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Related Party Transactions
 3 Months Ended
Mar. 31, 2012
PPL Energy Supply [Member]
  
Related Party Transactions [Line Items]  
Related Party Transactions

11. Related Party Transactions

 

PLR Contracts/Purchase of Accounts Receivable (PPL Energy Supply and PPL Electric)

 

PPL Electric holds competitive solicitations for PLR generation supply. PPL EnergyPlus has been awarded a portion of the PLR generation supply through these competitive solicitations. See Note 10 for additional information on the solicitations. PPL Electric's purchases from PPL EnergyPlus for the three months ended March 31, 2012 and 2011 totaled $22 million and $6 million. The sales and purchases are included in the Statements of Income as "Wholesale energy marketing to affiliate" by PPL Energy Supply, and as "Energy purchases from affiliate" by PPL Electric.

 

Under the standard Supply Master Agreement for the solicitation process, PPL Electric requires all suppliers to post collateral once credit exposures exceed defined credit limits. PPL EnergyPlus is required to post collateral with PPL Electric when the aggregate credit exposure with respect to electricity, capacity and other related products to be delivered by PPL EnergyPlus exceeds a contractual credit limit. Based on the current credit rating and tangible net worth of PPL Energy Supply, as guarantor, PPL EnergyPlus' credit limit was $35 million at March 31, 2012. In no instance is PPL Electric required to post collateral to suppliers under these supply contracts.

 

PPL Electric's customers may choose an alternative supplier for their generation supply. See Note 2 for additional information regarding PPL Electric's purchases of accounts receivable from alternative suppliers, including PPL EnergyPlus.

 

At March 31, 2012, PPL Energy Supply had a net credit exposure of $42 million to PPL Electric from its commitment as a PLR supplier and from the sale of its accounts receivable to PPL Electric.

Wholesale Sales and Purchases (LG&E and KU)

 

LG&E and KU jointly dispatch their generation units with the lowest cost generation used to serve their retail native load. When LG&E has excess generation capacity after serving its own retail native load and its generation cost is lower than that of KU, KU purchases electricity from LG&E. When KU has excess generation capacity after serving its own retail native load and its generation cost is lower than that of LG&E, LG&E purchases electricity from KU. These transactions are reflected in the Statements of Income as "Electric revenue from affiliate" and "Energy purchases from affiliate" and are recorded at a price equal to the seller's fuel cost. Savings realized from such intercompany transactions are shared equally between the two companies. The volume of energy each company has to sell to the other is dependent on its native load needs and its available generation.

Allocations of Corporate Service Costs (PPL Energy Supply, PPL Electric, LKE)

 

PPL Services provides corporate functions such as financial, legal, human resources and information technology services. PPL Services charges the respective PPL subsidiaries for the cost of such services when they can be specifically identified. The cost of the services that is not directly charged to PPL subsidiaries is allocated to applicable subsidiaries based on an average of the subsidiaries' relative invested capital, operation and maintenance expenses and number of employees. PPL Services charged the following amounts, which PPL management believes are reasonable, including amounts applied to accounts that are further distributed between capital and expense:

  Three Months Ended
  March 31,
  2012 2011
       
PPL Energy Supply $ 57 $ 50
PPL Electric   42   39
LKE   5   5

Intercompany Billings by LKS (LG&E and KU)

 

LKS provides LG&E and KU with a variety of centralized administrative, management and support services. The cost of these services is directly charged to the company or, for general costs that cannot be directly attributed, charged based on predetermined allocation factors, including the following measures: number of customers, total assets, revenues, number of employees and/or other statistical information. LKS charged the amounts in the table below, which LKE management believes are reasonable, including amounts that are further distributed between capital and expense:

  Three Months Ended
  March 31,
  2012  2011
        
LG&E $41  $33
KU  46   49

In addition, LG&E and KU provide services to each other and to LKS. Billings between LG&E and KU relate to labor and overheads associated with union and hourly employees performing work for the other company, charges related to jointly-owned generating units and other miscellaneous charges.

Intercompany Borrowings

 

(PPL Energy Supply)

 

A PPL Energy Supply subsidiary periodically holds revolving demand notes from certain affiliates. At March 31, 2012, there were no balances outstanding. At December 31, 2011, a note with PPL Energy Funding had an outstanding balance of $198 million, which was reflected in "Note receivable from affiliate" on the Balance Sheet. Interest earned on these revolving facilities is included in "Interest Income from Affiliates" on the Statements of Income. The interest rates on borrowings are equal to one-month LIBOR plus a spread. For the three months ended March 31, 2012 and 2011, interest earned on borrowings was insignificant.

