UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 10-Q
[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended September 30, 2015
OR
[   ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from _________ to ___________

Commission File Number	Registrant; State of Incorporation; Address and Telephone Number	IRS Employer Identification No.
1-11459	PPL Corporation (Exact name of Registrant as specified in its charter) (Pennsylvania) Two North Ninth Street Allentown, PA 18101-1179 (610) 774-5151	23-2758192
1-905	PPL Electric Utilities Corporation (Exact name of Registrant as specified in its charter) (Pennsylvania) Two North Ninth Street Allentown, PA 18101-1179 (610) 774-5151	23-0959590
333-173665	LG&E and KU Energy LLC (Exact name of Registrant as specified in its charter) (Kentucky) 220 West Main Street Louisville, KY 40202-1377 (502) 627-2000	20-0523163
1-2893	Louisville Gas and Electric Company (Exact name of Registrant as specified in its charter) (Kentucky) 220 West Main Street Louisville, KY 40202-1377 (502) 627-2000	61-0264150
1-3464	Kentucky Utilities Company (Exact name of Registrant as specified in its charter) (Kentucky and Virginia) One Quality Street Lexington, KY 40507-1462 (502) 627-2000	61-0247570

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.

PPL Corporation	Yes  X	No
PPL Electric Utilities Corporation	Yes  X	No
LG&E and KU Energy LLC	Yes  X	No
Louisville Gas and Electric Company	Yes  X	No
Kentucky Utilities Company	Yes  X	No

Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files).

PPL Corporation	Yes  X	No
PPL Electric Utilities Corporation	Yes  X	No
LG&E and KU Energy LLC	Yes  X	No
Louisville Gas and Electric Company	Yes  X	No
Kentucky Utilities Company	Yes  X	No

Indicate by check mark whether the registrants are large accelerated filers, accelerated filers, non-accelerated filers, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

	Large accelerated filer	Accelerated filer	Non-accelerated filer	Smaller reporting company
PPL Corporation	[ X ]	[     ]	[     ]	[     ]
PPL Electric Utilities Corporation	[     ]	[     ]	[ X ]	[     ]
LG&E and KU Energy LLC	[     ]	[     ]	[ X ]	[     ]
Louisville Gas and Electric Company	[     ]	[     ]	[ X ]	[     ]
Kentucky Utilities Company	[     ]	[     ]	[ X ]	[     ]

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).

PPL Corporation	Yes	No  X
PPL Electric Utilities Corporation	Yes	No  X
LG&E and KU Energy LLC	Yes	No  X
Louisville Gas and Electric Company	Yes	No  X
Kentucky Utilities Company	Yes	No  X

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

PPL Corporation	Common stock, $0.01 par value, 672,845,584 shares outstanding at October 23, 2015.
PPL Electric Utilities Corporation	Common stock, no par value, 66,368,056 shares outstanding and all held by PPL Corporation at October 23, 2015.
LG&E and KU Energy LLC	PPL Corporation directly holds all of the membership interests in LG&E and KU Energy LLC.
Louisville Gas and Electric Company	Common stock, no par value, 21,294,223 shares outstanding and all held by LG&E and KU Energy LLC at October 23, 2015.
Kentucky Utilities Company	Common stock, no par value, 37,817,878 shares outstanding and all held by LG&E and KU Energy LLC at October 23, 2015.

This document is available free of charge at the Investors section of PPL Corporation's website at www.pplweb.com. However, information on this website does not constitute a part of this Form 10-Q.

PPL CORPORATION

PPL ELECTRIC UTILITIES CORPORATION

LG&E and KU Energy LLC

Louisville Gas and Electric Company

Kentucky Utilities Company

FORM 10-Q

FOR THE QUARTER ENDED September 30, 2015

Table of Contents

This combined Form 10-Q is separately filed by the following Registrants in their individual capacity: PPL Corporation, PPL Electric Utilities Corporation, LG&E and KU Energy LLC, Louisville Gas and Electric Company and Kentucky Utilities Company. Information contained herein relating to any individual Registrant is filed by such Registrant solely on its own behalf, and no Registrant makes any representation as to information relating to any other Registrant, except that information under "Forward-Looking Information" relating to subsidiaries of PPL Corporation is also attributed to PPL Corporation and information relating to the subsidiaries of LG&E and KU Energy LLC is also attributed to LG&E and KU Energy LLC.

Unless otherwise specified, references in this Report, individually, to PPL Corporation, PPL Electric Utilities Corporation, LG&E and KU Energy LLC, Louisville Gas and Electric Company and Kentucky Utilities Company are references to such entities directly or to one or more of their subsidiaries, as the case may be, the financial results of which subsidiaries are consolidated into such Registrants in accordance with GAAP. This presentation has been applied where identification of particular subsidiaries is not material to the matter being disclosed, and to conform narrative disclosures to the presentation of financial information on a consolidated basis.

				Page
GLOSSARY OF TERMS AND ABBREVIATIONS				i
FORWARD-LOOKING INFORMATION				1
PART I.  FINANCIAL INFORMATION
	Item 1.  Financial Statements
		PPL Corporation and Subsidiaries
			Condensed Consolidated Statements of Income	3
			Condensed Consolidated Statements of Comprehensive Income	4
			Condensed Consolidated Statements of Cash Flows	5
			Condensed Consolidated Balance Sheets	6
			Condensed Consolidated Statements of Equity	8
		PPL Electric Utilities Corporation and Subsidiaries
			Condensed Consolidated Statements of Income	10
			Condensed Consolidated Statements of Cash Flows	11
			Condensed Consolidated Balance Sheets	12
			Condensed Consolidated Statements of Equity	14
		LG&E and KU Energy LLC and Subsidiaries
			Condensed Consolidated Statements of Income	15
			Condensed Consolidated Statements of Comprehensive Income	16
			Condensed Consolidated Statements of Cash Flows	17
			Condensed Consolidated Balance Sheets	18
			Condensed Consolidated Statements of Equity	20
		Louisville Gas and Electric Company
			Condensed Statements of Income	22
			Condensed Statements of Cash Flows	23
			Condensed Balance Sheets	24
			Condensed Statements of Equity	26
		Kentucky Utilities Company
			Condensed Statements of Income	28
			Condensed Statements of Cash Flows	29
			Condensed Balance Sheets	30
			Condensed Statements of Equity	32

		Combined Notes to Condensed Financial Statements (Unaudited)
			1.   Interim Financial Statements			33
			2.   Summary of Significant Accounting Policies			33
			3.   Segment and Related Information			34
			4.   Earnings Per Share			35
			5.   Income Taxes			36
			6.   Utility Rate Regulation			38
			7.   Financing Activities			42
			8.   Acquisitions, Development and Divestitures			44
			9.   Defined Benefits			48
			10. Commitments and Contingencies			50
			11. Related Party Transactions			58
			12. Other Income (Expense) - net			59
			13. Fair Value Measurements			60
			14. Derivative Instruments and Hedging Activities			62
			15. Goodwill			71
			16. Asset Retirement Obligations			71
			17. Accumulated Other Comprehensive Income (Loss)			71
			18. New Accounting Guidance Pending Adoption			73
		Item 2.  Combined Management's Discussion and Analysis of Financial Condition and Results of Operations
			Overview			76
				Introduction		76
				Business Strategy		78
				Financial and Operational Developments		79
					PPL Corporation and Subsidiaries - Earnings	79
					2015 Outlook	79
					Other Financial and Operational Developments	80
			Results of Operations			84
				PPL Corporation and Subsidiaries - Segment Earnings, Margins and Statement of Income Analysis		85
				PPL Electric Utilities Corporation and Subsidiaries - Earnings, Margins and Statement of Income    Analysis		92
				LG&E and KU Energy LLC and Subsidiaries - Earnings, Margins and Statement of Income Analysis		94
				Louisville Gas and Electric Company - Earnings, Margins and Statement of Income Analysis		96
				Kentucky Utilities Company - Earnings, Margins and Statement of Income Analysis		98
			Financial Condition			100
				Liquidity and Capital Resources		100
				Risk Management		107
				Foreign Currency Translation		109
				Related Party Transactions		109
				Acquisitions, Development and Divestitures		109
				Environmental Matters		109
			New Accounting Guidance			110
			Application of Critical Accounting Policies			110
		Item 3.  Quantitative and Qualitative Disclosures About Market Risk				111
		Item 4.  Controls and Procedures				111
PART II.  OTHER INFORMATION
	Item 1.  Legal Proceedings					111
	Item 1A.  Risk Factors					111
	Item 4.  Mine Safety Disclosures					112
	Item 5. Other Information					112
	Item 6.  Exhibits					112

SIGNATURES	114
COMPUTATIONS OF RATIO OF EARNINGS TO FIXED CHARGES	115
CERTIFICATES OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002	120
CERTIFICATES OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002	130

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GLOSSARY OF TERMS AND ABBREVIATIONS

PPL Corporation and its subsidiaries

KU - Kentucky Utilities Company, a public utility subsidiary of LKE engaged in the regulated generation, transmission, distribution and sale of electricity, primarily in Kentucky.

LG&E - Louisville Gas and Electric Company, a public utility subsidiary of LKE engaged in the regulated generation, transmission, distribution and sale of electricity and the distribution and sale of natural gas in Kentucky.

LKE - LG&E and KU Energy LLC, a subsidiary of PPL and the parent of LG&E, KU and other subsidiaries.

LKS- LG&E and KU Services Company, a subsidiary of LKE that provides services to LKE and its subsidiaries.

PPL - PPL Corporation, the parent holding company of PPL Electric, PPL Energy Funding, PPL Capital Funding, LKE and other subsidiaries.

PPL Capital Funding - PPL Capital Funding, Inc., a financing subsidiary of PPL that provides financing for the operations of PPL and certain subsidiaries. Debt issued by PPL Capital Funding is guaranteed as to payment by PPL.

PPL Electric - PPL Electric Utilities Corporation, a public utility subsidiary of PPL engaged in the regulated transmission and distribution of electricity in its Pennsylvania service area and that provides electricity supply to its retail customers in this area as a PLR.

PPL Energy Funding - PPL Energy Funding Corporation, a subsidiary of PPL and the parent holding company of PPL Global and other subsidiaries.

PPL EU Services - PPL EU Services Corporation, a subsidiary of PPL that, beginning in 2015, provides support services and corporate functions such as financial, supply chain, human resources and information technology services primarily to PPL Electric and its affiliates.

PPL Global - PPL Global, LLC, a subsidiary of PPL Energy Funding that, primarily through its subsidiaries, owns and operates WPD, PPL's regulated electricity distribution businesses in the U.K.

PPL Services - PPL Services Corporation, a subsidiary of PPL that provides services to PPL and its subsidiaries.

PPL WPD Limited - an indirect U.K. subsidiary of PPL Global. PPL WPD Limited holds a liability for a closed defined benefit pension plan and a receivable with WPD plc.

Registrant(s) - refers to the Registrants named on the cover of this Report (each a "Registrant" and collectively, the "Registrants").

Subsidiary Registrant(s) - Registrants that are direct or indirect wholly owned subsidiaries of PPL: PPL Electric, LKE, LG&E and KU.

WPD - refers to WPD plc and its subsidiaries together with a sister company PPL WPD Limited.

WPD (East Midlands) - Western Power Distribution (East Midlands) plc, a British regional electricity distribution utility company.

WPD plc - Western Power Distribution plc, formerly known as Western Power Distribution Limited, an indirect U.K. subsidiary of PPL Global. Its principal indirectly owned subsidiaries are WPD (East Midlands), WPD (South Wales), WPD (South West) and WPD (West Midlands).

WPD Midlands - refers to WPD (East Midlands) and WPD (West Midlands), collectively.

WPD (South Wales) - Western Power Distribution (South Wales) plc, a British regional electricity distribution utility company.

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WPD (South West) - Western Power Distribution (South West) plc, a British regional electricity distribution utility company.

WPD (West Midlands) - Western Power Distribution (West Midlands) plc, a British regional electricity distribution utility company.

WKE - Western Kentucky Energy Corp., a subsidiary of LKE that leased certain non-utility generating plants in western Kentucky until July 2009.

Other terms and abbreviations

£ - British pound sterling.

2014 Form 10-K - Annual Report to the SEC on Form 10-K for the year ended December 31, 2014.

Act 11 - Act 11 of 2012 that became effective on April 16, 2012. The Pennsylvania legislation authorizes the PUC to approve two specific ratemaking mechanisms: the use of a fully projected future test year in base rate proceedings and, subject to certain conditions, a DSIC.

Act 129 - Act 129 of 2008 that became effective in October 2008. The law amends the Pennsylvania Public Utility Code and creates an energy efficiency and conservation program and smart metering technology requirements, adopts new PLR electricity supply procurement rules, provides remedies for market misconduct and changes to the Alternative Energy Portfolio Standard (AEPS).

AFUDC - Allowance for Funds Used During Construction, the cost of equity and debt funds used to finance construction projects of regulated businesses, which is capitalized as part of construction costs.

AOCI - accumulated other comprehensive income or loss.

ARO - asset retirement obligation.

ATM Program - At-the-Market stock offering program.

Basis - when used in the context of derivatives and commodity trading, the commodity price differential between two locations, products or time periods.

BSER - Best System of Emission Reduction. The degree of emission reduction that EPA determines has been adequately demonstrated when taking into account the cost of achieving such reduction and any non-air quality health and environmental impact and energy requirements. 

Cane Run Unit 7 - a natural gas combined-cycle unit in Kentucky, jointly owned by LG&E and KU, which provides electric generating capacity of 642 MW (141 MW and 501 MW to LG&E and KU).

CCR(s) - Coal Combustion Residual(s). CCRs include fly ash, bottom ash and sulfur dioxide scrubber wastes.

Clean Air Act - federal legislation enacted to address certain environmental issues related to air emissions, including acid rain, ozone and toxic air emissions.

Clean Water Act - federal legislation enacted to address certain environmental issues relating to water quality including effluent discharges, cooling water intake, and dredge and fill activities.

COBRA - Consolidated Omnibus Budget Reconciliation Act, which provides individuals the option to temporarily continue employer group health insurance coverage after termination of employment.

ii

CPCN -Certificate of Public Convenience and Necessity. Authority granted by the KPSC pursuant to Kentucky Revised Statute 278.020 to provide utility service to or for the public or the construction of certain plant, equipment, property or facility for furnishing of utility service to the public.

Customer Choice Act - the Pennsylvania Electricity Generation Customer Choice and Competition Act, legislation enacted to restructure the state's electric utility industry to create retail access to a competitive market for generation of electricity.

DNO - Distribution Network Operator in the U.K.

DOJ - U.S. Department of Justice.

DPCR4 - Distribution Price Control Review 4, the U.K. five-year rate review period applicable to WPD that commenced April 1, 2005.

DPCR5 - Distribution Price Control Review 5, the U.K. five-year rate review period applicable to WPD that commenced April 1, 2010.

DRIP - PPL Amended and Restated Dividend Reinvestment and Direct Stock Purchase Plan.

DSIC - the Distribution System Improvement Charge authorized under Act 11, which is an alternative ratemaking mechanism providing more-timely cost recovery of qualifying distribution system capital expenditures.

DSM - Demand Side Management. Pursuant to Kentucky Revised Statute 278.285, the KPSC may determine the reasonableness of DSM plans proposed by any utility under its jurisdiction. Proposed DSM mechanisms may seek full recovery of costs and revenues lost by implementing DSM programs and/or incentives designed to provide financial rewards to the utility for implementing cost-effective DSM programs. The cost of such programs shall be assigned only to the class or classes of customers which benefit from the programs.

ECR - Environmental Cost Recovery. Pursuant to Kentucky Revised Statute 278.183, Kentucky electric utilities are entitled to the current recovery of costs of complying with the Clean Air Act, as amended, and those federal, state or local environmental requirements that apply to coal combustion wastes and by-products from the production of energy from coal.

EEI - Edison Electric Institute, the association that represents U.S. investor-owned electric companies.

ELG(s) - Effluent Limitation Guidelines, regulations promulgated by the EPA.

EPA - Environmental Protection Agency, a U.S. government agency.

EPS - earnings per share.

Equity Unit(s) - a PPL equity unit, issued in April 2011, consisting of a Purchase Contract and, initially, a 5.0% undivided beneficial ownership interest in $1,000 principal amount of PPL Capital Funding 4.32% Junior Subordinated Notes due 2019.

E.W. Brown - a generating station in Kentucky with capacity of 1,594 MW.

FERC - Federal Energy Regulatory Commission, the U.S. federal agency that regulates, among other things, interstate transmission and wholesale sales of electricity, hydroelectric power projects and related matters.

FGD - flue-gas desulfurization, a pollution control process for the removal of sulfur dioxide from exhaust gas.

Fitch - Fitch, Inc., a credit rating agency.

GAAP - Generally Accepted Accounting Principles in the U.S.

GBP - British pound sterling.

GHG - greenhouse gas(es).

iii

GLT - Gas Line Tracker. The KPSC approved LG&E's recovery of costs associated with gas service lines, gas risers, leak mitigation, and gas main replacements. Rate recovery became effective on January 1, 2013.

Holdco - Talen Energy Holdings, Inc., a Delaware corporation, which was formed for the purposes of the June 1, 2015 spinoff of PPL Energy Supply, LLC.

If-Converted Method - A method applied to calculate diluted EPS for a company with outstanding convertible debt. The method is applied as follows: Interest charges (after-tax) applicable to the convertible debt are added back to net income and the convertible debt is assumed to have been converted to equity at the beginning of the period, and the resulting common shares are treated as outstanding shares. Both adjustments are made only for purposes of calculating diluted EPS. This method was applied to PPL's Equity Units prior to settlement.

IRS - Internal Revenue Service, a U.S. government agency.

KPSC - Kentucky Public Service Commission, the state agency that has jurisdiction over the regulation of rates and service of utilities in Kentucky.

LIBOR - London Interbank Offered Rate.

MATS - Mercury and Air Toxics Standards, regulations promulgated by the EPA.

Moody's - Moody's Investors Service, Inc., a credit rating agency.

MW - megawatt, one thousand kilowatts.

NAAQS - National Ambient Air Quality Standards periodically adopted pursuant to the Clean Air Act.

NERC - North American Electric Reliability Corporation.

NGCC - Natural gas-fired combined-cycle generating plant.

NorthWestern - NorthWestern Corporation, a Delaware corporation, and successor in interest to Montana Power's electricity delivery business, including Montana Power's rights and obligations under contracts with PPL Montana.

NPNS - the normal purchases and normal sales exception as permitted by derivative accounting rules. Derivatives that qualify for this exception may receive accrual accounting treatment.

NRC - Nuclear Regulatory Commission, the U.S. federal agency that regulates nuclear power facilities.

NSR - The new source review provisions of the Clean Air Act that impose stringent emission control requirements on new and modified sources of air emissions that result in emission increases beyond thresholds allowed by the Clean Air Act.

OCI - other comprehensive income or loss.

Ofgem - Office of Gas and Electricity Markets, the British agency that regulates transmission, distribution and wholesale sales of electricity and related matters.

OVEC - Ohio Valley Electric Corporation, located in Piketon, Ohio, an entity in which LKE indirectly owns an 8.13% interest (consists of LG&E's 5.63% and KU's 2.50% interests), which is accounted for as a cost-method investment. OVEC owns and operates two coal-fired power plants, the Kyger Creek plant in Ohio and the Clifty Creek plant in Indiana, with combined summer rating capacities of 2,120 MW.

PLR - Provider of Last Resort, the role of PPL Electric in providing default electricity supply within its delivery area to retail customers who have not chosen to select an alternative electricity supplier under the Customer Choice Act.

PP&E - property, plant and equipment.

iv

PPL EnergyPlus - prior to the June 1, 2015 spinoff of PPL Energy Supply, PPL EnergyPlus, LLC, a subsidiary of PPL Energy Supply that marketed and traded wholesale and retail electricity and gas, and supplied energy and energy services in competitive markets.

PPL Energy Supply - prior to the June 1, 2015 spinoff, PPL Energy Supply, LLC, a subsidiary of PPL Energy Funding and the parent company of PPL EnergyPlus and other subsidiaries.

PPL Montana - prior to the June 1, 2015 spinoff of PPL Energy Supply, PPL Montana, LLC, an indirect subsidiary of PPL Energy Supply, LLC that generated electricity for wholesale sales in Montana and the Pacific Northwest. 

PUC - Pennsylvania Public Utility Commission, the state agency that regulates certain ratemaking, services, accounting and operations of Pennsylvania utilities.

RAV - regulatory asset value. This term, used within the U.K. regulatory environment, is also commonly known as RAB or regulatory asset base. RAV is based on historical investment costs at time of privatization, plus subsequent allowed additions less annual regulatory depreciation, and represents the value on which DNOs earn a return in accordance with the regulatory cost of capital. RAV is indexed to Retail Price Index (RPI) in order to allow for the effects of inflation. Since the beginning of DPCR5 in April 2010, RAV additions have been based on a percentage of annual total expenditures, which have continued from April 2015 under RIIO-ED1. RAV is intended to represent expenditures that have a long-term benefit to WPD (similar to capital projects for the U.S. regulated businesses that are generally included in rate base).

RCRA - Resource Conservation and Recovery Act of 1976.

Regulation S-X - SEC regulation governing the form and content of and requirements for financial statements required to be filed pursuant to the federal securities laws.

RFC - ReliabilityFirst Corporation, one of eight regional entities with delegated authority from NERC that work to safeguard the reliability of the bulk power systems throughout North America.

RIIO-ED1 - RIIO represents "Revenues = Incentive + Innovation + Outputs." RIIO-ED1 refers to the initial eight-year rate review period applicable to WPD which commenced April 1, 2015.

Riverstone - Riverstone Holdings LLC, a Delaware limited liability company and ultimate parent company of the entities that own the competitive power generation business contributed to Talen Energy other than the competitive power generation business contributed by virtue of the spinoff of a newly formed parent of PPL Energy Supply.

RJS Power - RJS Generation Holdings LLC, a Delaware limited liability company controlled by Riverstone, that owns the competitive power generation business contributed by its owners to Talen Energy other than the competitive power generation business contributed by virtue of the spinoff of a newly formed parent of PPL Energy Supply.

RMC - Risk Management Committee.

S&P - Standard & Poor's Ratings Services, a credit rating agency.

Sarbanes-Oxley - Sarbanes-Oxley Act of 2002, which sets requirements for management's assessment of internal controls for financial reporting. It also requires an independent auditor to make its own assessment.

SCRs - selective catalytic reduction, a pollution control process for the removal of nitrogen oxide from exhaust gas.

Scrubber - an air pollution control device that can remove particulates and/or gases (primarily sulfur dioxide) from exhaust gases.

SEC - the U.S. Securities and Exchange Commission, a U.S. government agency primarily responsible to protect investors and maintain the integrity of the securities markets.

SERC - SERC Reliability Corporation, one of eight regional entities with delegated authority from NERC that work to safeguard the reliability of the bulk power systems throughout North America.

v

Smart meter - an electric meter that utilizes smart metering technology.

Smart metering technology - technology that can measure, among other things, time of electricity consumption to permit offering rate incentives for usage during lower cost or demand intervals. The use of this technology also has the potential to strengthen network reliability.

Superfund - federal environmental statute that addresses remediation of contaminated sites; states also have similar statutes.

Talen Energy - Talen Energy Corporation, the Delaware corporation formed to be the publicly traded company and owner of the competitive generation assets of PPL Energy Supply and certain affiliates of Riverstone.

Talen Energy Marketing - PPL EnergyPlus' new name subsequent to the spinoff of PPL Energy Supply.

Total shareowner return - the change in market value of a share of the Company's common stock plus the value of all dividends paid on a share of the common stock during the applicable performance period, divided by the price of the common stock as of the beginning of the performance period. The price used for purposes of this calculation is the average share price for the 20 trading days at the beginning and end of the applicable period.

Treasury Stock Method - A method applied to calculate diluted EPS that assumes any proceeds that could be obtained upon exercise of options and warrants (and their equivalents) would be used to purchase common stock at the average market price during the relevant period.

VaR - value-at-risk, a statistical model that attempts to estimate the value of potential loss over a given holding period under normal market conditions at a given confidence level.

Volumetric risk - the risk that the actual load volumes provided under full-requirement sales contracts could vary significantly from forecasted volumes.

VSCC - Virginia State Corporation Commission, the state agency that has jurisdiction over the regulation of Virginia corporations, including utilities.

vi

Forward-looking Information

Statements contained in this Form 10-Q concerning expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are other than statements of historical fact are "forward-looking statements" within the meaning of the federal securities laws. Although the Registrants believe that the expectations and assumptions reflected in these statements are reasonable, there can be no assurance that these expectations will prove to be correct. Forward-looking statements are subject to many risks and uncertainties, and actual results may differ materially from the results discussed in forward-looking statements. In addition to the specific factors discussed in each Registrant's 2014 Form 10-K and in "Item 2. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10-Q, the following are among the important factors that could cause actual results to differ materially from the forward-looking statements.

· fuel supply;

· continuing ability to recover fuel costs and environmental expenditures in a timely manner at LG&E and KU, and natural gas supply costs at LG&E;

· weather conditions affecting customer energy use;

· availability of existing generation facilities;

· the duration of and cost associated with unscheduled outages at our generating facilities;

· transmission and distribution system conditions and operating costs;

· expansion of alternative and distributed sources of electricity generation and storage;

· collective labor bargaining negotiations;

· the outcome of litigation against the Registrants and their subsidiaries;

· potential effects of threatened or actual terrorism, war or other hostilities, cyber-based intrusions or natural disasters;

· the commitments and liabilities of the Registrants and their subsidiaries;

· the effectiveness of our risk management programs, including foreign currency and interest rate hedging;

· our ability to attract and retain qualified employees;

· volatility in demand for electricity and prices for energy and transmission services;

· competition in retail and wholesale power and natural gas markets;

· market prices of commodity inputs for ongoing capital expenditures;

· capital market conditions, including the availability of capital or credit, changes in interest rates and certain economic indices, and decisions regarding capital structure;

· stock price performance of PPL;

· volatility in the fair value of debt and equity securities and its impact on the value of assets in defined benefit plans, and the potential cash funding requirements if fair value declines;

· interest rates and their effect on pension and retiree medical liabilities and interest payable on certain debt securities;

· volatility in or the impact of other changes in financial markets and economic conditions;

· new accounting requirements or new interpretations or applications of existing requirements;

· changes in securities and credit ratings;

· changes in foreign currency exchange rates for British pound sterling;

· current and future environmental conditions, regulations and other requirements and the related costs of compliance, including environmental capital expenditures, emission allowance costs and other expenses;

· changes in political, regulatory or economic conditions in states, regions or countries where the Registrants or their subsidiaries conduct business;

· receipt of necessary governmental permits, approvals and rate relief;

· new state, federal or foreign legislation or regulatory developments;

· the outcome of any rate cases or other cost recovery or revenue filings by PPL Electric, LG&E, KU or WPD;

· the impact of any state, federal or foreign investigations applicable to the Registrants and their subsidiaries and the energy industry;

· the effect of any business or industry restructuring;

· development of new projects, markets and technologies;

· performance of new ventures; and

· business dispositions or acquisitions and our ability to realize expected benefits from such business transactions.

Any such forward-looking statements should be considered in light of such important factors and in conjunction with other documents of the Registrants on file with the SEC.

1

New factors that could cause actual results to differ materially from those described in forward-looking statements emerge from time to time, and it is not possible for the Registrants to predict all such factors, or the extent to which any such factor or combination of factors may cause actual results to differ from those contained in any forward-looking statement. Any forward-looking statement speaks only as of the date on which such statement is made, and the Registrants undertake no obligation to update the information contained in such statement to reflect subsequent developments or information.

2

PART I.  FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, except share data)
			Three Months Ended				Nine Months Ended
			September 30,				September 30,
			2015		2014		2015		2014
Operating Revenues			$	1,878	$	1,879	$	5,889	$	5,906
Operating Expenses
	Operation
		Fuel		228		240		695		748
		Energy purchases		177		173		676		683
		Other operation and maintenance		482		467		1,405		1,382
	Depreciation			226		233		658		688
	Taxes, other than income			79		78		241		238
	Total Operating Expenses			1,192		1,191		3,675		3,739
Operating Income				686		688		2,214		2,167
Other Income (Expense) - net				75		136		61		33
Interest Expense				221		213		645		637
Income from Continuing Operations Before Income Taxes				540		611		1,630		1,563
Income Taxes				144		201		432		534
Income from Continuing Operations After Income Taxes				396		410		1,198		1,029
Income (Loss) from Discontinued Operations (net of income taxes) (Note 8)				(3)		87		(915)		13
Net Income			$	393	$	497	$	283	$	1,042
Earnings Per Share of Common Stock:
	Income from Continuing Operations After Income Taxes Available to PPL
	Common Shareowners:
		Basic	$	0.59	$	0.61	$	1.78	$	1.58
		Diluted	$	0.59	$	0.61	$	1.78	$	1.55
	Net Income Available to PPL Common Shareowners:
		Basic	$	0.58	$	0.74	$	0.42	$	1.60
		Diluted	$	0.58	$	0.74	$	0.42	$	1.57
Dividends Declared Per Share of Common Stock			$	0.3775	$	0.3725	$	1.1225	$	1.1175
Weighted-Average Shares of Common Stock Outstanding (in thousands)
		Basic		670,763		664,432		668,731		649,561
		Diluted		673,702		666,402		671,254		665,501

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

3

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
				Three Months Ended				Nine Months Ended
				September 30,				September 30,
				2015		2014		2015		2014
Net income				$	393	$	497	$	283	$	1,042
Other comprehensive income (loss):
Amounts arising during the period - gains (losses), net of tax (expense)
	benefit:
		Foreign currency translation adjustments, net of tax of ($3), ($9), ($2), ($3)			52		(48)		(97)		80
		Available-for-sale securities, net of tax of $0, $1, ($9), ($20)					(1)		7		18
		Qualifying derivatives, net of tax of $11, $2, $4, $31			(19)		(5)		8		(52)
		Defined benefit plans:
			Prior service costs, net of tax of $0, $0, $4, $0						(6)
			Net actuarial gain (loss), net of tax of $0, ($1), ($36), $1				(1)		52		(3)
Reclassifications from AOCI - (gains) losses, net of tax expense (benefit):
		Available-for-sale securities, net of tax of $0, $4, $2, $6					(3)		(2)		(5)
		Qualifying derivatives, net of tax of ($3), $3, ($23), $4			10		(12)		20		2
		Equity investees' other comprehensive (income) loss, net of
			tax of $0, $0, $1, $0						(1)
		Defined benefit plans:
			Prior service costs, net of tax of $0, ($1), $0, ($3)				1				3
			Net actuarial loss, net of tax of ($10), ($9), ($35), ($26)		35		29		111		84
	Total other comprehensive income (loss)				78		(40)		92		127
Comprehensive income				$	471	$	457	$	375	$	1,169

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

4

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
				Nine Months Ended September 30,
				2015		2014
Cash Flows from Operating Activities
	Net income			$	283	$	1,042
	(Income) loss from discontinued operations (net of income taxes)				915		(13)
	Income from continuing operations (net of income taxes)				1,198		1,029
	Adjustments to reconcile Income from continuing operations (net of taxes) to net cash provided by operating activities - continuing operations
		Depreciation			658		688
		Amortization			46		51
		Defined benefit plans - expense			44		37
		Deferred income taxes and investment tax credits			359		416
		Unrealized (gains) losses on derivatives, and other hedging activities			(17)		(99)
		Adjustment to WPD line loss accrual					65
		Stock-based compensation expense			26		24
		Other			9		(1)
	Change in current assets and current liabilities
		Accounts receivable			(5)		(59)
		Accounts payable			(180)		(53)
		Unbilled revenues			91		122
		Fuel, materials and supplies			60		7
		Taxes payable			(142)		138
		Regulatory assets and liabilities, net			46		7
		Other			(48)		28
	Other operating activities
		Defined benefit plans - funding			(396)		(290)
		Settlement of interest rate swaps			(88)
		Other assets			(42)		10
		Other liabilities			69		43
			Net cash provided by operating activities - continuing operations		1,688		2,163
	Net cash provided by operating activities - discontinued operations				343		465
			Net cash provided by operating activities		2,031		2,628
Cash Flows from Investing Activities
	Investing activities from continuing operations:
	Expenditures for property, plant and equipment				(2,560)		(2,602)
	Expenditures for intangible assets				(32)		(36)
	Purchase of other investments				(15)
	Proceeds from the sale of other investments				136
	Net (increase) decrease in restricted cash and cash equivalents				5		12
	Other investing activities				3		(4)
			Net cash provided by (used in) investing activities - continuing operations		(2,463)		(2,630)
	Net cash provided by (used in) investing activities - discontinued operations				(149)		(344)
			Net cash provided by (used in) investing activities		(2,612)		(2,974)
Cash Flows from Financing Activities
	Financing activities from continuing operations:
	Issuance of long-term debt				1,137		296
	Retirement of long-term debt						(237)
	Issuance of common stock				145		1,037
	Payment of common stock dividends				(750)		(718)
	Net increase (decrease) in short-term debt				(271)		(192)
	Other financing activities				(30)		(49)
			Net cash provided by (used in) financing activities - continuing operations		231		137
	Net cash provided by (used in) financing activities - discontinued operations				(546)		(166)
	Net cash distributions to parent from discontinued operations				132		448
			Net cash provided by (used in) financing activities		(183)		419
Effect of Exchange Rates on Cash and Cash Equivalents					(6)		13
Net (Increase) Decrease in Cash and Cash Equivalents included in Discontinued Operations					352		45
Net Increase (Decrease) in Cash and Cash Equivalents					(418)		131
Cash and Cash Equivalents at Beginning of Period					1,399		863
Cash and Cash Equivalents at End of Period				$	981	$	994

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

5

CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, shares in thousands)
			September 30,		December 31,
			2015		2014
Assets
Current Assets
	Cash and cash equivalents		$	981	$	1,399
	Short-term investments					120
	Accounts receivable (less reserve:  2015, $46; 2014, $44)
		Customer		713		737
		Other		64		71
	Unbilled revenues			421		517
	Fuel, materials and supplies			321		381
	Prepayments			86		75
	Deferred income taxes			223		125
	Other current assets			181		134
	Current assets of discontinued operations					2,600
	Total Current Assets			2,990		6,159
Property, Plant and Equipment
	Regulated utility plant			33,752		30,568
	Less:  accumulated depreciation - regulated utility plant			5,632		5,361
		Regulated utility plant, net		28,120		25,207
	Non-regulated property, plant and equipment			534		592
	Less:  accumulated depreciation - non-regulated property, plant and equipment			170		162
		Non-regulated property, plant and equipment, net		364		430
	Construction work in progress			1,478		2,532
	Property, Plant and Equipment, net			29,962		28,169
Other Noncurrent Assets
	Regulatory assets			1,627		1,562
	Goodwill			3,613		3,667
	Other intangibles			672		668
	Other noncurrent assets			382		322
	Noncurrent assets of discontinued operations					8,317
	Total Other Noncurrent Assets			6,294		14,536
Total Assets			$	39,246	$	48,864

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

6

CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, shares in thousands)
		September 30,		December 31,
		2015		2014
Liabilities and Equity
Current Liabilities
	Short-term debt	$	557	$	836
	Long-term debt due within one year		1,460		1,000
	Accounts payable		808		995
	Taxes		118		263
	Interest		300		298
	Dividends		254		249
	Customer deposits		312		304
	Regulatory liabilities		151		91
	Other current liabilities		508		632
	Current liabilities of discontinued operations				2,775
	Total Current Liabilities		4,468		7,443
Long-term Debt			17,745		17,173
Deferred Credits and Other Noncurrent Liabilities
	Deferred income taxes		3,736		3,227
	Investment tax credits		129		132
	Accrued pension obligations		963		1,457
	Asset retirement obligations		539		324
	Regulatory liabilities		962		992
	Other deferred credits and noncurrent liabilities		482		525
	Noncurrent liabilities of discontinued operations				3,963
	Total Deferred Credits and Other Noncurrent Liabilities		6,811		10,620
Commitments and Contingent Liabilities (Notes 6 and 10)
Equity
	Common stock - $0.01 par value (a)		7		7
	Additional paid-in capital		9,630		9,433
	Earnings reinvested		2,791		6,462
	Accumulated other comprehensive loss		(2,206)		(2,274)
	Total Equity		10,222		13,628
Total Liabilities and Equity		$	39,246	$	48,864

