PPL has a risk management policy approved by the Board of Directors to manage market risk (including price, liquidity and volumetric risk) and credit risk (including non-performance risk and payment default risk). The RMC, comprised of senior management and chaired by the Chief Risk Officer, oversees the risk management function. Key risk control activities designed to ensure compliance with the risk policy and detailed programs include, but are not limited to, credit review and approval, validation of transactions and market prices, verification of risk and transaction limits, VaR analyses, portfolio stress tests, gross margin at risk analyses, sensitivity analyses and daily portfolio reporting, including open positions, determinations of fair value and other risk management metrics.

Market risk includes the potential loss that may be incurred as a result of price changes associated with a particular financial or commodity instrument as well as market liquidity and volumetric risks. Forward contracts, futures contracts, options, swaps and structured transactions are utilized as part of risk management strategies to minimize unanticipated fluctuations in earnings caused by changes in commodity prices, volumes of full-requirement sales contracts, basis exposure, interest rates and/or foreign currency exchange rates. Many of the contracts meet the definition of a derivative. All derivatives are recognized on the Balance Sheets at their fair value, unless NPNS is elected.

The table below summarizes the market risks that affect PPL and its Subsidiary Registrants.

PPL

Energy Supply

Electric

LKE

LG&E

Commodity price risk (including basis and

volumetric risk)

Interest rate risk:

Debt issuances

Defined benefit plans

NDT securities

Equity securities price risk:

Defined benefit plans

NDT securities

Future stock transactions

Foreign currency risk - WPD investment and

earnings

X = PPL and PPL Energy Supply actively mitigate market risks through their risk management programs described above.

M = The regulatory environments for PPL's regulated entities, by definition, significantly mitigate market risk.

 PPL is exposed to commodity price risk through its domestic subsidiaries as described below. Volumetric risk is significantly mitigated at WPD as a result of the method of regulation in the U.K.

 PPL Energy Supply is exposed to commodity price risk for energy and energy-related products associated with the sale of electricity from its generating assets and other electricity and gas marketing activities and the purchase of fuel and fuel-related commodities for generating assets, as well as for proprietary trading activities.

 PPL Electric is exposed to commodity price risk from its obligation as PLR; however, its PUC-approved cost recovery mechanism substantially eliminates its exposure to this risk. PPL Electric also mitigates its exposure to volumetric risk by entering into full-requirement supply agreements to serve its PLR customers. These supply agreements transfer the volumetric risk associated with the PLR obligation to the energy suppliers.

 LG&E's and KU's rates include certain mechanisms for fuel, gas supply and environmental expenses. These mechanisms generally provide for timely recovery of market price and volumetric fluctuations associated with these expenses.

 PPL and its subsidiaries are exposed to interest rate risk associated with forecasted fixed-rate and existing floating-rate debt issuances. WPD holds over-the-counter cross currency swaps to limit exposure to market fluctuations on interest and principal payments from changes in foreign currency exchange rates and interest rates. LG&E utilizes over-the-counter interest rate swaps to limit exposure to market fluctuations on floating-rate debt and LG&E and KU utilize forward starting interest rate swaps to hedge changes in benchmark interest rates in connection with future debt issuances.

 PPL and its subsidiaries are exposed to interest rate risk associated with debt securities held by defined benefit plans. This risk is significantly mitigated to the extent that the plans are sponsored at, or sponsored on behalf of, the regulated domestic utilities and for certain plans at WPD due to the recovery mechanisms in place. Additionally, PPL Energy Supply is exposed to interest rate risk associated with debt securities held by the NDT.

 PPL and its subsidiaries are exposed to equity securities price risk associated with defined benefit plans. This risk is significantly mitigated at the regulated domestic utilities and for certain plans at WPD due to the recovery mechanisms in place. Additionally, PPL Energy Supply is exposed to equity securities price risk in the NDT funds.

 PPL is exposed to equity securities price risk from future stock sales and/or purchases.

 PPL is exposed to foreign currency exchange risk primarily associated with its investments and earnings in U.K. affiliates.

Credit risk is the potential loss that may be incurred due to a counterparty's non-performance.

