Revenue from Contracts with Customers

9 Months Ended

Sep. 30, 2022

Revenue from Contract with Customer [Abstract]

Revenue from Contracts with Customers

3. Revenue from Contracts with Customers

(All Registrants)

See Note 3 in the Registrants' 2021 Form 10-K for a discussion of the principal activities from which PPL Electric, LG&E and KU and PPL’s Pennsylvania Regulated and Kentucky Regulated segments generate their revenues.

(PPL)

Rhode Island Regulated Segment Revenues

The Rhode Island Regulated segment generates substantially all of its revenues from contracts with customers from RIE’s regulated tariff-based transmission and distribution of electricity and regulated tariff-based distribution of natural gas.

Distribution Revenue

Distribution revenues are primarily from the sale of electricity, natural gas, and related services to retail customers. Distribution sales are regulated by the RIPUC, which is responsible for approving the rates and other terms of services as part of the rate making process. Natural gas and electric distribution revenues are derived from the regulated sale and distribution of electricity and natural gas to residential, commercial, and industrial customers within RIE’s service territory under the tariff rates. The performance obligation related to distribution sales is to provide electricity and natural gas to customers on demand. The performance obligation is satisfied over time because the customer simultaneously receives and consumes the electricity or natural gas as services are provided. RIE records revenues related to the distribution sales based upon the approved tariff rate and the volume delivered to the customers, which corresponds with the amount RIE has the right to invoice.

Distribution revenue also includes estimated unbilled amounts, which represent the estimated amounts due from retail customers as a result of customer's bills rendered throughout the month, rather than bills being rendered at the end of the month. Unbilled revenues are determined based on estimated unbilled sales volumes for the respective customer classes and then applying the applicable tariff rate to those volumes. Any difference between estimated and actual revenues is adjusted the following month when the previous unbilled estimate is reversed and actual billings occur. This method of recognition fairly presents RIE's transfer of electricity and natural gas to the customer as the amount recognized is based on actual and estimated volumes delivered and the tariff rate per unit of energy and any applicable fixed charges or regulatory mechanisms as approved by the respective regulatory body.

Certain customers have the option to obtain electricity or natural gas from other suppliers. In those circumstances, revenue is only recognized for providing delivery of the commodity to the customer.

Transmission Revenue

RIE’s transmission services are regulated by the FERC and coordinated with Independent System Operator (ISO) – New England (ISO-NE). Additionally, RIE makes available its transmission facilities to NEP, for operation and control pursuant to an integrated facilities agreement, Service Agreement No. 23 (Integrated Facilities Agreement or IFA). These revenues arise under tariff/rate agreements and are collected primarily from RIE’s distribution customers. The revenue is recognized over-time as transmission services are provided and consumed. This method of recognition fairly presents RIE’s transfer of transmission services as the daily rate is set by a FERC-approved formula-based rate.

(All Registrants)

The following tables reconcile "Operating Revenues" included in each Registrant's Statement of Income with revenues generated from contracts with customers for the periods ended September 30.

	2022 Three Months
	PPL		PPL Electric		LG&E		KU
Operating Revenues (a)	$	2,134	$	766	$	436	$	553
Revenues derived from:
Alternative revenue programs (b)	51		3		3		1
Other (c)	(8)		(4)		(1)		(2)
Revenues from Contracts with Customers	$	2,177	$	765	$	438	$	552
	2021 Three Months
	PPL		PPL Electric		LG&E		KU
Operating Revenues (a)	$	1,512	$	627	$	395	$	494
Revenues derived from:
Alternative revenue programs (b)	19		22		(1)		(2)
Other (c)	(4)		—		(2)		(2)
Revenues from Contracts with Customers	$	1,527	$	649	$	392	$	490
	2022 Nine Months
	PPL		PPL Electric		LG&E		KU
Operating Revenues (a)	$	5,612	$	2,217	$	1,339	$	1,569
Revenues derived from:
Alternative revenue programs (b)	(16)		(56)		12		5
Other (c)	(21)		(11)		(5)		(3)
Revenues from Contracts with Customers	$	5,575	$	2,150	$	1,346	$	1,571
	2021 Nine Months
	PPL		PPL Electric		LG&E		KU
Operating Revenues (a)	$	4,298	$	1,769	$	1,165	$	1,374
Revenues derived from:
Alternative revenue programs (b)	62		68		(2)		(4)
Other (c)	(15)		—		(7)		(8)
Revenues from Contracts with Customers	$	4,345	$	1,837	$	1,156	$	1,362

(a)PPL includes $384 million and $512 million for the three and nine months ended September 30, 2022 of revenues from external customers reported by the Rhode Island Regulated segment. PPL Electric represents revenues from external customers reported by the Pennsylvania Regulated segment and LG&E and KU, net of intercompany power sales and transmission revenues, represent revenues from external customers reported by the Kentucky Regulated segment. See Note 2 for additional information.

(b)This line item shows the over/under collection of rate mechanisms deemed alternative revenue programs with over-collections of revenue shown as positive amounts in the table above and under-collections shown as negative amounts. For PPL Electric, the nine months ended September 30, 2022, includes $74 million related to the amortization of the regulatory liability primarily recorded in 2021 for a reduction in the transmission formula rate return on equity that is reflected in rates in 2022. The three and nine months ended September 30, 2021, included a $13 million and $64 million revenue reduction recorded as a result of the challenge to the transmission formula rate return on equity. See Note 6 for additional information.

(c)Represents additional revenues outside the scope of revenues from contracts with customers, such as lease and other miscellaneous revenues.

The following tables show revenues from contracts with customers disaggregated by customer class for the periods ended September 30.

