WPD has recorded conditional AROs required by U.K. law related to treated wood poles, gas-filled switchgear and fluid-filled cables.

PPL Energy Supply has recorded liabilities in the financial statements to reflect various legal obligations associated with the retirement of long-lived assets, the most significant of which relates to the decommissioning of the Susquehanna plant. The accrued nuclear decommissioning obligation was $292 million and $270 million at December 31, 2011 and 2010, and is included in "Asset retirement obligations" on the Balance Sheets. The fair value of investments that are legally restricted for the decommissioning of the Susquehanna nuclear plant was $640 million and $618 million at December 31, 2011 and 2010, and is included in "Nuclear plant decommissioning trust funds" on the Balance Sheets. See Notes 18 and 23 for additional information on the nuclear decommissioning trust funds. Other AROs recorded relate to various environmental requirements for coal piles, ash basins and other waste basin retirements.

PPL Energy Supply has recorded several conditional AROs, the most significant of which related to the removal and disposal of asbestos-containing material. In addition to the AROs that were recorded for asbestos-containing material, PPL Energy Supply identified other asbestos-related obligations, but were unable to reasonably estimate their fair values. PPL Energy Supply management was unable to reasonably estimate a settlement date or range of settlement dates for the remediation of all of the asbestos-containing material at certain of the generation plants. If economic events or other circumstances change that enable PPL Energy Supply to reasonably estimate the fair value of these retirement obligations, they will be recorded at that time.

PPL Energy Supply also identified legal retirement obligations associated with the retirement of a reservoir that could not be reasonably estimated due to an indeterminable settlement date.

PPL Electric has identified legal retirement obligations for the retirement of certain transmission assets that could not be reasonably estimated due to indeterminable settlement dates. These assets are located on rights-of-way that allow the grantor to require PPL Electric to relocate or remove the assets. Since this option is at the discretion of the grantor of the right-of-way, PPL Electric is unable to determine when these events may occur.

LG&E's and KU's AROs are primarily related to the final retirement of assets associated with generating units. LG&E also has AROs related to natural gas mains and wells. LG&E's and KU's transmission and distribution lines largely operate under perpetual property easement agreements which do not generally require restoration upon removal of the property. Therefore, no material AROs are recorded for transmission and distribution assets. As described in Notes 1 and 6, the accretion expense recorded by LG&E and KU is offset with a regulatory credit on the income statement, such that there is no earnings impact.


		PPL				PPL Energy Supply
		2011		2010		2011		2010

ARO at beginning of period		$	448	$	426	$	345	$	426
	Accretion expense		33		32		26		31
	Obligations assumed in acquisition of LKE				103
	Obligations assumed in acquisition of WPD Midlands (a)		15
	Derecognition (b)						(5)
	Obligations incurred		14		4		11		4
	Changes in estimated cash flow or settlement date		5		(100)		(1)		(100)
	Obligations settled		(18)		(17)		(17)		(16)
ARO at end of period		$	497	$	448	$	359	$	345

		LKE		LG&E		KU

ARO at December 31, 2009, Predecessor		$	65	$	31	$	34
	Accretion expense		4		2		2
	Changes in estimated cash flow or settlement date		54		30		24
	Obligations settled		(1)		(1)
ARO at October 31, 2010, Predecessor			122		62		60
	Purchase accounting		(19)		(13)		(6)
ARO at December 31, 2010, Successor			103		49		54
	Accretion expense		6		3		3
	Obligations incurred		3		2		1
	Changes in estimated cash flow or settlement date		7		4		3
	Obligations settled		(1)		(1)
ARO at December 31, 2011, Successor		$	118	$	57	$	61

(a) Obligations required under U.K. law related to treated wood poles, gas-filled switchgear and fluid-filled cables. See Note 10 for additional information on the acquisition.

(b) Represents AROs derecognized as a result of PPL Energy Supply's distribution of its membership interest in PPL Global to PPL Energy Supply's parent, PPL Energy Funding. See Note 9 for additional information on the distribution.

In the third quarter of 2010, PPL Susquehanna completed a site-specific study to update the estimated cost to dismantle and decommission each Susquehanna nuclear unit immediately following final shutdown. This estimate included decommissioning the radiological portions of the station and the cost of removal of non-radiological structures and materials. Based on this study, which used a methodology consistent with the prior site-specific study done in 2002, the decommissioning ARO liability and the associated long-lived asset were reduced by $103 million. The primary factor for this decline was the lower estimated inflation rate assumption used in the 2010 ARO calculation.

The classification of AROs on the Balance Sheets was as follows.

		December 31, 2011
				PPL Energy
		PPL		Supply		LKE		LG&E		KU

Current portion (a)		$	13	$	10	$	2	$	2
Long-term portion (b)			484		349		116		55	$	61
	Total	$	497	$	359	$	118	$	57	$	61


		December 31, 2010
				PPL Energy
		PPL		Supply		LKE		LG&E		KU

Current portion (a)		$	13	$	13
Long-term portion (b)			435		332	$	103	$	49	$	54
	Total	$	448	$	345	$	103	$	49	$	54