10-Q

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, 2005
	OR
[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from _________ to ___________

Commission File Number	Registrant; State of Incorporation; Address and Telephone Number	IRS Employer Identification 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, 189,753,784 shares outstanding at April 29, 2005, excluding 31,056,521 shares held as treasury stock
PPL Energy Supply, LLC	PPL Corporation indirectly holds all of the membership interests in PPL Energy Supply, LLC.
PPL Electric Utilities Corporation	Common stock, no par value, 78,029,863 shares outstanding and all held by PPL Corporation at April 29, 2005, excluding 79,270,519 shares held as treasury stock

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

PPL CORPORATION
PPL ENERGY SUPPLY, LLC
PPL ELECTRIC UTILITIES CORPORATION

FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2005

Table of Contents

				Page
GLOSSARY OF TERMS AND ABBREVIATIONS					i
FORWARD-LOOKING INFORMATION					1
PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		PPL Corporation and Subsidiaries
			Condensed Consolidated Statement of Income		2
			Condensed Consolidated Statement of Cash Flows		3
			Condensed Consolidated Balance Sheet		4
		PPL Energy Supply, LLC and Subsidiaries
			Condensed Consolidated Statement of Income		6
			Condensed Consolidated Statement of Cash Flows		7
			Condensed Consolidated Balance Sheet		8
		PPL Electric Utilities Corporation and Subsidiaries
			Condensed Consolidated Statement of Income		10
			Condensed Consolidated Statement of Cash Flows		11
			Condensed Consolidated Balance Sheet		12
		Combined Notes to Condensed Consolidated Financial Statements			14
	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
			PPL Corporation and Subsidiaries		37
			PPL Energy Supply, LLC and Subsidiaries		48
			PPL Electric Utilities Corporation and Subsidiaries		57
	Item 3. Quantitative and Qualitative Disclosures About Market Risk				60
	Item 4. Controls and Procedures				60
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings				60
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds				60
	Item 6. Exhibits				61
SIGNATURES					62
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
			PPL Corporation and Subsidiaries		63
			PPL Energy Supply, LLC and Subsidiaries		64
			PPL Electric Utilities Corporation and Subsidiaries		65
CERTIFICATES OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
			PPL Corporation		66
			PPL Energy Supply, LLC		68
			PPL Electric Utilities Corporation		70
CERTIFICATES OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
			PPL Corporation		72
			PPL Energy Supply, LLC		74
			PPL Electric Utilities Corporation		76

GLOSSARY OF TERMS AND ABBREVIATIONS

£ - British pounds sterling.

2001 Senior Secured Bond Indenture - PPL Electric's Indenture, dated as of August 1, 2001, to JPMorgan Chase Bank, as trustee, as supplemented.

2004 Form 10-K - Annual Report to the SEC on Form 10-K for the year ended December 31, 2004.

APA - Asset Purchase Agreement.

ARO - asset retirement obligation.

Bcf - billion cubic feet.

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.

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.

EITF - Emerging Issues Task Force, an organization that assists the FASB in improving financial reporting through the identification, discussion and resolution of financial accounting 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.

Fitch - Fitch Ratings.

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.

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

LIBOR - London Interbank Offered Rate.

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.

Moody's - Moody's Investors Service, Inc.

MW - megawatt, one thousand kilowatts.

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

NorthWestern - NorthWestern Energy Division, a Delaware corporation and a subsidiary 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 the 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.

Ofgem - Office of Gas and Electricity Markets, the British agency that regulates transmission, distribution and wholesale sales of electricity and related matters.

PCB - polychlorinated biphenyl, an additive to oil used in certain electrical equipment up to the late-1970s. It is now classified as a hazardous chemical.

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

PEPS Units, Series B (Premium Equity Participating Security Units, or PEPS^SM Units, Series B) - securities issued by PPL and PPL Capital Funding that consisted 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.) - operator of the electric transmission network and electric energy market in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia.

PLR (Provider of Last Resort) - The role of PPL Electric in providing electricity to retail customers within its delivery territory who have not chosen to select an alternative electricity supplier 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 wholly owned financing subsidiary of PPL.

PPL Capital Funding Trust I - a Delaware statutory business trust created to issue the Preferred Security component of the PEPS Units. This trust was terminated in June 2004.

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 that 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 that specializes 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 that owns and operates U.S. generating facilities through various subsidiaries.

PPL Global - PPL Global, LLC, a subsidiary of PPL Energy Supply that owns and operates international energy businesses that are focused on the regulated distribution of electricity.

PPL Maine - PPL Maine, LLC, a subsidiary of PPL Generation that owns generating operations in Maine.

PPL Martins Creek - PPL Martins Creek, LLC, a generating subsidiary of PPL Generation that owns generating operations in Pennsylvania.

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

PPL Services - PPL Services Corporation, a subsidiary of PPL that 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 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, which solely held debentures of PPL Capital Funding, and by SIUK Capital Trust I, which solely holds debentures of WPD LLP.

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

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

PURTA - the Pennsylvania Public Utility Realty Tax Act.

Regulation S-X - SEC regulation governing the form and content of and requirements for financial statements required to be filed pursuant to the federal securities laws.

SCR - selective catalytic reduction, a pollution control process.

SEC - Securities and Exchange Commission, a U.S. government agency whose primary mission is to protect investors and maintain the integrity of the securities markets.

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 and whose common securities are held by WPD LLP.

S&P - Standard & Poor's Ratings Services.

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 synthetic fuel products.

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

WPD - refers collectively to WPDH Limited and WPDL.

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 conditions affecting customer energy usage and operating costs;
• 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 and availability of existing generation facilities and operating costs;
• transmission and distribution system conditions and operating costs;
• environmental conditions and requirements;
• 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, federal or foreign investigations applicable to PPL and its subsidiaries and the energy industry;
• the outcome of litigation against PPL and its subsidiaries;
• capital market conditions, including changes in interest rates, and decisions regarding capital structure;
• stock price performance;
• the market prices of equity securities and the impact on pension income and resultant cash funding requirements for defined benefit pension plans;
• securities and credit ratings;
• state, federal and foreign regulatory developments;
• foreign exchange rates;
• new state, federal or foreign legislation, including new tax legislation;
• national or regional economic conditions, including any potential effects arising from 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)
			Three Months Ended March 31,
			2005		2004
Operating Revenues
	Utility		$	1,151	$	1,085
	Unregulated retail electric and gas			25		31
	Wholesale energy marketing			271		278
	Net energy trading margins			16		6
	Energy related businesses			139		119
	Total			1,602		1,519
Operating Expenses
	Operation
		Fuel		245		205
		Energy purchases		269		267
		Other operation and maintenance		364		316
		Amortization of recoverable transition costs		69		71
	Depreciation			105		99
	Taxes, other than income			73		57
	Energy related businesses			148		138
	Total			1,273		1,153
Operating Income				329		366
Other Income - net				9		11
Interest Expense				135		124
Income from Continuing Operations Before Income Taxes, Minority Interest   and Dividends on Preferred Stock				203		253
Income Taxes				32		72
Minority Interest				2		2
Dividends on Preferred Stock				1		1
Income from Continuing Operations				168		178
Loss from Discontinued Operations (net of income taxes)						1
Net Income			$	168	$	177
Earnings Per Share of Common Stock:
	Income from Continuing Operations:
		Basic	$	0.89	$	1.00
		Diluted	$	0.88	$	0.99
	Net income:
		Basic	$	0.89	$	1.00
		Diluted	$	0.88	$	0.99
Dividends Declared Per Share of Common Stock			$	0.46	$	0.41
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)
			Three Months Ended March 31,
			2005			2004
Net Cash Provided by Operating Activities			$	309		$	317
Cash Flows From Investing Activities
	Expenditures for property, plant and equipment			(169	)		(174	)
	Investment in generating assets and electric energy projects						(18	)
	Proceeds from the sale of minority interest in CGE						123
	Purchases of auction rate securities						(39	)
	Proceeds from the sale of auction rate securities			66			8
	Net decrease in restricted cash			16			3
	Other investing activities			(8	)		(1	)
		Net cash used in investing activities		(95	)		(98	)
Cash Flows From Financing Activities
	Issuance of common stock			24			12
	Issuance of long-term debt			116			14
	Retirement of long-term debt			(396	)		(107	)
	Payment of common dividends			(77	)		(69	)
	Payment of preferred dividends			(1	)		(1	)
	Net increase (decrease) in short-term debt			265			(6	)
	Other financing activities			(9	)		(1	)
		Net cash used in financing activities		(78	)		(158	)
Effect of Exchange Rates on Cash and Cash Equivalents				2			4
Net Increase in Cash and Cash Equivalents				138			65
Cash and Cash Equivalents at Beginning of Period				616			466
Cash and Cash Equivalents at End of Period			$	754		$	531
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)
			March 31, 2005		December 31, 2004
Assets
Current Assets
	Cash and cash equivalents		$	754	$	616
	Restricted cash			53		50
	Accounts receivable (less reserve: 2005 and 2004, $88)			576		459
	Unbilled revenues			355		407
	Fuel, materials and supplies			267		309
	Prepayments			160		56
	Deferred income taxes			227		162
	Price risk management assets			242		115
	Other			65		130
				2,699		2,304
Investments
	Investment in unconsolidated affiliates - at equity			54		51
	Nuclear plant decommissioning trust fund			405		409
	Other			12		12
				471		472
Property, Plant and Equipment - net
	Electric plant in service
		Transmission and distribution		5,998		5,927
		Generation		4,019		4,007
		General		456		480
				10,473		10,414
	Construction work in progress			164		148
	Nuclear fuel			158		153
		Electric plant		10,795		10,715
	Gas and oil plant			213		213
	Other property			219		221
				11,227		11,149
Regulatory and Other Noncurrent Assets
	Recoverable transition costs			1,363		1,431
	Goodwill			1,137		1,127
	Other acquired intangibles			341		336
	Other			940		942
				3,781		3,836
			$	18,178	$	17,761
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)
		March 31, 2005			December 31, 2004
Liabilities and Equity
Current Liabilities
	Short-term debt	$	306		$	42
	Long-term debt		840			866
	Accounts payable		412			407
	Above market NUG contracts		72			73
	Taxes		204			164
	Interest		121			129
	Dividends		88			79
	Price risk management liabilities		295			167
	Other		463			368
			2,801			2,295
Long-term Debt			6,550			6,792
Long-term Debt with Affiliate Trust			89			89
Deferred Credits and Other Noncurrent Liabilities
	Deferred income taxes and investment tax credits		2,429			2,426
	Accrued pension obligations		459			476
	Asset retirement obligations		262			257
	Above market NUG contracts		188			206
	Other		976			874
			4,314			4,239
Commitments and Contingent Liabilities
Minority Interest			55			56
Preferred Stock without Sinking Fund Requirements			51			51
Shareowners' Common Equity
	Common stock		2			2
	Capital in excess of par value		3,609			3,577
	Treasury stock		(838	)		(838	)
	Earnings reinvested		1,951			1,870
	Accumulated other comprehensive loss		(378	)		(323	)
	Capital stock expense and other		(28	)		(49	)
			4,318			4,239
		$	18,178		$	17,761
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)
			Three Months Ended March 31,
			2005		2004
Operating Revenues
	Wholesale energy marketing		$	271	$	278
	Wholesale energy marketing to affiliate			415		410
	Utility			293		279
	Unregulated retail electric and gas			25		31
	Net energy trading margins			16		6
	Energy related businesses			133		114
	Total			1,153		1,118
Operating Expenses
	Operation
		Fuel		192		159
		Energy purchases		178		213
		Energy purchases from affiliate		38		37
		Other operation and maintenance		262		236
	Depreciation			74		70
	Taxes, other than income			25		26
	Energy related businesses			139		131
	Total			908		872
Operating Income				245		246
Other Income - net				10		11
Interest Expense				65		53
Interest Expense with Affiliate				7		3
Income from Continuing Operations Before Income Taxes and Minority Interest				183		201
Income Taxes				26		52
Minority Interest				2		2
Income from Continuing Operations				155		147
Loss from Discontinued Operations (net of income taxes)						1
Net Income			$	155	$	146
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)
			Three Months Ended March 31,
			2005			2004
Net Cash Provided by Operating Activities			$	299		$	272
Cash Flows From Investing Activities
	Expenditures for property, plant and equipment			(123	)		(114	)
	Investment in generating assets and electric energy projects						(18	)
	Proceeds from the sale of minority interest in CGE						123
	Purchases of auction rate securities						(9	)
	Proceeds from the sale of auction rate securities			51			3
	Net increase in notes receivable from affiliates						(4	)
	Net decrease in restricted cash			17			2
	Other investing activities			(8	)		(1	)
		Net cash used in investing activities		(63	)		(18	)
Cash Flows From Financing Activities
	Issuance of long-term debt						14
	Contributions from Member						8
	Retirement of long-term debt			(208	)		(5	)
	Distributions to Member			(58	)		(63	)
	Net increase (decrease) in short-term debt			165			(51	)
		Net cash used in financing activities		(101	)		(97	)
Effect of Exchange Rates on Cash and Cash Equivalents				2			4
Net Increase in Cash and Cash Equivalents				137			161
Cash and Cash Equivalents at Beginning of Period				357			222
Cash and Cash Equivalents at End of Period			$	494		$	383
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the financial statements.

CONDENSED CONSOLIDATED BALANCE SHEET
PPL Energy Supply, LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)
			March 31, 2005		December 31, 2004
Assets
Current Assets
	Cash and cash equivalents		$	494	$	357
	Restricted cash			3		3
	Accounts receivable (less reserve: 2005, $66; 2004, $68)			306		259
	Unbilled revenues			219		250
	Accounts receivable from affiliates			142		152
	Collateral on PLR energy supply to affiliate			300		300
	Fuel, materials and supplies			229		256
	Prepayments			34		42
	Deferred income taxes			171		128
	Price risk management assets			242		113
	Other			49		97
				2,189		1,957
Investments
	Investment in unconsolidated affiliates - at equity			54		51
	Nuclear plant decommissioning trust fund			405		409
	Other			5		5
				464		465
Property, Plant and Equipment - net
	Electric plant in service
		Transmission and distribution		3,581		3,523
		Generation		4,019		4,007
		General		232		254
				7,832		7,784
	Construction work in progress			128		115
	Nuclear fuel			158		153
		Electric plant		8,118		8,052
	Gas and oil plant			20		21
	Other property			154		156
				8,292		8,229
Other Noncurrent Assets
	Goodwill			1,081		1,072
	Other acquired intangibles			210		202
	Other			559		559
				1,850		1,833
			$	12,795	$	12,484
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the financial statements.

CONDENSED CONSOLIDATED BALANCE SHEET
PPL Energy Supply, LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)
		March 31, 2005		December 31, 2004
Liabilities and Equity
Current Liabilities
	Short-term debt	$	164
	Long-term debt		5	$	181
	Accounts payable		351		338
	Accounts payable to affiliates		80		52
	Above market NUG contracts		72		73
	Taxes		93		101
	Interest		83		87
	Deferred revenue on PLR energy supply to affiliate		12		12
	Price risk management liabilities		287		163
	Other		300		262
			1,447		1,269
Long-term Debt			3,698		3,694
Note Payable to Affiliate			495		495
Long-term Debt with Affiliate Trust			89		89
Deferred Credits and Other Noncurrent Liabilities
	Deferred income taxes and investment tax credits		1,293		1,261
	Accrued pension obligations		318		341
	Asset retirement obligations		262		257
	Above market NUG contracts		188		206
	Deferred revenue on PLR energy supply to affiliate		43		46
	Other		815		720
			2,919		2,831
Commitments and Contingent Liabilities
Minority Interest			55		56
Member's Equity			4,092		4,050
		$	12,795	$	12,484
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)
			Three Months Ended March 31,
			2005		2004
Operating Revenues
	Retail electric		$	780	$	732
	Wholesale electric			1		4
	Wholesale electric to affiliate			38		37
	Total			819		773
Operating Expenses
	Operation
		Energy purchases		91		55
		Energy purchases from affiliate		415		410
		Other operation and maintenance		101		78
		Amortization of recoverable transition costs		69		71
	Depreciation			28		26
	Taxes, other than income			47		31
	Total			751		671
Operating Income				68		102
Other Income - net				4		1
Interest Expense				53		49
Income Before Income Taxes				19		54
Income Taxes				3		20
Income Before Dividends on Preferred Stock				16		34
Dividends on Preferred Stock				1		1
Income Available to PPL Corporation			$	15	$	33
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)
			Three Months Ended March 31,
			2005			2004
Net Cash Provided by Operating Activities			$	4		$	44
Cash Flows From Investing Activities
	Expenditures for property, plant and equipment			(40	)		(54	)
	Purchases of auction rate securities						(30	)
	Proceeds from the sale of auction rate securities			10			5
	Net decrease in restricted cash			2			2
	Other investing activities						1
		Net cash used in investing activities		(28	)		(76	)
Cash Flows From Financing Activities
	Issuance of long-term debt			116
	Retirement of long-term debt			(188	)		(102	)
	Payment of preferred dividends			(1	)		(1	)
	Payment of common dividends to PPL Corporation			(16	)		(1	)
	Net increase in short-term debt			100			45
	Other financing activities			(5	)
		Net cash provided by (used in) financing activities		6			(59	)
Net Decrease in Cash and Cash Equivalents				(18	)		(91	)
Cash and Cash Equivalents at Beginning of Period				151			162
Cash and Cash Equivalents at End of Period			$	133		$	71
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the financial statements.

CONDENSED CONSOLIDATED BALANCE SHEET
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
			March 31, 2005		December 31, 2004
Assets
Current Assets
	Cash and cash equivalents		$	133	$	151
	Restricted cash			42		42
	Accounts receivable (less reserve: 2005, $20; 2004, $18)			234		179
	Unbilled revenues			130		148
	Accounts receivable from affiliates			6		17
	Note receivable from affiliate			300		300
	Prepayments			111		6
	Prepayment on PLR energy supply from affiliate			12		12
	Other			76		66
				1,044		921
Property, Plant and Equipment - net
	Electric plant in service
		Transmission and distribution		2,417		2,404
		General		219		220
				2,636		2,624
	Construction work in progress			30		29
		Electric plant		2,666		2,653
	Other property			4		4
				2,670		2,657
Regulatory and Other Noncurrent Assets
	Recoverable transition costs			1,363		1,431
	Intangibles			116		117
	Prepayment on PLR energy supply from affiliate			43		46
	Other			357		354
				1,879		1,948
			$	5,593	$	5,526
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the financial statements.

CONDENSED CONSOLIDATED BALANCE SHEET
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
		March 31, 2005			December 31, 2004
Liabilities and Equity
Current Liabilities
	Short-term debt	$	142		$	42
	Long-term debt		485			336
	Accounts payable		37			39
	Accounts payable to affiliates		153			168
	Taxes		60			46
	Collateral on PLR energy supply from affiliate		300			300
	Other		140			98
			1,317			1,029
Long-term Debt			1,987			2,208
Deferred Credits and Other Noncurrent Liabilities
	Deferred income taxes and investment tax credits		780			776
	Other		187			190
			967			966
Commitments and Contingent Liabilities
Preferred Stock without Sinking Fund Requirements			51			51
Shareowner's Common Equity
	Common stock		1,476			1,476
	Additional paid-in capital		361			361
	Treasury stock		(912	)		(912	)
	Earnings reinvested		353			354
	Capital stock expense and other		(7	)		(7	)
			1,271			1,272
		$	5,593		$	5,526
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, 2004, is derived from each Registrant's 2004 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 2004 Form 10-K. The results of operations for the three months ended March 31, 2005, are not necessarily indicative of the results to be expected for the full year ending December 31, 2005, 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, 2004, and December 31, 2004, financial statements have been reclassified to conform to the presentation in the March 31, 2005, 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 2004 Form 10-K.

   (PPL and PPL Energy Supply)

   Depreciation

   PPL subsidiaries periodically review the depreciable lives of their fixed assets. In light of significant planned environmental capital expenditures, PPL Generation conducted studies of depreciable lives of Montour Units 1 and 2 and Brunner Island Unit 3 during the first quarter of 2005. Based on these studies, management determined that the useful lives for these units should be extended from 2025 to 2035. Therefore, effective January 1, 2005, PPL Generation revised the useful lives of these fossil units. The effect of this change for the first quarter of 2005 was to increase net income by approximately $2 million, as a result of lower depreciation.

   Goodwill

   The change in the carrying amount of "Goodwill," as shown on the Balance Sheet, was due to the effect of foreign exchange rates.

   (PPL, PPL Energy Supply and PPL Electric)

   Stock-Based Compensation

   Effective January 1, 2003, PPL and its subsidiaries prospectively adopted the fair value method of accounting for stock-based compensation. If the fair value method had been used to account for all outstanding stock-based compensation awards in both periods, there would not have been a material impact on reported net income and EPS.

   See Note 16 for a discussion of SFAS 123 (revised 2004), "Share-Based Payment."

   In SFAS 123 (revised 2004) the FASB provided additional guidance on the requirement to accelerate expense recognition for employees who are at or near retirement age and who are under a plan that allows for accelerated vesting upon an employee's retirement which is relevant to prior accounting for stock-based compensation. PPL's plans allow for accelerated vesting upon an employee's retirement. Thus, for employees who are retirement eligible when stock-based awards are granted, PPL will recognize the expense immediately. For employees who are not retirement eligible when stock-based awards are granted, PPL will amortize the awards over the shorter of the vesting period or the period up to the employee's attainment of retirement age. Retirement eligible has been defined as the early retirement age of 55 under PPL's primary pension plans.

   (PPL)

   In the first quarter of 2005, PPL recorded an adjustment of approximately $10 million after tax, or $0.06 per share, to accelerate stock-based compensation expense for retirement-eligible employees. Approximately $5 million of the total, or $0.03 per share, was related to prior periods. The prior period amounts were not material to previously issued financial statements.

   (PPL Energy Supply)

   In the first quarter of 2005, PPL Energy Supply recorded a charge of approximately $7 million after tax to accelerate stock-based compensation expense for retirement-eligible employees. Approximately $4 million of the after-tax total was related to prior periods. The prior period amounts were not material to previously issued financial statements.

   (PPL Electric)

   In the first quarter of 2005, PPL Electric recorded a charge of approximately $3 million after tax to accelerate stock-based compensation expense for retirement-eligible employees. Approximately $1 million of the after-tax total was related to prior periods. The prior period amounts were not material to previously issued financial statements.

   New Accounting Standards

   See Note 16 for information on new accounting standards pending adoption.

3. Segment and Related Information

   (PPL and PPL Energy Supply)

   See the "Segment and Related Information" Note in each Registrant's 2004 Form 10-K for a discussion of reportable segments. As of March 31, 2005, there were no changes to the reportable segments except that the segments were renamed to more specifically describe their businesses. The reportable segments are now Supply, International Delivery (formerly International) and Pennsylvania Delivery (formerly Delivery).

   Financial data for the segments are as follows:

   		Three Months Ended March 31,
   		PPL				PPL Energy Supply
   		2005		2004		2005		2004
   Income Statement Data
   Revenues from external customers
   	Supply	$	434	$	417	$	843	$	823
   	International Delivery		310		295		310		295
   	Pennsylvania Delivery (a)		858		807
   			1,602		1,519		1,153		1,118
   Intersegment revenues
   	Supply		416		410
   	Pennsylvania Delivery (a)		38		38
   Net Income
   	Supply		86		89		93		98
   	International Delivery (b)		62		48		62		48
   	Pennsylvania Delivery (a)		20		40
   		$	168	$	177	$	155	$	146

   		PPL				PPL Energy Supply
   		March 31, 2005		December 31, 2004		March 31, 2005		December 31, 2004
   Balance Sheet Data
   Total assets
   	Supply	$	7,009	$	6,673	$	7,389	$	7,094
   	International Delivery		5,406		5,390		5,406		5,390
   	Pennsylvania Delivery (a)		5,763		5,698
   		$	18,178	$	17,761	$	12,795	$	12,484

   
   

   (a)	The Pennsylvania Delivery segment is not a component of PPL Energy Supply.
   (b)	2004 includes the "Loss from Discontinued Operations." See Note 8 for additional information.

   
   
4. Earnings Per Share

   (PPL)

   Basic EPS is calculated using the weighted-average number of common shares outstanding during the period. Diluted EPS is calculated using weighted-average shares outstanding that 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 were 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,
   		2005		2004
   Income (Numerator)
   Income from continuing operations		$	168	$	178
   	Loss from discontinued operations (net of income taxes)				1
   Net Income		$	168	$	177
   Shares (Denominator)
   Shares for Basic EPS			189,060		177,150
   Add incremental shares:
   	Convertible Senior Notes		584
   	Stock options and other share-based awards		1,031		607
   Shares for Diluted EPS			190,675		177,757
   Basic EPS
   Income from continuing operations		$	0.89	$	1.00
   	Loss from discontinued operations (net of income taxes)
   Net Income		$	0.89	$	1.00
   Diluted EPS
   Income from continuing operations		$	0.88	$	0.99
   	Loss from discontinued operations (net of income taxes)
   Net Income		$	0.88	$	0.99

   In May 2001, PPL and PPL Capital Funding Trust I issued 23 million PEPS Units that contained a purchase contract component for PPL's common stock. The purchase contracts were only dilutive if the average price of PPL's common stock exceeded a threshold appreciation price, which was adjusted for cash distributions on PPL common stock. The threshold appreciation price was initially set at $65.03 and was adjusted to $63.38 as of April 1, 2004, based on dividends paid on PPL's common stock since issuance. The purchase contracts were settled in May 2004. Since the average price did not exceed the threshold appreciation price, the purchase contracts were excluded from the diluted EPS calculation for 2004.

   In January 2004, PPL completed an exchange offer resulting in the exchange of approximately four million PEPS Units for PEPS Units, Series B. The primary difference in the units related to the debt component. The purchase contract components of both units, which were potentially dilutive, were identical. The threshold appreciation price for the purchase contract component of the PEPS Units, Series B was adjusted in the same manner as that of the PEPS Units and was $63.38 as a result of the adjustment as of April 1, 2004. These purchase contracts were settled in May 2004. Since the average price did not exceed the threshold appreciation price, the purchase contracts were excluded from the diluted EPS calculation for 2004.

   In May 2003, PPL Energy Supply issued $400 million of 2.625% Convertible Senior Notes due 2023. Based on the terms at the time of issuance, the Convertible Senior Notes could be settled entirely in cash or shares of PPL common stock. The notes were modified in November 2004 to require cash settlement of the principal amount, permit settlement of any conversion premium in cash or stock and eliminate a provision that required settlement in stock in the event of default. These modifications were made in response to the FASB's ratification in October 2004 of EITF Issue 04-8, "The Effect of Contingently Convertible Instruments on Diluted Earnings per Share," as well as other anticipated rules relating to EPS. EITF Issue 04-8 requires contingently convertible instruments to be included in diluted EPS. It also requires restatement of prior-period diluted EPS, in certain circumstances, based upon the terms of the contingently convertible instruments as of the date of adoption, which was December 31, 2004, for PPL.

   Based upon the current conversion rate of 20.1106 shares per $1,000 principal of notes, the Convertible Senior Notes will have a dilutive impact when the average market price of PPL common stock exceeds the conversion price of $49.73. The Convertible Senior Notes did not have a dilutive impact on EPS for the three months ended March 31, 2004.

   The maximum number of shares that could potentially be issued to settle the conversion premium, based upon the current conversion rate, is 8,044,240 shares. Based on PPL's common stock price at March 31, 2005, the conversion premium equated to 635,461 shares, or approximately $34 million.

   The following number of stock options to purchase PPL common shares were excluded in the periods' computations of diluted EPS because the effect would have been antidilutive.

   	Three Months Ended March 31,
   (Thousands of Shares)	2005	2004
   Antidilutive stock options	804	747

   
   
5. Income Taxes

   (PPL, PPL Energy Supply and PPL Electric)

   Reconciliations of effective income tax rates are as follows:

   		Three Months Ended March 31,
   PPL		2005			2004
   Reconciliation of Income Tax Expense
   	Indicated federal income tax on pre-tax income at statutory tax rate - 35%	$	71		$	89
   Increase (decrease) due to:
   	State income taxes		(2	)		4
   	Amortization of investment tax credit		(3	)		(3	)
   	Difference related to income recognition of foreign affiliates (net of foreign income taxes)		(10	)		(3	)
   	Federal income tax credits		(24	)		(14	)
   	Other					(1	)
   			(39	)		(17	)
   Total income tax expense		$	32		$	72
   Effective income tax rate			15.8%			28.5%
   PPL Energy Supply
   Reconciliation of Income Tax Expense
   	Indicated federal income tax on pre-tax income at statutory tax rate - 35%	$	64		$	70
   Increase (decrease) due to:
   	State income taxes		(1	)		1
   	Amortization of investment tax credit		(2	)		(2	)
   	Difference related to income recognition of foreign affiliates (net of foreign income taxes)		(10	)		(3	)
   	Federal income tax credits		(24	)		(14	)
   	Other		(1	)
   			(38	)		(18	)
   Total income tax expense		$	26		$	52
   Effective income tax rate			14.2%			25.9%
   PPL Electric
   Reconciliation of Income Tax Expense
   	Indicated federal income tax on pre-tax income at statutory tax rate - 35%	$	6		$	19
   Increase (decrease) due to:
   	State income taxes					3
   	Amortization of investment tax credit		(1	)		(1	)
   	Release of tax reserves		(2	)
   	Other					(1	)
   			(3	)		1
   Total income tax expense		$	3		$	20
   Effective income tax rate			15.8%			37.0%

   (PPL and PPL Energy Supply)

   In October 2004, President Bush signed the American Jobs Creation Act of 2004 (the Act). The Act creates a temporary incentive for U.S. corporations to repatriate accumulated income earned abroad by providing an 85% dividends received deduction for certain dividends from controlled foreign corporations. The deduction is subject to a number of limitations, and uncertainty remains as to how to interpret numerous provisions in the Act. As such, PPL Energy Supply is not in a position to decide on whether, and to what extent, it might repatriate foreign earnings that have not yet been remitted to the U.S. based on its analysis to date. However, it is reasonably possible that PPL Energy Supply may repatriate some amount between zero and $500 million, with the respective tax liability ranging from zero to $27 million. PPL Energy Supply expects to be in a position to finalize its assessment by December 31, 2005.

   The Act also provides, beginning in 2005, a tax deduction from income for certain qualified domestic production activities. FSP FAS 109-1, "Application of FASB Statement No. 109, 'Accounting for Income Taxes', to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004," specifies that this tax deduction will be treated as a special deduction and not as a tax rate reduction. During the first quarter of 2005, the Treasury Department and the IRS issued interim guidance related to the tax deduction. Based on the interim guidance, PPL and PPL Energy Supply estimate an annual tax benefit for the year 2005 of approximately $3 million.