PPL is exposed to credit risk from "in-the-money" interest rate and foreign currency derivatives with financial institutions, as well as additional credit risk through certain of its subsidiaries, as discussed below.

PPL Energy Supply is exposed to credit risk from "in-the-money" commodity derivatives with its energy trading partners, which include other energy companies, fuel suppliers, financial institutions, other wholesale customers and retail customers.

LKE and LG&E are exposed to credit risk from interest rate derivatives with third-party financial institutions.

The majority of PPL and PPL Energy Supply's credit risk stems from commodity derivatives for multi-year contracts for energy sales and purchases. If PPL Energy Supply's counterparties fail to perform their obligations under such contracts and PPL Energy Supply could not replace the sales or purchases at the same or better prices as those under the defaulted contracts, PPL Energy Supply would incur financial losses. Those losses would be recognized immediately or through lower revenues or higher costs in future years, depending on the accounting treatment for the defaulted contracts. In the event a supplier of LKE (through its subsidiaries LG&E and KU) or PPL Electric defaults on its obligation, those entities would be required to seek replacement power or replacement fuel in the market. In general, incremental costs incurred by these entities would be recoverable from customers in future rates, thus mitigating the financial risk for these entities.

PPL and its subsidiaries have credit policies in place to manage credit risk, including the use of an established credit approval process, daily monitoring of counterparty positions and the use of master netting agreements or provisions. These agreements generally include credit mitigation provisions, such as margin, prepayment or collateral requirements. PPL and its subsidiaries may request additional credit assurance, in certain circumstances, in the event that the counterparties' credit ratings fall below investment grade, their tangible net worth falls below specified percentages or their exposures exceed an established credit limit. See Note 18 for credit concentration associated with energy trading partners.

Net derivative positions on the balance sheets are not offset against the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) under master netting arrangements.

PPL's and PPL Energy Supply's obligation to return counterparty cash collateral under master netting arrangements was $9 million and $112 million at December 31, 2013 and 2012.

PPL Electric, LKE and LG&E had no obligation to return cash collateral under master netting arrangements at December 31, 2013 and 2012.

PPL, LKE and LG&E had posted cash collateral under master netting arrangements of $22 million and $32 million at December 31, 2013 and 2012.

PPL Energy Supply, PPL Electric and KU had not posted any cash collateral under master netting arrangements at December 31, 2013 and 2012.

See "Offsetting Derivative Investments" below for a summary of derivative positions presented in the balance sheets where a right of setoff exists under these arrangements.

Commodity price risk, including basis and volumetric risk, is among PPL's and PPL Energy Supply's most significant risks due to the level of investment that PPL and PPL Energy Supply maintain in their competitive generation assets, as well as the extent of their marketing activities. Several factors influence price levels and volatilities. These factors include, but are not limited to, seasonal changes in demand, weather conditions, available generating assets within regions, transportation/transmission availability and reliability within and between regions, market liquidity, and the nature and extent of current and potential federal and state regulations.

PPL Energy Supply maximizes the value of its unregulated wholesale and unregulated retail energy portfolios through the use of non-trading strategies that include sales of competitive baseload generation, optimization of competitive intermediate and peaking generation and marketing activities.

PPL Energy Supply has a formal hedging program to economically hedge the forecasted purchase and sale of electricity and related fuels for its competitive baseload generation fleet, which includes 7,369 MW (summer rating) of nuclear, coal and hydroelectric generating capacity. PPL Energy Supply attempts to optimize the overall value of its competitive intermediate and peaking fleet, which includes 3,309 MW (summer rating) of natural gas and oil-fired generation. PPL Energy Supply's marketing portfolio is comprised of full-requirement sales contracts and related supply contracts, retail natural gas and electricity sales contracts and other marketing activities. The strategies that PPL Energy Supply uses to hedge its full-requirement sales contracts include purchasing energy (at a liquid trading hub or directly at the load delivery zone), capacity and RECs in the market and/or supplying the energy, capacity and RECs from its generation assets.

