XML 97 R50.htm IDEA: XBRL DOCUMENT

Utility Rate Regulation - Regulatory Liabilities (Details) - USD ($)
$ in Millions

3 Months Ended

7 Months Ended

Mar. 31, 2021

Dec. 31, 2020

Regulatory Liabilities [Line Items]

Current regulatory liabilities

$ 130

$ 79

Noncurrent regulatory liabilities

$ 2,526

2,530

Utility Rate Regulation

7. Utility Rate Regulation

(All Registrants)

The following table provides information about the regulatory assets and liabilities of cost-based rate-regulated utility operations.


	PPL				PPL Electric
	March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020
Current Regulatory Assets:


Plant outage costs	$	55	$	46	$	—	$	—
Gas supply clause	8		4		—		—
Smart meter rider	21		17		21		17


Transmission formula rate	20		15		20		15
Storm costs	5		7		5		7

Other	12		10		1		1
Total current regulatory assets	$	121	$	99	$	47	$	40

Noncurrent Regulatory Assets:
Defined benefit plans	$	556	$	570	$	282	$	290

Storm costs	14		17		—		—
Unamortized loss on debt	29		30		7		8
Interest rate swaps	18		23		—		—
Terminated interest rate swaps	74		75		—		—
Accumulated cost of removal of utility plant	234		240		234		240
AROs	304		300		—		—

Other	4		7		2		3
Total noncurrent regulatory assets	$	1,233	$	1,262	$	525	$	541


	PPL				PPL Electric
	March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020
Current Regulatory Liabilities:
Generation supply charge	$	18	$	21	$	18	$	21
Transmission service charge	27		1		27		1

Environmental cost recovery	6		4		—		—
Universal service rider	16		22		16		22

Fuel adjustment clause	5		5		—		—
TCJA customer refund	15		11		15		11
Storm damage expense rider	5		6		5		6
Act 129 compliance rider	6		7		6		7
Challenge to transmission formula rate return on equity reserve (a)	27		—		27		—
Other	5		2		—		—
Total current regulatory liabilities	$	130	$	79	$	114	$	68



Noncurrent Regulatory Liabilities:
Accumulated cost of removal of utility plant	$	665	$	653	$	—	$	—
Power purchase agreement - OVEC	41		43		—		—
Net deferred taxes	1,673		1,690		552		560
Defined benefit plans	64		60		21		18
Terminated interest rate swaps	65		66		—		—
Other	18		18		—		—
Total noncurrent regulatory liabilities	$	2,526	$	2,530	$	573	$	578


	LKE				LG&E				KU
	March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020
Current Regulatory Assets:

Plant outage costs	$	55	$	46	$	20	$	12	$	35	$	34

Gas supply clause	8		4		8		4		—		—




Other	11		9		8		7		3		2
Total current regulatory assets	$	74	$	59	$	36	$	23	$	38	$	36

Noncurrent Regulatory Assets:
Defined benefit plans	$	274	$	280	$	170	$	174	$	104	$	106
Storm costs	14		17		9		11		5		6
Unamortized loss on debt	22		22		13		13		9		9
Interest rate swaps	18		23		18		23		—		—
Terminated interest rate swaps	74		75		43		44		31		31
AROs	304		300		85		85		219		215

Other	2		4		1		1		1		3
Total noncurrent regulatory assets	$	708	$	721	$	339	$	351	$	369	$	370


	LKE				LG&E				KU
	March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020
Current Regulatory Liabilities:
Environmental cost recovery	$	6	$	4	$	—	$	—	$	6	$	4


Fuel adjustment clause	5		5		1		—		4		5





Other	5		2		2		—		3		2
Total current regulatory liabilities	$	16	$	11	$	3	$	—	$	13	$	11

Noncurrent Regulatory Liabilities:
Accumulated cost of removal of utility plant	$	665	$	653	$	278	$	274	$	387	$	379

Power purchase agreement - OVEC	41		43		28		30		13		13
Net deferred taxes	1,121		1,130		525		528		596		602
Defined benefit plans	43		42		1		—		42		42

Terminated interest rate swaps	65		66		33		33		32		33
Other	18		18		16		17		2		1
Total noncurrent regulatory liabilities	$	1,953	$	1,952	$	881	$	882	$	1,072	$	1,070

(a)See “Regulatory Matters - Federal Matters - Challenge to PPL Electric Transmission Formula Rate Return on Equity” below for further information.

