Fair Value Measurements

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

13. Fair Value Measurements

(All Registrants)

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. See Note 1 in each Registrant's 2019 Form 10-K for information on the levels in the fair value hierarchy.

Recurring Fair Value Measurements

The assets and liabilities measured at fair value were:

	June 30, 2020								December 31, 2019
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
PPL
Assets
Cash and cash equivalents	$	1,278	$	1,278	$	—	$	—	$	815	$	815	$	—	$	—
Restricted cash and cash equivalents (a)	23		23		—		—		21		21		—		—
Special use funds (a):
Commingled debt fund measured at NAV (b)	27		—		—		—		29		—		—		—
Commingled equity fund measured at NAV (b)	26		—		—		—		27		—		—		—
Total special use funds	53		—		—		—		56		—		—		—

	June 30, 2020								December 31, 2019
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Price risk management assets (c):
Foreign currency contracts	108		—		108		—		142		—		142		—
Cross-currency swaps	201		—		201		—		154		—		154		—
Total price risk management assets	309		—		309		—		296		—		296		—
Total assets	$	1,663	$	1,301	$	309	$	—	$	1,188	$	836	$	296	$	—
Liabilities
Price risk management liabilities (c):
Interest rate swaps	$	38	$	—	$	38	$	—	$	21	$	—	$	21	$	—
Foreign currency contracts	—		—		—		—		5		—		5		—
Total price risk management liabilities	$	38	$	—	$	38	$	—	$	26	$	—	$	26	$	—
PPL Electric
Assets
Cash and cash equivalents	$	13	$	13	$	—	$	—	$	262	$	262	$	—	$	—
Restricted cash and cash equivalents (a)	2		2		—		—		2		2		—		—
Total assets	$	15	$	15	$	—	$	—	$	264	$	264	$	—	$	—
LKE
Assets
Cash and cash equivalents	$	152	$	152	$	—	$	—	$	27	$	27	$	—	$	—
Cash collateral posted to counterparties (d)	2		2		—		—		—		—		—		—
Total assets	$	154	$	154	$	—	$	—	$	27	$	27	$	—	$	—
Liabilities
Price risk management liabilities:
Interest rate swaps	$	28	$	—	$	28	$	—	$	21	$	—	$	21	$	—
Total price risk management liabilities	$	28	$	—	$	28	$	—	$	21	$	—	$	21	$	—
LG&E
Assets
Cash and cash equivalents	$	5	$	5	$	—	$	—	$	15	$	15	$	—	$	—
Cash collateral posted to counterparties (d)	2		2		—		—		—		—		—		—
Total assets	$	7	$	7	$	—	$	—	$	15	$	15	$	—	$	—
Liabilities
Price risk management liabilities:
Interest rate swaps	$	28	$	—	$	28	$	—	$	21	$	—	$	21	$	—
Total price risk management liabilities	$	28	$	—	$	28	$	—	$	21	$	—	$	21	$	—
KU
Assets
Cash and cash equivalents	$	145	$	145	$	—	$	—	$	12	$	12	$	—	$	—
Total assets	$	145	$	145	$	—	$	—	$	12	$	12	$	—	$	—

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

(b)In accordance with accounting guidance, certain investments that are measured at fair value using net asset value per share (NAV), or its equivalent, have not been classified in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Balance Sheets.

(c)Current portion is included in "Price risk management assets" and "Other current liabilities" and noncurrent portion is included in "Price risk management assets" and "Other deferred credits and noncurrent liabilities" on the Balance Sheets.

(d)Included in "Other noncurrent assets" on the Balance Sheets. Represents cash collateral posted to offset the exposure with counterparties related to certain interest rate swaps under master netting arrangements that are not offset.

Special Use Funds

(PPL)

The special use funds are investments restricted for paying active union employee medical costs. In May 2018, PPL received a favorable private letter ruling from the IRS permitting a transfer of excess funds from the PPL Bargaining Unit Retiree Health Plan VEBA to a new subaccount within the VEBA to be used to pay medical claims of active bargaining unit employees. The funds are invested primarily in commingled debt and equity funds measured at NAV and are classified as investments in equity securities. Changes in fair value of the funds are recorded to the Statements of Income.

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.

Financial Instruments Not Recorded at Fair Value (All Registrants)

The carrying amounts of long-term debt on the Balance Sheets and their estimated fair values are set forth below. Long-term debt is classified as Level 2. The effect of third-party credit enhancements is not included in the fair value measurement.

	June 30, 2020				December 31, 2019
	Carrying Amount (a)		Fair Value		Carrying Amount (a)		Fair Value
PPL	$	23,156	$	27,894	$	21,893	$	25,481
PPL Electric	3,986		4,939		3,985		4,589
LKE	6,497		7,704		6,002		6,766
LG&E	2,005		2,436		2,005		2,278
KU	3,117		3,727		2,623		3,003

(a)Amounts are net of debt issuance costs.

The carrying amounts of other current financial instruments (except for long-term debt due within one year) approximate their fair values because of their short-term nature.