(a) 780,000 shares authorized; 671,792 and 665,849 shares issued and outstanding at September 30, 2015 and December 31, 2014.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

7

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
	Common
	stock								Accumulated
	shares				Additional				other
	outstanding		Common		paid-in		Earnings		comprehensive
	(a)		stock		capital		reinvested		loss		Total
June 30, 2015	669,514	$	7	$	9,564	$	2,654	$	(2,284)	$	9,941
Common stock issued	2,278				72						72
Stock-based compensation					(6)						(6)
Net income							393				393
Dividends and dividend equivalents							(256)				(256)
Other comprehensive income (loss)									78		78
September 30, 2015	671,792	$	7	$	9,630	$	2,791	$	(2,206)	$	10,222
December 31, 2014	665,849	$	7	$	9,433	$	6,462	$	(2,274)	$	13,628
Common stock issued	5,943				183						183
Stock-based compensation					14						14
Net income							283				283
Dividends and dividend equivalents							(754)				(754)
Distribution of PPL Energy Supply (Note 8)							(3,200)		(24)		(3,224)
Other comprehensive income (loss)									92		92
September 30, 2015	671,792	$	7	$	9,630	$	2,791	$	(2,206)	$	10,222
June 30, 2014	664,018	$	7	$	9,358	$	5,768	$	(1,398)	$	13,735
Common stock issued	635				21						21
Stock-based compensation					9						9
Net income							497				497
Dividends and dividend equivalents							(248)				(248)
Other comprehensive income (loss)									(40)		(40)
September 30, 2014	664,653	$	7	$	9,388	$	6,017	$	(1,438)	$	13,974
December 31, 2013	630,321	$	6	$	8,316	$	5,709	$	(1,565)	$	12,466
Common stock issued	34,332		1		1,048						1,049
Stock-based compensation					24						24
Net income							1,042				1,042
Dividends and dividend equivalents							(734)				(734)
Other comprehensive income (loss)									127		127
September 30, 2014	664,653	$	7	$	9,388	$	6,017	$	(1,438)	$	13,974

(a) Shares in thousands. Each share entitles the holder to one vote on any question presented at any shareowners' meeting.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

8

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9

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
			Three Months Ended				Nine Months Ended
			September 30,				September 30,
			2015		2014		2015		2014
Operating Revenues			$	519	$	477	$	1,625	$	1,518
Operating Expenses
	Operation
		Energy purchases		154		128		519		431
		Energy purchases from affiliate				20		14		68
		Other operation and maintenance		162		133		435		402
	Depreciation			55		47		158		137
	Taxes, other than income			27		25		87		80
	Total Operating Expenses			398		353		1,213		1,118
Operating Income				121		124		412		400
Other Income (Expense) - net				1		3		5		6
Interest Expense				32		33		96		91
Income Before Income Taxes				90		94		321		315
Income Taxes				35		37		130		121
Net Income (a)			$	55	$	57	$	191	$	194

(a) Net income approximates comprehensive income.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

10

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
				Nine Months Ended
				September 30,
				2015		2014
Cash Flows from Operating Activities
	Net income			$	191	$	194
	Adjustments to reconcile net income to net cash provided by operating activities
		Depreciation			158		137
		Amortization			19		13
		Defined benefit plans - expense			13		10
		Deferred income taxes and investment tax credits			127		65
		Other			(9)		(20)
	Change in current assets and current liabilities
		Accounts receivable			18		(45)
		Accounts payable			(140)		(25)
		Unbilled revenues			28		40
		Prepayments			(17)		(17)
		Regulatory assets and liabilities			46		19
		Taxes payable			(50)		45
		Other			13		2
	Other operating activities
		Defined benefit plans - funding			(33)		(20)
		Other assets			(6)		8
		Other liabilities			15		6
			Net cash provided by operating activities		373		412
Cash Flows from Investing Activities
	Expenditures for property, plant and equipment				(758)		(700)
	Expenditures for intangible assets				(9)		(25)
	Net (increase) decrease in notes receivable from affiliates						150
	Other investing activities				3		13
			Net cash provided by (used in) investing activities		(764)		(562)
Cash Flows from Financing Activities
	Issuance of long-term debt						296
	Retirement of long-term debt						(10)
	Contributions from parent				275		95
	Payment of common stock dividends to parent				(140)		(121)
	Net increase (decrease) in short-term debt				68		(20)
	Other financing activities						(4)
			Net cash provided by (used in) financing activities		203		236
Net Increase (Decrease) in Cash and Cash Equivalents					(188)		86
Cash and Cash Equivalents at Beginning of Period					214		25
Cash and Cash Equivalents at End of Period				$	26	$	111

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

11

CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, shares in thousands)
			September 30,		December 31,
			2015		2014
Assets
Current Assets
	Cash and cash equivalents		$	26	$	214
	Accounts receivable (less reserve: 2015, $21; 2014, $17)
		Customer		312		312
		Other		10		44
	Unbilled revenues			85		113
	Materials and supplies			34		43
	Prepayments			27		10
	Deferred income taxes			103		58
	Regulatory assets			10		12
	Other current assets			10		13
	Total Current Assets			617		819
Property, Plant and Equipment
	Regulated utility plant			8,565		7,589
	Less: accumulated depreciation - regulated utility plant			2,613		2,517
		Regulated utility plant, net		5,952		5,072
	Construction work in progress			512		738
	Property, Plant and Equipment, net			6,464		5,810
Other Noncurrent Assets
	Regulatory assets			942		897
	Intangibles			243		235
	Other noncurrent assets			39		24
	Total Other Noncurrent Assets			1,224		1,156
Total Assets			$	8,305	$	7,785

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

12

CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, shares in thousands)
		September 30,		December 31,
		2015		2014
Liabilities and Equity
Current Liabilities
	Short-term debt	$	68
	Long term debt due within one year		100	$	100
	Accounts payable		315		325
	Accounts payable to affiliates		36		70
	Taxes		35		85
	Interest		26		34
	Regulatory liabilities		120		76
	Other current liabilities		114		103
	Total Current Liabilities		814		793
Long-term Debt			2,503		2,502
Deferred Credits and Other Noncurrent Liabilities
	Deferred income taxes		1,655		1,483
	Accrued pension obligations		149		212
	Regulatory liabilities		25		18
	Other deferred credits and noncurrent liabilities		69		60
	Total Deferred Credits and Other Noncurrent Liabilities		1,898		1,773
Commitments and Contingent Liabilities (Notes 6 and 10)
Equity
	Common stock - no par value (a)		364		364
	Additional paid-in capital		1,925		1,603
	Earnings reinvested		801		750
	Total Equity		3,090		2,717
Total Liabilities and Equity		$	8,305	$	7,785

(a) 170,000 shares authorized; 66,368 shares issued and outstanding at September 30, 2015 and December 31, 2014.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

13

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
	Common
	stock
	shares			Additional
	outstanding	Common		paid-in		Earnings
	(a)	stock		capital		reinvested		Total
June 30, 2015	66,368	$	364	$	1,810	$	779	$	2,953
Net income							55		55
Capital contributions from PPL					115				115
Dividends declared on common stock							(33)		(33)
September 30, 2015	66,368	$	364	$	1,925	$	801	$	3,090
December 31, 2014	66,368	$	364	$	1,603	$	750	$	2,717
Net income							191		191
Capital contributions from PPL (b)					322				322
Dividends declared on common stock							(140)		(140)
September 30, 2015	66,368	$	364	$	1,925	$	801	$	3,090
June 30, 2014	66,368	$	364	$	1,435	$	695	$	2,494
Net income							57		57
Dividends declared on common stock							(34)		(34)
September 30, 2014	66,368	$	364	$	1,435	$	718	$	2,517
December 31, 2013	66,368	$	364	$	1,340	$	645	$	2,349
Net income							194		194
Capital contributions from PPL					95				95
Dividends declared on common stock							(121)		(121)
September 30, 2014	66,368	$	364	$	1,435	$	718	$	2,517

(a) Shares in thousands. All common shares of PPL Electric stock are owned by PPL.

(b) Includes non-cash contributions of $47 million.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

14

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
LG&E and KU Energy LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)
			Three Months Ended				Nine Months Ended
			September 30,				September 30,
			2015		2014			2015		2014
Operating Revenues			$	801	$	753	$	2,414	$	2,409
Operating Expenses
	Operation
		Fuel		228		240		695		748
		Energy purchases		23		24		143		184
		Other operation and maintenance		202		197		625		609
	Depreciation			97		89		286		262
	Taxes, other than income			14		13		43		39
	Total Operating Expenses			564		563		1,792		1,842
Operating Income				237		190		622		567
Other Income (Expense) - net				(1)		(2)		(3)		(6)
Interest Expense				43		42		127		125
Interest Expense with Affiliate								1
Income Before Income Taxes				193		146		491		436
Income Taxes				73		55		194		165
Net Income			$	120	$	91	$	297	$	271

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

15

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
LG&E and KU Energy LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)
				Three Months Ended				Nine Months Ended
				September 30,				September 30,
				2015		2014		2015		2014
Net income				$	120	$	91	$	297	$	271
Other comprehensive income (loss):
Amounts arising during the period - gains (losses), net of tax (expense)
	benefit:
		Defined benefit plans:
			Net actuarial loss, net of tax of $0, $0, $5, $1						(8)		(2)
Reclassifications from AOCI - (gains) losses, net of tax expense (benefit):
		Equity investees' other comprehensive (income) loss, net of
			tax of $0, $0, $1, $0						(1)		(1)
		Defined benefit plans:
			Prior service costs, net of tax of $0, $0, $0, $0						1
			Net actuarial loss, net of tax of $0, $0, ($1), $0		1				2
Total other comprehensive income (loss)					1				(6)		(3)
Comprehensive income				$	121	$	91	$	291	$	268

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

16

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
LG&E and KU Energy LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)
				Nine Months Ended September 30,
				2015		2014
Cash Flows from Operating Activities
	Net income			$	297	$	271
	Adjustments to reconcile net income to net cash provided by operating activities
		Depreciation			286		262
		Amortization			18		18
		Defined benefit plans - expense			29		18
		Deferred income taxes and investment tax credits			199		251
		Other			29		11
	Change in current assets and current liabilities
		Accounts receivable			(1)		(3)
		Accounts payable			(34)		7
		Accounts payable to affiliates			(7)		(2)
		Unbilled revenues			19		49
		Fuel, materials and supplies			43		4
		Income tax receivable			132		(28)
		Taxes payable					5
		Accrued interest			37		36
		Other			(2)		(10)
	Other operating activities
		Defined benefit plans - funding			(66)		(43)
		Settlement of interest rate swaps			(88)
		Other assets			(4)
		Other liabilities			8		5
			Net cash provided by operating activities		895		851
Cash Flows from Investing Activities
	Expenditures for property, plant and equipment				(928)		(843)
	Net (increase) decrease in notes receivable from affiliates						70
	Other investing activities				7
			Net cash provided by (used in) investing activities		(921)		(773)
Cash Flows from Financing Activities
	Net increase (decrease) in notes payable with affiliates				21		22
	Issuance of long-term debt				1,050
	Net increase (decrease) in short-term debt				(500)		103
	Debt issuance and credit facility costs				(9)		(3)
	Distributions to member				(157)		(327)
	Contributions from member				55		139
			Net cash provided by (used in) financing activities		460		(66)
Net Increase (Decrease) in Cash and Cash Equivalents					434		12
Cash and Cash Equivalents at Beginning of Period					21		35
Cash and Cash Equivalents at End of Period				$	455	$	47

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

17

CONDENSED CONSOLIDATED BALANCE SHEETS
LG&E and KU Energy LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)
			September 30,		December 31,
			2015		2014
Assets
Current Assets
	Cash and cash equivalents		$	455	$	21
	Accounts receivable (less reserve: 2015, $23; 2014, $25)
		Customer		228		231
		Other		14		18
	Unbilled revenues			148		167
	Fuel, materials and supplies			260		311
	Prepayments			23		28
	Income taxes receivable			4		136
	Deferred income taxes			68		16
	Regulatory assets			27		25
	Other current assets			5		3
	Total Current Assets			1,232		956
Property, Plant and Equipment
	Regulated utility plant			11,481		10,014
	Less: accumulated depreciation - regulated utility plant			1,094		1,069
		Regulated utility plant, net		10,387		8,945
	Construction work in progress			839		1,559
	Property, Plant and Equipment, net			11,226		10,504
Other Noncurrent Assets
	Regulatory assets			685		665
	Goodwill			996		996
	Other intangibles			136		174
	Other noncurrent assets			102		101
	Total Other Noncurrent Assets			1,919		1,936
Total Assets			$	14,377	$	13,396

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

18

CONDENSED CONSOLIDATED BALANCE SHEETS
LG&E and KU Energy LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)
		September 30,		December 31,
		2015		2014
Liabilities and Equity
Current Liabilities
	Short-term debt	$	75	$	575
	Long-term debt due within one year		900		900
	Notes payable with affiliates		62		41
	Accounts payable		284		399
	Accounts payable to affiliates		1		2
	Customer deposits		51		52
	Taxes		36		36
	Price risk management liabilities		5		5
	Price risk management liabilities with affiliates				66
	Regulatory liabilities		31		15
	Interest		60		23
	Other current liabilities		142		131
	Total Current Liabilities		1,647		2,245
Long-term Debt			4,717		3,667
Deferred Credits and Other Noncurrent Liabilities
	Deferred income taxes		1,489		1,241
	Investment tax credits		128		131
	Accrued pension obligations		275		305
	Asset retirement obligations		488		274
	Regulatory liabilities		937		974
	Price risk management liabilities		45		43
	Other deferred credits and noncurrent liabilities		214		268
	Total Deferred Credits and Other Noncurrent Liabilities		3,576		3,236
Commitments and Contingent Liabilities (Notes 6 and 10)
Member's equity			4,437		4,248
Total Liabilities and Equity		$	14,377	$	13,396

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

19

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
LG&E and KU Energy LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)
		Member's
		Equity
June 30, 2015	$	4,329
Net income		120
Contributions from member		35
Distributions to member		(48)
Other comprehensive income (loss)		1
September 30, 2015	$	4,437
December 31, 2014	$	4,248
Net income		297
Contributions from member		55
Distributions to member		(157)
Other comprehensive income (loss)		(6)
September 30, 2015	$	4,437
June 30, 2014	$	4,225
Net income		91
Contributions from member		20
Distributions to member		(106)
September 30, 2014	$	4,230
December 31, 2013	$	4,150
Net income		271
Contributions from member		139
Distributions to member		(327)
Other comprehensive income (loss)		(3)
September 30, 2014	$	4,230

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

20

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21

CONDENSED STATEMENTS OF INCOME
Louisville Gas and Electric Company
(Unaudited)
(Millions of Dollars)
			Three Months Ended				Nine Months Ended
			September 30,				September 30,
			2015		2014		2015		2014
Operating Revenues
	Retail and wholesale		$	349	$	334	$	1,089	$	1,096
	Electric revenue from affiliate			2		13		32		74
	Total Operating Revenues			351		347		1,121		1,170
Operating Expenses
	Operation
		Fuel		82		99		267		320
		Energy purchases		18		20		129		167
		Energy purchases from affiliate		9		3		17		11
		Other operation and maintenance		87		94		286		286
	Depreciation			40		39		122		116
	Taxes, other than income			7		6		21		19
	Total Operating Expenses			243		261		842		919
Operating Income				108		86		279		251
Other Income (Expense) - net				(1)				(3)		(3)
Interest Expense				13		13		39		37
Income Before Income Taxes				94		73		237		211
Income Taxes				36		27		91		78
Net Income (a)			$	58	$	46	$	146	$	133

(a) Net income equals comprehensive income.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

22

CONDENSED STATEMENTS OF CASH FLOWS
Louisville Gas and Electric Company
(Unaudited)
(Millions of Dollars)
				Nine Months Ended September 30,
				2015		2014
Cash Flows from Operating Activities
	Net income			$	146	$	133
	Adjustments to reconcile net income to net cash provided by operating activities
		Depreciation			122		116
		Amortization			9		9
		Defined benefit plans - expense			10		7
		Deferred income taxes and investment tax credits			93		31
		Other			25		(2)
	Change in current assets and current liabilities
		Accounts receivable			10		4
		Accounts receivable from affiliates			4		(10)
		Accounts payable			(14)		8
		Accounts payable to affiliates			(1)		(4)
		Unbilled revenues			13		27
		Fuel, materials and supplies			21		5
		Income tax receivable			74		(2)
		Taxes payable			(1)		10
		Accrued interest			9		9
		Other			9		1
	Other operating activities
		Defined benefit plans - funding			(25)		(12)
		Settlement of interest rate swaps			(44)
		Other assets			10		1
		Other liabilities			(1)		(4)
			Net cash provided by operating activities		469		327
Cash Flows from Investing Activities
	Expenditures for property, plant and equipment				(519)		(422)
			Net cash provided by (used in) investing activities		(519)		(422)
Cash Flows from Financing Activities
	Issuance of long-term debt				550
	Net increase (decrease) in short-term debt				(264)		123
	Debt issuance and credit facility costs				(5)		(1)
	Payment of common stock dividends to parent				(81)		(83)
	Contributions from parent				20		73
			Net cash provided by (used in) financing activities		220		112
Net Increase (Decrease) in Cash and Cash Equivalents					170		17
Cash and Cash Equivalents at Beginning of Period					10		8
Cash and Cash Equivalents at End of Period				$	180	$	25

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

23

CONDENSED BALANCE SHEETS
Louisville Gas and Electric Company
(Unaudited)
(Millions of Dollars, shares in thousands)
			September 30,		December 31,
			2015		2014
Assets
Current Assets
	Cash and cash equivalents		$	180	$	10
	Accounts receivable (less reserve: 2015, $1; 2014, $2)
		Customer		97		107
		Other		9		11
	Unbilled revenues			63		76
	Accounts receivable from affiliates			19		23
	Fuel, materials and supplies			133		162
	Prepayments			6		8
	Income taxes receivable					74
	Deferred income taxes			23
	Regulatory assets			11		21
	Other current assets			2		1
	Total Current Assets			543		493
Property, Plant and Equipment
	Regulated utility plant			4,651		4,031
	Less: accumulated depreciation - regulated utility plant			384		456
		Regulated utility plant, net		4,267		3,575
	Construction work in progress			414		676
	Property, Plant and Equipment, net			4,681		4,251
Other Noncurrent Assets
	Regulatory assets			396		397
	Goodwill			389		389
	Other intangibles			79		97
	Other noncurrent assets			28		35
	Total Other Noncurrent Assets			892		918
Total Assets			$	6,116	$	5,662

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

24

CONDENSED BALANCE SHEETS
Louisville Gas and Electric Company
(Unaudited)
(Millions of Dollars, shares in thousands)
		September 30,		December 31,
		2015		2014
Liabilities and Equity
Current Liabilities
	Short-term debt			$	264
	Long-term debt due within one year	$	250		250
	Accounts payable		191		240
	Accounts payable to affiliates		20		20
	Customer deposits		25		25
	Taxes		18		19
	Price risk management liabilities		5		5
	Price risk management liabilities with affiliates				33
	Regulatory liabilities		15		10
	Interest		15		6
	Other current liabilities		50		42
	Total Current Liabilities		589		914
Long-term Debt			1,653		1,103
Deferred Credits and Other Noncurrent Liabilities
	Deferred income taxes		818		700
	Investment tax credits		35		36
	Accrued pension obligations		34		57
	Asset retirement obligations		147		66
	Regulatory liabilities		439		458
	Price risk management liabilities		45		43
	Other deferred credits and noncurrent liabilities		97		111
	Total Deferred Credits and Other Noncurrent Liabilities		1,615		1,471
Commitments and Contingent Liabilities (Notes 6 and 10)
Stockholder's Equity
	Common stock - no par value (a)		424		424
	Additional paid-in capital		1,541		1,521
	Earnings reinvested		294		229
	Total Equity		2,259		2,174
Total Liabilities and Equity		$	6,116	$	5,662

(a) 75,000 shares authorized; 21,294 shares issued and outstanding at September 30, 2015 and December 31, 2014.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

25

CONDENSED STATEMENTS OF EQUITY
Louisville Gas and Electric Company
(Unaudited)
(Millions of Dollars)
	Common
	stock
	shares				Additional
	outstanding		Common		paid-in		Earnings
	(a)		stock		capital		reinvested		Total
June 30, 2015	21,294	$	424	$	1,541	$	259	$	2,224
Net income							58		58
Cash dividends declared on common stock							(23)		(23)
September 30, 2015	21,294	$	424	$	1,541	$	294	$	2,259
December 31, 2014	21,294	$	424	$	1,521	$	229	$	2,174
Net income							146		146
Capital contributions from LKE					20				20
Cash dividends declared on common stock							(81)		(81)
September 30, 2015	21,294	$	424	$	1,541	$	294	$	2,259
June 30, 2014	21,294	$	424	$	1,417	$	199	$	2,040
Net income							46		46
Capital contributions from LKE					20				20
Cash dividends declared on common stock							(23)		(23)
September 30, 2014	21,294	$	424	$	1,437	$	222	$	2,083
December 31, 2013	21,294	$	424	$	1,364	$	172	$	1,960
Net income							133		133
Capital contributions from LKE					73				73
Cash dividends declared on common stock							(83)		(83)
September 30, 2014	21,294	$	424	$	1,437	$	222	$	2,083

(a) Shares in thousands. All common shares of LG&E stock are owned by LKE.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

26

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27

CONDENSED STATEMENTS OF INCOME
Kentucky Utilities Company
(Unaudited)
(Millions of Dollars)
			Three Months Ended				Nine Months Ended
			September 30,				September 30,
			2015		2014		2015		2014
Operating Revenues
	Retail and wholesale		$	452	$	419	$	1,325	$	1,313
	Electric revenue from affiliate			9		3		17		11
	Total Operating Revenues			461		422		1,342		1,324
Operating Expenses
	Operation
		Fuel		146		141		428		428
		Energy purchases		5		4		14		17
		Energy purchases from affiliate		2		13		32		74
		Other operation and maintenance		108		97		321		302
	Depreciation			57		50		164		145
	Taxes, other than income			7		7		22		20
	Total Operating Expenses			325		312		981		986
Operating Income				136		110		361		338
Other Income (Expense) - net						(1)		1		(1)
Interest Expense				20		19		58		58
Income Before Income Taxes				116		90		304		279
Income Taxes				44		34		115		106
Net Income (a)			$	72	$	56	$	189	$	173

(a) Net income approximates comprehensive income.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

28

CONDENSED STATEMENTS OF CASH FLOWS
Kentucky Utilities Company
(Unaudited)
(Millions of Dollars)
				Nine Months Ended September 30,
				2015		2014
Cash Flows from Operating Activities
	Net income			$	189	$	173
	Adjustments to reconcile net income to net cash provided by operating activities
		Depreciation			164		145
		Amortization			8		8
		Defined benefit plans - expense			9		4
		Deferred income taxes and investment tax credits			132		129
		Other			4		11
	Change in current assets and current liabilities
		Accounts receivable			(11)		(8)
		Accounts payable			(18)		6
		Accounts payable to affiliates			(7)		4
		Unbilled revenues			6		22
		Fuel, materials and supplies			22		(1)
		Income tax receivable			60		(3)
		Taxes payable			9		(12)
		Accrued interest			19		18
		Other			(3)		(8)
	Other operating activities
		Defined benefit plans - funding			(20)		(4)
		Settlement of interest rate swaps			(44)
		Other assets			(9)		(2)
		Other liabilities					4
			Net cash provided by operating activities		510		486
Cash Flows from Investing Activities
	Expenditures for property, plant and equipment				(407)		(418)
	Other investing activities				7
			Net cash provided by (used in) investing activities		(400)		(418)
Cash Flows from Financing Activities
	Issuance of long-term debt				500
	Net increase (decrease) in short-term debt				(236)		(20)
	Debt issuance and credit facility costs				(4)		(1)
	Payment of common stock dividends to parent				(106)		(112)
	Contributions from parent						66
			Net cash provided by (used in) financing activities		154		(67)
Net Increase (Decrease) in Cash and Cash Equivalents					264		1
Cash and Cash Equivalents at Beginning of Period					11		21
Cash and Cash Equivalents at End of Period				$	275	$	22

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

29

CONDENSED BALANCE SHEETS
Kentucky Utilities Company
(Unaudited)
(Millions of Dollars, shares in thousands)
			September 30,		December 31,
			2015		2014
Assets
Current Assets
	Cash and cash equivalents		$	275	$	11
	Accounts receivable (less reserve: 2015, $2; 2014, $2)
		Customer		131		124
		Other		5		6
	Unbilled revenues			85		91
	Fuel, materials and supplies			127		149
	Prepayments			7		10
	Income taxes receivable					60
	Deferred income taxes			30		2
	Regulatory assets			16		4
	Other current assets			3		2
	Total Current Assets			679		459
Property, Plant and Equipment
	Regulated utility plant			6,828		5,977
	Less: accumulated depreciation - regulated utility plant			710		611
		Regulated utility plant, net		6,118		5,366
	Construction work in progress			421		880
	Property, Plant and Equipment, net			6,539		6,246
Other Noncurrent Assets
	Regulatory assets			289		268
	Goodwill			607		607
	Other intangibles			57		77
	Other noncurrent assets			61		58
	Total Other Noncurrent Assets			1,014		1,010
Total Assets			$	8,232	$	7,715

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

30

CONDENSED BALANCE SHEETS
Kentucky Utilities Company
(Unaudited)
(Millions of Dollars, shares in thousands)
		September 30,		December 31,
		2015		2014
Liabilities and Equity
Current Liabilities
	Short-term debt			$	236
	Long-term debt due within one year	$	250		250
	Accounts payable		77		141
	Accounts payable to affiliates		41		47
	Customer deposits		26		27
	Taxes		23		14
	Price risk management liabilities with affiliates				33
	Regulatory liabilities		16		5
	Interest		30		11
	Other current liabilities		53		41
	Total Current Liabilities		516		805
Long-term Debt			2,341		1,841
Deferred Credits and Other Noncurrent Liabilities
	Deferred income taxes		1,048		884
	Investment tax credits		93		95
	Accrued pension obligations		44		59
	Asset retirement obligations		341		208
	Regulatory liabilities		498		516
	Other deferred credits and noncurrent liabilities		63		101
	Total Deferred Credits and Other Noncurrent Liabilities		2,087		1,863
Commitments and Contingent Liabilities (Notes 6 and 10)
Stockholder's Equity
	Common stock - no par value (a)		308		308
	Additional paid-in capital		2,596		2,596
	Accumulated other comprehensive income (loss)		(1)
	Earnings reinvested		385		302
	Total Equity		3,288		3,206
Total Liabilities and Equity		$	8,232	$	7,715

(a) 80,000 shares authorized; 37,818 shares issued and outstanding at September 30, 2015 and December 31, 2014.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

31

CONDENSED STATEMENTS OF EQUITY
Kentucky Utilities Company
(Unaudited)
(Millions of Dollars)
	Common							Accumulated
	stock							other
	shares			Additional				comprehensive
	outstanding	Common		paid-in		Earnings		income
	(a)	stock		capital		reinvested		(loss)		Total
June 30, 2015	37,818	$	308	$	2,596	$	338	$	(1)	$	3,241
Net income							72				72
Cash dividends declared on common stock							(25)				(25)
September 30, 2015	37,818	$	308	$	2,596	$	385	$	(1)	$	3,288
December 31, 2014	37,818	$	308	$	2,596	$	302			$	3,206
Net income							189				189
Cash dividends declared on common stock							(106)				(106)
Other comprehensive income (loss)								$	(1)		(1)
September 30, 2015	37,818	$	308	$	2,596	$	385	$	(1)	$	3,288
June 30, 2014	37,818	$	308	$	2,571	$	261			$	3,140
Net income							56				56
Cash dividends declared on common stock							(26)				(26)
September 30, 2014	37,818	$	308	$	2,571	$	291			$	3,170
December 31, 2013	37,818	$	308	$	2,505	$	230	$	1	$	3,044
Net income							173				173
Capital contributions from LKE					66						66
Cash dividends declared on common stock							(112)				(112)
Other comprehensive income (loss)									(1)		(1)
September 30, 2014	37,818	$	308	$	2,571	$	291	$		$	3,170

(a) Shares in thousands. All common shares of KU stock are owned by LKE.

The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.

32

Combined Notes to Condensed Financial Statements (Unaudited)

1. Interim Financial Statements

(All Registrants)

Capitalized terms and abbreviations appearing in the unaudited combined notes to condensed financial statements are defined in the glossary. Dollars are in millions, except per share data, unless otherwise noted. The specific Registrant to which disclosures are applicable is identified in parenthetical headings in italics above the applicable disclosure or within the applicable disclosure. Within combined disclosures, amounts are disclosed for any Registrant when significant.

The accompanying unaudited condensed financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all of the information and footnote disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation in accordance with GAAP are reflected in the condensed financial statements. All adjustments are of a normal recurring nature, except as otherwise disclosed. Each Registrant's Balance Sheet at December 31, 2014 is derived from that Registrant's 2014 audited Balance Sheet. The financial statements and notes thereto should be read in conjunction with the financial statements and notes contained in each Registrant's 2014 Form 10-K. The results of operations for the three and nine months ended September 30, 2015 are not necessarily indicative of the results to be expected for the full year ending December 31, 2015 or other future periods, because results for interim periods can be disproportionately influenced by various factors, developments and seasonal variations.

The classification of certain prior period amounts has been changed to conform to the presentation in the September 30, 2015 financial statements.

(PPL)

"Income (Loss) from Discontinued Operations (net of income taxes)" on the Statements of Income includes the activities of PPL Energy Supply, substantially representing PPL's former Supply segment, which was spun off and distributed to PPL shareowners on June 1, 2015. PPL Energy Supply's assets and liabilities have been reclassified on the Balance Sheet at December 31, 2014 to assets and liabilities of discontinued operations. The assets and liabilities were distributed and removed from PPL's Balance Sheets in the second quarter of 2015. In addition, the Statements of Cash Flows separately report the cash flows of the discontinued operations. See Note 8 for additional information.

2. Summary of Significant Accounting Policies

(All Registrants)

The following accounting policy disclosures represent updates to Note 1 to each indicated Registrant's 2014 Form 10-K and should be read in conjunction with those disclosures.

Accounts Receivable (PPL and PPL Electric)

In accordance with a PUC-approved purchase of accounts receivable program, PPL Electric purchases certain accounts receivable from alternative electricity suppliers at a discount, which reflects a provision for uncollectible accounts. The alternative electricity suppliers have no continuing involvement or interest in the purchased accounts receivable. The purchased accounts receivable are initially recorded at fair value using a market approach based on the purchase price paid and are classified as Level 2 in the fair value hierarchy. During the three and nine months ended September 30, 2015, PPL Electric purchased $361 million and $968 million of accounts receivable from unaffiliated third parties. During the three and nine months ended September 30, 2014, PPL Electric purchased $260 million and $874 million of accounts receivable from unaffiliated third parties and $77 million and $261 million from PPL EnergyPlus. PPL Electric's purchases from PPL EnergyPlus for the nine months ended September 30, 2015 were $146 million and include purchases through May 31, 2015, which is the period during which PPL Electric and PPL EnergyPlus were affiliated entities. As a result of the June 1, 2015 spinoff of PPL Energy Supply and creation of Talen Energy, PPL EnergyPlus (renamed Talen Energy Marketing) is no

33

longer an affiliate of PPL Electric. PPL Electric's purchases from Talen Energy Marketing subsequent to May 31, 2015 are included as purchases from an unaffiliated third party.

Depreciation (PPL)

Effective January 1, 2015, after completing a review of the useful lives of its distribution network assets, WPD extended the weighted average useful lives of these assets to 69 years from 55 years. For the three and nine months ended September 30, 2015, this change in useful lives resulted in lower depreciation of $22 million ($17 million after-tax or $0.03 per share) and $64 million ($50 million after-tax or $0.08 per share).

New Accounting Guidance Adopted (All Registrants)

Reporting of Discontinued Operations

Effective January 1, 2015, the Registrants prospectively adopted accounting guidance that changes the criteria for determining what should be classified as a discontinued operation and the related presentation and disclosure requirements. A discontinued operation may include a component of an entity or a group of components of an entity, or a business activity. A disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on the entity's operations and financial results when any of the following occurs: (1) The components of an entity or group of components of an entity meets the criteria to be classified as held for sale, (2) The component of an entity or group of components of an entity is disposed of by sale, or (3) The component of an entity or group of components of an entity is disposed of other than by sale (for example, by abandonment or in a distribution to owners in a spinoff).

As a result of the spinoff on June 1, 2015, PPL Energy Supply has been reported as a discontinued operation under the new discontinued operations guidance. See Note 8 for additional information.

3. Segment and Related Information

(PPL)

See Note 2 in PPL's 2014 Form 10-K for a discussion of reportable segments and related information.

On June 1, 2015, PPL completed the spinoff of PPL Energy Supply, which substantially represented PPL's Supply segment. As a result of this transaction, PPL no longer has a Supply segment. See Note 8 for additional information.

Financial data for the segments and reconciliation to PPL's consolidated results for the periods ended September 30 are:

		Three Months				Nine Months
		2015		2014		2015		2014
Income Statement Data
Revenues from external customers
	U.K. Regulated	$	552	$	644	$	1,836	$	1,964
	Kentucky Regulated		801		753		2,414		2,409
	Pennsylvania Regulated		519		477		1,625		1,516
	Corporate and Other		6		5		14		17
Total		$	1,878	$	1,879	$	5,889	$	5,906
Net Income
	U.K. Regulated (a)	$	249	$	295	$	814	$	688
	Kentucky Regulated		111		82		267		247
	Pennsylvania Regulated		55		57		191		194
	Corporate and Other (b)		(19)		(24)		(74)		(100)
	Discontinued Operations (c)		(3)		87		(915)		13
Total		$	393	$	497	$	283	$	1,042

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		September 30,		December 31,
		2015		2014
Balance Sheet Data
Assets
	U.K. Regulated	$	16,382	$	16,005
	Kentucky Regulated		14,043		13,062
	Pennsylvania Regulated		8,305		7,785
	Corporate and Other (d)		516		1,095
	Discontinued Operations (c)				10,917
Total assets		$	39,246	$	48,864

(a) Includes unrealized gains and losses from economic activity. See Note 14 for additional information.

(b) 2015 includes transition costs related to the formation of the Talen Energy organization and to reconfigure the remaining PPL Services functions. See Note 8 for additional information.

(c) See Note 8 for additional information.

(d) Primarily consists of unallocated items, including cash, PP&E and the elimination of inter-segment transactions.

4. Earnings Per Share

(PPL)

Basic EPS is computed by dividing income available to PPL common shareowners by the weighted-average number of common shares outstanding during the applicable period. Diluted EPS is computed by dividing income available to PPL common shareowners by the weighted-average number of common shares outstanding, increased by incremental shares that would be outstanding if potentially dilutive non-participating securities were converted to common shares as calculated using the Treasury Stock Method or the If-Converted Method, as applicable. Incremental non-participating securities that have a dilutive impact are detailed in the table below.

