10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  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 June 30, 2009
	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
1-32944	PPL Energy Supply, LLC (Exact name of Registrant as specified in its charter) (Delaware) Two North Ninth Street Allentown, PA  18101-1179 (610) 774-5151	23-3074920
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

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 Energy Supply, LLC	Yes  X	No
PPL Electric Utilities Corporation	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	No
PPL Energy Supply, LLC	Yes	No
PPL Electric Utilities Corporation	Yes	No

Indicate by check mark whether the Registrants are large accelerated filers, accelerated filers, non-accelerated filers, or a smaller reporting company.  See definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.  (Check one):

	Large accelerated filer	Accelerated filer	Non-accelerated filer	Smaller reporting company
PPL Corporation	[ X ]	[     ]	[     ]	[     ]
PPL Energy Supply, LLC	[     ]	[     ]	[ X ]	[     ]
PPL Electric Utilities Corporation	[     ]	[     ]	[ 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 Energy Supply, LLC	Yes	No  X
PPL Electric Utilities Corporation	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, $.01 par value, 376,580,347 shares outstanding at July 24, 2009.
PPL Energy Supply, LLC	PPL Corporation indirectly holds all of the membership interests in PPL Energy Supply, LLC.
PPL Electric Utilities Corporation	Common stock, no par value, 66,368,056 shares outstanding and all held by PPL Corporation at July 24, 2009.

This document is available free of charge at the Investor Center on PPL's Web site at www.pplweb.com.  However, information on this Web site does not constitute a part of this Form 10-Q.

PPL CORPORATION

PPL ENERGY SUPPLY, LLC

PPL ELECTRIC UTILITIES CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED June 30, 2009

Table of Contents

				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		2
			Condensed Consolidated Statements of Cash Flows		3
			Condensed Consolidated Balance Sheets		4
			Condensed Consolidated Statements of Equity		6
			Condensed Consolidated Statements of Comprehensive Income		7
		PPL Energy Supply, LLC and Subsidiaries
			Condensed Consolidated Statements of Income		8
			Condensed Consolidated Statements of Cash Flows		9
			Condensed Consolidated Balance Sheets		10
			Condensed Consolidated Statements of Equity		12
			Condensed Consolidated Statements of Comprehensive Income		13
		PPL Electric Utilities Corporation and Subsidiaries
			Condensed Consolidated Statements of Income		14
			Condensed Consolidated Statements of Cash Flows		15
			Condensed Consolidated Balance Sheets		16
		Combined Notes to Condensed Consolidated Financial Statements			18
	Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations
			PPL Corporation and Subsidiaries		70
			PPL Energy Supply, LLC and Subsidiaries		84
			PPL Electric Utilities Corporation and Subsidiaries		97
	Item 3.  Quantitative and Qualitative Disclosures About Market Risk				102
	Item 4.  Controls and Procedures				102
	Item 4T.  Controls and Procedures				102
PART II.  OTHER INFORMATION
	Item 1.  Legal Proceedings				103
	Item 1A.  Risk Factors				103
	Item 4.  Submission of Matters to a Vote of Security Holders				103
	Item 6.  Exhibits				104
SIGNATURES					105
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
			PPL Corporation and Subsidiaries		106
			PPL Energy Supply, LLC and Subsidiaries		107
			PPL Electric Utilities Corporation and Subsidiaries		108
CERTIFICATES OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
			PPL Corporation		109
			PPL Energy Supply, LLC		111
			PPL Electric Utilities Corporation		113
CERTIFICATES OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
			PPL Corporation		115
			PPL Energy Supply, LLC		117
			PPL Electric Utilities Corporation		119

GLOSSARY OF TERMS AND ABBREVIATIONS

PPL Corporation and its current and former subsidiaries

Hyder - - Hyder Limited, a subsidiary of WPDL that was the previous owner of South Wales Electricity plc.  In March 2001, South Wales Electricity plc was acquired by WPDH Limited and renamed WPD (South Wales).  The Hyder non-electricity delivery businesses are substantially liquidated.

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

PPL Capital Funding - PPL Capital Funding, Inc., a wholly owned financing subsidiary of PPL.

PPL Electric- PPL Electric Utilities Corporation, a regulated utility subsidiary of PPL that transmits and distributes electricity in its service territory and provides electric supply to retail customers in this territory as a PLR.

PPL Energy Funding - PPL Energy Funding Corporation, a subsidiary of PPL and the parent company of PPL Energy Supply.

PPL EnergyPlus - PPL EnergyPlus, LLC, a subsidiary of PPL Energy Supply that markets and trades wholesale and retail electricity and gas, and supplies energy and energy services in deregulated markets.

PPL Energy Supply - PPL Energy Supply, LLC, a subsidiary of PPL Energy Funding and the parent company of PPL Generation, PPL EnergyPlus, PPL Global and other subsidiaries.

PPL Gas Utilities - PPL Gas Utilities Corporation, a regulated utility that provided natural gas distribution, transmission and storage services, and the competitive sale of propane, which was a subsidiary of PPL until its sale in October 2008.

PPL Generation - PPL Generation, LLC, a subsidiary of PPL Energy Supply that owns and operates U.S. generating facilities through various subsidiaries.

PPL Global - PPL Global, LLC, a subsidiary of PPL Energy Supply that primarily owns and operates a business in the U.K. that is focused on the regulated distribution of electricity.

PPL Investment Corp. - PPL Investment Corporation, a subsidiary of PPL Energy Supply.

PPL Maine - PPL Maine, LLC, a subsidiary of PPL Generation that owns generating operations in Maine.

PPL Martins Creek - PPL Martins Creek, LLC, a subsidiary of PPL Generation that owns generating operations in Pennsylvania.

PPL Montana - PPL Montana, LLC, an indirect subsidiary of PPL Generation that generates electricity for wholesale sales in Montana and the Pacific Northwest.

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

PPL Susquehanna - PPL Susquehanna, LLC, a nuclear generating subsidiary of PPL Generation.

WPD - - refers collectively to WPDH Limited and WPDL.

WPD LLP - Western Power Distribution LLP, a wholly owned subsidiary of WPDH Limited, which owns WPD (South West) and WPD (South Wales).

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

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

WPDH Limited - Western Power Distribution Holdings Limited, an indirect, wholly owned subsidiary of PPL Global.  WPDH Limited owns WPD LLP.

WPDL - - WPD Investment Holdings Limited, an indirect wholly owned subsidiary of PPL Global.  WPDL owns 100% of the common shares of Hyder.

Other terms and abbreviations

£ - - British pounds sterling.

2008 Form 10-K - Annual Report to the SEC on Form 10-K for the year ended December 31, 2008.

A.M. Best - A.M. Best Company, a company that reports on the financial condition of insurance companies.

AMT - alternative minimum tax.

AOCI - - accumulated other comprehensive income or loss.

APB - Accounting Principles Board.

ARB - Accounting Research Bulletin.

ARO - - asset retirement obligation.

Baseload generation - includes the output provided by PPL's nuclear, coal, hydroelectric and qualifying facilities.

Basis - the commodity price differential between two locations, products or time periods.

Bcf - - billion cubic feet.

CAIR - the EPA's Clean Air Interstate Rule.

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

COLA - - license application for a combined construction permit and operating license from the NRC.

CTC - - competitive transition charge on customer bills to recover allowable transition costs under the Customer Choice Act.

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.

DDCP - - Directors Deferred Compensation Plan.

DEP - - Department of Environmental Protection, a state government agency.

DOE - - Department of Energy, a U.S. government agency.

DRIP - - Dividend Reinvestment Plan.

Economic Stimulus Package - The American Recovery and Reinvestment Act of 2009, generally referred to as the federal economic stimulus package, which was signed into law in February 2009.

EITF - - Emerging Issues Task Force, an organization that assists the FASB in improving financial reporting through the identification, discussion and resolution of financial accounting issues within the framework of existing authoritative literature.

EMF - - electric and magnetic fields.

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

EPS - - earnings per share.

ESOP - - Employee Stock Ownership Plan.

FASB- Financial Accounting Standards Board, a rulemaking organization that establishes financial accounting and reporting standards.

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

FIN - FASB Interpretation.

Fitch - Fitch, Inc.

FSP - FASB Staff Position.

FTR - financial transmission rights, which are financial instruments established to manage price risk related to electricity transmission congestion.  They entitle the holder to receive compensation or require the holder to remit payment for certain congestion-related transmission charges that arise when the transmission grid is congested.

GAAP - - generally accepted accounting principles in the U.S.

GWh - - gigawatt-hour, one million kilowatt-hours.

ICP - - Incentive Compensation Plan.

ICPKE - - Incentive Compensation Plan for Key Employees.

Intermediate and peaking generation - includes the output provided by PPL Energy Supply's oil- and natural gas-fired units.

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

ISO - - Independent System Operator.

ITC - - intangible transition charge on customer bills to recover intangible transition costs associated with securitizing stranded costs under the Customer Choice Act.

LIBOR-London Interbank Offered Rate.

MACT - - maximum achievable control technology.

Montana Power - The Montana Power Company, a Montana-based company that sold its generating assets to PPL Montana in December 1999.  Through a series of transactions consummated during the first quarter of 2002, Montana Power sold its electricity delivery business to NorthWestern.

Moody's - - Moody's Investors Service, Inc.

MW - - megawatt, one thousand kilowatts.

MWh - - megawatt-hour, one thousand kilowatt-hours.

NDT - - nuclear plant decommissioning trust.

NERC - - North American Electric Reliability Corporation.

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.

NPDES - - National Pollutant Discharge Elimination System.

NPNS - - the normal purchases and normal sales exception as permitted by derivative accounting rules.

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

NUGs(Non-Utility Generators) - generating plants not owned by public utilities, whose electrical output must be purchased by utilities under the PURPA if the plant meets certain criteria.

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.

PEDFA - Pennsylvania Economic Development Financing Authority.

PJM(PJM Interconnection, L.L.C.) - operator of the electric transmission network and electric energy market in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia.

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

PP&E- property, plant and equipment.

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

PUC Final Order - final order issued by the PUC on August 27, 1998, approving the settlement of PPL Electric's restructuring proceeding.

PURPA -Public Utility Regulatory Policies Act of 1978, legislation passed by the U.S. Congress to encourage energy conservation, efficient use of resources and equitable rates.

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 (the regional reliability entity that replaced the Mid-Atlantic Area Coordination Council).

RMC - - Risk Management Committee.

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

SCR - - selective catalytic reduction, a pollution control process.

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

SEC - - Securities and Exchange Commission, a U.S. government agency whose primary mission is to protect investors and maintain the integrity of the securities markets.

SFAS - - Statement of Financial Accounting Standards, the accounting and financial reporting rules issued by the FASB.

S&P - - Standard & Poor's Ratings Services.

Smart grid - an electricity distribution system that allows information to flow from a customer's electric meter in two directions.  The goal of a smart grid is to use technologies to increase power grid efficiency, reliability, and flexibility.

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.

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

Tolling agreement- agreement whereby the owner of an electric generating facility agrees to use that facility to convert fuel provided by a third party into electric energy for delivery back to the third party.

VaR - - value-at-risk.

Accounting Pronouncements

EITF 08-5 - Issuer's Accounting for Liabilities Measured at Fair Value with a Third-Party Credit Enhancement.

FIN 46(R) - Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.

FSP APB 14-1 - Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement).

FSPEITF 03-6-1 - Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.

FSP FAS 107-1 and APB 28-1 - Interim Disclosures about Fair Value of Financial Instruments.

FSP FAS 115-2 and FAS 124-2 - Recognition and Presentation of Other-Than-Temporary Impairments.

FSP FAS 132(R)-1 - Employers' Disclosures about Postretirement Benefit Plan Assets.

FSP FAS 157-4- Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.

Topic 5M - Other Than Temporary Impairment of Certain Investments in Equity Securities, previously entitled Other Than Temporary Impairment of Certain Investments in Debt and Equity Securities.

SFAS 107 - Disclosures about Fair Value of Financial Instruments.

SFAS 132(R) - Employers' Disclosures about Pensions and Other Postretirement Benefits.

SFAS 133 - Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted.

SFAS 141(R) - Business Combinations (revised 2007).

SFAS 157 - Fair Value Measurements, as amended.

SFAS 160 - Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51.

SFAS 161 - Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133.

SFAS 165 - Subsequent Events.

SFAS 166 - Accounting for Transfers of Financial Assets - an amendment of FASB Statement No. 140.

SFAS 167 - Amendments to FASB Interpretation No. 46(R).

SFAS 168 - The FASB Accounting Standards Codification ™ and the Hierarchy of Generally Accepted Accounting Principles - a replacement of FASB Statement No. 162.

FORWARD-LOOKING INFORMATION

Statements contained in this Form 10-Q report concerning expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements which are other than statements of historical fact are "forward-looking statements" within the meaning of the federal securities laws.  Although PPL, PPL Energy Supply and PPL Electric 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 involve a number of 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 "Item 1A. Risk Factors" in the companies' 2008 Form 10-K and in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10-Q report, the following are among the important factors that could cause actual results to differ materially from the forward-looking statements.

· fuel supply availability;

· weather conditions affecting generation, customer energy use and operating costs;

· operation, availability and operating costs of existing generation facilities;

· transmission and distribution system conditions and operating costs;

· collective labor bargaining negotiations;

· the outcome of litigation against PPL and its subsidiaries;

· potential effects of threatened or actual terrorism, war or other hostilities;

· the commitments and liabilities of PPL and its subsidiaries;

· market demand and prices for energy, capacity, emission allowances and delivered fuel;

· competition in retail and wholesale power markets;

· liquidity of wholesale power markets;

· defaults by counterparties under energy, fuel or other power product contracts;

· market prices of commodity inputs for ongoing capital expenditures;

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

· stock price performance of PPL;

· the fair value of debt and equity securities and the impact on defined benefit costs and resultant cash funding requirements for defined benefit plans;

· interest rates and their effect on pension, retiree medical and nuclear decommissioning liabilities;

· the impact of the current financial and economic downturn;

· the profitability and liquidity, including access to capital markets and credit facilities, of PPL and its subsidiaries;

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

· securities and credit ratings;

· foreign currency exchange rates;

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

· political, regulatory or economic conditions in states, regions or countries where PPL or its subsidiaries conduct business;

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

· new state, federal or foreign legislation, including new tax legislation;

· state, federal and foreign regulatory developments;

· the impact of any state, federal or foreign investigations applicable to PPL and its 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

· asset acquisitions and dispositions.

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

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 PPL, PPL Energy Supply or PPL Electric 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 PPL, PPL Energy Supply and PPL Electric undertake no obligation to update the information contained in such statement to reflect subsequent developments or information.

PartI. 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 June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Operating Revenues
Utility	$	881		$	981		$	1,946		$	2,101
Unregulated retail electric and gas		32			33			74			67
Wholesale energy marketing
Realized		760			434			1,565			862
Unrealized economic activity (Note 14)		(112	)		(616	)		240			(796	)
Net energy trading margins		7			52			(5	)		50
Energy-related businesses		105			130			204			246
Total Operating Revenues		1,673			1,014			4,024			2,530
Operating Expenses
Operation
Fuel		186			189			444			429
Energy purchases
Realized		615			309			1,299			626
Unrealized economic activity (Note 14)		65			(604	)		334			(863	)
Other operation and maintenance		354			358			726			734
Amortization of recoverable transition costs		70			68			154			144
Depreciation		114			117			223			228
Taxes, other than income		67			72			139			147
Energy-related businesses		98			120			189			227
Total Operating Expenses		1,569			629			3,508			1,672
Operating Income		104			385			516			858
Other Income (Expense) - net		(6	)		13			29			24
Other-Than-Temporary Impairments		1			7			18			10
Interest Expense		99			108			188			216
Income (Loss) from Continuing Operations Before Income Taxes		(2	)		283			339			656
Income Taxes		(31	)		94			67			220
Income from Continuing Operations After Income Taxes		29			189			272			436
Income (Loss) from Discontinued Operations (net of income taxes) (Note 8)		(32	)		6			(29	)		24
Net Income (Loss)		(3	)		195			243			460
Net Income Attributable to Noncontrolling Interests		4			5			9			10
Net Income (Loss) Attributable to PPL Corporation	$	(7	)	$	190		$	234		$	450
Amounts Attributable to PPL Corporation:
Income from Continuing Operations After Income Taxes	$	25		$	184		$	263		$	426
Income (Loss) from Discontinued Operations (net of income taxes)		(32	)		6			(29	)		24
Net Income (Loss)	$	(7	)	$	190		$	234		$	450
Earnings Per Share of Common Stock:
Income from Continuing Operations After Income Taxes Available to PPL Corporation Common Shareowners:
Basic	$	0.07		$	0.49		$	0.70		$	1.14
Diluted	$	0.07		$	0.49		$	0.70		$	1.13
Net Income (Loss) Available to PPL Corporation Common Shareowners:
Basic	$	(0.02	)	$	0.50		$	0.62		$	1.20
Diluted	$	(0.02	)	$	0.50		$	0.62		$	1.19
Dividends Declared Per Share of Common Stock	$	0.345		$	0.335		$	0.69		$	0.67
Weighted-Average Shares of Common Stock Outstanding (in thousands)
Basic		375,881			373,158			375,493			373,009
Diluted		376,206			374,902			375,805			374,990

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
	Six Months Ended June 30,
	2009			2008
Cash Flows from Operating Activities
Net income	$	243		$	460
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		225			230
Amortization of recoverable transition costs and other		182			178
Deferred income taxes and investment tax credits		(86	)		(38	)
Gains related to the extinguishment of notes		(29	)
Impairment of assets		104			11
Unrealized (gains) losses on derivatives and other hedging activities		40			(84	)
Other		19			18
Change in current assets and current liabilities
Accounts receivable		71			53
Accounts payable		(184	)		114
Unbilled revenue		94			(174	)
Fuel, materials and supplies		(45	)		(3	)
Prepayments		(85	)		(68	)
Taxes		(15	)		6
Counterparty collateral deposits		201			304
Price risk management assets and liabilities		(192	)		(26	)
Other		21			(42	)
Other operating activities
Other assets		(5	)		17
Other liabilities		9			(23	)
Net cash provided by operating activities		568			933
Cash Flows from Investing Activities
Expenditures for property, plant and equipment		(524	)		(661	)
Expenditures for intangible assets		(48	)		(258	)
Proceeds from the sale of intangible assets		8			2
Purchases of nuclear plant decommissioning trust investments		(153	)		(95	)
Proceeds from the sale of nuclear plant decommissioning trust investments		141			82
Purchases of other investments					(50	)
Proceeds from the sale of other investments		150			36
Net (increase) decrease in restricted cash and cash equivalents		189			(281	)
Other investing activities		(3	)		9
Net cash used in investing activities		(240	)		(1,216	)
Cash Flows from Financing Activities
Issuance of long-term debt		298			399
Retirement of long-term debt		(430	)		(217	)
Issuance of common stock		30			17
Repurchase of common stock due to the repurchase program					(38	)
Payment of common stock dividends		(256	)		(239	)
Net increase (decrease) in short-term debt		(77	)		400
Other financing activities		(20	)		1
Net cash provided by (used in) financing activities		(455	)		323
Effect of Exchange Rates on Cash and Cash Equivalents					(2	)
Net Increase (Decrease) in Cash and Cash Equivalents		(127	)		38
Cash and Cash Equivalents at Beginning of Period		1,100			430
Cash and Cash Equivalents included in Assets Held for Sale					(2	)
Cash and Cash Equivalents at End of Period	$	973		$	466

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

CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
	June 30, 2009		December 31, 2008
Assets
Current Assets
Cash and cash equivalents	$	973	$	1,100
Short-term investments				150
Restricted cash and cash equivalents		131		320
Accounts receivable (less reserve:  2009, $38; 2008, $36)
Customer		411		456
Other		39		77
Unbilled revenues		507		599
Fuel, materials and supplies		382		337
Prepayments		169		84
Price risk management assets		1,966		1,224
Other intangibles		27		17
Assets held for sale		182
Other		8		19
Total Current Assets		4,795		4,383
Investments
Equity method investments		32		47
Nuclear plant decommissioning trust funds		468		446
Other		22		29
Total Investments		522		522
Property, Plant and Equipment
Electric plant
Transmission and distribution		8,394		8,046
Generation		10,134		9,588
General		872		840
Electric plant in service		19,400		18,474
Construction work in progress		647		1,131
Nuclear fuel		397		428
Electric plant		20,444		20,033
Gas and oil plant		68		68
Other property		161		156
Property, plant and equipment, gross		20,673		20,257
Less:  accumulated depreciation		7,991		7,882
Property, Plant and Equipment, net		12,682		12,375
Regulatory and Other Noncurrent Assets
Regulatory assets		571		737
Goodwill		796		763
Other intangibles		617		637
Price risk management assets		1,986		1,392
Other		441		596
Total Regulatory and Other Noncurrent Assets		4,411		4,125
Total Assets	$	22,410	$	21,405

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

CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
	June 30, 2009			December 31, 2008
Liabilities and Equity
Current Liabilities
Short-term debt	$	611		$	679
Long-term debt		486			696
Accounts payable		585			766
Taxes		62			77
Interest		116			130
Dividends		135			131
Price risk management liabilities		1,768			1,324
Other		753			499
Total Current Liabilities		4,516			4,302
Long-term Debt		7,224			7,142
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes and investment tax credits		1,940			1,764
Price risk management liabilities		1,072			836
Accrued pension obligations		873			899
Asset retirement obligations		394			389
Other		553			677
Total Deferred Credits and Other Noncurrent Liabilities		4,832			4,565
Commitments and Contingent Liabilities (Note 10)
Equity
PPL Corporation Shareowners' Common Equity
Common stock - $0.01 par value (a)		4			4
Capital in excess of par value		2,246			2,196
Earnings reinvested		3,837			3,862
Accumulated other comprehensive loss		(568	)		(985	)
Total PPL Corporation Shareowners' Common Equity		5,519			5,077
Noncontrolling Interests		319			319
Total Equity		5,838			5,396
Total Liabilities and Equity	$	22,410		$	21,405

(a)	780 million shares authorized; 376 million and 375 million shares issued and outstanding at June 30, 2009 and December 31, 2008.
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, shares in thousands)
	PPL Corporation Shareowners
	Common stock shares outstanding		Common stock		Capital in excess of par value			Earnings reinvested			Accumulated other comprehensive loss			Non-controlling interests			Total
March 31, 2009	375,597		$	4	$	2,228		$	3,973		$	(968	)	$	319		$	5,556
Common stock issued (b)	547					15												15
Stock-based compensation						3												3
Net income (loss)									(7	)					4			(3	)
Dividends, dividend equivalents and distributions (c)									(130	)					(4	)		(134	)
Other comprehensive income												401						401
Cumulative effect adjustment (d)									1			(1	)
June 30, 2009	376,144		$	4	$	2,246		$	3,837		$	(568	)	$	319		$	5,838
December 31, 2008 (a)	374,581		$	4	$	2,196		$	3,862		$	(985	)	$	319		$	5,396
Common stock issued (b)	1,597					49												49
Common stock repurchased	(34	)				(1	)											(1	)
Stock-based compensation						2												2
Net income									234						9			243
Dividends, dividend equivalents and distributions (c)									(260	)					(9	)		(269	)
Other comprehensive income												418						418
Cumulative effect adjustment (d)									1			(1	)
June 30, 2009	376,144		$	4	$	2,246		$	3,837		$	(568	)	$	319		$	5,838
March 31, 2008 (a)	372,981		$	4	$	2,170		$	3,570		$	(160	)	$	320		$	5,904
Common stock issued (b)	1,538					18												18
Stock-based compensation						5												5
Net income									190						5			195
Dividends, dividend equivalents and distributions (c)									(126	)					(5	)		(131	)
Other comprehensive loss												(488	)					(488	)
June 30, 2008	374,519		$	4	$	2,193		$	3,634		$	(648	)	$	320		$	5,503
December 31, 2007 (a)	373,271		$	4	$	2,185		$	3,435		$	(68	)	$	320		$	5,876
Common stock issued (b)	2,072					25												25
Common stock repurchased	(824	)				(39	)											(39	)
Stock-based compensation						22												22
Net income									450						10			460
Dividends, dividend equivalents and distributions (c)									(251	)					(10	)		(261	)
Other comprehensive loss												(580	)					(580	)
June 30, 2008	374,519		$	4	$	2,193		$	3,634		$	(648	)	$	320		$	5,503

(a)	"Capital in excess of par value" and "Earnings reinvested" have been adjusted by $13 million in accordance with FSP APB 14-1.  See Note 2 for additional information.
(b)	The three months ended June 30, 2009, includes common stock shares issued through the ICP, ICPKE, and DRIP.  The six months ended June 30, 2009, includes common stock shares issued through the ICP, ICPKE, DRIP, ESOP and DDCP.  The three months ended June 30, 2008, includes common stock shares issued through the ICP, ICPKE, and the 2-5/8% Convertible Senior Notes.  The six months ended June 30, 2008, includes common stock shares issued through the ICP, ICPKE and the 2-5/8% Convertible Senior Notes.  "Capital in excess of par value" for the six months ended June 30, 2009, includes $7 million for a company contribution to the ESOP.
(c)	"Earnings reinvested" includes dividends and dividend equivalents on PPL Corporation common stock and restricted stock units.  "Noncontrolling interests" includes dividends and distributions to noncontrolling interests.
(d)	Adjustment made in accordance with FSP FAS 115-2 and FAS 124-2.  See Note 2 for additional information.
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009		2008
Net income (loss)	$	(3	)	$	195		$	243	$	460
Other comprehensive income (loss):
Amounts arising during the period - gains (losses), net of tax (expense) benefit:
Foreign currency translation adjustments, net of tax of $4, $1, $4, $0		162			(13	)		70		(72	)
Available-for-sale securities, net of tax of $(17), $7, $(11), $22		16			(7	)		10		(21	)
Qualifying derivatives, net of tax of $(49), $315, $(172), $348		50			(456	)		232		(499	)
Equity investee's other comprehensive loss					(1	)				(1	)
Reclassifications to net income - (gains) losses, net of tax expense (benefit):
Available-for-sale securities, net of tax of $1, $1		(1	)		(1	)
Qualifying derivatives, net of tax of $(110), $12, $(67), $(2)		170			(18	)		97		(1	)
Defined benefit plans:
Prior service costs, net of tax of $(2), $(3), $(4), $(5)		2			3			6		7
Net actuarial loss, net of tax of $(1), $(1), $(2), $(3)		1			4			2		6
Transition obligation		1			1			1		1
Total other comprehensive income (loss) attributable to PPL Corporation		401			(488	)		418		(580	)
Comprehensive income (loss)		398			(293	)		661		(120	)
Comprehensive income attributable to noncontrolling interests		4			5			9		10
Comprehensive income (loss) attributable to PPL Corporation	$	394		$	(298	)	$	652	$	(130	)

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

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
PPL Energy Supply, LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)
	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Operating Revenues
Wholesale energy marketing
Realized	$	760		$	434		$	1,565		$	862
Unrealized economic activity (Note 14)		(112	)		(616	)		240			(796	)
Wholesale energy marketing to affiliate		411			428			908			917
Utility		155			211			331			452
Unregulated retail electric and gas		32			33			74			67
Net energy trading margins		7			52			(5	)		50
Energy-related businesses		103			129			199			243
Total Operating Revenues		1,356			671			3,312			1,795
Operating Expenses
Operation
Fuel		186			189			444			429
Energy purchases
Realized		583			264			1,235			540
Unrealized economic activity (Note 14)		65			(604	)		334			(863	)
Energy purchases from affiliate		20			30			40			58
Other operation and maintenance		270			265			550			547
Depreciation		80			82			153			158
Taxes, other than income		21			25			41			44
Energy-related businesses		97			118			186			224
Total Operating Expenses		1,322			369			2,983			1,137
Operating Income		34			302			329			658
Other Income (Expense) - net		(6	)		10			23			19
Other-Than-Temporary Impairments		1			7			18			10
Interest Income from Affiliates		1			2			2			7
Interest Expense		67			76			122			146
Interest Expense with Affiliate		1						1
Income (Loss) from Continuing Operations Before Income Taxes		(40	)		231			213			528
Income Taxes		(41	)		78			24			180
Income from Continuing Operations After Income Taxes		1			153			189			348
Income (Loss) from Discontinued Operations (net of income taxes) (Note 8)		(32	)		5			(29	)		14
Net Income (Loss)		(31	)		158			160			362
Net Income Attributable to Noncontrolling Interests					1						1
Net Income (Loss) Attributable to PPL Energy Supply	$	(31	)	$	157		$	160		$	361
Amounts Attributable to PPL Energy Supply:
Income from Continuing Operations After Income Taxes	$	1		$	152		$	189		$	347
Income (Loss) from Discontinued Operations (net of income taxes)		(32	)		5			(29	)		14
Net Income (Loss)	$	(31	)	$	157		$	160		$	361

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
PPL Energy Supply, LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)
	Six Months Ended June 30,
	2009			2008
Cash Flows from Operating Activities
Net income	$	160		$	362
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		154			159
Deferred income taxes and investment tax credits		6			33
Impairment of assets		100			10
Unrealized (gains) losses on derivatives and other hedging activities		41			(86	)
Other		(17	)		26
Change in current assets and current liabilities
Accounts receivable		121			105
Accounts payable		(203	)		92
Unbilled revenue		50			(201	)
Fuel, materials and supplies		(45	)		(9	)
Collateral on PLR energy supply to affiliate		221
Counterparty collateral deposits		201			304
Price risk management assets and liabilities		(191	)		(25	)
Other		11			46
Other operating activities
Other assets		(6	)		5
Other liabilities		(35	)		(22	)
Net cash provided by operating activities		568			799
Cash Flows from Investing Activities
Expenditures for property, plant and equipment		(391	)		(516	)
Expenditures for intangible assets		(42	)		(256	)
Proceeds from the sale of intangible assets		8			2
Purchases of nuclear plant decommissioning trust investments		(153	)		(95	)
Proceeds from the sale of nuclear plant decommissioning trust investments		141			82
Purchases of other investments					(47	)
Proceeds from the sale of other investments		150			33
Net (increase) decrease in restricted cash and cash equivalents		190			(275	)
Net increase in note receivable from affiliate		(47	)
Other investing activities		(3	)		7
Net cash used in investing activities		(147	)		(1,065	)
Cash Flows from Financing Activities
Issuance of long-term debt					399
Retirement of long-term debt		(220	)		(57	)
Distributions to Member		(373	)		(567	)
Contributions from Member					95
Net increase in short-term debt		142			400
Other financing activities		(5	)		(2	)
Net cash provided by (used in) financing activities		(456	)		268
Effect of Exchange Rates on Cash and Cash Equivalents					(2	)
Net Decrease in Cash and Cash Equivalents		(35	)
Cash and Cash Equivalents at Beginning of Period		464			355
Cash and Cash Equivalents at End of Period	$	429		$	355

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

CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Energy Supply, LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)
	June 30, 2009		December 31, 2008
Assets
Current Assets
Cash and cash equivalents	$	429	$	464
Short-term investments				150
Restricted cash and cash equivalents		126		315
Accounts receivable (less reserve:  2009, $23; 2008, $21)
Customer		160		220
Other		31		66
Unbilled revenues		360		408
Accounts receivable from affiliates		121		159
Note receivable from affiliate		47
Collateral on PLR energy supply to affiliate		79		300
Fuel, materials and supplies		346		301
Prepayments		32		71
Price risk management assets		1,959		1,221
Assets held for sale		182
Other intangibles		27		17
Other		5		6
Total Current Assets		3,904		3,698
Investments
Equity method investments		32		47
Nuclear plant decommissioning trust funds		468		446
Other		17		21
Total Investments		517		514
Property, Plant and Equipment
Electric plant
Transmission and distribution		3,822		3,540
Generation		10,134		9,588
General		278		286
Electric plant in service		14,234		13,414
Construction work in progress		548		1,031
Nuclear fuel		397		428
Electric plant		15,179		14,873
Gas and oil plant		68		68
Other property		159		154
Property, plant and equipment, gross		15,406		15,095
Less:  accumulated depreciation		5,995		5,935
Property, Plant and Equipment, net		9,411		9,160
Other Noncurrent Assets
Goodwill		796		763
Other intangibles		483		507
Price risk management assets		1,956		1,346
Other		325		481
Total Other Noncurrent Assets		3,560		3,097
Total Assets	$	17,392	$	16,469

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

CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Energy Supply, LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)
	June 30, 2009		December 31, 2008
Liabilities and Equity
Current Liabilities
Short-term debt	$	611	$	584
Short-term debt with affiliate		124
Accounts payable		523		684
Accounts payable to affiliates		35		62
Taxes		27		31
Interest		77		88
Deferred revenue on PLR energy supply to affiliate		6		12
Price risk management liabilities		1,768		1,313
Other		612		382
Total Current Liabilities		3,783		3,156
Long-term Debt		5,000		5,196
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes and investment tax credits		1,352		1,110
Price risk management liabilities		1,072		836
Accrued pension obligations		512		556
Asset retirement obligations		394		389
Other		287		414
Total Deferred Credits and Other Noncurrent Liabilities		3,617		3,305
Commitments and Contingent Liabilities (Note 10)
Equity
Member's equity		4,974		4,794
Noncontrolling interests		18		18
Total Equity		4,992		4,812
Total Liabilities and Equity	$	17,392	$	16,469

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

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
PPL Energy Supply, LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)
	Member's equity			Non-controlling interests			Total
March 31, 2009	$	4,696		$	18		$	4,714
Net loss		(31	)					(31	)
Other comprehensive income		386						386
Distributions		(77	)					(77	)
June 30, 2009	$	4,974		$	18		$	4,992
December 31, 2008	$	4,794		$	18		$	4,812
Net income		160						160
Other comprehensive income		393						393
Distributions		(373	)					(373	)
June 30, 2009	$	4,974		$	18		$	4,992
March 31, 2008	$	4,830		$	19		$	4,849
Net income		157			1			158
Other comprehensive loss		(493	)					(493	)
Contributions from member		95						95
Distributions		(75	)		(1	)		(76	)
June 30, 2008	$	4,514		$	19		$	4,533
December 31, 2007	$	5,205		$	19		$	5,224
Net income		361			1			362
Other comprehensive loss		(580	)					(580	)
Contributions from member		95						95
Distributions		(567	)		(1	)		(568	)
June 30, 2008	$	4,514		$	19		$	4,533

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

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
PPL Energy Supply, LLC and Subsidiaries
(Unaudited)
(Millions of Dollars)
	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009		2008
Net income (loss)	$	(31	)	$	158		$	160	$	362
Other comprehensive income (loss):
Amounts arising during the period - gains (losses), net of tax (expense) benefit:
Foreign currency translation adjustments, net of tax of $4, $1, $4, $0		162			(13	)		70		(72	)
Available-for-sale securities, net of tax of $(18), $7, $(12), $22		16			(6	)		10		(20	)
Qualifying derivatives, net of tax of $(39), $318, $(154), $349		36			(460	)		207		(501	)
Equity investee's other comprehensive loss					(1	)				(1	)
Reclassifications to net income - (gains) losses, net of tax expense (benefit):
Available-for-sale securities, net of tax of $1, $1		(1	)		(1	)
Qualifying derivatives, net of tax of $(111), $12, $(68), $(3)		169			(19	)		98		1
Defined benefit plans:
Prior service costs, net of tax of $(1), $(1), $(3), $(3)		3			3			6		6
Net actuarial loss, net of tax of $0, $(2), $(1), $(3)		1			3			2		6
Transition obligation					1					1
Total other comprehensive income (loss) attributable to PPL Energy Supply		386			(493	)		393		(580	)
Comprehensive income (loss)		355			(335	)		553		(218	)
Comprehensive income attributable to noncontrolling interests					1					1
Comprehensive income (loss) attributable to PPL Energy Supply	$	355		$	(336	)	$	553	$	(219	)

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

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
Operating Revenues
Retail electric	$	727	$	770	$	1,617	$	1,650
Wholesale electric to affiliate		20		30		40		58
Total Operating Revenues		747		800		1,657		1,708
Operating Expenses
Operation
Energy purchases		31		44		63		85
Energy purchases from affiliate		411		428		908		917
Other operation and maintenance		98		101		204		204
Amortization of recoverable transition costs		70		68		154		144
Depreciation		30		33		63		65
Taxes, other than income		46		48		98		104
Total Operating Expenses		686		722		1,490		1,519
Operating Income		61		78		167		189
Other Income (Expense) - net				2		2		4
Interest Income from Affiliate		1		1		3		4
Interest Expense		31		24		59		50
Interest Expense with Affiliate				2		1		5
Income Before Income Taxes		31		55		112		142
Income Taxes		10		19		37		50
Net Income (a)		21		36		75		92
Dividends on Preferred Securities		4		4		9		9
Net Income Available to PPL Corporation	$	17	$	32	$	66	$	83

(a) Comprehensive income approximates net income.

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
	Six Months Ended June 30,
	2009			2008
Cash Flows from Operating Activities
Net income	$	75		$	92
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Depreciation		63			65
Amortization of recoverable transition costs and other		163			154
Deferred income taxes and investment tax credits		(82	)		(14	)
Other		17			12
Change in current assets and current liabilities
Accounts receivable		(7	)		(30	)
Accounts payable		(61	)		(42	)
Prepayments		(108	)		(83	)
Unbilled revenue		44			24
Collateral on PLR energy supply from affiliate		(221	)
Other		12			(8	)
Other operating activities
Other assets		1			1
Other liabilities		13			16
Net cash provided by (used in) operating activities		(91	)		187
Cash Flows from Investing Activities
Expenditures for property, plant and equipment		(125	)		(131	)
Net decrease in note receivable from affiliate		221			202
Net increase in restricted cash and cash equivalents					(11	)
Other investing activities					2
Net cash provided by investing activities		96			62
Cash Flows from Financing Activities
Issuance of long-term debt		298
Retirement of long-term debt		(9	)		(160	)
Payment of common stock dividends to PPL		(148	)		(48	)
Net decrease in short-term debt		(95	)
Payment of dividends on preferred securities		(9	)		(9	)
Other financing activities		(5	)
Net cash provided by (used in) financing activities		32			(217	)
Net Increase in Cash and Cash Equivalents		37			32
Cash and Cash Equivalents at Beginning of Period		483			33
Cash and Cash Equivalents at End of Period	$	520		$	65

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

CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
	June 30, 2009		December 31, 2008
Assets
Current Assets
Cash and cash equivalents	$	520	$	483
Restricted cash and cash equivalents		1		1
Accounts receivable (less reserve:  2009, $15; 2008, $14)
Customer		248		233
Other		3		11
Unbilled revenues		146		190
Accounts receivable from affiliates		8		8
Note receivable from affiliate		79		300
Prepayments		115		7
Prepayment on PLR energy supply from affiliate		6		12
Other		49		50
Total Current Assets		1,175		1,295
Property, Plant and Equipment
Electric plant
Transmission and distribution		4,572		4,506
General		519		489
Electric plant in service		5,091		4,995
Construction work in progress		83		79
Electric plant		5,174		5,074
Other property		2		2
Property, plant and equipment, gross		5,176		5,076
Less:  accumulated depreciation		1,967		1,924
Property, Plant and Equipment, net		3,209		3,152
Regulatory and Other Noncurrent Assets
Recoverable transition costs		120		281
Intangibles		134		130
Taxes recoverable through future rates		252		250
Recoverable costs of defined benefit plans		186		192
Other		116		116
Total Regulatory and Other Noncurrent Assets		808		969
Total Assets	$	5,192	$	5,416

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

CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
	June 30, 2009		December 31, 2008
Liabilities and Equity
Current Liabilities
Short-term debt			$	95
Long-term debt	$	486		495
Accounts payable		43		57
Accounts payable to affiliates		143		186
Taxes		48		65
Collateral on PLR energy supply from affiliate		79		300
Other		151		124
Total Current Liabilities		950		1,322
Long-term Debt		1,572		1,274
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes and investment tax credits		696		767
Accrued pension obligations		217		209
Other		193		198
Total Deferred Credits and Other Noncurrent Liabilities		1,106		1,174
Commitments and Contingent Liabilities (Note 10)
Shareowners' Equity
Preferred securities		301		301
Common stock - no par value (a)		364		364
Additional paid-in capital		424		424
Earnings reinvested		475		557
Total Shareowners' Equity		1,564		1,646
Total Liabilities and Equity	$	5,192	$	5,416

(a) 170 million shares authorized; 66 million shares issued and outstanding at June 30, 2009 and December 31, 2008.

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

Combined Notes to Condensed Consolidated Financial Statements (Unaudited)

Terms and abbreviations appearing in Combined Notes to Condensed Consolidated Financial Statements are explained in the glossary.  Dollars are in millions, except per share data, unless otherwise noted.

1.   Interim Financial Statements

(PPL, PPL Energy Supply and PPL Electric)

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. 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 footnotes required by accounting principles generally accepted in the U.S. for complete financial statements.  In the opinion of management, all adjustments considered necessary for a fair presentation in accordance with accounting principles generally accepted in the U.S. are reflected in the condensed consolidated financial statements.  All adjustments are of a normal recurring nature, except as otherwise disclosed.  Each Registrant's Balance Sheet as of December 31, 2008 is derived from that Registrant's 2008 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 2008 Form 10-K.  The results of operations for the six months ended June 30, 2009 are not necessarily indicative of the results to be expected for the full year ending December 31, 2009, or other future periods, because results for interim periods can be disproportionately influenced by various factors and developments and seasonal variations.

The classification of certain prior period amounts has been changed to conform to the presentation in the June 30, 2009 financial statements.  For PPL and PPL Energy Supply, these changes include the impact of new accounting standards adopted.  See Note 2 for additional information.

(PPL)

Discontinued Operations for the three and six months ended June 30, 2008, includes the operating activity of PPL's natural gas distribution and propane businesses that were sold in October 2008.  See Note 8 for additional information.  The Statements of Cash Flows do not separately report the cash flows of the Discontinued Operations.

(PPL and PPL Energy Supply)

Discontinued Operations for the six months ended June 30, 2008 includes activity related to the Latin American businesses that were dissolved in 2008.

In May 2009, PPL Generation signed a definitive agreement to sell its Long Island generation business and related tolling agreements.  In July 2009, PPL Maine signed a definitive agreement to sell the majority of its hydroelectric generation business.  PPL expects both sales to close in 2009.  The results of operations for the three and six months ended June 30, 2009 and 2008 are classified as Discontinued Operations.  The assets and liabilities of the Long Island generation business and the majority of the Maine hydroelectric generation business expected to be sold are classified as held for sale on the Balance Sheet at June 30, 2009.

See Note 8 for additional information on the Discontinued Operations and the anticipated sales.  The Statements of Cash Flows do not separately report the cash flows of the Discontinued Operations.

2.   Summary of Significant Accounting Policies

The following accounting policy disclosures represent updates to the "Summary of Significant Accounting Policies" Note in each Registrant's 2008 Form 10-K and should be read in conjunction with that discussion.

Revenue (PPL and PPL Electric)

Revenue Recognition

Beginning November 1, 2008, PPL Electric's transmission revenues are billed in accordance with a tariff pending FERC-approval that utilizes a formula rate recovery mechanism.  The tariff allows for recovery of actual transmission costs incurred, a return on transmission plant placed in service and an incentive return on construction work in progress for FERC-approved regional transmission expansion projects.  The tariff utilizes estimated costs for the current year billing to customers and requires a true-up to adjust for actual costs in the subsequent year's rate.  Once PPL Electric's formula rate recovery mechanism is approved by the FERC, the annual update of the rate is implemented automatically without specific approval by the FERC required before going into effect.

During the three months ended June 30, 2009, a true-up was recorded for the FERC formula-based transmission revenues that had been billed for the period November 1, 2008 through May 31, 2009 based on a calculation of the amounts that will be returned to customers in future rates for the required true-up to actual costs.  This amount is reflected on the Statement of Income in "Utility" revenue for PPL and in "Retail electric" for PPL Electric, and reduced revenue by $11 million and net income by $7 million for the three and six months ended June 30, 2009.  The overcollected revenue and an insignificant amount of interest will be returned to customers in monthly rates between June 1, 2009 and May 31, 2010.

The $7 million after-tax true-up recorded in the three months ended June 30, 2009 includes $5 million related to prior periods ($2 million related to 2008 and $3 million related to the three months ended March 31, 2009).  The true-up, reflected in the Pennsylvania Delivery segment for PPL, is not considered by management as material to the financial statements of PPL and PPL Electric for the year ended December 31, 2008 or the quarter ended March 31, 2009 and it is not expected to be material to the financial statements for the full year 2009.

Investments in Debt and Equity Securities (PPL, PPL Energy Supply and PPL Electric)

Investments in debt securities are classified as held-to-maturity and measured at amortized cost, when there is an intent and ability to hold the securities to maturity.  Debt securities and equity securities that are acquired and held principally for the purpose of selling them in the near-term are classified as trading.  Trading securities are generally held to capitalize on fluctuations in their value.  All other investments in debt and equity securities are classified as available-for-sale.  Both trading and available-for-sale securities are carried at fair value.  The specific identification method is used to calculate realized gains and losses on debt and equity securities.  Any unrealized gains and losses on trading securities are included in earnings.  Through March 31, 2009, unrealized gains and losses on all available-for-sale securities were reported, net of tax, in OCI or recognized in earnings when the decline in fair value below amortized cost was determined to be an other-than-temporary impairment.

As described in "New Accounting Standards Adopted," FSP FAS 115-2 and FAS 124-2 modifies the criteria for determining whether a decline in fair value of a debt security is other than temporary and whether the other than temporary impairment is recognized in earnings or reported in OCI.  Beginning April 1, 2009, when a debt security is in an unrealized loss position:

· if there is an intent to sell the security or a requirement to sell the security before recovery, the other-than-temporary impairment is recognized currently in earnings; or

· if there is no intent to sell the security or requirement to sell the security before recovery, the portion of the other-than-temporary impairment that is considered a credit loss is recognized currently in earnings and the remainder of the other-than-temporary impairment is reported in OCI, net of tax; or

· if there is no intent to sell the security or requirement to sell the security before recovery and there is no credit loss, the unrealized loss is reported in OCI, net of tax.

Equity securities were not impacted by the FSP; therefore, unrealized gains and losses on available-for-sale equity securities continue to be reported, net of tax, in OCI or recognized in earnings when a decline in fair value below amortized cost is determined to be an other-than-temporary impairment.  See Notes 13 and 18 for additional information on investments in debt and equity securities.

New Accounting Standards Adopted (PPL, PPL Energy Supply and PPL Electric)

EITF 08-5

EITF 08-5 applies to liabilities issued with an inseparable third-party credit enhancement when the liability is measured or disclosed at fair value on a recurring basis.  An issuer shall disclose the existence of a third-party credit enhancement, and the fair value measurement of the liability shall not include the effect of this third-party credit enhancement.

PPL and its subsidiaries adopted EITF 08-5, prospectively, effective January 1, 2009.  The initial adoption of EITF 08-5 did not have a material impact on PPL and its subsidiaries' financial statements, as this guidance currently only impacts the fair value disclosure of certain credit-enhanced debt instruments.  See "Financial Instruments Not Recorded at Fair Value-Other" within Note 13 for these disclosures.

FSP APB 14-1

FSP APB 14-1 requires an issuer to separately account for the liability and equity components of convertible debt instruments that may be settled in cash (or other assets) upon conversion in a manner that reflects the issuer's nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods.  The discount that results from separating the liability and equity components will be amortized over the life of the debt and recognized as interest expense.  PPL and its subsidiaries adopted FSP APB 14-1 effective January 1, 2009, which required retrospective application to all prior periods presented.

FSP APB 14-1 was applicable to PPL Energy Supply's 2-5/8% Convertible Senior Notes due 2023 (Convertible Senior Notes), which upon conversion required cash settlement of the principal amount and permitted settlement of any conversion premium in cash or PPL common stock.  During 2008, all of the Convertible Senior Notes were either converted at the election of the holders or redeemed at par as a result of PPL Energy Supply calling the notes for redemption.  FSP APB 14-1 required only retrospective application with regard to the Convertible Senior Notes, as none of these notes were outstanding at the effective date.  The retrospective application of this FSP impacted PPL in periods prior to 2006.  As such, PPL reduced the opening balance of "Earnings reinvested" by $13 million with a corresponding increase to "Capital in excess of par value."

FSP EITF 03-6-1

FSP EITF 03-6-1 requires that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents be considered participating securities and be included in the computation of EPS under the two-class method.  The two-class method treats share-based payment awards that pay nonforfeitable dividends as a separate class of stock for purposes of computing EPS.

PPL and its subsidiaries adopted FSP EITF 03-6-1, retrospectively, effective January 1, 2009.  The adoption did not have a material impact on PPL and its subsidiaries.  As a result of the application of this FSP, PPL's restricted stock, restricted stock units, and stock units granted to directors are now considered participating securities; therefore, PPL is required to compute EPS under the two-class method.  The retrospective application of this FSP caused PPL's basic EPS for income from continuing operations after income taxes available to PPL Corporation common shareowners to decrease by $0.01 for the three months ended June 30, 2008, and basic EPS for net income available to PPL Corporation common shareowners to decrease by $0.01 for the six months ended June 30, 2008.  See Note 4 for additional information.

FSP FAS 107-1 and APB 28-1

FSP FAS 107-1 and APB 28-1 applies to all financial instruments within the scope of SFAS 107 and requires a publicly traded company to include disclosures about the fair value of its financial instruments in interim reporting periods.

PPL and its subsidiaries adopted FSP FAS 107-1 and APB 28-1, prospectively, effective April 1, 2009.  This FSP does not require disclosures for earlier periods presented for comparative purposes at initial adoption. In periods after initial adoption, this FSP requires comparative disclosures only for periods ending after initial adoption.  The adoption of FSP FAS 107-1 and APB 28-1 did not have a material impact on PPL and its subsidiaries' financial statements, as this guidance only impacts disclosures about the fair value of financial instruments.  See "Financial Instruments Not Recorded at Fair Value-Other" within Note 13 for these disclosures.

FSP FAS 115-2 and FAS 124-2

FSP FAS 115-2 and FAS 124-2 modifies the existing requirement that an entity have the intent and ability to hold an impaired debt security to recovery in order to conclude an impairment was temporary.  Instead, an impairment of a debt security is other than temporary if (1) an entity has the intent to sell the security, (2) it is more likely than not that an entity will be required to sell the security before recovery, or (3) an entity does not expect to recover the entire amortized cost basis of the security, referred to as a credit loss.

In addition, the FSP changes the recording of an other-than-temporary impairment on a debt security if the reason for the other-than-temporary impairment is the recognition of a credit loss.  In this situation, the other-than-temporary impairment will be separated into the credit loss component, which is recognized in earnings, and the remainder of the other-than-temporary impairment, which is recorded in OCI.

For a debt security held at the beginning of the period of adoption for which an other-than-temporary impairment was previously recognized, if an entity does not intend to sell the debt security and it is not more likely than not that the entity will be required to sell the debt security before recovery of its amortized cost basis, the cumulative effect of applying this FSP will be recognized as an adjustment to the opening balance of retained earnings with a corresponding adjustment to AOCI.

The FSP affects the accounting for PPL's and PPL Energy Supply's investments in debt securities in the NDT funds.  Prior to the application of this FSP, PPL and PPL Energy Supply were unable to demonstrate the ability to hold an impaired debt security in the NDT funds until recovery; therefore, an unrealized loss on a debt security always represented an other-than-temporary impairment that required a current period charge to earnings.  Based on the application of this FSP, certain unrealized losses on investments in debt securities are no longer considered other-than-temporary impairments and will be recorded to OCI.

PPL and its subsidiaries adopted FSP FAS 115-2 and FAS 124-2, effective April 1, 2009.  Related SEC guidance, Topic 5M, was also amended to no longer apply to debt securities.  As a result of the adoption, PPL and PPL Energy Supply recorded an immaterial cumulative effect adjustment to the opening balance of retained earnings with a corresponding reduction to AOCI.

FSP FAS 157-4

FSP FAS 157-4, which supersedes FSP FAS 157-3, provides additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased.  It also includes guidance on identifying circumstances that indicate a transaction is not orderly.  This FSP emphasizes that the objective of a fair value measurement remains the same; that is, 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 under current market conditions.

PPL and its subsidiaries adopted FSP FAS 157-4, prospectively, effective April 1, 2009.  This FSP does not require disclosures for earlier periods presented for comparative purposes at initial adoption. In periods after initial adoption, this FSP requires comparative disclosures only for periods ending after initial adoption.  The adoption of FSP FAS 157-4 did not have a material impact on PPL and its subsidiaries' financial statements.

SFAS 141(R)

SFAS 141(R) changes the accounting and reporting for business combinations occurring after its adoption.  In addition, SFAS 141(R) requires entities to recognize changes in unrecognized tax benefits acquired in a business combination, including business combinations that occurred prior to January 1, 2009, in income tax expense rather than in goodwill.  PPL and its subsidiaries adopted SFAS 141(R), prospectively, effective January 1, 2009.  The January 1, 2009 adoption of SFAS 141(R) did not have a significant impact on PPL and its subsidiaries; however, the impact in future periods could be material.

In the first quarter of 2009, PPL and PPL Energy Supply recorded an income tax benefit of $14 million as a result of settling an income tax dispute.  Prior to the adoption of SFAS 141(R), $7 million of this income tax benefit would have been recorded as a reduction to goodwill.

SFAS 157

Effective January 1, 2009, PPL and its subsidiaries fully applied SFAS 157 to fair value measurement concepts used within their financial statements where applicable.

SFAS 160

The FASB issued SFAS 160 to improve the relevancy, comparability, and transparency of the financial information an entity provides when it has a noncontrolling interest in a subsidiary and when it changes its ownership interest in a subsidiary.  SFAS 160 requires that the ownership interests in subsidiaries held by parties other than the parent be presented in the consolidated statement of financial position within equity, but separate from the parent's equity, and that the amount of consolidated net income attributable to the parent and to the noncontrolling interest be presented on the face of the consolidated statement of income.  SFAS 160 modifies the accounting for both changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary and for the deconsolidation of a subsidiary.  SFAS 160 also requires enhanced disclosures relating to noncontrolling interests.

PPL and its subsidiaries adopted SFAS 160, prospectively, effective January 1, 2009, concurrent with the adoption of SFAS 141(R), except for the presentation and disclosure requirements, which required retrospective application.  The adoption of SFAS 160 did not have a material impact on PPL and its subsidiaries' financial statements.

At June 30, 2009 and December 31, 2008, PPL reflected PPL Electric's preferred securities of $301 million within "Noncontrolling interests" on the Balance Sheets.  Dividend requirements of $4 million and $9 million were included in "Net Income Attributable to Noncontrolling Interests" on the Statements of Income for the three and six months ended June 30, 2009 and 2008.

SFAS 161

SFAS 161 applies to all derivative instruments, including bifurcated derivative instruments and nonderivative instruments that are designated and qualify as hedging instruments pursuant to SFAS 133, as well as related hedged items accounted for under SFAS 133.  SFAS 161 requires an entity to expand disclosures to provide greater transparency about (a) how and why it uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and (c) how derivative instruments and related hedged items affect its financial position, results of operations and cash flows.

PPL and its subsidiaries adopted SFAS 161, prospectively, effective January 1, 2009.  The enhanced disclosures required by SFAS 161 are presented in Note 14.  SFAS 161 was issued to provide greater transparency by enhancing existing disclosures; therefore, the adoption did not have a material impact on PPL and its subsidiaries' financial statements.

SFAS 165

SFAS 165 sets forth the period after the balance sheet date during which management of a reporting entity shall evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements.  Additionally, SFAS 165 sets forth recognition and disclosure requirements for events or transactions that occur after the balance sheet date, including a requirement to disclose the date through which subsequent events have been evaluated.  SFAS 165 shall be applied to the accounting for and disclosure of subsequent events that are not within the scope of other GAAP.

PPL and its subsidiaries adopted SFAS 165, prospectively, for the interim periods ended June 30, 2009.  The initial adoption of SFAS 165 did not have a material impact on PPL and its subsidiaries' financial statements.  See Note 21 for the disclosures required by SFAS 165.

New Accounting Standards Pending Adoption

See Note 20 for a discussion of new accounting standards pending adoption.

3.   Segment and Related Information

(PPL and PPL Energy Supply)

See the "Segment and Related Information" Note in each Registrant's 2008 Form 10-K for a discussion of reportable segments.  The Supply segment of PPL and PPL Energy Supply includes the elimination of intersegment transactions.

Financial data for the segments are:

	Three Months Ended June 30,					Six Months Ended June 30,
PPL	2009			2008		2009		2008
Income Statement Data
Revenues from external customers
Supply (a)	$	783		$	24	$	2,061	$	410
International Delivery		163			220		346		470
Pennsylvania Delivery (b)		727			770		1,617		1,650
	$	1,673		$	1,014	$	4,024	$	2,530
Intersegment revenues
Supply	$	411		$	428	$	908	$	917
Pennsylvania Delivery		20			30		40		58
Net Income (Loss) Attributable to PPL
Supply (c)	$	(86	)	$	97	$	19	$	199
International Delivery (d)		62			62		149		160
Pennsylvania Delivery (b) (e)		17			31		66		91
	$	(7	)	$	190	$	234	$	450

	June 30, 2009		December 31, 2008
Balance Sheet Data
Total assets
Supply	$	12,841	$	11,790
International Delivery		4,377		4,199
Pennsylvania Delivery		5,192		5,416
	$	22,410	$	21,405

	Three Months Ended June 30,					Six Months Ended June 30,
PPL Energy Supply	2009			2008		2009		2008
Income Statement Data
Revenues from external customers
Supply (a)	$	1,193		$	451	$	2,966	$	1,325
International Delivery		163			220		346		470
	$	1,356		$	671	$	3,312	$	1,795
Net Income (Loss) Attributable to PPL Energy Supply
Supply (c)	$	(93	)	$	95	$	11	$	201
International Delivery (d)		62			62		149		160
	$	(31	)	$	157	$	160	$	361

	June 30, 2009		December 31, 2008
Balance Sheet Data
Total assets
Supply	$	13,015	$	12,270
International Delivery		4,377		4,199
	$	17,392	$	16,469

(a)	Includes unrealized gains and losses from economic activity.  See "Commodity Price Risk (Non-trading) - Economic Activity" in Note 14 for additional information.
(b)	2009 includes an unfavorable true-up to operating revenue of $11 million and to net income (loss) of $7 million related to the FERC formula-based transmission revenues.  See Note 2 for additional information.
(c)	2009 and 2008 include the results of Discontinued Operations of the Long Island generation business and the majority of the Maine hydroelectric generation business.  See Note 8 for additional information.
(d)	The six months ended June 30, 2008, includes the results of Discontinued Operations of the Latin American businesses.  See Note 8 for additional information.
(e)	2008 includes the results of Discontinued Operations of PPL's natural gas distribution and propane businesses.  See Note 8 for additional information.

4.   Earnings Per Share

(PPL)

EPS is computed using the two-class method, which is an earnings allocation method for computing EPS that treats a participating security as having rights to earnings that would otherwise have been available to common shareowners.  Share-based payment awards that provide recipients a non-forfeitable right to dividends or dividend equivalents are considered participating securities.

Basic EPS is computed by dividing income available to common shareowners by the weighted-average number of common shares outstanding during the period.  Diluted EPS is computed by dividing income available to common shareowners by the weighted-average number of shares outstanding that are increased for additional shares that would be outstanding if potentially dilutive non-participating securities were converted to common shares.  In 2009 and 2008, these securities consisted of stock options and performance units granted under the incentive compensation plans.  In 2008, these securities also included PPL Energy Supply's 2-5/8% Convertible Senior Notes (Convertible Senior Notes).

The basic and diluted EPS computations and reconciliations of the amounts of income and shares (in thousands) of common stock used in the calculations are:

	Three Months Ended June 30,					Six Months Ended June 30,
	2009			2008		2009			2008
Income (Numerator)
Income from continuing operations after income taxes attributable to PPL	$	25		$	184	$	263		$	426
Less amounts allocated to participating securities					1		1			2
Income from continuing operations after income taxes available to PPL common shareowners	$	25		$	183	$	262		$	424
Income (loss) from discontinued operations (net of income taxes) available to PPL common shareowners	$	(32	)	$	6	$	(29	)	$	24
Net income (loss) attributable to PPL	$	(7	)	$	190	$	234		$	450
Less amounts allocated to participating securities					1		1			2
Net income (loss) available to PPL common shareowners	$	(7	)	$	189	$	233		$	448
Shares of Common Stock (Denominator)
Weighted-average shares - Basic EPS		375,881			373,158		375,493			373,009
Add incremental non-participating securities:
Stock options and performance units		325			1,073		312			1,104
Convertible Senior Notes					671					877
Weighted-average shares - Diluted EPS		376,206			374,902		375,805			374,990
Basic EPS
Available to PPL common shareowners:
Income from continuing operations after income taxes	$	0.07		$	0.49	$	0.70		$	1.14
Income (loss) from discontinued operations (net of income taxes)		(0.09	)		0.01		(0.08	)		0.06
Net Income (Loss)	$	(0.02	)	$	0.50	$	0.62		$	1.20

Diluted EPS
Available to PPL common shareowners:
Income from continuing operations after income taxes	$	0.07		$	0.49	$	0.70		$	1.13
Income (loss) from discontinued operations (net of income taxes)		(0.09	)		0.01		(0.08	)		0.06
Net Income (Loss)	$	(0.02	)	$	0.50	$	0.62		$	1.19

For the three and six months ended June 30, 2009, there were 1,636,390 and 2,143,289 stock options and performance units excluded from the computation of diluted EPS because the effect would have been antidilutive.

During the six months ended June 30, 2008, all then outstanding Convertible Senior Notes were either converted at the election of the holders or redeemed at par by PPL Energy Supply.  No Convertible Senior Notes were outstanding at June 30, 2008.

During the six months ended June 30, 2009, PPL issued 419,746 shares of common stock under its stock-based compensation plans.  In addition, PPL issued 235,013 and 942,016 shares of common stock related to its ESOP and its DRIP.

5.   Income Taxes

(PPL, PPL Energy Supply and PPL Electric)

Reconciliations of effective income tax rates are:

	Three Months Ended June 30,			Six Months Ended June 30,
PPL	2009	2008		2009		2008
Reconciliation of Income Taxes
Federal income tax on Income (Loss) from Continuing Operations Before Income Taxes at statutory tax rate - 35%		$	99	$	119	$	230

Increase (decrease) due to:
State income taxes (a)	$	(7	)	$	8					$	16
Amortization of investment tax credit		(3	)		(2	)	$	(5	)		(5	)
Difference related to income recognition of foreign affiliates (net of foreign income taxes)		(8	)		(9	)		(19	)		(17	)
Change in foreign tax reserves (a)		(15	)		17			(29	)		5
Foreign income tax return adjustments (b)					(17	)		1			(17	)
Change in federal tax reserves (a)					3			10			6
Stranded cost securitization (a)		(2	)		(2	)		(3	)		(3	)
Domestic manufacturing deduction		(4	)		(3	)		(7	)		(7	)
Federal income tax credits (c)											13
Other		8									(1	)
		(31	)		(5	)		(52	)		(10	)
Total income taxes from continuing operations	$	(31	)	$	94		$	67		$	220

(a)	For the three months ended June 30, 2009, PPL recorded a $17 million benefit related to federal, state and foreign income tax reserves, which consisted primarily of a $15 million benefit reflected in "Change in foreign tax reserves," and a $2 million benefit reflected in "Stranded cost securitization."
	For the three months ended June 30, 2008, PPL recorded an $18 million tax expense related to federal, state and foreign income tax reserves, which consisted primarily of a $17 million expense reflected in "Change in foreign tax reserves" and a $3 million expense reflected in "Change in federal tax reserves," offset by a $2 million benefit reflected in "Stranded cost securitization."
	For the six months ended June 30, 2009, PPL recorded a $23 million benefit related to federal, state and foreign income tax reserves, which consisted primarily of a $29 million benefit reflected in "Change in foreign tax reserves," a $3 million benefit reflected in "Stranded cost securitization" and a $1 million benefit reflected in "Other," offset by a $10 million expense reflected in "Change in federal tax reserves."
	For the six months ended June 30, 2008, PPL recorded an $8 million expense related to federal, state and foreign income tax reserves, which consisted primarily of a $5 million expense reflected in "Change in foreign tax reserves" and a $6 million expense reflected in "Change in federal tax reserves," offset by a $3 million benefit reflected in "Stranded cost securitization."
(b)	For the six months ended June 30, 2009, PPL recorded a $1 million foreign income tax expense as a result of filing the 2008 income tax returns, which is reflected in "Foreign income tax return adjustments."
	For the three and six months ended June 30, 2008, PPL recorded a $17 million foreign income tax benefit as a result of filing the 2007 income tax returns, which is reflected in "Foreign income tax return adjustments."
(c)	In March 2008, PPL Energy Supply recorded a $13 million expense to adjust the amount of synthetic fuel tax credits recorded during 2007.  See Note 10 for additional information.

PPL has evaluated the impact of the change in earnings estimates on its projected annual effective tax rate.  The result of the change in estimate reduced income tax expense for the three months ended June 30, 2009 by $9 million ($0.02 per share, basic and diluted).

	Three Months Ended June 30,						Six Months Ended June 30,
PPL Energy Supply	2009			2008			2009			2008
Reconciliation of Income Taxes
Federal income tax on Income (Loss) from Continuing Operations Before Income Taxes at statutory tax rate - 35%	$	(14	)	$	81		$	75		$	185
Increase (decrease) due to:
State income taxes (a)		(8	)		8			(2	)		14
Amortization of investment tax credit		(2	)		(2	)		(4	)		(4	)
Difference related to income recognition of foreign affiliates (net of foreign income taxes)		(8	)		(9	)		(19	)		(17	)
Change in foreign tax reserves (a)		(15	)		17			(29	)		5
Foreign income tax return adjustments (b)					(17	)		1			(17	)
Change in federal tax reserves (a)					2			3			6
Domestic manufacturing deduction		(4	)		(3	)		(7	)		(7	)
Federal income tax credits (c)											13
Other		10			1			6			2
		(27	)		(3	)		(51	)		(5	)
Total income taxes	$	(41	)	$	78		$	24		$	180

(a)	For the three months ended June 30, 2009, PPL Energy Supply recorded a $15 million benefit in foreign income tax reserves reflected in "Change in foreign tax reserves."
	For the three months ended June 30, 2008, PPL Energy Supply recorded a $20 million expense related to federal, state and foreign income tax reserves, which consisted primarily of a $17 million expense reflected in "Change in foreign tax reserves," a $2 million expense reflected in "Change in federal tax reserves" and a $1 million expense reflected in "State income taxes."
	For the six months ended June 30, 2009, PPL Energy Supply recorded a $26 million benefit related to federal, state and foreign income tax reserves, which consisted primarily of a $29 million benefit reflected in "Change in foreign tax reserves," offset by a $3 million expense reflected in "Change in federal tax reserves."
	For the six months ended June 30, 2008, PPL Energy Supply recorded an $11 million expense related to federal, state and foreign income tax reserves, which consisted primarily of a $5 million expense reflected in "Change in foreign tax reserves" and a $6 million expense reflected in "Change in federal tax reserves."
(b)	For the six months ended June 30, 2009, PPL Energy Supply recorded a $1 million foreign income tax expense as a result of filing the 2008 income tax returns, which is reflected in "Foreign income tax return adjustments."
	For the three and six months ended June 30, 2008, PPL Energy Supply recorded a $17 million foreign income tax benefit as a result of filing the 2007 income tax returns, which is reflected in "Foreign income tax return adjustments."
(c)	In March 2008, PPL Energy Supply recorded a $13 million expense to adjust the amount of synthetic fuel tax credits recorded during 2007.  See Note 10 for additional information.

