At March 31, 2004, PPL Energy Supply's potential annual exposure to increased
  interest expense, based on a 10% increase in interest rates, was insignificant.

PPL Energy Supply is also exposed to changes in the fair value of its U.S.
  and international debt portfolio. At March 31, 2004, 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 $109 million.

PPL and PPL Energy Supply utilize various risk management instruments to reduce
  PPL Energy Supply's exposure to adverse interest rate movements for future anticipated
  financings. While PPL Energy Supply is exposed to changes in the fair value
  of these instruments, they are designed such that any economic loss in value
  should be offset by interest rate savings at the time the future anticipated
  financing is completed. At March 31, 2004, PPL Energy Supply estimated that
  its potential exposure to a change in the fair value of these instruments, through
  a 10% adverse movement in interest rates, was $1 million.

Foreign Currency Risk

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

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

PPL executed forward sale transactions for £21.4 million to hedge a portion
  of its net investment in WPDH Limited. The estimated value of these agreements
  as of March 31, 2004 was $5 million, being the amount PPL would pay to terminate
  the transactions.

PPL executed forward sale transactions for 79.6 billion Chilean pesos to hedge
a portion of its net investment in its subsidiary that owned the investment in
CGE. The estimated value of these agreements as of March 31, 2004, being the amount
PPL would receive to terminate the transactions, was $2 million.

To protect expected income in British pounds sterling, PPL entered into average
  rate options for £44 million. At March 31, 2004, the market value
  of these positions, representing the amount PPL would pay to terminate them,
  was insignificant.

To protect expected income in Chilean pesos, PPL entered into average rate
  options for 4.1 billion Chilean pesos. At March 31, 2004, the market value
  of these positions, representing the amount PPL would pay to terminate them,
  was insignificant.

WPDH Limited executed cross-currency swaps totaling $1.5 billion to hedge the
  interest payments and value of its U.S. dollar-denominated bonds. The estimated
  value of this position on March 31, 2004, being the amount PPL would pay to
  terminate them, including accrued interest, was $204 million.

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

Nuclear Decommissioning Fund - Securities Price Risk

In connection with certain NRC requirements, PPL Susquehanna maintains trust
  funds to fund certain costs of decommissioning the Susquehanna station. As of
  March 31, 2004, these funds were invested primarily in domestic equity securities
  and fixed-rate, fixed-income securities and are reflected at fair value on PPL
  Energy Supply's Balance Sheet. The mix of securities is designed to provide
  returns to be used to fund Susquehanna's decommissioning and to compensate for
  inflationary increases in decommissioning costs. However, the equity securities
  included in the trusts are exposed to price fluctuation in equity markets, and
  the values of fixed-rate, fixed-income securities are exposed to changes in
  interest rates. PPL Susquehanna actively monitors the investment performance
  and periodically reviews asset allocation in accordance with its nuclear decommissioning
  trust policy statement. At March 31, 2004, a hypothetical 10% increase in interest
  rates and a 10% decrease in equity prices would have resulted in an estimated
  $26 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.

Credit Risk

Credit risk relates to the risk of loss that PPL Energy Supply would incur
  as a result of non-performance by counterparties of their contractual obligations.
  PPL Energy Supply maintains credit policies and procedures with respect to counterparties
  (including requirements that counterparties maintain certain credit ratings
  criteria) and requires other assurances in the form of credit support or collateral
  in certain circumstances in order to limit counterparty credit risk. However,
  PPL Energy Supply has concentrations of suppliers and customers among electric
  utilities, natural gas distribution companies and other energy marketing and
  trading companies. These concentrations of counterparties may impact PPL Energy
  Supply's overall exposure to credit risk, either positively or negatively, in
  that counterparties may be similarly affected by changes in economic, regulatory
  or other conditions. PPL Energy Supply records certain non-performance reserves
  to reflect the probability that a counterparty with contracts that are out of
  the money (from the counterparty's standpoint) will default in its performance,
  in which case PPL Energy Supply would have to sell into a lower-priced market
  or purchase from a higher-priced market. These reserves are reflected in the
  fair value of assets recorded in "Price risk management assets" on the Balance
  Sheet. PPL Energy Supply also records reserves to reflect the probability that
  a counterparty will not make payments for deliveries PPL Energy Supply has made
  but not yet billed. These reserves are reflected in "Unbilled revenues" on the
  Balance Sheet. PPL Energy Supply has also established a reserve with respect
  to certain sales to the California ISO for which PPL Energy Supply has not yet
  been paid, as well as a reserve related to PPL Energy Supply's exposure as a
  result of the Enron bankruptcy, which are reflected in "Accounts receivable"
  on the Balance Sheet. See Note 8 to the Financial Statements for additional
  information on the sales to the California ISO.