Reconciliations of the amounts of income and shares of PPL common stock (in thousands) for the periods ended September 30 used in the EPS calculation are:

			Three Months				Nine Months
			2015		2014		2015		2014
Income (Numerator)
Income from continuing operations after income taxes			$	396	$	410	$	1,198	$	1,029
Less amounts allocated to participating securities				2		2		5		5
Income from continuing operations after income taxes available to PPL
	common shareowners - Basic			394		408		1,193		1,024
Plus interest charges (net of tax) related to Equity Units (a)										9
Income from continuing operations after income taxes available to PPL
	common shareowners - Diluted		$	394	$	408	$	1,193	$	1,033
Income (loss) from discontinued operations (net of income taxes) available
	to PPL common shareowners - Basic and Diluted		$	(3)	$	87	$	(915)	$	13
Net income			$	393	$	497	$	283	$	1,042
Less amounts allocated to participating securities				2		2		1		5
Net income available to PPL common shareowners - Basic				391		495		282		1,037
Plus interest charges (net of tax) related to Equity Units (a)										9
Net income available to PPL common shareowners - Diluted			$	391	$	495	$	282	$	1,046
Shares of Common Stock (Denominator)
Weighted-average shares - Basic EPS				670,763		664,432		668,731		649,561
Add incremental non-participating securities:
		Share-based payment awards		2,939		1,970		2,523		1,860
		Equity Units (a)								14,080
Weighted-average shares - Diluted EPS				673,702		666,402		671,254		665,501
Basic EPS
Available to PPL common shareowners:
		Income from continuing operations after income taxes	$	0.59	$	0.61	$	1.78	$	1.58
		Income (loss) from discontinued operations (net of income taxes)		(0.01)		0.13		(1.36)		0.02
		Net Income Available to PPL common shareowners	$	0.58	$	0.74	$	0.42	$	1.60
Diluted EPS
Available to PPL common shareowners:
		Income from continuing operations after income taxes	$	0.59	$	0.61	$	1.78	$	1.55
		Income (loss) from discontinued operations (net of income taxes)		(0.01)		0.13		(1.36)		0.02
		Net Income Available to PPL common shareowners	$	0.58	$	0.74	$	0.42	$	1.57

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(a) In 2014, the If-Converted Method was applied to the Equity Units prior to the March 2014 settlement.

For the periods ended September 30, PPL issued common stock related to stock-based compensation plans and the DRIP as follows (in thousands):

	Three Months				Nine Months
	2015		2014		2015		2014
Stock-based compensation plans (a)		1,368		210		3,805		2,228
DRIP		475		425		1,318		425

(a) Includes stock options exercised, vesting of performance units, vesting of restricted stock and restricted stock units and conversion of stock units granted to directors.

See Note 7 for additional information on common stock issued under the ATM Program.

For the periods ended September 30, the following shares (in thousands) were excluded from the computations of diluted EPS because the effect would have been antidilutive.

	Three Months				Nine Months
	2015		2014		2015		2014
Stock options		1,484		527		1,218		1,901
Performance units						49
Restricted stock units								41

5. Income Taxes

Reconciliations of income taxes for the periods ended September 30 are as follows.

(PPL)
				Three Months				Nine Months
				2015		2014		2015		2014
Federal income tax on Income from Continuing Operations Before
	Income Taxes at statutory tax rate - 35%			$	189	$	214	$	571	$	547
Increase (decrease) due to:
		State income taxes, net of federal income tax benefit			15		13		44		28
		Valuation allowance adjustments (a)					3		8		49
		Impact of lower U.K. income tax rates			(40)		(48)		(138)		(124)
		U.S. income tax on foreign earnings - net of foreign tax credit (b)					26		(1)		47
		Federal and state tax reserve adjustments (c)			(9)				(21)
		Foreign income tax return adjustments							(4)
		Amortization of investment tax credit			(1)		1		(3)		(3)
		Depreciation not normalized			(1)		(3)		(4)		(7)
		Intercompany interest on U.K. financing entities			(4)				(15)		(4)
		Other			(5)		(5)		(5)		1
			Total increase (decrease)		(45)		(13)		(139)		(13)
Total income taxes				$	144	$	201	$	432	$	534

(a) As a result of the spinoff announcement, PPL recorded deferred income tax expense during the three and nine months ended September 30, 2014 to adjust valuation allowances on deferred tax assets primarily for state net operating loss carryforwards that were previously supported by the future earnings of PPL Energy Supply. See Note 8 for additional information on the spinoff.

(b) During the three and nine months ended September 30, 2015, PPL recorded lower income tax expense due to a decrease in taxable dividends.

(c) During the three and nine months ended September 30, 2015, PPL recorded a $9 million tax benefit related to a planned amendment of a prior period tax return.

During the nine months ended September 30, 2015, PPL recorded a $12 million tax benefit to adjust the settled refund amount approved by the Joint Committee of Taxation for the open audit years 1998-2011.

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(PPL Electric)
				Three Months				Nine Months
				2015		2014		2015		2014
Federal income tax on Income Before Income Taxes at statutory
	tax rate - 35%			$	32	$	33	$	112	$	110
Increase (decrease) due to:
		State income taxes, net of federal income tax benefit			7		5		21		17
		Depreciation not normalized			(1)		(2)		(3)		(5)
		Other			(3)		1				(1)
			Total increase (decrease)		3		4		18		11
Total income taxes				$	35	$	37	$	130	$	121

(LKE)
				Three Months				Nine Months
				2015		2014		2015		2014
Federal income tax on Income from Continuing Operations Before
	Income Taxes at statutory tax rate - 35%			$	68	$	51	$	172	$	153
Increase (decrease) due to:
		State income taxes, net of federal income tax benefit			7		6		18		16
		Amortization of investment tax credit			(1)		(1)		(2)		(3)
		Valuation allowance adjustment (a)							8
		Other			(1)		(1)		(2)		(1)
			Total increase (decrease)		5		4		22		12
Total income taxes				$	73	$	55	$	194	$	165

(a) Represents a valuation allowance against tax credits expiring in 2016 and 2017 that are more likely than not to expire before being utilized.

(LG&E)
				Three Months				Nine Months
				2015		2014		2015		2014
Federal income tax on Income Before Income Taxes at statutory
	tax rate - 35%			$	33	$	26	$	83	$	74
Increase (decrease) due to:
		State income taxes, net of federal income tax benefit			4		3		9		8
		Other			(1)		(2)		(1)		(4)
			Total increase (decrease)		3		1		8		4
Total income taxes				$	36	$	27	$	91	$	78

(KU)
				Three Months				Nine Months
				2015		2014		2015		2014
Federal income tax on Income Before Income Taxes at statutory
	tax rate - 35%			$	41	$	32	$	106	$	98
Increase (decrease) due to:
		State income taxes, net of federal income tax benefit			4		3		11		10
		Other			(1)		(1)		(2)		(2)
			Total increase (decrease)		3		2		9		8
Total income taxes				$	44	$	34	$	115	$	106

Unrecognized Tax Benefits (PPL)

Changes to unrecognized tax benefits for the periods ended September 30 are as follows.

		Three Months				Nine Months
		2015		2014		2015		2014
PPL
	Beginning of period	$	5	$	21	$	20	$	22
	Additions based on tax positions of prior years								1
	Reductions based on tax positions of prior years								(2)
	Settlements						(15)
	End of period	$	5	$	21	$	5	$	21

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Other (PPL)

In February 2015, PPL and the IRS Appeals division reached a settlement on the amount of PPL's refund from its open audits for the years 1998 - 2011. In April 2015, PPL was notified that the Joint Committee on Taxation approved PPL's settlement. For the nine months ended September 30, 2015, PPL recorded a tax benefit of $24 million. Of this amount, $12 million is reflected in continuing operations.

6. Utility Rate Regulation

(All Registrants)

The following table provides information about the regulatory assets and liabilities of cost-based rate-regulated utility operations.

		PPL				PPL Electric
		September 30,		December 31,		September 30,		December 31,
		2015		2014		2015		2014
Current Regulatory Assets:
	Environmental cost recovery	$	19	$	5
	Gas supply clause		1		15
	Transmission service charge		7		6	$	7	$	6
	Other		10		11		3		6
Total current regulatory assets (a)		$	37	$	37	$	10	$	12
Noncurrent Regulatory Assets:
	Defined benefit plans (b)	$	734	$	720	$	411	$	372
	Taxes recoverable through future rates		323		316		323		316
	Storm costs		101		124		34		46
	Unamortized loss on debt		70		77		44		49
	Interest rate swaps (c)		146		122
	Accumulated cost of removal of utility plant		130		114		130		114
	AROs		109		79
	Other		14		10
Total noncurrent regulatory assets		$	1,627	$	1,562	$	942	$	897
Current Regulatory Liabilities:
	Generation supply charge	$	41	$	28	$	41	$	28
	Demand side management		12		2
	Gas supply clause		9		6
	Transmission formula rate		61		42		61		42
	Storm damage expense		13		3		13		3
	Other		15		10		5		3
Total current regulatory liabilities		$	151	$	91	$	120	$	76
Noncurrent Regulatory Liabilities:
	Accumulated cost of removal of utility plant	$	695	$	693
	Coal contracts (d)		28		59
	Power purchase agreement - OVEC (d)		86		92
	Net deferred tax assets		23		26
	Act 129 compliance rider		25		18	$	25	$	18
	Defined benefit plans		22		16
	Interest rate swaps		82		84
	Other		1		4
Total noncurrent regulatory liabilities		$	962	$	992	$	25	$	18

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			LKE				LG&E				KU
			September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
			2015		2014		2015		2014		2015		2014
Current Regulatory Assets:
	Environmental cost recovery		$	19	$	5	$	10	$	4	$	9	$	1
	Gas supply clause			1		15		1		15
	Fuel adjustment clause					4				2				2
	Other			7		1						7		1
Total current regulatory assets			$	27	$	25	$	11	$	21	$	16	$	4
Noncurrent Regulatory Assets:
	Defined benefit plans (b)		$	323	$	348	$	200	$	215	$	123	$	133
	Storm costs			67		78		37		43		30		35
	Unamortized loss on debt			26		28		17		18		9		10
	Interest rate swaps (c)			146		122		102		89		44		33
	AROs			109		79		38		28		71		51
	Plant retirement costs (e)			6								6
	Other			8		10		2		4		6		6
Total noncurrent regulatory assets			$	685	$	665	$	396	$	397	$	289	$	268
Current Regulatory Liabilities:
	Demand side management		$	12	$	2	$	6	$	1	$	6	$	1
	Gas supply clause			9		6		9		6
	Fuel adjustment clause			8								8
	Gas line tracker					3				3
	Other			2		4						2		4
Total current regulatory liabilities			$	31	$	15	$	15	$	10	$	16	$	5
Noncurrent Regulatory Liabilities:
	Accumulated cost of removal
		of utility plant	$	695	$	693	$	304	$	302	$	391	$	391
	Coal contracts (d)			28		59		12		25		16		34
	Power purchase agreement - OVEC (d)			86		92		59		63		27		29
	Net deferred tax assets			23		26		23		24				2
	Defined benefit plans			22		16						22		16
	Interest rate swaps			82		84		41		42		41		42
	Other			1		4				2		1		2
Total noncurrent regulatory liabilities			$	937	$	974	$	439	$	458	$	498	$	516

(a) For PPL, these amounts are included in "Other current assets" on the Balance Sheets.

(b) Included in 2015 is $4 million for PPL and LKE, $3 million for LG&E and $1 million for KU related to the deferred recovery of the difference between the pension cost calculated in accordance with LG&E and KU's pension accounting policy and pension cost using a 15 year amortization period for actuarial gains and losses as provided in the June 30, 2015 rate case settlement. See Note 9 and "Kentucky Activities - Rate Case Proceedings" below for additional information.

(c) Amounts include net settlements related to forward-starting interest rate swaps that were terminated in September 2015 and are included in "Cash Flows from Operating Activities" on the Statements of Cash Flows. See Note 14 for additional information.

(d) These liabilities were recorded as offsets to certain intangible assets that were recorded at fair value upon the acquisition of LKE by PPL.

(e) The June 30, 2015 rate case settlement provided for deferred recovery of costs associated with Green River's coal-fired generating unit retirements. These costs include inventory write-downs and separation benefits and will be amortized over three years.

Regulatory Matters

U.K. Activities (PPL)

RIIO-ED1

On April 1, 2015, the RIIO-ED1 eight-year price control period commenced for WPD's four DNOs. See "Item 1. Business - Segment Information - U. K. Regulated Segment" of PPL's 2014 Form 10-K for additional information on RIIO-ED1.

Ofgem Review of Line Loss Calculation

In March 2014, Ofgem issued its final decision on the DPCR4 line loss incentives and penalties mechanism. As a result, during the first quarter of 2014 WPD increased its liability by $65 million for over-recovery of line losses with a reduction to "Operating Revenues" on the Statement of Income. WPD began refunding the liability to customers on April 1, 2015 and will continue through March 31, 2019. The liability at September 30, 2015 was $75 million.

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Kentucky Activities (PPL, LKE, LG&E and KU)

Rate Case Proceedings

On June 30, 2015, the KPSC approved a rate case settlement agreement providing for increases in the annual revenue requirements associated with KU base electricity rates of $125 million and LG&E base gas rates of $7 million.  The annual revenue requirement associated with base electricity rates at LG&E was not changed.  Although the settlement did not establish a specific return on equity with respect to the base rates, an authorized 10% return on equity will be utilized in the ECR and GLT mechanisms.  The settlement agreement provides for deferred recovery of costs associated with Green River Units 3 and 4 through their retirement.  The new regulatory asset will be amortized over three years. The settlement also provides regulatory asset treatment for the difference between pension expense calculated in accordance with LG&E and KU's pension accounting policy and pension expense using a 15 year amortization period for actuarial gains and losses. The new rates and all elements of the settlement became effective July 1, 2015.

KPSC Landfill Proceedings

On May 22, 2015, LG&E and KU filed an application with the KPSC for a declaratory order that the existing CPCN and ECR approvals regarding the initial phases of construction and rate recovery of the landfill for management of CCRs at the Trimble County Station remain in effect. The current design of the proposed landfill provides for construction in substantially the same location as originally proposed with approximately the same storage capacity and expected useful life. On May 20, 2015, the owner of an underground limestone mine filed a complaint with the KPSC requesting it to revoke the CPCN for the Trimble County landfill and limit recovery of costs for the Ghent Station landfill on the grounds that, as a result of cost increases, the proposed landfill no longer constitutes the least cost alternative for CCR management. The KPSC has initiated its own investigation, consolidated the proceedings, and ordered an accelerated procedural schedule. The KPSC conducted a hearing on the matter in September 2015 and LG&E and KU are awaiting a ruling. Although the companies continue to believe that the landfills at the Trimble County and Ghent stations are the least cost options and the CPCN and prior KPSC determinations provide the necessary regulatory authority to proceed with construction of the landfill and obtain cost recovery, LG&E and KU are currently unable to predict the outcome or impact of the pending proceedings.

Pennsylvania Activities (PPL and PPL Electric)

Act 11 authorizes the PUC to approve two specific ratemaking mechanisms: the use of a fully projected future test year in base rate proceedings and, subject to certain conditions, the use of a Distribution System Improvement Charge (DSIC). Such alternative ratemaking procedures and mechanisms provide opportunity for accelerated cost-recovery and, therefore, are important to PPL Electric as it is in a period of significant capital investment to maintain and enhance the reliability of its delivery system, including the replacement of aging distribution assets.

Rate Case Proceeding

On March 31, 2015, PPL Electric filed a request with the PUC for an increase in its annual distribution revenue requirement of approximately $167.5 million. The application was based on a fully projected future test year of January 1, 2016 through December 31, 2016. On September 3, 2015, PPL Electric filed with the PUC Administrative Law Judge a petition for approval of a settlement agreement under which PPL Electric would be permitted to increase its annual distribution rates by $124 million, effective January 1, 2016. On October 5, 2015, the Administrative Law Judge issued a recommended decision approving the settlement agreement. The PUC is expected to issue its final order in December 2015. PPL Electric cannot predict the outcome of this proceeding.

Distribution System Improvement Charge (DSIC)

On March 31, 2015, PPL Electric filed a petition requesting a waiver of the DSIC cap of 5% of billed revenues and approval to increase the maximum allowable DSIC from 5% to 7.5% for service rendered after January 1, 2016. PPL Electric filed the petition concurrently with its 2015 rate case and the Administrative Law Judge granted PPL Electric's request to consolidate these two proceedings. Under the terms of the settlement agreement discussed above, PPL Electric agreed to withdraw the petition without prejudice to re-file it at a later date.

40

Storm Damage Expense Rider (SDER)

In its December 28, 2012 final rate case order, the PUC directed PPL Electric to file a proposed SDER. The SDER is a reconcilable automatic adjustment clause under which PPL Electric annually will compare actual storm costs to storm costs allowed in base rates and refund or recoup any differences from customers. In March 2013, PPL Electric filed its proposed SDER with the PUC and, as part of that filing, requested recovery of the 2012 qualifying storm costs related to Hurricane Sandy. PPL Electric proposed that the SDER become effective January 1, 2013 at a zero rate with qualifying storm costs incurred in 2013 and the 2012 Hurricane Sandy costs included in rates effective January 1, 2014. In April 2014, the PUC issued a final order approving the SDER with a January 1, 2015 effective date and initially including actual storm costs compared to collections for December 2013 through November 2014. As a result, PPL Electric reduced its regulatory liability by $12 million in March 2014. Also, as part of the April 2014 order, PPL Electric was authorized to recover Hurricane Sandy storm damage costs through the SDER of $29 million over a three-year period beginning January 1, 2015.

On June 20, 2014, the Office of Consumer Advocate (OCA) filed a petition with the Commonwealth Court of Pennsylvania requesting that the Court reverse and remand the April 2014 order permitting PPL Electric to establish the SDER. This matter remains pending before the Commonwealth Court. On January 15, 2015, the PUC issued a final order closing an investigation related to a separate OCA complaint concerning PPL Electric's October 2014 preliminary SDER calculation and modified the effective date of the SDER to February 1, 2015.

Smart Meter Rider (SMR)

Act 129 requires installation of smart meters for new construction, upon the request of consumers and at their cost, or on a depreciation schedule not exceeding 15 years. Under Act 129, EDCs are able to recover the costs of providing smart metering technology. All of PPL Electric's metered customers currently have advanced meters installed at their service locations capable of many of the functions required under Act 129. PPL Electric conducted pilot projects and technical evaluations of its current advanced metering technology and concluded that the current technology does not meet all of the requirements of Act 129. PPL Electric recovered the cost of its pilot programs and evaluations through a cost recovery mechanism, the Smart Meter Rider. In August 2013, PPL Electric filed with the PUC an annual report describing the actions it was taking under its Smart Meter Plan during 2013 and its planned actions for 2014. PPL Electric also submitted revised SMR charges that became effective January 1, 2014. In June 2014, PPL Electric filed its final Smart Meter Plan with the PUC. In that plan, PPL Electric proposes by the end of 2019 to replace all of its current meters with new meters that meet the Act 129 requirements. The total cost of the project is estimated to be approximately $450 million, of which approximately $328 million is expected to be capital. PPL Electric proposes to recover these costs through the SMR which the PUC previously approved for recovery of such costs. On April 30, 2015, the Administrative Law Judge assigned by the PUC to review PPL Electric's Smart Meter Plan issued a recommended decision approving the plan with minor modifications. On September 3, 2015, the PUC entered a final order approving the Smart Meter Plan with minor modifications.

Federal Matters (PPL, LKE and KU)

FERC Wholesale Formula Rates

In September 2013, KU filed an application with the FERC to adjust the formula rate under which KU provides wholesale requirements power sales to 12 municipal customers. Among other changes, the application requests an amended formula whereby KU would charge cost-based rates with a subsequent true-up to actual costs, replacing the current formula which does not include a true-up. KU's application proposed an authorized return on equity of 10.7%. Certain elements, including the new formula rate, became effective April 23, 2014, subject to refund. In April 2014, nine municipalities submitted notices of termination, under the original notice period provisions, to cease taking power under the wholesale requirements contracts. Such terminations are to be effective in 2019, except in the case of one municipality with a 2017 effective date. In addition, a tenth municipality has become a transmission-only customer as of June 2015. In July 2014, KU agreed on settlement terms with the two municipal customers that did not provide termination notices and filed the settlement proposal with the FERC for its approval. In August 2014, the FERC issued an order on the interim settlement agreement allowing the proposed rates to become effective pending a final order. If approved, the settlement agreement will resolve the rate case with respect to these two municipalities, including approval of the formula rate with a true-up provision and authorizing a return on equity of 10% or the return on equity awarded to other parties in this case, whichever is lower. In August 2015, KU filed a partial settlement agreement with the nine terminating municipalities, which, if approved by FERC, would resolve all but one open matter with one municipality, including providing for certain refunds, approving the formula rate with a true-up provision, and authorizing a 10.25% return on equity. A single remaining unresolved issue with one terminating municipality

41

is in FERC litigation proceedings. KU cannot predict the ultimate outcome of these FERC proceedings regarding its wholesale power agreements with the municipalities, but does not currently anticipate significant remaining refunds beyond amounts already recorded.

7. Financing Activities

Credit Arrangements and Short-term Debt

(All Registrants)

The Registrants maintain credit facilities to enhance liquidity, provide credit support and provide a backstop to commercial paper programs. For reporting purposes, on a consolidated basis, the credit facilities and commercial paper programs of PPL Electric, LKE, LG&E and KU also apply to PPL and the credit facilities and commercial paper programs of LG&E and KU also apply to LKE. The amounts borrowed below are recorded as "Short-term debt" on the Balance Sheets. The following credit facilities were in place at:

				September 30, 2015										December 31, 2014
										Letters of						Letters of
										Credit						Credit
										and						and
										Commercial						Commercial
				Expiration						Paper		Unused				Paper
				Date		Capacity		Borrowed		Issued		Capacity		Borrowed		Issued
PPL
U.K.
	WPD plc
		Syndicated Credit Facility			Dec. 2016	£	210	£	127			£	83	£	103
	WPD (South West)
		Syndicated Credit Facility			July 2020		245						245
	WPD (East Midlands)
		Syndicated Credit Facility			July 2020		300		139				161		64
	WPD (West Midlands)
		Syndicated Credit Facility			July 2020		300						300
	Uncommitted Credit Facilities						65			£	4		61			£	5
			Total U.K. Credit Facilities (a)			£	1,120	£	266	£	4	£	850	£	167	£	5
U.S.
	PPL Capital Funding
		Syndicated Credit Facility			July 2019	$	300					$	300
		Syndicated Credit Facility			Nov. 2018		300						300
		Bilateral Credit Facility			Mar. 2016		150			$	20		130			$	21
			Total PPL Capital Funding Credit Facilities			$	750			$	20	$	730			$	21
PPL Electric
	Syndicated Credit Facility				July 2019	$	300			$	69	$	231			$	1
LKE
	Syndicated Credit Facility (b)				Oct. 2018	$	75	$	75			$		$	75
LG&E
	Syndicated Credit Facility				July 2019	$	500					$	500			$	264
KU
	Syndicated Credit Facility				July 2019	$	400					$	400			$	236
	Letter of Credit Facility				Oct. 2017		198			$	198						198
			Total KU Credit Facilities			$	598			$	198	$	400			$	434

(a) WPD plc's amounts borrowed at September 30, 2015 and December 31, 2014 were USD-denominated borrowings of $200 million and $161 million, which bore interest at 1.80% and 1.86%. WPD (East Midlands) amounts borrowed at September 30, 2015 and December 31, 2014 were GBP-denominated borrowings which equated to $214 million and $100 million, which bore interest at 0.91% and 1.00%. At September 30, 2015, the unused capacity under the U.K. credit facilities was $1.3 billion.

(b) LKE's interest rates on outstanding borrowings at September 30, 2015 and December 31, 2014 were 1.45% and 1.67%.

PPL Electric, LG&E and KU maintain commercial paper programs to provide an additional financing source to fund short-term liquidity needs, as necessary. Commercial paper issuances, included in "Short-term debt" on the Balance Sheets, are

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supported by the respective Registrant's Syndicated Credit Facility. The following commercial paper programs were in place at:

		September 30, 2015								December 31, 2014
		Weighted -				Commercial				Weighted -		Commercial
		Average				Paper		Unused		Average		Paper
		Interest Rate		Capacity		Issuances		Capacity		Interest Rate		Issuances
PPL Electric			0.41%	$	300	$	68	$	232
LG&E					350				350		0.42%	$	264
KU					350				350		0.49%		236
	Total			$	1,000	$	68	$	932			$	500

In October 2015, PPL Capital Funding established a commercial paper program for up to $600 million to provide an additional financing source to fund its short-term liquidity needs from time to time. Commercial paper issuances will be supported by PPL Capital Funding's Syndicated Credit Facilities. PPL guarantees PPL Capital Funding's payment obligations on the commercial paper notes.

(LKE)

See Note 11 for discussion of intercompany borrowings.

Long-term Debt

(PPL, LKE and LG&E)

In September 2015, LG&E issued $300 million of 3.30% First Mortgage Bonds due 2025 and $250 million of 4.375% First Mortgage Bonds due 2045. LG&E received proceeds of $298 million and $248 million, net of discounts and underwriting fees, which were used to repay short-term debt and additionally will be used for the repayment of First Mortgage Bonds maturing in November 2015, and for general corporate purposes.

(PPL, LKE and KU)

In September 2015, KU issued $250 million of 3.30% First Mortgage Bonds due 2025 and $250 million of 4.375% First Mortgage Bonds due 2045. KU received proceeds of $248 million for each issuance, net of discounts and underwriting fees, which were used to repay short-term debt and additionally will be used for the repayment of First Mortgage Bonds maturing in November 2015, and for general corporate purposes.

(PPL and PPL Electric)

In October 2015, PPL Electric issued $350 million of 4.150% First Mortgage Bonds due 2045. PPL Electric received proceeds of $345 million, net of a discount and underwriting fees, which will be used to repay short-term debt and for general corporate purposes.

(PPL)

ATM Program

In February 2015, PPL entered into two separate equity distribution agreements, pursuant to which PPL may sell, from time to time, up to an aggregate of $500 million of its common stock. For the periods ended September 30, 2015, PPL issued the following:

	Three Months		Nine Months
Number of shares		435,800		857,500
Average share price	$	32.95	$	33.33
Net proceeds		14		28

Distributions

In August 2015, PPL declared its increased quarterly common stock dividend, payable October 1, 2015, at 37.75 cents per share (equivalent to $1.51 per annum). Future dividends, declared at the discretion of the Board of Directors, will depend

43

upon future earnings, cash flows, financial and legal requirements and other factors. See Note 8 for information regarding the June 1, 2015 distribution to PPL's shareowners of a newly formed entity, Holdco, which at closing owned all of the membership interests of PPL Energy Supply and all of the common stock of Talen Energy.

8. Acquisitions, Development and Divestitures

(All Registrants)

The Registrants from time to time evaluate opportunities for potential acquisitions, divestitures and development projects. Development projects are reexamined based on market conditions and other factors to determine whether to proceed with, modify or terminate the projects. Any resulting transactions may impact future financial results. See Note 8 in the 2014 Form 10-K for additional information.

(PPL)

Discontinued Operations

Spinoff of PPL Energy Supply

In June 2014, PPL and PPL Energy Supply executed definitive agreements with affiliates of Riverstone to spin off PPL Energy Supply and immediately combine it with Riverstone's competitive power generation businesses to form a new, stand-alone, publicly traded company named Talen Energy. The transaction was subject to customary closing conditions, including receipt of regulatory approvals from the NRC, FERC, DOJ and PUC, all of which were received by mid-April 2015. On April 29, 2015, PPL's Board of Directors declared the June 1, 2015 distribution to PPL's shareowners of record on May 20, 2015 of a newly formed entity, Holdco, which at closing owned all of the membership interests of PPL Energy Supply and all of the common stock of Talen Energy.

Immediately following the spinoff on June 1, 2015, Holdco merged with a special purpose subsidiary of Talen Energy, with Holdco continuing as the surviving company to the merger and as a wholly owned subsidiary of Talen Energy and the sole owner of PPL Energy Supply. Substantially contemporaneous with the spinoff and merger, RJS Power was contributed by its owners to become a subsidiary of Talen Energy. PPL shareowners received approximately 0.1249 shares of Talen Energy common stock for each share of PPL common stock they owned on May 20, 2015. Following completion of these transactions, PPL shareowners owned 65% of Talen Energy and affiliates of Riverstone owned 35%. The spinoff had no effect on the number of PPL common shares owned by PPL shareowners or the number of shares of PPL common stock outstanding. The transaction is intended to be tax-free to PPL and its shareowners for U.S. federal income tax purposes.

PPL has no continuing ownership interest in, control of, or affiliation with Talen Energy and Talen Energy Supply (formerly PPL Energy Supply).

Loss on Spinoff

In conjunction with the accounting for the spinoff, PPL evaluated whether the fair value of the Supply segment's net assets was less than the carrying value as of the June 1, 2015 spinoff date.

PPL considered several valuation methodologies to derive a fair value estimate of its Supply segment at the spinoff date. These methodologies included considering the closing "when-issued" Talen Energy market value on June 1, 2015 (the spinoff date), adjusted for the proportional share of the equity value attributable to the Supply segment, as well as, the valuation methods consistently used in PPL's goodwill impairment assessments - an income approach using a discounted cash flow analysis of the Supply segment and an alternative market approach considering market multiples of comparable companies.

Although the market value of Talen Energy approach utilized the most observable inputs of the three approaches, PPL considered certain limitations of the "when-issued" trading market for the spinoff transaction including the short trading duration, lack of liquidity in the market and anticipated initial Talen stock ownership base selling pressure, among other factors, and concluded that these factors limit this input being solely determinative of the fair value of the Supply segment. As such, PPL also considered the other valuation approaches in estimating the overall fair value, but ultimately assigned the highest weighting to the Talen Energy market value approach.

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The following table summarizes PPL's fair value analysis:

		Weighted
		Fair Value
Approach	Weighting	(in billions)
Talen Energy Market Value	50%	$	1.4
Income/Discounted Cash Flow	30%		1.1
Alternative Market (Comparable Company)	20%		0.7
Estimated Fair Value		$	3.2

A key assumption included in the fair value estimate is the application of a control premium of 25% in the two market approaches. PPL concluded it was appropriate to apply a control premium in these approaches as the goodwill impairment testing guidance was followed in determining the estimated fair value of the Supply segment which has historically been a reporting unit for PPL. This guidance provides that the market price of an individual security (and thus the market capitalization of a reporting unit with publically traded equity securities) may not be representative of the fair value of the reporting unit. This guidance also indicates that substantial value may arise to a controlling shareholder from the ability to take advantage of synergies and other benefits that arise from control over another entity, and that the market price of a Company's individual share of stock does not reflect this additional value to a controlling shareholder. Therefore, the quoted market price need not be the sole measurement basis for determining the fair value, and including a control premium is appropriate in measuring the fair value of a reporting unit.

In determining the control premium, PPL reviewed premiums received during the last five years in market sales transactions obtained from observable independent power producer and hybrid utility transactions greater than $1 billion. Premiums for these transactions ranged from 5% to 42% with a median of approximately 25%. Given these metrics, PPL concluded a control premium of 25% to be reasonable for both of the market valuation approaches used.

Assumptions used in the discounted cash flow analysis included forward energy prices, forecasted generation, and forecasted operation and maintenance expenditures that were consistent with assumptions used in the Energy Supply portion of the recent Talen Energy business planning process and a market participant discount rate.

Using these methodologies and weightings, PPL determined the estimated fair value of the Supply segment (classified as Level 3) was below its carrying value of $4.1 billion and recorded a loss on the spinoff of $879 million in the second quarter of 2015, which is reflected in discontinued operations and is nondeductible for tax purposes. This amount served to reduce the basis of the net assets accounted for as a dividend at the June 1, 2015 spinoff date.

Costs of Spinoff

Following the announcement of the transaction to form Talen Energy, efforts were initiated to identify the appropriate staffing for Talen Energy and for PPL and its subsidiaries following completion of the spinoff.  Organizational plans were substantially completed in 2014. The new organizational plans identified the need to resize and restructure the organizations and as a result, in 2014, estimated charges for employee separation benefits were recorded. See Note 8 in the 2014 Form 10-K for additional information. The separation benefits include cash severance compensation, lump sum COBRA reimbursement payments and outplacement services.  Most separations and payment of separation benefits are expected to be completed by the end of 2015. At September 30, 2015 and December 31, 2014, the recorded liabilities related to the separation benefits were $11 million and $21 million, which are included in "Other current liabilities" on the Balance Sheets.

Additional employee-related costs incurred primarily include accelerated stock-based compensation and prorated performance-based cash incentive and stock-based compensation awards, primarily for PPL Energy Supply employees and for PPL Services employees who became PPL Energy Supply employees in connection with the transaction. PPL Energy Supply recognized $24 million of these costs at the spinoff closing date, which are reflected in discontinued operations.

As the vesting for all PPL Energy Supply employees was accelerated and all remaining unrecognized compensation expense accelerated concurrently with the spinoff, PPL does not expect to recognize significant future compensation costs for equity awards held by former PPL Energy Supply employees. PPL's future stock-based compensation expense will not be significantly impacted by equity award adjustments that occurred as a result of the spinoff. Stock-based compensation expense recognized in future periods will correspond to the unrecognized compensation expense as of the date of the spinoff, which reflects the unamortized balance of the original grant date fair value of the equity awards held by PPL employees.

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PPL recorded $44 million of third-party costs related to this transaction during the nine months ended September 30, 2015. Of these costs, $31 million were primarily for bank advisory, legal and accounting fees to facilitate the transaction, and are reflected in discontinued operations. An additional $13 million of consulting and other costs were incurred during the nine months ended September 30, 2015, related to the formation of the Talen Energy organization and to reconfigure the remaining PPL service functions. These costs are primarily recorded in "Other operation and maintenance" on the Statement of Income. No significant additional third-party costs are expected to be incurred. PPL recorded $5 million and $21 million of third-party costs related to this transaction during the three and nine months ended September 30, 2014.

At the close of the transaction, $72 million ($42 million after-tax) of cash flow hedges, primarily unamortized losses on PPL interest rate swaps recorded in AOCI and designated as cash flow hedges of PPL Energy Supply's future interest payments, were reclassified into earnings and reflected in discontinued operations.

As a result of the spinoff announcement in June 2014, PPL recorded $3 million and $49 million of deferred income tax expense during the three and nine months ended September 30, 2014, to adjust valuation allowances on deferred tax assets primarily for state net operating loss carryforwards that were previously supported by the future earnings of PPL Energy Supply.

Continuing Involvement

As a result of the spinoff, PPL and PPL Energy Supply entered into a Transition Services Agreement (TSA) that terminates no later than two years from the spinoff date. The TSA sets forth the terms and conditions for PPL and Talen Energy to provide certain transition services to one another. PPL will provide Talen Energy certain information technology, financial and accounting, human resource and other specified services. For the three and nine months ended September 30, 2015, the amounts PPL billed Talen Energy for these services were $11 million and $14 million. In general, the fees for the transition services allow the provider to recover its cost of the services, including overheads, but without margin or profit.

Additionally, prior to the spinoff, through the annual competitive solicitation process, PPL EnergyPlus was awarded supply contracts for a portion of the PLR generation supply for PPL Electric, which were retained by Talen Energy Marketing as part of the spinoff transaction. PPL Electric's supply contracts with Talen Energy Marketing extend through December 2015. The energy purchases were previously included in PPL Electric's Statements of Income as "Energy purchases from affiliate" but were eliminated in PPL's Consolidated Statements of Income.

Subsequent to the spinoff, PPL Electric's energy purchases from Talen Energy Marketing were not significant and are no longer considered affiliate transactions.

Summarized Results of Discontinued Operations

The operations of the Supply segment are included in "Income (Loss) from Discontinued Operations (net of income taxes)" on the Statements of Income. Following are the components of Discontinued Operations in the Statements of Income for the periods ended September 30:

	Three Months				Nine Months
	2015		2014		2015		2014
Operating revenues			$	1,623	$	1,427	$	1,741
Operating expenses				1,429		1,328		1,593
Other Income (Expense) - net				8		(22)		6
Interest Expense (a)				47		150		145
Income (loss) before income taxes				155		(73)		9
Income tax expense (benefit)	$	3		68		(37)		(4)
Loss on spinoff						(879)
Income (Loss) from Discontinued Operations (net of income taxes)	$	(3)	$	87	$	(915)	$	13

(a) Includes interest associated with the Supply Segment with no additional allocation as the Supply segment was sufficiently capitalized.