PPL Energy Supply has evaluated the impact of the change in earnings estimates on its projected annual effective tax rate.  The result of the change in estimate reduced income tax expense for the three months ended June 30, 2009 by $10 million.

	Three Months Ended June 30,						Six Months Ended June 30,
PPL Electric	2009			2008			2009			2008
Reconciliation of Income Taxes
Federal income tax on Income Before Income Taxes at statutory tax rate - 35%	$	11		$	20		$	39		$	50
Increase (decrease) due to:
State income taxes		1			2			4			6
Amortization of investment tax credit								(1	)		(1	)
Stranded cost securitization (a)		(2	)		(2	)		(3	)		(3	)
Other (a)					(1	)		(2	)		(2	)
		(1	)		(1	)		(2	)
Total income taxes	$	10		$	19		$	37		$	50

(a)	For the three months ended June 30, 2009, PPL Electric recorded a $1 million benefit related to federal and state income tax reserves, which consisted of a $2 million benefit reflected in "Stranded cost securitization, " offset by a $1 million expense reflected in "Other."
	For the three months ended June 30, 2008, PPL Electric recorded a $2 million benefit in state income tax reserves reflected in "Stranded cost securitization."
	For the six months ended June 30, 2009 and 2008, PPL Electric recorded a $3 million benefit in state income tax reserves reflected in "Stranded cost securitization."

Unrecognized Tax Benefits

Changes to unrecognized tax benefits were as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
PPL
Beginning of period (a)	$	187		$	200		$	202		$	204
Additions based on tax positions of prior years					17			14			34
Reductions based on tax positions of prior years											(10	)
Additions based on tax positions related to the current year					2			3			7
Settlements		(14	)					(40	)		(12	)
Lapse of applicable statutes of limitations		(2	)		(2	)		(4	)		(4	)
Effects of foreign currency translation		2						(2	)		(2	)
End of period	$	173		$	217		$	173		$	217
PPL Energy Supply
Beginning of period (a)	$	94		$	111		$	119		$	130
Additions based on tax positions of prior years					17			2			17
Reductions based on tax positions of prior years											(7	)
Additions based on tax positions related to the current year					2			3			4
Settlements		(14	)					(40	)		(12	)
Effects of foreign currency translation		2						(2	)		(2	)
End of period	$	82		$	130		$	82		$	130

PPL Electric
Beginning of period	$	82		$	83		$	77		$	68
Additions based on tax positions of prior years								7			17
Reductions based on tax positions of prior years											(3	)
Additions based on tax positions related to the current year											3
Lapse of applicable statutes of limitations		(2	)		(2	)		(4	)		(4	)
End of period	$	80		$	81		$	80		$	81

(a) The beginning of period balance for the six months ended June 30, 2008 includes a $15 million adjustment to exclude recognized uncertain tax positions from unrecognized tax benefits.

At June 30, 2009, the total unrecognized tax benefits and related indirect effects that, if recognized, would decrease the effective tax rate were:

	PPL			PPL Energy Supply			PPL Electric
Total unrecognized tax benefits	$	173		$	82		$	80
Unrecognized tax benefits associated with taxable or deductible temporary differences		(18	)		19			(37	)
Total indirect effect of unrecognized tax benefits on other tax jurisdictions		(41	)		(13	)		(25	)
Total unrecognized tax benefits and related indirect effects that, if recognized, would decrease the effective tax rate	$	114		$	88		$	18

At June 30, 2009, it was reasonably possible that during the next 12 months the total amount of unrecognized tax benefits could increase by as much as $11 million or decrease by up to $106 million for PPL, increase by as much as $11 million or decrease by up to $86 million for PPL Energy Supply and decrease by up to $9 million for PPL Electric.  These increases and decreases could result from subsequent recognition, derecognition and/or changes in measurement of uncertain tax positions related to the creditability of foreign taxes, the timing and utilization of foreign tax credits and the related impact on AMT and other credits, the timing and/or valuation of certain deductions, intercompany transactions and unitary filing groups.  The events that could cause these changes are direct settlements with taxing authorities, litigation, legal or administrative guidance by relevant taxing authorities and the lapse of an applicable statute of limitation.

At June 30, 2009, PPL, PPL Energy Supply and PPL Electric had accrued interest related to tax positions of $37 million, $28 million and $6 million.  At December 31, 2008, PPL, PPL Energy Supply and PPL Electric had accrued interest of $35 million, $28 million and $7 million.

PPL and its subsidiaries recognize interest in "Income Taxes" on their Statements of Income.  The following amounts were recognized.

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
PPL	$	(2	)	$	2		$	2		$	1
PPL Energy Supply		(2	)		3
PPL Electric					(1	)		(1	)		1

The net expense (benefit) recognized during the three and six months ended June 30, 2009 and June 30, 2008 for PPL and PPL Energy Supply were primarily the result of additional interest accrued or reversed related to tax positions of prior years and the lapse of applicable statutes of limitations, with respect to certain issues.

6.   Workforce Reduction

(PPL, PPL Energy Supply and PPL Electric)

In February 2009, PPL announced workforce reductions that resulted in the elimination of approximately 200 management and staff positions across PPL's domestic operations, or approximately 6% of PPL's non-union, domestic workforce.  The majority of the affected employees were separated during the first quarter of 2009.  The charges noted below consisted primarily of enhanced pension and severance benefits under PPL's Pension Plan and Separation Policy and were recorded to "Other operation and maintenance" expense on the Statement of Income.

As a result of the workforce reductions, PPL recorded a one-time charge of $22 million ($13 million after tax) in the first quarter of 2009.

PPL Energy Supply eliminated approximately 50 management and staff positions and recorded a one-time charge of $13 million ($8 million after tax) in the first quarter of 2009.  Included in this charge was $8 million ($4 million after tax) of allocated costs associated with the elimination of employees of PPL Services.

PPL Electric eliminated approximately 50 management and staff positions and recorded a one-time charge of $9 million ($5 million after tax) in the first quarter of 2009.  Included in this charge was $3 million ($1 million after tax) of allocated costs associated with the elimination of employees of PPL Services.

7.   Credit Arrangements and Financing Activities

Credit Arrangements

(PPL and PPL Energy Supply)

PPL Energy Supply had the following credit facilities in place at June 30, 2009:

	Expiration Date		Capacity		Borrowed		Letters of Credit Issued		Unused Capacity
PPL Energy Supply Domestic Credit Facilities
364-day Syndicated Credit Facility (a)		Sept-09	$	385					$	385
364-day Bilateral Credit Facility (b)		Mar-10		200		n/a	$	2		198
5-year Structured Credit Facility (c)		Mar-11		300		n/a		236		64
5-year Syndicated Credit Facility (d)		June-12		3,225	$	285		588		2,352
Total PPL Energy Supply Domestic Credit Facilities			$	4,110	$	285	$	826	$	2,999
WPD Credit Facilities
WPDH Limited 5-year Syndicated Credit Facility (e)		Jan-13	£	150	£	145		n/a	£	5
WPD (South West) 5-year Syndicated Credit Facility (f)		Oct-09		150		65		n/a		85
WPD (South West) Uncommitted Credit Facilities (g)				65		5		n/a		60
WPD (South West) Letter of Credit Facility		Mar-10		3		n/a	£	3
Total WPD Credit Facilities (h)			£	368	£	215	£	3	£	150

(a)	Under this facility, PPL Energy Supply has the ability to make cash borrowings and to cause the lenders to issue letters of credit.  Borrowings generally bear interest at LIBOR-based rates plus a spread, depending upon the company's public debt rating.
(b)	In March 2009, PPL Energy Supply's 364-day bilateral credit facility was amended.  The amendment included extending the expiration date from March 2009 to March 2010 and reducing the capacity from $300 million to $200 million.  Under this facility, PPL Energy Supply can cause the bank to issue letters of credit but cannot make cash borrowings.
(c)	Under this facility, PPL Energy Supply has the ability to cause the lenders to issue letters of credit but cannot make cash borrowings.  PPL Energy Supply's obligations under this facility are supported by a $300 million letter of credit issued on PPL Energy Supply's behalf under a separate, but related, $300 million five-year credit agreement, also expiring in March 2011.
(d)	Under this facility, PPL Energy Supply has the ability to make cash borrowings and to cause the lenders to issue letters of credit.  Borrowings generally bear interest at LIBOR-based rates plus a spread, depending upon the company's public debt rating.  The borrowing outstanding at June 30, 2009 bears interest at 2.14%.
(e)	Borrowings under this facility bear interest at LIBOR-based rates plus a spread, depending on the company's public debt rating.  The cash borrowings outstanding at June 30, 2009 were comprised of a USD-denominated borrowing of $181 million, which equated to £125 million at the time of borrowing and bears interest at approximately 2.43%, and a GBP-denominated borrowing of £20 million, which bears interest at approximately 1.99%.
(f)	Borrowings under this facility bear interest at LIBOR-based rates plus a spread, depending on the company's public debt rating.  The weighted-average interest rate on the borrowings outstanding at June 30, 2009 was 1.22%. In July 2009, this facility was terminated and replaced with a new £210 million three-year syndicated credit facility expiring in July 2012.  Under the new facility, WPD (South West) has the ability to make cash borrowings but cannot cause the lenders to issue letters of credit.  Borrowings under this facility bear interest at LIBOR-based rates plus a margin.  The new facility contains financial covenants that require WPD (South West) to maintain an interest coverage ratio of not less than 3.0 times consolidated earnings before income taxes, depreciation and amortization and total net debt not in excess of 85% of its regulatory asset base, in each case calculated in accordance with the credit facility.
(g)	The weighted-average interest rate on the borrowings outstanding under these facilities at June 30, 2009 was 1.21%.
(h)	At June 30, 2009, the unused capacity of the WPD credit facilities was approximately $241 million.

PPL Energy Supply closed its commercial paper program in January 2009.

(PPL and PPL Electric)

PPL Electric had the following credit facilities in place at June 30, 2009:

	Expiration Date		Capacity	Borrowed		Letters of Credit Issued		Unused Capacity
5-year Syndicated Credit Facility (a)	May-12	$	190		$	1	$	189
Asset-backed Credit Facility (b)	Jul-09		150			n/a		150
Total PPL Electric Credit Facilities		$	340		$	1	$	339

(a)	Under this facility, PPL Electric has the ability to make cash borrowings and to cause the lenders to issue letters of credit.  Borrowings generally bear interest at LIBOR-based rates plus a spread, depending upon the company's public debt rating.
(b)	PPL Electric participates in an asset-backed commercial paper program through which PPL Electric obtains financing by selling and contributing its eligible accounts receivable and unbilled revenue to a special purpose, wholly-owned subsidiary on an ongoing basis.  The subsidiary has pledged these assets to secure loans from a commercial paper conduit sponsored by a financial institution.  The subsidiary's borrowing costs under the credit facility vary based on the commercial paper conduit's actual cost to issue commercial paper that supports the debt.
	At June 30, 2009 and December 31, 2008, $226 million and $76 million of accounts receivable and $144 million and $170 million of unbilled revenue were pledged by the subsidiary under the credit agreement related to PPL Electric's and the subsidiary's participation in the asset-backed commercial paper program.  Based on the accounts receivable and unbilled revenue pledged, $150 million was available for borrowing at June 30, 2009. PPL Electric's sale to its subsidiary of the accounts receivable and unbilled revenue is an absolute sale of the assets, and PPL Electric does not retain an interest in these assets.  However, for financial reporting purposes, the subsidiary's financial results are consolidated in PPL Electric's financial statements.  PPL Electric performs certain record-keeping and cash collection functions with respect to the assets in return for a servicing fee from the subsidiary. In July 2009, PPL Electric and the subsidiary extended the expiration date of the credit agreement to July 2010.

PPL Electric maintains a commercial paper program for up to $200 million to provide an additional financing source to fund its short-term liquidity needs, if and when necessary.  Commercial paper issuances are supported by PPL Electric's five-year syndicated credit facility that expires in May 2012 based on available capacity.  PPL Electric had no commercial paper outstanding at June 30, 2009.

(PPL, PPL Energy Supply and PPL Electric)

The subsidiaries of PPL are separate legal entities.  PPL's subsidiaries are not liable for the debts of PPL.  Accordingly, creditors of PPL may not satisfy their debts from the assets of the subsidiaries absent a specific contractual undertaking by a subsidiary to pay PPL's creditors or as required by applicable law or regulation.  Similarly, absent a specific contractual undertaking or as required by applicable law or regulation, PPL is not liable for the debts of its subsidiaries.  Accordingly, creditors of PPL's subsidiaries may not satisfy their debts from the assets of PPL absent a specific contractual undertaking by PPL to pay the creditors of its subsidiaries or as required by applicable law or regulation.

Similarly, the subsidiaries of PPL Energy Supply and PPL Electric are separate legal entities.  These subsidiaries are not liable for the debts of PPL Energy Supply and PPL Electric.  Accordingly, creditors of PPL Energy Supply and PPL Electric may not satisfy their debts from the assets of their subsidiaries absent a specific contractual undertaking by a subsidiary to pay the creditors or as required by applicable law or regulation.  In addition, absent a specific contractual undertaking or as required by applicable law or regulation, PPL Energy Supply and PPL Electric are not liable for the debts of their subsidiaries.  Accordingly, creditors of these subsidiaries may not satisfy their debts from the assets of PPL Energy Supply or PPL Electric absent a specific contractual undertaking by that parent to pay the creditors of its subsidiaries or as required by applicable law or regulation.

Financing Activities

(PPL)

In March 2009, PPL Capital Funding retired the entire $201 million of its 4.33% Notes Exchange Series A upon maturity.

(PPL and PPL Energy Supply)

In March 2009, PPL Energy Supply completed tender offers to purchase up to $250 million aggregate principal amount of certain of its outstanding senior notes in order to reduce future interest expense. Pursuant to the offers, PPL Energy Supply purchased approximately $100 million aggregate principal amount of its 6.00% Senior Notes due 2036 for $77 million, plus accrued interest, and approximately $150 million aggregate principal amount of its 6.20% Senior Notes due 2016 for $143 million, plus accrued interest.  In connection with the extinguishment of these notes, PPL and PPL Energy Supply recorded a net gain of $25 million, which is reflected in "Other Income (Expense) - net" on the Statement of Income for the six months ended June 30, 2009.  PPL recorded an additional net gain of $4 million in "Other Income (Expense) - net" as a result of reclassifying gains and losses on related cash flow hedges from AOCI into earnings.

In April 2009, the PEDFA issued $231 million aggregate principal amount of Exempt Facilities Revenue Refunding Bonds, Series 2009A and 2009B due 2038 and Series 2009C due 2037 (PPL Energy Supply, LLC Project), on behalf of PPL Energy Supply.  The Series 2009A bonds, in an aggregate principal amount of $100 million, and the Series 2009B bonds, in an aggregate principal amount of $50 million, were issued by the PEDFA in order to refund $150 million aggregate principal amount of Exempt Facilities Revenue Bonds, Series 2008A and 2008B (PPL Energy Supply, LLC Project) due 2038 that were issued by the PEDFA in December 2008 on behalf of PPL Energy Supply, and for which PPL Investment Corp. acted as initial purchaser.  The Series 2009C bonds, in an aggregate principal amount of $81 million, were issued in order to refund $81 million aggregate principal amount of Exempt Facilities Revenue Bonds, Series 2007 (PPL Energy Supply, LLC Project) due 2037 that were issued by the PEDFA in December 2007 on behalf of PPL Energy Supply.  Among other things, the completed refundings were able to take advantage of provisions in the Economic Stimulus Package that eliminated the application of the AMT to interest payable on the refinanced indebtedness.  The refundings of the bonds were effected by the ultimate distribution of $231 million by the PEDFA to the bond holders, including PPL Investment Corp.  As a result of the refundings of the bonds, PPL Investment Corp. received proceeds of $150 million, which is reflected as a cash flow from investing activities on the Statement of Cash Flows for PPL and PPL Energy Supply for the six months ended June 30, 2009.

The Series 2009A, 2009B and 2009C bonds are structured as variable-rate remarketable bonds.  PPL Energy Supply may convert the interest rate mode on the bonds from time to time to a commercial paper rate, daily rate, weekly rate or a term rate of at least one year.  The bonds are subject to mandatory purchase under certain circumstances, including upon conversion to a different interest rate mode, and are subject to mandatory redemption upon a determination that the interest on the bonds would be included in the holders' gross income for federal tax purposes.  The Series 2009A bonds bore interest at an initial rate of 0.90% through June 30, 2009.  The Series 2009B bonds bear interest at an initial rate of 1.25% through September 30, 2009.  The Series 2009C bonds are in a weekly interest rate mode, bearing interest at 0.30% at June 30, 2009.

In connection with the issuance of each series of bonds by the PEDFA, PPL Energy Supply entered into separate loan agreements with the PEDFA pursuant to which the PEDFA loaned to PPL Energy Supply the proceeds of the Series 2009A, Series 2009B and Series 2009C bonds on payment terms that correspond to those of the bonds.  PPL Energy Supply issued separate promissory notes to the PEDFA to evidence its obligations under each of the loan agreements.  These loan agreements and promissory notes replaced those associated with the refunded 2007 and 2008 PEDFA bonds in a non-cash transaction that is excluded from the Statement of Cash Flows.

Concurrent with the issuance of each series of bonds, separate letters of credit, totaling $237 million, were issued under PPL Energy Supply's $3.2 billion five-year syndicated credit facility to the trustee in support of each series of bonds.  The letters of credit permit the trustee to draw amounts to pay principal of and interest on, and the purchase price of, the Series 2009A, Series 2009B and Series 2009C bonds when due.  PPL Energy Supply is required to reimburse any draws on the letters of credit within one business day of such draw.

PPL Energy Supply elected to change the interest rate mode on the Series 2009A bonds to a commercial paper rate mode upon expiration of the initial rate period.  As such, in July 2009, the Series 2009A bonds were remarketed in a commercial paper rate mode and bear interest at 0.90% through December 9, 2009, at which time the bonds will be remarketed based upon an interest rate mode elected by PPL Energy Supply.  In connection with this change, the letter of credit supporting the Series 2009A bonds was modified accordingly.

(PPL and PPL Electric)

In May 2009, PPL Electric issued $300 million of 6.25% First Mortgage Bonds due 2039 (6.25% Bonds).  The 6.25% Bonds may be redeemed any time prior to maturity at PPL Electric's option at make-whole redemption prices.  PPL Electric received proceeds of $296 million, net of a discount and underwriting fees, from the issuance of the 6.25% Bonds.  Approximately $86 million of the proceeds will be used to partially fund the repayment at maturity of $486 million outstanding aggregate principal amount of PPL Electric's Senior Secured Bonds, 6-1/4% Series, due August 2009.  The balance of such repayment will be funded from the issuance in October 2008 of $400 million of 7.125% Senior Secured Bonds due 2013.  The balance of the proceeds from the issuance of the 6.25% Bonds is being used for general corporate purposes, including capital expenditures.

In June 2009, PPL Electric repaid its $9 million obligation under a Variable Rate Pollution Control Facilities Note in connection with the early redemption in full of the underlying pollution control revenue bonds that were issued by the Indiana County Industrial Development Authority and due in June 2027.

Distributions and Capital Contributions

(PPL)

In February 2009, PPL announced an increase to its quarterly common stock dividend, effective April 1, 2009, to 34.5 cents per share (equivalent to $1.38 per annum).  Future dividends, declared at the discretion of the Board of Directors, will be dependent upon future earnings, cash flows, financial requirements and other factors.

(PPL Energy Supply)

During the six months ended June 30, 2009, PPL Energy Supply distributed $373 million to its parent company, PPL Energy Funding.

(PPL Electric)

During the six months ended June 30, 2009, PPL Electric paid common stock dividends of $148 million to PPL.

8.   Acquisitions, Development and Divestitures

(PPL, PPL Energy Supply and PPL Electric)

PPL and its subsidiaries continuously evaluate strategic options and, from time to time, PPL and its subsidiaries are involved in negotiations with third parties regarding acquisitions and dispositions of businesses and assets, joint ventures and development projects, which may or may not result in definitive agreements.  Any such transactions may impact future financial results.

Domestic

(PPL and PPL Energy Supply)

License Renewals

In 2006, PPL Susquehanna applied to the NRC for 20-year license renewals for each of the Susquehanna units to extend their expiration dates to 2042 for Unit 1 and to 2044 for Unit 2.  A final decision on the license renewal is expected to be issued in December 2009.  Through June 30, 2009, PPL and PPL Energy Supply capitalized $16 million of license renewal costs, which are included in "Other intangibles" within "Other Noncurrent Assets" on the Balance Sheets.

Development

In April 2009, PPL announced that it filed a new application with the FERC for approval to expand the capacity of its Holtwood hydroelectric plant by 125 MW.  The previous application had been withdrawn in December 2008 due to economic conditions at the time.  PPL reconsidered this project in light of the availability of tax incentives and potential federal loan guarantees under the Economic Stimulus Package.  The expansion project has an expected capital cost of approximately $440 million.  PPL could begin construction in 2010, with generation operations scheduled to start in 2013.  PPL's ability and decision whether to proceed with the Holtwood facility expansion is subject to government approvals in addition to the FERC license amendment, the availability of certain federal economic stimulus incentives, as well as negotiation of acceptable construction and other related contracts.  PPL cannot predict whether the Holtwood facility expansion will ultimately proceed to completion.  In July 2009, a PPL subsidiary submitted an application to the DOE for a federal loan guarantee for the Holtwood expansion project.

In March 2009, PPL Montana received FERC approval for its request to redevelop the Rainbow hydroelectric facility, near Great Falls, Montana, for a total plant capacity of 60 MW (representing an increase of 28 MW).  The redevelopment project has an expected capital cost of $230 million.  In July 2009, a PPL subsidiary submitted an application to the DOE for a federal loan guarantee for the Rainbow redevelopment project.

In January 2008, PPL Susquehanna received NRC approval for its request to increase the generation capacity of the Susquehanna nuclear plant.  The total expected capacity increase is 159 MW, of which PPL Susquehanna's 90% ownership share is 143 MW.  The first uprate for Unit 1 totaling 50 MW was completed in May 2008.  The second uprate for Unit 1 will be completed in 2010.  The first uprate for Unit 2 totaling 60 MW was completed in 2009 and the second uprate will be completed in 2011.  PPL Susquehanna's share of the remaining total increase is 44 MW.  PPL Susquehanna's share of the expected capital cost for all these uprates is $345 million.

In October 2008, PPL submitted a COLA to the NRC for the proposed Bell Bend nuclear generating unit (Bell Bend) to be built adjacent to PPL's Susquehanna plant.  The COLA was formally docketed and accepted for review by the NRC in December 2008.  The NRC is now reviewing the COLA and issuing numerous and detailed requests for additional information that Bell Bend must respond to on a strict timetable.  In May 2009, the NRC published its official review schedule that culminates with the issuance of Bell Bend's final safety evaluation report in March 2012, after which public hearings will be held that are expected to take up to a year before Bell Bend's license can be issued.

In September 2008, a PPL subsidiary submitted Part I of an application to the DOE for a federal loan guarantee for Bell Bend.  The subsidiary submitted Part II of the loan guarantee application in December 2008.  There is considerable uncertainty about the likelihood of DOE financial support for the project due to the current level of appropriations available to the DOE for this purpose ($18.5 billion appropriated by the U.S. Congress at June 30, 2009) and the number of projects competing for those resources.  In June 2009, the DOE announced that it is working to finalize loan guarantees with four applicants, none of which was the PPL subsidiary.  None of the ten applicants who submitted Part II applications have been formally eliminated by the DOE; however, the DOE noted that the available funds would not likely be enough for more than four applicants.

PPL's subsidiary submits quarterly application updates for Bell Bend to the DOE in order to remain active in the process.  PPL cannot predict whether additional appropriations will be made for the DOE loan guarantee program, which proposed nuclear projects will ultimately be granted DOE loan guarantees, or the specific impact of these and other factors on the potential construction of the Bell Bend project.

PPL has made no decision to proceed with construction of Bell Bend and expects that such decision will not be made for several years given the anticipated lengthy NRC license approval process.  Additionally, PPL has announced that it does not expect to proceed to construction absent a joint arrangement with other interested parties and without a federal loan guarantee or other acceptable financing structures.  PPL and its subsidiaries are currently authorized by PPL's Board of Directors to spend up to $90 million on the COLA and other permits necessary for construction.  Through June 30, 2009, $65 million of costs associated with the licensing effort were capitalized and are included in "Other intangibles" within "Other Noncurrent Assets" on the Balance Sheets.

Discontinued Operations

(PPL and PPL Energy Supply)

Anticipated Sale of Long Island Generation Business

As a result of management's ongoing strategic review of PPL's non-core asset portfolio, in May 2009, PPL Generation signed a definitive agreement to sell its Long Island generation business for approximately $135 million in cash, adjusted for working capital at the sale date and subject to reduction monthly if the sale does not close by September 1, 2009.  This business includes a 79.9 MW gas-fired plant in the Edgewood section of Brentwood, New York and a 79.9 MW oil-fired plant in Shoreham, New York.  The Long Island Power Authority has contracted with PPL Energy Supply subsidiaries to purchase all of the Long Island generation business' capacity and ancillary services as part of tolling agreements that expire in 2017 and 2018.  Each agreement is considered to contain a lease for accounting purposes.  The Shoreham plant lease is classified as a direct-financing lease and the Edgewood plant lease is classified as an operating lease.  These tolling agreements will be transferred to the new owner upon completion of the sale.

The Long Island generation business met the held for sale criteria in the second quarter of 2009.  As a result, net assets held for sale with a carrying amount of $189 million were written down to their estimated fair value less cost to sell of $137 million at June 30, 2009, resulting in a pre-tax impairment charge of $52 million ($34 million after tax).  This charge, recorded in the Supply segment for PPL and PPL Energy Supply, is included in "Income (Loss) from Discontinued Operations (net of income taxes)" on the Statements of Income for the three and six months ended June 30, 2009.  Closing of the sale is subject to the receipt of various state and federal regulatory approvals and third-party consents, and is expected to occur later in 2009.

The results of operations for the three and six months ended June 30, 2009 and 2008 have been classified as Discontinued Operations on the Statements of Income.  The assets and liabilities at June 30, 2009 are classified on the Balance Sheet as held for sale.

Following are the components of Discontinued Operations on the Statements of Income.

	Three Months Ended June 30,					Six Months Ended June 30,
	2009			2008		2009			2008
Operating revenues	$	5		$	6	$	11		$	13
Operating expenses (a)		54					55			3
Operating income (loss)		(49	)		6		(44	)		10
Interest expense (b)		1			1		2			1
Income (loss) before income taxes		(50	)		5		(46	)		9
Income taxes		(18	)		1		(16	)		3
Income (Loss) from Discontinued Operations	$	(32	)	$	4	$	(30	)	$	6

(a)	2009 includes the impairment to the carrying value of the Long Island generation business.
(b)	Represents allocated interest expense based upon debt attributable to PPL's Long Island generation business.

The major classes of assets and liabilities held for sale on the Balance Sheet at June 30, 2009, related to the anticipated sale of the Long Island generation business, were $43 million of PP&E and a $94 million net investment in a direct-financing lease (corresponding amounts at December 31, 2008 were $88 million of PP&E and a $104 million net investment in a direct-financing lease, which have not been reclassified on the Balance Sheet as of that period).

Anticipated Sale of Maine Hydroelectric Generation Business

In 2004, PPL Maine entered into an agreement with a coalition of government agencies and private groups to sell three of its nine hydroelectric dams in Maine.  Under the agreement, a non-profit organization designated by the coalition received a five-year option to purchase the dams for $25 million, and if the option was exercised PPL Maine would receive rights to increase energy output at its other Maine hydroelectric dams.  The coalition has announced plans to remove or bypass the dams subject to the agreement in order to restore runs of Atlantic salmon and other migratory fish to the Penobscot River.  In June 2008, the coalition notified PPL Maine of its intent to exercise the purchase option.  The agreement requires updates to the representations and warranties in the purchase and sale agreement, and several approvals by the FERC and other regulatory agencies.  In November 2008, PPL Maine and the coalition filed a request with FERC, the U.S. Army Corps of Engineers and the Maine DEP to approve the transfer of ownership for the three dams.  Certain of these required regulatory approvals have been obtained, but PPL cannot predict whether or when all of them will be obtained.  As a result, these three Maine hydroelectric dams had not met the held for sale criteria at June 30, 2009.

In July 2009, indirectly related to the above potential sale and as a result of management's ongoing strategic review of PPL's non-core asset portfolio, PPL Maine signed a definitive agreement to sell the majority of its hydroelectric generation business for approximately $95 million in cash.  The portion of the business being sold includes five hydroelectric facilities and PPL's 50% equity interest in the owner of a sixth hydroelectric facility, which has been accounted for as an equity investment, as well as the rights to increase energy output at these facilities if the potential sale discussed above is completed.  PPL's interest in these six facilities represents a total of 30 MW of electric generating capacity.  Of the sales price, $14 million is contingent consideration that would be realized upon completion of the potential sale of PPL Maine's three other hydroelectric facilities noted above.  PPL expects the sale of the majority of the Maine generation business to close in 2009 and expects to record a gain on the transaction.

These Maine hydroelectric facilities met the held for sale criteria in the second quarter and at June 30, 2009 are classified on the Balance Sheet as held for sale.  The results of operations for the three and six months ended June 30, 2009 and 2008 have been classified as Discontinued Operations on the Statements of Income and are included in the Supply segment for PPL and PPL Energy Supply.  An insignificant amount of interest expense was allocated based upon debt attributable to the Maine hydroelectric generation business being sold.

Following are the components of Discontinued Operations on the Statements of Income.

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
Operating revenues	$	1	$	3	$	3	$	6
Operating expenses		1		1		2		2
Operating income				2		1		4
Other income-net						1		1
Income before income taxes				2		2		5
Income taxes				1		1		2
Income from Discontinued Operations	$		$	1	$	1	$	3

The major classes of assets held for sale on the Balance Sheet at June 30, 2009, related to the anticipated sale of the majority of the Maine hydroelectric generation business, were $22 million of PP&E and a $19 million equity method investment (corresponding amounts at December 31, 2008 were substantially the same, but have not been reclassified on the Balance Sheet as of that period).

Sale of Latin American Businesses

In 2007, PPL completed the sale of its regulated electricity delivery businesses in Chile, El Salvador and Bolivia, which were included in the International Delivery segment.  In 2008, PPL Global recognized income tax benefits and miscellaneous expenses in Discontinued Operations in connection with the dissolution of the remaining Latin American holding companies.  This process was substantially completed in 2008.  Following are the components of Discontinued Operations on the Statements of Income.

	Six Months Ended June 30, 2008
Operating expenses		$	2
Operating loss			(2	)
Other income (expense) - net			(1	)
Loss before income taxes			(3	)
Income taxes (a)			(8	)
Income from Discontinued Operations		$	5

(a) Includes $6 million from the recognition of a previously unrecognized tax benefit associated with a prior period tax position.

(PPL)

Sale of Gas and Propane Businesses

In October 2008, PPL completed the sale of its natural gas distribution and propane businesses, which were included in the Pennsylvania Delivery segment.  In February 2009, PPL recognized an insignificant charge in Discontinued Operations in connection with the settlement of a working capital adjustment.  Following are the components of Discontinued Operations on the Statements of Income.

	Three Months Ended June 30,		Six Months Ended June 30,
	2008		2008
Operating revenues	$	42	$	136
Operating expenses		40		116
Operating income		2		20
Interest expense (a)		1		3
Income before income taxes		1		17
Income taxes				7
Income from Discontinued Operations	$	1	$	10

(a) The three and six months ended June 30, 2008 include $1 million and $2 million of allocated interest expense based upon debt attributable to PPL's natural gas distribution and propane businesses.

9.   Defined Benefits

(PPL and PPL Energy Supply)

Net periodic defined benefit costs (credits) were:

	Pension Benefits
	Three Months Ended June 30,												Six Months Ended June 30,
	Domestic						WPD						Domestic						WPD
	2009			2008			2009			2008			2009			2008			2009			2008
PPL
Service cost	$	15		$	15		$	2		$	4		$	30		$	30		$	4		$	8
Interest cost		36			34			37			49			72			69			74			98
Expected return on plan assets		(42	)		(44	)		(45	)		(60	)		(84	)		(89	)		(90	)		(120	)
Amortization of:
Transition asset		(1	)		(1	)								(2	)		(2	)
Prior service cost		5			5			1			1			10			10			2			2
Actuarial (gain) loss		1			(2	)		1			5			2			(4	)		2			10
Net periodic defined benefit costs (credits) prior to special termination benefits		14			7			(4	)		(1	)		28			14			(8	)		(2	)
Special termination benefits (a)														9
Net periodic defined benefit costs (credits)	$	14		$	7		$	(4	)	$	(1	)	$	37		$	14		$	(8	)	$	(2	)

PPL Energy Supply
Service cost	$	1		$	1		$	2		$	4		$	2		$	2		$	4		$	8
Interest cost		1			1			37			49			3			3			74			98
Expected return on plan assets		(1	)		(2	)		(45	)		(60	)		(3	)		(4	)		(90	)		(120	)
Amortization of:
Prior service cost								1			1									2			2
Actuarial loss								1			5			1						2			10
Net periodic defined benefit costs (credits)	$	1		$			$	(4	)	$	(1	)	$	3		$	1		$	(8	)	$	(2	)

(a) Relates to the 2009 workforce reduction.  See Note 6 for additional information.

	Other Postretirement Benefits
	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
PPL
Service cost	$	2		$	2		$	3		$	4
Interest cost		7			8			14			16
Expected return on plan assets		(4	)		(5	)		(8	)		(10	)
Amortization of:
Transition obligation		2			2			4			4
Prior service cost		2			2			4			5
Actuarial loss					1			1			2
Net periodic defined benefit costs	$	9		$	10		$	18		$	21

10.   Commitments and Contingencies

Energy Purchases, Energy Sales and Other Commitments

Energy Purchase Commitments

(PPL and PPL Energy Supply)

PPL and PPL Energy Supply enter into long-term purchase contracts to supply the fuel requirements for generation facilities.  These contracts include commitments to purchase coal, emission allowances, limestone, natural gas, oil and nuclear fuel and extend through 2019.  PPL and PPL Energy Supply also enter into long-term contracts for the storage and transportation of natural gas.  The long-term natural gas storage contracts extend through 2012, and the long-term natural gas transportation contracts extend through 2032.  Additionally, PPL and PPL Energy Supply have entered into long-term contracts to purchase power that extend through 2017, excluding long-term power purchase agreements for the full output of two wind farms.  These wind farm contracts extend through 2027.

(PPL and PPL Electric)

In 2007, PPL Electric began to conduct competitive solicitations to purchase electricity generation supply in 2010, after its existing PLR contract expires, for customers who do not choose a competitive supplier.  A total of six auctions were planned.  Each solicitation is for 850 MW of expected generation supply.  Average generation supply prices (per MWh), including Pennsylvania gross receipts tax and an adjustment for line losses, for the first five solicitations are as follows:

	Residential			Small Commercial and Small Industrial
July 2007		$	101.77		$	105.11
October 2007			105.08			105.75
March 2008			108.80			108.76
October 2008			112.51			111.94
April 2009			86.74			87.59
Average			102.98			103.84

The fifth competitive solicitation occurred in March 2009 and was approved by the PUC in April 2009.  The sixth competitive solicitation is scheduled for October 2009.

In August 2008, PPL Electric filed a request with the PUC to approve its plan to purchase the PLR electricity supply that PPL Electric will need for January 2011 through May 2014.  Under the plan, PPL Electric proposed to buy this electricity four times a year, beginning in the third quarter of 2009, for 12- and 24- month periods.  PPL Electric also would seek bids from other companies to manage its hourly purchases in the competitive electricity market.  For residential and small-business customers, 90% of the supply would be acquired through fixed-price contracts of 12 or 24 months, and 10% through hourly purchases in the open market.  All of the power for large commercial and industrial customers would be purchased on an hourly basis in the open market.  An independent third party would administer the process of securing power supply contracts and, with PUC oversight, select the suppliers that would provide generation supply at the lowest cost to PPL Electric's customers.

In November 2008, PPL Electric proposed several amendments to its plan to reflect passage of Pennsylvania Act 129 (Act 129).  Act 129, among other things, adopts new PLR electricity supply procurement rules.  PPL Electric added provisions to purchase 5% of its default service supply through five-year contracts and an additional 5% through ten-year contracts.  It reduced the term of its plan by one year, proposing that the plan end in May 2013, rather than in May 2014.  Finally, PPL Electric provided support for several findings that the PUC was required to make under Act 129.  In June 2009, PPL Electric received approval from the PUC on its purchase plan.

(PPL Energy Supply and PPL Electric)

See Note 11 for information on the power supply agreements between PPL EnergyPlus and PPL Electric.

Energy Sales Commitments

(PPL and PPL Energy Supply)

In connection with its marketing activities or hedging strategyfor certain of its power plants, PPL Energy Supply has entered into long-term power sales contracts that extend through 2023.  All long-term contracts were executed at prices that approximated market prices at the time of execution.  Also, PPL Energy Supply has entered into full-requirement and retail sales contracts with various counterparties.  These contracts extend through 2019.

(PPL Energy Supply and PPL Electric)

See Note 11 for information on the power supply agreements between PPL EnergyPlus and PPL Electric.

PPL Montana Hydroelectric License Commitments(PPL and PPL Energy Supply)

PPL Montana owns and operates 11 hydroelectric facilities and one storage reservoir licensed by the FERC under long-term licenses pursuant to the Federal Power Act.  Pursuant to Section 8(e) of the Federal Power Act, the FERC approved the transfer from Montana Power to PPL Montana of all pertinent licenses and any amendments in connection with the Montana Asset Purchase Agreement.

The Kerr Dam Project license (50-year term) was jointly issued by the FERC to Montana Power and the Confederated Salish and Kootenai Tribes of the Flathead Reservation in 1985, and required Montana Power to hold and operate the project for 30 years.  The license required Montana Power, and subsequently PPL Montana as a result of the purchase of its Kerr Dam from Montana Power, to continue to implement a plan to mitigate the impact of the Kerr Dam on fish, wildlife and their habitat.  Under this arrangement, PPL Montana has a remaining commitment to spend $12 million between 2009 and 2015, in addition to the annual rent it pays to the tribes.  Between 2015 and 2025, the tribes have the option to purchase, hold and operate the project for the remainder of the license term, which expires in 2035.

PPL Montana entered into two Memoranda of Understanding (MOUs) with state, federal and private entities related to the issuance in 2000 of the FERC renewal license for the nine dams for the Missouri-Madison project.  The MOUs are periodically updated and renewed and require PPL Montana to implement plans to mitigate the impact of its projects on fish, wildlife and their habitat, and to increase recreational opportunities.  The MOUs were created to maximize collaboration between the parties and enhance the possibility to receive matching funds from relevant federal agencies.  Under these arrangements, PPL Montana has a remaining commitment to spend $37 million between 2009 and 2040.

Legal Matters

(PPL, PPL Energy Supply and PPL Electric)

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.

(PPL and PPL Energy Supply)

Montana Power Shareholders' Litigation

In August 2001, a purported class-action lawsuit was filed by a group of Montana Power shareholders against Montana Power, the directors of Montana Power, certain advisors and consultants of Montana Power, and PPL Montana.  The plaintiffs allege, among other things, that Montana Power failed to obtain shareholder approval for the sale of Montana Power's generation assets to PPL Montana in 1999, and that the sale "was null and void ab initio."  Among the remedies sought by the plaintiffs is the establishment of a "resulting and/or constructive trust" on both the generation assets and all profits earned by PPL Montana from the generation assets, plus interest on the amounts subject to the trust.  This lawsuit is pending in the U.S. District Court of Montana, Butte Division, and the judge placed this proceeding on hold pending the outcome of certain motions currently before the U.S. Bankruptcy Court for the District of Delaware, the resolution of which may impact this proceeding.  The judge in this case has not established a schedule to resume the proceeding.  Settlement discussions resumed in June 2009.  PPL and PPL Energy Supply cannot predict the outcome of this matter.

Montana Hydroelectric Litigation

In November 2004, PPL Montana, Avista Corporation (Avista) and PacifiCorp commenced an action for declaratory judgment in Montana First Judicial District Court seeking a determination that no lease payments or other compensation for their hydroelectric facilities' use and occupancy of streambeds in Montana can be collected by the State of Montana.  This request was brought following the dismissal of the State of Montana's federal lawsuit seeking such payments or compensation in the U.S. District Court of Montana, Missoula Division, on jurisdictional grounds.  The State's federal lawsuit was founded on allegations that the beds of Montana's navigable rivers became state-owned trust property upon Montana's admission to statehood, and that the use of them for placement of dam structures, affiliated structures and reservoirs should, under a 1931 regulatory scheme enacted after all but one of the dams in question were constructed, trigger lease payments for use of land beneath.  In July 2006, the Montana state court approved a stipulation by the State of Montana that it is not seeking lease payments or other compensation from PPL Montana for the period prior to PPL Montana's acquisition of the hydroelectric facilities in December 1999.

In June and October 2007, Pacificorp and Avista, respectively, entered into settlement agreements with the State of Montana providing, in pertinent part, that each company would make prospective lease payments of $50,000 and $4 million per year for use of the State's navigable streambed (adjusted annually for inflation and subject to other future adjustments).  Under these settlement agreements, the future annual payments resolved the State's claims for both past and future compensation.

In the October 2007 trial of this matter, the State of Montana asserted that PPL Montana should make a prospective lease payment for use of the State's streambeds of $6 million per year (adjusted annually for inflation) and a retroactive payment of compensation for the 2000-2006 period (including interest) of $41 million.  PPL Montana vigorously contested both such assertions.

In June 2008, the District Court issued a decision awarding compensation of approximately $34 million for prior years and approximately $6 million for 2007 compensation.  The Court also deferred the determination of compensation for 2008 and future years to the Montana State Land Board.

PPL Montana believes that the District Court's decision and a number of its pretrial rulings are erroneous.  In October 2008, PPL Montana filed an appeal of the decision to the Montana Supreme Court and a stay of judgment, including a stay of the Land Board's authority to assess compensation against PPL Montana for 2008 and future periods.  Oral argument of the case before the Montana Supreme Court is scheduled for September 2009.  PPL Montana cannot predict the outcome of this matter.

PPL Montana believes it is reasonably possible that a liability for prior use and occupancy of certain Montana streambeds may ultimately be incurred for the periods 2000 through 2006, and the amount awarded by the District Court represents the maximum exposure.  PPL Montana has not recorded a loss accrual for this portion of the State's claim.

For 2007 and subsequent years, PPL Montana believes it is probable that its hydroelectric projects will be subject to annual estimated compensation ranging from $300,000 to $6 million.  Given that there was no single amount within that range more likely than any other, PPL Montana is annually accruing $300,000.

PPL Montana will continue to assess the loss exposure for the Montana hydroelectric litigation in future periods.

Regulatory Issues

Pennsylvania Activities (PPL and PPL Electric)

In May 2007, the PUC approved final regulations regarding the obligation of Pennsylvania electric utilities to provide default electricity supply in 2011 and beyond.  The regulations provide that default service providers will acquire electricity supply at prevailing market prices pursuant to procurement and implementation plans approved by the PUC.  The regulations also address the utilities' recovery of electricity supply costs.  The final regulations became effective in September 2007.  See "Energy Purchase Commitments" for details of PPL Electric's competitive solicitations under the PUC regulations.

For several years, PPL and PPL Electric have been working with Pennsylvania legislators, regulators and other stakeholders to develop constructive measures to help customers transition to market rates after 2009, including a variety of rate mitigation, educational and energy conservation programs, consistent with several initiatives being developed by the State Administration and legislature.  In this regard, in November 2007, PPL Electric requested the PUC to approve a plan under which its residential and small commercial customers could phase-in the impact of price increases when generation rate caps expire in 2010.  Under the phase-in plan approved by the PUC and implemented in October 2008, customers can pay additional amounts with their electric bills beginning in mid-2008 and continuing through 2009, and such additional amounts, plus accrued interest of 6%, will be applied to their 2010 and 2011 electric bills, mitigating the impact of the rate cap expiration.  The phase-in plan is available on an "opt-in" basis (i.e., customers must affirmatively enroll) and is available to customers enrolled in budget billing.  Over 140,000 customers enrolled in the program.  Customers can continue to enroll in this program through the end of 2009.  At June 30, 2009, PPL Electric has recorded a liability of $21 million related to this activity.

In February 2009, PPL Electric asked the PUC for permission to offer customers a second option for reducing the potential initial impact of higher electricity prices resulting from expiration of generation rate caps.  This option will enable eligible residential and eligible small-business customers to defer payment of any increase greater than 25% in their 2010 electric bills.  The 25% will be calculated on an average rate schedule usage basis, and will be based on a comparison of currently estimated 2009 bills to currently estimated 2010 bills.  Deferred amounts, plus interest of 6%, would be repaid by customers over a one- or two-year period, depending on their level of electricity use.  All deferrals would be repaid by the end of 2012.  Like the phase-in plan, the deferral option will be available on an "opt-in" basis.  In July 2009, the PUC approved the deferral option.  Customers may enroll in the program until December 15, 2009.

Also, the General Assembly passed and the Governor signed into law Act 129 in October 2008.  The law 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 makes changes to the existing Alternative Energy Portfolio Standard.

Under Act 129, Electric Distribution Companies (EDCs) must develop and file an energy efficiency and conservation plan with the PUC.  EDCs must contract with a conservation service provider to implement all or a portion of the plan.  Act 129 requires reduction in consumption of 1% by 2011 and 3% by 2013, and a reduction in peak demand of 4.5% by 2013.  EDCs will be able to recover the costs of implementing an energy efficiency and conservation plan.  These costs are capped at 2% of the EDC's 2006 revenue.

Act 129 also requires installation of smart meters under the following conditions:  for new construction, upon the request of consumers at their cost, or on a depreciation schedule not exceeding 15 years.  PPL Electric's current advanced metering technology generally meets the definition of smart metering technology in Act 129 and does not need to be replaced.  Under Act 129, EDCs will be able to recover the costs of providing smart metering technology.

Act 129 also requires the default service provider (DSP) to provide electric generation supply service to customers pursuant to a PUC-approved competitive procurement plan through auctions, requests for proposal and bilateral contracts at the sole discretion of the DSP.  Act 129 requires a mix of spot market purchases, short-term contracts and long-term contracts (4 to 20 years, with long-term contracts limited to up to 25% of the load unless otherwise approved by the PUC).  The DSP will be able to recover the costs associated with a competitive procurement plan.

Under Act 129, the DSP competitive procurement plan must ensure adequate and reliable service "at least cost to customers" over time.  Act 129 also grants the PUC authority to extend long-term power contracts up to 20 years, if necessary, to achieve the "least cost" standard.

Act 129 does not address rate mitigation.  Legislation has been introduced that would allow eligible customers to defer payment of certain increases at the time that rate caps expire and allow the EDC to recover these deferred amounts following the expiration of rate caps.  There are several bills that address such a phase-in.  The provisions of the bills differ as to the permitted level of increases in customer bills (ranging from 0% to 25%) and the inclusion of language specifically authorizing the EDC to recover associated carrying costs.  PPL and PPL Electric have expressed strong concern regarding the potential adverse consequences of some of these measures on the financial health and credit quality of PPL Electric.

In July 2009, PPL Electric filed its proposed energy efficiency and conservation (EE&C) Plan with the PUC.  PPL Electric's EE&C Plan includes 14 programs.  All programs are voluntary for customers.  As required by Act 129, at least one conservation program and one peak demand reduction program will be available for each customer class.  The filing also includes a proposed rate mechanism for recovery of all costs incurred by PPL Electric to implement its EE&C Plan.  Act 129 requires the PUC to act on each EE&C Plan within 120 days of submission, which in PPL Electric's case will be November 1, 2009.  PPL Electric cannot predict the outcome of this matter.

Certain Pennsylvania legislators have introduced legislation to extend generation rate caps or otherwise limit cost recovery through rates for Pennsylvania utilities beyond their transition periods, which in PPL Electric's case would be December 31, 2009.  PPL and PPL Electric have expressed strong concern regarding the severe potential consequences of such legislation on customer service, system reliability, adequate future generation supply and PPL Electric's financial viability.  If such legislation or similar legislation were ultimately enacted, PPL Electric could experience substantial operating losses, cash flow shortfalls and other adverse financial impacts.  In addition, continuing uncertainty concerning PPL Electric's ability to recover its market supply and other costs of operation after 2009 could adversely impact its credit quality, financing costs and availability of credit facilities necessary to operate its business.  PPL and PPL Electric believe that such an extension of rate caps, if enacted into law, would violate federal law and the U.S. Constitution.  At this time, PPL and PPL Electric cannot predict the final outcome or impact of this legislative and regulatory process.

FERC Transmission Rates (PPL and PPL Electric)

In August 2008, PPL Electric asked the FERC to change the method for calculating its transmission rates to formula-based rates to support continued investment in its transmission system.  Under formula-based rates, a fixed earnings level is set for the utility, and the utility annually adjusts its transmission rates, subject to FERC review, to reflect changes in costs.  The process offers an opportunity for public input.  The proposed rate design would ensure that there is no over-recovery or under-recovery of the actual costs of providing transmission delivery service.  The rate change request, if approved, would result in a monthly increase of $0.74 for an average PPL Electric residential customer.  This request would not affect generation charges or distribution rates.  PPL Electric requested that the proposed rate take effect November 1, 2008.

In October 2008, the FERC accepted the proposed rate for filing, effective November 1, 2008, subject to refund.  The FERC did not adjust the requested return on equity of 12.84%, which included 50 basis points for membership in PJM.  Finally, the FERC set the matter for hearing, but held the hearings in abeyance to provide time to establish settlement judge procedures.  In May 2009, a settlement was reached by all of the parties to the proceeding and PPL Electric was granted approval to implement the formula rate as filed in the settlement, effective June 1, 2009, until final resolution of the proceeding.  Rates under this element were permitted to go into effect on June 1, 2009, subject to final FERC approval.  PPL Electric cannot predict the outcome of this matter.  See Note 2 for information on a true-up of these revenues.

California ISO and Western Markets(PPL and PPL Energy Supply)

Through its subsidiaries, PPL made $18 million of sales to the California ISO during the period October 2000 through June 2001, of which $17 million has not been paid to PPL subsidiaries.  Given the myriad of electricity supply problems faced by the California electric utilities and the California ISO, PPL cannot predict whether or when it will receive payment.  At June 30, 2009, PPL continues to be fully reserved for non-payment for these sales.

Regulatory proceedings arising out of the California electricity supply situation have been filed at the FERC.  The FERC has determined that all sellers of energy into markets operated by the California ISO and the California Power Exchange, including PPL Montana, should be subject to refund liability for the period beginning October 2, 2000 through June 20, 2001, but the FERC has not yet ruled on the exact amounts that the sellers, including PPL Montana, would be required to refund.  In decisions in September 2004 and August 2006, the U.S. Court of Appeals for the Ninth Circuit held that the FERC had the additional legal authority to order refunds for periods prior to October 2, 2000, and ordered the FERC to determine whether or not it would be appropriate to grant such additional refunds.  In February 2008, the FERC initiated proceedings to determine whether it would be appropriate to grant additional refunds.  The FERC also instituted settlement proceedings to explore whether a settlement is possible.

In June 2003, the FERC took several actions as a result of a number of related investigations.  The FERC terminated proceedings to consider whether to order refunds for spot market bilateral sales made in the Pacific Northwest, including sales made by PPL Montana, during the period December 2000 through June 2001.  In August 2007, the U.S. Court of Appeals for the Ninth Circuit reversed the FERC's decision and ordered the FERC to consider additional evidence.  The FERC also commenced additional investigations relating to "gaming" and bidding practices during 2000 and 2001, but neither PPL EnergyPlus nor PPL Montana believes it is a subject of these investigations.

In February 2004, the Montana Public Service Commission initiated a limited investigation of the Montana retail electricity market for the years 2000 and 2001, focusing on how that market was affected by transactions involving the possible manipulation of the electricity grid in the western U.S.  The investigation includes all public utilities and licensed electricity suppliers in Montana, including PPL Montana, as well as other entities that may possess relevant information.  In June 2004, the Montana Attorney General served PPL Montana and more than 20 other companies with subpoenas requesting documents, and PPL Montana has provided responsive documents to the Montana Attorney General.

While PPL and its subsidiaries believe that they have not engaged in any improper trading or marketing practices affecting the California and western markets, PPL cannot predict the outcome of the above-described investigations, lawsuits and proceedings or whether any PPL subsidiaries will be the target of any additional governmental investigations or named in other lawsuits or refund proceedings.

PJM RPM Litigation (PPL, PPL Energy Supply and PPL Electric)

In May 2008, a group of state public utility commissions, state consumer advocates, municipal entities and electric cooperatives, industrial end-use customers and a single electric distribution company (collectively, the RPM Buyers) filed a complaint before the FERC objecting to the prices for capacity under the PJM Reliability Pricing Model (RPM) that were set in the 2008-09, 2009-10 and 2010-11 RPM base residual auctions.  The RPM Buyers requested that the FERC reset the rates paid to generators for capacity in those periods to a significantly lower level.  Thus, the complaint requests that generators be paid less for those periods through refunds and/or prospective changes in rates.  The relief requested in the complaint, if granted, could have a material effect on PPL, PPL Energy Supply and PPL Electric.  PJM, PPL and numerous other parties have responded to the complaint, strongly opposing the relief sought by the RPM Buyers.  In September 2008, the FERC entered an order denying the complaint.  PPL cannot predict the outcome of this proceeding.

In December 2008, the PJM submitted amendments to certain provisions governing its RPM capacity market.  The amendments were intended to permit the compensation available to suppliers that provide capacity, like PPL Energy Supply, to increase.  The PJM sought approval of the amendments in time for them to be implemented for the May 2009 capacity auction (for service in June 2012 through May 2013).  Numerous parties, including PPL, protested the PJM's filing.  Certain of the protesting parties proposed changes to the capacity market auction that would result in a reduction in compensation to capacity suppliers.  The changes proposed by the PJM and by other parties in response to the PJM proposals could significantly affect the compensation available to suppliers of capacity participating in future RPM auctions.  In April 2009, the FERC entered an order approving in part and disapproving in part the changes proposed by PJM.  The FERC's order is subject to timely rehearing petitions and appeals.  Rights to appeal this decision expire during August 2009.  PPL cannot predict the outcome of this proceeding.

FERC Market-Based Rate Authority(PPL and PPL Energy Supply)

In December 1998, the FERC issued an order authorizing PPL EnergyPlus to make wholesale sales of electric power and related products at market-based rates.  In that order, the FERC directed PPL EnergyPlus to file an updated market analysis within three years of the date of the order, and every three years thereafter.  Market-based rate filings with the FERC were made in November 2004 by PPL EnergyPlus, PPL Electric, PPL Montana and most of PPL Generation's subsidiaries.  These filings consisted of a Western market-based rate filing for PPL Montana and an Eastern market-based rate filing for most of the other PPL subsidiaries in the PJM region.

In September 2005, the FERC issued an order conditionally approving the Eastern market-based rate filing, subject to PPL subsidiaries making a compliance filing providing further support that they cannot erect other non-transmission barriers to entry into the generation market.  The PPL subsidiaries made this compliance filing in October 2005, which the FERC accepted.

In May 2006, the FERC issued an order rejecting the claims of the various parties in the proceeding regarding PPL's Western market-based rate filing and granting PPL Montana market-based rate authority in NorthWestern's control area.  In July 2007, the FERC denied two outstanding requests for rehearing of its 2006 order.  Subsequently, various parties in this proceeding filed appeals of the order with the U.S. Court of Appeals for the Ninth Circuit.  In September 2007, a party also filed a complaint with the FERC seeking additional refunds in the event that the U.S. Court of Appeals overturns or reverses the FERC order.  In June 2009, the U.S. Court of Appeals denied the appeal.  While PPL Montana continues to believe that it does not have market power in NorthWestern's control area and that it has no obligations to make additional sales of power to NorthWestern regardless of the outcome of this proceeding, it cannot predict the outcome of these proceedings.

In January 2008, pursuant to the schedule established by FERC orders, PPL's subsidiaries made another market-based rate renewal filing for all Eastern subsidiaries in the PJM, New England and New York regions, including PPL Electric, PPL EnergyPlus and most of PPL Generation's subsidiaries.  In October 2008, the FERC renewed these subsidiaries' market-based rate authority as requested.

Currently, if a seller is granted market-based rate authority by the FERC, it may enter into power contracts during the time period for which such authority has been granted.  If the FERC determines that the market is not workably competitive or that the seller possesses market power or is not charging "just and reasonable" rates, the FERC institutes prospective action.  Any contracts entered into pursuant to the FERC's market-based rate authority remain in effect and are generally subject to a high standard of review before the FERC can order any changes.  Recent court decisions by the U.S. Court of Appeals for the Ninth Circuit have raised issues that may make it more difficult for the FERC to continue its program of promoting wholesale electricity competition through market-based rate authority.  These court decisions permit retroactive refunds and a lower standard of review by the FERC for changing power contracts, and could have the effect of requiring the FERC to review in advance most, if not all, power contracts.  In June 2008, the U.S. Supreme Court reversed one of the decisions of the U.S. Court of Appeals for the Ninth Circuit, thus upholding the higher standard of review for modifying contracts.  The FERC has not yet taken action in response to these recent court decisions.  At this time, PPL cannot predict the impact of these court decisions on the FERC's future market-based rate authority program or on PPL's business.

IRS Synthetic Fuels Tax Credits(PPL and PPL Energy Supply)

PPL, through its subsidiaries, had interests in two synthetic fuel production facilities:  the Somerset facility, which was located in Pennsylvania, and the Tyrone facility, which was located in Kentucky.  PPL received tax credits pursuant to Section 29/45K of the Internal Revenue Code based on the sale of synthetic fuel from these facilities.  The Section 29/45K tax credit program expired at the end of 2007, and production of synthetic fuel at these facilities and all other synthetic fuel operations ceased as of December 31, 2007.  The facilities were dismantled and retired in 2008.

In April 2008, the IRS published the domestic first purchase price (DFPP) for the prior year indicating that the DFPP reference price increased above PPL's estimated price levels for 2007 and the inflation-adjusted phase-out range decreased from PPL's estimate for 2007.  Therefore, PPL recorded an expense of $13 million ($0.04 per share, basic and diluted, for PPL) in the first quarter of 2008, to "Income Taxes" on the Statement of Income to account for this difference.

Energy Policy Act of 2005 - Reliability Standards(PPL, PPL Energy Supply and PPL Electric)

In August 2005, the Energy Policy Act of 2005 (the 2005 Energy Act) was signed into law.  The 2005 Energy Act is comprehensive legislation that substantially affects the regulation of energy companies, amends federal energy laws and provides the FERC with new oversight responsibilities.  Among the important changes implemented under this legislation is the appointment of the NERC to establish and enforce mandatory reliability standards (Reliability Standards) regarding the bulk power system.  The FERC will oversee this process and independently enforce 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.  The FERC has indicated it intends to enforce vigorously the Reliability Standards using, among other means, civil penalty authority.  Under the Federal Power Act, the FERC may assess civil penalties of up to $1 million per day, per violation, for certain violations.  The first group of Reliability Standards approved by the FERC became effective in June 2007.

In September 2007, PPL Electric self-reported to the RFC that PPL Electric had identified a potential violation of certain reliability requirements and submitted an accompanying mitigation plan.  In February 2008, the RFC notified PPL Electric that it had completed its investigation, accepted PPL Electric's mitigation plan and issued a Notice of Alleged Violation.  In September 2008, the RFC issued its Notice of Confirmed Violation concerning this matter.  Any RFC determination remains subject to the approval of the NERC and the FERC.  At this time, PPL Electric cannot predict the outcome of this matter.

In the course of implementing its program to ensure compliance with the Reliability Standards by those PPL affiliates subject to the standards, PPL anticipates that certain other instances of potential non-compliance may be identified from time to time.  PPL cannot predict the fines or penalties that may be imposed.

U.K. Overhead Electricity Networks(PPL and PPL Energy Supply)

In 2002 and for safety reasons, the U.K. Government issued guidance that low voltage overhead electricity networks within three meters horizontal clearance of a building should either be insulated or relocated.  This imposed a retroactive requirement on existing assets that were built with lower clearances.  In 2008, following extensive discussion, the U.K. Government determined that the U.K. electricity network should comply with the guidance issued.  WPD estimates that the cost of compliance will be approximately $91 million and is expected to be allowed to be recovered through rates.  The Government has determined that WPD (South Wales) should comply by 2015 and WPD (South West) by 2018.

To improve network reliability, in January 2009 the U.K. Government enforced a regulation requiring network operators to implement a risk-based program over 25 years to clear trees within falling distance of key high-voltage overhead lines. WPD estimates that the cost of compliance will be approximately $105 million over the 25-year period and is expected to be allowed to be recovered through rates.

U.K. Electricity Regulation (PPL and PPL Energy Supply)

WPD operates under distribution licenses granted, and price controls set, by the Ofgem.  The price control formula that governs WPD's allowed revenue is normally determined every five years, with the next distribution price control review (DPCR) to be completed by the end of 2009, effective April 1, 2010.  An initial proposals paper has been issued by the Ofgem.  Earnings in 2010 and beyond may be affected by the DPCR.  WPD cannot predict the ultimate outcome of the DPCR.

Environmental Matters - Domestic

(PPL, PPL Energy Supply and PPL Electric)

Due to the environmental issues discussed below or other environmental matters, PPL subsidiaries may be required to modify, curtail, replace or cease operating certain facilities to comply with statutes, regulations and actions by regulatory bodies or courts.  In this regard, PPL subsidiaries also may incur capital expenditures or operating expenses in amounts which are not now determinable, but could be significant.

Air(PPL and PPL Energy Supply)

The Clean Air Act deals, in part, with emissions causing acid deposition, attainment of federal ambient air quality standards and toxic air emissions and visibility standards in the U.S.  Amendments to the Clean Air Act requiring additional emission reductions are likely to continue to be proposed in the U.S. Congress.  The Clean Air Act allows states to develop more stringent regulations and in some instances, as discussed below, Pennsylvania and Montana have chosen to do so.

Clean Air Interstate Rule (CAIR)

Citing its authority under the Clean Air Act, in 1997, the EPA developed new standards for ambient levels of ozone and fine particulates in the U.S.  To facilitate attainment of these standards, the EPA promulgated the CAIR for 28 midwestern and eastern states, including Pennsylvania, to reduce sulfur dioxide emissions by about 50% by 2010 and to extend the current seasonal program for reduction in nitrogen oxides emissions to a year-round program starting in 2009.  Starting in 2015, the CAIR requires further reductions in the CAIR region, in sulfur dioxide of 30% from 2010 levels, and nitrogen oxides during the ozone season of 17% from 2009 levels.  The CAIR allowed these reductions to be achieved through cap-and-trade programs.

In July 2008, the United States Court of Appeals for the D.C. Circuit (the U.S. Circuit Court) issued a ruling that invalidated CAIR in its entirety, including its cap-and-trade program.  The U.S. Circuit Court did not overturn the previously existing cap-and-trade program for sulfur dioxide reductions under the acid rain program or the previously existing cap-and-trade program for reductions in nitrogen oxides during the ozone season.

In December 2008, the U.S. Circuit Court remanded CAIR back to the EPA without vacating the cap-and-trade program, effectively reinstating, at least temporarily, CAIR and its requirements for annual-reduction for nitrogen oxides beginning in 2009 and for further reduction in sulfur dioxide by requiring the surrender of two acid rain allowances for every ton of sulfur dioxide emitted beginning in 2010.

PPL expects to meet the annual nitrogen oxide reductions required by CAIR in 2009.  However, the ultimate disposition of CAIR's cap-and-trade program and the value of annual nitrogen oxide allowances as well as sulfur dioxide allowances, remain uncertain.  If the EPA revises CAIR to require more stringent emission reductions or revises CAIR to eliminate the regional cap-and-trade program, the costs of compliance are not now determinable, but could be significant.

In 2006, the EPA revised the ambient air quality standard for fine particulates and in 2008 the EPA tightened the ambient air quality standard for ozone.  These more stringent standards could result in requirements to reduce emissions of sulfur dioxide and nitrogen oxides beyond those required under the CAIR.  If additional reductions were to be required, the costs are not now determinable, but could be significant.  In addition, the EPA is expected to propose this year and finalize next year a new one hour ambient air quality standard for nitrogen dioxide.  The level of the standard and the effects on PPL power plants are not yet determinable.

To continue meeting the sulfur dioxide reduction requirements under the acid rain provisions of the Clean Air Act, and the reductions required by CAIR (remanded by the U.S. Circuit Court, but currently in place), PPL has installed scrubbers at its Montour plant that are now in service.  PPL is continuing with installation of scrubbers at its Brunner Island plant.  The Unit 3 scrubber was placed in-service in the second quarter of 2009, and the scrubber for Units 1 and 2 is scheduled to be placed in-service in late fall of 2009.  In addition, with respect to compliance with annual and ozone season nitrogen oxide reduction requirements, PPL's plan is to operate the SCRs at Montour Units 1 and 2, to utilize the existing combustion controls and to purchase any needed emission allowances on the open market.

Mercury

Also citing its authority under the Clean Air Act, in May 2005, the EPA issued the Clean Air Mercury Regulations (CAMR) that affect coal-fired plants.  These regulations established a cap-and-trade program to take effect in two phases, with a first phase to begin in January 2010, and a second phase with more stringent requirements to begin in January 2018.  However, in February 2008, the U.S. Circuit Court overturned the EPA's rule.  Under this decision, the EPA must either properly remove mercury from regulation under the hazardous air pollutant provisions of the Clean Air Act or develop standards imposing MACT for electric generating units.  In January 2009, the EPA stated that it will proceed with developing MACT standards for mercury emissions from electric generating units.  The costs of complying with such standards are not now determinable, but could be significant.

Pennsylvania adopted mercury rules more stringent than CAMR.  Pennsylvania's rules establish mercury emission limits for each coal-fired generating facility beginning in 2010, and require that mercury emission allowances under the EPA's cap-and-trade program under CAMR be met at each unit without the benefit of an emissions trading program, and that tighter emission limits based on the second phase of the CAMR requirements be accelerated to begin in 2015.  In light of the U.S. Circuit Court decision overturning CAMR, in September 2008, PPL filed a complaint with the Pennsylvania Commonwealth Court (Commonwealth Court) seeking to have the Pennsylvania mercury rule rescinded on the basis that it is unlawful, invalid and unenforceable under the provisions of the Pennsylvania Air Pollution Control Act.  In January 2009, the Pennsylvania Commonwealth Court ruled in PPL's favor.  The decision is on appeal to the Pennsylvania Supreme Court.  Pending final resolution of this matter, PPL is evaluating its mercury control plans and what steps it needs to take at this time.

If the Pennsylvania mercury rule is ultimately upheld, PPL may need to install chemical injection systems on its Brunner Island units to achieve the Phase 1 mercury reduction requirements.  PPL estimates that the capital cost of such chemical injection systems at Brunner Island will be approximately $40 million.  For Montour, PPL would need to operate the SCRs (already in place) year-round along with the scrubbers to achieve compliance with Phase 1.  There is, however, the possibility that these actions would not be sufficient to meet Pennsylvania's new mercury requirements, and additional injection systems could be required at an estimated cost of approximately $32 million.

To meet Pennsylvania's 2015 mercury requirements, if the rule is upheld, and/or any similarly stringent MACT rule adopted by the EPA, adsorption/absorption technology with fabric filters may be required at most of PPL's Pennsylvania coal-fired generating units.  Based on current analysis and industry estimates, PPL estimates that if this technology were required at every one of its Pennsylvania coal-fired generating units, the aggregate capital cost of compliance would be approximately $530 million.