6. Comprehensive Income

   (PPL and PPL Energy Supply)

   The after-tax components of comprehensive income are:

   		Three Months Ended March 31,
   		PPL						PPL Energy Supply
   		2005			2004			2005			2004
   Net Income		$	168		$	177		$	155		$	146
   Other comprehensive income (loss):
   	Foreign currency translation adjustments		16			79			16			79
   	Disposition of investment in CGE - foreign currency translation adjustment (Note 8)					10						10
   	Unrealized loss on available-for-sale securities		(5	)		(3	)		(5	)		(3	)
   	Unrealized loss on qualifying derivatives		(66	)		(36	)		(66	)		(33	)
   	Total other comprehensive income (loss)		(55	)		50			(55	)		53
   Comprehensive Income		$	113		$	227		$	100		$	199

   (PPL Electric)

   PPL Electric's comprehensive income approximates net income.

7. Credit Arrangements and Financing Activities

   Credit Arrangements

   (PPL, PPL Energy Supply and PPL Electric)

   PPL Energy Supply and PPL Electric maintain credit facilities in order to enhance liquidity, and as a credit back-stop to their respective commercial paper programs. PPL Electric maintains two credit facilities: a $100 million three-year credit facility maturing in June 2006 and a $200 million five-year credit facility maturing in June 2009. PPL Energy Supply also maintains two credit facilities: a $300 million three-year credit facility maturing in June 2006 and an $800 million five-year credit facility maturing in June 2009. At March 31, 2005, 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 under their respective facilities to issue letters of credit. At March 31, 2005, PPL Electric had no letters of credit outstanding under its credit facilities, and PPL Energy Supply had $396 million of letters of credit outstanding under its credit facilities.

   (PPL and PPL Energy Supply)

   WPD (South West) maintains three credit facilities: a £100 million 364-day credit facility expiring in October 2005, a £150 million three-year credit facility expiring in October 2007, and a £150 million five-year credit facility expiring in October 2009. In December 2004, WPD (South West) borrowed £108 million (approximately $208 million at December 2004 exchange rates) under its credit facilities. This borrowing was recorded in January 2005 due to the one-month reporting lag. The balance outstanding under the WPD (South West) credit facilities at March 31, 2005, was £85 million (approximately $164 million at current exchange rates).

   WPD also has a £2.5 million uncommitted borrowing line, which has £1.25 million (approximately $2 million at current exchange rates) of letters of credit outstanding.

   In March 2005, PPL Energy Supply entered into a 364-day bilateral reimbursement agreement with a bank for the purpose of issuing letters of credit. Under the agreement, PPL Energy Supply can cause the bank to issue up to $200 million of letters of credit. As of March 31, 2005, there were no letters of credit outstanding under this agreement.

   (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 April 2005, PPL Capital Funding retired all $320 million of its 7-3/4% Medium-term Notes due April 2005 at par value. The funds for the retirement were obtained from PPL Energy Supply's August 2004 issuance of $300 million of 5.40% Senior Notes maturing in August 2014.

   (PPL and PPL Energy Supply)

   In December 2004, WPD borrowed £108 million (approximately $208 million at December 2004 exchange rates) under its credit facilities to retire $178 million of 6.75% Unsecured Bonds due December 2004 and settle the related $30 million cross currency swap. The total amount is included on the Statement of Cash Flows as "Retirement of long-term debt." This bond retirement was recorded in January 2005 due to the one-month reporting lag.

   At March 31, 2005, PPL Energy Supply had no commercial paper outstanding under its commercial paper program, but plans to access the commercial paper market in the second quarter of 2005.

   During the three months ended March 31, 2005, PPL Energy Supply distributed $58 million to its parent company.

   (PPL and PPL Electric)

   At March 31, 2005, $113 million of accounts receivable and $115 million of unbilled revenue were pledged under the credit agreement related to PPL Electric's asset-backed commercial paper program. Also at this date, there was $42 million of short-term debt outstanding under the credit agreement at an interest rate of 2.79%, with such debt being used to cash collateralize letters of credit issued on PPL Electric's behalf. At March 31, 2005, based on the accounts receivable and unbilled revenue pledged, an additional $103 million was available for borrowing. PPL Electric's sale to its subsidiary of the accounts receivable and unbilled revenue is an absolute sale of the assets, and PPL Electric does not retain an interest in these assets. However, for financial reporting purposes, the subsidiary's financial results are consolidated in PPL Electric's financial statements.

   In the first quarter of 2005, PPL Transition Bond Company made principal payments on transition bonds totaling $73 million.

   At March 31, 2005, PPL Electric had $100 million of commercial paper outstanding under its commercial paper program that had an average interest rate of 2.90%.

   In February 2005, the Lehigh County Industrial Development Authority (LCIDA) issued $116 million of 4.70% Pollution Control Revenue Refunding Bonds due 2029 on behalf of PPL Electric. The proceeds of the LCIDA bonds were used in March 2005 to refund the LCIDA's $116 million of 6.40% Pollution Control Revenue Refunding Bonds due 2029. PPL Electric has entered into a loan agreement with the LCIDA pursuant to which the LCIDA has loaned to PPL Electric the proceeds of the LCIDA bonds on payment terms that correspond to the LCIDA bonds. The scheduled principal and interest payments on the LCIDA bonds are insured. In order to secure its obligations to the insurance provider, PPL Electric issued $116 million aggregate principal amount of its Senior Secured Bonds (under its 2001 Senior Secured Bond Indenture), which also have payment terms that correspond to the LCIDA bonds.

   In April 2005, PPL Electric retired all $69 million of its 6-1/2% First Mortgage Bonds due April 2005 at par value.

   Dividends (PPL)

   In February 2005, PPL announced an increase to its quarterly common stock dividend, payable April 1, 2005, to 46 cents per share (equivalent to $1.84 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.

8. Acquisitions, Development and Divestitures

   (PPL and PPL Energy Supply)

   Domestic Generation Projects

   In 2003, PPL Maine entered into an agreement in principle with a coalition of government agencies and private groups to sell three of its nine hydroelectric dams in Maine.  The parties reached a final agreement in 2004 and submitted the plan to the FERC for approval. Under the agreement, a non-profit organization designated by the coalition would have a five-year option to purchase the dams for approximately $25 million, and PPL Maine would receive rights to increase energy output at its other hydroelectric dams in Maine. The coalition has announced plans to remove or bypass the dams subject to the agreement in order to restore runs of Atlantic salmon and other migratory fish to the Penobscot River. The agreement requires several approvals by the FERC, and PPL cannot predict whether or when these regulatory approvals will be obtained.

   In 2004, a subsidiary of PPL Generation agreed to sell the 450 MW Sundance power plant located in Pinal County, Arizona, to Arizona Public Service Company for approximately $190 million in cash, subject to the receipt of various state and federal regulatory approvals and customary closing conditions. In January 2005, each party waived the remaining contractual obligation for approval by the state regulator, the Arizona Corporation Commission. The sale still requires approvals by the FERC under the Federal Power Act. PPL estimates that a loss on sale or impairment charge of about $47 million after tax, or $0.25 per share, could be recorded in 2005 depending on the timing and likelihood of obtaining FERC approvals. PPL cannot predict whether or when the FERC approvals for this transaction will be obtained.

   International Energy Projects

   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 this non-strategic business was not economically viable. PPL Global sold this investment to local management for a nominal amount in June 2004. The operating results of the Latin American telecommunications company, which were a loss of approximately $1 million for the three months ended March 31, 2004, are reflected as "Loss from Discontinued Operations" on the Statement of Income.

   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 to the write-off of the associated cumulative translation adjustment, primarily as a result of the devaluation of the Chilean peso since the original acquisition in 2000.

9. Commitments and Contingent Liabilities

   Energy Purchases and Sales Commitments

   Energy Purchase Commitments (PPL, PPL Energy Supply and PPL Electric)

   PPL and PPL Energy Supply enter into long-term purchase contracts to supply the fuel requirements for generation facilities. These include contracts to purchase coal, natural gas, oil and uranium. These contracts extend for terms through 2019. PPL and PPL Energy Supply also enter into long-term contracts for the storage and transport of natural gas. These contracts extend through 2014 and 2032, respectively. Additionally, PPL Energy Supply enters into long-term contracts to purchase power to meet load requirements and emissions allowances for its generation facilities. These contracts extend for terms through 2010.

   PPL Energy Supply entered into long-term power purchase agreements with two wind project developers to purchase the full output of their facilities when they begin commercial operation, which is expected by the end of 2005. One of the power purchase agreements is for 100 MW and extends for a term of 15 years, while the other is for 20 MW and extends for a term of 20 years.

   As part of the purchase of generation assets from Montana Power, PPL Montana assumed a power purchase agreement, which was still in effect at March 31, 2005. In accordance with purchase accounting guidelines, PPL Montana recorded a liability of $58 million as the estimated fair value of the agreement at the acquisition date. The liability is being reduced over the term of the agreement, through 2010, as an adjustment to "Energy purchases" on the Statement of Income. The unamortized balance of the liability related to the agreement at March 31, 2005, was $51 million and is included in "Deferred Credits and Other Noncurrent Liabilities - Other" on the Balance Sheet.

   Liability for Above Market NUG Contracts

   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, 2005, the remaining liability associated with the above market NUG contracts was $260 million.

   Energy Sales Commitments (PPL and PPL Energy Supply)

   PPL Energy Supply enters into long-term power sales contracts in connection with its load-serving activities or associated with certain of its power plants. These power sales contracts extend for terms through 2017. All long-term contracts were executed at pricing that approximated market rates, including profit margin, at the time of execution.

   As part of the purchase of generation assets from Montana Power, PPL Montana assumed a power sales agreement, which is still in effect at March 31, 2005. In accordance with purchase accounting guidelines, PPL Montana recorded a liability of $7 million as the estimated difference between the fair value and the market value of the agreement at the acquisition date. The agreement was re-evaluated under DIG Issue C20, "Scope Exceptions: Interpretation of the Meaning of Not Clearly and Closely Related in Paragraph 10(b) Regarding Contracts with a Price Adjustment Feature," which changed its fair value and reclassified it as a derivative instrument. The current liability balance is $6 million as of March 31, 2005.

   On July 1, 2002, PPL EnergyPlus began to sell to NorthWestern an aggregate of 450 MW of energy 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.

   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 commenced in July 2004.

   As a result of New Jersey's Electric Discount and Energy Competition Act, the New Jersey 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. This contract commenced in August 2003. 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 commenced in June 2004. In the first quarter of 2005, PPL EnergyPlus was awarded a portion of the Commercial Industrial Energy Pricing tranche, which will amount to approximately 85 MW after expected shopping. These contracts will commence in June 2005.

   In April 2003, PPL EnergyPlus entered into an agreement with Arizona Public Service Company to provide capacity and associated electricity. The remaining commitment is to provide 150 MW from June through September of 2005. See Note 8 for information regarding the possible sale of the Sundance power plant to Arizona Public Service Company.

   In January 2004, PPL EnergyPlus began supplying 12.5% of Connecticut Light & Power Company's Transitional Standard Offer load, under a three-year fixed-price contract. During peak hours, PPL EnergyPlus' obligation to supply the Transitional Standard Offer load may reach 625 MW.

   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 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. In July 2004, the plaintiffs notified the District Court that the parties had reached an oral partial settlement of the case that would result in the dismissal of PPL Montana as a defendant, and in January 2005 a global settlement agreement was filed with the District Court along with a motion to approve the agreement. Under the terms of the global settlement agreement, the plaintiffs' claims against PPL Montana would be dismissed and PPL Montana would not have to pay any amounts to the plaintiffs. The global settlement agreement must still be approved by the District Court. PPL and PPL Energy Supply cannot predict whether the global settlement agreement will be approved or the outcome of this matter if it is not approved.

   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, including a claim for punitive damages. 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.

   In October 2004, the federal district court in Delaware, where NorthWestern's bankruptcy proceeding had been pending, approved a joint stipulation between PPL Montana and NorthWestern under which NorthWestern agreed to establish a segregated reserve to be used for any distributions to be made to satisfy any final judgment that PPL Montana may be awarded pursuant to PPL Montana's counterclaims. This segregated reserve has been funded with shares of NorthWestern common stock equal to $50 million, valued as of the effective date of NorthWestern's plan of reorganization. Also in October, the federal district court in Delaware confirmed NorthWestern's plan of reorganization, and in November 2004, NorthWestern announced that it had officially emerged from bankruptcy protection.

   In May 2005, PPL Montana and NorthWestern reached an agreement in principle pursuant to which each of the parties will withdraw its claims in this litigation. Under the terms of this agreement, NorthWestern will retain the CTS and PPL Montana will pay NorthWestern $9 million. The settlement of this matter is subject to the parties' execution of a final agreement and the satisfaction of the terms and conditions of any such agreement, and PPL cannot be certain whether or when the parties will reach a final agreement. PPL and PPL Energy Supply recognized an after-tax charge of approximately $6 million (or $0.03 per share for PPL) in the first quarter of 2005 for a loss contingency related to this matter.

   If a final agreement between the parties is not reached, the trial for this matter is expected to commence in the Montana federal district court in the last half of 2005. PPL and PPL Energy Supply cannot be certain of the outcome of this matter.

   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. In May 2004, the Montana Attorney General filed a motion to allow the State of Montana to intervene as an additional plaintiff in the litigation. This motion was granted without objection. The individual plaintiffs, the school districts and the State sought declaratory judgment, compensatory damages and attorneys fees and costs for use of state and/or "school trust" lands by hydropower facilities and to require the 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 became state-owned property upon Montana's admission to statehood, and that the use thereof for placement of dam structures, affiliated structures and reservoirs should, under an existing regulatory scheme, trigger lease payments for use of land underneath. The plaintiffs also sought relief on theories of unjust enrichment, trespass and negligence. No specific amount of damages or future rental value has been claimed by the plaintiffs. The defendants filed separate motions to dismiss the individual plaintiffs' and school district's complaint, as well as the complaint of the State of Montana. In September 2004, the federal court granted the motions to dismiss the individual plaintiffs' and school districts' complaint but denied the similar motions as to the State of Montana's complaint. Following the federal court's September decision, PPL Montana and the other defendants filed a motion to dismiss the State of Montana's complaint for lack of diversity jurisdiction and also filed a motion to vacate certain portions of the decision. The federal court has not yet ruled on these motions.

   In November 2004, PPL Montana, Avista Corporation and PacifiCorp commenced an action for declaratory judgment in Montana First Judicial District Court seeking a determination that no lease payments or other compensation for the hydropower facilities' use and occupancy of streambeds can be collected by the State of Montana. The State subsequently filed counterclaims and a motion for summary judgment. In February 2005, the individual plaintiffs and school districts who were dismissed from the federal court proceeding, along with a state teachers' union, filed a motion to intervene as additional defendants in this state court proceeding, and also filed a proposed answer and counterclaims to be used if their motion to intervene is granted. The state court denied this motion to intervene, but has not yet ruled on any of the other above-described motions. PPL and PPL Energy Supply cannot predict the outcome of either the federal or the state court proceeding.

   Regulatory Issues

   California ISO and Western Markets (PPL and PPL Energy Supply)

   Through its subsidiaries, PPL made approximately $18 million of sales to the California ISO during the period from October 2000 through June 2001, 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, 2005, 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 September 2004, the U.S. Court of Appeals for the Ninth Circuit held that the FERC had the additional legal authority to order refunds for periods prior to October 2, 2000, and ordered the FERC to determine whether or not it would be appropriate to grant such additional refunds.

   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 had 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. These orders have been appealed to the U.S. Court of Appeals for the Ninth Circuit. 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 intervenors 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 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. In June 2004, the Montana Attorney General served PPL Montana and more than 20 other companies with subpoenas requesting documents, and PPL Montana has provided responsive documents to the Montana Attorney General. 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 Litigation (PPL, PPL Energy Supply and PPL Electric)

   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, 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. 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 brought in the same court that is still pending. 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. In September 2004, this complaint was dismissed by the District Court and the plaintiff has appealed the dismissal to the U.S. Court of Appeals for the Third Circuit.

   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 Energy Supply 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 ISO - New England and data requests served by subpoena from the Connecticut Attorney General. Both OMOI and ISO - New England have issued preliminary reports finding no regulatory or other violations concerning these matters. 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 December 2004, Exelon Corporation, on behalf of its subsidiary, PECO Energy, Inc. (PECO), filed a complaint against PJM and PPL Electric with the FERC alleging that PJM had overcharged PECO from April 1998 through May 2003 as a result of an error by PJM in the State Estimator Model used in connection with billing all PJM customers for certain transmission, spot market energy and ancillary services charges. Specifically, the complaint alleges that PJM mistakenly identified PPL Electric's Elroy substation transformer as belonging to PECO and that, as a consequence, during times of congestion, PECO's bills for transmission congestion from PJM erroneously reflected energy that PPL Electric took from the Elroy substation and used to serve PPL Electric's load. The complaint requests the FERC, among other things, to direct PPL Electric to refund to PJM $39 million, plus interest of approximately $8 million, and for PJM to refund these same amounts to PECO. In February 2005, PPL Electric filed its response with the FERC stating that neither PPL Electric nor any of its affiliates should be held financially responsible or liable to PJM or PECO as a result of PJM's error.

   In April 2005, the FERC issued an Order Establishing Hearing and Settlement Judge Proceedings (the Order). In the Order, the FERC determined that PECO is entitled to reimbursement for the transmission congestion charges that PECO asserts PJM erroneously billed to it at the Elroy substation. The FERC set for additional proceedings before a judge the determination of the amount of the overcharge to PECO and which PJM market participants were undercharged and therefore are responsible for reimbursement to PECO. The FERC also ordered procedures before a judge to attempt to reach a settlement of the dispute.

   PPL and PPL Electric recognized an after-tax charge of approximately $27 million (or $0.14 per share for PPL) in the first quarter of 2005 for a loss contingency related to this matter. The pre-tax accrual was approximately $47 million, with $39 million included in "Energy purchases" on the Statement of Income, and $8 million in "Interest Expense."

   PPL, PPL Electric and PPL Energy Supply cannot be certain of the outcome of this matter or the impact on PPL and its subsidiaries. Some or all of the first quarter 2005 charges for this matter may be reversed in a future period depending on the outcome of this matter, the potential for recovery of any amounts paid as a result of the additional FERC proceedings, the application of the relevant provisions of the energy supply agreements between PPL Electric and PPL EnergyPlus and other factors. Depending on these factors, PPL Energy Supply, the parent company of PPL EnergyPlus, may incur some or all of the costs associated with this matter in a future period.

   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 intervenors and that, in any event, it would meet such economic test if required by the FERC.

   In June 2004, FERC approved certain changes to its standards for granting market-based rate authority. As a result of the schedule adopted by the FERC, PPL EnergyPlus, PPL Electric, PPL Montana and most of PPL Generation's subsidiaries were required to file in November 2004 updated analyses demonstrating that they should continue to maintain market-based rate authority under the new standards. PPL made two filings, one for PPL Montana and one for most of the other PPL subsidiaries. The Montana Public Service Commission and the Montana Consumer Counsel filed pleadings opposing the filing by PPL Montana. The Montana Public Service Commission requested that the FERC hold a hearing on the market-based rate renewal application, while the Montana Consumer Counsel suggested applying an altered version of the FERC's tests for assessing market power in reviewing the renewal application. The PJM Industrial Customer Coalition, the PP&L Industrial Customer Alliance and the consumer advocates of Maryland and Pennsylvania filed pleadings opposing the filings by the other PPL subsidiaries. These parties challenge the FERC's continued reliance on market-based rates to yield just and reasonable prices for wholesale electric transactions and suggest that the FERC change its tests for market power to include capacity and ancillary services markets. While PPL believes its filings demonstrate that all PPL subsidiaries pass the new tests established by the FERC in June 2004, PPL cannot predict the outcome of these proceedings.

   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 contained 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 purported 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 requested comments and held 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.

   Montana Hydroelectric License Contingencies (PPL and PPL Energy Supply)

   PPL Montana has 11 hydroelectric facilities and one storage reservoir licensed by the FERC pursuant to the Federal Power Act under long-term licenses which expire on varying dates from 2009 through 2040. Pursuant to Section 8(e) of the Federal Power Act, the FERC approved the transfer from Montana Power to PPL Montana of all pertinent licenses and any amendments in connection with the Montana APA.

   The Kerr Dam Project license was jointly issued by the FERC to Montana Power and the Confederated Salish and Kootenai Tribes of the Flathead Reservation in 1985, and required Montana Power to hold and operate the project for 30 years. The license required Montana Power, and subsequently PPL Montana as a result of the purchase of the Kerr Dam from Montana Power, to continue to implement a plan to mitigate the impact of the Kerr Dam on fish, wildlife and the habitat. Under this arrangement, PPL Montana has a remaining commitment to spend approximately $67 million between 2005 and 2035.

   PPL Montana entered into a Memorandum of Understanding (MOU) with state, federal and private entities related to the issuance in 2000 of the FERC renewal license for the nine dams for the Missouri-Madison project. The MOU requires PPL Montana to implement plans to mitigate the impact of its projects on fish, wildlife and the habitat, and to increase recreational opportunities. The MOU was created to maximize collaboration between the parties and possibilities for matching funds from relevant federal agencies. Under this arrangement, PPL Montana has a remaining commitment to spend approximately $26 million between 2005 and 2040.

   Wallingford Deactivation (PPL and PPL Energy Supply)

   In January 2003, PPL negotiated an agreement with 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 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 District of Columbia 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 located in Kentucky. PPL receives tax credits pursuant to Section 29 of the Internal Revenue Code based on the sale of synthetic fuel from these facilities to unaffiliated third-party purchasers. Section 29 of the Internal Revenue Code provides tax credits for the production and sale of solid synthetic fuels produced from coal. Section 29 tax credits are currently scheduled to expire at the end of 2007.

   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.

   In addition, Section 29 provides for the phase-out of the synthetic fuel tax credit when the reference price for crude oil, as adjusted for inflation, exceeds a certain threshold. The reference price is published by the IRS annually in April for the prior year and is calculated based on the annual average wellhead price per barrel for all unregulated domestic crude oil. The average reference price for crude oil in 2004 was $36.75 per barrel, significantly below the phase-out level. Accordingly, the tax credit phase-out did not impact results in 2004. Accounting for inflation, PPL estimates that the 2005 tax credit phase-out would start at about $52 per barrel and the tax credit would be totally eliminated at about $65 per barrel. Based on market conditions at April 30, 2005, PPL currently does not expect any significant phase-out of the synfuel tax credit for 2005. However, given the recent increases in and volatility of crude oil prices, PPL cannot predict the final average reference price for 2005 and a significant increase in oil prices could reduce the synfuel tax credit and adversely impact PPL's 2005 earnings. For 2006 and 2007, PPL has taken measures to mitigate the impact of a phase-out of the synfuel tax credit due to high oil prices.

   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 synthetic fuel, 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 synthetic fuel produced at the Somerset facility resulting in an aggregate of approximately $220 million of tax credits as of March 31, 2005.

   PPL owns a limited partnership interest in the entity that owns and operates 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 synthetic fuel to be produced at the Tyrone facility qualifies for Section 29 tax credits. In reliance on this private letter ruling, this entity has sold synthetic fuel produced at the Tyrone facility resulting in an aggregate of approximately $24 million of tax credits as of March 31, 2005. The Tyrone facility began commercial operation in the third quarter of 2004, after being relocated to Kentucky from Pennsylvania.

   PPL also purchases synthetic fuel 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 synthetic fuel operations as evidence that the required significant chemical change has occurred, and that it was reviewing information regarding these test procedures and practices. In October 2003, the IRS announced that it had completed its review 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. 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 2003 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 the Somerset facility and the Tyrone facility have been operated in compliance with their respective private letter rulings 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.

   During 2004, certain other owners or operators of synthetic fuel facilities reported that the IRS had questioned whether their facilities were placed in service before July 1, 1998. Whether or not a facility meets the "placed-in service" requirement is based on the particular facts and circumstances relating to the operation of that facility. PPL is not aware of the facts and circumstances relating to the operation of the facilities being questioned by the IRS or the specific IRS position in these other matters. PPL believes that the Tyrone and Somerset facilities meet the in-service requirement. However, PPL cannot predict the outcome of the IRS's inquiries or the impact of those inquiries on PPL.

   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, fine particulate matter standards and toxic air emissions in the U.S. PPL's subsidiaries are in substantial compliance with the Clean Air Act. The Bush administration's Clear Skies Initiative and proposals of certain members of Congress would amend the Clean Air Act. These amendments could require significant further reductions in emissions of nitrogen oxide and sulfur dioxide and reductions in emission of mercury.

   Although the Bush administration's Clear Skies Initiative does not include limits on carbon dioxide emissions, rising concerns about global warming have prompted several states to pass legislation capping carbon dioxide emissions and other bills have been introduced at the federal level proposing mandatory carbon dioxide reductions. However, the Bush administration is promoting a voluntary carbon dioxide reduction program. In support of this voluntary Climate VISION program, the electric power industry has committed to reducing its greenhouse gas emission intensity levels (measured as tons of carbon dioxide equivalent against electric power production in MWh) by 3% to 5% by the 2010 to 2012 period. Furthermore, an initiative is underway in nine Northeast states to propose a cap-and-trade program, the details of which are expected to be released in mid-2005 for carbon dioxide emissions from fossil fuel-fired power plants. Increased pressure for carbon dioxide emissions reduction is also coming from investor organizations and the international community. Pennsylvania and Montana have not, at this time, established any formal programs to address carbon dioxide and other greenhouse gases. As a result of the national and international concerns, PPL has conducted an inventory of its carbon dioxide emissions and is continuing to evaluate various options for reducing, avoiding, off-setting or sequestering its emissions.

   If the above-described initiatives or other legislative or regulatory initiatives result in mandatory reductions being imposed or if PPL adopts voluntary measures to reduce its carbon dioxide emissions, the cost of such reductions could be significant.

   The EPA has 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 finalized a rule (now called the Clean Air Interstate Rule - CAIR) for 28 midwestern and eastern states, including Pennsylvania, to reduce national sulfur dioxide emissions by 40% (about 50% in the CAIR region) by 2010 and to extend the current seasonal program for nitrogen oxide emission reductions to a year-round program (in the CAIR region) starting in 2009. Starting in 2015, the final rule requires further reductions in sulfur dioxide and nitrogen oxide of 30% and 20%, respectively, from 2010 levels. The final 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. PPL expects the rule to be challenged by several states and environmental groups.

   In order to continue meeting existing sulfur dioxide reduction requirements of the Clean Air Act, PPL will need to use its banked sulfur dioxide allowances and to purchase additional allowances. Currently, PPL has enough sulfur dioxide allowances to cover expected consumption through 2006, but will experience shortfalls in some years after 2006. As a result and based on projected allowance prices, PPL plans to complete the installation of sulfur dioxide scrubbers at its Montour Units 1 and 2 and Brunner Island Unit 3 by 2008. PPL also is evaluating under CAIR the possible installation of SCR technology to reduce nitrogen oxide emissions at Brunner Island Unit 3 at a later date. PPL's current plan reflects a cost of approximately $730 million for the combined cost of the scrubbers at Montour and Brunner Island and of the SCR at Brunner Island. PPL currently is in the process of evaluating vendor proposals for this equipment and will provide updated costs estimates, which are expected to increase, after the completion of that process.

   The EPA has finalized mercury regulations that affect coal-fired plants. These regulations establish an emission trading program to take effect beginning January 2010, with a second phase to take effect in 2018. At the same time that it finalized these mercury regulations, the EPA determined that it currently does not need to regulate nickel emissions from oil-fired units. PPL is still assessing what measures it will need to take to comply with the mercury regulations. PPL believes that it may be possible to comply with the 2010 requirements with the mercury removal co-benefits that are expected to be achieved from the installation of the scrubbers at Montour and Brunner Island. However, PPL may need to take additional measures to comply with the 2010 requirements, and it expects to need to take additional measures to comply with the 2018 requirements. The costs to PPL of complying with any such additional measures are not now determinable, but could be significant.

   Pennsylvania and about eight other states have indicated that they will challenge the EPA's new mercury regulations as being inadequate. The Pennsylvania Environmental Quality Board (PEQB) is also reviewing a petition filed by PennFuture, an environmental organization, requesting the PEQB to develop significantly more stringent mercury rules than those proposed by the EPA. The costs to PPL of complying with any such new mercury rules are not now determinable, but could be significant.

   The Ozone Transport Commission (consisting of Pennsylvania and 11 other states and the District of Columbia) has passed a resolution calling for reductions in sulfur dioxide, nitrogen oxide and mercury emissions that are more stringent than those proposed by the EPA or contemplated by the Clear Skies Initiative. Should Pennsylvania implement such reductions, the cost to PPL 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. However, states and environmental groups have also been bringing enforcement actions alleging violations of "New Source" requirements by coal-fired plants. At this time, PPL is unable to predict whether such EPA, state or citizens 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 began responding to the Colstrip information request. The EPA has stayed further production of Colstrip documents pending discussion among the Colstrip owners and the EPA. 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 or citizens group 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 which are not now determinable, but 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 2003 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 PPL's Lower Mt. Bethel generating plant. In October 2003, PPL finalized an agreement with the New Jersey DEP and the Pennsylvania DEP pursuant to which PPL 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. Pursuant to the agreement, PPL Martins Creek began reducing the fuel sulfur content for the coal units as well as the plant's two oil-fired units in June 2004. The agreement also calls for PPL to 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. Some of these donations have already been made to the Pennsylvania Environmental Council. 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 oil-fired units at 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 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 plant, and the Pennsylvania DEP and PPL are litigating issues relating to the opacity of emissions from the Montour plant. PPL is continuing to discuss these matters 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 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 the EPA promulgates Best Available Retrofit Technology requirements for nitrogen oxide emissions. 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. PPL is engaged in settlement negotiations on these matters with the EPA, the Montana Department of Environmental Quality (DEQ) and the Northern Cheyenne Tribe. In addition, the Montana DEQ 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 Montana completed an ambient air quality modeling demonstration and, based on that study, voluntarily proposed to the Montana DEQ that the permit include restrictions related to sulfur dioxide emissions. The Montana DEQ has accepted PPL Montana's proposal and has issued an amended operating permit to PPL and issued an amended air permit, which PPL expects will resolve this matter.

   Water/Waste (PPL and PPL Energy Supply)

   Seepages have been detected at one of the wastewater basins at the Montour station, and PPL is working with the Pennsylvania DEP to assess the seepage and develop an abatement plan. PPL is assessing impacted groundwater at two closed wastewater basins at the Brunner Island station to determine what abatement actions may be needed. PPL plans to comprehensively address issues related to wastewater basins at all of its Pennsylvania plants as part of the process to renew the residual waste permits for these basins which expire within the next three years. The cost of addressing seepages at PPL's Pennsylvania plants is not now determinable, but could be significant.

