Asset Retirement Obligations

12 Months Ended

Dec. 31, 2015

Asset Retirement Obligations [Abstract]

19. Asset Retirement Obligations

(PPL)

WPD has recorded conditional AROs required by U.K. law related to treated wood poles, gas-filled switchgear and fluid-filled cables.

(PPL and PPL Electric)

PPL Electric has identified legal retirement obligations for the retirement of certain transmission assets that could not be reasonably estimated due to indeterminable settlement dates. These assets are located on rights-of-way that allow the grantor to require PPL Electric to relocate or remove the assets. Since this option is at the discretion of the grantor of the right-of-way, PPL Electric is unable to determine when these events may occur.

(PPL, LKE, LG&E and KU)

LG&E's and KU's AROs are primarily related to the final retirement of assets associated with generating units. LG&E also has AROs related to natural gas mains and wells. LG&E's and KU's transmission and distribution lines largely operate under perpetual property easement agreements which do not generally require restoration upon removal of the property. Therefore, no material AROs are recorded for transmission and distribution assets. As described in Notes 1 and 6, LG&E's and KU's accretion and depreciation expense are recorded as a regulatory asset, such that there is no earnings impact.

The changes in the carrying amounts of AROs were as follows.

			PPL				LKE				LG&E				KU
			2015		2014		2015		2014		2015		2014		2015		2014

ARO at beginning of period			$	336	$	301	$	285	$	252	$	74	$	74	$	211	$	178
	Accretion			19		16		18		14		5		4		13		10
	Obligations incurred			5		1		5		1		3				2		1
	Changes in estimated cash flow
		or settlement date		235		25		234		23		98		1		136		22
	Effect of foreign currency
		exchange rates		(2)		(2)
	Obligations settled			(7)		(5)		(7)		(5)		(5)		(5)		(2)
ARO at end of period			$	586	$	336	$	535	$	285	$	175	$	74	$	360	$	211

LKE recorded increases of $228 million ($139 million at KU and $89 million at LG&E) to the existing AROs during 2015 as a result of an engineering study that was performed, in connection with the final CCR rule, providing clarity on projected CCR closure costs and revisions in the timing and amounts of future expected cash flows. Further increases to AROs or changes to current capital plans or to operating costs may be required as estimates of future cash flows are refined based on closure developments, groundwater monitoring results and regulatory or legal proceedings. In 2014, AROs were revalued primarily due to updates in the estimated cash flows for ash ponds based on updated cost estimates.

As of December 31, 2015, LKE had $50 million ($25 million at LG&E and KU) of the ARO balances classified as current liabilities. These current liabilities are primarily related to CCR closure costs expected to be incurred in 2016. As of December 31, 2014, substantially all of the ARO balances are classified as noncurrent liabilities.

See Note 13 for information on the final CCR rule and Note 6 for information on the rate recovery applications with the KPSC.