Montana also has finalized mercury emission rules that require, by 2010, every coal-fired generating plant in that state to achieve reduction levels more stringent than the CAMR's 2018 requirements.  PPL is installing chemical injection systems to meet these requirements.  PPL estimates that its share of the capital cost for these systems in Montana will be approximately $15 million.  Because enhanced chemical injection technologies may not be sufficiently developed to meet this level of reductions by 2010, there is a risk that adsorption/absorption technology with fabric filters at both Colstrip and Corette would be required.  Based on current analysis and industry estimates, PPL estimates that if this technology were required, its share of the capital cost to achieve compliance at its Montana units would be approximately $140 million.

Regional Haze and Visibility

In addition to the above rules, the Clean Air Visibility Rule was issued by the EPA in June 2005, to address regional haze or regionally-impaired visibility caused by multiple sources over a wide area.  The rule defines Best Available Retrofit Technology (BART) requirements for electric generating units, including presumptive limits for sulfur dioxide and nitrogen oxides controls for large units.  Under the BART rule, PPL submitted to the Pennsylvania DEP its analyses of the visibility impacts of particulate matter emissions from Martins Creek Units 3 and 4, Brunner Island Units 2 and 3 and Montour Units 1 and 2.  The EPA had determined that meeting the requirements for CAIR also met the BART requirements for sulfur dioxide and nitrogen dioxide.  PPL's analyses have shown that because PPL had already upgraded its particulate emissions controls at Montour Units 1 and 2 and Brunner Island Unit 3, and was in the process of upgrading its particulate emissions controls on Brunner Island Unit 2 in 2009 (presently being installed), that further controls were not justified as there would be little corresponding visibility improvement.  PPL has not received comments from the Pennsylvania DEP on these submissions.

Also under the BART rule, PPL submitted to the EPA its analyses of the visibility impacts of sulfur dioxide, nitrogen oxides and particulate matter emissions for Colstrip Units 1 and 2 and Corette.  PPL's analyses have shown that further reductions are not needed.  The EPA has responded to PPL's reports for Colstrip and Corette and requested further information and analysis.  PPL completed further analysis and submitted addendums to its initial reports for Colstrip and Corette.  In February 2009, PPL received an information request for additional data related to the Colstrip generating station non-BART affected emission sources.  PPL responded to this request in March 2009.  PPL has not received comments from the EPA on these submissions.

PPL cannot predict whether any additional reductions will be required in Pennsylvania or Montana.  If additional reductions are required, the costs are not now determinable, but could be significant.

New Source Review (NSR)

In 1999, the EPA initiated enforcement actions against several electric generators, asserting that older, coal-fired power plants operated by those generators have, over time, been modified in ways that increased their emissions and subjected them to more stringent NSR requirements under the Clean Air Act.  The EPA subsequently issued information requests and notices of violation, and commenced enforcement actions against other generators.  PPL received such information requests for its Colstrip, Corette and Martins Creek plants.  Although the EPA announced in 2005 that it would not bring new enforcement actions under these NSR rules, the Justice Department recently declared that it is now considering bringing such actions.  In April 2009, PPL received information requests for its Montour and Brunner Island plants.  PPL has met with the EPA regarding this matter.  PPL's response to the request is currently on hold pending evaluation by PPL and the EPA as to whether to engage in pre-litigation settlement discussions.  The EPA has sent PPL a proposed term sheet as a starting point for any such settlement discussions.  PPL is evaluating the feasibility and costs of achieving those terms.

In January 2009, PPL received a notice of violation from the EPA for projects undertaken at the Keystone plant at which PPL is part owner.  The EPA alleges that the projects were undertaken without proper NSR compliance.  PPL cannot predict the outcome of this proceeding.

States and environmental groups also have brought enforcement actions alleging violations of the NSR regulations by coal-fired plants, and PPL is unable to predict whether such state or citizen enforcement actions will be brought with respect to any of PPL affiliates' plants.

If PPL's past activities are found to have violated the NSR regulations, then PPL must install best available control technology for any pollutant found to have significantly increased due to a major modification.  The costs to install and operate such technology are not now determinable, but could be significant.

Finally, if the EPA regulates carbon dioxide emissions pursuant to the 2007 U.S. Supreme Court decision on global climate change (as discussed below), carbon dioxide emissions could become subject to the NSR provisions of the Clean Air Act.  The implications are uncertain, as PPL is not aware of any permitting authorities having implemented the NSR regulations for carbon dioxide emissions.

Opacity

The New Jersey DEP and certain New Jersey residents have raised environmental concerns with respect to the visible opacity of emissions from the oil-fired units at the Martins Creek plant.  Similar issues also are being raised by the Pennsylvania DEP.  PPL studied the issue and as a result installed chemical injection systems to reduce visible emissions.  If it is determined that further actions must be taken to address the visible opacity of these emissions, such actions could result in costs that are not now determinable, but could be significant.

Global Climate Change

There is concern nationally and internationally about global climate change and the contribution of greenhouse gas emissions including, most significantly, carbon dioxide from the combustion of fossil fuels.  This concern has led to increased federal legislative proposals, actions at regional, state and local levels, as well as litigation relating to greenhouse gas emissions, including an April 2007 U.S. Supreme Court decision holding that the EPA has the authority to regulate greenhouse gas emissions from new motor vehicles under the Clean Air Act.  As a result of this decision, in July 2008 the EPA issued an "Advance Notice of Proposed Rulemaking," proposing alternative approaches to regulate carbon dioxide emissions.  Upon taking office in January 2009, President Obama reaffirmed statements he made during the presidential campaign about his support for mandatory regulation of greenhouse gas emissions, including a cap-and-trade system.  The new Administrator of the EPA has indicated that the EPA is moving forward with regulation of greenhouse gas emissions under the Clean Air Act, though the exact form of such regulation remains unclear.  In April 2009, the EPA proposed a rule to require economy-wide reporting of greenhouse gas emissions and the EPA issued a proposed finding that greenhouse gases contribute to air pollution and may endanger public health or welfare.  Also, increased pressure for carbon dioxide emissions reduction is being initiated by investor and environmental organizations, and the international community.  The construction and operation of coal-fired power plants have received particularly intense scrutiny.

PPL believes future legislation and regulations that affect carbon dioxide emissions from power plants are likely, although technology to efficiently capture, remove and sequester carbon dioxide emissions is not presently available on a commercial scale.  In June 2009, the U.S. House of Representatives passed H.R. 2454, the American Clean Energy and Security Act of 2009.  A key element affecting PPL includes a declining cap on carbon emissions beginning in 2012, which requires a three percent reduction in greenhouse gas emissions (below 2005 levels) by 2012, increasing to 17% by 2020, 42% by 2030 and 83% by 2050.  The legislation also would require that electric utilities meet a mandatory 20% renewable energy supply and energy efficiency requirement by 2020.  The Senate plans to begin to address climate change legislation in the fall.  Renewable electricity standards are currently included in a separate bill, S.1462, the American Clean Energy Leadership Act of 2009, which passed in the Senate Energy Committee in June 2009.  Under this bill, electric utilities would be required to meet a 15% standard through renewable sources of energy and energy efficiency by 2021.

PPL is currently evaluating H.R.2454 and S.1462.  PPL management believes there are financial, regulatory and logistical uncertainties related to implementing renewable energy mandates that will need to be resolved before the impact to PPL of implementing renewable energy legislation can be meaningfully estimated.  Such uncertainties, among others, relate to the need to provide back-up supply to augment intermittent renewable generation, potential generation oversupply that could result from such renewable generation and back-up, impacts to the PJM capacity market and the need for substantial changes to transmission and distribution systems to accommodate renewable energy, which challenges and uncertainties are not directly addressed by the proposed legislation.  Because of the uncertainties as to the final outcome of federal climate change and energy legislation and regulation, PPL cannot at this time predict the effect on its future competitive position, results of operation, cash flows and financial position, of any greenhouse gas emission, renewable energy mandate or other global climate change requirements that may be adopted, although the costs to implement and comply with any such requirements could be material.

At the regional level, ten northeastern states signed a Memorandum of Understanding (MOU) agreeing to establish a greenhouse gas emission cap-and-trade program, called the Regional Greenhouse Gas Initiative (RGGI).  The program commenced in January 2009 and calls for stabilization of carbon dioxide emissions, at base levels established in 2005, from electric power plants larger than 25 MW in capacity.  The MOU also provides for a 10% reduction in carbon dioxide emissions from base levels by 2019.

Pennsylvania has not stated an intention to join RGGI, but has enacted the Pennsylvania Climate Change Act of 2008 (Act).  That Act established a Climate Change Advisory Committee to advise the DEP on the development of a Climate Change Action Plan.  PPL is participating on that Advisory Committee.  Legislation has been introduced in the Pennsylvania House of Representatives that would, if enacted, significantly increase renewable and solar supply requirements.

In the Western U.S., 11 states, including Montana, and Canadian provinces are members of the Western Climate Initiative (WCI).  The WCI has established a goal of reducing carbon dioxide emissions 15% below the 2005 levels by 2020 and is currently developing greenhouse gas emission allocations, offsets, and reporting recommendations.

PPL has conducted an inventory of its carbon dioxide emissions and is continuing to evaluate options for reducing, avoiding, off-setting or sequestering its carbon dioxide emissions.  In 2008, PPL estimates that its power plants emitted approximately 28 million tons of carbon dioxide (based on PPL's equity share of these assets).

PPL believes that the regulation of greenhouse gas emissions may have a material impact on its future capital expenditures and operations, but the costs are not now determinable.  Furthermore, PPL believes that the imposition of mandatory renewable energy and energy efficiency requirements could have a material impact on PPL.

Water/Waste (PPL and PPL Energy Supply)

Martins Creek Fly Ash Release

In August 2005, there was a release of approximately 100 million gallons of water containing fly ash from a disposal basin at the Martins Creek plant used in connection with the operation of the two 150 MW coal-fired generating units at the plant.  This resulted in ash being deposited onto adjacent roadways and fields, and into a nearby creek and the Delaware River.  The leak was stopped, and PPL has determined that the problem was caused by a failure in the disposal basin's discharge structure.  PPL has conducted extensive clean-up and completed studies, in conjunction with a group of natural resource trustees and the Delaware River Basin Commission, evaluating the effects of the release on the river's sediment, water quality and ecosystem.

The Pennsylvania DEP filed a complaint in Pennsylvania Commonwealth Court against PPL Martins Creek and PPL Generation, alleging violations of various state laws and regulations and seeking penalties and injunctive relief.  The Delaware Riverside Conservancy and several citizens were granted the right, without objection from PPL, to intervene in the Pennsylvania DEP's action.  PPL and the Pennsylvania DEP have settled this matter.  The settlement required a payment of $1.5 million in penalties and reimbursement of the DEP's costs.  PPL made this payment in the second quarter of 2008.  The settlement also requires PPL to submit a report on the completed studies of possible natural resource damages.  PPL submitted the assessment report to the agencies in June 2007.  PPL met with the agencies in January 2009 to discuss the status of their natural resource damage assessment and their review of the June 2007 report.  In March 2009, the agencies provided some limited information on their projection of damages to the Delaware River resources from this release and cleanup.  PPL has requested that the agencies provide further details.  At this point, PPL is not certain whether the agencies will require additional studies, but PPL does expect the trustees and the Delaware River Basin Commission will seek to recover their costs and/or restoration costs for damages that they can demonstrate were caused by the release.

Through June 30, 2009, PPL Energy Supply spent $28 million for remediation and related costs and an immaterial remediation liability remained.  PPL and PPL Energy Supply cannot be certain of the outcome of the natural resource damage assessment or associated costs, the outcome of any lawsuit brought by the citizens and businesses or the exact nature of any other regulatory or other legal actions that may be initiated against PPL, PPL Energy Supply or their subsidiaries as a result of the disposal basin release.

Basin Seepage - Pennsylvania

Seepages have been detected at active and retired wastewater basins at various PPL plants, including the Montour, Brunner Island and Martins Creek generating facilities.  PPL has completed an assessment of some of the seepages at the Montour and Brunner Island facilities and is working with the Pennsylvania DEP to implement abatement measures for those seepages.  PPL is continuing to conduct assessments of other seepages at the Montour and Brunner Island facilities as well as seepages at the Martins Creek facility to determine the appropriate abatement actions.  PPL currently plans to spend up to $50 million to upgrade and/or replace certain wastewater facilities in response to the seepages and for other facility changes.  The potential additional cost to address the identified seepages or other seepages at all of PPL's Pennsylvania plants is not now determinable, but could be significant.

Basin Seepage - Montana

In May 2003, approximately 50 plaintiffs brought an action against PPL Montana and the other owners of the Colstrip plant alleging property damage from seepage from the freshwater and wastewater ponds at Colstrip.  In the first quarter of 2008, PPL Montana recorded an additional reserve of $7 million ($0.01 per share, basic and diluted, for PPL) to "Other operation and maintenance" on the Statement of Income.  In July 2008, the plaintiffs and the remaining owner-defendants remaining after dismissal of NorthWestern due to its bankruptcy executed a settlement agreement.  PPL Montana and the other remaining owner-defendants funded the settlement, concluding the matter.  PPL Montana's share of the settlement was approximately $8 million.  In June 2008, PPL Montana recorded an insignificant reserve for its share of potential additional settlements with three property owners living near the original plaintiffs but who were not parties to the lawsuit.  PPL Montana may incur additional costs related to the potential claims, including additional groundwater investigations and any related remedial measures, which are not now determinable, but could be significant.

In February 2007, six plaintiffs filed a separate lawsuit in the Montana Sixteenth Judicial District Court against the Colstrip plant owners asserting similar property damage claims as were asserted by the plaintiffs to the May 2003 complaint.  The lawsuit is in its initial stages of discovery and investigation, and PPL Montana is unable to predict the outcome of these proceedings.  PPL Montana has undertaken certain groundwater investigations and remediation at the Colstrip plant to address groundwater contamination alleged by the plaintiffs as well as other groundwater contamination at the plant.  PPL Montana may incur further costs based on the outcome of this lawsuit and its additional groundwater investigations and any related remedial measures, which are not now determinable, but could be significant.

Other Issues

In January 2006, the EPA significantly increased the drinking water standard related to arsenic.  The revised standard, 10 parts per billion (ppb), may result in individual states taking action that could require several PPL subsidiaries to further treat wastewater and/or take abatement action at their power plants.  In Pennsylvania, this arsenic standard has been incorporated into the state's water quality standards and could result in more stringent limits to PPL's NPDES permits for its Pennsylvania plants.  Recently, the EPA has developed a draft risk assessment of arsenic that increases the cancer risk exposure by more than 20 times, which would further lower the current standard of 10 ppb to 0.1 ppb.  If required, a change to this lower level would involve very expensive treatment and, at this time, there are no assurances that it could even be attained.

The EPA finalized requirements in 2004 for new or modified cooling water intake structures.  These requirements affect where generating facilities are built, establish intake design standards and could lead to requirements for cooling towers at new and modified power plants.  Another rule finalized in 2004 that addressed existing structures has been withdrawn following a January 2007 decision by the U.S. Court of Appeals for the Second Circuit.  In April 2008, the U.S. Supreme Court granted petitions for writs of certiorari filed by Utility Water Act Group, Public Service Enterprise Group, Inc. and Entergy Corporation, and subsequently ruled that the EPA has discretion to use cost-benefit analysis in determining the best technology available for minimizing adverse environmental impact.  It is expected that the EPA will incorporate this option in its revisions of the rule.  How the cost-benefit analysis will be employed, other issues raised by the Second Circuit Court (that were not reviewed by the U.S. Supreme Court), and actions the states may take on their own, could result in stricter standards for existing structures that could impose significant costs on PPL subsidiaries.

The EPA released its 2008 Effluent Guidelines Plan and has chosen not to revise the steam electric effluent guidelines.  Instead, the EPA plans to continue to study the industry's wastewater discharges, with a focus on coal-fired plants and "particular interest" in Flue Gas Desulfurization wastewater treatment, ash sluice water management and water reuse opportunities.  The EPA plans to continue to study the industry through 2009 and 2010 annual reviews, including sampling at selected plants.

PPL has signed a consent order with the Pennsylvania DEP under which it will take further actions to minimize the possibility of fish kills at its Brunner Island plant.  Fish are attracted to warm water in power plant discharge channels, especially during cold weather.  In the past, fish kills have occurred at Brunner Island when debris at intake pumps resulted in a unit trip or reduction in load, causing a sudden change in water temperature in the discharge channel when fish were present.

PPL paid a nominal penalty to the DEP for fish kills that occurred in October 2007 and March 2008.  In addition, PPL had committed to construct a barrier to prevent debris from entering the intake area.  However, due to potential impacts in the floodplain, PPL was not able to obtain the necessary authorization from local townships and an alternative plan is being developed.  PPL has also committed to investigate alternatives to completely exclude fish from the discharge area.  PPL will need to implement one of these alternatives if a fish kill occurs after construction of the cooling towers at Brunner Island is completed in 2010.  The costs of these measures are not now determinable, but could be significant.

The EPA and several states, including Montana, are considering establishing regulations under the Resource Conservation and Recovery Act (RCRA) that could impact the disposal and management of coal combustion products (CCPs), including ash and scrubber wastes and other by-products.  Following the large ash release at a Tennessee Valley Authority site in Tennessee in December 2008 and subsequent widespread media coverage the EPA, under pressure from a variety of environmental groups and some legislators, has committed to proposing CCP regulations by the end of 2009 and has been seeking information from the power industry as it considers whether or not to regulate CCPs as hazardous waste.  As a precursor to developing regulations, the EPA issued letters in March 2009 to power plant owners, including PPL subsidiaries, requesting information on the structural integrity of their CCP disposal and associated water treatment impoundments.  PPL has responded to the requests and the EPA conducted a follow-up inspection of PPL Montana's Colstrip plant.  In June 2009, the EPA's Office of Enforcement and Compliance Assurance issued a much broader information request to Colstrip and 18 other non-affiliated plants, seeking information under the RCRA, the Clean Water Act and the Emergency Planning and Community Right-to-Know Act.  Although the EPA's enforcement office issued the request, the EPA has not necessarily concluded that the plants are in violation of any EPA requirements.  PPL cannot predict at this time the outcome of these matters or what the EPA's regulations may require and what impact, if any, they would have on PPL's facilities.

Superfund and Other Remediation

(PPL, PPL Energy Supply and PPL Electric)

PPL Electric is a potentially responsible party at several sites listed by the EPA under the federal Superfund program, including the Columbia Gas Plant Site, the Metal Bank site and the Ward Transformer 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.  However, should the EPA require different or additional measures in the future, or should PPL's share of costs at multi-party sites increase significantly more than currently expected, the costs to PPL could be significant.

PPL Electric has been remediating several sites that were not being addressed under another regulatory program such as Superfund, but for which PPL Electric may be liable for remediation.  These include a number of coal gas manufacturing facilities formerly owned or operated by a predecessor to PPL Electric.

Depending on the outcome of investigations at sites where investigations have not begun or have not been completed, the costs of remediation and other liabilities could be substantial.  PPL and its subsidiaries also could incur other non-remediation costs at sites included in the consent orders or other contaminated sites, the costs of which are not now determinable, but could be significant.

The EPA is evaluating the risks associated with naphthalene, a chemical by-product 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 facilities.  The costs to PPL of complying with any such requirements are not now determinable, but could be significant.

(PPL and PPL Energy Supply)

Under the Pennsylvania Clean Streams Law, subsidiaries of PPL Generation are obligated to remediate acid mine drainage at former mine sites and may be required to take additional steps to prevent potential acid mine drainage at previously capped refuse piles.  One PPL Generation subsidiary is pumping mine water at two mine sites and treating water at one of these sites.  Another PPL Generation subsidiary has installed a passive wetlands treatment system at a third site.  At June 30, 2009, PPL Energy Supply had accrued a discounted liability of $25 million to cover the costs of pumping and treating groundwater at the two mine sites for 50 years and for operating and maintaining passive wetlands treatment at the third site.  PPL Energy Supply discounted this liability based on risk-free rates at the time of the mine closures.  The weighted average rate used was 8.18%.  Expected undiscounted payments are estimated at $1 million for each of the years from 2009 through 2013, and the expected payments for the work after 2013 are $144 million.

(PPL, PPL Energy Supply and PPL Electric)

Future cleanup or remediation work at sites currently under review, or at sites not currently identified, may result in material additional operating costs for PPL subsidiaries that cannot be estimated at this time.

Electric and Magnetic Fields (PPL, PPL Energy Supply and PPL Electric)

Concerns have been expressed by some members of the public regarding potential health effects of power frequency EMFs, which are emitted by all devices carrying electricity, including electric transmission and distribution lines and substation equipment.  Government officials in the U.S. and the U.K. have reviewed this issue.  The U.S. National Institute of Environmental Health Sciences concluded in 2002 that, for most health outcomes, there is no evidence that EMFs cause adverse effects.  The agency further noted that there is some epidemiological evidence of an association with childhood leukemia, but that the evidence is difficult to interpret without supporting laboratory evidence.  The U.K. National Radiological Protection Board (part of the U.K. Health Protection Agency) concluded in 2004 that, while the research on EMFs does not provide a basis to find that EMFs cause any illness, there is a basis to consider precautionary measures beyond existing exposure guidelines.  In April 2007, the Stakeholder Group on Extremely Low Frequency EMF, set up by the U.K. Government, issued its interim assessment which describes a number of options for reducing public exposure to EMFs.  This assessment is being considered by the U.K. Government.  PPL and its subsidiaries believe the current efforts to determine whether EMFs cause adverse health effects should continue and are taking steps to reduce EMFs, where practical, in the design of new transmission and distribution facilities.  PPL and its subsidiaries are unable to predict what effect, if any, the EMF issue might have on their operations and facilities either in the U.S. or the U.K., and the associated cost, or what, if any, liabilities they might incur related to the EMF issue.

Environmental Matters - WPD (PPL and PPL Energy Supply)

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.

The U.K. government has implemented a project to determine the impact of flooding on the U.K. utility infrastructure, including major electricity substations.  WPD estimates a cost of $35 million to comply with the anticipated requirements and expects to be allowed to recover costs through rates.

There are no other material legal or administrative proceedings pending against or related to WPD with respect to environmental matters.  See "Environmental Matters - Domestic - Superfund and Other Remediation - Electric and Magnetic Fields" for a discussion of EMFs.

Other

Nuclear Insurance(PPL and PPL Energy Supply)

PPL Susquehanna is a member of certain insurance programs that provide coverage for property damage to members' nuclear generating stations.  Facilities at the Susquehanna station are insured against property damage losses up to $2.75 billion under these programs.  PPL Susquehanna is also a member of an insurance program that provides insurance coverage for the cost of replacement power during prolonged outages of nuclear units caused by certain specified conditions.  Under the property and replacement power insurance programs, PPL Susquehanna could be assessed retroactive premiums in the event of the insurers' adverse loss experience.  This maximum assessment was $37 million.

In the event of a nuclear incident at the Susquehanna station, PPL Susquehanna's public liability for claims resulting from such incident would be limited to $12.5 billion under provisions of The Price-Anderson Act Amendments under the Energy Policy Act of 2005.  PPL Susquehanna is protected against this liability by a combination of commercial insurance and an industry assessment program.  In the event of a nuclear incident at any of the reactors covered by The Price-Anderson Act Amendments under the Energy Policy Act of 2005, PPL Susquehanna could be assessed up to $235 million per incident, payable at $35 million per year.

At June 30, 2009, the property, replacement power and nuclear incident insurers maintained an A.M. Best financial strength rating of A ("Excellent").

Guarantees and Other Assurances

(PPL, PPL Energy Supply and PPL Electric)

In the normal course of business, PPL, PPL Energy Supply and PPL Electric 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 enter.

(PPL)

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

(PPL, PPL Energy Supply and PPL Electric)

The table below provides an update to those guarantees that are within the scope of accounting guidance on guarantees and are specifically disclosed in Note 15 to the Financial Statements contained in each Registrant's 2008 Form 10-K.  Other than noted in footnote (i), the probability of expected payment/performance under each of these guarantees is remote.

	Recorded Liability at
	June 30, 2009		December 31, 2008		Exposure at June 30, 2009 (a)			Expiration Date
PPL
Indemnifications for sale of PPL Gas Utilities					$	300	(b)
PPL Energy Supply (c)
Letters of credit issued on behalf of affiliates						17	(d)	2009 to 2011
Retroactive premiums under nuclear insurance programs						37	(e)
Nuclear claims under The Price-Anderson Act Amendments under The Energy Policy Act of 2005						235	(f)
Indemnifications for entities in liquidation and sales of assets	$	1	$	1		10	(g)	2010 to 2012
Indemnification to operators of jointly owned facilities						6	(h)
WPD guarantee of pension and other obligations of unconsolidated entities		1		2		32	(i)	2017
Tax indemnification related to unconsolidated WPD affiliates						9	(j)	2012
Guarantee of a portion of an unconsolidated entity's debt		1		1		22	(k)	2018

(a)	Represents the estimated maximum potential amount of future payments that could be required to be made under the guarantee.
(b)	PPL has provided indemnification to the purchaser of PPL Gas Utilities and Penn Fuel Propane, LLC for damages arising out of any breach of the representations, warranties and covenants under the related transaction agreement and for damages arising out of certain other matters, including certain pre-closing unknown environmental liabilities relating to former manufactured gas plant properties or off-site disposal sites, if any, outside of Pennsylvania.  The indemnification provisions for most representations and warranties, including tax and environmental matters, are capped at 15% of the purchase price ($45.0 million), in the aggregate, and are triggered (i) only if the individual claim exceeds $50,000, and (ii) only if, and only to the extent that, in the aggregate, total claims exceed 1.5% of the purchase price ($4.5 million).  The indemnification provisions for most representations and warranties survive for a period of one year after the closing.  Certain representations and warranties, including those having to do with transaction authorization and title, survive indefinitely, are capped at the purchase price and are not subject to the above threshold or deductible.  The indemnification provision for the tax matters representations survives for the duration of the applicable statute of limitations, and the indemnification provision for the environmental matters representations survives for a period of three years after the transaction closing.  The indemnification relating to unknown environmental liabilities for manufactured gas plants and disposal sites outside of Pennsylvania could survive more than three years, but only with respect to applicable property or sites identified by the purchaser prior to the third anniversary of the transaction closing.  The indemnification for covenants survives until the applicable covenant is performed and is not subject to any cap.
(c)	Other than the letters of credit, all guarantees of PPL Energy Supply also apply to PPL on a consolidated basis.
(d)	Standby letter of credit arrangements under PPL Energy Supply's $300 million five-year credit facility for the purposes of protecting various third parties against nonperformance by PPL.  This is not a guarantee by PPL on a consolidated basis.
(e)	PPL Susquehanna is contingently obligated to pay this amount related to potential retroactive premiums that could be assessed under its nuclear insurance programs.  See "Nuclear Insurance" for additional information.
(f)	This is the maximum amount PPL Susquehanna could be assessed for each incident at any of the nuclear reactors covered by this Act.  See "Nuclear Insurance" for additional information.
(g)	PPL Energy Supply's maximum exposure with respect to certain indemnifications and the expiration of the indemnifications cannot be estimated because, in the case of certain indemnification provisions, the maximum potential liability is not capped by the transaction documents and the expiration date is based on the applicable statute of limitations.  The exposure noted is only for those cases in which the agreements provide for a specific limit on the amount of the indemnification.
	In connection with the liquidation of wholly owned subsidiaries that have been deconsolidated upon turning the entities over to the liquidators, certain affiliates of PPL Global have agreed to indemnify the liquidators, directors and/or the entities themselves for any liabilities or expenses arising during the liquidation process, including liabilities and expenses of the entities placed into liquidation.  In some cases, the indemnifications are limited to a maximum amount that is based on distributions made from the subsidiary to its parent either prior or subsequent to being placed into liquidation.  In other cases, the maximum amount of the indemnifications is 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 in which the agreements provide for a specific limit on the amount of the indemnification, and the expiration date was based on an estimate of the dissolution date of the entities.  In 2009, $212 million of previously disclosed exposure expired.
	In addition to the $10 million exposure disclosed above, PPL Energy Supply has provided indemnification to the purchaser of a generating facility for losses arising out of any breach of the representations, warranties and covenants under the related transaction documents and for losses arising with respect to liabilities not specifically assumed by the purchaser, including certain pre-closing environmental and tort liabilities.  The indemnification other than for pre-closing environmental and tort liabilities is triggered only if the purchaser's losses reach $1 million in the aggregate, capped at 50% of the purchase price (or $95 million), and either expired in May 2007 or will expire pursuant to applicable statutes of limitations.  The indemnification provision for unknown environmental and tort liabilities related to periods prior to PPL Energy Supply's ownership of the real property on which the facility is located is capped at $4 million in the aggregate and survives for a maximum period of five years after the transaction closing.
(h)	In December 2007, a subsidiary of PPL Energy Supply executed revised owners agreements for two jointly owned facilities, the Keystone and Conemaugh generating stations.  The agreements require that in the event of any default by an owner, the other owners fund contributions for the operation of the generating stations, based upon their ownership percentages.  The maximum obligation among all owners, for each station, is currently $20 million.  The non-defaulting owners, who make up the defaulting owner's obligations, are entitled to the generation entitlement of the defaulting owner, based upon their ownership percentage.  The agreements do not have an expiration date.
(i)	As a result of the privatization of the utility industry in the U.K., certain electric associations' roles and responsibilities were discontinued or modified.  As a result, certain obligations, primarily pension-related, associated with these organizations have been guaranteed by the participating members.  Costs are allocated to the members based on predetermined percentages as outlined in specific agreements.  However, if a member becomes insolvent, costs can be reallocated to and are guaranteed by the remaining members.  At June 30, 2009, WPD has recorded an estimated discounted liability based on its current allocated percentage of the total expected costs 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.  Therefore, they have been estimated based on the types of obligations.
(j)	Two WPD unconsolidated affiliates were refinanced during 2005.  Under the terms of the refinancing, WPD has indemnified the lender against certain tax and other liabilities.
(k)	Reflects principal payments only.

PPL, PPL Energy Supply and PPL Electric and their subsidiaries 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, PPL, PPL Energy Supply and PPL Electric and their subsidiaries have not made any significant payments with respect to these types of guarantees and the probability of payment/performance under these guarantees is remote.  At June 30, 2009, the aggregate fair value of the indemnities related to arrangements entered into subsequent to December 31, 2002 was insignificant.

11.   Related Party Transactions

PLR Contracts (PPL Energy Supply and PPL Electric)

PPL Electric has power purchase agreements with PPL EnergyPlus, effective July 2000 and January 2002, under which PPL EnergyPlus will supply PPL Electric's entire PLR load through December 31, 2009.  Under these contracts, PPL EnergyPlus provides electricity at the predetermined capped prices that PPL Electric is authorized to charge its PLR customers.  For the three months ended June 30, 2009 and 2008, these purchases totaled $411 million and $428 million.  For the six months ended June 30, 2009 and 2008, these purchases totaled $908 million and $917 million.  These purchases include nuclear decommissioning recovery and amortization of an up-front contract payment and are included in the Statements of Income as "Wholesale energy marketing to affiliate" by PPL Energy Supply, and as "Energy purchases from affiliate" by PPL Electric.

Under one of the PLR contracts, PPL Electric is required to make performance assurance deposits with PPL EnergyPlus when the market price of electricity is less than the contract price by more than its contract collateral threshold.  Conversely, PPL EnergyPlus is required to make performance assurance deposits with PPL Electric when the market price of electricity is greater than the contract price by more than its contract collateral threshold.  PPL Electric estimated that at June 30, 2009 and December 31, 2008, the fair value of the contract was approximately $312 million and $917 million.  Accordingly, at June 30, 2009 and December 31, 2008, PPL Energy Supply was required to provide PPL Electric with performance assurance of $79 million and $300 million.  These deposits are shown on the Balance Sheets as "Collateral on PLR energy supply to/from affiliate," a current asset of PPL Energy Supply and a current liability of PPL Electric.  PPL Electric pays interest equal to the one-month LIBOR plus 0.5% on this deposit, which is included in "Interest Expense with Affiliate" on the Statements of Income.  PPL Energy Supply records the receipt of the interest as affiliated interest income, which is included in "Interest Income from Affiliates" on the Statements of Income.  For the three months ended June 30, 2009 and 2008, interest related to these deposits was insignificant and $2 million.  For the six months ended June 30, 2009 and 2008, interest related to these deposits was $1 million and $5 million.

In 2001, PPL Electric made a $90 million up-front payment to PPL EnergyPlus in connection with the PLR contracts.  The up-front payment is being amortized by both parties over the term of the PLR contracts.  The unamortized balance of this payment and other payments under the contracts was $6 million and $12 million at June 30, 2009 and December 31, 2008.  These balances are reflected on the Balance Sheets as "Deferred revenue on PLR energy supply to affiliate" by PPL Energy Supply, and as "Prepayment on PLR energy supply from affiliate" by PPL Electric.  The prepayment will be fully amortized during 2009.

Under Pennsylvania law and PUC regulations, PPL Electric is required to buy electricity generation supply for customers who do not choose a competitive supplier.  PPL Electric has conducted five of its six planned competitive solicitations for generation supply in 2010, after its existing PLR contract expires.  Competitive bids have been solicited for 4,250 MW, or 83%, of PPL Electric's expected generation supply requirements for these customers in 2010.  An independent company, NERA Economic Consulting (NERA), is managing this competitive solicitation process.  NERA compiles the results and presents them to the PUC.  See Note 10 for additional information on the results of the completed solicitations.  The sixth competitive solicitation is scheduled for October 2009.

PPL EnergyPlus was one of the successful bidders in the first competitive solicitation process and has entered into an agreement with PPL Electric to supply up to 671 MW of total peak load in 2010, at an average price of $91.42 per MWh.

Under the standard Supply Master Agreement for the bid solicitation process, PPL Electric requires all suppliers to post collateral once credit exposures exceed defined credit limits.  In no instance is PPL Electric required to post collateral to suppliers under these supply contracts.  PPL EnergyPlus is required to post collateral with PPL Electric:  (a) when the market price of electricity to be delivered by PPL EnergyPlus exceeds the contract price for the forecasted quantity of electricity to be delivered and (b) this market price exposure exceeds a contractual credit limit.  Based on the current credit rating of PPL Energy Supply, as guarantor, this credit limit is $35 million.  At June 30, 2009, PPL Energy Supply provided PPL Electric with an insignificant letter of credit as performance assurance.

At June 30, 2009, PPL Electric had credit exposure to PPL EnergyPlus under the PLR contracts and its solicitations for generation supply in 2010 of $312 million, excluding the effects of netting and collateral arrangements.  As a result of netting and collateral arrangements, PPL Electric's credit exposure was reduced to $51 million.

PPL Energy Supply has credit exposure to PPL Electric under the PLR contracts and the solicitations for generation supply in 2010.  At June 30, 2009, PPL Energy Supply's credit exposure with PPL Electric was $261 million, excluding the effects of netting arrangements.  As a result of netting arrangements, PPL Energy Supply's credit exposure was reduced to zero.

NUG Purchases (PPL Energy Supply and PPL Electric)

PPL Electric has a reciprocal contract with PPL EnergyPlus to sell electricity purchased under contracts with NUGs.  PPL Electric purchases electricity from the NUGs at contractual rates and then sells the electricity at the same price to PPL EnergyPlus.  For the three months ended June 30, 2009 and 2008, these NUG purchases totaled $20 million and $30 million.  For the six months ended June 30, 2009 and 2008, these NUG purchases totaled $40 million and $58 million.  These amounts are included in the Statements of Income as "Wholesale electric to affiliate" by PPL Electric, and as "Energy purchases from affiliate" by PPL Energy Supply.

Allocations of Corporate Service Costs(PPL Energy Supply and PPL Electric)

PPL Services provides corporate functions such as financial, legal, human resources and information services.  PPL Services charges the respective PPL subsidiaries for the cost of such services when they can be specifically identified.  The cost of these services that is not directly charged to PPL subsidiaries is allocated to certain subsidiaries based on an average of the subsidiaries' relative invested capital, operation and maintenance expenses, and number of employees.  PPL Services allocated the following amounts, which PPL management believes are reasonable, to PPL Energy Supply and PPL Electric, including amounts applied to accounts that are further distributed between capital and expense.

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009 (a)		2008
PPL Energy Supply	$	53	$	54	$	108	$	105
PPL Electric		28		32		60		59

(a) Excludes allocated costs associated with the February 2009 workforce reduction.  See Note 6 for additional information.

Intercompany Borrowings

(PPL Energy Supply)

PPL Energy Supply had a $47 million balance outstanding on a note receivable from an affiliate at June 30, 2009 and no such notes were outstanding at December 31, 2008.  Interest is due quarterly at a rate equal to 1-month LIBOR plus 1%.  The note is shown on the Balance Sheet as "Note receivable from affiliate."  Interest earned on this note is included in "Interest Income from Affiliates" on the Statements of Income and was $1 million and insignificant for the three months ended June 30, 2009 and 2008.  Interest earned for the six months ended June 30, 2009 and 2008 was $1 million and $2 million.

PPL Energy Supply had a $124 million balance outstanding on short-term debt with an affiliate at June 30, 2009 and no such debt was outstanding at December 31, 2008.  Interest is due quarterly at a rate equal to 1-month LIBOR plus 2.25%.  The balance is shown on the Balance Sheet as "Short-term debt with affiliate."  Interest accrued on this debt is included in "Interest Expense with Affiliates" on the Statements of Income and was $1 million for the three and six months ended June 30, 2009.  No such interest was incurred during the same periods in 2008.

(PPL Electric)

In August 2004, a PPL Electric subsidiary issued a $300 million demand note to an affiliate.  There was a $79 million balance outstanding at June 30, 2009 and a $300 million balance outstanding at December 31, 2008.  Interest is due quarterly at a rate equal to 3-month LIBOR plus 1%.  This note is shown on the Balance Sheet as "Note receivable from affiliate."  Interest earned on the note is included in "Interest Income from Affiliate" on the Statements of Income, and was $1 million for each of the three months ended June 30, 2009 and 2008.  For the six months ended June 30, 2009 and 2008, interest earned was $3 million and $4 million.

Intercompany Derivatives (PPL Energy Supply)

In 2009 and 2008, PPL Energy Supply entered into a combination of average rate forwards and average rate options with PPL to sell British pounds sterling.  These hedging instruments have terms identical to average rate forwards and average rate options entered into by PPL with third parties to protect the translation of expected income denominated in British pounds sterling to U.S. dollars.  At June 30, 2009, the total exposure hedged was £61 million and the fair value of these positions was a net liability of $9 million, which is reflected in "Current Liabilities - Price risk management liabilities" on the Balance Sheet.  No similar hedging instruments were outstanding at December 31, 2008.  Gains and losses, both realized and unrealized, on these types of hedging instruments are included in "Other Income (Expense) - net" on the Statements of Income.  PPL Energy Supply recorded net losses of $11 million for both the three and six months ended June 30, 2009.  PPL Energy Supply recorded net losses of $1 million and $2 million for the three and six months ended June 30, 2008 related to similar average rates forwards and average rate options.

PPL Energy Supply is also party to forward contracts with PPL to sell British pounds sterling to protect the value of a portion of its net investment in WPD.  These hedging instruments have terms identical to forward sales contracts entered into by PPL with third parties.  The total notional amount of the contracts outstanding at June 30, 2009 was £55 million (approximately $108 million based on contracted rates).  The fair value of these positions was a net asset of $17 million and $34 million at June 30, 2009 and December 31, 2008, which is reflected in the foreign currency translation adjustment component of AOCI on the Balance Sheets.  Additionally, $10 million and $16 million was reflected in "Current Assets - Price risk management assets" on the Balance Sheets at June 30, 2009 and December 31, 2008 and $7 million and $18 million was reflected in "Other Noncurrent Assets - Price risk management assets" on the Balance Sheets at June 30, 2009 and December 31, 2008.

Trademark Royalties (PPL Energy Supply)

A PPL subsidiary owns PPL trademarks and bills certain affiliates for their use.  PPL Energy Supply was allocated $11 million and $5 million of this license fee for the three months ended June 30, 2009 and 2008, and $22 million and $14 million for the six months ended June 30, 2009 and 2008.  These allocations are primarily included in "Other operation and maintenance" on the Statements of Income.

Intercompany Insurance (PPL Energy Supply and PPL Electric)

PPL Power Insurance Ltd. (PPL Power Insurance) is a subsidiary of PPL that provides insurance coverage to PPL and its subsidiaries for property damage, general/public liability and workers' compensation.

PPL Power Insurance charged premiums as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
PPL Energy Supply	$	1	$	1	$	2	$	2
PPL Electric		2		2		5		4
Other (a)		1		1		1		1
Total	$	4	$	4	$	8	$	7

(a) Primarily worker's compensation

Recoveries on various insurance claims with PPL Power Insurance, which were primarily included as offsets to "Other operation and maintenance" on the Statements of Income, were recorded as follows:

	Three Months Ended June 30,			Six Months Ended June 30,
	2009		2008	2009		2008
PPL Energy Supply	$	3		$	4
PPL Electric					3	$	6
Total	$	3		$	7	$	6

12.   Other Income (Expense) - net

(PPL, PPL Energy Supply and PPL Electric)

The breakdown of "Other Income (Expense) - net" was:

	Three Months Ended June 30,					Six Months Ended June 30,
	2009			2008		2009		2008
PPL
Other Income
Gains related to the extinguishment of notes (Note 7)						$	29
Interest income	$	1		$	7		8	$	17
Earnings on securities in the NDT funds		5			3		6		5
Equity earnings		1			1		1		1
Hyder liquidation distributions					1				3
Gain on sale of PP&E					2				2
Miscellaneous - Domestic		1			2		3		3
Miscellaneous - International		1			1		1		1
Total		9			17		48		32
Other Expense
Economic foreign currency hedges		11			1		11		1
Charitable contributions		1					2		1
Miscellaneous - Domestic		2			1		5		3
Miscellaneous - International		1			2		1		3
Other Income (Expense) - net	$	(6	)	$	13	$	29	$	24

PPL Energy Supply
Other Income
Gains related to the extinguishment of notes (Note 7)						$	25
Earnings on securities in the NDT funds	$	5		$	3		6	$	5
Interest income		1			6		5		13
Equity earnings		1			1		1		1
Hyder liquidation distributions					1				3
Gain on sale of PP&E					2				2
Miscellaneous - Domestic							2		1
Miscellaneous - International		1			1		1		1
Total		8			14		40		26
Other Expense
Economic foreign currency hedges		11			2		11		2
Miscellaneous - Domestic		2					5		2
Miscellaneous - International		1			2		1		3
Other Income (Expense) - net	$	(6	)	$	10	$	23	$	19
PPL Electric
Other Income
Interest income	$	1		$	2	$	3	$	4
Other Expense		1					1
Other Income (Expense) - net	$			$	2	$	2	$	4

13.   Fair Value Measurements and Credit Concentration

(PPL, PPL Energy Supply and PPL Electric)

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).  PPL and its subsidiaries use, as appropriate, 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) to measure the fair value of an asset or liability.  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.

Recurring Fair Value Measurements

	June 30, 2009								December 31, 2008
			Fair Value Measurements Using								Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
PPL
Assets
Cash and cash equivalents	$	973	$	973					$	1,100	$	1,100
Short-term investments - municipal debt securities										150		150
Restricted cash and cash equivalents		159		159						347		347
Price risk management assets:
Energy commodities		3,878		15	$	3,685	$	178		2,460		19	$	2,143	$	298
Interest rate/foreign exchange		74				72		2		156				152		4
		3,952		15		3,757		180		2,616		19		2,295		302
NDT funds:
Cash and cash equivalents		5		5						7		7
Equity securities: (a)
U.S. large-cap		216		148		68				182		116		66
U.S. mid/small-cap		84		63		21				69		50		19
Debt securities:
U.S. Treasury		59		59						77		77
U.S. government agency		11				11				14				14
Municipality		64				64				61				61
Investment-grade corporate		27				27				33				33
Residential mortgage-backed securities		1				1				2				2
Other		1				1				1				1
		468		275		193				446		250		196
Auction rate securities		18						18		24						24
	$	5,570	$	1,422	$	3,950	$	198	$	4,683	$	1,866	$	2,491	$	326
Liabilities
Price risk management liabilities:
Energy commodities	$	2,826	$	9	$	2,778	$	39	$	2,133	$	15	$	2,008	$	110
Interest rate/foreign exchange		14				14				27				27
	$	2,840	$	9	$	2,792	$	39	$	2,160	$	15	$	2,035	$	110

PPL Energy Supply
Assets
Cash and cash equivalents	$	429	$	429					$	464	$	464
Short-term investments - municipal debt securities										150		150
Restricted cash and cash equivalents		140		140						328		328
Price risk management assets:
Energy commodities		3,878		15	$	3,685	$	178		2,460		19	$	2,143	$	298
Interest rate/foreign exchange		37				35		2		107				103		4
		3,915		15		3,720		180		2,567		19		2,246		302
NDT funds:
Cash and cash equivalents		5		5						7		7
Equity securities: (a)
U.S. large-cap		216		148		68				182		116		66
U.S. mid/small-cap		84		63		21				69		50		19
Debt securities:
U.S. Treasury		59		59						77		77
U.S. government agency		11				11				14				14
Municipality		64				64				61				61
Investment-grade corporate		27				27				33				33
Residential mortgage-backed securities		1				1				2				2
Other		1				1				1				1
		468		275		193				446		250		196
Auction rate securities		15						15		19						19
	$	4,967	$	859	$	3,913	$	195	$	3,974	$	1,211	$	2,442	$	321
Liabilities
Price risk management liabilities:
Energy commodities	$	2,826	$	9	$	2,778	$	39	$	2,133	$	15	$	2,008	$	110
Interest rate/foreign exchange		14				14				16				16
	$	2,840	$	9	$	2,792	$	39	$	2,149	$	15	$	2,024	$	110
PPL Electric
Assets
Cash and cash equivalents	$	520	$	520					$	483	$	483
Restricted cash and cash equivalents		15		15						15		15
	$	535	$	535					$	498	$	498

(a) Level 1 is comprised of securities that track the Wilshire 5000 index, which is invested in approximately 70% large-cap stocks and 30% mid/small-cap stocks.  U.S. large-cap equity securities classified as Level 2 represent investments in commingled equity funds that track the S&P 500 index.  U.S. mid/small-cap equity securities classified as Level 2 represent investments in commingled equity funds that track the Wilshire 4500 index.

A reconciliation of assets and liabilities classified as Level 3 at June 30, 2009 is as follows:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Three Months Ended												Six Months Ended
	Energy Commodities, net			Interest Rate/ Foreign Exchange			Auction Rate Securities			Total			Energy Commodities, net			Interest Rate/ Foreign Exchange			Auction Rate Securities			Total
PPL
Balance at beginning of period	$	116		$	45		$	22		$	183		$	188		$	4		$	24		$	216
Total realized/unrealized gains (losses)
Included in earnings		(55	)								(55	)		(76	)								(76	)
Included in OCI		13			(31	)		(4	)		(22	)		3			(28	)		(6	)		(31	)
Purchases, sales, issuances and settlements, net		49									49			85									85
Transfers (out of) and/or into Level 3		16			(12	)					4			(61	)		26						(35	)
Balance at end of period	$	139		$	2		$	18		$	159		$	139		$	2		$	18		$	159
PPL Energy Supply
Balance at beginning of period	$	116		$	45		$	17		$	178		$	188		$	4		$	19		$	211
Total realized/unrealized gains (losses)
Included in earnings		(55	)								(55	)		(76	)								(76	)
Included in OCI		13			(31	)		(2	)		(20	)		3			(28	)		(4	)		(29	)
Purchases, sales, issuances and settlements, net		49									49			85									85
Transfers (out of) and/or into Level 3		16			(12	)					4			(61	)		26						(35	)
Balance at end of period	$	139		$	2		$	15		$	156		$	139		$	2		$	15		$	156

Gains and losses on assets and liabilities classified as Level 3 and included in earnings for the three and six months ended June 30, 2009 are reported in the Statement of Income as follows:

	Three Months Ended								Six Months Ended
	Energy Commodities, net								Energy Commodities, net
	Wholesale Energy Marketing		Net Energy Trading Margins			Energy Purchases			Wholesale Energy Marketing		Net Energy Trading Margins			Energy Purchases
PPL and PPL Energy Supply
Total gains (losses) included in earnings for the period	$	11	$	(9	)	$	(57	)	$	15	$	(18	)	$	(73	)
Change in unrealized gains (losses) relating to positions still held at the reporting date		11					(38	)		13		(1	)		(39	)

A reconciliation of assets and liabilities classified as Level 3 at June 30, 2008 is as follows:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Three Months Ended									Six Months Ended
	Energy Commodities, net			Auction Rate Securities			Total			Energy Commodities, net			Auction Rate Securities			Total
PPL
Balance at beginning of period	$	207		$	40		$	247		$	134					$	134
Total realized/unrealized gains (losses)
Included in earnings		(1	)					(1	)		(1	)					(1	)
Included in OCI		67			(8	)		59			140		$	(8	)		132
Purchases, sales, issuances and settlements, net		1			(11	)		(10	)		1			(11	)		(10	)
Transfers (out of) and/or into Level 3														40			40
Balance at end of period	$	274		$	21		$	295		$	274		$	21		$	295
PPL Energy Supply
Balance at beginning of period	$	207		$	35		$	242		$	134					$	134
Total realized/unrealized gains (losses)
Included in earnings		(1	)					(1	)		(1	)					(1	)
Included in OCI		67			(7	)		60			140		$	(7	)		133
Purchases, sales, issuances and settlements, net		1			(11	)		(10	)		1			(11	)		(10	)
Transfers (out of) and/or into Level 3														35			35
Balance at end of period	$	274		$	17		$	291		$	274		$	17		$	291

Losses on assets and liabilities classified as Level 3 and included in earnings for both the three and six months ended June 30, 2008 are reported in the Statement of Income as follows:

	Energy Commodities, net
	Net Energy Trading Margins
PPL and PPL Energy Supply
Total losses included in earnings for the period	$	(1	)
Change in unrealized losses relating to positions still held at the reporting date		(1	)

Cash and Cash Equivalents, Short-term Investments, and Restricted Cash and Cash Equivalents

PPL and its subsidiaries use the market approach to determine the fair value of cash and cash equivalents, short-term investments, and restricted cash and cash equivalents.  The fair value measurements of short-term investments are based on quoted prices.

Price Risk Management Assets/Liabilities - Energy Commodities

The only energy commodity contracts classified as Level 1 are exchange-traded derivative gas and oil contracts.  When observable inputs are used to measure all or most of the value of a contract, the contract is classified as Level 2.  Over-the-counter (OTC) contracts are valued by traders using quotes obtained from an exchange, binding and non-binding broker quotes, prices posted by ISOs or published tariff rates.  PPL's risk management group obtains quotes from the market to validate the forward price curves.  OTC contracts include forwards, swaps, options and structured deals for electricity, gas, oil, and/or emission allowances and may be offset with similar positions in exchange-traded markets.  To the extent possible, fair value measurements utilize various inputs that include quoted prices for similar contracts or market-corroborated inputs.  In certain instances, these instruments may be valued using models, including standard option valuation models and standard industry models.  For example, the fair value of a structured deal that delivers power to an illiquid delivery point may be measured by valuing the nearest liquid trading point plus the value of the basis between the two points.  The basis input may be from market quotes, FTR prices, or historical prices.

When unobservable inputs are significant to the fair value measurement, a contract is classified as Level 3.  Additionally, Level 2 and Level 3 fair value measurements include adjustments for credit risk based on PPL's own creditworthiness (for net liabilities) and its counterparties' creditworthiness (for net assets).  PPL's credit department assesses all reasonably available market information and uses probabilities of default to calculate the credit adjustment.  PPL assumes that observable market prices include sufficient adjustments for liquidity and modeling risks, but for Level 3 fair value measurements, PPL also assesses the need for additional adjustments for liquidity or modeling risks.  The contracts classified as Level 3 represent contracts for which the delivery dates are beyond the dates for which independent prices are available or for power basis, which PPL generally values using historical prices.

Price Risk Management Assets/Liabilities -Interest Rate/Foreign Exchange

To manage its interest rate and foreign exchange risk, PPL and PPL Energy Supply generally use interest rate contracts such as forward-starting swaps and fixed-to-floating swaps, foreign exchange contracts such as forwards and options, and cross-currency swaps that contain characteristics of both interest rate and foreign exchange instruments.  PPL and PPL Energy Supply use an income approach to measure the fair value of these instruments, utilizing observable inputs such as forward interest rates and foreign exchange rates, and credit valuation adjustments, which may not be observable.  Given the duration of some of these contracts, PPL and PPL Energy Supply often cannot practicably obtain market information to value credit risk and therefore rely on their own models.  These models use projected probabilities of default based on historical observances.  When the credit valuation adjustment is significant to the overall valuation, the contracts are classified as Level 3.

NDT Funds

PPL and PPL Energy Supply generally use the market approach to measure the fair value of the securities held in the NDT funds.  The fair value measurements of cash and cash equivalents and equity securities are based on quoted prices in active markets.  The fair value measurements of commingled equity index funds are based on firm quotes of net asset values per share, which are not obtained from a quoted price in an active market.  The fair value measurements of debt securities are generally based on evaluated prices that reflect observable market information, such as actual trade information for identical securities or for similar securities, adjusted for observable differences.  When this information is not available, the fair value of debt securities is measured using present value techniques, which incorporate other observable inputs including interest rates for debt securities with credit ratings and terms to maturity similar to the debt securities being measured.

Auction Rate Securities

PPL's and PPL Energy Supply's auction rate securities are recorded in "Investments - Other" on the Balance Sheet and include Federal Family Education Loan Program guaranteed student loan revenue bonds as well as various municipal bond issues.  Auction rate securities are classified as Level 3 because failed auctions limit the amount of observable market data that is available for measuring the fair value of these securities.

At June 30, 2009 and December 31, 2008, the par value of these auction rate securities totaled $29 million for PPL and $24 million for PPL Energy Supply.  Contractual maturities for these auction rate securities are a weighted average of approximately 27 years.  Despite failed auctions in 2008 and 2009, PPL and PPL Energy Supply continued to earn interest on these investments at contractually prescribed interest rates.  During the second quarter of 2009, PPL Energy Supply liquidated an insignificant amount of securities at par.

At June 30, 2009 and December 31, 2008, PPL concluded that the fair value of its auction rate securities was $18 million and $24 million.  PPL Energy Supply concluded that the fair value of its auction rate securities was $15 million and $19 million at these same periods.  At June 30, 2009 and December 31, 2008, the temporary declines from par value were $11 million and $5 million for PPL, and $9 million and $5 million for PPL Energy Supply, and have been recorded in OCI.

PPL and PPL Energy Supply estimated the fair value of auction rate securities based on the following criteria:  (i) the underlying structure and credit quality of each security; (ii) the present value of future estimated interest and principal payments discounted using interest rates for bonds with a credit rating and remaining term to maturity similar to the stated maturity of the auction rate securities; and (iii) consideration of the impact of auction failures or redemption at par.  Based upon the evaluation of available information, PPL and PPL Energy Supply believe these investments continue to be of high credit quality and they do not have significant exposure to realize losses on these securities.  The estimated fair value of these securities could change significantly based on future market conditions.

Nonrecurring Fair Value Measurements (PPL and PPL Energy Supply)

	Fair Value Measurements Using
	Total		Level 1	Level 2		Level 3		Loss
Sulfur dioxide emission allowances (a)	$	15				$	15	$	(30	)
Long Island generation business (b)		138		$	138				(52	)

(a)	Current and long-term sulfur dioxide emission allowances are included in "Other intangibles" in their respective areas on the Balance Sheet.
(b)	Assets of the Long Island generation business disposal group are included in "Assets held for sale" on the Balance Sheet.

Sulfur Dioxide Emission Allowances

Due to a significant decline in market prices at March 31, 2009, PPL Energy Supply assessed the recoverability of certain sulfur dioxide emission allowances.  As a result, sulfur dioxide emission allowances with a carrying amount of $45 million were written down to their estimated fair value of $15 million, resulting in an impairment charge of $30 million being recorded during the first quarter of 2009.  This charge, recorded in the Supply segment for PPL and PPL Energy Supply, is included in "Other operation and maintenance" on the Statement of Income.

When available, observable market prices were used to value the sulfur dioxide emission allowances.  When observable market prices were not available, fair value was modeled using prices from observable transactions and appropriate discount rates.  The modeled values were significant to the overall fair value measurement.

Long Island Generation Business

The Long Island generation business met the held for sale criteria at June 30, 2009.  As a result, net assets held for sale with a carrying amount of $189 million were written down to their estimated fair value less cost to sell of $137 million.  See Note 8 for additional information on the anticipated sale.

The fair value was modeled using valuations obtained from third parties and appropriate discount rates.  The fair value of $138 million, which excludes $1 million of estimated costs to sell, was corroborated by the negotiated sales price adjusted for the additional anticipated cash flows from operations prior to the sale date.

Financial Instruments Not Recorded at Fair Value

(PPL, PPL Energy Supply and PPL Electric)

NPNS

PPL and PPL Energy Supply enter into full-requirement sales contracts, power purchase agreements, certain retail energy and physical capacity contracts and certain contracts to purchase emission allowances expected to be consumed.  These contracts range in maturity through 2023 and qualify for NPNS.  PPL Electric has also entered into contracts that qualify for NPNS.  See "Energy Purchase Commitments" within Note 10 for information about PPL Electric's competitive solicitations.  All of these contracts are accounted for using the accrual method of accounting; therefore, there were no amounts recorded on the Balance Sheets at June 30, 2009 and December 31, 2008.  The estimated fair value of these contracts was:

	Net Asset (Liability)
	June 30, 2009			December 31, 2008
PPL	$	155		$	136
PPL Energy Supply		449			239
PPL Electric		(294	)		(103	)

Other

Financial instruments for which the carrying amount on the Balance Sheets and the estimated fair value (based on quoted market prices for the securities where available and estimates based on current rates where quoted market prices are not available) are different, are set forth below and include debt with third-party credit enhancements.  The carrying value of PLR energy supply to/from affiliate and short-term debt represented or approximated fair value due to the liquid nature of the instruments or variable interest rates associated with the financial instruments.

	June 30, 2009 (a)				December 31, 2008
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
PPL
Long-term debt	$	7,710	$	7,370	$	7,838	$	6,785
PPL Energy Supply
Long-term debt		5,000		4,833		5,196		4,507
PPL Electric
Long-term debt		2,058		2,080		1,769		1,682

(a) The effect of credit enhancements is not included in the fair value measurement.  See "EITF 08-5" under "New Accounting Standards Adopted" within Note 2 for additional information.

Credit Concentration Associated with Financial Instruments

(PPL, PPL Energy Supply and PPL Electric)

PPL and its subsidiaries enter into contracts with many entities for the purchase and sale of energy.  Many of these contracts are considered a normal part of doing business and, as such, the fair value of these contracts is not reflected in the financial statements.  However, the fair value of these contracts is considered when committing to new business from a credit perspective.

(PPL)

At June 30, 2009, PPL had credit exposure of $4.0 billion to energy trading partners, excluding the effects of netting arrangements and collateral.  As a result of netting arrangements and collateral, PPL's credit exposure was reduced to $1.6 billion.  One of the counterparties accounted for 29% of this exposure, and no other individual counterparty accounted for more than 14% of the exposure.  Ten counterparties accounted for $1.3 billion, or 84%, of the total exposure.  Nine of these counterparties had an investment grade credit rating from S&P and accounted for 97% of the top 10 exposure.  The one counterparty that is not rated investment grade has posted collateral as per the terms and conditions of the contract and is current on its obligations.

(PPL Energy Supply)

At June 30, 2009, PPL Energy Supply had credit exposure of $4.1 billion to energy trading partners, excluding the effects of netting arrangements and collateral.  As a result of netting arrangements and collateral, PPL Energy Supply's credit exposure was reduced to $1.6 billion.  One of the counterparties accounted for 28% of this exposure, and no other individual counterparty accounted for more than 14% of the exposure.  Ten counterparties accounted for $1.3 billion, or 82%, of the total exposure.  These counterparties had an investment grade credit rating from S&P and accounted for 100% of the top 10 exposure.

Additionally, PPL Energy Supply has credit exposure to PPL Electric under the PLRcontracts.  This exposure is excluded from the exposure discussed above.  See Note 11 for additional information on the related-party credit exposure.

(PPL Electric)

At June 30, 2009, PPL Electric had no credit exposure as a result of its solicitations for the 2010 PLR supply.  There were nine successful bidders, all of which had an investment grade credit rating from S&P.  In the first competitive solicitation process, PPL EnergyPlus was awarded a significant portion of the solicitation.

PPL Electric has credit exposure to PPL Energy Supply under the current PLR contracts.  See Note 11 for additional information on the related party credit exposure.

14.   Derivative Instruments and Hedging Activities

Risk Management Objectives

(PPL, PPL Energy Supply and PPL Electric)

PPL has a risk management policy approved by the Board of Directors to manage market risk and counterparty credit risk.  The RMC, comprised of senior management and chaired by the Vice President-Risk Management, oversees the risk management function.  Key risk control activities designed to ensure compliance with the risk policy and detailed programs include, but are not limited to, credit review and approval, validation of transactions and market prices, verification of risk and transaction limits, VaR analyses, sensitivity analyses, and daily portfolio reporting, including open positions, determinations of fair value, and other risk management metrics.

Market risk is the potential loss PPL and its subsidiaries may incur as a result of price changes associated with a particular financial or commodity instrument.

PPL and PPL Energy Supply are exposed to market risk from:

· commodity price risk for energy and energy-related products associated with the sale of electricity from its generating assets and other electricity marketing activities and the purchase of fuel and fuel-related commodities for generating assets, as well as for proprietary trading activities;

· interest rate and price risk associated with debt used to finance operations, as well as debt and equity securities in NDT funds and defined benefit plans; and

· foreign currency exchange rate risk associated with investments in U.K. affiliates, as well as purchases of equipment in currencies other than U.S. dollars.

PPL and PPL Energy Supply utilize forward contracts, futures contracts, options, swaps and structured deals such as tolling agreements as part of the risk management strategy to minimize unanticipated fluctuations in earnings caused by changes in commodity prices, interest rates and foreign currency exchange rates.  All derivatives are recognized on the balance sheet at their fair value, unless they qualify for NPNS.

PPL Electric is exposed to market risk from its obligation as the PLR to its customers.  It has mitigated that risk with the fixed-price PLR agreement with PPL EnergyPlus, which expires at the end of 2009, and by entering into fixed-price load-following supply agreements for its customers for 2010.

Credit risk is the potential loss PPL and its subsidiaries may incur due to a counterparty's non-performance, including defaults on payments and energy commodity deliveries.

PPL and PPL Energy Supply are exposed to credit risk from:

· commodity derivatives with its energy trading partners, which include other energy companies, fuel suppliers, and financial institutions;

· interest rate derivatives with financial institutions; and

· foreign currency derivatives with financial institutions.

PPL Electric is exposed to credit risk from its load-following supply agreements for its customers in 2010.

The majority of the credit risk stems from PPL Energy Supply's and PPL Electric's commodity derivatives for multi-year contracts for energy sales and purchases.  If the counterparties fail to perform their obligations under such contracts and PPL and its subsidiaries could not replace the sales or purchases at the same prices as those under the defaulted contracts, PPL would incur financial losses.  Those losses would be recognized immediately or through lower revenues or higher costs in future years, depending on the accounting treatment for the defaulted contracts.

PPL and its subsidiaries have credit policies to manage their credit risk, including the use of an established credit approval process, daily monitoring of counterparty positions, and the use of master netting agreements.  These agreements generally include credit mitigation provisions, such as margin, prepayment or collateral requirements.  PPL and its subsidiaries may request the additional credit assurance, in certain circumstances, in the event that the counterparties' credit ratings fall below investment grade or their exposures exceed an established credit limit.  See Note 13 for credit concentration associated with financial instruments.

PPL's and PPL Energy Supply's obligation to return counterparty cash collateral under master netting arrangements was $221 million at June 30, 2009 and $22 million at December 31, 2008.

PPL Electric's obligation to return cash collateral to PPL Energy Supply under master netting arrangements was $79 million at June 30, 2009 and $300 million at December 31, 2008.  See Note 11 for additional information.

PPL and PPL Electric have not posted any cash collateral under master netting arrangements.  See Note 17 for additional information on deposits for trading purposes.

Commodity Price Risk (Non-trading)

(PPL and PPL Energy Supply)

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

To hedge the impact of market price fluctuations on PPL's and PPL Energy Supply's energy-related assets, liabilities and other contractual arrangements, PPL EnergyPlus sells and purchases physical energy at the wholesale level under FERC market-based tariffs throughout the U.S. and enters into financial exchange-traded and over-the-counter contracts.  Certain contracts qualify for NPNS or are non-derivatives and are therefore not reflected in the financial statements until delivery.  See Note 13 for additional information on NPNS.  PPL and PPL Energy Supply segregate their remaining non-trading activities into two categories:  cash flow hedge activity and economic activity.

Cash Flow Hedges

PPL and PPL Energy Supply enter into financial and physical derivative contracts, including forwards, futures, swaps and options, to hedge the price risk associated with electric, gas, oil and other commodities.  Many of these contracts have qualified for hedge accounting.  These contracts range in maturity through 2014.  Cash flow hedges are discontinued if it is no longer probable that the original forecasted transaction will occur by the end of the originally specified time periods.  In certain instances, amounts previously recorded in AOCI are reclassified to earnings.  There were no such reclassifications during the three and six months ended June 30, 2009 and 2008.

For the three months ended June 30, 2009 and 2008, hedge ineffectiveness associated with energy derivatives was, after tax, a gain of $39 million and insignificant.  For the six months ended June 30, 2009 and 2008, hedge ineffectiveness associated with energy derivatives was, after tax, a gain of $55 million and $2 million.

Additionally, during the past twelve months certain power and gas cash flow hedges failed hedge effectiveness testing.  Hedge accounting is not permitted for the quarter in which this occurs and, accordingly, the entire change in fair value for the periods that failed was recorded to the income statement.  These transactions were not dedesignated as hedges, since prospective regression analysis demonstrates that these hedges are expected to be highly effective over their term.  During the second quarter of 2009, fewer power and gas cash flow hedges failed hedge effectiveness testing as compared to the previous three quarters.  Therefore, the previously recognized unrealized gains associated with these hedges were reversed.  For the three and six months ended June 30, 2009, after-tax losses of $160 million and $92 million were recognized in earnings.  No such amounts were recorded in 2008.

At June 30, 2009, the accumulated net unrealized after-tax gains on qualifying derivatives that are expected to be reclassified into earnings during the next 12 months were $17 million for PPL and $16 million for PPL Energy Supply.

Economic Activity

PPL Energy Supply also uses derivative contracts to economically hedge the impact of market price fluctuations on its energy-related assets, liabilities and other contractual arrangements that do not receive hedge accounting treatment.  PPL Energy Supply refers to these transactions as economic activity.  The economic activity category includes energy derivative transactions that have previously qualified or could potentially qualify for hedge accounting; however, these transactions have either been disqualified from hedge accounting or management has not elected to designate them as accounting hedges.  This category also includes transactions entered into to optimize the economic value of PPL Energy Supply's generation assets or to hedge its wholesale or retail load obligations.  These contracts range in maturity through 2017.  Additionally, the ineffective portion of qualifying cash flow hedges, including the entire change in fair value for certain cash flow hedges that failed effectiveness testing during the current period as discussed in the preceding "Cash Flow Hedges" section, is also included when PPL Energy Supply reports its economic activity.