(LKE)

 

LKE maintains a $300 million revolving demand note with a PPL Energy Supply subsidiary whereby LKE can borrow funds on a short-term basis at market-based rates. The interest rates on borrowings are equal to one-month LIBOR plus a spread. At March 31, 2012 and December 31, 2011, there was no balance outstanding. Interest on the revolving demand note with the PPL Energy Supply subsidiary was not significant for 2012 and 2011.

 

After PPL's acquisition of LKE in November 2010, LKE held a note receivable from a PPL affiliate. At March 31, 2012, $5 million was outstanding compared with $15 million at December 31, 2011. The interest rates on the outstanding borrowings were 2.24% and 2.26% for the three months ended March 31, 2012 and 2011. Interest income on this note was not significant for the three months ended March 31, 2012 and 2011.

 

(LG&E)

 

LG&E participates in an intercompany money pool agreement whereby LKE and/or KU make available to LG&E funds up to $500 million at an interest rate based on a market index of commercial paper issues. At March 31, 2012 and December 31, 2011, there was no balance outstanding. The interest rate for the three months ended March 31, 2012 was 0.41%. Interest expense incurred on the money pool agreement with LKE and/or KU was not significant for the three months ended March 31, 2012 and 2011.

 

(KU)

 

KU participates in an intercompany money pool agreement whereby LKE and/or LG&E make available to KU funds up to $500 million at an interest rate based on a market index of commercial paper issues. At March 31, 2012 and December 31, 2011, there was no balance outstanding. The interest rate for the three months ended March 31, 2012 was 0.41%. Interest expense incurred on the money pool agreement with LKE and/or LG&E was not significant for the three months ended March 31, 2012 and 2011.

Trademark Royalties (PPL Energy Supply)

 

A PPL subsidiary owns PPL trademarks and billed certain affiliates for their use. This agreement was terminated in December 2011. PPL Energy Supply was charged $10 million of this license fee for the three months ended March 31, 2011, which was included primarily in "Other operation and maintenance" on the Statement of Income.

 

Other (PPL Energy Supply, PPL Electric, LKE, LG&E and KU)

 

See Note 7 for a discussion regarding capital transactions by PPL Energy Supply, PPL Electric, LKE, LG&E and KU. For PPL Energy Supply, PPL Electric, LG&E and KU, refer to Note 9 for discussions regarding intercompany allocations associated with defined benefits.

PPL Electric [Member]
  
Related Party Transactions [Line Items]  
Related Party Transactions

11. Related Party Transactions

 

PLR Contracts/Purchase of Accounts Receivable (PPL Energy Supply and PPL Electric)

 

PPL Electric holds competitive solicitations for PLR generation supply. PPL EnergyPlus has been awarded a portion of the PLR generation supply through these competitive solicitations. See Note 10 for additional information on the solicitations. PPL Electric's purchases from PPL EnergyPlus for the three months ended March 31, 2012 and 2011 totaled $22 million and $6 million. The sales and purchases are included in the Statements of Income as "Wholesale energy marketing to affiliate" by PPL Energy Supply, and as "Energy purchases from affiliate" by PPL Electric.

 

Under the standard Supply Master Agreement for the solicitation process, PPL Electric requires all suppliers to post collateral once credit exposures exceed defined credit limits. PPL EnergyPlus is required to post collateral with PPL Electric when the aggregate credit exposure with respect to electricity, capacity and other related products to be delivered by PPL EnergyPlus exceeds a contractual credit limit. Based on the current credit rating and tangible net worth of PPL Energy Supply, as guarantor, PPL EnergyPlus' credit limit was $35 million at March 31, 2012. In no instance is PPL Electric required to post collateral to suppliers under these supply contracts.

 

PPL Electric's customers may choose an alternative supplier for their generation supply. See Note 2 for additional information regarding PPL Electric's purchases of accounts receivable from alternative suppliers, including PPL EnergyPlus.

 

At March 31, 2012, PPL Energy Supply had a net credit exposure of $42 million to PPL Electric from its commitment as a PLR supplier and from the sale of its accounts receivable to PPL Electric.