Related Party Transactions

PPL Energy Supply is not aware of any material ownership interests or operating
  responsibility by senior management of PPL Energy Supply in outside partnerships,
  including leasing transactions with variable interest entities, or other entities
  doing business with PPL Energy Supply.

For additional information on related party transactions, see Note 9 to the
  Financial Statements.

Acquisitions, Development and Divestitures

From time to time, PPL Energy Supply and its subsidiaries are involved in negotiations
  with third parties regarding acquisitions, joint ventures and other arrangements
  which may or may not result in definitive agreements. See Note 7 to the Financial
  Statements for information regarding recent acquisitions and development activities.

At March 31, 2004, PPL Energy Supply had domestic generation projects under
  development which will provide 863 MW of additional generation. In April 2004,
  the turbine upgrade for PPL Susquehanna Unit 1 was completed. This project provides
  a nominal power increase of 50 MW of generation capacity, of which PPL Susquehanna
  has a 90% undivided interest.

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

Environmental Matters

See Note 8 to the Financial Statements for a discussion of environmental matters.

New Accounting Standards

See Note 15 to the Financial Statements for information on new accounting standards
  adopted in 2004 or pending adoption.

Application of Critical Accounting Policies

PPL Energy Supply's financial condition and results of operations are impacted
  by the methods, assumptions and estimates used in the application of critical
  accounting policies. The following accounting policies are particularly important
  to the financial condition or results of operations of PPL Energy Supply, and
  require estimates or other judgments of matters inherently uncertain: price
  risk management, pension and other postretirement benefits, asset impairment,
  leasing, loss contingencies and asset retirement obligations.

See Item 7, "Management's Discussion and Analysis of Financial Condition and
  Results of Operations," in PPL Energy Supply's Annual Report to the SEC on Form
  10-K for the year ended December 31, 2003 for a discussion of each critical
  accounting policy. PPL's senior management has reviewed these critical accounting
  policies, and the estimates and assumptions regarding them, with its Audit Committee.
  In addition, PPL's senior management reviewed the Form 10-K disclosures regarding
  the application of these critical accounting policies with the Audit Committee.

---

PPL ELECTRIC UTILITIES CORPORATION
  AND SUBSIDIARIES



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

Overview

PPL Electric provides electricity delivery service in eastern and central Pennsylvania.
  Its headquarters are in Allentown, Pennsylvania. See Item 1, "Business - Background"
  in PPL Electric's Annual Report to the SEC on Form 10-K for the year ended December
  31, 2003 for a description of PPL Electric's business. See Item 7, "Management's
  Discussion and Analysis of 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, 2003 for an overview of PPL Electric's strategy and the risks and the challenges
  that it faces in its business.

The information provided in this "Management's Discussion and Analysis of Financial
  Condition and Results of Operations" should be read in conjunction with PPL
  Electric's Condensed Consolidated Financial Statements and the accompanying
  Notes.

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

Results of Operations

The following discussion, which explains significant changes in principal items
  on the Statement of Income, compares the three months ended March 31, 2004 to
  the comparable period in 2003.

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

Earnings

Income available to PPL was:

| |  | Three Months
        Ended 
        March 31, |   
| |  | --------------------------------------------- | --
| |  |                                               |   
| |  | 2004                                          |   
| |  |                                               |   
| |  | $                                             | 33



The after-tax changes in income available to PPL were primarily due to:

|                                                                     | Three Months
        EndedMarch 31, 2004 vs. March 31, 2003
|-------------------------------------------------------------------- | -----------------------------------------------------------
|                                                                     |                                                            
|                                                                     |                                                            
|Taxes, other than income                                             |                                                            
|                                                                     |                                                            
|Wholesale electric revenues                                          |                                                            
|                                                                     |                                                            
|Operation and maintenance expenses                                   |                                                            
|                                                                     |                                                            
|Depreciation                                                         |                                                            
|                                                                     |                                                            
|Financing costs (excluding transition
        bond interest expense) |                                                            
|                                                                     |                                                            
|                                                                     |                                                            
|                                                                     |                                                            

The period to period changes in earnings components are discussed in the balance
  of "Results of Operations."