Examples of transactions represented in this category include certain purchase contracts used to supply full-requirement sales contracts; FTRs or basis swaps used to hedge basis risk associated with the sale of generation or supplying full-requirement sales contracts; spark spreads (sale of electricity with the simultaneous purchase of fuel); retail gas activities; hedges of the fair value of fuel inventory; and fuel oil swaps used to hedge price escalation clauses in coal transportation and other fuel-related contracts.  PPL Energy Supply also uses options, which include the sale of call options and the purchase of put options tied to a particular generating unit.  Since PPL Energy Supply owns the physical generating capacity, its price exposure is limited to the cost of the particular generating unit and does not expose PPL Energy Supply to uncovered market price risk.  PPL Energy Supply also purchases call options or sells put options to create a net purchase position to cover an overall short position in its non-trading portfolio.

The unrealized gains (losses) for this activity are reflected in the Statements of Income as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Operating Revenues
Unregulated retail electric and gas	$	1		$	(1	)	$	2		$	(1	)
Wholesale energy marketing		(112	)		(616	)		240			(796	)
Operating Expenses
Fuel		26			17			28			24
Energy purchases		(65	)		604			(334	)		863

The net unrealized gains (losses) recorded in "Wholesale energy marketing" for the three and six months ended June 30, 2009 resulted primarily from certain full-requirement sales contracts in which PPL Energy Supply did not elect NPNS and from hedge ineffectiveness as discussed in the "Cash Flow Hedges" section above.  The net unrealized gains (losses) recorded in "Energy purchases" for the three and six months ended June 30, 2009 resulted primarily from certain purchase contracts to supply the full-requirement sales contracts noted above for which PPL Energy Supply did not elect hedge treatment and from hedge ineffectiveness.  Since power prices have decreased significantly during the period, these fixed-price contracts have resulted in unrealized gains and losses.

Commodity Price Risk (Trading)

(PPL and PPL Energy Supply)

PPL Energy Supply also executes energy contracts to take advantage of market opportunities.  As a result, PPL Energy Supply may at times create a net open position in its portfolio that could result in significant losses if prices do not move in the manner or direction anticipated.

Commodity Volumetric Activity

(PPL and PPL Energy Supply)

PPL Energy Supply currently employs four primary strategies to maximize the value of its wholesale energy portfolio.  As further discussed below, these strategies include the sales of baseload generation, optimization of intermediate and peaking generation, marketing activities, and proprietary trading activities.

Sales of Baseload Generation

PPL Energy Supply has a formal hedging program for its baseload generation fleet, which includes 7,600 MW of generating capacity.  The objective of this program is to provide a reasonable level of near-term cash flow and earnings certainty for the next three years; however, in certain instances, PPL Energy Supply will sell power and purchase fuel beyond this three-year period.  PPL Energy Supply sells its expected generation output on a forward basis using both derivative and non-derivative instruments.  Both are included in the following tables.

The following table presents the expected sales, in GWh, of baseload generation based on current forecasted assumptions for 2009-2013.  These expected sales could be impacted by several factors, including plant availability.

2009 (a)		2010		2011		2012		2013 - 2014 (b)
	27,687		51,869		51,705		52,859		104,949

(a)	Represents expected sales from July 1, 2009 to December 31, 2009.
(b)	Amount based on 2013 volumes with no assumed change for 2014.

The following table presents the percentage of expected baseload generation sales shown above that has been sold forward under fixed-price contracts and the related percentage of fuel that has been purchased or committed at June 30, 2009:

						Fuel Purchases % (c)
Year	Derivative Sales % (a)			Total Power Sales % (b)		Coal		Nuclear
2009 (d)		20%	(e)		97%		100%		100%
2010		85%			98%		98%		100%
2011		72%			80%		81%		100%
2012		46%			53%		63%		100%
2013-2014		1%			7%		48%		100%

(a)	Excludes non-derivative contracts and contracts that qualify for NPNS.  Volumes for option contracts factor in the probability of an option being exercised and may be less than the notional amount of the option.  Percentages are based on fixed-price contracts only.
(b)	Amount represents derivative and non-derivative contracts. Volumes for option contracts factor in the probability of an option being exercised and may be less than the notional amount of the option.  Percentages are based on fixed-price contracts only.
(c)	Coal and nuclear contracts receive accrual accounting treatment, as they are not derivative contracts.Percentages are based on both fixed- and variable-priced contracts.
(d)	Represents the time period from July 1, 2009 to December 31, 2009.
(e)	The majority of PPL Energy Supply's baseload generation for 2009 is allocated to supplying the PLR contract with PPL Electric.  This contract is not a derivative contract.  The PLR contract expires on December 31, 2009.

In addition to the fuel purchases above, PPL Energy Supply attempts to economically hedge the fuel price risk that is within its fuel-related contracts and coal transportation contracts, which are tied to changes in crude oil or diesel prices.  The following table presents the volumes (in thousands of barrels) of derivative contracts used in support of this strategy at June 30, 2009:

Contract Type		2009 (a)		2010		2011		2012
	Oil Swaps		270		420		408	180

(a) Represents the time period from July 1, 2009 to December 31, 2009.

Optimization of Intermediate and Peaking Generation

In addition to its baseload generation activities, PPL Energy Supply attempts to optimize the overall value of its intermediate and peaking fleet, which includes 4,402 MW of gas and oil-fired generation.  PPL Energy Supply uses both option and non-option contracts to support this strategy.  The following table presents the volumes of derivative contracts used in support of this strategy at June 30, 2009:

	Units		2009 (a)		2010
Net Power Sales:
Options (b)		GWh		59		260
Non-option contracts		GWh		1,870		510
Net Power/Fuel Purchases:
Options (b)		GWh		34
Non-option contracts		GWh		37
Non-option contracts		Bcf		15.0		5.4

(a)	Represents the time period from July 1, 2009 to December 31, 2009.
(b)	Volumes for option contracts factor in the probability of an option being exercised and may be less than the notional amount of the option.

Marketing Activities

PPL Energy Supply's marketing portfolio is comprised of full-requirement sales contracts and their related supply contracts, retail gas and electricity sales contracts and other marketing activities.  The full-requirement sales contracts and their related supply contracts make up a significant component of the marketing portfolio.  The obligations under the full-requirement sales contracts include supplying a bundled product of energy, capacity, renewable energy credits (RECs), and other ancillary products.  PPL Energy Supply uses a variety of strategies to hedge its full-requirement sales contracts, including purchasing energy at a liquid trading hub or directly at the load delivery zone, purchasing capacity and RECs in the market and supplying the energy, capacity and RECs with its generation.  RECs are not derivatives and therefore are excluded from the table below.  The following table presents the volumes of (sales)/purchase contracts, excluding FTRs, basis and capacity contracts, used in support of these activities at June 30, 2009:

	Units		2009 (a)		2010		2011		2012		2013 - 2019
Energy sales contracts (b)		GWh	(12,318	)	(29,834	)	(13,106	)	(4,982	)	(17,700	)
Related energy supply contracts
Energy purchases		GWh	11,467		25,835		11,083		3,991		11,663
Volumetric hedges (c)		GWh	(36	)	(261	)	196
Volumetric hedges (c)		Bcf	(2.1	)	(0.5	)
Generation supply		GWh	403		3,870		2,001		2,173		12,257

(a)	Represents the time period from July 1, 2009 to December 31, 2009.
(b)	The majority of PPL Energy Supply's full-requirement sales contracts receive accrual accounting as they qualify for NPNS or are not derivative contracts.  Also included in these volumes are the sales from PPL EnergyPlus to PPL Electric to supply PPL Electric's 2009 and 2010 load obligation.
(c)	PPL Energy Supply uses power and gas options, swaps and futures to hedge the volumetric risk associated with full-requirement sales contracts since the demand for power varies hourly.

As noted above, PPL Energy Supply's marketing activities also include its retail gas portfolio.  PPL Energy Supply has sold a total of 5.1 Bcf of gas to retail customers through 2012, which has been hedged with 5.1 Bcf of gas purchases.

FTRs and Other Basis Positions

PPL Energy Supply buys and sells FTRs and other basis positions to mitigate the basis risk between delivery points related to the sales of its generation, the supply of its full-requirement sales contracts and retail contracts, as well as for proprietary trading purposes.  The following table presents the volumes of FTR and basis (sales)/purchase contracts at June 30, 2009:

Commodity	Units	2009 (a)		2010		2011		2012
FTRs	GWh	46,041		38,116		192
Power Basis Positions	GWh	(1,710	)	(9,191	)	(1,664	)	(878	)
Gas Basis Positions	Bcf	14.6		7.4		(0.6	)	(1.5	)

(a) Represents the time period from July 1, 2009 to December 31, 2009.

Capacity Positions

PPL Energy Supply buys and sells capacity related to the sales of its generation and the supply of its full-requirement sales contracts, as well as for proprietary trading purposes.  The following table presents the volumes of derivative capacity (sales)/purchase contracts (in MW-months) at June 30, 2009:

	2009 (a)			2010		2011		2012		2013 - 2016	2017 - 2023
Capacity		(24,470	)	(70,200	)	(34,253	)	(8,410	)	11,898	(252	)

(a) Represents the time period from July 1, 2009 to December 31, 2009.

Proprietary Trading Activity

At June 30, 2009, PPL Energy Supply's proprietary trading positions, excluding FTRs, basis and capacity contracts, were not significant.

Interest Rate Risk

(PPL and PPL Energy Supply)

PPL and its subsidiaries have issued debt to finance its operations, which results in an exposure to interest rate risk.  PPL and its subsidiaries utilize various financial derivative instruments to adjust the mix of fixed and floating interest rates in its debt portfolio, adjust the duration of its debt portfolio 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 PPL's and its subsidiaries' debt portfolio due to changes in benchmark interest rates.

Cash Flow Hedges

Interest rate risks include exposure to adverse interest rate movements for outstanding variable rate debt and for future anticipated financings.  PPL and PPL Energy Supply may enter into financial interest rate swap contracts that qualify as cash flow hedges to hedge floating interest rate risk associated with both existing and anticipated debt issuances.  For PPL, these interest rate swap contracts range in maturity through 2020 and had a notional value of $100 million at June 30, 2009.  For the three and six months ended June 30, 2009 and 2008, hedge ineffectiveness associated with these derivatives was not significant.  No contracts were outstanding at PPL Energy Supply at June 30, 2009.

WPDH Limited holds a net notional position in cross-currency swaps totaling $302 million to hedge the interest payments and principal of its U.S. dollar-denominated senior notes with maturity dates ranging from December 2017 to December 2028.  For the three and six months ended June 30, 2009 and 2008, hedge ineffectiveness was not significant.

Cash flow hedges are discontinued if it is no longer probable that the original forecasted transaction will occur by the end of the originally specified time periods.  In certain instances, amounts previously recorded in AOCI are reclassified to earnings.  PPL had no such reclassification for the three months ended June 30, 2009, but reclassified a net after-tax gain of $2 million for the six months ended June 30, 2009.  PPL had no such classifications in 2008.  PPL Energy Supply had no such reclassifications in 2009 or 2008.

At June 30, 2009, the accumulated net unrealized after-tax gains on qualifying derivatives that are expected to be reclassified into earnings during the next 12 months were $4 million for PPL and $3 million for PPL Energy Supply.  Amounts are reclassified as the hedged interest payments are made.

Fair Value Hedges

PPL and PPL Energy Supply are exposed to changes in the fair value of their domestic and international debt portfolios.  To manage this risk, PPL and PPL Energy Supply may enter into financial contracts to hedge fluctuations in the fair value of existing debt issuances due to changes in benchmark interest rates.  At June 30, 2009, PPL held contracts that range in maturity through 2047 and had a notional value of $850 million.  PPL Energy Supply did not hold any such contracts at June 30, 2009.  PPL and PPL Energy Supply did not recognize any gains or losses resulting from the ineffective portion of fair value hedges or from a portion of the hedging instrument being excluded from the assessment of hedge effectiveness for the three and six months ended June 30, 2009.  For the three and six months ended June 30, 2008, hedge ineffectiveness associated with interest rate derivatives was insignificant.  Additionally, PPL and PPL Energy Supply did not recognize any gains or losses resulting from hedges of debt issuances that no longer qualified as fair value hedges for the three and six months ended June 30, 2009 and 2008.

Foreign Currency Risk

(PPL and PPL Energy Supply)

PPL and PPL Energy Supply are exposed to foreign currency risk, primarily through investments in U.K. affiliates.  In addition, PPL's and PPL Energy Supply's domestic operations may make purchases of equipment in currencies other than U.S. dollars.

PPL and PPL Energy Supply have 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 and PPL Energy Supply enter into financial instruments to protect against foreign currency translation risk of expected earnings.

Cash Flow Hedges

PPL and PPL Energy Supply may enter into foreign currency derivatives associated with foreign currency-denominated debt and the exchange rate associated with firm commitments denominated in foreign currencies; however, at June 30, 2009, there were no existing contracts of this nature.  Amounts previously classified in AOCI are reclassified as the hedged interest payments are made and as the related equipment is depreciated.

Cash flow hedges are discontinued if it is no longer probable that the original forecasted transaction will occur by the end of the originally specified time periods.  In certain instances, amounts previously recorded in AOCI are reclassified to earnings.  There were no such reclassifications during the three and six months ended June 30, 2009 and 2008.

Fair Value Hedges

PPL and PPL Energy Supply enter into foreign currency forward contracts to hedge the exchange rates associated with firm commitments denominated in foreign currencies; however, at June 30, 2009, there were no existing contracts of this nature.  PPL and PPL Energy Supply did not recognize any gains or losses resulting from the ineffective portion of fair value hedges or from a portion of the hedging instrument being excluded from the assessment of hedge effectiveness for the three and six months ended June 30, 2009 and 2008.  Additionally, PPL and PPL Energy Supply did not recognize any gains or losses resulting from hedges of firm commitments that no longer qualified as fair value hedges for the three and six months ended June 30, 2009 and 2008.

Net Investment Hedges

PPL and PPL Energy Supply may enter into foreign currency contracts to protect the value of a portion of their net investment in WPD.  The total notional amount of the contracts outstanding at June 30, 2009 was £55 million.  The settlement dates of these contracts range from September 2009 through June 2011.  At June 30, 2009, the fair value of these positions was a net asset of $17 million.  For the three months ended June 30, 2009 and 2008, PPL and PPL Energy Supply recognized net investment hedge losses, after tax, of $8 million and $1 million in the foreign currency translation adjustment component of OCI.  For the six months ended June 30, 2009 and 2008, PPL and PPL Energy Supply recognized net investment hedge gains (losses), after tax, of $(7) million and $1 million in the foreign currency translation adjustment component of OCI.  At June 30, 2009, $9 million of accumulated net investment hedge gains, after tax, were included in the foreign currency translation adjustment component of AOCI compared with $16 million of gains at December 31, 2008.  See Note 11 for additional information.

Economic Activity

PPL and PPL Energy Supply may enter into foreign currency contracts as an economic hedge of anticipated earnings valued in British pounds sterling.  At June 30, 2009, the total exposure hedged was £61 million and the net fair value of these positions was a net liability of $9 million.  These contracts have termination dates ranging from July 2009 to December 2009.  No similar hedging instruments were outstanding at December 31, 2008.  Gains and losses, both realized and unrealized, on these contracts are included in "Other Income (Expense) - net" on the Statements of Income.  For both the three and six months ended June 30, 2009, PPL and PPL Energy Supply recorded net losses of $11 million.  For the three and six months ended June 30, 2008, PPL and PPL Energy Supply recorded net losses of $1 million and $2 million.  See Note 11 for additional information.

Accounting and Reporting

(PPL, PPL Energy Supply and PPL Electric)

All derivative instruments are recorded at fair value on the balance sheet as an asset or liability (unless they qualify for NPNS), and changes in the derivatives' fair value are recognized currently in earnings unless specific hedge accounting criteria are met.  See Note 13 for additional information on NPNS.

PPL and its subsidiaries have elected not to offset net derivative positions in the financial statements.  Accordingly, PPL and its subsidiaries do not offset such derivative positions against the fair value of amounts (or amounts that approximate fair value) recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) under master netting arrangements.

Gains and losses associated with non-trading bilateral sales of electricity at major market delivery points are netted with purchases that offset the sales at those same delivery points.  A major market delivery point is any delivery point with liquid pricing available.

PPL and PPL Energy Supply reflect their net realized and unrealized gains and losses associated with all derivatives that are held for trading purposes in the "Net energy trading margins" line on the Statements of Income.

The circumstances and intent existing at the time that derivative contracts are entered into are used to determine their accounting designation, which is subsequently verified by an independent internal group on a daily basis.  The following summarizes the guidelines that have been provided to the marketers who are responsible for contract designation for derivative energy contracts.

· Any wholesale and retail contracts to sell electricity and the related capacity that do not meet the definition of a derivative receive accrual accounting.

· Physical electricity-only transactions can receive cash flow hedge treatment if all of the qualifications are met.

· Physical capacity-only transactions to sell excess capacity from PPL's generation qualify for NPNS.  The forward value of these transactions is not recorded in the financial statements and has no earnings impact until delivery.

· Any physical energy sale or purchase not intended to hedge an economic exposure is considered speculative, with unrealized gains or losses recorded immediately through earnings.

· Financial transactions, which can be settled in cash, do not qualify for NPNS because they do not require physical delivery.  These transactions can receive cash flow hedge treatment if they lock in the cash flows PPL will receive or pay for energy expected to be sold or purchased in the spot market.

· PPL purchases FTRs for both proprietary trading activities and hedging purposes.  FTRs, although economically effective as electricity basis hedges, do not currently qualify for hedge accounting treatment.  Unrealized and realized gains and losses from FTRs that were entered into for trading purposes are recorded in "Net energy trading margins" on the Statements of Income.  Unrealized and realized gains and losses from FTRs that were entered into to offset probable transmission congestion expenses are recorded in "Energy purchases" on the Statements of Income.

· Physical and financial transactions for gas and oil to meet fuel and retail requirements can receive cash flow hedge treatment if they lock in the price PPL will pay and meet the definition of a derivative.

· Certain option contracts may receive hedge accounting treatment.  Those that are not eligible are marked to fair value through earnings.

Unrealized gains or losses on cash flow hedges are recorded in OCI, excluding ineffectiveness that is recognized immediately in earnings.  These unrealized gains and losses become realized when the contracts settle and are recognized in earnings when the hedged transactions occur.

The following is a summary of certain guidelines that have been provided to PPL's Finance Department, which is responsible for contract designation for interest rate and foreign currency derivatives.

· Transactions to lock in an interest rate prior to a debt issuance can be designated as cash flow hedges.  Any unrealized gains or losses on transactions receiving cash flow hedge treatment are recorded in OCI and are amortized as a component of interest expense when the hedged transactions occur.

· Transactions entered into to hedge fluctuations in the fair value of existing debt can be designated as fair value hedges.  To the extent that the change in the fair value of the derivative offsets the change in the fair value of the existing debt, there is no earnings impact, as both changes are reflected in interest expense.  Realized gains and losses over the life of the hedge are reflected in interest expense.

· Transactions entered into to hedge the value of a net investment of foreign operations can be designated as net investment hedges.  To the extent that the derivatives are highly effective at hedging the value of the net investment, gains and losses are recorded in the foreign currency translation adjustment component of OCI and will not be recorded in earnings until the investment is substantially liquidated.

· Derivative transactions that do not qualify for hedge accounting treatment are marked to fair value through earnings.  These transactions generally include hedges of earnings translation risk associated with subsidiaries that report their financial statements in a currency other than the U.S. dollar.  As such, these transactions eliminate earnings volatility due solely to changes in foreign currency exchange rates.

(PPL)

The following table presents the fair value and location of derivative instruments recorded on the Balance Sheet at June 30, 2009:

	Assets			Liabilities
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments
Interest rate swaps	Price risk management assets - current	$	7	Price risk management liabilities - current
	Price risk management assets - noncurrent		30	Price risk management liabilities - noncurrent
Cross-currency swaps contracts	Price risk management assets - current		1	Price risk management liabilities - current
	Price risk management assets - noncurrent		18	Price risk management liabilities - noncurrent	$	5
Foreign exchange contracts	Price risk management assets - current		11	Price risk management liabilities - current
	Price risk management assets - noncurrent		7	Price risk management liabilities - noncurrent
Commodity contracts	Price risk management assets - current		393	Price risk management liabilities - current		233
	Price risk management assets - noncurrent		896	Price risk management liabilities - noncurrent		238
Total derivatives designated as hedging instruments			1,363			476
Derivatives not designated as hedging instruments (a)
Commodity contracts	Price risk management assets - current		1,554	Price risk management liabilities - current		1,526
	Price risk management assets - noncurrent		1,035	Price risk management liabilities - noncurrent		829
			2,589			2,355
Foreign exchange contracts	Price risk management assets - current			Price risk management liabilities - current		9
Total derivatives not designated as hedging instruments			2,589			2,364
Total derivatives		$	3,952		$	2,840

(a) $254 million of net gains associated with derivatives that were no longer designated as hedging instruments are recorded in AOCI at June 30, 2009.

The after-tax balances of accumulated net unrealized gains (losses) (excluding net investment hedges) in AOCI were $308 million and $(21) million at June 30, 2009 and December 31, 2008.  The after-tax balances of accumulated net unrealized losses (excluding net investment hedges) in AOCI were $692 million and $192 million at June 30, 2008 and December 31, 2007.

The following table presents the pre-tax effect of derivative instruments recognized in income or OCI for the three months ended June 30, 2009:

Derivatives in Fair Value Hedging Relationships	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative			Hedged Items in Fair Value Hedging Relationships	Location of Gain (Loss) Recognized in Income on Related Hedged Item	Amount of Gain (Loss) Recognized in Income on Related Hedged Item
Interest rate swaps	Interest expense	$	(7	)	Fixed rate debt	Interest expense	$	17

Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)			Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from AOCI into Income			Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Interest rate swaps	$	24		Interest expense				Interest expense
Cross-currency swaps		(49	)	Interest expense				Interest expense
				Other income (expense) - net	$	(37	)	Other income (expense) - net
Commodity contracts		124
				Wholesale energy marketing		(174	)	Wholesale energy marketing	$	68
				Fuel		(10	)	Fuel
				Energy purchases		(126	)	Energy purchases		(1	)
Total commodity		124				(310	)			67
Total	$	99			$	(347	)		$	67

Derivatives in Net Investment Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)			Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from AOCI into Income	Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Foreign exchange contracts	$	(12	)

Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative
Foreign exchange contracts	Other income (expense) - net	$	(11	)
Commodity contracts	Unregulated retail electric and gas		3
	Wholesale energy marketing		216
	Net energy trading margins (a)		9
	Fuel		13
	Energy purchases		(258	)
Total		$	(28	)

(a) Differs from statement of income due to intra-month transactions which PPL defines as spot activity.

The following table presents the pre-tax effect of derivative instruments recognized in income or OCI for the six months ended June 30, 2009:

Derivatives in Fair Value Hedging Relationships	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative			Hedged Items in Fair Value Hedging Relationships	Location of Gain (Loss) Recognized in Income on Related Hedged Item	Amount of Gain (Loss) Recognized in Income on Related Hedged Item
Interest rate swaps	Interest expense	$	(5	)	Fixed rate debt	Interest expense	$	23

Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)			Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from AOCI into Income			Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Interest rate swaps	$	43		Interest expense	$	(2	)	Interest expense
				Other income (expense) - net		4		Other income (expense) - net
Cross-currency swaps		(39	)	Interest expense		1		Interest expense
				Other income (expense) - net		(15	)	Other income (expense) - net
Commodity contracts		400
				Wholesale energy marketing		(8	)	Wholesale energy marketing	$	98
				Fuel		(9	)	Fuel
				Depreciation		1		Depreciation
				Energy purchases		(230	)	Energy purchases		(4	)
Total commodity		400				(246	)			94
Total	$	404			$	(258	)		$	94

Derivatives in Net Investment Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)			Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from AOCI into Income	Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Foreign exchange contracts	$	(11	)

Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative
Foreign exchange contracts	Other income (expense) - net	$	(11	)
Commodity contracts	Unregulated retail electric and gas		6
	Wholesale energy marketing		500
	Net energy trading margins (a)		(4	)
	Fuel		5
	Energy purchases		(642	)
Total		$	(146	)

(a) Differs from statement of income due to intra-month transactions which PPL defines as spot activity.

(PPL Energy Supply)

The following table presents the fair value and location of derivative instruments recorded on the Balance Sheet at June 30, 2009:

	Assets			Liabilities
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments
Cross-currency swaps contracts	Price risk management assets - current	$	1	Price risk management liabilities - current
	Price risk management assets - noncurrent		18	Price risk management liabilities - noncurrent	$	5
Foreign exchange contracts	Price risk management assets - current		11	Price risk management liabilities - current
	Price risk management assets - noncurrent		7	Price risk management liabilities - noncurrent
Commodity contracts	Price risk management assets - current		393	Price risk management liabilities - current		233
	Price risk management assets - noncurrent		896	Price risk management liabilities - noncurrent		238
Total derivatives designated as hedging instruments			1,326			476
Derivatives not designated as hedging instruments (a)
Commodity contracts	Price risk management assets - current		1,554	Price risk management liabilities - current		1,526
	Price risk management assets - noncurrent		1,035	Price risk management liabilities - noncurrent		829
			2,589			2,355
Foreign exchange contracts	Price risk management assets - current			Price risk management liabilities - current		9
Total derivatives not designated as hedging instruments			2,589			2,364
Total derivatives		$	3,915		$	2,840

(a) $254 million of net gains associated with derivatives that were no longer designated as hedging instruments are recorded in AOCI at June 30, 2009.

The after-tax balances of accumulated net unrealized gains (losses) (excluding net investment hedges) in AOCI were $293 million and $(12) million at June 30, 2009 and December 31, 2008.  The after-tax balances of accumulated net unrealized losses (excluding net investment hedges) in AOCI were $688 million and $188 million at June 30, 2008 and December 31, 2007.

The pre-tax effect of derivative instruments recognized in income or OCI for the three months ended June 30, 2009:

Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)			Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from AOCI into Income			Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Cross-currency swaps	$	(49	)	Interest expense				Interest expense
				Other income (expense) - net	$	(37	)	Other income (expense) - net
Commodity contracts		124
				Wholesale energy marketing		(174	)	Wholesale energy marketing	$	68
				Fuel		(10	)	Fuel
				Energy purchases		(126	)	Energy purchases		(1	)
Total commodity		124				(310	)			67
Total	$	75			$	(347	)		$	67

Derivatives in Net Investment Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)			Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from AOCI into Income	Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Foreign exchange contracts	$	(12	)

Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative
Foreign exchange contracts	Other income (expense) - net	$	(11	)
Commodity contracts	Wholesale energy marketing		216
	Unregulated retail electric and gas		3
	Net energy trading margins (a)		9
	Fuel		13
	Energy purchases		(258	)
Total		$	(28	)

(a) Differs from statement of income due to intra-month transactions which PPL Energy Supply defines as spot activity.

The following table presents the pre-tax effect of derivative instruments recognized in income or OCI for the six months ended June 30, 2009:

Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)			Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from AOCI into Income			Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Cross-currency swaps	$	(39	)	Interest expense	$	1		Interest expense
				Other income (expense) - net		(15	)	Other income (expense) - net
Commodity contracts		400
				Wholesale energy marketing		(8	)	Wholesale energy marketing	$	98
				Fuel		(9	)	Fuel
				Depreciation		1		Depreciation
				Energy purchases		(230	)	Energy purchases		(4	)
Total commodity		400				(246	)			94
Total	$	361			$	(260	)		$	94

Derivatives in Net Investment Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)			Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from AOCI into Income	Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Foreign exchange contracts	$	(11	)

Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative
Foreign exchange contracts	Other income (expense) - net	$	(11	)
Commodity contracts	Wholesale energy marketing		500
	Unregulated retail electric and gas		6
	Net energy trading margins (a)		(4	)
	Fuel		5
	Energy purchases		(642	)
Total		$	(146	)

(a) Differs from statement of income due to intra-month transactions which PPL Energy Supply defines as spot activity.

Credit Risk-Related Contingent Features

(PPL and PPL Energy Supply)

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

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

To determine net liability positions, PPL and PPL Energy Supply use the fair value of each agreement, such as an International Swaps and Derivatives Association, Inc. contract.  The aggregate fair value of all derivative instruments with the credit contingent provisions described above that were in a net liability position at June 30, 2009 was $311 million for PPL and $309 million for PPL Energy Supply of which both had posted collateral of $255 million in the normal course of business.  At June 30, 2009, if the credit contingent provisions underlying these derivative instruments were triggered due to a credit downgrade below investment grade, PPL and PPL Energy Supply would have been required to post an additional $132 million and $130 million of collateral to their counterparties.

15.   Goodwill

(PPL and PPL Energy Supply)

The changes in the carrying amounts of goodwill by segment were:

	Supply		International Delivery		Total
Balance at December 31, 2008	$	94	$	669	$	763
Effect of foreign currency exchange rates				33		33
Balance at June 30, 2009	$	94	$	702	$	796

16.   Asset Retirement Obligations

(PPL and PPL Energy Supply)

The change in the carrying amounts of the AROs was:

AROs at December 31, 2008	$	389
Accretion expense		15
Revisions to estimates		1
Obligations settled		(11	)
AROs at June 30, 2009	$	394

The most significant ARO recorded by PPL and PPL Energy Supply relates to the decommissioning of the Susquehanna nuclear station.  The accrued nuclear decommissioning obligation was $335 million and $322 million at June 30, 2009 and December 31, 2008.

Assets in the NDT funds are legally restricted for purposes of settling PPL's and PPL Energy Supply's ARO related to the decommissioning of the Susquehanna station.  The aggregate fair value of these assets was $468 million and $446 million at June 30, 2009 and December 31, 2008.  See Notes 13 and 18 for additional information on the fair value of these assets.

17.   Restricted Cash and Cash Equivalents

(PPL, PPL Energy Supply and PPL Electric)

The following table details the components of restricted cash and cash equivalents by reporting entity and by type.

	June 30, 2009
	PPL		PPL Energy Supply		PPL Electric
Current:
Funds deposited with trustee to defease First Mortgage Bonds (a)	$	1			$	1
Deposits for trading purposes (b)		31	$	31
Counterparty collateral		92		92
Client deposits		4
Miscellaneous		3		3
Total current		131		126		1
Noncurrent:
Required deposits of WPD (c)		14		14
Funds deposited with Trustee to defease First Mortgage Bonds (a)		13				13
Other		1				1
Total noncurrent		28		14		14
	$	159	$	140	$	15

	December 31, 2008
	PPL		PPL Energy Supply		PPL Electric
Current:
Funds deposited with Trustee to defease First Mortgage Bonds (a)	$	1			$	1
Deposits for trading purposes (b)		301	$	301
Counterparty collateral		12		12
Client deposits		4
Miscellaneous		2		2
Total current		320		315		1
Noncurrent:
Required deposits of WPD (c)		13		13
Funds deposited with Trustee to defease First Mortgage Bonds (a)		14				14
Total noncurrent		27		13		14
	$	347	$	328	$	15

(a)	The carrying amount of related First Mortgage Bonds was $10 million at June 30, 2009 and December 31, 2008.
(b)	Represents margin posted by PPL Energy Supply in connection with trading activities.  The decrease from December 31, 2008 relates primarily to decreases in market prices and the realization of certain transactions.
(c)	Primarily consists of insurance reserves.

18.   Available-for-Sale Securities

(PPL and PPL Energy Supply)

The following table shows the amortized cost of available-for-sale securities and the gross unrealized gains and losses recorded in AOCI.  See Note 13 for information regarding the fair value of these securities.

	June 30, 2009							December 31, 2008
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized  Losses			Amortized Cost		Gross Unrealized Gains		Gross Unrealized  Losses(a)
PPL
Short-term investments – municipal debt securities								$	150
NDT funds:
Cash and cash equivalents	$	5							7
Equity securities:
U.S. large-cap		171	$	45					160	$	22
U.S. mid/small-cap		65		19					60		9
Debt securities:
U.S. Treasury		55		4					67		10
U.S. government agency		11							13		1
Municipality		63		3	$	(2	)		59		2
Investment-grade corporate		26		2		(1	)		31		2
Residential mortgage-backed securities		1							2
Other		1							1
		398		73		(3	)		400		46
Auction rate securities		29				(11	)		29			$	(5	)
Total PPL	$	427	$	73	$	(14	)	$	579	$	46	$	(5	)
PPL Energy Supply
Short-term investments – municipal debt securities								$	150
NDT funds:
Cash and cash equivalents	$	5							7
Equity securities:
U.S. large-cap		171	$	45					160	$	22
U.S. mid/small-cap		65		19					60		9
Debt securities:
U.S. Treasury		55		4					67		10
U.S. government agency		11							13		1
Municipality		63		3	$	(2	)		59		2
Investment-grade corporate		26		2		(1	)		31		2
Residential mortgage-backed securities		1							2
Other		1							1
		398		73		(3	)		400		46
Auction rate securities		24				(9	)		24			$	(5	)
Total PPL Energy Supply	$	422	$	73	$	(12	)	$	574	$	46	$	(5	)

(a) Prior to the adoption of FSP FAS 115-2 and FAS 124-2, there were no unrealized losses recorded in AOCI on debt securities in the NDT funds.  See Note 2 for additional information.

The following table shows the gross unrealized losses not recognized in earnings and the related fair value of investments, aggregated by investment category and length of time that individual securities have been in an unrealized loss position as of June 30, 2009.

	Less Than 12 Months					12 Months or Greater					Total
	Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value
PPL
NDT funds:
Debt securities:
Municipality	$	(2	)	$	47						$	(2	)	$	47
Investment-grade corporate						$	(1	)	$	7		(1	)		7
		(2	)		47		(1	)		7		(3	)		54
Auction rate securities		(8	)		11		(3	)		7		(11	)		18
Total	$	(10	)	$	58	$	(4	)	$	14	$	(14	)	$	72
PPL Energy Supply
NDT funds:
Debt securities:
Municipality	$	(2	)	$	47						$	(2	)	$	47
Investment-grade corporate						$	(1	)	$	7		(1	)		7
		(2	)		47		(1	)		7		(3	)		54
Auction rate securities		(6	)		8		(3	)		7		(9	)		15
Total	$	(8	)	$	55	$	(4	)	$	14	$	(12	)	$	69

At December 31, 2008, the fair value of PPL's and PPL Energy Supply's auction rate securities in an unrealized loss position for less than 12 months was $21 million and $19 million.  The unrealized losses on these auction rate securities were $5 million for PPL and PPL Energy Supply.

The following table shows the scheduled maturity dates of debt securities held at June 30, 2009.

	Maturity Less Than 1 Year		Maturity 1-5 Years		Maturity 5-10 Years		Maturity in Excess of 10 Years		Total
PPL
Amortized Cost	$	4	$	63	$	47	$	72	$	186
Fair Value		5		65		48		63		181
PPL Energy Supply
Amortized Cost	$	4	$	63	$	47	$	67	$	181
Fair Value		5		65		48		60		178

The following table shows proceeds from and realized gains (losses) on sales of available-for-sale securities.

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
PPL
Proceeds from sales in NDT funds (a)	$	54		$	42		$	141		$	82
Other proceeds from sales		150			11			150			36
Gross realized gains (b)		6			2			13			6
Gross realized losses (b)		(3	)		(2	)		(13	)		(7	)
PPL Energy Supply
Proceeds from sales in NDT funds (a)	$	54		$	42		$	141		$	82
Other proceeds from sales		150			11			150			33
Gross realized gains (b)		6			2			13			6
Gross realized losses (b)		(3	)		(2	)		(13	)		(7	)

(a)	These proceeds, along with deposits of amounts collected from customers, are used to pay income taxes and fees related to managing the trust.  Remaining proceeds are reinvested in the trust.
(b)	Excludes the impact of other-than-temporary impairment charges recognized in the Statements of Income.

NDT Funds

When the fair value of a security is less than amortized cost, PPL and PPL Energy Supply must make certain assertions to avoid recording an other-than-temporary impairment that requires a current period charge to earnings.  The NRC requires that nuclear decommissioning trusts be managed by independent investment managers, with discretion to buy and sell securities in the trusts.  As a result, PPL and PPL Energy Supply were unable to demonstrate the ability to hold an impaired security until it recovers its value; therefore, unrealized losses on debt securities through March 31, 2009, and unrealized losses on equity securities for all periods presented represented other-than-temporary impairments that required a current period charge to earnings.

As described in "New Accounting Standards Adopted - FSP FAS 115-2 and FAS 124-2" in Note 2, effective April 1, 2009, when PPL and PPL Energy Supply intend to sell a debt security or more likely than not will be required to sell a debt security before recovery, then the other-than-temporary impairment recognized in earnings will equal the entire difference between the security's amortized cost basis and its fair value.  However, if there is no intent to sell a debt security and it is not more likely than not that they will be required to sell the security before recovery, but the security has suffered a credit loss, the other-than-temporary impairment will be separated into the credit loss component, which is recognized in earnings, and the remainder of the other-than-temporary impairment, which is recorded in OCI.  Temporary impairments of debt securities and unrealized gains on both debt and equity securities are recorded to OCI.  There were no credit losses on debt securities held in the NDT funds at June 30, 2009.

Auction Rate Securities

At June 30, 2009 and December 31, 2008, the estimated fair value of the auction rate securities was $11 million and $5 million lower than par value for PPL and $9 million and $5 million lower than par value for PPL Energy Supply.  See Note 13 for additional information on these securities, including fair value.  Based upon the evaluation of available information, PPL and PPL Energy Supply believe these investments continue to be of high credit quality and they do not have significant exposure to realize losses on these securities.  PPL and PPL Energy Supply have no current plans to sell these securities until they can be liquidated at par value and do not anticipate having to sell these securities in order to fund operations or for any other purpose.  As such, the decline in fair value was deemed temporary due to general market conditions.  During the second quarter of 2009, PPL Energy Supply liquidated an insignificant amount of these securities at par.

Short-term Investments

In December 2008, the PEDFA issued $150 million aggregate principal amount of Exempt Facilities Revenue Bonds, Series 2008A and 2008B due 2038 (Series 2008 Bonds) on behalf of PPL Energy Supply.  PPL Investment Corp. acted as the initial purchaser of the Series 2008 Bonds upon issuance.  At December 31, 2008, these investments were reflected in "Short-term investments" on the Balance Sheet.  In April 2009, PPL Investment Corp. received $150 million for its investment in the Series 2008 bonds when they were refunded by the PEDFA.  See "Financing Activities" in Note 7 for more information on the refundings.  No realized or unrealized gains (losses) were recorded on these securities, as the difference between carrying value and fair value was insignificant.

19.   Leases

Lessor Transactions (PPL and PPL Energy Supply)

A PPL Energy Supply subsidiary is the lessor, for accounting purposes, of each of the Shoreham and Edgewood plants (collectively with related tolling agreements, the Long Island generation business).  In May 2009, PPL Generation signed a definitive agreement to sell the Long Island generation business.  The tolling agreements related to these plants, accounted for as containing leases, will be transferred to the new owner upon completion of the sale.  The lease related to the Shoreham plant is classified as a direct-financing lease.  Future minimum lease payments on this lease are estimated to be $16 million per year for 2009 through 2013.  The lease related to the Edgewood plant is classified as an operating lease.  Minimum future lease rentals are estimated to be $3 million per year for 2009 through 2013.  At December 31, 2008, total minimum future rentals under this lease were estimated to be $28 million.  PPL Energy Supply no longer expects to receive these payments subsequent to completion of the anticipated sale.  See Note 8 for additional information on the anticipated sale.

20.   New Accounting Standards Pending Adoption

(PPL, PPL Energy Supply and PPL Electric)

FSP FAS 132(R)-1

FSP FAS 132(R)-1 amends SFAS 132(R) to provide guidance on an employer's disclosures about plan assets of defined benefit plans.  The objectives of the disclosures are to provide users of financial statements with an understanding of:

· how investment allocation decisions are made, including the factors that are pertinent to an understanding of investment policies and strategies;

· the major categories of plan assets;

· the inputs and valuation techniques used to measure the fair value of plan assets;

· the effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets for the period; and

· significant concentrations of risk within plan assets.

PPL and its subsidiaries will adopt FSP FAS 132(R)-1, prospectively, effective December 31, 2009.  FSP FAS 132(R)-1 was issued to provide greater transparency within disclosures; therefore, the adoption is not expected to have a material impact on PPL and its subsidiaries' financial statements.

SFAS 166

SFAS 166 was issued to revise the accounting for transfers of financial assets.  SFAS 166 eliminates the concept of a qualifying special-purpose entity (QSPE); therefore, QSPEs will be subject to consolidation guidance.  Further, SFAS 166 changes the requirements for the derecognition of financial assets, establishes new criteria for reporting the transfer of a portion of a financial asset as a sale and requires transferors to initially recognize, at fair value, assets obtained and liabilities incurred as a result of a transfer accounted for as a sale.  Additionally, SFAS 166 requires enhanced disclosures to improve the transparency around transfers of financial assets and a transferor's continuing involvement.

PPL and its subsidiaries will adopt SFAS 166 effective January 1, 2010.  Early adoption is prohibited.  SFAS 166 will be applied prospectively to new transfers of financial assets.  Disclosures will be required for all transfers, including those entered into before the effective date.  Comparative disclosures are encouraged, but not required, for periods in which these disclosures were not previously required.  The potential impact of adoption to the financial statements is not yet determinable but could be material.

SFAS 167

SFAS 167 amends FIN 46(R) to replace the quantitative-based risks and rewards calculation for determining which entity, if any, has a controlling financial interest in a variable interest entity (VIE) and is the primary beneficiary.  SFAS 167 prescribes a qualitative approach focused on identifying which entity has the power to direct the activities of a VIE that most significantly impact the VIE's economic performance and the obligation to absorb losses of or the right to receive benefits from the VIE that could potentially be significant to the VIE.  SFAS 167 requires ongoing assessments of whether an entity is the primary beneficiary of a VIE and requires enhanced disclosures to improve the transparency about an entity's involvement in a VIE.

Upon adoption of SFAS 167, all previous consolidation conclusions must be reconsidered.  Additionally, with the elimination of the QSPE concept in SFAS 166, QSPEs need to be evaluated for consolidation.  If the initial application of SFAS 167 results in consolidation of a VIE, the assets, liabilities, and noncontrolling interests of the VIE will be measured at their carrying amounts as if SFAS 167 had been applied from the point in time the entity became the primary beneficiary of the VIE (unless the fair value option is elected).  Any difference between the net amounts required to be recognized and the amount of any previously recognized interest will be reflected as a cumulative-effect adjustment to retained earnings.  If initial application of SFAS 167 results in deconsolidation of a VIE, any retained interest in the VIE will be measured at its carrying value as if SFAS 167 had been applied from the inception of the VIE.

PPL and its subsidiaries will adopt SFAS 167, prospectively, effective January 1, 2010. Early adoption is prohibited.  Comparative disclosures are not required for periods in which these disclosures were not previously required.  The potential impact of adoption to the financial statements is not yet determinable but could be material.

SFAS 168

SFAS 168 establishes the FASB Accounting Standards CodificationTM (ASC) as the primary source of authoritative GAAP, other than guidance issued by the SEC.  SFAS 168 eliminates the previous GAAP hierarchy of accounting and reporting guidance and replaces it with two levels of literature: authoritative and nonauthoritative.  The ASC does not change GAAP; rather, it organizes GAAP pronouncements in a consistent manner by accounting topic.  PPL and its subsidiaries will adopt SFAS 168 beginning with the period ended September 30, 2009, and will update references to accounting and reporting standards to reflect the nomenclature presented in the ASC.  The implementation of SFAS 168 will not have a material impact on PPL and its subsidiaries' financial statements.

21.   Subsequent Events

(PPL, PPL Energy Supply and PPL Electric)

Subsequent events have been evaluated through the time of issuance of these financial statements on August 4, 2009, and are included in the relevant note disclosures.

PPL CORPORATION AND SUBSIDIARIES

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

Overview

PPL is an energy and utility holding company with headquarters in Allentown, Pennsylvania.  Refer to "Item 1. Business - Background" in PPL's 2008 Form 10-K for descriptions of its reportable segments, which are Supply, International Delivery and Pennsylvania Delivery.  Through its subsidiaries, PPL is primarily engaged in the generation and marketing of electricity in two key markets - the northeastern and western U.S. - and in the delivery of electricity in Pennsylvania and the U.K.  See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview" in PPL's 2008 Form 10-K for a discussion of PPL's strategy and the risks and challenges that it faces in its business.  See "Forward-Looking Information," Note 10 to the Financial Statements and the remainder of Item 2 in this Form 10-Q, and "Item 1A. Risk Factors" and the rest of Item 7 in PPL's 2008 Form 10-K for more information concerning the material risks and uncertainties that PPL faces in its businesses and with respect to its future earnings.

Market Events

The recent conditions in the financial markets have been disruptive to the processes of managing credit risk, responding to liquidity needs, measuring derivatives and other financial instruments at fair value, and managing market price risk.  Bank credit capacity has been reduced and the cost of renewing or establishing new credit facilities has increased significantly, thereby making less certain businesses' ability to enter into long-term energy commitments or reliably estimate the longer-term cost and availability of credit.

Commodity Price Risk

The volatility of wholesale energy prices due to recent conditions in the financial and commodity markets significantly impacted PPL's earnings in 2009.  See "Statement of Income Analysis - Domestic Gross Energy Margins - Domestic Gross Energy Margins By Region" for further discussion.

Credit Risk

Credit risk is the risk that PPL would incur a loss as a result of nonperformance by counterparties of their contractual obligations.  PPL maintains credit policies and procedures to limit counterparty credit risk.  The recent conditions in the financial and commodity markets have generally increased PPL's exposure to credit risk.  See Notes 13 and 14 to the Financial Statements and "Risk Management - Energy Marketing & Trading and Other - Credit Risk" in PPL's 2008 Form 10-K for more information on credit risk.

Liquidity Risk

Despite the recent conditions in the financial and capital markets, external financing activities by domestic electric utilities are being completed, albeit at higher-than-historical interest rates.  PPL expects to continue to have access to adequate sources of liquidity through operating cash flows, cash and cash equivalents, credit facilities and, from time to time, through the issuance of capital market securities.  See "Financial Condition - Liquidity and Capital Resources" for an expanded discussion of PPL's liquidity position and a discussion of financing transactions.

Valuations in Inactive Markets

The recent conditions in the financial markets have generally made it difficult to determine the fair value of certain assets and liabilities in inactive markets.  Management has reviewed the activity in the energy and financial markets in which PPL transacts, concluding that all of these markets were active at June 30, 2009, with the exception of the market for auction rate securities.  See Notes 13 and 18 to the Financial Statements and "Financial Condition - Liquidity and Capital Resources - Auction Rate Securities" for a discussion of these investments.

Securities Price Risk

Declines in the market price of debt and equity securities result in unrealized losses that reduce the asset values of PPL's investments in its NDT funds and defined benefit plans.  Both the pension plan and the NDT funds had positive returns in the second quarter of 2009, thereby recovering a portion of the negative returns incurred in 2008 and the first quarter of 2009.  PPL actively monitors the performance of the investments held in its NDT funds and periodically reviews the funds' investment allocations.  See "Financial Condition - Risk Management - Energy Marketing & Trading and Other - NDT Funds - Securities Price Risk" for additional information on securities price risk.

Determination of the funded status of defined benefit plans, contribution requirements and net periodic defined benefit costs for future years are subject to changes in various assumptions, in addition to the actual performance of the assets in the plans.  See "Application of Critical Accounting Policies - Defined Benefits" in PPL's 2008 Form 10-K for a discussion of the assumptions and sensitivities regarding those assumptions.

The Economic Stimulus Package

The Economic Stimulus Package is intended to stimulate the U.S. economy through federal tax relief, expansion of unemployment benefits and other social stimulus provisions, domestic spending for education, health care and infrastructure, including the energy sector.  A portion of the benefits included in the Economic Stimulus Package are offered in the form of loan fee reductions, expanded loan guarantees and secondary market incentives, including delayed recognition for tax purposes of income related to the cancellation of certain types of debt.  See "Financial Condition - Liquidity and Capital Resources" for a discussion of the applicability to the purchase of notes by PPL Energy Supply.

Funds from the Economic Stimulus Package will be allocated to various federal agencies, such as the DOE, and will also be provided to state agencies through block grants.  The DOE plans to use a portion of the funds for smart grid and other efficiency-related programs, and has initiated a process for that purpose.  The Commonwealth of Pennsylvania is accepting applications for funding of certain energy projects including solar projects.  As discussed in Note 8 to the Financial Statements, PPL has reconsidered its Holtwood expansion project in view of the tax incentives and potential loan guarantees for renewable energy projects contained in the Economic Stimulus Package.  PPL has filed DOE loan guarantee applications for the Holtwood expansion project and for the Rainbow redevelopment project.  In addition, in July 2009, PPL Electric proposed to the DOE a $38 million project that would use smart grid technology to strengthen reliability, save energy and improve electric service for 60,000 Harrisburg, Pennsylvania area customers.  PPL Electric is requesting a DOE grant to provide half of the funding for this pilot program.  PPL and its subsidiaries continue to review the Economic Stimulus Package's provisions to determine the impact on PPL's possible expansion plans, transmission projects and other business-related activities.

The following information should be read in conjunction with PPL's Condensed Consolidated Financial Statements and the accompanying Notes and with PPL's 2008 Form 10-K.

Terms and abbreviations are explained in the glossary.  Dollars are in millions, except per share data, unless otherwise noted.

Results of Operations

The following discussion begins with a summary of PPL's earnings.  "Results of Operations" continues with a review of results by reportable segment and a description of key factors by segment that management expects may impact future earnings.  This section ends with "Statement of Income Analysis," which includes explanations of significant changes in principal items on PPL's Statements of Income, comparing the three and six months ended June 30, 2009, with the same periods in 2008.

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

Earnings

Net income (loss) attributable to PPL and the related EPS were:

	Three Months Ended June 30,					Six Months Ended June 30,
	2009			2008		2009		2008
Net income (loss) attributable to PPL	$	(7	)	$	190	$	234	$	450
EPS - basic	$	(0.02	)	$	0.50	$	0.62	$	1.20
EPS - diluted	$	(0.02	)	$	0.50	$	0.62	$	1.19

The changes in net income (loss) attributable to PPL from period to period were, in part, due to several special items that management considers significant.  Details of these special items are provided within the review of each segment's earnings.

Segment Results

Net income (loss) attributable to PPL by segment was:

	Three Months Ended June 30,					Six Months Ended June 30,
	2009			2008		2009		2008
Supply	$	(86	)	$	97	$	19	$	199
International Delivery		62			62		149		160
Pennsylvania Delivery		17			31		66		91
Total	$	(7	)	$	190	$	234	$	450

Supply Segment

The Supply segment primarily consists of the domestic energy marketing, domestic generation and domestic development operations of PPL Energy Supply.  In May 2009, PPL announced its intention to sell its Long Island generation business, and in July 2009, announced its intention to sell the majority of its Maine hydroelectric generation business.  PPL expects the sales to close in 2009.  See Note 8 to the Financial Statements for additional information.

In 2009 and 2008, the Supply segment results reflect the reclassification of the revenues and expenses of the Long Island generation business and the majority of its Maine hydroelectric generation business to Discontinued Operations.

Supply segment net income (loss) attributable to PPL was:

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Energy revenues
External (a)	$	686		$	(97	)	$	1,872		$	182
Intersegment		411			428			908			917
Energy-related businesses		97			121			189			228
Total operating revenues		1,194			452			2,969			1,327
Fuel and energy purchases
External (a)		835			(150	)		2,014			107
Intersegment		20			30			40			58
Other operation and maintenance		225			205			457			431
Depreciation		57			49			107			92
Taxes, other than income		8			7			15			9
Energy-related businesses		94			117			182			221
Total operating expenses		1,239			258			2,815			918
Other Income (Expense) - net		6			9			35			12
Other-Than-Temporary Impairments		1			7			18			10
Interest Expense		50			48			97			89
Income Taxes		(36	)		55			26			131
Income (Loss) from discontinued operations		(32	)		5			(29	)		9
Noncontrolling Interest					1						1
Net Income (Loss) Attributable to PPL	$	(86	)	$	97		$	19		$	199

(a) Includes unrealized gains and losses from economic activity.  See "Commodity Price Risk (Non-trading) - Economic Activity" in Note 14 for additional information.

The after-tax changes in net income (loss) attributable to PPL between these periods were due to the following factors.

	June 30, 2009 vs. June 30, 2008
	Three Months Ended			Six Months Ended
Domestic gross energy margins	$	(34	)	$	(37	)
Other operation and maintenance		(11	)		4
Depreciation		(5	)		(9	)
Taxes, other than income		(1	)		(4	)
Other income (expense) - net		(6	)		5
Interest expense		(2	)		(5	)
Income taxes and other		(3	)		(5	)
Special items		(121	)		(129	)
	$	(183	)	$	(180	)

· See "Domestic Gross Energy Margins" for further discussion.

· Higher other operation and maintenance for the three months ended June 30, 2009, compared with the same period in 2008, primarily due to higher outage costs at the Susquehanna nuclear plant as a result of the timing of the 2009 refueling outage, partially offset by lower outage costs at the Eastern and Western U.S. fossil/hydroelectric stations.

· Higher depreciation for the six months ended June 30, 2009, compared with the same period in 2008, primarily due to the Montour scrubbers and Susquehanna generation uprate projects that were placed in-service in the second quarter of 2008 and the Brunner Island scrubber placed in-service in the second quarter of 2009.

· Lower other income (expense) - net for the three months ended June 30, 2009, compared with the same period in 2008, primarily due to lower interest income.

The following after-tax amounts, which management considers special items, impacted the Supply segment earnings.  See the indicated Notes to the Financial Statements for additional information.

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Unrealized gains (losses) from energy-related economic activity (Note 14)	$	(88	)	$	4		$	(38	)	$	54
Adjustments - NDT investments (a)		2			(4	)		(1	)		(4	)
Impairments and other impacts - emission allowances (Note 13)								(15	)
Impairments - assets held for sale and other (Note 13)		(34	)					(36	)
Workforce reduction charge (Note 6)								(6	)
Off-site remediation of ash basin leak (Note 10)					1						1
Montana basin seepage litigation (Note 10)											(5	)
Synthetic fuel tax adjustment (Note 10)											(13	)
Total	$	(120	)	$	1		$	(96	)	$	33

(a) Represents other-than-temporary impairment charges on securities, including reversals of previous impairments when securities previously impaired were sold.

Earnings Outlook

Excluding special items, PPL projects higher earnings for its Supply segment in 2009 compared with 2008, driven by higher energy margins as a result of higher expected baseload generation and margins from marketing and trading activities, despite higher expected coal expense, partially offset by higher expected operation and maintenance expenses and depreciation.

In July 2009, PPL Maine signed a definitive agreement to sell the majority of its hydroelectric generation business.  The transaction is expected to result in an after-tax gain in the range of $26 million to $35 million ($0.07 to $0.09 per share, basic and diluted), including the contingent consideration that would be realized upon completion of the anticipated sale of PPL Maine's three other hydroelectric facilities.  This gain will be classified as a special item, and due to the contingent consideration, a portion may be recorded beyond 2009 or ultimately may not be realized.  See Note 8 to the Financial Statements for additional information.

International Delivery Segment

The International Delivery segment consists primarily of the electricity distribution operations in the U.K.  In the first quarter of 2008, the International Delivery segment recognized income tax benefits and miscellaneous expenses in Discontinued Operations as the dissolution of the remaining Latin American holding companies commenced.  See Note 8 to the Financial Statements for additional information.  International Delivery segment net income attributable to PPL was:

	Three Months Ended June 30,					Six Months Ended June 30,
	2009			2008		2009			2008
Utility revenues	$	155		$	211	$	331		$	452
Energy-related businesses		8			9		15			18
Total operating revenues		163			220		346			470
Other operation and maintenance		31			50		65			96
Depreciation		27			35		53			71
Taxes, other than income		13			17		26			34
Energy-related businesses		4			3		7			6
Total operating expenses		75			105		151			207
Other Income (Expense) - net		(13	)		1		(11	)		4
Interest Expense		18			34		31			72
Income Taxes		(5	)		20		4			40
Income from Discontinued Operations										5
Net Income Attributable to PPL	$	62		$	62	$	149		$	160

The after-tax changes in net income attributable to PPL between these periods were due to the following factors.

	June 30, 2009 vs. June 30, 2008
	Three Months Ended			Six Months Ended
U.K.
Delivery margins	$	(2	)
Other operating expenses		6		$	10
Interest expense		6			21
Income taxes		22			31
Foreign currency exchange rates		(25	)		(60	)
Hyder liquidation distributions		(1	)		(3	)
Other		(3	)		(2	)
U.S. Income taxes		4			6
Discontinued operations (Note 8)					(5	)
Other		(1	)
Special items		(6	)		(9	)
	$			$	(11	)

· Lower other operating expenses for both periods primarily due to lower pension costs resulting from an increase in the discount rate and lower WPD meter operator expenses due to the transfer of that activity to a third party.

· Lower interest expense for both periods on the index-linked senior unsecured notes primarily due to lower inflation rates.

· Lower U.K. income taxes for both periods primarily due to changes in uncertain tax positions, partially offset by tax return adjustments in 2008.  See Note 5 to the Financial Statements for additional information.

· Changes in foreign currency exchange rates negatively impacted U.K. earnings for both periods.  The weighted-average exchange rate for the British pound sterling was approximately $1.46 for the three and six months ended June 30, 2009, versus approximately $1.98 for the same periods in 2008.

The following after-tax amounts, which management considers special items, impacted the International Delivery segment earnings.

	Three Months Ended June 30,				Six Months Ended June 30,
	2009			2008	2009			2008
Unrealized losses from foreign currency economic activity (Note 14)	$	(6	)		$	(6	)
Asset impairments						(1	)
Workforce reduction charge (Note 6)						(2	)
Total	$	(6	)		$	(9	)

Earnings Outlook

Excluding special items, PPL projects lower earnings for its International Delivery segment in 2009 compared with 2008, primarily as a result of less favorable foreign currency exchange rates.  See Note 10 to the Financial Statements for information on the potential impact of the Ofgem's five-year pricing review and its potential impact on WPD's revenues and earnings for 2010 and beyond.

Pennsylvania Delivery Segment

The Pennsylvania Delivery segment for both 2009 and 2008 includes the regulated electric delivery operations of PPL Electric.  The Pennsylvania Delivery segment results in 2008 also include the revenues and expenses of PPL's natural gas distribution and propane businesses, which are classified as Discontinued Operations.  In October 2008, PPL sold its natural gas distribution and propane businesses.  See Note 8 to the Financial Statements for additional information.

Pennsylvania Delivery segment net income attributable to PPL was:

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
Operating revenues
External	$	727	$	770	$	1,617	$	1,650
Intersegment		20		30		40		58
Total operating revenues		747		800		1,657		1,708
Fuel and energy purchases
External		31		44		63		85
Intersegment		411		428		908		917
Other operation and maintenance		98		103		204		207
Amortization of recoverable transition costs		70		68		154		144
Depreciation		30		33		63		65
Taxes, other than income		46		48		98		104
Total operating expenses		686		724		1,490		1,522
Other Income (Expense) - net		1		3		5		8
Interest Expense		31		26		60		55
Income Taxes		10		19		37		49
Income from Discontinued Operations				1				10
Noncontrolling Interests		4		4		9		9
Net Income Attributable to PPL	$	17	$	31	$	66	$	91

The after-tax changes in net income attributable to PPL between these periods were due to the following factors.

	June 30, 2009 vs. June 30, 2008
	Three Months Ended			Six Months Ended
Delivery revenues (net of CTC/ITC amortization, interest expense on transition bonds and ancillary charges)	$	(11	)	$	(10	)
Other operation and maintenance		3			10
Interest expense		(6	)		(9	)
Discontinued operations, net of special item (Note 8)		(2	)		(11	)
Income taxes and other		1
Special items		1			(5	)
	$	(14	)	$	(25	)

· Lower delivery revenues for both periods were primarily due to economic conditions including industrial customers scaling back on production, and a true-up of the FERC formula-based transmission revenues recorded in the three months ended June 30, 2009.  See Note 2 to the Financial Statements for additional information on the true-up.  In addition, during the second quarter of 2009, weather had an unfavorable impact on sales volumes.

· Lower other operation and maintenance expense for the six months ended June 30, 2009, compared with the same period in 2008, primarily due to decreased contractor expenses in 2009 and higher storm costs in 2008, net of insurance recoveries.

· Higher interest expense for both periods, primarily due to $400 million of debt issuances in 2008 that prefund a portion of 2009 debt maturities.

The following after-tax amounts, which management considers special items, also had an impact on the Pennsylvania Delivery segment earnings.

	Three Months Ended June 30,				Six Months Ended June 30,
	2009	2008			2009			2008
Sale of gas and propane businesses		$	(1	)				$	(1	)
Asset impairments					$	(1	)
Workforce reduction charge (Note 6)						(5	)
Total		$	(1	)	$	(6	)	$	(1	)

Earnings Outlook

Excluding special items, PPL projects lower earnings in its Pennsylvania Delivery segment in 2009 compared with 2008, primarily due to higher financing costs, lower electricity delivery revenues, higher operation and maintenance expenses, and the divestiture of its natural gas distribution and propane businesses.

See Note 10 to the Financial Statements for a discussion of items that could impact earnings beyond 2009, including the PUC-approved plan to procure default electricity supply for 2010 through May 2013, Pennsylvania legislative updates and other regulatory activities.

Statement of Income Analysis --

Domestic Gross Energy Margins

Non-GAAP Financial Measure

The following discussion includes financial information prepared in accordance with GAAP, as well as a non-GAAP financial measure, "Domestic Gross Energy Margins."  The presentation of "Domestic Gross Energy Margins" is intended to supplement the investor's understanding of PPL's domestic non-trading and trading activities by combining applicable income statement line items and related adjustments to calculate a single financial measure.  PPL believes that "Domestic Gross Energy Margins" are useful and meaningful to investors because they provide them with the results of PPL's domestic non-trading and trading activities as another criterion in making their investment decisions.  PPL's management also uses "Domestic Gross Energy Margins" in measuring certain corporate performance goals used in determining variable compensation.  Other companies may use different measures to present the results of their non-trading and trading activities.  Additionally, "Domestic Gross Energy Margins" are not intended to replace "Operating Income," which is determined in accordance with GAAP, as an indicator of overall operating performance.  The following table provides a reconciliation between "Operating Income" and "Domestic Gross Energy Margins" as defined by PPL.

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Operating Income (a)	$	104		$	385		$	516		$	858
Adjustments:
Energy-related businesses, net (b)		(7	)		(10	)		(15	)		(19	)
Other operation and maintenance (a)		354			358			726			734
Amortization of recoverable transition costs (a)		70			68			154			144
Depreciation (a)		114			117			223			228
Taxes, other than income (a)		67			72			139			147
Revenue adjustments (c)		(337	)		92			(1,226	)		(324	)
Expense adjustments (c)		24			(635	)		267			(920	)
Domestic gross energy margins	$	389		$	447		$	784		$	848

(a)	As reported on the Statements of Income.
(b)	Amount represents the net of "Energy-related businesses" revenue and expense as reported on the Statements of Income.
(c)	The components of these adjustments are detailed in the tables below.

The following tables provide the income statement line items and other adjustments that comprise domestic gross energy margins.

	Three Months Ended June 30,
	2009			2008			Change
Revenue
Utility (a)	$	881		$	981		$	(100	)
Unregulated retail electric and gas (a)		32			33			(1	)
Wholesale energy marketing (a)		648			(182	)		830
Net energy trading margins (a)		7			52			(45	)
Revenue adjustments (b)
WPD utility revenue		(155	)		(211	)		56
Domestic delivery component of utility revenue		(293	)		(310	)		17
Other utility revenue		(7	)		(14	)		7
Unrealized gains from economic hedge activity (c)		111			617			(506	)
Margins from Supply segment discontinued operations		7			10			(3	)
Total revenue adjustments		(337	)		92			(429	)
		1,231			976			255
Expense
Fuel (a)		186			189			(3	)
Energy purchases (a)		680			(295	)		975
Expense adjustments (b)
Unrealized gains (losses) from economic hedge activity (c)		(39	)		621			(660	)
Domestic electric ancillaries (e)		(11	)		(14	)		3
Gross receipts tax (f)		26			27			(1	)
Other					1			(1	)
Total expense adjustments		(24	)		635			(659	)
		842			529			313
Domestic gross energy margins	$	389		$	447		$	(58	)

	Six Months Ended June 30,
	2009			2008			Change
Revenue
Utility (a)	$	1,946		$	2,101		$	(155	)
Unregulated retail electric and gas (a)		74			67			7
Wholesale energy marketing (a)		1,805			66			1,739
Net energy trading margins (a)		(5	)		50			(55	)
Revenue adjustments (b)
WPD utility revenue		(331	)		(452	)		121
Domestic delivery component of utility revenue		(647	)		(664	)		17
Other utility revenue		(21	)		(26	)		5
Unrealized gains (losses) from economic hedge activity (c)		(242	)		797			(1,039	)
Gains from sale of emission allowances (d)					1			(1	)
Margins from Supply segment discontinued operations		15			20			(5	)
Total revenue adjustments		(1,226	)		(324	)		(902	)
		2,594			1,960			634
Expense
Fuel (a)		444			429			15
Energy purchases (a)		1,633			(237	)		1,870
Expense adjustments (b)
Unrealized gains (losses) from economic hedge activity (c)		(306	)		887			(1,193	)
Domestic electric ancillaries (e)		(23	)		(26	)		3
Gross receipts tax (f)		57			57
Other		5			2			3
Total expense adjustments		(267	)		920			(1,187	)
		1,810			1,112			698
Domestic gross energy margins	$	784		$	848		$	(64	)

(a)	As reported on the Statements of Income.
(b)	To include/exclude the impact of any revenues and expenses not associated with domestic gross energy margins, consistent with the way management reviews domestic gross energy margins internally.
(c)	See "Commodity Price Risk (Non-trading) - Economic Activity" in Note 14 to the Financial Statements for additional information regarding economic activity.
(d)	Included in "Other operation and maintenance" on the Statements of Income.
(e)	Included in "Energy purchases" on the Statements of Income.
(f)	Included in "Taxes, other than income" on the Statements of Income.

Domestic Gross Energy Margins By Region

Domestic gross energy margins are generated through PPL's various strategies to maximize the value of its wholesale energy portfolio.  The most significant of these strategies include the sales of baseload generation and optimization of intermediate and peaking generation, both of which are considered asset-related margins, and marketing and proprietary trading activities.  PPL also manages these activities on a geographic basis that is aligned with its generation assets.

	Three Months Ended June 30,
	2009		2008		Change
Asset-related margins:
Eastern U.S.	$	310	$	306	$	4
Western U.S.		77		68		9
Marketing and trading margins:
Eastern U.S.		2		73		(71	)
Western U.S.
Domestic gross energy margins	$	389	$	447	$	(58	)

	Six Months Ended June 30,
	2009		2008			Change
Asset-related margins:
Eastern U.S.	$	607	$	620		$	(13	)
Western U.S.		160		140			20
Marketing and trading margins:
Eastern U.S.		17		98			(81	)
Western U.S.				(10	)		10
Domestic gross energy margins	$	784	$	848		$	(64	)

Eastern U.S.

Eastern U.S. asset-related margins were $4 million higher and $13 million lower during the three and six months ended June 30, 2009, compared with the same periods in 2008.  The increase during the three months ended June 30, 2009 was primarily due to gains resulting from the settlement of economic positions related to portfolio rebalancing and optimization strategies, higher capacity revenue and a 2.2% increase in PLR sales prices in accordance with the PUC Final Order.  Partially offsetting these higher margins was lower baseload generation of 9% and higher average baseload generation fuel prices of 12%, primarily due to higher coal prices.  The decrease during the six months ended June 30, 2009 was primarily due to lower baseload generation of 5% and higher average baseload generation fuel prices of 8%, primarily due to higher coal prices.  This decrease was partially offset by gains resulting from the settlement of economic positions related to portfolio rebalancing and optimization strategies, higher capacity revenue and a 2.2% increase in PLR sales prices in accordance with the PUC Final Order.