   PPL Montana continues to undertake certain groundwater investigation and remediation measures at its Colstrip plant to address groundwater contamination. These measures include offering to extend city water to certain residents who live near the plant. In addition, in May 2003, approximately 50 plaintiffs brought an action now pending at the Montana Sixteenth Judicial District Court, Rosebud County, against PPL Montana and the other owners of the Colstrip plant alleging property damage from seepage from the freshwater and wastewater ponds at Colstrip. This action could result in PPL Montana and the other Colstrip owners being liable for damages and being required to take additional remedial measures beyond those noted above. Beyond estimated costs of approximately $1 million (PPL Montana's share of the estimated costs, for which PPL has recorded a contingency reserve) for the proposed settlement of these property damage claims and for extending city water, PPL Montana may incur further costs based on its additional groundwater investigations and any related remedial measures, which costs are not now determinable, but could be significant.

   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 could be significant.

   The EPA has significantly tightened the water quality standard for arsenic. The revised standard becomes effective in 2006. The revised standard may result in action by individual states that could require several PPL subsidiaries to either further treat wastewater or take abatement action at their power plants, or both. The cost of complying with any such requirements is not now determinable, but could be significant.

   The EPA finalized requirements in 2004 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 that was finalized in 2004 addresses existing structures. PPL does not believe that either of these rules will impose material costs on PPL subsidiaries. However, six northeastern states have challenged the new rules for existing structures as being inadequate. If this challenge is successful, it could result in the EPA establishing stricter standards for existing structures that could impose significant costs on PPL subsidiaries.

   Superfund and Other Remediation

   (PPL, PPL Energy Supply and PPL Electric)

   In 1995, PPL Electric and PPL Generation, and in 1996, PPL Gas Utilities entered into consent orders 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, PPL Generation or PPL Gas Utilities 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. This may also include former coal gas manufacturing facilities and potential mercury contamination from gas meters and regulators at PPL Gas Utilities' sites.

   Since the PPL Electric Consent Order expired on January 31, 2005, and since only four sites remained, PPL has negotiated a new consent order and agreement (COA) with the Pennsylvania DEP that combines both PPL Electric's and PPL Gas Utilities' consent orders into one single agreement. As of March 31, 2005, PPL Electric and PPL Gas Utilities have 178 sites to address under the new combined COA. Additional sites formerly owned or operated by PPL Electric, PPL Generation or PPL Gas Utilities are added to the consent orders on a case-by-case basis.

   At March 31, 2005, PPL Electric and PPL Gas Utilities had accrued approximately $3 million and $7 million, representing the estimated amounts each 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 and its subsidiaries also could incur other non-remediation costs at sites included in the consent orders or other contaminated sites, the costs of which are not now determinable, but could be significant.

   The EPA is evaluating the risks associated with naphthalene, a chemical by-product of coal gas manufacturing operations. As a result of the EPA's evaluation, individual states may establish stricter standards for water quality and soil clean-up. This could require several PPL subsidiaries to take more extensive assessment and remedial actions at former coal gas manufacturing facilities. The costs to PPL of complying with any such requirements are not now determinable, but could be significant.

   (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 is installing 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, 2005, a PPL Energy Supply subsidiary had accrued $28 million to cover the costs of pumping and treating groundwater at the two mine sites for 50 years and for operating and maintaining passive wetlands treatment at the third site.

   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 could be significant.

   (PPL, PPL Energy Supply and PPL Electric)

   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 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 potential health effects of power frequency electric and/or magnetic fields (EMFs), which 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 reviewed this issue. The U.S. National Institute of Environmental Health Sciences concluded in 2002 that, for most health outcomes, there is no evidence of EMFs causing adverse effects. The agency further noted that there is some epidemiological evidence of an association with childhood leukemia, but that this evidence is difficult to interpret without supporting laboratory evidence. The U.K. National Radiological Protection Board concluded in 2004 that, while the research on EMFs does not provide a basis to find that EMFs cause any illness, there is a basis to consider precautionary measures beyond existing exposure guidelines. PPL and its subsidiaries believe the current efforts to determine whether EMFs cause adverse health effects should continue and are taking steps to reduce EMFs, where practical, in the design of new transmission and distribution facilities. PPL and its subsidiaries are unable to predict what effect, if any, the EMF issue might have on their operations and facilities either in the U.S. or abroad, and the associated cost, or what, if any, liabilities they 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 setting the permissible noise levels for operation of the Lower Mt. Bethel facility. PPL appealed the court's decision to the Commonwealth Court, and an intervenor 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 intervenor appealed this ruling to the Commonwealth Court. In April 2004, the Commonwealth Court affirmed the decision of the Court of Common Pleas, and the Supreme Court of Pennsylvania has denied the intervenor's Petition for Allowance of Appeal.

   The certificate of occupancy for the Lower Mt. Bethel facility was issued by the local township zoning officer in April 2004, and the facility was placed in service in May 2004. In May 2004, the intervenor in the legal proceedings regarding the facility's permissible noise levels filed an appeal with the township zoning board regarding the issuance of the certificate of occupancy. The hearing on the appeal was held in December 2004, and the intervenor's appeal was denied. The intervenor appealed the zoning board's decision to the Northampton County Court of Common Pleas in February 2005.

   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, 2005, this maximum assessment was about $38 million.

   In the event of a nuclear incident at the Susquehanna station, PPL Susquehanna's public liability for claims resulting from such incident would be 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.

   (PPL, PPL Energy Supply and PPL Electric)

   The table below provides an update to those guarantees that are within the scope of FIN 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34," and are specifically disclosed in Note 14 to the Financial Statements contained in each Registrant's 2004 Form 10-K.

   		Recorded Liability at			Exposure at
   		March 31, 2005	December 31, 2004		March 31, 2005 (a)			Expiration Date
   PPL
   Residual value guarantees of leased equipment					$	7			2006	(b)
   PPL Energy Supply (c)
   WPD LLP guarantee of obligations under SIUK Capital Trust I preferred securities						82	(d)		2027
   Letters of credit issued on behalf of affiliates						5	(e)		2006
   Support agreements to guarantee partnerships' obligations for the sale of coal						9			2007
   Retroactive premiums under nuclear insurance programs						38
   Nuclear claims under The Price Anderson Amendments Act of 1988						201	(f)
   Contingent purchase price payments to former owners of synfuel projects	$	12	$	11		53			2007
   Residual value guarantees of leased equipment						3			2006	(b)
   WPD guarantee of pension and other obligations of unconsolidated entities (g)		4				46			2017
   WPD guarantee related to a contract assigned as part of a sale of one of its businesses						20			2005
   Indemnifications for entities in liquidation						288			2008 to 2012
   WPD guarantee of an unconsolidated entity's lease obligations						1			2008
   PPL Electric (c)
   Guarantee of a portion of an unconsolidated entity's debt						7	(d)		2008
   Residual value guarantees of leased equipment		1		1		81			2006	(b)

   (a)	Represents the estimated maximum potential amount of future payments that could be required to be made under the guarantee.
   (b)	Although the expiration date noted is 2006, equipment of similar value is generally leased and guaranteed on an on-going basis.
   (c)	Other than the exceptions noted in (e) below, all guarantees of PPL Energy Supply and PPL Electric also apply to PPL on a consolidated basis.
   (d)	Reflects principal payments only.
   (e)	Represents letters of credit issued at the direction of PPL Energy Supply for the benefit of third parties for assurance against nonperformance by PPL and PPL Gas Utilities. This is not a guarantee by PPL on a consolidated basis.
   (f)	Amount is per incident.
   (g)	As a result of the privatization of the utility industry in the U.K., certain electric associations' roles and responsibilities were discontinued or modified. As a result, certain obligations, primarily pension-related, associated with these organizations have been guaranteed by the participating members. Costs are allocated to the members based on predetermined percentages as outlined in specific agreements. However, if a member becomes insolvent, costs can be reallocated to and are guaranteed by the remaining members. At March 31, 2005, WPD has recorded an estimated discounted liability based on its current allocated percentage of the total expected costs. Neither the expiration date nor the maximum amount of potential payments for certain obligations is explicitly stated in the related agreements and, therefore, have been estimated based on the types of obligations.

   
   
10. Related Party Transactions

    Affiliate Trust (PPL and PPL Energy Supply)

    At both March 31, 2005, and December 31, 2004, PPL and PPL Energy Supply's Balance Sheets reflect $89 million of "Long-term Debt with Affiliate Trust." This debt represents obligations of PPL Energy Supply under 8.23% subordinated debentures maturing in February 2027 that are held by SIUK Capital Trust I, which is a variable interest entity whose common securities are owned by PPL Energy Supply but which is not consolidated by PPL Energy Supply. Interest expense on this obligation was $3 million for the three months ended March 31, 2005 and 2004, and is reflected in "Interest Expense" for PPL and "Interest Expense with Affiliate" for PPL Energy Supply on the Statement of Income. See Note 22 in each Registrant's 2004 Form 10-K for additional information.

    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 provides electricity at the predetermined capped prices that PPL Electric is authorized to charge its PLR customers. For the three months ended March 31, 2005 and 2004, these purchases totaled $415 million and $410 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 affiliate" revenues by PPL Energy Supply.

    Under one of 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. PPL Electric estimates that, at March 31, 2005, the market price of electricity would exceed the contract price by approximately $2.3 billion. Accordingly, at March 31, 2005, 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's deposit with PPL Electric was $300 million at March 31, 2005, and December 31, 2004. This deposit is shown on the Balance Sheet as "Collateral on PLR energy supply to/from affiliate," a current asset of PPL Energy Supply and a current liability of PPL Electric. PPL Electric pays interest equal to the one-month LIBOR plus 0.5% on this deposit, which is included in "Interest Expense" on the Statement of Income.

    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 $55 million at March 31, 2005, and $58 million at December 31, 2004. 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 prices to PPL EnergyPlus. For the three months ended March 31, 2005 and 2004, these NUG purchases totaled $38 million and $37 million, and are included in the Statement of Income as "Wholesale electric to affiliate" revenues by PPL Electric, and as "Energy purchases from affiliate" 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:

    	Three Months Ended March 31,
    	PPL Energy Supply				PPL Electric
    	2005		2004		2005		2004
    Direct expenses	$	25	$	24	$	14	$	14
    Overhead costs		19		14		7		6

    Intercompany Borrowings

    (PPL Energy Supply)

    PPL Energy Supply had no notes receivable from affiliates at March 31, 2005, and December 31, 2004. Interest earned on cash collateral and loans to affiliates, included in "Other Income - net" on the Statement of Income, was $2 million for the three months ended March 31, 2005, and insignificant for the same period in 2004.

    In May 2004, PPL Energy Supply issued a $495 million note payable to an affiliate, which is shown on the Balance Sheet as "Note Payable to Affiliate." The note matures in May 2006 with interest payable monthly in arrears at LIBOR plus 1%. Interest expense on this note was $4 million for the three months ended March 31, 2005, and is reflected in "Interest Expense with Affiliate" on the Statement of Income.

    (PPL Electric)

    In August 2004, a PPL Electric subsidiary made a $300 million demand loan to an affiliate, with interest due quarterly at a rate equal to the 3-month LIBOR plus 1.25%. This loan is shown on the Balance Sheet as "Note receivable from affiliate." Interest earned on loans to affiliates, included in "Other Income - net" on the Statement of Income, was $3 million for the three months ended March 31, 2005, and insignificant for the same period in 2004.

    Trademark Royalties (PPL Energy Supply)

    A PPL subsidiary owns PPL trademarks and bills certain affiliates for their use. PPL Energy Supply was allocated $8 million of this license fee for both the three months ended March 31, 2005 and 2004, which is primarily included in "Other operation and maintenance" on the Statement of Income.

11. Other Income - Net

    (PPL, PPL Energy Supply and PPL Electric)

    The breakdown of "Other Income - net" was as follows:

    		Three Months Ended March 31,
    PPL		2005		2004
    	Other Income
    	Interest income	$	6	$	3
    	Equity earnings		1		1
    	Realized earnings on nuclear decommissioning trust		1		4
    	Hyder-related activity				2
    	Gain by WPD on the disposition of property		1		1
    	Miscellaneous - International		3		3
    	Miscellaneous - Domestic		1		2
    	Total		13		16
    	Other Deductions
    	Charitable contributions		2		2
    	Miscellaneous - International				1
    	Miscellaneous - Domestic		2		2
    	Other Income - net	$	9	$	11
    PPL Energy Supply
    	Other Income
    	Interest income	$	4	$	2
    	Affiliated interest income		2
    	Equity earnings		1		1
    	Realized earnings on nuclear decommissioning trust		1		4
    	Hyder-related activity				2
    	Gain by WPD on the disposition of property		1		1
    	Miscellaneous - International		3		3
    	Miscellaneous - Domestic		1		1
    	Total		13		14
    	Other Deductions
    	Loss on hedge activity		1
    	Miscellaneous - International				1
    	Miscellaneous - Domestic		2		2
    	Other Income - net	$	10	$	11
    PPL Electric
    	Other Income
    	Interest income	$	2	$	1
    	Affiliated interest income		3
    	Miscellaneous				1
    	Total		5		2
    	Other Deductions		1		1
    	Other Income - net	$	4	$	1

12. Derivative Instruments and Hedging Activities

    (PPL and PPL Energy Supply)

    Fair Value Hedges

    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 significant gains or losses resulting from hedges of firm commitments that no longer qualified as fair value hedges for the three months ended March 31, 2005 or 2004.

    During the three months ended March 31, 2005, PPL Electric redeemed the $116 million of 6.40% Pollution Control Revenue Refunding Bonds due 2029. Consequently, PPL recognized a gain of $3 million related to accelerating the amortization of the fair value hedges related to these bonds.

    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, 2005 or 2004.

    Cash Flow Hedges

    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. The current contract matures in 2006. PPL and PPL Energy Supply also enter into foreign currency forward contracts to hedge the cash flows associated with foreign currency-denominated debt, the exchange rates associated with firm commitments denominated in foreign currencies and the net investment of foreign operations. These forward contracts range in maturity through 2028.

    Net investment hedge activity is reported in the foreign currency translation adjustments component of other comprehensive income. PPL recorded net investment hedge losses, after tax, of $7 million and $4 million as of March 31, 2005 and 2004.

    Cash flow hedges may be discontinued if 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, 2005 or 2004.

    Due to hedge ineffectiveness, PPL and PPL Energy Supply reclassified losses, after tax, of $2 million 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, 2005. For the same period in 2004, the amount was insignificant.

    As of March 31, 2005, the deferred net loss, after tax, on derivative instruments in "Accumulated other comprehensive income" expected to be reclassified into earnings during the next twelve months was $52 million for PPL and $47 million for PPL Energy Supply.

    The following table shows the change in accumulated unrealized gains or losses on derivatives, after tax, in accumulated other comprehensive income for the following periods:

    		Three Months Ended March 31,
    		2005				2004
    PPL
    	Beginning accumulated derivative gain (loss)	$	(63)			$	41
    	Net change associated with current period hedging activities and other		(79		)		(99	)
    	Net change from reclassification into earnings		13				63
    	Ending accumulated derivative gain (loss)	$	(129		)	$	5
    PPL Energy Supply
    	Beginning accumulated derivative gain (loss)	$		(45)		$	60
    	Net change associated with current period hedging activities and other			(78	)		(94	)
    	Net change from reclassification into earnings			12			61
    	Ending accumulated derivative gain (loss)	$		(111	)	$	27

    Credit Concentration

    PPL and PPL Energy Supply enter into contracts with many entities for the purchase and sale of energy. Many 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 are the mark-to-market value of multi-year contracts for energy sales and purchases. Therefore, if these counterparties fail to perform their obligations under such contracts, PPL and PPL Energy Supply would not experience an immediate financial loss, but would experience lower revenues or higher costs in future years to the extent that replacement sales or purchases could not be made at the same prices as those under the defaulted contracts.

    At March 31, 2005, PPL had a credit exposure of $348 million to energy trading partners. Ten counterparties accounted for 70% of this exposure. No other individual counterparty accounted for more than 3% of the exposure. Nine of the ten counterparties had an investment grade credit rating from S&P. The non-investment grade counterparty has remained current on obligations under its contracts, and has supplied a letter of credit as collateral against its obligations.

    At March 31, 2005, PPL Energy Supply had a credit exposure of $342 million to energy trading partners. Ten counterparties accounted for 71% of this exposure. No other individual counterparty accounted for more than 3% of the exposure. Nine of the ten counterparties had an investment grade credit rating from S&P. The non-investment grade counterparty has remained current on obligations under its contracts, and has supplied a letter of credit as collateral against its obligations.

    PPL and PPL Energy Supply generally have the right to request collateral from their counterparties in the event that the counterparties' credit ratings fall below investment grade. 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.

    (PPL Energy Supply and PPL Electric)

    In past years, PPL Energy Supply has had an exposure to PPL Electric under the long-term contract for PPL EnergyPlus to provide PPL Electric's PLR load. However, beginning in 2004, increases in electricity prices have reversed this position. PPL Electric estimates that, at March 31, 2005, the market price of electricity would exceed the contract price by approximately $2.3 billion. In accordance with the terms of one of the PLR contracts, PPL Energy Supply provided PPL Electric with cash collateral 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.

13. Pension and Other Postretirement Benefits

    (PPL and PPL Energy Supply)

    The components of net pension and other postretirement benefit cost (credit) were as follows:

    	Pension Benefits												Other Postretirement Benefits
    	Three Months Ended March 31,												Three Months Ended March 31,
    	2005						2004						2005			2004
    	Domestic			International			Domestic			International
    PPL
    Service cost	$	14		$	4		$	12		$	4		$	2		$	1
    Interest cost		29			38			28			36			7			6
    Expected return on plan assets		(40	)		(52	)		(38	)		(53	)		(5	)		(4	)
    Amortization of transition obligation		(1	)					(1	)					2			2
    Amortization of prior service cost		4			1			4			1			1
    Amortization of (gain) loss					6			(2	)		2			2			2
    Net periodic pension and other postretirement benefit cost (credit) prior to termination benefits		6			(3	)		3			(10	)		9			7
    Termination benefits					5
    Net periodic pension and other postretirement benefit cost (credit)	$	6		$	2		$	3		$	(10	)	$	9		$	7
    PPL Energy Supply
    Service cost	$	1		$	4		$	1		$	4
    Interest cost		1			38			1			36
    Expected return on plan assets		(1	)		(52	)		(1	)		(53	)
    Amortization of prior service cost					1						1
    Amortization of loss					6						2
    Net periodic pension and other postretirement benefit cost (credit) prior to termination benefits		1			(3	)		1			(10	)
    Termination benefits					5
    Net periodic pension and other postretirement benefit cost (credit)	$	1		$	2		$	1		$	(10	)

14. Restricted Cash

    (PPL, PPL Energy Supply and PPL Electric)

    The following table details the components of restricted cash by reporting entity and by type:

    			March 31, 2005
    			PPL		PPL Energy Supply		PPL Electric
    Current:
    Collateral for letters of credit (a)			$	42			$	42
    Miscellaneous				11	$	3
    	Restricted cash - current			53		3		42
    Noncurrent:
    Required deposit of WPD's insurance subsidiary				20		20
    PPL Transition Bond Company Indenture reserves (b)				20				20
    	Restricted cash - noncurrent			40		20		20
    		Total restricted cash	$	93	$	23	$	62

    			December 31, 2004
    			PPL		PPL Energy Supply		PPL Electric
    Current:
    Collateral for letters of credit (a)			$	42			$	42
    Miscellaneous				8	$	3
    	Restricted cash - current			50		3		42
    Noncurrent:
    Required deposit of WPD's insurance subsidiary				37		37
    PPL Transition Bond Company Indenture reserves (b)				22				22
    	Restricted cash - noncurrent			59		37		22
    		Total restricted cash	$	109	$	40	$	64

    (a)	A deposit with a financial institution of funds from the asset-backed commercial paper program to fully collateralize $42 million of letters of credit. See Note 7 for further discussion on the asset-backed commercial paper program.
    (b)	Credit enhancement for PPL Transition Bond Company's $2.4 billion Series 1999-1 Bonds to protect against losses or delays in scheduled payments.

    
    
15. Asset Retirement Obligations

    (PPL and PPL Energy Supply)

    The change in the carrying amounts of the AROs was as follows:

    ARO at December 31, 2004	$	257
    Add: Accretion expense		5
    ARO at March 31, 2005	$	262

    Funds in the nuclear decommissioning trust are legally restricted for purposes of settling PPL's and PPL Energy Supply's ARO related to the decommissioning of the Susquehanna station. PPL Electric collects authorized nuclear decommissioning costs through the CTC. These revenues are passed on to PPL EnergyPlus under the power supply agreements between PPL Electric and PPL EnergyPlus. Similarly, these revenues are passed on to PPL Susquehanna under a power supply agreement between PPL EnergyPlus and PPL Susquehanna. These revenues, less applicable taxes, are used to fund the nuclear decommissioning trust and can only be used for future decommissioning costs. The fair value of the nuclear plant decommissioning trust fund was $405 million as of March 31, 2005, and $409 million as of December 31, 2004.

    See Note 16 for a discussion of FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations, an Interpretation of FASB Statement No. 143," and its potential impact on PPL and its subsidiaries.

16. New Accounting Standards

    (PPL, PPL Energy Supply and PPL Electric)

    SFAS 123(R)

    In December 2004, the FASB issued SFAS 123 (revised 2004), "Share-Based Payment," which is known as SFAS 123(R) and replaces SFAS 123, "Accounting for Stock-Based Compensation," as amended by SFAS 148, "Accounting for Stock-Based Compensation-Transition and Disclosure." Among other things, SFAS 123(R) eliminates the alternative to use the intrinsic value method of accounting for stock-based compensation. SFAS 123(R) requires public entities to recognize compensation expense for awards of equity instruments to employees based on the grant-date fair value of the awards. SFAS 123(R) was originally effective for public entities that do not file as small business issuers as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. However, in April 2005, the SEC issued a rule that amended Regulation S-X to change this effective date to the beginning of an entity's fiscal year that begins on or after June 15, 2005.

    SFAS 123(R) requires public entities to apply the modified prospective application transition method of adoption. Under this application, entities must recognize compensation expense based on the grant-date fair value for new awards granted or modified after the effective date and for unvested awards outstanding on the effective date. Additionally, public entities may choose to apply modified retrospective application to periods before the effective date of SFAS 123(R). This application may be applied either to all prior years for which SFAS 123 was effective or only to prior interim periods in the year of initial adoption of SFAS 123(R). Under modified retrospective application, prior periods would be adjusted to recognize compensation expense as though stock-based awards granted, modified or settled in cash in fiscal years beginning after December 15, 1994, had been accounted for under SFAS 123.

    PPL and its subsidiaries must adopt SFAS 123(R) no later than January 1, 2006. PPL and its subsidiaries do not plan to apply modified retrospective application to any periods prior to the date of adoption. In addition, PPL and its subsidiaries adopted the fair-value method of accounting for stock-based compensation under SFAS 123 effective January 1, 2003. Therefore, the adoption of SFAS 123(R) is not expected to have a material impact on PPL and its subsidiaries.

    FIN 47

    In March 2005, the FASB issued Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations, an Interpretation of FASB Statement No. 143." FIN 47 clarifies that an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liability's fair value can be reasonably estimated. FIN 47 also clarifies when an entity would be expected to have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective for fiscal years ending after December 15, 2005. The impact of initially applying FIN 47 is required to be recognized as a cumulative effect of a change in accounting principle. Retrospective application of interim financial information is permitted but not required.

    PPL and its subsidiaries are currently in the process of reviewing (i) certain obligations to perform asset retirement activities that are conditional upon a future event occurring and (ii) certain legal retirement obligations that were identified but are not measurable at this time due to indeterminable dates of retirement. The potential impact of applying the guidance in FIN 47 to these items is not yet determinable, but could be material.
    

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. In PPL's 2004 Form 10-K, descriptions of its major segments are found in "Item 1. Business - Background" and the current corporate organizational structure is shown in Exhibit 99. 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 2004 Form 10-K for an overview of PPL's strategy and the risks and the challenges that it faces in its business.

PPL's reportable segments are Supply, International Delivery and Pennsylvania Delivery. See Note 3 to the Financial Statements for further segment information.

The following information should be read in conjunction with PPL's Condensed Consolidated Financial Statements and the accompanying Notes.

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

Results of Operations

The following discussion begins with a review of PPL's earnings and a description of key factors by segment that management expects may impact future earnings. "Results of Operations" continues with a summary of results by reportable segment and ends with explanations of significant changes in principal items on PPL's Statement of Income, comparing the three months ended March 31, 2005, to the comparable period in 2004.

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, 2005, as compared with the same period in 2004, changes in foreign exchange rates increased WPD's portion of revenue and expense line items by about 5%.

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,
	2005		2004
Net income	$	168	$	177
EPS - basic	$	0.89	$	1.00
EPS - diluted	$	0.88	$	0.99

The after-tax change in net income was due to:

			Three Months Ended March 31, 2005 vs. March 31, 2004
Domestic:
	Eastern U.S. non-trading margins			$	16
	Northwestern U.S. non-trading margins				(9	)
	Net energy trading margins				6
	Delivery revenues (net of CTC/ITC amortization, interest expense on transition bonds and ancillary charges)				28
	Operation and maintenance expenses				(24	)
	Depreciation				(2	)
	Taxes, other than income (excluding gross receipts tax)				(8	)
	Synfuel earnings				7
	Interest expense				(2	)
	Other				(2	)
		Total Domestic			10
International:
	U.K.:
		Operation and maintenance expenses			(8	)
		Impact of changes in foreign currency exchange rates			3
	Latin America				2
	U.S. income taxes				6
	Interest expense				3
		Total International			6
Unusual items:
	Sale of CGE (Note 8)				8
	PJM billing dispute (Note 9)				(27	)
	NorthWestern litigation (Note 9)				(6	)
				$	(9	)

The period-to-period changes in earnings components, including domestic gross energy margins by region and income statement line items, are discussed following the future earnings factors and segment results.

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

Supply Segment:

• PPL's future energy margins and, consequently, its future earnings, will be impacted by changes in market prices for electricity, as well as fluctuations in fuel prices, fuel transportation costs and emission allowance expenses. For instance, although PPL expects market prices for electricity in 2005 to be higher than in 2004, PPL is not expecting an increase in its 2005 energy margins due to expected increases in the cost of fuel, fuel transportation and emissions allowances. See Note 9 to the Financial Statements for a discussion of the status of PPL's sulfur dioxide emission allowances.

• A key part of PPL's overall strategy is to enter into long-term and intermediate-term energy supply agreements in order to mitigate market price and supply risk. PPL's ability to continue to enter into such agreements, and to renew existing energy supply agreements, may affect its future earnings. See Note 9 to the Financial Statements for more information regarding PPL's wholesale energy commitments and Note 10 for more information regarding the PLR contracts.

• Due to current electricity and natural gas price levels, there is a risk that PPL may be unable to recover its investment in certain 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 earnings impact of this issue, based upon future energy and fuel price levels, applicable accounting rules and other factors, but such impact may be material.

• In June 2004, a subsidiary of PPL Generation agreed to sell the 450 MW Sundance power plant to Arizona Public Service Company. Each party has waived the remaining contractual conditions for approval of the transaction by the Arizona Corporation Commission. The sale still requires approvals of the FERC under the Federal Power Act. PPL cannot predict whether or when these approvals will be obtained. PPL estimates that a loss on sale or an impairment charge of about $47 million, after tax, or $0.25 per share, could be recorded in 2005 depending on the timing and likelihood of obtaining the FERC approvals.

• PPL's ability to manage operational risk with respect to its generation plants is critical to its financial performance. Specifically, depending on the timing and duration of both planned and unplanned outages (in particular, if such outages are during peak periods or periods of severe weather), PPL's revenue from energy sales could be adversely affected and its need to purchase power to satisfy its energy commitments could be significantly increased. PPL has been successful in the past several years in increasing fleet-wide equivalent availability (i.e., the percentage of time in a year that a generating unit is capable of producing power) from the low 80% range to over 90%. However, since many of its generating units are reaching mid-life, PPL is faced with the potential for outages of longer duration to accommodate significant investments in major component replacements.

• PPL has interests in two synthetic fuel facilities and receives tax credits pursuant to Section 29 of the Internal Revenue Code based on its sale of synthetic fuel to unaffiliated third-party purchasers. PPL has estimated that these facilities will contribute approximately $0.21 to annual EPS through 2007, when the availability of such tax credits is scheduled to expire. See Note 9 to the Financial Statements for a discussion of the requirements to receive the Section 29 tax credits, the IRS review of synthetic fuel production procedures and the impact of higher oil prices on the Section 29 tax credits.

• To comply with existing and future environmental requirements and as a result of voluntary pollution control measures it may take, PPL expects to spend significant amounts on environmental control and compliance in the future. The costs of such measures, in most cases, are not now determinable with certainty. For instance, PPL's current cost estimates for sulfur dioxide reduction at its generating plants are preliminary and PPL could incur significantly higher capital and operating expenses due to more stringent environmental requirements, changing market conditions with respect to the cost of pollution control equipment or emissions allowances, delays in the installation of pollution control equipment or other factors. See Note 9 to the Financial Statements for more information regarding current environmental requirements and initiatives, including those relating to air emissions, and PPL's anticipated capital expenditure program to meet the sulfur dioxide reduction requirements of the Clean Air Act.

International Delivery Segment:

• Earnings in 2005 and beyond are expected to continue to be adversely affected by increased pension costs. Specifically, WPD will experience increased pension costs due to a recent actuarial valuation of WPD's plans that reflects higher pension obligations. The increase in pension costs in 2005 is forecasted to be approximately $24 million, after tax, and the increase in pension costs is expected to continue to be significant in 2006. An additional $4 million of expense, after tax, was recognized in the first quarter related to termination benefits.

Pennsylvania Delivery Segment:

• In December 2004, the PUC approved an increase in PPL Electric's distribution rates of approximately $137 million (based on a return on equity of 10.7%), and approved PPL Electric's proposed mechanism for collecting an additional $57 million in transmission-related charges, for a total increase of approximately $194 million, effective January 1, 2005.

• PPL Electric has agreed to provide electricity supply to its PLR customers at predetermined rates through 2009 and has entered into PUC-approved, full requirements energy supply agreements with PPL EnergyPlus to fulfill its PLR obligation. The predetermined charges for generation supply which PPL Electric collects from its PLR customers and pays to PPL EnergyPlus under the energy supply agreements provide for annual increases in each year commencing in 2006 and continuing through 2009. PPL Electric's PLR obligation after 2009 will be determined by the PUC pursuant to rules that have not yet been promulgated. See Note 10 to the Financial Statements for more information regarding the PLR contracts.

• In January 2005, severe ice storms hit PPL Electric's service territory. PPL Electric had to restore service to about 238,000 customers. Although the actual cost of these storms and the specific allocation of such cost between operation and maintenance expense and capital costs is not yet finalized, PPL Electric currently estimates a total cost of $22 million, with approximately $19 million, or $0.06 per share, being recorded as an expense on PPL Electric's income statement for the first quarter of 2005.

