10. Stock-Based Compensation

(PPL, PPL Electric and LKE)

In 2012, shareowners approved the SIP. This equity plan replaced the ICP and incorporated the following changes:

 Eliminates the potential to pay dividend equivalents on stock options.

 Eliminates the automatic lapse of restrictions on all equity awards in the event of a "potential" change in control and requires that a termination of employment occur in the event of a change in control before restrictions lapse.

 Changes the treatment of outstanding stock options upon retirement to limit the exercise period to the earlier of the end of the term (ten years from grant) or five years after retirement.

To further align the executives’ interests with those of PPL shareowners, this plan provides that each restricted stock unit entitles the executive to accrue additional restricted stock units equal to the amount of quarterly dividends paid on PPL stock. These additional restricted stock units are deferred and payable in shares of PPL common stock at the end of the restriction period. Dividend equivalents on restricted stock unit awards granted under the ICP and the ICPKE are currently paid in cash when dividends are declared by PPL.

Under the ICP, SIP and the ICPKE (together, the Plans), restricted shares of PPL common stock, restricted stock units, performance units and stock options may be granted to officers and other key employees of PPL, PPL Electric, LKE and other affiliated companies. Awards under the Plans are made by the Compensation, Governance and Nominating Committee (CGNC) of the PPL Board of Directors, in the case of the ICP and SIP, and by the PPL Corporate Leadership Council (CLC), in the case of the ICPKE.

The following table details the award limits under each of the Plans.

		Annual Grant Limit		Annual Grant Limit
		Total As % of		For Individual Participants -
	Total Plan	Outstanding	Annual Grant	Performance Based Awards
	Award	PPL Common Stock	Limit	For awards	For awards
	Limit	On First Day of	Options	denominated in	denominated in
Plan	(Shares)	Each Calendar Year	(Shares)	shares (Shares)	cash (in dollars)

ICP (a)	15,769,431	2%	3,000,000
SIP	10,000,000		2,000,000	750,000	$	15,000,000
ICPKE	14,199,796	2%	3,000,000

(a) Applicable to outstanding awards granted from January 27, 2006 to January 26, 2012. During 2012, the total plan award limit was reached and the ICP was replaced by the SIP.

Any portion of these awards that has not been granted may be carried over and used in any subsequent year. If any award lapses, is forfeited or the rights of the participant terminate, the shares of PPL common stock underlying such an award are again available for grant. Shares delivered under the Plans may be in the form of authorized and unissued PPL common stock, common stock held in treasury by PPL or PPL common stock purchased on the open market (including private purchases) in accordance with applicable securities laws.

Restricted Stock and Restricted Stock Units

Restricted shares of PPL common stock are outstanding shares with full voting and dividend rights. Restricted stock awards are granted as a retention award for select key executives and vest when the recipient reaches a certain age or meets service or other criteria set forth in the executive's restricted stock award agreement.

The Plans allow for the grant of restricted stock units. Restricted stock units are awards based on the fair value of PPL common stock on the date of grant. Actual PPL common shares will be issued upon completion of a restriction period, generally three years.

The fair value of restricted stock and restricted stock units granted is recognized on a straight-line basis over the service period or through the date at which the employee reaches retirement eligibility. The fair value of restricted stock and restricted stock units granted to retirement-eligible employees is recognized as compensation expense immediately upon the date of grant. Recipients of restricted stock units granted under the ICPKE may also be granted the right to receive dividend equivalents through the end of the restriction period or until the award is forfeited. Restricted stock and restricted stock units are subject to forfeiture or accelerated payout under the plan provisions for termination, retirement, disability and death of employees. Restrictions lapse on restricted stock and restricted stock units fully, in certain situations, as defined by each of the Plans.

