Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

FOR THE YEARS ENDED DECEMBER 31,

PPL Corporation and Subsidiaries

(Millions of Dollars, except share data)

			2021						2020						2019
Operating Revenues			$	5,783					$	5,474					$	5,602
Operating Expenses
Operation
Fuel			710						632						709
Energy purchases			752						634						723
Other operation and maintenance			1,608						1,420						1,509
Depreciation			1,082						1,022						949
Taxes, other than income			207						180						186
Total Operating Expenses			4,359						3,888						4,076
Operating Income			1,424						1,586						1,526
Other Income (Expense) - net			15						2						14
Interest Expense			918						634						621
Income (Loss) from Continuing Operations Before Income Taxes			521						954						919
Income Taxes			503						314						183
Income (Loss) from Continuing Operations After Income Taxes			18						640						736
Income (Loss) from Discontinued Operations (net of income taxes) (Note 9)			(1,498)						829						1,010
Net Income (Loss)			$	(1,480)					$	1,469					$	1,746
Earnings Per Share of Common Stock:
Basic
Income (Loss) from Continuing Operations After Income Taxes			$	0.03					$	0.83					$	1.01
Income (Loss) from Discontinued Operations (net of income taxes)			(1.96)						1.08						1.38
Net Income (Loss) Available to PPL Common Shareowners			$	(1.93)					$	1.91					$	2.39
Diluted
Income (Loss) from Continuing Operations After Income Taxes			$	0.03					$	0.83					$	1.00
Income (Loss) from Discontinued Operations (net of income taxes)			(1.96)						1.08						1.37
Net Income (Loss) Available to PPL Common Shareowners			$	(1.93)					$	1.91					$	2.37
Weighted-Average Shares of Common Stock Outstanding (in thousands)
Basic			762,902						768,590						728,512
Diluted			764,819						769,384						736,754

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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED DECEMBER 31,

PPL Corporation and Subsidiaries

(Millions of Dollars)

			2021						2020						2019
Net income (loss)			$	(1,480)					$	1,469					$	1,746
Other comprehensive income (loss):
Amounts arising during the period - gains (losses), net of tax (expense) benefit:
Foreign currency translation adjustments, net of tax of ($123), $0, $0			372						267						108
Qualifying derivatives, net of tax of $11, $5, $2			(39)						(19)						(11)
Defined benefit plans:
Prior service costs, net of tax of $0, $0, $0			—						(1)						(1)
Net actuarial gain (loss), net of tax of $1, $74, $119			(1)						(341)						(592)
Reclassifications from AOCI - (gains) losses, net of tax expense (benefit):
Qualifying derivatives, net of tax of ($5), ($8), ($5)			25						24						13
Defined benefit plans:
Prior service costs, net of tax of ($1), ($1), ($1)			2						3						2
Net actuarial (gain) loss, net of tax of ($33), ($51), ($22)			126						205						87
Reclassifications from AOCI due to sale of the U.K. utility business - (gains) losses, net of tax expense (benefit):
Foreign currency translation adjustments, net of tax of $140, $0, $0			786						—						—
Qualifying derivatives, net of tax of $0, $0, $0			15						—						—
Defined benefit plans:
Prior service costs, net of tax of ($2), $0, $0			8						—						—
Net actuarial (gain) loss, net of tax of ($798), $0, $0			2,769						—						—
Total other comprehensive income (loss)			4,063						138						(394)
Comprehensive income			$	2,583					$	1,607					$	1,352

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

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,

PPL Corporation and Subsidiaries

(Millions of Dollars)

			2021						2020						2019
Cash Flows from Operating Activities
Net income (loss)			$	(1,480)					$	1,469					$	1,746
Loss (income) from discontinued operations (net of income taxes)			1,498						(829)						(1,010)
Income from continuing operations (net of income taxes)			18						640						736
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation			1,082						1,022						949
Amortization			39						58						58
Deferred income taxes and investment tax credits			87						169						169
Impairment of solar panels			37						—						—
Loss on extinguishment of debt			395						—						—
Other			20						67						69
Change in current assets and current liabilities
Accounts receivable			(14)						(70)						(3)
Accounts payable			24						(1)						(66)
Taxes payable			27						131						9
Regulatory assets and liabilities, net			52						(63)						(88)
Other			(67)						118						(29)
Other operating activities
Defined benefit plans - funding			(53)						(119)						(73)
Other assets			(111)						(59)						(100)
Other liabilities			8						(21)						(24)
Net cash provided by operating activities - continuing operations			1,544						1,872						1,607
Net cash provided by operating activities - discontinued operations			726						874						820
Net cash provided by operating activities			2,270						2,746						2,427
Cash Flows from Investing Activities
Expenditures for property, plant and equipment			(1,973)						(2,270)						(2,243)
Proceeds from sale of discontinued operations, net of cash divested			10,560						—						—
Other investing activities			(23)						4						10
Net cash provided by (used in) investing activities - continuing operations			8,564						(2,266)						(2,233)
Net cash provided by (used in) investing activities - discontinued operations			(607)						(992)						(847)
Net cash provided by (used in) investing activities			7,957						(3,258)						(3,080)
Cash Flows from Financing Activities
Issuance of long-term debt			650						1,848						1,099
Retirement of long-term debt			(4,606)						(975)						(300)
Issuance of common stock			9						34						1,167
Proceeds from project financing			19						173						—
Payment of common stock dividends			(1,279)						(1,275)						(1,192)
Purchase of treasury stock			(1,003)						—						—
Issuance of term loan			—						300						—
Issuance of commercial paper			—						73						—
Retirement of term loan			(300)						—						—
Retirement of commercial paper			(73)						—						—
Net increase (decrease) in short-term debt			(726)						(43)						(341)
Other financing activities			(35)						(36)						(25)
Net cash provided by (used in) financing activities - continuing operations			(7,344)						99						408
Net cash provided by (used in) financing activities - discontinued operations			(411)						209						171
Contributions from discontinued operations			365						78						257
Net cash provided by (used in) financing activities			(7,390)						386						836
Effect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash included in Discontinued Operations			8						17						10
Net (Increase) Decrease in Cash, Cash Equivalents and Restricted Cash included in Discontinued Operations			284						(108)						(154)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash			3,129						(217)						39
Cash, Cash Equivalents and Restricted Cash at Beginning of Period			443						660						621
Cash, Cash Equivalents and Restricted Cash at End of Period			$	3,572					$	443					$	660
Supplemental Disclosures of Cash Flow Information
Cash paid (received) during the period for:
Interest - net of amount capitalized			$	191					$	586					$	552
Income taxes - net			$	284					$	4					$	(12)
Significant non-cash transactions:
Accrued expenditures for property, plant and equipment at December 31,			$	245					$	257					$	292

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

CONSOLIDATED BALANCE SHEETS AT DECEMBER 31,

PPL Corporation and Subsidiaries

(Millions of Dollars, shares in thousands)

			2021						2020
Assets
Current Assets
Cash and cash equivalents			$	3,571					$	442
Accounts receivable (less reserve: 2021, $65; 2020, $71)
Customer			583						603
Other			58						86
Unbilled revenues (less reserve: 2021, $2; 2020, $4)			307						301
Fuel, materials and supplies			322						302
Prepayments			60						53
Other current assets			106						130
Current assets held for sale (Note 9)			—						18,983
Total Current Assets			5,007						20,900
Property, Plant and Equipment
Regulated utility plant			30,477						29,040
Less: accumulated depreciation - regulated utility plant			6,488						6,008
Regulated utility plant, net			23,989						23,032
Non-regulated property, plant and equipment			266						237
Less: accumulated depreciation - non-regulated property, plant and equipment			41						37
Non-regulated property, plant and equipment, net			225						200
Construction work in progress			1,256						1,268
Property, Plant and Equipment, net			25,470						24,500
Other Noncurrent Assets
Regulatory assets			1,236						1,262
Goodwill			716						716
Other intangibles			343						351
Other noncurrent assets (less reserve for accounts receivable: 2021, $2; 2020, $0)			451						387
Total Other Noncurrent Assets			2,746						2,716
Total Assets			$	33,223					$	48,116

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

CONSOLIDATED BALANCE SHEETS AT DECEMBER 31,

PPL Corporation and Subsidiaries

(Millions of Dollars, shares in thousands)

			2021						2020
Liabilities and Equity
Current Liabilities
Short-term debt			$	69					$	1,168
Long-term debt due within one year			474						1,074
Accounts payable			679						745
Taxes			96						69
Interest			81						113
Dividends			305						319
Regulatory liabilities			182						79
Other current liabilities			437						465
Current liabilities held for sale (Note 9)			—						11,023
Total Current Liabilities			2,323						15,055
Long-term Debt			10,666						13,615
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes			3,151						2,536
Investment tax credits			119						122
Accrued pension obligations			183						189
Asset retirement obligations			157						132
Regulatory liabilities			2,422						2,530
Other deferred credits and noncurrent liabilities			479						564
Total Deferred Credits and Other Noncurrent Liabilities			6,511						6,073
Commitments and Contingent Liabilities (Notes 7 and 14)
Equity
Common stock - $0.01 par value (a)			8						8
Additional paid-in capital			12,303						12,270
Treasury stock			(1,003)						—
Earnings reinvested			2,572						5,315
Accumulated other comprehensive loss			(157)						(4,220)
Total Equity			13,723						13,373
Total Liabilities and Equity			$	33,223					$	48,116

(a)1,560,000 shares authorized; 769,890 shares issued and 735,112 shares outstanding at December 31, 2021. 1,560,000 shares authorized; 768,907 shares issued and outstanding at December 31, 2020.

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

CONSOLIDATED STATEMENTS OF EQUITY

PPL Corporation and Subsidiaries

(Millions of Dollars)

			PPL Shareowners
			Common stock shares outstanding (a)						Common stock						Additional paid-in capital						Treasury Stock						Earnings reinvested						Accumulated other comprehensive loss												Total
December 31, 2018			720,323						$	7					$	11,021					$	—					$	4,593					$	(3,964)											$	11,657
Common stock issued			46,910						1						1,184																														1,185
Stock-based compensation															9																														9
Net income (loss)																											1,746																		1,746
Dividends and dividend equivalents (b)																											(1,212)																		(1,212)
Other comprehensive income (loss)																																	(394)												(394)
December 31, 2019			767,233						$	8					$	12,214					$	—					$	5,127					$	(4,358)											$	12,991
Common stock issued			1,674												51																														51
Stock-based compensation															5																														5
Net income (loss)																											1,469																		1,469
Dividends and dividend equivalents (b)																											(1,279)																		(1,279)
Other comprehensive income (loss)																																	138												138
Adoption of financial instrument credit losses guidance cumulative effect adjustment (Note 1)																											(2)																		(2)
December 31, 2020			768,907						$	8					$	12,270					$	—					$	5,315					$	(4,220)											$	13,373
Common stock issued			983												29																														29
Treasury stock			(34,778)																		(1,003)																								(1,003)
Stock-based compensation															4																														4
Net income (loss)																											(1,480)																		(1,480)
Dividends and dividend equivalents (b)																											(1,263)																		(1,263)
Other comprehensive income (loss)																																	4,063												4,063
December 31, 2021			735,112						$	8					$	12,303					$	(1,003)					$	2,572					$	(157)											$	13,723

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

(b)Dividends declared per share of common stock at December 31, 2021, 2020 and 2019 were: $1.66, $1.66 and $1.65.

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

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CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31,

PPL Electric Utilities Corporation and Subsidiaries

(Millions of Dollars)

			2021						2020						2019
Operating Revenues			$	2,402					$	2,331					$	2,358
Operating Expenses
Operation
Energy purchases			566						491						549
Other operation and maintenance			557						513						566
Depreciation			424						403						386
Taxes, other than income			120						107						112
Total Operating Expenses			1,667						1,514						1,613
Operating Income			735						817						745
Other Income (Expense) - net			21						18						25
Interest Income from Affiliate			5						2						6
Interest Expense			162						173						170
Income Before Income Taxes			599						664						606
Income Taxes			154						167						149
Net Income (a)			$	445					$	497					$	457

(a)Net income equals comprehensive income.

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

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,

PPL Electric Utilities Corporation and Subsidiaries

(Millions of Dollars)

			2021						2020						2019
Cash Flows from Operating Activities
Net income			$	445					$	497					$	457
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation			424						403						386
Amortization			19						26						24
Defined benefit plans expense (income)			(10)						(1)						—
Deferred income taxes and investment tax credits			79						83						90
Other			(19)						(5)						(19)
Change in current assets and current liabilities
Accounts receivable			(9)						(47)						33
Accounts payable			(3)						21						5
Unbilled revenues			(8)						13						(14)
Materials and supplies			(5)						(18)						(8)
Prepayments			(4)						(3)						(1)
Regulatory assets and liabilities, net			96						(40)						(43)
Taxes payable			14						4						1
Other			(1)						(10)						(3)
Other operating activities
Defined benefit plans - funding			(21)						(21)						(21)
Other assets			(12)						(28)						15
Other liabilities			(16)						10						11
Net cash provided by operating activities			969						884						913
Cash Flows from Investing Activities
Expenditures for property, plant and equipment			(898)						(1,145)						(1,114)
Expenditures for intangible assets			(6)						(9)						(7)
Increase in notes receivable from affiliate			(499)						—						—
Other investing activities			3						3						4
Net cash used in investing activities			(1,400)						(1,151)						(1,117)
Cash Flows from Financing Activities
Issuance of long-term debt			650						250						393
Retirement of long-term debt			(400)						—						(100)
Contributions from parent			1,075						940						400
Payment of common stock dividends to parent			(334)						(400)						(486)
Return of capital to parent			(574)						(745)						—
Other financing activities			(5)						(2)						(8)
Net cash provided by financing activities			412						43						199
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash			(19)						(224)						(5)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period			40						264						269
Cash, Cash Equivalents and Restricted Cash at End of Period			$	21					$	40					$	264
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest - net of amount capitalized			$	156					$	158					$	154
Income taxes - net			$	64					$	67					$	32
Significant non-cash transactions:
Accrued expenditures for property, plant and equipment at December 31,			$	118					$	156					$	180

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

CONSOLIDATED BALANCE SHEETS AT DECEMBER 31,

PPL Electric Utilities Corporation and Subsidiaries

(Millions of Dollars, shares in thousands)

			2021						2020
Assets
Current Assets
Cash and cash equivalents			$	21					$	40
Accounts receivable (less reserve: 2021, $31; 2020, $41)
Customer			305						311
Other			22						17
Accounts receivable from affiliates			11						10
Notes receivable from affiliate			499						—
Unbilled revenues (less reserve: 2021, $2; 2020, $2)			129						121
Materials and supplies			61						59
Prepayments			13						9
Regulatory assets			22						40
Other current assets			21						13
Total Current Assets			1,104						620
Property, Plant and Equipment
Regulated utility plant			14,082						13,514
Less: accumulated depreciation - regulated utility plant			3,386						3,297
Regulated utility plant, net			10,696						10,217
Construction work in progress			581						592
Property, Plant and Equipment, net			11,277						10,809
Other Noncurrent Assets
Regulatory assets			488						541
Intangibles			270						268
Pension benefit asset			50						12
Other noncurrent assets (less reserve for accounts receivable: 2021, $2; 2020, $0)			113						74
Total Other Noncurrent Assets			921						895
Total Assets			$	13,302					$	12,324

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

CONSOLIDATED BALANCE SHEETS AT DECEMBER 31,

PPL Electric Utilities Corporation and Subsidiaries

(Millions of Dollars, shares in thousands)

			2021						2020
Liabilities and Equity
Current Liabilities
Long-term debt due within one year			$	474					$	400
Accounts payable			367						428
Accounts payable to affiliates			56						39
Taxes			31						17
Interest			35						39
Regulatory liabilities			153						68
Other current liabilities			108						105
Total Current Liabilities			1,224						1,096
Long-term Debt			4,010						3,836
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes			1,668						1,559
Accrued pension obligations			8						8
Regulatory liabilities			559						578
Other deferred credits and noncurrent liabilities			97						123
Total Deferred Credits and Other Noncurrent Liabilities			2,332						2,268
Commitments and Contingent Liabilities (Notes 7 and 14)
Equity
Common stock - no par value (a)			364						364
Additional paid-in capital			4,254						3,753
Earnings reinvested			1,118						1,007
Total Equity			5,736						5,124
Total Liabilities and Equity			$	13,302					$	12,324

(a)170,000 shares authorized; 66,368 shares issued and outstanding at December 31, 2021 and December 31, 2020.

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

CONSOLIDATED STATEMENTS OF EQUITY

PPL Electric Utilities Corporation and Subsidiaries

(Millions of Dollars)

			Common stock shares outstanding (a)						Common stock						Additional paid-in capital						Earnings reinvested						Total
December 31, 2018			66,368						$	364					$	3,158					$	939					$	4,461
Net income																					457						457
Capital contributions from parent															400												400
Dividends declared on common stock																					(486)						(486)
December 31, 2019			66,368						$	364					$	3,558					$	910					$	4,832
Net income																					497						497
Capital contributions from parent															940												940
Return of capital to parent															(745)												(745)
Dividends declared on common stock																					(400)						(400)
December 31, 2020			66,368						$	364					$	3,753					$	1,007					$	5,124
Net income																					445						445
Capital contributions from parent															1,075												1,075
Return of capital to parent															(574)												(574)
Dividends declared on common stock																					(334)						(334)
December 31, 2021			66,368						$	364					$	4,254					$	1,118					$	5,736

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

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

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STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31,

Louisville Gas and Electric Company

(Millions of Dollars)

			2021						2020						2019
Operating Revenues
Retail and wholesale			$	1,545					$	1,435					$	1,473
Electric revenue from affiliate			24						21						27
Total Operating Revenues			1,569						1,456						1,500
Operating Expenses
Operation
Fuel			265						246						289
Energy purchases			167						125						154
Energy purchases from affiliate			23						19						7
Other operation and maintenance			400						373						387
Depreciation			279						259						231
Taxes, other than income			46						40						39
Total Operating Expenses			1,180						1,062						1,107
Operating Income			389						394						393
Other Income (Expense) – net			(5)						(1)						(11)
Interest Expense			81						87						87
Income Before Income Taxes			303						306						295
Income Taxes			54						62						63
Net Income (a)			$	249					$	244					$	232

(a)Net income equals comprehensive income.

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

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,

Louisville Gas and Electric Company

(Millions of Dollars)

			2021						2020						2019
Cash Flows from Operating Activities
Net income			$	249					$	244					$	232
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation			279						259						231
Amortization			2						9						15
Defined benefit plans - expense			1						3						3
Deferred income taxes and investment tax credits			8						3						56
Change in current assets and current liabilities
Accounts receivable			(11)						(3)						(9)
Accounts receivable from affiliates			(13)						4						6
Accounts payable			32						(18)						(10)
Accounts payable to affiliates			(4)						(5)						5
Unbilled revenues			(1)						(3)						1
Fuel, materials and supplies			(17)						4						5
Regulatory assets and liabilities, net			(23)						—						(19)
Taxes payable			2						(1)						7
Other			(18)						(3)						(5)
Other operating activities
Defined benefit plans - funding			(3)						(11)						(6)
Expenditures for asset retirement obligations			(27)						(20)						(30)
Other assets			2						(2)						(1)
Other liabilities			—						23						11
Net cash provided by operating activities			458						483						492
Cash Flows from Investing Activities
Expenditures for property, plant and equipment			(466)						(456)						(482)
Net cash used in investing activities			(466)						(456)						(482)
Cash Flows from Financing Activities
Net increase in notes payable with affiliates			324						—						—
Issuance of long-term debt			—						—						399
Retirement of long-term debt			—						—						(200)
Acquisition of outstanding bonds			—						—						(40)
Remarketing of reacquired bonds			—						—						40
Payment of common stock dividends to parent			(192)						(161)						(182)
Contributions from parent			74						103						25
Issuance of commercial paper			—						41						—
Retirement of commercial paper			(41)						—						—
Net decrease in short-term debt			(152)						(17)						(41)
Other financing activities			(3)						(1)						(6)
Net cash provided by (used in) financing activities			10						(35)						(5)
Net Increase (Decrease) in Cash and Cash Equivalents			2						(8)						5
Cash and Cash Equivalents at Beginning of Period			7						15						10
Cash and Cash Equivalents at End of Period			$	9					$	7					$	15
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest - net of amount capitalized			$	77					$	82					$	77
Income taxes - net			$	52					$	63					$	2
Significant non-cash transactions:
Accrued expenditures for property, plant and equipment at December 31,			$	60					$	60					$	59

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

BALANCE SHEETS AT DECEMBER 31,

Louisville Gas and Electric Company

(Millions of Dollars, shares in thousands)

			2021						2020
Assets
Current Assets
Cash and cash equivalents			$	9					$	7
Accounts receivable (less reserve: 2021, $3; 2020, $2)
Customer			130						127
Other			25						35
Unbilled revenues (less reserve: 2021, $0; 2020, $1)			80						79
Accounts receivable from affiliates			31						16
Fuel, materials and supplies			137						119
Prepayments			14						14
Regulatory assets			33						23
Other current assets			2						1
Total Current Assets			461						421
Property, Plant and Equipment
Regulated utility plant			7,192						6,735
Less: accumulated depreciation - regulated utility plant			1,172						1,020
Regulated utility plant, net			6,020						5,715
Construction work in progress			242						320
Property, Plant and Equipment, net			6,262						6,035
Other Noncurrent Assets
Regulatory assets			337						351
Goodwill			389						389
Other intangibles			30						35
Other noncurrent assets			113						114
Total Other Noncurrent Assets			869						889
Total Assets			$	7,592					$	7,345

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

BALANCE SHEETS AT DECEMBER 31,

Louisville Gas and Electric Company

(Millions of Dollars, shares in thousands)

			2021						2020
Liabilities and Equity
Current Liabilities
Short-term debt			$	69					$	262
Notes payable with affiliates			324						—
Long-term debt due within one year			—						292
Accounts payable			163						153
Accounts payable to affiliates			31						31
Customer deposits			32						32
Taxes			34						32
Price risk management liabilities			1						2
Regulatory liabilities			21						—
Interest			15						15
Asset retirement obligations			10						10
Other current liabilities			37						50
Total Current Liabilities			737						879
Long-term Debt			2,006						1,715
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes			751						716
Investment tax credits			32						33
Price risk management liabilities			17						21
Asset retirement obligations			74						57
Regulatory liabilities			818						882
Other deferred credits and noncurrent liabilities			78						94
Total Deferred Credits and Other Noncurrent Liabilities			1,770						1,803
Commitments and Contingent Liabilities (Notes 7 and 14)
Equity
Common stock - no par value (a)			424						424
Additional paid-in capital			1,997						1,923
Earnings reinvested			658						601
Total Equity			3,079						2,948
Total Liabilities and Equity			$	7,592					$	7,345

(a)75,000 shares authorized; 21,294 shares issued and outstanding at December 31, 2021 and December 31, 2020.

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

STATEMENTS OF EQUITY

Louisville Gas and Electric Company

(Millions of Dollars)

			Common stock shares outstanding (a)						Common stock						Additional paid-in capital						Earnings reinvested						Total
December 31, 2018			21,294						$	424					$	1,795					$	468					$	2,687
Net income																					232						232
Capital contributions from LKE															25												25
Cash dividends declared on common stock																					(182)						(182)
December 31, 2019			21,294						$	424					$	1,820					$	518					$	2,762
Net income																					244						244
Capital contributions from LKE															103												103
Cash dividends declared on common stock																					(161)						(161)
December 31, 2020			21,294						$	424					$	1,923					$	601					$	2,948
Net income																					249						249
Capital contributions from LKE															74												74
Cash dividends declared on common stock																					(192)						(192)
December 31, 2021			21,294						$	424					$	1,997					$	658					$	3,079

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

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

(THIS PAGE LEFT BLANK INTENTIONALLY.)

STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31,

Kentucky Utilities Company

(Millions of Dollars)

			2021						2020						2019
Operating Revenues
Retail and wholesale			$	1,803					$	1,671					$	1,733
Electric revenue from affiliate			23						19						7
Total Operating Revenues			1,826						1,690						1,740
Operating Expenses
Operation
Fuel			445						386						420
Energy purchases			19						18						20
Energy purchases from affiliate			24						21						27
Other operation and maintenance			463						429						438
Depreciation			366						346						315
Taxes, other than income			41						37						35
Total Operating Expenses			1,358						1,237						1,255
Operating Income			468						453						485
Other Income (Expense) – net			4						3						(4)
Interest Expense			109						113						109
Income Before Income Taxes			363						343						372
Income Taxes			67						63						79
Net Income (a)			$	296					$	280					$	293

(a)Net income equals comprehensive income.

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

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,

Kentucky Utilities Company

(Millions of Dollars)

			2021						2020						2019
Cash Flows from Operating Activities
Net income			$	296					$	280					$	293
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation			366						346						315
Amortization			12						8						10
Defined benefit plans - expense (credit)			(3)						—						(1)
Deferred income taxes and investment tax credits			1						20						39
Other			(3)						(1)						(3)
Change in current assets and current liabilities
Accounts receivable			6						(13)						(3)
Accounts receivable from affiliates			1						(1)						—
Accounts payable			(12)						9						(15)
Accounts payable to affiliates			15						(16)						(2)
Unbilled revenues			6						(9)						4
Fuel, materials and supplies			1						6						(6)
Regulatory assets and liabilities, net			(22)						(26)						(26)
Taxes payable			(10)						2						2
Other			(18)						(5)						(6)
Other operating activities
Defined benefit plans - funding			(1)						(3)						(3)
Expenditures for asset retirement obligations			(36)						(64)						(59)
Other assets			9						(2)						(2)
Other liabilities			—						12						16
Net cash provided by operating activities			608						543						553
Cash Flows from Investing Activities
Expenditures for property, plant and equipment			(560)						(510)						(610)
Other investing activities			4						3						—
Net cash used in investing activities			(556)						(507)						(610)
Cash Flows from Financing Activities
Net increase in notes payable with affiliates			294						—						—
Issuance of long-term debt			—						498						306
Retirement of long-term debt			—						(500)						—
Payment of common stock dividends to parent			(250)						(200)						(229)
Contributions from parent			100						128						68
Issuance of commercial paper			—						32						—
Retirement of commercial paper			(32)						—						—
Net increase (decrease) in short-term debt			(171)						21						(85)
Other financing activities			(2)						(5)						(5)
Net cash provided by (used in) financing activities			(61)						(26)						55
Net Increase (Decrease) in Cash and Cash Equivalents			(9)						10						(2)
Cash and Cash Equivalents at Beginning of Period			22						12						14
Cash and Cash Equivalents at End of Period			$	13					$	22					$	12
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest - net of amount capitalized			$	105					$	109					$	101
Income taxes - net			$	72					$	44					$	39
Significant non-cash transactions:
Accrued expenditures for property, plant and equipment at December 31,			$	67					$	40					$	54

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

BALANCE SHEETS AT DECEMBER 31,

Kentucky Utilities Company

(Millions of Dollars, shares in thousands)

			2021						2020
Assets
Current Assets
Cash and cash equivalents			$	13					$	22
Accounts receivable (less reserve: 2021, $3; 2020, $1)
Customer			144						156
Other			12						30
Unbilled revenues (less reserve: 2021, $0; 2020, $1)			91						97
Accounts receivable from affiliates			—						1
Fuel, materials and supplies			124						123
Prepayments			15						15
Regulatory assets			9						36
Other current assets			2						1
Total Current Assets			410						481
Property, Plant and Equipment
Regulated utility plant			9,219						8,808
Less: accumulated depreciation - regulated utility plant			1,929						1,690
Regulated utility plant, net			7,290						7,118
Construction work in progress			378						321
Property, Plant and Equipment, net			7,668						7,439
Other Noncurrent Assets
Regulatory assets			411						370
Goodwill			607						607
Other intangibles			23						26
Other noncurrent assets			153						149
Total Other Noncurrent Assets			1,194						1,152
Total Assets			$	9,272					$	9,072

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

BALANCE SHEETS AT DECEMBER 31,

Kentucky Utilities Company

(Millions of Dollars, shares in thousands)

			2021						2020
Liabilities and Equity
Current Liabilities
Short-term debt			$	—					$	203
Notes payable with affiliates			294						—
Long-term debt due within one year			—						132
Accounts payable			108						121
Accounts payable to affiliates			64						43
Customer deposits			32						32
Taxes			19						29
Regulatory liabilities			8						11
Interest			18						19
Asset retirement obligations			22						40
Other current liabilities			47						59
Total Current Liabilities			612						689
Long-term Debt			2,618						2,486
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes			865						835
Investment tax credits			87						88
Asset retirement obligations			83						75
Regulatory liabilities			1,045						1,070
Other deferred credits and noncurrent liabilities			34						47
Total Deferred Credits and Other Noncurrent Liabilities			2,114						2,115
Commitments and Contingent Liabilities (Notes 7 and 14)
Equity
Common stock - no par value (a)			308						308
Additional paid-in capital			2,957						2,857
Earnings reinvested			663						617
Total Equity			3,928						3,782
Total Liabilities and Equity			$	9,272					$	9,072

(a) 80,000 shares authorized; 37,818 shares issued and outstanding at December 31, 2021 and December 31, 2020.