Wholesale Sales and Purchases (LG&E and KU)

 

LG&E and KU jointly dispatch their generation units with the lowest cost generation used to serve their retail native load. When LG&E has excess generation capacity after serving its own retail native load and its generation cost is lower than that of KU, KU purchases electricity from LG&E. When KU has excess generation capacity after serving its own retail native load and its generation cost is lower than that of LG&E, LG&E purchases electricity from KU. These transactions are reflected in the Statements of Income as "Electric revenue from affiliate" and "Energy purchases from affiliate" and are recorded at a price equal to the seller's fuel cost. Savings realized from such intercompany transactions are shared equally between the two companies. The volume of energy each company has to sell to the other is dependent on its native load needs and its available generation.

Allocations of Corporate Service Costs (PPL Energy Supply, PPL Electric, LKE)

 

PPL Services provides corporate functions such as financial, legal, human resources and information technology services. PPL Services charges the respective PPL subsidiaries for the cost of such services when they can be specifically identified. The cost of the services that is not directly charged to PPL subsidiaries is allocated to applicable subsidiaries based on an average of the subsidiaries' relative invested capital, operation and maintenance expenses and number of employees. PPL Services charged the following amounts, which PPL management believes are reasonable, including amounts applied to accounts that are further distributed between capital and expense:

  Three Months Ended
  March 31,
  2012 2011
       
PPL Energy Supply $ 57 $ 50
PPL Electric   42   39
LKE   5   5

Intercompany Billings by LKS (LG&E and KU)

 

LKS provides LG&E and KU with a variety of centralized administrative, management and support services. The cost of these services is directly charged to the company or, for general costs that cannot be directly attributed, charged based on predetermined allocation factors, including the following measures: number of customers, total assets, revenues, number of employees and/or other statistical information. LKS charged the amounts in the table below, which LKE management believes are reasonable, including amounts that are further distributed between capital and expense:

  Three Months Ended
  March 31,
  2012  2011
        
LG&E $41  $33
KU  46   49

In addition, LG&E and KU provide services to each other and to LKS. Billings between LG&E and KU relate to labor and overheads associated with union and hourly employees performing work for the other company, charges related to jointly-owned generating units and other miscellaneous charges.

Intercompany Borrowings

 

(PPL Energy Supply)

 

A PPL Energy Supply subsidiary periodically holds revolving demand notes from certain affiliates. At March 31, 2012, there were no balances outstanding. At December 31, 2011, a note with PPL Energy Funding had an outstanding balance of $198 million, which was reflected in "Note receivable from affiliate" on the Balance Sheet. Interest earned on these revolving facilities is included in "Interest Income from Affiliates" on the Statements of Income. The interest rates on borrowings are equal to one-month LIBOR plus a spread. For the three months ended March 31, 2012 and 2011, interest earned on borrowings was insignificant.

(LKE)

 

LKE maintains a $300 million revolving demand note with a PPL Energy Supply subsidiary whereby LKE can borrow funds on a short-term basis at market-based rates. The interest rates on borrowings are equal to one-month LIBOR plus a spread. At March 31, 2012 and December 31, 2011, there was no balance outstanding. Interest on the revolving demand note with the PPL Energy Supply subsidiary was not significant for 2012 and 2011.

 

After PPL's acquisition of LKE in November 2010, LKE held a note receivable from a PPL affiliate. At March 31, 2012, $5 million was outstanding compared with $15 million at December 31, 2011. The interest rates on the outstanding borrowings were 2.24% and 2.26% for the three months ended March 31, 2012 and 2011. Interest income on this note was not significant for the three months ended March 31, 2012 and 2011.

 

(LG&E)

 

LG&E participates in an intercompany money pool agreement whereby LKE and/or KU make available to LG&E funds up to $500 million at an interest rate based on a market index of commercial paper issues. At March 31, 2012 and December 31, 2011, there was no balance outstanding. The interest rate for the three months ended March 31, 2012 was 0.41%. Interest expense incurred on the money pool agreement with LKE and/or KU was not significant for the three months ended March 31, 2012 and 2011.