PPL and PPL Energy Supply enter into financial and physical derivative contracts, including forwards, futures, swaps and options, to hedge the price risk associated with electricity, natural gas, oil and other commodities. Certain contracts are non-derivatives or NPNS is elected and therefore they are not reflected in the financial statements until delivery. PPL and PPL Energy Supply segregate their non-trading activities into two categories: cash flow hedges and economic activity as discussed below.

Certain derivative contracts have qualified for hedge accounting so that the effective portion of a derivative's gain or loss is deferred in AOCI and reclassified into earnings when the forecasted transaction occurs. Certain cash flow hedge positions were dedesignated during 2013 and 2012 and the unamortized portion remained in AOCI because the original forecasted transaction is still expected to occur. There were no active cash flow hedges at December 31, 2013. At December 31, 2013, the accumulated net unrecognized after-tax gains (losses) that are expected to be reclassified into earnings during the next 12 months were $25 million for PPL and PPL Energy Supply. Cash flow hedges are discontinued if it is no longer probable that the original forecasted transaction will occur by the end of the originally specified time periods and any amounts previously recorded in AOCI are reclassified into earnings once it is determined that the hedge transaction is probable of not occurring. For 2013, there were no reclassifications, while in 2012 and 2011, such reclassifications were insignificant.

For 2013 and 2012, hedge ineffectiveness associated with energy derivatives was insignificant. For 2011, hedge ineffectiveness associated with energy derivatives was an after-tax gain (loss) of $(22) million.

Many derivative contracts economically hedge the commodity price risk associated with electricity, natural gas, oil and other commodities but do not receive hedge accounting treatment because they were not eligible for hedge accounting or because hedge accounting was not elected. These derivatives hedge a portion of the economic value of PPL Energy Supply's competitive generation assets and unregulated full-requirement and retail contracts, which are subject to changes in fair value due to market price volatility and volume expectations. Additionally, economic activity would also include the ineffective portion of qualifying cash flow hedges (see "Cash Flow Hedges" above). The derivative contracts in this category that existed at December 31, 2013 range in maturity through 2019.

Examples of economic activity may include hedges on sales of baseload generation, certain purchase contracts used to supply full-requirement sales contracts, FTRs or basis swaps used to hedge basis risk associated with the sale of competitive generation or supplying full-requirement sales contracts, Spark Spread hedging contracts, retail electric and natural gas activities, and fuel oil swaps used to hedge price escalation clauses in coal transportation and other fuel-related contracts. PPL Energy Supply also uses options, which include the sale of call options and the purchase of put options tied to a particular generating unit. Since the physical generating capacity is owned, price exposure is generally capped at the price at which the generating unit would be dispatched and therefore does not expose PPL Energy Supply to uncovered market price risk.

The net fair value of economic positions at December 31, 2013 and December 31, 2012 was a net asset (liability) of $107 million and $346 million for PPL and PPL Energy Supply. The unrealized gains (losses) for economic activity were as follows.

PPL Energy Supply has a proprietary trading strategy which is utilized to take advantage of market opportunities. As a result, PPL Energy Supply may at times create a net open position in its portfolio that could result in losses if prices do not move in the manner or direction anticipated. Net energy trading margins, which are included in "Unregulated wholesale energy" on the Statements of Income, were insignificant for 2013, 2012 and 2011.

At December 31, 2013, the net volumes of derivative (sales)/purchase contracts used in support of the various strategies discussed above were as follows.

		Volumes (a)
Commodity	Unit of Measure	2014	2015	2016	Thereafter

Power	MWh	(33,278,963)	(14,421,817)	4,348,927	18,931,370
Capacity	MW-Month	(19,575)	(3,929)	501	9
Gas	MMBtu	25,869,617	(33,082,289)	19,082,945	(9,202,403)
Coal	Tons	495,900
FTRs	MW-Month	9,581	1,705
Oil	Barrels	150,000	380,869	274,137	101,261

(a) Volumes for option contracts factor in the probability of an option being exercised and may be less than the notional amount of the option.

PPL and its subsidiaries issue debt to finance their operations, which exposes them to interest rate risk. Various financial derivative instruments are utilized to adjust the mix of fixed and floating interest rates in their debt portfolio, adjust the duration of the debt portfolio and lock in benchmark interest rates in anticipation of future financing, when appropriate. Risk limits under PPL's risk management program are designed to balance risk exposure to volatility in interest expense and changes in the fair value of the debt portfolio due to changes in benchmark interest rates.

