Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). A market approach (generally, data from market transactions), an income approach (generally, present value techniques and option-pricing models), and/or a cost approach (generally, replacement cost) are used to measure the fair value of an asset or liability, as appropriate. These valuation approaches incorporate inputs such as observable, independent market data and/or unobservable data that management believes are predicated on the assumptions market participants would use to price an asset or liability. These inputs may incorporate, as applicable, certain risks such as nonperformance risk, which includes credit risk. The fair value of a group of financial assets and liabilities is measured on a net basis. Transfers between levels are recognized at end-of-reporting-period values. During 2013 and 2012, there were no transfers between Level 1 and Level 2. See Note 1 for information on the levels in the fair value hierarchy.

				December 31, 2013								December 31, 2012
				Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
PPL
Assets
	Cash and cash equivalents			$	1,102	$	1,102					$	901	$	901
	Restricted cash and cash equivalents (a)				156		156						135		135
	Price risk management assets:
		Energy commodities			1,188		3	$	1,123	$	62		2,068		2	$	2,037	$	29
		Interest rate swaps			91				91				15				15
		Cross-currency swaps											14				13		1
	Total price risk management assets				1,279		3		1,214		62		2,097		2		2,065		30
	NDT funds:
		Cash and cash equivalents			14		14						11		11
		Equity securities
			U.S. large-cap		547		409		138				412		308		104
			U.S. mid/small-cap		81		33		48				60		25		35
		Debt securities
			U.S. Treasury		95		95						95		95
			U.S. government sponsored agency		6				6				9				9
			Municipality		77				77				82				82
			Investment-grade corporate		38				38				40				40
			Other		5				5				3				3
		Receivables (payables), net			1		(1)		2						(2)		2
	Total NDT funds				864		550		314				712		437		275
	Auction rate securities (b)				19						19		19				3		16
Total assets				$	3,420	$	1,811	$	1,528	$	81	$	3,864	$	1,475	$	2,343	$	46

Liabilities
	Price risk management liabilities:
		Energy commodities		$	1,070	$	4	$	1,028	$	38	$	1,566	$	2	$	1,557	$	7
		Interest rate swaps			36				36				80				80
		Foreign currency contracts			106				106				44				44
		Cross-currency swaps			32				32				4				4
	Total price risk management liabilities			$	1,244	$	4	$	1,202	$	38	$	1,694	$	2	$	1,685	$	7

PPL Energy Supply
Assets
	Cash and cash equivalents			$	239	$	239					$	413	$	413
	Restricted cash and cash equivalents (a)				85		85						63		63
	Price risk management assets:
		Energy commodities			1,188		3	$	1,123	$	62		2,068		2	$	2,037	$	29
	Total price risk management assets				1,188		3		1,123		62		2,068		2		2,037		29
	NDT funds:
		Cash and cash equivalents			14		14						11		11
		Equity securities
			U.S. large-cap		547		409		138				412		308		104
			U.S. mid/small-cap		81		33		48				60		25		35
		Debt securities
			U.S. Treasury		95		95						95		95
			U.S. government sponsored agency		6				6				9				9
			Municipality		77				77				82				82
			Investment-grade corporate		38				38				40				40
			Other		5				5				3				3
		Receivables (payables), net			1		(1)		2						(2)		2
	Total NDT funds				864		550		314				712		437		275
	Auction rate securities (b)				16						16		16				3		13
Total assets				$	2,392	$	877	$	1,437	$	78	$	3,272	$	915	$	2,315	$	42

Liabilities
	Price risk management liabilities:
		Energy commodities		$	1,070	$	4	$	1,028	$	38	$	1,566	$	2	$	1,557	$	7
	Total price risk management liabilities			$	1,070	$	4	$	1,028	$	38	$	1,566	$	2	$	1,557	$	7

PPL Electric
Assets
	Cash and cash equivalents			$	25	$	25					$	140	$	140
	Restricted cash and cash equivalents (c)				12		12						13		13
Total assets				$	37	$	37					$	153	$	153

LKE
Assets
	Cash and cash equivalents		$	35	$	35			$	43	$	43
	Restricted cash and cash equivalents (d)			22		22				32		32
	Price risk management assets:
		Interest rate swaps								14			$	14
	Total price risk management assets									14				14
Total assets			$	57	$	57			$	89	$	75	$	14

Liabilities
	Price risk management liabilities:
		Interest rate swaps	$	36			$	36	$	58			$	58
	Total price risk management liabilities		$	36			$	36	$	58			$	58