 

(KU)

 

KU participates in an intercompany money pool agreement whereby LKE and/or LG&E make available to KU funds up to $500 million at an interest rate based on a market index of commercial paper issues. At March 31, 2012 and December 31, 2011, there was no balance outstanding. The interest rate for the three months ended March 31, 2012 was 0.41%. Interest expense incurred on the money pool agreement with LKE and/or LG&E was not significant for the three months ended March 31, 2012 and 2011.

Trademark Royalties (PPL Energy Supply)

 

A PPL subsidiary owns PPL trademarks and billed certain affiliates for their use. This agreement was terminated in December 2011. PPL Energy Supply was charged $10 million of this license fee for the three months ended March 31, 2011, which was included primarily in "Other operation and maintenance" on the Statement of Income.

 

Other (PPL Energy Supply, PPL Electric, LKE, LG&E and KU)

 

See Note 7 for a discussion regarding capital transactions by PPL Energy Supply, PPL Electric, LKE, LG&E and KU. For PPL Energy Supply, PPL Electric, LG&E and KU, refer to Note 9 for discussions regarding intercompany allocations associated with defined benefits.

LKE [Member]
  
Related Party Transactions [Line Items]  
Related Party Transactions

11. Related Party Transactions

 

PLR Contracts/Purchase of Accounts Receivable (PPL Energy Supply and PPL Electric)

 

PPL Electric holds competitive solicitations for PLR generation supply. PPL EnergyPlus has been awarded a portion of the PLR generation supply through these competitive solicitations. See Note 10 for additional information on the solicitations. PPL Electric's purchases from PPL EnergyPlus for the three months ended March 31, 2012 and 2011 totaled $22 million and $6 million. The sales and purchases are included in the Statements of Income as "Wholesale energy marketing to affiliate" by PPL Energy Supply, and as "Energy purchases from affiliate" by PPL Electric.

 

Under the standard Supply Master Agreement for the solicitation process, PPL Electric requires all suppliers to post collateral once credit exposures exceed defined credit limits. PPL EnergyPlus is required to post collateral with PPL Electric when the aggregate credit exposure with respect to electricity, capacity and other related products to be delivered by PPL EnergyPlus exceeds a contractual credit limit. Based on the current credit rating and tangible net worth of PPL Energy Supply, as guarantor, PPL EnergyPlus' credit limit was $35 million at March 31, 2012. In no instance is PPL Electric required to post collateral to suppliers under these supply contracts.

 

PPL Electric's customers may choose an alternative supplier for their generation supply. See Note 2 for additional information regarding PPL Electric's purchases of accounts receivable from alternative suppliers, including PPL EnergyPlus.

 

At March 31, 2012, PPL Energy Supply had a net credit exposure of $42 million to PPL Electric from its commitment as a PLR supplier and from the sale of its accounts receivable to PPL Electric.

Wholesale Sales and Purchases (LG&E and KU)

 

LG&E and KU jointly dispatch their generation units with the lowest cost generation used to serve their retail native load. When LG&E has excess generation capacity after serving its own retail native load and its generation cost is lower than that of KU, KU purchases electricity from LG&E. When KU has excess generation capacity after serving its own retail native load and its generation cost is lower than that of LG&E, LG&E purchases electricity from KU. These transactions are reflected in the Statements of Income as "Electric revenue from affiliate" and "Energy purchases from affiliate" and are recorded at a price equal to the seller's fuel cost. Savings realized from such intercompany transactions are shared equally between the two companies. The volume of energy each company has to sell to the other is dependent on its native load needs and its available generation.

Allocations of Corporate Service Costs (PPL Energy Supply, PPL Electric, LKE)

 

PPL Services provides corporate functions such as financial, legal, human resources and information technology services. PPL Services charges the respective PPL subsidiaries for the cost of such services when they can be specifically identified. The cost of the services that is not directly charged to PPL subsidiaries is allocated to applicable subsidiaries based on an average of the subsidiaries' relative invested capital, operation and maintenance expenses and number of employees. PPL Services charged the following amounts, which PPL management believes are reasonable, including amounts applied to accounts that are further distributed between capital and expense:

  Three Months Ended
  March 31,
  2012 2011
       
PPL Energy Supply $ 57 $ 50
PPL Electric   42   39
LKE   5   5

Intercompany Billings by LKS (LG&E and KU)

 

LKS provides LG&E and KU with a variety of centralized administrative, management and support services. The cost of these services is directly charged to the company or, for general costs that cannot be directly attributed, charged based on predetermined allocation factors, including the following measures: number of customers, total assets, revenues, number of employees and/or other statistical information. LKS charged the amounts in the table below, which LKE management believes are reasonable, including amounts that are further distributed between capital and expense:

  Three Months Ended
  March 31,
  2012  2011
        
LG&E $41  $33
KU  46   49

In addition, LG&E and KU provide services to each other and to LKS. Billings between LG&E and KU relate to labor and overheads associated with union and hourly employees performing work for the other company, charges related to jointly-owned generating units and other miscellaneous charges.