The weighted-average grant date fair value of restricted stock and restricted stock units granted was:

	2015		2014		2013

PPL	$	34.50	$	31.50	$	30.30
PPL Electric		34.41		31.81		30.55
LKE		34.89		30.98		30.00

Restricted stock and restricted stock unit activity for 2015 was:

			Weighted-
			Average
		Restricted	Grant Date Fair
		Shares/Units	Value Per Share
PPL
Nonvested, beginning of period		3,485,520	$	30.07
	Granted	1,028,009		34.50
	Anti-dilution adjustments (a)	247,098		N/A
	Vested	(3,055,205)		29.34
	Forfeited	(25,947)		30.70
Nonvested, end of period (b)		1,679,475		29.65

PPL Electric
Nonvested, beginning of period		286,811	$	30.04
	Transfer between registrants	(22,730)		29.56
	Granted	75,213		34.41
	Anti-dilution adjustments (a)	18,661		N/A
	Vested	(127,507)		29.12
	Forfeited	(9,363)		30.51
Nonvested, end of period		221,085		29.48

LKE
Nonvested, beginning of period		341,468	$	29.76
	Transfer between registrants	4,300		31.74
	Granted	98,360		34.89
	Anti-dilution adjustments (a)	24,587		N/A
	Vested	(149,752)		28.55
Nonvested, end of period		318,963		29.65

(a) Includes adjustment to all restricted stock units granted prior to the spinoff of PPL Energy Supply as provided for under the anti-dilution provisions of PPL’s stock-based compensation Plans.

(b) Excludes 1,226,193 restricted stock units for which restrictions lapsed for former PPL Energy Supply employees as a result of the spinoff, but for which distribution will not occur until the end of the original restriction period of the awards.

Substantially all restricted stock and restricted stock unit awards are expected to vest.

The total fair value of restricted stock and restricted stock units vesting for the years ended December 31 was:

	2015		2014		2013

PPL	$	28	$	11	$	12
PPL Electric		4		2		3
LKE		4				1

Performance Units

Performance units are intended to encourage and reward future corporate performance. Performance units represent a target number of shares (Target Award) of PPL's common stock that the recipient would receive upon PPL's attainment of the applicable performance goal. Performance is determined based on total shareowner return during a three-year performance period. At the end of the period, payout is determined by comparing PPL's performance to the total shareowner return of the companies included in the Philadelphia Stock Exchange Utility Index. Awards are payable on a graduated basis based on thresholds that measure PPL's performance relative to peers that comprise the applicable index on which each years' awards are measured. Awards can be paid up to 200% of the Target Award or forfeited with no payout if performance is below a minimum established performance threshold. Dividends payable during the performance cycle accumulate and are converted into additional performance units and are payable in shares of PPL common stock upon completion of the performance period based on the determination of the CGNC of whether the performance goals have been achieved. Under the plan provisions, performance units are subject to forfeiture upon termination of employment except for retirement, disability or death of an employee, in which case the total performance units remain outstanding and are eligible for vesting through the conclusion of the performance period.

Beginning in 2014, the fair value of performance units granted to retirement-eligible employees is recognized as compensation expense on a straight-line basis over a one-year period, the minimum vesting period required for an employee to be entitled to payout of the awards. For employees who are not retirement-eligible, compensation expense is recognized over the shorter of the three-year performance period or the period until the employee is retirement-eligible, with a minimum vesting and recognition period of one-year. The fair value of performance units granted in 2013 and prior years is recognized as compensation expense on a straight-line basis over the three-year performance period. Performance units vest on a pro rata basis, in certain situations, as defined by each of the Plans.

The fair value of each performance unit granted was estimated using a Monte Carlo pricing model that considers stock beta, a risk-free interest rate, expected stock volatility and expected life. The stock beta was calculated comparing the risk of the individual securities to the average risk of the companies in the index group. The risk-free interest rate reflects the yield on a U.S. Treasury bond commensurate with the expected life of the performance unit. Volatility over the expected term of the performance unit is calculated using daily stock price observations for PPL and all companies in the index group and is evaluated with consideration given to prior periods that may need to be excluded based on events not likely to recur that had impacted PPL and the companies in the index group. PPL uses a mix of historic and implied volatility to value awards.