LG&E
Assets
	Cash and cash equivalents		$	8	$	8			$	22	$	22
	Restricted cash and cash equivalents (d)			22		22				32		32
	Price risk management assets:
		Interest rate swaps								7			$	7
	Total price risk management assets									7				7
Total assets			$	30	$	30			$	61	$	54	$	7

Liabilities
	Price risk management liabilities:
		Interest rate swaps	$	36			$	36	$	58			$	58
	Total price risk management liabilities		$	36			$	36	$	58			$	58

KU
Assets
	Cash and cash equivalents		$	21	$	21			$	21	$	21
	Price risk management assets:
		Interest rate swaps								7			$	7
	Total price risk management assets									7				7
Total assets			$	21	$	21			$	28	$	21	$	7

(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.

(c) Current portion is included in "Other current assets" and the long-term portion is included in "Other noncurrent assets" on the Balance Sheets.

A reconciliation of net assets and liabilities classified as Level 3 for the years ended December 31 is as follows:

			PPL
			Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
			Energy		Auction		Cross-
			Commodities,		Rate		Currency
			net		Securities		Swaps		Total
2013
Balance at beginning of period			$	22	$	16	$	1	$	39
	Total realized/unrealized gains (losses)
		Included in earnings		(5)						(5)
		Included in OCI (a)						1		1
	Sales			(2)						(2)
	Settlements			(3)						(3)
	Transfers into Level 3			10		3		3		16
	Transfers out of Level 3			2				(5)		(3)
Balance at end of period			$	24	$	19	$		$	43

2012
Balance at beginning of period			$	13	$	24	$	4	$	41
	Total realized/unrealized gains (losses)
		Included in earnings		2				(1)		1
		Included in OCI (a)		1				1		2
	Sales					(5)				(5)
	Settlements			(13)						(13)
	Transfers into Level 3			8						8
	Transfers out of Level 3			11		(3)		(3)		5
Balance at end of period			$	22	$	16	$	1	$	39

(a) "Energy Commodities" and "Cross-Currency Swaps" are included in "Qualifying derivatives" and "Auction Rate Securities" are included in "Available-for-sale securities" on the Statements of Comprehensive Income.

A reconciliation of net assets and liabilities classified as Level 3 for the years ended December 31 is as follows:

			PPL Energy Supply
			Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
			Energy		Auction
			Commodities,		Rate
			net		Securities		Total
2013
Balance at beginning of period			$	22	$	13	$	35
	Total realized/unrealized gains (losses)
		Included in earnings		(5)				(5)
	Sales			(2)				(2)
	Settlements			(3)				(3)
	Transfers into Level 3			10		3		13
	Transfers out of Level 3			2				2
Balance at end of period			$	24	$	16	$	40

2012
Balance at beginning of period			$	13	$	19	$	32
	Total realized/unrealized gains (losses)
		Included in earnings		2				2
		Included in OCI (a)		1				1
	Sales					(3)		(3)
	Settlements			(13)				(13)
	Transfers into Level 3			8				8
	Transfers out of Level 3			11		(3)		8
Balance at end of period			$	22	$	13	$	35

(a) "Energy Commodities" are included in "Qualifying derivatives" and "Auction Rate Securities" are included in "Available-for-sale securities" on the Statements of Comprehensive Income.

The significant unobservable inputs used in and quantitative information about the fair value measurement of assets and liabilities classified as Level 3 are as follows:

December 31, 2013

Fair Value, net

Significant

Range

Asset

Valuation

Unobservable

(Weighted

(Liability)

Technique

Input(s)

Average) (a)

PPL

Energy commodities

Retail natural gas sales contracts (b)

Discounted cash flow

Observable wholesale prices used as proxy for retail delivery points

10% - 100% (86%)

Full-requirement sales contracts (c)

(12)

Discounted cash flow

Proprietary model

100% (100%)

Auction rate securities (f)

Discounted cash flow

Modeled from SIFMA Index

10% - 80% (63%)

PPL Energy Supply

Energy commodities

Retail natural gas sales contracts (b)

Discounted cash flow

Observable wholesale prices used as proxy for retail delivery points

10% - 100% (86%)

Full-requirement sales contracts (c)

(12)

Discounted cash flow

Proprietary model

100% (100%)

Auction rate securities (f)

Discounted cash flow

Modeled from SIFMA Index

10% - 80% (63%)

December 31, 2012

Fair Value, net

Significant

Range

Asset

Valuation

Unobservable

(Weighted

(Liability)