Interest rate risks include exposure to adverse interest rate movements for outstanding variable rate debt and for future anticipated financings. Financial interest rate swap contracts that qualify as cash flow hedges may be entered into to hedge floating interest rate risk associated with both existing and anticipated debt issuances. At December 31, 2013, outstanding interest rate swap contracts range in maturity through 2044 for PPL's domestic interest rate swaps. These swaps had an aggregate notional value of $1.3 billion at December 31, 2013.

At December 31, 2013, PPL held a notional position in cross-currency interest rate swaps totaling $1.3 billion that range in maturity through 2028 to hedge the interest payments and principal of WPD's U.S. dollar-denominated senior notes.

For 2013 and 2012, hedge ineffectiveness associated with interest rate derivatives was insignificant. For 2011, hedge ineffectiveness associated with these derivatives resulted in a net after-tax gain (loss) of $(9) million, which included a gain (loss) of $(4) million attributable to certain interest rate swaps that failed hedge effectiveness testing during the second quarter of 2011.

Cash flow hedges are discontinued if it is no longer probable that the original forecasted transaction will occur by the end of the originally specified time period and any amounts previously recorded in AOCI are reclassified into earnings once it is determined that the hedged transaction is probable of not occurring. PPL had no such reclassifications for 2013, 2012 and 2011.

At December 31, 2013, the accumulated net unrecognized after-tax gains (losses) on qualifying derivatives that are expected to be reclassified into earnings during the next 12 months were $(10) million. Amounts are reclassified as the hedged interest payments are made.

In November 2012 and April 2013, LG&E and KU entered into forward-starting interest rate swaps with PPL that hedged the interest payments on new debt that was expected to be issued in 2013. In September 2013, these hedges were terminated and LG&E and KU entered into new forward-starting interest rate swaps with PPL, effectively extending the start date of the prior hedges from September 2013 to December 2013. All of these swaps had terms identical to forward-starting swaps entered into by PPL with third parties. New debt totaling $500 million was issued in November 2013 (LG&E and KU each issued $250 million) and the hedges issued in September were terminated in November 2013. Net cash settlements of $86 million (LG&E and KU each received $43 million) were received on the swaps that were terminated in September and November, which are included in "Cash Flows from Operating Activities" on the Statement of Cash Flows. Realized gains and losses on these swaps are probable of recovery through regulated rates; as such, the net settlements were reclassified from AOCI to regulatory liabilities and are being recognized in "Interest Expense" on the Statements of Income over the life of the newly issued debt. For 2013, there was no hedge ineffectiveness recorded for the interest rate derivatives.

PPL is exposed to changes in the fair value of its debt portfolio. To manage this risk, financial contracts may be entered into to hedge fluctuations in the fair value of existing debt issuances due to changes in benchmark interest rates. In July 2012, contracts held by PPL that ranged in maturity through 2047 and had a notional value of $99 million were canceled without penalties by the counterparties. PPL did not hold any such contracts at December 31, 2013 or 2012. PPL did not recognize gains or losses resulting from the ineffective portion of fair value hedges or from a portion of the hedging instrument being excluded from the assessment of hedge effectiveness or from hedges of debt issuances that no longer qualified as fair value hedges for 2013, 2012 and 2011.

In 2011, PPL Electric redeemed $400 million of 7.125% Senior Secured Bonds due 2013. As a result of this redemption, PPL recorded a gain (loss) of $22 million, or $14 million after tax, for 2011 in "Other Income (Expense) - net" on the Statement of Income as a result of accelerated amortization of the fair value adjustments to the debt in connection with previously settled fair value hedges.

LG&E enters into interest rate swap contracts that economically hedge interest payments on variable rate debt. Because realized gains and losses from the swaps, including a terminated swap contract, are recoverable through regulated rates, any subsequent changes in fair value of these derivatives are included in regulatory assets or liabilities until they are realized as interest expense. Realized gains and losses are recognized in "Interest Expense" on the Statements of Income when the hedged transaction occurs. At December 31, 2013, LG&E held contracts with a notional amount of $179 million that range in maturity through 2033.

