Fair Value Measurements and Credit Concentration (Tables)

3 Months Ended

Mar. 31, 2012

Fair Value Measurements and Credit Concentration [Abstract]

Fair Value of Assets and Liabilities Measured on Recurring Basis

The assets and liabilities measured at fair value were:

				March 31, 2012								December 31, 2011
				Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
PPL
Assets
	Cash and cash equivalents			$	1,103	$	1,103					$	1,202	$	1,202
	Restricted cash and cash equivalents (a)				230		230						209		209
	Price risk management assets:
		Energy commodities			4,371		2	$	4,336	$	33		3,423		3	$	3,390	$	30
		Interest rate swaps			3				3				3				3
		Foreign currency contracts			5				5				18				18
		Cross-currency swaps			37				34		3		24				20		4
	Total price risk management assets				4,416		2		4,378		36		3,468		3		3,431		34
	NDT funds:
		Cash and cash equivalents			8		8						12		12
		Equity securities
			U.S. large-cap		329		228		101				292		202		90
			U.S. mid/small-cap		133		98		35				117		87		30
		Debt securities
			U.S. Treasury		87		87						86		86
			U.S. government sponsored agency		10				10				10				10
			Municipality		84				84				83				83
			Investment-grade corporate		38				38				38				38
			Other		2				2				2				2
		Receivables (payables), net			2				2						(3)		3
	Total NDT funds				693		421		272				640		384		256
	Auction rate securities (b)				24						24		24						24
Total assets				$	6,466	$	1,756	$	4,650	$	60	$	5,543	$	1,798	$	3,687	$	58

Liabilities
	Price risk management liabilities:
		Energy commodities		$	3,154	$	2	$	3,138	$	14	$	2,345	$	1	$	2,327	$	17
		Interest rate swaps			54				54				63				63
		Foreign currency contracts			13				13
		Cross-currency swaps			2				2				2				2
	Total price risk management liabilities			$	3,223	$	2	$	3,207	$	14	$	2,410	$	1	$	2,392	$	17

PPL Energy Supply
Assets
	Cash and cash equivalents			$	135	$	135					$	379	$	379
	Restricted cash and cash equivalents				164		164						145		145
	Price risk management assets:
		Energy commodities			4,371		2	$	4,336	$	33		3,423		3	$	3,390	$	30
	Total price risk management assets				4,371		2		4,336		33		3,423		3		3,390		30
	NDT funds:
		Cash and cash equivalents			8		8						12		12
		Equity securities
			U.S. large-cap		329		228		101				292		202		90
			U.S. mid/small-cap		133		98		35				117		87		30
		Debt securities
			U.S. Treasury		87		87						86		86
			U.S. government sponsored agency		10				10				10				10
			Municipality		84				84				83				83
			Investment-grade corporate		38				38				38				38
			Other		2				2				2				2
		Receivables (payables), net			2				2						(3)		3
	Total NDT funds				693		421		272				640		384		256
	Auction rate securities (b)				19						19		19						19
Total assets				$	5,382	$	722	$	4,608	$	52	$	4,606	$	911	$	3,646	$	49

Liabilities
	Price risk management liabilities:
		Energy commodities		$	3,154	$	2	$	3,138	$	14	$	2,345	$	1	$	2,327	$	17
	Total price risk management liabilities			$	3,154	$	2	$	3,138	$	14	$	2,345	$	1	$	2,327	$	17

PPL Electric
Assets
	Cash and cash equivalents			$	149	$	149					$	320	$	320
	Restricted cash and cash equivalents (c)				13		13						13		13
Total assets				$	162	$	162					$	333	$	333

(a) Current portion is included in "Restricted cash and cash equivalents" and long-term portion is included in "Other noncurrent assets" on the Balance Sheets.

(b) Included in "Other investments" on the Balance Sheets.

Reconciliation of Net Assets and Liabilities Classified as Level 3

A reconciliation of net assets and liabilities classified as Level 3 for the three months ended March 31 is as follows:

			Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
			2012								2011
			Energy		Auction		Cross-				Energy		Auction
			Commodities,		Rate		Currency				Commodities,		Rate
			net		Securities		Swaps		Total		net		Securities		Total
PPL
Balance at beginning of period			$	13	$	24	$	4	$	41	$	(3)	$	25	$	22
	Total realized/unrealized gains (losses)
		Included in earnings		18						18		1				1
		Included in OCI (a)		2				2		4		1				1
	Purchases											2				2
	Sales											(3)				(3)
	Settlements			(6)						(6)		22				22
	Transfers out of Level 3			(8)				(3)		(11)		12				12
Balance at end of period			$	19	$	24	$	3	$	46	$	32	$	25	$	57

PPL Energy Supply
Balance at beginning of period			$	13	$	19			$	32	$	(3)	$	20	$	17
	Total realized/unrealized gains (losses)
		Included in earnings		18						18		1				1
		Included in OCI (a)		2						2		1				1
	Purchases											2				2
	Sales											(3)				(3)
	Settlements			(6)						(6)		22				22
	Transfers out of Level 3			(8)						(8)		12				12
Balance at end of period			$	19	$	19			$	38	$	32	$	20	$	52

(a) "Energy Commodities" and "Cross-Currency Swaps" are included in "Qualifying derivatives" on the Statements of Comprehensive Income.