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

STATEMENTS OF EQUITY

Kentucky Utilities Company

(Millions of Dollars)

			Common stock shares outstanding (a)						Common stock						Additional paid-in capital						Earnings reinvested						Accumulated other comprehensive income (loss)						Total
December 31, 2018			37,818						$	308					$	2,661					$	473					$	—					$	3,442
Net income																					293												293
Capital contributions from LKE															68																		68
Cash dividends declared on common stock																					(229)												(229)
December 31, 2019			37,818						$	308					$	2,729					$	537					$	—					$	3,574
Net income																					280												280
Capital contributions from LKE															128																		128
Cash dividends declared on common stock																					(200)												(200)
December 31, 2020			37,818						$	308					$	2,857					$	617					$	—					$	3,782
Net income																					296												296
Capital contributions from LKE															100																		100
Cash dividends declared on common stock																					(250)												(250)
December 31, 2021			37,818						$	308					$	2,957					$	663					$	—					$	3,928

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

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

COMBINED NOTES TO FINANCIAL STATEMENTS

Index to Combined Notes to Consolidated Financial Statements

The notes to the consolidated financial statements that follow are a combined presentation. The following list indicates the Registrants to which the footnotes apply:

						Registrant
						PPL						PPL Electric						LG&E						KU
1. Summary of Significant Accounting Policies						x						x						x						x
2. Segment and Related Information						x						x						x						x
3. Revenue from Contracts with Customers						x						x						x						x
4. Preferred Securities						x						x						x						x
5. Earnings Per Share						x
6. Income and Other Taxes						x						x						x						x
7. Utility Rate Regulation						x						x						x						x
8. Financing Activities						x						x						x						x
9. Acquisitions, Development and Divestitures						x
10. Leases						x						x						x						x
11. Stock-Based Compensation						x						x
12. Retirement and Postemployment Benefits						x						x						x						x
13. Jointly Owned Facilities						x												x						x
14. Commitments and Contingencies						x						x						x						x
15. Related Party Transactions												x						x						x
16. Other Income (Expense) - net						x						x
17. Fair Value Measurements						x						x						x						x
18. Derivative Instruments and Hedging Activities						x						x						x						x
19. Goodwill and Other Intangible Assets						x						x						x						x
20. Asset Retirement Obligations						x						x						x						x
21. Accumulated Other Comprehensive Income (Loss)						x

1. Summary of Significant Accounting Policies

(All Registrants)

General

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

Business and Consolidation

(PPL)

PPL is a utility holding company that, through its regulated subsidiaries, is primarily engaged in: 1) the generation, transmission, distribution and sale of electricity and the distribution and sale of natural gas, primarily in Kentucky; and 2) the transmission, distribution and sale of electricity in Pennsylvania. Headquartered in Allentown, PA, PPL's principal subsidiaries are LKE (including its principal subsidiaries, LG&E and KU) and PPL Electric. PPL's corporate level financing subsidiary is PPL Capital Funding.

On March 17, 2021, PPL WPD Limited entered into a share purchase agreement to sell PPL's U.K. utility business, which substantially represented PPL's U.K. Regulated segment, to a subsidiary of National Grid plc. The sale was completed on June 14, 2021. The results of operations of the U.K. utility business are classified as Discontinued Operations on PPL's Statements of Income. The assets and liabilities of the U.K. utility business as of December 31, 2020 are classified as assets and liabilities held for sale on PPL's Balance Sheets. PPL has elected to separately report the cash flows of continuing and discontinued operations on the Statements of Cash Flows. Unless otherwise noted, the notes to these financial statements exclude amounts related to discontinued operations and assets and liabilities held for sale for all periods presented. See Note 9 for additional information.

On July 1, 2021, LKE redeemed, at par, its $250 million 4.375% Senior Notes due 2021 and on July 9, 2021, LKE filed a Form 15 with the SEC to suspend its duty to file reports under sections 13 and 15(d) of the Securities Exchange Act of 1934. As a result, beginning with the June 30, 2021 Form 10-Q, LKE was no longer reported as a Registrant.

(PPL and PPL Electric)

PPL Electric is a cost-based rate-regulated utility subsidiary of PPL. PPL Electric's principal business is the transmission and distribution of electricity to serve retail customers in its franchised territory in eastern and central Pennsylvania and the regulated supply of electricity to retail customers in that territory as a PLR.

(PPL, LG&E and KU)

LG&E and KU are engaged in the generation, transmission, distribution and sale of electricity. LG&E also engages in the distribution and sale of natural gas. LG&E and KU maintain their separate identities and serve customers in Kentucky under their respective names. KU also serves customers in Virginia under the Old Dominion Power name.

(All Registrants)

The financial statements of the Registrants include each company's own accounts as well as the accounts of all entities in which the company has a controlling financial interest. Entities for which a controlling financial interest is not demonstrated through voting interests are evaluated based on accounting guidance for Variable Interest Entities (VIEs). The Registrants consolidate a VIE when they are determined to have a controlling interest in the VIE and, as a result, are the primary beneficiary of the entity. Amounts consolidated under the VIE guidance are not material to the Registrants.

All significant intercompany transactions have been eliminated.

The financial statements of PPL, LG&E and KU include their share of any undivided interests in jointly owned facilities, as well as their share of the related operating costs of those facilities. See Note 13 for additional information.

Regulation

(All Registrants)

PPL Electric, LG&E and KU are cost-based rate-regulated utilities for which rates are set by regulators to enable PPL Electric, LG&E and KU to recover the costs of providing electric or gas service, as applicable, and to provide a reasonable return to shareholders. Base rates are generally established based on a future test period. As a result, the financial statements are subject to the accounting for certain types of regulation as prescribed by GAAP and reflect the effects of regulatory actions. Regulatory assets are recognized for the effect of transactions or events where future recovery of underlying costs is probable in regulated customer rates. The effect of such accounting is to defer certain or qualifying costs that would otherwise currently be charged to expense. Regulatory liabilities are recognized for amounts expected to be returned through future regulated customer rates. In certain cases, regulatory liabilities are recorded based on an understanding or agreement with the regulator that rates have been set to recover expected future costs, and the regulated entity is accountable for any amounts charged pursuant to such rates and not yet expended for the intended purpose. The accounting for regulatory assets and regulatory liabilities is based on specific ratemaking decisions or precedent for each transaction or event as prescribed by the FERC or the applicable state regulatory commissions. See Note 7 for additional details regarding regulatory matters.

Accounting Records

The system of accounts for domestic regulated entities is maintained in accordance with the Uniform System of Accounts prescribed by the FERC and adopted by the applicable state regulatory commissions.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Loss Accruals

Potential losses are accrued when (1) information is available that indicates it is "probable" that a loss has been incurred, given the likelihood of uncertain future events and (2) the amount of loss can be reasonably estimated. Accounting guidance defines "probable" as cases in which "the future event or events are likely to occur." The Registrants continuously assess potential loss contingencies for environmental remediation, litigation claims, regulatory penalties and other events. Loss accruals for environmental remediation are discounted when appropriate.

The accrual of contingencies that might result in gains is not recorded, unless realization is assured.

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.

Price Risk Management

(All Registrants)

Interest rate contracts are used to hedge exposure to changes in the fair value of debt instruments and to hedge exposure to variability in expected cash flows associated with existing floating-rate debt instruments or forecasted fixed-rate issuances of debt. Foreign currency exchange contracts are used to hedge foreign currency exposures. Similar derivatives may receive different accounting treatment, depending on management's intended use and documentation.

Certain contracts may not meet the definition of a derivative because they lack a notional amount or a net settlement provision. In cases where there is no net settlement provision, markets are periodically assessed to determine whether market mechanisms have evolved to facilitate net settlement. Certain derivative contracts may be excluded from the requirements of derivative accounting treatment because the NPNS has been elected. These contracts are accounted for using accrual accounting. Contracts that have been classified as derivative contracts are reflected on the balance sheets at fair value. The portion of derivative positions that deliver within a year are included in "Current Assets" and "Current Liabilities," while the portion of derivative positions that deliver beyond a year are recorded in "Other Noncurrent Assets" and "Deferred Credits and Other Noncurrent Liabilities."

Cash inflows and outflows related to derivative instruments are included as a component of operating, investing or financing activities on the Statements of Cash Flows, depending on the classification of the hedged items.

PPL and its subsidiaries have elected not to offset net derivative positions against the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) under master netting arrangements.

(PPL)

Processes exist that allow for subsequent review and validation of contract information as it relates to interest rate derivatives and foreign currency derivatives. The accounting department provides the treasury department with guidelines on appropriate accounting classifications for various contract types and strategies. Examples of accounting guidelines provided to the treasury department staff include, but are not limited to:

• Transactions to lock in an interest rate prior to a debt issuance can be designated as cash flow hedges, to the extent the forecasted debt issuances remain probable of occurring.

• Cross-currency transactions to hedge interest and principal repayments can be designated as cash flow hedges.

• Transactions to hedge fluctuations in the fair value of existing debt can be designated as fair value hedges.

• Transactions to hedge the value of a net investment of foreign operations can be designated as net investment hedges.

• Derivative transactions that do not qualify for cash flow or net investment hedge treatment are marked to fair value through earnings. As such, these transactions reduce earnings volatility due solely to changes in foreign currency exchange rates. PPL also hedges anticipated transactions, including the previously completed sale of its U.K utility business and net investments.

(All Registrants)

Derivative transactions may be marked to fair value through regulatory assets/liabilities at PPL Electric, LG&E and KU, if approved by the appropriate regulatory body. These transactions generally include the effect of interest rate swaps that are included in customer rates.

(PPL and PPL Electric)

To meet its obligation as a PLR to its customers, PPL Electric has entered into certain contracts that meet the definition of a derivative. However, NPNS has been elected for these contracts.

See Notes 17 and 18 for additional information on derivatives.

Revenue (All Registrants)

Operating revenues are primarily recorded based on energy deliveries through the end of each calendar month. Unbilled retail revenues result because customers' bills are rendered throughout the month, rather than bills being rendered at the end of the month. For LG&E and KU, unbilled revenues for a month are calculated by multiplying an estimate of unbilled kWh or Mcf by the estimated average cents per kWh or Mcf. Any difference between estimated and actual revenues is adjusted the following month when the previous unbilled estimate is reversed and actual billings occur. For PPL Electric, unbilled revenues for a month are calculated by multiplying the actual unbilled volumes by the price per tariff.

PPL Electric's, LG&E's and KU's base rates are determined based on cost of service. Some regulators have also authorized the use of additional alternative revenue programs, which enable PPL Electric, LG&E and KU to adjust future rates based on past activities or completed events. Revenues from alternative revenue programs are recognized when the specific events permitting future billings have occurred. Revenues from alternative revenue programs are required to be presented separately from revenues from contracts with customers. These amounts are, however, presented as revenues from contracts with customers, with an offsetting adjustment to alternative revenue program revenue, when they are billed to customers in future periods. See Note 3 for additional information.

Financing and Other Receivables

(All Registrants)

Accounts receivable are reported on the Balance Sheets at the gross outstanding amount adjusted for an allowance for doubtful accounts. Financing receivables include accounts receivable, with the exception of those items within accounts receivable that are not subject to the credit loss model.

Financing receivable collectibility is evaluated using a current expected credit loss model, consisting of a combination of factors, including past due status based on contractual terms, trends in write-offs and the age of the receivable. Specific events, such as bankruptcies, are also considered when applicable. Adjustments to the allowance for doubtful accounts are made when necessary based on the results of analysis, the aging of receivables and historical and industry trends. The Registrants periodically evaluate the impact of observable external factors on the collectibility of the financing receivables to determine if adjustments to the allowance for doubtful accounts should be made based on current conditions or reasonable and supportable forecasts. Accounts receivable are written off in the period in which the receivable is deemed uncollectible.

(PPL and PPL Electric)

PPL Electric has identified one class of financing receivables, “accounts receivable - customer”, which includes financing receivables for all billed and unbilled sales with residential and non-residential customers. All other financing receivables are classified as other. Within the credit loss model for the residential customer accounts receivables, customers are disaggregated based on their projected propensity to pay, which is derived from historical trends and the current activity of the individual customer accounts. Conversely, the non-residential customer accounts receivables are not further segmented due to the varying nature of the individual customers, which lack readily identifiable risk characteristics for disaggregation.

(PPL, LG&E and KU)

LG&E and KU have identified one class of financing receivables, “accounts receivable - customer”, which includes financing receivables for all billed and unbilled sales with customers. All other financing receivables are classified as other.

(All Registrants)

The changes in the allowance for doubtful accounts are included in the following table. Amounts relate to financing receivables, except as noted.

									Additions
			Balance at Beginning of Period						Charged to Income						Charged to Other Accounts						Deductions (b)						Balance at End of Period
PPL
2021			$	73					$	26					$	—					$	30					$	69		(d)
2020 (a)			58			(a)			28						—						13						73			(d)
2019			54						34						3						35						56
PPL Electric
2021			$	41					$	13					$	—					$	19					$	35		(c)
2020			30			(a)			19						—						8						41			(c)
2019			27						26						—						25						28
LG&E
2021			$	3					$	4					$	—					$	4					$	3
2020			1						4						—						2						3
2019			1						2						2						4						1
KU
2021			$	2					$	8					$	—					$	7					$	3
2020			1						4						—						3						2
2019			2						4						1						6						1

(a)Adjusted for $2 million cumulative-effect adjustment upon adoption of current expected credit loss guidance.

(b)Primarily related to uncollectible accounts written off.

(c)Includes $3 million related to other accounts receivables at December 31, 2021 and 2020.

(d)Includes $32 million and $30 million related to other accounts receivables at December 31, 2021 and 2020.

Cash

(All Registrants)

Cash Equivalents

All highly liquid investments with original maturities of three months or less are considered to be cash equivalents.

(PPL)

Restricted Cash and Cash Equivalents

Bank deposits and other cash equivalents that are restricted by agreement or that have been clearly designated for a specific purpose are classified as restricted cash and cash equivalents. On the Balance Sheets, the current portion of restricted cash and cash equivalents is included in "Other current assets," while the noncurrent portion is included in "Other noncurrent assets."

Reconciliation of Cash, Cash Equivalents and Restricted Cash

The following provides a reconciliation of Cash, Cash Equivalents and Restricted Cash reported within the Balance Sheets to the amounts shown on the Statements of Cash Flows:

			December 31, 2021						December 31, 2020
Cash and cash equivalents			$	3,571					$	442
Restricted cash - current			1						1
Total Cash, Cash Equivalents and Restricted Cash			$	3,572					$	443

(All Registrants)

Fair Value Measurements

The Registrants value certain financial and nonfinancial assets and liabilities at fair value. Generally, the most significant fair value measurements relate to price risk management assets and liabilities, investments in securities in defined benefit plans, and cash and cash equivalents. 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.

The Registrants classify fair value measurements within one of three levels in the fair value hierarchy. The level assigned to a fair value measurement is based on the lowest level input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are as follows:

• Level 1** - quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date. Active markets are those in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

• Level 2 - inputs other than quoted prices included within Level 1 that are either directly or indirectly observable for substantially the full term of the asset or liability.

• Level 3 - unobservable inputs that management believes are predicated on the assumptions market participants would use to measure the asset or liability at fair value.

Assessing the significance of a particular input requires judgment that considers factors specific to the asset or liability. As such, the Registrants' assessment of the significance of a particular input may affect how the assets and liabilities are classified within the fair value hierarchy.

Investments

Generally, the original maturity date of an investment and management's intent and ability to sell an investment prior to its original maturity determine the classification of investments as either short-term or long-term. Investments that would otherwise be classified as short-term, but are restricted as to withdrawal or use for other than current operations or are clearly

designated for expenditure in the acquisition or construction of noncurrent assets or for the liquidation of long-term debts, are classified as long-term.

Investments in entities in which a company has the ability to exercise significant influence but does not have a controlling financial interest are accounted for under the equity method. All other investments are carried at cost or fair value. These investments are included in "Other noncurrent assets" on the Balance Sheets. Earnings from these investments are recorded in "Other Income (Expense) - net" on the Statements of Income.

Short-term investments generally include certain deposits as well as securities that are considered highly liquid or provide for periodic reset of interest rates. Investments with original maturities greater than three months and less than a year, as well as investments with original maturities of greater than a year that management has the ability and intent to sell within a year, are included in "Other current assets" on the Balance Sheets.

Long-Lived and Intangible Assets

Property, Plant and Equipment

(All Registrants)

PP&E is recorded at original cost, unless impaired. PP&E acquired in business combinations is recorded at fair value at the time of acquisition. If impaired, the asset is written down to fair value at that time, which becomes the new cost basis of the asset. Original cost for constructed assets includes material, labor, contractor costs, certain overheads and financing costs, where applicable. Included in PP&E are capitalized costs of software projects that were developed or obtained for internal use. The cost of repairs and minor replacements are charged to expense as incurred. The Registrants record costs associated with planned major maintenance projects in the period in which work is performed and costs are incurred.

AFUDC is capitalized at PPL Electric as part of the construction costs for cost-based rate-regulated projects for which a return on such costs is recovered after the project is placed in service. The debt component of AFUDC is credited to "Interest Expense" and the equity component is credited to "Other Income (Expense) - net" on the Statements of Income. LG&E and KU generally do not record AFUDC as a return is provided on construction work in progress.

(PPL and PPL Electric)

PPL and PPL Electric capitalize interest costs as part of construction costs. Capitalized interest, including the debt component of AFUDC, for the years ended December 31 is as follows:

			2021						2020						2019
PPL			$	6					$	7					$	9
PPL Electric			6						7						8

Depreciation (All Registrants)

Depreciation is recorded over the estimated useful lives of property using various methods including the straight-line, composite and group methods. When a component of PP&E that was depreciated under the composite or group method is retired, the original cost is charged to accumulated depreciation. When all or a significant portion of an operating unit that

was depreciated under the composite or group method is retired or sold, the property and the related accumulated depreciation account is reduced and any gain or loss is included in income, unless otherwise required by regulators. LG&E and KU accrue costs of removal net of estimated salvage value through depreciation, which is included in the calculation of customer rates over the assets' depreciable lives in accordance with regulatory practices. Cost of removal amounts accrued through depreciation rates are accumulated as a regulatory liability until the removal costs are incurred. For LG&E and KU, all ARO depreciation expenses are reclassified to a regulatory asset or regulatory liability. See "Asset Retirement Obligations" below and Note 7 for additional information. PPL Electric records net costs of removal when incurred as a regulatory asset. The regulatory asset is subsequently amortized through depreciation over a five-year period, which is recoverable in customer rates in accordance with regulatory practices.

Following are the weighted-average annual rates of depreciation, for regulated utility plant, for the years ended December 31:

			2021						2020						2019
PPL			3.61		%				3.53		%				3.54		%
PPL Electric			3.05		%				2.99		%				3.05		%
LG&E			3.99		%				4.00		%				3.87		%
KU			4.17		%				4.00		%				4.02		%

Goodwill and Other Intangible Assets (All Registrants)

Goodwill represents the excess of the purchase price paid over the fair value of the identifiable net assets acquired in a business combination.

Other acquired intangible assets are initially measured based on their fair value. Intangibles that have finite useful lives are amortized over their useful lives based upon the pattern in which the economic benefits of the intangible assets are consumed or otherwise used. Costs incurred to obtain an initial license and renew or extend terms of licenses are capitalized as intangible assets.

When determining the useful life of an intangible asset, including intangible assets that are renewed or extended, PPL and its subsidiaries consider:

• the expected use of the asset;

• the expected useful life of other assets to which the useful life of the intangible asset may relate;

• legal, regulatory, or contractual provisions that may limit the useful life;

• the company's historical experience as evidence of its ability to support renewal or extension;

• the effects of obsolescence, demand, competition, and other economic factors; and,

• the level of maintenance expenditures required to obtain the expected future cash flows from the asset.

Asset Impairment (Excluding Investments)

(All Registrants)

The Registrants review long-lived assets that are subject to depreciation or amortization, including finite-lived intangibles, for impairment when events or circumstances indicate carrying amounts may not be recoverable.

A long-lived asset classified as held and used is impaired when the carrying amount of the asset exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If impaired, the asset's carrying value is written down to its fair value.

A long-lived asset classified as held for sale is impaired when the carrying amount of the asset (disposal group) exceeds its fair value less cost to sell. If impaired, the asset's (disposal group's) carrying value is written down to its fair value less cost to sell.

PPL, LG&E and KU review goodwill for impairment at the reporting unit level annually or more frequently when events or circumstances indicate that the carrying amount of a reporting unit may be greater than the unit's fair value. Additionally, goodwill must be tested for impairment in circumstances when a portion of goodwill has been allocated to a business to be disposed. PPL's, LG&E's and KU's reporting units are primarily at the operating segment level.

PPL, for its Kentucky Regulated segment and LKE reporting units, and individually LG&E and KU may elect either to initially make a qualitative evaluation about the likelihood of an impairment of goodwill or to bypass the qualitative evaluation and test goodwill for impairment using a quantitative test. If the qualitative evaluation (referred to as step zero) is elected and the assessment results in a determination that it is not more likely than not that the fair value of a reporting unit is less than the carrying amount, the quantitative impairment test is not necessary. However, the quantitative impairment test is required if management concludes it is more likely than not that the fair value of a reporting unit is less than the carrying amount based on the step zero assessment. If the carrying amount of the reporting unit, including goodwill, exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

In the fourth quarter of 2021, PPL, for its Kentucky Regulated segment and LKE reporting units, and individually, LG&E and KU, elected to perform qualitative step zero evaluations for their annual goodwill impairment tests, as of October 1, 2021. Based on these evaluations, management concluded it was not "more likely than not" that the fair value of these reporting units was less than their carrying values. As such, quantitative impairment tests were not performed.

(PPL)

During the three month-period ended June 30, 2021, Safari Energy determined that the carrying value of its solar panel inventory would not be fully recoverable due to a decrease in the net realizable value of the modules. The decrease was due primarily to the combination of the three following factors: (1) a continued decrease in the fair value of the modules on hand due to more efficient modules being available on the market, (2) the federal government's extension of certain investment tax credits which make modules on the open market eligible for those credits at higher levels of credits and (3) an increase in commodity prices for materials used in various types of solar projects, all of which place pressure on the economics of those projects, making the cost of Safari's solar panels uncompetitive. As a result, Safari Energy recorded a loss of $37 million ($28 million after-tax) in June 2021 to record the solar panels at fair value. The loss was recorded to "Other operation and maintenance" expense on the Statement of Income. Solar panel inventories of $32 million are included in "Other noncurrent assets" on PPL's Balance Sheet at December 31, 2021.

PPL considered whether the events and circumstances that led to the impairment of Safari Energy's solar panels would more likely than not reduce the fair value of PPL's Distributed Energy Resources reporting unit below its carrying amount. Based on PPL's assessment, a quantitative impairment test was not required as of June 30, 2021.

In the fourth quarter of 2021, PPL elected to perform a quantitative goodwill impairment test in conjunction with the annual goodwill impairment assessment for the Distributed Energy Resources reporting unit. The test did not indicate impairment of the reporting unit , however, it is possible that an impairment charge could occur in future periods if any of the assumptions used in determining fair value of the reporting unit are negatively impacted.

(PPL, LG&E and KU)

Asset Retirement Obligations

PPL and its subsidiaries record liabilities to reflect various legal obligations associated with the retirement of long-lived assets. Initially, this obligation is measured at fair value and offset with an increase in the value of the capitalized asset, which is depreciated over the asset's useful life. Until the obligation is settled, the liability is increased through the recognition of accretion expense classified within "Other operation and maintenance" on the Statements of Income to reflect changes in the obligation due to the passage of time. For LG&E and KU, all ARO accretion and depreciation expenses are reclassified as a regulatory asset or regulatory liability. ARO regulatory assets associated with certain CCR projects are amortized to expense in accordance with regulatory approvals. For other AROs, deferred accretion and depreciation expense is recovered through cost of removal.

Estimated ARO costs and settlement dates, which affect the carrying value of the ARO and the related capitalized asset, are reviewed periodically to ensure that any material changes are incorporated into the latest estimate of the ARO. Any change to the capitalized asset, positive or negative, is generally amortized over the remaining life of the associated long-lived asset. See Note 7 and Note 20 for additional information on AROs.

Compensation and Benefits

Defined Benefits (All Registrants)

Certain PPL subsidiaries sponsor various defined benefit pension and other postretirement plans. An asset or liability is recorded to recognize the funded status of all defined benefit plans with an offsetting entry to AOCI or, for LG&E, KU and PPL Electric, to regulatory assets or liabilities. Consequently, the funded status of all defined benefit plans is fully recognized on the Balance Sheets.

The expected return on plan assets is determined based on a market-related value of plan assets, which is calculated by rolling forward the prior year market-related value with contributions, disbursements and long-term expected return on investments. One-fifth of the difference between the actual value and the expected value is added (or subtracted if negative) to the expected value to determine the new market-related value.

PPL uses an accelerated amortization method for the recognition of gains and losses for its defined benefit pension plans. Under the accelerated method, actuarial gains and losses in excess of 30% of the plan's projected benefit obligation are amortized on a straight-line basis over one-half of the required amortization period. Actuarial gains and losses in excess of 10% of the greater

of the plan's projected benefit obligation or the market-related value of plan assets and less than 30% of the plan's projected benefit obligation are amortized on a straight-line basis over the full required amortization period.

See Note 7 for a discussion of the regulatory treatment of defined benefit costs and Note 12 for a discussion of defined benefits.

Stock-Based Compensation (PPL and PPL Electric)

PPL has several stock-based compensation plans for purposes of granting stock options, restricted stock, restricted stock units and performance units to certain employees as well as stock units and restricted stock units to directors. PPL grants most stock-based awards in the first quarter of each year. PPL and its subsidiaries recognize compensation expense for stock-based awards based on the fair value method. Forfeitures of awards are recognized when they occur. See Note 11 for a discussion of stock-based compensation. All awards are recorded as equity or a liability on the Balance Sheets. Stock-based compensation is primarily included in "Other operation and maintenance" on the Statements of Income. Stock-based compensation expense for PPL Electric includes an allocation of PPL Services' expense.

Taxes

Income Taxes

(All Registrants)

PPL and its domestic subsidiaries file a consolidated U.S. federal income tax return.

Significant management judgment is required in developing the Registrants' provision for income taxes, primarily due to the uncertainty related to tax positions taken or expected to be taken on tax returns and valuation allowances on deferred tax assets.

The Registrants use a two-step process to evaluate tax positions. The first step requires an entity to determine whether, based on the technical merits supporting a particular tax position, it is more likely than not (greater than a 50% chance) that the tax position will be sustained. This determination assumes that the relevant taxing authority will examine the tax position and is aware of all the relevant facts surrounding the tax position. The second step requires an entity to recognize in its financial statements the benefit of a tax position that meets the more-likely-than-not recognition criterion. The benefit recognized is measured at the largest amount of benefit that has a likelihood of realization upon settlement that exceeds 50%. Unrecognized tax benefits are classified as current to the extent management expects to settle the uncertain tax position by payment or receipt of cash within one year of the reporting date. The amounts ultimately paid upon resolution of issues raised by taxing authorities may differ materially from the amounts accrued and may materially impact the financial statements of the Registrants in future periods. At December 31, 2021, no significant changes in unrecognized tax benefits were projected over the next 12 months.

Deferred income taxes reflect the net future tax effects of temporary differences between the carrying amounts of assets and liabilities for accounting purposes and their basis for income tax purposes, as well as the tax effects of net operating losses and tax credit carryforwards.

The Registrants record valuation allowances to reduce deferred income tax assets to the amounts that are more-likely-than-not to be realized. The need for valuation allowances requires significant management judgment. If the Registrants determine that they are able to realize deferred tax assets in the future in excess of recorded net deferred tax assets, adjustments to the valuation allowances increase income by reducing tax expense in the period that such determination is made. Likewise, if the Registrants determine that they are not able to realize all or part of net deferred tax assets in the future, adjustments to the valuation allowances would decrease income by increasing tax expense in the period that such determination is made. The amount of deferred tax assets ultimately realized may differ materially from the estimates utilized in the computation of valuation allowances and may materially impact the financial statements in the future.

The Registrants defer investment tax credits when the credits are generated and amortize the deferred amounts over the average lives of the related assets.

The Registrants recognize tax-related interest and penalties in "Income Taxes" on their Statements of Income.

The Registrants use the portfolio approach method of accounting for deferred taxes related to pre-tax OCI transactions. The portfolio approach involves a strict period-by-period cumulative incremental allocation of income taxes to the change in income and losses reflected in OCI. Under this approach, the net cumulative tax effect is ignored. The net change in unrealized gains and losses recorded in AOCI under this approach would be eliminated only on the date the investment portfolio is classified as held for sale or is liquidated.