PPL is exposed to foreign currency risk, primarily through investments in and earnings of U.K. affiliates. PPL has adopted a foreign currency risk management program designed to hedge certain foreign currency exposures, including firm commitments, recognized assets or liabilities, anticipated transactions and net investments. In addition, PPL enters into financial instruments to protect against foreign currency translation risk of expected earnings.

PPL enters into foreign currency contracts on behalf of a subsidiary to protect the value of a portion of its net investment in WPD. The contracts outstanding at December 31, 2013 had a notional amount of £301 million (approximately $477 million based on contracted rates). The settlement dates of these contracts range from May 2014 through December 2015.

Additionally, a PPL Global subsidiary that has a U.S. dollar functional currency entered into GBP intercompany loans payable with PPL WEM subsidiaries that have GBP functional currency. The loans qualify as a net investment hedge for the PPL Global subsidiary. As such, the foreign currency gains and losses on the intercompany loans for the PPL Global subsidiary are recorded to the foreign currency translation adjustment component of OCI. At December 31, 2013, the outstanding balances of the intercompany loans were £42 million (approximately $69 million based on spot rates). For 2013 and 2012, PPL recognized insignificant amounts of net investment hedge after-tax gains (losses) on the intercompany loans in the foreign currency translation adjustment component of OCI.

At December 31, 2013 and 2012, PPL had an insignificant amount and $14 million of accumulated net investment hedge after-tax gains (losses) that were included in the foreign currency translation adjustment component of AOCI.

PPL enters into foreign currency contracts on behalf of a subsidiary to economically hedge GBP-denominated anticipated earnings. At December 31, 2013, the total exposure hedged by PPL was approximately £1.4 billion (approximately $2.3 billion based on contracted rates). These contracts had termination dates ranging from January 2014 through December 2015.

In anticipation of the repayment of a portion of the GBP-denominated borrowings under the 2011 Bridge Facility with U.S. dollar proceeds received from PPL's issuance of common stock and 2011 Equity Units and PPL WEM's issuance of U.S. dollar-denominated senior notes, PPL entered into forward contracts to purchase GBP in order to economically hedge the foreign currency exchange rate risk related to the repayment. When these trades were settled in April 2011, PPL recorded $55 million of pre-tax, net gains (losses) in "Other Income (Expense) - net" on the Statement of Income.

All derivative instruments are recorded at fair value on the Balance Sheet as an asset or liability unless NPNS is elected. NPNS contracts for PPL and PPL Energy Supply include certain full-requirement sales contracts, other physical purchase and sales contracts and certain retail energy and physical capacity contracts, and for PPL Electric include certain full-requirement purchase contracts and other physical purchase contracts. Changes in the fair value of derivatives not designated as NPNS are recognized currently in earnings unless specific hedge accounting criteria are met and designated as such, except for the change in fair value of LG&E's and KU's interest rate swaps that are recognized as regulatory assets or regulatory liabilities. See Note 6 for amounts recorded in regulatory assets and regulatory liabilities at December 31, 2013 and 2012.

See Note 1 for additional information on accounting policies related to derivative instruments.

The following table presents the fair value and location of derivative instruments recorded on the Balance Sheets.

						December 31, 2013								December 31, 2012
						Derivatives designated as				Derivatives not designated				Derivatives designated as				Derivatives not designated
						hedging instruments				as hedging instruments				hedging instruments				as hedging instruments
						Assets		Liabilities		Assets		Liabilities		Assets		Liabilities		Assets		Liabilities
Current:
	Price Risk Management
		Assets/Liabilities (a):
			Interest rate swaps (b)			$	82					$	4	$	14	$	22			$	5
			Cross-currency swaps					$	4								3
			Foreign currency
				contracts					16				55				2				23
			Commodity contracts							$	860		750		59			$	1,452		1,010
					Total current		82		20		860		809		73		27		1,452		1,038
Noncurrent:
	Price Risk Management
		Assets/Liabilities (a):
			Interest rate swaps (b)				9						32		1						53
			Cross-currency swaps						28						14		1
			Foreign currency
				contracts					4				31								19
			Commodity contracts								328		320		27				530		556
					Total noncurrent		9		32		328		383		42		1		530		628
Total derivatives						$	91	$	52	$	1,188	$	1,192	$	115	$	28	$	1,982	$	1,666

The following tables present the pre-tax effect of derivative instruments recognized in income, OCI or regulatory assets and regulatory liabilities.