Technique

Input(s)

Average) (a)

PPL

Energy commodities

Retail natural gas sales contracts (b)

Discounted cash flow

Observable wholesale prices used as proxy for retail delivery points

21% - 100% (75%)

Power sales contracts (d)

(4)

Discounted cash flow

Proprietary model used to calculate forward basis prices

24% (24%)

FTR purchase contracts (e)

Discounted cash flow

Historical settled prices used to model forward prices

100% (100%)

Auction rate securities (f)

Discounted cash flow

Modeled from SIFMA Index

54% - 74% (64%)

Cross-currency swaps (g)

Discounted cash flow

Credit valuation adjustment

22% (22%)

PPL Energy Supply

Energy commodities

Retail natural gas sales contracts (b)

Discounted cash flow

Observable wholesale prices used as proxy for retail delivery points

21% - 100% (75%)

Power sales contracts (d)

(4)

Discounted cash flow

Proprietary model used to calculate forward basis prices

24% (24%)

FTR purchase contracts (e)

Discounted cash flow

Historical settled prices used to model forward prices

100% (100%)

Auction rate securities (f)

Discounted cash flow

Modeled from SIFMA Index

57% - 74% (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) As the forward price of natural gas increases/(decreases), the fair value of contracts (decreases)/increases.

(c) As forward market prices increase/(decrease), the fair value of contracts (decreases)/increases. As the volumetric assumptions for full-requirement sales contracts in a gain position increase/(decrease), the fair value of contracts increases/(decreases). As the volumetric assumptions for full-requirement sales contracts in a loss position increase/(decrease), the fair value of contracts (decreases)/increases.

(d) As the forward price of basis increases/(decreases), the fair value of contracts (decreases)/increases.

(e) As the forward implied spread increases/(decreases), the fair value of contracts increases/(decreases).

(f) The model used to calculate fair value incorporates an assumption that the auctions will continue to fail. As the modeled forward rates of the SIFMA Index increase/(decrease), the fair value of the securities increases/(decreases).

(g) 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.

Net gains and losses on assets and liabilities classified as Level 3 and included in earnings for the years ended December 31 were reported in the Statements of Income as follows:

																		Cross-Currency
		Energy Commodities, net																Swaps

		Unregulated				Unregulated Retail								Energy				Interest
		Wholesale Energy				Energy						Fuel		Purchases				Expense
		2013		2012		2013			2012		2013		2012	2013		2012		2013	2012
PPL
Total gains (losses) included in earnings		$	(36)	$	(19)		$	25	$	26	$	3		$	3	$	(5)		$	(1)
Change in unrealized gains (losses) relating to
	positions still held at the reporting date		(23)		(3)			24		29					1		1

PPL Energy Supply
Total gains (losses) included in earnings			(36)		(19)			25		26		3			3		(5)
Change in unrealized gains (losses) relating to
	positions still held at the reporting date		(23)		(3)			24		29					1		1

Price Risk Management Assets/Liabilities - Energy Commodities (PPL and PPL Energy Supply)

Energy commodity contracts are generally valued using the income approach, except for exchange-traded derivative contracts, which are valued using the market approach and are classified as Level 1. When the lowest level inputs that are significant to the fair value measurement of a contract are observable, the contract is classified as Level 2. Level 2 contracts are valued using inputs which may include quotes obtained from an exchange (where there is insufficient market liquidity to warrant inclusion in Level 1), binding and non-binding broker quotes, prices posted by ISOs or published tariff rates. Furthermore, independent quotes are obtained from the market to validate the forward price curves. Energy commodity contracts include forwards, futures, swaps, options and structured transactions and may be offset with similar positions in exchange-traded markets. To the extent possible, fair value measurements utilize various inputs that include quoted prices for similar contracts or market-corroborated inputs. In certain instances, these contracts may be valued using models, including standard option valuation models and standard industry models.

When unobservable inputs are significant to the fair value measurement, a contract is classified as Level 3. Level 3 contracts are valued using PPL proprietary models which may include significant unobservable inputs such as delivery at a location where pricing is unobservable, delivery dates that are beyond the dates for which independent quotes are available, implied volatilities, implied correlations and market implied heat rates. Forward transactions, including forward transactions classified as Level 3, are analyzed by PPL's Risk Management department, which reports to the Chief Financial Officer (CFO). Accounting personnel, who also report to the CFO, interpret the analysis quarterly to appropriately classify the forward transactions in the fair value hierarchy. Valuation techniques are evaluated periodically. Additionally, Level 2 and Level 3 fair value measurements include adjustments for credit risk based on PPL's own creditworthiness (for net liabilities) and its counterparties' creditworthiness (for net assets). PPL's credit department assesses all reasonably available market information which is used by accounting personnel to calculate the credit valuation adjustment.