  On February 11, 2005, PPL Electric filed a petition with the PUC for authority to defer and amortize for regulatory accounting and reporting purposes its actual cost of these storms, excluding capitalized costs of approximately $3 million and regular payroll expenses of approximately $2 million (pursuant to PUC precedent on this issue). If the PUC grants this petition, PPL Electric's management will assess the recoverability of these costs in PPL Electric's next general rate increase proceeding, in accordance with SFAS 71, "Accounting for the Effects of Certain Types of Regulation." Depending on the likelihood of such recovery based on this assessment, most of the first quarter expense could be reversed in that future period. At this time, PPL Electric cannot predict the outcome of its deferral petition or the likelihood of recovery of these storm costs.

All Segments:

• 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 2004, future impairments may occur due to determinations of carrying value exceeding the fair value of these investments.

• From time to time, PPL and its subsidiaries are involved in negotiations with third parties regarding acquisitions and dispositions of businesses and assets. Any such transactions may impact future earnings.

• See Note 9 to the Financial Statements for potential commitments and contingent liabilities that may impact future earnings.

• See Note 16 to the Financial Statements for new accounting standards that have been issued but not yet adopted by PPL that may impact future earnings.

Segment Results

Net income by segment was as follows:

		Three Months Ended March 31,
		2005		2004
Supply		$	86	$	89
International Delivery			62		48
Pennsylvania Delivery			20		40
	Total	$	168	$	177

Supply Segment

The Supply segment owns and operates power plants to generate electricity, markets this electricity and other power purchases to deregulated wholesale and retail markets and acquires and develops domestic generation projects. The Supply segment primarily consists of the activities of PPL Generation and PPL EnergyPlus.

Segment net income was as follows:

		Three Months Ended March 31,
		2005		2004
Energy revenues
	External	$	312	$	315
	Intersegment		416		410
Energy related businesses			122		102
	Total operating revenues		850		827
Fuel and energy purchases
	External		307		318
	Intersegment		38		38
Other operation and maintenance			191		171
Depreciation			38		35
Taxes, other than income			12		13
Energy related businesses			142		116
	Total operating expenses		728		691
Other Income - net					2
Interest Expense			30		24
Income Taxes			6		25
	Total	$	86	$	89

The after-tax change in net income was due to the following factors:

		Three Months Ended March 31, 2005 vs. March 31, 2004
Eastern U.S. non-trading margins			$	16
Northwestern U.S. non-trading margins				(9	)
Net energy trading margins				6
Operation and maintenance expenses				(10	)
Synfuel earnings				7
Depreciation				(2	)
Interest expense				(3	)
Other				(2	)
	Total			3
Unusual item - NorthWestern litigation (Note 9)				(6	)
			$	(3	)

• See "Domestic Gross Energy Margins" for an explanation of non-trading margins by geographic region and for an explanation on net energy trading margins.

• Higher operation and maintenance expenses were primarily due to accelerated amortization of stock-based compensation for retirement-eligible employees, which resulted from additional accounting guidance. See Note 2 to the Financial Statements for additional information.

• The improved earnings contribution from synfuel operations resulted from the Tyrone facility that began commercial operation during the third quarter of 2004.

The change in net income was also attributable to an accrual of approximately $6 million after tax for the loss contingency related to the NorthWestern litigation. See Note 9 to the Financial Statements for additional information on the accrual.

International Delivery Segment

The International Delivery segment owns and operates international energy businesses that are focused on the distribution of electricity. The segment primarily consists of the operations of the regulated international energy businesses of PPL Global. The majority of PPL Global's international businesses are located in the U.K., Chile, El Salvador and Bolivia.

Segment net income was as follows:

		Three Months Ended March 31,
		2005		2004
Energy revenues		$	293	$	279
Energy related businesses			17		16
	Total operating revenues		310		295
Fuel and energy purchases			63		54
Other operation and maintenance			62		56
Depreciation			38		36
Taxes, other than income			14		13
Energy related businesses			6		21
	Total operating expenses		183		180
Other Income - net			5		7
Interest Expense			50		49
Income Taxes			18		22
Minority Interest			2		2
Loss from Discontinued Operations					1
	Total	$	62	$	48

The after-tax change in net income was due to the following factors:

		Three Months Ended March 31, 2005 vs. March 31, 2004
U.K.:
	Operation and maintenance expenses		$	(8	)
	Impact of changes in foreign currency exchange rates			3
Latin America				2
U.S. income taxes				6
Interest expense				3
	Total			6
Unusual item - Sale of CGE (Note 8)				8
			$	14

• The U.K.'s earnings were negatively impacted by higher operation and maintenance expenses, primarily due to increased pension costs and termination benefit expenses.

• U.S. income taxes on dividends from WPD decreased primarily due to greater utilization of foreign tax credits.

• Lower interest expense was due to lower affiliate debt.

Pennsylvania Delivery Segment

The Pennsylvania Delivery segment includes the regulated electric and gas delivery operations of PPL Electric and PPL Gas Utilities.

Segment net income was as follows:

		Three Months Ended March 31,
		2005		2004
Operating revenues
	External	$	858	$	807
	Intersegment		38		38
	Total operating revenues		896		845
Fuel and energy purchases
	External		144		100
	Intersegment		416		410
Other operation and maintenance			111		89
Amortization of recoverable transition costs			69		71
Depreciation			29		28
Taxes, other than income			47		31
	Total operating expenses		816		729
Other Income - net			4		1
Interest Expense			55		51
Income Taxes			8		25
Dividends on Preferred Stock			1		1
	Total	$	20	$	40

The after-tax change in net income was due to the following factors:

		Three Months Ended March 31, 2005 vs. March 31, 2004
Delivery revenues (net of CTC/ITC amortization, interest expense on transition bonds and ancillary charges)			$	28
Operation and maintenance expenses				(13	)
Taxes, other than income (excluding gross receipts tax)				(8	)
	Total			7
Unusual item - PJM billing dispute (Note 9)				(27	)
			$	(20	)

• Delivery revenues increased as a result of higher transmission and distribution customer rates effective January 1, 2005, and a 3.7% increase in electricity delivery sales volumes.

• The increase in operation and maintenance expenses was primarily due to the costs incurred in January 2005 to restore electric service to customers as a result of severe ice storms that affected portions of PPL Electric's service territory. The increase was also due to accelerated amortization of stock-based compensation for retirement-eligible employees, which resulted from additional accounting guidance. See Note 2 to the Financial Statements for additional information on stock-based compensation.

• Taxes, other than income, benefited in 2004 from the reversal of 1998 and 1999 PURTA tax accruals related to the PPL Susquehanna tax appeals.

The change in net income was also attributable to an accrual of approximately $27 million after tax for the loss contingency related to the PJM billing dispute. See Note 9 to the Financial Statements for additional information on the accrual.

Domestic Gross Energy Margins

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

			Three Months Ended March 31, 2005 vs. March 31, 2004
Utility				$	66
Unregulated retail electric and gas					(6	)
Wholesale energy marketing					(7	)
Net energy trading margins					10
Other revenue adjustments (a)					(45	)
	Total revenues				18
Fuel					40
Energy purchases					2
Other cost adjustments (a)					(44	)
	Total cost of sales				(2	)
		Domestic gross energy margins		$	20

(a) Adjusted to exclude the impact of any revenues and costs not associated with domestic gross energy margins, in particular, revenues and energy costs related to the international operations of PPL Global, the domestic delivery operations of PPL Electric and PPL Gas Utilities and an accrual for the loss contingency related to the PJM billing dispute (see Note 9 to the Financial Statements for additional information). Also adjusted to include gains or losses on sales of emission allowances, which are included in "Other operation and maintenance" expenses on the Statement of Income.

Changes in Domestic Gross Energy Margins By Region

Domestic gross energy margins are generated through PPL's normal hedging (non-trading) activities, as well as trading activities. PPL manages its non-trading energy business on a geographic basis that is aligned with its generation assets.

		Three Months Ended March 31, 2005 vs. March 31, 2004
Eastern U.S.			$	27
Northwestern U.S.				(15)
Southwestern U.S.				(2)
Net energy trading				10
	Domestic gross energy margins		$	20

Eastern U.S.

Eastern U.S. non-trading margins were higher primarily because a greater portion of PPL's supply came from its own generation, instead of purchased power. This was due to the timing of plant outages as well as the operation of the Lower Mt. Bethel plant, which began commercial operation in May 2004. The increase was achieved despite higher supply costs, which were driven by increased fossil fuel and power purchase prices. Power purchase prices increased by 4% primarily due to higher market prices for fossil fuel; however, this increase was more than offset by a 10% increase in the average sales price for wholesale transactions. Fuel costs increased 23% due to a 6% increase in generation across a diverse mix of low-cost coal-fired, nuclear and hydroelectric plants and a 17% increase in the average consumed cost of fossil fuels. In addition, PPL also benefited from favorable transmission congestion positions, and gains on sales of emission allowances.

Northwestern U.S.

Northwestern U.S. non-trading margins were lower primarily due to an 8% reduction in coal and hydroelectric generation output. Generation was adversely affected by outages and reduced river flows. Additionally, the average consumed cost of coal increased by 10% primarily due to an unfavorable arbitration ruling effective April 2004.

Net Energy Trading

PPL enters into certain energy contracts that meet the criteria of trading derivatives as defined by EITF Issue 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 $10 million increase was primarily due to an increase in realized gains on electricity positions as well as an increase in wholesale physical gas trading. The physical volumes associated with energy trading for the three months ended March 31, 2005, were 1,066 GWh and 4.5 Bcf, compared with 994 GWh and 2.4 Bcf for the three months ended March 31, 2004.

Utility Revenues

The increase in utility revenues was attributable to the following:

			Three Months Ended March 31, 2005 vs. March 31, 2004
Domestic:
	Retail electric revenue (PPL Electric)
		Electric delivery		$	32
		PLR electric generation supply			16
	Gas revenue (PPL Gas Utilities)				7
	Wholesale electric revenue (PPL Electric)				(3	)
International:
	Retail electric delivery (PPL Global)
		Chile			7
		U.K.			4
		El Salvador			3
				$	66

The increase in utility revenues was primarily due to:

• higher delivery revenues resulting from higher transmission and distribution customer rates effective January 1, 2005, and a 3.7% increase in sales volumes;
• higher PPL Electric PLR revenues due to higher energy and capacity rates, and a 5.6% increase in volumes, in part due to the 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 revenues in Chile, primarily due to a 7.3% increase in sales volumes, primarily attributable to regulated customers;
• higher WPD revenues, primarily due to the change in foreign currency exchange rates, partially offset by a reduction in certain charges which had been a pass-through to customer rates; and
• higher revenues in El Salvador, due to a 5.3% increase in sales volumes of all customer types.

Energy Related Businesses

Energy related businesses contributed $10 million more to operating income for the three months ended March 31, 2005, compared with the same period in 2004. The increase was attributable to:

• a $15 million pre-tax loss in 2004, related to the sale of CGE (see Note 8 to the Financial Statements); and
• a $2 million increase from mechanical contracting and engineering subsidiaries due to a favorable closeout on a major project; partially offset by
• a $6 million higher pre-tax operating loss from synfuel projects due to increased production levels which improve after-tax earnings.

Other Operation and Maintenance

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

	Three Months Ended March 31, 2005 vs. March 31, 2004
Costs associated with severe ice storms in January 2005		$	19
Accelerated amortization of stock-based compensation (Note 2)			17
Increase in domestic and international pension costs			14
NorthWestern litigation accrual (Note 9)			9
Increase in foreign currency exchange rates			2
Gains on sales of emission allowances			(7	)
Reduction in WPD costs that are a pass-through to customer rates			(5	)
Other			(1	)
		$	48

The $14 million increase in net pension costs was primarily attributable to a reduction in the discount rate assumptions for PPL's domestic pension plans at December 31, 2004, and increased amortization of prior year actuarial losses for WPD's pension plans. These events will result in PPL's recognition of increased net pension costs in 2005. See Note 13 to the Financial Statements for details of the costs of PPL's pension plans.

Depreciation

The increase in depreciation expense was due to:

	Three Months Ended March 31, 2005 vs. March 31, 2004
Lower Mt. Bethel generation facility, which began commercial operation in May 2004		$	4
Other additions to PP&E			4
Foreign currency exchange rates			1
Extension of useful lives of certain fossil generation assets (Note 2)			(3	)
		$	6

Taxes, Other Than Income

In the first quarter of 2004, PPL Electric reversed a $14 million accrued liability for 1998 and 1999 PURTA taxes that had been accrued based on potential exposure in the proceedings regarding the Susquehanna nuclear station tax assessment. The rights of third-party intervenors to further appeal expired in 2004. The reversal is the primary reason for the $16 million increase in taxes, other than income.

Other Income - net

See Note 11 to the Financial Statements for details of other income.

Interest Expense

The increase in interest expense was due to:

	Three Months Ended March 31, 2005 vs. March 31, 2004
Interest expense related to the Lower Mt. Bethel generation facility, which began commercial operation in May 2004 (a)		$	9
Interest accrued for PJM billing dispute (Note 9)			8
Increase in short-term debt interest expense			2
Decrease in interest expense due to the repayment in June 2004 of financing related to the Sundance and University Park generation facilities (b)			(6	)
Decrease in other long-term debt interest expense			(4	)
Other			2
		$	11

(a)	Prior to commercial operation, interest related to the Lower Mt. Bethel financing was capitalized as part of the cost of the facility.
(b)	In June 2004, subsidiaries of PPL Energy Supply purchased the Sundance and University Park generation facilities from the lessor that was consolidated by PPL Energy Supply under FIN 46 (revised December 2003), "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51." In connection with the purchase, the related financing was repaid.

Income Taxes

Income taxes decreased by $40 million. The decrease was primarily attributable to:

• a $10 million tax benefit recognized in 2005 related to additional nonconventional fuel tax credits in excess of credits recognized in 2004;
• a $7 million decrease in tax expense on foreign earnings in 2005 relative to 2004; and
• a $22 million decrease in income tax expense due to lower pre-tax book income.

Discontinued Operations

See "Discontinued Operations" in Note 8 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.

Financial Condition

Liquidity

At March 31, 2005, PPL had $754 million of cash and short-term investments and $306 million of short-term debt. At December 31, 2004, PPL had $682 million in cash and short-term investments and $42 million of short-term debt. The increase in PPL's cash and short-term investment position was primarily the net result of:

• $309 million of cash provided by operating activities;
• the issuance of $116 million of tax-exempt long-term debt at PPL Electric;
• the issuance of $24 million of common stock; and
• an increase in short-term debt of $265 million; offset by
• the retirement of $396 million of long-term debt;
• the payment of $78 million of common and preferred dividends; and
• $169 million of capital expenditures.

Rating Agency Decisions

S&P, Moody's and 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.

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 January 2005, S&P affirmed PPL Electric's A-/A-2 corporate credit ratings and favorably revised its outlook on the company to stable from negative following the authorization of a $194 million rate increase by the PUC. S&P indicated that the outlook revision reflects its expectations that the rate increase, effective January 1, 2005, will allow for material improvement in PPL Electric's financial profile, which had lagged S&P's expectations in recent years. S&P indicated that the stable outlook reflects its expectations that PPL Electric "will rapidly improve and then maintain financial metrics more consistent with its ratings." S&P indicated that it expects PPL Electric's operations to remain stable through the expiration of the PLR agreement.

Additionally, in January 2005, S&P revised its outlooks on the WPD companies to stable from negative. S&P attributes this positive change to financial profile improvements resulting from the final regulatory outcome published by Ofgem in November 2004. At the same time, S&P affirmed the WPD companies' long-term and short-term credit ratings.

Also in January 2005, Fitch announced that it downgraded the WPD companies' senior unsecured credit ratings by one notch as follows:

• WPDH Limited to BBB- from BBB
• WPD LLP to BBB from BBB+
• WPD (South West) and WPD (South Wales) to BBB+/F2 from A-/F1

Fitch has a stable outlook on all of the WPD companies.

Fitch stated that its downgrade was prompted by the high level of pension-adjusted leverage at WPD. Fitch acknowledged that WPD's funding plan should reduce its pension deficit over time and it expects WPD to proceed with its de-leveraging program. However, Fitch indicated that it is not certain enough, due to the unpredictability in future pension valuations, that pension-adjusted leverage will support a BBB rating at WPDH Limited. Fitch indicated that WPD (South West) and WPD (South Wales) have been downgraded to maintain a two-notch differential with WPDH Limited because Fitch does not believe that WPD's financial ring-fencing is restrictive enough to support a three-notch differential.

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 2004 Form 10-K.

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 value of these contracts:

	Three Months Ended March 31,
	2005			2004
Fair value of contracts outstanding at the beginning of the period	$	(11	)	$	86
Contracts realized or otherwise settled during the period		(7	)		(24	)
Fair value of new contracts at inception
Other changes in fair values		(88	)		23
Fair value of contracts outstanding at the end of the period	$	(106	)	$	85

The following chart segregates estimated fair values of PPL's commodity derivative contracts that qualify for hedge accounting treatment at March 31, 2005, 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			Maturity 1-3 Years			Maturity 3-5 Years			Maturity in Excess of 5 Years	Total Fair Value
Source of Fair Value
Prices actively quoted	$	15		$	15		$	1			$	31
Prices provided by other external sources		(17	)		(111	)		(9	)			(137	)
Prices based on models and other valuation methods
Fair value of contracts outstanding at the end of the period	$	(2	)	$	(96	)	$	(8	)		$	(106	)

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 a price curve was developed by PPL due to 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, 2005, PPL estimated that a 10% adverse movement in market prices of both electricity and fuel across all geographic areas and time periods would have decreased the value of the commodity contracts in its non-trading portfolio by approximately $202 million. For purposes of this calculation, an increase in the market price for electricity is considered an adverse movement because PPL's electricity portfolio is generally in a net sales position, and a decrease in the market price for fuel is considered an adverse movement because PPL's commodity fuels portfolio is generally in a net purchase position. PPL enters into these commodity contracts to reduce the market risk inherent in the generation of electricity.

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 not have a material impact on expected 2005 gross margins. Similarly, a 10% adverse movement in all fossil fuel prices would decrease 2005 gross margins by $14 million.

PPL also executes energy contracts to take advantage of market opportunities. As a result, PPL may at times create a net open position in its portfolio that could result in significant losses if prices do not move in the manner or direction anticipated. The margins from these trading activities are shown in the Statement of Income as "Net energy trading margins."

Commodity Price Risk (Trading)

PPL's trading contracts mature at various times through 2008. The following chart sets forth PPL's net fair value of trading contracts:

	Three Months Ended March 31,
	2005			2004
Fair value of contracts outstanding at the beginning of the period	$	10		$	3
Contracts realized or otherwise settled during the period		(4	)		(3	)
Fair value of new contracts at inception		3			4
Other changes in fair values		7			7
Fair value of contracts outstanding at the end of the period	$	16		$	11

PPL will reverse approximately $1 million of the $16 million unrealized trading gains over the next three months of 2005 as the transactions are realized.

The following chart segregates estimated fair values of PPL's trading portfolio at March 31, 2005, 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			Maturity 1-3 Years		Maturity 3-5 Years	Maturity in Excess of 5 Years	Total Fair Value
Source of Fair Value
Prices actively quoted	$	3		$	1			$	4
Prices provided by other external sources		9			4				13
Prices based on models and other valuation methods		(1	)						(1	)
Fair value of contracts outstanding at the end of the period	$	11		$	5			$	16

See "Commodity Price Risk (Non-trading)" for information on the various sources of fair value.

As of March 31, 2005, 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.

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, 2005, PPL's potential annual exposure to increased interest expense, based on a 10% increase in interest rates, was estimated at $5 million.

PPL is also exposed to changes in the fair value of its domestic and international debt portfolios. At March 31, 2005, 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 approximately $212 million.

PPL utilizes various risk management instruments to reduce its exposure to the expected future cash flow variability of its debt instruments. These risks include exposure to adverse interest rate movements for outstanding variable rate debt and for future anticipated financing. While PPL is exposed to changes in the fair value of these instruments, any changes in the fair value of these instruments are recorded into equity and then reclassified into earnings in the same period during which the item being hedged affects earnings. At March 31, 2005, the market value of these instruments, representing the amount PPL would pay upon their termination, was approximately $1 million. At March 31, 2005, PPL estimated that its potential exposure to a change in the fair value of these instruments, through a 10% adverse movement in the hedged exposure, was insignificant.

PPL also utilizes various risk management instruments to adjust the mix of fixed and floating interest rates in its debt portfolio. While PPL is exposed to changes in the fair value of these instruments, any change in market value is recorded with an equal and offsetting change in the value of the debt being hedged. At March 31, 2005, 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 $18 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.

To protect expected income denominated in British pounds sterling, PPL entered into average rate options for £32 million. At March 31, 2005, the market value of these positions, representing the amount PPL would receive upon their termination, was approximately $1 million.

To protect expected income in Chilean pesos, PPL entered into average rate options for 4 billion Chilean pesos. At March 31, 2005, the market value of these positions, representing the amount PPL would receive upon their termination, was insignificant.

PPL executed net forward sale transactions for £10 million to hedge a portion of its net investment in WPDH Limited. The estimated value of these agreements as of March 31, 2005, was $1 million, being the amount PPL would pay to terminate the transactions.

WPDH Limited held a net position in cross-currency swaps totaling $1.1 billion to hedge the interest payments and value of its U.S. dollar-denominated bonds. The estimated value of this position at March 31, 2005, being the amount PPL would pay to terminate it, including accrued interest, was $255 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, 2005, 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 in the trusts 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, 2005, a hypothetical 10% increase in interest rates and a 10% decrease in equity prices would have resulted in an estimated $30 million reduction in the fair value of the trust assets. See the "Nuclear Decommissioning" Note in the 2004 Form 10-K for more information regarding the nuclear decommissioning trust funds.

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.

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

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 8 to the Financial Statements for information regarding recent development and divestiture activities.

PPL is currently planning incremental capacity increases of 255 MW at several existing domestic generating facilities.

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

New Accounting Standards

See Note 16 to the Financial Statements for information on new accounting standards 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 2004 Form 10-K 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. In PPL Energy Supply's 2004 Form 10-K, a description of PPL Energy Supply's domestic and international businesses is found in "Item 1. Business - Background" and a listing of its principal subsidiaries is shown in Exhibit 99. 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 2004 Form 10-K for an overview of PPL Energy Supply's strategy and the risks and the challenges that it faces in its business.

PPL Energy Supply's reportable segments are Supply and International Delivery. See Note 3 to the Financial Statements for further segment information.

The following information should be read in conjunction with PPL Energy Supply's Condensed Consolidated Financial Statements and the accompanying Notes.

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

Results of Operations

The following discussion begins with a review of PPL Energy Supply's earnings and a description of key factors by segment that management expects may impact future earnings. "Results of Operations" continues with a summary of results by reportable segment and ends with explanations of significant changes in principal items on PPL Energy Supply's Statement of Income, comparing the three months ended March 31, 2005, to the comparable period in 2004.

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, 2005, as compared with the same period in 2004, changes in foreign exchange rates increased WPD's portion of revenue and expense line items by about 5%.

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 $155 million for the three months ended March 31, 2005, and $146 million for the same period in 2004. The after-tax change in net income was due to:

			Three Months Ended March 31, 2005 vs. March 31, 2004
Domestic:
	Eastern U.S. non-trading margins			$	16
	Northwestern U.S. non-trading margins				(9	)
	Net energy trading margins				6
	Operation and maintenance expenses				(6	)
	Interest expense				(9	)
	Synfuel earnings				7
	Other				(4	)
		Total Domestic			1
International:
	U.K.:
		Operation and maintenance expenses			(8	)
		Impact of changes in foreign currency exchange rates			3
	Latin America				2
	U.S. income taxes				6
	Interest expense				3
		Total International			6
Unusual items:
	Sale of CGE (Note 8)				8
	NorthWestern litigation (Note 9)				(6	)
				$	9

The period-to-period changes in earnings components, including domestic gross energy margins by region and income statement line items, are discussed following the future earnings factors and segment results.

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

Supply Segment:

• PPL Energy Supply's future energy margins and, consequently, its future earnings, will be impacted by changes in market prices for electricity, as well as fluctuations in fuel prices, fuel transportation costs and emission allowance expenses. For instance, although PPL Energy Supply expects market prices for electricity in 2005 to be higher than in 2004, PPL Energy Supply is not expecting an increase in its 2005 energy margins due to expected increases in the cost of fuel, fuel transportation and emissions allowances. See Note 9 to the Financial Statements for a discussion of the status of PPL Energy Supply's sulfur dioxide emission allowances.

• A key part of PPL Energy Supply's overall strategy is to enter into long-term and intermediate-term energy supply agreements in order to mitigate market price and supply risk. PPL Energy Supply's ability to continue to enter into such agreements, and to renew existing energy supply agreements, may affect its future earnings. See Note 9 to the Financial Statements for more information regarding PPL Energy Supply's wholesale energy commitments and Note 10 for more information regarding the PLR contracts.

• PPL Electric has agreed to provide electricity supply to its PLR customers at predetermined rates through 2009 and has entered into PUC-approved, full requirements energy supply agreements with PPL EnergyPlus to fulfill its PLR obligation. The predetermined charges for generation supply which PPL Electric collects from its PLR customers and pays to PPL EnergyPlus under the energy supply agreements provide for annual increases in each year commencing in 2006 and continuing through 2009. PPL Electric's PLR obligation after 2009 will be determined by the PUC pursuant to rules that have not yet been promulgated. See Note 10 to the Financial Statements for more information regarding the PLR contracts.

• 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 certain 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 earnings impact of this issue, based upon future energy price and fuel levels, applicable accounting rules and other factors, but such impact may be material.

• In June 2004, a subsidiary of PPL Generation agreed to sell the 450 MW Sundance power plant to Arizona Public Service Company. Each party has waived the remaining contractual conditions for approval of the transaction by the Arizona Corporation Commission. The sale still requires approvals of the FERC under the Federal Power Act. PPL Energy Supply cannot predict whether or when these approvals will be obtained. PPL Energy Supply estimates that a loss on sale or an impairment charge of about $47 million, after tax, could be recorded in 2005 depending on the timing and likelihood of obtaining the FERC approvals.

• PPL Energy Supply's ability to manage operational risk with respect to its generation plants is critical to its financial performance. Specifically, depending on the timing and duration of both planned and unplanned outages (in particular, if such outages are during peak periods or periods of severe weather), PPL Energy Supply's revenue from energy sales could be adversely affected and its need to purchase power to satisfy its energy commitments could be significantly increased. PPL Energy Supply has been successful in the past several years in increasing fleet-wide equivalent availability (i.e., the percentage of time in a year that a generating unit is capable of producing power) from the low 80% range to over 90%. However, since many of its generating units are reaching mid-life, PPL Energy Supply is faced with the potential for outages of longer duration to accommodate significant investments in major component replacements.

• PPL Energy Supply has interests in two synthetic fuel facilities and receives tax credits pursuant to Section 29 of the Internal Revenue Code based on its sale of synthetic fuel to unaffiliated third-party purchasers. PPL Energy Supply has estimated that these facilities will contribute approximately $40 million per year to earnings through 2007, when the availability of such tax credits is scheduled to expire. See Note 9 to the Financial Statements for a discussion of the requirements to receive the Section 29 tax credits, the IRS review of synthetic fuel production procedures and the impact of higher oil prices on the Section 29 tax credits.

• To comply with existing and future environmental requirements and as a result of voluntary pollution control measures it may take, PPL Energy Supply expects to spend significant amounts on environmental control and compliance in the future. The costs of such measures, in most cases, are not now determinable with certainty. For instance, PPL Energy Supply's current cost estimates for sulfur dioxide reduction at its generating plants are preliminary and PPL Energy Supply could incur significantly higher capital and operating expenses due to more stringent environmental requirements, changing market conditions with respect to the cost of pollution control equipment or emissions allowances, delays in the installation of pollution control equipment or other factors. See Note 9 to the Financial Statements for more information regarding current environmental requirements and initiatives, including those relating to air emissions, and PPL Energy Supply's anticipated capital expenditure program to meet the sulfur dioxide reduction requirements of the Clean Air Act.

International Delivery Segment:

• Earnings in 2005 and beyond are expected to continue to be adversely affected by increased pension costs. Specifically, WPD will experience increased pension costs due to a recent actuarial valuation of WPD's plans that reflects higher pension obligations. The increase in pension costs in 2005 is forecasted to be approximately $24 million, after tax, and the increase in pension costs is expected to continue to be significant in 2006. An additional $4 million of expense, after tax, was recognized in the first quarter related to termination benefits.

All Segments:

• 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 2004, future impairments may occur due to determinations of carrying value exceeding the fair value of these investments.

• From time to time, PPL Energy Supply and its subsidiaries are involved in negotiations with third parties regarding acquisitions and dispositions of businesses and assets. Any such transactions may impact future earnings.

• See Note 9 to the Financial Statements for potential commitments and contingent liabilities that may impact future earnings.

• See Note 16 to the Financial Statements for new accounting standards that have been issued but not yet adopted by PPL Energy Supply that may impact future earnings.

Segment Results

Net income by segment was as follows:

		Three Months Ended March 31,
		2005		2004
Supply		$	93	$	98
International Delivery			62		48
	Total	$	155	$	146

Supply Segment

The Supply segment owns and operates power plants to generate electricity, markets this electricity and other power purchases to deregulated wholesale and retail markets and acquires and develops domestic generation projects. The Supply segment primarily consists of the activities of PPL Generation and PPL EnergyPlus.

Segment net income was as follows:

		Three Months Ended March 31,
		2005		2004
Energy revenues		$	727	$	725
Energy related businesses			116		98
	Total operating revenues		843		823
Fuel and energy purchases			345		355
Other operation and maintenance			200		180
Depreciation			36		34
Taxes, other than income			11		13
Energy related businesses			133		110
	Total operating expenses		725		692
Other Income - net			5		4
Interest Expense			22		7
Income Taxes			8		30
	Total	$	93	$	98

The after-tax change in net income was due to the following factors:

		Three Months Ended March 31, 2005 vs. March 31, 2004
Eastern U.S. non-trading margins			$	16
Northwestern U.S. non-trading margins				(9	)
Net energy trading margins				6
Operation and maintenance expenses				(6	)
Interest expense				(9	)
Synfuel earnings				7
Other				(4	)
	Total			1
Unusual item - NorthWestern litigation (Note 9)				(6	)
			$	(5	)

• See "Domestic Gross Energy Margins" for an explanation of non-trading margins by geographic region and for an explanation on net energy trading margins.

• Higher operation and maintenance expenses were primarily due to accelerated amortization of stock-based compensation for retirement-eligible employees, which resulted from additional accounting guidance. See Note 2 to the Financial Statements for additional information.

• The improved earnings contribution from synfuel operations resulted from the Tyrone facility that began commercial operation during the third quarter of 2004.

• Higher interest expense was incurred in the first quarter of 2005 due to the issuance of additional debt, interest associated with Lower Mt. Bethel that is no longer being capitalized since commercial operation commenced in May 2004 and interest on loans from affiliated companies.