	Derivatives in	Hedged Items in	Location of Gain
	Fair Value Hedging	Fair Value Hedging	(Loss) Recognized	Gain (Loss) Recognized		Gain (Loss) Recognized
	Relationships	Relationships	in Income	in Income on Derivative		in Income on Related Item



2012
	Interest rate swaps	Fixed rate debt	Interest Expense			$	3
2011
	Interest rate swaps	Fixed rate debt	Interest Expense	$	2		25
			Other Income (Expense) - net				22

									Gain (Loss) Recognized
									in Income on Derivative
				Derivative Gain			Gain (Loss) Reclassified		(Ineffective Portion and
			Derivative	(Loss) Recognized in		Location of Gain (Loss)	from AOCI into Income		Amount Excluded from
			Relationships	OCI (Effective Portion)		Recognized in Income	(Effective Portion)		Effectiveness Testing)
2013
	Cash Flow Hedges:
		Interest rate swaps		$	127	Interest Expense	$	(20)
		Cross-currency swaps			(41)	Other Income (Expense) - net		(28)
						Interest Expense		1
		Commodity contracts				Unregulated wholesale energy		263	$	1
						Energy purchases		(58)
						Depreciation		2
						Other		3
	Total			$	86		$	163	$	1
	Net Investment Hedges:
		Foreign currency contracts		$	(14)

2012
	Cash Flow Hedges:
		Interest rate swaps		$	(28)	Other income (Expense) - net	$	1
						Interest Expense		(18)

		Cross-currency swaps			(15)	Other Income (Expense) - net		(23)
						Interest Expense		(2)
		Commodity contracts			114	Unregulated wholesale energy		891	$	(1)
						Energy purchases		(139)		(2)
						Depreciation		2
	Total			$	71		$	712	$	(3)
	Net Investment Hedges:
		Foreign currency contracts		$	(7)

2011
	Cash Flow Hedges:
		Interest rate swaps		$	(55)	Interest Expense	$	(13)	$	(13)
		Cross-currency swaps			(35)	Other Income (Expense) - net		29
						Interest Expense		5

		Commodity contracts			431	Unregulated wholesale energy		835		(39)
						Fuel		1
						Energy purchases		(243)		1
						Depreciation		2
	Total			$	341		$	616	$	(51)
	Net Investment Hedges:
		Foreign currency contracts		$	6

Derivatives Not Designated as	Location of Gain (Loss) Recognized in
Hedging Instruments	Income on Derivatives		2013		2012		2011

Foreign currency contracts	Other Income (Expense) - net	$	(38)	$	(52)	$	65
Interest rate swaps	Interest Expense		(8)		(8)		(8)
Commodity contracts	Utility						(1)
	Unregulated wholesale energy		(85)		1,199		1,600
	Unregulated retail energy		25		30		39
	Fuel		2				(1)
	Energy purchases		130		(965)		(1,493)
	Total	$	26	$	204	$	201

Derivatives Not Designated as	Location of Gain (Loss) Recognized as
Hedging Instruments	Regulatory Liabilities/Assets		2013		2012		2011

Interest rate swaps	Regulatory assets - noncurrent	$	22	$	1	$	(26)

Derivatives Designated as	Location of Gain (Loss) Recognized as
Cash Flow Hedges	Regulatory Liabilities/Assets		2013		2012		2011

Interest rate swaps	Regulatory liabilities - noncurrent	$	72	$	14

The following tables present the fair value and location of derivative instruments recorded on the Balance Sheets.