Intercompany Borrowings

 

(PPL Energy Supply)

 

A PPL Energy Supply subsidiary periodically holds revolving demand notes from certain affiliates. At March 31, 2012, there were no balances outstanding. At December 31, 2011, a note with PPL Energy Funding had an outstanding balance of $198 million, which was reflected in "Note receivable from affiliate" on the Balance Sheet. Interest earned on these revolving facilities is included in "Interest Income from Affiliates" on the Statements of Income. The interest rates on borrowings are equal to one-month LIBOR plus a spread. For the three months ended March 31, 2012 and 2011, interest earned on borrowings was insignificant.

(LKE)

 

LKE maintains a $300 million revolving demand note with a PPL Energy Supply subsidiary whereby LKE can borrow funds on a short-term basis at market-based rates. The interest rates on borrowings are equal to one-month LIBOR plus a spread. At March 31, 2012 and December 31, 2011, there was no balance outstanding. Interest on the revolving demand note with the PPL Energy Supply subsidiary was not significant for 2012 and 2011.

 

After PPL's acquisition of LKE in November 2010, LKE held a note receivable from a PPL affiliate. At March 31, 2012, $5 million was outstanding compared with $15 million at December 31, 2011. The interest rates on the outstanding borrowings were 2.24% and 2.26% for the three months ended March 31, 2012 and 2011. Interest income on this note was not significant for the three months ended March 31, 2012 and 2011.

 

(LG&E)

 

LG&E participates in an intercompany money pool agreement whereby LKE and/or KU make available to LG&E funds up to $500 million at an interest rate based on a market index of commercial paper issues. At March 31, 2012 and December 31, 2011, there was no balance outstanding. The interest rate for the three months ended March 31, 2012 was 0.41%. Interest expense incurred on the money pool agreement with LKE and/or KU was not significant for the three months ended March 31, 2012 and 2011.

 

(KU)

 

KU participates in an intercompany money pool agreement whereby LKE and/or LG&E make available to KU funds up to $500 million at an interest rate based on a market index of commercial paper issues. At March 31, 2012 and December 31, 2011, there was no balance outstanding. The interest rate for the three months ended March 31, 2012 was 0.41%. Interest expense incurred on the money pool agreement with LKE and/or LG&E was not significant for the three months ended March 31, 2012 and 2011.

Trademark Royalties (PPL Energy Supply)

 

A PPL subsidiary owns PPL trademarks and billed certain affiliates for their use. This agreement was terminated in December 2011. PPL Energy Supply was charged $10 million of this license fee for the three months ended March 31, 2011, which was included primarily in "Other operation and maintenance" on the Statement of Income.

 

Other (PPL Energy Supply, PPL Electric, LKE, LG&E and KU)

 

See Note 7 for a discussion regarding capital transactions by PPL Energy Supply, PPL Electric, LKE, LG&E and KU. For PPL Energy Supply, PPL Electric, LG&E and KU, refer to Note 9 for discussions regarding intercompany allocations associated with defined benefits.

LGE [Member]
  
Related Party Transactions [Line Items]  
Related Party Transactions

11. Related Party Transactions

 

PLR Contracts/Purchase of Accounts Receivable (PPL Energy Supply and PPL Electric)

 

PPL Electric holds competitive solicitations for PLR generation supply. PPL EnergyPlus has been awarded a portion of the PLR generation supply through these competitive solicitations. See Note 10 for additional information on the solicitations. PPL Electric's purchases from PPL EnergyPlus for the three months ended March 31, 2012 and 2011 totaled $22 million and $6 million. The sales and purchases are included in the Statements of Income as "Wholesale energy marketing to affiliate" by PPL Energy Supply, and as "Energy purchases from affiliate" by PPL Electric.