See Note 6 to the Financial Statements for income tax disclosures.

The provision for the Registrants' deferred income taxes related to regulatory assets and liabilities is based upon the ratemaking principles reflected in rates established by relevant regulators. The difference in the provision for deferred income taxes for regulatory assets and liabilities and the amount that otherwise would be recorded under GAAP is deferred and included on the Balance Sheets in noncurrent "Regulatory assets" or "Regulatory liabilities."

(PPL Electric, LG&E and KU)

The income tax provision for PPL Electric, LG&E and KU is calculated in accordance with an intercompany tax sharing agreement, which provides that taxable income be calculated as if PPL Electric, LG&E, KU and any domestic subsidiaries each filed a separate return. Tax benefits are not shared between companies. The entity that generates a tax benefit is the entity that is entitled to the tax benefit. The effect of PPL filing a consolidated tax return is taken into account in the settlement of current taxes and the recognition of deferred taxes.

At December 31, the following intercompany tax receivables (payables) were recorded:

			2021						2020
PPL Electric			$	(4)					$	(9)
LG&E			4						(1)
KU			1						(5)

Taxes, Other Than Income (All Registrants)

The Registrants present sales taxes in "Other current liabilities" on the Balance Sheets. These taxes are not reflected on the Statements of Income. See Note 6 for details of taxes included in "Taxes, other than income" on the Statements of Income.

Other

(All Registrants)

Leases

The Registrants evaluate whether arrangements entered into contain leases for accounting purposes. See Note 10 for additional information.

Fuel, Materials and Supplies

Fuel, natural gas stored underground and materials and supplies are valued using the average cost method. Fuel costs for electricity generation are charged to expense as used. For LG&E, natural gas supply costs are charged to expense as delivered to the distribution system. See Note 7 for further discussion of the fuel adjustment clauses and gas supply clause.

"Fuel, materials and supplies" on the Balance Sheets consisted of the following at December 31:

			2021
			PPL						PPL Electric						LG&E						KU
Fuel			$	90					$	—					$	32					$	58
Natural gas stored underground			54						—						54						—
Materials and supplies			178						61						51						66
Total			$	322					$	61					$	137					$	124

			2020
			PPL						PPL Electric						LG&E						KU
Fuel			$	95					$	—					$	38					$	57
Natural gas stored underground			30						—						30						—
Materials and supplies			177						59						51						66
Total			$	302					$	59					$	119					$	123

Guarantees

Generally, the initial measurement of a guarantee liability is the fair value of the guarantee at its inception. However, there are certain guarantees excluded from the scope of accounting guidance and other guarantees that are not subject to the initial recognition and measurement provisions of accounting guidance that only require disclosure. See Note 14 for further discussion of recorded and unrecorded guarantees.

(PPL)

Treasury Stock

PPL generally restores all shares of common stock acquired to authorized but unissued shares of common stock upon or soon after acquisition. In connection with its recent share repurchases in the third and fourth quarter of 2021, PPL has not yet returned these shares to authorized but unissued shares, as it is determining if it will retain some portion of these shares as Treasury stock to use in connection with certain compensation plans.

Foreign Currency Translation and Transactions

Adjustments resulting from foreign currency translation are recorded in AOCI and reclassified to income when the related foreign entity is sold. See Note 21 for additional information.

2. Segment and Related Information

(PPL)

PPL is organized into two segments: Kentucky Regulated and Pennsylvania Regulated. PPL's segments are segmented by geographic location.

The Kentucky Regulated segment consists primarily of LG&E's and KU's regulated electricity generation, transmission and distribution operations, as well as LG&E's regulated distribution and sale of natural gas.

The Pennsylvania Regulated segment includes the regulated electricity transmission and distribution operations of PPL Electric.

"Corporate and Other" primarily includes financing costs incurred at the corporate level that have not been allocated or assigned to the segments, certain other unallocated costs, as well as the financial results of Safari Energy, which is presented to reconcile segment information to PPL's consolidated results. For the periods ended December 31, 2020 and 2019, these amounts have been adjusted for certain costs that were previously included in the U.K. Regulated segment.

On March 17, 2021, PPL WPD Limited entered into a share purchase agreement to sell PPL's U.K. utility business, which substantially represented PPL's U.K. Regulated segment. As a result, PPL determined segment information for the U.K. Regulated segment would no longer be provided beginning with the March 31, 2021 Form 10-Q. The sale of the U.K. utility business was completed on June 14, 2021. See Note 9 for additional information.

Income Statement data for the segments and reconciliation to PPL's consolidated results for the years ended December 31 are as follows:

			2021						2020						2019
Operating Revenues from external customers (a)
Kentucky Regulated			$	3,348					$	3,106					$	3,206
Pennsylvania Regulated			2,402						2,330						2,358
Corporate and Other			33						38						38
Total			$	5,783					$	5,474					$	5,602

			2021						2020						2019
Depreciation
Kentucky Regulated			$	647					$	606					$	547
Pennsylvania Regulated			424						403						386
Corporate and Other			11						13						16
Total			$	1,082					$	1,022					$	949
Amortization (b)
Kentucky Regulated			$	15					$	19					$	27
Pennsylvania Regulated			19						26						24
Corporate and Other			5						13						7
Total			$	39					$	58					$	58
Interest Expense (c)
Kentucky Regulated			$	249					$	300					$	298
Pennsylvania Regulated			162						172						169
Corporate and Other (d)			507						162						154
Total			$	918					$	634					$	621
Income Before Income Taxes
Kentucky Regulated			$	562					$	516					$	530
Pennsylvania Regulated			599						664						607
Corporate and Other			(640)						(226)						(218)
Total			$	521					$	954					$	919
Income Taxes (e)
Kentucky Regulated			$	94					$	98					$	94
Pennsylvania Regulated			154						167						149
Corporate and Other			255						49						(60)
Total			$	503					$	314					$	183
Deferred income taxes and investment tax credits (f)
Kentucky Regulated			$	272					$	64					$	82
Pennsylvania Regulated			79						82						90
Corporate and Other			(264)						23						(3)
Total			$	87					$	169					$	169
Net Income
Kentucky Regulated			$	468					$	418					$	436
Pennsylvania Regulated			445						497						458
Corporate and Other (d)			(895)						(275)						(158)
Discontinued Operations			(1,498)						829						1,010
Total			$	(1,480)					$	1,469					$	1,746

(a)See Note 1 and Note 3 for additional information on Operating Revenues.

(b)Represents non-cash expense items that include amortization of operating lease right-of-use assets, regulatory assets and liabilities, debt discounts and premiums and debt issuance costs.

(c)Beginning in 2021, corporate level financing costs are no longer allocated to the reportable segments and are being reported in Corporate and Other. For the years ended December 31, 2020 and 2019, corporate level financing costs of $32 million, net of $8 million of income taxes, and $32 million, net of $9 million of income taxes, were allocated to the Kentucky Regulated segment. For the years ended December 31, 2020 and 2019, an immaterial amount of financing costs were allocated to the Pennsylvania Regulated segment.

(d)2021 includes losses from the extinguishment of PPL Capital Funding debt. See Note 8 for additional information.

(e)Represents both current and deferred income taxes, including investment tax credits.

(f)Represents a non-cash expense item that is also included in "Income Taxes."

Cash Flow data for the segments and reconciliation to PPL's consolidated results for the years ended December 31 are as follows:

			2021						2020						2019
Expenditures for long-lived assets
Kentucky Regulated			$	1,026					$	966					$	1,097
Pennsylvania Regulated			904						1,154						1,121
Corporate and Other			49						158						32
Total			$	1,979					$	2,278					$	2,250

The following provides Balance Sheet data for the segments and reconciliation to PPL's consolidated results as of:

			As of December 31,
			2021						2020
Total Assets
Kentucky Regulated			$	16,360					$	15,943
Pennsylvania Regulated			13,336						12,347
Corporate and Other (a)			3,527						843
Assets held for sale (b)			—						18,983
Total			$	33,223					$	48,116

(a)Primarily consists of unallocated items, including cash, PP&E, goodwill, the elimination of inter-segment transactions as well as the assets of Safari Energy.

(b)See Note 9 for additional information.

(PPL Electric, LG&E and KU)

PPL Electric has two operating segments that are aggregated into a single reportable segment. LG&E and KU are individually single operating and reportable segments.

3. Revenue from Contracts with Customers

(All Registrants)

The following is a description of the principal activities from which the Registrants and PPL’s segments generate their revenues.

(PPL and PPL Electric)

Pennsylvania Regulated Segment Revenue

The Pennsylvania Regulated Segment generates substantially all of its revenues from contracts with customers from PPL Electric’s tariff-based distribution and transmission of electricity.

Distribution Revenue

PPL Electric provides distribution services to residential, commercial, industrial, municipal and governmental end users of energy. PPL Electric satisfies its performance obligation to its distribution customers and revenue is recognized over-time as electricity is delivered and simultaneously consumed by the customer. The amount of revenue recognized is the volume of electricity delivered during the period multiplied by the price per tariff, plus a monthly fixed charge. This method of recognition fairly presents PPL Electric's transfer of electric service to the customer as the calculation is based on actual volumes, and the price per tariff and the monthly fixed charge are set by the PUC. Customers are typically billed monthly and outstanding amounts are normally due within 21 days of the date of the bill.

Distribution customers are "at will" customers of PPL Electric with no term contract and no minimum purchase commitment. Performance obligations are limited to the service requested and received to date. Accordingly, there is no unsatisfied performance obligation associated with PPL Electric’s retail account contracts.

Transmission Revenue

PPL Electric generates transmission revenues from a FERC-approved PJM Open Access Transmission Tariff. An annual revenue requirement for PPL Electric to provide transmission services is calculated using a formula-based rate. This revenue requirement is converted into a daily rate (dollars per day). PPL Electric satisfies its performance obligation to provide transmission services and revenue is recognized over-time as transmission services are provided and consumed. This method of recognition fairly presents PPL Electric's transfer of transmission services as the daily rate is set by a FERC approved formula-based rate. PJM remits payment on a weekly basis.

PPL Electric's agreement to provide transmission services contains no minimum purchase commitment. The performance obligation is limited to the service requested and received to date. Accordingly, PPL Electric has no unsatisfied performance obligations.

(PPL, LG&E and KU)

Kentucky Regulated Segment Revenue

The Kentucky Regulated Segment generates substantially all of its revenues from contracts with customers from LG&E's and KU's regulated tariff-based sales of electricity and LG&E's regulated tariff-based sales of natural gas.

LG&E and KU are engaged in the generation, transmission, distribution and sale of electricity in Kentucky and, in KU's case, Virginia. LG&E also engages in the distribution and sale of natural gas in Kentucky. Revenue from these activities is generated from tariffs approved by applicable regulatory authorities including the FERC, KPSC and VSCC. LG&E and KU satisfy their performance obligations upon LG&E's and KU's delivery of electricity and LG&E's delivery of natural gas to customers. This revenue is recognized over-time as the customer simultaneously receives and consumes the benefits provided by LG&E and KU. The amount of revenue recognized is the billed volume of electricity or natural gas delivered multiplied by a tariff rate per-unit of energy, plus any applicable fixed charges or additional regulatory mechanisms. Customers are billed monthly and outstanding amounts are typically due within 22 days of the date of the bill. Additionally, unbilled revenues are recognized as a result of customers' bills rendered throughout the month, rather than bills being rendered at the end of the month. Unbilled revenues for a month are calculated by multiplying an estimate of unbilled kWh or Mcf delivered but not yet billed by the estimated average cents per kWh or Mcf. Any difference between estimated and actual revenues is adjusted the following month when the previous unbilled estimate is reversed and actual billings occur. This method of recognition fairly presents LG&E's and KU's transfer of electricity and LG&E's transfer of natural gas to the customer as the amount recognized is based on actual and estimated volumes delivered and the tariff rate per-unit of energy and any applicable fixed charges or regulatory mechanisms as set by the respective regulatory body.

LG&E's and KU's customers generally have no minimum purchase commitment. Performance obligations are limited to the service requested and received to date. Accordingly, there is no unsatisfied performance obligation associated with these customers.

(All Registrants)

The following table reconciles "Operating Revenues" included in each Registrant's Statement of Income with revenues generated from contracts with customers for the years ended December 31:

			2021
			PPL						PPL Electric						LG&E						KU
Operating Revenues (a)			$	5,783					$	2,402					$	1,569					$	1,826
Revenues derived from:
Alternative revenue programs (b)			77						83						(3)						(3)
Other (c)			(22)						(3)						(8)						(9)
Revenues from Contracts with Customers			$	5,838					$	2,482					$	1,558					$	1,814

			2020
			PPL						PPL Electric						LG&E						KU
Operating Revenues (a)			$	5,474					$	2,331					$	1,456					$	1,690
Revenues derived from:
Alternative revenue programs (b)			(24)						(12)						(8)						(4)
Other (c)			(21)						(3)						(7)						(10)
Revenues from Contracts with Customers			$	5,429					$	2,316					$	1,441					$	1,676

			2019
			PPL						PPL Electric						LG&E						KU
Operating Revenues (a)			$	5,602					$	2,358					$	1,500					$	1,740
Revenues derived from:
Alternative revenue programs (b)			(30)						(6)						(10)						(14)
Other (c)			(31)						(10)						(9)						(12)
Revenues from Contracts with Customers			$	5,541					$	2,342					$	1,481					$	1,714

(a)Amounts for PPL Electric represent revenues from external customers reported by the Pennsylvania Regulated segment and amounts for LG&E and KU, net of intercompany power sales and transmission revenues, represent revenues from external customers reported by the Kentucky Regulated segment. See Note 2 for additional information.

(b)Alternative revenue programs include the transmission formula rate for PPL Electric, the ECR and DSM programs for LG&E and KU, the GLT and GSC programs for LG&E, and the generation formula rate for KU. For PPL Electric, revenue in 2021 was reduced by $78 million for a reduction in the transmission formula rate return on equity. See Note 7 for additional information. This line item shows the over/under collection of these rate mechanisms with over-collections of revenue shown as positive amounts in the table above and under-collections shown as negative amounts.

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

The following table shows revenues from contracts with customers disaggregated by customer class for the years ended December 31:

			2021
			Residential						Commercial						Industrial						Other (a)						Wholesale - municipality						Wholesale - other (b)						Transmission						Revenues from Contracts with Customers
PPL
PA Regulated			$	1,299					$	350					$	53					$	50					$	—					$	—					$	730					$	2,482
KY Regulated			1,416						928						586						305						24						66						—						3,325
Corp and Other			—						—						—						31						—						—						—						31
Total PPL			$	2,715					$	1,278					$	639					$	386					$	24					$	66					$	730					$	5,838
PPL Electric			$	1,299					$	350					$	53					$	50					$	—					$	—					$	730					$	2,482
LG&E			$	711					$	473					$	180					$	145					$	—					$	49					$	—					$	1,558
KU			$	705					$	455					$	406					$	160					$	24					$	64					$	—					$	1,814

			2020
			Residential						Commercial						Industrial						Other (a)						Wholesale - municipality						Wholesale - other (b)						Transmission						Revenues from Contracts with Customers
PPL
PA Regulated			$	1,238					$	314					$	44					$	50					$	—					$	—					$	670					$	2,316
KY Regulated			1,347						871						538						261						20						40						—						3,077
Corp and Other			—						—						—						36						—						—						—						36
Total PPL			$	2,585					$	1,185					$	582					$	347					$	20					$	40					$	670					$	5,429
PPL Electric			$	1,238					$	314					$	44					$	50					$	—					$	—					$	670					$	2,316
LG&E			$	676					$	444					$	173					$	114					$	—					$	34					$	—					$	1,441
KU			$	671					$	427					$	365					$	147					$	20					$	46					$	—					$	1,676

			2019
			Residential						Commercial						Industrial						Other (a)						Wholesale - municipality						Wholesale - other (b)						Transmission						Revenues from Contracts with Customers
PPL
PA Regulated			$	1,288					$	349					$	59					$	52					$	—					$	—					$	594					$	2,342
KY Regulated			1,322						908						562						277						43						49						—						3,161
Corp and Other			—						—						—						38						—						—						—						38
Total PPL			$	2,610					$	1,257					$	621					$	367					$	43					$	49					$	594					$	5,541
PPL Electric			$	1,288					$	349					$	59					$	52					$	—					$	—					$	594					$	2,342
LG&E			$	668					$	466					$	180					$	121					$	—					$	46					$	—					$	1,481
KU			$	654					$	442					$	382					$	156					$	43					$	37					$	—					$	1,714

(a)Primarily includes revenues from pole attachments, street lighting, other public authorities and other non-core businesses.

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

As discussed in Note 2, PPL segments its business by geographic location. Revenues from external customers for each segment/geographic location are reconciled to revenues from contracts with customers in the footnotes to the tables above. PPL Electric's revenues from contracts with customers are further disaggregated by distribution and transmission as indicated in the above tables.

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

The following table shows the accounts receivable and unbilled revenues balances that were impaired for the year ended December 31:

			2021						2020						2019
PPL			$	22					$	25					$	27
PPL Electric			10						17						21
LG&E			4						4						2
KU			8						4						4

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

			PPL						PPL Electric						LG&E						KU
Contract liabilities as of December 31, 2021			$	42					$	25					$	6					$	6
Contract liabilities as of December 31, 2020			40						23						5						6
Revenue recognized during the year ended December 31, 2021 that was included in the contract liability balance at December 31, 2020			24						11						5						6
Contract liabilities as of December 31, 2020			$	40					$	23					$	5					$	6
Contract liabilities as of December 31, 2019			37						21						5						4
Revenue recognized during the year ended December 31, 2020 that was included in the contract liability balance at December 31, 2019			22						9						5						4
Contract liabilities as of December 31, 2019			$	37					$	21					$	5					$	4
Contract liabilities as of December 31, 2018			40						23						5						4
Revenue recognized during the year ended December 31, 2019 that was included in the contract liability balance at December 31, 2018			25						11						5						4

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

At December 31, 2021, PPL had $46 million of performance obligations attributable to Corporate and Other that have not been satisfied. Of this amount, PPL expects to recognize approximately $41 million within the next 12 months.

4. Preferred Securities

(PPL)

PPL is authorized to issue up to 10 million shares of preferred stock. No PPL preferred stock was issued or outstanding in 2021, 2020 or 2019.

(PPL Electric)

PPL Electric is authorized to issue up to 20,629,936 shares of preferred stock. No PPL Electric preferred stock was issued or outstanding in 2021, 2020 or 2019.

(LG&E)

LG&E is authorized to issue up to 1,720,000 shares of preferred stock at a $25 par value and 6,750,000 shares of preferred stock without par value. LG&E had no preferred stock issued or outstanding in 2021, 2020 or 2019.

(KU)

KU is authorized to issue up to 5,300,000 shares of preferred stock and 2,000,000 shares of preference stock without par value. KU had no preferred or preference stock issued or outstanding in 2021, 2020 or 2019.

5. Earnings Per Share

(PPL)

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

These securities also included the remaining shares of PPL common stock forward sale agreements, which were settled in 2019. The forward sale agreements were dilutive under the Treasury Stock Method to the extent the average stock price of PPL's common shares exceeded the forward sale price prescribed in the agreements.

Reconciliations of the amounts of income and shares of PPL common stock (in thousands) for the periods ended December 31, used in the EPS calculation are:

			2021						2020						2019
Income (Numerator)
Income from continuing operations after income taxes			$	18					$	640					$	736
Less amounts allocated to participating securities			—						1						1
Income from continuing operations after income taxes available to PPL common shareowners - Basic and Diluted			$	18					$	639					$	735
Income (loss) from discontinued operations (net of income taxes) available to PPL common shareowners - Basic and Diluted			$	(1,498)					$	829					$	1,010
Net income (loss) attributable to PPL			$	(1,480)					$	1,469					1,746
Less amounts allocated to participating securities			—						1						1
Net income (loss) available to PPL common shareowners - Basic and Diluted			$	(1,480)					$	1,468					$	1,745
Shares of Common Stock (Denominator)
Weighted-average shares - Basic EPS			762,902						768,590						728,512
Add incremental non-participating securities:
Add: Dilutive share-based payment awards (a)			1,917						794						1,101
Add: Forward sale agreements			—						—						7,141
Weighted-average shares - Diluted EPS			764,819						769,384						736,754
Basic EPS
Available to PPL common shareowners:
Income from continuing operations after income taxes			$	0.03					$	0.83					$	1.01
Income (loss) from discontinued operations (net of income taxes)			(1.96)						1.08						1.38
Net Income (Loss) available to PPL common shareowners			$	(1.93)					$	1.91					$	2.39
Diluted EPS
Available to PPL common shareowners:
Income from continuing operations after income taxes			$	0.03					$	0.83					$	1.00
Income (loss) from discontinued operations (net of income taxes)			(1.96)						1.08						1.37
Net Income (Loss) available to PPL common shareowners			$	(1.93)					$	1.91					$	2.37

(a)The Treasury Stock Method was applied to non-participating share-based payment awards.

For the years ended December 31, PPL issued common stock related to stock-based compensation plans and DRIP as follows (in thousands):

			2021						2020
Stock-based compensation plans (a)			983						731
DRIP			—						943

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

For the years ended December 31, the following shares (in thousands) were excluded from the computations of diluted EPS because the effect would have been antidilutive:

			2021						2020						2019
Stock-based compensation awards			1,783						452						8

6. Income and Other Taxes

(PPL)

"Income (Loss) from Continuing Operations Before Income Taxes" is from domestic operations.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for accounting purposes and their basis for income tax purposes and the tax effects of net operating loss and tax credit carryforwards. The provision for PPL's deferred income taxes for regulated assets and liabilities is based upon the ratemaking principles of the applicable jurisdiction. See Notes 1 and 7 for additional information.

Net deferred tax assets have been recognized based on management's estimates of future taxable income.

Significant components of PPL's deferred income tax assets and liabilities were as follows:

			2021						2020
Deferred Tax Assets
Deferred investment tax credits			$	30					$	30
Regulatory liabilities			94						68
Income taxes due to customers			422						444
Accrued pension and postretirement costs			75						106
Federal loss carryforwards (a)			—						234
State loss carryforwards			483						448
Federal and state tax credit carryforwards (a)			15						401
Leases			67						68
Contributions in aid of construction			120						115
Other			84						68
Valuation allowances			(462)						(536)
Total deferred tax assets			928						1,446
Deferred Tax Liabilities
Plant - net			3,812						3,700
Regulatory assets			180						195
Other			75						70
Total deferred tax liabilities			4,067						3,965
Net deferred tax liability			$	3,139					$	2,519

(a)PPL utilized federal net operating losses of $1,115 million and tax credit carryforwards of $272 million in June 2021 as a result of the completion of the sale of the U.K. utility business on June 14, 2021. The related deferred tax assets decreased by approximately $506 million, with a corresponding reduction in current income taxes.

State deferred taxes are determined by entity and by jurisdiction. As a result, $12 million and $17 million of net deferred tax assets are shown as "Other noncurrent assets" on the Balance Sheets for 2021 and 2020.

At December 31, 2021, PPL had the following loss and tax credit carryforwards, related deferred tax assets and valuation allowances recorded against the deferred tax assets:

			Gross						Deferred Tax Asset						Valuation Allowance						Expiration
Loss and other carryforwards
State net operating losses			$	6,468					$	483					$	(459)					2022-2041

Credit carryforwards
State recycling credit									14						—						2028
State - other									1						—						Indefinite

Valuation allowances have been established for the amount that, more likely than not, will not be realized. The changes in deferred tax valuation allowances were as follows:

									Additions
			Balance at Beginning of Period						Charged to Income						Charged to Other Accounts						Deductions						Balance at End of Period
2021			$	536					$	48		(a)			$	—					$	122		(b)			$	462
2020			514						26						—						4						536
2019			495						24						—						5						514

(a)In 2021, PPL recorded a $31 million increase in a valuation allowance on a state net operating loss carryforward in connection with the loss on extinguishment associated with a tender offer to purchase and retire PPL Capital Funding's outstanding Senior Notes. See Note 8 for additional information on the tender offer.

(b)In light of the disposition of PPL's U.K. utility business, there was a decrease in the valuation allowance of approximately $113 million.

A U.S. based company with foreign subsidiaries may be required to record deferred taxes associated with the differences in the outside book-tax basis of those subsidiaries. The primary component of such outside basis differences is ordinarily accumulated unremitted earnings. In anticipation of the WPD sale, indefinite reinvestment of accumulated unremitted earnings of WPD was no longer relevant and, in the first quarter of 2021, PPL recorded a deferred tax liability reflecting the expected tax cost associated with the realization of the outside book-tax basis difference in the investment in WPD. In the second quarter of 2021, following completion of the WPD sale, that deferred tax was recorded to current tax expense.

Details of the components of income tax expense, a reconciliation of federal income taxes derived from statutory tax rates applied to "Income Before Income Taxes" to income taxes for reporting purposes, and details of "Taxes, other than income" were as follows:

			2021						2020						2019
Income Tax Expense (Benefit)
Current - Federal			$	(1)					$	(8)					$	(10)
Current - State			36						24						19
Current - Foreign			(1)						(2)						—
Total Current Expense (Benefit)			34						14						9
Deferred - Federal			28						135						141
Deferred - State			105						94						76
Deferred - Foreign (a)			383						101						(14)
Total Deferred Expense (Benefit), excluding operating loss carryforwards			516						330						203
Amortization of investment tax credit			(3)						(3)						(3)
Tax expense (benefit) of operating loss carryforwards
Deferred - Federal			12						6						7
Deferred - State			(56)						(33)						(33)
Total Tax Expense (Benefit) of Operating Loss Carryforwards			(44)						(27)						(26)
Total income tax expense (benefit)			$	503					$	314					$	183
Total income tax expense (benefit) - Federal			$	36					$	130					$	135
Total income tax expense (benefit) - State			85						85						62
Total income tax expense (benefit) - Foreign			382						99						(14)
Total income tax expense (benefit)			$	503					$	314					$	183

(a)In 2021, the U.K. Finance Act 2021 increased the U.K. corporation tax rate from 19% to 25%, effective April 1, 2023. The primary impact of the corporation tax rate increase was an increase in deferred tax liabilities of the U.K. utility business, which was sold on June 14, 2021, and a corresponding deferred tax expense of $383 million, which was recognized in continuing operations in the second quarter of 2021.

In 2020, the U.K. Finance Act 2020 cancelled the tax rate reduction from 19% to 17%. The primary impact of the cancellation of the corporation tax rate reduction was an increase in deferred tax liabilities and a corresponding deferred tax expense of $106 million.

In the table above, the following income tax expense (benefit) are excluded from income taxes:

			2021						2020						2019
Discontinued operations - PPL U.K. utility business			$	759					$	188					$	226
Reclassification from AOCI due to sale of UK utility business			660						—						—
Other comprehensive income			150						(19)						(93)
Total			$	1,569					$	169					$	133

			2021						2020						2019
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%			$	109					$	200					$	193
State income taxes, net of federal income tax benefit			23						48						45
Valuation allowance adjustments (a)			48						24						22
Federal and state income tax return adjustments			(3)						(9)						1
Impact of the U.K. Finance Acts on deferred tax balances (b)			383						101						(14)
Depreciation and other items not normalized			(5)						(5)						(10)
Amortization of excess deferred federal and state income taxes			(54)						(43)						(40)
Non-deductible officer's salary			6						7						4
Kentucky recycling credit, net of federal income tax expense (c)			—						—						(18)
Other			(4)						(9)						—
Total increase (decrease)			394						114						(10)
Total income tax expense (benefit)			$	503					$	314					$	183
Effective income tax rate			96.5%						32.9%						19.9%

(a)In 2021, PPL recorded a $31 million state deferred tax benefit on a net operating loss and an offsetting valuation allowance in connection with the loss on extinguishment associated with a tender offer to purchase and retire PPL Capital Funding's outstanding Senior Notes. See Note 8 for additional information on the tender offer.

In 2021, 2020, and 2019, PPL recorded deferred income tax expense of $15 million, $24 million and $25 million for valuation allowances primarily related to increased Pennsylvania net operating loss carryforwards expected to be unutilized.

(b)In 2020, the U.K. Finance Act 2020 cancelled the tax rate reduction to 17%, thereby maintaining the corporation tax rate at 19% for financial years 2020 and 2021. The primary impact of the cancellation of the corporation tax rate reduction was an increase in deferred tax liabilities and a corresponding deferred tax expense of $106 million.

In 2021, the U.K. Finance Act 2021 increased the U.K. corporation tax rate from 19% to 25%, effective April 1, 2023. The primary impact of the corporation tax rate increase was an increase in deferred tax liabilities of the U.K. utility business, which was sold on June 14, 2021, and a corresponding deferred tax expense of $383 million, which was recognized in continuing operations in the second quarter of 2021.

