$ 122

$ 182

6. 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, 2022		December 31, 2021		March 31, 2022		December 31, 2021
Current Regulatory Assets:


Gas supply clause	$	22	$	21	$	—	$	—
Smart meter rider	7		11		7		11
Fuel adjustment clause	15		11		—		—
Other	14		21		6		11
Total current regulatory assets (a)	$	58	$	64	$	13	$	22

Noncurrent Regulatory Assets:
Defined benefit plans	$	509	$	523	$	248	$	256
Plant outage costs	51		54		—		—
Storm costs	12		11		—		—
Unamortized loss on debt	23		24		3		4
Interest rate swaps	14		18		—		—
Terminated interest rate swaps	68		70		—		—
Accumulated cost of removal of utility plant	224		228		224		228
AROs	302		302		—		—
Other	16		6		—		—
Total noncurrent regulatory assets	$	1,219	$	1,236	$	475	$	488


	PPL				PPL Electric
	March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021
Current Regulatory Liabilities:
Generation supply charge	$	9	$	10	$	9	$	10
Transmission service charge	23		21		23		21
Universal service rider	4		17		4		17
TCJA customer refund	19		22		19		22
Act 129 compliance rider	15		10		15		10
Transmission formula rate return on equity (b)	30		73		30		73
Economic relief billing credit	13		27		—		—
Other	9		2		1		—
Total current regulatory liabilities	$	122	$	182	$	101	$	153



Noncurrent Regulatory Liabilities:
Accumulated cost of removal of utility plant	$	647	$	639	$	—	$	—
Power purchase agreement - OVEC	33		35		—		—
Net deferred taxes	1,574		1,591		523		531
Defined benefit plans	101		95		32		28
Terminated interest rate swaps	62		62		—		—

Total noncurrent regulatory liabilities	$	2,417	$	2,422	$	555	$	559


	LG&E				KU
	March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021
Current Regulatory Assets:

Gas supply clause	$	22	$	21	$	—	$	—
Gas line tracker	—		3		—		—

Generation formula rate	—		—		1		2

Fuel adjustment clause	4		4		11		7

Other	5		5		2		—
Total current regulatory assets	$	31	$	33	$	14	$	9

Noncurrent Regulatory Assets:
Defined benefit plans	$	160	$	164	$	101	$	103
Storm costs	8		8		4		3
Unamortized loss on debt	12		12		8		8
Interest rate swaps	14		18		—		—
Terminated interest rate swaps	40		41		28		29
AROs	75		75		227		227
Plant outage costs	14		15		37		39
Other	6		4		10		2
Total noncurrent regulatory assets	$	329	$	337	$	415	$	411


	LG&E				KU
	March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021
Current Regulatory Liabilities:

Demand side management	$	—	$	—	$	3	$	—



Gas line tracker	3		—		—		—



Economic relief billing credit	10		21		3		6
Other	1		—		1		2
Total current regulatory liabilities	$	14	$	21	$	7	$	8

Noncurrent Regulatory Liabilities:
Accumulated cost of removal of utility plant	$	268	$	262	$	379	$	377

Power purchase agreement - OVEC	23		24		10		11
Net deferred taxes	487		491		564		569
Defined benefit plans	11		10		58		57

Terminated interest rate swaps	31		31		31		31

Total noncurrent regulatory liabilities	$	820	$	818	$	1,042	$	1,045

(a)For PPL, these amounts are included in "Other current assets" on the Balance Sheets.

(b)See “Regulatory Matters - Federal Matters - PPL Electric Transmission Formula Rate Return on Equity” below for additional information.

Regulatory Matters

Federal Matters

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

In May 2020, PP&L Industrial Customer Alliance (PPLICA) filed a complaint with the FERC alleging that PPL Electric’s base return on equity (ROE) used to determine PPL Electric’s formula transmission rate was unjust and unreasonable. In August 2021, PPL Electric entered into a settlement agreement (the Settlement) with PPLICA and all other parties, including intervenors. The key aspects of the Settlement include changes to PPL Electric’s base ROE, changes to the equity component of PPL Electric’s capital structure, allowing modification of the current rate year to a calendar year and allowing modification of the current formula rate based on a historic test year to a projected test year. The settlement was approved by the FERC in November 2021. The interim rates reflecting the agreed-to-base ROE in the Settlement were effective December 1, 2021.

In the first quarter of 2021, PPL and PPL Electric recorded a revenue reduction on the Statement of Income of $19 million after-tax representing an estimate of the revenue subject to refund from the date of the complaint through March 31, 2021. Of this amount, $13 million related to 2020.

As of December 31, 2021, PPL and PPL Electric had a regulatory liability on the Balance Sheet of $73 million, which represents revenue subject to refund based on the difference between charges that were calculated using the ROE in effect at the time and charges calculated using the revised ROE provided for in the Settlement, plus interest at the FERC interest rate. During the three months ended March 31, 2022, $44 million of revenue was refunded to customers. The remaining balance will be refunded to customers through May 31, 2022.

FERC Transmission Rate Filing (PPL, 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. In 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, which was subsequently filed, modified, and approved by the FERC in 2020 and 2021. In 2020, LG&E and KU and other parties filed appeals with the D.C. Circuit Court of Appeals regarding FERC's orders on the

elimination of the mitigation and required transition mechanism. Oral arguments in the appellate proceeding occurred on February 14, 2022. 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 in future rate proceedings 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, 2022 and 2021, PPL Electric purchased $348 million and $324 million of accounts receivable from alternative suppliers.