The weighted-average assumptions used in the model were:

	2015	2014	2013

Expected stock volatility	15.90%	15.80%	15.50%
Expected life	3 years	3 years	3 years

The weighted-average grant date fair value of performance units granted was:

	2015		2014		2013

PPL	$	36.76	$	34.55	$	34.15
PPL Electric		37.93		34.43		33.97
LKE		37.10		34.12		33.84

Performance unit activity for 2015 was:

				Weighted-
				Average Grant
		Performance		Date Fair Value
		Units		Per Share
PPL
Nonvested, beginning of period			1,171,716	$	33.77
	Granted		481,197		36.76
	Anti-dilution adjustment (a)		90,251		N/A
	Vested		(509,139)		32.12
	Forfeited		(240,485)		33.35
Nonvested, end of period (b)			993,540		33.09

PPL Electric
Nonvested, beginning of period			59,615	$	33.77
	Transfer between registrants		(3,676)		35.80
	Granted		21,798		37.93
	Anti-dilution adjustment (a)		4,627		N/A
	Vested		(8,497)		31.38
	Forfeited		(6,196)		31.38
Nonvested, end of period			67,671		33.05

LKE
Nonvested, beginning of period			173,946	$	33.32
	Granted		66,439		37.10
	Anti-dilution adjustment (a)		13,207		N/A
	Vested		(30,921)		31.35
	Forfeited		(29,507)		31.36
Nonvested, end of period			193,164		32.96

(a) Includes adjustment to all performance units granted prior to the spinoff of PPL Energy Supply as provided for under the anti-dilution provisions of PPL’s stock-based compensation Plans.

(b) Excludes 322,429 performance units for which the service vesting requirement was waived for former PPL Energy Supply employees as a result of the spinoff, but for which the ultimate number of shares to be distributed will depend on the actual attainment of the performance goals at the end of the specified performance periods.

The total fair value of performance units vesting for the year ended December 31, 2015 and 2014 was $6 million and $5 million for PPL and insignificant for PPL Electric and LKE.

Stock Options

PPL’s CGNC eliminated the use of stock options and changed its long-term incentive mix to 60% performance units and 40% performance-contingent restricted stock units, resulting in 100% performance-based long-term incentive mix for equity awards granted beginning in January 2014.

Under the Plans, stock options had been granted with an option exercise price per share not less than the fair value of PPL's common stock on the date of grant. Options outstanding at December 31, 2015, become exercisable in equal installments over a three-year service period beginning one year after the date of grant, assuming the individual is still employed by PPL or a subsidiary. The CGNC and CLC have discretion to accelerate the exercisability of the options, except that the exercisability of an option issued under the ICP may not be accelerated unless the individual remains employed by PPL or a subsidiary for one year from the date of grant. All options expire no later than ten years from the grant date. The options become exercisable immediately in certain situations, as defined by each of the Plans. The fair value of options granted is recognized as compensation expense on a straight-line basis over the service period or through the date at which the employee reaches retirement eligibility. The fair value of options granted to retirement-eligible employees is recognized as compensation expense immediately upon the date of grant.

The fair value of each option granted is estimated using a Black-Scholes option-pricing model. PPL uses a risk-free interest rate, expected option life, expected volatility and dividend yield to value its stock options. The risk-free interest rate reflects the yield for a U.S. Treasury Strip available on the date of grant with constant rate maturity approximating the option's expected life. Expected life is calculated based on historical exercise behavior. Volatility over the expected term of the options is evaluated with consideration given to prior periods that may need to be excluded based on events not likely to recur that had impacted PPL's volatility in those prior periods. Management's expectations for future volatility, considering potential changes to PPL's business model and other economic conditions, are also reviewed in addition to the historical data to determine the final volatility assumption. PPL uses a mix of historic and implied volatility to value awards. The dividend yield is based on several factors, including PPL's most recent dividend payment, as of the grant date and the forecasted stock price. The assumptions used in the model were:

	2013

Risk-free interest rate		1.15%
Expected option life		6.48 years
Expected stock volatility		18.50%
Dividend yield		5.00%

The weighted-average grant date fair value of options granted was:

	2013

PPL	$	2.18
PPL Electric		2.19
LKE		2.18

Stock option activity for 2015 was:

						Weighted-
				Weighted		Average
				Average		Remaining		Aggregate
		Number		Exercise		Contractual		Total Intrinsic
		of Options		Price Per Share		Term (years)		Value
PPL
Outstanding at beginning of period			9,042,962	$	30.93
	Anti-dilution adjustment (a)		907,737		28.06
	Exercised		(3,559,874)		27.35
	Forfeited		(5,676)		26.67
Outstanding at end of period			6,385,149		28.54		5.2	$	42
Options exercisable at end of period			5,683,535		28.78		5.0		36