In certain instances, energy commodity contracts are transferred between Level 2 and Level 3. The primary reasons for the transfers during 2013 and 2012 were changes in the availability of market information and changes in the significance of the unobservable inputs utilized in the valuation of the contract. As the delivery period of a contract becomes closer, market information may become available. When this occurs, the model's unobservable inputs are replaced with observable market information.

Price Risk Management Assets/Liabilities - Interest Rate Swaps/Foreign Currency Contracts/Cross-Currency Swaps (PPL, LKE, LG&E and KU)

To manage interest rate risk, PPL, LKE, LG&E and KU use interest rate contracts such as forward-starting swaps, floating-to-fixed swaps and fixed-to-floating swaps. To manage foreign currency exchange risk, PPL uses foreign currency contracts such as forwards, options, and cross-currency swaps that contain characteristics of both interest rate and foreign currency contracts. An income approach is used to measure the fair value of these contracts, utilizing readily observable inputs, such as forward interest rates (e.g., LIBOR and government security rates) and forward foreign currency exchange rates (e.g., GBP), as well as inputs that may not be observable, such as credit valuation adjustments. In certain cases, market information cannot practicably be obtained to value credit risk and therefore internal models are relied upon. These models use projected probabilities of default and estimated recovery rates based on historical observances. When the credit valuation adjustment is significant to the overall valuation, the contracts are classified as Level 3. For PPL, the primary reason for the transfers during 2012 and 2013 was the change in the significance of the credit valuation adjustment. Cross-currency swaps classified as Level 3 are valued by PPL's Treasury department, which reports to the CFO. Accounting personnel, who also report to the CFO, interpret analysis quarterly to classify the contracts in the fair value hierarchy. Valuation techniques are evaluated periodically.

The market approach is used to measure the fair value of equity securities held in the NDT funds.

 The fair value measurements of equity securities classified as Level 1 are based on quoted prices in active markets.

 The fair value measurements of investments in commingled equity funds are classified as Level 2. These fair value measurements are based on firm quotes of net asset values per share, which are not obtained from a quoted price in an active market.

The fair value of debt securities is generally measured using a market approach, including the use of pricing models, which incorporate observable inputs. Common inputs include benchmark yields, reported trades, broker/dealer bid/ask prices, benchmark securities and credit valuation adjustments. When necessary, the fair value of debt securities is measured using the income approach, which incorporates similar observable inputs as well as monthly payment data, future predicted cash flows, collateral performance and new issue data.

Auction rate securities include Federal Family Education Loan Program guaranteed student loan revenue bonds, as well as various municipal bond issues. The probability of realizing losses on these securities is not significant.

The fair value of auction rate securities is estimated using an income approach that includes readily observable inputs, such as principal payments and discount curves for bonds with credit ratings and maturities similar to the securities, and unobservable inputs, such as future interest rates that are estimated based on the SIFMA Index, creditworthiness, and liquidity assumptions driven by the impact of auction failures. When the present value of future interest payments is significant to the overall valuation, the auction rate securities are classified as Level 3. The primary reason for the transfers in and out of Level 3 in 2013 and 2012 was the change in discount rates and SIFMA Index.

Auction rate securities are valued by PPL's Treasury department, which reports to the CFO. Accounting personnel, who also report to the CFO, interpret the analysis quarterly to classify the contracts in the fair value hierarchy. Valuation techniques are evaluated periodically.

Nonrecurring Fair Value Measurements (All Registrants except PPL Electric and LG&E)

The following nonrecurring fair value measurements occurred during the reporting periods, resulting in asset impairments.

(b) The loss on the Corette plant and emission allowances was recorded in the Supply segment and included in "Other operation and maintenance" on the Statement of Income. The loss on the EEI investment was recorded in the Kentucky Regulated segment and included in "Other-Than-Temporary Impairments" on the Statement of Income. Losses on RECs were recorded in the Supply segment and included in "Other operation and maintenance" on the Statements of Income.

(c) Current and long-term RECs are included in "Other current assets" and "Other intangibles" in their respective areas on the Balance Sheets.