The change in net income was also attributable to an accrual of approximately $6 million after tax for the loss contingency related to the NorthWestern litigation. See Note 9 to the Financial Statements for additional information on the accrual.

International Delivery Segment

The International Delivery segment owns and operates international energy businesses that are focused on the distribution of electricity. The segment primarily consists of the operations of the regulated international energy businesses of PPL Global. The majority of PPL Global's international businesses are located in the U.K., Chile, El Salvador and Bolivia.

Segment net income was as follows:

		Three Months Ended March 31,
		2005		2004
Energy revenues		$	293	$	279
Energy related businesses			17		16
	Total operating revenues		310		295
Fuel and energy purchases			63		54
Other operation and maintenance			62		56
Depreciation			38		36
Taxes, other than income			14		13
Energy related businesses			6		21
	Total operating expenses		183		180
Other Income - net			5		7
Interest Expense			50		49
Income Taxes			18		22
Minority Interest			2		2
Loss from Discontinued Operations					1
	Total	$	62	$	48

The after-tax change in net income was due to the following factors:

		Three Months Ended March 31, 2005 vs. March 31, 2004
U.K.:
	Operation and maintenance expenses		$	(8	)
	Impact of changes in foreign currency exchange rates			3
Latin America				2
U.S. income taxes				6
Interest expense				3
	Total			6
Unusual item - Sale of CGE (Note 8)				8
			$	14

• The U.K.'s earnings were negatively impacted by higher operation and maintenance expenses, primarily due to increased pension costs and termination benefit expenses.

• U.S. income taxes on dividends from WPD decreased primarily due to greater utilization of foreign tax credits.

• Lower interest expense was due to lower affiliate debt.

Domestic Gross Energy Margins

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

			Three Months Ended March 31, 2005 vs. March 31, 2004
Wholesale energy marketing				$	(7	)
Wholesale energy marketing to affiliate					5
Unregulated retail electric and gas					(6	)
Net energy trading margins					10
Other revenue adjustments (a)					16
	Total revenues				18
Fuel					33
Energy purchases					(35	)
Energy purchases from affiliate					1
Other cost adjustments (a)					(1	)
	Total cost of sales				(2	)
		Domestic gross energy margins		$	20

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

Changes in Domestic Gross Energy Margins By Region

Domestic gross energy margins are generated through PPL Energy Supply's normal hedging (non-trading) activities, as well as trading activities. PPL Energy Supply manages its non-trading energy business on a geographic basis that is aligned with its generation assets.

		Three Months Ended March 31, 2005 vs. March 31, 2004
Eastern U.S.			$	27
Northwestern U.S.				(15)
Southwestern U.S.				(2)
Net energy trading				10
	Domestic gross energy margins		$	20

Eastern U.S.

Eastern U.S. non-trading margins were higher primarily because a greater portion of PPL Energy Supply's supply came from its own generation, instead of purchased power. This was due to the timing of plant outages as well as the operation of the Lower Mt. Bethel plant, which began commercial operation in May 2004. The increase was achieved despite higher supply costs, which were driven by increased fossil fuel and power purchase prices. Power purchase prices increased by 4% primarily due to higher market prices for fossil fuel; however, this increase was more than offset by a 10% increase in the average sales price for wholesale transactions. Fuel costs increased 23% due to a 6% increase in generation across a diverse mix of low-cost coal-fired, nuclear and hydroelectric plants and a 17% increase in the average consumed cost of fossil fuels. In addition, PPL Energy Supply also benefited from favorable transmission congestion positions, and gains on sales of emission allowances.

Northwestern U.S.

Northwestern U.S. non-trading margins were lower primarily due to an 8% reduction in coal and hydroelectric generation output. Generation was adversely affected by outages and reduced river flows. Additionally, the average consumed cost of coal increased by 10% primarily due to an unfavorable arbitration ruling effective April 2004.

Net Energy Trading

PPL Energy Supply enters into certain energy contracts that meet the criteria of trading derivatives as defined by EITF Issue 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 $10 million increase was primarily due to an increase in realized gains on electricity positions as well as an increase in wholesale physical gas trading. The physical volumes associated with energy trading for the three months ended March 31, 2005, were 1,066 GWh and 4.5 Bcf, compared with 994 GWh and 2.4 Bcf for the three months ended March 31, 2004.

Utility Revenues

The increase in utility revenues was attributable to the following:

		Three Months Ended March 31, 2005 vs. March 31, 2004
International:
Retail electric delivery (PPL Global)
	Chile		$	7
	U.K.			4
	El Salvador			3
			$	14

The increase in utility revenues was primarily due to:

• higher revenues in Chile, primarily due to a 7.3% increase in sales volumes, primarily attributable to regulated customers;
• higher WPD revenues, primarily due to the change in foreign currency exchange rates, partially offset by a reduction in certain charges which had been a pass-through to customer rates; and
• higher revenues in El Salvador, due to a 5.3% increase in sales volumes of all customer types.

Energy Related Businesses

Energy related businesses contributed $11 million more to operating income for the three months ended March 31, 2005, compared with the same period in 2004. The increase was attributable to:

• a $15 million pre-tax loss in 2004, related to the sale of CGE (see Note 8 to the Financial Statements); and
• a $2 million increase from mechanical contracting and engineering subsidiaries due to a favorable closeout on a major project; partially offset by
• a $6 million higher pre-tax operating loss from synfuel projects due to increased production levels which improve after-tax earnings.

Other Operation and Maintenance

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

	Three Months Ended March 31, 2005 vs. March 31, 2004
Increase in domestic and international pension costs		$	13
Accelerated amortization of stock-based compensation (Note 2)			12
Increase in allocation of corporate service cost (Note 10)			5
NorthWestern litigation accrual (Note 9)			9
Increase in foreign currency exchange rates			2
Gains on sales of emission allowances			(7	)
Reduction in WPD costs that are a pass-through to customer rates			(5	)
Other			(3	)
		$	26

The $13 million increase in net pension costs was primarily attributable to a reduction in the discount rate assumptions for PPL Energy Supply's domestic pension plans at December 31, 2004, and increased amortization of prior year actuarial losses for WPD's pension plans. These events will result in PPL Energy Supply's recognition of increased net pension costs in 2005. See Note 13 to the Financial Statements for details of the costs of PPL Energy Supply's pension plans.

Depreciation

The increase in depreciation expense was due to:

	Three Months Ended March 31, 2005 vs. March 31, 2004
Lower Mt. Bethel generation facility, which began commercial operation in May 2004		$	4
Other additions to PP&E			2
Foreign currency exchange rates			1
Extension of useful lives of certain fossil generation assets (Note 2)			(3	)
		$	4

Other Income - net

See Note 11 to the Financial Statements for details of other income.

Interest Expense

The increase in interest expense was due to:

	Three Months Ended March 31, 2005 vs. March 31, 2004
Interest expense related to the Lower Mt. Bethel generation facility, which began commercial operation in May 2004 (a)		$	9
Increase in other long-term debt interest expense			5
Increase in interest expense with affiliate			4
Increase in short-term debt interest expense			2
Decrease in interest expense due to the repayment in June 2004 of financing related to the Sundance and University Park generation facilities(b)			(6	)
Other			2
		$	16

(a)	Prior to commercial operation, interest related to the Lower Mt. Bethel financing was capitalized as part of the cost of the facility.
(b)	In June 2004, subsidiaries of PPL Energy Supply purchased the Sundance and University Park generation facilities from the lessor that was consolidated by PPL Energy Supply under FIN 46 (revised December 2003), "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51." In connection with the purchase, the related financing was repaid.

Income Taxes

The $26 million decrease in income taxes was primarily attributable to:

• a $10 million tax benefit recognized in 2005 related to additional nonconventional fuel tax credits in excess of credits recognized in 2004;
• a $7 million decrease in tax expense on foreign earnings in 2005 relative to 2004; and
• an $8 million decrease in income tax expense due to lower pre-tax book income.

Discontinued Operations

See "Discontinued Operations" in Note 8 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.

Financial Condition

Liquidity

At March 31, 2005, PPL Energy Supply had $494 million of cash and short-term investments and $164 million of short-term debt. At December 31, 2004, PPL Energy Supply had $408 million in cash and short-term investments and no short-term debt. The increase in PPL Energy Supply's cash and short-term investment position was primarily the net result of:

• $299 million of cash provided by operating activities; and
• a $165 million increase in short-term debt; offset by
• distributions to Member of $58 million;
• the retirement of $208 million of long-term debt; and
• $123 million of capital expenditures.

Rating Agency Decisions

S&P, Moody's and 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.

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 January 2005, S&P revised its outlooks on the WPD companies to stable from negative. S&P attributes this positive change to financial profile improvements resulting from the final regulatory outcome published by Ofgem in November 2004. At the same time, S&P affirmed the WPD companies' long-term and short-term credit ratings.

Also in January 2005, Fitch announced that it downgraded the WPD companies' senior unsecured credit ratings by one notch as follows:

• WPDH Limited to BBB- from BBB
• WPD LLP to BBB from BBB+
• WPD (South West) and WPD (South Wales) to BBB+/F2 from A-/F1

Fitch has a stable outlook on all of the WPD companies.

Fitch stated that its downgrade was prompted by the high level of pension-adjusted leverage at WPD. Fitch acknowledged that WPD's funding plan should reduce its pension deficit over time and it expects WPD to proceed with its de-leveraging program. However, Fitch indicated that it is not certain enough, due to the unpredictability in future pension valuations, that pension-adjusted leverage will support a BBB rating at WPDH Limited. Fitch indicated that WPD (South West) and WPD (South Wales) have been downgraded to maintain a two-notch differential with WPDH Limited because Fitch does not believe that WPD's financial ring-fencing is restrictive enough to support a three-notch differential.

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 2004 Form 10-K.

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 value of these contracts:

	Three Months Ended March 31,
	2005			2004
Fair value of contracts outstanding at the beginning of the period	$	(9	)	$	86
Contracts realized or otherwise settled during the period		(9	)		(24	)
Fair value of new contracts at inception
Other changes in fair values		(88	)		22
Fair value of contracts outstanding at the end of the period	$	(106	)	$	84

The following chart segregates estimated fair values of PPL Energy Supply's commodity derivative contracts that qualify for hedge accounting treatment at March 31, 2005, 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			Maturity 1-3 Years			Maturity 3-5 Years			Maturity in Excess of 5 Years	Total Fair Value
Source of Fair Value
Prices actively quoted	$	15		$	15		$	1			$	31
Prices provided by other external sources		(17	)		(111	)		(9	)			(137	)
Prices based on models and other valuation methods
Fair value of contracts outstanding at the end of the period	$	(2)		$	(96	)	$	(8	)		$	(106	)

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 a price curve was developed by PPL Energy Supply due to 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, 2005, PPL Energy Supply estimated that a 10% adverse movement in market prices of both electricity and fuel across all geographic areas and time periods would have decreased the value of the commodity contracts in its non-trading portfolio by approximately $202 million. For purposes of this calculation, an increase in the market price for electricity is considered an adverse movement because PPL Energy Supply's electricity portfolio is generally in a net sales position, and a decrease in the market price for fuel is considered an adverse movement because PPL Energy Supply's commodity fuels portfolio is generally in a net purchase position. PPL Energy Supply enters into these commodity contracts to reduce the market risk inherent in the generation of electricity.

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 not have a material impact on expected 2005 gross margins. Similarly, a 10% adverse movement in all fossil fuel prices would decrease 2005 gross margins by $14 million.

PPL Energy Supply also executes energy contracts to take advantage of market opportunities. As a result, PPL Energy Supply may at times create a net open position in its portfolio that could result in significant losses if prices do not move in the manner or direction anticipated. The margins from these trading activities are shown in the Statement of Income as "Net energy trading margins."

Commodity Price Risk (Trading)

PPL Energy Supply's trading contracts mature at various times through 2008. The following chart sets forth PPL Energy Supply's net fair value of trading contracts:

	Three Months Ended March 31,
	2005			2004
Fair value of contracts outstanding at the beginning of the period	$	9		$	3
Contracts realized or otherwise settled during the period		(3	)		(3	)
Fair value of new contracts at inception		3			4
Other changes in fair values		7			7
Fair value of contracts outstanding at the end of the period	$	16		$	11

PPL Energy Supply will reverse approximately $1 million of the $16 million unrealized trading gains over the next three months of 2005 as the transactions are realized.

The following chart segregates estimated fair values of PPL Energy Supply's trading portfolio at March 31, 2005, 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			Maturity 1-3 years		Maturity 3-5 years	Maturity in Excess of 5 Years	Total Fair Value
Source of Fair Value
Prices actively quoted	$	3		$	1			$	4
Prices provided by other external sources		9			4				13
Prices based on models and other valuation methods		(1	)						(1	)
Fair value of contracts outstanding at the end of the period	$	11		$	5			$	16

See "Commodity Price Risk (Non-trading)" for information on the various sources of fair value.

As of March 31, 2005, 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.

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 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 Energy Supply's debt portfolio due to changes in the absolute level of interest rates.

At March 31, 2005, PPL Energy Supply's potential annual exposure to increased interest expense, based on a 10% increase in interest rates, was estimated at $1 million.

PPL Energy Supply is also exposed to changes in the fair value of its domestic and international debt portfolios. At March 31, 2005, 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 approximately $157 million.

PPL utilizes various risk management instruments to reduce its exposure to the expected future cash flow variability of its debt instruments. These risks include exposure to adverse interest rate movements for outstanding variable rate debt and for future anticipated financing. While PPL is exposed to changes in the fair value of these instruments, any changes in the fair value of these instruments are recorded into equity and then reclassified into earnings in the same period during which the item being hedged affects earnings. At March 31, 2005, the market value of these instruments, representing the amount PPL would pay upon their termination, was approximately $1 million. At March 31, 2005, PPL estimated that its potential exposure to a change in the fair value of these instruments, through a 10% adverse movement in the hedged exposure, was insignificant.

PPL and PPL Energy Supply also utilize various risk management instruments to adjust the mix of fixed and floating interest rates in PPL Energy Supply's debt portfolio. While PPL Energy Supply is exposed to changes in the fair value of these instruments, any change in market value is recorded with an equal and offsetting change in the value of the debt being hedged. At March 31, 2005, 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 approximately $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 and PPL Energy Supply enter into financial instruments to protect against foreign currency translation risk.

To protect expected income denominated in British pounds sterling, PPL entered into average rate options for £32 million. At March 31, 2005, the market value of these positions, representing the amount PPL would receive upon their termination, was approximately $1 million.

To protect expected income in Chilean pesos, PPL Energy Supply entered into average rate options for 4 billion Chilean pesos. At March 31, 2005, the market value of these positions, representing the amount PPL would receive upon their termination, was insignificant.

PPL executed net forward sale transactions for £10 million to hedge a portion of its net investment in WPDH Limited. The estimated value of these agreements as of March 31, 2005, was $1 million, being the amount PPL would pay to terminate the transactions.

WPDH Limited held a net position in cross-currency swaps totaling $1.1 billion to hedge the interest payments and value of its U.S. dollar-denominated bonds. The estimated value of this position at March 31, 2005, being the amount PPL and PPL Energy Supply would pay to terminate it, including accrued interest, was $255 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, 2005, 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 in the trusts 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, 2005, a hypothetical 10% increase in interest rates and a 10% decrease in equity prices would have resulted in an estimated $30 million reduction in the fair value of the trust assets. See the "Nuclear Decommissioning" Note in the 2004 Form 10-K for more information regarding the nuclear decommissioning trust funds.

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 10 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 8 to the Financial Statements for information regarding recent development and divestiture activities.

PPL Energy Supply is currently planning incremental capacity increases of 255 MW at several existing domestic generating facilities.

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

New Accounting Standards

See Note 16 to the Financial Statements for information on new accounting standards 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 2004 Form 10-K 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, PA. In PPL Electric's 2004 Form 10-K, a description of its business is found in "Item 1. Business - Background" and an overview of its strategy and the risks and the challenges that it faces in its business are discussed in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations."

The following information should be read in conjunction with PPL Electric's Condensed Consolidated Financial Statements and the accompanying Notes.

Terms and abbreviations 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, 2005, with the comparable period in 2004.

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 $15 million for the three months ended March 31, 2005, and $33 million for the same period in 2004. The after-tax change in income available to PPL was due to:

	Three Months Ended March 31, 2005 vs. March 31, 2004
Delivery revenues (net of CTC/ITC amortization, interest expense on transition bonds and ancillary charges)		$	28
Operation and maintenance expenses			(13	)
Taxes, other than income (excluding gross receipts tax)			(8	)
Other			2
Total			9
Unusual item - PJM billing dispute (Note 9)			(27	)
		$	(18	)

The period-to-period changes in earnings components are discussed following the future earnings factors.

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

• In December 2004, the PUC approved an increase in PPL Electric's distribution rates of approximately $137 million (based on a return on equity of 10.7%), and approved PPL Electric's proposed mechanism for collecting an additional $57 million in transmission-related charges, for a total increase of approximately $194 million, effective January 1, 2005.

• PPL Electric has agreed to provide electricity supply to its PLR customers at predetermined rates through 2009 and has entered into PUC-approved, full requirements energy supply agreements with PPL EnergyPlus to fulfill its PLR obligation. The predetermined charges for generation supply which PPL Electric collects from its PLR customers and pays to PPL EnergyPlus under the energy supply agreements provide for annual increases in each year commencing in 2006 and continuing through 2009. PPL Electric's PLR obligation after 2009 will be determined by the PUC pursuant to rules that have not yet been promulgated. See Note 10 to the Financial Statements for more information regarding the PLR contracts.

• In January 2005, severe ice storms hit PPL Electric's service territory. PPL Electric had to restore service to about 238,000 customers. Although the actual cost of these storms and the specific allocation of such cost between operation and maintenance expense and capital costs is not yet finalized, PPL Electric currently estimates a total cost of $22 million, with approximately $19 million being recorded as an expense on PPL Electric's income statement for the first quarter of 2005.

  On February 11, 2005, PPL Electric filed a petition with the PUC for authority to defer and amortize for regulatory accounting and reporting purposes its actual cost of these storms, excluding capitalized costs of approximately $3 million and regular payroll expenses of approximately $2 million (pursuant to PUC precedent on this issue). If the PUC grants this petition, PPL Electric's management will assess the recoverability of these costs in PPL Electric's next general rate increase proceeding, in accordance with SFAS 71, "Accounting for the Effects of Certain Types of Regulation." Depending on the likelihood of such recovery based on this assessment, most of the first quarter expense could be reversed in that future period. At this time, PPL Electric cannot predict the outcome of its deferral petition or the likelihood of recovery of these storm costs.

• See Note 9 to the Financial Statements for potential commitments and contingent liabilities that may impact future earnings.

• See Note 16 to the Financial Statements for new accounting standards that have been issued but not yet adopted by PPL Electric that may impact future earnings.

Operating Revenues

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

	Three Months Ended March 31, 2005 vs. March 31, 2004
Electric delivery		$	32
PLR electric generation supply			16
		$	48

The increase in delivery revenues resulted from higher transmission and distribution customer rates effective January 1, 2005, and a 3.7% increase in sales volumes. Higher PLR revenues were due to higher energy and capacity rates, and a 5.6% increase in volumes, in part due to the return of customers previously served by alternate suppliers.

Energy Purchases

Energy purchases increased by $36 million due to a $39 million pre-tax accrual for the PJM billing dispute, offset slightly by lower ancillary service costs in connection with the power supply contracts with PPL EnergyPlus. See Note 9 to the Financial Statements for additional information regarding the loss accrual recorded for the PJM billing dispute.

Energy Purchases from Affiliate

The increase in energy purchases from affiliate of $5 million reflects an increase in PLR load, as well as higher prices for energy purchased under the power supply contracts with PPL EnergyPlus needed to support PLR load.

Other Operation and Maintenance

Other operation and maintenance expense increased by $23 million, primarily due to $19 million of costs associated with severe ice storms that hit PPL Electric's service territory in January 2005 and a $5 million charge for accelerated amortization of stock-based compensation for retirement-eligible employees, which resulted from additional accounting guidance. See Note 2 to the Financial Statements for additional information on stock-based compensation.

Taxes, Other Than Income

In the first quarter of 2004, PPL Electric reversed a $14 million accrued liability for 1998 and 1999 PURTA taxes that had been accrued based on potential exposure in the proceedings regarding the Susquehanna nuclear station tax assessment. The rights of third-party intervenors to further appeal expired in 2004. The reversal is the primary reason for the $16 million increase in taxes, other than income.

Other Income - net

See Note 11 to the Financial Statements for details of other income.

Interest Expense

Interest expense increased by $4 million, primarily due to $8 million of interest accrued for the PJM billing dispute and additional interest paid on collateral held by PPL Electric relating to the PLR contract. This increase was partially offset by the net impact of long-term debt retirements. Over the last 12 months, $480 million of long-term debt retirements have occurred, while new issuances over the same period totaled $116 million. See Note 10 to the Financial Statements for further discussion of collateral held under the PLR contract.

Income Taxes

Income taxes decreased by $17 million, primarily as a result of lower pre-tax book income.

Financial Condition

Liquidity

At March 31, 2005, PPL Electric had $133 million of cash and short-term investments and $142 million of short-term debt. At December 31, 2004, PPL Electric had $161 million in cash and short-term investments and $42 million of short-term debt. The decrease in PPL Electric's cash and short-term investment position was primarily the net result of:

• the retirement of $188 million of long-term debt;
• the payment of $17 million of common and preferred dividends; and
• $40 million of capital expenditures; partially offset by
• $4 million of cash provided by operating activities;
• the issuance of $116 million of tax-exempt long-term debt; and
• an increase of $100 million in short-term debt.

Rating Agency Decisions

S&P, Moody's and Fitch periodically review the credit ratings on the debt and preferred securities of PPL Electric. Based on their respective reviews, the rating agencies may make certain ratings revisions.

The ratings of S&P, Moody's and Fitch are not a recommendation to buy, sell or hold any securities of PPL Electric. 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 January 2005, S&P affirmed PPL Electric's A-/A-2 corporate credit ratings and favorably revised its outlook on the company to stable from negative following the authorization of a $194 million rate increase by the PUC. S&P indicated that the outlook revision reflects its expectations that the rate increase, effective January 1, 2005, will allow for material improvement in PPL Electric's financial profile, which had lagged S&P's expectations in recent years. S&P indicated that the stable outlook reflects its expectations that PPL Electric "will rapidly improve and then maintain financial metrics more consistent with its ratings." S&P indicated that it expects PPL Electric's operations to remain stable through the expiration of the PLR agreement.

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 2004 Form 10-K.

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 through 2009. See Note 10 to the Financial Statements for information on the PLR contracts.

Interest Rate Risk

PPL Electric has issued debt to finance its operations, which increases its interest rate risk. At March 31, 2005, 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, 2005, 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 $45 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 10 to the Financial Statements.

Environmental Matters

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

New Accounting Standards

See Note 16 to the Financial Statements for information on new accounting standards 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 2004 Form 10-K 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
PPL ELECTRIC UTILITIES CORPORATION

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Controls and Procedures
(a)	Evaluation of disclosure controls and procedures.
	The registrants' principal executive officers and principal financial officers, based on their evaluation of the registrants' disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) have concluded that, as of March 31, 2005, the registrants' disclosure controls and procedures are adequate and effective to ensure that material information relating to the registrants and their consolidated subsidiaries is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms, particularly during the period for which this quarterly report has been prepared.
(b)	Change in internal controls over financial reporting.
	The registrants' principal executive officers and principal financial officers have concluded that there were no changes in the registrants' internal controls over financial reporting during the registrants' first fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrants' internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings
For additional information regarding various pending administrative and judicial proceedings involving regulatory, environmental and other matters, which information is incorporated by reference into this Part II, see:
	•	"Item 3. Legal Proceedings" in PPL's, PPL Energy Supply's and PPL Electric's 2004 Form 10-K; and
	•	Note 9 of the registrants' "Combined Notes to Condensed Consolidated Financial Statements" in Part I of this report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

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, 2005
February 1 to February 28, 2005	9,050	$52.75
March 1 to March 31, 2005	1,618	$54.69
Total	10,668

(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.

Item 6. Exhibits
10(a) -	Reimbursement Agreement, dated as of March 31, 2005, among PPL Energy Supply, LLC, The Bank of Nova Scotia, as Issuer and Administrative Agent, and the Lenders party thereto from time to time
12(a) -	PPL Corporation and Subsidiaries Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
12(b) -	PPL Energy Supply, LLC and Subsidiaries Computation of Ratio of Earnings to Fixed Charges
12(c) -	PPL Electric Utilities Corporation and Subsidiaries Computation of Ratio of Earnings to Fixed Charges
Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, for the quarterly period ended March 31, 2005, filed by the following officers for the following companies:
31(a) -	William F. Hecht for PPL Corporation
31(b) -	John R. Biggar for PPL Corporation
31(c) -	William F. Hecht for PPL Energy Supply, LLC
31(d) -	James E. Abel for PPL Energy Supply, LLC
31(e) -	John F. Sipics for PPL Electric Utilities Corporation
31(f) -	James E. Abel for PPL Electric Utilities Corporation
Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, for the quarterly period ended March 31, 2005, furnished by the following officers for the following companies:
32(a) -	William F. Hecht for PPL Corporation
32(b) -	John R. Biggar for PPL Corporation
32(c) -	William F. Hecht for PPL Energy Supply, LLC
32(d) -	James E. Abel for PPL Energy Supply, LLC
32(e) -	John F. Sipics for PPL Electric Utilities Corporation
32(f) -	James E. Abel for PPL Electric Utilities Corporation

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 4, 2005	/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
	Vice President and Treasurer
	(PPL Energy Supply, LLC)
	(principal financial officer)
	/s/  Paul A. Farr
	Paul A. Farr
	Vice President and Controller
	(PPL Electric Utilities Corporation)
	(principal accounting officer)

EX-10 2 ppl10q_3-05ex10a.htm

Exhibit 10(a)

REIMBURSEMENT AGREEMENT,

dated as of March 31, 2005,

among

PPL ENERGY SUPPLY, LLC,

as the Account Party,

VARIOUS FINANCIAL INSTITUTIONS AND OTHER PERSONS FROM TIME TO TIME
PARTIES HERETO,

as the Lenders,

THE BANK OF NOVA SCOTIA,

as the Issuer,

and

THE BANK OF NOVA SCOTIA,

as the Administrative Agent.

___________________________

TABLE OF CONTENTS

Page

ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1.	Defined Terms	1
SECTION 1.2.	Use of Defined Terms	7
SECTION 1.3.	Cross-References	7
SECTION 1.4.	Accounting and Financial Determinations	7
SECTION 1.5.	Incorporation by Reference to Incorporated Agreement	7
ARTICLE II
COMMITMENTS, ISSUANCE PROCEDURES AND LETTERS OF CREDIT
SECTION 2.1.	Letter of Credit Commitment	9
SECTION 2.2.	Reduction of the Letter of Credit Commitment Amount	9
SECTION 2.3.	Issuance Procedures	9
SECTION 2.4.	Register	11
ARTICLE III
INTEREST AND FEES
SECTION 3.1.	Post-Maturity Rates	12
SECTION 3.2.	Fees	12
ARTICLE IV
INCREASED COSTS AND OTHER PROVISIONS
SECTION 4.1.	Increased Capital Costs	13
SECTION 4.2.	Taxes	13
SECTION 4.3.	Payments, Computations	15
SECTION 4.4.	Sharing of Payments	16
SECTION 4.5.	Setoff	16
ARTICLE V
CONDITIONS TO CREDIT EXTENSIONS
SECTION 5.1.	Initial Credit Extension	17
SECTION 5.2.	All Credit Extensions	18
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1.	Status	18
SECTION 6.2.	Authority, No Conflict	19
SECTION 6.3.	Legality, etc	19
SECTION 6.4.	Financial Condition	19
SECTION 6.5.	Rights to Properties	19
SECTION 6.6.	Litigation	19
SECTION 6.7.	No Violation	20
SECTION 6.8.	ERISA	20
SECTION 6.9.	Governmental Approvals	20
SECTION 6.10.	Investment Company Act	20
SECTION 6.11.	Public Utility Holding Company Act	20
SECTION 6.12.	Restricted Subsidiaries, Etc	20
SECTION 6.13.	Tax Returns and Payments	21
SECTION 6.14.	Compliance with Laws	21
SECTION 6.15.	No Default	21
SECTION 6.16.	Environmental Matters	21
SECTION 6.17.	Reportable Transactions	22
SECTION 6.18.	Guarantees	22
ARTICLE VII
COVENANTS
SECTION 7.1.	Incorporation of Covenants from the Incorporated Agreement	22
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1.	Listing of Events of Default	23
SECTION 8.2.	Action if Bankruptcy	24
SECTION 8.3.	Action if Other Event of Default	25
ARTICLE IX
THE ADMINISTRATIVE AGENT
SECTION 9.1.	Actions	25
SECTION 9.2.	Exculpation	25
SECTION 9.3.	Successor	26
SECTION 9.4.	Credit Extensions by Scotia Capital	26
SECTION 9.5.	Credit Decisions	27
SECTION 9.6.	Copies, etc	27
SECTION 9.7.	Reliance by Administrative Agent	27
SECTION 9.8.	Defaults	27
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1.	Waivers, Amendments, etc	28
SECTION 10.2.	Notices; Time	28
SECTION 10.3.	Payment of Costs and Expenses	29
SECTION 10.4.	Indemnification	29
SECTION 10.5.	Survival	31
SECTION 10.6.	Severability	31
SECTION 10.7.	Headings	31
SECTION 10.8.	Execution in Counterparts, Effectiveness, etc	31
SECTION 10.9.	Governing Law; Entire Agreement	31
SECTION 10.10.	Successors and Assigns	31
SECTION 10.11.	Sale and Transfer of Credit Extensions; Participations in Credit Extensions	32
SECTION 10.12.	Other Transactions	34
SECTION 10.13.	Forum Selection and Consent to Jurisdiction	34
SECTION 10.14.	Waiver of Jury Trial	35
SECTION 10.15.	USA PATRIOT Act Notice	35

SCHEDULE I	- Disclosure Schedule
SCHEDULE II	- Percentages
EXHIBIT A	- Form of Issuance Request

REIMBURSEMENT AGREEMENT

THIS REIMBURSEMENT AGREEMENT, dated as of March 31, 2005, is among PPL ENERGY SUPPLY, LLC, a Delaware limited liability company (the "Account Party"), the financial institutions from time to time parties hereto (collectively, the "Lenders") and THE BANK OF NOVA SCOTIA ("Scotia Capital"), as an Issuer and as administrative agent (in such capacity, the "Administrative Agent").

W I T N E S S E T H:

WHEREAS, the Lenders are willing, on the terms and subject to the conditions hereinafter set forth, to extend the Letter of Credit Commitments; and

WHEREAS, the Issuer is willing, on the terms and subject to the conditions hereinafter set forth, to issue Letters of Credit for the account of the Account Party;

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.1. Defined Terms. The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof):

"Account Party" is defined in the preamble.