Eastern U.S. marketing and trading margins were $71 million and $81 million lower during the three and six months ended June 30, 2009, compared with the same periods in 2008.  The decrease for both periods was primarily due to lower FTR results, primarily due to lower congestion prices as a result of lower electricity prices, and lower margins on full-requirement sales contracts, primarily due to mild weather and the economic downturn.  Partially offsetting these decreases were increased margins in the power, gas, and oil trading positions.

Western U.S.

Western U.S. asset-related margins were $9 million and $20 million higher during the three and six months ended June 30, 2009, compared with the same periods in 2008.  The increase for both periods was primarily due to higher wholesale volumes of 18% and increased generation from the hydroelectric units of 18%.

Western U.S. marketing and trading margins were $10 million higher during the six months ended June 30, 2009, compared with the same period in 2008, consisting of $5 million of both higher realized trading margins and unrealized trading margins.

Utility Revenues

The decreases in utility revenues were attributable to:

	June 30, 2009 vs. June 30, 2008
	Three Months Ended			Six Months Ended
Domestic:
Retail electric revenue (PPL Electric)
PLR	$	(17	)	$	(8	)
Delivery		(28	)		(28	)
Other		1			2
U.K.:
Electric delivery revenue		(3	)		(4	)
Foreign currency exchange rates		(53	)		(117	)
	$	(100	)	$	(155	)

Domestic utility revenues for both periods were negatively impacted by economic conditions including industrial customers scaling back on production, and a true-up of the FERC formula-based transmission revenues.  See Note 2 to the Financial Statements for additional information on the true-up.  In addition, during the second quarter of 2009, weather had an unfavorable impact on sales volumes.  Lower U.K. electric delivery revenue for both periods was partially due to the transfer of meter operator activity to a third party in July 2008.

Energy-related Businesses

Energy-related businesses contributed $3 million less to operating income for the three months ended June 30, 2009, compared with the same period in 2008.  The decrease was primarily attributable to:

· $2 million less from WPD's energy-related businesses, primarily due to changes in foreign currency exchange rates; and

· $2 million less from domestic energy-related businesses, primarily due to a decline in construction activity caused by the slowdown in the economy.

Energy-related businesses contributed $4 million less to operating income for the six months ended June 30, 2009, compared with the same period in 2008.  Contributions from WPD-related businesses decreased by $4 million, primarily related to changes in foreign currency exchange rates.

Other Operation and Maintenance

The decreases in other operation and maintenance expenses were due to:

	June 30, 2009 vs. June 30, 2008
	Three Months Ended			Six Months Ended
Impairment of emission allowances (Note 13)				$	30
Workforce reduction charge (Note 6)					22
Defined benefit costs - Domestic	$	5			10
Outage costs at Susquehanna nuclear station		27			4
Outage costs at Eastern and Western U.S. fossil/hydroelectric stations		(6	)		(2	)
Contractor expenses					(2	)
Storm costs					(4	)
Stock-based compensation					(4	)
Defined benefit costs - U.K.		(2	)		(5	)
WPD meter operator expenses (a)		(3	)		(6	)
Montana basin seepage litigation (Note 10)		(1	)		(8	)
Uncollectible accounts		(5	)		(11	)
U.K. foreign currency exchange rates		(9	)		(17	)
Other - Domestic		(9	)		(12	)
Other - U.K.		(1	)		(3	)
	$	(4	)	$	(8	)

(a) In July 2008, WPD transferred its meter operator services to a third party.

Amortization of Recoverable Transition Costs

Amortization of recoverable transition costs increased by $2 million and $10 million for the three and six months ended June 30, 2009, compared with the same periods in 2008.  The amortization of recoverable transition costs is based on a PUC amortization schedule, adjusted for ITC and CTC recoveries in customer rates and related expenses.  Since the amortization substantially matches the revenue recorded based on recovery in customer rates, there is minimal impact on earnings.

Depreciation

The decreases in depreciation expense were due to:

	June 30, 2009 vs. June 30, 2008
	Three Months Ended			Six Months Ended
Additions to generation PP&E (a)	$	7		$	13
U.K. foreign currency exchange rates		(9	)		(18	)
Domestic delivery		(3	)		(2	)
Other		2			2
	$	(3	)	$	(5	)

(a) Attributable to the completion of the Susquehanna generation uprate and the Montour scrubber projects in the second quarter of 2008 and the Brunner Island Unit 3 scrubber in the second quarter of 2009.

Taxes, Other Than Income

The decreases in taxes, other than income were due to:

	June 30, 2009 vs. June 30, 2008
	Three Months Ended			Six Months Ended
Property tax expense (a)	$	(1	)	$	6
Pennsylvania gross receipts tax		(2	)		(5	)
U.K. foreign currency exchange rates		(5	)		(9	)
Other		3
	$	(5	)	$	(8	)

(a) The increase for the six months ended June 30, 2009 is primarily due to a $7 million property tax credit recorded by PPL Montana in the six months ended June 30, 2008.

Other Income (Expense) - net

See Note 12 to the Financial Statements for details of other income.

Other-Than-Temporary Impairments

See Note 18 to the Financial Statements for details of other-than-temporary impairments.

Interest Expense

The decreases in interest expense were due to:

	June 30, 2009 vs. June 30, 2008
	Three Months Ended			Six Months Ended
Long-term debt interest expense				$	8
Short-term debt interest expense	$	4			8
Capitalized interest		3			4
U.K. foreign currency exchange rates		(6	)		(11	)
Hedging activities		(5	)		(14	)
Inflation adjustment on U.K. Index-linked Senior Unsecured Notes		(6	)		(25	)
Other		1			2
	$	(9	)	$	(28	)

Income Taxes

The decreases in income taxes were due to:

	June 30, 2009 vs. June 30, 2008
	Three Months Ended			Six Months Ended
Foreign tax return adjustments	$	18		$	18
Nonconventional fuel and other tax credits		(1	)		(14	)
Tax reserve adjustments		(35	)		(31	)
Lower pre-tax book income		(109	)		(126	)
Other		2
	$	(125	)	$	(153	)

See Note 5 to the Financial Statements for additional information on income taxes.

Discontinued Operations

See "Discontinued Operations" in Note 8 to the Financial Statements for information related to the anticipated sales of PPL's Long Island generation business and the majority of its Maine hydroelectric generation business, PPL's Latin American businesses that were dissolved in 2008 and PPL's natural gas distribution and propane businesses that were sold in 2008.

Financial Condition

Liquidity and Capital Resources

PPL continues to focus on maintaining a strong credit profile and liquidity position during the disruptive conditions in the financial markets and historically difficult bank and capital market conditions.  PPL expects to continue to have adequate liquidity available through operating cash flows, cash and cash equivalents, its credit facilities and, as necessary, the issuance of capital market securities.

PPL had the following at:

	June 30, 2009		December 31, 2008
Cash and cash equivalents	$	973	$	1,100
Short-term investments (a)				150
	$	973	$	1,250
Short-term debt	$	611	$	679

(a) Represents tax-exempt bonds issued by the PEDFA in December 2008 on behalf of PPL Energy Supply and purchased by a subsidiary of PPL Energy Supply upon issuance.  Such bonds were refunded in April 2009.  See "Financing Activities" below for further discussion.

The $127 million decrease in PPL's cash and cash equivalents position was primarily the net result of:

· $524 million of capital expenditures;

· the payment of $430 million to retire $460 million aggregate principal amount of long-term debt;

· the payment of $256 million of common stock dividends;

· a net decrease in short-term debt of $77 million (excluding the impact of U.K. foreign currency exchange rates);

· $40 million in net expenditures for intangible assets;

· $568 million of cash provided by operating activities;

· proceeds of $298 million from the issuance of long-term debt;

· a decrease of $189 million in restricted cash and cash equivalents; and

· proceeds of $150 million from the sale of short-term investments.

Auction Rate Securities

PPL's investment in auction rate securities continues to be impacted by auction failures and the resulting illiquidity in 2009. PPL held auction rate securities with an aggregate par value of $29 million at June 30, 2009 and December 31, 2008.  PPL concluded that the fair value of its auction rate securities was $18 million at June 30, 2009 and $24 million at December 31, 2008, a temporary decline of $11 million and $5 million from par value.  Based upon the evaluation of available information, PPL believes these investments continue to be of high credit quality.  PPL believes it will not be required to sell these securities, including to fund operations, and does not intend to sell these securities until they can be liquidated at par value.  Therefore, PPL believes it does not have significant exposure to realize losses on these securities, and none of the decline in fair value is attributable to credit loss and therefore is deemed temporary due to general market conditions and has not been recognized in earnings.  During the second quarter of 2009, PPL liquidated an insignificant amount of these securities at par.  See Notes 13 and 18 to the Financial Statements for further discussion of auction rate securities.

Credit Facilities

At June 30, 2009, PPL's total committed borrowing capacity under credit facilities and the use of this borrowing capacity were:

	Committed Capacity		Borrowed		Letters of Credit Issued		UnusedCapacity
PPL Energy Supply Domestic Credit Facilities (a)	$	4,110	$	285	$	826	$	2,999
PPL Electric Credit Facilities (b)		340				1		339
Total Domestic Credit Facilities (c)	$	4,450	$	285	$	827	$	3,338
WPDH Limited Credit Facility	₤	150	₤	145		n/a	₤	5
WPD (South West) Credit Facilities (d)		153		65	₤	3		85
Total WPD Credit Facilities (e)	₤	303	₤	210	₤	3	₤	90

(a)	In March 2009, PPL Energy Supply's 364-day bilateral credit facility was amended.  The amendment included extending the expiration date from March 2009 to March 2010 and reducing the capacity from $300 million to $200 million. PPL Energy Supply currently plans to renew its $385 million 364-day syndicated credit facility that expires in September 2009.
(b)	Committed capacity includes a $150 million credit facility related to an asset-backed commercial paper program.  At June 30, 2009, based on accounts receivable and unbilled revenue pledged, $150 million was available for borrowing under the asset-backed credit facility.  In July 2009, PPL Electric and a subsidiary extended the expiration date of the credit agreement related to the asset-backed commercial paper program to July 2010.
(c)	The commitments under PPL's domestic credit facilities are provided by a diverse bank group consisting of 23 banks, with no one bank providing more than 14% of the total committed capacity.
(d)	In July 2009, WPD (South West) terminated its £150 million five-year syndicated credit facility, which was to expire in October 2009, and replaced it with a new £210 million three-year syndicated credit facility expiring in July 2012.  Under the new facility, WPD (South West) has the ability to make cash borrowings but cannot cause the lenders to issue letters of credit.  Borrowings under this facility bear interest at LIBOR-based rates plus a margin.  The new facility contains financial covenants that require WPD (South West) to maintain an interest coverage ratio of not less than 3.0 times consolidated earnings before income taxes, depreciation and amortization and total net debt not in excess of 85% of its regulatory asset base, in each case calculated in accordance with the credit facility.
(e)	At June 30, 2009, the unused capacity of WPD's committed credit facilities was approximately $145 million.

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

Commercial Paper

As discussed below under "Rating Agency Decisions," S&P lowered its rating on PPL Energy Supply's commercial paper to A-3 from A-2 in January 2009.  Since PPL Energy Supply did not expect to need to issue any commercial paper during 2009 and there is essentially no liquidity in commercial paper markets for paper with an A-3 rating, PPL Energy Supply closed its commercial paper program in January 2009 and requested that Moody's, S&P and Fitch each withdraw their ratings on its commercial paper program, which each rating agency subsequently did.

Market conditions to issue commercial paper with ratings of P-2, A-2 and F-2 by Moody's, S&P and Fitch have improved since 2008.  However, they continue to be impacted by the volatility experienced in the broader financial markets.  Based on its current cash position and anticipated cash flows, PPL Electric currently does not expect to need to issue any commercial paper during 2009, but it may do so from time to time to facilitate short-term cash flow needs.

Financing Activities

In March 2009, PPL Capital Funding retired the entire $201 million of its 4.33% Notes Exchange Series A upon maturity.

In March 2009, PPL Energy Supply completed tender offers to purchase up to $250 million aggregate principal amount of certain of its outstanding senior notes in order to reduce future interest expense.  Pursuant to the offers, PPL Energy Supply purchased approximately $100 million aggregate principal amount of its 6.00% Senior Notes due 2036 for $77 million, plus accrued interest, and approximately $150 million aggregate principal amount of its 6.20% Senior Notes due 2016 for $143 million, plus accrued interest.  See Note 7 to the Financial Statements for further discussion.  Under the Economic Stimulus Package, PPL will be permitted to defer recognition of income related to the extinguishment of these notes for tax purposes.  No amounts will be included in taxable income for the first five years.  Beginning in 2014, income related to the extinguishment of these notes will be included in taxable income ratably over five years.

In April 2009, the PEDFA issued $231 million aggregate principal amount of Exempt Facilities Revenue Refunding Bonds, Series 2009A and 2009B due 2038 and Series 2009C due 2037 (PPL Energy Supply, LLC Project), on behalf of PPL Energy Supply.  The Series 2009A bonds, in an aggregate principal amount of $100 million, and the Series 2009B bonds, in an aggregate principal amount of $50 million, were issued by the PEDFA in order to refund $150 million aggregate principal amount of Exempt Facilities Revenue Bonds, Series 2008A and 2008B (PPL Energy Supply, LLC Project) due 2038 that were issued by the PEDFA in December 2008 on behalf of PPL Energy Supply, and for which PPL Investment Corp. acted as initial purchaser.  The Series 2009C bonds, in an aggregate principal amount of $81 million, were issued in order to refund $81 million aggregate principal amount of Exempt Facilities Revenue Bonds, Series 2007 (PPL Energy Supply, LLC Project) due 2037 that were issued by the PEDFA in December 2007 on behalf of PPL Energy Supply.  Among other things, the completed refundings were able to take advantage of provisions in the Economic Stimulus Package that eliminated the application of the AMT to interest payable on the refinanced indebtedness.  The refundings of the bonds were effected by the ultimate distribution of $231 million by the PEDFA to the bond holders, including PPL Investment Corp.  As a result of the refundings of the bonds, PPL Investment Corp. received proceeds of $150 million, which is reflected as a cash flow from investing activities on the Statement of Cash Flows for PPL and PPL Energy Supply for the six months ended June 30, 2009.

The Series 2009A, 2009B and 2009C bonds are structured as variable-rate remarketable bonds.  PPL Energy Supply may convert the interest rate mode on the bonds from time to time to a commercial paper rate, daily rate, weekly rate or a term rate of at least one year.  The bonds are subject to mandatory purchase under certain circumstances, including upon conversion to a different interest rate mode, and are subject to mandatory redemption upon a determination that the interest on the bonds would be included in the holders' gross income for federal tax purposes.  The Series 2009A bonds bore interest at an initial rate of 0.90% through June 30, 2009.  The Series 2009B bonds bear interest at an initial rate of 1.25% through September 30, 2009.  The Series 2009C bonds are in a weekly interest rate mode, bearing interest at 0.30% at June 30, 2009.

In connection with the issuance of each series of bonds by the PEDFA, PPL Energy Supply entered into separate loan agreements with the PEDFA pursuant to which the PEDFA loaned to PPL Energy Supply the proceeds of the Series 2009A, Series 2009B and Series 2009C bonds on payment terms that correspond to those of the bonds.  PPL Energy Supply issued separate promissory notes to the PEDFA to evidence its obligations under each of the loan agreements.  These loan agreements and promissory notes replaced those associated with the refunded 2007 and 2008 PEDFA bonds in a non-cash transaction that is excluded from the Statement of Cash Flows.

Concurrent with the issuance of each series of bonds, separate letters of credit, totaling $237 million, were issued under PPL Energy Supply's $3.2 billion five-year syndicated credit facility to the trustee in support of each series of bonds.  The letters of credit permit the trustee to draw amounts to pay principal of and interest on, and the purchase price of, the Series 2009A, Series 2009B and Series 2009C bonds when due.  PPL Energy Supply is required to reimburse any draws on the letters of credit within one business day of such draw.

PPL Energy Supply elected to change the interest rate mode on the Series 2009A bonds to a commercial paper rate mode upon expiration of the initial rate period.  As such, in July 2009, the Series 2009A bonds were remarketed in a commercial paper rate mode and bear interest at 0.90% through December 9, 2009, at which time the bonds will be remarketed based upon an interest rate mode elected by PPL Energy Supply.  In connection with this change, the letter of credit supporting the Series 2009A bonds was modified accordingly.

In May 2009, PPL Electric issued $300 million of 6.25% First Mortgage Bonds due 2039 (6.25% Bonds).  The 6.25% Bonds may be redeemed any time prior to maturity at PPL Electric's option at make-whole redemption prices.  PPL Electric received proceeds of $296 million, net of a discount and underwriting fees, from the issuance of the 6.25% Bonds.  Approximately $86 million of the proceeds will be used to partially fund the repayment at maturity of $486 million outstanding aggregate principal amount of PPL Electric's Senior Secured Bonds, 6-1/4% Series, due August 2009.  The balance of such repayment will be funded from the issuance in October 2008 of $400 million of 7.125% Senior Secured Bonds due 2013.  The balance of the proceeds from the issuance of the 6.25% Bonds is being used for general corporate purposes, including capital expenditures.

In June 2009, PPL Electric repaid its $9 million obligation under a Variable Rate Pollution Control Facilities Note in connection with the early redemption in full of the underlying pollution control revenue bonds that were issued by the Indiana County Industrial Development Authority and due in June 2027.

Common Stock Dividends

In February 2009, PPL announced an increase to its quarterly common stock dividend, effective April 1, 2009, to 34.5 cents per share (equivalent to $1.38 per annum).  Future dividends, declared at the discretion of the Board of Directors, will be dependent upon future earnings, cash flows, financial requirements and other factors.

Rating Agency Decisions

Moody's, S&P and Fitch periodically review the credit ratings on the debt and preferred securities of PPL and its 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 PPL and its subsidiaries are based on information provided by PPL and other sources.  The ratings of Moody's, S&P and Fitch are not a recommendation to buy, sell or hold any securities of PPL or its 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.  A downgrade in PPL's or its subsidiaries' credit ratings could result in higher borrowing costs and reduced access to capital markets.

In January 2009, S&P completed a review of PPL, PPL Energy Supply and PPL Electric and revised its outlook for all three entities to negative from stable.  At that time, S&P affirmed the BBB issuer rating of PPL and PPL Energy Supply and affirmed the A- issuer rating of PPL Electric.  As a result of the negative outlook at PPL Energy Supply, S&P lowered the commercial paper rating of PPL Energy Supply to A-3 from A-2.  S&P stated in its press release regarding PPL and PPL Energy Supply that the revision in the outlook for PPL and PPL Energy Supply is based primarily on lower than expected cash flows for 2008 combined with concerns over further pressure on financial metrics in 2009.  S&P stated in its press release regarding PPL Electric that the revision in its outlook reflects the linkage with PPL along with their expectation that PPL Electric's financial metrics could weaken beginning in 2010.

At the request of PPL Energy Supply, Fitch, in January 2009, and Moody's and S&P, in February 2009, each withdrew their commercial paper rating for PPL Energy Supply.

In February 2009, S&P revised its outlook to negative from stable for each of WPDH Limited, WPD LLP, WPD (South Wales) and WPD (South West) and affirmed the issuer and short-term debt ratings of each of the entities.  S&P stated in its press release that the revision in the outlook is a reflection of the change to PPL's outlook and is not a result from any change in WPD's stand-alone credit profile.

In May 2009, Moody's completed a review of PPL, PPL Energy Supply and PPL Electric.  As a result of that review, Moody's revised its outlook for PPL, PPL Capital Funding, and PPL Electric to negative from stable.  At the same time, Moody's affirmed the Baa2 senior unsecured rating and stable outlook of PPL Energy Supply.  Moody's stated in its press release that the revision in the outlook for PPL Electric reflects Moody's expectation that PPL Electric's financial metrics will deteriorate beyond 2009 and considers the potential for additional pressure on cash flows.  Moody's also stated that the revision in the outlook for PPL and PPL Capital Funding reflects the increasing support for corporate earnings and cash flow anticipated from PPL Energy Supply and the subordinate position of the unsecured lenders at these entities relative to the unsecured lenders at the subsidiary levels.

Ratings Triggers

PPL and PPL Energy Supply have various derivative and non-derivative contracts, including contracts for the sale and purchase of electricity and fuel, commodity transportation and storage, tolling agreements, and interest rate and foreign currency trades, which contain provisions requiring PPL and PPL Energy Supply to post additional collateral, or permit the counterparty to terminate the contract, if PPL's or PPL Energy Supply's credit rating 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 that would have been required for derivative contracts in a net liability position at June 30, 2009.  At June 30, 2009, if PPL's and PPL Energy Supply's credit ratings had been below investment grade, PPL would have been required to post an additional $305 million of collateral to counterparties for both derivative and non-derivative commodity and commodity-related contracts used in its generation, marketing and trading operations and interest rate and foreign currency contracts.

Capital Expenditures

The schedule below shows PPL's capital expenditure projections at June 30, 2009.

	Projected
	2009		2010		2011		2012		2013
Construction expenditures (a)
Generating facilities	$	345	$	610	$	628	$	483	$	428
Transmission and distribution facilities		524		974		1,078		943		992
Environmental		210		68		98		114		6
Other		69		82		51		52		50
Total Construction Expenditures		1,148		1,734		1,855		1,592		1,476
Nuclear fuel		151		161		178		181		184
Total Capital Expenditures	$	1,299	$	1,895	$	2,033	$	1,773	$	1,660

(a) Construction expenditures include AFUDC and capitalized interest, which are expected to be $291 million for the 2009-2013 period.

PPL's capital expenditure projections for the years 2009-2013 total $8.7 billion.  Capital expenditure plans are revised periodically to reflect changes in operational, market and regulatory conditions.  The above schedule has been revised from that which was presented in PPL's 2008 Form 10-K, primarily due to PPL's April 2009 announcement that it filed a new application with the FERC for approval to expand the capacity of its Holtwood hydroelectric plant by 125 MW.  See Note 8 to the Financial Statements for additional information.

For additional information on PPL's liquidity and capital resources, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in PPL's 2008 Form 10-K.

Risk Management - Energy Marketing & Trading and Other

Market Risk

Commodity Price Risk (Non-trading)

PPL segregates its non-trading activities into two categories:  hedge activity and economic activity.  Transactions that are accounted for as hedge activity qualify for hedge accounting treatment.  The economic activity category includes transactions that address a specific risk, but were not eligible for hedge accounting or for which hedge accounting was not elected.  Although they do not receive hedge accounting treatment, these transactions are considered non-trading activity.  The net fair value of economic positions at June 30, 2009 and December 31, 2008 was a net asset of $7 million and a net liability of $52 million.

To hedge the impact of market price fluctuations on PPL's energy-related assets, liabilities and other contractual arrangements discussed above, PPL EnergyPlus sells and purchases physical energy at the wholesale level under FERC market-based tariffs throughout the U.S. and enters into financial exchange-traded and over-the-counter contracts.  PPL's non-trading commodity derivative contracts mature at various times through 2017.

The following table sets forth changes in the net fair value of PPL's non-trading commodity derivative contracts.  See Notes 13 and 14 to the Financial Statements for additional information.

	Three Months Ended June 30,					Six Months Ended June 30,
	2009		2008			2009		2008
Fair value of contracts outstanding at the beginning of the period	$	728	$	(268	)	$	402	$	(305	)
Contracts realized or otherwise settled during the period		102		(104	)		201		(67	)
Fair value of new contracts entered into during the period		133		70			55		170
Changes in fair value attributable to changes in valuation techniques (a)									55
Other changes in fair value		102		(752	)		407		(907	)
Fair value of contracts outstanding at the end of the period	$	1,065	$	(1,054	)	$	1,065	$	(1,054	)

(a) Amount represents the reduction of valuation reserves related to capacity and FTR contracts upon the adoption of SFAS 157.

The following table segregates the net fair value of PPL's non-trading commodity derivative contracts at June 30, 2009 based on whether the fair value was determined by prices quoted in active markets for identical instruments or other more subjective means.

	Net Asset (Liability)
	Maturity Less Than 1 Year		Maturity 1-3 Years		Maturity 4-5 Years		Maturity in Excess of 5 Years		Total Fair Value
Source of Fair Value
Prices quoted in active markets for identical instruments	$	4							$	4
Prices based on significant other observable inputs		97	$	631	$	191				919
Prices based on significant unobservable inputs		2		15		38	$	87		142
Fair value of contracts outstanding at the end of the period	$	103	$	646	$	229	$	87	$	1,065

Because of PPL's efforts to hedge the value of energy from its generation assets, PPL sells electricity, capacity and related services and buys fuel on a forward basis, resulting in open contractual positions.  If PPL were unable to deliver firm capacity and energy or to accept the delivery of fuel under its agreements, under certain circumstances it could be required to pay damages.  These damages would be based on the difference between the market price and the contract price of the commodity.  Depending on price volatility in the wholesale energy markets, such damages could be significant.  Extreme weather conditions, unplanned power plant outages, transmission disruptions, nonperformance by counterparties (or their own counterparties) with which it has energy contracts and other factors could affect PPL's ability to meet its obligations, or cause significant increases in the market price of replacement energy.  Although PPL attempts to mitigate these risks, there can be no assurance that it will be able to fully meet its firm obligations, that it will not be required to pay damages for failure to perform, or that it will not experience counterparty nonperformance in the future.

Commodity Price Risk (Trading)

PPL's trading contracts mature at various times through 2015.  The following table sets forth changes in the net fair value of PPL's trading commodity derivative contracts.  See Note 13 to the Financial Statements for additional information.

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Fair value of contracts outstanding at the beginning of the period	$	(37	)	$	22		$	(75	)	$	16
Contracts realized or otherwise settled during the period					(31	)		33			(31	)
Fair value of new contracts entered into during the period		9			31			35			23
Other changes in fair value		15			(6	)		(6	)		8
Fair value of contracts outstanding at the end of the period	$	(13	)	$	16		$	(13	)	$	16

PPL will reverse unrealized losses of approximately $1 million over the next three months as the transactions are realized.

The following table segregates the net fair value of PPL's trading commodity derivative contracts at June 30, 2009 based on whether the fair value was determined by prices quoted in active markets for identical instruments or other more subjective means.

	Net Asset (Liability)
	Maturity Less Than 1 Year			Maturity 1-3 Years			Maturity 4-5 Years			Maturity in Excess of 5 Years			Total Fair Value
Source of Fair Value
Prices quoted in active markets for identical instruments	$	1		$	1								$	2
Prices based on significant other observable inputs		(1	)		(12	)	$	(1	)	$	2			(12	)
Prices based on significant unobservable inputs					(2	)					(1	)		(3	)
Fair value of contracts outstanding at the end of the period	$			$	(13	)	$	(1	)	$	1		$	(13	)

VaR Models

PPL utilizes a VaR model to measure commodity price risk in domestic gross energy margins for its non-trading and trading portfolios.  This approach is consistent with how PPL's RMC assesses the market risk of its commodity business.  VaR is 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.  PPL calculates VaR using a Monte Carlo simulation technique based on a five-day holding period at a 95% confidence level.  On June 30, 2009 and December 31, 2008, the VaR for PPL's portfolios using end-of-quarter results for the period was as follows:

	Trading VaR				Non-Trading VaR
	June 30,		Dec. 31,		June 30,		Dec. 31,
	2009		2008		2009		2008
95% Confidence Level, Five-Day Holding Period
Period End	$	4	$	3	$	9	$	10
Average for the Period		2		10		11		14
High		4		22		13		20
Low		1		3		9		9

The trading portfolio includes all speculative positions, regardless of delivery period.  All positions not considered speculative are considered non-trading.  PPL's non-trading portfolio includes PPL's entire portfolio, including generation, with delivery periods through the next 12 months.  Both the trading and non-trading VaR computations exclude FTRs due to the absence of liquid spot and forward markets.  The fair value of the FTR positions at June 30, 2009 was an unrealized loss of $3 million, as follows:

	2009			2010			2011
Trading (a)	$	1
Non-trading		(1	)	$	(2	)	$	(1	)
Total	$			$	(2	)	$	(1	)

(a) The amount of trading losses expected to be realized in the next three months is insignificant.

Interest Rate Risk

PPL and its subsidiaries have issued debt to finance their operations, which exposes them to interest rate risk.  PPL utilizes various financial derivative instruments to adjust the mix of fixed and floating interest rates in its debt portfolio, adjust the duration of its debt portfolio 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 PPL's debt portfolio due to changes in the absolute level of interest rates.

At June 30, 2009, PPL's potential annual exposure to increased interest expense, based on a 10% increase in interest rates, was $1 million.

PPL is also exposed to changes in the fair value of its domestic and international debt portfolios.  PPL estimated that a 10% decrease in interest rates at June 30, 2009 would increase the fair value of its debt portfolio by $300 million.

PPL utilizes various risk management instruments to reduce its exposure to the expected future cash flow variability of its debt instruments.  These risks include exposure to adverse interest rate movements for outstanding variable rate debt and for future anticipated financing.  While PPL is exposed to changes in the fair value of these instruments, any changes in the fair value of these instruments are recorded in equity and then reclassified into earnings in the same period during which the item being hedged affects earnings.  At June 30, 2009, the fair value of these instruments was a net asset of $3 million.  PPL estimated that a 10% adverse movement in interest rates at June 30, 2009 would decrease the net asset by $3 million.

PPL also utilizes various risk management instruments to adjust the mix of fixed and floating interest rates in its debt portfolio.  The change in fair value of these instruments, as well as the offsetting change in the value of the hedged exposure of the debt, is reflected in earnings.  At June 30, 2009, the fair value of these instruments, including accrued interest, was an asset of $39 million.  PPL estimated that a 10% adverse movement in interest rates at June 30, 2009 would decrease the asset by $13 million.

WPDH Limited holds a net notional position in cross-currency swaps totaling $302 million to hedge the interest payments and principal of its U.S. dollar-denominated senior notes with maturity dates ranging from December 2017 to December 2028.  While PPL is exposed to changes in the fair value of these instruments, any change in the fair value of these instruments is recorded in equity and reclassified into earnings in the same period during which the item being hedged affects earnings.  The estimated fair value of this position, including accrued interest, at June 30, 2009 was a net asset of $14 million.  WPDH Limited estimated that a 10% adverse movement in foreign currency exchange rates and interest rates at June 30, 2009 would decrease the net asset by $40 million.

Foreign Currency Risk

PPL is exposed to foreign currency risk, primarily through investments in U.K. affiliates.  In addition, PPL's domestic operations may make purchases of equipment in currencies other than U.S. dollars.

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

To protect the value of a portion of its net investment in WPD, PPL executed forward contracts to sell British pounds sterling.  The total notional amount of the contracts outstanding at June 30, 2009 was £55 million.  The settlement dates of these contracts range from September 2009 through June 2011.  At June 30, 2009, the fair value of these positions was a net asset of $18 million.  PPL estimated that a 10% adverse movement in foreign currency exchange rates at June 30, 2009 would decrease the net asset by $9 million.

To economically hedge the translation of 2009 expected income denominated in British pounds sterling to U.S. dollars, PPL entered into a combination of average rate forwards and average rate options to sell British pounds sterling.  At June 30, 2009, the total exposure hedged was £61 million.  These forwards and options have termination dates ranging from July 2009 through December 2009.  At June 30, 2009, the fair value of these positions was a net liability of $9 million.  PPL estimated that a 10% adverse movement in foreign currency exchange rates at June 30, 2009 would increase the net liability by $8 million.

NDT Funds - Securities Price Risk

In connection with certain NRC requirements, PPL Susquehanna maintains trust funds to fund certain costs of decommissioning the Susquehanna nuclear station.  At June 30, 2009, these funds were invested primarily in domestic equity securities and fixed-rate, fixed-income securities.  These securities are reflected at fair value on PPL's Balance Sheet.  The mix of securities is designed to provide returns sufficient to fund Susquehanna's decommissioning and to compensate for inflationary increases in decommissioning costs.  However, the equity securities included in the trusts are exposed to price fluctuation in equity markets, and the values of fixed-rate, fixed-income securities are primarily exposed to changes in interest rates.  PPL actively monitors the investment performance and periodically reviews asset allocation in accordance with its NDT policy statement.  At June 30, 2009, a hypothetical 10% increase in interest rates and a 10% decrease in equity prices would have resulted in an estimated $33 million reduction in the fair value of the trusts' assets.  See Notes 13 and 18 to the Financial Statements for additional information regarding the NDT funds.

Credit Risk

See Notes 13 and 14 to the Financial Statements and "Risk Management - Energy Marketing & Trading and Other - Credit Risk" in PPL's 2008 Form 10-K for information on credit risk.

Related Party Transactions

PPL is not aware of any material ownership interests or operating responsibility by senior management of PPL, PPL Energy Supply or PPL Electric in outside partnerships, including leasing transactions with variable interest entities, or other entities doing business with PPL.

For additional information on related party transactions, see Note 11 to the Financial Statements.

Acquisitions, Development and Divestitures

PPL continuously evaluates strategic options for its business segments and, from time to time, PPL and its subsidiaries are involved in negotiations with third parties regarding acquisitions and dispositions of businesses and assets, joint ventures and development projects, which may or may not result in definitive agreements.  Any such transactions may impact future financial results.  See Note 8 to the Financial Statements for information regarding such recent transactions.

PPL is currently planning incremental capacity increases of 208 MW, primarily at its existing generating facilities.  Offsetting the planned capacity increases is an expected reduction of 30 MW due to the anticipated sale of the majority of PPL Maine's hydroelectric generation business, for which PPL Maine signed a definitive agreement in July 2009.  See Note 8 to the Financial Statements for additional information.

PPL continuously reexamines development projects based on market conditions and other factors to determine whether to proceed with the projects, sell, cancel or expand them, execute tolling agreements or pursue other options.

Environmental Matters

See Note 10 to the Financial Statements for a discussion of environmental matters.

New Accounting Standards

See Notes 2 and 20 to the Financial Statements for a discussion of new accounting standards adopted and pending adoption.

Application of Critical Accounting Policies

PPL's financial condition and results of operations are impacted by the methods, assumptions and estimates used in the application of critical accounting policies.  The following accounting policies are particularly important to the financial condition or results of operations of PPL, and require estimates or other judgments of matters inherently uncertain: price risk management, defined benefits, asset impairment, leasing, loss accruals, AROs and income tax uncertainties.  See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in PPL's 2008 Form 10-K for a discussion of each critical accounting policy.

PPL ENERGY SUPPLY, LLC AND SUBSIDIARIES

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

Overview

PPL Energy Supply is an energy company with headquarters in Allentown, Pennsylvania.  Refer to "Item 1. Business - Background" in PPL Energy Supply's 2008 Form 10-K for descriptions of its reportable segments, which are Supply and International Delivery.  Through its subsidiaries, PPL Energy Supply is primarily engaged in the generation and marketing of electricity in two key markets - the northeastern and western U.S. - and in the delivery of electricity in the U.K.  See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview" in PPL Energy Supply's 2008 Form 10-K for a discussion of PPL Energy Supply's strategy and the risks and challenges that it faces in its business.  See "Forward-Looking Information," Note 10 to the Financial Statements and the remainder of Item 2 in this Form 10-Q, and "Item 1A. Risk Factors" and the rest of Item 7 in PPL Energy Supply's 2008 Form 10-K for more information concerning the material risks and uncertainties that PPL Energy Supply faces in its businesses and with respect to its future earnings.

Market Events

The recent conditions in the financial markets have been disruptive to the processes of managing credit risk, responding to liquidity needs, measuring derivatives and other financial instruments at fair value, and managing market price risk.  Bank credit capacity has been reduced and the cost of renewing or establishing new credit facilities has increased significantly, thereby making less certain businesses' ability to enter into long-term energy commitments or reliably estimate the longer-term cost and availability of credit.

Commodity Price Risk

The volatility of wholesale energy prices due to recent conditions in the financial and commodity markets significantly impacted PPL Energy Supply's earnings in 2009.  See "Statement of Income Analysis - Domestic Gross Energy Margins - Domestic Gross Energy Margins By Region" for further discussion.

Credit Risk

Credit risk is the risk that PPL Energy Supply would incur a loss as a result of nonperformance by counterparties of their contractual obligations.  PPL Energy Supply maintains credit policies and procedures to limit counterparty credit risk.  The recent conditions in the financial and commodity markets have generally increased PPL Energy Supply's exposure to credit risk.  See Notes 11, 13 and 14 to the Financial Statements and "Risk Management - Energy Marketing & Trading and Other - Credit Risk" in PPL Energy Supply's 2008 Form 10-K for more information on credit risk.

Liquidity Risk

Despite the recent conditions in the financial and capital markets, external financing activities by domestic electric utilities are being completed, albeit at higher-than-historical interest rates.  PPL Energy Supply expects to continue to have access to adequate sources of liquidity through operating cash flows, cash and cash equivalents, credit facilities and, from time to time, through the issuance of capital market securities.  See "Financial Condition - Liquidity and Capital Resources" for an expanded discussion of PPL Energy Supply's liquidity position and a discussion of financing transactions.

Valuations in Inactive Markets

The recent conditions in the financial markets have generally made it difficult to determine the fair value of certain assets and liabilities in inactive markets.  Management has reviewed the activity in the energy and financial markets in which PPL Energy Supply transacts, concluding that all of these markets were active at June 30, 2009, with the exception of the market for auction rate securities.  See Notes 13 and 18 to the Financial Statements and "Financial Condition - Liquidity and Capital Resources - - Auction Rate Securities" for a discussion of these investments.

Securities Price Risk

Declines in the market price of debt and equity securities result in unrealized losses that reduce the asset values of PPL Energy Supply's investments in its NDT funds and defined benefit plans.  Both the pension plan and the NDT funds had positive returns in the second quarter of 2009, thereby recovering a portion of the negative returns incurred in 2008 and the first quarter of 2009.  PPL Energy Supply actively monitors the performance of the investments held in its NDT funds and periodically reviews the funds' investment allocations.  See "Financial Condition - Risk Management - Energy Marketing & Trading and Other - NDT Funds - Securities Price Risk" for additional information on securities price risk.

PPL Energy Supply's subsidiaries sponsor various defined benefit plans and participate in and are allocated costs from defined benefit plans sponsored by PPL.  Determination of the funded status of defined benefit plans, contribution requirements and net periodic defined benefit costs for future years are subject to changes in various assumptions, in addition to the actual performance of the assets in the plans.  See "Application of Critical Accounting Policies - Defined Benefits" in PPL's 2008 Form 10-K for a discussion of the assumptions and sensitivities regarding those assumptions.

The Economic Stimulus Package

The Economic Stimulus Package is intended to stimulate the U.S. economy through federal tax relief, expansion of unemployment benefits and other social stimulus provisions, domestic spending for education, health care and infrastructure, including the energy sector.  A portion of the benefits included in the Economic Stimulus Package are offered in the form of loan fee reductions, expanded loan guarantees and secondary market incentives, including delayed recognition for tax purposes of income related to the cancellation of certain types of debt.  See "Financial Condition - Liquidity and Capital Resources" for a discussion of the applicability to the purchase of notes by PPL Energy Supply.

Funds from the Economic Stimulus Package will be allocated to various federal agencies, such as the DOE, and will also be provided to state agencies through block grants.  The DOE plans to use a portion of the funds for smart grid and other efficiency-related programs, and has initiated a process for that purpose.  The Commonwealth of Pennsylvania is accepting applications for funding of energy projects including solar projects.  As discussed in Note 8 to the Financial Statements, PPL Energy Supply has reconsidered its Holtwood expansion project in view of the tax incentives and potential loan guarantees for renewable energy projects contained in the Economic Stimulus Package.  PPL Energy Supply filed DOE loan guarantee applications for the Holtwood expansion project and for the Rainbow redevelopment project.  PPL Energy Supply and its subsidiaries continue to review the Economic Stimulus Package's provisions to determine the impact on PPL Energy Supply's possible expansion plans and other business-related activities.

The following information should be read in conjunction with PPL Energy Supply's Condensed Consolidated Financial Statements and the accompanying Notes and with PPL Energy Supply's 2008 Form 10-K.

Terms and abbreviations are explained in the glossary.  Dollars are in millions unless otherwise noted.

Results of Operations

The following discussion begins with a summary of PPL Energy Supply's earnings.  "Results of Operations" continues with a review of results by reportable segment and a description of key factors by segment that management expects may impact future earnings.  This section ends with "Statement of Income Analysis," which includes explanations of significant changes in principal items on PPL Energy Supply's Statements of Income, comparing the three and six months ended June 30, 2009, with the same periods in 2008.

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

Earnings

Net income (loss) attributable to PPL Energy Supply was:

Three Months Ended June 30,					Six Months Ended June 30,
2009			2008		2009		2008
$	(31	)	$	157	$	160	$	361

The changes in net income (loss) attributable to PPL Energy Supply from period to period were, in part, attributable to several special items that management considers significant.  Details of these special items are provided within the review of each segment's earnings.

Segment Results

Net income (loss) attributable to PPL Energy Supply by segment was:

	Three Months Ended June 30,					Six Months Ended June 30,
	2009			2008		2009		2008
Supply	$	(93	)	$	95	$	11	$	201
International Delivery		62			62		149		160
Total	$	(31	)	$	157	$	160	$	361

Supply Segment

The Supply segment primarily consists of the domestic energy marketing, domestic generation and domestic development operations of PPL Energy Supply.  In May 2009, PPL Energy Supply announced its intention to sell its Long Island generation business, and in July 2009, announced its intention to sell the majority of its Maine hydroelectric generation business.  PPL Energy Supply expects the sales to close in 2009.  See Note 8 to the Financial Statements for additional information.

In 2009 and 2008, the Supply segment results reflect the reclassification of the revenues and expenses of the Long Island generation business and the majority of its Maine hydroelectric generation business to Discontinued Operations.

Supply segment net income (loss) attributable to PPL Energy Supply was:

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Energy revenues (a)	$	1,098		$	331		$	2,782		$	1,100
Energy-related businesses		95			120			184			225
Total operating revenues		1,193			451			2,966			1,325
Fuel and energy purchases (a)		854			(121	)		2,053			164
Other operation and maintenance		239			215			485			451
Depreciation		53			47			100			87
Taxes, other than income		8			8			15			10
Energy-related businesses		93			115			179			218
Total operating expenses		1,247			264			2,832			930
Other Income (Expense) - net (b)		8			11			36			22
Other-Than-Temporary Impairments		1			7			18			10
Interest Expense (c)		50			42			92			74
Income Taxes		(36	)		58			20			140
Income (Loss) from discontinued operations		(32	)		5			(29	)		9
Noncontrolling Interest					1						1
Net Income (Loss) Attributable to PPL Energy Supply	$	(93	)	$	95		$	11		$	201

(a)	Includes unrealized gains and losses from economic activity.  See "Commodity Price Risk (Non-trading) - Economic Activity" in Note 14 for additional information.
(b)	Includes interest income from affiliates.
(c)	Includes interest expense with affiliates.

The after-tax changes in net income (loss) attributable to PPL Energy Supply between these periods were due to the following factors.

	June 30, 2009 vs. June 30, 2008
	Three Months Ended			Six Months Ended
Domestic gross energy margins	$	(34	)	$	(37	)
Other operation and maintenance		(14	)		(1	)
Depreciation		(4	)		(8	)
Other income (expense) - net		(6	)
Interest expense		(5	)		(11	)
Income taxes and other		(4	)		(4	)
Special items		(121	)		(129	)
	$	(188	)	$	(190	)

· See "Domestic Gross Energy Margins" for further discussion.

· Higher other operation and maintenance for the three months ended June 30, 2009, compared with the same period in 2008, primarily due to higher outage costs at the Susquehanna nuclear plant as a result of the timing of the 2009 refueling outage, partially offset by lower outage costs at the Eastern and Western U.S. fossil/hydroelectric stations.

· Higher depreciation for the six months ended June 30, 2009, compared with the same period in 2008, primarily due to the Montour scrubbers and Susquehanna generation uprate projects that were placed in-service in the second quarter of 2008 and the Brunner Island scrubber placed in-service in the second quarter of 2009.

· Lower other income (expense) - net for the three months ended June 30, 2009, compared with the same period in 2008, primarily due to lower interest income.

· Higher interest expense for the six months ended June 30, 2009, compared with the same period in 2008, primarily due to interest on debt issued in March 2008.

The following after-tax amounts, which management considers special items, impacted the Supply segment earnings.  See the indicated Notes to the Financial Statements for additional information.

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Unrealized gains (losses) from energy-related, economic activity (Note 14)	$	(88	)	$	4		$	(38	)	$	54
Adjustments - NDT investments (a)		2			(4	)		(1	)		(4	)
Impairments and other impacts - emission allowances (Note 13)								(15	)
Impairments - assets held for sale and other (Note 13)		(34	)					(36	)
Workforce reduction charge (Note 6)								(6	)
Off-site remediation of ash basin leak (Note 10)					1						1
Montana basin seepage litigation (Note 10)											(5	)
Synthetic fuel tax adjustment (Note 10)											(13	)
Total	$	(120	)	$	1		$	(96	)	$	33

(a) Represents other-than-temporary impairment charges on securities, including reversals of previous impairments when securities previously impaired were sold.

Earnings Outlook

Excluding special items, PPL Energy Supply projects higher earnings for its Supply segment in 2009 compared with 2008, driven by higher energy margins as a result of higher expected baseload generation and margins from marketing and trading activities, despite higher expected coal expense, partially offset by higher expected operation and maintenance expenses and depreciation.

In July 2009, PPL Maine signed a definitive agreement to sell the majority of its hydroelectric generation business.  The transaction is expected to result in an after-tax gain in the range of $26 million to $35 million, including the contingent consideration that would be realized upon completion of the anticipated sale of PPL Maine's three other hydroelectric facilities.  This gain will be classified as a special item, and due to the contingent consideration, a portion may be recorded beyond 2009 or ultimately may not be realized.  See Note 8 to the Financial Statements for additional information.

International Delivery Segment

The International Delivery segment consists primarily of the electricity distribution operations in the U.K.  In the first quarter of 2008, the International Delivery segment recognized income tax benefits and miscellaneous expenses in Discontinued Operations as the dissolution of the remaining Latin American holding companies commenced.  See Note 8 to the Financial Statements for additional information.  International Delivery segment net income attributable to PPL Energy Supply was:

	Three Months Ended June 30,					Six Months Ended June 30,
	2009			2008		2009			2008
Utility revenues	$	155		$	211	$	331		$	452
Energy-related businesses		8			9		15			18
Total operating revenues		163			220		346			470
Other operation and maintenance		31			50		65			96
Depreciation		27			35		53			71
Taxes, other than income		13			17		26			34
Energy-related businesses		4			3		7			6
Total operating expenses		75			105		151			207
Other Income (Expense) - net		(13	)		1		(11	)		4
Interest Expense		18			34		31			72
Income Taxes		(5	)		20		4			40
Income from Discontinued Operations										5
Net Income Attributable to PPL Energy Supply	$	62		$	62	$	149		$	160

The after-tax changes in net income attributable to PPL Energy Supply between these periods were due to the following factors.

	June 30, 2009 vs. June 30, 2008
	Three Months Ended			Six Months Ended
U.K.
Delivery margins	$	(2	)
Other operating expenses		6		$	10
Interest expense		6			21
Income taxes		22			31
Foreign currency exchange rates		(25	)		(60	)
Hyder liquidation distributions		(1	)		(3	)
Other		(3	)		(2	)
U.S. Income taxes		4			6
Discontinued operations (Note 8)					(5	)
Other		(1	)
Special items		(6	)		(9	)
	$			$	(11	)

· Lower other operating expenses for both periods primarily due to lower pension costs resulting from an increase in the discount rate and lower WPD meter operator expenses due to the transfer of that activity to a third party.

· Lower interest expense for both periods on the index-linked senior unsecured notes primarily due to lower inflation rates.

· Lower U.K. income taxes for both periods primarily due to changes in uncertain tax positions, partially offset by tax return adjustments in 2008.  See Note 5 to the Financial Statements for additional information.

· Changes in foreign currency exchange rates negatively impacted U.K. earnings for both periods.  The weighted-average exchange rate for the British pound sterling was approximately $1.46 for the three and six months ended June 30, 2009, versus approximately $1.98 for the same periods in 2008.

The following after-tax amounts, which management considers special items, impacted the International Delivery segment earnings.

	Three Months Ended June 30,				Six Months Ended June 30,
	2009			2008	2009			2008
Unrealized losses from foreign currency economic activity (Note 14)	$	(6	)		$	(6	)
Asset impairments						(1	)
Workforce reduction charge (Note 6)						(2	)
Total	$	(6	)		$	(9	)

Earnings Outlook

Excluding special items, PPL Energy Supply projects lower earnings for its International Delivery segment in 2009 compared with 2008, primarily as a result of less favorable foreign currency exchange rates.  See Note 10 to the Financial Statements for information on the potential impact of the Ofgem's five-year pricing review and its potential impact on WPD's revenues and earnings for 2010 and beyond.

Statement of Income Analysis --

Domestic Gross Energy Margins

Non-GAAP Financial Measure

The following discussion includes financial information prepared in accordance with GAAP, as well as a non-GAAP financial measure, "Domestic Gross Energy Margins."  The presentation of "Domestic Gross Energy Margins" is intended to supplement the investor's understanding of PPL Energy Supply's domestic non-trading and trading activities by combining applicable income statement line items and related adjustments to calculate a single financial measure.  PPL Energy Supply believes that "Domestic Gross Energy Margins" are useful and meaningful to investors because they provide them with the results of PPL Energy Supply's domestic non-trading and trading activities as another criterion in making their investment decisions.  PPL Energy Supply's management also uses "Domestic Gross Energy Margins" in measuring certain corporate performance goals used in determining variable compensation.  Other companies may use different measures to present the results of their non-trading and trading activities.  Additionally, "Domestic Gross Energy Margins" are not intended to replace "Operating Income," which is determined in accordance with GAAP, as an indicator of overall operating performance.  The following table provides a reconciliation between "Operating Income" and "Domestic Gross Energy Margins" as defined by PPL Energy Supply.

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Operating Income (a)	$	34		$	302		$	329		$	658
Adjustments:
Utility (a)		(155	)		(211	)		(331	)		(452	)
Energy-related businesses, net (b)		(6	)		(11	)		(13	)		(19	)
Other operation and maintenance (a)		270			265			550			547
Depreciation (a)		80			82			153			158
Taxes, other than income (a)		21			25			41			44
Revenue adjustments (c)		115			623			(235	)		809
Expense adjustments (c)		30			(628	)		290			(897	)
Domestic gross energy margins	$	389		$	447		$	784		$	848

(a)	As reported on the Statements of Income.
(b)	Amount represents the net of "Energy-related businesses" revenue and expense as reported on the Statements of Income.
(c)	The components of these adjustments are detailed in the tables below.

The following tables provide the income statement line items and other adjustments that comprise domestic gross energy margins.

	Three Months Ended June 30,
	2009			2008			Change
Revenue
Wholesale energy marketing (a)	$	648		$	(182	)	$	830
Wholesale energy marketing to affiliate (a)		411			428			(17	)
Unregulated retail electric and gas (a)		32			33			(1	)
Net energy trading margins (a)		7			52			(45	)
Revenue adjustments (b)
Miscellaneous wholesale energy marketing to affiliate		(3	)		(3	)
Miscellaneous unregulated retail electric and gas					(1	)		1
Unrealized gains from economic hedge activity (c)		111			617			(506	)
Margins from Supply segment discontinued operations		7			10			(3	)
Total revenue adjustments		115			623			(508	)
		1,213			954			259
Expense
Fuel (a)		186			189			(3	)
Energy purchases (a)		648			(340	)		988
Energy purchases from affiliate (a)		20			30			(10	)
Expense adjustments (b)
Unrealized gains (losses) from economic hedge activity (c)		(39	)		621			(660	)
Other		9			7			2
Total expense adjustments		(30	)		628			(658	)
		824			507			317
Domestic gross energy margins	$	389		$	447		$	(58	)

	Six Months Ended June 30,
	2009			2008			Change
Revenue
Wholesale energy marketing (a)	$	1,805		$	66		$	1,739
Wholesale energy marketing to affiliate (a)		908			917			(9	)
Unregulated retail electric and gas (a)		74			67			7
Net energy trading margins (a)		(5	)		50			(55	)
Revenue adjustments (b)
Miscellaneous wholesale energy marketing to affiliate		(6	)		(7	)		1
Miscellaneous unregulated retail electric and gas		(1	)		(1	)
Unrealized gains (losses) from economic hedge activity (c)		(242	)		797			(1,039	)
Gains from sale of emission allowances (d)					1			(1	)
Margins from Supply segment discontinued operations		15			20			(5	)
Other		(1	)		(1	)
Total revenue adjustments		(235	)		809			(1,044	)
		2,547			1,909			638
Expense
Fuel (a)		444			429			15
Energy purchases (a)		1,569			(323	)		1,892
Energy purchases from affiliate (a)		40			58			(18	)
Expense adjustments (b)
Unrealized gains (losses) from economic hedge activity (c)		(306	)		887			(1,193	)
Other		16			10			6
Total expense adjustments		(290	)		897			(1,187	)
		1,763			1,061			702
Domestic gross energy margins	$	784		$	848		$	(64	)

(a)	As reported on the Statements of Income.
(b)	To include/exclude the impact of any revenues and expenses not associated with domestic gross energy margins, consistent with the way management reviews domestic gross energy margins internally.
(c)	See "Commodity Price Risk (Non-trading) - Economic Activity" in Note 14 to the Financial Statements for additional information regarding economic activity.
(d)	Included in "Other operation and maintenance" on the Statements of Income.

Domestic Gross Energy Margins By Region

Domestic gross energy margins are generated through PPL Energy Supply's various strategies to maximize the value of its wholesale energy portfolio.  The most significant of these strategies include the sales of baseload generation and optimization of intermediate and peaking generation, both of which are considered asset-related margins and marketing and proprietary trading activities.  PPL Energy Supply also manages these activities on a geographic basis that is aligned with its generation assets.

	Three Months Ended June 30,
	2009		2008		Change
Asset-related margins:
Eastern U.S.	$	310	$	306	$	4
Western U.S.		77		68		9
Marketing and trading margins:
Eastern U.S.		2		73		(71	)
Western U.S.
Domestic gross energy margins	$	389	$	447	$	(58	)

	Six Months Ended June 30,
	2009		2008			Change
Asset-related margins:
Eastern U.S.	$	607	$	620		$	(13	)
Western U.S.		160		140			20
Marketing and trading margins:
Eastern U.S.		17		98			(81	)
Western U.S.				(10	)		10
Domestic gross energy margins	$	784	$	848		$	(64	)

Eastern U.S.

Eastern U.S. asset-related margins were $4 million higher and $13 million lower during the three and six months ended June 30, 2009, compared with the same periods in 2008.  The increase during the three months ended June 30, 2009 was primarily due to gains resulting from the settlement of economic positions related to portfolio rebalancing and optimization strategies, higher capacity revenue and a 2.2% increase in PLR sales prices in accordance with the PUC Final Order.  Partially offsetting these higher margins was lower baseload generation of 9% and higher average baseload generation fuel prices of 12%, primarily due to higher coal prices.  The decrease during the six months ended June 30, 2009 was primarily due to lower baseload generation of 5% and higher average baseload generation fuel prices of 8%, primarily due to higher coal prices.  This decrease was partially offset by gains resulting from the settlement of economic positions related to portfolio rebalancing and optimization strategies, higher capacity revenue and a 2.2% increase in PLR sales prices in accordance with the PUC Final Order.

Eastern U.S. marketing and trading margins were $71 million and $81 million lower during the three and six months ended June 30, 2009, compared with the same periods in 2008.  The decrease for both periods was primarily due to lower FTR results, primarily due to lower congestion prices as a result of lower electricity prices, and lower margins on full-requirement sales contracts, primarily due to mild weather and the economic downturn.  Partially offsetting these decreases were increased margins in the power, gas, and oil trading positions.

Western U.S.

Western U.S. asset-related margins were $9 million and $20 million higher during the three and six months ended June 30, 2009, compared with the same periods in 2008.  The increase for both periods was primarily due to higher wholesale volumes of 18% and increased generation from the hydroelectric units of 18%.

Western U.S. marketing and trading margins were $10 million higher during the six months ended June 30, 2009, compared with the same period in 2008, consisting of $5 million of both higher realized trading margins and unrealized trading margins.

Utility Revenues

The decreases in utility revenues were attributable to:

	June 30, 2009 vs. June 30, 2008
	Three Months Ended			Six Months Ended
U.K. electric delivery revenue	$	(3	)	$	(4	)
U.K. foreign currency exchange rates		(53	)		(117	)
	$	(56	)	$	(121	)

Lower U.K. electric delivery revenue for both periods was partially due to the transfer of meter operator activity to a third party in July 2008.

Energy-related Businesses

Energy-related businesses contributed $5 million less to operating income for the three months ended June 30, 2009, compared with the same period in 2008.  The decrease was primarily attributable to:

· $2 million less from WPD's energy-related businesses, primarily due to changes in foreign currency exchange rates; and

· $2 million less from domestic energy-related businesses, primarily due to a decline in construction activity caused by the slowdown in the economy.

Energy-related businesses contributed $6 million less to operating income for the six months ended June 30, 2009, compared with the same period in 2008.  Contributions from WPD-related businesses decreased by $4 million, primarily related to changes in foreign currency exchange rates.

Other Operation and Maintenance

The increases in other operation and maintenance expenses were due to:

	June 30, 2009 vs. June 30, 2008
	Three Months Ended			Six Months Ended
Impairment of emission allowances (Note 13)				$	30
Workforce reduction charge (Note 6)					13
Trademark royalty fees from a PPL subsidiary (Note 11)	$	6			8
Defined benefit costs - Domestic		2			5
Outage costs at Susquehanna nuclear station		27			4
Allocation of certain corporate service costs (Note 11)		(1	)		3
Outage costs at Western and Eastern U.S. fossil/hydroelectric stations		(6	)		(2	)
Insurance recoveries		(3	)		(4	)
Stock-based compensation		1			(4	)
Defined benefit costs - U.K.		(2	)		(5	)
WPD meter operator expenses (a)		(3	)		(6	)
Uncollectible accounts		(2	)		(8	)
Montana basin seepage litigation (Note 10)		(1	)		(8	)
U.K. foreign currency exchange rates		(9	)		(17	)
Other - Domestic		(3	)		(3	)
Other - U.K.		(1	)		(3	)
	$	5		$	3

(a) In July 2008, WPD transferred its meter operator services to a third party.

Depreciation

The decreases in depreciation expense were due to:

	June 30, 2009 vs. June 30, 2008
	Three Months Ended			Six Months Ended
Additions to generation PP&E (a)	$	7		$	13
U.K. foreign currency exchange rates		(9	)		(18	)
	$	(2	)	$	(5	)

(a) Attributable to the completion of the Susquehanna generation uprate and the Montour scrubber projects in the second quarter of 2008 and the Brunner Island Unit 3 scrubber in the second quarter of 2009.

Taxes, Other Than Income

The decreases in taxes, other than income were due to:

	June 30, 2009 vs. June 30, 2008
	Three Months Ended			Six Months Ended
Property tax expense (a)	$	(1	)	$	6
U.K. foreign currency exchange rates		(5	)		(9	)
Other		2
	$	(4	)	$	(3	)

(a) The increase for the six months ended June 30, 2009 is primarily due to a $7 million property tax credit recorded by PPL Montana in the six months ended June 30, 2008.

Other Income (Expense) - net

See Note 12 to the Financial Statements for details of other income.

Other-Than-Temporary Impairments

See Note 18 to the Financial Statements for details of other-than-temporary impairments.

Interest Income from Affiliates

Interest income from affiliates decreased by $5 million for the six months ended June 30, 2009, compared with the same period in 2008.  The decrease was the result of a decline in the average balance and floating interest rate on a note receivable with an affiliate, and a decline in the average balance and floating interest rate on the collateral deposit related to the PLR contract.

Interest Expense

The decreases in interest expense, which includes "Interest Expense with Affiliates," were due to:

	June 30, 2009 vs. June 30, 2008
	Three Months Ended			Six Months Ended
Short-term debt interest expense	$	4		$	8
Capitalized interest		3			4
Long-term debt interest expense		(4	)		3
U.K. foreign currency exchange rates		(6	)		(11	)
Inflation adjustment on U.K. Index-linked Senior Unsecured Notes		(6	)		(25	)
Other		1			(2	)
	$	(8	)	$	(23	)

Income Taxes

The decreases in income taxes were due to:

	June 30, 2009 vs. June 30, 2008
	Three Months Ended			Six Months Ended
Foreign tax return adjustments	$	18		$	18
Nonconventional fuel and other tax credits		(1	)		(14	)
Tax reserve adjustments		(35	)		(37	)
Lower pre-tax book income		(104	)		(125	)
Other		3			2
	$	(119	)	$	(156	)

See Note 5 to the Financial Statements for additional information on income taxes.

Discontinued Operations

See "Discontinued Operations" in Note 8 to the Financial Statements for information related to the anticipated sales of PPL Energy Supply's Long Island generation business and the majority of its Maine hydroelectric generation business, and PPL Energy Supply's Latin American businesses that were dissolved in 2008.

Financial Condition

Liquidity and Capital Resources

PPL Energy Supply continues to focus on maintaining a strong credit profile and liquidity position during the disruptive conditions in the financial markets and historically difficult bank and capital market conditions.  PPL Energy Supply expects to continue to have adequate liquidity available through operating cash flows, cash and cash equivalents, its credit facilities and, as necessary, the issuance of capital market securities.

PPL Energy Supply had the following at:

	June 30, 2009		December 31, 2008
Cash and cash equivalents	$	429	$	464
Short-term investments (a)				150
	$	429	$	614
Short-term debt (b)	$	735	$	584

(a)	Represents tax-exempt bonds issued by the PEDFA in December 2008 on behalf of PPL Energy Supply and purchased by a subsidiary of PPL Energy Supply upon issuance.  Such bonds were refunded in April 2009.  See "Financing Activities" below for further discussion.
(b)	Includes short-term debt with affiliate.

The $35 million decrease in PPL Energy Supply's cash and cash equivalents position was primarily the net result of:

· $391 million of capital expenditures;

· distributions to Member of $373 million;

· the payment of $220 million to retire $250 million aggregate principal amount of long-term debt;

· $34 million in net expenditures for intangible assets;

· $568 million of cash provided by operating activities;

· a decrease of $190 million in restricted cash and cash equivalents;

· proceeds of $150 million from the sale of short-term investments; and

· an increase of $142 million in short-term debt.

Auction Rate Securities

PPL Energy Supply's investment in auction rate securities continues to be impacted by auction failures and the resulting illiquidity in 2009.  PPL Energy Supply held auction rate securities with an aggregate par value of $24 million at June 30, 2009 and December 31, 2008.  PPL Energy Supply concluded that the fair value of its auction rate securities was $15 million at June 30, 2009 and $19 million at December 31, 2008, a temporary decline of $9 million and $5 million from par value.  Based upon the evaluation of available information, PPL Energy Supply believes these investments continue to be of high credit quality.  PPL Energy Supply believes it will not be required to sell these securities, including to fund operations, and does not intend to sell these securities until they can be liquidated at par value. Therefore, PPL Energy Supply believes it does not have significant exposure to realize losses on these securities, and none of the decline in fair value is attributable to credit loss and therefore is deemed temporary due to general market conditions and has not been recognized in earnings.  During the second quarter of 2009, PPL Energy Supply liquidated an insignificant amount of these securities at par.  See Notes 13 and 18 to the Financial Statements for further discussion of auction rate securities.

Credit Facilities

At June 30, 2009, PPL Energy Supply's total committed borrowing capacity under credit facilities and the use of this borrowing capacity were:

	Committed Capacity		Borrowed		Letters of Credit Issued		Unused Capacity
PPL Energy Supply Domestic Credit Facilities (a)	$	4,110	$	285	$	826	$	2,999
WPDH Limited Credit Facility	₤	150	₤	145		n/a	₤	5
WPD (South West) Credit Facilities (b)		153		65	₤	3		85
Total WPD Credit Facilities (c)	₤	303	₤	210	₤	3	₤	90

(a)	In March 2009, PPL Energy Supply's 364-day bilateral credit facility was amended.  The amendment included extending the expiration date from March 2009 to March 2010 and reducing the capacity from $300 million to $200 million. The commitments under PPL Energy Supply's domestic credit facilities are provided by a diverse bank group consisting of 23 banks, with no one bank providing more than 15% of the total committed capacity. PPL Energy Supply currently plans to renew its $385 million 364-day syndicated credit facility that expires in September 2009.
(b)	In July 2009, WPD (South West) terminated its £150 million five-year syndicated credit facility, which was to expire in October 2009, and replaced it with a new £210 million three-year syndicated credit facility expiring in July 2012.  Under the new facility, WPD (South West) has the ability to make cash borrowings but cannot cause the lenders to issue letters of credit.  Borrowings under this facility bear interest at LIBOR-based rates plus a margin.  The new facility contains financial covenants that require WPD (South West) to maintain an interest coverage ratio of not less than 3.0 times consolidated earnings before income taxes, depreciation and amortization and total net debt not in excess of 85% of its regulatory asset base, in each case calculated in accordance with the credit facility.
(c)	At June 30, 2009, the unused capacity of WPD's committed credit facilities was approximately $145 million.

See Note 7 to the Financial Statements for further discussion of PPL Energy Supply's credit facilities.

Commercial Paper

As discussed below under "Rating Agency Decisions," S&P lowered its rating on PPL Energy Supply's commercial paper to A-3 from A-2 in January 2009.  Since PPL Energy Supply did not expect to need to issue any commercial paper during 2009 and there is essentially no liquidity in commercial paper markets for paper with an A-3 rating, PPL Energy Supply closed its commercial paper program in January 2009 and requested that Moody's, S&P and Fitch each withdraw their ratings on its commercial paper program, which each rating agency subsequently did.

Financing Activities

In March 2009, PPL Energy Supply completed tender offers to purchase up to $250 million aggregate principal amount of certain of its outstanding senior notes in order to reduce future interest expense.  Pursuant to the offers, PPL Energy Supply purchased approximately $100 million aggregate principal amount of its 6.00% Senior Notes due 2036 for $77 million, plus accrued interest, and approximately $150 million aggregate principal amount of its 6.20% Senior Notes due 2016 for $143 million, plus accrued interest.  See Note 7 to the Financial Statements for further discussion.  Under the Economic Stimulus Package, PPL Energy Supply will be permitted to defer recognition of income related to the extinguishment of these notes for tax purposes.  No amounts will be included in taxable income for the first five years.  Beginning in 2014, income related to the extinguishment of these notes will be included in taxable income ratably over five years.