(c)In 2019, LG&E recorded a deferred income tax benefit associated with two projects placed into service that prepare a generation waste material for reuse and, as a result, qualify for a Kentucky recycling credit. The applicable credit provides tax benefits for a portion of the equipment costs for major recycling projects in Kentucky.

			2021						2020						2019
Taxes, other than income
State gross receipts			$	113					$	100					$	107
Domestic - other			94						80						79
Total			$	207					$	180					$	186

(PPL Electric)

The provision for PPL Electric's deferred income taxes for regulated assets and liabilities is based upon the ratemaking principles reflected in rates established by the PUC and the FERC. The difference in the provision for deferred income taxes for regulated assets and liabilities and the amount that otherwise would be recorded under GAAP is deferred and included in "Regulatory assets" or "Regulatory liabilities" on the Balance Sheets.

Significant components of PPL Electric's deferred income tax assets and liabilities were as follows:

			2021						2020
Deferred Tax Assets
Accrued pension and postretirement costs			$	14					$	25
Contributions in aid of construction			95						91
Regulatory liabilities			52						24
Income taxes due to customers			154						162
Federal loss carryforwards (a)			—						52
Other			21						29
Total deferred tax assets			336						383
Deferred Tax Liabilities
Electric utility plant - net			1,891						1,826
Regulatory assets			74						86
Other			39						30
Total deferred tax liabilities			2,004						1,942
Net deferred tax liability			$	1,668					$	1,559

(a)PPL Electric utilized their remaining federal net operating losses and recorded the related deferred tax assets to current expense in June 2021 as a result of the completion of the sale of the U.K. utility business on June 14, 2021.

PPL Electric expects to have adequate levels of taxable income to realize its recorded deferred income tax assets.

Details of the components of income tax expense, a reconciliation of federal income taxes derived from statutory tax rates applied to "Income Before Income Taxes" to income taxes for reporting purposes, and details of "Taxes, other than income" were as follows:

			2021						2020						2019
Income Tax Expense (Benefit)
Current - Federal			$	40					$	61					$	44
Current - State			35						23						15
Total Current Expense (Benefit)			75						84						59
Deferred - Federal			59						45						51
Deferred - State			20						38						39
Total Deferred Expense (Benefit), excluding operating loss carryforwards			79						83						90
Total income tax expense (benefit)			$	154					$	167					$	149
Total income tax expense (benefit) - Federal			$	99					$	106					$	95
Total income tax expense (benefit) - State			55						61						54
Total income tax expense (benefit)			$	154					$	167					$	149

			2021						2020						2019
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%			$	126					$	139					$	127
Increase (decrease) due to:
State income taxes, net of federal income tax benefit			46						52						47
Federal and state income tax return adjustments			—						(4)						1
Depreciation and other items not normalized			(5)						(5)						(10)
Amortization of excess deferred federal income taxes (a)			(14)						(16)						(18)
Other			1						1						2
Total increase (decrease)			28						28						22
Total income tax expense (benefit)			$	154					$	167					$	149
Effective income tax rate			25.7%						25.2%						24.6%

(a)In 2021, 2020 and 2019, PPL Electric recorded lower income tax expense for the amortization of excess deferred taxes that primarily resulted from the U.S. federal corporate income tax rate reduction from 35% to 21% enacted by the TCJA. This amortization represents each year's refund amount, prior to a tax gross-up, to be paid to customers for previously collected deferred taxes at higher income tax rates.

			2021						2020						2019
Taxes, other than income
State gross receipts			$	113					$	100					$	107
Property and other			7						7						5
Total			$	120					$	107					$	112

(LG&E)

The provision for LG&E's deferred income taxes for regulated assets and liabilities is based upon the ratemaking principles reflected in rates established by the KPSC and the FERC. The difference in the provision for deferred income taxes for regulated assets and liabilities and the amount that otherwise would be recorded under GAAP is deferred and included in "Regulatory assets" or "Regulatory liabilities" on the Balance Sheets.

Significant components of LG&E's deferred income tax assets and liabilities were as follows:

			2021						2020
Deferred Tax Assets
Contributions in aid of construction			$	15					$	15
Regulatory liabilities			18						20
Deferred investment tax credits			8						8
Income taxes due to customers			125						132
State tax credit carryforwards			11						12
Lease liabilities			4						5
Valuation allowances			(11)						(12)
Other			11						11
Total deferred tax assets			181						191
Deferred Tax Liabilities
Plant - net			854						833
Regulatory assets			65						66
Lease right-of-use assets			4						4
Other			9						4
Total deferred tax liabilities			932						907
Net deferred tax liability			$	751					$	716

At December 31, 2021 LG&E had $11 million of state credit carryforwards that expire in 2028 and an $11 million valuation allowance related to state credit carryforwards due to insufficient projected Kentucky taxable income.

Details of the components of income tax expense, a reconciliation of federal income taxes derived from statutory tax rates applied to "Income Before Income Taxes" to income taxes for reporting purposes, and details of "Taxes, other than income" were:

			2021						2020						2019
Income Tax Expense (Benefit)
Current - Federal			$	41					$	53					$	4
Current - State			5						7						4
Total Current Expense (Benefit)			46						60						8
Deferred - Federal			1						(4)						46
Deferred - State			8						7						10
Total Deferred Expense (Benefit)			9						3						56
Amortization of investment tax credit - Federal			(1)						(1)						(1)
Total income tax expense (benefit)			$	54					$	62					$	63
Total income tax expense (benefit) - Federal			$	41					$	48					$	49
Total income tax expense (benefit) - State			13						14						14
Total income tax expense (benefit)			$	54					$	62					$	63

			2021						2020						2019
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%			$	64					$	64					$	62
Increase (decrease) due to:
State income taxes, net of federal income tax benefit			12						12						12
Amortization of excess deferred federal and state income taxes			(20)						(11)						(10)
Kentucky recycling credit, net of federal income tax expense (a)			—						—						(14)
Valuation allowance adjustments (a)			—						—						14
Other			(2)						(3)						(1)
Total increase (decrease)			(10)						(2)						1
Total income tax expense (benefit)			$	54					$	62					$	63
Effective income tax rate			17.8%						20.3%						21.4%

(a)In 2019, LG&E recorded a deferred income tax benefit associated with two projects placed into service that prepare a generation waste material for reuse and, as a result, qualify for a Kentucky recycling credit. The applicable credit provides tax benefits for a portion of the equipment costs for major recycling projects in Kentucky. This amount has been reserved due to insufficient Kentucky taxable income projected at LG&E.

			2021						2020						2019
Taxes, other than income
Property and other			$	46					$	40					$	39
Total			$	46					$	40					$	39

(KU)

The provision for KU's deferred income taxes for regulated assets and liabilities is based upon the ratemaking principles reflected in rates established by the KPSC, VSCC and the FERC. The difference in the provision for deferred income taxes for regulated assets and liabilities and the amount that otherwise would be recorded under GAAP is deferred and included in "Regulatory assets" or "Regulatory liabilities" on the Balance Sheets.

Significant components of KU's deferred income tax assets and liabilities were as follows:

			2021						2020
Deferred Tax Assets
Contributions in aid of construction			$	9					$	8
Regulatory liabilities			23						23
Deferred investment tax credits			22						22
Income taxes due to customers			143						150
State tax credit carryforwards			4						5
Lease liabilities			7						8
Valuation allowances			(3)						(4)
Other			4						4
Total deferred tax assets			209						216
Deferred Tax Liabilities
Plant - net			1,012						992
Regulatory assets			41						43
Pension and postretirement costs			13						8
Lease right-of-use assets			6						7
Other			2						1
Total deferred tax liabilities			1,074						1,051
Net deferred tax liability			$	865					$	835

At December 31, 2021 KU had $4 million of state credit carryforwards of which $3 million will expire in 2028 and $1 million that has an indefinite carryforward period. At December 31, 2021 KU had a $3 million valuation allowance related to state credit carryforwards due to insufficient projected Kentucky taxable income.

Details of the components of income tax expense, a reconciliation of federal income taxes derived from statutory tax rates applied to "Income Before Income Taxes" to income taxes for reporting purposes, and details of "Taxes, other than income" were:

			2021						2020						2019
Income Tax Expense (Benefit)
Current - Federal			$	58					$	40					$	35
Current - State			8						3						5
Total Current Expense (Benefit)			66						43						40
Deferred - Federal			(4)						11						28
Deferred - State			7						11						13
Total Deferred Expense (Benefit)			3						22						41
Amortization of investment tax credit - Federal			(2)						(2)						(2)
Total income tax expense (benefit)			$	67					$	63					$	79
Total income tax expense (benefit) - Federal			$	52					$	49					$	61
Total income tax expense (benefit) - State			15						14						18
Total income tax expense (benefit)			$	67					$	63					$	79

			2021						2020						2019
Reconciliation of Income Tax Expense (Benefit)
Federal income tax on Income Before Income Taxes at statutory tax rate - 21%			$	76					$	72					$	78
Increase (decrease) due to:
State income taxes, net of federal income tax benefit			14						14						15
Amortization of investment tax credit			(2)						(2)						(2)
Amortization of excess deferred federal and state income taxes			(20)						(17)						(13)
Kentucky recycling credit, net of federal income tax expense (a)			—						—						(4)
Valuation allowance adjustments (a)			—						—						4
Other			(1)						(4)						1
Total increase (decrease)			(9)						(9)						1
Total income tax expense (benefit)			$	67					$	63					$	79
Effective income tax rate			18.4%						18.4%						21.2%

(a)In 2019, KU recorded a deferred income tax benefit associated with a project placed into service that prepare a generation waste material for reuse and, as a result, qualify for a Kentucky recycling credit. The applicable credit provides tax benefits for a portion of the equipment costs for major recycling projects in Kentucky. This amount has been reserved due to insufficient Kentucky taxable income projected at KU.

			2021						2020						2019
Taxes, other than income
Property and other			$	41					$	37					$	35
Total			$	41					$	37					$	35

(All Registrants)

Unrecognized Tax Benefits

PPL or its subsidiaries file tax returns in four major tax jurisdictions. The income tax provisions for PPL Electric, LG&E and KU are calculated in accordance with an intercompany tax sharing agreement, which provides that taxable income be calculated as if each domestic subsidiary filed a separate consolidated return. PPL Electric or its subsidiaries indirectly or directly file tax returns in two major tax jurisdictions, and LG&E and KU indirectly or directly file tax returns in two major tax jurisdictions. With few exceptions, at December 31, 2021, these jurisdictions, as well as the tax years that are no longer subject to examination, were as follows.

			PPL						PPL Electric						LG&E						KU
U.S. (federal)			2017 and prior						2017 and prior						2017 and prior						2017 and prior
Pennsylvania (state)			2017 and prior						2017 and prior
Kentucky (state)			2014 and prior												2014 and prior						2014 and prior
U.K. (foreign)			2019 and prior

7. Utility Rate Regulation

Regulatory Assets and Liabilities

(All Registrants)

PPL, PPL Electric, LG&E and KU reflect the effects of regulatory actions in the financial statements for their cost-based rate-regulated utility operations. Regulatory assets and liabilities are classified as current if, upon initial recognition, the entire amount related to an item will be recovered or refunded within a year of the balance sheet date.

(PPL, LG&E and KU)

LG&E is subject to the jurisdiction of the KPSC and FERC, and KU is subject to the jurisdiction of the KPSC, FERC and VSCC.

LG&E's and KU's Kentucky base rates are calculated based on recovery of costs as well as a return on capitalization (common equity, long-term debt and short-term debt) including adjustments for certain net investments and costs recovered separately through other means. As such, LG&E and KU generally earn a return on regulatory assets.

(PPL and KU)

KU's Virginia base rates are calculated based on recovery of costs as well as a return on rate base (net utility plant plus working capital less accumulated deferred income taxes and miscellaneous deductions). As all regulatory assets and liabilities, except for regulatory assets and liabilities related to the levelized fuel factor, accumulated deferred income taxes, pension and postretirement benefits, and AROs related to certain CCR impoundments, are excluded from the return on rate base utilized in the calculation of Virginia base rates, no return is earned on the related assets.

KU's rates to municipal customers for wholesale power requirements are calculated based on annual updates to a formula rate that utilizes a return on rate base (net utility plant plus working capital less accumulated deferred income taxes and miscellaneous deductions). As all regulatory assets and liabilities, except accumulated deferred income taxes, are excluded from the return on rate base utilized in the development of municipal rates, no return is earned on the related assets.

(PPL and PPL Electric)

PPL Electric's distribution base rates are calculated based on recovery of costs as well as a return on distribution rate base (net utility plant plus a working capital allowance less plant-related deferred taxes and other miscellaneous additions and deductions). PPL Electric's transmission revenues are billed in accordance with a FERC tariff that allows for recovery of transmission costs incurred, a return on transmission-related rate base (net utility plant plus a working capital allowance less plant-related deferred taxes and other miscellaneous additions and deductions) and an automatic annual update. See "Transmission Formula Rate" below for additional information on this tariff. All regulatory assets and liabilities are excluded from distribution and transmission return on investment calculations; therefore, generally no return is earned on PPL Electric's regulatory assets.

(All Registrants)

The following table provides information about the regulatory assets and liabilities of cost-based rate-regulated utility operations at December 31:

			PPL												PPL Electric
			2021						2020						2021						2020
Current Regulatory Assets:
Plant outage costs			$	—					$	46					$	—					$	—
Gas supply clause			21						4						—						—
Smart meter rider			11						17						11						17
Transmission formula rate			6						15						6						15
Storm costs			—						7						—						7
Fuel adjustment clause			11						—						—						—
Other			15						10						5						1
Total current regulatory assets (a)			$	64					$	99					$	22					$	40
Noncurrent Regulatory Assets:
Defined benefit plans			$	523					$	570					$	256					$	290
Plant outage cost			54						—						—						—
Storm costs			11						17						—						—
Unamortized loss on debt			24						30						4						8
Interest rate swaps			18						23						—						—
Terminated interest rate swaps			70						75						—						—
Accumulated cost of removal of utility plant			228						240						228						240
AROs			302						300						—						—
Other			6						7						—						3
Total noncurrent regulatory assets			$	1,236					$	1,262					$	488					$	541

			PPL												PPL Electric
			2021						2020						2021						2020
Current Regulatory Liabilities:
Generation supply charge			$	10					$	21					$	10					$	21
Transmission service charge			21						1						21						1
Universal service rider			17						22						17						22
TCJA customer refund			22						11						22						11
Act 129 compliance rider			10						7						10						7
Transmission formula rate return on equity (b)			73						—						73						—
Economic relief billing rate			27						—						—						—
Other			2						17						—						6
Total current regulatory liabilities			$	182					$	79					$	153					$	68
Noncurrent Regulatory Liabilities:
Accumulated cost of removal of utility plant			$	639					$	653					$	—					$	—
Power purchase agreement - OVEC			35						43						—						—
Net deferred taxes			1,591						1,690						531						560
Defined benefit plans			95						60						28						18
Terminated interest rate swaps			62						66						—						—
Other			—						18						—						—
Total noncurrent regulatory liabilities			$	2,422					$	2,530					$	559					$	578

			LG&E												KU
			2021						2020						2021						2020
Current Regulatory Assets:
Gas supply clause			$	21					$	4					$	—					$	—
Fuel adjustment clause			4						—						7						—
Gas line tracker			3						4						—						—
Generation formula rate			—						—						2						2
Plant outage costs			—						12						—						34
Other			5						3						—						—
Total current regulatory assets			$	33					$	23					$	9					$	36
Noncurrent Regulatory Assets:
Defined benefit plans			$	164					$	174					$	103					$	106
Storm costs			8						11						3						6
Unamortized loss on debt			12						13						8						9
Interest rate swaps			18						23						—						—
Terminated interest rate swaps			41						44						29						31
AROs			75						85						227						215
Plant outage costs			15						—						39						—
Other			4						1						2						3
Total noncurrent regulatory assets			$	337					$	351					$	411					$	370

			LG&E												KU
			2021						2020						2021						2020
Current Regulatory Liabilities:
Economic relief billing credit			$	21					$	—					$	6					$	—
Fuel adjustment clauses			—						—						—						5
Environmental cost recovery			—						—						—						4
Other			—						—						2						2
Total current regulatory liabilities			$	21					$	—					$	8					$	11
Noncurrent Regulatory Liabilities:
Accumulated cost of removal of utility plant			$	262					$	274					$	377					$	379
Power purchase agreement - OVEC			24						30						11						13
Net deferred taxes			491						528						569						602
Defined benefit plans			10						—						57						42
Terminated interest rate swaps			31						33						31						33
Other			—						17						—						1
Total noncurrent regulatory liabilities			$	818					$	882					$	1,045					$	1,070

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

(b)See “Regulatory Matters - Federal Matters - PPL Electric Transmission Formula Rate Return on Equity” below for additional information.

Following is an overview of selected regulatory assets and liabilities detailed in the preceding tables. Specific developments with respect to certain of these regulatory assets and liabilities are discussed in "Regulatory Matters."

Defined Benefit Plans

(All Registrants)

Defined benefit plan regulatory assets and liabilities represent prior service cost and net actuarial gains and losses that will be recovered in defined benefit plans expense through future base rates based upon established regulatory practices and, generally, are amortized over the average remaining service lives of plan participants. These regulatory assets and liabilities are adjusted at least annually or whenever the funded status of defined benefit plans is remeasured.

(PPL, LG&E and KU)

As a result of previous rate case settlements and orders, the difference between pension cost calculated in accordance with LG&E's and KU's pension accounting policy and pension cost calculated using a 15-year amortization period for actuarial gains

and losses and settlements are recorded as a regulatory asset. As of December 31, 2021, the balances were $98 million for PPL, $54 million for LG&E and $44 million for KU. As of December 31, 2020, the balances were $79 million for PPL, $44 million for LG&E and $35 million for KU.

(All Registrants)

Storm Costs

PPL Electric, LG&E and KU have the ability to request from the PUC, KPSC and VSCC, as applicable, the authority to treat expenses related to specific extraordinary storms as a regulatory asset and defer such costs for regulatory accounting and reporting purposes. Once such authority is granted, LG&E and KU can request recovery of those expenses in a base rate case and begin amortizing the costs when recovery starts. PPL Electric can recover qualifying expenses caused by major storm events, as defined in its retail tariff, over three years through the Storm Damage Expense Rider commencing in the application year after the storm occurred. Storm costs incurred in PPL Electric's territory from a March 2018 storm were amortized through 2021. LG&E's and KU's regulatory assets for storm costs are being amortized through various dates ending in 2031.

Unamortized Loss on Debt

Unamortized loss on reacquired debt represents losses on long-term debt refinanced, reacquired or redeemed that have been deferred and will be amortized and recovered over either the original life of the extinguished debt or the life of the replacement debt (in the case of refinancing). Such costs are being amortized through 2029 for PPL Electric, through 2042 for KU, and through 2044 for LG&E.

Accumulated Cost of Removal of Utility Plant

LG&E and KU charge costs of removal through depreciation expense with an offsetting credit to a regulatory liability. The regulatory liability is relieved as costs are incurred.

PPL Electric does not accrue for costs of removal. When costs of removal are incurred, PPL Electric records the costs as a regulatory asset. Such deferral is included in rates and amortized over the subsequent five-year period.

Net Deferred Taxes

Regulatory liabilities associated with net deferred taxes represent the future revenue impact from the adjustment of deferred income taxes required primarily for excess deferred taxes and unamortized investment tax credits, largely a result of the TCJA enacted in 2017.

(PPL and PPL Electric)

Generation Supply Charge (GSC)

The GSC is a cost recovery mechanism that permits PPL Electric to recover costs incurred to provide generation supply to PLR customers who receive basic generation supply service. The recovery includes charges for generation supply, as well as administration of the acquisition process. In addition, the GSC contains a reconciliation mechanism whereby any over- or under-recovery from prior periods is refunded to, or recovered from, customers through the adjustment factor determined for the subsequent rate filing period.

Transmission Service Charge (TSC)

PPL Electric is charged by PJM for transmission service-related costs applicable to its PLR customers. PPL Electric passes these costs on to customers, who receive basic generation supply service through the PUC-approved TSC cost recovery mechanism. The TSC contains a reconciliation mechanism whereby any over- or under-recovery from customers is either refunded to, or recovered from, customers through the adjustment factor determined for the subsequent year.

Transmission Formula Rate

PPL Electric's transmission revenues are billed in accordance with a FERC-approved Open Access Transmission Tariff that utilizes a formula-based rate recovery mechanism. Under this formula, rates are put into effect in June of each year based upon prior year actual expenditures and current year forecasted capital additions. Rates are then adjusted the following year to reflect

actual annual expenses and capital additions, as reported in PPL Electric's annual FERC Form 1, filed under the FERC's Uniform System of Accounts. Any difference between the revenue requirement in effect for the prior year and actual expenditures incurred for that year is recorded as a regulatory asset or regulatory liability.

Storm Damage Expense Rider (SDER)

The SDER is a reconcilable automatic adjustment clause under which PPL Electric annually will compare actual storm costs to storm costs allowed in base rates and refund or recover any differences from customers. In the 2015 rate case settlement approved by the PUC in November 2015, it was determined that reportable storm damage expenses to be recovered annually through base rates will be set at $20 million. The SDER will recover from or refund to customers the applicable expenses from reportable storms as compared to the $20 million recovered annually through base rates.

Act 129 Compliance Rider

In compliance with Pennsylvania's Act 129 of 2008 and implementing regulations, PPL Electric is currently in Phase IV of the energy efficiency and conservation plan which was approved in March 2021. Phase IV allows PPL Electric to recover the maximum $313 million over the five-year period, June 1, 2021 through May 31, 2026. The plan includes programs intended to reduce electricity consumption. The recoverable costs include direct and indirect charges, including design and development costs, general and administrative costs and applicable state evaluator costs. The rates are applied to customers who receive distribution service through the Act 129 Compliance Rider. The actual Phase IV program costs are reconcilable after each 12 month period, and any over- or under-recovery from customers will be refunded or recovered over the next rate filing period. PPL Electric's Act 129 Phase III plan ended May 31, 2021 and any over-or under-recovery from customers related to Phase III will be refunded or recovered over the next rate filing period.

Smart Meter Rider (SMR)

Act 129 requires each electric distribution company (EDC) with more than 100,000 customers to have a PUC approved Smart Meter Technology Procurement and Installation Plan (SMP). As of December 31, 2019, PPL Electric replaced substantially all of its old meters with meters that meet the Act 129 requirements under its SMP. In accordance with Act 129, EDCs are able to recover the costs and earn a return on capital of providing smart metering technology. PPL Electric uses the SMR to recover the costs to implement its SMP. The SMR is a reconciliation mechanism whereby any over- or under-recovery from prior years is refunded to, or recovered from, customers through the adjustment factor determined for the subsequent quarters.

Universal Service Rider (USR)

The USR provides for recovery of costs associated with universal service programs, OnTrack and Winter Relief Assistance Program (WRAP), provided by PPL Electric to residential customers. OnTrack is a special payment program for low-income households and WRAP provides low-income customers a means to reduce electric bills through energy saving methods. The USR rate is applied to residential customers who receive distribution service. The actual program costs are reconcilable, and any over- or under-recovery from customers will be refunded or recovered annually in the subsequent year.

TCJA Customer Refund

As a result of the reduced U.S federal corporate income tax rate as enacted by the TCJA, the PUC ruled that these tax benefits should be refunded to customers. Timing differences between the recognition of these tax benefits and the refund of the benefit to the customer creates a regulatory liability. PPL Electric's liability is being credited back to distribution customers through a temporary negative surcharge and remains in place until PPL Electric files and the PUC approves new base rates. The TCJA is reconcilable, and any over- or under-recovery from customers will be refunded or recovered annually in the subsequent year.

(PPL, LG&E and KU)

Environmental Cost Recovery

Kentucky law permits LG&E and KU to recover the costs, including a return of operating expenses and a return of and on capital invested, of complying with the Clean Air Act and those federal, state or local environmental requirements, which apply to coal combustion wastes and by-products from coal-fired electricity generating facilities. The KPSC requires reviews of the past operations of the environmental surcharge for six-month and two-year billing periods to evaluate the related charges, credits and rates of return, as well as to provide for the roll-in of ECR amounts to base rates each two-year period. The KPSC has authorized return on equity of 9.35% for existing approved ECR projects. The ECR regulatory asset or liability represents

the amount that has been under- or over-recovered due to timing or adjustments to the mechanism and is typically recovered or refunded within 12 months.

Fuel Adjustment Clauses

LG&E's and KU's retail electric rates contain a fuel adjustment clause, whereby variances in power purchases and the cost of fuel to generate electricity, including transportation costs, from the costs embedded in base rates are adjusted in LG&E's and KU's rates. The KPSC requires formal reviews at six-month intervals to examine past fuel adjustments and at two-year intervals to review past operations of the fuel adjustment clause and, to the extent appropriate, may conduct public hearings and reestablish the fuel charge included in base rates. The regulatory assets or liabilities represent the amounts that have been under- or over-recovered due to timing or adjustments to the mechanism and are typically recovered within 12 months.

KU also employs a levelized fuel factor mechanism for Virginia customers using an average fuel cost factor based primarily on projected fuel costs and load for the fuel year (12 months ending March 31). The Virginia levelized fuel factor allows fuel recovery based on projected fuel costs for the fuel year plus an adjustment for any under- or over-recovery of fuel expenses from the prior fuel year. The regulatory assets or liabilities represent the amounts that have been under- or over-recovered due to timing or adjustments to the mechanism and are typically recovered or refunded within 12 months.

Economic Relief Billing Credit

The Economic Relief Billing Credit represents regulatory liabilities to be returned to customers through June 30, 2022, as agreed to in the Kentucky rate case in recognition of the economic impact of COVID-19. See "Regulatory Matters - Kentucky Activities - Rate Case Proceedings" below for additional information.

AROs

As discussed in Note 1, for LG&E and KU, all ARO accretion and depreciation expenses are reclassified as a regulatory asset or regulatory liability. ARO regulatory assets associated with certain CCR projects are amortized to expense in accordance with regulatory approvals. For other AROs, deferred accretion and depreciation expense is recovered through cost of removal.

Power Purchase Agreement - OVEC

As a result of purchase accounting associated with PPL's acquisition of LG&E and KU, the fair values of the OVEC power purchase agreement were recorded on the balance sheets of LG&E and KU with offsets to regulatory liabilities. The regulatory liabilities are being amortized using the units-of-production method until March 2026, the expiration date of the agreement at the date of the acquisition. LG&E's and KU's customer rates continue to reflect the original contracts. See Notes 14 and 19 for additional discussion of the power purchase agreement.

Interest Rate Swaps

LG&E's unrealized gains and losses are recorded as regulatory assets or regulatory liabilities until they are realized as interest expense. Interest expense from existing swaps is realized and recovered over the terms of the associated debt, which matures in 2033.

Terminated Interest Rate Swaps

Net realized gains and losses on all interest rate swaps are recovered through regulated rates. As such, any gains and losses on these derivatives are included in regulatory assets or liabilities and are primarily recognized in "Interest Expense" on the Statements of Income over the life of the associated debt.

Plant Outage Costs

From July 1, 2017 through June 30, 2021, plant outage costs in Kentucky were normalized for ratemaking purposes based on an average level of expenses. Plant outage expenses that were greater or less than the average will be collected from or returned to customers, through future base rates. Effective July 1, 2021 under-recovered plant outage costs are being amortized through 2029 for LG&E and KU.

Gas Supply Clause (PPL and LG&E)

LG&E's natural gas rates contain a gas supply clause, whereby the expected cost of natural gas supply and variances between actual and expected costs and customer usage from prior periods are adjusted quarterly in LG&E's rates, subject to approval by the KPSC. The gas supply clause also includes a separate natural gas procurement incentive mechanism, which allows LG&E's rates to be adjusted annually to share savings between the actual cost of gas purchases and market indices, with the shareholders and the customers during each performance-based rate year (12 months ending October 31). The regulatory assets or liabilities represent the total amounts that have been under- or over-recovered due to timing or adjustments to the mechanisms and are typically recovered or refunded within 18 months.

Regulatory Matters

Kentucky Activities (PPL, LG&E and KU)

Rate Case Proceedings

On November 25, 2020, LG&E and KU filed requests with the KPSC for an increase in annual electricity and gas revenues of approximately $331 million ($131 million and $170 million in electricity revenues at LG&E and KU and $30 million in gas revenues at LG&E). The revenue increases represented an increase of 11.6% and 10.4% in electricity revenues at LG&E and KU, and an increase of 8.3% in gas revenues at LG&E. In recognition of the economic impact of COVID-19, LG&E and KU requested approval of a one-year billing credit which will credit customers approximately $53 million ($41 million at LG&E and $12 million at KU). The billing credit represents the return to customers of certain regulatory liabilities on LG&E’s and KU’s Balance Sheets and serves to partially mitigate the rate increases during the first year in which the new rates are in effect.

LG&E’s and KU’s applications also included a request for a CPCN to deploy Advanced Metering Infrastructure across LG&E’s and KU’s service territories in Kentucky.