PPL Electric
Outstanding at beginning of period			507,920	$	30.04
	Transfer between registrants		(15,339)		29.60
	Anti-dilution adjustment (a)		44,859		28.06
	Exercised		(224,007)		27.20
Outstanding at end of period			313,433		27.79		5.2	$	2
Options exercisable at end of period			263,443		28.02		4.8		2

LKE
Outstanding at beginning of period			623,317	$	28.64
	Anti-dilution adjustment (a)		43,236		28.06
	Exercised		(240,897)		28.04
Outstanding at end of period			425,656		26.08		6.7	$	3
Options exercisable at end of period			277,101		25.80		6.5		2

(a) Adjustments to prior year grants under the anti-dilution provisions of PPL’s stock-based compensation Plans as a result of the spinoff of PPL Energy Supply.

Substantially all stock option awards are expected to vest.

For 2015, 2014 and 2013, PPL received $97 million, $67 million and $31 million in cash from stock options exercised. The related income tax benefits realized were not significant.

The total intrinsic value of stock options exercised for 2015, 2014 and 2013 were $21 million, $13 million and $6 million.

Compensation Expense

Compensation expense for restricted stock, restricted stock units, performance units and stock options accounted for as equity awards, which for PPL Electric and LKE includes an allocation of PPL Services' expense, was:

	2015		2014		2013

PPL	$	33	$	30	$	25
PPL Electric		14		12		10
LKE		8		8		8

See Note 8 for details of the costs recognized in discontinued operations related to the accelerated vesting of awards for former PPL Energy Supply employees.

The income tax benefit related to above compensation expense was as follows:

	2015		2014		2013

PPL	$	14	$	12	$	11
PPL Electric		6		5		4
LKE		3		3		3

The income tax benefit PPL realized from stock-based awards vested or exercised was not significant for 2015, 2014 or 2013.

At December 31, 2015, unrecognized compensation expense related to nonvested restricted stock, restricted stock units, performance units and stock option awards was:


			Weighted-
	Unrecognized		Average
	Compensation		Period for
	Expense		Recognition

PPL	$	8		1.6 years
PPL Electric		2		1.6 years
LKE		1		1.4 years

Stock-Based Compensation [Line Items]

Stock-Based Compensation

10. Stock-Based Compensation

(PPL, PPL Electric and LKE)

In 2012, shareowners approved the SIP. This equity plan replaced the ICP and incorporated the following changes:

 Eliminates the potential to pay dividend equivalents on stock options.

 Eliminates the automatic lapse of restrictions on all equity awards in the event of a "potential" change in control and requires that a termination of employment occur in the event of a change in control before restrictions lapse.

 Changes the treatment of outstanding stock options upon retirement to limit the exercise period to the earlier of the end of the term (ten years from grant) or five years after retirement.

To further align the executives’ interests with those of PPL shareowners, this plan provides that each restricted stock unit entitles the executive to accrue additional restricted stock units equal to the amount of quarterly dividends paid on PPL stock. These additional restricted stock units are deferred and payable in shares of PPL common stock at the end of the restriction period. Dividend equivalents on restricted stock unit awards granted under the ICP and the ICPKE are currently paid in cash when dividends are declared by PPL.

Under the ICP, SIP and the ICPKE (together, the Plans), restricted shares of PPL common stock, restricted stock units, performance units and stock options may be granted to officers and other key employees of PPL, PPL Electric, LKE and other affiliated companies. Awards under the Plans are made by the Compensation, Governance and Nominating Committee (CGNC) of the PPL Board of Directors, in the case of the ICP and SIP, and by the PPL Corporate Leadership Council (CLC), in the case of the ICPKE.

The following table details the award limits under each of the Plans.

		Annual Grant Limit		Annual Grant Limit
		Total As % of		For Individual Participants -
	Total Plan	Outstanding	Annual Grant	Performance Based Awards
	Award	PPL Common Stock	Limit	For awards	For awards
	Limit	On First Day of	Options	denominated in	denominated in
Plan	(Shares)	Each Calendar Year	(Shares)	shares (Shares)	cash (in dollars)

ICP (a)	15,769,431	2%	3,000,000
SIP	10,000,000		2,000,000	750,000	$	15,000,000
ICPKE	14,199,796	2%	3,000,000

(a) Applicable to outstanding awards granted from January 27, 2006 to January 26, 2012. During 2012, the total plan award limit was reached and the ICP was replaced by the SIP.