"Administrative Agent" is defined in the preamble and includes each other Person appointed as the successor Administrative Agent pursuant to Section 9.3.

"Agreement" means, on any date, this Reimbursement Agreement as originally in effect on the Effective Date and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified from time to time and in effect on such date.

"Authorized Officer" means, relative to any Person, those of its officers, general partners or managing members (as applicable) whose signatures and incumbency shall have been certified to the Administrative Agent, the Lenders and the Issuer pursuant to Section 5.1.1.

"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended, or any successor statute.

"Base Rate" means, for any day, a rate per annum equal to the higher of (a) the Prime Rate for such day and (b) the sum of 0.50% plus the Federal Funds Rate for such day.

"Business Day" means any day which is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed in New York, New York.

"Capital Lease" means any lease of property which, in accordance with GAAP, should be capitalized on the lessee's balance sheet.

"Capital Lease Obligations" means, with respect to any Person, all obligations of such Person as lessee under Capital Leases, in each case taken at the amount thereof accounted for as liabilities in accordance with GAAP.

"Capital Securities" means, with respect to any Person, all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of such Person's capital, whether now outstanding or issued after the Effective Date.

"Cash Collateralize" means, with respect to a Letter of Credit, the deposit of immediately available funds into a cash collateral account maintained with (or on behalf of) the Administrative Agent on terms satisfactory to the Administrative Agent in an amount equal to the Stated Amount of such Letter of Credit.

"CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended.

"CERCLIS" is defined in CERCLA.

"Change of Control" means (i) the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the SEC under the Securities Exchange Act of 1934, as amended) of 25% or more of the outstanding shares of voting stock of Parent or its successors or (ii) the failure at any time of Parent or its successors to own 80% or more of the outstanding shares of the Voting Stock in the Account Party.

"Code" means the Internal Revenue Code of 1986, and the regulations thereunder, in each case as amended, reformed or otherwise modified from time to time.

"Commitment Termination Date" means the earliest of

          (a) 364 days from the Effective Date;

          (b) the date on which the Letter of Credit Commitment Amount is terminated in full or reduced to zero pursuant to the terms of this Agreement; and

          (c) the date on which any Commitment Termination Event occurs.

Upon the occurrence of any event described in the preceding clauses (c) or (d), the Letter of Credit Commitment shall terminate automatically and without any further action.

"Commitment Termination Event" means

          (a) the occurrence of any Event of Default with respect to the Account Party described in Section 8.1.9; or

          (b) the occurrence and continuance of any other Event of Default and either (i) the declaration that all Letters of Credit be Cash Collateralized pursuant to Section 8.3, or (ii) the giving of notice by the Administrative Agent, acting at the direction of the Required Lenders, to the Account Party that the Letter of Credit Commitment has been terminated.

"Compliance Certificate" means a certificate duly completed and executed by an Authorized Officer of the Account Party, in form and substance satisfactory to the Administrative Agent.

"Consolidated Subsidiary" means with respect to any Person at any date any Subsidiary of such Person or other entity the accounts of which would be consolidated with those of such Person in its consolidated financial statements if such statements were prepared as of such date in accordance with GAAP.

"Corporation" means a corporation, association, company, joint stock company, limited liability company, partnership or business trust.

"Credit Extension" means the issuance of any Letter of Credit, or the renewal or extension of any Stated Expiry Date of any existing Letter of Credit, by the Issuer.

"Credit Parties" means, collectively, the Lenders, the Issuer and the Administrative Agent, and each of their respective successors, transferees and assigns.

"Debt" of any Person means, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person with respect to deposits or advances of any kind, (iii) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (iv) all Guarantees by such Person of Debt of others, (v) all Capital Lease Obligations and Synthetic Leases of such Person, (vi) all obligations of such Person in respect of Interest Rate Protection Agreements, foreign currency exchange agreements or other interest or exchange rate hedging arrangements (the amount of any such obligation to be the net amount that would be payable upon the acceleration, termination or liquidation thereof), but only to the extent that such net obligations exceed $75,000,000 in the aggregate and (vii) all obligations of such Person as an account party in respect of letters of credit and bankers' acceptances; provided, however, that "Debt" of such Person does not include (a) obligations of such Person under any installment sale, conditional sale or title retention agreement or any other agreement relating to obligations for the deferred purchase price of property or services (b) obligations under agreements relating to the purchase and sale of any commodity, including any power sale or purchase agreements, any commodity hedge or derivative (regardless of whether any such transaction is a "financial" or physical transaction), (c) any trade obligations or other obligations of such Person incurred in the ordinary course of business or (d) obligations of such Person under any lease agreement (including any lease intended as security) that is not a Capital Lease or a Synthetic Lease.

"Default" means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default.

"Disbursement" is defined in Section 2.3.2.

"Disbursement Date" is defined in Section 2.3.2.

"Disclosure Schedule" means the Disclosure Schedule attached hereto as Schedule I, as it may be amended, supplemented, amended and restated or otherwise modified from time to time by the Account Party with the written consent of the Required Lenders.

"Dollar" and the sign "$" mean lawful money of the United States.

"Effective Date" means the date this Agreement becomes effective pursuant to Section 10.8.

"Eligible Assignee" means any Person (other than a natural Person) agreed to by the Administrative Agent and the Issuer and (so long as no Default has occurred and is continuing) the Account Party.

"Environmental Laws" means any and all federal, state and local statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses or other written governmental restrictions relating to the environment or to emissions, discharges or releases of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or Hazardous Substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or Hazardous Substances or wastes.

"Environmental Liabilities" means all liabilities (including anticipated compliance costs) in connection with or relating to the business, assets, presently or previously owned, leased or operated property, activities (including, without limitation, off-site disposal) or operations of the Account Party or any of its Subsidiaries, whether vested or unvested, contingent or fixed, actual or potential, which arise under or relate to matters covered by Environmental Laws.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute.

"ERISA Group" means the Account Party and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Account Party, are treated as a single employer under Section 414(b) or (c) of the Code.

"Event of Default" is defined in Section 8.1.

"Exemption Certificate" is defined in clause (e) of Section 4.2.

"Federal Funds Rate" means for any day the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided, that (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average of quotations for such day on such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by the Administrative Agent.

"fiscal year" means any period of twelve consecutive calendar months ending on December 31; references to a Fiscal Year with a number corresponding to any calendar year (e.g., the "2004 Fiscal Year") refer to the Fiscal Year ending on December 31 of such calendar year.

"Foreign Subsidiary" means a Subsidiary which is not formed under the laws of the United States or any territory thereof.

"F.R.S. Board" means the Board of Governors of the Federal Reserve System or any successor thereto.

"GAAP" means United States generally accepted accounting principles applied on a consistent basis.

"Governmental Authority" means any federal, state or local government, authority, agency, central bank, quasi-governmental authority, court or other body or entity, and any arbitrator with authority to bind a party at law.

"Guarantee" of or by any person means any obligation, contingent or otherwise, of such person guaranteeing or having the economic effect of guaranteeing any Debt of any other person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of such person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or to purchase (or to advance or supply funds for the purchase of) any security for payment of such Debt, (ii) to purchase or lease property, securities or services for the purpose of assuring the owner of such Debt of the payment of such Debt or (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Debt; provided, however, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.

"Hazardous Substances" means any toxic, caustic or otherwise hazardous substance, including petroleum, its derivatives, by-products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics.

"herein", "hereof", "hereto", "hereunder" and similar terms contained in any Loan Document refer to such Loan Document as a whole and not to any particular Section, paragraph or provision of such Loan Document.

"including" and "include" means including without limiting the generality of any description preceding such term, and, for purposes of each Loan Document, the parties hereto agree that the rule of ejusdem generis shall not be applicable to limit a general statement, which is followed by or referable to an enumeration of specific matters, to matters similar to the matters specifically mentioned.

"Incorporated Agreement" means the Five-Year Credit Agreement, dated as of June 22, 2004, among the Account Party, the lenders from time to time party thereto, Wachovia Bank, National Association, as administrative agent and issuing lender, certain financial institutions, as syndication agents, certain financial institutions, as lead arrangers, and certain financial institutions (including Scotia Capital), as documentation agents as in effect on the date hereof and without giving effect to any subsequent modification, supplement, amendment or waiver by the lenders under, or by other parties to, the Incorporated Agreement, unless the Required Lenders agrees in writing that such modification, supplement, amendment or waiver shall apply to such provisions or schedules incorporated herein.

"Indemnified Liabilities" is defined in Section 10.4.

"Indemnified Parties" is defined in Section 10.4.

"Interest Rate Protection Agreements" means any agreement providing for an interest rate swap, cap or collar, or any other financial agreement designed to protect against fluctuations in interest rates.

"ISP Rules" is defined in Section 10.9.

"Issuance Request" means a request and certificate, duly executed by an Authorized Officer of the Account Party, to issue a Letter of Credit substantially in the form of Exhibit A hereto.

"Issuer" means Scotia Capital in its capacity as Issuer of the Letters of Credit. At the request of Scotia Capital and with the Account Party's consent (not to be unreasonably withheld), another Lender or an Affiliate of Scotia Capital may issue one or more Letters of Credit hereunder so long as such Lender or Affiliate is a commercial bank or trust company organized under the laws of the United States (or any state or political subdivision thereof) or a foreign commercial bank or trust company with a United States branch having (a) a capital and surplus of at least $1,000,000,000 and (b) a long-term senior unsecured debt rating of at least (i) A3 from Moody's and A- from S&P, if such entity is rated by both Moody's and S&P or (b) A3 from Moody's or A- from S&P, if such entity is rated by either Moody's or S&P but not both.

"LC Percentage" means, relative to any Lender, the applicable percentage relating to Letters of Credit set forth opposite its name on Schedule II hereto under the Letter of Credit Commitment column or set forth in an Assignment Agreement under the Letter of Credit Commitment column, as such percentage may be adjusted from time to time pursuant to Assignment Agreements executed by such Lender and its Assignee Lender and delivered pursuant to Section 10.11.

"Lender's Environmental Liability" means any and all losses, liabilities, obligations, penalties, claims, litigation, demands, defenses, costs, judgments, suits, proceedings, damages (including consequential damages), disbursements or expenses of any kind or nature whatsoever (including reasonable attorneys' fees at trial and appellate levels and experts' fees and disbursements and expenses incurred in investigating, defending against or prosecuting any litigation, claim or proceeding) which may at any time be imposed upon, incurred by or asserted or awarded against the Administrative Agent, any Lender, the Issuer or any of such Person's Affiliates, shareholders, directors, officers, employees, and agents in connection with or arising from:

          (a) any Hazardous Substance on, in, under or affecting all or any portion of any property of the Account Party or any of its Subsidiaries, the groundwater thereunder, or any surrounding areas thereof to the extent caused by releases from the Account Party's or any of its Subsidiaries' or any of their respective predecessors' properties;

          (b) any misrepresentation, inaccuracy or breach of any warranty, contained or referred to in Section 6.14;

          (c) any violation or claim of violation by the Account Party or any of its Subsidiaries of any Environmental Laws; or

          (d) the imposition of any lien for damages caused by or the recovery of any costs for the cleanup, release or threatened release of Hazardous Substance by the Account Party or any of its Subsidiaries, or in connection with any property owned or formerly owned by the Account Party or any of its Subsidiaries.

"Lenders" is defined in the preamble.

"Letter of Credit" is defined in Section 2.1.

"Letter of Credit Commitment" means the Issuer's obligation to issue Letters of Credit pursuant to Section 2.1.

"Letter of Credit Commitment Amount" means, on any date, a maximum amount of $200,000,000.

"Letter of Credit Outstandings" means, on any date, an amount equal to the sum of (i) the then aggregate amount which is undrawn and available under all issued and outstanding Letters of Credit, and (ii) the then aggregate amount of all unpaid and outstanding Reimbursement Obligations.

"Loan Documents" means, collectively, this Agreement, the Letters of Credit and each other agreement, certificate, document or instrument delivered by the Account Party in connection with any Loan Document, whether or not specifically mentioned herein or therein.

"Material Adverse Effect" means (i) any material adverse effect upon the business, assets, financial condition or operations of the Account Party or the Account Party and its Subsidiaries, taken as a whole; (ii) a material adverse effect on the ability of the Account Party to perform its obligations under this Agreement or the other Loan Documents or (iii) a material adverse effect on the validity or enforceability of this Agreement or any of the other Loan Documents.

"Material Debt" means Debt (other than the Obligations) of the Account Party and/or one or more of its Restricted Subsidiaries in a principal or face amount exceeding $40,000,000.

"Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $25,000,000.

"Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions.

"Moody's" means Moody's Investors Service, Inc.

"Non-Excluded Taxes" means any Taxes other than net income and franchise Taxes imposed with respect to any Secured Party by any Governmental Authority under the laws of which such Secured Party is organized or in which it maintains its applicable lending office.

"Non-U.S. Lender" means any Lender that is not a "United States person", as defined under Section 7701(a)(30) of the Code.

"Obligations" means all obligations (monetary or otherwise, whether absolute or contingent, matured or unmatured) of the Account Party arising under or in connection with a Loan Document, including Reimbursement Obligations.

"Organic Document" means, relative to the Account Party, its certificate of formation and limited liability company agreement.

"Other Taxes" means any and all stamp, documentary or similar Taxes, or any other excise or property Taxes or similar levies that arise on account of any payment made or required to be made under any Loan Document or from the execution, delivery, registration, recording or enforcement of any Loan Document.

"Parent" means PPL Corporation, a Pennsylvania corporation, and its successors.

"Participant" is defined in clause (e) of Section 10.11.

"Person" means any natural person, corporation, limited liability company, partnership, joint venture, association, trust or unincorporated organization, Governmental Authority or any other legal entity, whether acting in an individual, fiduciary or other capacity.

"PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

"Plan" means at any time an employee pension benefit plan (including a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group.

"Prime Rate" means the rate of interest then most recently established by the Administrative Agent in New York (and transmitted to the Borrower) as its base rate for Dollars loaned in the United States. The Prime Rate is not necessarily intended to be the lowest rate of interest determined by the Administrative Agent in connection with extensions of credit.

"Quarterly Payment Date" means the last day of March, June, September and December, or, if any such day is not a Business Day, the next succeeding Business Day.

"Register" is defined in Section 2.4.

"Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as amended, or any successor regulation.

"Regulation X" means Regulation X of the Board of Governors of the Federal Reserve System, as amended, or any successor regulation.

"Reimbursement Obligation" is defined in Section 2.3.3.

"Release" means a "release", as such term is defined in CERCLA.

"Replacement Lender" is defined in clause (h) of Section 10.11.

"Required Lenders" means, at any time, Lenders holding more than 50% of the Total Exposure Amount.

"Restricted Subsidiary" means each Subsidiary listed on Schedule 5.12 of the Incorporated Agreement; provided, that, each Restricted Subsidiary shall be a direct Wholly-Owned Subsidiary of the Account Party or a direct Wholly-Owned Subsidiary of a Restricted Subsidiary.

"S&P" means Standard & Poor's Rating Services, a division of The McGraw-Hill Companies, Inc.

"Scotia Capital" is defined in the preamble.

"SEC" means the Securities and Exchange Commission.

"Stated Amount" means, on any date and with respect to a particular Letter of Credit, the total amount then available to be drawn under such Letter of Credit.

"Stated Expiry Date" is defined in Section 2.1.

"Subsidiary" means, any Corporation a majority of the outstanding Voting Stock of which is owned, directly or indirectly, by the Account Party or one or more other Subsidiaries of the Account Party.

"Synthetic Lease" means any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an operating lease in accordance with GAAP.

"Taxes" means all income, stamp or other taxes, duties, levies, imposts, charges, assessments, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, and all interest, penalties or similar liabilities with respect thereto.

"Termination Date" means the date on which all Obligations have been paid in full in cash, all Letters of Credit have been terminated or expired (or been Cash Collateralized) and the Letter of Credit Commitment shall have terminated.

"Total Exposure Amount" means, on any date of determination (and without duplication), the aggregate amount of all Letter of Credit Outstandings and the unused amount of the Letter of Credit Commitment.

"Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the value of all benefit liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA.

"United States" or "U.S." means the United States of America, its fifty states and the District of Columbia.

"Voting Stock" means stock (or other interests) of a Corporation having ordinary voting power for the election of directors, managers or trustees thereof, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency.

"Wholly-Owned Subsidiary" means, with respect to any Person at any date, any Subsidiary of such Person all of the Voting Stock of which (except directors' qualifying shares) are at the time directly or indirectly owned by such Person.

SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall have such meanings when used in each other Loan Document and the Disclosure Schedule.

SECTION 1.3. Cross-References. Unless otherwise specified, references in a Loan Document to any Article or Section are references to such Article or Section of such Loan Document, and references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition.

SECTION 1.4. Accounting and Financial Determinations. Unless otherwise specified, all accounting terms used in each Loan Document shall be interpreted, and all accounting determinations and computations thereunder shall be made and all financial statements required to be delivered thereunder shall be prepared in accordance with GAAP as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Account Party's independent public accountants) with the audited consolidated financial statements of the Account Party most recently delivered to the Lenders; provided that, if the Account Party notifies the Administrative Agent that the Account Party wishes to amend any covenant in Article VII to eliminate the effect of any change in GAAP on the operation of such covenant (or if the Administrative Agent notifies the Account Party that the Required Lenders wish to amend any covenant in Article VII for such purpose), then the Account Party's compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Account Party and the Required Lenders.

SECTION 1.5. Incorporation by Reference to Incorporated Agreement. The following rules of construction shall apply:

          (a) Terms defined in the Incorporated Agreement and used in the provisions incorporated herein, unless otherwise defined herein or the context otherwise requires, shall have the definitions set forth in Section 1.01 of the Incorporated Agreement, and such definitions are hereby incorporated herein by reference, mutatis mutandis, and will be deemed to be and to continue in effect for the benefit of the Administrative Agent, the Lenders and the Issuer whether or not the Incorporated Agreement remains outstanding or in effect; provided, that any such definitions so incorporated shall be incorporated as of the date hereof and shall not be subject to any subsequent modification, supplement, amendment or waiver by the lenders under or other parties to the Incorporated Agreement, unless the Required Lenders agrees in writing that such modification, supplement, amendment or waiver shall apply to such definitions incorporated herein.

          (b) In addition, the parties hereto agree that, for the purposes of Article VII, references to terms in the Incorporated Agreement to "the Borrower" shall be a reference to the Account Party, "this Agreement" or "the Loan Document(s)" shall be a reference to this Reimbursement Agreement and the Loan Documents hereunder, "the Lenders" or the "Administrative Agent" shall be a reference to the Administrative Agent and Lenders under this Agreement, references to the "Issuing Lender" shall be a reference to the Issuer under this Agreement and a "Default" or "Event of Default" shall be a reference to a Default or Event of Default under this Agreement.

          (c) Unless the context otherwise requires, whenever any statements is qualified by "to the best knowledge of" or "known to" (or a similar phrase) any Person that is not a natural person, it is intended to indicate that the senior management of such Person has conducted a commercially reasonable inquiry and investigation prior to making such statement and no member of the senior management of such Person (including managers, in the case of limited liability companies, and general partners, in the case of partnerships) has current actual knowledge of the inaccuracy of such statement.

ARTICLE II
COMMITMENTS, ISSUANCE
PROCEDURES AND LETTERS OF CREDIT

SECTION 2.1. Letter of Credit Commitment. From time to time on any Business Day occurring from the Effective Date to (but excluding) five Business Days prior to the date set forth in clause (b) of the definition of Commitment Termination Date, the Issuer agrees that it will:

          (a) issue one or more standby letters of credit (the "Letter of Credit") for the account of the Account Party in the Stated Amount requested by the Account Party on such day including, on the Effective Date, issue each Letter of Credit in place of each Existing Letter of Credit; or

          (b) extend the Stated Expiry Date of an existing standby Letter of Credit previously issued hereunder as requested by the Account Party.

No Letter of Credit shall be stated to expire (the "Stated Expiry Date") beyond the earlier of (i) the date five days prior to the date set forth in clause (b) of the definition of Commitment Termination Date and (ii) one year from the date of such extension. The Issuer shall not be permitted or required to issue any Letter of Credit if, after giving effect thereto, the aggregate amount of all Letter of Credit Outstandings would exceed the Letter of Credit Commitment Amount.

SECTION 2.2. Reduction of the Letter of Credit Commitment Amount. The Letter of Credit Commitment Amount will, without any further action, automatically and permanently be reduced upon the occurrence of the Commitment Termination Date.

SECTION 2.3. Issuance Procedures. By delivering to the Administrative Agent an Issuance Request on or before 12:00 noon on a Business Day, the Account Party may from time to time irrevocably request on not less than three nor more than ten Business Days' notice, in the case of an initial issuance of a Letter of Credit and not less than three Business Days' prior notice, in the case of a request for the renewal or extension of the Stated Expiry Date of a standby Letter of Credit (in each case, unless a shorter notice period is agreed to by the Issuer, in its sole discretion), that the Issuer issue, or renew or extend the Stated Expiry Date of, a Letter of Credit in such form as may be requested by the Account Party and approved by the Issuer for general limited liability company purposes; provided, however, the Issuer agrees that it will (a) issue a Letter of Credit the next Business Day so long as (i) the Issuance Request is received by the Administrative Agent prior to 12:00 noon on the Business Day before the proposed issuance of such Letter of Credit and (ii) the form of such Letter of Credit has either been previously reviewed and accepted by the Issuer and (b) amend or otherwise modify a Letter of Credit on the same Business Day the applicable Issuance Request is received so long as (i) the Issuance Request is received by the Administrative Agent prior to 12:00 noon on the Business Day of the proposed amendment or modification of such Letter of Credit and (ii) such amendments or modifications are limited to an increase or decrease in the Stated Amount of such Letter of Credit or an extension of the Stated Expiry Date of such Letter of Credit. Notwithstanding the foregoing, in the event that the Account Party requests that the Issuer issue a Letter of Credit in a form that it has not had the opportunity to review or approve, the Issuer agrees it will issue such Letter of Credit one Business Day after the form of the Letter of Credit has been finalized among the Issuer, the Account Party and the beneficiary and is in form satisfactory to each of them. The Issuer will make available to the beneficiary thereof the original of the Letter of Credit which it issues and a copy to the Account Party.

SECTION 2.3.1. Other Lenders Participation. Upon the issuance of each Letter of Credit, and without further action, each Lender (other than the Issuer) shall be deemed to have irrevocably purchased, to the extent of its LC Percentage, a participation interest in such Letter of Credit (including the contingent liability and any Reimbursement Obligation with respect thereto), and such Lender shall, to the extent of its LC Percentage, be responsible (within one Business Day following notice to it) for reimbursing the Issuer for Reimbursement Obligations which have not been reimbursed by the Account Party in accordance with Section 2.3.3 (with the terms of this Section surviving the termination of this Agreement). In addition, such Lender shall, to the extent of its LC Percentage, be entitled to receive a ratable portion of the Letter of Credit fee payable pursuant to Section 3.2.2 with respect to each Letter of Credit and of interest payable pursuant to Section 3.1 with respect to any Reimbursement Obligation. To the extent that any Lender has reimbursed the Issuer for a Disbursement, such Lender shall be entitled to receive its ratable portion of any amounts subsequently received (from the Account Party or otherwise) in respect of such Disbursement.

SECTION 2.3.2. Disbursements. The Issuer or the Administrative Agent will notify the Account Party promptly of the presentment for payment of any Letter of Credit issued by the Issuer, together with notice of the date (the "Disbursement Date") such payment shall be made (each such payment, a "Disbursement"). Subject to the terms and provisions of such Letter of Credit and this Agreement, the Issuer shall make such payment to the beneficiary (or its designee) of such Letter of Credit. Prior to 3:00 p.m. on the first Business Day following the later of the Account Party's receipt of notice of a Disbursement or the Disbursement Date, the Account Party will reimburse the Administrative Agent, for the account of the Issuer, for all amounts which the Issuer has disbursed under such Letter of Credit, together with interest thereon at a rate per annum equal to the Base Rate for the period from the later of the Account Party's receipt of notice of a Disbursement or the Disbursement Date through the date of such reimbursement. Without limiting in any way the foregoing and notwithstanding anything to the contrary contained herein or in any separate application for any Letter of Credit, the Account Party hereby acknowledges and agrees that it shall be obligated to reimburse the Issuer upon each Disbursement of a Letter of Credit.

SECTION 2.3.3. Reimbursement. The obligation (a "Reimbursement Obligation") of the Account Party under Section 2.3.2 to reimburse the Issuer with respect to each Disbursement (including interest thereon), and, upon the failure of the Account Party to reimburse the Issuer, each Lender's obligation under Section 2.3.1 to reimburse the Issuer, shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Account Party or such Lender, as the case may be, may have or have had against the Issuer or any Lender, including any defense based upon the failure of any Disbursement to conform to the terms of the applicable Letter of Credit (if, in the Issuer's good faith opinion, such Disbursement is determined to be appropriate) or any non-application or misapplication by the beneficiary of the proceeds of such Letter of Credit; provided that, after paying in full its Reimbursement Obligation hereunder, nothing herein shall adversely affect the right of the Account Party or such Lender, as the case may be, to commence any proceeding against the Issuer for any wrongful Disbursement made by the Issuer under a Letter of Credit as a result of acts or omissions constituting gross negligence or willful misconduct on the part of the Issuer.

SECTION 2.3.4. Deemed Disbursements. Upon the occurrence and during the continuation of any Default under Section 8.1.9 or upon notification by the Administrative Agent (acting at the direction of the Required Lenders) to the Account Party of its obligations under this Section following the occurrence and during the continuation of any other Event of Default,

          (a) the aggregate Stated Amount of all Letters of Credit shall, without demand upon or notice to the Account Party or any other Person, be deemed to have been paid or disbursed by the Issuer of such Letters of Credit (notwithstanding that such amount may not in fact have been paid or disbursed); and

          (b) the Account Party shall be immediately obligated to reimburse the Issuer for the amount deemed to have been so paid or disbursed by the Issuer.

Amounts payable by the Account Party pursuant to this Section shall be deposited in immediately available funds with the Administrative Agent and held as collateral security for the Reimbursement Obligations. When all Defaults giving rise to the deemed disbursements under this Section have been cured or waived the Administrative Agent shall return to the Account Party all amounts then on deposit with the Administrative Agent pursuant to this Section which have not been applied to the satisfaction of the Reimbursement Obligations

SECTION 2.3.5. Nature of Reimbursement Obligations. The Account Party and, to the extent set forth in Section 2.3.1, each Lender shall assume all risks of the acts, omissions or misuse of any Letter of Credit by the beneficiary thereof. The Issuer (except to the extent of its own gross negligence or willful misconduct) shall not be responsible for:

          (a) the form, validity, sufficiency, accuracy, genuineness or legal effect of any Letter of Credit or any document submitted by any party in connection with the application for and issuance of a Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged;

          (b) the form, validity, sufficiency, accuracy, genuineness or legal effect of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or the proceeds thereof in whole or in part, which may prove to be invalid or ineffective for any reason;

(c) the failure of the beneficiary to comply fully with conditions required in order to demand payment under a Letter of Credit;

          (d) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise; or

          (e) any loss or delay in the transmission or otherwise of any document or draft required in order to make a Disbursement under a Letter of Credit.

None of the foregoing shall affect, impair or prevent the vesting of any of the rights or powers granted to the Issuer or any Lender hereunder. In furtherance and not in limitation or derogation of any of the foregoing, any action taken or omitted to be taken by the Issuer in good faith (and not constituting gross negligence or willful misconduct) shall be binding upon the Account Party and each such Credit Party, and shall not put the Issuer under any resulting liability to the Account Party or any Credit Party, as the case may be.

SECTION 2.4. Register. The Account Party hereby designates the Administrative Agent to serve as the Account Party's agent, solely for the purpose of this clause, to maintain a register (the "Register") on which the Administrative Agent will record each Lender's LC Percentage, annexed to which the Administrative Agent shall retain a copy of each Assignment Agreement delivered to the Administrative Agent pursuant to Section 10.11. Failure to make any recordation, or any error in such recordation, shall not affect the Account Party's Obligations. The entries in the Register shall be conclusive, in the absence of manifest error, and the Account Party, the Administrative Agent and the Lenders shall treat each Person in whose name a LC Percentage is registered as the owner thereof for the purposes of all Loan Documents, notwithstanding notice or any provision herein to the contrary. Any assignment or transfer of a Lender of its rights and obligations shall be registered in the Register only upon delivery to the Administrative Agent of a Assignment Agreement that has been executed by the requisite parties pursuant to Section 10.11. No assignment or transfer of a Lender's rights and obligations shall be effective unless such assignment or transfer shall have been recorded in the Register by the Administrative Agent as provided in this Section

ARTICLE III
INTEREST AND FEES

SECTION 3.1. Post-Maturity Rates. After the date any Reimbursement Obligation is due and payable (whether upon acceleration or otherwise), or after any other monetary Obligation of the Account Party shall have become due and payable, the Account Party shall pay on demand, but only to the extent permitted by law, interest (after as well as before judgment) on such amounts at a rate per annum equal to the Base Rate plus 2% per annum.

SECTION 3.2. Fees. The Account Party agrees to pay the fees set forth below. All such fees shall be non-refundable.

SECTION 3.2.1. Commitment Fee. The Account Party agrees to pay to the Administrative Agent for the account of each Lender (based on its LC Percentage), for the period (including any portion thereof when any of the Letter of Credit Commitment is suspended by reason of the Account Party's inability to satisfy any condition of Article V) commencing on the Effective Date and continuing through the Commitment Termination Date, a commitment fee equal to 0.15% per annum, multiplied by the sum of the average daily unused portion of the Letter of Credit Commitment Amount (net of Letter of Credit Outstandings). All commitment fees payable pursuant to this Section shall be payable by the Account Party in arrears on each Quarterly Payment Date, commencing with the first Quarterly Payment Date following the Effective Date, and on the Commitment Termination Date.

SECTION 3.2.2. Letter of Credit Fee. The Account Party agrees to pay to the Administrative Agent, for the account of each Lender (based on its LC Percentage), a Letter of Credit fee equal to 0.50% per annum, multiplied by the Stated Amount of each such Letter of Credit, such fees being payable quarterly in arrears on each Quarterly Payment Date following the date of issuance of each Letter of Credit and on the Commitment Termination Date. The Account Party also agrees to pay to the Issuer an issuance fee of $100 for each Letter of Credit issued such fee being paid on the date of such issuance.