The applications were based on a forecasted test year of July 1, 2021 through June 30, 2022 and requested an authorized return on equity of 10.0%.

On April 19, 2021, LG&E and KU entered into an agreement with all intervening parties to the proceedings resolving all matters in their applications, with the explicit exception of LG&E's and KU's net metering proposals.

On June 30, 2021 and December 6, 2021, the KPSC issued orders approving the proposed agreement filed in April 2021, with certain modifications. The orders provided for increases in annual revenues of $207 million ($74 million and $110 million in electricity revenues at LG&E and KU and $23 million in gas revenues at LG&E) based on an authorized return on equity of 9.425%. The orders grant an authorized 9.35% return on equity for the ECR and GLT mechanisms and do not modify the requested one-year billing credit. The orders approved the CPCN to deploy Advanced Metering Infrastructure and provide regulatory asset treatment for the remaining net book value of legacy meters upon full implementation of the Advanced Metering Infrastructure program. The orders also approved the establishment of a Retired Asset Recovery (RAR) rider to provide for recovery of and return on the remaining investment in certain electric generating units upon their retirement over a ten-year period following retirement. In respect of the RAR rider, LG&E and KU continue to use currently approved depreciation rates for Mill Creek Units 1 and 2 and Brown Unit 3. The orders also approved a four-year "stay out" commitment from LG&E and KU to refrain from effective base rate increases before July 1, 2025, subject to certain exceptions. On September 24, 2021, the KPSC issued orders providing adjustments to previous net metering proposals. These adjustments did not impact the annual revenue increases.

Pennsylvania Activities (PPL and PPL Electric)

Act 129

Act 129 requires Pennsylvania Electric Distribution Companies (EDCs) to meet, by specified dates, specified goals for reduction in customer electricity usage and peak demand. EDCs not meeting the requirements of Act 129 are subject to significant penalties. PPL Electric filed with the PUC its Act 129 Phase IV Energy Efficiency and Conservation Plan on November 30, 2020, for the five-year period starting June 1, 2021 and ending on May 31, 2026. PPL Electric's Phase IV Act 129 Plan was approved by the PUC at its March 25, 2021, public meeting.

Act 129 also requires EDCs to act as a default service provider (DSP), which provides electricity generation supply service to customers pursuant to a PUC-approved default service procurement plan. A DSP is able to recover the costs associated with its default service procurement plan.

Federal Matters

PPL Electric Transmission Formula Rate Return on Equity (PPL and PPL Electric)

On May 21, 2020, PP&L Industrial Customer Alliance (PPLICA) filed a complaint with the FERC alleging that PPL Electric's base return on equity (ROE) of 11.18% used to determine PPL Electric's formula transmission rate was unjust and unreasonable.

On August 20, 2021, PPL Electric entered into a settlement agreement (the Settlement) with PPLICA and all other parties, including intervenors, with respect to the complaint filed by PPLICA on May 21, 2020.

The key aspects of the Settlement include:

• changes to PPL Electric’s base ROE:

◦beginning as of May 21, 2020 and continuing through May 31, 2022, the ROE shall be 9.90%;

◦beginning on June 1, 2022 and continuing through May 31, 2023, the ROE shall be 9.95%;

◦beginning on June 1, 2023, the ROE shall be 10.00%, which shall continue in effect unless and until changed as permitted by the terms of the Settlement;

• changes the equity component of PPL Electric’s capital structure to be the lower of (i) PPL Electric’s actual equity component, calculated in accordance with the formula rate template, or (ii) 56.00%;

• allows modification of the current rate year of June 1 to May 31 to a calendar year of January 1 to December 31; and

• allows modification of the current formula rate based on a historic test year to a projected test year.

In 2021, PPL Electric recorded a revenue reduction of $78 million ($55 million after-tax), of which $73 million ($52 million after-tax) represents revenue subject to refund for the period May 21, 2020 through November 30, 2021. The reduction recorded includes $28 million ($20 million after-tax) related to the period from May 21, 2020 to December 31, 2020. The $73 million of revenue to be refunded will be returned to customers from January 1, 2022 through May 31, 2022 and is based on the difference between charges that were calculated using the ROE in effect at the time and charges calculated using the revised ROE provided for the Settlement, plus interest at the FERC interest rate.

The FERC approved the Settlement on November 5, 2021. Interim rates reflecting the agreed-to-base ROE in the Settlement were effective December 1, 2021.

(PPL, LG&E and KU)

FERC Transmission Rate Filing

In 2018, LG&E and KU applied to the FERC requesting elimination of certain on-going credits to a sub-set of transmission customers relating to the 1998 merger of LG&E's and KU's parent entities and the 2006 withdrawal of LG&E and KU from the Midcontinent Independent System Operator, Inc. (MISO), a regional transmission operator and energy market. The application sought termination of LG&E's and KU's commitment to provide certain Kentucky municipalities mitigation for certain horizontal market power concerns arising out of the 1998 LG&E and KU merger and 2006 MISO withdrawal. The amounts at issue are generally waivers or credits granted to a limited number of Kentucky municipalities for either certain LG&E and KU or MISO transmission charges incurred for transmission service received. In 2019, the FERC granted LG&E's and KU's request to remove the ongoing credits, conditioned upon the implementation by LG&E and KU of a transition mechanism for certain existing power supply arrangements, which was subsequently filed, modified, and approved by the FERC in 2020 and 2021. In 2020, LG&E and KU and other parties filed appeals with the D.C. Circuit Court of Appeals regarding FERC's orders on the elimination of the mitigation and required transition mechanism. Oral arguments in the appellate proceeding occurred on February 14, 2022. LG&E and KU cannot predict the outcome of the respective appellate and FERC proceedings. LG&E and KU currently receive recovery of the waivers and credits provided through other rate mechanisms and such rate recovery would be anticipated to be adjusted consistent with potential changes or terminations of the waivers and credits, as such become effective.

Other

Purchase of Receivables Program

(PPL and PPL Electric)

In accordance with a PUC-approved purchase of accounts receivable program, PPL Electric purchases certain accounts receivable from alternative electricity suppliers at a discount, which reflects a provision for uncollectible accounts. The alternative electricity suppliers have no continuing involvement or interest in the purchased accounts receivable. Accounts receivable that are acquired are initially recorded at fair value on the date of acquisition. During 2021, 2020 and 2019, PPL Electric purchased $1.2 billion, $1.1 billion and $1.2 billion of accounts receivable from alternative suppliers.

8. Financing Activities

Credit Arrangements and Short-term Debt

(All Registrants)

The Registrants maintain credit facilities to enhance liquidity, provide credit support and provide a backstop to commercial paper programs. For reporting purposes, on a consolidated basis, the credit facilities and commercial paper programs of PPL Electric, LG&E and KU also apply to PPL. The amounts listed in the borrowed column below are recorded as "Short-term debt" on the Balance Sheets except for borrowings under PPL Capital Funding's term loan agreement due March 2022, which are reflected in "Long-term debt" at December 31, 2020. The following credit facilities were in place at:

			December 31, 2021																														December 31, 2020
			Expiration Date						Capacity						Borrowed						Letters of Credit and Commercial Paper Issued						Unused Capacity						Borrowed						Letters of Credit and Commercial Paper Issued
PPL
PPL Capital Funding
Syndicated Credit Facility (a) (b)			Dec 2026						$	1,250					$	—					$	—					$	1,250					$	—					$	402
Bilateral Credit Facility (a) (b)			Mar 2022						50						—						—						50						—						—
Bilateral Credit Facility (a) (b)			Mar 2022						50						—						15						35						—						15
Term Loan Credit Facility (a) (b)			Mar 2021						—						—						—						—						200						—
Term Loan Credit Facility (a) (b)			Mar 2021						—						—						—						—						100						—
Term Loan Credit Facility (a) (b)			Mar 2022						—						—						—						—						100						—
Total PPL Capital Funding Credit Facilities									$	1,350					$	—					$	15					$	1,335					$	400					$	417
PPL Electric
Syndicated Credit Facility (a) (b)			Dec 2026						$	650					$	—					$	1					$	649					$	—					$	1
LG&E
Syndicated Credit Facility (a) (b)			Dec 2026						$	500					$	—					$	69					$	431					$	—					$	262
KU
Syndicated Credit Facility (a) (b)			Dec 2026						$	400					$	—					$	—					$	400					$	—					$	203

(a)Each company pays customary fees under its respective facility and borrowings generally bear interest at LIBOR-based rates plus an applicable margin.

(b)The facilities contain a financial covenant requiring debt to total capitalization not to exceed 70% for PPL Capital Funding, PPL Electric, LG&E and KU, as calculated in accordance with the facilities and other customary covenants. Additionally, subject to certain conditions, PPL Capital Funding may request that the capacity of one of its bilateral credit facilities expiring in March 2022 be increased by up to $30 million and PPL Capital Funding, PPL Electric, LG&E and KU may each request up to a $250 million increase in its syndicated credit facility's capacity. Participation in any such increase is at the sole discretion of each lender.

(PPL)

In December 2021, PPL Capital Funding amended and restated its existing $1.450 billion revolving credit facility to extend the termination date from January 26, 2024 to December 6, 2026, to decrease the borrowing capacity to $1.250 billion and to

provide for the option to add Narragansett Electric as an additional borrower upon acquisition by PPL Rhode Island Holdings, LLC.

(PPL and PPL Electric)

In December 2021, PPL Electric Utilities Corporation amended and restated its existing $650 million revolving credit facility to extend the termination date from January 26, 2024 to December 6, 2026.

(PPL and LG&E)

In December 2021, LG&E amended and restated its existing $500 million revolving credit facility to extend the termination date from January 26, 2024 to December 6, 2026.

(PPL and KU)

In December 2021, KU amended and restated its existing $400 million revolving credit facility to extend the termination date from January 26, 2024 to December 6, 2026.

(All Registrants)

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

			December 31, 2021																								December 31, 2020
			Weighted - Average Interest Rate						Capacity						Commercial Paper Issuances						Unused Capacity						Weighted - Average Interest Rate						Commercial Paper Issuances
PPL Capital Funding									$	1,500					$	—					$	1,500					0.25%						$	402
PPL Electric									650						—						650												—
LG&E (a)			0.31%						425						69						356						0.28%						262
KU									350						—						350						0.28%						203
Total									$	2,925					$	69					$	2,856											$	867

(a)In March 2021, the capacity for the LG&E commercial paper program was increased from $350 million to $425 million.

(PPL Electric, LG&E and KU)

See Note 15 for a discussion of intercompany borrowings.

Long-term Debt (All Registrants)

															December 31,
			Weighted-Average Rate (d)						Maturities (d)						2021						2020
PPL
Senior Unsecured Notes			3.81		%				2026 - 2047						$	1,566					$	4,850
Senior Secured Notes/First Mortgage Bonds (a) (b) (c)			3.59		%				2022 - 2050						9,205						8,955
Junior Subordinated Notes			2.89		%				2067						480						930
Term Loan Credit Facility															—						100
Total Long-term Debt before adjustments															11,251						14,835
Unamortized premium and (discount), net															(34)						(40)
Unamortized debt issuance costs															(77)						(106)
Total Long-term Debt															11,140						14,689
Less current portion of Long-term Debt															474						1,074
Total Long-term Debt, noncurrent															$	10,666					$	13,615

															December 31,
			Weighted-Average Rate (d)						Maturities (d)						2021						2020
PPL Electric
Senior Secured Notes/First Mortgage Bonds (a) (b)			3.37		%				2022 - 2049						$	4,539					$	4,289
Total Long-term Debt Before Adjustments															4,539						4,289
Unamortized discount															(22)						(23)
Unamortized debt issuance costs															(33)						(30)
Total Long-term Debt															4,484						4,236
Less current portion of Long-term Debt															474						400
Total Long-term Debt, noncurrent															$	4,010					$	3,836
LG&E
First Mortgage Bonds (a) (c)			3.59		%				2025 - 2049						$	2,024					$	2,024
Total Long-term Debt Before Adjustments															2,024						2,024
Unamortized discount															(4)						(4)
Unamortized debt issuance costs															(14)						(13)
Total Long-term Debt															2,006						2,007
Less current portion of Long-term Debt															—						292
Total Long-term Debt, noncurrent															$	2,006					$	1,715
KU
First Mortgage Bonds (a) (c)			3.97		%				2023 - 2050						$	2,642					$	2,642
Total Long-term Debt Before Adjustments															2,642						2,642
Unamortized premium															5						5
Unamortized discount															(9)						(9)
Unamortized debt issuance costs															(20)						(20)
Total Long-term Debt															2,618						2,618
Less current portion of Long-term Debt															—						132
Total Long-term Debt, noncurrent															$	2,618					$	2,486

(a)Includes PPL Electric's senior secured and first mortgage bonds that are secured by the lien of PPL Electric's 2001 Mortgage Indenture, which covers substantially all of PPL Electric’s tangible distribution properties and certain of its tangible transmission properties located in Pennsylvania, subject to certain exceptions and exclusions. The carrying value of PPL Electric's property, plant and equipment was approximately $11.3 billion and $10.8 billion at December 31, 2021 and 2020.

Includes LG&E's first mortgage bonds that are secured by the lien of the LG&E 2010 Mortgage Indenture which creates a lien, subject to certain exceptions and exclusions, on substantially all of LG&E's real and tangible personal property located in Kentucky and used or to be used in connection with the generation, transmission and distribution of electricity and the storage and distribution of natural gas. The aggregate carrying value of the property subject to the lien was $5.7 billion and $5.5 billion at December 31, 2021 and 2020.

Includes KU's first mortgage bonds that are secured by the lien of the KU 2010 Mortgage Indenture which creates a lien, subject to certain exceptions and exclusions, on substantially all of KU's real and tangible personal property located in Kentucky and used or to be used in connection with the generation, transmission and distribution of electricity. The aggregate carrying value of the property subject to the lien was $6.9 billion and $6.7 billion at December 31, 2021 and 2020.

(b)Includes PPL Electric's series of senior secured bonds that secure its obligations to make payments with respect to each series of Pollution Control Bonds that were issued by the LCIDA and the PEDFA on behalf of PPL Electric. These senior secured bonds were issued in the same principal amount, contain payment and redemption provisions that correspond to and bear the same interest rate as such Pollution Control Bonds. These senior secured bonds were issued under PPL Electric's 2001 Mortgage Indenture and are secured as noted in (a) above. This amount includes $224 million of which PPL Electric is allowed to convert the interest rate mode on the bonds from time to time to a commercial paper rate, daily rate, weekly rate, or term rate of at least one year and $90 million which is subject to mandatory redemption upon determination that the interest rate on the bonds would be included in the holders' gross income for federal tax purposes.

Includes $250 million of notes that may be called on or after September 28, 2021 and $650 million of notes that may be called on or after June 24, 2022, at a redemption price equal to 100% of the principal amount of the bonds, plus accrued and unpaid interest to, but excluding, such redemption date.

(c)Includes LG&E's and KU's series of first mortgage bonds that were issued to the respective trustees of tax-exempt revenue bonds to secure its respective obligations to make payments with respect to each series of bonds. The first mortgage bonds were issued in the same principal amounts, contain payment and redemption provisions that correspond to and bear the same interest rate as such tax-exempt revenue bonds. These first mortgage bonds were issued under the LG&E 2010 Mortgage Indenture and the KU 2010 Mortgage Indenture and are secured as noted in (a) above. The related tax-exempt revenue

bonds were issued by various governmental entities, principally counties in Kentucky, on behalf of LG&E and KU. The related revenue bond documents allow LG&E and KU to convert the interest rate mode on the bonds from time to time to a commercial paper rate, daily rate, weekly rate, term rate of at least one year or, in some cases, an auction rate or a LIBOR index rate.

At December 31, 2021, the aggregate tax-exempt revenue bonds issued on behalf of LG&E and KU that were in a term rate mode totaled $782 million for PPL, comprised of $473 million and $309 million for LG&E and KU. At December 31, 2021, the aggregate tax-exempt revenue bonds issued on behalf of LG&E and KU that were in a variable rate mode totaled $66 million and $33 million for LG&E and KU. These variable rate tax-exempt revenue bonds are subject to tender for purchase by LG&E and KU at the option of the holder and to mandatory tender for purchase by LG&E and KU upon the occurrence of certain events.

(d)The table reflects principal maturities only, based on stated maturities or earlier put dates, and the weighted-average rates as of December 31, 2021.

None of the outstanding debt securities noted above have sinking fund requirements. The aggregate maturities of long-term debt, based on stated maturities or earlier put dates, for the periods 2022 through 2026 and thereafter are as follows:

			PPL						PPL Electric												LG&E						KU
2022			$	474					$	474											$	—					$	—
2023			353						340												—						13
2024			650						650												—						—
2025			550						—												300						250
2026			904						—												90						164
Thereafter			8,320						3,075												1,634						2,215
Total			$	11,251					$	4,539											$	2,024					$	2,642

(PPL)

In April 2021, PPL Capital Funding repaid its $100 million term loan expiring in March 2022.

In June 2021, PPL Capital Funding commenced a tender offer to purchase for cash and retire (1) any and all of its outstanding 4.20% Senior Notes due 2022, 3.50% Senior Notes due 2022, 3.40% Senior Notes due 2023 and 3.95% Senior Notes due 2024 and (2) up to $1 billion aggregate purchase price of its outstanding 4.70% Senior Notes due 2043, 5.00% Senior Notes due 2044, 4.00% Senior Notes due 2047, 4.125% Senior Notes due 2030 and 3.10% Senior Notes due 2026.

In June 2021, in connection with the tender offer, PPL Capital Funding retired $1,962 million combined aggregate principal amount of its outstanding Senior Notes for $2,293 million aggregate cash purchase price that included the tender premium and accrued interest. These Senior Notes had a weighted average interest rate of 4.14%. The loss on extinguishment associated with the transaction was $322 million, which included the tender premium, bank fees and unamortized fees, hedges and discounts. This loss on extinguishment was recorded to "Interest Expense" on the Statements of Income.

In July 2021, PPL Capital Funding redeemed the remaining $1,072 million combined aggregate principal amount of its outstanding 4.20% Senior Notes due 2022, 3.50% Senior Notes due 2022, 3.40% Senior Notes due 2023 and 3.95% Senior Notes due 2024 that had not been validly tendered for an aggregate cash purchase price of $1,133 million, which included make-whole premiums and accrued interest. These Senior Notes had a weighted average interest rate of 3.71%. The loss on extinguishment associated with the transaction was $58 million, which included make-whole premiums, unamortized fees, hedges and discounts. PPL Capital Funding also redeemed its $450 million of 5.90% Junior Subordinated Notes due in 2073 at par. The loss on extinguishment associated with this transaction was $15 million, which included unamortized fees.

In July 2021, LKE redeemed at par the $250 million 4.375% Senior Notes due 2021.

PPL has guaranteed PPL Capital Funding's obligations under the credit agreement and notes.

(PPL and PPL Electric)

In June 2021, PPL Electric issued $650 million of First Mortgage Bonds, Floating Rate Series due 2024. PPL Electric received proceeds of $647 million, net of underwriting fees, which were used to redeem its $400 million outstanding First Mortgage Bonds, 3% Series due 2021 in July 2021 and for general corporate purposes.

(PPL and LG&E)

In April 2021, the Louisville/Jefferson County Metro Government of Kentucky remarketed $128 million of Pollution Control Revenue Bonds, 2003 Series A due 2033 previously issued on behalf of LG&E. The bonds were remarketed at a long-term rate and will bear interest at 2.00% through their maturity date of October 1, 2033.

In May 2021, the County of Trimble, Kentucky remarketed $35 million of Pollution Control Revenue Bonds, 2001 Series B due 2027 previously issued on behalf of LG&E. The bonds were remarketed at a long-term rate and will bear interest at 1.35% through their maturity date of November 1, 2027.

In May 2021, the Louisville/Jefferson County Metro Government of Kentucky remarketed $35 million of Pollution Control Revenue Bonds, 2001 Series B due 2027 previously issued on behalf of LG&E. The bonds were remarketed at a long-term rate and will bear interest at 1.35% through their maturity date of November 1, 2027.

In June 2021, LG&E converted the $31 million of Louisville/Jefferson County Metro Government of Kentucky Environmental Facilities Revenue Refunding Bonds, 2007 Series A issued on its behalf to a weekly interest rate. The bonds mature on June 1, 2033.

In June 2021, LG&E converted the $35 million of Louisville/Jefferson County Metro Government, of Kentucky Environmental Facilities Revenue Refunding Bonds, 2007 Series B issued on its behalf to a weekly interest rate. The bonds mature on June 1, 2033.

In September 2021, the County of Trimble, Kentucky remarketed $28 million of Pollution Control Revenue Bonds, 2001 Series A due 2026, previously issued on behalf of LG&E. The bonds were remarketed at a long-term rate and will bear interest at 0.625% through their maturity date of September 1, 2026.

(PPL and KU)

In June 2021, the County of Carroll, Kentucky remarketed $54 million of Environmental Facilities Revenue Refunding Bonds, 2006 Series B due 2034 previously issued on behalf of KU. The bonds were remarketed at a long-term rate and will bear interest at 2.125% though their maturity date of October 1, 2034.

In June 2021, the County of Carroll, Kentucky remarketed $78 million of Environmental Facilities Revenue Bonds 2008 Series A due 2032 previously issued on behalf of KU. The bonds were remarketed at a long-term rate and will bear interest at 2.00% through their maturity date of February 1, 2032.

See Note 15 for additional information related to intercompany borrowings.

Legal Separateness (All Registrants)

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 PPL's subsidiaries absent a specific contractual undertaking by a subsidiary to pay PPL's creditors or as required by applicable law or regulation. Similarly, PPL is not liable for the debts of its subsidiaries, nor are its subsidiaries liable for the debts of one another. Accordingly, creditors of PPL's subsidiaries may not satisfy their debts from the assets of PPL or its other subsidiaries absent a specific contractual undertaking by PPL or its other subsidiaries to pay the creditors or as required by applicable law or regulation.

Similarly, the subsidiaries of PPL Electric are each separate legal entities. These subsidiaries are not liable for the debts of PPL Electric. Accordingly, creditors of PPL Electric may not satisfy its debts from the assets of its subsidiaries absent a specific contractual undertaking by a subsidiary to pay the creditors or as required by applicable law or regulation. Similarly, PPL Electric is not liable for the debts of its subsidiaries, nor are its subsidiaries liable for the debts of one another. Accordingly, creditors of these subsidiaries may not satisfy their debts from the assets of PPL Electric (or its other subsidiaries) absent a specific contractual undertaking by PPL Electric or any such other subsidiary to pay such creditors or as required by applicable law or regulation.

(PPL)

Equity Securities

Share Repurchases

In August 2021, PPL's Board of Directors authorized share repurchases of up to $3 billion of PPL common shares. The actual amount repurchased will depend on various factors, including PPL’s share price, market conditions, and the determination of other uses for the proceeds from the sale of the U.K. utility business, including for incremental capital expenditures. PPL may purchase shares on each trading day subject to market conditions and principles of best execution.

During the year ended December 31, 2021, PPL repurchased 34.8 million shares at a cost of $1.0 billion. Commission fees incurred, which have been included in the cost of repurchases above, were insignificant through December 31, 2021.

ATM Program

In February 2018, PPL entered into an equity distribution agreement, pursuant to which PPL may sell, from time to time, up to an aggregate of $1.0 billion of its common stock through an at-the-market offering program, including a forward sales component. The compensation paid to the selling agents by PPL may be up to 2% of the gross offering proceeds of the shares. There were no issuances under the ATM program for the twelve months ended December 31, 2021 and 2020. The ATM program expired in February 2021.

Distributions and Related Restrictions

In November 2021, PPL declared its quarterly common stock dividend, payable January 3, 2022, at 41.50 cents per share (equivalent to $1.66 per annum). On February 18, 2022, PPL announced a quarterly common stock dividend of 20.00 cents per share, payable April 1, 2022, to shareowners of record as of March 10, 2022. Future dividends will be declared at the discretion of the Board of Directors and will depend upon future earnings, cash flows, financial and legal requirements and other factors.

Neither PPL Capital Funding nor PPL may declare or pay any cash dividend or distribution on its capital stock during any period in which PPL Capital Funding defers interest payments on its 2007 Series A Junior Subordinated Notes due 2067. At December 31, 2021, no interest payments were deferred.

(All Registrants)

PPL relies on dividends or loans from its subsidiaries to fund PPL's dividends to its common shareholders. The net assets of certain PPL subsidiaries are subject to legal restrictions. LG&E, KU and PPL Electric are subject to Section 305(a) of the Federal Power Act, which makes it unlawful for a public utility to make or pay a dividend from any funds "properly included in capital account." The meaning of this limitation has never been clarified under the Federal Power Act. LG&E, KU and PPL Electric believe, however, that this statutory restriction, as applied to their circumstances, would not be construed or applied by the FERC to prohibit the payment from retained earnings of dividends that are not excessive and are for lawful and legitimate business purposes. In February 2012, LG&E and KU petitioned the FERC requesting authorization to pay dividends in the future based on retained earnings balances calculated without giving effect to the impact of purchase accounting adjustments for PPL's 2010 acquisition of LG&E and KU. In May 2012, the FERC approved the petitions with the further condition that each utility may not pay dividends if such payment would cause its adjusted equity ratio to fall below 30% of total capitalization. Accordingly, at December 31, 2021, net assets of $1.4 billion for LG&E and $1.9 billion for KU were restricted for purposes of paying dividends to LKE, and net assets of $1.7 billion for LG&E and $2.0 billion for KU were available for payment of dividends to LKE. LG&E and KU believe they will not be required to change their current dividend practices as a result of the foregoing requirement. In addition, under Virginia law, KU is prohibited from making loans to affiliates without the prior approval of the VSCC. There are no comparable statutes under Kentucky law applicable to LG&E and KU, or under Pennsylvania law applicable to PPL Electric. However, orders from the KPSC require LG&E and KU to obtain prior consent or approval before lending amounts to PPL.

9. Acquisitions, Development and Divestitures

(PPL)

Discontinued Operations

Sale of the U.K. Utility Business

On March 17, 2021, PPL WPD Limited (WPD Limited) entered into a share purchase agreement (WPD SPA) to sell PPL's U.K. utility business to National Grid Holdings One plc (National Grid U.K.), a subsidiary of National Grid plc. Pursuant to the WPD SPA, National Grid U.K. would acquire 100% of the issued share capital of PPL WPD Investments Limited (WPD Investments) for £7.8 billion in cash. WPD Limited would also receive an additional amount of £548,000 for each day during the period from January 1, 2021 to the closing date if the dividends usually declared by WPD Investments to WPD Limited were not paid for that period.

On June 14, 2021, the sale of the U.K. utility business was completed. The transaction resulted in cash proceeds of $10.7 billion inclusive of foreign currency hedges executed by PPL. PPL received net proceeds, after taxes and fees, of $10.4 billion.

WPD Limited and National Grid U.K. each made customary representations and warranties in the WPD SPA. National Grid U.K., at its expense, purchased warranty and indemnity insurance. WPD Limited agreed to indemnify National Grid U.K. for certain tax related matters. See Note 14 for additional information. PPL has not had and will not have any significant involvement with the U.K. utility business after completion of the sale.

Loss on Sale

The following table summarizes the pre-tax loss recorded upon completion of the sale.

			Loss on sale for the year ended December 31, 2021
Sales proceeds, net of realized foreign currency hedge losses (a)			$	10,732
Unrealized foreign currency hedge losses recognized in 2020			125
Less: Costs to sell (b)			69
Less: Carrying value (c)			12,397
Loss on sale			$	(1,609)

(a)Includes the fixed and additional consideration of £7,881 million specified in the WPD SPA, converted at a spot rate of $1.4107 per GBP, offset by $386 million of realized foreign currency hedge losses to hedge the proceeds from the sale.

(b)Includes bank advisory, legal and accounting fees to facilitate the transaction.

(c)Represents the carrying value of the U.K. utility business at the time of sale and includes the realization of AOCI of $3.6 billion, which arose primarily from currency translation adjustments and defined benefit plans associated with the U.K. utility business.

Summarized Results of Discontinued Operations

The operations of the U.K. utility business are included in "Income (Loss) from Discontinued Operations (net of income taxes)" on the Statements of Income. Following are the components of discontinued operations in the Statements of Income for the years ended December 31:

			2021						2020						2019
Operating Revenues			$	1,344					$	2,133					$	2,167
Operating Expenses			467						916						853
Other Income (Expense) - net			202						167						295
Interest Expense (a)			209						367						373
Income before income taxes			870						1,017						1,236
Loss on sale			(1,609)						—						—
Income Taxes			759						188						226
Income (Loss) from Discontinued Operations (net of income taxes)			$	(1,498)					$	829					$	1,010

(a)No interest from corporate level debt was allocated to discontinued operations.