In March 2004, PPL Electric filed a proposal with the PUC to increase distribution
rates by approximately $164 million and to pass through to customers approximately $57 million in increased
transmission charges that PPL Electric pays to PJM for transmission services.
The PUC's review of the distribution rate request is expected to take about nine
months. Transmission services are provided under the PJM Open Access Transmission
Tariff, a rate schedule filed with and approved by the FERC. Under the federal
"filed rate doctrine," such FERC-approved rates may be recovered from retail customers
without a review of those rates by a state agency such as the PUC. In addition,
PPL Electric's PUC-approved retail tariff permits the automatic pass-through of
transmission charges. PPL Electric agreed to a cap on both of these charges until
December 31, 2004 as part of its 1998 settlement under the PUC Final Order. Generation
charges for customers who do not select an alternative energy supplier are fixed
through 2009 and are not affected by these changes. The combination of the proposed
distribution rate increase and transmission charge pass-through would result in
an 8.1% increase over PPL Electric's present rates effective January 1, 2005.
PPL Electric cannot predict the outcome of this proceeding.

Operating Revenues

Retail Electric

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

|                                                  | Three Months
        EndedMarch 31, 2004 vs. March 31, 2003
|------------------------------------------------- | -----------------------------------------------------------
|                                                  |                                                            
|PLR electric generation supply                    |                                                            
|                                                  |                                                            
|Delivery and PLR Supply to PPL
        Generation |                                                            
|                                                  |                                                            
|Other                                             |                                                            
|                                                  |                                                            
|                                                  |                                                            
|                                                  |                                                            



The increase in operating revenues from retail electric operations for the
  three months ended March 31, 2004, compared with the same period in 2003, was
  primarily due to:

- higher PLR revenues due to higher energy and capacity rates in 2004 compared
    with 2003, and a 4% increase in volumes, in part due to the return of customers
    previously served by alternate suppliers; partially offset by
- lower delivery revenues resulting from a .8% decrease in delivery sales,
    in part due to colder than normal weather during the first quarter of 2003;
    and
- lower sales to PPL Generation. PPL Generation's power plants began self-supplying
    their station use in April 2003, rather than taking delivery from PPL Electric.

Wholesale Electric

PPL Electric wholesale revenues were primarily derived from sales to municipalities.
  The $4 million decrease in wholesale revenues for the three months ended March
  31, 2004, compared with the same period in 2003, was due to the expiration of
  all municipal purchase power agreements at the end of January 2004.

Energy Purchases from Affiliate

Energy purchases from affiliate increased by $23 million for the three months
  ended March 31, 2004, compared with the same period in 2003. This increase reflects
  higher prices for energy purchased under the power supply contracts with PPL
  EnergyPlus needed to support PLR load, coupled with an increase in PLR load.

Depreciation

Depreciation increased by $2 million for the three months ended March 31, 2004,
  compared with the same period in 2003, primarily due to plant and software additions,
  including the Automated Meter Reading project.

Taxes, Other Than Income

In the first quarter of 2004, PPL Electric reversed $14 million of accrued
  1998 and 1999 PURTA taxes that had been previously accrued based on potential
  exposure of third-party intervention in the proceedings regarding the Susquehanna
  nuclear station tax assessment. The rights of these third parties to further
  appeal expired in 2004. This is the primary reason for the $13 million decrease
  in taxes, other than income, for the three months ended March 31, 2004, compared
  with the same period in 2003.

Interest Expense

Interest expense decreased by $7 million for the three months ended March 31,
  2004, compared to the same period in 2003. This decrease was the net impact
  of retirements in 2003 of First Mortgage Bonds, Pollution Control Bonds and
  Transition Bonds, partially offset by the issuance in 2003 of $100 million of
  Senior Secured Bonds and $90 million of Pollution Control Bonds.

Income Taxes

Income taxes increased by $4 million for the three months ended March 31, 2004,
  compared with the same period in 2003, as a result of higher pre-tax book income.

Financial Condition

Liquidity

At March 31, 2004, PPL Electric had $96 million of cash and cash equivalents
  and $45 million of short-term debt. At December 31, 2003, PPL Electric had $162
  million in cash and cash equivalents and no short-term debt. The decrease in
  cash and cash equivalents was the net result of:

- the retirement of $102 million of long-term debt; and
- $54 million of capital expenditures; partially offset by
- $44 million of cash provided by operating activities; and
- an increase of $45 million in short-term debt.

For additional information on PPL Electric's Liquidity, See Item 7, "Management's
  Discussion and Analysis of Financial Condition and Results of Operations," in
  PPL Electric's Annual Report to the SEC on Form 10-K for the year ended December
  31, 2003.

Risk Management

Market Risk

Commodity Price Risk - PLR Contracts

PPL Electric and PPL EnergyPlus have power supply agreements under which PPL
  EnergyPlus sells to PPL Electric (under a predetermined pricing arrangement)
  energy and capacity to fulfill PPL Electric's PLR obligation through 2009. As
  a result, PPL Electric has shifted any electric price risk relating to its PLR
  obligation to PPL EnergyPlus for 2002 through 2009. See Note 9 to the Financial
  Statements for information on the PLR contracts.