					December 31, 2013						December 31, 2012
					Derivatives designated as		Derivatives not designated				Derivatives designated as			Derivatives not designated
					hedging instruments		as hedging instruments				hedging instruments			as hedging instruments
					Assets	Liabilities	Assets		Liabilities		Assets		Liabilities	Assets		Liabilities
Current:
	Price Risk Management
		Assets/Liabilities (a):
			Commodity contracts				$	860	$	750	$	59		$	1,452	$	1,010
				Total current				860		750		59			1,452		1,010
Noncurrent:
	Price Risk Management
		Assets/Liabilities (a):
			Commodity contracts					328		320		27			530		556
				Total noncurrent				328		320		27			530		556
Total derivatives							$	1,188	$	1,070	$	86		$	1,982	$	1,566

The following tables present the pre-tax effect of derivative instruments recognized in income or OCI. There were no gains (losses) on interest rate swaps for 2013 or 2012.

	Derivatives in	Hedged Items in	Location of Gain
	Fair Value Hedging	Fair Value Hedging	(Loss) Recognized	Gain (Loss) Recognized	Gain (Loss) Recognized
	Relationships	Relationships	in Income	in Income on Derivative	in Income on Related Item



2011
	Interest rate swaps	Fixed rate debt	Interest Expense		$	2

									Gain (Loss) Recognized
									in Income on Derivative
				Derivative Gain			Gain (Loss) Reclassified		(Ineffective Portion and
			Derivative	(Loss) Recognized in		Location of Gain (Loss)	from AOCI into Income		Amount Excluded from
			Relationships	OCI (Effective Portion)		Recognized in Income	(Effective Portion)		Effectiveness Testing)
2013
	Cash Flow Hedges:
		Commodity contracts				Unregulated wholesale energy	$	263	$	1
						Depreciation		2
						Energy purchases		(58)
	Total						$	207	$	1

2012
	Cash Flow Hedges:
		Commodity contracts		$	114	Unregulated wholesale energy	$	891	$	(1)
						Depreciation		2
						Energy purchases		(139)		(2)
	Total			$	114		$	754	$	(3)

2011
	Cash Flow Hedges:
		Commodity contracts		$	431	Unregulated wholesale energy	$	835	$	(39)
						Fuel		1
						Energy purchases		(243)		1
						Depreciation		2
	Total			$	431		$	595	$	(38)

Derivatives Not Designated as	Location of Gain (Loss) Recognized in
Hedging Instruments	Income on Derivatives		2013		2012		2011

Commodity contracts	Unregulated wholesale energy	$	(85)	$	1,199	$	1,600
	Unregulated retail energy		25		30		39
	Fuel		2				(1)
	Energy purchases		130		(965)		(1,493)
	Total	$	72	$	264	$	145

The following table presents the fair value and the location on the Balance Sheets of derivative instruments designated as cash flow hedges.

The following table presents the pre-tax effect of derivative instruments designated as cash flow hedges that are recognized in regulatory liabilities.

The following table presents the fair value and the location on the Balance Sheets of derivative instruments designated as cash flow hedges.

The following table presents the pre-tax effect of derivative instruments designated as cash flow hedges that are recognized in regulatory liabilities.

The following table presents the fair value and the location on the Balance Sheets of derivative instruments designated as cash flow hedges.

The following table presents the pre-tax effect of derivative instruments designated as cash flow hedges that are recognized in regulatory liabilities.

The following table presents the fair value and the location on the Balance Sheets of derivatives not designated as hedging instruments.

					December 31, 2013			December 31, 2012
					Assets	Liabilities			Assets	Liabilities
Current:
	Price Risk Management
		Assets/Liabilities (a):
			Interest rate swaps			$	4			$	5
				Total current			4				5
Noncurrent:
	Price Risk Management
		Assets/Liabilities (a):
			Interest rate swaps				32				53
				Total noncurrent			32				53
Total derivatives						$	36			$	58

The following tables present the pre-tax effect of derivatives not designated as cash flow hedges that are recognized in income or regulatory assets.