Summarized Assets and Liabilities Held for Sale

The following major classes of assets and liabilities of the U.K. utility business were reclassified on PPL's Balance Sheet to "Current assets held for sale" and "Current liabilities held for sale" as of December 31, 2020:

									Held for Sale at December 31, 2020
Cash and cash equivalents									$	266
Accounts receivable and unbilled revenues									389
Price risk management assets									146
Property, plant and equipment, net (a)									14,392
Goodwill									2,558
Other intangibles									413
Pension benefit asset									682
Other assets									137
Total Assets									$	18,983
Short-term debt and long-term debt due within one year									$	994
Accounts payable									220
Customer deposits									217
Accrued interest									190
Long-term debt									7,938
Total deferred income taxes									1,032
Price risk management liabilities									137
Other deferred credits and liabilities									295
Total Liabilities									$	11,023
Net assets (b)									$	7,960

(a)Depreciation of fixed assets ceased upon classification as held for sale in the first quarter of 2021.

(b)The net assets and liabilities held for sale exclude $4.0 billion of AOCI related to the U.K. utility business that is required to be included in the carrying value of an entity classified as held for sale when assessing impairment and determining the gain or loss on sale. Prior to the sale, AOCI related to the U.K. utility business was reported as a component of PPL’s equity.

Acquisitions

Share Purchase Agreement to Acquire Narragansett Electric

On March 17, 2021, PPL and its subsidiary, PPL Energy Holdings, entered into a share purchase agreement (Narragansett SPA) with National Grid USA (National Grid U.S.), a subsidiary of National Grid plc, to acquire 100% of the outstanding shares of common stock of Narragansett Electric for approximately $3.8 billion in cash. On May 3, 2021, an Assignment and Assumption Agreement was entered into by PPL, PPL Energy Holdings, PPL Rhode Island Holdings and National Grid U.S. whereby certain interests of PPL Energy Holdings in the Narragansett SPA were assigned to and assumed by PPL Rhode Island Holdings. Pursuant to that Assignment and Assumption Agreement, PPL Rhode Island Holdings became the purchasing entity under the Narragansett SPA. The acquisition is expected to be funded with proceeds from the sale of the U.K. utility business. PPL has agreed to guarantee all obligations of PPL Energy Holdings and PPL Rhode Island Holdings under the Narragansett SPA and the related Assignment and Assumption Agreement.

The closing of the acquisition is subject to the receipt of certain U.S. regulatory approvals or waivers, including, among others, authorizations or waivers from the Rhode Island Division of Public Utilities and Carriers, the Massachusetts Department of Public Utilities, the Federal Communications Commission (FCC), and the FERC, as well as review under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other customary conditions to closing, including the execution and delivery of certain related transaction documents. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with respect to the acquisition, expired on June 2, 2021. On July 14, 2021, the FCC consented to the Transfer of Control Application for the transfer of control of certain communications licenses held by Narragansett Electric from National Grid U.S. to PPL. On July 16, 2021, the Massachusetts Department of Public Utilities (MDPU) granted a waiver of jurisdiction with respect to the acquisition, finding that the acquisition would not adversely impact Massachusetts ratepayers. On December 3, 2021, the MPDU denied the request by the Attorney General of Massachusetts (AG) to stay the order granting the waiver, and on December 31, 2021, the AG then moved for the Massachusetts Supreme Judicial Court (SJC) to stay the

final MDPU order. That request remains pending. If a stay is issued, PPL would not be able to close the acquisition until any stay is lifted or the appeal is resolved. On September 23, 2021, the FERC issued an order authorizing, as consistent with the public interest, the disposition of jurisdictional facilities that will result in PPL Rhode Island Holdings, LLC, acquiring 100% of the outstanding shares of common stock of Narragansett Electric. The regulatory approvals remain subject to any applicable appeal periods. PPL anticipates receiving a final order from the Rhode Island Division of Public Utilities and Carriers with respect to the acquisition by March 2022, however, no assurance can be given as to ultimate outcome of that review or the timing of any final decision.

PPL Energy Holdings and PPL Rhode Island Holdings and National Grid U.S. have each made customary representations, warranties and covenants in the Narragansett SPA, including, among others, customary indemnification provisions and covenants by National Grid U.S. to conduct the Narragansett Electric business in the ordinary course between the execution of the Narragansett SPA and the closing of the acquisition. The consummation of the transaction is not subject to a financing condition.

In connection with the acquisition, National Grid U.S. and one or more of its subsidiaries and Narragansett Electric will enter into a transition services agreement, pursuant to which National Grid U.S. and/or one or more of its affiliates will agree to provide certain transition services to Narragansett Electric and its affiliates to facilitate the operation of Narragansett Electric following the consummation of the acquisition and the transition of operations to PPL, as agreed upon in the Narragansett SPA.

10. Leases

(All Registrants)

The Registrants determine whether contractual arrangements contain a lease by evaluating whether those arrangements either implicitly or explicitly identify an asset, whether the Registrants have the right to obtain substantially all of the economic benefits from use of the asset throughout the term of the arrangement, and whether the Registrants have the right to direct the use of the asset. Renewal options are included in the lease term if it is reasonably certain the Registrants will exercise those options. Periods for which the Registrants are reasonably certain not to exercise termination options are also included in the lease term. The Registrants have certain agreements with lease and non-lease components, such as office space leases, which are generally accounted for separately.

LG&E and KU have entered into various operating leases primarily for office space, vehicles and railcars. The leases generally have fixed payments with expiration dates ranging from 2022 to 2033, some of which have options to extend the leases from one year to ten years and some have options to terminate at LG&E's and KU's discretion.

PPL has also entered into various operating leases primarily for office and warehouse space. These leases generally have fixed payments with expiration dates ranging from 2024 through 2030.

PPL Electric also has operating leases which do not have a significant impact to its operations.

Short-term Leases

Short-term leases are leases with a term that is 12 months or less and do not include a purchase option or option to extend the initial term of the lease to greater than 12 months that the Registrants are reasonably certain to exercise. The Registrants have made an accounting policy election to not recognize the right-of-use asset and the lease liability arising from leases classified as short-term. Expenses related to short-term leases are included in the tables below.

Discount Rate

The discount rate for a lease is the rate implicit in the lease unless that rate cannot be readily determined. In that case, the Registrants are required to use their incremental borrowing rate, which is the rate the Registrants would have to pay to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment.

The Registrants receive secured borrowing rates from financial institutions based on their applicable credit profiles. The Registrants use the secured rate which corresponds with the term of the applicable lease.

(PPL, LG&E and KU)

Lessee Transactions

The following table provides the components of lease cost for the Registrants' operating leases for the years ended December 31:

			2021						2020						2019
PPL
Lease cost:
Operating lease cost			$	24					$	28					$	30
Short-term lease cost			6						7						5
Total lease cost			$	30					$	35					$	35
LG&E
Lease cost:
Operating lease cost			$	6					$	8					$	12
Short-term lease cost			1						1						1
Total lease cost			$	7					$	9					$	13
KU
Lease cost:
Operating lease cost			$	10					$	13					$	13
Short-term lease cost			1						1						1
Total lease cost			$	11					$	14					$	14

The following table provides other key information related to the Registrants' operating leases at December 31:

			2021						2020						2019
PPL
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases			$	23					$	24					$	26
Right-of-use asset obtained in exchange for new operating lease liabilities			12						17						45
LG&E
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases			$	6					$	7					$	9
Right-of-use asset obtained in exchange for new operating lease liabilities			4						6						5
KU
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases			$	10					$	11					$	11
Right-of-use asset obtained in exchange for new operating lease liabilities			7						9						11

The following table provides the total future minimum rental payments for operating leases, as well as a reconciliation of these undiscounted cash flows to the lease liabilities recognized on the Balance Sheets as of December 31, 2021.

			PPL						LG&E						KU
2022			$	23					$	6					$	10
2023			20						5						8
2024			15						4						6
2025			8						3						4
2026			3						1						1
Thereafter			5						1						1
Total			$	74					$	20					$	30
Weighted-average discount rate			3.38%						3.48%						3.67%
Weighted-average remaining lease term (in years)			4						4						4
Current lease liabilities (a)			$	22					$	6					$	9
Non-current lease liabilities (a)			47						12						17
Right-of-use assets (b)			62						15						24

(a) Current lease liabilities are included in "Other Current Liabilities" on the Balance Sheets. Non-current lease liabilities are included in "Other deferred credits and noncurrent liabilities" on the Balance Sheets. The difference between the total future minimum lease payments and the recorded lease liabilities is due to the impact of discounting.

(b) Right-of-use assets are included in "Other noncurrent assets" on the Balance Sheets.

Lessor Transactions

Third parties leased land from LG&E and KU at certain generation plants to produce refined coal used to generate electricity. The leases were operating leases and expired in 2021. Payments were allocated among lease and non-lease components as stated in the agreements. Lease payments were fixed or determined based on the amount of refined coal used in electricity generation at the facility. Payments received were primarily recorded as a regulatory liability and amortized in accordance with regulatory approvals.

The following table shows the lease income recognized for the years ended December 31:

			PPL						LG&E						KU
Lease income recognized for the twelve months ended December 31, 2021			$	11					$	5					$	5
Lease income recognized for the twelve months ended December 31, 2020			16						6						9
Lease income recognized for the twelve months ended December 31, 2019			14						5						8

11. Stock-Based Compensation

(PPL and PPL Electric)

Under the ICP, SIP and the ICPKE (together, the Plans), restricted shares of PPL common stock, restricted stock units, performance units and stock options may be granted to officers and other key employees of PPL, PPL Electric and other affiliated companies. Awards under the Plans are made by the Compensation Committee of the PPL Board of Directors, in the case of the ICP and SIP, and by the PPL Corporate Leadership Council (CLC), in the case of the ICPKE.

The following table details the award limits under each of the Plans.

						Total Plan						Annual Grant Limit Total As % of Outstanding						Annual Grant						Annual Grant Limit For Individual Participants - Performance Based Awards
						Award Limit						PPL Common Stock On First Day of						Limit Options						For awards denominated in						For awards denominated in
Plan						(Shares)						Each Calendar Year						(Shares)						shares (Shares)						cash (in dollars)
SIP						15,000,000												2,000,000						750,000						$	15,000,000
ICPKE						14,199,796						2		%				3,000,000

Any portion of these awards that has not been granted may be carried over and used in any subsequent year. If any award lapses, the rights of the participant terminate, or, with respect to certain awards, is forfeited, and the shares of PPL common stock underlying such an award are again available for grant. Shares delivered under the Plans may be in the form of authorized

and unissued PPL common stock, common stock held in treasury by PPL or PPL common stock purchased on the open market (including private purchases) in accordance with applicable securities laws.

Restricted Stock Units

Restricted stock units represent the right to receive shares of PPL common stock in the future, generally three years after the date of grant, in an amount based on the fair value of PPL common stock on the date of grant.

Under the SIP, each restricted stock unit entitles the grant recipient to accrue additional restricted stock units equal to the amount of quarterly dividends paid on PPL stock. These additional restricted stock units are deferred and payable in shares of PPL common stock at the end of the restriction period. Dividend equivalents on restricted stock unit awards granted under the ICPKE are currently paid in cash when dividends are declared by PPL.

The fair value of restricted stock units granted is recognized on a straight-line basis over the restriction period or through the date at which the employee reaches retirement eligibility. The fair value of restricted stock units granted to retirement-eligible employees is recognized as compensation expense immediately upon the date of grant. Recipients of restricted stock units granted under the ICPKE may also be granted the right to receive dividend equivalents through the end of the restriction period or until the award is forfeited. Restricted stock units are subject to forfeiture or accelerated payout under the plan provisions for termination, retirement, disability and death of employees. Restrictions lapse on restricted stock units fully, in certain situations, as defined by each of the Plans.

The weighted-average grant date fair value of restricted stock units granted was:

			2021						2020						2019
PPL			$	28.00					$	35.30					$	31.95
PPL Electric			27.96						35.37						32.33

Restricted stock unit activity for 2021 was:

			Restricted Shares/Units						Weighted- Average Grant Date Fair Value Per Share
PPL
Nonvested, beginning of period			896,336						$	32.56
Granted			458,610						28.00
Vested			(303,890)						30.57
Forfeited			(46,473)						30.23
Nonvested, end of period			1,004,583						31.19
PPL Electric
Nonvested, beginning of period			210,720						$	32.73
Transfer between registrants			(92,596)						32.99
Granted			51,587						27.96
Vested			(32,266)						29.98
Forfeited			(6,158)						32.16
Nonvested, end of period			131,287						31.50

Substantially all restricted stock unit awards are expected to vest.

The total fair value of restricted stock units vesting for the years ended December 31 was:

			2021						2020						2019
PPL			$	8					$	19					$	13
PPL Electric			1						3						2

Performance Units - Total Shareowner Return

Performance units based on relative Total Shareowner Return (TSR) are intended to encourage and reward future corporate performance. Performance units represent a target number of shares (Target Award) of PPL's common stock that the recipient would receive upon PPL's attainment of the applicable performance goal. Performance is determined based on TSR during a three-year performance period. At the end of the period, payout is determined by comparing PPL's performance to the TSR of the companies included in the PHLX Utility Sector Index. Awards are payable on a graduated basis based on thresholds that measure PPL's performance relative to peers that comprise the applicable index on which each year's awards are measured. Awards can be paid up to 200% of the Target Award or forfeited with no payout if performance is below a minimum established performance threshold. Dividends payable during the performance cycle accumulate and are converted into additional performance units and are payable in shares of PPL common stock upon completion of the performance period based on the Compensation Committee's determination of achievement of the performance goals. Under the plan provisions, TSR performance units are subject to forfeiture upon termination of employment other than retirement, one year or more from commencement of the performance period, disability or death of an employee.

The fair value of TSR performance units granted to retirement-eligible employees is recognized as compensation expense on a straight-line basis over a one-year period, the minimum vesting period required for an employee to be entitled to payout of the awards with no proration. For employees who are not retirement-eligible, compensation expense is recognized over the shorter of the three-year performance period or the period until the employee is retirement-eligible, with a minimum vesting and recognition period of one-year. If an employee retires before the one-year vesting period, the performance units are forfeited. Performance units vest on a pro rata basis, in certain situations, as defined by each of the Plans.

The fair value of each performance unit granted was estimated using a Monte Carlo pricing model that considers stock beta, a risk-free interest rate, expected stock volatility and expected life. The stock beta was calculated comparing the risk of the individual securities to the average risk of the companies in the index group. The risk-free interest rate reflects the yield on a U.S. Treasury bond commensurate with the expected life of the performance unit. Volatility over the expected term of the performance unit is calculated using daily stock price observations for PPL and all companies in the index group and is evaluated with consideration given to prior periods that may need to be excluded based on events not likely to recur that had impacted PPL and the companies in the index group. PPL uses a mix of historic and implied volatility to value awards.

The weighted-average assumptions used in the model were:

			2021						2020						2019
Expected stock volatility			27.81%						15.64%						17.57%
Expected life			3 years						3 years						3 years

The weighted-average grant date fair value of TSR performance units granted was:

			2021						2020						2019
PPL			$	32.44					$	37.63					$	35.83
PPL Electric			32.92						38.64						35.68

TSR performance unit activity for 2021 was:

			TSR Performance Units						Weighted- Average Grant Date Fair Value Per Share
PPL
Nonvested, beginning of period			626,254						$	36.98
Granted			306,009						32.44
Vested			(53,340)						34.47
Forfeited (a)			(245,150)						37.75
Nonvested, end of period			633,773						34.68

			TSR Performance Units						Weighted- Average Grant Date Fair Value Per Share
PPL Electric
Nonvested, beginning of period			61,807						$	37.44
Transfer between registrants			(53,663)						37.42
Granted			10,010						32.92
Forfeited (a)			(2,800)						38.47
Nonvested, end of period			15,354						34.36

(a)Primarily related to the forfeiture of 2018 domestic performance units as performance during the period was below the minimum established performance threshold, which resulted in no payout.

For the year ended December 31, 2021, $2 million of TSR performance units vested. All awards vested were associated with the sale of the U.K. utility business. See Note 9 for additional information on the sale of the U.K. utility business. No TSR performance units vested for the years ended December 31, 2020 and 2019. Amounts for PPL Electric are insignificant.

Performance Units - Return on Equity

Beginning in 2017, PPL changed its executive compensation mix to add performance units based on achievement of a corporate Return on Equity (ROE). ROE performance units are intended to further align compensation with the company’s strategy and reward for future corporate performance.

Payout of these performance units will be based on the calculated average of the annual corporate ROE for each year of the three-year performance period for PPL Corporation. In light of the transformational nature of the potential sale of the U.K. utility business in 2021, PPL’s ROE-based performance units issued for 2021 were based on a one-year performance period from January 1, 2021 to December 31, 2021; however, these units retained the three year vesting schedule and other characteristics. ROE performance units represent a target number of shares (Target Award) of PPL's common stock that the recipient would receive upon PPL's attainment of the applicable ROE performance goal. ROE performance units can be paid up to 200% of the Target Award or forfeited with no payout if performance is below a minimum established performance threshold. Dividends payable during the performance cycle accumulate and are converted into additional performance units and are payable in shares of PPL common stock upon completion of the performance period based on the Compensation Committee's determination of achievement of the performance goals. Under the plan provisions, these performance units are subject to forfeiture upon termination of employment other than retirement, disability or death of an employee.

The fair value of each ROE performance unit is based on the closing price of PPL Common Stock on the date of grant. The fair value of ROE performance units is recognized on a straight-line basis over the service period or through the date at which the employee reaches retirement eligibility. The fair value awards granted to retirement-eligible employees is recognized as compensation expense immediately upon the date of grant. As these awards are based on performance conditions, the level of attainment is monitored each reporting period and compensation expense is adjusted based on the expected attainment level.

The weighted-average grant date fair value of ROE performance units granted was:

			2021						2020						2019
PPL			$	30.08					$	34.95					$	30.89
PPL Electric			29.39						35.59						30.76

ROE performance unit activity for 2021 was:

			ROE Performance Unit						Weighted- Average Grant Date Fair Value Per Share
PPL
Nonvested, beginning of period			728,664						$	32.81
Granted			572,571						30.08
Vested			(570,722)						32.02
Forfeited			(8,160)						30.44
Nonvested, end of period			722,353						31.28
PPL Electric
Nonvested, beginning of period			61,807						$	33.01
Transfer between registrants			(53,663)						33.00
Granted			12,895						29.39
Vested			(5,685)						32.27
Nonvested, end of period			15,354						30.27

The total fair value of ROE performance units vesting for the years ended December 31 was:

			2021						2020
PPL			$	16					$	8
PPL Electric			—						1

Stock Options

PPL's Compensation, Governance and Nominating Committee, now known as the Compensation Committee, eliminated the use of stock options due to changes in its long-term incentive mix beginning in January 2014.

Under the Plans, stock options had been granted with an option exercise price per share not less than the fair value of PPL's common stock on the date of grant. Options outstanding at December 31, 2021, are fully vested. All options expire no later than 10 years from the grant date. The options become exercisable immediately in certain situations, as defined by each of the Plans.

Stock option activity for 2021 was:

			Number of Options						Weighted Average Exercise Price Per Share						Weighted- Average Remaining Contractual Term (years)						Aggregate Total Intrinsic Value
PPL
Outstanding at beginning of period			1,103,016						$	26.22
Exercised			(337,014)						25.42
Outstanding and exercisable at end of period			766,002						26.57						1						$	3

For 2021, 2020 and 2019, PPL received $10 million, $8 million and $53 million in cash from stock options exercised. The total intrinsic value of stock options exercised was insignificant in 2021 and 2020 and $11 million in 2019. The related income tax benefits realized were not significant.

Compensation Expense

Compensation expense for restricted stock, restricted stock units, performance units and stock options accounted for as equity awards, which for PPL Electric includes an allocation of PPL Services' expense, was:

			2021						2020						2019
PPL			$	34					$	28					$	35
PPL Electric			11						10						12

The income tax benefit related to above compensation expense was as follows:

			2021						2020						2019
PPL			$	10					$	8					$	10
PPL Electric			3						3						3

At December 31, 2021, unrecognized compensation expense related to nonvested stock awards was:

			Unrecognized Compensation Expense						Weighted- Average Period for Recognition
PPL			$	19					1.7
PPL Electric			2						1.8

12. Retirement and Postemployment Benefits

(All Registrants)

Defined Benefits

Certain employees of PPL's subsidiaries are eligible for pension benefits under non-contributory defined benefit pension plans with benefits based on length of service and final average pay, as defined by the plans. Effective January 1, 2012, PPL's primary defined benefit pension plan was closed to all newly hired salaried employees. Effective July 1, 2014, PPL's primary defined benefit pension plan was closed to all newly hired bargaining unit employees. Newly hired employees are eligible to participate in the PPL Retirement Savings Plan, a 401(k) savings plan with enhanced employer contributions.

The defined benefit pension plans of LKE and its subsidiaries were closed to new salaried and bargaining unit employees hired after December 31, 2005. Employees hired after December 31, 2005 receive additional company contributions above the standard matching contributions to their savings plans. The pension plans sponsored by LKE and LG&E were merged effective January 1, 2020 into the LG&E and KU Pension Plan. The merged plan is sponsored by LKE. LG&E and KU participate in this plan.

PPL and certain of its subsidiaries also provide supplemental retirement benefits to executives and other key management employees through unfunded nonqualified retirement plans.

Certain employees of PPL's subsidiaries are eligible for certain health care and life insurance benefits upon retirement through contributory plans. Effective January 1, 2014, the PPL Postretirement Medical Plan was closed to all newly hired salaried employees. Effective July 1, 2014, the PPL Postretirement Medical Plan was closed to all newly hired bargaining unit employees. Postretirement health benefits may be paid from 401(h) accounts established as part of the PPL Retirement Plan and the LG&E and KU Pension Plan within the PPL Services Corporation Master Trust, funded VEBA trusts and company funds.

(PPL)

The following table provides the components of net periodic defined benefit costs (credits) for PPL's pension and other postretirement benefit plans for the years ended December 31.

			Pension Benefits																								Other Postretirement Benefits
			2021						2020						2019																								2021						2020						2019
Net periodic defined benefit costs (credits):
Service cost			$	56					$	56					$	50																							$	6					$	6					$	6
Interest cost			121						146						164																								16						19						22
Expected return on plan assets			(255)						(246)						(245)																								(23)						(21)						(18)
Amortization of:
Prior service cost (credit)			8						9						8																								1						1						(1)
Actuarial (gain) loss			93						89						56																								(1)						—						1
Net periodic defined benefit costs (credits) prior to settlements and termination benefits			23						54						33																								(1)						5						10
Settlements (a)			18						23						1																								—						—						—
Net periodic defined benefit costs (credits)			$	41					$	77					$	34																							$	(1)					$	5					$	10
Other Changes in Plan Assets and Benefit Obligations Recognized in OCI and Regulatory Assets/Liabilities - Gross:
Settlement			(18)						(23)						(1)																								—						—						—
Net (gain) loss			42						(221)						(121)																								(53)						(6)						(18)
Prior service cost (credit)			3						1						2																								—						5						—
Amortization of:
Prior service (cost) credit			(8)						(9)						(8)																								(1)						(1)						1
Actuarial gain (loss)			(93)						(89)						(56)																								1						—						(1)
Total recognized in OCI and regulatory assets/liabilities			(74)						(341)						(184)																								(53)						(2)						(18)
Total recognized in net periodic defined benefit costs, OCI and regulatory assets/liabilities			$	(33)					$	(264)					$	(150)																							$	(54)					$	3					$	(8)

(a)2021 and 2020 include a settlement charge for a retired PPL executive as well as a settlement charge incurred as a result of the amount of lump sum payment distributions from the LKE qualified pension plan. In accordance with existing regulatory accounting treatment, LG&E and KU have primarily maintained the settlement charge in regulatory assets to be amortized in accordance with existing regulatory practice. The portion of the settlement attributed to LKE's operations outside of the jurisdiction of the KPSC has been charged to expense.

For PPL's pension and postretirement benefits, the amounts recognized in OCI and regulatory assets/liabilities for the years ended December 31 were as follows:

			Pension Benefits																		Other Postretirement Benefits
			2021						2020						2019						2021						2020						2019
OCI			$	(70)					$	(428)					$	(194)					$	(42)					$	(12)					$	(13)
Regulatory assets/liabilities			(4)						87						10						(11)						10						(5)
Total recognized in OCI and regulatory assets/liabilities			$	(74)					$	(341)					$	(184)					$	(53)					$	(2)					$	(18)

(LG&E)

The following table provides the components of net periodic defined benefit costs for LG&E's pension benefit plan for the year ended December 31.

			Pension Benefits
			2019 (a)
Net periodic defined benefit costs (credits):
Service cost			$	1
Interest cost			11
Expected return on plan assets			(21)
Amortization of:
Prior service cost (credit)			5
Actuarial loss (b)			9
Net periodic defined benefit costs (credits) (c)			$	5
Other Changes in Plan Assets and Benefit Obligations Recognized in Regulatory Assets - Gross:
Net (gain) loss			$	(19)
Amortization of:
Prior service credit			(5)
Actuarial gain			(9)
Total recognized in regulatory assets/liabilities			(33)
Total recognized in net periodic defined benefit costs and regulatory assets			$	(28)

(a)The pension plans sponsored by LKE and LG&E were merged effective January 1, 2020 into the LG&E and KU Pension Plan, sponsored by LKE.

(b)As a result of the 2014 Kentucky rate case settlement that became effective July 1, 2015, the difference between actuarial (gain)/loss calculated in accordance with LG&E's pension accounting policy and actuarial (gain)/loss calculated using a 15 year amortization period was $3 million in 2019.

(c)Due to the amount of lump sum payment distributions from the LG&E qualified pension plan, settlement charges of $5 million in 2019 was incurred. In accordance with existing regulatory accounting treatment, LG&E has maintained the settlement charge in regulatory assets. The amount will be amortized in accordance with existing regulatory practice.

(All Registrants)

The following net periodic defined benefit costs (credits) were charged to expense or regulatory assets, excluding amounts charged to construction and other non-expense accounts.

			Pension Benefits																								Other Postretirement Benefits
			2021						2020						2019																								2021						2020						2019
PPL			$	12					$	40					$	18																							$	(1)					$	4					$	8
PPL Electric (a)			(9)						(2)						(4)																								(1)						2						4
LG&E (a) (b)			(1)						4						3																								2						2						2
KU (a) (b)			(3)						1						(1)																								—						—						—

(a)PPL Electric and KU do not directly sponsor any defined benefit plans. PPL Electric and KU were allocated these costs of defined benefit plans sponsored by PPL Services (for PPL Electric) and by LKE (for KU), based on their participation in those plans, which management believes are reasonable. KU is also allocated costs of defined benefit plans from LKS for defined benefit plans sponsored by LKE. Effective January 1, 2020, the LKE and LG&E defined benefit pension plans were merged into a combined defined benefit pension plan, sponsored by LKE, therefore LG&E does not directly sponsor any defined benefit plans. LG&E and KU were allocated these costs of defined benefit plans sponsored by LKE, based on their participation in those plans, which management believes are reasonable. LG&E and KU are also allocated costs of defined benefit plans from LKS for defined benefit plans sponsored by LKE. See Note 15 for additional information on costs allocated to LG&E and KU from LKS.

(b)As a result of the 2014 Kentucky rate case settlement that became effective July 1, 2015, the difference between net periodic defined benefit costs calculated in accordance with LG&E's and KU's pension accounting policy and the net periodic defined benefit costs calculated using a 15 year amortization period for gains and losses is recorded as a regulatory asset. Of the costs charged to Other operation and maintenance, Other Income (Expense) - net or regulatory assets, excluding amounts charged to construction and other non-expense accounts, insignificant amounts for LG&E and KU were recorded as regulatory assets in 2021, $3 million for LG&E and $1 million for KU were recorded as regulatory assets in 2020 and $2 million for LG&E and $1 million for KU were recorded as regulatory assets in 2019.

(PPL and LG&E)

PPL and LG&E use base mortality tables issued by the Society of Actuaries for all defined benefit pension and other postretirement benefit plans. In 2019, PPL and LG&E used RP-2014 base tables with collar and factor adjustments, where applicable, and the MP-2017 mortality improvement scale from 2006 on a generational basis. In 2020, PPL updated to the Pri-2012 base table and the MP-2020 projection scale with varying adjustment factors based on the underlying demographic and geographic differences and experience of the plan participants.

The following weighted-average assumptions were used in the valuation of the benefit obligations at December 31.

			Pension Benefits																		Other Postretirement Benefits
			2021						2020																		2021						2020
PPL
Discount rate			3.15		%				2.92		%																3.13		%				2.84		%
Rate of compensation increase			3.76		%				3.76		%																3.77		%				3.75		%

The following weighted-average assumptions were used to determine the net periodic defined benefit costs for the years ended December 31.