Regulatory Matters

Kentucky Activities (PPL, LKE, LG&E and KU)

Rate Case Proceedings

On November 25, 2020, LG&E and KU filed requests with the KPSC for an increase in annual electricity and gas revenues of approximately $331 million ($131 million and $170 million in electricity revenues at LG&E and KU and $30 million in gas revenues at LG&E). The revenue increases would be an increase of 11.6% and 10.4% in electricity revenues at LG&E and KU, and an increase of 8.3% in gas revenues at LG&E. In recognition of the economic impact of COVID-19, LG&E and KU requested approval of a one-year billing credit which will credit customers approximately $53 million ($41 million at LG&E and $12 million at KU). The billing credit represents the return to customers of certain regulatory liabilities on LG&E’s and KU’s Balance Sheets and serves to partially mitigate the rate increases during the first year in which the new rates are in effect.

LG&E’s and KU’s applications also included a request for a CPCN to deploy Advanced Metering Infrastructure across LG&E’s and KU’s service territories in Kentucky.

The applications were based on a forecasted test year of July 1, 2021 through June 30, 2022 and requested an authorized return on equity of 10.0%.

On April 19, 2021, LG&E and KU entered into an agreement with all intervening parties to the proceedings resolving all matters in their applications, with the explicit exception of LG&E's and KU's net metering proposals. The agreement proposes increases in annual revenues of $217 million ($77 million and $116 million in electricity revenues at LG&E and KU and $24 million in gas revenues at LG&E) based on an authorized return on equity of 9.55%. The proposal includes an authorized 9.35% return on equity for the ECR and GLT mechanisms. The agreement does not modify the requested one-year billing credit. The agreement proposes that the KPSC should grant LG&E’s and KU’s request for a CPCN to deploy Advanced Metering Infrastructure and proposes the establishment of a Retired Asset Recovery rider (RAR) to provide for recovery of and return on the remaining investment in certain electric generating units upon their retirement over a ten-year period following retirement. In respect of the RAR rider, the agreement proposes that LG&E and KU will continue to use currently approved depreciation rates for Mill Creek units 1 and 2 and Brown Unit 3. The agreement also proposes a four-year “stay-out” commitment from LG&E and KU to refrain from effective base rate increases before July 1, 2025, subject to certain exceptions.

A hearing on the agreement, and the underlying proceedings, was completed on April 28, 2021. Subject to KPSC approval, the rates, decreased by the amount of the billing credit, are expected to become effective July 1, 2021. An Order on the net metering issues is expected by the end of September 2021. PPL, LKE, LG&E and KU cannot predict the outcome of these proceedings.

Pennsylvania Activities (PPL and PPL Electric)

Act 129

Act 129 requires Pennsylvania Electric Distribution Companies (EDCs) to meet, by specified dates, specified goals for reduction in customer electricity usage and peak demand. EDCs not meeting the requirements of Act 129 are subject to significant penalties. PPL Electric filed with the PUC its Act 129 Phase IV Energy Efficiency and Conservation Plan (Phase IV Act 129 Plan) on November 30, 2020, for the five-year period starting June 1, 2021 and ending on May 31, 2026. PPL Electric's Phase IV Act 129 Plan was approved by the PUC at its March 25, 2021, public meeting.

Federal Matters

Challenge to PPL Electric Transmission Formula Rate Return on Equity (PPL and PPL Electric)

On May 21, 2020, PP&L Industrial Customer Alliance (PPLICA) filed a complaint with the FERC alleging that PPL Electric's base return on equity (ROE) of 11.18% used to determine PPL Electric's formula transmission rate is unjust and unreasonable, and proposing an alternative ROE of 8.0% based on its interpretation of FERC Opinion No. 569. However, also on May 21, 2020, the FERC issued Opinion No. 569-A in response to numerous requests for rehearing of Opinion No. 569, which revised the method for analyzing base ROE. On June 10, 2020, PPLICA filed a Motion to Supplement the May 21, 2020 complaint in which PPLICA continued to allege that PPL Electric’s base ROE is unjust and unreasonable, but revised its analysis of PPL Electric's base ROE to reflect the guidance provided in Opinion No. 569-A. The amended complaint proposed an updated alternative ROE of 8.5% and also requested that the FERC preserve the original refund effective date as established by the filing of the original complaint on May 21, 2020. Several parties have filed motions to intervene, including one party who filed Comments in Support of the original complaint.

On July 10, 2020, PPL Electric filed its Answer and supporting Testimony to the PPLICA filings arguing that the FERC should deny the original and amended complaints as they are without merit and fail to demonstrate the existing base ROE is unjust and unreasonable. In addition, PPL Electric contended any refund effective date should be set for no earlier than June 10, 2020 and PPLICA's proposed replacement ROE should be rejected.