Any portion of these awards that has not been granted may be carried over and used in any subsequent year. If any award lapses, is forfeited or the rights of the participant terminate, the shares of PPL common stock underlying such an award are again available for grant. Shares delivered under the Plans may be in the form of authorized and unissued PPL common stock, common stock held in treasury by PPL or PPL common stock purchased on the open market (including private purchases) in accordance with applicable securities laws.

Restricted Stock and Restricted Stock Units

Restricted shares of PPL common stock are outstanding shares with full voting and dividend rights. Restricted stock awards are granted as a retention award for select key executives and vest when the recipient reaches a certain age or meets service or other criteria set forth in the executive's restricted stock award agreement.

The Plans allow for the grant of restricted stock units. Restricted stock units are awards based on the fair value of PPL common stock on the date of grant. Actual PPL common shares will be issued upon completion of a restriction period, generally three years.

The fair value of restricted stock and restricted stock units granted is recognized on a straight-line basis over the service period or through the date at which the employee reaches retirement eligibility. The fair value of restricted stock and restricted stock units granted to retirement-eligible employees is recognized as compensation expense immediately upon the date of grant. Recipients of restricted stock units granted under the ICPKE may also be granted the right to receive dividend equivalents through the end of the restriction period or until the award is forfeited. Restricted stock and restricted stock units are subject to forfeiture or accelerated payout under the plan provisions for termination, retirement, disability and death of employees. Restrictions lapse on restricted stock and restricted stock units fully, in certain situations, as defined by each of the Plans.

The weighted-average grant date fair value of restricted stock and restricted stock units granted was:

	2015		2014		2013

PPL	$	34.50	$	31.50	$	30.30
PPL Electric		34.41		31.81		30.55
LKE		34.89		30.98		30.00

Restricted stock and restricted stock unit activity for 2015 was:

			Weighted-
			Average
		Restricted	Grant Date Fair
		Shares/Units	Value Per Share
PPL
Nonvested, beginning of period		3,485,520	$	30.07
	Granted	1,028,009		34.50
	Anti-dilution adjustments (a)	247,098		N/A
	Vested	(3,055,205)		29.34
	Forfeited	(25,947)		30.70
Nonvested, end of period (b)		1,679,475		29.65

PPL Electric
Nonvested, beginning of period		286,811	$	30.04
	Transfer between registrants	(22,730)		29.56
	Granted	75,213		34.41
	Anti-dilution adjustments (a)	18,661		N/A
	Vested	(127,507)		29.12
	Forfeited	(9,363)		30.51
Nonvested, end of period		221,085		29.48

LKE
Nonvested, beginning of period		341,468	$	29.76
	Transfer between registrants	4,300		31.74
	Granted	98,360		34.89
	Anti-dilution adjustments (a)	24,587		N/A
	Vested	(149,752)		28.55
Nonvested, end of period		318,963		29.65

(a) Includes adjustment to all restricted stock units granted prior to the spinoff of PPL Energy Supply as provided for under the anti-dilution provisions of PPL’s stock-based compensation Plans.

(b) Excludes 1,226,193 restricted stock units for which restrictions lapsed for former PPL Energy Supply employees as a result of the spinoff, but for which distribution will not occur until the end of the original restriction period of the awards.

Substantially all restricted stock and restricted stock unit awards are expected to vest.

The total fair value of restricted stock and restricted stock units vesting for the years ended December 31 was:

	2015		2014		2013

PPL	$	28	$	11	$	12
PPL Electric		4		2		3
LKE		4				1

Performance Units

Performance units are intended to encourage and reward future corporate performance. Performance units represent a target number of shares (Target Award) of PPL's common stock that the recipient would receive upon PPL's attainment of the applicable performance goal. Performance is determined based on total shareowner return during a three-year performance period. At the end of the period, payout is determined by comparing PPL's performance to the total shareowner return of the companies included in the Philadelphia Stock Exchange Utility Index. Awards are payable on a graduated basis based on thresholds that measure PPL's performance relative to peers that comprise the applicable index on which each years' awards are measured. Awards can be paid up to 200% of the Target Award or forfeited with no payout if performance is below a minimum established performance threshold. Dividends payable during the performance cycle accumulate and are converted into additional performance units and are payable in shares of PPL common stock upon completion of the performance period based on the determination of the CGNC of whether the performance goals have been achieved. Under the plan provisions, performance units are subject to forfeiture upon termination of employment except for retirement, disability or death of an employee, in which case the total performance units remain outstanding and are eligible for vesting through the conclusion of the performance period.