 

Under the standard Supply Master Agreement for the solicitation process, PPL Electric requires all suppliers to post collateral once credit exposures exceed defined credit limits. PPL EnergyPlus is required to post collateral with PPL Electric when the aggregate credit exposure with respect to electricity, capacity and other related products to be delivered by PPL EnergyPlus exceeds a contractual credit limit. Based on the current credit rating and tangible net worth of PPL Energy Supply, as guarantor, PPL EnergyPlus' credit limit was $35 million at March 31, 2012. In no instance is PPL Electric required to post collateral to suppliers under these supply contracts.

 

PPL Electric's customers may choose an alternative supplier for their generation supply. See Note 2 for additional information regarding PPL Electric's purchases of accounts receivable from alternative suppliers, including PPL EnergyPlus.

 

At March 31, 2012, PPL Energy Supply had a net credit exposure of $42 million to PPL Electric from its commitment as a PLR supplier and from the sale of its accounts receivable to PPL Electric.

Wholesale Sales and Purchases (LG&E and KU)

 

LG&E and KU jointly dispatch their generation units with the lowest cost generation used to serve their retail native load. When LG&E has excess generation capacity after serving its own retail native load and its generation cost is lower than that of KU, KU purchases electricity from LG&E. When KU has excess generation capacity after serving its own retail native load and its generation cost is lower than that of LG&E, LG&E purchases electricity from KU. These transactions are reflected in the Statements of Income as "Electric revenue from affiliate" and "Energy purchases from affiliate" and are recorded at a price equal to the seller's fuel cost. Savings realized from such intercompany transactions are shared equally between the two companies. The volume of energy each company has to sell to the other is dependent on its native load needs and its available generation.

Allocations of Corporate Service Costs (PPL Energy Supply, PPL Electric, LKE)

 

PPL Services provides corporate functions such as financial, legal, human resources and information technology services. PPL Services charges the respective PPL subsidiaries for the cost of such services when they can be specifically identified. The cost of the services that is not directly charged to PPL subsidiaries is allocated to applicable subsidiaries based on an average of the subsidiaries' relative invested capital, operation and maintenance expenses and number of employees. PPL Services charged the following amounts, which PPL management believes are reasonable, including amounts applied to accounts that are further distributed between capital and expense:

  Three Months Ended
  March 31,
  2012 2011
       
PPL Energy Supply $ 57 $ 50
PPL Electric   42   39
LKE   5   5

Intercompany Billings by LKS (LG&E and KU)

 

LKS provides LG&E and KU with a variety of centralized administrative, management and support services. The cost of these services is directly charged to the company or, for general costs that cannot be directly attributed, charged based on predetermined allocation factors, including the following measures: number of customers, total assets, revenues, number of employees and/or other statistical information. LKS charged the amounts in the table below, which LKE management believes are reasonable, including amounts that are further distributed between capital and expense:

  Three Months Ended
  March 31,
  2012  2011
        
LG&E $41  $33
KU  46   49

In addition, LG&E and KU provide services to each other and to LKS. Billings between LG&E and KU relate to labor and overheads associated with union and hourly employees performing work for the other company, charges related to jointly-owned generating units and other miscellaneous charges.

Intercompany Borrowings

 

(PPL Energy Supply)

 

A PPL Energy Supply subsidiary periodically holds revolving demand notes from certain affiliates. At March 31, 2012, there were no balances outstanding. At December 31, 2011, a note with PPL Energy Funding had an outstanding balance of $198 million, which was reflected in "Note receivable from affiliate" on the Balance Sheet. Interest earned on these revolving facilities is included in "Interest Income from Affiliates" on the Statements of Income. The interest rates on borrowings are equal to one-month LIBOR plus a spread. For the three months ended March 31, 2012 and 2011, interest earned on borrowings was insignificant.

(LKE)

 

LKE maintains a $300 million revolving demand note with a PPL Energy Supply subsidiary whereby LKE can borrow funds on a short-term basis at market-based rates. The interest rates on borrowings are equal to one-month LIBOR plus a spread. At March 31, 2012 and December 31, 2011, there was no balance outstanding. Interest on the revolving demand note with the PPL Energy Supply subsidiary was not significant for 2012 and 2011.

 

After PPL's acquisition of LKE in November 2010, LKE held a note receivable from a PPL affiliate. At March 31, 2012, $5 million was outstanding compared with $15 million at December 31, 2011. The interest rates on the outstanding borrowings were 2.24% and 2.26% for the three months ended March 31, 2012 and 2011. Interest income on this note was not significant for the three months ended March 31, 2012 and 2011.