ARTICLE IV
INCREASED COSTS AND OTHER PROVISIONS

SECTION 4.1. Increased Capital Costs. If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any Governmental Authority affects or would affect the amount of capital required or expected to be maintained by any Credit Party or any Person controlling such Credit Party, and such Credit Party determines (in good faith but in its sole and absolute discretion) that the rate of return on its or such controlling Person's capital as a consequence of the Letter of Credit Commitment, or the Letters of Credit participated in, by such Credit Party is reduced to a level below that which such Credit Party or such controlling Person could have achieved but for the occurrence of any such circumstance, then upon notice from time to time by such Credit Party to the Account Party, the Account Party shall within fifteen days following receipt of such notice pay directly to such Credit Party additional amounts sufficient to compensate such Credit Party or such controlling Person for such reduction in rate of return, solely to the extent that any such additional amounts were incurred by such Credit Party or such controlling Person within 90 days of such demand. Each Credit Party will promptly notify the Account Party and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, that will entitle such Credit Party to compensation pursuant to this Section 4.1 and will designate a different lending office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. A certificate of any Lender claiming compensation under this Section and setting forth in reasonable detail the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Credit Party may use any reasonable averaging and attribution methods.

SECTION 4.2. Taxes. The Account Party covenants and agrees as follows with respect to Taxes.

          (a) Any and all payments by the Account Party under each Loan Document shall be made without setoff, counterclaim or other defense, and free and clear of, and without deduction or withholding for or on account of, any Taxes. In the event that any Taxes are imposed and required to be deducted or withheld from any payment required to be made by the Account Party to or on behalf of any Credit Party under any Loan Document, then:

                    (i) subject to clause (f), if such Taxes are Non-Excluded Taxes, the amount of such payment shall be increased as may be necessary so that such payment is made, after withholding or deduction for or on account of such Taxes, in an amount that is not less than the amount provided for in such Loan Document; and

                    (ii) the Account Party shall withhold the full amount of such Taxes from such payment (as increased pursuant to clause (a)(i)) and shall pay such amount to the Governmental Authority imposing such Taxes in accordance with applicable law.

          (b) In addition, the Account Party shall pay all Other Taxes imposed to the relevant Governmental Authority imposing such Other Taxes in accordance with applicable law.

          (c) As promptly as practicable after the payment of any Taxes or Other Taxes, and in any event within 45 days of any such payment being due, the Account Party shall furnish to the Administrative Agent a copy of an official receipt (or a certified copy thereof) evidencing the payment of such Taxes or Other Taxes. The Administrative Agent shall make copies thereof available to any Lender upon request therefor.

          (d) Subject to clause (f), the Account Party shall indemnify each Credit Party for any Non-Excluded Taxes and Other Taxes levied, imposed or assessed on (and whether or not paid directly by) such Credit Party whether or not such Non-Excluded Taxes or Other Taxes are correctly or legally asserted by the relevant Governmental Authority. Promptly upon having knowledge that any such Non-Excluded Taxes or Other Taxes have been levied, imposed or assessed, and promptly upon notice thereof by any Credit Party, the Account Party shall pay such Non-Excluded Taxes or Other Taxes directly to the relevant Governmental Authority (provided that, no Credit Party shall be under any obligation to provide any such notice to the Account Party). In addition, the Account Party shall indemnify each Credit Party for any incremental Taxes that may become payable by such Credit Party as a result of any failure of the Account Party to pay any Taxes when due to the appropriate Governmental Authority or to deliver to the Administrative Agent, pursuant to clause (c), documentation evidencing the payment of Taxes or Other Taxes. With respect to indemnification for Non-Excluded Taxes and Other Taxes actually paid by any Credit Party or the indemnification provided in the immediately preceding sentence, such indemnification shall be made within 30 days after the date such Credit Party makes written demand therefor. The Account Party acknowledges that any payment made to any Credit Party or to any Governmental Authority in respect of the indemnification obligations of the Account Party provided in this clause shall constitute a payment in respect of which the provisions of clause (a) and this clause shall apply.

          (e) Each Non-U.S. Lender, on or prior to the date on which such Non-U.S. Lender becomes a Lender hereunder (and from time to time thereafter upon the request of the Account Party or the Administrative Agent, but only for so long as such non-U.S. Lender is legally entitled to do so), shall deliver to the Account Party and the Administrative Agent either (i) two duly completed copies of either (x) Internal Revenue Service Form W-8BEN claiming eligibility of the Non-U.S. Lender for benefits of an income tax treaty to which the United States is a party or (y) Internal Revenue Service Form W-8ECI, or in either case an applicable successor form; or (ii) in the case of a Non-U.S. Lender that is not legally entitled to deliver either form listed in clause (e)(i), (x) a certificate to the effect that such Non-U.S. Lender is not (A) a "bank" within the meaning of Section 881(c)(3)(A) of the Code, (B) a "10 percent shareholder" of the Account Party within the meaning of Section 881(c)(3)(B) of the Code, or (C) a controlled foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(C) of the Code (referred to as an "Exemption Certificate") and (y) two duly completed copies of Internal Revenue Service Form W-8BEN or applicable successor form.

          (f) The Account Party shall not be obligated to pay any additional amounts to any Lender pursuant to clause (a)(i), or to indemnify any Lender pursuant to clause (d), in respect of United States federal withholding taxes to the extent imposed as a result of (i) the failure of such Lender to deliver to the Account Party the form or forms and/or an Exemption Certificate, as applicable to such Lender, pursuant to clause (e), (ii) such form or forms and/or Exemption Certificate not establishing a complete exemption from U.S. federal withholding tax or the information or certifications made therein by the Lender being untrue or inaccurate on the date delivered in any material respect, or (iii) the Lender designating a successor lending office at which it maintains its Letter of Credit Commitment or rights and obligations hereunder which has the effect of causing such Lender to become obligated for tax payments in excess of those in effect immediately prior to such designation; provided that, the Account Party shall be obligated to pay additional amounts to any such Lender pursuant to clause (a)(i), and to indemnify any such Lender pursuant to clause (d), in respect of United States federal withholding taxes if (i) any such failure to deliver a form or forms or an Exemption Certificate or the failure of such form or forms or Exemption Certificate to establish a complete exemption from U.S. federal withholding tax or inaccuracy or untruth contained therein resulted from a change in any applicable statute, treaty, regulation or other applicable law or any interpretation of any of the foregoing occurring after the Effective Date, which change rendered such Lender no longer legally entitled to deliver such form or forms or Exemption Certificate or otherwise ineligible for a complete exemption from U.S. federal withholding tax, or rendered the information or certifications made in such form or forms or Exemption Certificate untrue or inaccurate in a material respect, (ii) the redesignation of the Lender's lending office was made at the request of the Account Party or (iii) the obligation to pay any additional amounts to any such Lender pursuant to clause (a)(i) or to indemnify any such Lender pursuant to clause (d) is with respect to an Assignee Lender that becomes an Assignee Lender as a result of an assignment made at the request of the Account Party.

          (g) In the event that a Credit Party receives an indemnification payment pursuant to clause (d) above and the Account Party makes a written request to the Credit Party for its cooperation, the relevant Credit Party shall cooperate with the Account Party in challenging such Non-Excluded Taxes or Other Taxes, provided that (i) the Credit Party reasonably determines in good faith that it will not suffer any adverse effect as a result thereof, (ii) all costs of such challenge are for the account of the Account Party, and (iii) the Account Party delivers to the Credit Party an opinion of counsel reasonably satisfactory to the Credit Party to the effect that there is substantial authority (within the meaning of Code section 6662(d)(2)(B)(i)) to prevail on such refund claim.

SECTION 4.3. Payments, Computations. Unless otherwise expressly provided in a Loan Document, all payments by the Account Party pursuant to each Loan Document shall be made by the Account Party to the Administrative Agent for the account of the Credit Parties entitled to receive such payment. All payments shall be made without setoff, deduction or counterclaim not later than 3:00 p.m. on the date due in same day or immediately available funds to such account as the Administrative Agent shall specify from time to time by notice to the Account Party. Funds received after that time shall be deemed to have been received by the Administrative Agent on the next succeeding Business Day. The Administrative Agent shall promptly remit in same day funds to each Credit Party its share, if any, of such payments received by the Administrative Agent for the account of such Credit Party. All interest and fees shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 360 days. Payments due on other than a Business Day shall (except as otherwise required by clause (c) of the definition of "Interest Period") be made on the next succeeding Business Day and such extension of time shall be included in computing interest and fees in connection with that payment.

          (b) All amounts received as a result of the exercise of remedies under the Loan Documents or under applicable law shall be applied upon receipt to the Obligations as follows: (i) first, to the payment of all Obligations owing to the Administrative Agent, in its capacity as the Administrative Agent (including the fees and expenses of counsel to the Administrative Agent), (ii) second, after payment in full in cash of the amounts specified in clause (b)(i), to the ratable payment of all interest (including interest accruing after the commencement of a proceeding in bankruptcy, insolvency or similar law, whether or not permitted as a claim under such law) and fees owing under the Loan Documents, and all costs and expenses owing to the Credit Parties pursuant to the terms of the Loan Documents, until paid in full in cash, (iii) third, after payment in full in cash of the amounts specified in clauses (b)(i) and (b)(ii), to the ratable payment of the aggregate Reimbursement Obligations then owing and Cash Collateralize contingent liabilities under Letter of Credit Outstandings, (iv) fourth, after payment in full in cash of the amounts specified in clauses (b)(i) through (b)(iii), to the ratable payment of all other Obligations owing to the Credit Parties, and (v) fifth, after payment in full in cash of the amounts specified in clauses (b)(i) through (b)(iv), and following the Termination Date, to the Account Party or any other Person lawfully entitled to receive such surplus.

SECTION 4.4. Sharing of Payments. If any Credit Party shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Credit Extension or Reimbursement Obligation (other than pursuant to the terms of Sections 4.1 or 4.2) in excess of its pro rata share of payments obtained by all Credit Parties, such Credit Party shall purchase from the other Credit Parties such participations in Credit Extensions made by them as shall be necessary to cause such purchasing Credit Party to share the excess payment or other recovery ratably (to the extent such other Credit Parties were entitled to receive a portion of such payment or recovery) with each of them; provided that, if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Credit Party, the purchase shall be rescinded and each Credit Party which has sold a participation to the purchasing Credit Party shall repay to the purchasing Credit Party the purchase price to the ratable extent of such recovery together with an amount equal to such selling Credit Party's ratable share (according to the proportion of (a) the amount of such selling Credit Party's required repayment to the purchasing Credit Party to (b) total amount so recovered from the purchasing Credit Party) of any interest or other amount paid or payable by the purchasing Credit Party in respect of the total amount so recovered. The Account Party agrees that any Credit Party purchasing a participation from another Credit Party pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 4.5) with respect to such participation as fully as if such Credit Party were the direct creditor of the Account Party in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law any Credit Party receives a secured claim in lieu of a setoff to which this Section applies, such Credit Party shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Credit Parties entitled under this Section to share in the benefits of any recovery on such secured claim

SECTION 4.5. Setoff. Each Credit Party shall, upon the occurrence and during the continuance of any Default described in Section 8.1.9 or, with the consent of the Required Lender, upon the occurrence and during the continuance of any other Event of Default, have the right to appropriate and apply to the payment of the Obligations owing to it (whether or not then due). Each Credit Party agrees promptly to notify the Account Party and the Administrative Agent after any such appropriation and application made by such Credit Party; provided that, the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Credit Party under this Section are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Credit Party may have.

ARTICLE V
CONDITIONS TO CREDIT EXTENSIONS

SECTION 5.1. Initial Credit Extension. The obligations of the Lenders to make the initial Credit Extension (or participate therein) shall be subject to the prior or concurrent satisfaction of each of the conditions precedent set forth in this Article.

SECTION 5.1.1. Resolutions, etc. The Administrative Agent shall have received from the Account Party (i) a copy of a good standing certificate, dated a date reasonably close to the Effective Date and (ii) a certificate, dated as of the date hereof, duly executed and delivered by any vice president, the controller, the treasurer, the assistant treasurer, secretary or assistant secretary of the Account Party as to

          (a) resolutions of the Account Party's Board of Managers then in full force and effect authorizing the execution, delivery and performance of each Loan Document to be executed by the Account Party and the transactions contemplated hereby and thereby;

          (b) the incumbency and signatures of those of its officers authorized to act with respect to each Loan Document to be executed by the Account Party; and

          (c) the full force and validity of each Organic Document of the Account Party and copies thereof;

upon which certificates each Credit Party may conclusively rely until it shall have received a further certificate of any such officer of the Account Party canceling or amending such prior certificate.

SECTION 5.1.2. Financial Information, etc. The Administrative Agent shall have received an audited consolidated balance sheet of the Account Party and its Subsidiaries, as of December 31, 2004, certified by the principal financial or accounting officer of the Account Party, which shall be satisfactory to the Administrative Agent.

SECTION 5.1.3. Compliance Certificate. The Administrative Agent shall have received a Compliance Certificate, calculated as of December 31, 2004, duly executed and delivered by the principal financial or accounting officer of the Account Party, in form and substance reasonably satisfactory to the Administrative Agent.

SECTION 5.1.4. Closing Fees, Expenses, etc. The Administrative Agent shall have received for its own account, or for the account of each Lender, as the case may be, all fees, costs and expenses due and payable pursuant to Sections 3.2 and, if then invoiced, 10.3.

SECTION 5.1.5. Opinions of Counsel. The Administrative Agent shall have received opinions, dated the Effective Date and addressed to the Administrative Agent and all Lenders, from Dewey Ballantine LLP, New York counsel to the Account Party, in form and substance satisfactory to the Administrative Agent.

SECTION 5.2. All Credit Extensions. The obligation of the Issuer to make any Credit Extension shall be subject to the satisfaction of each of the conditions precedent set forth below.

SECTION 5.2.1. Compliance with Warranties, No Default, etc. Both before and after giving effect to any Credit Extension the following statements shall be true and correct:

          (a) the representations and warranties set forth in each Loan Document (other than the representations and warranties set forth in clause (b) of Section 6.4 and Section 6.6) shall, in each case, be true and correct with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date); and

          (b) no Default shall have then occurred and be continuing.

SECTION 5.2.2. Issuance Request. The Administrative Agent shall have received an Issuance Request duly executed and delivered by an Authorized Officer of the Account Party. Each delivery of an Issuance Request and the acceptance by the beneficiary of such Letter of Credit shall constitute a representation and warranty by the Account Party that on the date of such Credit Extension (both immediately before and after giving effect to such Credit Extension) the statements made in Section 5.2.1 are true and correct in all material respects.

SECTION 5.2.3. Satisfactory Legal Form. All documents executed or submitted pursuant hereto by or on behalf of the Account Party shall be reasonably satisfactory in form and substance to the Administrative Agent and its counsel, and the Administrative Agent and its counsel shall have received all information, approvals, opinions, documents or instruments as the Administrative Agent or its counsel may reasonably request.

ARTICLE VI
REPRESENTATIONS AND WARRANTIES

In order to induce the Credit Parties to enter into this Agreement and to make Credit Extensions hereunder, the Account Party represents and warrants to each Credit Party as set forth in this Article.

SECTION 6.1. Status. The Account Party is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has the limited liability company authority to make and perform this Agreement and each other Loan Document to which it is a party.

SECTION 6.2. Authority, No Conflict. The execution, delivery and performance by the Account Party of this Agreement and each other Loan Document to which it is a party have been duly authorized by all necessary limited liability company action and do not violate (i) any provision of law or regulation, or any decree, order, writ or judgment, (ii) any provision of its limited liability company agreement, or (iii) result in the breach of or constitute a default under any indenture or other agreement or instrument to which the Account Party is a party.

SECTION 6.3. Legality, etc. This Agreement and each other Loan Document to which the Account Party is a party constitute the legal, valid and binding obligations of the Account Party, enforceable against the Account Party in accordance with their terms except to the extent limited by (a) bankruptcy, insolvency, fraudulent conveyance or reorganization laws or by other laws relating to or affecting the enforceability of creditors' rights generally and by general equitable principles which may limit the right to obtain equitable remedies regardless of whether enforcement is considered in a proceeding of law or equity or (b) any applicable public policy on enforceability of provisions relating to contribution and indemnification.

SECTION 6.4. Financial Condition.

          (a) The consolidated balance sheet of the Account Party and its Consolidated Subsidiaries as of December 31, 2004 and the related consolidated statements of income and cash flows for the fiscal year then ended, reported on by PricewaterhouseCoopers LLP, copies of which have been delivered to each of the Administrative Agent and the Lenders, fairly present, in conformity with GAAP, the consolidated financial position of the Account Party as of such date and its consolidated results of operations and cash flows for such fiscal year.

          (b) Since December 31, 2004, except as disclosed in or contemplated by the Account Party's Form 10-K Report to the SEC for the year ended December 31, 2004, there has been no change in the business, assets, financial condition or operations of the Account Party and its Consolidated Subsidiaries, considered as a whole, that would materially and adversely affect the Account Party's ability to perform any of its obligations under this Agreement or the other Loan Documents.

SECTION 6.5. Rights to Properties. The Account Party and its Restricted Subsidiaries have good and valid fee, leasehold, easement or other right, title or interest in or to all the properties necessary to the conduct of their business as conducted on the date hereof and as presently proposed to be conducted, except to the extent the failure to have such rights or interests would not have a Material Adverse Effect.

SECTION 6.6. Litigation. Except as disclosed in or contemplated by the Account Party's Form 10-K Report to the SEC for the year ended December 31, 2004 or in any subsequent Form 10-Q or 8-K Report or otherwise furnished in writing to the Administrative Agent prior to the Effective Date, no litigation, arbitration or administrative proceeding against the Account Party is pending or, to the Account Party's knowledge, threatened, which, if adversely determined, would materially and adversely affect the ability of the Account Party to perform any of its obligations under this Agreement or the other Loan Documents. There is no litigation, arbitration or administrative proceeding pending or, to the knowledge of the Account Party, threatened which questions the validity of this Agreement or the other Loan Documents to which it is a party.

SECTION 6.7. No Violation. No part of the proceeds of the Credit Extensions hereunder (including proceeds of any disbursements under any Letter of Credit) will be used, directly or indirectly by the Account Party for the purpose of purchasing or carrying any "margin stock" within the meaning of F.R.S. Board Regulation U, or for any other purpose which violates, or which conflicts with, the provisions of F.R.S. Board Regulation U or X. The Account Party is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any such "margin stock".

SECTION 6.8. ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Code with respect to each Material Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Code with respect to each Material Plan. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Code in respect of any Material Plan, (ii) failed to make any contribution or payment to any Material Plan, or made any amendment to any Material Plan, which has resulted or could result in the imposition of a lien or the posting of a bond or other security under ERISA or the Code or (iii) incurred any material liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA.

SECTION 6.9. Governmental Approvals. No authorization, consent or approval from any Governmental Authority is required for the execution, delivery and performance by the Account Party of this Agreement and the other Loan Documents to which it is a party, except such authorizations, consents and approvals as have been obtained prior to the Effective Date and are in full force and effect.

SECTION 6.10. Investment Company Act. The Account Party is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended.

SECTION 6.11. Public Utility Holding Company Act. The Account Party is not a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended.

SECTION 6.12. Restricted Subsidiaries, Etc. Each Restricted Subsidiary of the Account Party, as of the Effective Date, is a Wholly-Owned Subsidiary of the Account Party and is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all corporate or other organizational powers to carry on its businesses as now conducted.

SECTION 6.13. Tax Returns and Payments. The Account Party and each of its Restricted Subsidiaries has filed or caused to be filed all Federal, state, local and foreign income tax returns required to have been filed by it and has paid or caused to be paid all income taxes shown to be due on such returns except income taxes that are being contested in good faith by appropriate proceedings and for which the Account Party or its Restricted Subsidiaries, as the case may be, shall have set aside on its books appropriate reserves with respect thereto in accordance with GAAP or that would not reasonably be expected to have a Material Adverse Effect.

SECTION 6.14. Compliance with Laws. To the knowledge of the Account Party or any of its Restricted Subsidiaries, the Account Party and each of its Restricted Subsidiaries is in compliance with all applicable laws, regulations and orders of any Governmental Authority, domestic or foreign, in respect of the conduct of its business and the ownership of its property (including compliance with all applicable ERISA and Environmental Laws and the requirements of any permits issued under such Environmental Laws), except to the extent (a) such compliance is being contested in good faith by appropriate proceedings or (b) non-compliance would not reasonably be expected to materially and adversely affect its ability to perform any of its obligations under this Agreement or any other Loan Document to which it is a party.

SECTION 6.15. No Default. No Default or Event of Default has occurred and is continuing.

SECTION 6.16. Reportable Transactions. The Account Party does not intend to treat any of the transactions contemplated by this Agreement as a "reportable transaction" (within the meaning of Treasury Regulation Section 1.6011-4). In the event the Account Party takes or determines to take any action inconsistent with such intention, it will promptly notify the Administrative Agent thereof. If the Account Party so notifies the Administrative Agent, or if the Administrative Agent or any Lender determines that the any of the transactions contemplated by this Agreement constitutes a "reportable transaction," the Account Party acknowledges that each such Person may treat its extensions of credit as part of a transaction that is subject to Treasury Regulation Section 301.6112-1, and such Persons may maintain the lists and other records required by such Treasury Regulation.

SECTION 6.17. Guarantees. As of the Effective Date, except as set forth in Item 6.17 of the Disclosure Schedule, the Account Party has no Guarantees of any Debt of any Foreign Subsidiary of the Account Party other than such Debt not in excess of $25,000,000 in the aggregate.

ARTICLE VII
COVENANTS

SECTION 7.1. Incorporation of Covenants from the Incorporated Agreement. The Account Party agrees with each Lender, the Issuer and the Administrative Agent that until the Termination Date has occurred, the Account Party will perform or cause to be performed each covenant of the "Borrower" contained in Article IV of the Incorporated Agreement, with each definition and related term, as in effect on the Effective Date (and thereafter as in effect to the extent modified by the Required Lenders) being incorporated in this Agreement by this reference as though specifically set forth herein, subject in all cases to the terms of Section 1.5.

ARTICLE VIII
EVENTS OF DEFAULT

SECTION 8.1. Listing of Events of Default. Each of the following events or occurrences described in this Article shall constitute an "Event of Default".

SECTION 8.1.1. Non-Payment of Obligations. The Account Party shall default in the payment or prepayment when due of:

          (a) any Reimbursement Obligation; or

          (b) any fee described in Article III or any other monetary Obligation, and such default shall continue unremedied for a period of five days after such amount was due.

SECTION 8.1.2. Breach of Warranty. Any representation or warranty of the Account Party made or deemed to be made in any Loan Document (including any certificates delivered pursuant to Article V) is or shall be incorrect when made or deemed to have been made in any material respect.

SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations. The Account Party shall default in the due performance or observance of any of its obligations under Sections 6.01(a), (b) or (c), clause (ii) of Section 6.05, or Sections 6.06, 6.08, 6.09, 6.12, 6.13 or 6.14 of the Incorporated Agreement.

SECTION 8.1.4. Non-Performance of Other Covenants and Obligations. The Account Party shall (a) fail to observe or perform any covenant or agreement contained in Section 6.01(d) of the Incorporated Agreement for 10 days after any such failure; or (b) fail to observe or perform any covenant or agreement contained in this Agreement or any other Loan Document (other than those covered by Sections 8.1.1, 8.1.2, 8.1.3 or clause (a) above) for 30 days after written notice thereof has been given to the Account Party by the Administrative Agent, or at the request of the Required Lenders.

SECTION 8.1.5. Default on Material Debt. The Account Party or any Restricted Subsidiary shall (i) fail to pay any principal or interest, regardless of amount, due in respect of any Material Debt beyond any period of grace provided with respect thereto, or (ii) fail to observe or perform any other term, covenant, condition or agreement contained in any agreement or instrument evidencing or governing any such Material Debt beyond any period of grace provided with respect thereto if the effect of any failure referred to in this clause (ii) is to cause, or to permit the holder or holders of such Debt or a trustee on its or their behalf to cause, such Indebtedness to become due prior to its stated maturity.

SECTION 8.1.6. Judgments. The Account Party or any of its Restricted Subsidiaries shall fail within 60 days to pay, bond or otherwise discharge any judgment or order for the payment of money in excess of $20,000,000, entered against the Account Party or any such Restricted Subsidiary that is not stayed on appeal or otherwise being appropriately contested in good faith.

SECTION 8.1.7. Pension Plans. Any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $25,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could reasonably be expected to cause one or more members of the ERISA Group to incur a current payment obligation in excess of $25,000,000.

SECTION 8.1.8. Change of Control. Any Change of Control shall have occurred.

SECTION 8.1.9. Bankruptcy, Insolvency, etc. Any of the following shall occur:

          (a) the Account Party or any Restricted Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay, or shall admit in writing its inability to pay, its debts as they become due, or shall take any corporate action to authorize any of the foregoing; or

          (b) an involuntary case or other proceeding shall be commenced against the Account Party or any Restricted Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any Restricted Subsidiary under the Bankruptcy Code.

SECTION 8.2. Action if Bankruptcy. If any Event of Default described in Section 8.1.9 with respect to the Account Party shall occur, the Letter of Credit Commitment (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all Obligations hereunder (including Reimbursement Obligations) shall automatically be and become immediately due and payable, without notice or demand to any Person and the Account Party shall automatically and immediately be obligated to Cash Collateralize all Letter of Credit Outstandings and pay other monetary Obligations.

SECTION 8.3. Action if Other Event of Default. If any Event of Default (other than any Event of Default described in Section 8.1.9 with respect to the Account Party) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Administrative Agent, upon the direction of the Required Lenders, shall by notice to the Account Party declare all or any portion of the outstanding principal amount of all Obligations hereunder (including Reimbursement Obligations) to be due and payable and/or the Letter of Credit Commitment (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment, and/or, as the case may be, the Letter of Credit Commitment shall terminate and the Account Party shall automatically and immediately be obligated to Cash Collateralize all Letter of Credit Outstandings any pay other monetary Obligations.

ARTICLE IX
THE ADMINISTRATIVE AGENT

SECTION 9.1. Actions. Each Lender hereby appoints Scotia Capital as its Administrative Agent under and for purposes of each Loan Document. Each Lender authorizes the Administrative Agent to act on behalf of such Lender under each Loan Document and, in the absence of other written instructions from the Required Lenders received from time to time by the Administrative Agent (with respect to which the Administrative Agent agrees that it will comply, except as otherwise provided in this Section or as otherwise advised by counsel in order to avoid contravention of applicable law), to exercise such powers hereunder and thereunder as are specifically delegated to or required of the Administrative Agent by the terms hereof and thereof, together with such powers as may be incidental thereto. Each Lender hereby indemnifies (which indemnity shall survive any termination of this Agreement) the Administrative Agent, pro rata according to such Lender's proportionate Total Exposure Amount, from and against any and all liabilities, obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, the Administrative Agent in any way relating to or arising out of any Loan Document, (including attorneys' fees), and as to which the Administrative Agent is not reimbursed by the Account Party; provided that, no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses which are determined by a court of competent jurisdiction in a final proceeding to have resulted from the Administrative Agent's gross negligence or willful misconduct. The Administrative Agent shall not be required to take any action under any Loan Document, or to prosecute or defend any suit in respect of any Loan Document, unless it is indemnified hereunder to its satisfaction. If any indemnity in favor of the Administrative Agent shall be or become, in the Administrative Agent's determination, inadequate, the Administrative Agent may call for additional indemnification from the Lenders and cease to do the acts indemnified against hereunder until such additional indemnity is given.

SECTION 9.2. Exculpation. Neither the Administrative Agent nor any of its directors, officers, employees or agents shall be liable to any Credit Party for any action taken or omitted to be taken by it under any Loan Document, or in connection therewith, except for its own willful misconduct or gross negligence, nor responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity or due execution of any Loan Document, nor for the creation, perfection or priority of any Liens purported to be created by any of the Loan Documents, or the validity, genuineness, enforceability, existence, value or sufficiency of any collateral security, nor to make any inquiry respecting the performance by the Account Party of its Obligations. Any such inquiry which may be made by the Administrative Agent shall not obligate it to make any further inquiry or to take any action. The Administrative Agent shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which the Administrative Agent believes to be genuine and to have been presented by a proper Person.

SECTION 9.3. Successor. The Administrative Agent may resign as such at any time upon at least 30 days' prior notice to the Account Party and all Lenders. If the Administrative Agent at any time shall resign, the Required Lenders may appoint another Lender as a successor Administrative Agent which (subject, so long as no Event of Default has occurred and is continuing, to the prior approval of the Account Party) shall thereupon become the Administrative Agent hereunder. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be one of the Lenders or a commercial banking institution organized under the laws of the United States (or any State thereof) or a United States branch or agency of a commercial banking institution, and having a combined capital and surplus of at least $250,000,000; provided that, if, such retiring Administrative Agent is unable to find a commercial banking institution which is willing to accept such appointment and which meets the qualifications set forth in above, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor as provided for above. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall be entitled to receive from the retiring Administrative Agent such documents of transfer and assignment as such successor Administrative Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under the Loan Documents. After any retiring Administrative Agent's resignation hereunder as the Administrative Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under the Loan Documents, and Section 10.3 and Section 10.4 shall continue to inure to its benefit.

SECTION 9.4. Credit Extensions by Scotia Capital. Scotia Capital shall have the same rights and powers with respect to the Credit Extensions made by it or any of its Affiliates and may exercise the same as if it were not the Administrative Agent. Scotia Capital and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Account Party or any Subsidiary or Affiliate of the Account Party as if Scotia Capital were not the Administrative Agent hereunder.

SECTION 9.5. Credit Decisions. Each Lender acknowledges that it has, independently of the Administrative Agent and each other Lender, and based on such Lender's review of the financial information of the Account Party, the Loan Documents (the terms and provisions of which being satisfactory to such Lender) and such other documents, information and investigations as such Lender has deemed appropriate, made its own credit decision to extend its Letter of Credit Commitment. Each Lender also acknowledges that it will, independently of the Administrative Agent and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under the Loan Documents.

SECTION 9.6. Copies, etc. The Administrative Agent shall give prompt notice to each Lender of each notice or request required or permitted to be given to the Administrative Agent by the Account Party pursuant to the terms of the Loan Documents (unless concurrently delivered to the Lenders by the Account Party). The Administrative Agent will distribute to each Lender each document or instrument received for its account and copies of all other communications received by the Administrative Agent from the Account Party for distribution to the Lenders by the Administrative Agent in accordance with the terms of the Loan Documents.

SECTION 9.7. Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telecopy, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Administrative Agent. As to any matters not expressly provided for by the Loan Documents, the Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, thereunder in accordance with instructions given by the Required Lenders or all of the Lenders as is required in such circumstance, and such instructions of such Lenders and any action taken or failure to act pursuant thereto shall be binding on all Secured Parties.

SECTION 9.8. Defaults. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of a Default unless the Administrative Agent has received a written notice from a Lender or the Account Party specifying such Default and stating that such notice is a "Notice of Default". In the event that the Administrative Agent receives such a notice of the occurrence of a Default, the Administrative Agent shall give prompt notice thereof to the Lenders. The Administrative Agent shall (subject to Section 10.1) take such action with respect to such Default as shall be directed by the Required Lenders; provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interest of the Credit Parties except to the extent that this Agreement expressly requires that such action be taken, or not be taken, only with the consent or upon the authorization of the Required Lenders or all Lenders.