			Pension Benefits																								Other Postretirement Benefits
			2021						2020						2019																								2021						2020						2019
PPL
Discount rate			2.92		%				3.64		%				4.35		%																						2.84		%				3.60		%				4.31		%
Rate of compensation increase			3.76		%				3.79		%				3.79		%																						3.75		%				3.76		%				3.76		%
Expected return on plan assets			7.25		%				7.25		%				7.25		%																						6.48		%				6.44		%				6.46		%
LG&E
Discount rate			—		%				—		%				4.33		%
Expected return on plan assets (a)			—		%				—		%				7.25		%

(a)The expected long-term rates of return for pension and other postretirement benefits are based on management's projections using a best-estimate of expected returns, volatilities and correlations for each asset class. Each plan's specific current and expected asset allocations are also considered in developing a reasonable return assumption.

(PPL)

The following table provides the assumed health care cost trend rates for the years ended December 31:

			2021						2020						2019
PPL
Health care cost trend rate assumed for next year
– obligations			6.25		%				6.50		%				6.60		%
– cost			6.50		%				6.60		%				6.60		%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
– obligations			5.00		%				5.00		%				5.00		%
– cost			5.00		%				5.00		%				5.00		%
Year that the rate reaches the ultimate trend rate
– obligations			2027						2027						2024
– cost			2027						2024						2023

The funded status of PPL's plans at December 31 was as follows:

			Pension Benefits																		Other Postretirement Benefits
			2021						2020																		2021						2020
Change in Benefit Obligation
Benefit Obligation, beginning of period			$	4,251					$	4,146																	$	573					$	557
Service cost			56						56																		6						6
Interest cost			121						146																		16						19
Participant contributions			—						—																		14						15
Plan amendments			2						2																		—						5
Actuarial (gain) loss			(88)						256																		(50)						29
Settlements			(106)						(114)																		—						—
Gross benefits paid			(247)						(241)																		(55)						(58)
Benefit Obligation, end of period			3,989						4,251																		504						573
Change in Plan Assets
Plan assets at fair value, beginning of period			4,068						3,585																		367						340
Actual return on plan assets			125						723																		25						56
Employer contributions			47						115																		18						18
Participant contributions			—						—																		11						11
Settlements			(106)						(114)																		—						—
Gross benefits paid			(247)						(241)																		(54)						(58)
Plan assets at fair value, end of period			3,887						4,068																		367						367
Funded Status, end of period			$	(102)					$	(183)																	$	(137)					$	(206)
Amounts recognized in the Balance Sheets consist of:
Noncurrent asset			$	91					$	24																	$	—					$	—
Current liability			(10)						(18)																		(15)						(22)
Noncurrent liability			(183)						(189)																		(122)						(184)
Net amount recognized, end of period			$	(102)					$	(183)																	$	(137)					$	(206)
Amounts recognized in AOCI and regulatory assets/liabilities (pre-tax) consist of:
Prior service cost (credit)			$	22					$	27																	$	12					$	14
Net actuarial (gain) loss			626						695																		(51)						—
Total			$	648					$	722																	$	(39)					$	14
Total accumulated benefit obligation for defined benefit pension plans			$	3,786					$	4,024

For PPL's pension and other postretirement benefit plans, the amounts recognized in AOCI and regulatory assets/liabilities at December 31 were as follows:

			Pension Benefits												Other Postretirement Benefits
			2021						2020						2021						2020
AOCI			$	239					$	270					$	(2)					$	10
Regulatory assets/liabilities			409						452						(37)						4
Total			$	648					$	722					$	(39)					$	14

The actuarial gain for pension plans in 2021 was primarily related to a change in the discount rate used to measure the benefit obligations of those plans. The actuarial loss for pension plans in 2020 was related to a change in the discount rate used to measure the benefit obligations of those plans offset by gains resulting from the updated mortality assumptions noted above and other demographic assumption changes resulting from the completion of a tri-annual demographic experience study.

The following tables provide information on pension plans where the projected benefit obligation (PBO) or accumulated benefit obligation (ABO) exceed the fair value of plan assets:

			PBO in excess of plan assets
			2021						2020
Projected benefit obligation			$	193					$	1,875
Fair value of plan assets			—						1,668
			ABO in excess of plan assets
			2021						2020
Accumulated benefit obligation			$	177					$	184
Fair value of plan assets			—						—

(PPL Electric)

Although PPL Electric does not directly sponsor any defined benefit plans, it is allocated a portion of the funded status and costs of plans sponsored by PPL Services based on its participation in those plans, which management believes are reasonable. The actuarially determined obligations of current active employees and retirees are used as a basis to allocate total plan activity, including active and retiree costs and obligations. Allocations to PPL Electric resulted in assets/(liabilities) at December 31 as follows:

			2021						2020
Pension			$	42					$	4
Other postretirement benefits			(78)						(99)

(LG&E)

Although LG&E does not directly sponsor any defined benefit plans, it is allocated a portion of the funded status and costs of plans sponsored by LKE. LG&E is also allocated costs of defined benefits plans from LKS for defined benefit plans sponsored by LKE. See Note 15 for additional information on costs allocated to LG&E from LKS. These allocations are based on LG&E's participation in those plans, which management believes are reasonable. The actuarially determined obligations of current active employees and retired employees of LG&E are used as a basis to allocate total plan activity, including active and retiree costs and obligations. Allocations to LG&E resulted in assets/(liabilities) at December 31 as follows:

			2021						2020
Pension			$	85					$	78
Other postretirement benefits			(51)						(68)

(KU)

Although KU does not directly sponsor any defined benefit plans, it is allocated a portion of the funded status and costs of plans sponsored by LKE. KU is also allocated costs of defined benefit plans from LKS for defined benefit plans sponsored by LKE. See Note 15 for additional information on costs allocated to KU from LKS. These allocations are based on KU's participation in those plans, which management believes are reasonable. The actuarially determined obligations of current active employees and retired employees of KU are used as a basis to allocate total plan activity, including active and retiree costs and obligations. Allocations to KU resulted in assets/(liabilities) at December 31 as follows.

			2021						2020
Pension			$	75					$	62
Other postretirement benefits			(6)						(16)

Plan Assets - Pension Plans

(PPL)

PPL's primary legacy pension plan and the pension plan sponsored by LKE are invested in the PPL Services Corporation Master Trust (the Master Trust) that also includes 401(h) accounts that are restricted for certain other postretirement benefit obligations of PPL and LKE. The investment strategy for the Master Trust is to achieve a risk-adjusted return on a mix of assets that, in combination with PPL's funding policy, will ensure that sufficient assets are available to provide long-term growth and liquidity for benefit payments, while also managing the duration of the assets to complement the duration of the liabilities. The Master Trust benefits from a wide diversification of asset types, investment fund strategies and external investment fund managers, and therefore has no significant concentration of risk.

The investment policy of the Master Trust outlines investment objectives and defines the responsibilities of the EBPB, external investment managers, investment advisor and trustee and custodian. The investment policy is reviewed annually by PPL's Board of Directors.

The EBPB created a risk management framework around the trust assets and pension liabilities. This framework considers the trust assets as being composed of three sub-portfolios: growth, immunizing and liquidity portfolios. The growth portfolio is comprised of investments that generate a return at a reasonable risk, including equity securities, certain debt securities and alternative investments. The immunizing portfolio consists of debt securities, generally with long durations, and derivative positions. The immunizing portfolio is designed to offset a portion of the change in the pension liabilities due to changes in interest rates. The liquidity portfolio consists primarily of cash and cash equivalents.

Target allocation ranges have been developed for each portfolio based on input from external consultants with a goal of limiting funded status volatility. The EBPB monitors the investments in each portfolio, and seeks to obtain a target portfolio that emphasizes reduction of risk of loss from market volatility. In pursuing that goal, the EBPB establishes revised guidelines from time to time. EBPB investment guidelines as of the end of 2021 are presented below.

The asset allocation for the trust and the target allocation by portfolio at December 31 are as follows:

			Percentage of trust assets												2021
			2021						2020						Target Asset Allocation
Growth Portfolio			55		%				56		%				55		%
Equity securities			32		%				34		%
Debt securities (a)			13		%				13		%
Alternative investments			10		%				9		%
Immunizing Portfolio			43		%				43		%				43		%
Debt securities (a)			35		%				33		%
Derivatives			8		%				10		%
Liquidity Portfolio			2		%				1		%				2		%
Total			100		%				100		%				100		%

(a)Includes commingled debt funds, which PPL treats as debt securities for asset allocation purposes.

(PPL)

The fair value of net assets in the Master Trust by asset class and level within the fair value hierarchy was:

			December 31, 2021																								December 31, 2020
			Fair Value Measurements Using																								Fair Value Measurements Using
			Total						Level 1						Level 2						Level 3						Total						Level 1						Level 2						Level 3
PPL Services Corporation Master Trust
Cash and cash equivalents			$	266					$	266					$	—					$	—					$	300					$	300					$	—					$	—
Equity securities:
U.S. Equity			41						41						—						—						60						60						—						—
U.S. Equity fund measured at NAV (a)			754						—						—						—						742						—						—						—
International equity fund at NAV (a)			511						—						—						—						566						—						—						—
Commingled debt measured at NAV (a)			677						—						—						—						712						—						—						—

			December 31, 2021																								December 31, 2020
			Fair Value Measurements Using																								Fair Value Measurements Using
			Total						Level 1						Level 2						Level 3						Total						Level 1						Level 2						Level 3
Debt securities:
U.S. Treasury and U.S. government sponsored agency			281						280						1						—						336						335						1						—
Corporate			1,039						—						1,019						20						1,045						—						1,030						15
Other			14						—						14						—						13						—						13						—
Alternative investments:
Real estate measured at NAV (a)			69						—						—						—						76						—						—						—
Private equity measured at NAV (a)			94						—						—						—						68						—						—						—
Hedge funds measured at NAV (a)			236						—						—						—						223						—						—						—
Limited Partnerships at NAV (a)			—						—						—						—						6						—						—						—
Derivatives			35						—						35						—						(37)						—						(37)						—
PPL Services Corporation Master Trust assets, at fair value			4,017						$	587					$	1,069					$	20					4,110						$	695					$	1,007					$	15
Receivables and payables, net (b)			25																								116
401(h) accounts restricted for other postretirement benefit obligations			(155)																								(158)
Total PPL Services Corporation Master Trust pension assets			$	3,887																							$	4,068

(a)In accordance with accounting guidance certain investments that are measured at fair value using the net asset value per share (NAV), or its equivalent, practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.

(b)Receivables and payables, net represents amounts for investments sold/purchased but not yet settled along with interest and dividends earned but not yet received.

A reconciliation of the Master Trust assets classified as Level 3 at December 31, 2021 is as follows:

			Corporate debt																		Total
Balance at beginning of period			$	15																	$	15
Purchases, sales and settlements			5																		5
Balance at end of period			$	20																	$	20

A reconciliation of the Master Trust assets classified as Level 3 at December 31, 2020 is as follows:

			Corporate debt						Insurance contracts												Total
Balance at beginning of period			$	20					$	4											$	24
Purchases, sales and settlements			(5)						(4)												(9)
Balance at end of period			$	15					$	—											$	15

The fair value measurements of cash and cash equivalents are based on the amounts on deposit.

The market approach is used to measure fair value of equity securities. The fair value measurements of equity securities (excluding commingled funds), which are generally classified as Level 1, are based on quoted prices in active markets. These securities represent actively and passively managed investments that are managed against various equity indices.

Investments in commingled equity and debt funds are categorized as equity securities. Investments in commingled equity funds include funds that invest in U.S. and international equity securities. Investments in commingled debt funds include funds that invest in a diversified portfolio of emerging market debt obligations, as well as funds that invest in investment grade long-duration fixed-income securities.

The fair value measurements of debt securities are generally based on evaluations that reflect observable market information, such as actual trade information for identical securities or for similar securities, adjusted for observable differences. The fair value of debt securities is generally measured using a market approach, including the use of pricing models, which incorporate observable inputs. Common inputs include benchmark yields, relevant trade data, broker/dealer bid/ask prices, benchmark securities and credit valuation adjustments. When necessary, the fair value of debt securities is measured using the income approach, which incorporates similar observable inputs as well as payment data, future predicted cash flows, collateral

performance and new issue data. For the Master Trust, these securities represent investments in securities issued by U.S. Treasury and U.S. government sponsored agencies; investments securitized by residential mortgages, auto loans, credit cards and other pooled loans; investments in investment grade and non-investment grade bonds issued by U.S. companies across several industries; investments in debt securities issued by foreign governments and corporations.

Investments in real estate represent an investment in a partnership whose purpose is to manage investments in core U.S. real estate properties diversified geographically and across major property types (e.g., office, industrial, retail, etc.). The strategy is focused on properties with high occupancy rates with quality tenants. This results in a focus on high income and stable cash flows with appreciation being a secondary factor. Core real estate generally has a lower degree of leverage when compared with more speculative real estate investing strategies. The partnership has limitations on the amounts that may be redeemed based on available cash to fund redemptions. Additionally, the general partner may decline to accept redemptions when necessary to avoid adverse consequences for the partnership, including legal and tax implications, among others. The fair value of the investment is based upon a partnership unit value.

Investments in private equity represent interests in partnerships in multiple early-stage venture capital funds and private equity fund of funds that use a number of diverse investment strategies. The partnerships have limited lives of at least 10 years, after which liquidating distributions will be received. Prior to the end of each partnership's life, the investment cannot be redeemed with the partnership; however, the interest may be sold to other parties, subject to the general partner's approval. At December 31, 2021, the Master Trust had unfunded commitments of $111 million that may be required during the lives of the partnerships. Fair value is based on an ownership interest in partners' capital to which a proportionate share of net assets is attributed.

Investments in limited partnerships include Term Asset-Backed Securities Loan Facility (TALF) funds. The Master Trust received notice that the TALF funds are liquidating in an orderly manner and distributing capital back to the partners. Therefore, the Master Trust has no unfunded commitment related to the TALF funds. Fair value of the funds is based on an ownership interest in partners' capital to which a proportionate share of net assets is attributed.

Investments in hedge funds represent investments in a fund of hedge funds. Hedge funds seek a return utilizing a number of diverse investment strategies. The strategies, when combined aim to reduce volatility and risk while attempting to deliver positive returns under most market conditions. Major investment strategies for the fund of hedge funds include long/short equity, tactical trading, event driven, and relative value. Shares may be redeemed with 45 days prior written notice. The fund is subject to short term lockups and other restrictions. The fair value for the fund has been estimated using the net asset value per share.

The fair value measurements of derivative instruments 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. These securities primarily represent investments in treasury futures, total return swaps, interest rate swaps and swaptions (the option to enter into an interest rate swap), which are valued based on quoted prices, changes in the value of the underlying exposure or on the swap details, such as swap curves, notional amount, index and term of index, reset frequency, volatility and payer/receiver credit ratings.

In 2019, obligations underlying an investment in an immediate participation guaranteed group annuity contract, classified as Level 3, were assumed by the insurance company, with a residual amount remaining in the general account of the insurer that was paid into the master trust or distributed to participants in 2020.

Plan Assets - Other Postretirement Benefit Plans

The investment strategy with respect to other postretirement benefit obligations is to fund VEBA trusts and/or 401(h) accounts with voluntary contributions and to invest in a tax efficient manner. Excluding the 401(h) accounts included in the Master Trust, other postretirement benefit plans are invested in a mix of assets for long-term growth with an objective of earning returns that provide liquidity as required for benefit payments. These plans benefit from diversification of asset types, investment fund strategies and investment fund managers and, therefore, have no significant concentration of risk. Equity securities include investments in domestic large-cap commingled funds. Ownership interests in commingled funds that invest entirely in debt securities are classified as equity securities, but treated as debt securities for asset allocation and target allocation purposes. Ownership interests in money market funds are treated as cash and cash equivalents for asset allocation and target allocation purposes. The asset allocation for the PPL VEBA trusts and the target allocation, by asset class, at December 31 are detailed below.

			Percentage of plan assets												Target Asset Allocation
			2021						2020						2021
Asset Class
U.S. Equity securities			45		%				42		%				45		%
Debt securities (a)			52		%				55		%				50		%
Cash and cash equivalents (b)			3		%				3		%				5		%
Total			100		%				100		%				100		%

(a)Includes commingled debt funds and debt securities.

(b)Includes money market funds.

The fair value of assets in the other postretirement benefit plans by asset class and level within the fair value hierarchy was:

			December 31, 2021																								December 31, 2020
			Fair Value Measurement Using																								Fair Value Measurement Using
			Total						Level 1						Level 2						Level 3						Total						Level 1						Level 2						Level 3
Money market funds			$	6					$	6					$	—					$	—					$	5					$	5					$	—					$	—
U.S. Equity securities:
Large-cap equity fund measure at NAV (a)			96						—						—						—						89						—						—						—
Commingled debt fund measured at NAV (a)			75						—						—						—						77						—						—						—
Debt securities:
Corporate bonds			38						—						38						—						37						—						37						—
U.S. Treasury and U.S. government sponsored agency			—						—						—						—						2						—						2						—
Total VEBA trust assets, at fair value			215						$	6					$	38					$	—					210						$	5					$	39					$	—
Receivables and payables, net (b)			(3)																								(1)
401(h) account assets			155																								158
Total other postretirement benefit plan assets			$	367																							$	367

(a)In accordance with accounting guidance certain investments that are measured at fair value using the net asset value per share (NAV), or its equivalent, practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.

(b)Receivables and payables represent amounts for investments sold/purchased but not yet settled along with interest and dividends earned but not yet received.

Investments in money market funds represent investments in funds that invest primarily in a diversified portfolio of investment grade money market instruments, including, but not limited to, commercial paper, notes, repurchase agreements and other evidences of indebtedness with a maturity not exceeding 13 months from the date of purchase. The primary objective of the fund is a level of current income consistent with stability of principal and liquidity. Redemptions can be made daily on this fund.

Investments in large-cap equity securities represent investments in a passively managed equity index fund that invests in securities and a combination of other collective funds. Fair value measurements are not obtained from a quoted price in an active market but are based on firm quotes of net asset values per share as provided by the trustee of the fund. Redemptions can be made daily on this fund.

Investments in commingled debt securities represent investments in a fund that invests in a diversified portfolio of investment grade long-duration fixed income securities. Redemptions can be made daily on these funds.

Investments in corporate bonds represent investment in a diversified portfolio of investment grade long-duration fixed income securities. The fair value of debt securities are generally based on evaluations that reflect observable market information, such as actual trade information for identical securities or for similar securities, adjusted for observable differences.

Investments in U.S. Treasury and U.S. government sponsored agencies represent securities included in a portfolio of investment-grade long-duration fixed income. The fair value of debt securities are generally based on evaluations that reflect observable market information, such as actual trade information for identical securities or for similar securities, adjusted for observable differences.

Expected Cash Flows - Defined Benefit Plans (PPL)

PPL does not plan to contribute to its pension plans in 2022, as PPL's defined benefit pension plans have the option to utilize available prior year credit balances to meet current and future contribution requirements.

PPL sponsors various non-qualified supplemental pension plans for which no assets are segregated from corporate assets. PPL expects to make approximately $10 million of benefit payments under these plans in 2022.

PPL is not required to make contributions to its other postretirement benefit plans but has historically funded these plans in amounts equal to the postretirement benefit costs recognized. Continuation of this past practice would cause PPL to contribute $22 million to its other postretirement benefit plans in 2022.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid by the plans and the following federal subsidy payments are expected to be received by PPL.

									Other Postretirement
			Pension						Benefit Payment						Expected Federal Subsidy
2022			$	207					$	44					$	1
2023			207						42						—
2024			204						41						—
2025			204						40						—
2026			202						38						—
2027-2030			946						176						1

Savings Plans (All Registrants)

Substantially all employees of PPL's subsidiaries are eligible to participate in deferred savings plans (401(k)s). Employer contributions to the plans were:

			2021						2020						2019
PPL			$	29					$	29					$	30
PPL Electric			5						6						6
LG&E			7						6						6
KU			5						5						5

13. Jointly Owned Facilities

(PPL, LG&E and KU)

At December 31, 2021 and 2020, the Balance Sheets reflect the owned interests in the generating plants listed below.

						Ownership Interest						Electric Plant						Accumulated Depreciation						Construction Work in Progress
PPL
			December 31, 2021
			Trimble County Unit 1			75.00		%				$	457					$	79					$	—
			Trimble County Unit 2			75.00		%				1,360						247						121
			December 31, 2020
			Trimble County Unit 1			75.00		%				$	440					$	64					$	2
			Trimble County Unit 2			75.00		%				1,340						227						106

						Ownership Interest						Electric Plant						Accumulated Depreciation						Construction Work in Progress
LG&E
			December 31, 2021
			E.W. Brown Units 6-7			38.00		%				$	53					$	24					$	—
			Paddy's Run Unit 13 & E.W. Brown Unit 5			53.00		%				51						25						—
			Trimble County Unit 1			75.00		%				457						79						—
			Trimble County Unit 2			14.25		%				379						57						64
			Trimble County Units 5-6			29.00		%				36						15						—
			Trimble County Units 7-10			37.00		%				81						34						—
			Cane Run Unit 7			22.00		%				125						19						—
			E.W. Brown Solar Unit			39.00		%				10						2						—
			Solar Share			44.00		%				2						—						—
			December 31, 2020
			E.W. Brown Units 6-7			38.00		%				$	46					$	22					$	—
			Paddy's Run Unit 13 & E.W. Brown Unit 5			53.00		%				51						22						—
			Trimble County Unit 1			75.00		%				440						64						2
			Trimble County Unit 2			14.25		%				370						51						54
			Trimble County Units 5-6			29.00		%				33						14						1
			Trimble County Units 7-10			37.00		%				77						31						1
			Cane Run Unit 7			22.00		%				123						15						—
			E.W. Brown Solar Unit			39.00		%				10						2						—
			Solar Share			44.00		%				2						—						—
KU
			December 31, 2021
			E.W. Brown Units 6-7			62.00		%				$	88					$	40					$	—
			Paddy's Run Unit 13 & E.W. Brown Unit 5			47.00		%				45						22						—
			Trimble County Unit 2			60.75		%				981						190						57
			Trimble County Units 5-6			71.00		%				84						36						—
			Trimble County Units 7-10			63.00		%				133						57						—
			Cane Run Unit 7			78.00		%				444						70						—
			E.W. Brown Solar Unit			61.00		%				16						4						—
			Solar Share			56.00		%				3						—						—
			December 31, 2020
			E.W. Brown Units 6-7			62.00		%				$	76					$	37					$	—
			Paddy's Run Unit 13 & E.W. Brown Unit 5			47.00		%				45						20						—
			Trimble County Unit 2			60.75		%				970						176						52
			Trimble County Units 5-6			71.00		%				77						33						4
			Trimble County Units 7-10			63.00		%				129						53						2
			Cane Run Unit 7			78.00		%				443						57						2
			E.W. Brown Solar Unit			61.00		%				16						3						—
			Solar Share			56.00		%				2						—						—

Each subsidiary owning these interests provides its own funding for its share of the facility. Each receives a portion of the total output of the generating plants equal to its percentage ownership. The share of fuel and other operating costs associated with the plants is included in the corresponding operating expenses on the Statements of Income.

14. Commitments and Contingencies

Energy Purchase Commitments (PPL, LG&E and KU)

LG&E and KU enter into purchase contracts to supply the coal and natural gas requirements for generation facilities and LG&E's retail natural gas supply operations. These contracts include the following commitments:

Contract Type			Maximum Maturity Date
Natural Gas Fuel			2024
Natural Gas Retail Supply			2023
Coal			2026
Coal Transportation and Fleeting Services			2027
Natural Gas Transportation			2026

LG&E and KU have a power purchase agreement with OVEC expiring in June 2040. See footnote (c) to the table in "Guarantees and Other Assurances" below for information on the OVEC power purchase contract, including recent developments in credit or debt conditions relating to OVEC. Future obligations for power purchases from OVEC are demand payments, comprised of debt-service payments and contractually-required reimbursements of plant operating, maintenance and other expenses, and are projected as follows:

			LG&E						KU						Total
2022			$	23					$	10					$	33
2023			23						10						33
2024			22						10						32
2025			22						10						32
2026			22						10						32
Thereafter			218						96						314
Total			$	330					$	146					$	476

LG&E and KU had total energy purchases under the OVEC power purchase agreement for the years ended December 31 as follows:

			2021						2020						2019
LG&E			$	13					$	12					$	15
KU			6						6						7
Total			$	19					$	18					$	22

Legal Matters

(All Registrants)

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

Talen Litigation (PPL)

Background

In September 2013, one of PPL's former subsidiaries, PPL Montana entered into an agreement to sell its hydroelectric generating facilities. In June 2014, PPL and PPL Energy Supply, the parent company of PPL Montana, entered into various definitive agreements with affiliates of Riverstone to spin off PPL Energy Supply and ultimately combine it with Riverstone's competitive power generation businesses to form a stand-alone company named Talen Energy. In November 2014, after executing the spinoff agreements but prior to the closing of the spinoff transaction, PPL Montana closed the sale of its hydroelectric generating facilities. Subsequently, on June 1, 2015, the spinoff of PPL Energy Supply was completed. Following the spinoff transaction, PPL had no continuing ownership interest in or control of PPL Energy Supply. In connection with the spinoff transaction, PPL Montana became Talen Montana, LLC (Talen Montana), a subsidiary of Talen Energy. Talen Energy Marketing also became a subsidiary of Talen Energy as a result of the June 2015 spinoff of PPL Energy Supply. Talen Energy has owned and operated both Talen Montana and Talen Energy Marketing since the spinoff. At the time of the spinoff, affiliates of Riverstone acquired a 35% ownership interest in Talen Energy. Riverstone subsequently acquired the remaining interests in Talen Energy in a take private transaction in December 2016.

Talen Montana Retirement Plan and Talen Energy Marketing, LLC, Individually and on Behalf of All Others Similarly Situated v. PPL Corporation et al.

On October 29, 2018, Talen Montana Retirement Plan and Talen Energy Marketing filed a putative class action complaint on behalf of current and contingent creditors of Talen Montana who allegedly suffered harm or allegedly will suffer reasonably foreseeable harm as a result of the November 2014 distribution of proceeds from the sale of then-PPL Montana's hydroelectric generating facilities. The action was filed in the Sixteenth Judicial District of the State of Montana, Rosebud County, against PPL and certain of its affiliates and current and former officers and directors (Talen Putative Class Action). Plaintiff asserts claims for, among other things, fraudulent transfer, both actual and constructive; recovery against subsequent transferees; civil conspiracy; aiding and abetting tortious conduct; and unjust enrichment. Plaintiff is seeking avoidance of the purportedly fraudulent transfer, unspecified damages, including punitive damages, the imposition of a constructive trust, and other relief. In December 2018, PPL removed the Talen Putative Class Action from the Sixteenth Judicial District of the State of Montana to the United States District Court for the District of Montana, Billings Division (MT Federal Court). In January 2019, the plaintiff moved to remand the Talen Putative Class Action back to state court, and dismissed without prejudice all current and former PPL Corporation directors from the case. In September 2019, the MT Federal Court granted plaintiff's motion to remand the case back to state court. Although, the PPL defendants petitioned the Ninth Circuit Court of Appeals to grant an appeal of the remand decision, in November 2019, the Ninth Circuit Court of Appeals denied that request and in December 2019, Talen Montana Retirement Plan filed a Second Amended Complaint in the Sixteenth Judicial District of the State of Montana, Rosebud County, which removed Talen Energy Marketing as a plaintiff. In January 2020, PPL defendants filed a motion to dismiss the Second Amended Complaint or, in the alternative, to stay the proceedings pending the resolution of the below mentioned Delaware Action. The Court held a hearing on June 24, 2020 regarding the motions. On September 11, 2020, the Court granted PPL defendants' alternative Motion for a Stay of the proceedings.

PPL Corporation et al. vs. Riverstone Holdings LLC, Talen Energy Corporation et al.

On November 30, 2018, PPL, certain PPL affiliates, and certain current and former officers and directors (PPL plaintiffs) filed a complaint in the Court of Chancery of the State of Delaware seeking various forms of relief against Riverstone, Talen Energy and certain of their affiliates (Delaware Action), in response to and as part of the defense strategy for an action filed by Talen Montana, LLC (the Talen Direct Action, since dismissed) and the Talen Putative Class Action described above (together, the Montana Actions) originally filed in Montana state court in October 2018. In the complaint, the PPL plaintiffs ask the Delaware Court of Chancery for declaratory and injunctive relief. This includes a declaratory judgment that, under the separation agreement governing the spinoff of PPL Energy Supply, all related claims that arise must be heard in Delaware; that the statute of limitations in Delaware and the spinoff agreement bar these claims at this time; that PPL is not liable for the claims in either the Talen Direct Action or the Talen Putative Class Action as PPL Montana was solvent at all relevant times; and that the separation agreement requires that Talen Energy indemnify PPL for all losses arising from the debts of Talen Montana, among other things. PPL's complaint also seeks damages against Riverstone for interfering with the separation agreement and against Riverstone affiliates for breach of the implied covenant of good faith and fair dealing. The complaint was subsequently amended on January 11, 2019 and March 20, 2019, to include, among other things, claims related to indemnification with respect to the Montana Actions, request a declaration that the Montana Actions are time-barred under the spinoff agreements, and allege additional facts to support the tortious interference claim. In April 2019, the defendants filed motions to dismiss the amended complaint. In July 2019, the Court heard oral arguments from the parties regarding the motions to dismiss, and in October 2019, the Delaware Court of Chancery issued an opinion sustaining all of the PPL plaintiffs' claims except for the claim for breach of implied covenant of good faith and fair dealing. As a result of the dismissal of the Talen Direct Action in December 2019, in January 2020, Talen Energy filed a new motion to dismiss five of the remaining eight claims in the amended complaint. The Court heard oral argument on the motion to dismiss on May 28, 2020, and on June 22, 2020, issued an opinion denying the motion in its entirety. Discovery is proceeding, and the parties have filed certain motions and cross-motions for summary judgment, which are not yet scheduled for hearing. The trial was previously scheduled for February 2022, but has been rescheduled for July 2022.