PPL, PPL Energy Supply, LKE, LG&E and KU or certain of their subsidiaries have master netting arrangements or similar agreements in place including derivative clearing agreements with futures commission merchants (FCMs) to permit the trading of cleared derivative products on one or more futures exchanges. The clearing arrangements permit an FCM to use and apply any property in its possession as a set off to pay amounts or discharge obligations owed by a customer upon default of the customer and typically do not place any restrictions on the FCM's use of collateral posted by the customer. PPL, PPL Energy Supply, LKE, LG&E and KU and their subsidiaries also enter into agreements pursuant to which they trade certain energy and other products. Under the agreements, upon termination of the agreement as a result of a default or other termination event, the non-defaulting party typically would have a right to setoff amounts owed under the agreement against any other obligations arising between the two parties (whether under the agreement or not), whether matured or contingent and irrespective of the currency, place of payment or place of booking of the obligation.

PPL, PPL Energy Supply, LKE, LG&E and KU have elected not to offset derivative assets and liabilities and not to offset net derivative positions against the right to reclaim cash collateral pledged (an asset) or the obligation to return cash collateral received (a liability) under derivatives agreements. The table below summarizes the derivative positions presented in the balance sheets where a right of setoff exists under these arrangements and related cash collateral received or pledged.

		Assets								Liabilities
				Eligible for Offset								Eligible for Offset
						Cash								Cash
				Derivative		Collateral						Derivative		Collateral
		Gross		Instruments		Received		Net		Gross		Instruments		Pledged		Net
December 31, 2013
PPL
	Energy Commodities	$	1,188	$	912	$	7	$	269	$	1,070	$	912	$	1	$	157
	Treasury Derivatives		91		61				30		174		61		23		90
Total		$	1,279	$	973	$	7	$	299	$	1,244	$	973	$	24	$	247

PPL Energy Supply
	Energy Commodities	$	1,188	$	912	$	7	$	269	$	1,070	$	912	$	1	$	157

December 31, 2012
PPL
	Energy Commodities	$	2,068	$	1,413	$	111	$	544	$	1,566	$	1,413	$	9	$	144
	Treasury Derivatives		29		19				10		128		19		30		79
Total		$	2,097	$	1,432	$	111	$	554	$	1,694	$	1,432	$	39	$	223

PPL Energy Supply
	Energy Commodities	$	2,068	$	1,413	$	111	$	544	$	1,566	$	1,413	$	9	$	144

Certain derivative contracts contain credit risk-related contingent features which, when in a net liability position, would permit the counterparties to require the transfer of additional collateral upon a decrease in the credit ratings of PPL, PPL Energy Supply, LKE, LG&E and KU or certain of their subsidiaries. Most of these features would require the transfer of additional collateral or permit the counterparty to terminate the contract if the applicable credit rating were to fall below investment grade. Some of these features also would allow the counterparty to require additional collateral upon each downgrade in the credit rating at levels that remain above investment grade. In either case, if the applicable credit rating were to fall below investment grade (i.e., below BBB- for S&P or Fitch, or Baa3 for Moody's), and assuming no assignment to an investment grade affiliate were allowed, most of these credit contingent features require either immediate payment of the net liability as a termination payment or immediate and ongoing full collateralization on derivative instruments in net liability positions.

Additionally, certain derivative contracts contain credit risk-related contingent features that require adequate assurance of performance be provided if the other party has reasonable concerns regarding the performance of PPL's obligation under the contract. A counterparty demanding adequate assurance could require a transfer of additional collateral or other security, including letters of credit, cash and guarantees from a creditworthy entity. This would typically involve negotiations among the parties. However, amounts disclosed below represent assumed immediate payment or immediate and ongoing full collateralization for derivative instruments in net liability positions with "adequate assurance" features.

At December 31, 2013, the effect of a decrease in credit ratings below investment grade on derivative contracts that contain credit risk-related contingent features and were in a net liability position is summarized as follows:

				PPL
		PPL		Energy Supply		LKE		LG&E

Aggregate fair value of derivative instruments in a net liability
	position with credit risk-related contingent features	$	245	$	157	$	26	$	26
Aggregate fair value of collateral posted on these derivative instruments			41		19		22		22
Aggregate fair value of additional collateral requirements in the event of
	a credit downgrade below investment grade (a)		214		147		6		6

(a) Includes the effect of net receivables and payables already recorded on the Balance Sheet.