Summarized Assets and Liabilities of Discontinued Operations

The assets and liabilities of PPL's Supply segment for all periods prior to the spinoff are included in "Current assets of discontinued operations", "Noncurrent assets of discontinued operations", "Current liabilities of discontinued operations" and "Noncurrent liabilities of discontinued operations" on PPL's Balance Sheet. Net assets, after recognition of the loss on

46

spinoff, of $3.2 billion were distributed to PPL shareowners on June 1, 2015, as a result of the completion of the spinoff of PPL Energy Supply. The following major classes of assets and liabilities were distributed and removed from PPL's Balance Sheet on June 1, 2015. Additionally, the following major classes of assets and liabilities were reclassified to discontinued operations as of December 31, 2014:

			Discontinued
	Distribution on		Operations at
	June 1,		December 31,
	2015		2014
Cash and cash equivalents (a)	$	371	$	352
Restricted cash and cash equivalents		156		176
Accounts receivable and unbilled revenues		325		504
Fuels, materials and supplies		415		455
Price risk management assets		784		1,079
Other current assets		65		34
Total Current Assets		2,116		2,600
Investments		999		980
PP&E, net		6,384		6,428
Goodwill		338		338
Other intangibles		260		257
Price risk management assets		244		239
Other noncurrent assets		78		75
Total Noncurrent Assets		8,303		8,317
Total assets	$	10,419	$	10,917
Short-term debt and long-term debt due within one year	$	885	$	1,165
Accounts payable		252		361
Price risk management liabilities		763		1,024
Other current liabilities		229		225
Total Current Liabilities		2,129		2,775
Long-term debt (excluding current portion)		1,932		1,683
Deferred income taxes		1,259		1,223
Price risk management liabilities		206		193
Accrued pension obligations		244		299
Asset retirement obligations		443		415
Other deferred credits and noncurrent liabilities		103		150
Total Noncurrent Liabilities		4,187		3,963
Total liabilities	$	6,316	$	6,738
Adjustment for loss on spinoff		879
Net assets distributed	$	3,224

(a) The distribution of PPL Energy Supply's cash and cash equivalents at June 1, 2015 is included in "Net cash provided by (used in) financing activities - discontinued operations" on the Statement of Cash Flows for the nine months ended September 30, 2015.

Montana Hydro Sale

In November 2014, PPL Montana completed the sale to NorthWestern of 633 MW of hydroelectric generating facilities located in Montana for approximately $900 million in cash. The proceeds from the sale remained with PPL and did not transfer to Talen Energy as a result of the spinoff of PPL Energy Supply. The sale included 11 hydroelectric power facilities and related assets, included in the Supply segment.

As the Montana hydroelectric power facilities were previously reported as a component of PPL Energy Supply and the Supply Segment, the components of discontinued operations for these facilities contained in the Statements of Income are included in the disclosure above.

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Development

Future Capacity Needs (PPL, LKE, LG&E and KU)

The Cane Run Unit 7 NGCC was put into commercial operation on June 19, 2015. As a result and to meet more stringent EPA regulations, LG&E retired one coal-fired generating unit at the Cane Run plant in March 2015 and retired the remaining two coal-fired generating units at the plant in June 2015. Additionally, KU retired the remaining two coal-fired generating units at the Green River plant on September 30, 2015. LG&E and KU incurred costs of $11 million and $6 million, respectively, directly related to these retirements including inventory write-downs and separation benefits. However, there were no gains or losses on the retirement of these units. See Note 6 for more information related to the regulatory recovery of the costs associated with the retirement of the Green River units.

In October 2013, LG&E and KU announced plans for a 10 MW solar generation facility to be operational in 2016 at a cost of approximately $36 million. In December 2014, a final order was issued by the KPSC approving the request to construct the solar generating facility at E.W. Brown.

9. Defined Benefits

(PPL)

PPL performed a remeasurement of the assets and the obligations for the PPL Retirement Plan and PPL Postretirement Benefit plans as of May 31, 2015 to allow for separation of those plans for PPL and Talen Energy as required in accordance with the spinoff transaction agreements. The net pension obligations for all active PPL Energy Supply employees and for individuals who terminated employment from PPL Energy Supply on or after July 1, 2000 were distributed and removed from PPL's Balance Sheet. The net other postretirement benefit obligations for all active PPL Energy Supply employees were distributed and removed from PPL's Balance Sheet. In addition, the net nonqualified pension plan obligations for all PPL Energy Supply active and inactive employees were retained by PPL. As a result, PPL distributed and removed from its Balance Sheet $244 million of net accrued pension obligations and $7 million of other postretirement benefit obligations. See Note 8 for additional information on the spinoff of PPL Energy Supply.

(PPL, LKE and LG&E)

Certain net periodic defined benefit costs are applied to accounts that are further distributed between capital and expense, including certain costs allocated to applicable subsidiaries for plans sponsored by PPL Services and LKE. Additionally, as a result of the LG&E and KU rate case settlement that became effective July 1, 2015, the difference between pension cost calculated in accordance with LG&E and KU's pension accounting policy and pension cost calculated using a 15 year amortization period for actuarial gains and losses is recorded as a regulatory asset. See Note 6 for further information. Following are the net periodic defined benefit costs (credits) of the plans sponsored by PPL and its subsidiaries, LKE and its subsidiaries and LG&E for the periods ended September 30:

			Pension Benefits
			Three Months								Nine Months
			U.S.				U.K.				U.S.				U.K.
			2015		2014 (c)		2015		2014		2015 (b)		2014 (c)		2015		2014
PPL
Service cost			$	20	$	24	$	21	$	18	$	76	$	73	$	60	$	54
Interest cost				42		56		80		90		152		168		236		268
Expected return on plan assets				(56)		(72)		(133)		(133)		(201)		(216)		(393)		(395)
Amortization of:
		Prior service cost		1		5						5		15
		Actuarial (gain) loss		18		8		39		34		65		22		118		100
Net periodic defined benefit
	costs (credits) prior to
	termination benefits			25		21		7		9		97		62		21		27
Termination benefits (a)						(7)								13
Net periodic defined benefit
	costs (credits)		$	25	$	14	$	7	$	9	$	97	$	75	$	21	$	27

48

		Pension Benefits
		Three Months				Nine Months
		2015		2014		2015		2014
LKE
Service cost		$	7	$	5	$	20	$	16
Interest cost			17		17		51		50
Expected return on plan assets			(22)		(21)		(66)		(62)
Amortization of:
	Prior service cost		1		1		5		3
	Actuarial (gain) loss		9		4		26		10
Net periodic defined benefit costs (credits)		$	12	$	6	$	36	$	17
LG&E
Service cost						$	1	$	1
Interest cost		$	3	$	4		10		11
Expected return on plan assets			(5)		(4)		(15)		(14)
Amortization of:
	Prior service cost		1		1		2		2
	Actuarial (gain) loss		3		1		9		4
Net periodic defined benefit costs (credits)		$	2	$	2	$	7	$	4

(a) The three and nine months ended September 30, 2014 include termination benefits of ($2) million and $2 million for PPL Electric. The remaining ($5) million and $11 million relate to PPL Energy Supply and are reflected in discontinued operations.

(b) For the nine months ended September 30, 2015, the total net periodic defined benefit cost includes $18 million reflected in discontinued operations related to costs allocated from PPL's plans to PPL Energy Supply prior to the spinoff.

(c) For the three and nine months ended September 30, 2014, the total net periodic defined benefit cost includes $1 million and $29 million reflected in discontinued operations related to costs allocated from PPL's plans to PPL Energy Supply.

		Other Postretirement Benefits
		Three Months				Nine Months
		2015		2014		2015		2014
PPL
Service cost		$	2	$	3	$	9	$	9
Interest cost			6		7		20		23
Expected return on plan assets			(6)		(6)		(20)		(19)
Net periodic defined benefit costs (credits)		$	2	$	4	$	9	$	13
LKE
Service cost		$	1	$	1	$	4	$	3
Interest cost			2		2		7		7
Expected return on plan assets			(1)		(1)		(4)		(4)
Amortization of:
	Prior service cost		1		1		2		2
Net periodic defined benefit costs (credits)		$	3	$	3	$	9	$	8

(PPL Electric, LG&E and KU)

In addition to the specific plans it sponsors, LG&E is allocated costs of defined benefit plans sponsored by LKE based on its participation in those plans, which management believes are reasonable. PPL Electric and KU do not directly sponsor any defined benefit plans. PPL Electric is allocated costs of defined benefit plans sponsored by PPL Services and KU is allocated costs of defined benefit plans sponsored by LKE based on their participation in those plans, which management believes are reasonable. For the periods ended September 30, PPL Services allocated the following net periodic defined benefit costs to PPL Electric, and LKE allocated the following net periodic defined benefit costs to LG&E and KU.

	Three Months				Nine Months
	2015		2014		2015		2014
PPL Electric (a)	$	8	$	3	$	24	$	18

LG&E	3	2	10	6
KU	4	2	13	6

(a) The three and nine months ended September 30, 2014 include ($2) million and $2 million of termination benefits for PPL Electric related to a one-time voluntary retirement window offered to certain bargaining unit employees.

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10. Commitments and Contingencies

(PPL)

All commitments, contingencies and guarantees associated with PPL Energy Supply and its subsidiaries were retained by Talen Energy Supply and its subsidiaries at the spinoff date without recourse to PPL.

Legal Matters

(All Registrants)

PPL and its subsidiaries are involved in legal proceedings, claims and litigation in the ordinary course of business. PPL and its subsidiaries cannot predict the outcome of such matters, or whether such matters may result in material liabilities, unless otherwise noted.

WKE Indemnification (PPL and LKE)

See footnote (e) to the table in "Guarantees and Other Assurances" below for information on an LKE indemnity relating to its former WKE lease, including related legal proceedings.

(PPL, LKE, LG&E and KU)

Cane Run Environmental Claims

In December 2013, six residents, on behalf of themselves and others similarly situated, filed a class action complaint against LG&E and PPL in the U.S. District Court for the Western District of Kentucky alleging violations of the Clean Air Act and RCRA. In addition, these plaintiffs assert common law claims of nuisance, trespass and negligence. These plaintiffs seek injunctive relief and civil penalties, plus costs and attorney fees, for the alleged statutory violations. Under the common law claims, these plaintiffs seek monetary compensation and punitive damages for property damage and diminished property values for a class consisting of residents within four miles of the plant. In their individual capacities, these plaintiffs seek compensation for alleged adverse health effects. In response to a motion to dismiss filed by PPL and LG&E, in July 2014, the court dismissed the plaintiffs' RCRA claims and all but one Clean Air Act claim, but declined to dismiss their common law tort claims. Upon motion of LG&E and PPL, the district court certified for appellate review the issue of whether the state common law claims are preempted by federal statute. In December 2014, the U.S. Court of Appeals for the Sixth Circuit issued an order granting appellate review regarding the above matter and such issues as may appropriately be presented by the parties and determined by the court. Oral argument before the Sixth Circuit was held in August 2015, but a ruling has not yet been issued by the Court. PPL, LKE and LG&E cannot predict the outcome of this matter. LG&E retired one coal-fired unit at the Cane Run plant in March 2015 and the remaining two coal-fired units at the plant in June 2015.

Mill Creek Environmental Claims

In May 2014, the Sierra Club filed a citizen suit against LG&E in the U.S. District Court for the Western District of Kentucky for alleged violations of the Clean Water Act. The Sierra Club alleges that various discharges at the Mill Creek plant constitute violations of the plant's water discharge permit. The Sierra Club seeks civil penalties, injunctive relief, costs and attorney's fees. In August 2015, the Court denied cross-motions for summary judgment filed by both parties and directed the parties to proceed with discovery. PPL, LKE and LG&E cannot predict the outcome of this matter or the potential impact on the operations of the Mill Creek plant but believe the plant is operating in compliance with the permits.

E.W. Brown Environmental Claims

In October 2015, KU received a notice of intent from Earthjustice and the Sierra Club informing certain federal and state agencies of the Sierra Club's intent to file a citizen suit, following expiration of the mandatory 60-day notification period, for alleged violations of the Clean Water Act. The claimant alleges discharges at the E.W. Brown plant in violation of applicable rules and the plant's water discharge permit. The claimant asserts that, unless the alleged discharges are promptly brought into compliance, it intends to seek civil penalties, injunctive relief and attorney's fees. PPL, LKE and KU cannot predict the outcome of this matter or the potential impact on the operations of the E. W. Brown plant.

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Regulatory Issues (All Registrants)

See Note 6 for information on regulatory matters related to utility rate regulation.

Electricity - Reliability Standards

The NERC is responsible for establishing and enforcing mandatory reliability standards (Reliability Standards) regarding the bulk power system. The FERC oversees this process and independently enforces the Reliability Standards.

The Reliability Standards have the force and effect of law and apply to certain users of the bulk power electricity system, including electric utility companies, generators and marketers. Under the Federal Power Act, the FERC may assess civil penalties of up to $1 million per day, per violation, for certain violations.

PPL, LG&E, KU and PPL Electric monitor their compliance with the Reliability Standards and continue to self-report or self-log potential violations of certain applicable reliability requirements and submit accompanying mitigation plans, as required. The resolution of a small number of potential violations is pending. Any Regional Reliability Entity (including RFC or SERC) determination concerning the resolution of violations of the Reliability Standards remains subject to the approval of the NERC and the FERC.

In the course of implementing their programs to ensure compliance with the Reliability Standards by those PPL affiliates subject to the standards, certain other instances of potential non-compliance may be identified from time to time. The Registrants cannot predict the outcome of these matters, and cannot estimate a range of reasonably possible losses, if any.

In October 2012, the FERC initiated its consideration of proposed changes to Reliability Standards to address the impacts of geomagnetic disturbances on the reliable operation of the bulk-power system, which might, among other things, lead to a requirement to install equipment that blocks geomagnetically induced currents on implicated transformers. In May 2013, FERC issued Order No. 779, requiring NERC to submit two types of Reliability Standards for FERC's approval. The first type would require certain owners and operators of the nation's electricity infrastructure, such as the Registrants, to develop and implement operational procedures to mitigate the effects of geomagnetic disturbances on the bulk-power system. This NERC-proposed standard was approved by FERC in June 2014. These requirements do not impose significant costs on the Registrants. The second type is to require owners and operators of the bulk-power system to assess certain geomagnetic disturbance events and develop and implement plans to protect the bulk-power system from those events. FERC issued a notice of proposed rulemaking on this second type of Reliability Standard on May 14, 2015. The Registrants do not presently anticipate significant costs to comply with the requirements if finalized as proposed.

Environmental Matters - Domestic

(All Registrants)

Due to the environmental issues discussed below or other environmental matters, it may be necessary for the Registrants to modify, curtail, replace or cease operation of certain facilities or performance of certain operations to comply with statutes, regulations and other requirements of regulatory bodies or courts. In addition, legal challenges to new environmental permits or rules add to the uncertainty of estimating the future cost of these permits and rules.

LG&E and KU are entitled to recover, through the ECR mechanism, certain costs of complying with the Clean Air Act, as amended, and those federal, state or local environmental requirements applicable to coal combustion wastes and by-products from facilities that generate electricity from coal in accordance with approved compliance plans. Costs not covered by the ECR mechanism for LG&E and KU and all such costs for PPL Electric are subject to rate recovery before the companies' respective state regulatory authorities, or the FERC, if applicable. Because PPL Electric does not own any generating plants, its exposure to related environmental compliance costs is reduced. PPL, PPL Electric, LKE, LG&E and KU can provide no assurances as to the ultimate outcome of future environmental or rate proceedings before regulatory authorities.

(PPL, LKE, LG&E and KU)

Air

The Clean Air Act, which regulates air pollutants from mobile and stationary sources, has a significant impact on the operation of fossil fuel plants. The Clean Air Act requires the EPA periodically to review and establish concentration levels

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in the ambient air for six criteria pollutants to protect public health and welfare. These concentration levels are known as NAAQS. The six criteria pollutants are carbon monoxide, lead, nitrogen dioxide, ozone, particulate matter and SO₂.

Federal environmental regulations of these criteria pollutants require states to adopt implementation plans, known as SIPs, for certain pollutants, which detail how the state will attain the standards that are mandated by the relevant law or regulation. Each state identifies the areas within its boundaries that meet the NAAQS (attainment areas) and those that do not (non-attainment areas), and must develop a SIP both to bring non-attainment areas into compliance with the NAAQS and to maintain good air quality in attainment areas. In addition, for attainment of ozone and fine particulates standards, states in the eastern portion of the country, including Kentucky, are subject to a regional program developed by the EPA known as the Cross-State Air Pollution Rule. The NAAQS, future revisions to the NAAQS and SIPs implementing them, or future revisions to regional programs, may require installation of additional pollution controls, the costs of which PPL, LKE, LG&E and KU believe are subject to cost recovery.

Although PPL, LKE, LG&E and KU do not currently anticipate significant costs to comply with these programs, changes in market or operating conditions could result in different costs than anticipated.

National Ambient Air Quality Standards (NAAQS)

Under the Clean Air Act, the EPA is required to reassess the NAAQS for certain air pollutants on a five-year schedule. In 2008, the EPA revised the NAAQS for ozone and proposed to further strengthen the standard in November 2014. The EPA released a new ozone standard on October 1, 2015. The states and EPA will determine attainment with the new ozone standard through review of relevant ambient air monitoring data, with attainment or nonattainment designations scheduled no later than October 2017. States are also obligated to address interstate transport issues associated with new ozone standards through the establishment of "good neighbor" state implementation plans for those states that are found to contribute significantly to another states' non-attainment. States that are not in the ozone transport region, including Kentucky, are working together to evaluate further nitrogen oxide reductions from fossil-fueled plants with SCRs. The nature and timing of any additional reductions resulting from these evaluations cannot be predicted at this time.

In 2010, the EPA finalized revised NAAQS for sulfur dioxide and required states to identify areas that meet those standards and areas that are in "non-attainment". In July 2013, the EPA finalized non-attainment designations for parts of the country, including part of Jefferson County in Kentucky. Attainment must be achieved by 2018. PPL, LKE, LG&E and KU anticipate that certain previously required compliance measures, such as upgraded or new sulfur dioxide scrubbers at certain plants and the retirement of coal-fired generating units at LG&E's Cane Run plant and KU's Green River and Tyrone plants, will help to achieve compliance with the new sulfur dioxide and ozone standards. If additional reductions are required, the costs could be significant.

Mercury and Air Toxics Standards (MATS)

In February 2012, the EPA finalized the MATS rule requiring reductions of mercury and other hazardous air pollutants from fossil-fuel fired power plants, with an effective date of April 16, 2012. The MATS rule was challenged by industry groups and states and was upheld by the U.S. Court of Appeals for the D.C. Circuit Court (D.C. Circuit Court) in April 2014. A group of states subsequently petitioned the U.S. Supreme Court (Supreme Court) to review this decision and on June 29, 2015, the Supreme Court held that the EPA failed to properly consider costs when deciding to regulate hazardous air emissions from power plants under MATS.  The Court remanded the matter to the D.C. Circuit Court.  EPA's MATS rule remains in effect pending action by the D.C. Circuit Court. It is uncertain whether the D.C. Circuit Court will vacate the MATS rule, remand the rule to the EPA, or require further proceedings or actions. 

LG&E and KU have installed significant controls in connection with the MATS rule and in conjunction with compliance with other environmental requirements, including fabric-filter baghouses, upgraded FGDs or chemical additive systems for which appropriate KPSC authorization and/or ECR treatment has been received. PPL, LKE, LG&E and KU cannot predict the outcome of this matter or the potential impact, if any, on plant operations, rate treatment or future capital or operating needs.

New Source Review (NSR)

The EPA has continued its NSR enforcement efforts targeting coal-fired generating plants. The EPA has asserted that modification of these plants has increased their emissions and, consequently, that they are subject to stringent NSR

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requirements under the Clean Air Act. PPL, LKE, LG&E and KU received various EPA information requests in 2007 and 2009, but have received no further communications from the EPA related to those requests since providing their responses. States and environmental groups also have commenced litigation alleging violations of the NSR regulations by coal-fired generating plants across the nation. PPL, LKE, LG&E and KU cannot predict the outcome of these matters, and cannot estimate the impact, if any.

If LG&E or KU is found to have triggered the applicability of NSR regulations by increasing pollutants beyond allowable thresholds through a plant modification, the company could, among other things, be required to meet substantially more stringent permit limits. The costs to meet such limits, including installation of technology at certain units, could be significant.

Trimble County Unit 2 Air Permit

The Sierra Club and other environmental groups petitioned the Kentucky Environmental and Public Protection Cabinet to overturn the air permit issued for the Trimble County Unit 2 baseload coal-fired generating unit, but the agency upheld the permit in an order issued in September 2007. In response to subsequent petitions by environmental groups, the EPA ordered certain non-material changes to the permit which, in January 2010, were incorporated into a final revised permit issued by the Kentucky Division for Air Quality. In March 2010, the environmental groups petitioned the EPA to object to the revised state permit. Until the EPA issues a final ruling on the pending petition and all available appeals are exhausted, PPL, LKE, LG&E and KU cannot predict the outcome of this matter or the potential impact on plant operations, including increased capital costs, if any.

Climate Change

(All Registrants)

Authority to Regulate Carbon Dioxide Emissions

The EPA issued rules in 2014 regulating carbon dioxide emissions from stationary sources under the NSR and Title V operating permit provisions of the Clean Air Act. The EPA's rules were challenged in court and, in June 2014, the U.S. Supreme Court ruled that the EPA has authority to regulate carbon dioxide emissions under the Clean Air Act but only for stationary sources that would otherwise have been subject to these provisions due to significant increases in emissions of other pollutants. As a result, any new sources or major modifications to an existing GHG source causing a net significant increase in carbon dioxide emissions must comply with permit limits for carbon dioxide, but only if it would otherwise be subject to limits on new or modified sources due to significant increases in other pollutants.

The EPA's Rules under Section 111 of the Clean Air Act

As further described below, in August 2015, the EPA finalized rules imposing greenhouse gas emission standards for both new and existing power plants. The EPA has also issued a proposed federal implementation plan which would apply to any states that fail to submit an acceptable state implementation plan under these rules. The EPA's authority to promulgate these regulations under Section 111 of the Clean Air Act has been challenged in the D.C. Circuit Court by several states and industry groups.

The EPA's rule for new power plants imposes separate emission standards for coal and natural gas units based on the application of different technologies. The coal standard is based on the application of partial carbon capture and sequestration technology, but because this technology is not presently commercially available, the rule effectively precludes the construction of new coal-fired plants. The standard for NGCC power plants is the same as the EPA proposed in 2012 and is not continuously achievable. The preclusion of new coal-fired plants and the compliance difficulties posed for new natural gas-fired plants could have a significant industry-wide impact.

(PPL, LKE, LG&E and KU)

The EPA's Clean Power Plan

The EPA's rule for existing power plants, referred to as the Clean Power Plan, was published in the Federal Register in October 2015. The Rule contains state-specific rate-based and mass-based reduction goals and guidelines for the development, submission and implementation of state implementation plans to achieve the state goals. State-specific goals

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were calculated from 2012 data by applying EPA's broad interpretation and definition of the BSER, resulting in the most stringent targets to be met in 2030, with interim targets to be met beginning in 2022. The EPA believes it has offered some flexibility to the states as to how their compliance plans can be crafted, including the option to use a rate-based approach (limit emissions per megawatt hour) or a mass-based approach (limit total tons of emissions per year), and the option to demonstrate compliance through emissions trading and multi-state collaborations. Under the rate-based approach, Kentucky would need to make a 41% reduction from its 2012 emissions rate and under a mass-based approach it would need to make a 36% reduction. These reductions are significantly greater than initially proposed and present significant challenges to the state. If Kentucky fails to develop an approvable implementation plan by September 2016 (with the possibility of an extension until 2018), the EPA will impose a federal implementation plan that could be more stringent than what the state plan might provide. Depending on the provisions of the Kentucky implementation plan, LG&E and KU may need to modify their current portfolio of generating assets during the next decade and/or participate in an allowance trading program. LG&E and KU are participating in the ongoing regulatory processes at the state and federal level in an effort to provide input into the state or federal implementation plan that will govern reductions in Kentucky. PPL, LKE, LG&E and KU cannot predict the outcome of this matter or the potential impact, if any, on plant operations, or future capital or operating needs. PPL, LKE, LG&E and KU believe that the costs, which could be significant, would be subject to cost recovery.

In April 2014, the Kentucky General Assembly passed legislation which limits the measures that the Kentucky Energy and Environment Cabinet may consider in setting performance standards to comply with the EPA's regulations governing GHG emissions from existing sources. The legislation provides that such state GHG performance standards shall be based on emission reductions, efficiency measures, and other improvements available at each power plant, rather than renewable energy, end-use energy efficiency, fuel switching and re-dispatch. These statutory restrictions may make it more difficult for Kentucky to achieve the GHG reduction levels that the EPA has established for Kentucky.

A number of lawsuits have been filed asserting common law claims including nuisance, trespass and negligence against various companies with GHG emitting plants and, although the decided cases to date have not sustained claims brought on the basis of these theories of liability, the law remains unsettled on these claims. In June 2011, the U.S. Supreme Court in the case of AEP v. Connecticut ruled that federal common law claims against five utility companies for allegedly causing a public nuisance as a result of their emissions of GHGs were displaced by the Clean Air Act and regulatory actions of the EPA. In addition, in Comer v. Murphy Oil (Comer case), the U.S. Court of Appeals for the Fifth Circuit (Fifth Circuit) upheld a district court ruling that plaintiffs did not have standing to pursue state common law claims against companies that emit GHGs. The plaintiffs in the Comer case later filed a substantially similar complaint against a larger group of companies which was subsequently dismissed by the U.S. District Court for the Southern District of Mississippi. The lower court's ruling was affirmed by the Fifth Circuit in May 2013. Additional litigation in federal and state courts over such issues is continuing. PPL, LKE, LG&E and KU cannot predict the outcome of these matters.

Water/Waste

Coal Combustion Residuals (CCRs)

On April 17, 2015, the EPA published its final rule regulating CCRs. CCRs include fly ash, bottom ash and sulfur dioxide scrubber wastes. The rule became effective on October 19, 2015. It imposes extensive new requirements, including location restrictions, design and operating standards, groundwater monitoring and corrective action requirements and closure and post-closure care requirements on CCR impoundments and landfills that are located on active power plants and not closed. Under the rule, the EPA will regulate CCRs as non-hazardous under Subtitle D of RCRA and allow beneficial use of CCRs, with some restrictions. This self-implementing rule requires posting of compliance documentation on a publicly accessible website and is enforceable through citizen suits. LG&E's and KU's plants using surface impoundments for management and disposal of CCRs will be most impacted by this rule. The rule's requirements for covered CCR impoundments and landfills include commencement or completion of closure activities generally between three and ten years from certain triggering events. PPL, LKE, LG&E and KU also anticipate incurring capital or operation and maintenance costs prior to that time to address other provisions of the rule, such as groundwater monitoring and disposal facility modifications or closings, or to implement various compliance strategies.

In connection with the final CCR rule, LG&E and KU recorded increases to existing AROs during the three and nine months ending September 30, 2015. See Note 16 for additional information. Further increases to AROs or changes to current capital plans or to operating costs may be required as estimates are refined based on closure developments, groundwater monitoring results, and regulatory or legal proceedings. Costs relating to this rule are subject to rate recovery.

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Trimble County Landfill

In May 2011, LG&E submitted an application for a special waste landfill permit to handle CCRs generated at the Trimble County plant. In May 2013, the Kentucky Division of Waste Management denied the permit application on the grounds that the proposed facility would violate the Kentucky Cave Protection Act. In January 2014, LG&E submitted to the Kentucky Division of Waste Management a landfill permit application for an alternate site adjacent to the plant. LG&E has also applied for other necessary regulatory approvals including a dredge and fill permit from the U.S. Army Corps of Engineers. LG&E and KU have responded to comments on the permit application submitted by EPA and other parties. PPL, LKE, LG&E and KU are unable to determine the potential impact of this matter until all permits are issued and any resulting legal challenges are concluded. See Note 6 for additional information on Kentucky Public Service Commission proceedings relating to the Trimble County Landfill.

Clean Water Act

Regulations under the federal Clean Water Act dictate permitting and mitigation requirements for many of LG&E's and KU's construction projects. Many of those requirements relate to power plant operations, including requirements related to the treatment of pollutants in effluents prior to discharge, the temperature of effluent discharges and the location, design and construction of cooling water intake structures at generating facilities, standards intended to protect aquatic organisms by reducing capture in the screens attached to cooling water intake structures (impingement) at generating facilities and the water volume brought into the facilities (entrainment). The requirements could impose significant costs which are subject to rate recovery.

Effluent Limitations Guidelines (ELGs)

On September 30, 2015, the EPA released its final effluent limitations guidelines for wastewater discharge permits for new and existing steam electric generating facilities. The rule provides strict technology-based discharge limitations for control of pollutants in scrubber wastewater, fly ash and bottom ash transport water, mercury control wastewater, gasification wastewater, and combustion residual leachate. The new guidelines require deployment of additional control technologies providing physical, chemical, and biological treatment of wastewaters. The guidelines also mandate operational changes including "no discharge" requirements for fly ash and bottom ash transport waters and mercury control wastewaters. The implementation date for individual generating stations will be determined by the states on a case-by-case basis according to criteria provided by the EPA, but the requirements of the rule must be fully implemented no later than 2023. It is not currently known how Kentucky intends to integrate the ELGs into its ongoing permit renewal process. LG&E and KU continue to assess the requirements of this complex rule to determine available compliance strategies.   PPL, LKE, LG&E and KU are unable to fully estimate compliance costs or timing at this time although certain preliminary estimates are included in current capital forecasts, for applicable periods. Costs to comply with ELGs or other discharge limits, which are expected to be significant, are subject to rate recovery.

(PPL, LKE and LG&E)

Clean Water Act Section 316(b)

The EPA's final 316(b) rule for existing facilities became effective in October 2014, and regulates cooling water intake structures and their impact on aquatic organisms. States are allowed broad discretion to make site-specific determinations under the rule. The rule requires existing facilities to choose between several options to reduce the impact to aquatic organisms that become trapped against water intake screens (impingement) and to determine the intake structure's impact on aquatic organisms pulled through a plant's cooling water system (entrainment). Plants equipped with closed-cycle cooling, an acceptable option, would likely not incur substantial costs. Once-through systems would likely require additional technology to comply with the rule. Mill Creek Unit 1 is the only unit expected to be impacted. PPL, LKE, and LG&E are evaluating compliance strategies but do not presently expect the compliance costs, which are subject to rate recovery, to be significant.

(All Registrants)

Waters of the United States (WOTUS)

The U.S. Court of Appeals for the Sixth Circuit has issued a stay of EPA's rule on the definition of WOTUS pending the court's review of the rule. The effect of the stay is that the WOTUS rule is not currently in effect anywhere in the United

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States. The ultimate outcome of the court's review of the rule remains uncertain. The Registrants had not expected the rule to have a significant impact on their operations, but were unable to predict the impact of the rule in light of the ongoing litigation, particularly in Pennsylvania where the rule could have resulted in significant project delays and added costs, as permits and other regulatory requirements could have been imposed for many activities not otherwise covered by permitting requirements (including vegetation management for transmission lines and activities affecting storm water conveyances and wetlands).

Other Issues

The EPA is reassessing its polychlorinated biphenyls (PCB) regulations under the Toxic Substance Control Act, which currently allow certain PCB articles to remain in use. In April 2010, the EPA issued an Advanced Notice of Proposed Rulemaking for changes to these regulations. This rulemaking could lead to a phase-out of all or some PCB-containing equipment. The EPA has postponed the release of the revised regulations to March 2016. The Registrants cannot predict at this time the outcome of these proposed EPA regulations and what impact, if any, they would have on their facilities, but the costs could be significant.

(PPL, LKE, LG&E and KU)

In May 2010, the Kentucky Waterways Alliance and other environmental groups filed a petition with the Kentucky Energy and Environment Cabinet (KEEC) challenging the Kentucky Pollutant Discharge Elimination System permit issued in April 2010, which covers water discharges from the Trimble County plant. In November 2010, the KEEC issued a final order upholding the permit which was subsequently appealed by the environmental groups. In September 2013, the Franklin Circuit Court reversed the KEEC order upholding the permit and remanded the permit to the agency for further proceedings. LG&E and the KEEC appealed the order to the Kentucky Court of Appeals. In July 2015, the Court of Appeals upheld the lower court ruling. LG&E and the KEEC have moved for discretionary review by the Kentucky Supreme Court. PPL, LKE, LG&E and KU are unable to predict the outcome of this matter or the potential impact, if any, on plant operations or future capital or operating needs.

Superfund and Other Remediation (All Registrants)

PPL Electric is potentially responsible for costs at several sites listed by the EPA under the federal Superfund program, including the Columbia Gas Plant site, the Metal Bank site and the Brodhead site. Clean-up actions have been or are being undertaken at all of these sites, the costs of which have not been significant to PPL Electric. Should the EPA require different or additional measures in the future, however, or should PPL Electric's share of costs at multi-party sites increase substantially more than currently expected, the costs could be significant.

PPL Electric, LG&E and KU are investigating, responding to agency inquiries, remediating, or have completed the remediation of, several sites that were not addressed under a regulatory program such as Superfund, but for which PPL Electric, LG&E and KU may be liable for remediation. These include a number of former coal gas manufacturing plants in Pennsylvania and Kentucky previously owned or operated or currently owned by predecessors or affiliates of PPL Electric, LG&E and KU. To date, the costs of these sites have not been significant. There are additional sites, formerly owned or operated by PPL Electric, LG&E and KU predecessors or affiliates, for which PPL Electric, LG&E and KU lack information on current site conditions and are therefore unable to predict what, if any, potential liability they may have.

Depending on the outcome of investigations at sites where investigations have not begun or been completed or developments at sites for which PPL Electric, LG&E and KU currently lack information, the costs of remediation and other liabilities could be significant. PPL, PPL Electric, LKE, LG&E and KU cannot estimate a range of reasonably possible losses, if any, related to these matters.

The EPA is evaluating the risks associated with polycyclic aromatic hydrocarbons and naphthalene, chemical by-products of coal gas manufacturing. As a result of the EPA's evaluation, individual states may establish stricter standards for water quality and soil cleanup. This could require several PPL subsidiaries to take more extensive assessment and remedial actions at former coal gas manufacturing plants. PPL, PPL Electric, LKE, LG&E and KU cannot estimate a range of reasonably possible losses, if any, related to these matters.

From time to time, PPL's subsidiaries undertake remedial action in response to notices of violations, spills or other releases at various on-site and off-site locations, negotiate with the EPA and state and local agencies regarding actions necessary for compliance with applicable requirements, negotiate with property owners and other third parties alleging impacts from PPL's

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operations and undertake similar actions necessary to resolve environmental matters that arise in the course of normal operations. Based on analyses to date, resolution of these environmental matters is not expected to have a significant adverse impact on the operations of PPL Electric, LG&E and KU.

Future cleanup or remediation work at sites currently under review, or at sites not currently identified, may result in significant additional costs for PPL, PPL Electric, LKE, LG&E and KU.

Environmental Matters - WPD (PPL)

WPD's distribution businesses are subject to environmental regulatory and statutory requirements. PPL believes that WPD has taken and continues to take measures to comply with the applicable laws and governmental regulations for the protection of the environment.

Other

Guarantees and Other Assurances

(All Registrants)

In the normal course of business, the Registrants enter into agreements that provide financial performance assurance to third parties on behalf of certain subsidiaries. Such agreements include, for example, guarantees, stand-by letters of credit issued by financial institutions and surety bonds issued by insurance companies. These agreements are entered into primarily to support or enhance the creditworthiness attributed to a subsidiary on a stand-alone basis or to facilitate the commercial activities in which these subsidiaries engage.

(PPL)

PPL fully and unconditionally guarantees all of the debt securities of PPL Capital Funding.

(All Registrants)

The table below details guarantees provided as of September 30, 2015. "Exposure" represents the estimated maximum potential amount of future payments that could be required to be made under the guarantee. The probability of expected payment/performance under each of these guarantees is remote except for "WPD guarantee of pension and other obligations of unconsolidated entities" and "Indemnification of lease termination and other divestitures." The total recorded liability at September 30, 2015 and December 31, 2014, was $24 million and $26 million for PPL and $19 million for LKE for both periods. For reporting purposes, on a consolidated basis, all guarantees of PPL Electric, LKE, LG&E and KU also apply to PPL, and all guarantees of LG&E and KU also apply to LKE.