In April 2009, the PEDFA issued $231 million aggregate principal amount of Exempt Facilities Revenue Refunding Bonds, Series 2009A and 2009B due 2038 and Series 2009C due 2037 (PPL Energy Supply, LLC Project), on behalf of PPL Energy Supply.  The Series 2009A bonds, in an aggregate principal amount of $100 million, and the Series 2009B bonds, in an aggregate principal amount of $50 million, were issued by the PEDFA in order to refund $150 million aggregate principal amount of Exempt Facilities Revenue Bonds, Series 2008A and 2008B (PPL Energy Supply, LLC Project) due 2038 that were issued by the PEDFA in December 2008 on behalf of PPL Energy Supply, and for which PPL Investment Corp. acted as initial purchaser.  The Series 2009C bonds, in an aggregate principal amount of $81 million, were issued in order to refund $81 million aggregate principal amount of Exempt Facilities Revenue Bonds, Series 2007 (PPL Energy Supply, LLC Project) due 2037 that were issued by the PEDFA in December 2007 on behalf of PPL Energy Supply.  Among other things, the completed refundings were able to take advantage of provisions in the Economic Stimulus Package that eliminated the application of the AMT to interest payable on the refinanced indebtedness.  The refundings of the bonds were effected by the ultimate distribution of $231 million by the PEDFA to the bond holders, including PPL Investment Corp.  As a result of the refundings of the bonds, PPL Investment Corp. received proceeds of $150 million, which is reflected as a cash flow from investing activities on the Statement of Cash Flows for PPL and PPL Energy Supply for the six months ended June 30, 2009.

The Series 2009A, 2009B and 2009C bonds are structured as variable-rate remarketable bonds.  PPL Energy Supply may convert the interest rate mode on the bonds from time to time to a commercial paper rate, daily rate, weekly rate or a term rate of at least one year.  The bonds are subject to mandatory purchase under certain circumstances, including upon conversion to a different interest rate mode, and are subject to mandatory redemption upon a determination that the interest on the bonds would be included in the holders' gross income for federal tax purposes.  The Series 2009A bonds bore interest at an initial rate of 0.90% through June 30, 2009.  The Series 2009B bonds bear interest at an initial rate of 1.25% through September 30, 2009.  The Series 2009C bonds are in a weekly interest rate mode, bearing interest at 0.30% at June 30, 2009.

In connection with the issuance of each series of bonds by the PEDFA, PPL Energy Supply entered into separate loan agreements with the PEDFA pursuant to which the PEDFA loaned to PPL Energy Supply the proceeds of the Series 2009A, Series 2009B and Series 2009C bonds on payment terms that correspond to those of the bonds.  PPL Energy Supply issued separate promissory notes to the PEDFA to evidence its obligations under each of the loan agreements.  These loan agreements and promissory notes replaced those associated with the refunded 2007 and 2008 PEDFA bonds in a non-cash transaction that is excluded from the Statement of Cash Flows.

Concurrent with the issuance of each series of bonds, separate letters of credit, totaling $237 million, were issued under PPL Energy Supply's $3.2 billion five-year syndicated credit facility to the trustee in support of each series of bonds.  The letters of credit permit the trustee to draw amounts to pay principal of and interest on, and the purchase price of, the Series 2009A, Series 2009B and Series 2009C bonds when due.  PPL Energy Supply is required to reimburse any draws on the letters of credit within one business day of such draw.

PPL Energy Supply elected to change the interest rate mode on the Series 2009A bonds to a commercial paper rate mode upon expiration of the initial rate period.  As such, in July 2009, the Series 2009A bonds were remarketed in a commercial paper rate mode and bear interest at 0.90% through December 9, 2009, at which time the bonds will be remarketed based upon an interest rate mode elected by PPL Energy Supply.  In connection with this change, the letter of credit supporting the Series 2009A bonds was modified accordingly.

Rating Agency Decisions

Moody's, S&P and Fitch periodically review the credit ratings on the debt and preferred securities of PPL Energy Supply and its 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 PPL Energy Supply and its subsidiaries are based on information provided by PPL Energy Supply and other sources.  The ratings of Moody's, S&P and Fitch are not a recommendation to buy, sell or hold any securities of PPL Energy Supply or its 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.  A downgrade in PPL Energy Supply's or its subsidiaries' credit ratings could result in higher borrowing costs and reduced access to capital markets.

In January 2009, S&P completed a review of PPL Energy Supply, upon which it revised its outlook to negative from stable and affirmed its BBB issuer rating.  As a result of the negative outlook, S&P lowered PPL Energy Supply's commercial paper rating to A-3 from A-2.  S&P stated in its press release that the revision in the outlook for PPL Energy Supply is based primarily on lower than expected cash flows for 2008 combined with concerns over further pressure on financial metrics in 2009.

At the request of PPL Energy Supply, Fitch, in January 2009, and Moody's and S&P, in February 2009, each withdrew their commercial paper rating for PPL Energy Supply.

In February 2009, S&P revised its outlook to negative from stable for each of WPDH Limited, WPD LLP, WPD (South Wales) and WPD (South West) and affirmed the issuer and short-term debt ratings of each of the entities.  S&P stated in its press release that the revision in the outlook is a reflection of the change to PPL's outlook to negative from stable and is not a result from any change in WPD's stand-alone credit profile.

In May 2009, Moody's completed a review of PPL Energy Supply and affirmed the Baa2 senior unsecured rating and stable outlook of PPL Energy Supply.

Ratings Triggers

PPL Energy Supply has various derivative and non-derivative contracts, including contracts for the sale and purchase of electricity and fuel, commodity transportation and storage, and tolling agreements, which contain provisions requiring PPL Energy Supply to post additional collateral, or permit the counterparty to terminate the contract, if PPL Energy Supply's credit rating 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 that would have been required for derivative contracts in a net liability position at June 30, 2009.  At June 30, 2009, if PPL Energy Supply's credit rating had been below investment grade, PPL Energy Supply would have been required to post an additional $303 million of collateral to counterparties for both derivative and non-derivative commodity and commodity-related contracts used in its generation, marketing and trading operations and interest rate and foreign currency contracts.

Capital Expenditures

The schedule below shows PPL Energy Supply's capital expenditure projections at June 30, 2009.

	Projected
	2009		2010		2011		2012		2013
Construction expenditures (a)
Generating facilities	$	345	$	610	$	628	$	483	$	428
Transmission and distribution facilities		251		428		448		460		477
Environmental		210		68		98		114		6
Other		14		17		6		7		6
Total Construction Expenditures		820		1,123		1,180		1,064		917
Nuclear fuel		151		161		178		181		184
Total Capital Expenditures	$	971	$	1,284	$	1,358	$	1,245	$	1,101

(a) Construction expenditures include AFUDC and capitalized interest, which are expected to be $211 million for the 2009-2013 period.

PPL Energy Supply's capital expenditure projections for the years 2009-2013 total $6 billion.  Capital expenditure plans are revised periodically to reflect changes in operational, market and regulatory conditions.  The above schedule has been revised from that which was presented in PPL Energy Supply's 2008 Form 10-K, primarily due to PPL's April 2009 announcement that it filed a new application with the FERC for approval to expand the capacity of its Holtwood hydroelectric plant by 125 MW.  See Note 8 to the Financial Statements for additional information.

For additional information on PPL Energy Supply's liquidity and capital resources, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in PPL Energy Supply's 2008 Form 10-K.

Risk Management - Energy Marketing & Trading and Other

Market Risk

Commodity Price Risk (Non-trading)

PPL Energy Supply segregates its non-trading activities into two categories:  hedge activity and economic activity.  Transactions that are accounted for as hedge activity qualify for hedge accounting treatment.  The economic activity category includes transactions that address a specific risk, but were not eligible for hedge accounting or for which hedge accounting was not elected.  Although they do not receive hedge accounting treatment, these transactions are considered non-trading activity.  The net fair value of economic positions at June 30, 2009 and December 31, 2008 was a net asset of $7 million and a net liability of $52 million.

To hedge the impact of market price fluctuations on PPL Energy Supply's energy-related assets, liabilities and other contractual arrangements discussed above, PPL EnergyPlus sells and purchases physical energy at the wholesale level under FERC market-based tariffs throughout the U.S. and enters into financial exchange-traded and over-the-counter contracts.  PPL Energy Supply's non-trading commodity derivative contracts mature at various times through 2017.

The following table sets forth changes in the net fair value of PPL Energy Supply's non-trading commodity derivative contracts.  See Notes 13 and 14 to the Financial Statements for additional information.

	Three Months Ended June 30,					Six Months Ended June 30,
	2009		2008			2009		2008
Fair value of contracts outstanding at the beginning of the period	$	728	$	(268	)	$	402	$	(305	)
Contracts realized or otherwise settled during the period		102		(104	)		201		(67	)
Fair value of new contracts entered into during the period		133		70			55		170
Changes in fair value attributable to changes in valuation techniques (a)									55
Other changes in fair value		102		(752	)		407		(907	)
Fair value of contracts outstanding at the end of the period	$	1,065	$	(1,054	)	$	1,065	$	(1,054	)

(a) Amount represents the reduction of valuation reserves related to capacity and FTR contracts upon the adoption of SFAS 157.

The following table segregates the net fair value of PPL Energy Supply's non-trading commodity derivative contracts at June 30, 2009, based on whether the fair value was determined by prices quoted in active markets for identical instruments or other more subjective means.

	Net Asset (Liability)
	Maturity Less Than 1 Year		Maturity 1-3 Years		Maturity 4-5 Years		Maturity in Excess of 5 Years		Total Fair Value
Source of Fair Value
Prices quoted in active markets for identical instruments	$	4							$	4
Prices based on significant other observable inputs		97	$	631	$	191				919
Prices based on significant unobservable inputs		2		15		38	$	87		142
Fair value of contracts outstanding at the end of the period	$	103	$	646	$	229	$	87	$	1,065

Because of PPL Energy Supply's efforts to hedge the value of energy from its generation assets, PPL Energy Supply sells electricity, capacity and related services and buys fuel on a forward basis, resulting in open contractual positions.  If PPL Energy Supply were unable to deliver firm capacity and energy or to accept the delivery of fuel under its agreements, under certain circumstances it could be required to pay damages.  These damages would be based on the difference between the market price and the contract price of the commodity.  Depending on price volatility in the wholesale energy markets, such damages could be significant.  Extreme weather conditions, unplanned power plant outages, transmission disruptions, nonperformance by counterparties (or their own counterparties) with which it has energy contracts and other factors could affect PPL Energy Supply's ability to meet its obligations, or cause significant increases in the market price of replacement energy.  Although PPL Energy Supply attempts to mitigate these risks, there can be no assurance that it will be able to fully meet its firm obligations, that it will not be required to pay damages for failure to perform, or that it will not experience counterparty nonperformance in the future.

Commodity Price Risk (Trading)

PPL Energy Supply's trading contracts mature at various times through 2015.  The following table sets forth changes in the net fair value of PPL Energy Supply's trading commodity derivative contracts.  See Note 13 to the Financial Statements for additional information.

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Fair value of contracts outstanding at the beginning of the period	$	(37	)	$	22		$	(75	)	$	16
Contracts realized or otherwise settled during the period					(31	)		33			(31	)
Fair value of new contracts entered into during the period		9			31			35			23
Other changes in fair value		15			(6	)		(6	)		8
Fair value of contracts outstanding at the end of the period	$	(13	)	$	16		$	(13	)	$	16

PPL Energy Supply will reverse unrealized losses of approximately $1 million over the next three months as the transactions are realized.

The following table segregates the net fair value of PPL Energy Supply's trading commodity derivative contracts at June 30, 2009 based on whether the fair value was determined by prices quoted in active markets for identical instruments or other more subjective means.

	Net Asset (Liability)
	Maturity Less Than 1 Year			Maturity 1-3 Years			Maturity 4-5 Years			Maturity in Excess of 5 Years			Total Fair Value
Source of Fair Value
Prices quoted in active markets for identical instruments	$	1		$	1								$	2
Prices based on significant other observable inputs		(1	)		(12	)	$	(1	)	$	2			(12	)
Prices based on significant unobservable inputs					(2	)					(1	)		(3	)
Fair value of contracts outstanding at the end of the period	$			$	(13	)	$	(1	)	$	1		$	(13	)

VaR Models

PPL Energy Supply utilizes a VaR model to measure commodity price risk in domestic gross energy margins for its non-trading and trading portfolios.  This approach is consistent with how PPL's RMC assesses the market risk of its commodity business.  VaR is 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.  PPL Energy Supply calculates VaR using a Monte Carlo simulation technique based on a five-day holding period at a 95% confidence level.  On June 30, 2009 and December 31, 2008, the VaR for PPL Energy Supply's portfolios using end-of-quarter results for the period was as follows:

	Trading VaR				Non-Trading VaR
	June 30,		Dec. 31,		June 30,		Dec. 31,
	2009		2008		2009		2008
95% Confidence Level, Five-Day Holding Period
Period End	$	4	$	3	$	9	$	10
Average for the Period		2		10		11		14
High		4		22		13		20
Low		1		3		9		9

The trading portfolio includes all speculative positions, regardless of delivery period.  All positions not considered speculative are considered non-trading.  PPL Energy Supply's non-trading portfolio includes PPL Energy Supply's entire portfolio, including generation, with delivery periods through the next 12 months.  Both the trading and non-trading VaR computations exclude FTRs due to the absence of liquid spot and forward markets.  The fair value of the FTR positions at June 30, 2009 was an unrealized loss of $3 million, as follows:

	2009			2010			2011
Trading (a)	$	1
Non-trading		(1	)	$	(2	)	$	(1	)
Total	$			$	(2	)	$	(1	)

(a) The amount of trading losses expected to be realized in the next three months is insignificant.

Interest Rate Risk

PPL Energy Supply and its subsidiaries have issued debt to finance their operations, which exposes them to interest rate risk.  PPL and PPL Energy Supply utilize various financial derivative instruments to adjust the mix of fixed and floating interest rates in PPL Energy Supply's debt portfolio, adjust the duration of its debt portfolio 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 PPL Energy Supply's debt portfolio due to changes in the absolute level of interest rates.

At June 30, 2009, PPL Energy Supply's potential annual exposure to increased interest expense, based on a 10% increase in interest rates, was $1 million.

PPL Energy Supply is also exposed to changes in the fair value of its domestic and international debt portfolios.  PPL Energy Supply estimated that a 10% decrease in interest rates at June 30, 2009 would increase the fair value of its debt portfolio by $196 million.

PPL and PPL Energy Supply utilize various risk management instruments to reduce PPL Energy Supply's exposure to the expected future cash flow variability of its debt instruments.  These risks include exposure to adverse interest rate movements for outstanding variable rate debt and for future anticipated financing.  While PPL Energy Supply is exposed to changes in the fair value of these instruments, any changes in the fair value of these instruments are recorded in equity and then reclassified into earnings in the same period during which the item being hedged affects earnings.  At June 30, 2009, PPL Energy Supply had none of these instruments outstanding.

PPL and PPL Energy Supply also utilize various risk management instruments to adjust the mix of fixed and floating interest rates in PPL Energy Supply's debt portfolio.  The change in fair value of these instruments, as well as the offsetting change in the value of the hedged exposure of the debt, is reflected in earnings.  At June 30, 2009, PPL Energy Supply had none of these instruments outstanding.

WPDH Limited holds a net notional position in cross-currency swaps totaling $302 million to hedge the interest payments and principal of its U.S. dollar-denominated senior notes with maturity dates ranging from December 2017 to December 2028.  While PPL Energy Supply is exposed to changes in the fair value of these instruments, any change in the fair value of these instruments is recorded in equity and reclassified into earnings in the same period during which the item being hedged affects earnings.  The estimated fair value of this position, including accrued interest, at June 30, 2009 was a net asset of $14 million.  WPDH Limited estimated that a 10% adverse movement in foreign currency exchange rates and interest rates at June 30, 2009 would decrease the net asset by $40 million.

Foreign Currency Risk

PPL Energy Supply is exposed to foreign currency risk, primarily through investments in U.K. affiliates.  In addition, PPL Energy Supply's domestic operations may make purchases of equipment in currencies other than U.S. dollars.

PPL and PPL Energy Supply have 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 Energy Supply enters into financial instruments to protect against foreign currency translation risk of expected earnings.

To protect the value of a portion of PPL Energy Supply's net investment in WPD, PPL executed forward contracts to sell British pounds sterling.  The total notional amount of the contracts outstanding at June 30, 2009 was £55 million.  The settlement dates of these contracts range from September 2009 through June 2011.  At June 30, 2009, the fair value of these positions was a net asset of $18 million.  PPL Energy Supply estimated that a 10% adverse movement in foreign currency exchange rates at June 30, 2009 would decrease the net asset by $9 million.

To economically hedge the translation of 2009 expected income denominated in British pounds sterling to U.S. dollars, PPL entered into a combination of average rate forwards and average rate options to sell British pounds sterling.  At June 30, 2009, the total exposure hedged was £61 million.  These forwards and options have termination dates ranging from July 2009 through December 2009.  At June 30, 2009, the fair value of these positions was a net liability of $9 million.  PPL Energy Supply estimated that a 10% adverse movement in foreign currency exchange rates at June 30, 2009 would increase the net liability by $8 million.

NDT Funds - Securities Price Risk

In connection with certain NRC requirements, PPL Susquehanna maintains trust funds to fund certain costs of decommissioning the Susquehanna nuclear station.  At June 30, 2009, these funds were invested primarily in domestic equity securities and fixed-rate, fixed-income securities.  These securities are reflected at fair value on PPL Energy Supply's Balance Sheet.  The mix of securities is designed to provide returns sufficient to fund Susquehanna's decommissioning and to compensate for inflationary increases in decommissioning costs.  However, the equity securities included in the trusts are exposed to price fluctuation in equity markets, and the values of fixed-rate, fixed-income securities are primarily exposed to changes in interest rates.  PPL actively monitors the investment performance and periodically reviews asset allocation in accordance with its NDT policy statement.  At June 30, 2009, a hypothetical 10% increase in interest rates and a 10% decrease in equity prices would have resulted in an estimated $33 million reduction in the fair value of the trusts' assets.  See Notes 13 and 18 to the Financial Statements for additional information regarding the NDT funds.

Credit Risk

See Notes 11, 13 and 14 to the Financial Statements and "Risk Management - Energy Marketing & Trading and Other - Credit Risk" in PPL Energy Supply's 2008 Form 10-K for information on credit risk.

Related Party Transactions

PPL Energy Supply is not aware of any material ownership interests or operating responsibility by senior management of PPL Energy Supply in outside partnerships, including leasing transactions with variable interest entities, or other entities doing business with PPL Energy Supply.

For additional information on related party transactions, see Note 11 to the Financial Statements.

Acquisitions, Development and Divestitures

PPL Energy Supply continuously evaluates strategic options for its business segments and, from time to time, PPL Energy Supply and its subsidiaries are involved in negotiations with third parties regarding acquisitions and dispositions of businesses and assets, joint ventures and development projects, which may or may not result in definitive agreements.  Any such transactions may impact future financial results.  See Note 8 to the Financial Statements for information regarding such recent transactions.

PPL Energy Supply is currently planning incremental capacity increases of 208 MW, primarily at its existing generating facilities.  Offsetting the planned capacity increases is an expected reduction of 30 MW due to the anticipated sale of the majority of PPL Maine's hydroelectric generation business, for which PPL Maine signed a definitive agreement in July 2009.  See Note 8 to the Financial Statements for additional information.

PPL Energy Supply continuously reexamines development projects based on market conditions and other factors to determine whether to proceed with the projects, sell, cancel or expand them, execute tolling agreements or pursue other options.

Environmental Matters

See Note 10 to the Financial Statements for a discussion of environmental matters.

New Accounting Standards

See Notes 2 and 20 to the Financial Statements for a discussion of new accounting standards adopted and pending adoption.

Application of Critical Accounting Policies

PPL Energy Supply's financial condition and results of operations are impacted by the methods, assumptions and estimates used in the application of critical accounting policies.  The following accounting policies are particularly important to the financial condition or results of operations of PPL Energy Supply, and require estimates or other judgments of matters inherently uncertain: price risk management, defined benefits, asset impairment, leasing, loss accruals, AROs and income tax uncertainties.  See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in PPL Energy Supply's 2008 Form 10-K for a discussion of each critical accounting policy.

PPL ELECTRIC UTILITIES CORPORATION AND SUBSIDIARIES

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

Overview

PPL Electric is an electricity delivery service provider in eastern and central Pennsylvania with headquarters in Allentown, Pennsylvania.  Refer to "Item 1. Business - Background" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview" in PPL Electric's 2008 Form 10-K for a description of its business, discussion of its strategy, and the risks and challenges that it faces in its business.  See "Forward-Looking Information," Note 10 to the Financial Statements and the remainder of Item 2 in this Form 10-Q, and "Item 1A. Risk Factors" and the rest of Item 7 in PPL Electric's 2008 Form 10-K for more information concerning the material risks and uncertainties that PPL Electric faces in its business and with respect to its future earnings.

Market Events

The recent conditions in the financial markets have been disruptive to the processes of managing credit risk, responding to liquidity needs, measuring financial instruments at fair value, and managing market price risk.  Bank credit capacity has been reduced and the cost of renewing or establishing new credit facilities has increased significantly, thereby making less certain businesses' ability to enter into long-term energy commitments or reliably estimate the longer-term cost and availability of credit.

Credit Risk

Credit risk is the risk that PPL Electric would incur a loss as a result of nonperformance by counterparties of their contractual obligations.  PPL Electric maintains credit policies and procedures to limit counterparty credit risk.  The recent conditions in the financial and commodity markets have generally increased PPL Electric's exposure to credit risk.  See Notes 11, 13 and 14 to the Financial Statements and "Risk Management - Credit Risk" in PPL Electric's 2008 Form 10-K for more information on credit risk.

Liquidity Risk

Despite the recent conditions in the financial and capital markets, external financing activities by domestic electric utilities are being completed, albeit at higher-than-historical interest rates.  PPL Electric expects to continue to have access to adequate sources of liquidity through operating cash flows, cash and cash equivalents, credit facilities and, from time to time, through the issuance of capital market securities.  See "Financial Condition - Liquidity and Capital Resources" for an expanded discussion of PPL Electric's liquidity position and a discussion of financing transactions.

Securities Price Risk

PPL Electric participates in and is allocated costs from defined benefit plans sponsored by PPL.  Declines in the market price of debt and equity securities result in unrealized losses that reduce the asset values of PPL's defined benefit plans.  PPL's pension plan had positive returns in the second quarter of 2009, thereby recovering a portion of the negative returns incurred in 2008 and the first quarter of 2009.  Determination of the funded status of defined benefit plans, contribution requirements and net periodic defined benefit costs for future years are subject to changes in various assumptions, in addition to the actual performance of the assets in the plans.  See "Application of Critical Accounting Policies - Defined Benefits" in PPL Electric's 2008 Form 10-K for a discussion of the assumptions and sensitivities regarding those assumptions.

The Economic Stimulus Package

The Economic Stimulus Package is intended to stimulate the U.S. economy through federal tax relief, expansion of unemployment benefits and other social stimulus provisions, domestic spending for education, health care and infrastructure, including the energy sector.  A portion of the benefits included in the Economic Stimulus Package are offered in the form of loan fee reductions, expanded loan guarantees and secondary market incentives.  Funds from the Economic Stimulus Package will be allocated to various federal agencies, such as the DOE, and will also be provided to state agencies through block grants.  The DOE plans to use a portion of the funds for smart grid and other efficiency-related programs, and has initiated a process for that purpose.  In July 2009, PPL Electric proposed to the DOE a $38 million project that would use smart grid technology to strengthen reliability, save energy and improve electric service for 60,000 Harrisburg, Pennsylvania area customers.  PPL Electric is requesting a DOE grant to provide half of the funding for this pilot program.  PPL Electric and its subsidiaries continue to review the Economic Stimulus Package's provisions to determine the impact on PPL Electric's transmission projects and other business-related activities.

The following information should be read in conjunction with PPL Electric's Condensed Consolidated Financial Statements and the accompanying Notes and with PPL Electric's 2008 Form 10-K.

Terms and abbreviations are explained in the glossary.  Dollars are in millions unless otherwise noted.

Results of Operations

The following discussion begins with a summary of PPL Electric's earnings.  "Results of Operations" continues with a description of key factors that management expects may impact future earnings.  This section ends with "Statement of Income Analysis," which includes explanations of significant changes in principal items on PPL Electric's Statements of Income, comparing the three and six months ended June 30, 2009, with the same periods in 2008.

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

Earnings

Net income available to PPL was:

Three Months Ended June 30,				Six Months Ended June 30,
2009		2008		2009		2008
$	17	$	32	$	66	$	83

The after-tax changes in net income available to PPL between these periods were due to the following factors.

	June 30, 2009 vs. June 30, 2008
	Three Months Ended			Six Months Ended
Delivery revenues (net of CTC/ITC amortization, interest expense on transition bonds and ancillary charges)	$	(11	)	$	(10	)
Other operation and maintenance		2			8
Interest expense		(6	)		(9	)
Special items					(6	)
	$	(15	)	$	(17	)

· Lower delivery revenues for both periods were primarily due to economic conditions including industrial customers scaling back on production and a true-up of the FERC formula-based transmission revenues recorded in the three months ended June 30, 2009.  See Note 2 to the Financial Statements for additional information on the true-up.  In addition, during the second quarter of 2009, weather had an unfavorable impact on sales volumes.

· Lower other operation and maintenance expense for the six months ended June 30, 2009, compared with the same period in 2008, primarily due to decreased contractor expenses in 2009 and higher storm costs in 2008, net of insurance recoveries.

· Higher interest expense for both periods, primarily due to $400 million of debt issuances in 2008 that prefund a portion of 2009 debt maturities.

The following after-tax amounts, which management considers special items, also had an impact on earnings for the six months ended June 30, 2009.

Asset impairments	$	(1	)
Workforce reduction charge (Note 6)		(5	)
Total	$	(6	)

Earnings Outlook

Excluding special items, PPL Electric projects lower earnings in 2009 compared with 2008, primarily due to higher financing costs, lower electricity delivery revenues and higher operation and maintenance expenses.

See Note 10 to the Financial Statements for a discussion of items that could impact earnings beyond 2009, including the PUC-approved plan to procure default electricity supply for 2010 through May 2013, Pennsylvania legislative updates and other regulatory activities.

Statement of Income Analysis --

Operating Revenues

Retail Electric

The decreases in revenues from retail electric operations were attributable to:

	June 30, 2009 vs. June 30, 2008
	Three Months Ended			Six Months Ended
Delivery	$	(28	)	$	(28	)
PLR		(17	)		(8	)
Other		2			3
	$	(43	)	$	(33	)

Retail electric revenues for both periods were negatively impacted by economic conditions including industrial customers scaling back on production, and a true-up of the FERC formula-based transmission revenues.  See Note 2 to the Financial Statements for additional information on the true-up.  In addition, during the second quarter of 2009, weather had an unfavorable impact on sales volumes.

Wholesale Electric to Affiliate

PPL Electric has a contract to sell to PPL EnergyPlus the electricity that PPL Electric purchases under contracts with NUGs.  The decreases of $10 million and $18 million in wholesale electric to affiliate for the three and six months ended June 30, 2009, compared with the same periods in 2008, were primarily due to the expiration of two NUG contracts during 2008.  Substantially all of the remaining NUG contracts will expire by 2010.

Energy Purchases

The decreases of $13 million and $22 million in energy purchases for the three and six months ended June 30, 2009, compared with the same periods in 2008, were primarily due to the expiration of two NUG contracts in 2008 (substantially all of the remaining NUG contracts will expire by 2010), as well as lower ancillary charges, which are primarily the result of lower pricing.

Energy Purchases from Affiliate

Energy purchases from affiliate decreased by $17 million and $9 million for the three and six months ended June 30, 2009, compared with the same periods in 2008.  The decreases were attributable to unfavorable weather during the second quarter of 2009 and the impact of economic conditions primarily on industrial customers, partially offset by higher prices for energy purchased under the power supply contracts with PPL EnergyPlus that were needed to support that load.

Other Operation and Maintenance

The changes in other operation and maintenance expenses were due to:

	June 30, 2009 vs. June 30, 2008
	Three Months Ended			Six Months Ended
Workforce reduction charge (Note 6)				$	9
Insurance recovery of storm costs (Note 11)					3
Uncollectible accounts	$	2			2
Allocation of certain corporate service costs (Note 11)		(3	)		1
Storm costs					(4	)
Contractor expenses					(2	)
Salary/overhead expense		(3	)		(6	)
Other		1			(3	)
	$	(3	)	$

Amortization of Recoverable Transition Costs

Amortization of recoverable transition costs increased by $2 million and $10 million for the three and six months ended June 30, 2009, compared with the same periods in 2008.  The amortization of recoverable transition costs is based on a PUC amortization schedule, adjusted for ITC and CTC recoveries in customer rates and related expenses.  Since the amortization substantially matches the revenue recorded based on recovery in customer rates, there is minimal impact on earnings.

Taxes, Other Than Income

Taxes, other than income decreased by $2 million and $6 million for the three and six months ended June 30, 2009, compared with the same periods in 2008.  The decreases were primarily due to a decrease in Pennsylvania gross receipts tax, which was attributable to the decline in delivery volumes.

Other Income (Expense) - net

See Note 12 to the Financial Statements for details of other income.

Financing Costs

The increases in financing costs, which include "Interest Expense" and "Interest Expense with Affiliate," were due to:

	June 30, 2009 vs. June 30, 2008
	Three Months Ended			Six Months Ended
Long-term debt interest expense	$	6		$	8
Interest on PLR contract collateral (Note 11)		(2	)		(4	)
Other		1			1
	$	5		$	5

Income Taxes

The decreases in income taxes were due to:

	June 30, 2009 vs. June 30, 2008
	Three Months Ended			Six Months Ended
Tax reserve adjustments	$	1
Lower pre-tax book income		(9	)	$	(11	)
Other		(1	)		(2	)
	$	(9	)	$	(13	)

See Note 5 to the Financial Statements for additional information on income taxes.

Financial Condition

Liquidity and Capital Resources

PPL Electric continues to focus on maintaining a strong credit profile and liquidity position during the disruptive conditions in the financial markets and historically difficult bank and capital market conditions.  PPL Electric expects to continue to have adequate liquidity available through operating cash flows, cash and cash equivalents, its credit facilities and, as necessary, the issuance of capital market securities.

PPL Electric had the following at:

	June 30, 2009		December 31, 2008
Cash and cash equivalents	$	520	$	483
Short-term debt				95

The $37 million increase in PPL Electric's cash and cash equivalents position was primarily the net result of:

· proceeds of $298 million from the issuance of long-term debt;

· the net receipt of $221 million under a demand loan with an affiliate;

· the payment of $157 million of dividends on common stock and preferred securities;

· $125 million of capital expenditures;

· a net decrease in short-term debt of $95 million;

· $91 million of cash used in operating activities; and

· the retirement of $9 million of long-term debt.

Credit Facilities

At June 30, 2009, PPL Electric's total committed borrowing capacity under its credit facilities and the use of this borrowing capacity were:

	Committed Capacity		Borrowed	Letters of Credit Issued		Unused Capacity
5-year Syndicated Credit Facility (a)	$	190		$	1	$	189
Asset-backed Credit Facility (b)		150			n/a		150
Total PPL Electric Credit Facilities	$	340		$	1	$	339

(a)	The commitments under this credit facility are currently provided by a diverse bank group consisting of 20 banks, with no one bank providing more than 18% of the total committed capacity.
(b)	At June 30, 2009, based on accounts receivable and unbilled revenue pledged, $150 million was available for borrowing under the asset-backed credit facility.  In July 2009, PPL Electric and a subsidiary extended the expiration date of the credit agreement related to the asset-backed commercial paper program to July 2010.

See Note 7 to the Financial Statements for further discussion of PPL Electric's credit facilities.

Commercial Paper

Market conditions to issue commercial paper with ratings of P-2, A-2 and F-2 by Moody's, S&P and Fitch have improved since 2008.  However, they continue to be impacted by the volatility experienced in the broader financial markets.  Based on its current cash position and anticipated cash flows, PPL Electric currently does not expect to need to issue any commercial paper during 2009, but it may do so from time to time to facilitate short-term cash flow needs.

Financing Activities

In May 2009, PPL Electric issued $300 million of 6.25% First Mortgage Bonds due 2039 (6.25% Bonds).  The 6.25% Bonds may be redeemed any time prior to maturity at PPL Electric's option at make-whole redemption prices.  PPL Electric received proceeds of $296 million, net of a discount and underwriting fees, from the issuance of the 6.25% Bonds.  Approximately $86 million of the proceeds will be used to partially fund the repayment at maturity of approximately $486 million outstanding aggregate principal amount of PPL Electric's Senior Secured Bonds, 6-1/4% Series, due August 2009.  The balance of such repayment will be funded from the issuance in October 2008 of $400 million of 7.125% Senior Secured Bonds due 2013.  The balance of the proceeds from the issuance of the 6.25% Bonds is being used for general corporate purposes, including capital expenditures.

In June 2009, PPL Electric repaid its $9 million obligation under a Variable Rate Pollution Control Facilities Note in connection with the early redemption in full of the underlying pollution control revenue bonds that were issued by the Indiana County Industrial Development Authority and due in June 2027.

Rating Agency Decisions

Moody's, S&P and Fitch periodically review the credit ratings on the debt and preferred securities of PPL Electric.  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 PPL Electric are based on information provided by PPL Electric and other sources.  The ratings of Moody's, S&P and Fitch are not a recommendation to buy, sell or hold any securities of PPL Electric.  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.  A downgrade in PPL Electric's credit ratings could result in higher borrowing costs and reduced access to capital markets.

In January 2009, S&P completed a review of PPL Electric, upon which it revised its outlook to negative from stable and affirmed the A- issuer rating of PPL Electric.  S&P stated in its press release that the revision in its outlook reflects the linkage with PPL, whose outlook was also revised to negative from stable, along with their expectation that PPL Electric's financial metrics could weaken beginning in 2010.

In May 2009, Moody's completed a review of PPL Electric.  As a result of that review, Moody's revised its outlook for PPL Electric to negative from stable.  Moody's stated in its press release that the revision in the outlook for PPL Electric reflects Moody's expectation that PPL Electric's financial metrics will deteriorate beyond 2009 and considers the potential for additional pressure on cash flows.

Fitch did not take any actions related to PPL Electric during the six months ended June 30, 2009.

For additional information on PPL Electric's liquidity and capital resources, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in PPL Electric's 2008 Form 10-K.

Risk Management

Market Risk

Commodity Price Risk - PLR Contracts through 2009

PPL Electric and PPL EnergyPlus have power supply agreements under which PPL EnergyPlus sells to PPL Electric (under a predetermined pricing arrangement) energy and capacity to fulfill PPL Electric's PLR obligation through 2009.  As a result, PPL Electric has shifted any electric price risk relating to its PLR obligation to PPL EnergyPlus through 2009.  See Note 11 to the Financial Statements for information regarding credit risk associated with the PLR contracts with PPL EnergyPlus.

Commodity Price Risk - PLR Contracts Subsequent to 2009

PPL Electric will provide PLR service beginning January 1, 2010 under a PUC-approved plan through which PPL Electric will fully recover all incurred costs including administrative costs.  The plan covers the period through December 31, 2010.  Under the plan, PPL Electric has entered into various full-requirement power purchase agreements with multiple wholesale suppliers that include fixed prices.  As a result, PPL Electric has shifted any electric price risk relating to its PLR obligation to those wholesale suppliers through 2010.  In June 2009, PPL Electric received PUC approval of a plan with a similar structure, including cost recovery, covering the period from January 1, 2011 through May 31, 2013.  See Note 10 the Financial Statements for information on the PUC-approved procurement plan and other ongoing Pennsylvania regulatory and legislative activities.

Interest Rate Risk

PPL Electric has issued debt to finance its operations, which exposes it to interest rate risk.  At June 30, 2009, PPL Electric's potential annual exposure to increased interest expense, based on a 10% increase in interest rates, was not significant.

PPL Electric is also exposed to changes in the fair value of its debt portfolio.  PPL Electric estimated that a 10% decrease in interest rates at June 30, 2009, would increase the fair value of its debt portfolio by $73 million.

Credit Risk

See Notes 11, 13 and 14 to the Financial Statements and "Risk Management - Credit Risk" in PPL Electric's 2008 Form 10-K for information on credit risk.

Related Party Transactions

PPL Electric is not aware of any material ownership interests or operating responsibility by senior management of PPL Electric in outside partnerships, including leasing transactions with variable interest entities, or other entities doing business with PPL Electric.

For additional information on related party transactions, see Note 11 to the Financial Statements.

Environmental Matters

See Note 10 to the Financial Statements for a discussion of environmental matters.

New Accounting Standards

See Notes 2 and 20 to the Financial Statements for a discussion of new accounting standards adopted and pending adoption.

Application of Critical Accounting Policies

PPL Electric's financial condition and results of operations are impacted by the methods, assumptions and estimates used in the application of critical accounting policies.  The following accounting policies are particularly important to the financial condition or results of operations of PPL Electric, and require estimates or other judgments of matters inherently uncertain: defined benefits, loss accruals, income tax uncertainties and regulation.  See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in PPL Electric's 2008 Form 10-K for a discussion of each critical accounting policy.

PPL CORPORATION

PPL ENERGY SUPPLY, LLC

PPL ELECTRIC UTILITIES CORPORATION

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Reference is made to "Risk Management - Energy Marketing & Trading and Other" for PPL and PPL Energy Supply and "Risk Management" for PPL Electric in Management's Discussion and Analysis of Financial Condition and Results of Operations.

Item 4.  Controls and Procedures

PPL Corporation
(a)	Evaluation of disclosure controls and procedures.
	The registrant's principal executive officer and principal financial officer, based on their evaluation of the registrant's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) have concluded that, as of June 30, 2009, the registrant's disclosure controls and procedures are effective to ensure that material information relating to the registrant and its 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 officer, to allow for timely decisions regarding required disclosure.
(b)	Change in internal controls over financial reporting.
	The registrant's principal executive officer and principal financial officer have concluded that there were no changes in the registrant's internal control over financial reporting during the registrant's second fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.

Item 4(T).  Controls and Procedures

PPL Energy Supply, LLC and PPL Electric Utilities Corporation
(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) and 15d-15(e) of the Securities Exchange Act of 1934) have concluded that, as of June 30, 2009, 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' second fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrants' internal control over financial reporting.

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings
For additional information regarding various 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 PPL's, PPL Energy Supply's and PPL Electric's 2008 Form 10-K; and
·	Note 10 of the registrants' "Combined Notes to Condensed Consolidated Financial Statements" in Part I of this report.

Item 1A.  Risk Factors

There have been no material changes in PPL's, PPL Energy Supply's and PPL Electric's risk factors from those disclosed in "Item 1A. Risk Factors" of the 2008 Form 10-K.

Item 4.  Submission of Matters to a Vote of Security Holders
At PPL's Annual Meeting of Shareowners held on May 20, 2009, the shareowners:
	(1)	Elected the three nominees for the office of director. The votes for individual nominees were:
			Number of Votes
			For	Withhold Authority
		John W. Conway	281,439,443	17,379,532
		E. Allen Deaver	290,142,322	8,676,653
		James H. Miller	289,456,305	9,362,670
		Directors whose terms of office continued were Frederick M. Bernthal, Louise K. Goeser, Stuart E. Graham, Stuart Heydt,  Craig A. Rogerson, W. Keith Smith and Keith H. Williamson.
	(2)	Ratified the appointment of Ernst & Young LLP as independent registered public accounting firm for the year ending December 31, 2009.  The vote was 295,308,508 in favor and 2,309,466 against, with 1,201,001 abstaining and no broker non-votes.
	(3)	Approved a non-binding shareowner proposal for the election of each director annually.  The vote was 202,494,314 in favor and 54,374,726 against, with 2,818,498 abstaining and 39,131,437 broker non-votes.
At PPL Electric's Annual Meeting of Shareowners held on May 21, 2009, the shareowners:
	(1)	Elected all six nominees for the office of director.  Dean A. Christiansen, David G. DeCampli, Paul A. Farr, Robert J. Grey, James H. Miller and William H. Spence were elected with 66,368,056 votes cast for each director, no votes cast against and no votes abstaining.

Item 6.  Exhibits
10(a)	-	Amendment to Form of Severance Agreement entered into between PPL Corporation and the Named Executive Officers
10(b)	-	Employment letter dated May 22, 2009 between PPL Services Corporation and Gregory N. Dudkin
10(c)	-	£210 million Multicurrency Revolving Facility Agreement, dated July 7, 2009, between Western Power Distribution (South West) plc and HSBC Bank plc, Lloyds TSB Bank plc and Clydesdale Bank plc
12(a)	-	PPL Corporation and Subsidiaries Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
12(b)	-	PPL Energy Supply, LLC and Subsidiaries Computation of Ratio of Earnings to Fixed Charges
12(c)	-	PPL Electric Utilities Corporation and Subsidiaries Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, for the quarterly period ended June 30, 2009, filed by the following officers for the following companies:
31(a)	-	James H. Miller for PPL Corporation
31(b)	-	Paul A. Farr for PPL Corporation
31(c)	-	James H. Miller for PPL Energy Supply, LLC
31(d)	-	Paul A. Farr for PPL Energy Supply, LLC
31(e)	-	David G. DeCampli for PPL Electric Utilities Corporation
31(f)	-	J. Matt Simmons, Jr. for PPL Electric Utilities Corporation
Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, for the quarterly period ended June 30, 2009, furnished by the following officers for the following companies:
32(a)	-	James H. Miller for PPL Corporation
32(b)	-	Paul A. Farr for PPL Corporation
32(c)	-	James H. Miller for PPL Energy Supply, LLC
32(d)	-	Paul A. Farr for PPL Energy Supply, LLC
32(e)	-	David G. DeCampli for PPL Electric Utilities Corporation
32(f)	-	J. Matt Simmons, Jr. for PPL Electric Utilities Corporation

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)
	PPL Energy Supply, LLC
	(Registrant)
	PPL Electric Utilities Corporation
	(Registrant)
Date:  August 4, 2009	/s/  J. Matt Simmons, Jr.
	J. Matt Simmons, Jr.
	Vice President and Controller
	(Principal Accounting Officer)

EX-10.A

Exhibit 10(a)

AGREEMENT

THIS AGREEMENT, effective as of _______________, ____, is made by and between PPL Corporation, a Pennsylvania corporation and _______________ (the "Executive").

WHEREAS, the Company considers it essential to the best interests of its shareowners to foster the continued employment of key management personnel; and

WHEREAS, the Board of Directors of the Company (the "Board") recognizes that, as is the case with many publicly-held corporations, the possibility of a Change in Control (as defined in the last Section hereof) exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its shareowners; and

WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control;

WHEREAS, the Executive and the Company have entered into a Severance Agreement effective as of __________________ (the “Prior Severance Agreement”), which the Executive and the Company desire to terminate, in its entirety, effective as of the date hereof, and in lieu thereof enter into this Agreement;

NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows:

1.  Defined Terms.  The definitions of capitalized terms used in this Agreement are provided in the last Section hereof.

2.  Term of Agreement.  The Term of this Agreement shall commence on the date hereof and shall continue in effect through December 31, ____; provided, however, that commencing on January 1, ____ and each January 1 thereafter, the Term shall automatically be extended for one additional year unless, either the Company or the Executive gives at least 15 months advance notice of termination by, not later than September 30 of the year preceding the year in which the Term is then scheduled to expire, giving notice not to extend the Term; and further provided, however, that if a Change in Control shall have occurred during the Term, the Term shall expire no earlier than thirty-six (36) months beyond the month in which such Change in Control occurred.  Notwithstanding the foregoing, and subject to any extensions pursuant to Section 7.3, in the event that prior to the occurrence of a Change in Control or Potential Change in Control, the Executive's employment is terminated for any reason then this Agreement shall terminate as of the date that the Executive's employment is terminated.

3.  Company's Covenants Summarized.  In order to induce the Executive to remain in the employ of the Company and in consideration of the Executive's covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the Severance Payments and the other payments and benefits described herein.  Except as provided in Section 9.1 hereof, no Severance Payments shall be payable under this Agreement unless there shall have been (or, under the terms of the second sentence of Section 6.1 hereof, there shall be deemed to have been) a termination of the Executive's employment with the Company following a Change in Control and during the Term.  This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed to in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company.

4.  The Executive's Covenants.  The Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control during the Term, the Executive will remain in the employ of the Company until the earliest of (i) the last day of the Potential Change in Control Period, (ii) the date of a Change in Control, (iii) the date of termination by the Executive of the Executive's employment for Good Reason or by reason of death, Disability or Retirement, or (iv) the termination by the Company of the Executive's employment for any reason.

5.  Compensation Other Than Severance Payments.

5.1  Following a Change in Control and during the Term, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period (other than any disability plan), until the Executive's employment is terminated by the Company for Disability.

5.2  If the Executive's employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay to the Executive (i) the Executive's full base salary through the Date of Termination at the rate in effect immediately prior to the Date of Termination, or if higher, the rate in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of the Company's compensation or benefit plans, programs or arrangements as in effect immediately prior to the Date of Termination, or if more favorable to the Executive, as in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, (ii) the value of any annual bonus or cash incentive plan payment that would have been paid for service in the final calendar year of employment, as if 100% of target goals were achieved, but prorated by multiplying by a fraction equal to the number of full calendar months of service completed divided by 12, and (iii) the value of any Restricted Stock Units that would have been awarded for service in the final calendar year of employment, as if 100% of target goals were achieved, but prorated by multiplying by a fraction equal to the number of full calendar months of service completed divided by 12.

5.3  If the Executive's employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay to the Executive the Executive's normal post-termination compensation and benefits due the Executive as such payments become due.  Such post-termination compensation and benefits shall be determined under, and paid in accordance with, the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the occurrence of the first event or circumstance constituting Good Reason.

6.  Severance Payments.

6.1  The Company shall pay the Executive the payments, and provide the Executive the benefits, described in Section 6.2 (the "Severance Payments") upon the termination of the Executive's employment following a Change in Control and during the Term, in addition to the payments and benefits described in Section 5 hereof, unless such termination is (i) by the Company for Cause, (ii) by reason of death, Disability or Retirement, or (iii) by the Executive without Good Reason.  For purposes of this Agreement, the Executive's employment shall be deemed to have been terminated following a Change in Control by the Company without Cause or by the Executive with Good Reason if (A) the Executive's employment is terminated by the Company without Cause prior to a Change in Control (whether or not a Change in Control ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control or (B) if the Executive terminates his employment for Good Reason prior to a Change in Control (whether or not a Change in Control ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person, or (C) the Executive's employment is terminated by the Company without Cause or by the Executive for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control (whether or not a Change in Control ever occurs).  For purposes of any determination regarding the applicability of the immediately preceding sentence, any position taken by the Executive shall be presumed to be correct unless the Company establishes to the Board by clear and convincing evidence that such position is not correct.

6.2  The following shall constitute the Severance Payments under this Agreement:

(A)  In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive including any payments under the Separation Policy (GP401) or any similar plan, policy or procedure or arrangement, if eligible, or the Executive’s Prior Severance Agreement or any employment agreement or arrangement between the Executive and the Company, to the extent provided in Section 11 of this Agreement, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to three times the sum of (i) the Executive's base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, and (ii) the highest annual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by the Company in respect of any of the last three fiscal years ending immediately prior to the fiscal year in which occurs the Date of Termination or, if higher, immediately prior to the fiscal year in which occurs the first event or circumstance constituting Good Reason (including as an amount so paid any amount that would have been so paid but for the Executive's request that the amount not be paid).  For purposes of determining the value of the annual bonus earned by the Executive in any calendar year, the value of any restricted stock awards or stock options earned by the Executive in any such year shall not be included in the value of the annual bonus for such year;

(B)  For the thirty-six (36) month period immediately following the Date of Termination, the Company shall arrange to provide the Executive and his dependents, life, disability, accident and health insurance benefits substantially similar to those provided to the Executive and his dependents immediately prior to the Date of Termination (without giving effect to any reduction in such benefits subsequent to a Change in Control which reduction constitutes Good Reason) or, if more favorable to the Executive, those provided to the Executive and his dependents immediately prior to the first occurrence of an event or circumstance constituting Good Reason, at no greater after-tax cost to the Executive than the after-tax cost to the Executive immediately prior to such date or occurrence; provided, however, that, unless the Executive consents to a different method (after taking into account the effect of such method on the calculation of "parachute payments" pursuant to Section 6.3 hereof), such health insurance benefits shall be provided through a third-party insurer.  Benefits otherwise receivable by the Executive pursuant to this Section 6.2(B) shall be reduced to the extent benefits of the same type are received by or made available to the Executive during the thirty-six (36) month period following the Date of Termination (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, the first occurrence of an event or circumstance constituting Good Reason.

(C)  Notwithstanding any provision of any annual or long-term incentive plan to the contrary, the Company shall pay to the Executive a lump sum amount, in cash, equal to the sum of (i) any unpaid incentive compensation that has been allocated or awarded to the Executive for a completed fiscal year or other measuring period preceding the Date of Termination under any such plan and which, as of the Date of Termination, is contingent only upon the continued employment of the Executive to a subsequent date, and (ii) to the extent not otherwise paid or deferred at the Executive's election, pursuant to the terms of the applicable plan, a pro rata portion to the Date of Termination of the aggregate value of all contingent incentive compensation awards to the Executive for all then uncompleted periods under any such plan, calculated as to each such award by multiplying the award that the Executive would have earned on the last day of the performance award period, assuming the achievement, at the level that would produce the maximum award, of the individual and corporate performance goals established with respect to such award, by the fraction obtained by dividing the number of full months and any fractional portion of a month during such performance award period through the Date of Termination by the total number of months contained in such performance award period.

(D)  In addition to the retirement benefits to which the Executive may be entitled under each Pension Plan, if any, or any successor plan thereto, the Company shall pay the Executive a lump sum amount, in cash, equal to the excess of (i) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith and determined as a straight life annuity commencing at the date (but in no event earlier than the third anniversary of the Date of Termination) as of which the actuarial equivalent of such annuity is greatest) which the Executive would have accrued under the terms of all Pension Plans (without regard to any amendment to any Pension Plan made subsequent to a Change in Control and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of retirement benefits thereunder), determined as if the Executive were fully vested thereunder and had accumulated after the Date of Termination thirty-six (36) additional months of service credit thereunder (and if any Pension Plan imposes a maximum number of months for purposes of accrual of benefits thereunder, such thirty-six (36) additional months shall be reduced, but not below zero, to the extent necessary so that the total number of months of service credited thereunder, including the number of months credited pursuant to this Section 6.2(D), does not exceed such maximum number of months) and had been credited under each Pension Plan during such period with compensation equal to the Executive's compensation (as defined in such Pension Plan) during the twelve (12) months immediately preceding the Date of Termination or, if higher, during the twelve months immediately prior to the first occurrence of an event or circumstance constituting Good Reason, over (ii) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith and determined as a straight life annuity commencing at the date (but in no event earlier than the Date of Termination) as of which the actuarial equivalent of such annuity is greatest) which the Executive had accrued pursuant to the provisions of the Pension Plans as of the Date of Termination.  For purposes of this Section 6.2(D), "actuarial equivalent" shall be determined using the same assumptions utilized under the PPL Supplemental Executive Retirement Plan or any successor plan, immediately prior to the Date of Termination, or, if more favorable to the Executive, immediately prior to the first occurrence of an event or circumstance constituting Good Reason.

(E)  If the Executive would have become entitled to benefits under the Company's post-retirement health care or life insurance plans, as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, had the Executive's employment terminated at any time during the period of thirty-six (36) months after the Date of Termination, the Company shall provide such post-retirement health care or life insurance benefits to the Executive and the Executive's dependents commencing on the later of (i) the date on which such coverage would have first become available and (ii) the date on which benefits described in subsection (B) of this Section 6.2 terminate.

(F)  The Company shall provide the Executive with outplacement services suitable to the Executive's position for a period of three years or, if earlier, until the first acceptance by the Executive of an offer of employment.

6.3         (A) Whether or not the Executive becomes entitled to the Severance Payments, if any of the payments or benefits received or to be received by the Executive in connection with a Change in Control or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control or any Person affiliated with the Company or such Person) (such payments or benefits, excluding the Gross-Up Payment, being hereinafter referred to as the "Total Payments") will be subject to the Excise Tax, the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon the Gross-Up Payment, and after taking into account the phase out of itemized deductions and personal exemptions attributable to the Gross-Up Payment, shall be equal to the Total Payments.

(B)  For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as "parachute payments" (within the meaning of section 280G(b)(2) of the Code) unless, in the opinion of tax counsel ("Tax Counsel") reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the Change in Control, the Company's independent auditor (the "Auditor"), such payments or benefits (in whole or in part) do not constitute parachute payments, including by reason of section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within the meaning of section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of section 280G(b)(4)(B) of the Code) in excess of the Base Amount (within the meaning of Section 280G(b)(3) of the Code) allocable to such reasonable compensation, or are otherwise not subject to the Excise Tax, and (iii) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of sections 280G(d)(3) and (4) of the Code.  For purposes of determining the amount of the Gross-Up Payment, (x) the Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Date of Termination (or if there is no Date of Termination, then the date on which the Gross-Up Payment is calculated for purposes of this Section 6.2), net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes, and (y) the Executive shall be deemed to be subject to the loss of itemized deductions and personal exemptions to the maximum extent provided by the Code for each dollar of incremental income.

(C)  In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Executive shall repay to the Company, within five (5) business days following the time that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the Executive, to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive's taxable income and wages for purposes of federal, state and local income and employment taxes, plus interest on the amount of such repayment at 120% of the rate provided in section 1274(b)(2)(B) of the Code).  In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) within five (5) business days following the time that the amount of such excess is finally determined.  The Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments.

6.4  The payments provided in subsection 6.2(A), (C) and (D) hereof and Section 6.3 hereof shall be made on the last day of the sixth month following the Date of Termination (or if there is no Date of Termination, then the date on which the Gross-Up Payment is calculated for purposes of Section 6.2 hereof); provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Executive, or, in the case of payments under Section 6.2 hereof, in accordance with Section 6.2 hereof, of the minimum amount of such payments to which the Executive is clearly entitled and shall pay the remainder of such payments (together with interest on the unpaid remainder (or on all such payments to the extent the Company fails to make such payments when due) at 120% of the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30th) day after the last day of the sixth month following the Date of Termination.  In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5th) business day after demand by the Company (together with interest at 120% of the rate provided in section 1274(b)(2)(B) of the Code).  At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement).

6.5  The Company also shall pay to the Executive all legal fees and expenses incurred by the Executive in disputing in good faith any issue hereunder relating to the termination of the Executive's employment hereunder or in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder.  Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require.

7.  Termination Procedures and Compensation During Dispute.

7.1  Notice of Termination.  After a Change in Control and during the Term, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof.  For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated.  Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail.

7.2  Date of Termination.  "Date of Termination", with respect to any purported termination of the Executive's employment after a Change in Control and during the Term, shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (ii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given).

7.3  Dispute Concerning Termination.  If within fifteen (15) days after any Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this Section 7.3), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be extended until the earlier of (i) the date on which the Term ends or (ii) the date on which the dispute is finally resolved, either by mutual written agreement of the parties or by a final judgment, order or decree of an arbitrator or a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided, however, that the Date of Termination shall be extended by a notice of dispute given by the Executive only if such notice is given in good faith and the Executive pursues the resolution of such dispute with reasonable diligence.

7.4  Compensation During Dispute.  If a purported termination occurs following a Change in Control and during the Term and the Date of Termination is extended in accordance with Section 7.3 hereof, the Company shall continue to pay the Executive the full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, salary) and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the Date of Termination, as determined in accordance with Section 7.3 hereof.  Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement (other than those due under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under this Agreement.

8.  No Mitigation.  The Company agrees that, if the Executive's employment with the Company terminates during the Term, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 or Section 7.4 hereof.  Further, the amount of any payment or benefit provided for in this Agreement (other than in Section 6.1(B) hereof) shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise.

9.  Successors; Binding Agreement.

9.1  In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.

9.2  This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate.

10.  Notices.  For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed, to the Executive at the last known address maintained in the Company's personnel records, and to the Company, to the address set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt:

To the Company:

PPL Corporation

Two North Ninth Street

Allentown, Pennsylvania  18101

Attention:  Corporate Secretary

11.  Miscellaneous.  No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board.  No waiver by either party hereto at any time of any breach by the other party hereto of, or any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof, which have been made by either party, including but not limited to, the Prior Severance Agreement; provided, however, that this Agreement shall supersede any agreement setting forth the terms and conditions of the Executive's employment with the Company only in the event that the Executive's employment with the Company is terminated on or following a Change in Control, by the Company other than for Cause or by the Executive for Good Reason.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Commonwealth of Pennsylvania.  All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections.  Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed.  The obligations of the Company and the Executive under this Agreement that by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Sections 6 and 7 hereof) shall survive such expiration.

12.  Validity.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

13.  Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

14.  Settlement of Disputes; Arbitration.  The Board shall make all determinations as to the Executive's right to benefits under this Agreement.  Any denial by the Board of a claim for benefits under this Agreement shall be stated in writing and delivered or mailed to the Executive and such notice shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon, and shall be written in a manner that may be understood without legal or actuarial counsel.  In addition, the Board shall afford a reasonable opportunity to the Executive for a review of the decision denying the Executive's claim and, in the event of continued disagreement, the Executive may appeal within a period of 60 days after receipt of notification of denial.  Failure to perfect an appeal within the 60-day period shall make the decision conclusive.  Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Philadelphia, Pennsylvania in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply. Judgment may be entered on the arbitrator's award in any court having jurisdiction.  Notwithstanding any provision of this Agreement to the contrary, the Executive shall be entitled to seek specific performance of the Executive's right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

15.  Definitions.  For purposes of this Agreement, the following terms shall have the meanings indicated below:

(A)           "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act.

(B)           "Base Amount" shall have the meaning set forth in section 280G(b)(3) of the Code.

(C)           "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the Exchange Act.

(D)           "Board" shall mean the Board of Directors of the Company.

(E)           "Cause" for termination by the Company of the Executive's employment shall mean (i) the willful and continued failure by the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from the Executive's incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise.  For purposes of clauses (i) and (ii) of this definition, (a) no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company, and (b) in the event of a dispute concerning the application of this provision, no claim by the Company that Cause exists shall be given effect unless the Company establishes to the Board by clear and convincing evidence that Cause exists.

(F)           "Change in Control" means the occurrence of any one of the following events:

(I)  the following individuals cease for any reason to constitute a majority of the number of directors then serving: individ­uals who, on the date hereof, constitute the Board and any new direc­tor (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of direc­tors of the Company) whose appointment or election by the Board or nomination for election by the Company's shareowners was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previ­ously so approved or recommended;

(II)  any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities entitled to vote generally in the election of directors;

(III)  there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation or other entity, other than (I) a merger or con­solidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation contin­uing to represent (either by remaining outstanding or by being con­verted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 60% of the combined voting power of the securities of the Company or at least 60% of the combined voting power of the securities of such surviving entity or any parent thereof outstanding immediately after such merger or consolidation; or (II) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (excluding in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliates) representing 20% or more of the combined voting power of the Company's then outstanding securities;

(IV)  the shareowners of the Company approve a plan of complete liquidation or dissolution of the Company; or

(V)  the Board adopts a resolution to the effect that a "Change in Control" has occurred or is anticipated to occur.

(G)           "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.

(H)           "Company" shall mean PPL Corporation and, except in determining, under Section 15(E) hereof, whether or not any Change in Control of the Company has occurred in connection with such succession, shall include its subsidiaries and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise.  For purposes of this Agreement, the Executive's employment by (including termination of such employment) and compensation from any subsidiary of the Company shall be deemed employment by and compensation from the Company.

(I)           "Date of Termination" shall have the meaning set forth in Section 7.2 hereof.

(J)           "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment, if, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties.

(K)           "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time.

(L)           "Excise Tax" shall mean any excise tax imposed under section 4999 of the Code.

(M)           "Executive" shall mean the individual named in the first paragraph of this Agreement.

(N)           "Good Reason" for termination of the Executive's employment with the Company by such Executive shall mean the occurrence (without the Executive's express written consent which specifically references this Agreement) after a Change in Control, or prior to a Change in Control under the circumstances described in clauses (B) and (C) of the second sentence of Section 6.1 hereof (treating all references in paragraphs (I) through (VII) below to a "Change in Control" as references to a "Potential Change in Control"), of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph (I), (V), (VI), or (VII) below, such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof:

(I)  the assignment to the Executive of any duties inconsistent with the Executive's status as an executive officer or key employee of the Company or a substantial adverse alteration in the nature or status of the Executive's responsibilities from those in effect immediately prior to a Change in Control;

(II)  a reduction by the Company of the Executive's annual base salary as in effect on the date of this Agreement, or as the same may be increased from time to time, except for across-the-board decreases uniformly affecting management, key employees and salaried employees of the Company or the business unit in which the Executive is then employed;

(III)  the relocation of the Executive's principal work location to a location more than 30 miles from the vicinity of such work location immediately prior to a Change in Control or the Company's requiring the Executive to be based anywhere other than such principal place of employment (or permitted relocation thereof) except for required travel on the Company's business to an extent substantially consistent with the Executive's present business travel obligations;

(IV)  the failure by the Company to pay to the Executive any portion of the Executive's current compensation or to pay to the Executive any portion of an installment of deferred compensation under any deferred compensation program of the Company, within seven (7) days of the date such compensation is due, except for across-the-board compensation deferrals uniformly affecting management, key employees and salaried employees of the Company or the business unit in which the Executive is then employed;

(V)  the failure by the Company to continue in effect any compensation or benefit plan in which the Executive participates immediately prior to a Change in Control which is material to the Executive's total compensation, or any substitute plans adopted prior to a Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount or timing of payment of benefits provided and the level of the Executive's participation relative to other participants, as existed immediately prior to the Change in Control;

(VI)  the failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Executive was participating immediately prior to a Change in Control, except for across-the-board changes to any such plans uniformly affecting all participants in such plans, the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy at the time of the Change in Control; or

(VII)  any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 7.1 hereof.  For purposes of this Agreement, no such purported termination shall be effective.

The Executive's right to terminate his or her employment with the Company for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness.  The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder.

For purposes of any determination regarding the existence of Good Reason, any claim by the Executive that Good Reason exists shall be presumed correct unless the Company established to the Board by clear and convincing evidence that Good Reason does not exist.

(O)           "Notice of Termination" shall have the meaning stated in Section 7.1 hereof.

(P)           "Pension Plan" shall mean any tax-qualified, supplemental or excess defined benefit pension plan maintained by the Company and any other agreement entered into between the Executive and the Company which is designed to provide the Executive with supplemental retirement benefits.

(Q)           "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; provided, however, a Person shall not include (i) the Company or any of its Affiliates, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the shareowners of the Company in substantially the same proportions as their ownership of stock of the Company.

(R)           "Potential Change in Control" shall be deemed to have occurred if the conditions or events set forth in any one of the following paragraphs shall have been satisfied or shall have occurred:

(I)  the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control;

(II)  the Company or any Person publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control;

(III)  the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred;

(IV)  any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 5% or more of the combined voting power of the Company's then outstanding securities entitled to vote generally in the election of directors.

Notwithstanding the foregoing, a "Potential Change of Control" shall not be deemed to occur if (i) a Person acquired such beneficial ownership of 5% or more of the Company's outstanding common shares but less than 20% and such Person has reported or is required to report such ownership on Schedule 13G under the Exchange Act (or any comparable or successor report); (ii) a Person acquired such beneficial ownership of 5% or more of the Company's outstanding common shares and such Person has reported or is required to report such ownership under Schedule 13D under the Exchange Act (or any comparable or successor report), which Schedule 13D does not state any intention to or reserve the right to control or influence the management or policies of the Company or engage in any of the actions specified in Item 4 of such Schedule (other than the disposition of the common shares) and, within 10 business days of being requested by the Company to advise it regarding the same, certifies to the Company that such Person acquired common shares amounting to 5% or more of the Company's outstanding common shares inadvertently and who or which, together with all Affiliates thereof, thereafter does not acquire additional common shares while the Beneficial Owner, as such term is defined in or used by Regulation 13D-G as promulgated under the Exchange Act, of 5% or more of the common shares then outstanding; provided, however, that if the Person requested to so certify fails to do so within 10 business days, then a Potential Change of Control shall be deemed to have occurred immediately after such 10-Business-Day period; or (iii) any Person who becomes the Beneficial Owner of 5% or more of the common shares then outstanding due to the repurchase of common shares by the Company unless and until such Person, after becoming aware that such Person has become the Beneficial Owner of 5% or more of the common shares then outstanding, acquires beneficial ownership of additional common shares representing 1% or more of the common shares then outstanding.

(S)           "Potential Change in Control Period" shall mean the period commencing on the occurrence of a Potential Change in Control and ending upon the occurrence of a Change in Control or, if earlier (i) with respect to a Potential Change in Control occurring pursuant to Section 15(R)(I), immediately upon the abandonment or termination of the applicable agreement, (ii) with respect to a Potential Change in Control occurring pursuant to Section 15(R)(II), immediately upon a public announcement by the applicable party that such party has abandoned its intention to take or consider taking actions which if consummated would result in a Change in Control or (iii) with respect to a Potential Change in Control occurring pursuant to Section 15(R)(III) or (IV), upon the one year anniversary of the occurrence of such Potential Change in Control (or such earlier date as may be determined by the Board).

(T)           "Retirement" shall be deemed the reason for the termination by the Executive of the Executive's employment if such employment is terminated in accordance with the Company's retirement policy, including early retirement, generally applicable to its salaried employees.

(U)           "Severance Payments" shall have the meaning set forth in Section

6.1 hereof.

(V)           "Term" shall mean the period of time described in Section 2 hereof (including any extension, continuation or termination described therein).

(W)           "Total Payments" shall mean those payments described in Section

6.3 hereof.

PPL CORPORATION

By __________________________ James H. Miller Chairman/President and CEO       ____________________________ [Name of Executive] __________________________ Date         __________________________ Date

EX-10.B

Exhibit 10(b)

May 22, 2009

PERSONAL and CONFIDENTIAL

Mr. Gregory N. Dudkin

208 Spruce Street

Philadelphia, PA  19106

Dear Gregory:

We are delighted with the prospect of your joining PPL Corporation.  On behalf of PPL, I would like to present our formal offer to you to join us as Senior Vice President-EU Operations, reporting directly to Dave DeCampli, President-PPL Electric Utilities.

You will be an employee and officer of PPL Electric Utilities Corporation.  Naturally, as an elected officer, this position is subject to board of managers’ approval.  If you accept our offer, we will proceed immediately to have you elected.

We are providing a level of base salary and performance-oriented incentive programs that will make employment with PPL both challenging and financially attractive.

Our offer includes a first-year compensation program consisting of an annualized salary of $325,000 plus incentive compensation.

As an elected officer, you will be eligible for various incentives.  Currently, the annualized value of these incentives includes:  a target annual cash incentive of 50% of your annual salary (and a potential payment range of 50% to 200% of target based on performance) and long-term incentive opportunities totaling 130% of your annual salary.

The long-term incentive is comprised of: (i) an annual incentive targeted at about 52% of your annual salary in the form of restricted stock units based on performance achievement based on three year financial and operational goals, (ii) annual award targeted at 26% of your annual salary in performance units, and (iii) stock options valued at about 52% of your annual salary.  The performance unit grant is payable based on relative, total shareowner return compared to our peers over a 3-year performance period and has a payment range of 50% to 200% of target based on performance.  The total annual incentive target consisting of these three components is 130% of your annual salary.

The annual cash incentive and the restricted stock unit awards are determined in the first quarter of the year.  We will determine your 2009 PPL annual cash incentive, assuming you are otherwise eligible, based on an assumed full 12 months of employment rather than a partial award for the period of your employment in 2009.

As part of our offer, you will receive pro-rata performance units (for the 2009 – 2011 performance period) and stock option awards for 2009 and will be eligible for full awards in 2010.  Upon your employment, we will award you performance units and options equal in value to approximately $49,292 and $98,583 respectively (assumes a June 1 employment date).

In addition to the above compensation and awards, we will provide a sign-on bonus with a value of $150,000, which will be paid $75,000 in cash, following your employment date and a grant equivalent to $75,000 in the form of restricted stock units on which restrictions will expire in three years.  If you voluntarily leave PPL prior to completion of one full-year of service, you would be required to return the cash sign-on bonus to PPL.  Your signature below authorizes PPL to deduct any amounts owed from your final paycheck.