On October 15, 2020, the FERC issued an order on the PPLICA complaints which established hearing and settlement procedures, set a refund effective date of May 21, 2020 and granted the motions to intervene. On November 16, 2020, PPL Electric filed a request for rehearing of the portion of the October 15, 2020 Order that set the May 21, 2020 refund effective date. On December 17, 2020, the FERC issued a Notice of Denial of Rehearing by Operation of Law and Providing for Further Consideration. On February 16 and April 19, 2021, PPL Electric filed Petitions for Review with the United States Court of Appeals for the District of Columbia Circuit of the portion of the October 15, 2020 Order that set the May 21, 2020 refund effective date.

PPL Electric continues to believe its ROE is just and reasonable and that it has meritorious defenses against the original and amended complaints. Settlement negotiations are currently proceeding, but there can be no assurance that they will result in a final settlement. Although PPL Electric cannot predict the outcome of this matter, in the first quarter of 2021, PPL Electric recorded a revenue reserve of $19 million after-tax. Of this amount, $13 million relates to the period from May 21, 2020 to December 31, 2020. Additional revenue earned from May 21, 2020 through the ultimate resolution of this matter may be subject to refund. A change of 50 basis points to the base ROE would impact PPL Electric's net income by approximately $12 million on an annual basis.

FERC Transmission Rate Filing (PPL, LKE, LG&E and KU)

In 2018, LG&E and KU applied to the FERC requesting elimination of certain on-going credits to a sub-set of transmission customers relating to the 1998 merger of LG&E's and KU's parent entities and the 2006 withdrawal of LG&E and KU from the Midcontinent Independent System Operator, Inc. (MISO), a regional transmission operator and energy market. The application sought termination of LG&E's and KU's commitment to provide certain Kentucky municipalities mitigation for certain horizontal market power concerns arising out of the 1998 LG&E and KU merger and 2006 MISO withdrawal. The amounts at issue are generally waivers or credits granted to a limited number of Kentucky municipalities for either certain LG&E and KU or MISO transmission charges incurred for transmission service received. Due to the development of robust, accessible energy markets over time, LG&E and KU believe the mitigation commitments are no longer relevant or appropriate. In March 2019, the FERC granted LG&E's and KU's request to remove the ongoing credits, conditioned upon the implementation by LG&E

and KU of a transition mechanism for certain existing power supply arrangements, subject to FERC review and approval. In July 2019, LG&E and KU proposed their transition mechanism to the FERC and in September 2019, the FERC rejected the proposed transition mechanism. In September 2020, the FERC issued orders in the rehearing process that modified various aspects of the September 2019 orders which had approved future termination of the credits, including adjusting which customer arrangements are covered by the transition mechanism and respective future periods or dates for termination of credits. In November 2020, the FERC denied the parties' rehearing requests. In November 2020 and January 2021, LG&E and KU and other parties appealed the September 2020 and November 2020 orders at the D.C. Circuit Court of Appeals. The appellate proceedings are continuing, and also include certain additional prior pending petitions for review relating to the matter. On January 15, 2021, LG&E and KU made a filing seeking FERC acceptance of a new proposal for a transition mechanism. On March 16, 2021, the FERC accepted the filed transition mechanism agreements effective on March 17, 2021 but subject to refund, and established hearing and settlement procedures. LG&E and KU are also required to make certain compliance filings consistent with the March 16, 2021 order. LG&E and KU cannot predict the outcome of the respective appellate and FERC proceedings. LG&E and KU currently receive recovery of the waivers and credits provided through other rate mechanisms and such rate recovery would be anticipated to be adjusted consistent with potential changes or terminations of the waivers and credits, as such become effective.

Other

Purchase of Receivables Program (PPL and PPL Electric)

In accordance with a PUC-approved purchase of accounts receivable program, PPL Electric purchases certain accounts receivable from alternative electricity suppliers at a discount, which reflects a provision for uncollectible accounts. The alternative electricity suppliers have no continuing involvement or interest in the purchased accounts receivable. Accounts receivable that are acquired are initially recorded at fair value on the date of acquisition. During the three months ended March 31, 2021, and 2020, PPL Electric purchased $324 million and $311 million of accounts receivable from alternative suppliers.

PPL Electric [Member]

Regulatory Liabilities [Line Items]

Regulatory Liability due to ROE Reserve, After Tax

$ 19

Generation Supply Charge [Member]

Regulatory Liabilities [Line Items]

Current regulatory liabilities

Environmental Cost Recovery [Member]

Regulatory Liabilities [Line Items]

Current regulatory liabilities

Universal Service Rider [Member]

Regulatory Liabilities [Line Items]