	Exposure at			Expiration
	September 30, 2015			Date
PPL
Indemnifications related to the WPD Midlands acquisition			(a)
WPD indemnifications for entities in liquidation and sales of assets	$	11	(b)	2018
WPD guarantee of pension and other obligations of unconsolidated entities		116	(c)
PPL Electric
Guarantee of inventory value		36	(d)	2018
LKE
Indemnification of lease termination and other divestitures		301	(e)	2021 - 2023
LG&E and KU
LG&E and KU guarantee of shortfall related to OVEC			(f)

(a) Indemnifications related to certain liabilities, including a specific unresolved tax issue and those relating to properties and assets owned by the seller that were transferred to WPD Midlands in connection with the acquisition. A cross indemnity has been received from the seller on the tax issue. The maximum exposure and expiration of these indemnifications cannot be estimated because the maximum potential liability is not capped and the expiration date is not specified in the transaction documents.

(b) Indemnification to the liquidators and certain others for existing liabilities or expenses or liabilities arising during the liquidation process. The indemnifications are limited to distributions made from the subsidiary to its parent either prior or subsequent to liquidation or are not explicitly stated in the agreements. The indemnifications generally expire two to seven years subsequent to the date of dissolution of the entities. The exposure noted only includes those cases where the agreements provide for specific limits.

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In connection with their sales of various businesses, WPD and its affiliates have provided the purchasers with indemnifications that are standard for such transactions, including indemnifications for certain pre-existing liabilities and environmental and tax matters or have agreed to continue their obligations under existing third-party guarantees, either for a set period of time following the transactions or upon the condition that the purchasers make reasonable efforts to terminate the guarantees. Finally, WPD and its affiliates remain secondarily responsible for lease payments under certain leases that they have assigned to third parties.

(c) Relates to certain obligations of discontinued or modified electric associations that were guaranteed at the time of privatization by the participating members. Costs are allocated to the members and can be reallocated if an existing member becomes insolvent. At September 30, 2015, WPD has recorded an estimated discounted liability for which the expected payment/performance is probable. Neither the expiration date nor the maximum amount of potential payments for certain obligations is explicitly stated in the related agreements, and as a result, the exposure has been estimated.

(d) A third party logistics firm provides inventory procurement and fulfillment services. The logistics firm has title to the inventory, however, upon termination of the contracts, PPL Electric has guaranteed to purchase any remaining inventory that has not been used or sold.

(e) LKE provides certain indemnifications covering the due and punctual payment, performance and discharge by each party of its respective obligations. The most comprehensive of these guarantees is the LKE guarantee covering operational, regulatory and environmental commitments and indemnifications made by WKE under a 2009 Transaction Termination Agreement. This guarantee has a term of 12 years ending July 2021, and a maximum exposure of $200 million, exclusive of certain items such as government fines and penalties that fall outside the cap. Another WKE-related LKE guarantee covers other indemnifications related to the purchase price of excess power, has a term expiring in 2023, and a maximum exposure of $100 million. In May 2012, LKE's indemnitee received an unfavorable arbitration panel's decision interpreting this matter. In October 2014, LKE's indemnitee filed a motion for discretionary review with the Kentucky Supreme Court seeking to overturn the arbitration decision, and such motion was denied by the court in September 2015.  In September 2015, a counterparty issued a demand letter to LKE's indemnitee.  LKE does not believe appropriate contractual, legal or commercial grounds exist for the claim made and anticipates the indemnitee to dispute the demand. LKE believes its indemnification obligations in the WKE matter remain subject to various uncertainties, including additional legal and contractual developments, as well as future prices, availability and demand for the subject excess power. The ultimate outcomes of the WKE termination-related indemnifications cannot be predicted at this time. Additionally, LKE has indemnified various third parties related to historical obligations for other divested subsidiaries and affiliates. The indemnifications vary by entity and the maximum exposures range from being capped at the sale price to no specified maximum; LKE could be required to perform on these indemnifications in the event of covered losses or liabilities being claimed by an indemnified party. LKE cannot predict the ultimate outcomes of the indemnification circumstances, but does not currently expect such outcomes to result in significant losses above the amounts recorded.

(f) Pursuant to the OVEC power purchase contract, LG&E and KU are obligated to pay for their share of OVEC's excess debt service, post-retirement and decommissioning costs, as well as any shortfall from amounts currently included within a demand charge designed and currently expected to cover these costs over the term of the contract. The maximum exposure and the expiration date of these potential obligations are not presently determinable. See "Energy Purchase Commitments" and "Guarantees and Other Assurances" in Note 13 in PPL's, LKE's, LG&E's and KU's 2014 Form 10-K for additional information on the OVEC power purchase contract.

The Registrants provide other miscellaneous guarantees through contracts entered into in the normal course of business. These guarantees are primarily in the form of indemnification or warranties related to services or equipment and vary in duration. The amounts of these guarantees often are not explicitly stated, and the overall maximum amount of the obligation under such guarantees cannot be reasonably estimated. Historically, no significant payments have been made with respect to these types of guarantees and the probability of payment/performance under these guarantees is remote.

PPL, on behalf of itself and certain of its subsidiaries, maintains insurance that covers liability assumed under contract for bodily injury and property damage. The coverage provides maximum aggregate coverage of $225 million. This insurance may be applicable to obligations under certain of these contractual arrangements.

11. Related Party Transactions

PLR Contracts/Purchase of Accounts Receivable (PPL Electric)

PPL Electric holds competitive solicitations for PLR generation supply. PPL EnergyPlus was awarded a portion of the PLR generation supply through these competitive solicitations. The purchases from PPL EnergyPlus are included in PPL Electric's Statements of Income as "Energy purchases from affiliate" through May 31, 2015, the period through which PPL Electric and PPL EnergyPlus were affiliated entities. As a result of the June 1, 2015 spinoff of PPL Energy Supply and creation of Talen Energy, PPL EnergyPlus (renamed Talen Energy Marketing) is no longer an affiliate of PPL Electric. PPL Electric's purchases from Talen Energy Marketing subsequent to May 31, 2015 are included as purchases from an unaffiliated third party.

Under the standard Default Service Supply Master Agreement for the solicitation process, PPL Electric requires all suppliers to post collateral once credit exposures exceed defined credit limits. Wholesale suppliers are required to post collateral with PPL Electric when: (a) the market price of electricity to be delivered by the wholesale suppliers exceeds the contract price for the forecasted quantity of electricity to be delivered; and (b) this market price exposure exceeds a contractual credit limit. In no instance is PPL Electric required to post collateral to suppliers under these supply contracts.

PPL Electric's customers may choose an alternative supplier for their generation supply. See Note 2 for additional information regarding PPL Electric's purchases of accounts receivable from alternative suppliers, including Talen Energy Marketing. See Note 8 for additional information regarding the spinoff of PPL Energy Supply.

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Support Costs (PPL Electric, LKE, LG&E and KU)

PPL Services and LKS provide their respective PPL and LKE subsidiaries with administrative, management and support services.  In 2015, PPL EU Services was formed to provide the majority of financial, supply chain, human resources and facilities management services primarily to PPL Electric.  PPL Services will continue to provide certain corporate functions. For all service companies, the costs of these services are charged to the respective recipients as direct support costs.  General costs that cannot be directly attributed to a specific entity are allocated and charged to the respective recipients as indirect support costs.  PPL Services and PPL EU Services use a three-factor methodology that includes the applicable recipients' invested capital, operation and maintenance expenses and number of employees to allocate indirect costs.  LKS bases its indirect allocations on the subsidiaries' number of employees, total assets, revenues, number of customers and/or other statistical information. PPL Services, PPL EU Services and LKS expensed the following amounts for the periods ended September 30, and believe these amounts are reasonable, including amounts applied to accounts that are further distributed between capital and expense.

	Three Months				Nine Months
	2015		2014		2015		2014
PPL Electric from PPL Services	$	35	$	34	$	90	$	113
LKE from PPL Services		4		3		12		11
PPL Electric from PPL EU Services		12				44

LG&E from LKS	36	36	107	103
KU from LKS	43	43	127	120

In addition to the charges for services noted above, LKS makes payments on behalf of LG&E and KU for fuel purchases and other costs for products or services provided by third parties. LG&E and KU also provide services to each other and to LKS. Billings between LG&E and KU relate to labor and overheads associated with union and hourly employees performing work for the other company, charges related to jointly-owned generating units and other miscellaneous charges. Tax settlements between LKE and LG&E and LKE and KU are reimbursed through LKS.

Intercompany Borrowings (LKE)

LKE maintains a $225 million revolving line of credit with a PPL Energy Funding subsidiary whereby LKE can borrow funds on a short-term basis at market-based rates. At September 30, 2015 and December 31, 2014, $62 million and $41 million were outstanding and were reflected in "Notes payable with affiliates" on the consolidated Balance Sheets. The interest rate on borrowings is equal to one-month LIBOR plus a spread. The interest rates on the outstanding borrowing at September 30, 2015 and December 31, 2014 were 1.70% and 1.65%. Interest on the revolving line of credit was not significant for the three and nine months ended September 30, 2015 and 2014.

Intercompany Derivatives (LKE, LG&E and KU)

Periodically, LG&E and KU enter into forward-starting interest rate swaps with PPL. These hedging instruments have terms identical to forward-starting swaps entered into by PPL with third parties. See Note 14 for additional information on intercompany derivatives.

Other (PPL Electric, LG&E and KU)

See Note 9 for discussions regarding intercompany allocations associated with defined benefits.

12. Other Income (Expense) - net

(PPL)

"Other Income (Expense) - net" for the three and nine months ended September 30, 2015 and 2014 consisted primarily of gains on foreign currency exchange contracts to economically hedge the earnings translation risk of WPD's earnings denominated in British pound sterling. See Note 14 for additional information on these derivatives.

59

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. Transfers between levels are recognized at end-of-reporting-period values. During the three and nine months ended September 30, 2015 and 2014, there were no transfers between Level 1 and Level 2. See Note 1 in each Registrant's 2014 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, excluding assets and liabilities of discontinued operations at December 31, 2014, were:

			September 30, 2015								December 31, 2014
			Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
PPL
Assets
	Cash and cash equivalents		$	981	$	981					$	1,399	$	1,399
	Short-term investments											120		120
	Restricted cash and cash equivalents (a)			36		36						31		31
	Price risk management assets (b):
		Interest rate swaps		1			$	1
		Foreign currency contracts		169				169				130			$	130
		Cross-currency swaps		61				61				29				28	$	1
	Total price risk management assets			231				231				159				158		1
	Auction rate securities (c)			1					$	1		2						2
Total assets			$	1,249	$	1,017	$	231	$	1	$	1,711	$	1,550	$	158	$	3
Liabilities
	Price risk management liabilities (b):
		Interest rate swaps	$	82			$	82			$	156			$	156
		Foreign currency contracts		7				7				2				2
		Cross-currency swaps										3				3
	Total price risk management liabilities		$	89			$	89			$	161			$	161
PPL Electric
Assets
	Cash and cash equivalents		$	26	$	26					$	214	$	214
	Restricted cash and cash equivalents (a)			2		2						3		3
Total assets			$	28	$	28					$	217	$	217

LKE
Assets
	Cash and cash equivalents		$	455	$	455			$	21	$	21
	Cash collateral posted to counterparties (d)			10		10				21		21
Total assets			$	465	$	465			$	42	$	42
Liabilities
	Price risk management liabilities:
		Interest rate swaps	$	50			$	50	$	114			$	114
Total price risk management liabilities			$	50			$	50	$	114			$	114

60

			September 30, 2015							December 31, 2014
			Total		Level 1		Level 2		Level 3	Total		Level 1		Level 2		Level 3
LG&E
Assets
	Cash and cash equivalents		$	180	$	180				$	10	$	10
	Cash collateral posted to counterparties (d)			10		10					21		21
Total assets			$	190	$	190				$	31	$	31
Liabilities
	Price risk management liabilities:
		Interest rate swaps	$	50			$	50		$	81			$	81
Total price risk management liabilities			$	50			$	50		$	81			$	81
KU
Assets
	Cash and cash equivalents		$	275	$	275				$	11	$	11
Total assets			$	275	$	275				$	11	$	11
Liabilities
	Price risk management liabilities:
		Interest rate swaps								$	33			$	33
Total price risk management liabilities										$	33			$	33

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

(b) Included in "Other current assets", "Other current liabilities", "Other noncurrent assets" and "Other deferred credits and noncurrent liabilities" on the Balance Sheets.

(c) 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.

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. Cross-currency swaps are valued by PPL's Treasury department, which reports to the Chief Financial Officer (CFO). Accounting personnel, who also report to the CFO, interpret analysis quarterly to classify the contracts in the fair value hierarchy. Valuation techniques are evaluated periodically.

Nonrecurring Fair Value Measurements (PPL)

See Note 8 for information regarding the estimated fair value of the Supply segment's net assets as of the June 1, 2015 spinoff date.

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, excluding long-term debt of discontinued operations at December 31, 2014. The fair values were estimated using an income approach by discounting future cash flows at estimated current cost of funding rates, which incorporate the credit risk of the Registrants. Long-term debt is classified as Level 2. The effect of third-party credit enhancements is not included in the fair value measurement.

61

	September 30, 2015				December 31, 2014
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
PPL	$	19,205	$	21,184	$	18,173	$	20,466
PPL Electric		2,603		2,882		2,602		2,990

LKE	5,617	5,927	4,567	4,946
LG&E	1,903	1,978	1,353	1,455
KU	2,591	2,763	2,091	2,313

The carrying value of short-term debt (including notes between affiliates), when outstanding, approximates fair value due to the variable interest rates associated with the short-term debt and is classified as Level 2.

14. Derivative Instruments and Hedging Activities

Risk Management Objectives

(All Registrants)

PPL has a risk management policy approved by the Board of Directors to manage market risk associated with commodities, interest rates on debt issuances and foreign exchange (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, verification of risk and transaction limits, VaR analyses and the coordination and reporting of the Enterprise Risk Management (ERM) program.

Market Risk

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 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 following summarizes the market risks that affect PPL and its Subsidiary Registrants.

Interest rate risk

· PPL and its subsidiaries are exposed to interest rate risk associated with forecasted fixed-rate and existing floating-rate debt issuances. PPL and WPD hold 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. PPL, LG&E and KU utilize forward starting interest rate swaps to hedge changes in benchmark interest rates, when appropriate, 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.

Foreign currency risk

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

62

Commodity price risk

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

· 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 and fuel-related expenses. In addition, LG&E's rates include certain mechanisms for natural gas supply. These mechanisms generally provide for timely recovery of market price and volumetric fluctuations associated with these expenses.

Equity securities price risk

· 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.

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

Credit Risk

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.

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, subject to regulatory review or other processes, appropriate incremental costs incurred by these entities would be recoverable from customers through applicable rate mechanisms, 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.

Master Netting Arrangements

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, LKE, LG&E and KU had no obligation to return cash collateral under master netting arrangements at September 30, 2015 and December 31, 2014.

PPL, LKE and LG&E posted $10 million and $21 million of cash collateral under master netting arrangements at September 30, 2015 and December 31, 2014.

KU did not post any cash collateral under master netting arrangements at September 30, 2015 and December 31, 2014.

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

63

Interest Rate Risk

(PPL, LKE, LG&E and KU)

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.

Cash Flow Hedges

(PPL)

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 September 30, 2015, outstanding interest rate swaps contracts range in maturity through 2026 for WPD and through 2016 for PPL's domestic interest rate swaps. These swaps held an aggregate notional value of $792 million, of which £320 million (approximately $492 million based on spot rates) was related to WPD.

At September 30, 2015, PPL held an aggregate notional value in cross-currency interest rate swap contracts of $1.3 billion that range in maturity from 2016 through 2028 to hedge the interest payments and principal of WPD's U.S. dollar-denominated senior notes.

For the three months ended September 30, 2015, PPL had an insignificant amount of hedge ineffectiveness associated with interest rate derivatives and no hedge ineffectiveness for the three months ended September 30, 2014. For the nine months ended September 30, 2015 and 2014, PPL had an insignificant amount of hedge ineffectiveness associated with interest rate derivatives.

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.

As a result of the June 1, 2015 spinoff of PPL Energy Supply, all PPL cash flow hedges associated with PPL Energy Supply were ineffective and discontinued and therefore, reclassified into earnings during the second quarter of 2015 and reflected in discontinued operations for the nine months ended September 30, 2015. See Note 8 for additional information.

For PPL's remaining cash flow hedges, for the three months ended September 30, 2015 and 2014 and the nine months ended September 30, 2015, PPL had no cash flow hedges reclassified into earnings associated with discontinued cash flow hedges. For the nine months ended September 30, 2014, PPL had an insignificant amount reclassified into earnings associated with discontinued cash flow hedges.

At September 30, 2015, 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 insignificant. Amounts are reclassified as the hedged interest expense is recorded.

(LKE, LG&E and KU)

Periodically, LG&E and KU enter into forward-starting interest rate swaps with PPL that have terms identical to forward-starting swaps entered into by PPL with third parties. It is probable that realized gains and losses on all of these swaps will be recoverable through regulated rates; as such, any gains and losses on these derivatives are included in regulatory assets or liabilities and will be recognized in "Interest Expense" on the Statements of Income over the life of the underlying debt at the time the underlying hedged interest expense is recorded. In September 2015, first mortgage bonds totaling $1.05 billion were issued (LG&E issued $550 million and KU issued $500 million) and all outstanding forward-starting interest rate swaps were terminated. Net cash settlements of $88 million were paid on the swaps that were terminated (LG&E and KU each paid $44 million). The settlements are included in "Regulatory assets" (noncurrent) on the Balance Sheets and "Cash Flows from Operating Activities" on the Statements of Cash Flows.

64

Economic Activity (PPL, LKE and LG&E)

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 at the time the underlying hedged interest expense is recorded. At September 30, 2015, LG&E held contracts with a notional amount of $179 million that range in maturity through 2033.

Foreign Currency Risk

(PPL)

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 GBP earnings.

Net Investment Hedges

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 September 30, 2015 had a notional amount of £134 million (approximately $221 million based on contracted rates). The settlement dates of these contracts range from November 2015 through June 2016.

At September 30, 2015, PPL had $18 million of accumulated net investment hedge after tax gains (losses) that were included in the foreign currency translation adjustment component of AOCI, compared to $14 million at December 31, 2014.

Economic Activity

PPL enters into foreign currency contracts on behalf of a subsidiary to economically hedge GBP-denominated anticipated earnings. At September 30, 2015, the total exposure hedged by PPL was approximately £1.7 billion (approximately $2.7 billion based on contracted rates). These contracts had termination dates ranging from October 2015 through December 2017.

Accounting and Reporting

(All Registrants)

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 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 changes in fair values 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 September 30, 2015 and December 31, 2014.

See Notes 1 and 17 in each Registrant's 2014 Form 10-K for additional information on accounting policies related to derivative instruments.

(PPL)

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

65

						September 30, 2015								December 31, 2014
						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)			$	1	$	31			$	5			$	94			$	5
			Cross-currency swaps (b)				26										3
			Foreign currency
				contracts			19			$	76		6	$	12			$	67
					Total current		46		31		76		11		12		97		67		5
Noncurrent:
	Price Risk Management
		Assets/Liabilities (a):
			Interest rate swaps (b)						1				45				14				43
			Cross-currency swaps (b)				35								29
			Foreign currency
				contracts							74		1		5				46		2
					Total noncurrent		35		1		74		46		34		14		46		45
Total derivatives						$	81	$	32	$	150	$	57	$	46	$	111	$	113	$	50

(a) Included in "Other current assets", "Other current liabilities", "Other noncurrent assets" and "Other deferred credits and noncurrent liabilities" on the Balance Sheets.

(b) Excludes accrued interest, if applicable.

The following tables present the pre-tax effect of derivative instruments recognized in income, OCI or regulatory assets and regulatory liabilities for the periods ended September 30, 2015.

Three Months

Nine Months

Gain (Loss)

Gain (Loss)

Recognized

Recognized

in Income

in Income

on Derivative

Gain (Loss)

on Derivative

Gain (Loss)

(Ineffective

Reclassified

(Ineffective

Location of

Reclassified

Portion and

from AOCI

Portion and

Derivative Gain

Gain (Loss)

from AOCI

Amount

into

Amount

(Loss) Recognized in

Recognized

into Income

Excluded from

Income

Excluded from

Derivative

OCI (Effective Portion)

in Income

(Effective

Effectiveness

(Effective

Effectiveness

Relationships

Three Months

Nine Months

on Derivative

Portion)

Testing)

Portion)

Testing)

Cash Flow Hedges:

Interest rate swaps

$

(27)

$

(29)

Interest expense

$

(2)

$

(9)

Discontinued

operations

$

(77)

Cross-currency swaps

(3)

33

Interest expense

(1)

1

Other income

(expense) - net

(10)

22

Commodity contracts

Discontinued

operations

13

7

Total

$

(30)

$

4

$

(13)

$

27

$

(70)

Net Investment Hedges:

Foreign currency contracts

$

7

$

6

Derivatives Not Designated as	Location of Gain (Loss) Recognized in
Hedging Instruments	Income on Derivative	Three Months		Nine Months
Foreign currency contracts	Other income (expense) - net	$	78	$	64
Interest rate swaps	Interest expense		(2)		(6)
	Total	$	76	$	58
Derivatives Not Designated as	Location of Gain (Loss) Recognized as
Hedging Instruments	Regulatory Liabilities/Assets	Three Months		Nine Months
Interest rate swaps	Regulatory assets - noncurrent	$	(5)	$	(2)

66

Derivatives Designated as	Location of Gain (Loss) Recognized as
Hedging Instruments	Regulatory Liabilities/Assets	Three Months		Nine Months
Interest rate swaps	Regulatory assets - noncurrent	$	(42)	$	(22)

The following tables present the pre-tax effect of derivative instruments recognized in income, OCI, or regulatory assets and regulatory liabilities for the periods ended September 30, 2014.

Three Months

Nine Months

Gain (Loss)

Gain (Loss)

Recognized

Recognized

in Income

in Income

on Derivative

Gain (Loss)

on Derivative

Gain (Loss)

(Ineffective

Reclassified

(Ineffective

Location of

Reclassified

Portion and

from AOCI

Portion and

Derivative Gain

Gain (Loss)

from AOCI

Amount

into

Amount

(Loss) Recognized in

Recognized

into Income

Excluded from

Income

Excluded from

Derivative

OCI (Effective Portion)

in Income

(Effective

Effectiveness

(Effective

Effectiveness

Relationships

Three Months

Nine Months

on Derivative

Portion)

Testing)

Portion)

Testing)

Cash Flow Hedges:

Interest rate swaps

$

(5)

$

(65)

Interest expense

$

(5)

$

(14)

$

2

Cross-currency swaps

(2)

(18)

Interest expense

1

Other income

(expense) - net

12

(17)

Commodity contracts

Discontinued

operations

8

30

Total

$

(7)

$

(83)

$

15

$

$

2

Net Investment Hedges:

Foreign currency contracts

$

25

$

7

Derivatives Not Designated as	Location of Gain (Loss) Recognized in
Hedging Instruments	Income on Derivative	Three Months		Nine Months
Foreign currency contracts	Other income (expense) - net	$	134	$	38
Interest rate swaps	Interest expense		(2)		(6)
	Total	$	132	$	32
Derivatives Not Designated as	Location of Gain (Loss) Recognized as
Hedging Instruments	Regulatory Liabilities/Assets	Three Months		Nine Months
Interest rate swaps	Regulatory assets - noncurrent			$	(6)
Derivatives Designated as	Location of Gain (Loss) Recognized as
Hedging Instruments	Regulatory Liabilities/Assets	Three Months		Nine Months
Interest rate swaps	Regulatory assets - noncurrent	$	(4)	$	(4)
	Regulatory liabilities - noncurrent	$	6	$	6

(LKE)

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

				September 30, 2015		December 31, 2014
				Assets	Liabilities	Assets	Liabilities
Current:
	Price Risk Management
		Assets/Liabilities (a):
			Interest rate swaps				$	66

(a) Represents the location on the Balance Sheets.

67

The following table presents the pre-tax effect of derivative instruments designated as cash flow hedges that are recognized in regulatory assets for the periods ended September 30, 2015.

Derivative Instruments	Location of Gain (Loss)	Three Months		Nine Months
Interest rate swaps	Regulatory assets - noncurrent	$	(42)	$	(22)

The following table presents the pre-tax effect of derivative instruments designated as cash flow hedges that are recognized in regulatory assets and liabilities for the periods ended September 30, 2014.

Derivative Instruments	Location of Gain (Loss)	Three Months		Nine Months
Interest rate swaps	Regulatory assets - noncurrent	$	(4)	$	(4)
Derivative Instruments	Location of Gain (Loss)	Three Months		Nine Months
Interest rate swaps	Regulatory liabilities - noncurrent	$	6	$	6

(LG&E)

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

				September 30, 2015		December 31, 2014
				Assets	Liabilities	Assets	Liabilities
Current:
	Price Risk Management
		Assets/Liabilities (a):
			Interest rate swaps				$	33

(a) Represents the location on the Balance Sheets.

The following table presents the pre-tax effect of derivative instruments designated as cash flow hedges that are recognized in regulatory assets for the periods ended September 30, 2015.

Derivative Instruments	Location of Gain (Loss)	Three Months		Nine Months
Interest rate swaps	Regulatory assets - noncurrent	$	(21)	$	(11)

The following table presents the pre-tax effect of derivative instruments designated as cash flow hedges that are recognized in regulatory assets and liabilities for the periods ended September 30, 2014.

Derivative Instruments	Location of Gain (Loss)	Three Months		Nine Months
Interest rate swaps	Regulatory assets - noncurrent	$	(2)	$	(2)
Derivative Instruments	Location of Gain (Loss)	Three Months		Nine Months
Interest rate swaps	Regulatory liabilities - noncurrent	$	3	$	3

(KU)

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

				September 30, 2015		December 31, 2014
				Assets	Liabilities	Assets	Liabilities
Current:
	Price Risk Management
		Assets/Liabilities (a):
			Interest rate swaps				$	33

(a) Represents the location on the Balance Sheets.

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The following table presents the pre-tax effect of derivative instruments designated as cash flow hedges that are recognized in regulatory assets for the periods ended September 30, 2015.

Derivative Instruments	Location of Gain (Loss)	Three Months		Nine Months
Interest rate swaps	Regulatory assets - noncurrent	$	(21)	$	(11)

The following table presents the pre-tax effect of derivative instruments designated as cash flow hedges that are recognized in regulatory assets and liabilities for the periods ended September 30, 2014.

Derivative Instruments	Location of Gain (Loss)	Three Months		Nine Months
Interest rate swaps	Regulatory assets - noncurrent	$	(2)	$	(2)
Derivative Instruments	Location of Gain (Loss)	Three Months		Nine Months
Interest rate swaps	Regulatory liabilities - noncurrent	$	3	$	3

(LKE and LG&E)

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

					September 30, 2015			December 31, 2014
					Assets	Liabilities			Assets	Liabilities
Current:
	Price Risk Management
		Assets/Liabilities (a):
			Interest rate swaps			$	5			$	5
				Total current			5				5
Noncurrent:
	Price Risk Management
		Assets/Liabilities (a):
			Interest rate swaps				45				43
				Total noncurrent			45				43
Total derivatives						$	50			$	48

(a) Represents the location on the Balance Sheets.

The following tables present the pre-tax effect of derivatives not designated as cash flow hedges that are recognized in income or regulatory assets for the periods ended September 30, 2015.

	Location of Gain (Loss) Recognized in
Derivative Instruments	Income on Derivatives	Three Months		Nine Months
Interest rate swaps	Interest expense	$	(2)	$	(6)
	Location of Gain (Loss) Recognized in
Derivative Instruments	Regulatory Assets	Three Months		Nine Months
Interest rate swaps	Regulatory assets - noncurrent	$	(5)	$	(2)

The following tables present the pre-tax effect of derivatives not designated as cash flow hedges that are recognized in income or regulatory assets for the periods ended September 30, 2014.

	Location of Gain (Loss) Recognized in
Derivative Instruments	Income on Derivatives	Three Months		Nine Months
Interest rate swaps	Interest expense	$	(2)	$	(6)
	Location of Gain (Loss) Recognized in
Derivative Instruments	Regulatory Assets	Three Months		Nine Months
Interest rate swaps	Regulatory assets - noncurrent			$	(6)

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(PPL, LKE, LG&E and KU)

Offsetting Derivative Instruments

PPL, LKE, LG&E and KU or certain of their subsidiaries have master netting arrangements in place and also enter into agreements pursuant to which they purchase or sell 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 set off 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, 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
September 30, 2015
Treasury Derivatives
	PPL	$	231	$	33		$	198	$	89	$	33	$	10	$	46
	LKE									50				10		40
	LG&E									50				10		40
December 31, 2014
Treasury Derivatives
	PPL	$	159	$	65		$	94	$	161	$	65	$	21	$	75
	LKE									114				20		94
	LG&E									81				20		61
	KU									33						33

Credit Risk-Related Contingent Features

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, 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 credit rating at levels that remain above investment grade. In either case, if the applicable credit rating were to fall below investment grade, 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, LKE's, LG&E's, and KU's obligations under the contracts. 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.

(PPL, LKE and LG&E)

At September 30, 2015, derivative contracts in a net liability position that contain credit risk-related contingent features, collateral posted on those positions and the related effect of a decrease in credit ratings below investment grade are summarized as follows:

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		PPL		LKE		LG&E
Aggregate fair value of derivative instruments in a net liability position with credit risk-related
	contingent features	$	32	$	30	$	30
Aggregate fair value of collateral posted on these derivative instruments			10		10		10
Aggregate fair value of additional collateral requirements in the event of
	a credit downgrade below investment grade (a)		22		20		20

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

15. Goodwill

(PPL)

The change in the carrying amount of goodwill for the nine months ended September 30, 2015 was due to the effect of foreign currency exchange rates on the U.K. Regulated segment.

16.  Asset Retirement Obligations
(PPL, LKE, LG&E and KU)
The changes in the carrying amounts of AROs were as follows.
		PPL		LKE		LG&E		KU
Balance at December 31, 2014		$	336	$	285	$	74	$	211
	Accretion		14		13		4		9
	Changes in estimated cash flow or settlement date		221		221		83		138
	Effect of foreign currency exchange rates		(1)
	Obligations settled		(5)		(5)		(4)		(1)
Balance at September 30, 2015		$	565	$	514	$	157	$	357

Substantially all of the ARO balances are classified as noncurrent at September 30, 2015 and December 31, 2014.

In connection with the final CCR rule, LG&E and KU recorded increases to the existing AROs of $57 million ($36 million at LG&E and $21 million at KU) and $219 million ($81 million at LG&E and $138 million at KU) during the three and nine months ended September 30, 2015 due to revisions in the timing and amounts of future expected cash flows. An updated engineering study based on the final rule was performed in the third quarter providing further clarity on the projected CCR closure costs and resulted in a revision to the estimate recorded in June. 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. PPL, LKE, LG&E and KU believe relevant costs relating to this rule are subject to rate recovery. See Note 10 for information on the final CCR rule.

LG&E's and KU's accretion and ARO-related depreciation expense are recorded as a regulatory asset, such that there is no net earnings impact.

17. Accumulated Other Comprehensive Income (Loss)

(PPL and LKE)

The after-tax changes in AOCI by component for the periods ended September 30 were as follows.

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		Foreign		Unrealized gains (losses)						Defined benefit plans
		currency		Available-				Equity		Prior		Actuarial		Transition
		translation		for-sale		Qualifying		investees'		service		gain		asset
		adjustments		securities		derivatives		AOCI		costs		(loss)		(obligation)		Total
PPL
June 30, 2015		$	(435)			$	2			$	(3)	$	(1,849)	$	1	$	(2,284)
Amounts arising during the period			52				(19)										33
Reclassifications from AOCI							10						35				45
Net OCI during the period			52				(9)						35				78
September 30, 2015		$	(383)			$	(7)			$	(3)	$	(1,814)	$	1	$	(2,206)
December 31, 2014		$	(286)	$	202	$	20	$	1	$	3	$	(2,215)	$	1	$	(2,274)
Amounts arising during the period			(97)		7		8				(6)		52				(36)
Reclassifications from AOCI					(2)		20		(1)				111				128
Net OCI during the period			(97)		5		28		(1)		(6)		163				92
Distribution of PPL Energy
	Supply (Note 8)				(207)		(55)						238				(24)
September 30, 2015		$	(383)	$		$	(7)	$		$	(3)	$	(1,814)	$	1	$	(2,206)
June 30, 2014		$	117	$	190	$	61	$	1	$	(4)	$	(1,764)	$	1	$	(1,398)
Amounts arising during the period			(48)		(1)		(5)						(1)				(55)
Reclassifications from AOCI					(3)		(12)				1		29				15
Net OCI during the period			(48)		(4)		(17)				1		28				(40)
September 30, 2014		$	69	$	186	$	44	$	1	$	(3)	$	(1,736)	$	1	$	(1,438)
December 31, 2013		$	(11)	$	173	$	94	$	1	$	(6)	$	(1,817)	$	1	$	(1,565)
Amounts arising during the period			80		18		(52)						(3)				43
Reclassifications from AOCI					(5)		2				3		84				84
Net OCI during the period			80		13		(50)				3		81				127
September 30, 2014		$	69	$	186	$	44	$	1	$	(3)	$	(1,736)	$	1	$	(1,438)
LKE
June 30, 2015								$	(1)	$	(7)	$	(44)			$	(52)
Reclassifications from AOCI													1				1
Net OCI during the period													1				1
September 30, 2015								$	(1)	$	(7)	$	(43)			$	(51)
December 31, 2014										$	(8)	$	(37)			$	(45)
Amounts arising during the period													(8)				(8)
Reclassifications from AOCI								$	(1)		1		2				2
Net OCI during the period									(1)		1		(6)				(6)
September 30, 2015								$	(1)	$	(7)	$	(43)			$	(51)
June 30, 2014										$	(2)	$	12			$	10
Net OCI during the period
September 30, 2014										$	(2)	$	12			$	10
December 31, 2013								$	1	$	(2)	$	14			$	13
Amounts arising during the period													(2)				(2)
Reclassifications from AOCI									(1)								(1)
Net OCI during the period									(1)				(2)				(3)
September 30, 2014								$		$	(2)	$	12			$	10

(PPL)

The following table presents the gains (losses) and related income taxes for reclassifications from AOCI for the periods ended September 30. The defined benefit plan components of AOCI are not reflected in their entirety in the statement of income during the periods; rather, they are included in the computation of net periodic defined benefit costs (credits). See Note 9 for additional information.

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		Three Months				Nine Months				Affected Line Item on the
Details about AOCI		2015		2014		2015		2014		Statements of Income
Available-for-sale securities				$	7	$	4	$	11	Other Income (Expense) - net
Total Pre-tax					7		4		11
Income Taxes					(4)		(2)		(6)
Total After-tax					3		2		5
Qualifying derivatives
	Interest rate swaps	$	(2)		(5)		(9)		(12)	Interest Expense
							(77)			Discontinued operations
	Cross-currency swaps		(10)		12		22		(17)	Other Income (Expense) - net
			(1)				1		1	Interest Expense
	Energy commodities				8		20		30	Discontinued operations
Total Pre-tax			(13)		15		(43)		2
Income Taxes			3		(3)		23		(4)
Total After-tax			(10)		12		(20)		(2)
Equity investees' AOCI							2			Other Income (Expense) - net
Total Pre-tax							2
Income Taxes							(1)
Total After-tax							1
Defined benefit plans
	Prior service costs				(2)				(6)
	Net actuarial loss		(45)		(38)		(146)		(110)
Total Pre-tax			(45)		(40)		(146)		(116)
Income Taxes			10		10		35		29
Total After-tax			(35)		(30)		(111)		(87)
Total reclassifications during the period		$	(45)	$	(15)	$	(128)	$	(84)

18. New Accounting Guidance Pending Adoption

(All Registrants)

Accounting for Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (FASB) issued accounting guidance that establishes a comprehensive new model for the recognition of revenue from contracts with customers. This model is based on the core principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

For public business entities, this guidance can be applied using either a full retrospective or modified retrospective transition method, beginning in annual reporting periods after December 15, 2017 and interim periods within those years. Public business entities may early adopt this guidance in annual reporting periods beginning after December 15, 2016. The Registrants expect to adopt this guidance effective January 1, 2018.