The enclosed term-sheet summarizes the components of our offer.

We will also extend to you change in control protection as an officer of PPL.  This protection is provided to key executives under a separate contract and, in your case, when approved, would provide two times annual salary and annual cash incentive up to the maximum available without incurring the federal excise tax on excess severance payments in the event of your termination of employment in conjunction with a change-in-control of PPL Corporation.  This agreement also extends the employee group life, disability, accident and health insurance coverage for a two-year period and provides an additional two years of pension credit in determining your PPL retirement benefit.

If your employment should be terminated within one year of employment for any reason, provided it is not for cause, we will provide you a severance payment equal to one year’s base salary.  If your employment is terminated by the company for reasons other than for cause after your first year of employment, you will receive payment equal to your salary for a period of 52 weeks or until you secure alternative employment, whichever occurs first.  This severance payment is contingent on your executing a release in a form acceptable to PPL.  In addition, for a period equal to the severance payment period (e.g., one year if you are terminated within one year of hire) we will continue active employee health, dental and basic life insurance benefits, provided you execute a release in a form acceptable to PPL.

You will be eligible for PPL’s other executive benefits including coverage under the Supplemental Executive Retirement Plan (“SERP”).  The SERP is a defined benefit pension plan that provides officers with enhanced retirement benefits upon retirement after 10 years of service or, upon attaining age 60.  You will also be eligible for PPL’s Officers Deferred Compensation Plan (“ODCP”).  The ODCP permits deferral of compensation to allow an executive to manage current income taxes.  The ODCP also provides for company matching contributions that are unable to be made under the qualified employee savings plan due to certain federal limitations.

You will also be eligible for executive financial planning services.

We require executives to accumulate PPL stock under our Executive Equity Ownership Guideline Program.  In your position, you would be required to hold one-time your salary in PPL shares by the end of five years.

Finally, you will, of course, also be eligible for PPL’s comprehensive package of other employee benefit plans including the tax qualified employee pension, savings/401(k) plan, health benefits, dental, life insurance, and other benefits including vacation where you will be eligible for 6 weeks of vacation, prorated for your first year of employment.  Our health benefits for active employees currently only require employee contributions of about 8% of cost on average.  Retiree medical benefits are available for employees retiring after attaining age 55 with 10 years of service.

In order to continue the employment process, please follow these steps:

·   This offer is valid through May 29, 2009, and we request your written acceptance by that date by signing and returning the enclosed copy of this letter.

·   The company has a relocation policy which typically only applies to employees relocating within a year of hire.  We are willing to review this policy with you.

·   If you accept this offer, please call 800-760-8378, National Drug Screen, Inc.  Tell them you are candidate for employment at PPL and are calling to schedule a pre-employment drug screen.  They will schedule you and provide you with a location and time to go for the screening.  If you experience any problems in scheduling your drug screen call the PPL Dispensary, 484-634-4028.

·   On the enclosed copy of this letter, write the date, time and name of the facility where you made arrangements for your drug screen.

·   In addition, we request that you complete the enclosed PPL Application Form, HR/Payroll Employment Information Form, and Personal History Questionnaire and return these items with the signed offer letter. An envelope has been provided for your convenience.

Our offer is contingent upon your satisfactory completion of the background reference and drug screen.  Additionally, on your first day of employment we will need to complete the government-mandated I-9 form showing proof of employment eligibility under the Immigration Reform and Control Act of 1986.  A list of suitable proofs of identity is enclosed.

We recognize that you would be interested in a long-term relationship with the Company, and it is certainly our hope and expectation that such a relationship would develop.  Please know, however, that employment at the Company would be on an “at-will” basis.  This means that it is for no defined period of time and can be terminated by either you or the Company, with or without cause or advance notice.  Of course, as a professional courtesy, we would appreciate advance notification from you of any intended change in your employment status.  Likewise, we would attempt, where appropriate, to provide reasonable notice of any intended change in your status.

Please feel free to call me at any time, at 610-774-4536 if you have any questions.  We are looking forward to your joining us as a key member of the management team responsible for guiding PPL toward a successful future.

Sincerely,

Stephen R. Russo

Enclosures

Please sign below to accept this proposal:

Signed:  __________________________                                                                                                Date:  ______________________

DATE OF DRUG SCREEN FACILITY COMPLETING DRUG SCREEN

EX-10.C

Exhibit 10(c)

CONFORMED COPY

Dated 7 July   2009

(1) Western Power Distribution (South West) Plc as the Company

(2) HSBC Bank plc, Lloyds TSB Bank plc and Clydesdale Bank PLC as Mandated Lead Arrangers

(3) HSBC Bank plc as Facility Agent

£210,000,000 Multicurrency Revolving Facility Agreement

Eversheds LLP One Wood Street London EC2V 7WS	Tel Fax Int DX	0845 497 9797 0845 497 4919 +44 20 7919 4500 154280 Cheapside 8
	www.eversheds.com

CONTENTS

Clause		Page
1	INTERPRETATION		1
2	THE FACILITY		17
3	PURPOSE		18
4	CONDITIONS PRECEDENT		18
5	UTILISATION		19
6	OPTIONAL CURRENCIES		20
7	REPAYMENT		22
8	PREPAYMENT AND CANCELLATION		23
9	INTEREST		26
11	MARKET DISRUPTION		27
12	TAXES		29
13	INCREASED COSTS		32
14	MITIGATION		33
15	PAYMENTS		34
16	REPRESENTATIONS		37
17	INFORMATION COVENANTS		40
18	FINANCIAL COVENANTS		44
19	GENERAL COVENANTS		47
20	DEFAULT		53
21	THE ADMINISTRATIVE PARTIES		56
22	EVIDENCE AND CALCULATIONS		63
23	FEES		64
24	INDEMNITIES AND BREAK COSTS		65
25	EXPENSES		66
26	AMENDMENTS AND WAIVERS		67
27	CHANGES TO THE PARTIES		68
28	DISCLOSURE OF INFORMATION		71
29	SET-OFF		72
30	PRO RATA SHARING		72
31	SEVERABILITY		74
32	COUNTERPARTS		74
33	NOTICES		74
34	LANGUAGE		76
35	GOVERNING LAW		76
36	ENFORCEMENT		76
Schedules
1	Original Parties		78
2	Conditions Precedent Documents		79
3	Form of Request		80
4	Calculation of the mandatory cost		81
6	Intentionally left blank		87
7	Form of Compliance Certificate		88

THIS AGREEMENT is dated 7 July 2009

BETWEEN:

(1) WESTERN POWER DISTRIBUTION (SOUTH WEST) PLC (registered number 02366894) (the Company);

(2) HSBC BANK PLC, LLOYDS TSB BANK PLCand CLYDESDALE BANK PLC(each in this capacity as a Mandated Lead Arranger and together in this capacity, the Mandated Lead Arrangers);

(3) THE FINANCIAL INSTITUTIONS listed in Schedule 1 (Original Parties) as original lenders (the Original Lenders);

(4) HSBC BANK PLC as facility agent (in this capacity, the Facility Agent).

IT IS AGREED as follows:

1. INTERPRETATION

1.1 Definitions

In this Agreement:

“Acceptable Bank”	means a bank or financial institution which has a rating for its long-term unsecured and non credit-enhanced debt obligations of A-1 or higher by Standard & Poor’s Rating Services or F1 or higher by Fitch Ratings Ltd or P-1 or higher by Moody’s Investor Services Limited or a comparable rating from an internationally recognised credit rating agency.
“Act”	means the Electricity Act 1989 and, unless the context otherwise requires, all subordinate legislation made pursuant thereto.
“Administrative Party”	means a Mandated Lead Arranger or the Facility Agent.
“Affiliate”	means a Subsidiary or a Holding Company of a person or any other Subsidiary of that Holding Company, and, in the case of Clydesdale Bank PLC only, includes National Australia Bank Limited (ABN 12 004 044 937).
“Applicable Accounting Principles”	means those accounting principles, standards and practices generally accepted in the United Kingdom and the accounting and reporting requirements of the Companies Act 2006, in each case as used in the Original Financial Statements.
“Authority”	means The Gas and Electricity Markets Authority established under Section 1 of the Utilities Act 2000.
“Availability Period”	means the period from and including the date of this Agreement to and including the date falling one month prior to the Final Maturity Date.
“Balancing and Settlement Code”	means the document, as modified from time to time, setting out the electricity balancing and settlement arrangements designated by the Secretary of State and adopted by The National Grid Company plc (Registered No. 2366977) or its successor pursuant to its transmission licence.
“Balancing and Settlement Code Framework”	means the agreement of that title, in the form approved by the Secretary of State, as amended from time to time, to which the Company is a party and by which the Balancing and Settlement Code is made binding upon the Company.
“Break Costs”	means the amount (if any) which a Lender is entitled to receive under this Agreement as compensation if any part of a Loan or overdue amount is prepaid.
“Business Day”	means a day (other than a Saturday or a Sunday) on which commercial banks are open in London and: (a)   if on that day a payment in or a purchase of a currency (other than euro) is to be made, the principal financial centre of the country of that currency; or (b)   if on that day a payment in or purchase of euro is to be made, which is also a TARGET Day.
“Commitment”	means: (a)   in relation to an Original Lender, the Sterling amount set opposite its name under the heading “Commitment” in Schedule 1 (The Original Parties) and the amount of any other Commitment transferred to it under this Agreement; and (b)   in relation to any other Lender, the Sterling amount of any Commitment transferred to it under this Agreement, to the extent not cancelled, reduced or transferred by it under this Agreement.
“Compliance Certificate”	means a certificate substantially in the form of Schedule 7 (Form of Compliance Certificate) setting out, among other things, calculations of the financial covenants.
“Debt Purchase Transaction”	means, in relation to a person, a transaction where such person: (a)   purchases by way of assignment or transfer; (b)   enters into any sub-participation in respect of; or (c)   enters into any other agreement or arrangement having an economic effect substantially similar to a sub-participation in respect of, any Commitment or amount outstanding under this Agreement.
“Default”	means: (a)   an Event of Default; or (b)   an event which would be (with the lapse of time, the expiry of a grace period, the giving of notice or the making of any determination under the Finance Documents or any combination of them) an Event of Default.
“Environmental Law”	means all regulations and other laws concerning the protection of human health or the environment.
euro or euros or €	means the single currency of the Participating Member States.
“Event of Default”	means an event specified as such in this Agreement.
“Existing Facility Agreement”	means the revolving facility agreement dated 18 October 2002 between, among others, the Company as the borrower, Bayerische Landesbank acting through its London Branch, BNP Paribas, Fortis Bank S.A./N.V., Lloyds TSB Bank plc and WestLB AG, London Branch as the mandated lead arrangers and the Lloyds TSB Bank plc as the Facility Agent (as amended and restated from time to time).
“Facility”	means the revolving loan facility made available under this Agreement as described in Clause 2 (The Facility).
“Facility Office”	means the office(s) notified by a Lender to the Facility Agent: (a)   on or before the date it becomes a Lender; or (b)   by not less than five Business Days' notice, as the office(s) through which it will perform its obligations under this Agreement.
“Fee Letter”	means any letter entered into by reference to this Agreement between one or more Administrative Parties and the Company setting out the amount of certain fees referred to in the Agreement.
“Final Maturity Date”	means the third anniversary of the date of this Agreement.
“Finance Document”	means: (a)   this Agreement; (b)   a Fee Letter; (c)   a Transfer Certificate; or (d)   any other document designated as such by the Facility Agent and the Company.
“Finance Party”	means a Lender or an Administrative Party.
“Financial Indebtedness”	means any indebtedness for or in respect of: (a)   moneys borrowed; (b)   any acceptance credit; (c)   any bond, note, debenture, loan stock or other similar instrument; (d)   any redeemable preference share; (e)   any finance or capital lease; (f)   receivables sold or discounted (otherwise than on a non-recourse basis); (g)   the acquisition cost of any asset to the extent payable after its acquisition or possession by the party liable where the deferred payment is arranged primarily as a method of raising finance or financing the acquisition of that asset; (h)   any derivative transaction protecting against or benefiting from fluctuations in any rate or price (and, except for non-payment of an amount, the then mark to market value of the derivative transaction will be used to calculate its amount); (i)   any other transaction (including any forward sale or purchase agreement) which has the commercial effect of a borrowing; (j)   any counter-indemnity obligation in respect of any guarantee, indemnity, bond, letter of credit or any other instrument issued by a bank or financial institution; or any guarantee, indemnity or similar assurance against financial loss of any person in respect of any item referred to in paragraphs (a) to (j) above.
“Group”	means the Company and its Subsidiaries.
“Holding Company”	means in relation to a company or corporation, any other company or corporation in respect of which it is a Subsidiary.
“Increased Cost”	means: (a)   an additional or increased cost; (b)   a reduction in the rate of return under a Finance Document or on its overall capital; or (c)   a reduction of an amount due and payable under any Finance Document, which is incurred or suffered by a Finance Party or any of its Affiliates but only to the extent attributable to that Finance Party having entered into any Finance Document or funding or performing its obligations under any Finance Document.
“Information Package”	means the information package in the form approved by the Company concerning the Group which, at the Company’s request and on its behalf, was prepared in relation to this transaction and distributed by the Mandated Lead Arrangers to selected financial institutions before the date of this Agreement and which includes, amongst other things, a document entitled ‘Presentation to Banks May 2009’.
“ITA”	means the Income Tax Act 2007.
Legal Reservations	means (a)   the principle that equitable remedies may be granted or refused at the discretion of a court and the limitation of enforcement by laws relating to insolvency, reorganisation and other laws generally affecting the rights of creditors; (b)   the time barring of claims under the Limitation Act 1980 and the Foreign Limitation Periods Act 1984, the possibility that an undertaking to assume liability for or indemnify a person against non-payment of UK stamp duty may be void and defences of set-off or counterclaim; (c)   similar principles, rights and defences under the laws of any jurisdiction in which a member of the Group or a Holding Company of the Company is incorporated; and (d)   any other matters which are set out as qualifications or reservations as to matters of law of general application in any legal opinion provided under Schedule 2.
Lender	means: (a)   an Original Lender; or (b)   any person which becomes a Lender after the date of this Agreement.
“LIBOR”	means for a Term of any Loan or overdue amount: (a)   the applicable Screen Rate; or (b)   if no Screen Rate is available for the relevant currency or Term of that Loan or overdue amount, the arithmetic mean (rounded upward to four decimal places) of the rates, as supplied to the Facility Agent at its request, quoted by the Reference Banks to leading banks in the London interbank market, as of 11.00 a.m. on the Rate Fixing Day for the offering of deposits in the currency of that Loan or overdue amount for a period comparable to that Term.
“Licence”	means: (a)   the electricity distribution licence made and treated as granted to the Company under Section 6(1)(c) of the Act pursuant to a licensing scheme made by the Secretary of State under Part II of Schedule 7 to the Utilities Act 2000 on 28 September, 2001; or (b)   any statutory amendment or replacement licence or licences granted pursuant to the Utilities Act 2000 which permit the Company to distribute electricity in the area it is certified to operate in.
“Loan”	means, unless otherwise stated in this Agreement, the principal amount of each borrowing under this Agreement or the principal amount outstanding of that borrowing.
Majority Lenders	means, at any time, Lenders: (a)   whose share in the outstanding Loans and whose undrawn Commitments then aggregate 662/3 per cent. or more of the aggregate of all the outstanding Loans and the undrawn Commitments of all the Lenders; (b)   if there is no Loan then outstanding, whose undrawn Commitments then aggregate 662/3 per cent. or more of the Total Commitments; or (c)   if there is no Loan then outstanding and the Total Commitments have been reduced to zero, whose Commitments aggregated 662/3 per cent. or more of the Total Commitments immediately before the reduction.
“Mandatory Cost”	means the cost of complying with certain regulatory requirements, expressed as a percentage rate per annum and calculated by the Facility Agent under Schedule 4 (Calculation of the Mandatory Cost).
“Margin”	means 2.50% per annum.
“Material Adverse Effect”	means a material adverse effect on the ability of the Company to perform: (a)   its payment obligations under the Finance Documents; or (b)   its obligations under clauses 18.3 (Interest Cover) or 18.4 (Asset Cover) of this Agreement.
“Material Subsidiary”	means, at any time, a Subsidiary of the Company whose gross assets or gross revenues (on an unconsolidated basis and excluding intra-Group items) then equal or exceed 10 per cent. of the gross assets or gross revenues of the Group. For this purpose: (a)   the gross assets or gross revenues of a Subsidiary of the Company will be determined from its financial statements (unconsolidated if it has Subsidiaries) upon which the latest audited financial statements of the Group have been based; (b)   if a Subsidiary of the Company becomes a member of the Group after the date on which the latest audited financial statements of the Group have been prepared, the gross assets or gross revenues of that Subsidiary will be determined from its latest financial statements; (c)   the gross assets or gross revenues of the Group will be determined from the Company’s latest audited financial statements, adjusted (where appropriate) to reflect the gross assets or gross revenues of any company or business subsequently acquired or disposed of; and (d)   if a Material Subsidiary disposes of all or substantially all of its assets to another Subsidiary of the Company, it will immediately cease to be a Material Subsidiary and the other Subsidiary (if it is not already) will immediately become a Material Subsidiary; the subsequent financial statements of those Subsidiaries and the Group will be used to determine whether those Subsidiaries are Material Subsidiaries or not. If there is a dispute as to whether or not a company is a Material Subsidiary, a certificate of the auditors of the Company will be, in the absence of manifest error, conclusive.
“Maturity Date”	means the last day of the Term of a Loan.
“OFGEM”	means the Office of Gas and Electricity Markets.
“Original Financial Statements”	means the audited consolidated financial statements of the Company for the year ended 31 March, 2008.
“Participating Member State”	means a member state of the European Community that adopts or has adopted the euro as its lawful currency under the legislation of the European Community relating to Economic and Monetary Union.
“Party”	means a party to this Agreement.
“Pro Rata Share”	means: (a)   for the purpose of determining a Lender's share in a utilisation of the Facility, the proportion which its Commitment under the Facility bears to all the Commitments under the Facility; and (b)    for any other purpose on a particular date: (i)   the proportion which a Lender's share of the Loans (if any) bears to all the Loans; (ii)   if there is no Loan outstanding on that date, the proportion which its Commitment bears to the Total Commitments on that date; or (iii)  if the Total Commitments have been cancelled, the proportion which its Commitments bore to the Total Commitments immediately before being cancelled.
“PUHCA”	means the Public Utility Holding Company Act of 2005, as amended, of the United States of America.

“Rate Fixing Day”   means:   (a)    the first day of a Term for a Loan denominated in Sterling; or   (b)   the second Business Day before the first day of a Term for a Loan denominated in any other currency;   or such other day as the Facility Agent determines is generally treated as the rate fixing day by market practice in the relevant interbank market.  

“Reference Banks”	means the Facility Agent, Lloyds TSB Bank plc and Clydesdale Bank PLC and any other bank or financial institution appointed as such by the Facility Agent under this Agreement.
“Repeating Representations”	means the representations which are deemed to be repeated under this Agreement.
“Request”	means a request for a Loan, substantially in the form of Schedule 3 (Form of Request).
“Rollover Loan”	means one or more Loans: (a)   to be made on the same day that a maturing Loan is due to be repaid; (b)   the aggregate amount of which is equal to or less than the maturing Loan; (c)   in the same currency as the maturing Loan; and (d)   to be made for the purpose of refinancing a maturing Loan.
“Screen Rate”	means the British Bankers’ Association Interest Settlement Rate (if any) for the relevant currency and Term displayed on the appropriate page of the Reuters screen.  If the relevant page is replaced or the service ceases to be available, the Facility Agent (after consultation with the Company and the Lenders) may specify another page or service displaying the appropriate rate.
“Secretary of State”	means the Secretary of State for Trade and Industry.
“Security Interest”	means any mortgage, pledge, lien, charge, assignment, hypothecation or security interest or any other agreement or arrangement having a similar effect.
“Sterling” and “£”	mean the lawful currency of the United Kingdom.
“Subsidiary”	(a)   a subsidiary within the meaning of section 1159 of the Companies Act 2006; and (b)   unless the context otherwise requires, a subsidiary undertaking within the mean of section 1162 of the Companies Act 2006.
“TARGET2”	means the Trans-European Automated Real-time Gross Settlement Express Transfer payment system which utilises a single platform and which was launch on 19 November 2007.
“TARGET Day”	means any day on which TARGET2 is open for the settlement of payments in euro.
“Tax”	means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty, addition to tax or any interest payable in connection with any failure to pay or any delay in paying any of the same.)
“Tax Deduction”	means a deduction or withholding for or on account of Tax from a payment under a Finance Document.
“Tax Payment”	means a payment made by the Company to a Finance Party in any way relating to a Tax Deduction or under any indemnity given by the Company in respect of Tax under any Finance Document.
“Taxes Act”	means the Income and Corporation Taxes Act 1988.
“Term”	means each period determined under this Agreement by reference to which interest on a Loan or an overdue amount is calculated.
“Total Commitments”	means the aggregate of the Commitments, being £210,000,000 at the date of this Agreement.
“Transfer Certificate”	means a certificate, substantially in the form of Schedule 5 (Form of Transfer Certificate), with such amendments as the Facility Agent may approve or reasonably require or any other form agreed between the Facility Agent and the Company.
“U.K.”	means the United Kingdom.
“U.S. Dollars and U.S.$”	means the lawful currency for the time being of the United States of America.
“Unpaid Sum”	means any sum due and payable but unpaid by the Company under the Finance Documents.
“Utilisation Date”	means each date on which the Facility is utilised.

1.2 Construction

1.2.1 The following definitions have the meanings given to them in clause 18.1 (Financial covenants):

1.2.1.1 Consolidated EBITDA;

1.2.1.2 Interest Payable;

1.2.1.3 Measurement Period;

1.2.1.4 Regulatory Asset Base; and

1.2.1.5 Total Net Debt.

1.2.2 In this Agreement, unless the contrary intention appears, a reference to:

1.2.2.1 an amendment includes a supplement, novation, restatement or re-enactment and amended will be construed accordingly;

1.2.2.2 assets includes present and future properties, revenues and rights of every description;

1.2.2.3 an authorisation includes an authorisation, consent, approval, resolution, licence, exemption, filing, registration or notarisation;

1.2.2.4 disposal means a sale, transfer, grant, lease or other disposal, whether voluntary or involuntary, and dispose will be construed accordingly;

1.2.2.5 indebtedness includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money;

1.2.2.6 know your customer requirements are the identification checks that a Finance Party requests in order to meet its obligations under any applicable law or regulation to identify a person who is (or is to become) its customer;

1.2.2.7 a person includes any individual, company, corporation, unincorporated association or body (including a partnership, trust, joint venture or consortium), government, state, agency, organisation or other entity whether or not having separate legal personality;

1.2.2.8 a regulation includes any regulation, rule, official directive, request or guideline (whether or not having the force of law but, if not having the force of law, being of a type with which any person to which it applies is accustomed to comply) of any governmental, inter-governmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;

1.2.2.9 the winding-up of a person includes the administration, dissolution or liquidation or other like process of that person, any composition or arrangement with the creditors, amalgamation, reconstruction, reorganisation or consolidation pursuant to Part XXVI of the Companies Act 2006 proposed or carried out in respect of that person or a company voluntary arrangement pursuant to the Insolvency Act 1986 carried out or proposed in respect of that person;

1.2.2.10 a currency is a reference to the lawful currency for the time being of the relevant country;

1.2.2.11 a Default (other than an Event of Default) being outstanding means that it has not been remedied or waived and an Event of Default being outstanding means that it has not been waived;

1.2.2.12 a provision of law is a reference to that provision as extended, applied, amended or re-enacted and includes any subordinate legislation;

1.2.2.13 a Clause, a Subclause or a Schedule is a reference to a clause or subclause of, or a schedule to, this Agreement;

1.2.2.14 a person includes its successors in title, permitted assigns and permitted transferees;

1.2.2.15 a Finance Document or another document is a reference to that Finance Document or other document as amended; and

1.2.2.16 a time of day is a reference to London time.

1.2.3 Unless the contrary intention appears, a reference to a month or months is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month or the calendar month in which it is to end, except that:

1.2.3.1 if the numerically corresponding day is not a Business Day, the period will end on the next Business Day in that month (if there is one) or the preceding Business Day (if there is not);

1.2.3.2 if there is no numerically corresponding day in that month, that period will end on the last Business Day in that month; and

1.2.3.3 notwithstanding clause 1.2.3.1 above, a period which commences on the last Business Day of a month will end on the last Business Day in the next month or the calendar month in which it is to end, as appropriate.

1.2.4 Unless expressly provided to the contrary in a Finance Document, a person who is not a party to a Finance Document may not enforce any of its terms under the Contracts (Rights of Third Parties) Act 1999 and notwithstanding any term of any Finance Document, the consent of any third party is not required for any variation (including any release or compromise of any liability) or termination of that Finance Document.

1.2.5 Unless the contrary intention appears:

1.2.5.1 a reference to a Party will not include that Party if it has ceased to be a Party under this Agreement;

1.2.5.2 a word or expression used in any other Finance Document or in any notice given in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement; and

1.2.5.3 any obligation of the Company under the Finance Documents which is not a payment obligation remains in force for so long as any payment obligation of the Company is or may be outstanding under the Finance Documents.

1.2.6 The headings in this Agreement do not affect its interpretation.

2. THE FACILITY

2.1 The Facility

Subject to the terms of this Agreement, the Lenders make available to the Company a revolving loan facility denominated in Sterling in an aggregate amount equal to the Total Commitments.

2.2 Nature of a Finance Party's rights and obligations

Unless otherwise agreed by all the Finance Parties:

2.2.1 the obligations of a Finance Party under the Finance Documents are several;

2.2.2 failure by a Finance Party to perform its obligations does not affect the obligations of any other Party under the Finance Documents;

2.2.3 no Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents;

2.2.4 the rights of a Finance Party under the Finance Documents are separate and independent rights;

2.2.5 a debt arising under the Finance Documents to a Finance Party is a separate and independent debt; and

2.2.6 a Finance Party may, except as otherwise stated in the Finance Documents, separately enforce those rights.

3. PURPOSE

3.1 Purpose

The Company shall apply all amounts borrowed by it under the Facility towards:

3.1.1 the core working capital requirements of the Company (including the repayment of all loans made under the Existing Facility Agreement); and

3.1.2 general corporate purposes,

in each case, in compliance with the Licence.

3.2 No obligation to monitor

No Finance Party is bound to monitor or verify any amount borrowed pursuant to this Facility Agreement.

4. CONDITIONS PRECEDENT

4.1 Conditions precedent documents

A Request may not be given until the Facility Agent has notified the Company and the Lenders that it has received all of the documents and evidence set out in Schedule 2 (Conditions precedent documents) in form and substance satisfactory to the Facility Agent.  The Facility Agent must give this notification to the Company and the Lenders promptly upon being so satisfied.

4.2 Further conditions precedent

The obligations of each Lender to participate in any Loan are subject to the further conditions precedent that on both the date of the Request and the Utilisation Date for that Loan:

4.2.1 the Repeating Representations are correct in all material respects; and

4.2.2 no Default or, in the case of a Rollover Loan, no Event of Default is outstanding or would result from the Loan.

4.3 Maximum number

Unless the Facility Agent agrees, a Request may not be given if, as a result, there would be more than 15 Loans outstanding.

5. UTILISATION

5.1 Giving of Requests

5.1.1 The Company may borrow a Loan by giving to the Facility Agent a duly completed Request.

5.1.2 Unless the Facility Agent otherwise agrees, the latest time for receipt by the Facility Agent of a duly completed Request is 11.00 a.m. one Business Day before the Rate Fixing Day for the proposed borrowing.

5.1.3 Each Request is irrevocable.

5.2 Completion of Requests

A Request for a Loan will not be regarded as having been duly completed unless:

5.2.1 the Utilisation Date is a Business Day falling within the Availability Period;

5.2.2 The amount of the Loan requested is:

5.2.2.1 a minimum of £5,000,000 or its equivalent in accordance with Clause 6.5 (Optional Currency Equivalents),  and an integral multiple of 1,000,000 units of that currency;

5.2.2.2 the maximum undrawn amount available under this Agreement for Loans under the Facility on the proposed Utilisation Date; or

5.2.2.3 such other amount as the Facility Agent may agree; and

5.2.3 the proposed Term complies with this Agreement.

Only one Loan may be requested in a Request.

5.3 Advance of Loan

5.3.1 The Facility Agent must promptly notify each Lender of the details of the requested Loan and the amount of its share in that Loan.

5.3.2 The amount of each Lender's share of the Loan will be its Pro Rata Share on the proposed Utilisation Date.

5.3.3 No Lender is obliged to participate in a Loan if as a result:

5.3.3.1 its share in the Loans would exceed its Commitment; or

5.3.3.2 the Loans would exceed the Total Commitments.

5.3.4 If the conditions set out in this Agreement have been met, each Lender must make its share in the Loan available to the Facility Agent for the Company on the Utilisation Date.

6. OPTIONAL CURRENCIES

6.1 General

In this Clause:

Agent's Spot Rate of Exchange means the Facility Agent's spot rate of exchange for the purchase of the relevant currency in the London foreign exchange market with Sterling at or about 11.00 a.m. on a particular day.

Optional Currency means any currency (other than Sterling) in which a Loan may be denominated under this Agreement.

Pre-approved Currency means U.S.$ and euro.

Sterling Amount of a Loan or part of a Loan means:

6.1.1 if the Loan is denominated in Sterling, its amount; or

6.1.2 in the case of any Loan denominated in an Optional Currency, its equivalent in Sterling calculated on the basis of  the Agent's Spot Rate of Exchange one Business Day before the Rate Fixing Day for that Term.

6.2 Selection

6.2.1 The Company must select the currency of a Loan in its Request. The Company may select Sterling or an Optional Currency for a Loan.

6.2.2 Unless the Facility Agent otherwise agrees, the Loans may not be denominated at any one time in more than three currencies.

6.3 Selection of Optional Currencies

6.3.1 A Loan may be denominated in an Optional Currency for a Term if:

6.3.1.1 that Optional Currency is readily available in the amount required and freely convertible into Sterling in the relevant interbank market on the Rate Fixing Day and the first day of that Term; and

6.3.1.2 that Optional Currency is a Pre-approved Currency or has been previously approved by the Facility Agent (acting on the instruction of all the Lenders) on or prior to receipt by the Facility Agent of the relevant Request for that Loan.

6.3.2 If the Facility Agent has received a request from the Company for a currency to be approved as an Optional Currency (other than a Pre-approved Currency), the Facility Agent must, within five Business Days, confirm to the Company:

6.3.2.1 whether or not the Lenders have given their approval; and

6.3.2.2 if approval has been given, the minimum amount (and, if required, integral multiples) for any Loan in that currency.

6.4 Revocation of currency

6.4.1 Notwithstanding any other term of this Agreement, if before 12 noon on any Rate Fixing Day the Facility Agent receives notice from a Lender that:

6.4.1.1 the Optional Currency requested is not readily available to it in the relevant interbank market in the amount and for the period required; or

6.4.1.2 participating in a Loan in the proposed Optional Currency might contravene any law or regulation applicable to it,

the Facility Agent must give notice to the Company to that effect promptly and in any event before 5.00 p.m. on that day.

6.4.2 In this event:

6.4.2.1 that Lender must participate in the Loan in Sterling; and

6.4.2.2 the share of that Lender in the Loan and any other similarly affected Lender(s) will be treated as a separate Loan denominated in Sterling during that Term.

6.4.3 Any part of a Loan treated as a separate Loan under this Subclause will not be taken into account for the purposes of any limit on the number of Loans or currencies outstanding at any one time.

6.4.4 A Loan will still be treated as a Rollover Loan if it is not denominated in the same currency as the maturing Loan by reason only of the operation of this Subclause.

6.5 Optional Currency equivalents

Except as expressly provided in this Agreement, the equivalent in Sterling of a Loan or part of a Loan in an Optional Currency for the purposes of calculating:

6.5.1 whether any limit under this Agreement has been exceeded;

6.5.2 the amount of a Loan;

6.5.3 the share of a Lender in a Loan;

6.5.4 the amount of any repayment of a Loan; or

6.5.5 the undrawn amount of a Lender's Commitment,

is its Sterling Amount.

6.6 Notification

The Facility Agent must notify the Lenders and the Company of the relevant Sterling Amount (and the applicable Agent's Spot Rate of Exchange) by 3:00pm one Business Day before the Rate Fixing Date.

7. REPAYMENT

7.1 Repayment of Loans

7.1.1 The Company must repay each Loan in full on its Maturity Date.  No Loan may be outstanding after the applicable Final Maturity Date.

7.1.2 Subject to the other terms of this Agreement, any amounts repaid under clause 7.1.1 above may be re-borrowed.

8. PREPAYMENT AND CANCELLATION

8.1 Mandatory prepayment - illegality

8.1.1 A Lender must notify the Company promptly if it becomes aware that it is unlawful in any jurisdiction for that Lender to perform any of its obligations under a Finance Document or to fund or maintain its share in any Loan.

8.1.2 After notification under clause 8.1.1 above:

8.1.2.1 the Company must repay or prepay the share of that Lender in each Loan made to it on the date specified in clause 8.1.3 below; and

8.1.2.2 the Commitments of that Lender will be immediately cancelled.

8.1.3 The date for repayment or prepayment of a Lender's share in a Loan will be:

8.1.3.1 the Business Day following receipt by the Company of notice from the Lender under clause 8.1.1 above; or

8.1.3.2 if later, the latest date allowed by the relevant law.

8.2 Mandatory prepayment - change of control

If, except in the context of a group reorganisation where the Company continues to be controlled directly or indirectly, by PPL Corporation, the Company becomes aware of any person (whether alone or together with any associated person or persons) gaining control of the Company (for these purposes "associated person" means, in relation to any person, a person who is (i) "acting in concert" (as defined in the City Code on Takeovers and Mergers) with that person or (ii) a "connected person" (as defined in section 839 of the Taxes Act) of that person and "control" has the meaning given to it in Section 1159 of the Companies Act 2006):

8.2.1 within 5 days of such date, the Company shall give notice of such change of control to the Facility Agent;

8.2.2 the Lenders and the Company shall immediately enter into negotiations for a period of not more than 45 days from the date of the change of control with a view to agreeing whether the Facility shall continue to be made available and on what terms;

8.2.3 if no such agreement is reached within the said period of 45 days then:

8.2.3.1 any Lender may on 10 days' notice to the Facility Agent and to the Company require the repayment of its share in each Loan and cancel its Commitment; and

8.2.3.2 the Majority Lenders may on 10 days' notice to the Company require repayment in full of all outstanding Loans and cancel the Total Commitments; and

8.2.4 A Lender shall not be obliged to fund any further utilisations of the Facility (except for a Rollover Loan) during the negotiation period set out in clause 8.2.2, and if no agreement is reached within such negotiation period, during the 10 day notice period set out in clause 8.2.3.

8.3 Voluntary prepayment

8.3.1 The Company may, by giving not less than three Business Days' prior written notice to the Facility Agent, prepay any Loan at any time in whole or in part.

8.3.2 A prepayment of part of a Loan drawn in US Dollars must be in a minimum amount of $5,000,000 and an integral multiple of U.S. $1,000,000.

8.3.3 A prepayment of part of a Loan drawn in Sterling must be in a minimum amount of £5,000,000 and an integral multiple of £1,000,000.

8.3.4 A prepayment of part of a Loan drawn in euros must be in a minimum amount of €5,000,000 and an integral multiple of €1,000,000.

8.4 Automatic cancellation

The Commitments of each Lender will be automatically cancelled at the close of business on the last day of the relevant Availability Period.

8.5 Voluntary cancellation

8.5.1 The Company may, by giving not less than three Business Days' prior written notice to the Facility Agent, cancel the unutilised amount of the Total Commitments in whole or in part.

8.5.2 Partial cancellation of the Total Commitments must be in a minimum amount of £5,000,000 and an integral multiple of £1,000,000.

8.5.3 Any cancellation in part will be applied against the Commitment of each Lender pro rata.

8.6 Involuntary prepayment and cancellation

8.6.1 If the Company is, or will be, required to pay to a Lender a Tax Payment or an Increased Cost, the Company may, while the requirement continues, give notice to the Facility Agent requesting prepayment and cancellation in respect of that Lender.

8.6.2 After notification under clause 8.6.1 above:

8.6.2.1 the Company must repay or prepay that Lender's share in each Loan made to it on the date specified in clause 8.6.3 below; and

8.6.2.2 the Commitments of that Lender will be immediately cancelled.

8.6.3 The date for repayment or prepayment of a Lender's share in a Loan will be the last day of the current Term for that Loan or, if earlier, the date specified by the Company in its notification.

8.7 Re-borrowing of Loans

Any voluntary prepayment of a Loan may be re-borrowed on the terms of this Agreement.  Any mandatory or involuntary prepayment of a Loan may not be re-borrowed.

8.8 Miscellaneous provisions

8.8.1 Any notice of prepayment and/or cancellation under this Agreement is irrevocable and must specify the relevant date(s) and the affected Loans and Commitments.  The Facility Agent must notify the Lenders promptly of receipt of any such notice.

8.8.2 All prepayments under this Agreement must be made with accrued interest on the amount prepaid.  No premium or penalty is payable in respect of any prepayment except for Break Costs.

8.8.3 The Majority Lenders may agree a shorter notice period for a voluntary prepayment or a voluntary cancellation.

8.8.4 No prepayment or cancellation is allowed except in accordance with the express terms of this Agreement.

8.8.5 No amount of the Total Commitments cancelled under this Agreement may subsequently be reinstated.

9. INTEREST

9.1 Calculation of interest

The rate of interest on each Loan for each Term is the percentage rate per annum equal to the aggregate of the applicable:

9.1.1 Margin;

9.1.2 LIBOR; and

9.1.3 Mandatory Cost.

9.2 Payment of interest

Except where it is provided to the contrary in this Agreement, the Company must pay accrued interest on each Loan made to it on the last day of each Term and also, if the Term is longer than six months, on the dates falling at six-monthly intervals after the first day of that Term.

9.3 Interest on overdue amounts

9.3.1 If the Company fails to pay any amount payable by it under the Finance Documents, it must immediately on demand by the Facility Agent pay interest on the overdue amount from its due date up to the date of actual payment, both before, on and after judgment.

9.3.2 Interest on an overdue amount is payable at a rate determined by the Facility Agent to be one per cent. per annum above the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted a Loan in the currency of the overdue amount.  For this purpose, the Facility Agent may (acting reasonably):

9.3.2.1 select successive Terms of any duration of up to three months; and

9.3.2.2 determine the appropriate Rate Fixing Day for that Term.

9.3.3 Notwithstanding clause 9.3.2 above, if the overdue amount is a principal amount of a Loan and becomes due and payable prior to the last day of its current Term, then:

9.3.3.1 the first Term for that overdue amount will be the unexpired portion of that Term; and

9.3.3.2 the rate of interest on the overdue amount for that first Term will be one per cent. per annum above the rate then payable on that Loan.

After the expiry of the first Term for that overdue amount, the rate on the overdue amount will be calculated in accordance with clause 9.3.2 above.

9.3.4 Interest (if unpaid) on an overdue amount will be compounded with that overdue amount at the end of each of its Terms but will remain immediately due and payable.

9.4 Notification of rates of interest

The Facility Agent must promptly notify each relevant Party of the determination of a rate of interest under this Agreement.

10. TERMS

10.1 Selection

10.1.1 Each Loan has one Term only.

10.1.2 The Company must select the Term for a Loan in the relevant Request.

10.1.3 Subject to the following provisions of this Clause, each Term for a Loan will be one, two, three or six months or for a period of one to thirty days duration as selected by the Company or any other period agreed by the Company and the Lenders.

10.1.4 A Term for a Loan shall start on the Utilisation Date for that Loan.

10.2 No overrunning the Final Maturity Date

If a Term would otherwise overrun the Final Maturity Date, it will be shortened so that it ends on the Final Maturity Date.

10.3 Other adjustments

The Facility Agent and the Company may enter into such other arrangements as they may agree for the adjustment of Terms and the consolidation and/or splitting of Loans.

10.4 Notification

The Facility Agent must notify the Company and the Lenders of the duration of each Term promptly after ascertaining its duration.

11. MARKET DISRUPTION

11.1 Failure of a Reference Bank to supply a rate

If LIBOR is to be calculated by reference to the Reference Banks but a Reference Bank does not supply a rate by 12.00 noon on a Rate Fixing Day, the applicable LIBOR will, subject as provided below, be calculated on the basis of the rates of the remaining Reference Banks.

11.2 Market disruption

11.2.1 In this Clause, each of the following events is a market disruption event:

11.2.1.1 LIBOR is to be calculated by reference to the Reference Banks but no, or only one, Reference Bank supplies a rate by 12.00 noon on the Rate Fixing Day; or

11.2.1.2 the Facility Agent receives by close of business on the Rate Fixing Day notification from Lenders whose shares in the relevant Loan exceed 50 per cent. of that Loan that such Lenders are unable to obtain matching deposits in the relevant interbank market or the rate at which they can do so is in excess of LIBOR for the relevant Term.

11.2.2 The Facility Agent must promptly notify the Company and the Lenders of a market disruption event.

11.2.3 After notification under clause 11.2.2 above, the rate of interest on each Lender's share in the affected Loan for the relevant Term will be the aggregate of the applicable:

11.2.3.1 Margin;

11.2.3.2 rate notified to the Facility Agent by that Lender as soon as practicable, and in any event before interest is due to be paid in respect of that Term, to be that which expresses as a percentage rate per annum the cost to that Lender of funding its share in that Loan from whatever source it may reasonably select; and

11.2.3.3 Mandatory Cost.

11.3 Alternative basis of interest or funding

11.3.1 If a market disruption event occurs and the Facility Agent or the Company so requires, the Company and the Facility Agent must enter into negotiations for a period of not more than 30 days with a view to agreeing an alternative basis for determining the rate of interest and/or funding for the affected Loan and any future Loan.

11.3.2 Any alternative basis agreed will be, with the prior consent of all the Lenders, binding on all the Parties.

12. TAXES

12.1 General

In this Clause:

Tax Credit means a credit against any Tax or any relief or remission for Tax (or its repayment).

U.K. Lender means a Lender which is within the charge to U.K. corporation tax in respect of, and beneficially entitled to, a payment of interest on a Loan made by a person that was a bank for the purposes of section 879 of the ITA at the time the Loan was made.

12.2 Tax gross-up

12.2.1 The Company must make all payments to be made by it under the Finance Documents without any Tax Deduction, unless a Tax Deduction is required by law.

12.2.2 If:

12.2.2.1 a Lender is not, or ceases to be, a U.K. Lender; or

12.2.2.2 the Company or a Lender is aware that the Company must make a Tax Deduction (or that there is a change in the rate or the basis of a Tax Deduction),

it must promptly notify the Facility Agent.  The Facility Agent must then promptly notify the affected Parties.

12.2.3 Except as provided below, if a Tax Deduction is required by law to be made by the Company or the Facility Agent, the amount of the payment due from the Company will be increased to an amount which (after making the Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.

12.2.4 Except as provided below, the Company is not required to make an increased payment under clause 12.2.3 above to a Lender that is not, or has ceased to be, a U.K. Lender in excess of the amount that the Company would have had to pay had the Lender been, or not ceased to be, a U.K. Lender.

12.2.5 Clause 12.2.4 above will not apply if the Lender has ceased to be a U.K. Lender by reason of any change after the date it became a Lender under this Agreement in (or in the interpretation, administration, or application of) any law or double taxation agreement or any published practice or concession of any relevant taxing authority.

12.2.6 Where a Lender fails to give notice under clause 12.2.2 above within 60 days after it obtains knowledge (or, after reasonable due enquiry, ought to have obtained knowledge) of such event, then such Lender shall, with respect to any claim made by it under this Clause 12.2 (Tax gross-up), only be entitled to claim an increased payment for the period from and after the date that is 60 days prior to the date on which the Lender does give notice.

12.2.7 If the Company is required to make a Tax Deduction, it must make the minimum Tax Deduction and must make any payment required in connection with that Tax Deduction within the time allowed by law.

12.2.8 Within 30 days of making either a Tax Deduction or a payment required in connection with a Tax Deduction, the Company must deliver to the Facility Agent for the relevant Finance Party entitled to the payment a statement under section 975 of the ITA or other evidence satisfactory to that Finance Party (acting reasonably) that the Tax Deduction has been made or (as applicable) the appropriate payment has been paid to the relevant taxing authority.

12.3 Tax indemnity

12.3.1 Except as provided below, the Company must indemnify a Finance Party against any loss or liability which that Finance Party (in its absolute discretion) determines will be or has been suffered (directly or indirectly) by that Finance Party for or on account of Tax in relation to a payment received or receivable (or any payment deemed to be received or receivable) under a Finance Document.

12.3.2 Clause 12.3.1 above does not apply to any Tax assessed on a Finance Party under the laws of the jurisdiction in which:

12.3.2.1 that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident for tax purposes; or

12.3.2.2 that Finance Party's Facility Office is located in respect of amounts received or receivable in that jurisdiction,

if that Tax is imposed on or calculated by reference to the net income received or receivable by that Finance Party. However, any payment deemed to be received or receivable, including any amount treated as income but not actually received by the Finance Party, such as a Tax Deduction, will not be treated as net income received or receivable for this purpose.

12.3.3 A Finance Party making, or intending to make, a claim under clause 12.3.1 above must promptly notify the Company of the event which will give, or has given, rise to the claim.

12.4 Tax Credit

If the Company makes a Tax Payment and the relevant Finance Party has obtained and used any Tax Credit that is attributable to that Tax Payment, then, if in its discretion (acting reasonably) it can do so without any further adverse consequences for it, that Finance Party must pay an amount to the Company which that Finance Party determines (in its discretion, acting reasonably) will leave it (after that payment) in the same after-tax position as it would have been in if the Tax Payment had not been required to be made by the Company.  The relevant Finance Party shall take those steps it considers in its opinion reasonable to seek and claim any tax credit.

12.5 Tax Warranty of Lenders

Each Lender severally warrants to the Company on the date it becomes a Lender that it is a U.K. Lender.  A Lender must promptly notify the Company if it ceases to be a U.K. Lender after this Agreement is entered into.

12.6 Stamp taxes

The Company must pay and indemnify each Finance Party against any stamp duty, registration or other similar Tax payable in connection with the entry into, performance or enforcement of any Finance Document, except for any such Tax payable in connection with the entry into of a Transfer Certificate.

12.7 Value added taxes

12.7.1 All costs and expenses payable under a Finance Document by the Company is exclusive of any value added tax or any other Tax of a similar nature which might be chargeable in connection with that amount.  If any such Tax is chargeable, the Company must pay to the Finance Party (in addition to and at the same time as paying that amount) an amount equal to the amount of that Tax.

12.7.2 The obligation of the Company under clause 12.7.1 above will be reduced to the extent that the Finance Party determines (acting reasonably) that it is entitled to repayment or a credit in respect of the relevant Tax.

13. INCREASED COSTS

13.1 Increased Costs

Except as provided below in this Clause, the Company must pay to a Finance Party the amount of any Increased Cost incurred by that Finance Party or any of its Affiliates as a result of:

13.1.1 the introduction of, or any change in, or any change in the interpretation or application of, any law or regulation; or

13.1.2 compliance with any law or regulation,

made after the date of this Agreement.

13.2 Exceptions

The Company need not make any payment for an Increased Cost to the extent that the Increased Cost is:

13.2.1 compensated for under another Clause or would have been but for an exception to that Clause;

13.2.2 a Tax on the overall net income of a Finance Party or any of its Affiliates;

13.2.3 attributable to a Finance Party or its Affiliate wilfully failing to comply with any law or regulation; or

13.2.4 incurred in any period or periods ending prior to the date falling 60 days before the date any demand in relation to that Increased Cost is made (save where the relevant Finance Party (after due enquiry) was unaware of the existence of such Increased Cost or where such Increased Cost is caused by reason of a change in (or in the interpretation, administration or application of) law with retrospective effect).

13.3 Claims

A Finance Party intending to make a claim for an Increased Cost must notify the Company promptly of the circumstances giving rise to, and the amount of, the claim.

14. MITIGATION

14.1 Mitigation

14.1.1 Each Finance Party must, in consultation with the Company (other than upon the occurrence of an event referred to at Clause 14.1.1.4 where no such consultation is required), take all reasonable steps to mitigate any circumstances which arise and which result or would result in:

14.1.1.1 any Tax Payment or Increased Cost being payable to that Finance Party;

14.1.1.2 that Finance Party being able to exercise any right of prepayment and/or cancellation under this Agreement by reason of any illegality;

14.1.1.3 that Finance Party incurring any cost of complying with the minimum reserve requirements of the European Central Bank; or

14.1.1.4 the occurrence of any market disruption event,

including transferring its rights and obligations under the Finance Documents to an Affiliate or changing its Facility Office.

14.1.2 A Finance Party is not obliged to take any step under this Subclause if, in the opinion of that Finance Party (acting reasonably), to do so might be prejudicial to it.

14.1.3 Each Finance Party must promptly notify the Company of any circumstances as described in Clauses 14.1.1.1 to 14.1.1.4.

14.1.4 The Company must indemnify each Finance Party for all costs and expenses reasonably incurred by it as a result of any step taken under this Clause 14.1 (Mitigation).

14.1.5 This clause does not in any way limit the obligations of the Company under the Finance Documents.

14.2 Substitution

Notwithstanding Clause 14.1, if any circumstances arise which result in:

14.2.1 any Tax Payment or Increased Cost being payable to that Finance Party;

14.2.2 that Finance Party being able to exercise any right of prepayment and/or cancellation under this Agreement by reason of any illegality;

14.2.3 that Finance Party incurring any cost of complying with the minimum reserve requirements of the European Central Bank; or

14.2.4 the occurrence of any market disruption event,

then the Company, at its expense, at any time within 180 days after the occurrence of the relevant event or circumstance, so long as no Default is outstanding, may by notice to such Finance Party require it (and, if applicable, its Affiliate) to novate all (and not part only) its rights and obligations hereunder (including its Commitments and its share of any Loans) in accordance with Clause 27 to a bank or financial institution specified by the Company and acceptable to the Facility Agent which is willing to take such a novation as aforesaid provided that:

14.2.5 such novation shall not conflict with or violate any law applicable to or binding on such Finance Party (or, if applicable, its Affiliate); and

14.2.6 the Company shall have paid to the Finance Party (or, if applicable, its Affiliate) all amounts accrued and owing hereunder.

Notwithstanding the above, the Company shall not be entitled to require a novation under this Clause 14.2 with respect to any Finance Party if:

14.2.7 the relevant Finance Party shall have mitigated the effect of the relevant event or circumstance as provided in Clause 14.1.1.1, and the novation would have no greater or further mitigating effect; or

14.2.8 the relevant event or circumstances are applicable to all Finance Parties.

14.3 Conduct of business by a Finance Party

No term of this Agreement will:

14.3.1 interfere with the right of any Finance Party to arrange its affairs (Tax or otherwise) in whatever manner it thinks fit or oblige any Finance Party to investigate or claim any Tax Credit; or

14.3.2 oblige any Finance Party to disclose any information relating to its affairs (Tax or otherwise) or any computation in respect of Tax.

15. PAYMENTS

15.1 Place

Unless a Finance Document specifies that payments under it are to be made in another manner, all payments by a Party (other than the Facility Agent) under the Finance Documents must be made to the Facility Agent to its account at such office or bank:

15.1.1 in the principal financial centre of the country of the relevant currency; or

15.1.2 in the case of euro, in the principal financial centre of a Participating Member State or London,

as it may notify to that Party for this purpose by not less than five Business Days' prior notice.

15.2 Funds

Payments under the Finance Documents to the Facility Agent must be made for value on the due date at such times and in such funds as the Facility Agent may specify to the Party concerned as being customary at the time for the settlement of transactions in the relevant currency in the place for payment.

15.3 Distribution

15.3.1 Each payment received by the Facility Agent under the Finance Documents for another Party must, except as provided below, be made available by the Facility Agent to that Party by payment (as soon as practicable after receipt) to its account with such office or bank:

15.3.1.1 in the principal financial centre of the country of the relevant currency; or

15.3.1.2 in the case of euro, in the principal financial centre of a Participating Member State or London,

as it may notify to the Facility Agent for this purpose by not less than five Business Days' prior notice.

15.3.2 The Facility Agent may apply any amount received by it for the Company in or towards payment (as soon as practicable after receipt) of any amount due from the Company under the Finance Documents or in or towards the purchase of any amount of any currency to be so applied.

15.3.3 Where a sum is paid to the Facility Agent under this Agreement for another Party, the Facility Agent is not obliged to pay that sum to that Party until it has established that it has actually received it.  However, the Facility Agent may assume that the sum has been paid to it, and, in reliance on that assumption, make available to that Party a corresponding amount.  If it transpires that the sum has not been received by the Facility Agent, that Party must immediately on demand by the Facility Agent refund any corresponding amount made available to it together with interest on that amount from the date of payment to the date of receipt by the Facility Agent at a rate calculated by the Facility Agent to reflect its cost of funds.

15.4 Currency

15.4.1 Unless a Finance Document specifies that payments under it are to be made in a different manner, the currency of each amount payable under the Finance Documents is determined under this Clause.

15.4.2 Interest is payable in the currency in which the relevant amount in respect of which it is payable is denominated.

15.4.3 A repayment or prepayment of any principal amount (or overdue amount) is payable in the currency in which that principal amount (or overdue amount) is denominated on its due date.

15.4.4 Amounts payable in respect of costs and expenses and Taxes are payable in the currency in which they are incurred.

15.4.5 Each other amount payable under the Finance Documents is payable in Sterling.

15.4.6 Any amount expressed to be payable in a currency other than Sterling shall be paid in that other currency.

15.5 No set-off or counterclaim

All payments made by the Company under the Finance Documents must be made without set-off or counterclaim.

15.6 Business Days

15.6.1 If a payment under the Finance Documents is due on a day which is not a Business Day, the due date for that payment will instead be the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not) or whatever day the Facility Agent determines is market practice.

15.6.2 During any extension of the due date for payment of any principal (or overdue amount) under this Agreement interest is payable on that principal (or overdue amount) at the rate payable on the original due date.

15.7 Partial payments

15.7.1 If any Administrative Party receives a payment insufficient to discharge all the amounts then due and payable by the Company under the Finance Documents, the Administrative Party must apply that payment towards the obligations of the Company under the Finance Documents in the following order:

15.7.1.1 first, in or towards payment pro rata of any unpaid fees, costs and expenses of the Administrative Parties under the Finance Documents;

15.7.1.2 secondly, in or towards payment pro rata of any accrued interest or fee due but unpaid under this Agreement;

15.7.1.3 thirdly, in or towards payment pro rata of any principal amount due but unpaid under this Agreement; and

15.7.1.4 fourthly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents.

15.7.2 The Facility Agent must, if so directed by all the Lenders, vary the order set out in sub-clauses 15.7.1.1 to 15.7.1.4 above.

15.7.3 This Subclause will override any appropriation made by the Company.

15.8 Timing of payments

If a Finance Document does not provide for when a particular payment is due, that payment will be due within three Business Days of demand by the relevant Finance Party.

16. REPRESENTATIONS

16.1 Representations

The representations set out in this Clause are made by the Company to each Finance Party.

16.2 Status

It is a limited liability company, duly incorporated and validly existing under the Companies Act 2006 in England and Wales.

16.3 Powers and authority

It has the power to enter into and perform, and has taken all necessary action to authorise the entry into and performance of, the Finance Documents to which it is or will be a party and the transactions contemplated by those Finance Documents.

16.4 Legal validity

Subject to any general principles of law limiting its obligations and referred to in any legal opinion required under this Agreement, each Finance Document to which it is a party is its legally binding, valid and enforceable obligation.

16.5 Non-conflict

The entry into and performance by it of, and the transactions contemplated by, the Finance Documents do not conflict with any borrowing or other power or restricted granted or imposed by:

16.5.1 any law or regulation applicable to it and violation of which has or is likely to have a Material Adverse Effect; or

16.5.2 its constitutional documents.

16.6 No default

16.6.1 No Event of Default is continuing or might reasonably be expected to result from the making of any Loan.

16.6.2 No other event or circumstance is outstanding which constitutes a default under any other agreement or instrument which is binding on it or any of its Subsidiaries or to which its (or any of its Subsidiaries’) assets are subject which might have a Material Adverse Effect.

16.7 Authorisations

All authorisations required by it (including any authorisations required under PUHCA or the Act, if any) in connection with the entry into, performance, validity and enforceability of, and the transactions contemplated by, the Finance Documents have been obtained or effected (as appropriate) and are in full force and effect.

16.8 Financial statements

Its audited consolidated financial statements most recently delivered to the Facility Agent (which, at the date of this Agreement, are the Original Financial Statements):

16.8.1 have been prepared in accordance with accounting principles and practices generally accepted in its jurisdiction of incorporation, consistently applied; and

16.8.2 fairly represent its consolidated financial condition as at the date to which they were drawn up,

except, in each case, as disclosed to the contrary in those financial statements..

16.9 No material adverse change

Other than as disclosed in writing to the Mandated Lead Arrangers prior to the date of this Agreement there has been no material adverse change in its consolidated financial condition since the date to which the Original Financial Statements were drawn up.

16.10 Litigation   No litigation, arbitration or administrative proceedings are current or, to its knowledge, pending or threatened, which, if adversely determined, are reasonably likely to have a Material Adverse Effect.

16.11 Winding Up No meeting has been convened for its winding-up and, so far as it is aware, no petition, application or the like is outstanding for its winding-up.  

16.12 Non-Violation of other Agreements:   Its entry into, exercise of its rights and/or performance of or compliance with its obligations under this Agreement do not and will not violate, to an extent or in a manner which has or is likely to have a Material Adverse Effect on it, any agreement to which it is a party or which is binding on it.

16.13 Governing Law and Enforcement

16.13.1 The choice of English law as the governing law of the Finance Documents will be recognised and enforced in its jurisdiction of incorporation.

16.13.2 Any judgement obtained in England in relation to a Finance Document will be recognised and enforced in its jurisdiction of incorporation.

16.14 Deduction of Tax   It is not required to make any deduction for or on account of Tax from any payment it may make under any Finance Document to a Lender which is a UK Lender.

16.15 No filing or stamp taxes   Under the law of its jurisdiction of incorporation it is not necessary that the Finance Documents be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents.

16.16 No misleading information

16.16.1 Any factual information provided by any member of the Group for the purposes of the Information Package was true and accurate in all material respects as at the date it was provided or as at the date (if any) at which it is stated.

16.16.2 The financial projections contained in the Information Package have been prepared on the basis of recent historical information and on the basis of reasonable assumptions.

16.16.3 Nothing has occurred or been omitted from the Information Package and no information has been given or withheld that results in the information contained in the Information Package being untrue or misleading in any material respect.

16.17 Pari Passu ranking   Its payment obligations under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.

16.18 Times for making representations

16.18.1 The representations set out in this Clause are made by the Company on the date of this Agreement.

16.18.2 The representations in Clauses 16.2 to 16.8 (inclusive), 16.10 to 16.13 (inclusive) are deemed to be repeated by the Company on the date of each Request and the first day of each Term.

16.18.3 When a representation is repeated, it is applied to the circumstances existing at the time of repetition.

17. INFORMATION COVENANTS

17.1 Financial statements

17.1.1 The Company must supply to the Facility Agent in sufficient copies for all the Lenders:

17.1.1.1 its audited consolidated financial statements for each of its financial years; and

17.1.1.2 its interim consolidated financial statements for the first half-year of each of its financial years.

17.1.2 All financial statements must be supplied as soon as they are available and:

17.1.2.1 in the case of the Company's audited consolidated financial statements, within 180 days; and

17.1.2.2 in the case of the Company's interim financial statements, within 90 days,

of the end of the relevant financial period.

17.2 Form of Financial Statement

If any financial statement delivered or to be delivered to the Facility Agent under Clause 17.1 is not to be or, as the case may be, has not been prepared in accordance with Applicable Accounting Principles:

17.2.1 The Company and the Facility Agent (on behalf of and after consultation with all the Lenders) shall, on the request of the Facility Agent or the Company, negotiate in good faith with a view to agreeing such amendments to the above financial ratio and/or the definitions of the terms used in it as are necessary to give the Lenders comparable protection to that contemplated at the date of this Agreement;

17.2.2 If amendments are agreed by the Company and the Majority Lenders within 25 days, those amendments shall take effect in accordance with the terms of that agreement;

17.2.3 If such amendments are not so agreed within 25 days, the Company shall:

17.2.3.1 within 30 days after the end of that 25 day period; and

17.2.3.2 with all subsequent financial statements to be delivered to the Facility Agent under Clause 17.1,

deliver to the Facility Agent details of all such adjustments as need to be made to the relevant financial statements to bring them into line with the Companies Act 2006 (as in effect on the date of this Agreement) and Applicable Accounting Principles.

17.3 Compliance Certificate

17.3.1 The Company must supply to the Facility Agent a Compliance Certificate with each set of its financial statements, sent to the Facility Agent under this Agreement.

17.3.2 A Compliance Certificate must be signed by two directors of the Company.

17.4 Information - miscellaneous

The Company must supply to the Facility Agent, in sufficient copies for all the Lenders if the Facility Agent so requests:

17.4.1 copies of all documents despatched by the Company to its creditors generally or any class of them at the same time as they are despatched;

17.4.2 promptly upon becoming aware of them, details of any litigation, arbitration or administrative proceedings which are current, threatened or pending and which might, if adversely determined, have a Material Adverse Effect;

17.4.3 promptly on request, a list of the then current Material Subsidiaries; and

17.4.4 promptly on request, such further information regarding the financial condition and operations of the Group as any Finance Party through the Facility Agent may reasonably request.

17.5 Notification of Default

17.5.1 The Company must notify the Facility Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence.

17.5.2 Promptly on request by the Facility Agent, the Company must supply to the Facility Agent a certificate signed by two of its directors on its behalf, certifying that no Default is outstanding or, if a Default is outstanding, specifying the Default and the steps, if any, being taken to remedy it.

17.6 Use of websites

17.6.1 Except as provided below, the Company may deliver any information under this Agreement to a Lender by posting it on to an electronic website if:

17.6.1.1 the Facility Agent and the Lender agree;

17.6.1.2 the Company and the Facility Agent designate an electronic website for this purpose;

17.6.1.3 the Company notifies the Facility Agent of the address of and password for the website; and

17.6.1.4 the information posted is in a format agreed between the Company and the Facility Agent.

The Facility Agent must supply each relevant Lender with the address of and password for the website.

17.6.2 Notwithstanding the above, the Company must supply to the Facility Agent in paper form a copy of any information posted on the website together with sufficient copies for:

17.6.2.1 any Lender not agreeing to receive information via the website; and

17.6.2.2 within ten Business Days of request any other Lender, if that Lender so requests.

17.6.3 The Company must promptly upon becoming aware of its occurrence, notify the Facility Agent if:

17.6.3.1 the website cannot be accessed;

17.6.3.2 the website or any information on the website is infected by any electronic virus or similar software;

17.6.3.3 the password for the website is changed; or

17.6.3.4 any information to be supplied under this Agreement is posted on the website or amended after being posted.

If the circumstances in sub-clauses 17.6.3.1 or 17.6.3.2 above occur, the Company must supply any information required under this Agreement in paper form.

17.7 Know your customer requirements

17.7.1 The Company must promptly on the request of any Finance Party supply to that Finance Party any documentation or other evidence which is reasonably requested by that Finance Party (whether for itself, on behalf of any Finance Party or any prospective new Lender) to enable a Finance Party or prospective new Lender to carry out and be satisfied with the results of all applicable know your customer requirements.

17.7.2 Each Lender must promptly on the request of the Facility Agent supply to the Facility Agent any documentation or other evidence which is reasonably required by the Facility Agent to carry out and be satisfied with the results of all know your customer requirements.

18. FINANCIAL COVENANTS

18.1 Definitions

In this Clause:

Cash means, at any time, cash denominated in a currency of the United States of America, the United Kingdom, any member state of the European Economic Area or any Participating Member State in hand or at bank and (in the latter case) credited to an account in the name of a member of the Group with an Acceptable Bank and to which a member of the Group is alone (or together with other members of the Group) beneficially entitled and for so long as:

(a) that cash is repayable:

(i) if that cash is deposited with a Lender, within 270 days after the relevant date of calculation; or

(ii) if that cash is deposited with any other lender or financial institution, within 45 days after the relevant date of calculation;

(b) repayment of that cash is not contingent on the prior discharge of any other indebtedness of any member of the Group or of any other person whatsoever or on the satisfaction of any other condition;

(c) there is no Security Interest over that cash other than Security Interests permitted under Clause 19.5.3.9 (Negative pledge); and

(d) the cash is freely and (except as mentioned in paragraph (a) above) immediately available to be applied in repayment or prepayment of the Facility.

Cash Equivalent Investments means at any time:

(a) certificates of deposit maturing within one year after the relevant date of calculation and issued by an Acceptable Bank;

(b) any investment in marketable debt obligations issued or guaranteed by the government of the United States of America, the United Kingdom, any member state of the European Economic Area or any Participating Member State or by an instrumentality or agency of any of them having an equivalent credit rating, maturing within one year after the relevant date of calculation and not convertible or exchangeable to any other security;

(c) commercial paper not convertible or exchangeable to any other security:

(i) for which a recognised trading market exists;

(ii) issued by an issuer incorporated in the United States of America, the United Kingdom, any member state of the European Economic Area or any Participating Member State;

(iii) which matures within one year after the relevant date of calculation; and

(iv) which has a credit rating of either A-1 or higher by Standard & Poor's Rating Services or F1 or higher by Fitch Ratings Ltd or P-1 or higher by Moody's Investor Services Limited, or, if no rating is available in respect of the commercial paper, the issuer of which has, in respect of its long-term unsecured and non-credit enhanced debt obligations, an equivalent rating;

(d) sterling bills of exchange eligible for rediscount at the Bank of England (or their dematerialised equivalent) and accepted by an Acceptable Bank;

(e) any investment in money market funds which:

(i) have a credit rating of either A-1 or higher by Standard & Poor's Rating Services or F1 or higher by Fitch Ratings Ltd or P-1 or higher by Moody's Investor Services Limited;

(ii) which invest substantially all their assets in securities of the types described in Clauses (a) to (d) above; and

(iii) can be turned into cash on not more than 30 days' notice; or

(f) any other debt security approved by the Majority Lenders,

in each case, denominated in a currency of the United States of America, the United Kingdom, any member state of the European Economic Area or any Participating Member State and to which any member of the Group is alone (or together with other members of the Group beneficially entitled at that time and which is not issued or guaranteed by any member of the Group or subject to any Security Interest (other than Security Interests permitted under Clause 19.5.3.9 (Negative pledge).

Consolidated EBITDA means the consolidated net pre-taxation profits of the Group for a Measurement Period as adjusted by:

(a) adding back Interest Payable;

(b) taking no account of any exceptional or extraordinary item;

(c) excluding any amount attributable to minority interests;

(d) adding back depreciation and amortisation; and

(e) taking no account of any revaluation of an asset or any loss or gain over book value arising on the disposal of an asset (otherwise than in the ordinary course of trading) by a member of the Group during that Measurement Period.

Interest Payable means, in relation to any Measurement Period, all interest payable and similar charges of the Group expressed in Sterling and determined on a consolidated basis in accordance with Applicable Accounting Principles.

Measurement Period means a half-year of the Company.

Regulatory Asset Base means the regulatory asset base of the Company most recently published by OFGEM.