Beginning in 2014, the fair value of performance units granted to retirement-eligible employees is recognized as compensation expense on a straight-line basis over a one-year period, the minimum vesting period required for an employee to be entitled to payout of the awards. For employees who are not retirement-eligible, compensation expense is recognized over the shorter of the three-year performance period or the period until the employee is retirement-eligible, with a minimum vesting and recognition period of one-year. The fair value of performance units granted in 2013 and prior years is recognized as compensation expense on a straight-line basis over the three-year performance period. Performance units vest on a pro rata basis, in certain situations, as defined by each of the Plans.

The fair value of each performance unit granted was estimated using a Monte Carlo pricing model that considers stock beta, a risk-free interest rate, expected stock volatility and expected life. The stock beta was calculated comparing the risk of the individual securities to the average risk of the companies in the index group. The risk-free interest rate reflects the yield on a U.S. Treasury bond commensurate with the expected life of the performance unit. Volatility over the expected term of the performance unit is calculated using daily stock price observations for PPL and all companies in the index group and is evaluated with consideration given to prior periods that may need to be excluded based on events not likely to recur that had impacted PPL and the companies in the index group. PPL uses a mix of historic and implied volatility to value awards.

The weighted-average assumptions used in the model were:

	2015	2014	2013

Expected stock volatility	15.90%	15.80%	15.50%
Expected life	3 years	3 years	3 years

The weighted-average grant date fair value of performance units granted was:

	2015		2014		2013

PPL	$	36.76	$	34.55	$	34.15
PPL Electric		37.93		34.43		33.97
LKE		37.10		34.12		33.84

Performance unit activity for 2015 was:

				Weighted-
				Average Grant
		Performance		Date Fair Value
		Units		Per Share
PPL
Nonvested, beginning of period			1,171,716	$	33.77
	Granted		481,197		36.76
	Anti-dilution adjustment (a)		90,251		N/A
	Vested		(509,139)		32.12
	Forfeited		(240,485)		33.35
Nonvested, end of period (b)			993,540		33.09

PPL Electric
Nonvested, beginning of period			59,615	$	33.77
	Transfer between registrants		(3,676)		35.80
	Granted		21,798		37.93
	Anti-dilution adjustment (a)		4,627		N/A
	Vested		(8,497)		31.38
	Forfeited		(6,196)		31.38
Nonvested, end of period			67,671		33.05

LKE
Nonvested, beginning of period			173,946	$	33.32
	Granted		66,439		37.10
	Anti-dilution adjustment (a)		13,207		N/A
	Vested		(30,921)		31.35
	Forfeited		(29,507)		31.36
Nonvested, end of period			193,164		32.96

(a) Includes adjustment to all performance units granted prior to the spinoff of PPL Energy Supply as provided for under the anti-dilution provisions of PPL’s stock-based compensation Plans.

(b) Excludes 322,429 performance units for which the service vesting requirement was waived for former PPL Energy Supply employees as a result of the spinoff, but for which the ultimate number of shares to be distributed will depend on the actual attainment of the performance goals at the end of the specified performance periods.

The total fair value of performance units vesting for the year ended December 31, 2015 and 2014 was $6 million and $5 million for PPL and insignificant for PPL Electric and LKE.

Stock Options

PPL’s CGNC eliminated the use of stock options and changed its long-term incentive mix to 60% performance units and 40% performance-contingent restricted stock units, resulting in 100% performance-based long-term incentive mix for equity awards granted beginning in January 2014.

Under the Plans, stock options had been granted with an option exercise price per share not less than the fair value of PPL's common stock on the date of grant. Options outstanding at December 31, 2015, become exercisable in equal installments over a three-year service period beginning one year after the date of grant, assuming the individual is still employed by PPL or a subsidiary. The CGNC and CLC have discretion to accelerate the exercisability of the options, except that the exercisability of an option issued under the ICP may not be accelerated unless the individual remains employed by PPL or a subsidiary for one year from the date of grant. All options expire no later than ten years from the grant date. The options become exercisable immediately in certain situations, as defined by each of the Plans. The fair value of options granted is recognized as compensation expense on a straight-line basis over the service period or through the date at which the employee reaches retirement eligibility. The fair value of options granted to retirement-eligible employees is recognized as compensation expense immediately upon the date of grant.