The Registrants are currently assessing the impact of adopting this guidance, as well as the transition method they will use.

Reporting Uncertainties about an Entity's Ability to Continue as a Going Concern

In August 2014, the FASB issued accounting guidance which will require management to assess, for each interim and annual period, whether there are conditions or events that raise substantial doubt about an entity's ability to continue as a going concern. Substantial doubt about an entity's ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date the financial statements are issued.

When management identifies conditions or events that raise substantial doubt about an entity's ability to continue as a going concern, management is required to disclose information that enables users of the financial statements to understand the principal conditions or events that raised substantial doubt about the entity's ability to continue as a going concern and management's evaluation of the significance of those conditions or events. If substantial doubt about the entity's ability to

73

continue as a going concern has been alleviated as a result of management's plan, the entity should disclose information that allows the users of the financial statements to understand those plans. If the substantial doubt about the entity's ability to continue as a going concern is not alleviated by management's plans, management's plans to mitigate the conditions or events that gave rise to the substantial doubt about the entity's ability to continue as a going concern should be disclosed, as well as a statement that there is substantial doubt the entity's ability to continue as a going concern within one year after the date the financial statements are issued.

For all entities, this guidance should be applied prospectively within the annual periods ending after December 15, 2016, and for annual periods and interim periods thereafter. Early adoption is permitted.

The Registrants will adopt this guidance for the annual period ending December 31, 2016. The adoption of this guidance is not expected to have a significant impact on the Registrants.

Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity

In November 2014, the FASB issued guidance that clarifies how current accounting guidance should be interpreted when evaluating the economic characteristics and risks of a host contract of a hybrid financial instrument issued in the form of a share. This guidance does not change the current criteria for determining whether separation of an embedded derivative feature from a hybrid financial instrument is required. Entities are still required to evaluate whether the economic risks of the embedded derivative feature are clearly and closely related to those of the host contract, among other relevant criteria.

An entity should consider the substantive terms and features of the entire hybrid financial instrument, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract to determine whether the host contract is more akin to a debt instrument or more akin to an equity instrument. An entity should assess the relative strength of the debt-like and equity-like terms and features when determining how to weight those terms and features.

For public business entities, this guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 and should be applied using a modified retrospective method for existing hybrid financial instruments issued in the form of a share as of the beginning of the fiscal year the guidance is adopted. Early adoption is permitted. Retrospective application is permitted but not required.

The Registrants will adopt this guidance on January 1, 2016. The adoption of this guidance is not expected to have a significant impact on the Registrants.

Income Statement Presentation of Extraordinary and Unusual Items

In January 2015, the FASB issued accounting guidance that eliminates the concept of extraordinary items, which requires an entity to separately classify, present in the income statement and disclose material events and transactions that are both unusual and occur infrequently. The requirement to report material events or transactions that are unusual or infrequent as a separate component of income from continuing operations has been retained, as has the requirement to separately present the nature and financial effects of each event or transaction in the income statement as a separate component of continuing operations or disclose them within the notes to the financial statements. The scope of these requirements has been expanded to include items that are both unusual and occur infrequently.

For all entities, this guidance is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted provided that an entity applies the guidance from the beginning of the fiscal year of adoption. The guidance may be applied either retrospectively or prospectively.

The Registrants will adopt this guidance on January 1, 2016. The adoption of this guidance is not expected to have a significant impact on the Registrants.

Simplifying the Presentation of Debt Issuance Costs

In April 2015, the FASB issued accounting guidance to simplify the presentation of debt issuance costs by requiring that they be presented on the balance sheet as a direct deduction from the carrying amount of the associated debt liability, consistent with the presentation of debt discounts. For debt issuance costs associated with line of credit arrangements, the guidance was subsequently updated to reflect a speech by the SEC which noted that it would not object to an entity deferring and

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presenting debt issuance costs as an asset and subsequently amortizing the debt issuance costs ratably over the term of the line of credit arrangement.

For public business entities, this guidance should be applied retrospectively for financial statements issued for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. Early adoption is permitted.

The Registrants are assessing in which period they will adopt this guidance. The adoption of this guidance will require the Registrants to reclassify debt issuance costs from assets to long-term debt, and is not expected to have a significant impact on the Registrants.

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Item 2. Combined Management's Discussion and Analysis of Financial Condition and
Results of Operations

(All Registrants)

This "Item 2. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" is separately filed by PPL Corporation, PPL Electric, LKE, LG&E and KU. Information contained herein relating to any individual Registrant is filed by such Registrant solely on its own behalf, and no Registrant makes any representation as to information relating to any other Registrant. The specific Registrant to which disclosures are applicable is identified in parenthetical headings in italics above the applicable disclosure or within the applicable disclosure for each Registrant's related activities and disclosures. Within combined disclosures, amounts are disclosed for any Registrant when significant.

The following should be read in conjunction with the Registrants' Condensed Consolidated Financial Statements and the accompanying Notes and with the Registrants' 2014 Form 10-K. Capitalized terms and abbreviations are defined in the glossary. Dollars are in millions, except per share data, unless otherwise noted.

"Management's Discussion and Analysis of Financial Condition and Results of Operations" includes the following information:

· "Overview" provides a description of each Registrant's business strategy, a description of key factors expected to impact future earnings and a discussion of important financial and operational developments.

· "Results of Operations" for PPL provides a detailed analysis of earnings by segment, and for PPL Electric, LKE, LG&E and KU, includes a summary of earnings. For all Registrants, "Margins" provides explanations of non-GAAP financial measures and "Statement of Income Analysis" addresses significant changes in principal line items on the Statements of Income, comparing the three and nine months ended September 30, 2015 with the same periods in 2014.

· "Financial Condition - Liquidity and Capital Resources" provides an analysis of the Registrants' liquidity positions and credit profiles. This section also includes a discussion of rating agency actions.

· "Financial Condition - Risk Management" provides an explanation of the Registrants' risk management programs relating to market and credit risk.

Overview

Introduction

(PPL)

PPL, headquartered in Allentown, Pennsylvania, is a utility holding company. PPL, through its regulated utility subsidiaries, delivers electricity to customers in the U.K., Pennsylvania, Kentucky, Virginia and Tennessee; delivers natural gas to customers in Kentucky; and generates electricity from power plants in Kentucky. In June 2014, PPL and PPL Energy Supply executed definitive agreements with affiliates of Riverstone to combine their competitive power generation businesses into a new, stand-alone, publicly traded company named Talen Energy. The transaction was completed on June 1, 2015. See "Financial and Operational Developments - Other Financial and Operational Developments - Spinoff of PPL Energy Supply" below for additional information.

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PPL's principal subsidiaries are shown below (* denotes an SEC registrant).

		PPL Corporation*
				PPL Capital Funding
PPL Global ● Engages in the regulated distribution of electricity in the U.K.		LKE*			PPL Electric* ● Engages in the regulated transmission and distribution of electricity in Pennsylvania
	LG&E* ● Engages in the regulated generation, transmission, distribution and sale of electricity and distribution and sale of natural gas in Kentucky		KU* ● Engages in the regulated generation, transmission, distribution and sale of electricity, primarily in Kentucky
U.K. Regulated Segment		Kentucky Regulated Segment			Pennsylvania Regulated Segment

PPL's reportable segments' results primarily represent the results of the Subsidiary Registrants, except that the reportable segments are also allocated certain corporate level financing and other costs that are not included in the results of the applicable Subsidiary Registrants. The U.K. Regulated segment does not have a related Subsidiary Registrant.

In addition to PPL, the other Registrants included in this filing are as follows.

(PPL Electric)

PPL Electric, headquartered in Allentown, Pennsylvania, is a direct wholly owned subsidiary of PPL and a regulated public utility that is an electricity transmission and distribution service provider in eastern and central Pennsylvania. PPL Electric is subject to regulation as a public utility by the PUC, and certain of its transmission activities are subject to the jurisdiction of FERC under the Federal Power Act. PPL Electric delivers electricity in its Pennsylvania service area and provides electricity supply to retail customers in that area as a PLR under the Customer Choice Act.

(LKE)

LKE, headquartered in Louisville, Kentucky, is a wholly owned subsidiary of PPL and a holding company that owns regulated utility operations through its subsidiaries, LG&E and KU, which constitute substantially all of LKE's assets. LG&E and KU are engaged in the generation, transmission, distribution and sale of electricity. LG&E also engages in the distribution and sale of natural gas. LG&E and KU maintain their separate corporate identities and serve customers in Kentucky under their respective names. KU also serves customers in Virginia under the Old Dominion Power name and in Tennessee under the KU name.

(LG&E)

LG&E, headquartered in Louisville, Kentucky, is a wholly owned subsidiary of LKE and a regulated utility engaged in the generation, transmission, distribution and sale of electricity and distribution and sale of natural gas in Kentucky. LG&E is subject to regulation as a public utility by the KPSC, and certain of its transmission activities are subject to the jurisdiction of the FERC under the Federal Power Act.

(KU)

KU, headquartered in Lexington, Kentucky, is a wholly owned subsidiary of LKE and a regulated utility engaged in the generation, transmission, distribution and sale of electricity in Kentucky, Virginia and Tennessee. KU is subject to regulation as a public utility by the KPSC, the VSCC and the Tennessee Regulatory Authority, and certain of its transmission and wholesale power activities are subject to the jurisdiction of the FERC under the Federal Power Act. KU serves its Virginia customers under the Old Dominion Power name and its Kentucky and Tennessee customers under the KU name.

77

Business Strategy

(All Registrants)

The strategy for the regulated businesses of WPD, PPL Electric, LG&E and KU is to provide efficient, reliable and safe operations and strong customer service, maintain constructive regulatory relationships and achieve timely recovery of costs. These regulated businesses are expected to achieve stable, long-term growth in rate base and RAV, as applicable, as significant capital expenditures are planned to maintain existing assets and to improve system reliability and, for LKE, LG&E and KU, to comply with federal and state environmental regulations related to coal-fired electricity generation facilities. This rate base growth in the domestic utilities is expected to result in stable earnings growth for the foreseeable future. However, we are not expecting significant earnings growth from the U.K. Regulated segment as WPD is transitioning to the RIIO-ED1 price control period, which began on April 1, 2015. U.K. revenues are expected to significantly decline from 2014 to 2015 resulting from revenue profiling in the prior price control period (DPCR5) and a lower return on regulatory equity, partially offset by the fast-track bonus. In addition, starting in 2017, the amount of incentive revenues WPD is able to earn is expected to decline as a result of tighter reliability and customer service targets set by Ofgem under RIIO-ED1. Despite these factors negatively impacting revenues in the U.K., management is focused on maintaining relatively flat earnings per share for the U.K. Regulated segment from 2015 to 2018.

In addition, for the U.K. regulated businesses, effective April 1, 2015 under the RIIO-ED1 price control period, 80% of network related expenditures are added to the RAV and, together with adjustments for inflation as measured by Retail Price Index (RPI) and a return on RAV, recovered through allowed revenue with the remaining 20% of expenditures being recovered in the current regulatory year. RAV is intended to represent expenditures that have a long-term benefit to WPD (similar to capital projects for the U.S. regulated businesses). The RAV balance at March 31, 2015 will continue to be recovered over 20 years and additions after April 1, 2023 will be recovered over 45 years. A transitional arrangement will gradually increase the applicable recoverable life during the current RIIO-ED1 eight-year price control period, resulting in an expected average useful life of 35 years for RAV additions in that period. See "Financial and Operational Developments - Other Financial and Operational Developments - RIIO-ED1" below for additional information.

For the U. S. regulated businesses, recovery of capital project costs is achieved through various rate-making mechanisms, including periodic base rate case proceedings using forward test years, annual FERC formula rate mechanisms, and other regulatory agency-approved recovery mechanisms. In Kentucky, the KPSC has adopted a series of regulatory mechanisms (ECR, DSM, GLT, fuel adjustment clause, gas supply clause and recovery on certain construction work-in-progress) that reduce regulatory lag and provide timely recovery of and return on, as appropriate, prudently incurred costs. In Pennsylvania, the FERC transmission formula rate, DSIC mechanism, SMR and other recovery mechanisms are in place to reduce regulatory lag and provide for timely recovery of and a return on, prudently incurred costs.

To manage financing costs and access to credit markets, and to fund capital expenditures, a key objective of the Registrants is to maintain investment grade credit ratings and adequate liquidity positions. In addition, the Registrants have financial and operational risk management programs that, among other things, are designed to monitor and manage exposure to earnings and cash flow volatility, as applicable, related to changes in interest rates, foreign currency exchange rates and counterparty credit quality. To manage these risks, PPL generally uses contracts such as forwards, options, and swaps.

(PPL)

Earnings generated by PPL's U.K. subsidiaries are subject to foreign currency translation risk. The U.K. subsidiaries also have currency exposure to the U.S. dollar to the extent of their U.S. dollar denominated debt. To manage these risks, PPL generally uses contracts such as forwards, options and cross currency swaps that contain characteristics of both interest rate and foreign currency exchange contracts.

Following the June 1, 2015 spinoff of PPL Energy Supply, PPL has no continuing ownership interest in, control of, or affiliation with Talen Energy and Talen Energy Supply (formerly, PPL Energy Supply).

Following the spinoff, PPL's focus is on its regulated utility businesses in the U.K., Kentucky and Pennsylvania, serving more than 10 million customers. PPL intends to maintain a strong balance sheet and manage its finances consistent with maintaining investment grade credit ratings and providing a competitive total shareowner return, including an attractive dividend. Following the spinoff transaction, PPL expects to reduce annual ongoing corporate support costs resulting from the 2014 corporate restructuring efforts as well as ongoing cost efficiency initiatives.

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See "Financial and Operational Developments - Other Financial and Operational Developments - Costs of Spinoff" and "Loss on Spinoff" below for additional information.

Financial and Operational Developments

Earnings (PPL)

PPL's earnings by reportable segments for the periods ended September 30 were as follows:

		Three Months						Nine Months
		2015		2014		$ Change		2015		2014		$ Change
U.K. Regulated		$	249	$	295	$	(46)	$	814	$	688	$	126
Kentucky Regulated			111		82		29		267		247		20
Pennsylvania Regulated			55		57		(2)		191		194		(3)
Corporate and Other (a)			(19)		(24)		5		(74)		(100)		26
Income from Continuing Operations
	After Income Taxes		396		410		(14)		1,198		1,029		169
Discontinued Operations (b)			(3)		87		(90)		(915)		13		(928)
Net Income (Loss)		$	393	$	497	$	(104)	$	283	$	1,042	$	(759)
Income from Continuing Operations
	After Income Taxes
EPS - basic		$	0.59	$	0.61	$	(0.02)	$	1.78	$	1.58	$	0.20
EPS - diluted (c)		$	0.59	$	0.61	$	(0.02)	$	1.78	$	1.55	$	0.23
Net Income (Loss)
EPS - basic		$	0.58	$	0.74	$	(0.16)	$	0.42	$	1.60	$	(1.18)
EPS - diluted (c)		$	0.58	$	0.74	$	(0.16)	$	0.42	$	1.57	$	(1.15)

(a) Primarily includes unallocated corporate-level financing and other costs. Also includes certain costs related to the spinoff of PPL Energy Supply. See the following table of special items for additional information.

(b) As a result of the spinoff of PPL Energy Supply, substantially representing PPL's former Supply segment, the earnings of the Supply segment are included in Discontinued Operations. The nine months ended September 30, 2015 includes an $879 million charge reflecting the difference between PPL's recorded value for the Supply segment and its estimated fair value as of the spinoff date, determined in accordance with applicable accounting rules under GAAP. See Note 8 to the Financial Statements for additional information.

(c) See Note 4 to the Financial Statements for information on the Equity Units' impact on the calculation of diluted EPS.

The following after-tax gains (losses), in total, which management considers special items, impacted PPL's results for the periods ended September 30. See PPL's "Results of Operations - Segment Earnings" for details of each segment's special items.

	Three Months						Nine Months
	2015		2014		$ Change		2015		2014		$ Change
U.K. Regulated	$	54	$	111	$	(57)	$	40	$	20	$	20
Kentucky Regulated		(1)		(1)				(13)				(13)
Pennsylvania Regulated				2		(2)				(2)		2
Corporate and Other (a)		(3)		(18)		15		(23)		(70)		47
Discontinued Operations (b)		(4)		87		(91)		(916)		13		(929)
Total PPL	$	46	$	181	$	(135)	$	(912)	$	(39)	$	(873)

(a) The three and nine months ended September 30, 2015 primarily include transition-related costs associated with the spinoff of PPL Energy Supply. The three months ended September 30, 2014 primarily includes $11 million of separation benefits and transition-related costs associated with the spinoff of PPL Energy Supply. The nine months ended September 30, 2014 includes $49 million of deferred income tax expense to adjust valuation allowances that were previously supported by the future earnings of PPL Energy Supply, $11 million of separation benefits and transition-related costs associated with the spinoff of PPL Energy Supply. See Note 8 for additional information on the spinoff.

(b) As a result of the spinoff of PPL Energy Supply, substantially representing PPL's former Supply segment, the earnings of the Supply segment are included in Discontinued Operations and considered to be a special item. The nine months ended September 30, 2015 includes an $879 million charge reflecting the difference between PPL's recorded value for the Supply segment and its estimated fair value as of the spinoff date, determined in accordance with applicable accounting rules under GAAP. See Note 8 to the Financial Statements for additional information.

2015 Outlook

(PPL)

Excluding special items, higher earnings are expected in 2015 compared with 2014, after adjusting 2014 to reflect the impact of dissynergies in the Corporate and Other category related to the spinoff of PPL Energy Supply. This increase is primarily attributable to increases in the U.K. Regulated and Kentucky Regulated segments and lower Corporate and Other charges.

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The following projections and factors underlying these projections (on an after-tax basis) are provided for PPL's segments and the Corporate and Other category and the related Registrants.

(PPL's U.K. Regulated Segment)

Excluding special items, higher earnings are projected in 2015 compared with 2014, primarily driven by lower income taxes and lower depreciation expense, partially offset by lower utility revenue from a price decrease due to the commencement of RIIO-ED1 effective April 1, 2015. The remaining 2015 foreign currency earnings exposure for this segment is fully hedged at an average rate of $1.54 per British pound sterling.

(PPL's Kentucky Regulated Segment and LKE, LG&E and KU)

Excluding special items, higher earnings are projected in 2015 compared with 2014, primarily driven by electric and gas base rate increases effective July 1, 2015, and returns on additional environmental capital investments, partially offset by higher operation and maintenance expense, higher depreciation and higher financing costs.

(PPL's Pennsylvania Regulated Segment and PPL Electric)

Excluding special items, lower earnings are projected in 2015 compared with 2014, primarily driven by higher operation and maintenance expense and higher depreciation expense, partially offset by higher transmission and distribution margins.

(PPL's Corporate and Other Category)

Excluding special items, lower costs are projected in 2015 compared with 2014, after adjusting 2014 to reflect the impact of dissynergies in the Corporate and Other category related to the spinoff of PPL Energy Supply, primarily driven by cost reductions resulting from corporate restructuring efforts and lower income taxes.

(All Registrants)

Earnings in future periods are subject to various risks and uncertainties. See "Forward-Looking Information," the rest of this Item 2, Notes 6 and 10 to the Financial Statements and "Item 1A. Risk Factors" in this Form 10-Q (as applicable) and "Item 1. Business" and "Item 1A. Risk Factors" in the Registrants' 2014 Form 10-K for a discussion of the risks, uncertainties and factors that may impact future earnings.

Other Financial and Operational Developments

Regulatory Requirements

(PPL, LKE, LG&E and KU)

The businesses of LKE, LG&E and KU are subject to extensive federal, state and local environmental laws, rules and regulations, including those pertaining to CCRs, GHG, ELGs, MATS and the Clean Power Plan. See "Financial Condition - Environmental Matters" below for additional information on the CCRs requirements and Note 10 to the Financial Statements for a discussion of the other significant environmental matters. These and other stringent environmental requirements have led PPL, LKE, LG&E and KU to retire approximately 800 megawatts of their coal-fired generating plants in Kentucky. In September 2015, KU retired two coal-fired units, with a combined summer capacity rating of 161 MW, at the Green River plant. LG&E retired a 240 MW coal-fired unit in March 2015 and two additional coal-fired units, with a combined summer capacity rating of 323 MW, in June 2015 at the Cane Run plant. The retirement of these units is not expected to have a material impact on the financial condition or results of operations of PPL, LKE, LG&E and KU.

Also as a result of the environmental requirements discussed above, LKE projects $2.2 billion ($1.1 billion each at LG&E and KU) in environmental capital investment over the next five years.

(All Registrants)

The Registrants cannot predict the impact that future regulatory requirements may have on their financial condition or results of operations.

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(PPL)

Spinoff of PPL Energy Supply

In June 2014, PPL and PPL Energy Supply executed definitive agreements with affiliates of Riverstone to spin off PPL Energy Supply and immediately combine it with Riverstone's competitive power generation businesses to form a new, stand-alone, publicly traded company named Talen Energy. In June 2015, the spinoff was completed. See Note 8 to the Financial Statements for additional information relating to the transaction.

Loss on Spinoff

In conjunction with the accounting for the spinoff, PPL evaluated whether the fair value of the Supply segment's net assets was less than the carrying value as of the June 1, 2015 spinoff date.

PPL considered several valuation methodologies to derive a fair value estimate of its Supply segment at the spinoff date. These methodologies included considering the closing "when-issued" Talen Energy market value on June 1, 2015 (the spinoff date), adjusted for the proportional share of the equity value attributable to the Supply segment, as well as the valuation methods consistently used in PPL's goodwill impairment assessments - an income approach using a discounted cash flow analysis of the Supply segment and an alternative market approach considering market multiples of comparable companies.

Although the market value of Talen Energy approach utilized the most observable inputs of the three approaches, PPL considered certain limitations of the "when-issued" trading market for the spinoff transaction including the short trading duration, lack of liquidity in the market and anticipated initial Talen stock ownership base selling pressure, among other factors, and concluded that these factors limit this input being solely determinative of the fair value of the Supply segment. As such, PPL also considered the other valuation approaches in estimating the overall fair value, but ultimately assigned the highest weighting to the Talen Energy market value approach.

The following table summarizes PPL's fair value analysis:

			Weighted
			Fair Value
Approach	Weighting		(in billions)
Talen Energy Market Value	50%	$	1.4
Income/Discounted Cash Flow	30%		1.1
Alternative Market (Comparable Company)	20%		0.7
Estimated Fair Value		$	3.2

A key assumption included in the fair value estimate is the application of a control premium of 25% in the two market approaches. PPL concluded it was appropriate to apply a control premium in these approaches as the goodwill impairment testing guidance was followed in determining the estimated fair value of the Supply segment which has historically been a reporting unit for PPL. This guidance provides that the market price of an individual security (and thus the market capitalization of a reporting unit with publically traded equity securities) may not be representative of the fair value of the reporting unit. This guidance also indicates that substantial value may arise to a controlling shareholder from the ability to take advantage of synergies and other benefits that arise from control over another entity, and that the market price of a Company's individual share of stock does not reflect this additional value to a controlling shareholder. Therefore, the quoted market price need not be the sole measurement basis for determining the fair value, and including a control premium is appropriate in measuring the fair value of a reporting unit.

In determining the control premium, PPL reviewed premiums received during the last five years in market sales transactions obtained from observable independent power producer and hybrid utility transactions greater than $1 billion. Premiums for these transactions ranged from 5% to 42% with a median of approximately 25%. Given these metrics, PPL concluded a control premium of 25% to be reasonable for both of the market valuation approaches used.

Assumptions used in the discounted cash flow analysis included forward energy prices, forecasted generation, and forecasted operation and maintenance expenditures that were consistent with assumptions used in the Energy Supply portion of the recent Talen Energy business planning process and a market participant discount rate.

Using these methodologies and weightings, PPL determined the estimated fair value of the Supply segment (classified as Level 3) was below its carrying value of $4.1 billion and recorded a loss on the spinoff of $879 million in the second quarter

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of 2015, which is reflected in discontinued operations and is nondeductible for tax purposes. This amount served to reduce the basis of the net assets accounted for as a dividend at the June 1, 2015 spinoff date.

Costs of Spinoff

Following the announcement of the transaction to form Talen Energy as discussed in "Business Strategy" above, efforts were initiated to identify the appropriate staffing for Talen Energy and for PPL and its subsidiaries following completion of the spinoff.  Organizational plans were substantially completed in 2014. The new organizational plans identified the need to resize and restructure the organizations and as a result, in 2014, estimated charges for employee separation benefits were recorded. See Note 8 in the 2014 Form 10-K for additional information. The separation benefits include cash severance compensation, lump sum COBRA reimbursement payments and outplacement services.  Most separations and payment of separation benefits are expected to be completed by the end of 2015. At September 30, 2015 and December 31, 2014, the recorded liabilities related to the separation benefits were $11 million and $21 million, which are included in "Other current liabilities" on the Balance Sheets.

Additional employee-related costs incurred primarily include accelerated stock-based compensation and prorated performance-based cash incentive and stock-based compensation awards, primarily for PPL Energy Supply employees and for PPL Services employees who became PPL Energy Supply employees in connection with the transaction. PPL Energy Supply recognized $24 million of these costs at the spinoff closing date which are reflected in discontinued operations.

PPL recorded $44 million of third-party costs related to this transaction during the nine months ended September 30, 2015. Of these costs, $31 million were primarily for bank advisory, legal and accounting fees to facilitate the transaction, and are reflected in discontinued operations. An additional $13 million of consulting and other costs were incurred during the nine months ended September 30, 2015 related to the formation of the Talen Energy organization and to reconfigure the remaining PPL service functions. These costs are primarily recorded in "Other operation and maintenance" on the Statement of Income. No significant additional third-party costs are expected to be incurred. PPL recorded $5 million and $21 million of third-party costs related to this transaction during the three and nine months ended September 30, 2014.

At the close of the transaction, $72 million ($42 million after-tax) of cash flow hedges, primarily unamortized losses on PPL interest rate swaps recorded in AOCI and designated as cash flow hedges of PPL Energy Supply's future interest payments, were reclassified into earnings and reflected in discontinued operations.

As a result of the spinoff announcement in June 2014, PPL recorded $3 million and $49 million of deferred income tax expense during the three and nine months ended September 30, 2014, to adjust valuation allowances on deferred tax assets primarily for state net operating loss carryforwards that were previously supported by the future earnings of PPL Energy Supply.

Discontinued Operations

The operations of the Supply segment are included in "Income (Loss) from Discontinued Operations (net of income taxes)" on the Statements of Income.

The assets and liabilities of PPL's Supply segment for all periods prior to the spinoff are included in "Current assets of discontinued operations", "Noncurrent assets of discontinued operations", "Current liabilities of discontinued operations" and "Noncurrent liabilities of discontinued operations" on PPL's Balance Sheet.

Net assets, after recognition of the loss on spinoff, of $3.2 billion were distributed to PPL shareowners on June 1, 2015, as a result of the completion of the spinoff of PPL Energy Supply.

RIIO-ED1

On April 1, 2015, the RIIO-ED1 eight-year price control period commenced for WPD's four DNOs. In February 2014, Ofgem published formal confirmation that WPD's Business Plans submitted by its four DNOs under RIIO-ED1 were accepted as submitted, or "fast-tracked." Fast tracking affords several benefits to the WPD DNOs, including the ability to collect additional revenue equivalent to 2.5% of total annual expenditures during the eight-year price control period, or approximately $43 million annually, greater revenue certainty and a higher level of cost savings retention. See "Item 1. Business - Segment Information - U.K. Regulated Segment" of PPL's 2014 Form 10-K for additional information on RIIO-ED1.

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Depreciation

Effective January 1, 2015, after completing a review of the useful lives of its distribution network assets, WPD extended the weighted average useful lives of these assets to 69 years from 55 years. For the three and nine months ended September 30, 2015, this change in useful lives resulted in lower depreciation of $22 million ($17 million after-tax or $0.03 per share) and $64 million ($50 million after-tax or $0.08 per share). It is expected to result in an annual reduction in depreciation of approximately $84 million ($66 million after-tax or $0.10 per share) in 2015.

IRS Audits for 1998 - 2011

In February 2015, PPL and the IRS Appeals division reached a settlement on the amount of PPL's refund from its open audits for the years 1998 - 2011. In April 2015, PPL was notified that the Joint Committee on Taxation approved PPL's settlement. For the nine months ended September 30, 2015, PPL recorded a tax benefit of $24 million. Of this amount, $12 million is reflected in continuing operations.

(PPL and PPL Electric)

Rate Case Proceedings

On March 31, 2015, PPL Electric filed a request with the PUC for an increase in its annual distribution revenue requirement of approximately $167.5 million.  The application was based on a fully projected future test year of January 1, 2016 through December 31, 2016. On September 3, 2015, PPL Electric filed with the PUC Administrative Law Judge a petition for approval of a settlement agreement under which PPL Electric would be permitted to increase its annual distribution rates by $124 million, effective January 1, 2016. On October 5, 2015, the Administrative Law Judge issued a recommended decision approving the settlement agreement. The PUC is expected to issue its final order in December 2015.

Concurrently, PPL Electric filed a petition requesting a waiver of the DSIC cap of 5% of billed revenues and approval to increase the maximum allowable DSIC from 5% to 7.5% for service rendered after January 1, 2016. PPL Electric filed the petition concurrently with its 2015 rate case and the Administrative Law Judge granted PPL Electric's request to consolidate these two proceedings. Under the terms of the settlement agreement discussed above, PPL Electric agreed to withdraw its DSIC waiver petition without prejudice to filing it at a later date.

(PPL, LKE and KU)

FERC Wholesale Formula Rates

In September 2013, KU filed an application with the FERC to adjust the formula rate under which KU provides wholesale requirements power sales to 12 municipal customers.  Among other changes, the application requests an amended formula whereby KU would charge cost-based rates with a subsequent true-up to actual costs, replacing the current formula which does not include a true-up.  KU's application proposed an authorized return on equity of 10.7%.  Certain elements, including the new formula rate, became effective April 23, 2014, subject to refund.  In April 2014, nine municipalities submitted notices of termination, under the original notice period provisions, to cease taking power under the wholesale requirements contracts.  Such terminations are to be effective in 2019, except in the case of one municipality with a 2017 effective date.  In addition, a tenth municipality has become a transmission-only customer as of June 2015.  In July 2014, KU agreed on settlement terms with the two municipal customers that did not provide termination notices and filed the settlement proposal with the FERC for its approval.  In August 2014, the FERC issued an order on the interim settlement agreement allowing the proposed rates to become effective pending a final order.  If approved, the settlement agreement will resolve the rate case with respect to these two municipalities, including approval of the formula rate with a true-up provision and authorizing a return on equity of 10% or the return on equity awarded to other parties in this case, whichever is lower.  In August 2015, KU filed a partial settlement agreement with the nine terminating municipalities, which, if approved by FERC, would resolve all but one open matter with one municipality, including providing for certain refunds, approving the formula rate with a true-up provision, and authorizing a 10.25% return on equity.  A single remaining unresolved issue with one terminating municipality is in FERC litigation proceedings.  KU cannot predict the ultimate outcome of these FERC proceedings regarding its wholesale power agreements with the municipalities, but does not currently anticipate significant remaining refunds beyond amounts already recorded.

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(PPL, LKE, LG&E and KU)

Rate Case Proceedings

On June 30, 2015, the KPSC approved a rate case settlement agreement providing for increases in the annual revenue requirements associated with KU base electricity rates of $125 million and LG&E base gas rates of $7 million.  The annual revenue requirement associated with base electricity rates at LG&E was not changed.  Although the settlement did not establish a specific return on equity with respect to the base rates, an authorized 10% return on equity will be utilized in the ECR and GLT mechanisms.  The settlement agreement provides for deferred recovery of costs associated with Green River Units 3 and 4 through their retirement.  The new regulatory asset will be amortized over three years. The settlement also provides regulatory asset treatment for the difference between pension expense calculated in accordance with LG&E and KU's pension accounting policy and pension expense using a 15 year amortization period for actuarial gains and losses. The new rates and all elements of the settlement became effective July 1, 2015.

(LKE and KU)

On June 30, 2015, KU filed an application with the VSCC to increase annual Virginia base electricity revenue by approximately $7.2 million, representing an increase of 10.1%. KU's application is based on an authorized 10.5% return on equity. Public meetings were held during September 2015 and a hearing in the matter may be held during 2015. Subject to regulatory review and approval, new rates would become effective April 1, 2016.

Results of Operations

(PPL)

The discussion for PPL provides a review of results by reportable segment. The "Margins" discussion provides explanations of non-GAAP financial measures (Kentucky Gross Margins and Pennsylvania Gross Delivery Margins) and a reconciliation of non-GAAP financial measures to "Operating Income." The "Statement of Income Analysis" discussion addresses significant changes in principal line items on PPL's Statements of Income, comparing the three and nine months ended September 30, 2015 with the same periods in 2014. "Segment Earnings, Margins and Statement of Income Analysis" is presented separately for PPL.

Tables analyzing changes in amounts between periods within "Segment Earnings" and "Statement of Income Analysis" are presented on a constant U.K. foreign currency exchange rate basis, where applicable, in order to isolate the impact of the change in the exchange rate on the item being explained. Results computed on a constant U.K. foreign currency exchange rate basis are calculated by translating current year results at the prior year weighted-average U.K. foreign currency exchange rate.

(Subsidiary Registrants)

The discussion for each of PPL Electric, LKE, LG&E and KU provides a summary of earnings. The "Margins" discussion includes a reconciliation of non-GAAP financial measures to "Operating Income" and "Statement of Income Analysis" addresses significant changes in principal line items on the Statements of Income comparing the three and nine months ended September 30, 2015 with the same periods in 2014. "Earnings, Margins and Statement of Income Analysis" is presented separately for PPL Electric, LKE, LG&E and KU.

(All Registrants)

The results for interim periods can be disproportionately influenced by numerous factors and developments and by seasonal variations. As such, the results of operations for interim periods do not necessarily indicate results or trends for the year or future periods.

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PPL: Segment Earnings, Margins and Statement of Income Analysis

Segment Earnings

U.K. Regulated Segment

The U.K. Regulated segment consists of PPL Global which primarily includes WPD's regulated electricity distribution operations, the results of hedging the translation of WPD's earnings from British pound sterling into U.S. dollars, and certain costs, such as U.S. income taxes, administrative costs, and allocated financing costs. The U.K. Regulated segment represents 68% of PPL's Income from Continuing Operations After Income Taxes for the nine months ended September 30, 2015 and 42% of PPL's assets at September 30, 2015.

Net Income for the periods ended September 30 includes the following results.

		Three Months						Nine Months
		2015		2014			$ Change	2015		2014		$ Change
Operating revenues		$	552	$	644	$	(92)	$	1,836	$	1,964	$	(128)
Other operation and maintenance			118		118				332		358		(26)
Depreciation			63		86		(23)		181		256		(75)
Taxes, other than income			38		41		(3)		111		119		(8)
	Total operating expenses		219		245		(26)		624		733		(109)
Other Income (Expense) - net			77		136		(59)		65		40		25
Interest Expense			109		115		(6)		312		352		(40)
Income Taxes			52		125		(73)		151		231		(80)
Net Income		$	249	$	295	$	(46)	$	814	$	688	$	126

The changes in the results of the U.K. Regulated segment between these periods were due to the factors set forth below, which reflect certain items that management considers special and the effects of movements in foreign currency exchange, including the effects of foreign currency hedge contracts, on separate lines within the table and not in their respective Statement of Income line items. See below for additional detail of the special items.