	Three Months
	Residential		Commercial		Industrial		Other (a)		Wholesale - municipality		Wholesale - other (b)		Transmission		Revenues from Contracts with Customers
PPL
2022
PA Regulated	$	407	$	135	$	22	$	13	$	—	$	—	$	188	$	765
KY Regulated	401		284		176		88		8		21		—		978
RI Regulated	100		34		3		251		—		—		39		427
Corp and Other	—		—		—		7		—		—		—		7
Total PPL	$	908	$	453	$	201	$	359	$	8	$	21	$	227	$	2,177
2021
PA Regulated	$	324	$	95	$	14	$	13	$	—	$	—	$	203	$	649
KY Regulated	360		250		154		81		7		20		—		872
RI Regulated	—		—		—		—		—		—		—		—
Corp and Other	—		—		—		6		—		—		—		6
Total PPL	$	684	$	345	$	168	$	100	$	7	$	20	$	203	$	1,527
PPL Electric
2022	$	407	$	135	$	22	$	13	$	—	$	—	$	188	$	765
2021	$	324	$	95	$	14	$	13	$	—	$	—	$	203	$	649
LG&E
2022	$	200	$	140	$	53	$	39	$	—	$	6	$	—	$	438
2021	$	180	$	123	$	46	$	37	$	—	$	6	$	—	$	392
KU
2022	$	201	$	144	$	123	$	51	$	8	$	25	$	—	$	552
2021	$	180	$	127	$	108	$	44	$	7	$	24	$	—	$	490

	Nine Months
	Residential		Commercial		Industrial		Other (a)		Wholesale - municipality		Wholesale - other (b)		Transmission		Revenues from Contracts with Customers
PPL
2022
PA Regulated	$	1,189	$	360	$	67	$	39	$	—	$	—	$	495	$	2,150
KY Regulated	1,218		805		497		264		22		66		—		2,872
RI Regulated	131		46		4		298		—		—		55		534
Corp and Other	—		—		—		19		—		—		—		19
Total PPL	$	2,538	$	1,211	$	568	$	620	$	22	$	66	$	550	$	5,575
2021
PA Regulated	$	964	$	260	$	39	$	38	$	—	$	—	$	536	$	1,837
KY Regulated	1,061		695		435		222		18		53		—		2,484
RI Regulated	—		—		—		—		—		—		—		—
Corp and Other	—		—		—		24		—		—		—		24
Total PPL	$	2,025	$	955	$	474	$	284	$	18	$	53	$	536	$	4,345

	Nine Months
	Residential		Commercial		Industrial		Other (a)		Wholesale - municipality		Wholesale - other (b)		Transmission		Revenues from Contracts with Customers
PPL Electric
2022	$	1,189	$	360	$	67	$	39	$	—	$	—	$	495	$	2,150
2021	$	964	$	260	$	39	$	38	$	—	$	—	$	536	$	1,837
LG&E
2022	$	615	$	410	$	147	$	125	$	—	$	49	$	—	$	1,346
2021	$	529	$	351	$	135	$	102	$	—	$	39	$	—	$	1,156
KU
2022	$	603	$	395	$	350	$	140	$	22	$	61	$	—	$	1,571
2021	$	532	$	344	$	300	$	120	$	18	$	48	$	—	$	1,362

(a)Primarily includes revenues from pole attachments, street lighting, other public authorities and other non-core businesses. The Rhode Island Regulated segment also includes open access revenues.

(b)Includes wholesale power and transmission revenues. LG&E and KU amounts include intercompany power sales and transmission revenues, which are eliminated upon consolidation at the Kentucky Regulated segment.

As discussed in Note 2, PPL segments its business by geographic location. Revenues from external customers for each segment/geographic location are reconciled to revenues from contracts with customers in the footnotes to the tables above.

Contract receivables from customers are primarily included in "Accounts receivable - Customer", "Unbilled revenues", and "Other noncurrent assets" on the Balance Sheets.

The following table shows the accounts receivable and unbilled revenues balances that were impaired for the periods ended September 30.

	Three Months				Nine Months
	2022		2021		2022		2021
PPL (a)	$	21	$	7	$	55	$	9
PPL Electric	7		3		12		4
LG&E	2		1		4		1
KU	3		3		5		4

(a)Includes $3 million and $26 million for the three and nine months ended September 30, 2022 related to the commitment to forgive customer arrearages for low income and protected residential customers at RIE. See Note 8 for additional information.

The following table shows the balances and certain activity of contract liabilities resulting from contracts with customers.

	PPL		PPL Electric		LG&E		KU
Contract liabilities at December 31, 2021	$	42	$	25	$	6	$	6
Contract liabilities at September 30, 2022	35		18		6		6
Revenue recognized during the nine months ended September 30, 2022 that was included in the contract liability balance at December 31, 2021	25		12		6		6
Contract liabilities at December 31, 2020	$	40	$	23	$	5	$	6
Contract liabilities at September 30, 2021	37		21		6		6
Revenue recognized during the nine months ended September 30, 2021 that was included in the contract liability balance at December 31, 2020	24		11		5		6

Contract liabilities result from recording contractual billings in advance for customer attachments to the Registrants' infrastructure and payments received in excess of revenues earned to date. Advanced billings for customer attachments are generally recognized as revenue ratably over the quarterly billing period. Payments received in excess of revenues earned to date are recognized as revenue as services are delivered in subsequent periods.

At September 30, 2022, PPL had $41 million of performance obligations attributable to Safari Holdings that have not been satisfied. Safari Holdings was sold on November 1, 2022. See Note 8 for additional information.