ARTICLE X
MISCELLANEOUS PROVISIONS

SECTION 10.1. Waivers, Amendments, etc. The provisions of each Loan Document (other than Letters of Credit, which shall be modified only in accordance with their respective terms) may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Account Party and the Required Lenders; provided that, no such amendment, modification or waiver shall:

          (a) modify clause (b) of Section 4.3, Section 4.4 (as it relates to sharing of payments) or this Section, in each case, without the consent of all Lenders;

          (b) increase the aggregate amount of any Credit Extensions required to be made or risk participated in by a Lender hereunder, or extend the final Commitment Termination Date of Credit Extensions made (or risk participated in) by a Lender, in each case without the consent of such Lender (it being agreed, however, that any vote to rescind any acceleration made pursuant to Section 8.2 and Section 8.3 of amounts owing with respect to any Obligations shall only require the vote of the Required Lenders);

          (c) reduce (by way of forgiveness), the amount of or reduce the rate of interest on any amounts due hereunder, reduce any fees described in Article III payable to any Lender or extend the date on which interest or fees are payable in connection herewith, in each case without the consent of such Lender (provided that, the vote of Required Lenders shall be sufficient to waive the payment, or reduce the increased portion, of interest accruing under Section 3.1);

          (d) reduce the percentage set forth in the definition of "Required Lenders" or modify any requirement hereunder that any particular action be taken by all Lenders without the consent of all Lenders;

          (e) increase the Stated Amount of any Letter of Credit unless consented to by the Issuer of such Letter of Credit;

          (f) release the Account Party from its Obligations under the Loan Documents, without the consent of all Lenders; or

          (g) affect adversely the interests, rights or obligations of the Administrative Agent (in its capacity as the Administrative Agent) or the Issuer (in its capacity as Issuer), unless consented to by the Administrative Agent or the Issuer, as the case may be.

No failure or delay on the part of any Credit Party in exercising any power or right under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on the Account Party in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by any Credit Party under any Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder.

SECTION 10.2. Notices; Time. All notices and other communications provided under each Loan Document shall be in writing or by facsimile and addressed, delivered or transmitted, if to the Account Party, the Administrative Agent, a Lender or the Issuer, to the applicable Person at its address or facsimile number set forth on Schedule II hereto or set forth in the Assignment Agreement, or at such other address or facsimile number as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when the confirmation of transmission thereof is received by the transmitter. Electronic mail and Internet and intranet websites may be used only to distribute routine communications by the Administrative Agent to the Lender, such as financial statements and other information as provided in Section 6.01 of the Incorporated Agreement and for the distribution and execution of Loan Documents for execution by the parties thereto, and may not be used for any other purpose. The parties hereto agree that delivery of an executed counterpart of a signature page to this Agreement and each other Loan Document by facsimile (or electronic transmission) shall be effective as delivery of an original executed counterpart of this Agreement or such other Loan Document. Unless otherwise indicated, all references to the time of a day in a Loan Document shall refer to New York time.

SECTION 10.3. Payment of Costs and Expenses. The Account Party agrees to pay on demand all expenses of the Administrative Agent (including the fees and reasonable out-of-pocket expenses of Mayer, Brown, Rowe & Maw LLP, counsel to the Administrative Agent and of local counsel, if any, who may be retained by or on behalf of the Administrative Agent) in connection with (a) the negotiation, preparation, execution and delivery of each Loan Document, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to any Loan Document as may from time to time hereafter be required, whether or not the transactions contemplated hereby are consummated; and (b) the preparation and review of the form of any document or instrument relevant to any Loan Document; provided, that the Account Party shall not be liable for any legal fees or disbursements of any counsel for the Administrative Agent and the Lenders other than Mayer, Brown, Rowe & Maw LLP associated with the preparation, execution and delivery of this Agreement and the closing documents contemplated hereby.

The Account Party further agrees to pay, and to save each Credit Party harmless from all liability for, any stamp or other taxes which may be payable in connection with the execution or delivery of each Loan Document or the Credit Extensions hereunder. The Account Party also agrees to reimburse the Administrative Agent upon demand for all reasonable out-of-pocket expenses (including reasonable attorneys' fees and legal expenses of counsel to the Administrative Agent) incurred by the Administrative Agent in connection with (x) the negotiation of any restructuring or "work-out" with the Account Party, whether or not consummated, of any Obligations and (y) the enforcement of any Obligations.

SECTION 10.4. Indemnification. In consideration of the execution and delivery of this Agreement by each Credit Party, the Account Party hereby indemnifies and holds each Credit Party and each of their respective officers, directors, employees and agents (collectively, the "Indemnified Parties") free and harmless from and against any and all actions, causes of action, suits, losses, costs, liabilities and damages, and expenses incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys' fees and disbursements, whether incurred in connection with actions between or among the parties hereto or the parties hereto and third parties (collectively, the "Indemnified Liabilities"), incurred by the Indemnified Parties or any of them as a result of, or arising out of, or relating to

          (a) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Credit Extension;

          (b) the entering into and performance of any Loan Document by any of the Indemnified Parties (including any action brought by or on behalf of the Account Party as the result of any determination by the Required Lenders pursuant to Article V not to extend any Credit Extension, provided that, any such action is resolved in favor of such Indemnified Party);

          (c) any investigation, litigation or proceeding related to any acquisition or proposed acquisition by the Account Party or any of its Subsidiaries of all or any portion of the Capital Securities or assets of any Person, whether or not an Indemnified Party is party thereto;

          (d) any investigation, litigation or proceeding related to any environmental cleanup, audit, compliance or other matter relating to the protection of the environment or the release by the Account Party or its Subsidiary of any Hazardous Substance;

          (e) the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, discharging or releases from, any real property owned or operated by the Account Party or its Subsidiary of any Hazardous Substance (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environmental Law), regardless of whether caused by, or within the control of, the Account Party or such Subsidiary; or

          (f) each Lender's Environmental Liability (the indemnification herein shall survive repayment of the Obligations and any transfer of the property of the Account Party or its Subsidiary by foreclosure or by a deed in lieu of foreclosure for any Lender's Environmental Liability, regardless of whether caused by, or within the control of, the Account Party or such Subsidiary);

except for Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of the relevant Indemnified Party's gross negligence or willful misconduct. The Account Party and its successors and assigns hereby waive, release and agree not to make any claim or bring any cost recovery action against, any Indemnified Party under CERCLA or any state equivalent, or any similar law now existing or hereafter enacted. It is expressly understood and agreed that to the extent that any Indemnified Party is strictly liable under any Environmental Laws, the Account Party's obligation to such Indemnified Party under this indemnity shall likewise be without regard to fault on the part of the Account Party with respect to the violation or condition which results in liability of an Indemnified Party. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Account Party agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.

SECTION 10.5. Survival. The obligations of the Account Party under Sections 4.1, 4.2, 10.3 and 10.4, and the obligations of the Lenders under Section 9.1, shall in each case survive any assignment from one Lender to another (in the case of Sections 10.3 and 10.4) and the occurrence of the Termination Date. The representations and warranties made by the Account Party in each Loan Document shall survive the execution and delivery of such Loan Document.

SECTION 10.6. Severability. Any provision of any Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction.

SECTION 10.7. Headings. The various headings of each Loan Document are inserted for convenience only and shall not affect the meaning or interpretation of such Loan Document or any provisions thereof.

SECTION 10.8. Execution in Counterparts, Effectiveness, etc. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be an original and all of which shall constitute together but one and the same agreement. This Agreement shall become effective when counterparts hereof executed on behalf of the Account Party, the Administrative Agent and each Lender (or notice thereof satisfactory to the Administrative Agent), shall have been received by the Administrative Agent.

SECTION 10.9. Governing Law; Entire Agreement. EACH LOAN DOCUMENT (OTHER THAN THE LETTERS OF CREDIT, TO THE EXTENT SPECIFIED BELOW AND EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN A LOAN DOCUMENT) WILL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO LAWS OR RULES ARE DESIGNATED, THE INTERNATIONAL STANDBY PRACTICES (ISP98--INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NUMBER 590 (THE "ISP RULES")) AND, AS TO MATTERS NOT GOVERNED BY THE ISP RULES, THE INTERNAL LAWS OF THE STATE OF NEW YORK. The Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter thereof and supersede any prior agreements, written or oral, with respect thereto.

SECTION 10.10. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided that, the Account Party may not assign or transfer its rights or obligations hereunder without the consent of all Lenders (except to the extent that any such assignment results from the consummation of a merger or consolidation permitted pursuant to Section 6.08 of the Incorporated Agreement).

SECTION 10.11. Sale and Transfer of Credit Extensions; Participations in Credit Extensions. Each Lender may assign, or sell participations in, its Letters of Credit and Letter of Credit Commitment to one or more other Persons in accordance with the terms set forth below.

          (a) Any Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under the Loan Documents (including all or a portion of its Letter of Credit Commitment); provided that:

                    (i) except in the case of an assignment of the entire remaining amount of the assigning Lender's rights and obligations, the aggregate amount of such rights and obligations (including an obligation to risk participate in Letters of Credit) subject to each such assignment (determined as of the date the Assignment Agreement with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000, unless the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Account Party, otherwise consent; and

                    (ii) the parties to each assignment shall execute and deliver to the Administrative Agent a Assignment Agreement, together with a processing and recordation fee of $3,500 and if the Eligible Assignee is not already Lender, administrative details information with respect to such Eligible Assignee and applicable tax forms.

          (b) If the consent of the Account Party to an assignment or to an Eligible Assignee is required hereunder (including a consent to an assignment which does not meet the minimum assignment thresholds specified in this Section), the Account Party shall be deemed to have given its consent ten Business Days after the date notice thereof has been delivered by the assigning Lender (through the Administrative Agent) to the Account Party, unless such consent is expressly refused by the Account Party prior to such tenth Business Day.

          (c) Subject to acceptance and recording thereof by the Administrative Agent pursuant to clause (d), from and after the effective date specified in each Assignment Agreement, (i) the Eligible Assignee thereunder shall (if not already a Lender) be a party hereto and, to the extent of the interest assigned by such Assignment Agreement, have the rights and obligations of a Lender under the Loan Documents, and (ii) the assigning Lender thereunder shall (subject to Section 10.5) be released from its obligations under the Loan Documents, to the extent of the interest assigned by such Assignment Agreement (and, in the case of a Assignment Agreement covering all of the assigning Lender's rights and obligations under the Loan Documents, such Lender shall cease to be a party hereto, but shall (as to matters arising prior to the effectiveness of the Assignment Agreement) continue to be entitled to the benefits of any provisions of the Loan Documents which by their terms survive the termination of this Agreement). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with the terms of this Section shall be treated for purposes of the Loan Documents as a sale by such Lender of a participation in such rights and obligations in accordance with clause (e).

          (d) The Administrative Agent shall record each assignment made in accordance with this Section in the Register pursuant to Section 2.4. The Register shall be available for inspection by the Account Party and any Lender, at any reasonable time upon reasonable prior notice to the Administrative Agent.

          (e) Any Lender may, without the consent of, or notice to, any Person, sell participations to one or more Persons (other than natural Persons, the Account Party or any Affiliate of the Account Party) (a "Participant") in all or a portion of such Lender's rights or obligations under the Loan Documents; provided that, (i) such Lender's obligations under the Loan Documents shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Account Party, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents. Any agreement or instrument pursuant to which a Lender sells a participation shall provide that such Lender shall retain the sole right to enforce the rights and remedies of a Lender under the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents; provided that, such agreement or instrument may provide that such Lender will not, without the consent of the Participant, take any action of the type described in clauses (a) through (d) or clause (f) of Section 10.1 with respect to Obligations participated in by that Participant. Subject to clause (f), the Account Party agrees that each Participant shall be entitled to the benefits of Sections 4.1, 4.2, 10.3 and 10.4 and Section 6.01 of the Incorporated Agreement to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to clause (c). To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 4.5 as though it were a Lender, but only if such Participant agrees to be subject to Section 4.4 as though it were a Lender.

          (f) A Participant shall not be entitled to receive any greater payment under Section 4.1, 4.2, 10.3 or 10.4 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Account Party's prior written consent. A Participant that would be a Non-U.S. Lender if it were a Lender shall not be entitled to the benefits of Section 4.2 unless the Account Party is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Account Party, to comply with the requirements set forth in Section 4.2 as though it were a Lender. Any Lender that sells a participating interest in any Letter of Credit Commitment or other interest to a Participant under this Section shall indemnify and hold harmless the Account Party and the Administrative Agent from and against any taxes, penalties, interest or other costs or losses (including reasonable attorneys' fees and expenses) incurred or payable by the Account Party or the Administrative Agent as a result of the failure of the Account Party or the Administrative Agent to comply with its obligations to deduct or withhold any Taxes from any payments made pursuant to this Agreement to such Lender or the Administrative Agent, as the case may be, which Taxes would not have been incurred or payable if such Participant had been a Non-U.S. Lender that was entitled to deliver to the Account Party, the Administrative Agent or such Lender, and did in fact so deliver, a duly completed and valid Form W-8BEN or W-8ECI (or applicable successor form) entitling such Participant to receive payments under this Agreement without deduction or withholding of any United States federal taxes.

          (g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that, no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

          (h) In the event that S&P or Moody's, shall, after the date that any Person becomes a Lender, downgrade the long-term certificate of deposit ratings of such Lender, and the resulting ratings shall be below BBB- or Baa3, respectively, or the equivalent, then the Account Party and the Issuer shall each have the right, but not the obligation, upon notice to such Lender and the Administrative Agent, to replace such Lender with an Eligible Assignee or a financial institution (a "Replacement Lender") acceptable to the Account Party, the Administrative Agent, and the Issuer (such consents not to be unreasonably withheld or delayed; provided that no such consent shall be required if the Replacement Lender is an existing Lender), and upon any such downgrading of any Lender's long-term certificate of deposit rating, such Lender hereby agrees to transfer and assign (in accordance with this Section) all of its Letter of Credit Commitments and other rights and obligations under the Loan Documents (including Reimbursement Obligations) to such Replacement Lender; provided that, (i) such assignment shall be without recourse, representation or warranty (other than that such Lender owns the Letter of Credit Commitments being assigned, free and clear of any Liens) and (ii) the purchase price paid by the Replacement Lender shall be in the amount of such Lender's Percentage of outstanding Reimbursement Obligations, together with all accrued and unpaid interest and fees in respect thereof, plus all other amounts (other than the amounts (if any) demanded and unreimbursed under Sections 4.1 and 4.2, which shall be paid by the Account Party), owing to such Lender hereunder. Upon any such termination or assignment, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of, and subject to the obligations of, any provisions of the Loan Documents which by their terms survive the termination of this Agreement.

SECTION 10.12. Other Transactions. Nothing contained herein shall preclude the Administrative Agent, the Issuer or any other Lender from engaging in any transaction, in addition to those contemplated by the Loan Documents, with the Account Party or any of its Affiliates in which the Account Party or such Affiliate is not restricted hereby from engaging with any other Person.

SECTION 10.13. Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, ANY LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE LENDERS, THE ISSUER OR THE ACCOUNT PARTY IN CONNECTION HEREWITH OR THEREWITH MAY BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. THE ACCOUNT PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK AT THE ADDRESS FOR NOTICES SPECIFIED IN SECTION 10.2. THE ACCOUNT PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE ACCOUNT PARTY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE ACCOUNT PARTY HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THE LOAN DOCUMENTS.

SECTION 10.14. Waiver of Jury Trial. THE ADMINISTRATIVE AGENT, EACH LENDER, THE ISSUER AND THE ACCOUNT PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, EACH LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, SUCH LENDER, THE ISSUER OR THE ACCOUNT PARTY IN CONNECTION THEREWITH. THE ACCOUNT PARTY ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT, EACH LENDER AND THE ISSUER ENTERING INTO THE LOAN DOCUMENTS.

SECTION 10.15. Confidentiality. Each Lender agrees to hold all non-public information obtained pursuant to the requirements of this Agreement in accordance with its customary procedure for handling confidential information of this nature and in accordance with safe and sound banking practices; provided, that nothing herein shall prevent any Credit Party from disclosing such information (i) to any other Credit Party, (ii) to any other Person if reasonably incidental to the administration of the Letters of Credit, (iii) upon the order of any court or administrative agency, (iv) upon the request or demand of any regulatory agency or authority, (v) which had been publicly disclosed other than as a result of a disclosure by any Credit Party prohibited by this Agreement, (vi) in connection with any litigation to which any Credit Party or any of their respective subsidiaries or affiliates may be party, (vii) to the extent necessary in connection with the exercise of any remedy hereunder, (viii) to such Credit Party's affiliates and their respective directors, officers, employees and agents including legal counsel and independent auditors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such information and instructed to keep such information confidential) and (ix) subject to provisions substantially similar to those contained in this Section 9.12, to any actual or proposed Participant or Assignee. Notwithstanding the foregoing, any Credit Party or Mayer, Brown, Rowe & Maw LLP may circulate promotional materials and place advertisements in financial and other newspapers and periodicals or on a home page or similar place for dissemination of information on the Internet or worldwide web, in each case, after the closing of the transactions contemplated by this Agreement in the form of a "tombstone" or other release limited to describing the names of the Account Party or its affiliates, or any of them, and the amount, type and closing date of such transactions, all at their sole expense.

SECTION 10.16. USA PATRIOT Act Notice. Each Lender that is subject to the Patriot Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Account Party that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub.L. 107-56 (signed into law October 26, 2001)) (the "Patriot Act"), it is required to obtain, verify and record information that identifies the Account Party, which information includes the name and address of the Account Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Account Party in accordance with the Patriot Act.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written.

PPL ENERGY SUPPLY, LLC
By:	_________________________________
	Name:
	Title:
Address:		Two North Nine Street
		Allentown, PA 18101-1179
Facsimile No.: (610) 774-5106
Attention:

[SIGNATURE PAGE TO REIMBURSEMENT AGREEMENT]

THE BANK OF NOVA SCOTIA, as the Administrative Agent and the Issuer
By:	_________________________________
	Name:
	Title:
Address:		One Liberty Plaza
		New York, New York 10006
Facsimile No.: (212) 225-5480
Attention:

[SIGNATURE PAGE TO REIMBURSEMENT AGREEMENT]

SCHEDULE I

DISCLOSURE SCHEDULE TO REIMBURSEMENT AGREEMENT

ITEM 6.17 Guarantees

None.

SCHEDULE II

PERCENTAGES;
NAME AND NOTICE ADDRESS

NAME AND NOTICE ADDRESS OF LENDER LC PERCENTAGE

EX-12 3 ppl10q_3-05ex12a.htm

Exhibit 12(a)
PPL CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (Millions of Dollars)
				12 Months Ended March 31,			12 Months Ended December 31,
				2005			2004			2003			2002			2001		2000
Fixed charges, as defined:
	Interest on long-term debt			$	506		$	500		$	417		$	486		$	351	$	323
	Interest on short-term debt and   other interest				25			20			25			71			44		64
	Amortization of debt discount,   expense and premium - net				8			8			41			25			17		5
	Interest on capital lease obligations
		charged to expense																	4
	Estimated interest component of   operating rentals				33			34			52			39			36		25
	Preferred securities distributions of   subsidiaries on a pre-tax basis				5			5			45			79			64		31
			Total fixed charges	$	577		$	567		$	580		$	700		$	512	$	452
Earnings, as defined:
	Net income (a)			$	698		$	708		$	726		$	438		$	167	$	491
	Preferred security dividend    requirements				2			2			29			67			52		26
	Less undistributed income (loss)   of equity method investments				(12	)		(13	)		(18	)		(23	)		20		74
					712			723			773			528			199		443
Add:
	Income taxes				155			195			170			210			261		294
	Amortization of capitalized interest    on capital leases																		2
	Total fixed charges as above   (excluding capitalized interest,   capitalized interest on capital   lease obligations and preferred   security distributions of   subsidiaries on a pre-tax basis)				567			558			528			600			419		405
			Total earnings	$	1,434		$	1,476		$	1,471		$	1,338		$	879	$	1,144
Ratio of earnings to fixed charges					2.5			2.6			2.5			1.9			1.7		2.5
Ratio of earnings to combined fixed   charges and preferred stock   dividends (b)					2.5			2.6			2.5			1.9			1.7		2.5
(a)	Net income excludes extraordinary item, minority interest, loss from discontinued operations and the cumulative effects of changes in accounting principles.
(b)	PPL, the parent holding company, does not have any preferred stock outstanding; therefore, the ratio of earnings to combined fixed charges and preferred stock dividends is the same as the ratio of earnings to fixed charges.

EX-10

Exhibit 10(a)

EX-12

Exhibit 12(a)
PPL CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (Millions of Dollars)
				12 Months Ended March 31,			12 Months Ended December 31,
				2005			2004			2003			2002			2001		2000
Fixed charges, as defined:
	Interest on long-term debt			$	506		$	500		$	417		$	486		$	351	$	323
	Interest on short-term debt and   other interest				25			20			25			71			44		64
	Amortization of debt discount,   expense and premium - net				8			8			41			25			17		5
	Interest on capital lease obligations
		charged to expense																	4
	Estimated interest component of   operating rentals				33			34			52			39			36		25
	Preferred securities distributions of   subsidiaries on a pre-tax basis				5			5			45			79			64		31
			Total fixed charges	$	577		$	567		$	580		$	700		$	512	$	452
Earnings, as defined:
	Net income (a)			$	698		$	708		$	726		$	438		$	167	$	491
	Preferred security dividend    requirements				2			2			29			67			52		26
	Less undistributed income (loss)   of equity method investments				(12	)		(13	)		(18	)		(23	)		20		74
					712			723			773			528			199		443
Add:
	Income taxes				155			195			170			210			261		294
	Amortization of capitalized interest    on capital leases																		2
	Total fixed charges as above   (excluding capitalized interest,   capitalized interest on capital   lease obligations and preferred   security distributions of   subsidiaries on a pre-tax basis)				567			558			528			600			419		405
			Total earnings	$	1,434		$	1,476		$	1,471		$	1,338		$	879	$	1,144
Ratio of earnings to fixed charges					2.5			2.6			2.5			1.9			1.7		2.5
Ratio of earnings to combined fixed   charges and preferred stock   dividends (b)					2.5			2.6			2.5			1.9			1.7		2.5
(a)	Net income excludes extraordinary item, minority interest, loss from discontinued operations and the cumulative effects of changes in accounting principles.
(b)	PPL, the parent holding company, does not have any preferred stock outstanding; therefore, the ratio of earnings to combined fixed charges and preferred stock dividends is the same as the ratio of earnings to fixed charges.

EX-12

Exhibit 12(b)
PPL ENERGY SUPPLY, LLC AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Millions of Dollars)
			12 Months Ended March 31,			12 Months Ended December 31,
			2005			2004			2003			2002			2001		2000
Fixed charges, as defined:
	Interest on long-term debt		$	273		$	264		$	149		$	169		$	36	$	54
	Interest on short-term debt and   other interest			29			23			25			52			33		75
	Amortization of debt discount,   expense and premium - net			(4	)		(5	)		31			9			2		11
	Estimated interest component of   operating rentals			16			17			38			23			19		9
	Preferred securities distributions of   subsidiaries on a pre-tax basis									8			12
		Total fixed charges	$	314		$	299		$	251		$	265		$	90	$	149
Earnings, as defined:
	Net income (a)		$	669		$	661		$	719		$	509		$	168	$	246
	Preferred security dividend    requirement									5			9
	Less undistributed income (loss)   of equity method investments			(11	)		(12	)		(15	)		(22	)		20		74
				680			673			739			540			148		172
Add:
	Income taxes			173			199			185			266			274		125
	Total fixed charges as above   (excluding capitalized interest   and preferred security   distributions of subsidiaries   on a pre-tax basis)			309			294			237			234			66		135
		Total earnings	$	1,162		$	1,166		$	1,161		$	1,040		$	488	$	432
Ratio of earnings to fixed charges				3.7			3.9			4.6			3.9			5.4		2.9
(a)	Net income excludes minority interest, loss from discontinued operations and the cumulative effects of changes in accounting principles.

EX-12

Exhibit 12(c)
PPL ELECTRIC UTILITIES CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Millions of Dollars)
			12 Months Ended March 31,			12 Months Ended December 31,
			2005			2004		2003		2002		2001		2000
Fixed charges, as defined:
	Interest on long-term debt		$	169		$	176	$	201	$	209	$	220	$	223
	Interest on short-term debt and   other interest			18			7		3		3		4		16
	Amortization of debt discount,   expense and premium - net			7			7		8		7		6		4
	Interest on capital lease obligations   charged to expense														4
	Estimated interest component of   operating rentals			8			8		7		7		8		14
	Preferred security distributions of   subsidiaries on a pre-tax basis										13		23		23
		Total fixed charges	$	202		$	198	$	219	$	239	$	261	$	284
Earnings, as defined:
	Net income (a)		$	56		$	74	$	25	$	39	$	114	$	250
	Preferred security dividend   requirements			2			2		3		16		26		26
				58			76		28		55		140		276
Add:
	Income taxes (benefit)			(9	)		8		18		18		65		171
	Amortization of capitalized   interest on capital leases														2
	Total fixed charges as above   (excluding capitalized interest,   capitalized interest on capital   lease obligations and preferred   security distributions of   subsidiaries on a pre-tax basis)			202			197		219		225		238		257
		Total earnings	$	251		$	281	$	265	$	298	$	443	$	706
Ratio of earnings to fixed charges				1.2			1.4		1.2		1.2		1.7		2.5
(a)	Net income excludes extraordinary item and the cumulative effect of a change in accounting principle.

EX-31

Exhibit 31(a)

CERTIFICATION
I, WILLIAM F. HECHT, the principal executive officer of PPL Corporation (the "registrant"), certify that:
1.	I have reviewed this quarterly report on Form 10-Q of the registrant for the quarter ended March 31, 2005;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:  May 4, 2005			/s/  William F. Hecht
			William F. Hecht Chairman, President and Chief Executive Officer PPL Corporation

EX-31

Exhibit 31(b)

CERTIFICATION
I, JOHN R. BIGGAR, the principal financial officer of PPL Corporation (the "registrant"), certify that:
1.	I have reviewed this quarterly report on Form 10-Q of the registrant for the quarter ended March 31, 2005;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:  May 4, 2005			/s/  John R. Biggar
			John R. Biggar Executive Vice President and Chief Financial Officer PPL Corporation

EX-31

Exhibit 31(c)

CERTIFICATION
I, WILLIAM F. HECHT, the principal executive officer of PPL Energy Supply, LLC (the "registrant"), certify that:
1.	I have reviewed this quarterly report on Form 10-Q of the registrant for the quarter ended March 31, 2005;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	c.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:  May 4, 2005			/s/  William F. Hecht
			William F. Hecht President PPL Energy Supply, LLC

EX-31

Exhibit 31(d)

CERTIFICATION
I, JAMES E. ABEL, the principal financial officer of PPL Energy Supply, LLC (the "registrant"), certify that:
1.	I have reviewed this quarterly report on Form 10-Q of the registrant for the quarter ended March 31, 2005;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	c.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:  May 4, 2005			/s/  James E. Abel
			James E. Abel Vice President and Treasurer PPL Energy Supply, LLC

EX-31

Exhibit 31(e)

CERTIFICATION
I, JOHN F. SIPICS, the principal executive officer of PPL Electric Utilities Corporation (the "registrant"), certify that:
1.	I have reviewed this quarterly report on Form 10-Q of the registrant for the quarter ended March 31, 2005;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	c.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:  May 4, 2005			/s/  John F. Sipics
			John F. Sipics President PPL Electric Utilities Corporation

EX-31

Exhibit 31(f)

CERTIFICATION
I, JAMES E. ABEL, the principal financial officer of PPL Electric Utilities Corporation (the "registrant"), certify that:
1.	I have reviewed this quarterly report on Form 10-Q of the registrant for the quarter ended March 31, 2005;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	c.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:  May 4, 2005			/s/  James E. Abel
			James E. Abel Treasurer PPL Electric Utilities Corporation

EX-32

Exhibit 32(a)

CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
FOR PPL CORPORATION'S 10-Q FOR THE QUARTER ENDED MARCH 31, 2005

In connection with the quarterly report on Form 10-Q of PPL Corporation (the "Company") for the quarter ended March 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Covered Report"), I, the principal executive officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that:

• The Covered Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

• The information contained in the Covered Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  May 4, 2005 /s/ William F. Hecht                                   
William F. Hecht
Chairman, President and
Chief Executive Officer
PPL Corporation

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32

Exhibit 32(b)

CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
FOR PPL CORPORATION'S 10-Q FOR THE QUARTER ENDED MARCH 31, 2005

In connection with the quarterly report on Form 10-Q of PPL Corporation (the "Company") for the quarter ended March 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Covered Report"), I, the principal financial officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that:

• The Covered Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

• The information contained in the Covered Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  May 4, 2005 /s/ John R. Biggar                                    
John R. Biggar
Executive Vice President and
Chief Financial Officer
PPL Corporation

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32

Exhibit 32(c)

CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
FOR PPL ENERGY SUPPLY, LLC'S 10-Q FOR THE QUARTER ENDED MARCH 31, 2005

In connection with the quarterly report on Form 10-Q of PPL Energy Supply, LLC (the "Company") for the quarter ended March 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Covered Report"), I, the principal executive officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that:

• The Covered Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

• The information contained in the Covered Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  May 4, 2005 /s/ William F. Hecht                                   
William F. Hecht
President
PPL Energy Supply, LLC

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32

Exhibit 32(d)

CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
FOR PPL ENERGY SUPPLY, LLC'S 10-Q FOR THE QUARTER ENDED MARCH 31, 2005

In connection with the quarterly report on Form 10-Q of PPL Energy Supply, LLC (the "Company") for the quarter ended March 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Covered Report"), I, the principal financial officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that:

• The Covered Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

• The information contained in the Covered Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  May 4, 2005 /s/ James E. Abel                                     
James E. Abel
Vice President and Treasurer
PPL Energy Supply, LLC

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32

Exhibit 32(e)

CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
FOR PPL ELECTRIC UTILITIES CORPORATION'S 10-Q FOR THE QUARTER ENDED MARCH 31, 2005

In connection with the quarterly report on Form 10-Q of PPL Electric Utilities Corporation (the "Company") for the quarter ended March 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Covered Report"), I, the principal executive officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that:

• The Covered Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

• The information contained in the Covered Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  May 4, 2005 /s/ John F. Sipics                                   
John F. Sipics
President
PPL Electric Utilities Corporation

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32

Exhibit 32(f)

CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
FOR PPL ELECTRIC UTILITIES CORPORATION'S 10-Q FOR THE QUARTER ENDED MARCH 31, 2005

In connection with the quarterly report on Form 10-Q of PPL Electric Utilities Corporation (the "Company") for the quarter ended March 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Covered Report"), I, the principal financial officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that:

• The Covered Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

• The information contained in the Covered Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  May 4, 2005 /s/ James E. Abel                                     
James E. Abel
Treasurer
PPL Electric Utilities Corporation

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.