		Three Months		Nine Months
U.K.
	Utility revenues	$	(46)	$	(33)
	Other operation and maintenance		(12)		(5)
	Depreciation		17		59
	Interest expense		(2)		4
	Other		1
	Income taxes		13		13
U.S.
	Interest expense and other		1		13
	Income taxes		35		54
Foreign currency exchange, after-tax			4		1
Special items, after-tax			(57)		20
Total		$	(46)	$	126

U.K.

· Lower utility revenues for the three month period primarily due to $69 million from the April 1, 2015 price decrease primarily resulting from the commencement of RIIO-ED1, partially offset by $6 million of higher volume primarily due to weather and $14 million from reduced revenues in 2014 primarily due to a required £5 per residential customer reduction for the regulatory year that began April 1, 2014. This reduction will be included in revenue in the regulatory year beginning April 1, 2016.

· Lower utility revenues for the nine month period primarily due to $100 million from the April 1, 2015 price decrease primarily resulting from the commencement of RIIO-ED1, partially offset by $46 million from the April 1, 2014 price increase and $7 million of higher volume primarily due to weather.

· Lower depreciation expense for the three and nine month periods primarily due to a $22 million and $64 million impact of an extension of the network asset lives. See Note 2 to the Financial Statements for additional information.

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· Lower income taxes for the three month period primarily due to lower pre-tax income.

U.S.

· Lower income taxes for the three and nine month periods primarily due to decreases in taxable dividends.

The following after-tax gains (losses), which management considers special items, also impacted the U.K. Regulated segment's results during the periods ended September 30.

	Income Statement	Three Months				Nine Months
	Line Item	2015		2014		2015		2014
	Other Income
Foreign currency-related economic hedges, net of tax of ($29), ($60), ($10), ($39) (a)	(Expense)-net	$	54	$	111	$	20	$	72
	Other operation
WPD Midlands acquisition-related adjustment, net of tax of $0, $0, ($1), $0	and maintenance						2
Change in WPD line loss accrual, net of tax of $0, $0, $0, $13(b)	Operating Revenues								(52)
Settlement of certain income tax positions (c)	Income Taxes						18
Total		$	54	$	111	$	40	$	20

(a) Represents unrealized gains (losses) on contracts that economically hedge anticipated GBP denominated earnings.

(b) In March 2014, Ofgem issued its final decision on the DPCR4 line loss incentives and penalties mechanism. As a result, WPD increased its existing liability by $65 million, pre-tax, for over-recovery of line losses. See Note 6 to the Financial Statements for additional information.

(c) Relates to the April 2015 settlement of open audits for the years 1998-2011. See Note 5 to the Financial Statements for additional information.

Kentucky Regulated Segment

The Kentucky Regulated segment consists primarily of LKE's regulated electricity generation, transmission and distribution operations of LG&E and KU, as well as LG&E's regulated distribution and sale of natural gas. In addition, certain financing costs are allocated to the Kentucky Regulated segment. The Kentucky Regulated segment represents 22% of PPL's Income from Continuing Operations After Income Taxes for the nine months ended September 30, 2015 and 36% of PPL's assets at September 30, 2015.

Net Income for the periods ended September 30 includes the following results.

		Three Months						Nine Months
		2015		2014		$ Change		2015		2014		$ Change
Operating revenues		$	801	$	753	$	48	$	2,414	$	2,409	$	5
Fuel			228		240		(12)		695		748		(53)
Energy purchases			23		24		(1)		143		184		(41)
Other operation and maintenance			202		197		5		625		609		16
Depreciation			97		89		8		286		262		24
Taxes, other than income			14		13		1		43		39		4
	Total operating expenses		564		563		1		1,792		1,842		(50)
Other Income (Expense) - net			(2)		(2)				(8)		(6)		(2)
Interest Expense			56		56				167		164		3
Income Taxes			68		50		18		180		150		30
Net Income		$	111	$	82	$	29	$	267	$	247	$	20

The changes in the results of the Kentucky Regulated segment between these periods were due to the factors set forth below, which reflect amounts classified as Kentucky Gross Margins and certain items that management considers special on separate lines within the table and not in their respective Statement of Income line items. See below for additional detail of the special items.

	Three Months		Nine Months
Kentucky Gross Margins	$	50	$	75
Other operation and maintenance		(4)		(14)
Depreciation		1		(4)
Taxes, other than income				(2)
Other income (expense) - net				3
Interest expense				(3)
Income taxes		(18)		(22)
Special items				(13)
Total	$	29	$	20

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· See "Margins - Changes in Non-GAAP Financial Measures" for an explanation of Kentucky Gross Margins.

· Higher other operation and maintenance for the nine month period primarily due to $11 million of higher pension expense attributed to the change in mortality tables and lower discount rate in 2015 and $11 million of higher costs directly related to the Cane Run units' retirements consisting of an inventory write-down and separation benefits, partially offset by $7 million of lower storm expenses and $4 million of lower bad debt expense.

· Higher income taxes for the three and nine month periods primarily due to higher pre-tax income.

The following after-tax gains (losses), which management considers special items, also impacted the Kentucky Regulated

segment's results during the periods ended September 30.

	Income Statement	Three Months				Nine Months
	Line Item	2015		2014		2015		2014
EEI adjustments, net of tax of $0, $0, $0, $0 (a)	Other Income (Expense)-net			$	(1)
LKE acquisition-related adjustment (b)	Other Income (Expense)-net	$	(1)			$	(5)
Certain valuation allowances (c)	Income Taxes						(8)
Total		$	(1)	$	(1)	$	(13)

(a) Recorded by KU.

(b) Recorded at PPL and allocated to the Kentucky Regulated segment. The amount represents a settlement between E.ON AG (a German corporation and the indirect parent of E.ON US Investments Corp., the former parent of LKE) and PPL for a tax matter.

(c) Recorded at LKE and represents a valuation allowance against tax credits expiring in 2016 and 2017 that are more likely than not to expire before being utilized.

Pennsylvania Regulated Segment

The Pennsylvania Regulated segment includes the regulated electricity transmission and distribution operations of PPL Electric. The Pennsylvania Regulated segment represents 16% of PPL's Income from Continuing Operations After Income Taxes for the nine months ended September 30, 2015 and 21% of PPL's assets at September 30, 2015.

Net Income for the periods ended September 30 includes the following results.

		Three Months						Nine Months
		2015		2014		$ Change		2015		2014		$ Change
Operating revenues		$	519	$	477	$	42	$	1,625	$	1,518	$	107
Energy purchases
	External		154		128		26		519		431		88
	Intersegment				20		(20)		14		68		(54)
Other operation and maintenance			162		133		29		435		402		33
Depreciation			55		47		8		158		137		21
Taxes, other than income			27		25		2		87		80		7
	Total operating expenses		398		353		45		1,213		1,118		95
Other Income (Expense) - net			1		3		(2)		5		6		(1)
Interest Expense			32		33		(1)		96		91		5
Income Taxes			35		37		(2)		130		121		9
Net Income		$	55	$	57	$	(2)	$	191	$	194	$	(3)

The changes in the components of the Pennsylvania Regulated segment's results between these periods were due to the factors set forth below, which reflect amounts classified as Pennsylvania Gross Delivery Margins and a certain item that management considers special on separate lines and not in their respective Statement of Income line items. See below for additional detail of the special items.

	Three Months		Nine Months
Pennsylvania Gross Delivery Margins	$	30	$	56
Other operation and maintenance		(19)		(25)
Depreciation		(8)		(21)
Interest expense		1		(5)
Taxes other than income		(2)		(1)
Other income (expense) - net		(3)		(1)
Income taxes		1		(8)
Special item, after-tax		(2)		2
Total	$	(2)	$	(3)

87

· See "Margins - Changes in Non-GAAP Financial Measures" for an explanation of Pennsylvania Gross Delivery Margins.

· Higher other operation and maintenance expense for the three month period primarily due to $10 million of higher corporate service costs and $5 million of higher bad debt expenses.

· Higher other operation and maintenance expense for the nine month period primarily due to $19 million of higher corporate service costs and $7 million of higher bad debt expenses, partially offset by $7 million of lower storm costs.

· Higher depreciation expense for the three and nine month periods primarily due to PP&E additions, net, related to the ongoing efforts to ensure the reliability of the delivery system and the replacement of aging infrastructure.

The following after-tax (loss), which management considers a special item, also impacted the Pennsylvania Regulated segment's results during the periods ended September 30.

	Income Statement	Three Months			Nine Months
	Line Item	2015	2014		2015	2014
	Other operation
Separation benefits, net of tax of $0, ($1), $0, $1 (a)	and maintenance		$	2		$	(2)

(a) In June 2014, PPL Electric's largest IBEW local ratified a new three-year labor agreement. In connection with the new agreement, bargaining unit one-time voluntary retirement benefits were recorded in the second quarter of 2014 and adjusted in the third quarter of 2014.

Margins

Non-GAAP Financial Measures

Management utilizes the following non-GAAP financial measures as indicators of performance for its businesses.

· "Kentucky Gross Margins" is a single financial performance measure of the electricity generation, transmission and distribution operations of the Kentucky Regulated segment, LKE, LG&E and KU, as well as the Kentucky Regulated segment's, LKE's and LG&E's distribution and sale of natural gas. In calculating this measure, fuel, energy purchases and certain variable costs of production (recorded as "Other operation and maintenance" on the Statements of Income) are deducted from revenues. In addition, certain other expenses, recorded as "Other operation and maintenance", "Depreciation" and "Taxes, other than income" on the Statements of Income, associated with approved cost recovery mechanisms are offset against the recovery of those expenses, which are included in revenues. These mechanisms allow for direct recovery of these expenses and, in some cases, returns on capital investments and performance incentives. As a result, this measure represents the net revenues from electricity and gas operations.

· "Pennsylvania Gross Delivery Margins" is a single financial performance measure of the electricity delivery operations of the Pennsylvania Regulated segment and PPL Electric, which includes transmission and distribution activities. In calculating this measure, utility revenues and expenses associated with approved recovery mechanisms, including energy provided as a PLR, are offset with minimal impact on earnings. Costs associated with these mechanisms are recorded in "Energy purchases," "Other operation and maintenance," which is primarily Act 129 costs, and "Taxes, other than income," which is primarily gross receipts tax. This performance measure includes PLR energy purchases by PPL Electric from PPL EnergyPlus, which are reflected in "Energy purchases from affiliate" in the reconciliation tables. As a result of the spinoff of PPL Energy Supply and creation of Talen Energy on June 1, 2015, PPL EnergyPlus (renamed Talen Energy Marketing) is no longer an affiliate of PPL Electric. PPL Electric's purchases from Talen Energy Marketing subsequent to May 31, 2015 are reflected in "Energy Purchases" in the reconciliation tables. This measure represents the net revenues from the Pennsylvania Regulated segment's and PPL Electric's electricity delivery operations.

These measures are not intended to replace "Operating Income," which is determined in accordance with GAAP, as an indicator of overall operating performance. Other companies may use different measures to analyze and report their results of operations. Management believes these measures provide additional useful criteria to make investment decisions. These performance measures are used, in conjunction with other information, by senior management and PPL's Board of Directors to manage the operations and analyze actual results compared with budget.

88

Reconciliation of Non-GAAP Financial Measures

The following table contains the components from the Statement of Income that are included in the non-GAAP financial measures and a reconciliation to PPL's "Operating Income" for the periods ended September 30.

				2015 Three Months									2014 Three Months
				Kentucky		PA Gross							Kentucky		PA Gross
				Gross		Delivery					Operating		Gross		Delivery					Operating
				Margins		Margins		Other (a)			Income (b)		Margins		Margins		Other (a)			Income (b)
Operating Revenues				$	801	$	519	$	558	(c)	$	1,878	$	753	$	477	$	649	(c)	$	1,879
Operating Expenses
	Fuel				228							228		240							240
	Energy purchases				23		154					177		24		128		21			173
	Energy purchases from affiliate															20		(20)
	Other operation and
		maintenance			28		31		423			482		27		25		415			467
	Depreciation				11				215			226		2				231			233
	Taxes, other than income				1		25		53			79				25		53			78
			Total Operating Expenses		291		210		691			1,192		293		198		700			1,191
Total				$	510	$	309	$	(133)		$	686	$	460	$	279	$	(51)		$	688

				2015 Nine Months									2014 Nine Months
				Kentucky		PA Gross							Kentucky		PA Gross
				Gross		Delivery					Operating		Gross		Delivery					Operating
				Margins		Margins		Other (a)			Income (b)		Margins		Margins		Other (a)			Income (b)
Operating Revenues				$	2,414	$	1,625	$	1,850	(c)	$	5,889	$	2,409	$	1,518	$	1,979	(c)	$	5,906
Operating Expenses
	Fuel				695							695		748							748
	Energy purchases				143		519		14			676		184		431		68			683
	Energy purchases from affiliate						14		(14)							68		(68)
	Other operation and
		maintenance			77		84		1,244			1,405		75		74		1,233			1,382
	Depreciation				26				632			658		6				682			688
	Taxes, other than income				3		81		157			241		1		74		163			238
			Total Operating Expenses		944		698		2,033			3,675		1,014		647		2,078			3,739
Total				$	1,470	$	927	$	(183)		$	2,214	$	1,395	$	871	$	(99)		$	2,167

(a) Represents amounts excluded from Margins.

(b) As reported on the Statements of Income.

(c) Primarily represents WPD's operating revenue.

Changes in Non-GAAP Financial Measures

The following table shows the non-GAAP financial measures by PPL's reportable segment and by component, as applicable, for the periods ended September 30 as well as the change between periods. The factors that gave rise to the changes are described following the table.

		Three Months						Nine Months
		2015		2014		$ Change		2015		2014		$ Change
Kentucky Regulated
Kentucky Gross Margins
	LG&E	$	225	$	212	$	13	$	661	$	633	$	28
	KU		285		248		37		809		762		47
LKE		$	510	$	460	$	50	$	1,470	$	1,395	$	75

Pennsylvania Regulated
Pennsylvania Gross Delivery Margins
	Distribution	$	207	$	194	$	13	$	642	$	631	$	11
	Transmission		102		85		17		285		240		45
Total		$	309	$	279	$	30	$	927	$	871	$	56

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Kentucky Gross Margins

Kentucky Gross Margins increased for the three months ended September 30, 2015 compared with 2014 primarily due to higher base rates of $28 million ($27 million at KU and $1 million at LG&E) and returns on additional environmental capital investments of $14 million ($10 million at LG&E and $4 million at KU). The increase in base rates was the result of new rates approved by the KPSC effective July 1, 2015.

Kentucky Gross Margins increased for the nine months ended September 30, 2015 compared with 2014 primarily due to returns on additional environmental capital investments of $44 million ($29 million at LG&E and $15 million at KU) and higher base rates of $28 million ($27 million at KU and $1 million at LG&E). The increase in base rates was the result of new rates approved by the KPSC effective July 1, 2015.

Pennsylvania Gross Delivery Margins

Distribution

Distribution margins increased for the three months ended September 30, 2015 compared with 2014, primarily due to returns on additional distribution improvement capital investments of $5 million and a $4 million impact of favorable weather.

Distribution margins increased for the nine months ended September 30, 2015 compared with 2014, due to returns on additional distribution improvement capital investments of $13 million and an $11 million impact of favorable weather, partially offset by a $12 million benefit recorded in the first quarter of 2014 as a result of a change in estimate of a regulatory liability.

Transmission

Transmission margins increased for the three and nine month periods ended September 30, 2015 compared with 2014 primarily due to increased capital investments.

Statement of Income Analysis --
Operating Revenues
The increase (decrease) in operating revenues for the periods ended September 30, 2015 compared with 2014 was due to:
		Three Months		Nine Months
Domestic:
	PPL Electric (a)	$	44	$	109
	LKE (b)		48		5
	Other		(1)		(3)
	Total Domestic		91		111
U.K.:
	Price (c)		(54)		(45)
	Foreign currency exchange rates (d)		(48)		(158)
	Volume		6		7
	Line loss accrual adjustments (e)				65
	Other		4		3
	Total U.K.		(92)		(128)
Total		$	(1)	$	(17)

(a) See "Pennsylvania Gross Delivery Margins" for further information.

(b) See "Kentucky Gross Margins" for further information.

(c) The decrease for the three month period was primarily due to a price decrease effective April 1, 2015 resulting from the commencement of RIIO-ED1. The decrease for the nine month period was due to a price decrease effective April 1, 2015, partially offset by a price increase effective April 1, 2014.

(d) The offsetting impacts from foreign currency hedging instruments are recorded in "Other Income (Expense)-net."

(e) The increase for the nine month period was due to unfavorable accrual adjustments in 2014 based on Ofgem's final decision on the DPCR4 line loss incentives and penalties. See Note 6 to the Financial Statements for additional information.

Certain Operating Revenues and Expenses Included in "Margins"

The following Statement of Income line items and their related increase (decrease) during the periods ended September 30, 2015 compared with 2014 are included above within "Margins" and are not discussed separately.

90

	Three Months		Nine Months
Fuel	$	(12)	$	(53)
Energy purchases		4		(7)

Other Operation and Maintenance
The increase (decrease) in other operation and maintenance for the periods ended September 30, 2015 compared with 2014 was due to:
		Three Months		Nine Months
Domestic:
	Cane Run retired units			$	11
	Pension	$	2		11
	Bad Debts		6		10
	Act 129		5		8
	Other		(1)		7
U.K.:
	Network maintenance				(15)
	Foreign currency exchange rates (a)		(9)		(26)
	National Grid exit charges		6		10
	Pension		(3)		(10)
	Engineering management		3		12
	Other		6		5
Total		$	15	$	23

(a) The offsetting impacts from foreign currency hedging instruments are recorded in "Other Income (Expense)- net."

Depreciation

Depreciation decreased by $7 million and $30 million for the three and nine months ended September 30, 2015 compared with 2014, primarily due to a $22 million and $64 million reduction from an extension of the WPD network asset lives partially offset by additions to PP&E, net primarily at the domestic utilities. See Note 2 to the Financial Statements for additional information on the extension of WPD network asset lives.

Other Income (Expense) - net

Other income (expense) - net decreased by $61 million and increased by $28 million for the three and nine months ended September 30, 2015 compared with 2014, primarily due to changes in realized and unrealized gains on foreign currency contracts to economically hedge GBP denominated earnings from WPD.

Interest Expense
The increase (decrease) in interest expense for the periods ended September 30, 2015 compared with 2014 was due to:
	Three Months		Nine Months
Long-term debt interest expense (a)	$	10	$	38
Loss on extinguishment of debt (b)				(9)
Capitalized interest and debt component of AFUDC		6		4
Foreign currency exchange rates (c)		(8)		(25)
Total	$	8	$	8

(a) Both periods in 2015 include interest expense related to certain PPL Energy Funding debt that was previously associated with PPL's Supply segment and included in "Income (Loss) from Discontinued Operations (net of income taxes)" in 2014.

(b) In March 2014, PPL Capital Funding remarketed and exchanged junior subordinated notes that were originally issued in April 2011 as a component of PPL's 2011 Equity Units.

(c) The offsetting impacts from foreign currency hedging instruments are recorded in "Other Income (Expense) - net."

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Income Taxes

The increase (decrease) in income taxes for the periods ended September 30, 2015 compared with 2014 was due to:

	Three Months		Nine Months
Change in pre-tax income at current period tax rates	$	(14)	$	32
Valuation allowance adjustments (a)		(3)		(41)
Federal and state tax reserve adjustments (b)		(9)		(21)
U.S. income tax on foreign earnings net of foreign tax credit (c)		(26)		(48)
Foreign tax return adjustments				(4)
Intercompany interest on U.K. financing entities		(4)		(11)
Reduction in U.K. income tax rates		(2)		(8)
Other		1		(1)
Total	$	(57)	$	(102)

(a) As a result of the spinoff announcement, PPL recorded deferred income tax expense of $3 million and $49 million during the three and nine months ended September 30, 2014 to adjust valuation allowances on deferred tax assets primarily for state net operating loss carryforwards that were previously supported by the future earnings of PPL Energy Supply.

(b) During the three and nine months ended September 30, 2015, PPL recorded a $9 million tax benefit related to a planned amendment of a prior period tax return.

During the nine months ended September 30, 2015, PPL recorded a $12 million tax benefit to adjust the settled refund amount approved by the Joint Committee on Taxation for the open audit years 1998-2011.

(c) During the three and nine months ended September 30, 2015, PPL recorded lower income tax expense due to a decrease in taxable dividends.

See Note 5 to the Financial Statements for additional information.

Income (Loss) from Discontinued Operations (net of income taxes)

Income (Loss) from Discontinued Operations (net of income taxes) includes the results of operations of PPL Energy Supply, which was spun off from PPL on June 1, 2015 and substantially represents PPL's former Supply segment. See "Discontinued Operations" in Note 8 to the Financial Statements for additional information.

PPL Electric: Earnings, Margins and Statement of Income Analysis

Earnings
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Net Income	$	55	$	57	$	191	$	194
Special item, gains (losses), after-tax				2				(2)

Excluding a special item, earnings decreased for the nine month period in 2015 compared with 2014 primarily due to higher depreciation expense, higher operation and maintenance expense and higher income tax expense, partially offset by higher transmission and distribution margins.

The table below quantifies the changes in the components of Net Income between these periods, which reflects amounts classified as Pennsylvania Gross Delivery Margins and an item that management considers special on separate lines within the table and not in their respective Statement of Income line items.

	Three Months		Nine Months
Pennsylvania Gross Delivery Margins	$	30	$	56
Other operation and maintenance		(19)		(25)
Depreciation		(8)		(21)
Interest expense		1		(5)
Taxes other than income		(2)		(1)
Other income (expense) - net		(3)		(1)
Income taxes		1		(8)
Special item, after-tax (a)		(2)		2
Total	$	(2)	$	(3)

(a) See PPL's "Results of Operations - Segment Earnings - Pennsylvania Regulated Segment" for details of the special item.

92

Margins

"Pennsylvania Gross Delivery Margins" is a non-GAAP financial performance measure that management utilizes as an indicator of the performance of its business. See PPL's "Results of Operations - Margins" for information on why management believes this measure is useful and for explanations of the underlying drivers of the changes between periods.

The following tables contain the components from the Statements of Income that are included in this non-GAAP financial measure and a reconciliation to "Operating Income" for the periods ended September 30.

			2015 Three Months						2014 Three Months
			PA Gross						PA Gross
			Delivery				Operating		Delivery				Operating
			Margins		Other (a)		Income (b)		Margins		Other (a)		Income (b)
Operating Revenues			$	519			$	519	$	477			$	477
Operating Expenses
	Energy purchases			154				154		128				128
	Energy purchases from affiliate									20				20
	Other operation and maintenance			31	$	131		162		25	$	108		133
	Depreciation					55		55				47		47
	Taxes, other than income			25		2		27		25				25
		Total Operating Expenses		210		188		398		198		155		353
Total			$	309	$	(188)	$	121	$	279	$	(155)	$	124

			2015 Nine Months						2014 Nine Months
			PA Gross						PA Gross
			Delivery				Operating		Delivery				Operating
			Margins		Other (a)		Income (b)		Margins		Other (a)		Income (b)
Operating Revenues			$	1,625			$	1,625	$	1,518			$	1,518
Operating Expenses
	Energy purchases			519				519		431				431
	Energy purchases from affiliate			14				14		68				68
	Other operation and maintenance			84	$	351		435		74	$	328		402
	Depreciation					158		158				137		137
	Taxes, other than income			81		6		87		74		6		80
		Total Operating Expenses		698		515		1,213		647		471		1,118
Total			$	927	$	(515)	$	412	$	871	$	(471)	$	400

(a) Represents amounts excluded from Margins.

(b) As reported on the Statements of Income.

Statement of Income Analysis --

Certain Operating Revenues and Expenses Included in "Margins"

The following Statement of Income line items and their related increase (decrease) during the periods ended September 30, 2015 compared with 2014 are included above within "Margins" and are not discussed separately.

	Three Months		Nine Months
Operating revenues	$	42	$	107
Energy purchases		26		88
Energy purchases from affiliate		(20)		(54)

Other Operation and Maintenance

The increase (decrease) in other operation and maintenance for the periods ended September 30, 2015 compared with 2014 was due to:

93

	Three Months		Nine Months
Vegetation management	$	4	$	2
Storm costs		(4)		(12)
Act 129		5		8
Bad debts		8		14
Corporate service costs		10		19
Bargaining unit one-time voluntary retirement benefits		3		(3)
Other		3		5
Total	$	29	$	33

Depreciation

Depreciation increased by $8 million and $21 million for the three and nine months ended September 30, 2015 compared with 2014, primarily due to PP&E additions, net related to the ongoing efforts to ensure the reliability of the delivery system and the replacement of aging infrastructure.

Taxes, Other Than Income

Taxes, other than income increased by $2 million and $7 million for the three and nine months ended September 30, 2015 compared with 2014, primarily due to higher Pennsylvania gross receipts tax expense as a result of an increase in retail electric revenues. This tax is included in "Pennsylvania Gross Delivery Margins."

Interest Expense

Interest expense increased by $5 million for the nine months ended September 30, 2015 compared with 2014, primarily due to the issuance of first mortgage bonds in June 2014.

Income Taxes
The increase in income taxes for the periods ended September 30, 2015 compared with 2014 was due to:
	Three Months		Nine Months
Change in pre-tax income at current period tax rates	$	(1)	$	6
Federal and state tax reserve adjustments				3
Other		(1)
Total	$	(2)	$	9

See Note 5 to the Financial Statements for additional information.

LKE: Earnings, Margins and Statement of Income Analysis

Earnings
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Net Income	$	120	$	91	$	297	$	271
Special items, gains (losses), after-tax				(1)		(8)

Excluding special items, earnings increased for the three and nine month periods in 2015 compared with 2014 primarily due to higher returns on additional environmental capital investments and higher base electricity rates effective July 1, 2015, partially offset by higher other operation and maintenance expense.

The table below quantifies the changes in the components of Net Income between these periods, which reflect amounts classified as Margins and certain items that management considers special on separate lines within the table and not in their respective Statement of Income line items.

94

	Three Months		Nine Months
Margins	$	50	$	75
Other operation and maintenance		(4)		(14)
Depreciation		1		(4)
Taxes, other than income				(2)
Other income (expense)- net				3
Interest expense		(1)		(3)
Income taxes		(18)		(21)
Special items, after-tax (a)		1		(8)
Total	$	29	$	26

(a) See PPL's "Results of Operations - Segment Earnings - Kentucky Regulated Segment" for details of special items.

Margins

"Margins" is a non-GAAP financial performance measure that management utilizes as an indicator of the performance of its business. See PPL's "Results of Operations - Margins" for an explanation of why management believes this measure is useful and the underlying drivers of the changes between periods. Within PPL's discussion, LKE's Margins are referred to as "Kentucky Gross Margins."

The following tables contain the components from the Statements of Income that are included in this non-GAAP financial measure and a reconciliation to "Operating Income" for the periods ended September 30.

			2015 Three Months						2014 Three Months
							Operating						Operating
			Margins		Other (a)		Income (b)		Margins		Other (a)		Income (b)
Operating Revenues			$	801			$	801	$	753			$	753
Operating Expenses
	Fuel			228				228		240				240
	Energy purchases			23				23		24				24
	Other operation and maintenance			28	$	174		202		27	$	170		197
	Depreciation			11		86		97		2		87		89
	Taxes, other than income			1		13		14				13		13
		Total Operating Expenses		291		273		564		293		270		563
Total			$	510	$	(273)	$	237	$	460	$	(270)	$	190

			2015 Nine Months						2014 Nine Months
							Operating						Operating
			Margins		Other (a)		Income (b)		Margins		Other (a)		Income (b)
Operating Revenues			$	2,414			$	2,414	$	2,409			$	2,409
Operating Expenses
	Fuel			695				695		748				748
	Energy purchases			143				143		184				184
	Other operation and maintenance			77	$	548		625		75	$	534		609
	Depreciation			26		260		286		6		256		262
	Taxes, other than income			3		40		43		1		38		39
		Total Operating Expenses		944		848		1,792		1,014		828		1,842
Total			$	1,470	$	(848)	$	622	$	1,395	$	(828)	$	567

(a) Represents amounts excluded from Margins.

(b) As reported on the Statements of Income.

Statement of Income Analysis --

Certain Operating Revenues and Expenses included in "Margins"

The following Statement of Income line items and their related increase (decrease) during the periods ended September 30, 2015 compared with 2014 are included above within "Margins" and are not discussed separately.

95

	Three Months		Nine Months
Operating revenues	$	48	$	5
Fuel		(12)		(53)
Energy purchases		(1)		(41)

Other Operation and Maintenance
The increase in other operation and maintenance expense for the periods ended September 30, 2015 compared with 2014 was due to:
	Three Months		Nine Months
Cane Run retired units			$	11
Pension	$	2		11
Storm costs		3		(7)
Bad debts		(2)		(4)
Coal plant operations		(1)		(3)
Other		3		8
Total	$	5	$	16

Depreciation

Depreciation increased by $8 million and $24 million for the three and nine months ended September 30, 2015 compared with 2014 primarily due to additions to PP&E, net.

Income Taxes
The increase in income taxes for the periods ended September 30, 2015, compared with 2014, was due to:
	Three Months		Nine Months
Higher pre-tax book income at current period tax rates	$	18	$	21
Certain Valuation Allowances				8
Total	$	18	$	29

LG&E: Earnings, Margins and Statement of Income Analysis

Earnings
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Net Income	$	58	$	46	$	146	$	133

Earnings increased for the three and nine month periods in 2015 compared with 2014 primarily due to higher returns on additional environmental capital investments.

The table below quantifies the changes in the components of Net Income between these periods, which reflect amounts classified as Margins on a separate line within the table and not in their respective Statement of Income line items.

	Three Months		Nine Months
Margins	$	13	$	28
Other operation and maintenance		6		(4)
Depreciation		3		4
Other income (expense) - net		(1)
Interest expense				(2)
Income taxes		(9)		(13)
Total	$	12	$	13

Margins

"Margins" is a non-GAAP financial performance measure that management utilizes as an indicator of the performance of its business. See PPL's "Results of Operations - Margins" for an explanation of why management believes this measure is useful

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and the underlying drivers of the changes between periods. Within PPL's discussion, LG&E's Margins are included in "Kentucky Gross Margins."

The following tables contain the components from the Statements of Income that are included in this non-GAAP financial measure and a reconciliation to "Operating Income" for the periods ended September 30.

			2015 Three Months						2014 Three Months
							Operating						Operating
			Margins		Other (a)		Income (b)		Margins		Other (a)		Income (b)
Operating Revenues			$	351			$	351	$	347			$	347
Operating Expenses
	Fuel			82				82		99				99
	Energy purchases, including affiliate			27				27		23				23
	Other operation and maintenance			11	$	76		87		12	$	82		94
	Depreciation			5		35		40		1		38		39
	Taxes, other than income			1		6		7				6		6
		Total Operating Expenses		126		117		243		135		126		261
Total			$	225	$	(117)	$	108	$	212	$	(126)	$	86

			2015 Nine Months						2014 Nine Months
							Operating						Operating
			Margins		Other (a)		Income (b)		Margins		Other (a)		Income (b)
Operating Revenues			$	1,121			$	1,121	$	1,170			$	1,170
Operating Expenses
	Fuel			267				267		320				320
	Energy purchases, including affiliate			146				146		178				178
	Other operation and maintenance			33	$	253		286		37	$	249		286
	Depreciation			12		110		122		2		114		116
	Taxes, other than income			2		19		21				19		19
		Total Operating Expenses		460		382		842		537		382		919
Total			$	661	$	(382)	$	279	$	633	$	(382)	$	251

(a) Represents amounts excluded from Margins.

(b) As reported on the Statements of Income.

Statement of Income Analysis --

Certain Operating Revenues and Expenses included in "Margins"

The following Statement of Income line items and their related increase (decrease) during the periods ended September 30, 2015 compared with 2014 are included above within "Margins" and are not discussed separately.

	Three Months		Nine Months
Retail and wholesale	$	15	$	(7)
Electric revenue from affiliate		(11)		(42)
Fuel		(17)		(53)
Energy purchases		(2)		(38)
Energy purchases from affiliate		6		6

Other Operation and Maintenance

The decrease in other operation and maintenance expense for the periods ended September 30, 2015 compared with 2014 was due to:

	Three Months		Nine Months
Cane Run retired units			$	11
Pension				5
Storm costs	$	1		(4)
Coal plant operations		(2)		(5)
Bad debts		(1)		(2)
Other		(5)		(5)
Total	$	(7)	$

 

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Depreciation

Depreciation increased by $6 million for the nine months ended September 30, 2015 compared with 2014 primarily due to additions to PP&E, net.

Income Taxes

Income taxes increased by $9 million and $13 million for the three and nine months ended September 30, 2015 compared with 2014 primarily due to the change in pre-tax income at current period tax rates.

KU: Earnings, Margins and Statement of Income Analysis

Earnings
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Net Income	$	72	$	56	$	189	$	173
Special item, gain (loss), after-tax				(1)

Excluding a special item, earnings increased for the three and nine month periods in 2015 compared with 2014 primarily due to higher returns on additional environmental capital investments and higher base electricity rates effective July 1, 2015, partially offset by higher other operation and maintenance expense.

The table below quantifies the changes in the components of Net Income between these periods, which reflect amounts classified as Margins and a certain item that management considers special on separate lines within the table and not in their respective Statement of Income line items.

	Three Months		Nine Months
Margins	$	37	$	47
Other operation and maintenance		(8)		(13)
Depreciation		(3)		(9)
Taxes, other than income				(2)
Other income (expense)- net				2
Interest expense		(1)
Income taxes		(10)		(9)
Special item, after-tax		1
Total	$	16	$	16

Margins

"Margins" is a non-GAAP financial performance measure that management utilizes as an indicator of the performance of its business. See PPL's "Results of Operations - Margins" for an explanation of why management believes this measure is useful and the underlying drivers of the changes between periods. Within PPL's discussion, KU's Margins are included in "Kentucky Gross Margins."

The following tables contain the components from the Statements of Income that are included in this non-GAAP financial measure and a reconciliation to "Operating Income" for the periods ended September 30.

			2015 Three Months						2014 Three Months
							Operating						Operating
			Margins		Other (a)		Income (b)		Margins		Other (a)		Income (b)
Operating Revenues			$	461			$	461	$	422			$	422
Operating Expenses
	Fuel			146				146		141				141
	Energy purchases, including affiliate			7				7		17				17
	Other operation and maintenance			17	$	91		108		14	$	83		97
	Depreciation			6		51		57		2		48		50
	Taxes, other than income					7		7				7		7
		Total Operating Expenses		176		149		325		174		138		312
Total			$	285	$	(149)	$	136	$	248	$	(138)	$	110

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			2015 Nine Months						2014 Nine Months
							Operating						Operating
			Margins		Other (a)		Income (b)		Margins		Other (a)		Income (b)
Operating Revenues			$	1,342			$	1,342	$	1,324			$	1,324
Operating Expenses
	Fuel			428				428		428				428
	Energy purchases, including affiliate			46				46		91				91
	Other operation and maintenance			44	$	277		321		38	$	264		302
	Depreciation			14		150		164		4		141		145
	Taxes, other than income			1		21		22		1		19		20
		Total Operating Expenses		533		448		981		562		424		986
Total			$	809	$	(448)	$	361	$	762	$	(424)	$	338

(a) Represents amounts excluded from Margins.

(b) As reported on the Statements of Income.

Statement of Income Analysis --

Certain Operating Revenues and Expenses included in "Margins"

The following Statement of Income line items and their related increase (decrease) during the periods ended September 30, 2015 compared with 2014 are included above within "Margins" and are not discussed separately.

	Three Months		Nine Months
Retail and wholesale	$	33	$	12
Electric revenue from affiliate		6		6
Fuel		5
Energy purchases		1		(3)
Energy purchases from affiliate		(11)		(42)

Other Operation and Maintenance
The increase in other operation and maintenance expense for the periods ended September 30, 2015 compared with 2014 was due to:
	Three Months		Nine Months
Pension	$	3	$	9
Cane Run 7 operations		2		3
Storm costs		2		(3)
Coal plant operations		1		2
Other		3		8
Total	$	11	$	19

Depreciation

Depreciation increased by $7 million and $19 million for the three and nine months ended September 30, 2015 compared with 2014 primarily due to additions to PP&E, net.

