Derivative Instruments and Hedging Activities (Tables)

12 Months Ended

Dec. 31, 2011

Derivative Instruments and Hedging Activities [Abstract]

Commodity Price Risk (Non-trading) - Economic Activity - Pre-tax Gains (Losses) Associated with Economic Activity

The unrealized gains (losses) for economic activity are as follows.

		2011		2010		2009
Operating Revenues
	Unregulated retail electric and gas	$	31	$	1	$	6
	Wholesale energy marketing		1,407		(805)		(229)
Operating Expenses
	Fuel		6		29		49
	Energy purchases		(1,123)		286		(155)

Commodity Volumetric Activity - Sales of Baseload Generation - Expected Sales, in GWh, of Baseload Generation

The following table presents the expected sales, in GWh, from competitive baseload generation and tolling arrangements that are included in the baseload portfolio based on current forecasted assumptions for 2012-2014. These expected sales could be impacted by several factors, including plant availability.

2012	2013	2014
53,737	53,136	53,502

Commodity Volumetric Activity - Sales of Baseload Generation - Percentage of Expected Baseload Generation Sales

The following table presents the percentage of expected baseload generation sales shown above that has been sold forward under fixed price contracts and the related percentage of fuel that has been purchased or committed at December 31, 2011.

	Derivative	Total Power	Fuel Purchases (c)
Year	Sales (a)	Sales (b)	Coal	Nuclear
2012	85%	93%	98%	100%
2013	63%	71%	89%	100%
2014 (d)	4%	10%	62%	100%

(a)       Excludes non-derivative contracts and contracts that qualify for NPNS. Volumes for option contracts factor in the probability of an option being exercised and may be less than the notional amount of the option.

(b)       Amount represents derivative (including contracts that qualify for NPNS) and non-derivative contracts. Volumes for option contracts factor in the probability of an option being exercised and may be less than the notional amount of the option.Percentages are based on fixed-price contracts only.

(c)       Coal and nuclear contracts receive accrual accounting treatment, as they are not derivative contracts. Percentages are based on both fixed- and variable-priced contracts.

(d)       Volumes for derivative sales contracts that deliver in future periods total 1,541GWh and 7.2 Bcf.

Commodity Volumetric Activity - Sales of Baseload Generation - Economic Hedges Related to Fuel Price Risk

The following table presents the net volumes (in thousands of barrels) of derivative (sales)/purchase contracts used in support of these strategies at December 31, 2011.

	2012	2013	2014
Oil Swaps	591	540	240

Commodity Volumetric Activity - Optimization of Intermediate and Peaking Generation

The following table presents the net volumes of derivative (sales)/purchase contracts used in support of this strategy at December 31, 2011.

	Units	2012	2013	2014 (a)
Power Sales	GWh	(2,860)	(1,224)	(408)
Fuel Purchases (b)	Bcf	27.1	8.1	2.5

(a)       Volumes for derivative contracts used in support of these strategies that deliver in future periods are insignificant.

(b)       Included in these volumes are non-options and exercised option contracts that converted to non-option derivative contracts.Volumes associated with option contracts are not significant.

Commodity Volumetric Activity - Marketing Activities

The following table presents the volume of (sales)/purchase contracts, excluding FTRs, RECs, basis and capacity contracts, used in support of these activities at December 31, 2011.

		Units	2012	2013	2014
Energy sales contracts (a)		GWh	(16,235)	(6,524)	(3,681)
Related energy supply contracts (a)
	Energy purchases	GWh	10,658	1,359	136
	Volumetric hedges (b)	GWh	254	128	93
	Generation supply	GWh	5,389	4,462	3,259
Retail gas sales contracts		Bcf	(13.5)	(2.6)	(0.7)
Retail gas purchase contracts		Bcf	13.2	2.5	0.7

(a)       Includes NPNS and contracts that are not derivatives, which receive accrual accounting.

(b)       PPL Energy Supply uses power and gas options, swaps and futures to hedge the volumetric risk associated with full-requirement sales contracts since the demand for power varies hourly. Volumes for option contracts factor in the probability of an option being exercised and may be less than the notional amount of the option.

Commodity Volumetric Activity - FTRs and Other Basis Positions

The following table presents the net volumes of derivative FTR and basis (sales)/purchase contracts at December 31, 2011.

	Units	2012	2013	2014
FTRs	GWh	16,562
Power Basis Positions (a)	GWh	(18,035)	(8,343)	(2,628)
Gas Basis Positions (a)	Bcf	11.0	(5.2)	(0.9)

(a)       Net volumes that deliver in future periods are (677) GWh and (5.1) Bcf.

Commodity Volumetric Activity - Capacity Positions

The following table presents the net volumes of derivative capacity (sales)/purchase contracts at December 31, 2011.

	Units	2012	2013	2014 (a)
Capacity	MW-months	(7,797)	(3,108)	(2,578)

(a)       Volumes that deliver in future periods are 989MW-months.

Fair Value and Balance Sheet Location of Derivative Instruments

The following tables present the fair value and location of derivative instruments recorded on the Balance Sheets.