Interest Rate Risk

PPL Electric has issued debt to finance its operations, which increases its
  interest rate risk. At March 31, 2004, PPL Electric's potential annual exposure
  to increased interest expense, based on a 10% increase in interest rates, was
  insignificant.

PPL Electric is also exposed to changes in the fair value of its debt portfolio.
  At March 31, 2004, 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 $20 million.

Related Party Transactions

PPL Electric is not aware of any material ownership interests or operating
  responsibility by senior management of PPL Electric in outside partnerships,
  including leasing transactions with variable interest entities, or other entities
  doing business with PPL Electric.

For additional information on related party transactions, see Note 9 to the
  Financial Statements.

Environmental Matters

See Note 8 to the Financial Statements for a discussion of environmental matters.

New Accounting Standards

See Note 15 to the Financial Statements for information on new accounting standards
  adopted in 2004 or pending adoption.



Application of Critical Accounting Policies

PPL Electric's financial condition and results of operations are impacted by
  the methods, assumptions and estimates used in the application of critical accounting
  policies. The following accounting policies are particularly important to the
  financial condition or results of operations of PPL Electric, and require estimates
  or other judgments of matters inherently uncertain: pension and other postretirement
  benefits and loss contingencies.

See Item 7, "Management's Discussion and Analysis of Financial Condition and
  Results of Operations," in PPL Electric's Annual Report to the SEC on Form 10-K
  for the year ended December 31, 2003 for a discussion of each critical accounting
  policy. PPL's senior management has reviewed these critical accounting policies,
  and the estimates and assumptions regarding them, with its Audit Committee.
  In addition, PPL's senior management reviewed the Form 10-K disclosures regarding
  the application of these critical accounting policies with the Audit Committee.

---

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk



Reference is made to "Risk Management - Energy Marketing & Trading and
  Other" in Management's Discussion and Analysis of Financial Condition and Results
  of Operations.

|Item
        4. Controls and Procedures
|---------------------------------------
|                                       
|(a)                                    
|                                       
|                                       
|                                       
|(b)                                    
|                                       
|                                       

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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:
|                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                  

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Item 2. Changes in Securities, Use of Proceeds and
  Issuer Purchases of Equity Securities



Issuer Purchases Of Equity Securities:





|                                        | (a)                                                                     | (b)                                                             | (c)                                                                                                                                      | (d)                                                                                                                                                
|--------------------------------------- | ----------------------------------------------------------------------- | --------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------
|Period                                  | Total
        Number of
        Shares (or Units)
        Purchased (1) | Average
        Price Paid
        per Share 
        (or Unit) | Total
        Number of
        Shares (or Units) 
        Purchased as Part of
        Publicly Announced
        Plans or Programs (2) | Maximum
        Number (or
        Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased
        Under the Plans or Programs (2)
|January 1 to January 31, 2004           | 5,751                                                                   | $45.23                                                          |                                                                                                                                          |                                                                                                                                                    
|February 1 to February 29,
        2004 | 1,703                                                                   | $45.11                                                          |                                                                                                                                          |                                                                                                                                                    
|March 1 to March 31, 2004               | 37                                                                      | $46.44                                                          |                                                                                                                                          |                                                                                                                                                    
|Total                                   | 7,491                                                                   |                                                                 |                                                                                                                                          |                                                                                                                                                    



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

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|Item 6. Exhibits and Reports on Form
        8-K
|------------------------------------------------
|                                                
|(a)                                             
|                                                
|                                                
|                                                
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|                                                
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|                                                
|                                                
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|                                                
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|                                                
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|                                                
|                                                
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|                                                
|(b)                                             
|                                                
|                                                
|                                                
|**                                              
|                                                
|                                                
|                                                
|                                                
|                                                
|*                                               
|                                                
|                                                

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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)                        
|                  |                                     
|                  |                                     
|                  |                                     
|                  |                                     
|Date: May 7, 2004 | /s/  John R. Biggar                 
|                  | John R. Biggar                      
|                  | Executive Vice President and        
|                  | Chief Financial Officer             
|                  | (PPL Corporation)                   
|                  | (principal financial officer)       
|                  |                                     
|                  |                                     
|                  |                                     
|                  |                                     
|                  | /s/  James E. Abel                  
|                  | James E. Abel                       
|                  | Treasurer                           
|                  | (PPL Energy Supply, LLC)            
|                  | (principal financial officer)       
|                  |                                     
|                  |                                     
|                  |                                     
|                  |                                     
|                  | /s/  Mark D. Woods                  
|                  | Mark D. Woods                       
|                  | Controller                          
|                  | (PPL Electric Utilities Corporation)
|                  | (principal accounting officer)      
|                  |                                     
|                  |                                     
|                  |                                     
|                  |