 

(LG&E)

 

LG&E participates in an intercompany money pool agreement whereby LKE and/or KU make available to LG&E funds up to $500 million at an interest rate based on a market index of commercial paper issues. At March 31, 2012 and December 31, 2011, there was no balance outstanding. The interest rate for the three months ended March 31, 2012 was 0.41%. Interest expense incurred on the money pool agreement with LKE and/or KU was not significant for the three months ended March 31, 2012 and 2011.

 

(KU)

 

KU participates in an intercompany money pool agreement whereby LKE and/or LG&E make available to KU funds up to $500 million at an interest rate based on a market index of commercial paper issues. At March 31, 2012 and December 31, 2011, there was no balance outstanding. The interest rate for the three months ended March 31, 2012 was 0.41%. Interest expense incurred on the money pool agreement with LKE and/or LG&E was not significant for the three months ended March 31, 2012 and 2011.

Trademark Royalties (PPL Energy Supply)

 

A PPL subsidiary owns PPL trademarks and billed certain affiliates for their use. This agreement was terminated in December 2011. PPL Energy Supply was charged $10 million of this license fee for the three months ended March 31, 2011, which was included primarily in "Other operation and maintenance" on the Statement of Income.

 

Other (PPL Energy Supply, PPL Electric, LKE, LG&E and KU)

 

See Note 7 for a discussion regarding capital transactions by PPL Energy Supply, PPL Electric, LKE, LG&E and KU. For PPL Energy Supply, PPL Electric, LG&E and KU, refer to Note 9 for discussions regarding intercompany allocations associated with defined benefits.

KU [Member]
  
Related Party Transactions [Line Items]  
Related Party Transactions

11. Related Party Transactions

 

PLR Contracts/Purchase of Accounts Receivable (PPL Energy Supply and PPL Electric)

 

PPL Electric holds competitive solicitations for PLR generation supply. PPL EnergyPlus has been awarded a portion of the PLR generation supply through these competitive solicitations. See Note 10 for additional information on the solicitations. PPL Electric's purchases from PPL EnergyPlus for the three months ended March 31, 2012 and 2011 totaled $22 million and $6 million. The sales and purchases are included in the Statements of Income as "Wholesale energy marketing to affiliate" by PPL Energy Supply, and as "Energy purchases from affiliate" by PPL Electric.

 

Under the standard Supply Master Agreement for the solicitation process, PPL Electric requires all suppliers to post collateral once credit exposures exceed defined credit limits. PPL EnergyPlus is required to post collateral with PPL Electric when the aggregate credit exposure with respect to electricity, capacity and other related products to be delivered by PPL EnergyPlus exceeds a contractual credit limit. Based on the current credit rating and tangible net worth of PPL Energy Supply, as guarantor, PPL EnergyPlus' credit limit was $35 million at March 31, 2012. In no instance is PPL Electric required to post collateral to suppliers under these supply contracts.

 

PPL Electric's customers may choose an alternative supplier for their generation supply. See Note 2 for additional information regarding PPL Electric's purchases of accounts receivable from alternative suppliers, including PPL EnergyPlus.

 

At March 31, 2012, PPL Energy Supply had a net credit exposure of $42 million to PPL Electric from its commitment as a PLR supplier and from the sale of its accounts receivable to PPL Electric.

Wholesale Sales and Purchases (LG&E and KU)

 

LG&E and KU jointly dispatch their generation units with the lowest cost generation used to serve their retail native load. When LG&E has excess generation capacity after serving its own retail native load and its generation cost is lower than that of KU, KU purchases electricity from LG&E. When KU has excess generation capacity after serving its own retail native load and its generation cost is lower than that of LG&E, LG&E purchases electricity from KU. These transactions are reflected in the Statements of Income as "Electric revenue from affiliate" and "Energy purchases from affiliate" and are recorded at a price equal to the seller's fuel cost. Savings realized from such intercompany transactions are shared equally between the two companies. The volume of energy each company has to sell to the other is dependent on its native load needs and its available generation.