The fair value of each option granted is estimated using a Black-Scholes option-pricing model. PPL uses a risk-free interest rate, expected option life, expected volatility and dividend yield to value its stock options. The risk-free interest rate reflects the yield for a U.S. Treasury Strip available on the date of grant with constant rate maturity approximating the option's expected life. Expected life is calculated based on historical exercise behavior. Volatility over the expected term of the options is evaluated with consideration given to prior periods that may need to be excluded based on events not likely to recur that had impacted PPL's volatility in those prior periods. Management's expectations for future volatility, considering potential changes to PPL's business model and other economic conditions, are also reviewed in addition to the historical data to determine the final volatility assumption. PPL uses a mix of historic and implied volatility to value awards. The dividend yield is based on several factors, including PPL's most recent dividend payment, as of the grant date and the forecasted stock price. The assumptions used in the model were:

	2013

Risk-free interest rate		1.15%
Expected option life		6.48 years
Expected stock volatility		18.50%
Dividend yield		5.00%

The weighted-average grant date fair value of options granted was:

	2013

PPL	$	2.18
PPL Electric		2.19
LKE		2.18

Stock option activity for 2015 was:

						Weighted-
				Weighted		Average
				Average		Remaining		Aggregate
		Number		Exercise		Contractual		Total Intrinsic
		of Options		Price Per Share		Term (years)		Value
PPL
Outstanding at beginning of period			9,042,962	$	30.93
	Anti-dilution adjustment (a)		907,737		28.06
	Exercised		(3,559,874)		27.35
	Forfeited		(5,676)		26.67
Outstanding at end of period			6,385,149		28.54		5.2	$	42
Options exercisable at end of period			5,683,535		28.78		5.0		36

PPL Electric
Outstanding at beginning of period			507,920	$	30.04
	Transfer between registrants		(15,339)		29.60
	Anti-dilution adjustment (a)		44,859		28.06
	Exercised		(224,007)		27.20
Outstanding at end of period			313,433		27.79		5.2	$	2
Options exercisable at end of period			263,443		28.02		4.8		2

LKE
Outstanding at beginning of period			623,317	$	28.64
	Anti-dilution adjustment (a)		43,236		28.06
	Exercised		(240,897)		28.04
Outstanding at end of period			425,656		26.08		6.7	$	3
Options exercisable at end of period			277,101		25.80		6.5		2

(a) Adjustments to prior year grants under the anti-dilution provisions of PPL’s stock-based compensation Plans as a result of the spinoff of PPL Energy Supply.

Substantially all stock option awards are expected to vest.

For 2015, 2014 and 2013, PPL received $97 million, $67 million and $31 million in cash from stock options exercised. The related income tax benefits realized were not significant.

The total intrinsic value of stock options exercised for 2015, 2014 and 2013 were $21 million, $13 million and $6 million.

Compensation Expense

Compensation expense for restricted stock, restricted stock units, performance units and stock options accounted for as equity awards, which for PPL Electric and LKE includes an allocation of PPL Services' expense, was:

	2015		2014		2013

PPL	$	33	$	30	$	25
PPL Electric		14		12		10
LKE		8		8		8

See Note 8 for details of the costs recognized in discontinued operations related to the accelerated vesting of awards for former PPL Energy Supply employees.

The income tax benefit related to above compensation expense was as follows:

	2015		2014		2013

PPL	$	14	$	12	$	11
PPL Electric		6		5		4
LKE		3		3		3

The income tax benefit PPL realized from stock-based awards vested or exercised was not significant for 2015, 2014 or 2013.

At December 31, 2015, unrecognized compensation expense related to nonvested restricted stock, restricted stock units, performance units and stock option awards was:


			Weighted-
	Unrecognized		Average
	Compensation		Period for
	Expense		Recognition

PPL	$	8		1.6 years
PPL Electric		2		1.6 years
LKE		1		1.4 years