Income Taxes

Income taxes increased by $10 million and $9 million for the three and nine months ended September 30, 2015 compared with 2014 primarily due to the change in pre-tax income at current period tax rates.

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Financial Condition
The remainder of this Item 2 in this Form 10-Q is presented on a combined basis, providing information, as applicable, for all Registrants.
Liquidity and Capital Resources
(All Registrants)
The Registrants expect to continue to have adequate liquidity available through operating cash flows, cash and cash equivalents, credit facilities and commercial paper issuances.
The Registrants had the following at:
	PPL (a)		PPL Electric		LKE		LG&E		KU
September 30, 2015
Cash and cash equivalents	$	981	$	26	$	455	$	180	$	275
Short-term debt		557		68		75
Notes payable with affiliates						62
December 31, 2014
Cash and cash equivalents	$	1,399	$	214	$	21	$	10	$	11
Short-term investments		120
Short-term debt		836				575		264		236
Notes payable with affiliates						41

(a) At September 30, 2015, $199 million of cash and cash equivalents were denominated in GBP.  If these amounts would be remitted as dividends, PPL would not anticipate a material incremental U.S. tax cost.  Historically, dividends paid by foreign subsidiaries have been limited to distributions of the current year's earnings.  See Note 5 to the Financial Statements in PPL's 2014 Form 10-K for additional information on undistributed earnings of WPD.

Net cash provided by (used in) operating, investing and financing activities from continuing operations for the nine month period ended September 30, and the changes between periods, were as follows.

	PPL		PPL Electric		LKE		LG&E		KU
2015
Operating activities	$	1,688	$	373	$	895	$	469	$	510
Investing activities		(2,463)		(764)		(921)		(519)		(400)
Financing activities		231		203		460		220		154
2014
Operating activities	$	2,163	$	412	$	851	$	327	$	486
Investing activities		(2,630)		(562)		(773)		(422)		(418)
Financing activities		137		236		(66)		112		(67)
Change  - Cash Provided (Used)
Operating activities	$	(475)	$	(39)	$	44	$	142	$	24
Investing activities		167		(202)		(148)		(97)		18
Financing activities		94		(33)		526		108		221

Operating Activities

The components of the change in cash provided by (used in) operating activities from continuing operations for the nine months ended September 30, 2015 compared with 2014 were as follows.

		PPL		PPL Electric		LKE		LG&E		KU
Change - Cash Provided (Used)
	Net income	$	169	$	(3)	$	26	$	13	$	16
	Non-cash components		(56)		103		1		98		20
	Working capital		(368)		(121)		129		76		59
	Defined benefit plan funding		(106)		(13)		(23)		(13)		(16)
	Other operating activities		(114)		(5)		(89)		(32)		(55)
Total		$	(475)	$	(39)	$	44	$	142	$	24

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(PPL)

PPL had a $475 million decrease in cash provided by operating activities from continuing operations in 2015 compared with 2014.

· Income from continuing operations improved by $169 million between the periods. This was offset by $56 million less net non-cash expenses. The net $113 million increase from net income and non-cash components in 2015 compared with 2014 reflects higher margins in the Pennsylvania and Kentucky regulated segments and lower income taxes.

· The $368 million decrease in cash from changes in working capital was primarily due to a decrease in taxes payable, primarily due to higher income tax payments in 2015 and a decrease in accounts payable due to timing of payments.

· Defined benefit plan funding was $106 million higher in 2015.

· The decrease in cash from other operating activities was primarily due to payments of $88 million for the settlement of interest rate swaps.

(PPL Electric)

PPL Electric had a $39 million decrease in cash provided by operating activities in 2015 compared with 2014.

· The net increase in non-cash components of $103 million in 2015 compared with 2014 is primarily due to an increase in deferred income taxes, primarily due to a decrease in taxable income for bonus depreciation and higher depreciation expense due to PP&E additions, net related to the ongoing efforts to ensure the reliability of the delivery system and the replacement of aging infrastructure.

· The $121 million decline in cash from changes in working capital was primarily due to a decrease in accounts payable, primarily due to timing of payments and a decrease in taxes payable, primarily due to higher income tax payments in 2015, partially offset by a decrease in accounts receivable.

· Defined benefit plan funding was $13 million higher in 2015.

(LKE)

LKE had a $44 million increase in cash provided by operating activities in 2015 compared with 2014.

·LKE's non-cash components of net income included a $24 million increase in depreciation expense due to additional assets in service since the third quarter of 2014, and a $15 million increase associated with current regulatory assets net of current regulatory liabilities due to the timing of rate recovery mechanisms, partially offset by a $52 million decrease in deferred income taxes. The decrease in deferred income taxes was primarily due to recording Federal net operating losses, partially offset by an increase in accelerated tax depreciation over book depreciation.

·The increase in cash from working capital was driven primarily by a decrease in income tax receivable as a result of receiving payment from PPL for the use of excess tax depreciation deductions in 2014, a decrease in coal purchases as a result of plant retirements and Cane Run Unit 7 going in service, and a decrease in natural gas stored underground due to lower gas prices, partially offset by a decrease in accounts payable due to the timing of fuel purchases and payments, a decrease in unbilled revenue due to colder winter weather in 2014, and a decrease in taxes payable due to timing of payments.

· The decrease in cash from other operating activities was driven primarily by $88 million in payments for the settlement of interest rate swaps.

(LG&E)

LG&E had a $142 million increase in cash provided by operating activities in 2015 compared with 2014.

· LG&E's non-cash components of net income included a $62 million increase in deferred income taxes, a $21 million increase associated with current regulatory assets net of current regulatory liabilities due to the timing of rate

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recovery mechanisms, and a $6 million increase in depreciation expense due to additional assets in service since the third quarter of 2014. The increase in deferred income taxes was primarily due to an increase in accelerated tax depreciation over book depreciation of $80 million, partially offset by an increase of $16 million of net operating loss carryforwards.

· The increase in cash from working capital was driven primarily by a decrease in income tax receivable as a result of receiving payment from LKE for the use of excess tax depreciation deductions in 2014, a decrease in coal purchases as a result of plant retirements and Cane Run Unit 7 going in service, a decrease in natural gas stored underground due to lower gas prices, and a decrease in accounts receivable from affiliates due to timing of intercompany settlements associated with capital expenditures, partially offset by a decrease in accounts payable due to the timing of fuel purchases and payments, a decrease in unbilled revenue due to colder winter weather in 2014, and a decrease in taxes payable due to timing of payments.

· The decrease in cash from other operating activities was driven primarily by $44 million in payments for the settlement of interest rate swaps.

(KU)

KU had a $24 million increase in cash provided by operating activities in 2015 compared with 2014.

·KU's non-cash components of net income included a $19 million increase in depreciation expense due to additional assets in service since the third quarter of 2014, partially offset by a $6 million decrease associated with current regulatory assets net of current regulatory liabilities due to the timing of rate recovery mechanisms.

· The increase in cash from working capital was driven primarily by a decrease in income tax receivable as a result of receiving payments from LKE for the use of excess tax depreciation deductions in 2014, a decrease in coal purchases as a result of plant retirements and Cane Run Unit 7 going in service, and an increase in taxes payable due to timing of payments, partially offset by a decrease in accounts payable due to the timing of fuel purchases and payments, a decrease in unbilled revenue due to colder winter weather in 2014, and a decrease in accounts payable to affiliates due to timing of intercompany settlements associated with capital expenditures.

· The decrease in cash from other operating activities was driven primarily by $44 million in payments for the settlement of interest rate swaps.

Investing Activities

(All Registrants)

Expenditures for Property, Plant and Equipment

Investment in PP&E is the primary investing activity of the registrants. The change in expenditures for PP&E for the nine months ended September 30, 2015 compared with 2014 was as follows.

	PPL		PPL Electric		LKE		LG&E		KU
(Increase) Decrease	$	42	$	(58)	$	(85)	$	(97)	$	11

For PPL, lower project expenditures at WPD and KU were partially offset by higher project expenditures at PPL Electric and LG&E. The decrease in expenditures for WPD was primarily due to changes in foreign currency exchange rates. The decrease in expenditures for KU was related to lower expenditures for the construction of Cane Run Unit 7 which was put into commercial operation in June 2015, environmental air projects and CCR projects at KU's Ghent and E.W. Brown plants. The increase in expenditures for PPL Electric was primarily due to the Northeast Pocono reliability project, smart grid projects and other various projects, partially offset by the completion of the Susquehanna-Roseland transmission project. The increase in expenditures for LG&E was primarily due to environmental air projects at LG&E's Mill Creek plant, partially offset by lower expenditures for the construction of Cane Run Unit 7.

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Other Significant Changes in Components of Investing Activities

(PPL)

PPL received $136 million during the nine months ended September 30, 2015 from the sale of short-term investments.

(PPL Electric)

PPL Electric received $150 million during the nine months ended September 30, 2014 on notes receivable from affiliates.

Financing Activities

(All Registrants)

The components of the change in cash provided by (used in) financing activities from continuing operations for the nine months ended September 30, 2015 compared with 2014 was as follows.

		PPL		PPL Electric		LKE		LG&E		KU
Change - Cash Provided (Used)
	Long-term debt issuances/retirements, net	$	1,078	$	(286)	$	1,050	$	550	$	500
	Stock issuances/redemptions, net		(892)
	Dividends		(32)		(19)				2		6
	Capital contributions/distributions, net				180		86		(53)		(66)
	Change in short-term debt, net		(79)		88		(603)		(387)		(216)
	Other financing activities		19		4		(7)		(4)		(3)
	Total	$	94	$	(33)	$	526	$	108	$	221

For the nine months ended September 30, 2015, PPL received $94 million more cash from financing activities primarily due to the LG&E and KU long-term debt issuances in September 2015, partially offset by lower common stock issuances in 2015. The proceeds of the long-term debt issuances were used to repay short-term debt and additionally will be used for repayment of First Mortgage Bonds maturing in November 2015, and for general corporate purposes

See Note 7 to the Financial Statements in this Form 10-Q for information on 2015 short and long-term debt activity, equity transactions and PPL dividends. See the Registrants' 2014 Form 10-K for information on 2014 activity.

Credit Facilities

The Registrants maintain credit facilities to enhance liquidity, provide credit support and provide a backstop to commercial paper programs. Amounts borrowed under these credit facilities are reflected in "Short-term debt" on the Balance Sheets. At September 30, 2015, the total committed borrowing capacity and the use of that capacity under these credit facilities was as follows:

External (All Registrants)

						Letters of
						Credit
						and
		Committed				Commercial		Unused
		Capacity		Borrowed		Paper Issued		Capacity
PPL Capital Funding Credit Facilities		$	750			$	20	$	730
PPL Electric Credit Facility			300				69		231
LKE Credit Facility			75	$	75
LG&E Credit Facility			500						500
KU Credit Facilities			598				198		400
Total LKE			1,173		75		198		900
	Total U.S. Credit Facilities (a)	$	2,223	$	75	$	287	$	1,861
Total U.K. Credit Facilities (b)		£	1,055	£	266			£	789

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(a) The commitments under the U.S. credit facilities are provided by a diverse bank group, with no one bank and its affiliates providing an aggregate commitment of more than the following percentages of the total committed capacity: PPL - 13%, PPL Electric - 12%, LKE - 21%, LG&E - 12% and KU - 37%.

(b) The amounts borrowed at September 30, 2015 were USD-denominated borrowings of $200 million and GPB-denominated borrowings which equated to $214 million. At September 30, 2015, the USD equivalent of unused capacity under the U.K. committed credit facilities was $1.2 billion.

The commitments under the U.K. credit facilities are provided by a diverse bank group, with no one bank providing more than 14% of the total committed capacity.

See Note 7 to the Financial Statements for further discussion of the Registrants' credit facilities.

Intercompany (LKE, LG&E and KU)

	Committed				Other Used	Unused
	Capacity		Borrowed		Capacity	Capacity
LKE Credit Facility	$	225	$	62		$	163
LG&E Money Pool (a)		500					500
KU Money Pool (a)		500					500

(a) LG&E and KU participate in an intercompany money pool agreement whereby LKE, LG&E and/or KU make available funds up to $500 million at an interest rate based on a market index of commercial paper issues. However, the FERC has issued a maximum short-term debt limit for each utility at $500 million from any source.

See Note 11 to the Financial Statements for further discussion of intercompany credit facilities.

Commercial Paper (All Registrants)

PPL Electric, LG&E and KU maintain commercial paper programs to provide an additional financing source to fund short-term liquidity needs, as necessary. Commercial paper issuances, included in "Short-term debt" on the Balance Sheets, are supported by the respective Registrant's Syndicated Credit Facility. The following commercial paper programs were in place at September 30, 2015:

				Commercial
				Paper		Unused
		Capacity		Issuances		Capacity
PPL Electric		$	300	$	68	$	232
LG&E			350				350
KU			350				350
Total LKE			700				700
	Total PPL	$	1,000	$	68	$	932

In October 2015, PPL Capital Funding established a commercial paper program for up to $600 million to provide an additional financing source to fund its short-term liquidity needs from time to time. Commercial paper issuances will be supported by PPL Capital Funding's Syndicated Credit Facilities. PPL guarantees PPL Capital Funding's payment obligations on the commercial paper notes.

Long-term Debt

(PPL, LKE and LG&E)

In September 2015, LG&E issued $300 million of 3.30% First Mortgage Bonds due 2025 and $250 million of 4.375% First Mortgage Bonds due 2045. LG&E received proceeds of $298 million and $248 million, net of discounts and underwriting fees, which were used to repay short-term debt and additionally will be used for the repayment of First Mortgage Bonds maturing in November 2015, and for general corporate purposes.

(PPL, LKE and KU)

In September 2015, KU issued $250 million of 3.30% First Mortgage Bonds due 2025 and $250 million of 4.375% First Mortgage Bonds due 2045. KU received proceeds of $248 million for each issuance, net of discounts and underwriting fees,

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which were used to repay short-term debt and additionally will be used for the repayment of First Mortgage Bonds maturing in November 2015, and for general corporate purposes.

(PPL and PPL Electric)

In October 2015, PPL Electric issued $350 million of 4.150% First Mortgage Bonds due 2045. PPL Electric received proceeds of $345 million, net of a discount and underwriting fees, which will be used to repay short-term debt and for general corporate purposes.

(PPL)

ATM Program

For the periods ended September 30, 2015, PPL issued the following:

	Three Months		Nine Months
Number of shares		435,800		857,500
Average share price	$	32.95	$	33.33
Net proceeds		14		28

See Note 7 to the Financial Statements for additional information.

Common Stock Dividends

In August 2015, PPL declared its increased quarterly common stock dividend, payable October 1, 2015, at 37.75 cents per share (equivalent to $1.51 per annum). Future dividends, declared at the discretion of the Board of Directors, will be dependent upon future earnings, cash flows, financial and legal requirements and other factors.

Rating Agency Actions

(All Registrants)

Moody's, S&P and Fitch have periodically reviewed the credit ratings of the debt of the Registrants and their subsidiaries. Based on their respective independent reviews, the rating agencies may make certain ratings revisions or ratings affirmations.

A credit rating reflects an assessment by the rating agency of the creditworthiness associated with an issuer and particular securities that it issues. The credit ratings of the Registrants and their subsidiaries are based on information provided by the Registrants and other sources. The ratings of Moody's, S&P and Fitch are not a recommendation to buy, sell or hold any securities of the Registrants or their subsidiaries. Such ratings may be subject to revisions or withdrawal by the agencies at any time and should be evaluated independently of each other and any other rating that may be assigned to the securities. The credit ratings of the Registrants and their subsidiaries affect their liquidity, access to capital markets and cost of borrowing under their credit facilities.

The rating agencies have taken the following actions related to the Registrants and their subsidiaries during 2015.

In January 2015, Fitch withdrew its ratings for PPL, PPL Capital Funding, PPL Electric, LKE, LG&E, and KU.

(PPL)

In May 2015, Moody's upgraded the following ratings with a stable outlook:

· the long-term issuer rating from Baa3 to Baa2 for PPL;

· the senior unsecured rating from Baa3 to Baa2 for PPL Capital Funding; and

· the junior subordinated rating from Ba1 to Baa3 for PPL Capital Funding.

In May 2015, Fitch affirmed and withdrew its ratings for PPL UK Distribution Holdings Limited (formerly known as PPL WW), WPD (South Wales) and WPD (South West).

In June 2015, S&P upgraded the following ratings with a stable outlook:

· the long-term issuer rating from BBB to A- for PPL;

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· the senior unsecured rating from BBB- to BBB+ for PPL Capital Funding; and

· the junior subordinated rating from BB+ to BBB for PPL Capital Funding.

In June 2015, S&P affirmed the short-term issuer ratings for WPD plc, WPD (East Midlands), WPD (West Midlands), WPD (South Wales) and WPD (South West). S&P also upgraded the following ratings with a stable outlook:

· the long-term issuer rating from BBB to A- for WPD plc, WPD (East Midlands), WPD (West Midlands), WPD (South Wales) and WPD (South West);

· the senior unsecured rating from BBB- to BBB+ for WPD plc; and

· the senior unsecured rating from BBB to A- for WPD (East Midlands), WPD (West Midlands), WPD (South Wales) and WPD (South West).

In August 2015, S&P affirmed its ratings with a stable outlook for WPD plc, WPD (East Midlands), WPD (West Midlands), WPD (South Wales) and WPD (South West).

In October 2015, Moody's and S&P assigned ratings of P-2 and A-2, respectively, to PPL Capital Funding's $600 million commercial paper program. S&P also assigned a short-term issuer rating of A-2 to PPL.

(PPL and PPL Electric)

In May 2015, Moody's affirmed its ratings and revised its outlook to positive for PPL Electric.

In June 2015, S&P affirmed its commercial paper rating and upgraded the following ratings with a stable outlook for PPL Electric:

· the long-term issuer rating from BBB to A-; and

· the senior secured rating from A- to A.

In September 2015, Moody's affirmed its commercial paper rating and upgraded the following ratings with a stable outlook for PPL Electric:

· the long-term issuer rating from Baa1 to A3; and

· the senior secured rating from A2 to A1.

In September 2015, Moody's and S&P assigned ratings of A1 and A to PPL Electric's $350 million 4.15% First Mortgage Bonds due 2045.

(PPL, LKE, LG&E and KU)

In May 2015, Moody's upgraded the following ratings with a stable outlook for LKE:

· the long-term issuer rating from Baa2 to Baa1; and

· the senior unsecured rating from Baa2 to Baa1.

In June 2015, S&P affirmed its commercial paper ratings for LG&E and KU. S&P also upgraded the following ratings with a stable outlook:

· the long-term issuer ratings from BBB to A- for LKE, LG&E and KU;

· the senior secured ratings from A- to A for LG&E and KU; and

· the senior unsecured rating from BBB- to BBB+ for LKE.

In June 2015, S&P upgraded its ratings from AA+ to AAA for KU's 2000 Series A Solid Waste Disposal Facility Revenue Bonds, KU's 2004 Series A and 2008 Series A Environmental Facilities Revenue Bonds and KU's 2006 Series B Environmental Facilities Revenue Refunding Bonds and removed them from CreditWatch with positive implications.

In September 2015, Moody's and S&P assigned ratings of A1 and A to LG&E's $300 million 3.3% First Mortgage Bonds due 2025, LG&E's $250 million 4.375% First Mortgage Bonds due 2045, KU's $250 million 3.3% First Mortgage Bonds due 2025 and KU's $250 million 4.375% First Mortgage Bonds due 2045.

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Ratings Triggers

(PPL, LKE, LG&E and KU)

Various derivative and non-derivative contracts, including contracts for the sale and purchase of electricity and fuel, commodity transportation and storage, interest rate and foreign currency instruments (for PPL), contain provisions that require the posting of additional collateral or permit the counterparty to terminate the contract, if PPL's, LKE's, LG&E's or KU's or their subsidiaries' credit rating, as applicable, were to fall below investment grade. See Note 14 to the Financial Statements for a discussion of "Credit Risk-Related Contingent Features," including a discussion of the potential additional collateral requirements for PPL, LKE and LG&E for derivative contracts in a net liability position at September 30, 2015.

(All Registrants)

For additional information on the Registrants' liquidity and capital resources, see "Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Registrants' 2014 Form 10-K.

Risk Management

Market Risk

(All Registrants)

See Notes 13 and 14 to the Financial Statements for information about the Registrants' risk management objectives, valuation techniques and accounting designations.

The forward-looking information presented below provides estimates of what may occur in the future, assuming certain adverse market conditions and model assumptions. Actual future results may differ materially from those presented. These disclosures are not precise indicators of expected future losses, but only indicators of possible losses under normal market conditions at a given confidence level.

Interest Rate Risk

The Registrants and their subsidiaries issue debt to finance their operations, which exposes them to interest rate risk. The Registrants and their subsidiaries utilize various financial derivative instruments to adjust the mix of fixed and floating interest rates in their debt portfolios, adjust the duration of their debt portfolios and lock in benchmark interest rates in anticipation of future financing, when appropriate. Risk limits under the risk management program are designed to balance risk exposure to volatility in interest expense and changes in the fair value of the debt portfolios due to changes in the absolute level of interest rates.

The following interest rate hedges were outstanding at September 30, 2015.

						Effect of a
				Fair Value,		10% Adverse		Maturities
		Exposure		Net - Asset		Movement		Ranging
		Hedged		(Liability) (a)		in Rates (b)		Through
PPL
Cash flow hedges
	Interest rate swaps (c)	$	792	$	(31)	$	(12)	2026
	Cross-currency swaps (d)		1,262		61		(158)	2028
Economic hedges
	Interest rate swaps (e)		179		(51)		(2)	2033
LKE
Economic hedges
	Interest rate swaps (e)		179		(51)		(2)	2033
LG&E
Economic hedges
	Interest rate swaps (e)		179		(51)		(2)	2033

(a) Includes accrued interest, if applicable.

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(b) Effects of adverse movements decrease assets or increase liabilities, as applicable, which could result in an asset becoming a liability. Sensitivities represent a 10% adverse movement in interest rates, except for cross-currency swaps which also includes a 10% adverse movement in foreign currency exchange rates.

(c) Changes in the fair value of such cash flow hedges are recorded in equity or as regulatory assets or regulatory liabilities, if recoverable through regulated rates, and reclassified into earnings in the same period during which the item being hedged affects earnings.

(d) Cross-currency swaps are utilized to hedge the principal and interest payments of WPD's U.S. dollar-denominated senior notes. Changes in the fair value of these instruments are recorded in equity and reclassified into earnings in the same period during which the item being hedged affects earnings.

(e) Realized changes in the fair value of such economic hedges are recoverable through regulated rates and any subsequent changes in the fair value of these derivatives are included in regulatory assets or regulatory liabilities.

The Registrants are exposed to a potential increase in interest expense and to changes in the fair value of their debt portfolios. The estimated impact of a 10% adverse movement in interest rates on interest expense at September 30, 2015 was insignificant for PPL, PPL Electric, LKE, LG&E and KU.  The estimated impact of a 10% adverse movement in interest rates on the fair value of debt at September 30, 2015 is shown below.

	10% Adverse
	Movement
	in Rates
PPL	$	685
PPL Electric		129
LKE		185
LG&E		69
KU		105

Foreign Currency Risk (PPL)

PPL is exposed to foreign currency risk primarily through investments in U.K. affiliates.  Under its risk management program, PPL may enter into financial instruments to hedge certain foreign currency exposures, including translation risk of expected earnings, firm commitments, recognized assets or liabilities, anticipated transactions and net investments.

The following foreign currency hedges were outstanding at September 30, 2015.

					Effect of a
					10%
					Adverse
					Movement
					in Foreign
			Fair Value,		Currency		Maturities
	Exposure		Net - Asset		Exchange		Ranging
	Hedged		(Liability)		Rates (a)		Through
Net investment hedges (b)	£	134	$	19	$	(20)	2016
Economic hedges (c)		1,676		143		(235)	2017

(a) Effects of adverse movements decrease assets or increase liabilities, as applicable, which could result in an asset becoming a liability.

(b) To protect the value of a portion of its net investment in WPD, PPL executes forward contracts to sell GBP.

(c) To economically hedge the translation risk of expected earnings denominated in GBP.

Commodity Price Risk (Non-trading)

(PPL, LKE, LG&E and KU)

LG&E's and KU's retail electric rates, LG&E's natural gas rates and KU's municipal wholesale electric rates are set by regulatory commissions and the fuel costs incurred are directly recoverable from customers. As a result, LG&E and KU are subject to commodity price risk for only a small portion of their business operations. LG&E and KU sell excess economic generation to maximize the value of the physical assets at times when the assets are not required to serve LG&E's or KU's customers. See Note 14 to the Financial Statements for additional information.

(PPL and PPL Electric)

PPL Electric is exposed to market price and volumetric risks from its obligation as a PLR. The PUC has approved a cost recovery mechanism that allows PPL Electric to pass through to customers the cost associated with fulfilling its PLR obligation. This cost recovery mechanism substantially eliminates PPL Electric's exposure to market price risk. PPL Electric

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also mitigates its exposure to volumetric risk by entering into full-requirement energy supply contracts for the majority of its PLR obligations. These supply contracts transfer the volumetric risk associated with the PLR obligation to the energy suppliers.

Credit Risk (All Registrants)

See Notes 13 and 14 to the Financial Statements in this Form 10-Q and "Risk Management - Credit Risk" in the Registrants' 2014 Form 10-K for additional information.

Foreign Currency Translation (PPL)

The value of the British pound sterling fluctuates in relation to the U.S. dollar. Changes in this exchange rate resulted in a foreign currency translation loss of $101 million for the nine months ended September 30, 2015, which primarily reflected a $263 million decrease to PP&E and goodwill offset by a decrease of $162 million to net liabilities. Changes in this exchange rate resulted in a foreign currency translation gain of $75 million for the nine months ended September 30, 2014, which primarily reflected a $193 million increase to PP&E and goodwill offset by an increase of $118 million to net liabilities. The impact of foreign currency translation is recorded in AOCI.

Related Party Transactions (All Registrants)

The Registrants are not aware of any material ownership interests or operating responsibility by senior management in outside partnerships, including leasing transactions with variable interest entities, or other entities doing business with the Registrants. See Note 11 to the Financial Statements for additional information on related party transactions for PPL Electric, LKE, LG&E and KU.

Acquisitions, Development and Divestitures

(All Registrants)

The Registrants from time to time evaluate opportunities for potential acquisitions, divestitures and development projects. Development projects are reexamined based on market conditions and other factors to determine whether to proceed with, modify or terminate the projects. Any resulting transactions may impact future financial results. See Note 8 to the Financial Statements for information on the more significant activities.

(PPL)

See Note 8 to the Financial Statements for information on the spinoff of PPL Energy Supply.

Environmental Matters

(All Registrants)

Extensive federal, state and local environmental laws and regulations are applicable to PPL's, LKE's, LG&E's and KU's air emissions, water discharges and the management of hazardous and solid waste, as well as other aspects of the Registrants' businesses. The cost of compliance or alleged non-compliance cannot be predicted with certainty but could be significant. In addition, costs may increase significantly if the requirements or scope of environmental laws or regulations, or similar rules, are expanded or changed. Costs may take the form of increased capital expenditures or operating and maintenance expenses, monetary fines, penalties or other restrictions. Many of these environmental law considerations are also applicable to the operations of key suppliers, or customers, such as coal producers and industrial power users, and may impact the cost for their products or their demand for the Registrants' services. Increased capital and operating costs are subject to rate recovery. PPL, PPL Electric, LKE, LG&E and KU can provide no assurances as to the ultimate outcome of future environmental or rate proceedings before regulatory authorities.

See Note 10 to the Financial Statements for a discussion of the more significant environmental matters including:

· Climate Change,

· Waters of the United States,

· Coal Combustion Residuals,

· Effluent Limitations Guidelines,

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· Mercury and Air Toxics Standards, and

· National Ambient Air Quality Standards.

Additionally, see Note 13 to the Financial Statements and "Item 1. Business - Environmental Matters" in the Registrants' 2014 Form 10-K for additional information on environmental matters.

(PPL, LKE, LG&E and KU)

Coal Combustion Residuals (CCRs)

On October 19, 2015, the EPA's final rule regulating CCRs became effective. In connection with the final CCR rule, LG&E and KU recorded increases to existing AROs of $57 million and $219 million during the three and nine months ended September 30, 2015. See Note 16 to the Financial Statements for additional information. Further increases to AROs or changes to current capital plans or to operating costs may be required as estimates are refined based on closure developments, groundwater monitoring results and regulatory or legal proceedings. Costs relating to this rule are subject to rate recovery.

New Accounting Guidance (All Registrants)

See Notes 2 and 18 to the Financial Statements for a discussion of new accounting guidance adopted and pending adoption.

Application of Critical Accounting Policies (All Registrants)

Financial condition and results of operations are impacted by the methods, assumptions and estimates used in the application of critical accounting policies. The following table summarizes the accounting policies by Registrant that are particularly important to an understanding of the reported financial condition or results of operations, and require management to make estimates or other judgments of matters that are inherently uncertain. See "Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrants' 2014 Form 10-K for a discussion of each critical accounting policy.

		PPL
	PPL	Electric	LKE	LG&E	KU
Defined Benefits	X	X	X	X	X
Loss Accruals	X	X	X	X	X
Income Taxes	X	X	X	X	X
Asset Impairments (Excluding Investments)	X		X	X	X
AROs	X		X	X	X
Price Risk Management	X		X	X	X
Regulatory Assets and Liabilities	X	X	X	X	X
Revenue Recognition - unbilled revenue		X	X	X	X

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PPL Corporation

PPL Electric Utilities Corporation

LG&E and KU Energy LLC

Louisville Gas and Electric Company

Kentucky Utilities Company

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Reference is made to "Risk Management" in "Item 2. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations."

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

The Registrants' principal executive officers and principal financial officers, based on their evaluation of the Registrants' disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934) have concluded that, as of September 30, 2015, the Registrants' disclosure controls and procedures are effective to ensure that material information relating to the Registrants and their consolidated subsidiaries is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms, particularly during the period for which this quarterly report has been prepared. The aforementioned principal officers have concluded that the disclosure controls and procedures are also effective to ensure that information required to be disclosed in reports filed under the Exchange Act is accumulated and communicated to management, including the principal executive and principal financial officers, to allow for timely decisions regarding required disclosure.

(b) Change in internal controls over financial reporting.

The Registrants' principal executive officers and principal financial officers have concluded that there were no changes in the Registrants' internal control over financial reporting during the Registrants' third fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Registrants' internal control over financial reporting.

PPL Corporation

Following the announcement of the transaction to spin off PPL Energy Supply, LLC to form Talen Energy, management determined the appropriate staffing for Talen Energy and for PPL and its subsidiaries. During the nine months ended September 30, 2015, staffing changes, including the consolidation of certain positions and transition of responsibilities, resulted in changes in certain individuals responsible for executing internal controls. However, changes to system applications, business processes and the associated internal controls were not significant. Management has taken steps to minimize the risk from the changes in individuals executing internal controls.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding pending administrative and judicial proceedings involving regulatory, environmental and other matters, which information is incorporated by reference into this Part II, see:

· "Item 3. Legal Proceedings" in each Registrant's 2014 Form 10-K; and

· Notes 6 and 10 to the Financial Statements.

Item 1A. Risk Factors

There have been no material changes in the Registrants' risk factors from those disclosed in "Item 1A. Risk Factors" of the Registrants' 2014 Form 10-K, except that as a result of the June 1, 2015 spinoff by PPL of PPL Energy Supply, the risk factors disclosed under the heading "Risks Related to Supply Segment" at pages 26 through 31 of the Registrants' 2014 Form 10-K are no longer applicable.

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Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

PPL Electric Utilities Corporation

On October 27, 2015, PPL Electric amended and restated its By-laws to provide that the number of directors constituting the Company's board of directors shall be as determined from time to time by the directors.

Item 6. Exhibits

The following Exhibits indicated by an asterisk preceding the Exhibit number are filed herewith. The balance of the Exhibits has heretofore been filed with the Commission and pursuant to Rule 12(b)-32 are incorporated herein by reference. Exhibits indicated by a [_] are filed or listed pursuant to Item 601(b)(10)(iii) of Regulation S-K.

*3(a)	-	Bylaws of PPL Electric Utilities Corporation, effective as of October 27, 2015
4(a)	-	Supplemental Indenture No. 4, dated as of September 1, 2015, of Louisville Gas and Electric Company to The Bank of New York Mellon, as Trustee (Exhibit 4(a) to Louisville Gas and Electric Company Form 8-K Report (File No. 1-2893) dated September 28, 2015)
4(b)	-	Supplemental Indenture No. 4, dated as of September 1, 2015, of Kentucky Utilities Company to The Bank of New York Mellon, as Trustee (Exhibit 4(b) to Kentucky Utilities Company Form 8-K Report (File No. 1-3464) dated September 28, 2015)
4(c)	-	Supplemental Indenture No. 17, dated as of October 1, 2015, of PPL Electric Utilities Corporation to The Bank of New York Mellon, as Trustee (Exhibit 4(a) to PPL Electric Utilities Corporation Form 8-K Report (File No. 1-905) dated October 1, 2015)
*12(a)	-	PPL Corporation and Subsidiaries Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
*12(b)	-	PPL Electric Utilities Corporation and Subsidiaries Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
*12(c)	-	LG&E and KU Energy LLC and Subsidiaries Computation of Ratio of Earnings to Fixed Charges
*12(d)	-	Louisville Gas and Electric Company Computation of Ratio of Earnings to Fixed Charges
*12(e)	-	Kentucky Utilities Company Computation of Ratio of Earnings to Fixed Charges
Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, for the quarterly period ended September 30, 2015, filed by the following officers for the following companies:
*31(a)	-	PPL Corporation's principal executive officer
*31(b)	-	PPL Corporation's principal financial officer
*31(c)	-	PPL Electric Utilities Corporation's principal executive officer
*31(d)	-	PPL Electric Utilities Corporation's principal financial officer
*31(e)	-	LG&E and KU Energy LLC's principal executive officer
*31(f)	-	LG&E and KU Energy LLC's principal financial officer
*31(g)	-	Louisville Gas and Electric Company's principal executive officer
*31(h)	-	Louisville Gas and Electric Company's principal financial officer
*31(i)	-	Kentucky Utilities Company's principal executive officer
*31(j)	-	Kentucky Utilities Company's principal financial officer

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Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, for the quarterly period ended September 30, 2015, furnished by the following officers for the following companies:
*32(a)	-	PPL Corporation's principal executive officer and principal financial officer
*32(b)	-	PPL Electric Utilities Corporation's principal executive officer and principal financial officer
*32(c)	-	LG&E and KU Energy LLC's principal executive officer and principal financial officer
*32(d)	-	Louisville Gas and Electric Company's principal executive officer and principal financial officer
*32(e)	-	Kentucky Utilities Company's principal executive officer and principal financial officer
101.INS	-	XBRL Instance Document
101.SCH	-	XBRL Taxonomy Extension Schema
101.CAL	-	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	-	XBRL Taxonomy Extension Definition Linkbase
101.LAB	-	XBRL Taxonomy Extension Label Linkbase
101.PRE	-	XBRL Taxonomy Extension Presentation Linkbase

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized. The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiaries.

	PPL Corporation
	(Registrant)
Date:  October 30, 2015	/s/  Stephen K. Breininger
	Stephen K. Breininger
	Vice President and Controller
	(Principal Accounting Officer)
	PPL Electric Utilities Corporation
	(Registrant)
Date:  October 30, 2015	/s/  Stephen K. Breininger
	Stephen K. Breininger
	Vice President and Controller
	(Principal Financial Officer and Principal Accounting Officer)

	LG&E and KU Energy LLC
	(Registrant)
	Louisville Gas and Electric Company
	(Registrant)
	Kentucky Utilities Company
	(Registrant)
Date:  October 30, 2015	/s/  Kent W. Blake
	Kent W. Blake Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)

114