Significant Unobservable Inputs Used in Fair Value Measurement of Assets and Liabilities Classified as Level 3

The significant unobservable inputs used in the fair value measurement of assets and liabilities classified as Level 3 for the three months ended March 31 are as follows:

Quantitative Information about Level 3 Fair Value Measurements

2012

Fair Value, net

Range

Asset

Valuation

Unobservable

(Weighted

(Liability)

Technique

Input(s)

Average) (a)

PPL

Energy commodities

Retail natural gas contracts (b)

Discounted cash flow

Observable wholesale prices used as proxy for retail delivery points

20% - 100% (69%)

Electric contracts (c)

(6)

Discounted cash flow

Basis price between delivery points

28% - 33% (28%)

Other contracts (d)

(4)

Discounted cash flow

Various

22% - 100% (65%)

Auction rate securities (e)

Discounted cash flow

Modeled from SIFMA Index

15% - 90% (66%)

Cross-currency swaps (f)

Discounted cash flow

Credit valuation adjustment

23% - 37% (32%)

PPL Energy Supply

Energy commodities

Retail natural gas contracts (b)

Discounted cash flow

Observable wholesale prices used as proxy for retail delivery points

20% - 100% (69%)

Electric contracts (c)

(6)

Discounted cash flow

Basis price between delivery points

28% - 33% (28%)

Other contracts (d)

(4)

Discounted cash flow

Various

22% - 100% (65%)

Auction rate securities (e)

Discounted cash flow

Modeled from SIFMA Index

15% - 90% (65%)

(a) For energy commodities and auction rate securities, the range and weighted average represent the percentage of fair value derived from the unobservable inputs. For cross-currency swaps, the range and weighted average represent the percentage decrease in fair value due to the unobservable inputs used in the model to calculate the credit valuation adjustment.

(b) Retail natural gas contracts extend through 2017. $15 million of the fair value is scheduled to deliver within the next 12 months. As the price of natural gas increases/(decreases), the fair value of the contracts (decreases)/increases.

(c) Electric contracts extend through 2014. $(3) million of the fair value is scheduled to deliver within the next 12 months. As the price of electric increases/(decreases), the fair value of the contracts (decreases)/increases.

(d) Other includes FTR and capacity contracts. The models used to calculate the fair value of these contracts use historical settlement prices and extrapolation of observable forward curves. Increases/(decreases) in the historical settled prices or forward prices will (decrease)/increase the fair value.

(e) Auction rate securities have a weighted average contractual maturity of 24 years. The model used to calculate fair value incorporates significant assumptions, including the assumptions that the auctions will continue to fail and that the securities will be held to maturity. As the modeled forward rates of the SIFMA Index increase/(decrease), the fair value of the securities increases/(decreases).

(f) Cross-currency swaps extend through 2021. The credit valuation adjustment incorporates projected probabilities of default and estimated recovery rates. As the credit valuation adjustment increases/(decreases), the fair value of the swaps (decreases)/increases.

Fair Value of Assets and Liabilities Classified as Level 3 Measured on Recurring Basis Included in Earnings

Net gains and losses on assets and liabilities classified as Level 3 and included in earnings for the three months ended March 31 are reported in the Statements of Income as follows:

		2012
		Energy Commodities, net
		Unregulated		Wholesale		Net Energy
		Retail Electric		Energy		Trading		Energy
		and Gas		Marketing		Margins		Purchases
PPL and PPL Energy Supply
Total gains (losses) included in earnings for the period		$	16	$	4	$	(1)	$	(1)
Change in unrealized gains (losses) relating to positions still held
	at the reporting date		46		(18)		(1)		(5)

		2011
		Energy Commodities, net
		Unregulated		Wholesale		Net Energy
		Retail Electric		Energy		Trading		Energy
		and Gas		Marketing		Margins		Purchases
PPL and PPL Energy Supply
Total gains (losses) included in earnings for the period		$	1	$	1	$	(5)	$	4
Change in unrealized gains (losses) relating to positions still held
	at the reporting date		1				(1)		19

Fair Value of Financial Instruments Not Recorded at Fair Value - Other

The carrying amounts of contract adjustment payments related to the Purchase Contract component of the Equity Units and long-term debt on the Balance Sheets and their estimated fair values are set forth below.

		March 31, 2012				December 31, 2011
		Carrying				Carrying
		Amount		Fair Value		Amount		Fair Value
PPL
	Contract adjustment payments (a)	$	175	$	176	$	198	$	198
	Long-term debt		18,076		19,837		17,993		19,392
PPL Energy Supply
	Long-term debt		3,024		3,420		3,024		3,397
PPL Electric
	Long-term debt		1,718		2,014		1,718		2,012

(a) Reflected in "Other current liabilities" and "Other deferred credits and noncurrent liabilities" on the Balance Sheets.

- Definition

Tabular disclosure of the total amount of gains or losses for the period which are included in earnings or resulted in a change to net assets which gains or losses have arisen from the use of significant unobservable inputs (Level 3) to measure the fair value of assets and liabilities. Such gains or losses are attributable to the change in unrealized gains or losses relating to those assets and liabilities so valued which are still held at the reporting date and which change are also considered for disclosure; it may be expected that a description of where those unrealized gains or losses are reported in the statement of income or the statement of financial position would also be disclosed.

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- Definition

Tabular disclosure of the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such certain disclosures about the financial instruments, assets, and liabilities include: (1) the fair value of the required items together with their carrying amounts (as appropriate) and (2) the methodology and assumptions used in developing such estimates of fair value.

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