The significant unobservable inputs used in and the quantitative information about the nonrecurring fair value measurement of assets and liabilities classified as Level 3 are as follows:

Fair Value, net

Significant

Range

Asset

Valuation

Unobservable

(Weighted

(Liability)

Technique

Input(s)

Average)

PPL and PPL Energy Supply

Corette plant and emission allowances:

December 31, 2013

Discounted cash flow

Long-term forward price curves and capital expenditure projections

100% (100%)

PPL, LKE and KU

Equity investment in EEI:

December 31, 2012

Discounted cash flow

Long-term forward price curves and capital expenditure projections

100% (100%)

During the fourth quarter 2013, PPL Montana recorded an impairment loss on the Corette plant and related emission allowances. In connection with the completion of its annual business planning process that included revised long-term power and gas price assumptions and other factors, PPL Energy Supply has now determined that it is less likely that the Corette plant will restart after operations are suspended no later than April 2015. PPL Energy Supply performed an internal analysis using an income approach based on discounted cash flows to assess the fair value of the Corette asset group. Assumptions used in the fair value assessment were forward energy prices, expectations for demand for energy in Corette's market, and expected operation and maintenance and capital expenditures that were consistent with assumptions used in the business planning process. Through this analysis, PPL Energy Supply determined the fair value of the asset group to be negligible.

The assets were valued by the PPL Energy Supply Financial Department, which reports to the President of PPL Energy Supply. Accounting personnel, who report to the Chief Financial Officer, interpreted the analysis to appropriately classify the assets in the fair value hierarchy.

Due to declines in forecasted full-requirement obligations in certain markets as well as declines in market prices, PPL Energy Supply assessed the recoverability of certain RECs not expected to be used. Observable market prices (Level 2) were used to value the RECs.

During the fourth quarter 2012, KU recorded an other-than-temporary decline in the value of its equity investment in EEI. KU performed an internal analysis using an income approach based on discounted cash flows to assess the current fair value of its investment based on several factors. KU considered the following factors: long-dated forward power and fuel price curves, the cost of compliance with environmental standards, and the majority owner and operator's announcement in the fourth quarter 2012 to exit from the merchant generation business. Assumptions used in the fair value assessment were forward energy price curves, expectations for capacity (demand) for energy in EEI's market, and expected capital expenditures used in the calculation that were comparable to assumptions used by KU for internal budgeting and forecasting purposes. Through this analysis, KU determined the fair value to be zero.

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. The fair values of these instruments were estimated using an income approach by discounting future cash flows at estimated current cost of funding rates, which incorporate the credit risk of the Registrants. These instruments are classified as Level 2. The effect of third-party credit enhancements is not included in the fair value measurement.

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

The carrying value of short-term debt (including notes between affiliates), when outstanding, approximates fair value due to the variable interest rates associated with the short-term debt and is classified as Level 2.

Contracts are entered into with many entities for the purchase and sale of energy. When NPNS is elected, the fair value of these contracts is not reflected in the financial statements. However, the fair value of these contracts is considered when committing to new business from a credit perspective. See Note 19 for information on credit policies used to manage credit risk, including master netting arrangements and collateral requirements.

At December 31, 2013, PPL had credit exposure of $1.0 billion from energy trading partners, excluding the effects of netting arrangements, reserves and collateral. As a result of netting arrangements, reserves and collateral, PPL's credit exposure was reduced to $539 million. The top ten counterparties including their affiliates accounted for $281 million, or 52%, of this exposure. Nine of these counterparties had an investment grade credit rating from S&P or Moody's and accounted for 95% of the top ten exposures. The remaining counterparty has not been rated by S&P or Moody's, but is current on its obligations.

At December 31, 2013, PPL Energy Supply had credit exposure of $1.0 billion from energy trading partners, excluding exposure from related parties and the effects of netting arrangements, reserves and collateral. As a result of netting arrangements, reserves and collateral, this credit exposure was reduced to $536 million. The top ten counterparties including their affiliates accounted for $281 million, or 52%, of this exposure. Nine of these counterparties had an investment grade credit rating from S&P or Moody's and accounted for 95% of the top ten exposures. The remaining counterparty has not been rated by S&P or Moody's, but is current on its obligations. See Note 16 for information regarding the related party credit exposure.

PPL Electric is exposed to credit risk under energy supply contracts (including its supply contracts with PPL EnergyPlus); however, its PUC-approved recovery mechanism is anticipated to substantially eliminate this exposure.

At December 31, 2013, LKE's, LG&E's and KU's credit exposure was not significant.