						December 31, 2011								December 31, 2010
						Derivatives designated as				Derivatives not designated				Derivatives designated as				Derivatives not designated
						hedging instruments				as hedging instruments (a)				hedging instruments				as hedging instruments (a)
						Assets		Liabilities		Assets		Liabilities		Assets		Liabilities		Assets		Liabilities
Current:
	Price Risk Management
		Assets/Liabilities (b):
			Interest rate swaps			$	3	$	3			$	5	$	11	$	19			$	2
			Cross-currency swaps						2						7		9
			Foreign currency
				exchange contracts			7			$	11				7			$	4
			Commodity contracts				872		3		1,655		1,557		878		19		1,011		1,095
					Total current		882		8		1,666		1,562		903		47		1,015		1,097
Noncurrent:
	Price Risk Management
		Assets/Liabilities (b):
			Interest rate swaps										55		4						32
			Cross-currency swaps				24								37
			Commodity contracts				42		2		854		783		169		7		445		431
					Total noncurrent		66		2		854		838		210		7		445		463
Total derivatives						$	948	$	10	$	2,520	$	2,400	$	1,113	$	54	$	1,460	$	1,560

(a)       $237 million and $326 million of net gains associated with derivatives that were no longer designated as hedging instruments are recorded in AOCI at December 31, 2011 and 2010.

(b)       Represents the location on the Balance Sheet.

Pre-tax Gain (Loss) on Derivative Instruments Recognized in Income or OCI

The following tables present the pre-tax effect of derivative instruments recognized in income, OCI or regulatory assets.

	Derivatives in	Hedged Items in	Location of Gain
	Fair Value Hedging	Fair Value Hedging	(Loss) Recognized	Gain (Loss) Recognized		Gain (Loss) Recognized
	Relationships	Relationships	in Income	in Income on Derivative		in Income on Related Item
2011
	Interest rate swaps	Fixed rate debt	Interest expense	$	2	$	25
			Other Income - net				22
2010
	Interest rate swaps	Fixed rate debt	Interest expense	$	48	$	(6)
2009
	Interest rate swaps	Fixed rate debt	Interest expense	$	12	$	29
			Other Income - net				7

									Gain (Loss) Recognized
									in Income on Derivative
				Derivative Gain			Gain (Loss) Reclassified		(Ineffective Portion and
			Derivative	(Loss) Recognized in		Location of Gain (Loss)	from AOCI into Income		Amount Excluded from
			Relationships	OCI (Effective Portion)		Recognized in Income	(Effective Portion)		Effectiveness Testing)
2011
	Cash Flow Hedges:
		Interest rate swaps		$	(55)	Interest expense	$	(13)	$	(13)
		Cross-currency swaps			(35)	Interest expense		5
						Other income (expense) - net		29
		Commodity contracts			431	Wholesale energy marketing		835		(39)
						Fuel		1
						Depreciation		2
						Energy purchases		(243)		1
	Total			$	341		$	616	$	(51)
	Net Investment Hedges:
		Foreign exchange contracts		$	6
2010
	Cash Flow Hedges:
		Interest rate swaps		$	(145)	Interest expense	$	(4)	$	(17)
						Other income (expense) - net		(30)
		Cross-currency swaps			25	Interest expense		2
						Other income (expense) - net		16
		Commodity contracts			487	Wholesale energy marketing		680		(201)
						Fuel		2
						Depreciation		2
						Energy purchases		(458)		3
	Total			$	367		$	210	$	(215)
	Net Investment Hedges:
		Foreign exchange contracts		$	5
2009
	Cash Flow Hedges:
		Interest rate swaps		$	64	Interest expense	$	(2)
						Other income (expense) - net		1
		Cross-currency swaps			(45)	Interest expense		2
						Other income (expense) - net		(20)
		Commodity contracts			829	Wholesale energy marketing		358	$	(296)
						Fuel		(20)		2
						Depreciation		1
						Energy purchases		(544)		(7)
						Other O&M		1
	Total			$	848		$	(223)	$	(301)
	Net Investment Hedges:
		Foreign exchange contracts		$	(9)

Derivatives Not Designated as	Location of Gain (Loss) Recognized in
Hedging Instruments:	Income on Derivatives		2011		2010		2009
Foreign exchange contracts	Other income (expense) - net	$	65	$	3	$	(9)
Interest rate swaps	Interest expense		(8)
Commodity contracts	Utility		(1)		(2)
	Unregulated retail electric and gas		39		11		13
	Wholesale energy marketing		1,606		(70)		588
	Net energy trading margins (a)		(6)		1
	Fuel		(1)		12		12
	Energy purchases		(1,493)		(405)		(808)
	Total	$	201	$	(450)	$	(204)
Derivatives Not Designated as	Location of Gain (Loss) Recognized as
Hedging Instruments:	Regulatory Liabilities/Assets		2011		2010		2009
Interest rate swaps	Regulatory assets - noncurrent	$	(26)	$	(11)

(a)       Differs from the Statement of Income due to intra-month transactions that PPL defines as spot activity, which is not accounted for as a derivative.

Credit Risk-Related Contingent Features

At December 31, 2011, the effect of a decrease in credit ratings below investment grade on derivative contracts that contain credit contingent features and were in a net liability position is summarized as follows:

				PPL
		PPL		Energy Supply		LKE		LG&E
Aggregate fair value of derivative instruments in a net liability
	position with credit risk-related contingent provisions	$	156	$	118	$	39	$	39
Aggregate fair value of collateral posted on these derivative instruments			38		9		29		29
Aggregate fair value of additional collateral requirements in the event of
	a credit downgrade below investment grade (a)		183		173		10		10

(a)Includes the effect of net receivables and payables already recorded on the Balance Sheet.