Allocations of Corporate Service Costs (PPL Energy Supply, PPL Electric, LKE)

 

PPL Services provides corporate functions such as financial, legal, human resources and information technology services. PPL Services charges the respective PPL subsidiaries for the cost of such services when they can be specifically identified. The cost of the services that is not directly charged to PPL subsidiaries is allocated to applicable subsidiaries based on an average of the subsidiaries' relative invested capital, operation and maintenance expenses and number of employees. PPL Services charged the following amounts, which PPL management believes are reasonable, including amounts applied to accounts that are further distributed between capital and expense:

  Three Months Ended
  March 31,
  2012 2011
       
PPL Energy Supply $ 57 $ 50
PPL Electric   42   39
LKE   5   5

Intercompany Billings by LKS (LG&E and KU)

 

LKS provides LG&E and KU with a variety of centralized administrative, management and support services. The cost of these services is directly charged to the company or, for general costs that cannot be directly attributed, charged based on predetermined allocation factors, including the following measures: number of customers, total assets, revenues, number of employees and/or other statistical information. LKS charged the amounts in the table below, which LKE management believes are reasonable, including amounts that are further distributed between capital and expense:

  Three Months Ended
  March 31,
  2012  2011
        
LG&E $41  $33
KU  46   49

In addition, LG&E and KU provide services to each other and to LKS. Billings between LG&E and KU relate to labor and overheads associated with union and hourly employees performing work for the other company, charges related to jointly-owned generating units and other miscellaneous charges.

Intercompany Borrowings

 

(PPL Energy Supply)

 

A PPL Energy Supply subsidiary periodically holds revolving demand notes from certain affiliates. At March 31, 2012, there were no balances outstanding. At December 31, 2011, a note with PPL Energy Funding had an outstanding balance of $198 million, which was reflected in "Note receivable from affiliate" on the Balance Sheet. Interest earned on these revolving facilities is included in "Interest Income from Affiliates" on the Statements of Income. The interest rates on borrowings are equal to one-month LIBOR plus a spread. For the three months ended March 31, 2012 and 2011, interest earned on borrowings was insignificant.

(LKE)

 

LKE maintains a $300 million revolving demand note with a PPL Energy Supply subsidiary whereby LKE can borrow funds on a short-term basis at market-based rates. The interest rates on borrowings are equal to one-month LIBOR plus a spread. At March 31, 2012 and December 31, 2011, there was no balance outstanding. Interest on the revolving demand note with the PPL Energy Supply subsidiary was not significant for 2012 and 2011.

 

After PPL's acquisition of LKE in November 2010, LKE held a note receivable from a PPL affiliate. At March 31, 2012, $5 million was outstanding compared with $15 million at December 31, 2011. The interest rates on the outstanding borrowings were 2.24% and 2.26% for the three months ended March 31, 2012 and 2011. Interest income on this note was not significant for the three months ended March 31, 2012 and 2011.

 

(LG&E)

 

LG&E participates in an intercompany money pool agreement whereby LKE and/or KU make available to LG&E funds up to $500 million at an interest rate based on a market index of commercial paper issues. At March 31, 2012 and December 31, 2011, there was no balance outstanding. The interest rate for the three months ended March 31, 2012 was 0.41%. Interest expense incurred on the money pool agreement with LKE and/or KU was not significant for the three months ended March 31, 2012 and 2011.

 

(KU)

 

KU participates in an intercompany money pool agreement whereby LKE and/or LG&E make available to KU funds up to $500 million at an interest rate based on a market index of commercial paper issues. At March 31, 2012 and December 31, 2011, there was no balance outstanding. The interest rate for the three months ended March 31, 2012 was 0.41%. Interest expense incurred on the money pool agreement with LKE and/or LG&E was not significant for the three months ended March 31, 2012 and 2011.

Trademark Royalties (PPL Energy Supply)

 

A PPL subsidiary owns PPL trademarks and billed certain affiliates for their use. This agreement was terminated in December 2011. PPL Energy Supply was charged $10 million of this license fee for the three months ended March 31, 2011, which was included primarily in "Other operation and maintenance" on the Statement of Income.

 

Other (PPL Energy Supply, PPL Electric, LKE, LG&E and KU)

 

See Note 7 for a discussion regarding capital transactions by PPL Energy Supply, PPL Electric, LKE, LG&E and KU. For PPL Energy Supply, PPL Electric, LG&E and KU, refer to Note 9 for discussions regarding intercompany allocations associated with defined benefits.