Fair Value Measurements and Credit Concentration (Tables)

3 Months Ended

Mar. 31, 2015

Fair Value Measurements and Credit Concentration [Line Items]

Fair Value of Assets and Liabilities Measured on Recurring Basis

The assets and liabilities measured at fair value were:

				March 31, 2015								December 31, 2014
				Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
PPL
Assets
	Cash and cash equivalents			$	1,335	$	1,335					$	1,751	$	1,751
	Short-term investments				135		135						120		120
	Restricted cash and cash equivalents (a)				231		231						224		224
	Price risk management assets:
		Energy commodities			1,298		2	$	1,136	$	160		1,318		6	$	1,171	$	141
		Foreign currency contracts			209				209				130				130
		Cross-currency swaps			49				49				29				28		1
	Total price risk management assets				1,556		2		1,394		160		1,477		6		1,329		142
	NDT funds:
		Cash and cash equivalents			20		20						19		19
		Equity securities
			U.S. large-cap		620		461		159				611		454		157
			U.S. mid/small-cap		93		38		55				89		37		52
		Debt securities
			U.S. Treasury		97		97						99		99
			U.S. government sponsored agency		8				8				9				9
			Municipality		76				76				76				76
			Investment-grade corporate		45				45				42				42
			Other		3				3				3				3
		Receivables (payables), net			3		1		2				2				2
	Total NDT funds				965		617		348				950		609		341
	Auction rate securities (b)				10						10		10						10
Total assets				$	4,232	$	2,320	$	1,742	$	170	$	4,532	$	2,710	$	1,670	$	152

Liabilities
	Price risk management liabilities:
		Energy commodities		$	1,163	$	2	$	1,130	$	31	$	1,217	$	5	$	1,182	$	30
		Interest rate swaps			235				235				156				156
		Foreign currency contracts			6				6				2				2
		Cross-currency swaps			2				2				3				3
	Total price risk management liabilities			$	1,406	$	2	$	1,373	$	31	$	1,378	$	5	$	1,343	$	30

PPL Electric
Assets
	Cash and cash equivalents			$	35	$	35					$	214	$	214
	Restricted cash and cash equivalents (c)				2		2						3		3
Total assets				$	37	$	37					$	217	$	217

LKE
Assets
	Cash and cash equivalents		$	40	$	40			$	21	$	21
	Cash collateral posted to counterparties (d)			22		22				21		21
Total assets			$	62	$	62			$	42	$	42

Liabilities
	Price risk management liabilities:
		Interest rate swaps	$	174			$	174	$	114			$	114
Total price risk management liabilities			$	174			$	174	$	114			$	114

LG&E
Assets
	Cash and cash equivalents		$	17	$	17			$	10	$	10
	Cash collateral posted to counterparties (d)			22		22				21		21
Total assets			$	39	$	39			$	31	$	31

Liabilities
	Price risk management liabilities:
		Interest rate swaps	$	113			$	113	$	81			$	81
Total price risk management liabilities			$	113			$	113	$	81			$	81

KU
Assets
	Cash and cash equivalents		$	23	$	23			$	11	$	11
Total assets			$	23	$	23			$	11	$	11

Liabilities
	Price risk management liabilities:
		Interest rate swaps	$	61			$	61	$	33			$	33
Total price risk management liabilities			$	61			$	61	$	33			$	33

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

(b) Included in "Other investments" on the Balance Sheets.

(c) Current portion is included in "Other current assets" and long-term portion is included in "Other noncurrent assets" 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.

Reconciliation of Net Assets and Liabilities Classified as Level 3

A reconciliation of net assets and liabilities classified as Level 3 for the three months ended March 31 is as follows:

					Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
					2015								2014
					Energy		Auction		Cross-				Energy		Auction		Cross-
					Commodities,		Rate		Currency				Commodities,		Rate		Currency
					net		Securities		Swaps		Total		net		Securities		Swaps		Total
PPL
Balance at beginning of
	period				$	111	$	10	$	1	$	122	$	24	$	19			$	43
		Total realized/unrealized
			gains (losses)
				Included in earnings		(17)						(17)		(135)						(135)
				Included in OCI (a)						6		6					$	(1)		(1)
		Sales														(3)				(3)
		Settlements				30						30		128						128
		Transfers into Level 3				4						4
		Transfers out of Level 3				1				(7)		(6)						1		1
Balance at end of period					$	129	$	10	$		$	139	$	17	$	16	$		$	33

(a) "Energy Commodities, net" and "Cross-Currency Swaps" are included in "Qualifying derivatives" and "Auction Rate Securities" are included in "Available-for-sale securities" on the Statements of Comprehensive Income.