Total Net Debt means, in respect of the Company, at any time the consolidated Financial Indebtedness of the Company which is required to be accounted for as debt in the annual financial statements of the Company less the aggregate at such time of all Cash or Cash Equivalent Investments held by any member of the Group.

18.2 Interpretation

18.2.1 Except as provided to the contrary in this Agreement, an accounting term used in this Clause is to be construed in accordance with the principles applied in connection with the Original Financial Statements.

18.2.2 Any amount in a currency other than Sterling is to be taken into account at its Sterling equivalent calculated on the basis of:

18.2.2.1 the Facility Agent's spot rate of exchange for the purchase of the relevant currency in the London foreign exchange market with Sterling at or about 11.00 a.m. on the day the relevant amount falls to be calculated; or

18.2.2.2 if the amount is to be calculated on the last day of a financial period of the Company, the relevant rates of exchange used by the Company in, or in connection with, its financial statements for that period.

18.2.3 No item must be credited or deducted more than once in any calculation under this Clause.

18.3 Interest cover

The Company must ensure that the ratio of Consolidated EBITDA to Interest Payable is not, at the end of each Measurement Period, less than 3 to 1.

18.4 Asset Cover

The Company must ensure that the Total Net Debt does not at any time exceed 85% of its Regulatory Asset Base.

19. General Covenants

19.1 General

The Company agrees to be bound by the covenants set out in this Clause relating to it and, where the covenant is expressed to apply to each member of the Group, the Company must ensure that each of its Subsidiaries performs that covenant.

19.2 Authorisations

The Company must promptly obtain, maintain and comply with the terms of any authorisation required under any law or regulation to enable it to perform its obligations under, or for the validity or enforceability of, any Finance Document.

19.3 Compliance with laws

Each member of the Group must comply in all respects with all laws to which it is subject where failure to do so is reasonably likely to have a Material Adverse Effect.

19.4 Pari passu ranking

The Company must ensure that its payment obligations under the Finance Documents rank at least pari passu with all its other present and future unsecured payment obligations, except for obligations mandatorily preferred by law applying to companies generally.

19.5 Negative pledge

In this clause 19.5, “Quasi-Security” means an arrangement or transaction described in clause 19.5.2 below.

19.5.1 Except as provided below, neither the Company nor any Material Subsidiary may create or allow to exist any Security Interest or Quasi-Security on any of its assets.

19.5.2 Except as provided below, neither the Company nor any Material Subsidiary may:

19.5.2.1 sell, transfer or otherwise dispose of any of its assets on terms whereby they are or may be leased to or re-acquired by the Company or any Material Subsidiary;

19.5.2.2 sell, transfer or otherwise dispose of any of its receivables on recourse terms;

19.5.2.3 enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or

19.5.2.4 enter into any other preferential arrangement having a similar effect,

in circumstances where the arrangement or transaction is entered into primarily as a method of raising Financial Indebtedness or of financing the acquisition of an asset.

19.5.3.1 any Security Interest or Quasi-Security created under or in connection with or arising out of the Balancing and Settlement Code or any transactions or arrangements entered into in connection with the management of risks relating thereto;

19.5.3.2 in respect of overdue amounts which have not been overdue for more than 30 days and/or are being contested in good faith, liens arising solely by operation of law or by order of a court or tribunal (or by an agreement of similar effect) and/or in the ordinary course of business or operations;

19.5.3.3 any Security Interest or Quasi-Security created after the date of this Agreement for the sole purpose of re-financing all or any part of the Facility (at the option of the Company) provided that the monies borrowed or raised on such Security Interest or Quasi-Security shall, to that extent, be applied reasonably promptly in accordance with this Agreement in or towards repayment of the relevant Facility;

19.5.3.4 any Security Interest or Quasi-Security arising out of title retention provisions in a supplier's standard conditions of supply of goods acquired in the ordinary course of business or operations;

19.5.3.5 any Security Interest or Quasi-Security created on any asset acquired after the date of this Agreement for the sole purpose of financing or re-financing that acquisition and securing a principal, capital or nominal amount not exceeding the cost of that acquisition, provided that the Security Interest or Quasi-Security is removed or discharged within 6 months of the date of acquisition of such asset;

19.5.3.6 any Security Interest or Quasi-Security outstanding on or over any asset acquired after the date of this Agreement and in existence at the date of such acquisition, provided that the Security Interest or Quasi-Security is removed or discharged within 6 months of the date of acquisition of such asset;

19.5.3.7 any Security Interest or Quasi-Security created or outstanding on or over any asset of any company which becomes a Material Subsidiary of the Company after the date of this Agreement where such Security Interest or Quasi-Security is created prior to the date on which such company becomes a Material Subsidiary of the Company and is not created or increased in contemplation of such company being acquired and/or becoming a Material Subsidiary of the Company and the Security Interest or Quasi-Security is removed or discharged within 6 months of the date of such company becoming a Material Subsidiary of the Company;

19.5.3.8 any Security Interest or Quasi-Security created on any asset to secure any Financial Indebtedness incurred in connection with the financing of any asset or project in respect of which the repayment of that Financial Indebtedness is to be made from the revenues arising out of, or other proceeds of realisation from, that asset or project, with recourse to those revenues and proceeds and other assets used in connection with, or forming the subject matter of, that asset or project but without recourse (or with such limited recourse as the Majority Lenders may from time to time agree) to any other assets of the Group;

19.5.3.9 any netting arrangements under any swap or other hedging transaction which is on standard market terms;

19.5.3.10 any Security Interest or Quasi-Security created or outstanding with the prior approval of the Majority Lenders; and

19.5.3.11 any Security Interest or Quasi-Security created or outstanding on or over assets of the Company or any of its Material Subsidiaries provided that the aggregate outstanding principal or nominal amount secured by all Security Interests and Quasi-Security created or outstanding under this exception on or over such assets shall not at any time exceed £25,000,000 or its equivalent.

19.6 Disposals

19.6.1 Except as provided below, no member of the Group may, either in a single transaction or in a series of transactions and whether related or not, dispose of all or any part of its assets (other than cash) where the higher of the market value and the net consideration receivable (when aggregated with the higher of the market value and the net consideration receivable from any previous disposal by members of the Group) exceeds £5,000,000 (or its equivalent) in total during the term of this Agreement.

19.6.2 Clause 19.6.1 does not apply to:

19.6.2.1 any disposal made in the ordinary course of business or operations of the disposing entity (including, without limitation, disposals of subsidiaries or lines of business, provided that this shall not include a disposal of the core electricity distribution business);

19.6.2.2 disposals on normal commercial terms of obsolete assets or assets no longer required for the purpose of the relevant Person's business or operations;

19.6.2.3 any realisation of investments acquired, purchased or made by the temporary application of funds not immediately required in the relevant Person's business or operations;

19.6.2.4 the exchange of assets for other assets of a similar or superior nature and value, or the sale of assets on normal commercial terms for cash which is payable in full on the completion of the sale and is to be, and is, applied in or towards the purchase of similar assets within 6 months;

19.6.2.5 the disposal of assets by one wholly-owned Subsidiary of the Company to another or (if the consideration for the disposal does not exceed a normal commercial consideration) to the Company by one of its Subsidiaries;

19.6.2.6 disposals in connection with sale-and-leaseback or sale and repurchase transactions or any other form of "off balance sheet" financing, provided that the aggregate book value (in the books of the disposing party) of all assets the subject of all such disposals made during the period commencing on the date of this Agreement and ending on the date when no amount remains to be lent or remains payable under this Agreement shall not exceed £50,000,000; and

19.6.2.7 any disposal which the Majority Lenders shall have agreed shall not be taken into account.

19.7 Environmental matters

The Company will and will ensure that its Material Subsidiaries will comply with all applicable Environmental Law and other regulations, orders or other law applicable to the conduct of the business of the supply or distribution of electricity, in each case, where failure to do so would have a Material Adverse Effect.

19.8 Insurance

Each member of the Group must insure its business and assets with insurance companies to such an extent and against such risks as that member of the Group reasonably considers to be appropriate, having regard to the insurance arrangements of companies engaged in similar business.

19.9 Merger   The Company shall not enter into any amalgamation, demerger, merger or corporate reconstruction.

19.10 Change of business   The Company shall procure that no substantial change is made to the general nature of the business of the Company or the Group from that carried on at the date of this Agreement.

19.11 Acquisitions   Except as provided below, neither the Company nor any Material Subsidiary may acquire a company or any shares or securities or a business or undertaking (or, in each case, any interest in any of them).

19.11.1 Provided that no Event of Default is continuing on the date of the acquisition or would occur as a result of the acquisition, Clause 19.11.1 does not apply to:

19.11.1.1 an acquisition by a member of the Group of an asset sold, leased, transferred or otherwise disposed of by another member of the Group as permitted under clause 19.6.2 above;

19.11.1.2 an acquisition where the consideration (including associated costs and expenses) for the acquisition (when aggregated with the consideration (including associated costs and expenses) for any other acquisition permitted under this paragraph during the term of this Agreement does not exceed 2.5% of the sum of the issued share capital, share premium and consolidated reserves (including retained earnings) of the Company, as shown by its most recent audited consolidated financial statements; and

19.11.1.3 any acquisition which the Majority Lenders shall have consented to in writing.

19.12 Prohibition on the Debt Purchase Transactions of the Group   The Company shall not, and shall procure that each other member of the Group shall not, enter into any Debt Purchase Transaction or beneficially own all or any part of the share capital of a company that is a Lender or a party to a Debt Purchase Transaction of the type referred to in paragraphs (b) and (c) of the definition of Debt Purchase Transaction.

20. DEFAULT

20.1 Events of Default

Each of the events set out in this Clause is an Event of Default.

20.2 Non-payment

The Company fails to pay any sum payable under any Finance Document when due unless:

20.2.1 its failure to pay is caused by administrative or technical error; and

20.2.2 payment is made within 5 Business Days of its due date.

20.3 Breach of other obligations

20.3.1 The Company does not perform or comply with its obligations under Clause 18 (Financial covenants), Clause 19.5 (Negative Pledge), Clause 19.6 (Disposals) or Clause 19.11 (Acquisitions).

20.3.2 The Company does not perform or comply with any of its other obligations under any Finance Document in any material respect or any representation or warranty by the Company in this Agreement or in any document delivered under it is or proves to have been incorrect when made or deemed repeated, unless the non-compliance or circumstances giving rise to the misrepresentation, as the case may be, is capable of remedy and is not remedied within 30 Business Days of the earlier of the Facility Agent giving notice requiring the same to be remedied and the Company becoming aware of such non-compliance or misrepresentation, as the case may be.

20.4 Cross-default

20.4.1 Any Financial Indebtedness of the Company is not paid when due nor within any originally applicable grace period.

20.4.2 Any Financial Indebtedness of the Company is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described).

20.4.3 Any commitment for any Financial Indebtedness of the Company is cancelled or suspended by a creditor of the Company as a result of an event of default (however described).

20.4.4 Any creditor of the Company becomes entitled to declare any Financial Indebtedness of the Company due and payable prior to its specified maturity as a result of an event of default (however described).

20.4.5 No Event of Default will occur under this clause 20.4 unless and until the aggregate amount of such Financial Indebtedness falling within clauses 20.4.1 to 20.4.4 above is more than £20,000,000 or its equivalent in any other currency or currencies.

20.5 Insolvency

20.5.1 Any of the following occurs in respect of the Company:

20.5.1.1 it is unable to pay its debts generally as they fall due or it is deemed by a court of competent jurisdiction to be insolvent;

20.5.1.2 it suspends making payments on all or any class of its debts or publicly announces an intention to do so;

20.5.1.3 by reason of actual or anticipated financial difficulties, it begins negotiations with all or any class of its creditors for the general rescheduling of its indebtedness; or

20.5.1.4 a moratorium is declared in respect of any of its indebtedness.

20.5.2 If a moratorium occurs in respect of the Company, the ending of the moratorium will not remedy any Event of Default caused by the moratorium.

20.6 Insolvency proceedings

20.6.1 Except as provided below, any of the following occurs in respect of the Company:

20.6.1.1 any person presents a petition for its winding-up, administration or dissolution;

20.6.1.2 an order for its winding-up, administration or dissolution is made;

20.6.1.3 any liquidator, trustee in bankruptcy, judicial custodian, compulsory manager, receiver, administrative receiver, administrator or similar officer is appointed in respect of it or any of its assets;

20.6.1.4 its directors or other officers request the appointment of a liquidator, trustee in bankruptcy, judicial custodian, compulsory manager, receiver, administrative receiver, administrator or similar officer; or

20.6.1.5 any other analogous step or procedure is taken in any jurisdiction.

20.6.2 Clause 20.6.1 does not apply to (i) a petition for winding-up presented by a creditor which is being actively contested in good faith and with due diligence and with a reasonable prospect of success or (ii) a voluntary solvent winding-up, amalgamation, reconstruction or reorganisation or otherwise part of a solvent scheme of arrangement, in each case on terms approved by the Majority Lenders.

20.7 Creditors' process

A distress, attachment, execution or other legal process material in relation to the Company's ability to perform its payment obligations under this Agreement is levied, enforced or sued out on or against the assets of the Company and is not discharged or stayed within 90 days.

20.8 Licence

Either (1) the Authority gives notice in writing of the revocation of the Licence in accordance with its terms and that notice is not withdrawn or contested in good faith by appropriate proceedings or (2) the Licence is revoked, in either case, other than in circumstances which permit the Company or its Affiliates to carry on the distribution business of the Company either without a licence as a result of any change in the Act or regulatory regime or with a new licence, permitting the distribution of electricity in the authorised areas covered by the Licence, issued under the Act or pursuant to the Utilities Act, 2000.

20.9 Balancing and Settlement Code

20.9.1 The Company ceases to be a party to the Balancing and Settlement Code Framework Agreement other than in circumstances where the Company is able to carry its distribution business; or

20.9.2 the Company breaches the Balancing and Settlement Code and such breach has or is reasonably likely to have a Material Adverse Effect other than in circumstances where the Company is able to carry on its distribution business.

20.10 Unlawfulness and invalidity

20.10.1 It is or becomes unlawful for the Company to perform any of its obligations under the Finance Documents in any material respect.

20.10.2 Any obligation or obligations of the Company under any Finance Documents  are not (subject to the Legal Reservations) or cease to be legal, valid, binding or enforceable and the cessation individually or cumulatively materially and adversely affects the interests of the Lenders under the Finance Documents.

20.11 Cessation of business   The Company suspends or ceases to carry on (or threatens to suspend or cease to carry on) all or a material part of its business except as a result of a disposal permitted by clause 19.6.

20.12 Material Adverse Effect   Any event or circumstance occurs which has or is reasonably likely to have a Material Adverse Effect.

20.13 Acceleration   If an Event of Default is outstanding, the Facility Agent may, and must if so instructed by the Majority Lenders, by notice to the Company:

20.13.1 cancel the Total Commitments; and/or

20.13.2 declare that all or part of any amounts outstanding under the Finance Documents are:

20.13.2.1 immediately due and payable; and/or

20.13.2.2 payable on demand by the Facility Agent acting on the instructions of the Majority Lenders.

Any notice given under this subclause will take effect in accordance with its terms.

21. THE ADMINISTRATIVE PARTIES

21.1 Appointment and duties of the Facility Agent

21.1.1 Each Finance Party (other than the Facility Agent) irrevocably appoints the Facility Agent to act as its agent under the Finance Documents.

21.1.2 Each Finance Party irrevocably authorises the Facility Agent to:

21.1.2.1 perform the duties and to exercise the rights, powers and discretions that are specifically given to it under the Finance Documents, together with any other incidental rights, powers and discretions; and

21.1.2.2 execute each Finance Document expressed to be executed by the Facility Agent.

21.1.3 The Facility Agent has only those duties which are expressly specified in the Finance Documents.  Those duties are solely of a mechanical and administrative nature.

21.2 Role of the Mandated Lead Arranger

Except as specifically provided in the Finance Documents, no Mandated Lead Arranger has any obligations of any kind to any other Party in connection with any Finance Document.

21.3 No fiduciary duties

Except as specifically provided in a Finance Document, nothing in the Finance Documents makes an Administrative Party a trustee or fiduciary for any other Party or any other person.  No Administrative Party need hold in trust any moneys paid to it for a Party or be liable to account for interest on those moneys.

21.4 Individual position of an Administrative Party

21.4.1 If it is also a Lender, each Administrative Party has the same rights and powers under the Finance Documents as any other Lender and may exercise those rights and powers as though it were not an Administrative Party.

21.4.2 Each Administrative Party may:

21.4.2.1 carry on any business with the Company or its related entities (including acting as an agent or a trustee for any other financing); and

21.4.2.2 retain any profits or remuneration it receives under the Finance Documents or in relation to any other business it carries on with the Company or its related entities.

21.5 Reliance

The Facility Agent may:

21.5.1 rely on any notice or document believed by it to be genuine and correct and to have been signed by, or with the authority of, the proper person;

21.5.2 rely on any statement made by any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify;

21.5.3 engage, pay for and rely on professional advisers selected by it (including those representing a Party other than the Facility Agent); and

21.5.4 act under the Finance Documents through its personnel and agents.

21.6 Majority Lenders' instructions

21.6.1 The Facility Agent is fully protected if it acts on the instructions of the Majority Lenders in the exercise of any right, power or discretion or any matter not expressly provided for in the Finance Documents.  Any such instructions given by the Majority Lenders will be binding on all the Lenders.  In the absence of instructions, the Facility Agent may act as it considers to be in the best interests of all the Lenders.

21.6.2 The Facility Agent is not authorised to act on behalf of a Lender (without first obtaining that Lender's consent) in any legal or arbitration proceedings in connection with any Finance Document.

21.6.3 The Facility Agent may require the receipt of security satisfactory to it, whether by way of payment in advance or otherwise, against any liability or loss which it may incur in complying with the instructions of the Majority Lenders.

21.7 Responsibility

21.7.1 No Administrative Party is responsible to any other Finance Party for the adequacy, accuracy or completeness of:

21.7.1.1 any Finance Document or any other document; or

21.7.1.2 any statement or information (whether written or oral) made in or supplied in connection with any Finance Document.

21.7.2 Without affecting the responsibility of the Company for information supplied by it or on its behalf in connection with any Finance Document, each Lender confirms that it:

21.7.2.1 has made, and will continue to make, its own independent appraisal of all risks arising under or in connection with the Finance Documents (including the financial condition and affairs of the Company and its related entities and the nature and extent of any recourse against any Party or its assets); and

21.7.2.2 has not relied exclusively on any information provided to it by any Administrative Party in connection with any Finance Document.

21.7.3

21.7.3.1 Nothing in this Agreement will oblige the Facility Agent to satisfy any know your customer requirement in relation to the identity of any person on behalf of any Finance Party.

21.7.3.2 Each Finance Party confirms to the Facility Agent that it is solely responsible for any know your customer requirements it is required to carry out and that it may not rely on any statement in relation to those requirements made by any other person.

21.8 Exclusion of liability

21.8.1 The Facility Agent is not liable or responsible to any other Finance Party for any action taken or not taken by it in connection with any Finance Document, unless directly caused by its gross negligence or wilful misconduct.

21.8.2 The Facility Agent will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by the Facility Agent, if the Facility Agent has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the Facility Agent for that purpose.

21.8.3 No Party may take any proceedings against any officer, employee or agent of the Facility Agent in respect of any claim it might have against the Facility Agent or in respect of any act or omission of any kind by that officer, employee or agent in connection with any Finance Document.  Any officer, employee or agent of the Facility Agent may rely on this Subclause and enforce its terms under the Contracts (Rights of Third Parties) Act 1999.

21.9 Default

21.9.1 The Facility Agent is not obliged to monitor or enquire whether a Default has occurred.  The Facility Agent is not deemed to have knowledge of the occurrence of a Default.

21.9.2 If the Facility Agent:

21.9.2.1 receives notice from a Party referring to this Agreement, describing a Default and stating that the event is a Default; or

21.9.2.2 is aware of the non-payment of any principal or interest or any fee payable to a Lender under this Agreement,

it must promptly notify the Lenders.

21.10 Information

21.10.1 The Facility Agent must promptly forward to the person concerned the original or a copy of any document which is delivered to the Facility Agent by a Party for that person.

21.10.2 Except where a Finance Document specifically provides otherwise, the Facility Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party.

21.10.3 Except as provided above, the Facility Agent has no duty:

21.10.3.1 either initially or on a continuing basis to provide any Lender with any credit or other information concerning the risks arising under or in connection with the Finance Documents (including any information relating to the financial condition or affairs of the Company or its related entities or the nature or extent of recourse against any Party or its assets) whether coming into its possession before, on or after the date of this Agreement; or

21.10.3.2 unless specifically requested to do so by a Lender in accordance with a Finance Document, to request any certificate or other document from the Company.

21.10.4 In acting as the Facility Agent, the agency division of the Facility Agent is treated as a separate entity from its other divisions and departments.  Any information acquired by the Facility Agent which, in its opinion, is acquired by it otherwise than in its capacity as the Facility Agent may be treated as confidential by the Facility Agent and will not be treated as information possessed by the Facility Agent in its capacity as such.

21.10.5 The Facility Agent is not obliged to disclose to any person any confidential information supplied to it by a member of the Group solely for the purpose of evaluating whether any waiver or amendment is required to any term of the Finance Documents.

21.10.6 The Company irrevocably authorises the Facility Agent to disclose to the other Finance Parties any information which, in its opinion, is received by it in its capacity as the Facility Agent.

21.11 Indemnities

21.11.1 Without limiting the liability of the Company under the Finance Documents, each Lender must indemnify the Facility Agent for that Lender's Pro Rata Share of any loss or liability incurred by the Facility Agent in acting as the Facility Agent, except to the extent that the loss or liability is caused by the Facility Agent's gross negligence or wilful misconduct or to the extent that the Facility Agent has been reimbursed in full by the Company for such loss or liability.

21.11.2 The Facility Agent may deduct from any amount received by it for a Lender any amount due to the Facility Agent from that Lender under a Finance Document but unpaid.

21.11.3 The Company must indemnify the Facility Agent against any loss or liability properly incurred by the Facility Agent as a result of:

21.11.3.1 investigating any event which the Facility Agent reasonably believes to be a Default; or

21.11.3.2 acting or relying on any notice which the Facility Agent reasonably believes to be genuine, correct and appropriately authorised.

21.12 Compliance   The Facility Agent may refrain from doing anything (including disclosing any information) which might, in its opinion, constitute a breach of any law or regulation or be otherwise actionable at the suit of any person, and may do anything which, in its opinion, is necessary or desirable to comply with any law or regulation.

21.13 Resignation of the Facility Agent

21.13.1 The Facility Agent may resign and appoint any of its Affiliates as successor Facility Agent by giving notice to the Lenders and the Company.

21.13.2 Alternatively, the Facility Agent may resign by giving notice to the Lenders and the Company, in which case the Majority Lenders may appoint a successor Facility Agent.

21.13.3 If no successor Facility Agent has been appointed under clause 21.13.2 above within 30 days after notice of resignation was given, the Facility Agent may appoint a successor Facility Agent.

21.13.4 The person(s) appointing a successor Facility Agent must, if practicable, consult with the Company prior to the appointment.  Any successor Facility Agent must have an office in the U.K.

21.13.5 The resignation of the Facility Agent and the appointment of any successor Facility Agent will both become effective only when the successor Facility Agent notifies all the Parties that it accepts its appointment.  On giving the notification, the successor Facility Agent will succeed to the position of the Facility Agent and the term "Facility Agent" will mean the successor Facility Agent.

21.13.6 The retiring Facility Agent must, at its own cost, make available to the successor Facility Agent such documents and records and provide such assistance as the successor Facility Agent may reasonably request for the purposes of performing its functions as the Facility Agent under the Finance Documents.

21.13.7 Upon its resignation becoming effective, this Clause will continue to benefit the retiring Facility Agent in respect of any action taken or not taken by it in connection with the Finance Documents while it was the Facility Agent, and, subject to Clause 21.13.6 above, it will have no further obligations under any Finance Document.

21.13.8 The Majority Lenders may, by notice to the Facility Agent, require it to resign under Clause 21.13.2 above.

21.14 Relationship with Lenders

21.14.1 The Facility Agent may treat each Lender as a Lender, entitled to payments under this Agreement and as acting through its Facility Office(s) until it has received not less than five Business Days' prior notice from that Lender to the contrary.

21.14.2 The Facility Agent may at any time, and must if requested to do so by the Majority Lenders, convene a meeting of the Lenders.

21.14.3 The Facility Agent must keep a register of all the Parties and supply any other Party with a copy of the register on request.  The register will include each Lender's Facility Office(s) and contact details for the purposes of this Agreement.

21.15 Facility Agent's management time   If the Facility Agent requires, any amount payable to the Facility Agent by any Party under any indemnity or in respect of any costs or expenses incurred by the Facility Agent under the Finance Documents after the date of this Agreement may include the cost of using its management time or other resources and will be calculated on the basis of such reasonable daily or hourly rates as the Facility Agent may notify to the relevant Party.  This is in addition to any amount in respect of fees or expenses paid or payable to the Facility Agent under any other term of the Finance Documents.

21.16 Notice period   Where this Agreement specifies a minimum period of notice to be given to the Facility Agent, the Facility Agent may, at its discretion, accept a shorter notice period.

22. EVIDENCE AND CALCULATIONS

22.1 Accounts   Accounts maintained by a Finance Party in connection with this Agreement are prima facie evidence of the matters to which they relate for the purpose of any litigation or arbitration proceedings.

22.2 Certificates and determinations   Any certification or determination by a Finance Party of a rate or amount under the Finance Documents will be, in the absence of manifest error, conclusive evidence of the matters to which it relates.

22.3 Calculations

Any interest or fee accruing under this Agreement accrues from day to day and is calculated on the basis of the actual number of days elapsed and a year of 360 or 365 days or otherwise, depending on what the Facility Agent determines is market practice.

23. FEES

23.1 Facility Agent's fee

The Company must pay to the Facility Agent for its own account an annual agency fee in the manner agreed between the Facility Agent and the Company.

23.2 Participation fee

The Company must pay a participation fee in the manner agreed between the Mandated Lead Arrangers and the Company.

23.3 Commitment fee

23.3.1 Subject to clause 23.3.2, the Company must pay a commitment fee computed at the rate of 50 per cent. of the Margin on the undrawn, uncancelled amount of each Lender's Commitment for the Availability Period calculated from the date of this Agreement.

23.3.2 If the first Utilisation Date occurs within 1 day of the date of this Agreement, then the commitment fee referred to in clause 23.3.1 above shall instead be calculated from that first Utilisation Date but, for the avoidance of doubt, if the first Utilisation Date occurs more than 1 day after the date of this Agreement, then the commitment fee shall be calculated from the date of this Agreement.

23.3.3 The commitment fee is payable quarterly in arrears. Accrued commitment fee is also payable to the Facility Agent for a Lender on the date its Commitment is cancelled in full.

23.4 Utilisation fee

23.4.1 The Company must pay to the Facility Agent for each Lender a utilisation fee computed at the rate of 0.25% per annum on the Total Commitments for each day on which the aggregate amount of all drawn Loans exceeds £75,000,000.

23.4.2 Utilisation fee is payable on the amount of each Lender's share in the Loans.

23.4.3 Accrued utilisation fee is payable quarterly in arrear.  Accrued utilisation fee is also payable to the Facility Agent for a Lender on the date its Commitment is cancelled in full.

24. INDEMNITIES AND BREAK COSTS

24.1 Currency indemnity

24.1.1 The Company must, as an independent obligation, indemnify each Finance Party against any loss or liability which that Finance Party incurs as a consequence of:

24.1.1.1 that Finance Party receiving an amount in respect of the Company's liability under the Finance Documents; or

24.1.1.2 that liability being converted into a claim, proof, judgment or order,

in a currency other than the currency in which the amount is expressed to be payable under the relevant Finance Document.

24.1.2 Unless otherwise required by law, the Company waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency other than that in which it is expressed to be payable.

24.2 Other indemnities

The Company shall within 15 days of demand indemnify the Facility Agent and each Lender against any funding or other cost, loss, expense or liability in an amount certified by it in reasonable detail (together with documentation in support) sustained or incurred by it as a direct result of:

24.2.1 the occurrence of any Event of Default;

24.2.2 (other than by reason of negligence or default by a Finance Party) a Loan not being made after a Request has been delivered for that Loan; or

24.2.3 the receipt or recovery by any party (or the Facility Agent on its behalf) of all or any part of a Loan or overdue sum due from the Company otherwise than on the Final Maturity Date or Maturity Date (as relevant) of that Loan or, in the case of an overdue sum, the last day of an interest period relating to that overdue sum, as the case may be or a Loan or any part thereof not being prepaid in accordance with a notice of prepayment.

24.3 Break Costs

24.3.1 The Company must pay to each Lender its Break Costs.

24.3.2 Break Costs are the amount (if any) determined by the relevant Lender by which:

24.3.2.1 the interest which that Lender would have received for the period from the date of receipt of any part of its share in a Loan or an overdue amount to the last day of the applicable Term for that Loan or overdue amount if the principal or overdue amount received had been paid on the last day of that Term;

exceeds

24.3.2.2 the amount which that Lender would be able to obtain by placing an amount equal to the amount received by it on deposit with a leading bank in the appropriate interbank market for a period starting on the Business Day following receipt and ending on the last day of the applicable Term.

24.3.3 Each Lender must supply to the Facility Agent for the Company details of the amount of any Break Costs claimed by it under this Subclause.

25. EXPENSES

25.1 Initial costs

The Company must pay to each Administrative Party the amount of all costs and expenses (including legal fees) reasonably incurred by it in connection with the negotiation, preparation, printing and execution of the Finance Documents.

25.2 Subsequent costs

The Company must pay to the Facility Agent the amount of all costs and expenses (including legal fees) reasonably incurred by it in connection with:

25.2.1 the negotiation, preparation, printing and execution of any Finance Document (other than a Transfer Certificate) executed after the date of this Agreement; and

25.2.2 any amendment, waiver or consent requested by or on behalf of the Company or specifically allowed by this Agreement.

25.3 Enforcement costs

The Company must pay to each Finance Party the amount of all costs and expenses (including legal fees) incurred by it in connection with the enforcement of, or the preservation of any rights under, any Finance Document.

26. AMENDMENTS AND WAIVERS

26.1 Procedure

26.1.1 Except as provided in this Clause, any term of the Finance Documents may be amended or waived with the agreement of the Company and the Majority Lenders.  The Facility Agent may effect, on behalf of any Finance Party, an amendment or waiver allowed under this Clause.

26.1.2 The Facility Agent must promptly notify the other Parties of any amendment or waiver effected by it under clause 26.1.1 above.  Any such amendment or waiver is binding on all the Parties.

26.2 Exceptions

26.2.1 An amendment or waiver which relates to:

26.2.1.1 the definition of Majority Lenders in Clause 1.1 (Definitions);

26.2.1.2 an extension of the date of payment of any amount to a Lender under the Finance Documents;

26.2.1.3 a reduction in the Margin or a reduction in the amount of any payment of principal, interest, fee or other amount payable to a Lender under the Finance Documents;

26.2.1.4 an increase in, or an extension of, a Commitment or the Total Commitments;

26.2.1.5 a term of a Finance Document which expressly requires the consent of each Lender;

26.2.1.6 the right of a Lender to assign or transfer its rights or obligations under the Finance Documents; or

26.2.1.7 this Clause,

may only be made with the consent of all the Lenders.

26.2.2 An amendment or waiver which relates to the rights or obligations of an Administrative Party may only be made with the consent of that Administrative Party.

26.3 Change of currency

If a change in any currency of a country occurs (including where there is more than one currency or currency unit recognised at the same time as the lawful currency of a country), the Finance Documents will be amended to the extent the Facility Agent (acting reasonably and after consultation with the Company) determines is necessary to reflect the change.

26.4 Waivers and remedies cumulative

The rights of each Finance Party under the Finance Documents:

26.4.1 may be exercised as often as necessary;

26.4.2 are cumulative and not exclusive of its rights under the general law; and

26.4.3 may be waived only in writing and specifically.

Delay in exercising or non-exercise of any right is not a waiver of that right.

27. CHANGES TO THE PARTIES

27.1 Assignments and transfers by the Company

The Company may not assign or transfer any of its rights and obligations under the Finance Documents without the prior consent of all the Lenders.

27.2 Assignments and transfers by Lenders

27.2.1 A Lender (the Existing Lender) may, subject to the following provisions of this Subclause, at any time assign or transfer (including by way of novation) any of its rights and obligations under this Agreement to any other person (the New Lender).

27.2.2 Unless the Company and the Facility Agent otherwise agree, a transfer of part of a Commitment or rights and obligations under this Agreement by the Existing Lender must be in a minimum amount of £5,000,000.

27.2.3 An Existing Lender must consult with the Company for no more than five Business Days before it may make an assignment or transfer unless the New Lender is another Lender or an Affiliate of a Lender or an Event of Default has occurred and is outstanding.

27.2.4 The Facility Agent is not obliged to execute a Transfer Certificate until it has completed all know your customer requirements to its satisfaction.  The Facility Agent must promptly notify the Existing Lender and the New Lender if there are any such requirements.

27.2.5 A transfer of obligations will be effective only if either:

27.2.5.1 the obligations are novated in accordance with the following provisions of this Clause; or

27.2.5.2 the New Lender confirms to the Facility Agent and the Company in form and substance satisfactory to the Facility Agent that it is bound by the terms of this Agreement as a Lender.  On the transfer becoming effective in this manner the Existing Lender will be released from its obligations under this Agreement to the extent that they are transferred to the New Lender.

27.2.6 Unless the Facility Agent otherwise agrees, the New Lender must pay to the Facility Agent for its own account, on or before the date any assignment or transfer occurs, a fee of £1,750.

27.2.7 Any reference in this Agreement to a Lender includes a New Lender but excludes a Lender if no amount is or may be owed to or by it under this Agreement.

27.3 Procedure for transfer by way of novations

27.3.1 In this Subclause:

Transfer Date means, for a Transfer Certificate, the later of:

27.3.1.1 the proposed Transfer Date specified in that Transfer Certificate; and

27.3.1.2 the date on which the Facility Agent executes that Transfer Certificate.

27.3.2 A novation is effected if:

27.3.2.1 the Existing Lender and the New Lender deliver to the Facility Agent a duly completed Transfer Certificate; and

27.3.2.2 the Facility Agent executes it.

The Facility Agent must execute as soon as reasonably practicable a Transfer Certificate delivered to it and which appears on its face to be in order.

27.3.3 Each Party (other than the Existing Lender and the New Lender) irrevocably authorises the Facility Agent to execute any duly completed Transfer Certificate on its behalf.

27.3.4 On the Transfer Date:

27.3.4.1 the New Lender will assume the rights and obligations of the Existing Lender expressed to be the subject of the novation in the Transfer Certificate in substitution for the Existing Lender; and

27.3.4.2 the Existing Lender will be released from those obligations and cease to have those rights.

27.4 Limitation of responsibility of Existing Lender

27.4.1 Unless expressly agreed to the contrary, an Existing Lender is not responsible to a New Lender for the legality, validity, adequacy, accuracy, completeness or performance of:

27.4.1.1 any Finance Document or any other document; or

27.4.1.2 any statement or information (whether written or oral) made in or supplied in connection with any Finance Document,

and any representations or warranties implied by law are excluded.

27.4.2 Each New Lender confirms to the Existing Lender and the other Finance Parties that it:

27.4.2.1 has made, and will continue to make, its own independent appraisal of all risks arising under or in connection with the Finance Documents (including the financial condition and affairs of the Company and its related entities and the nature and extent of any recourse against any Party or its assets) in connection with its participation in this Agreement; and

27.4.2.2 has not relied exclusively on any information supplied to it by the Existing Lender in connection with any Finance Document.

27.4.3 Nothing in any Finance Document requires an Existing Lender to:

27.4.3.1 accept a re-transfer from a New Lender of any of the rights and obligations assigned or transferred under this Clause; or

27.4.3.2 support any losses incurred by the New Lender by reason of the non-performance by the Company of its obligations under any Finance Document or otherwise.

27.5 Costs resulting from change of Lender or Facility Office

If:

27.5.1 a Lender assigns or transfers any of its rights and obligations under the Finance Documents or changes its Facility Office; and

27.5.2 as a result of circumstances existing at the date the assignment, transfer or change occurs, the Company would be obliged to pay a Tax Payment or an Increased Cost,

the Company need only pay that Tax Payment or Increased Cost to the same extent that it would have been obliged to if no assignment, transfer or change had occurred.

27.6 Changes to the Reference Banks

27.6.1 If a Reference Bank (or, if a Reference Bank is not a Lender, the Lender of which it is an Affiliate) ceases to be a Lender, the Facility Agent must (in consultation with the Company) appoint another Lender or an Affiliate of a Lender to replace that Reference Bank.

27.6.2 If a Reference Bank ceases to have a London office or novates or assigns all its rights and obligations under this Agreement or if any Commitments of any Reference Bank are cancelled or if Loans it has advanced are prepaid it shall be replaced as a Reference Bank by such other Bank with an office in London as the Facility Agent (after consultation with the Company) shall designate by notice to the Company and the Banks.

28. Disclosure of Information

28.1.1 Each Finance Party must keep confidential any information supplied to it by or on behalf of the Company in connection with the Finance Documents. However, a Finance Party is entitled to disclose information:

28.1.1.1 which is publicly available, other than as a result of a breach by that Finance Party of this Clause;

28.1.1.2 in connection with any legal or arbitration proceedings;

28.1.1.3 if required to do so under any law or regulation;

28.1.1.4 to a governmental, banking, taxation or other regulatory authority;

28.1.1.5 to its professional advisers;

28.1.1.6 to the extent allowed under clause 28.1.2 below; or

28.1.1.7 with the agreement of the Company.

28.1.2 A Finance Party may disclose to an Affiliate or any person with whom it may enter, or has entered into, any kind of transfer, participation or other agreement in relation to this Agreement (a participant):

28.1.2.1 a copy of any Finance Document; and

28.1.2.2 any information which that Finance Party has acquired under or in connection with any Finance Document.

However, before a participant may receive any confidential information, it must agree with the relevant Finance Party to keep that information confidential on the terms of clause 28.1.2.1 above.

This Clause supersedes any previous confidentiality undertaking given by a Finance Party in connection with this Agreement prior to it becoming a Party.

29. SET-OFF

A Finance Party may set off any matured obligation owed to it by the Company under the Finance Documents (to the extent beneficially owned by that Finance Party) against any obligation (whether or not matured) owed by that Finance Party to the Company, regardless of the place of payment, booking branch or currency of either obligation.  If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.

30. PRO RATA SHARING

30.1 Redistribution

If any amount owing by the Company under this Agreement to a Lender (the recovering Lender) is discharged by payment, set-off or any other manner other than through the Facility Agent under this Agreement (a recovery), then:

30.1.1 the recovering Lender must, within three Business Days, supply details of the recovery to the Facility Agent;

30.1.2 the Facility Agent must calculate whether the recovery is in excess of the amount which the recovering Lender would have received if the recovery had been received by the Facility Agent under this Agreement; and

30.1.3 the recovering Lender must pay to the Facility Agent an amount equal to the excess (the redistribution).

30.2 Effect of redistribution

30.2.1 The Facility Agent must treat a redistribution as if it were a payment by the Company under this Agreement and distribute it among the Lenders, other than the recovering Lender, accordingly.

30.2.2 When the Facility Agent makes a distribution under clause 30.2.1 above, the recovering Lender will be subrogated to the rights of the Finance Parties which have shared in that redistribution.

30.2.3 If and to the extent that the recovering Lender is not able to rely on any rights of subrogation under clause 30.2.2 above, the Company will owe the recovering Lender a debt which is equal to the redistribution, immediately payable and of the type originally discharged.

30.2.4 If:

30.2.4.1 a recovering Lender must subsequently return a recovery, or an amount measured by reference to a recovery, to the Company; and

30.2.4.2 the recovering Lender has paid a redistribution in relation to that recovery,

each Finance Party must reimburse the recovering Lender all or the appropriate portion of the redistribution paid to that Finance Party, together with interest for the period while it held the re-distribution.  In this event, the subrogation in clause 30.2.2 above will operate in reverse to the extent of the reimbursement.

30.3 Exceptions

Notwithstanding any other term of this Clause, a recovering Lender need not pay a redistribution to the extent that:

30.3.1 it would not, after the payment, have a valid claim against the Company in the amount of the redistribution; or

30.3.2 it would be sharing with another Finance Party any amount which the recovering Lender has received or recovered as a result of legal or arbitration proceedings, where:

30.3.2.1 the recovering Lender notified the Facility Agent of those proceedings; and

30.3.2.2 the other Finance Party had an opportunity to participate in those proceedings but did not do so or did not take separate legal or arbitration proceedings as soon as reasonably practicable after receiving notice of them.

31. SEVERABILITY

31.1 If a term of a Finance Document is or becomes illegal, invalid or unenforceable in any jurisdiction, that shall not affect:

31.1.1 the legality, validity or enforceability in that jurisdiction of any other term of the Finance Documents; or

31.1.2 the legality, validity or enforceability in other jurisdictions of that or any other term of the Finance Documents.

32. COUNTERPARTS

Each Finance Document may be executed in any number of counterparts.  This has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.

33. NOTICES

33.1 In writing

33.1.1 Any communication in connection with a Finance Document must be in writing and, unless otherwise stated, may be given:

33.1.1.1 in person, by post, or fax or any other electronic communication approved by the Facility Agent; or

33.1.1.2 if between the Facility Agent and a Lender and the Facility Agent and the Lender agree, by e-mail or other electronic communication.

33.1.2 For the purpose of the Finance Documents, an electronic communication will be treated as being in writing.

33.1.3 Unless it is agreed to the contrary, any consent or agreement required under a Finance Document must be given in writing.

33.2 Contact details

33.2.1 Except as provided below, the contact details of each Party for all communications in connection with the Finance Documents are those notified by that Party for this purpose to the Facility Agent on or before the date it becomes a Party.

33.2.2 The contact details of the Company for this purpose are:

Address:	Avonbank, Feeder Road, Bristol, BS2 0TB
Fax number:	01179 332108
Phone number:	0117 933 2354
E-mail:	jhunt9@westernpower.co.uk
Attention:	Julie Hunt.
The contact details of the Facility Agent for this purpose are:
Address:	8 Canada Square, London E14 5HQ
Phone number:	020 7992 2036
Fax number:	020 7991 4348
Attention:	Ashley Parrett, Corporate Trust and Loan Agency

33.2.3 Any Party may change its contact details by giving five Business Days' notice to the Facility Agent or (in the case of the Facility Agent) to the other Parties.

33.2.4 Where a Party nominates a particular department or officer to receive a communication, a communication will not be effective if it fails to specify that department or officer.

33.3 Effectiveness

33.3.1 Except as provided below, any communication in connection with a Finance Document will be deemed to be given as follows:

33.3.1.1 if delivered in person, at the time of delivery;

33.3.1.2 if posted, five days after being deposited in the post, postage prepaid, in a correctly addressed envelope; and

33.3.1.3 if by fax, when received in legible form.

33.3.2 A communication given under clause 33.3.1 above but received on a non-working day or after business hours in the place of receipt will only be deemed to be given on the next working day in that place.

33.3.3 A communication to the Facility Agent will only be effective on actual receipt by it.

33.4 The Company

All formal communication under the Finance Documents to or from the Company must be sent through the Facility Agent.

34. LANGUAGE

34.1.1 Any notice given in connection with a Finance Document must be in English.

34.1.2 Any other document provided in connection with a Finance Document must be:

34.1.2.1 in English; or

34.1.2.2 (unless the Facility Agent otherwise agrees) accompanied by a certified English translation.  In this case, the English translation prevails unless the document is a statutory or other official document.

35. GOVERNING LAW

This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.

36. ENFORCEMENT

36.1 Jurisdiction

36.1.1 The English courts have exclusive jurisdiction to settle any dispute in connection with any Finance Document including a dispute relating to any non-contractual obligation arising out of or in connection with this Agreement.

36.1.2 The Englishcourts are the most appropriate and convenient courts to settle any such dispute and the Company waives objection to those courts on the grounds of inconvenient forum or otherwise in relation to proceedings in connection with any Finance Document.

36.1.3 This Clause is for the benefit of the Finance Parties only.  To the extent allowed by law, a Finance Party may take:

36.1.3.1 proceedings in any other court; and

36.1.3.2 concurrent proceedings in any number of jurisdictions.

This Agreement has been entered into on the date stated at the beginning of this Agreement.

SCHEDULE 1

Original Parties

Name of Original Lender	Commitments
HSBC Bank plc	£50,000,000
Lloyds TSB Bank plc	£40,000,000
Clydesdale Bank PLC	£40,000,000
Alliance & Leicester PLC	£25,000,000
Deutsche Bank AG London Branch	£25,000,000
Bayerische Landesbank London Branch	£20,000,000
The Governor and Company of The Bank of Ireland	£10,000,000

SCHEDULE 2

Conditions Precedent Documents

Company

1. A certified copy of the constitutional documents of the Company.

2. A certified copy of a resolution of the board of directors or a committee of the board of directors of the Company approving the terms of, and the transactions contemplated by, the Finance Documents.

3. A specimen of the signature of each person authorised on behalf of the Company to execute or witness the execution of any Finance Document or to sign or send any document or notice in connection with any Finance Document.

4. A certificate of the Company (signed by a director) confirming that borrowing the Total Commitments would not cause any borrowing limit binding on the Company to be exceeded.

Legal opinions

5. A legal opinion of Eversheds LLP, legal advisers to the Mandated Lead Arranger and the Facility Agent addressed to the Finance Parties.

Other documents and evidence

6. Evidence that all fees and expenses then due and payable from the Company under this Agreement have been or will be paid no later than the first Utilisation Date.

7. The Original Financial Statements.

8. Evidence that the Existing Facility Agreement has expired or will be prepaid and cancelled in full on or by the first Utilisation Date.

9. The Information Package.

10. A copy of any other Authorisation or other document, opinion or assurance which the Facility Agent notifies the Company is necessary or desirable in connection with the entry into and performance of the transactions contemplated by any Finance Document or for the validity and enforceability of any Finance Document.

SCHEDULE 3

Form of Request

To: From: Date:  HSBC BANK PLC as Facility Agent [                               ] [                               ]

WESTERN POWER DISTRIBUTION (SOUTH WEST) PLC- £210,000,000 Facility Agreement dated [                ] (as amended and restated from time to time) (the "Agreement")

1.             We refer to the Agreement.  This is a Request.

2.             We wish to borrow a Loan on the following terms:

(a)             Utilisation Date: [                               ]

(b)             Amount/currency: [                                         ]

(c)             Term: [                                         ].

3.             Our payment instructions are: [                                    ].

4. We confirm that each condition precedent under the Agreement which must be satisfied on the date of this Request is so satisfied.

5 We confirm that as at [relevant testing date] Consolidated EBITDA was [            ] and Interest Payable was [           ]; therefore, the ratio of Consolidated EBITDA to Interest Payable was [    ] to 1.

6. We confirm that as at [relevant testing date] Regulatory Asset Base was              [ ] and Total Net Debt was [ ]; therefore, Total Net Debt does not exceed an amount equal to 85% of the Regulatory Asset Base.

7.             This Request is irrevocable.

By:

[                               ]

SCHEDULE 4

Calculation of the mandatory cost

1.   The Mandatory Cost is an addition to the interest rate to compensate Lenders for the cost of compliance with (a) the requirements of the Bank of England and/or the Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank.

2.   On the first day of each Term (or as soon as possible thereafter)  the Facility Agent shall calculate, as a percentage rate, a rate (the "Additional Cost Rate") for each Lender, in accordance with the paragraphs set out below.  The Mandatory Cost will be calculated by the Facility Agent as a weighted average of the Lenders' Additional Cost Rates (weighted in proportion to the percentage participation of each Lender in the relevant Loan) and will be expressed as a percentage rate per annum.

3.   The Additional Cost Rate for any Lender lending from a Facility Office in a Participating Member State will be the percentage notified by that Lender to the Facility Agent.  This percentage will be certified by that Lender in its notice to the Facility Agent to be its reasonable determination of the cost (expressed as a percentage of that Lender's participation in all Loans made from that Facility Office) of complying with the minimum reserve requirements of the European Central Bank in respect of loans made from that Facility Office.

4.   The Additional Cost Rate for any Lender lending from a Facility Office in the United Kingdom will be calculated by the Facility Agent as follows:

(a)   in relation to a sterling Loan:

AB + C(B - D) + E x 0.01               100 - (A + C)     Per cent. per annum

(b)   in relation to a Loan in any currency other than sterling:

E x 0.01     300     Per cent. per annum.

Where:

A	is the percentage of Eligible Liabilities (assuming these to be in excess of any stated minimum) which that Lender is from time to time required to maintain as an interest free cash ratio deposit with the Bank of England to comply with cash ratio requirements.
B	is the percentage rate of interest (excluding the Margin and the Mandatory Cost and, if the Loan is an Unpaid Sum, the additional rate of interest specified in clause 9.3.1 (Interest on overdue amounts)) payable for the relevant Term on the Loan.
C	is the percentage (if any) of Eligible Liabilities which that Lender is required from time to time to maintain as interest bearing Special Deposits with the Bank of England.
D	is the percentage rate per annum payable by the Bank of England to  the Facility Agent on interest bearing Special Deposits.
E	is designed to compensate Lenders for amounts payable under the Fees Rules  and is calculated by the Facility Agent as being the average of the most recent rates of charge supplied by the Reference Banks to the Facility Agent pursuant to paragraph 7 below and expressed in pounds per £1,000,000.
5.	For the purposes of this Schedule:
	(a)	"Eligible Liabilities" and "Special Deposits" have the meanings given to them from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England;
	(b)	"Fees Rules" means the rules on periodic fees contained in the FSA Supervision Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;
	(c)	"Fee Tariffs" means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate);
	(d)	"Tariff Base" has the meaning given to it in, and will be calculated in accordance with, the Fees Rules; and
	(e)	"Unpaid Sum" means any sum due and payable but unpaid by the   Company under the Finance Documents.
6.	In application of the above formulae, A, B, C and D will be included in the formulae as percentages (i.e. 5 per cent. will be included in the formula as 5 and not as 0.05).  A negative result obtained by subtracting D from B shall be taken as zero.  The resulting figures shall be rounded to four decimal places.
7.	If requested by the Facility Agent, each Reference Bank shall, as soon as practicable after publication by the Financial Services Authority, supply to the Facility Agent, the rate of charge payable by that Reference Bank to the Financial Services Authority pursuant to the Fees Rules in respect of the relevant financial year of the Financial Services Authority (calculated for this purpose by that Reference Bank as being the average of the Fee Tariffs applicable to that Reference Bank for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of that Reference Bank.
8.	Each Lender shall supply any information required by the Facility Agent for the purpose of calculating its Additional Cost Rate. In particular, but without limitation, each Lender shall supply the following information on or prior to the date on which it becomes a Lender:
	(e)	the jurisdiction of its Facility Office; and
	(f)	any other information that the Facility Agent may reasonably require for such purpose.
	Each Lender shall promptly notify the Facility Agent of any change to the information provided by it pursuant to this paragraph.
9.	The percentages of each Lender for the purpose of A and C above and the rates of charge of each Reference Bank for the purpose of E above shall be determined by  the Facility Agent based upon the information supplied to it pursuant to paragraphs 7 and 8 above and on the assumption that, unless a Lender notifies  the Facility Agent to the contrary, each Lender's obligations in relation to cash ratio deposits and Special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a Facility Office in the same jurisdiction as its Facility Office.
10.	The Facility Agent shall have no liability to any person if such determination results in an Additional Cost Rate which over or under compensates any Lender and shall be entitled to assume that the information provided by any Lender or Reference Bank pursuant to paragraphs 3, 7 and 8 above is true and correct in all respects.
11.	The Facility Agent shall distribute the additional amounts received as a result of the Mandatory Cost to the Lenders on the basis of the Additional Cost Rate for each Lender based on the information provided by each Lender and each Reference Bank pursuant to paragraphs 3, 7 and 8 above.
12.	Any determination by the Facility Agent pursuant to this Schedule in relation to a formula, the Mandatory Cost, an Additional Cost Rate or any amount payable to a Lender shall, in the absence of manifest error, be conclusive and binding on all Parties.
13.	The Facility Agent may from time to time, after consultation with the Companyand the Lenders, determine and notify to all Parties any amendments which are required to be made to this Schedule in order to comply with any change in law, regulation or any requirements from time to time imposed by the Bank of England, the Financial Services Authority or the European Central Bank (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all Parties.

SCHEDULE 5

To:	HSBC BANK PLCas Facility Agent
From:	[THE EXISTING LENDER] (the Existing Lender) and [THE NEW LENDER] (the New Lender)
Date:	[                               ]

WESTERN POWER DISTRIBUTION (SOUTH WEST) PLC - £210,000,000 Facility Agreement dated [                       ] (as amended and restated from time to time) (the Agreement)

We refer to the Agreement.  This is a Transfer Certificate.

1.   The Existing Lender transfers by novation to the New Lender the Existing Lender's rights and obligations referred to in the Schedule below in accordance with the terms of the Agreement.

2.   The proposed Transfer Date is [    ].

3.   The administrative details of the New Lender for the purposes of the Agreement are set out in the Schedule.

4.   This Transfer Certificate and any non-contractual obligations arising out of or in connection with it are governed by English law.

THE SCHEDULE

Rights and obligations to be transferred by novation

[insert relevant details, including applicable Commitment (or part)]

Administrative details of the New Lender

[insert details of Facility Office, address for notices and payment details etc.]

[EXISTING LENDER]                                                                           [NEW LENDER]

By:                                                               By:

The Transfer Date is confirmed by the Facility Agent as [                               ].

[              ]

By:

SCHEDULE 6

Intentionally left blank

SCHEDULE 7

Form of Compliance Certificate

To:             HSBC BANK PLC as Facility Agent

From:        WESTERN POWER DISTRIBUTION (SOUTH WEST) PLC

Date:         [                               ]

WESTERN POWER DISTRIBUTION (SOUTH WEST) PLC - £210,000,000 Facility Agreement dated [                  ] (as amended and restated from time to time) (the Agreement)

1.   We refer to the Agreement.  This is a Compliance Certificate.

2.   We confirm that as at [relevant testing date], Consolidated EBITDA was [              ] and Interest Payable was [], therefore the ratio of Consolidated EBITDA to Interest Payable was [] to 1.

3.   We confirm that as at [relevant testing date], Regulatory Asset Base was [      ] and Total Net Debt was [        ]; therefore Total Net Debt does not exceed 85% of the Regulatory Asset Base.

4.   We set out below calculations establishing the figures in paragraph 2 above:

[                        ].

5.   We confirm that the following companies were Material Subsidiaries at [relevant testing date]:

[       ].

6.   [We confirm that no Default is outstanding as at [relevant testing date].]1 

WESTERN POWER DISTRIBUTION (SOUTH WEST) PLC

By:

Director

Director

___________________________________

1 If this statement cannot be made, the certificate should identify any Default that is outstanding and the steps, if any, being taken to remedy it.

SIGNATORIES

THE COMPANY

WESTERN POWER DISTRIBUTION (SOUTH WEST) PLC

By:	Daniel Oosthuizen
Address:	Avonbank, Feeder Road, Bristol, BS2 0TB
Fax:	01179 332108

THE MANDATED LEAD ARRANGERS

HSBC BANK PLC

By:	John Haire
Address:	8 Canada Square, London E14 5HQ
Fax:	020 7991 4348

LLOYDS TSB BANK PLC

By:	Somchart Sucharitkul
Address:	Wholesale Loans Servicing, Bank House, Wine Street, Bristol, BS1 2AN
Fax:	0207 158 3204

CLYDESDALE BANK PLC

By:	Alan Davis
Address:	Corporate & Structured Finance, 5th Floor, 33 Gracechurch Street, London, EC3V 0BT
Fax:	020 7929 6152

THE FACILITY AGENT

HSBC BANK PLC

By:	John Haire
Address:	8 Canada Square, London E14 5HQ
Fax:	020 7991 4348

THE ORIGINAL LENDERS

HSBC BANK PLC

By:	John Haire
Address:	Process Manager, Loans Administration, 24th Floor, 8 Canada Square, London, E14 5HQ
Fax:	020 7992 4680

LLOYDS TSB BANK PLC

By:	Somchart Sucharitkul
Address:	Wholesale Loans Servicing, Bank House, Wine Street, Bristol, BS1 2AN
Fax:	020 7158 3204

CLYDESDALE BANK PLC

By:	Alan Davis
Address:	Corporate & Structured Finance, 5th Floor, 33 Gracechurch Street, London,EC3V 0BT
Fax:	020 7929 6152

DEUTSCHE BANK AG LONDON BRANCH

By:	Michael Starmer-Smith      Alastair Macdonald
Address:	Great Winchester house, 1 Great Winchester Street, London, EC2N 2DB
Fax:	020 7545 4735

ALLIANCE & LEICESTER PLC

By:	T.J. Yeoman
Address:	FAO Corporate Administration Manager, 298 Deansgate, Manchester, M3 4HH
Fax	0161 953 3517

THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND

By:	Chris Dowling    Brendan Gilmore
Address:	Bow Bells House, 1 Bread Street, London, EC4M 9BE
Fax:	020 7248 6076

BAYERISCHE LANDESBANK LONDON BRANCH

By:	Wolfgang Kottmann    Avrille Palha
Address:	Bayern LB London Branch, 13/14 Appold Street, London, EC2A 2NB
Fax:	020 7955 5129

EX-12.A

Exhibit 12(a)
PPL CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (Millions of Dollars)
	Six Months Ended June 30,		Years Ended December 31,
	2009		2008 (c)		2007 (c)		2006 (c)		2005 (c)		2004 (c)
Earnings, as defined:
Income from Continuing Operations Before Income Taxes	$	339	$	1,357	$	1,281	$	1,099	$	795	$	854
Less earnings of equity method investments		2		3		5		6		7		4
Distributed income from equity method investments		2		3		7		3		5		5
		339		1,357		1,283		1,096		793		855
Total fixed charges as below		244		568		609		559		554		558
Less:
Capitalized interest		29		59		58		24		9		6
Preferred security distributions of subsidiaries on a pre-tax basis		11		27		23		24		5		5
Interest expense related to discontinued operations		2		8		35		36		37		30
Total fixed charges included in Income from Continuing Operations Before Income Taxes		202		474		493		475		503		517
Total earnings	$	541	$	1,831	$	1,776	$	1,571	$	1,296	$	1,372
Fixed charges, as defined:
Interest on long-term debt	$	196	$	478	$	522	$	482	$	465	$	491
Interest on short-term debt and other interest		15		28		35		13		29		20
Amortization of debt discount, expense and premium - net		8		12		8		11		23		8
Estimated interest component of operating rentals		13		22		21		29		32		34
Preferred securities distributions of subsidiaries on a pre-tax basis		11		27		23		24		5		5
Fixed charges of majority-owned share of 50% or less-owned persons		1		1
Total fixed charges (a)	$	244	$	568	$	609	$	559	$	554	$	558
Ratio of earnings to fixed charges		2.2		3.2		2.9		2.8		2.3		2.5
Ratio of earnings to combined fixed charges and preferred stock dividends (b)		2.2		3.2		2.9		2.8		2.3		2.5

(a)	Interest on unrecognized tax benefits is not included in fixed charges.
(b)	PPL, the parent holding company, does not have any preferred stock outstanding; therefore, the ratio of earnings to combined fixed charges and preferred stock dividends is the same as the ratio of earnings to fixed charges.
(c)	Certain line items have been revised due to the expected sales of the Long Island generation business and the Maine hydroelectric generation business and the related reclassification of prior period operating results to "Income (Loss) from Discontinued Operations."

EX-12.B

Exhibit 12(b)
PPL ENERGY SUPPLY, LLC AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Millions of Dollars)
	Six Months Ended June 30,		Years Ended December 31,
	2009		2008 (b)		2007 (b)			2006 (b)			2005 (b)		2004 (b)
Earnings, as defined:
Income from Continuing Operations Before Income Taxes	$	213	$	1,084	$	1,095		$	841		$	619	$	825
Less earnings of equity method investments		2		3		5			7			7		5
Distributed income from equity method investments		2		3		7			3			5		5
		213		1,084		1,097			837			617		825
Total fixed charges as below		166		390		388			326			307		289
Less:
Capitalized interest		27		56		54			21			7		5
Interest expense related to discontinued operations		2		4		29			30			31		24
Total fixed charges included in Income from Continuing Operations Before Income Taxes		137		330		305			275			269		260
Total earnings	$	350	$	1,414	$	1,402		$	1,112		$	886	$	1,085
Fixed charges, as defined:
Interest on long-term debt	$	133	$	345	$	353		$	296		$	259	$	255
Interest on short-term debt and other interest		15		27		24			16			26		23
Amortization of debt discount, expense and premium - net		4		2		(3	)		(1	)		7		(6	)
Estimated interest component of operating rentals		13		15		14			15			15		17
Fixed charges of majority-owned share of 50% or less-owned persons		1		1
Total fixed charges (a)	$	166	$	390	$	388		$	326		$	307	$	289
Ratio of earnings to fixed charges		2.1		3.6		3.6			3.4			2.9		3.8

(a)	Interest on unrecognized tax benefits is not included in fixed charges.
(b)	Certain line items have been revised due to the expected sales of the Long Island generation business and the Maine hydroelectric generation business and the related reclassification of prior period operating results to "Income (Loss) from Discontinued Operations."

EX-12.C

Exhibit 12(c)
PPL ELECTRIC UTILITIES CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (Millions of Dollars)
	Six Months Ended June 30,		Years Ended December 31,
	2009		2008		2007		2006		2005		2004
Earnings, as defined:
Income Before Income Taxes	$	112	$	278	$	246	$	298	$	216	$	84
Total fixed charges as below		62		114		143		159		190		198
Less capitalized interest		1		2		3		1				1
Total fixed charges included in Income Before Income Taxes		61		112		140		158		190		197
Total earnings	$	173	$	390	$	386	$	456	$	406	$	281
Fixed charges, as defined:
Interest on long-term debt	$	54	$	94	$	109	$	131	$	151	$	176
Interest on short-term debt and   other interest		4		13		23		13		22		7
Amortization of debt discount,   expense and premium - net		3		6		7		8		9		7
Estimated interest component of   operating rentals		1		1		4		7		8		8
Total fixed charges (a)	$	62	$	114	$	143	$	159	$	190	$	198
Ratio of earnings to fixed charges		2.8		3.4		2.7		2.9		2.1		1.4
Preferred stock dividend requirements on a   pre-tax basis	$	13	$	28	$	27	$	24	$	4	$	4
Fixed charges, as above		62		114		143		159		190		198
Total fixed charges and preferred stock dividends	$	75	$	142	$	170	$	183	$	194	$	202
Ratio of earnings to combined fixed charges   and preferred stock dividends		2.3		2.7		2.3		2.5		2.1		1.4

(a) Interest on unrecognized tax benefits is not included in fixed charges.

EX-31.A

Exhibit 31(a)

CERTIFICATION
I, JAMES H. MILLER, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of PPL Corporation (the "registrant");
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:  August 4, 2009			/s/  James H. Miller
			James H. Miller Chairman, President and Chief Executive Officer PPL Corporation

EX-31.B

Exhibit 31(b)

CERTIFICATION
I, PAUL A. FARR, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of PPL Corporation (the "registrant");
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:  August 4, 2009			/s/  Paul A. Farr
			Paul A. Farr Executive Vice President and Chief Financial Officer PPL Corporation

EX-31.C

Exhibit 31(c)

CERTIFICATION
I, JAMES H. MILLER, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of PPL Energy Supply, LLC (the "registrant");
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:  August 4, 2009			/s/  James H. Miller
			James H. Miller President PPL Energy Supply, LLC

EX-31.D

Exhibit 31(d)

CERTIFICATION
I, PAUL A. FARR, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of PPL Energy Supply, LLC (the "registrant");
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:  August 4, 2009			/s/  Paul A. Farr
			Paul A. Farr Executive Vice President PPL Energy Supply, LLC

EX-31.E

Exhibit 31(e)

CERTIFICATION
I, DAVID G. DECAMPLI, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of PPL Electric Utilities Corporation (the "registrant");
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:  August 4, 2009			/s/  David G. DeCampli
			David G. DeCampli President PPL Electric Utilities Corporation

EX-31.F

Exhibit 31(f)

CERTIFICATION
I, J. MATT SIMMONS, JR., certify that:
1.	I have reviewed this quarterly report on Form 10-Q of PPL Electric Utilities Corporation (the "registrant");
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:  August 4, 2009			/s/  J. Matt Simmons, Jr.
			J. Matt Simmons, Jr. Vice President and Controller PPL Electric Utilities Corporation

EX-32.A

Exhibit 32(a)

CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

FOR PPL CORPORATION'S 10-Q FOR THE QUARTER ENDED JUNE 30, 2009

In connection with the quarterly report on Form 10-Q of PPL Corporation (the "Company") for the quarter ended June 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Covered Report"), I, the principal executive officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that:

· The Covered Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

· The information contained in the Covered Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  August 4, 2009	/s/  James H. Miller
	James H. Miller Chairman, President and Chief Executive Officer PPL Corporation

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.B

Exhibit 32(b)

CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

FOR PPL CORPORATION'S 10-Q FOR THE QUARTER ENDED JUNE 30, 2009

In connection with the quarterly report on Form 10-Q of PPL Corporation (the "Company") for the quarter ended June 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Covered Report"), I, the principal financial officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that:

· The Covered Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

· The information contained in the Covered Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  August 4, 2009	/s/  Paul A. Farr
	Paul A. Farr Executive Vice President and Chief Financial Officer PPL Corporation

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.C

Exhibit 32(c)

CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

FOR PPL ENERGY SUPPLY, LLC'S 10-Q FOR THE QUARTER ENDED JUNE 30, 2009

In connection with the quarterly report on Form 10-Q of PPL Energy Supply, LLC (the "Company") for the quarter ended June 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Covered Report"), I, the principal executive officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that:

· The Covered Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

· The information contained in the Covered Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  August 4, 2009	/s/  James H. Miller
	James H. Miller President PPL Energy Supply, LLC

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.D

Exhibit 32(d)

CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

FOR PPL ENERGY SUPPLY, LLC'S 10-Q FOR THE QUARTER ENDED JUNE 30, 2009

In connection with the quarterly report on Form 10-Q of PPL Energy Supply, LLC (the "Company") for the quarter ended June 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Covered Report"), I, the principal financial officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that:

· The Covered Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

· The information contained in the Covered Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  August 4, 2009	/s/  Paul A. Farr
	Paul A. Farr Executive Vice President PPL Energy Supply, LLC

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.E

Exhibit 32(e)

CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

FOR PPL ELECTRIC UTILITIES CORPORATION'S 10-Q FOR THE QUARTER ENDED JUNE 30, 2009

In connection with the quarterly report on Form 10-Q of PPL Electric Utilities Corporation (the "Company") for the quarter ended June 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Covered Report"), I, the principal executive officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that:

· The Covered Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

· The information contained in the Covered Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  August 4, 2009	/s/  David G. DeCampli
	David G. DeCampli President PPL Electric Utilities Corporation

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.F

Exhibit 32(f)

CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

FOR PPL ELECTRIC UTILITIES CORPORATION'S 10-Q FOR THE QUARTER ENDED JUNE 30, 2009

In connection with the quarterly report on Form 10-Q of PPL Electric Utilities Corporation (the "Company") for the quarter ended June 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Covered Report"), I, the principal financial officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that:

· The Covered Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

· The information contained in the Covered Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  August 4, 2009	/s/  J. Matt Simmons, Jr.
	J. Matt Simmons, Jr. Vice President and Controller PPL Electric Utilities Corporation

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.