Significant Unobservable Inputs Used in Fair Value Measurement of Assets and Liabilities Classified as Level 3

The significant unobservable inputs used in and quantitative information about the fair value measurement of assets and liabilities classified as Level 3 are as follows:

March 31, 2015

Fair Value, net

Range

Asset

Valuation

Unobservable

(Weighted

(Liability)

Technique

Input(s)

Average) (a)

PPL

Energy commodities

Natural gas contracts (b)

Discounted cash flow

Proprietary model used to calculate forward prices

11% - 100% (43%)

Power sales contracts (c)

Discounted cash flow

Proprietary model used to calculate forward prices

10% - 100% (82%)

Heat rate options (e)

Discounted cash flow

Proprietary model used to calculate forward prices

22% - 44% (40%)

Auction rate securities (f)

Discounted cash flow

Modeled from SIFMA Index

41% - 69% (53%)

December 31, 2014

Fair Value, net

Range

Asset

Valuation

Unobservable

(Weighted

(Liability)

Technique

Input(s)

Average) (a)

PPL

Energy commodities

Natural gas contracts (b)

Discounted cash flow

Proprietary model used to calculate forward prices

11% - 100% (52%)

Power sales contracts (c)

(1)

Discounted cash flow

Proprietary model used to calculate forward prices

10% - 100% (59%)

FTR purchase contracts (d)

Discounted cash flow

Historical settled prices used to model forward prices

100% (100%)

Heat rate options (e)

Discounted cash flow

Proprietary model used to calculate forward prices

23% - 51% (45%)

Auction rate securities (f)

Discounted cash flow

Modeled from SIFMA Index

44% - 69% (63%)

Cross-currency swaps (g)

Discounted cash flow

Credit valuation adjustment

15% (15%)

(a) For energy commodities and auction rate securities, the range and weighted average represent the percentage of fair value derived from the unobservable inputs. For cross-currency swaps, the range and weighted average represent the percentage change in fair value due to the unobservable inputs used in the model to calculate the credit valuation adjustment.

(b) As the forward price of natural gas increases/(decreases), the fair value of purchase contracts increases/(decreases). As the forward price of natural gas increases/(decreases), the fair value of sales contracts (decreases)/increases.

(c) As forward market prices increase/(decrease), the fair value of contracts (decreases)/increases. As volumetric assumptions for contracts in a gain position increase/(decrease), the fair value of contracts increases/(decreases). As volumetric assumptions for contracts in a loss position increase/(decrease), the fair value of the contracts (decreases)/increases.

(d) As the forward implied spread increases/(decreases), the fair value of the contracts increases/(decreases).

(e) The proprietary model used to calculate fair value incorporates market heat rates, correlations and volatilities. As the market implied heat rate increases/(decreases), the fair value of the contracts increases/(decreases).

(f) The model used to calculate fair value incorporates an assumption that the auctions will continue to fail. As the modeled forward rates of the SIFMA Index increase/(decrease), the fair value of the securities increases/(decreases).

(g) The credit valuation adjustment incorporates projected probabilities of default and estimated recovery rates. As the credit valuation adjustment increases/(decreases), the fair value of the swaps (decreases)/increases.

The significant unobservable inputs used in and the quantitative information about the nonrecurring fair value measurement of assets and liabilities classified as Level 3 are as follows:

Fair Value, net

Significant

Range

Asset

Valuation

Unobservable

(Weighted

(Liability)

Technique

Input(s)

Average)(a)

Kerr Dam Project

March 31, 2014

Discounted cash flow

Proprietary model used to calculate plant value

38% (38%)

(a) The range and weighted average represent the percentage of fair value derived from the unobservable inputs.

Fair Value of Assets and Liabilities Classified as Level 3 Measured on Recurring Basis Included in Earnings

Net gains and losses on assets and liabilities classified as Level 3 and included in earnings for the three months ended are reported in the Statements of Income as follows:

		Energy Commodities, net
		Unregulated				Unregulated				Energy
		Wholesale Energy				Retail Energy				Purchases
		2015		2014		2015		2014		2015		2014
PPL
Total gains (losses) included in earnings		$	21	$	(89)	$	(40)	$	(63)	$	2	$	17
Change in unrealized gains (losses) relating
	to positions still held at the reporting date		25		(13)		(9)		(33)		1		1

Fair Value of Assets and Liabilities Measured on Nonrecurring Basis

The following nonrecurring fair value measurement occurred during the three months ended March 31, 2014, resulting in an asset impairment:

	Carrying		Fair Value Measurements Using
	Amount (a)		Level 3		Loss (b)
PPL
Kerr Dam Project	$	47	$	29	$	18

(a) Represents carrying value before fair value measurement.

(b) The loss on the Kerr Dam Project was recorded in the Supply segment and included in "Income (Loss) from Discontinued Operations (net of income taxes)" on the 2014 Statement of Income.

Fair Value of Financial Instruments Not Recorded at Fair Value - Other

The carrying amounts of long-term debt on the Balance Sheets and their estimated fair values are set forth below.

	March 31, 2015				December 31, 2014
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value

PPL	$	20,307	$	23,258	$	20,391	$	22,670
PPL Electric		2,603		3,084		2,602		2,990


LKE	4,567	5,091	4,567	4,946
LG&E	1,353	1,493	1,353	1,455
KU	2,091	2,396	2,091	2,313

- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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