With respect to each of the Talen-related matters described above, PPL believes that the 2014 distribution of proceeds was made in compliance with all applicable laws and that PPL Montana was solvent at all relevant times. Additionally, the agreements entered into in connection with the spinoff, which PPL and affiliates of Talen Energy and Riverstone negotiated and executed prior to the 2014 distribution, directly address the treatment of the proceeds from the sale of PPL Montana's hydroelectric generating facilities; in those agreements, Talen Energy and Riverstone definitively agreed that PPL was entitled to retain the proceeds.

PPL believes that it has meritorious defenses to the claims made in the Talen Putative Class Action and intends to continue to vigorously defend against this action. The Talen Putative Class Action was stayed at an early stage of litigation. While the

Delaware Action is progressing, at this time PPL cannot predict the outcome of either of these matters or estimate the range of possible losses, if any, that PPL might incur as a result of the claims, although they could be material.

Cane Run Environmental Claims (PPL and LG&E)

In December 2013, six residents, on behalf of themselves and others similarly situated, filed a class action complaint against LG&E and PPL in the U.S. District Court for the Western District of Kentucky (U.S. District Court) alleging violations of the Clean Air Act, RCRA, and common law claims of nuisance, trespass and negligence. In July 2014, the U.S. District Court dismissed the RCRA claims and all but one Clean Air Act claim, but declined to dismiss the common law tort claims. In February 2017, the U.S. District Court dismissed PPL as a defendant and dismissed the final federal claim against LG&E, and in April 2017, issued an Order declining to exercise supplemental jurisdiction on the state law claims dismissing the case in its entirety. In June 2017, the plaintiffs filed a class action complaint in Jefferson County, Kentucky Circuit Court, against LG&E alleging state law nuisance, negligence and trespass tort claims. The plaintiffs sought compensatory and punitive damages for alleged property damage due to purported plant emissions on behalf of a class of residents within one to three miles of the plant. On January 8, 2020, the Jefferson Circuit Court issued an order denying the plaintiffs’ request for class certification. On January 14, 2020, the plaintiffs filed a notice of appeal in the Kentucky Court of Appeals. On December 11, 2020, the Court of Appeals issued an order affirming the lower court’s denial of class certification. In December 2020, plaintiffs filed a petition for discretionary review with the Kentucky Supreme Court. On April 20, 2021, the Kentucky Supreme Court denied further review of the lower court order. The case was remanded to the Jefferson Circuit Court for the claims of the three remaining petitioners. Settlements with two of the three remaining petitioners were reached with none of the settlements having or expected to have a significant impact on LG&E's operations or financial condition.

E.W. Brown Environmental Claims (PPL and KU)

In July 2017, the Kentucky Waterways Alliance and the Sierra Club filed a citizen suit complaint against KU in the U.S. District Court for the Eastern District of Kentucky (U.S. District Court) alleging discharges at the E.W. Brown plant in violation of the Clean Water Act and the plant's water discharge permit and alleging contamination that may present an imminent and substantial endangerment in violation of the RCRA. The plaintiffs' suit relates to prior notices of intent to file a citizen suit submitted in October and November 2015 and October 2016. These plaintiffs sought injunctive relief ordering KU to take all actions necessary to comply with the Clean Water Act and RCRA, including ceasing the discharges in question, abating effects associated with prior discharges and eliminating the alleged imminent and substantial endangerment. These plaintiffs also sought assessment of civil penalties and an award of litigation costs and attorney fees. In December 2017, the U.S. District Court issued an Order dismissing the Clean Water Act and RCRA complaints against KU in their entirety. In January 2018, the plaintiffs appealed the dismissal Order to the U.S. Court of Appeals for the Sixth Circuit. In September 2018, the U.S. Court of Appeals for the Sixth Circuit issued its ruling affirming the lower court's decision to dismiss the Clean Water Act claims but reversing its dismissal of the RCRA claims against KU and remanding the latter to the U.S. District Court. In January 2019, KU filed an answer to plaintiffs’ complaint in the U.S. District Court. In May 2021, the U.S. District Court issued an order granting KU's motion for summary judgment and dismissed the case. In June 2021, the plaintiffs appealed the district court's order to the U.S. Court of Appeals for the Sixth Circuit. In September 2021, the parties entered into a settlement agreement, providing for dismissal of the appellate proceedings and release of other claims.

KU is undertaking extensive remedial measures at the E.W. Brown plant including closure of the former ash pond, implementation of a groundwater remedial action plan and performance of a corrective action plan including aquatic study of adjacent surface waters and risk assessment. The aquatic study and risk assessment are being undertaken pursuant to a 2017 agreed Order with the Kentucky Energy and Environment Cabinet (KEEC). KU conducted sampling of Herrington Lake in 2017 and 2018. In June 2019, KU submitted to the KEEC the required aquatic study and risk assessment, conducted by an independent third-party consultant, finding that discharges from the E.W. Brown plant have not had any significant impact on Herrington Lake and that the water in the lake is safe for recreational use and meets safe drinking water standards. On May 31, 2021, the KEEC approved the report and released a response to public comments. On August 6, 2021, KU submitted a Supplemental Remedial Alternatives Analysis (SRAA) report to the KEEC that outlines proposed additional fish, water, and sediment testing. KU has submitted a response to the KEEC's comments and expects to undertake the proposed testing in the spring of 2022.

Air (PPL and LG&E)

Sulfuric Acid Mist Emissions

In June 2016, the EPA issued a notice of violation under the Clean Air Act alleging that LG&E violated applicable rules relating to sulfuric acid mist emissions at its Mill Creek plant. The notice alleges failure to install proper controls, failure to operate the facility consistent with good air pollution control practice and causing emissions exceeding applicable requirements or constituting a nuisance or endangerment. LG&E believes it has complied with applicable regulations during the relevant time period. On July 31, 2020, the U.S. Department of Justice and Louisville Metro Air Pollution Control District filed a complaint in the U.S. District Court for the Western District of Kentucky alleging violations specified in the EPA notice of violation and seeking civil penalties and injunctive relief. In October 2020, LG&E filed a motion to dismiss the complaint. In December 2020, the U.S. Department of Justice and the Louisville Metro Air Pollution Control District filed an amended complaint. In February 2021, LG&E filed a renewed motion to dismiss regarding the amended complaint. In September 2021, the parties reached a tentative agreement providing for dismissal of the court action, the payment by LG&E of a penalty amount and performance of a supplemental environmental project (SEP). The parties have entered a Consent Decree, which is awaiting approval from the U.S. District Court for the Western District of Kentucky. PPL and LG&E are unable to predict the final outcome of this matter but do not believe the matter, including the agreed penalty and SEP, will have a significant impact on LG&E's operations or financial condition.

Water/Waste (PPL, LG&E and KU)

ELGs

In 2015, the EPA finalized ELGs for wastewater discharge permits for new and existing steam electricity generating facilities. These guidelines require deployment of additional control technologies providing physical, chemical and biological treatment and mandate operational changes including "no discharge" requirements for certain wastewaters. The implementation date for individual generating stations was to be determined by the states on a case-by-case basis according to criteria provided by the EPA. Legal challenges to the final rule were consolidated before the U.S. Court of Appeals for the Fifth Circuit. In April 2017, the EPA announced that it would grant petitions for reconsideration of the rule. In September 2017, the EPA issued a rule to postpone the compliance date for certain requirements. On October 13, 2020, the EPA published final revisions to its best available technology standards for certain wastewaters and potential extensions to compliance dates (the Reconsideration Rule). The rule is expected to be implemented by the states or applicable permitting authorities in the course of their normal permitting activities. LG&E and KU are currently implementing responsive compliance strategies and schedules. Certain aspects of these compliance plans and estimates relate to developments in state water quality standards, which are separate from the ELG rule or its implementation. Certain costs are included in the Registrants' capital plans and expected to be recovered from customers through rate recovery mechanisms, but additional costs and recovery will depend on further regulatory developments at the state level. In August 2021, the EPA published a notice of rulemaking announcing that it will propose revisions to the Reconsideration Rule and determine "whether more stringent limitations and standards are appropriate." Compliance with the Reconsideration Rule is required during the pendency of the rulemaking process.

CCRs

In 2015, the EPA issued a final rule governing management of CCRs which include fly ash, bottom ash and sulfur dioxide scrubber wastes. The CCR Rule imposes extensive new requirements for certain CCR impoundments and landfills, including public notifications, location restrictions, design and operating standards, groundwater monitoring and corrective action requirements, and closure and post-closure care requirements, and specifies restrictions relating to the beneficial use of CCRs. In July 2018, the EPA issued a final rule extending the deadline for closure of certain impoundments and adopting other substantive changes. In August 2018, the D.C. Circuit Court of Appeals vacated and remanded portions of the CCR Rule. In December 2019, the EPA addressed the deficiencies identified by the court and proposed amendments to change the closure deadline. In August 2020, the EPA published a final rule extending the deadline to initiate closure to April 11, 2021, while providing for certain extensions. The EPA is conducting ongoing rulemaking actions regarding various other amendments to the rule. Certain ongoing legal challenges to various provisions of the CCR Rule have been held in abeyance pending review by the EPA pursuant to the President's executive order. PPL, LG&E, and KU are monitoring the EPA’s ongoing efforts to refine and implement the regulatory program under the CCR Rule. In January 2022, the EPA issued several proposed regulatory determinations, facility notifications, and public announcements which indicate increased scrutiny by the EPA to determine the adequacy of measures taken by facility owners and operators to achieve closure of CCR surface impoundments and landfills. In particular, the agency indicated that it will focus on certain practices which it views as posing a threat of continuing groundwater contamination. Future guidance, regulatory determinations, rulemakings, and other developments could potentially require revisions to current LG&E and KU compliance plans including additional monitoring and remediation at surface

impoundments and landfills, the cost of which could be substantial. PPL, LG&E and KU are unable to predict the outcome of the ongoing litigation, rulemaking, and regulatory determinations or potential impacts on current LG&E and KU compliance plans. The Registrants are currently finalizing closure plans and schedules.

In January 2017, Kentucky issued a new state rule relating to CCR management, effective May 2017, aimed at reflecting the requirements of the federal CCR rule. As a result of a subsequent legal challenge, in January 2018, the Franklin County, Kentucky Circuit Court issued an opinion invalidating certain procedural elements of the rule. LG&E and KU presently operate their facilities under continuing permits authorized under the former program and do not currently anticipate material impacts as a result of the judicial ruling. Associated costs are expected to be subject to rate recovery.

LG&E and KU received KPSC approval for a compliance plan providing for the closure of impoundments at the Mill Creek, Trimble County, E.W. Brown, and Ghent stations, and construction of process water management facilities at those plants. In addition to the foregoing measures required for compliance with the federal CCR rule, KU also received KPSC approval for its plans to close impoundments at the retired Green River, Pineville and Tyrone plants to comply with applicable state law. As of April 2021, LG&E and KU have commenced closure of all of the subject impoundments and have completed closure of some of their smaller impoundments. LG&E and KU generally expect to complete impoundment closures within five years of commencement, although a longer period may be required to complete closure of some facilities. Associated costs are expected to be subject to rate recovery.

In connection with the final CCR rule, LG&E and KU recorded adjustments to existing AROs beginning in 2015 and continue to record adjustments as required. See Note 20 for additional information. Further changes to AROs, current capital plans or operating costs may be required as estimates are refined based on closure developments, groundwater monitoring results, and regulatory or legal proceedings. Costs relating to this rule are expected to be subject to rate recovery.

(All Registrants)

Superfund and Other Remediation

PPL Electric, LG&E and KU are potentially responsible for investigating and remediating contamination under the federal Superfund program and similar state programs. Actions are under way at certain sites including former coal gas manufacturing plants in Pennsylvania and Kentucky previously owned or operated by, or currently owned by predecessors or affiliates of, PPL Electric, LG&E and KU. PPL Electric is potentially responsible for a share of clean-up costs at certain sites including the Columbia Gas Plant site and the Brodhead site. Cleanup actions have been or are being undertaken at these sites as requested by governmental agencies, the costs of which have not been and are not expected to be significant to PPL Electric.

At December 31, 2021 and December 31, 2020, PPL Electric had a recorded liability of $10 million representing its best estimate of the probable loss incurred to remediate the sites identified above. Depending on the outcome of investigations at identified sites where investigations have not begun or been completed, or developments at sites for which information is incomplete, additional costs of remediation could be incurred. PPL Electric, LG&E and KU lack sufficient information about such additional sites to estimate any potential liability or range of reasonably possible losses, if any, related to these sites. Such costs, however, are not currently expected to be significant.

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

Regulatory Issues

See Note 7 for information on regulatory matters related to utility rate regulation.

Electricity - Reliability Standards

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

The Reliability Standards have the force and effect of law and apply to certain users of the bulk electric system, including electric utility companies, generators and marketers. Under the Federal Power Act, the FERC may assess civil penalties for certain violations.

PPL Electric, LG&E and KU monitor their compliance with the Reliability Standards and self-report or self-log potential violations of applicable reliability requirements whenever identified, and submit accompanying mitigation plans, as required. The resolution of a small number of potential violations is pending. Penalties incurred to date have not been significant. Any Regional Reliability Entity determination concerning the resolution of violations of the Reliability Standards remains subject to the approval of the NERC and the FERC.

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

Gas - Security Directives (PPL and LG&E)

In May and July of 2021, the Department of Homeland Security’s (DHS) Transportation Security Administration (TSA) released two security directives applicable to certain notified owners and operators of natural gas pipeline facilities (including local distribution companies) that TSA has determined to be critical. The first security directive required notified owners/operators to implement cybersecurity incident reporting to the DHS, designate a cybersecurity coordinator, and perform a gap assessment of current entity cybersecurity practices against certain voluntary TSA security guidelines and report relevant results and proposed mitigation to applicable DHS agencies. The second security directive requires notified entities to implement a significant number of specified cyber security controls and processes. LG&E does not believe the security directives will have a significant impact on LG&E’s operations or financial condition.

Other

Guarantees and Other Assurances

(All Registrants)

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

(PPL)

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

(All Registrants)

The table below details guarantees provided as of December 31, 2021. "Exposure" represents the estimated maximum potential amount of future payments that could be required to be made under the guarantee. The probability of expected payment/performance under each of these guarantees is remote. For reporting purposes, on a consolidated basis, the guarantees of PPL include the guarantees of its subsidiary Registrants.

			Exposure at December 31, 2021						Expiration Date
PPL
Indemnifications related to the sale of the U.K. utility business						(a)
Indemnifications related to certain tax liabilities related to the sale of the U.K. utility business			£	50		(b)			2028
LG&E and KU
LG&E and KU obligation of shortfall related to OVEC						(c)

(a)PPL WPD Limited agreed to provide a standard indemnity regarding “leakage” amounts, which included amounts taken out of the sold assets through dividends, return of capital, bonuses or similar method, received or waived by WPD (or its affiliates defined as members of the Sellers Group in the SPA) during the period from April 1, 2020 through June 14, 2021, except such amounts permitted under the WPD SPA. The amount of the cap on this indemnity was £7,881 million, the amount paid to PPL WPD Limited at closing. This indemnification expired in December 2021 and no claims have been made.

(b)PPL WPD Limited entered into a Tax Deed dated June 9, 2021 in which it agreed to a tax indemnity regarding certain potential tax liabilities of the entities sold with respect to periods prior to the completion of the sale, subject to customary exclusions and limitations. Because National Grid Holdings

One plc, the buyer, agreed to purchase indemnity insurance, the amount of the cap on the indemnity for these liabilities is £1, except with respect to certain surrenders of tax losses, for which the amount of the cap on the indemnity is £50 million.

(c)Pursuant to the OVEC power purchase contract, LG&E and KU are obligated to pay for their share of OVEC's excess debt service, post-retirement and decommissioning costs, as well as any shortfall from amounts included within a demand charge designed and expected to cover these costs over the term of the contract. PPL's proportionate share of OVEC's outstanding debt was $92 million at December 31, 2021, consisting of LG&E's share of $64 million and KU's share of $28 million. The maximum exposure and the expiration date of these potential obligations are not presently determinable. See "Energy Purchase Commitments" above for additional information on the OVEC power purchase contract.

In March 2018, a sponsor with a 4.85% pro-rata share of OVEC obligations filed for bankruptcy under Chapter 11 and, in August 2018, received a rejection order for the OVEC power purchase contract in the bankruptcy proceeding. OVEC and other entities challenged the contract rejection, the bankruptcy plan confirmation and regulatory aspects of the plan in various forums. In May 2020, OVEC and the relevant sponsor announced a settlement resolving all disputed matters in the bankruptcy and other proceedings, including providing that the sponsor will withdraw its request to reject the power purchase agreement. The settlement was implemented in July 2020.

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

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

Risks and Uncertainties (All Registrants)

The COVID-19 pandemic has disrupted the U.S. and global economies and continues to present challenges to businesses, communities, workforces, markets and increasingly to supply chains. In the U.S. and throughout the world, governmental authorities have taken actions to contain the spread of the virus and mitigate known or foreseeable impacts. In the Registrants’ service territories, mitigation measures have included quarantines, stay-at-home orders, travel restrictions, reduced operations or closures of businesses, schools and governmental agencies, and executive, legislative or regulatory actions to address health or other pandemic-related concerns. Many restrictions that had been imposed have been lifted but may be reenacted in the future. These actions have the potential to adversely impact the Registrants' business and operations, especially if these measures remain in effect for a prolonged period of time.

To date, there has been no material impact on the Registrants’ operations, financial condition, liquidity or on their supply chain as a result of COVID-19; however, the duration and severity of the outbreak and its ultimate effects on the global economy, the financial markets, or the Registrants’ workforce, customers and suppliers are uncertain. A protracted slowdown of broad sectors of the economy, prolonged or pervasive restrictions on businesses and their workforces, or significant changes in legislation or regulatory policy to address the COVID-19 pandemic all present significant risks to the Registrants. These or other unpredictable events resulting from the pandemic could reduce customer demand for electricity and gas, impact the Registrants’ employees and supply chains, result in an increase in certain costs, delay payments or increase bad debts, or result in changes in the fair value of their assets and liabilities, which could materially and adversely affect the Registrants’ business, results of operations, financial condition or liquidity.

15. Related Party Transactions

Wholesale Sales and Purchases (LG&E and KU)

LG&E and KU jointly dispatch their generation units with the lowest cost generation used to serve their retail customers. When LG&E has excess generation capacity after serving its own retail customers and its generation cost is lower than that of KU, KU purchases electricity from LG&E and vice versa. These transactions are reflected in the Statements of Income as "Electric revenue from affiliate" and "Energy purchases from affiliate" and are recorded at a price equal to the seller's fuel cost plus any split savings. Savings realized from such intercompany transactions are shared equally between both companies. The volume of energy each company has to sell to the other is dependent on its retail customers' needs and its available generation.

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

PPL Services, PPL EU Services, prior to its merger into PPL Services as of December 31, 2021, and LKS provide the Registrants and each other with administrative, management and support services. For all services companies, the costs of directly assignable and attributable services are charged to the respective recipients as direct support costs. General costs that cannot be directly attributed to a specific entity are allocated and charged to the respective recipients as indirect support

costs. PPL Services and PPL EU Services use a three-factor methodology that includes the applicable recipients' invested capital, operation and maintenance expenses and number of employees to allocate indirect costs. PPL Services may also use a ratio of overall direct and indirect costs or a weighted average cost ratio. LKS bases its indirect allocations on the subsidiaries' number of employees, total assets, revenues, number of customers and/or other statistical information. PPL Services, PPL EU Services and LKS charged the following amounts for the years ended December 31, including amounts applied to accounts that are further distributed between capital and expense on the books of the recipients, based on methods that are believed to be reasonable.

			2021						2020						2019
PPL Electric from PPL Services			$	54					$	50					$	59
PPL Electric from PPL EU Services			222						176						152
LG&E from LKS			169						170						160
KU from LKS			179						180						178

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

Intercompany Borrowings

(PPL Electric)

PPL Energy Funding maintains a $1,200 million revolving line of credit with a PPL Electric subsidiary. At December 31, 2021, PPL Energy Funding had borrowings outstanding in the amount of $499 million. This balance is reflected in "Notes receivable from affiliate" on the PPL Electric balance sheet. No balance was outstanding at December 31, 2020. The interest rates on borrowings are equal to one-month LIBOR plus a spread. Interest income is reflected in "Interest Income from Affiliate" on the Income Statements.

(LG&E)

LG&E participates in an intercompany money pool agreement whereby LKE and/or KU make available to LG&E funds up to the difference between LG&E's FERC borrowing limit and LG&E's commercial paper limit at an interest rate based on the lower of a market index of commercial paper issues and two additional rate options based on LIBOR. LG&E's money pool borrowing limit is $325 million. At December 31, 2021, LG&E had borrowings outstanding from LKE in the amount of $324 million. This balance is reflected in "Notes payable with affiliates" on the LG&E balance sheets. No balances were outstanding at December 31, 2020.

(KU)

KU participates in an intercompany money pool agreement whereby LKE and/or LG&E make available to KU funds up to the difference between KU's FERC borrowing limit and KU's commercial paper limit at an interest rate based on the lower of a market index of commercial paper issues and two additional rate options based on LIBOR. KU's money pool borrowing limit is $300 million. At December 31, 2021, KU had borrowings outstanding from LKE in the amount of $294 million. This balance is reflected in "Notes payable with affiliates" on the KU balance sheets. No balances were outstanding at December 31, 2020.

VEBA Funds Receivable (PPL Electric)

In May 2018, PPL received a favorable private letter ruling from the IRS permitting a transfer of excess funds from the PPL Bargaining Unit Retiree Health Plan VEBA to a new subaccount within the VEBA, to be used to pay medical claims of active bargaining unit employees. Based on PPL Electric's participation in PPL’s Other Postretirement Benefit plan, PPL Electric was allocated a portion of the excess funds from PPL Services. These funds have been recorded as an intercompany receivable on the Balance Sheets. The receivable balance decreases as PPL Electric pays incurred medical claims and is reimbursed by PPL Services. The intercompany receivable balance associated with these funds was $11 million as of December 31, 2021, of which $10 million was reflected in "Accounts receivable from affiliates" and $1 million was reflected in "Other noncurrent assets" on the Balance Sheets. The intercompany receivable balance associated with these funds was $22 million as of December 31, 2020, of which $10 million was reflected in "Accounts receivable from affiliates" and $12 million was reflected in "Other noncurrent assets" on the Balance Sheets.

Other (PPL Electric, LG&E and KU)

See Note 1 for discussions regarding the intercompany tax sharing agreement (for PPL Electric, LG&E and KU) and intercompany allocations of stock-based compensation expense (for PPL Electric). For PPL Electric, LG&E and KU, see Note 12 for discussions regarding intercompany allocations associated with defined benefits.

16. Other Income (Expense) - net

(PPL)

The components of "Other Income (Expense) - net" for the years ended December 31, were:

			2021						2020						2019
Other Income
Defined benefit plans - non-service credits (Note 12)			$	21					$	(2)					$	8
Interest income			12						9						15
AFUDC - equity component			18						20						23
Miscellaneous			10						7						7
Total Other Income			61						34						53
Other Expense
Charitable contributions			14						3						17
Miscellaneous			32						29						22
Total Other Expense			46						32						39
Other Income (Expense) - net			$	15					$	2					$	14

(PPL Electric)

The components of "Other Income (Expense) - net" for the years ended December 31, were:

			2021						2020						2019
Other Income
Defined benefit plans - non-service credits (Note 12)			$	9					$	4					$	4
Interest income			—						2						2
AFUDC - equity component			18						19						23
Total Other Income			27						25						29
Other Expense
Charitable contributions			3						3						3
Miscellaneous			3						4						1
Total Other Expense			6						7						4
Other Income (Expense) - net			$	21					$	18					$	25

17. Fair Value Measurements

(All Registrants)

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). A market approach (generally, data from market transactions), an income approach (generally, present value techniques and option-pricing models), and/or a cost approach (generally, replacement cost) are used to measure the fair value of an asset or liability, as appropriate. These valuation approaches incorporate inputs such as observable, independent market data and/or unobservable data that management believes are predicated on the assumptions market participants would use to price an asset or liability. These inputs may incorporate, as applicable, certain risks such as nonperformance risk, which includes credit risk. The fair value of a group of financial assets and liabilities is measured on a net basis. See Note 1 for information on the levels in the fair value hierarchy.

Recurring Fair Value Measurements

The assets and liabilities measured at fair value were:

			December 31, 2021																								December 31, 2020
			Total						Level 1						Level 2						Level 3						Total						Level 1						Level 2						Level 3
PPL
Assets
Cash and cash equivalents			$	3,571					$	3,571					$	—					$	—					$	442					$	442					$	—					$	—
Restricted cash and cash equivalents (a)			1						1						—						—						1						1						—						—
Special use funds (a):
Money market fund			2						2						—						—						—						—						—						—
Commingled debt fund measured at NAV (b)			22						—						—						—						26						—						—						—
Commingled equity fund measured at NAV (b)			21						—						—						—						25						—						—						—
Total special use funds			45						2						—						—						51						—						—						—
Total assets			$	3,617					$	3,574					$	—					$	—					$	494					$	443					$	—					$	—
Liabilities
Price risk management liabilities (c):
Interest rate swaps			$	18					$	—					$	18					$	—					$	23					$	—					$	23					$	—
Total price risk management liabilities			$	18					$	—					$	18					$	—					$	23					$	—					$	23					$	—
PPL Electric
Assets
Cash and cash equivalents			$	21					$	21					$	—					$	—					$	40					$	40					$	—					$	—
Total assets			$	21					$	21					$	—					$	—					$	40					$	40					$	—					$	—
LG&E
Assets
Cash and cash equivalents			$	9					$	9					$	—					$	—					$	7					$	7					$	—					$	—
Total assets			$	9					$	9					$	—					$	—					$	7					$	7					$	—					$	—
Liabilities
Price risk management liabilities:
Interest rate swaps			$	18					$	—					$	18					$	—					$	23					$	—					$	23					$	—
Total price risk management liabilities			$	18					$	—					$	18					$	—					$	23					$	—					$	23					$	—
KU
Assets
Cash and cash equivalents			$	13					$	13					$	—					$	—					$	22					$	22					$	—					$	—
Total assets			$	13					$	13					$	—					$	—					$	22					$	22					$	—					$	—

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

(b)In accordance with accounting guidance, certain investments that are measured at fair value using net asset value per share (NAV), or its equivalent, have not been classified in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.

(c)Current portion is included in "Other current liabilities" and noncurrent portion is included in "Other deferred credits and noncurrent liabilities" on the Balance Sheets.

Special Use Funds

(PPL)

The special use funds are investments restricted for paying active union employee medical costs. In 2018, PPL received a favorable private letter ruling from the IRS permitting a transfer of excess funds from the PPL Bargaining Unit Retiree Health Plan VEBA to a new subaccount within the VEBA to be used to pay medical claims of active bargaining unit employees. The funds are invested primarily in commingled debt and equity funds measured at NAV and are classified as investments in equity securities. Changes in the fair value of the funds are recorded to the Statement of Income.

Price Risk Management Assets/Liabilities - Interest Rate Swaps/Foreign Currency Contracts/Cross-Currency Swaps (PPL, LG&E and KU)

To manage interest rate risk, PPL, LG&E and KU use interest rate contracts such as forward-starting swaps, floating-to-fixed swaps and fixed-to-floating swaps. To manage foreign currency exchange risk, PPL uses foreign currency contracts such as forwards, options, and cross-currency swaps that contain characteristics of both interest rate and foreign currency contracts. An income approach is used to measure the fair value of these contracts, utilizing readily observable inputs, such as forward interest rates (e.g., LIBOR and government security rates) and forward foreign currency exchange rates (e.g., GBP), as well as inputs that may not be observable, such as credit valuation adjustments. In certain cases, market information cannot practicably be obtained to value credit risk and therefore internal models are relied upon. These models use projected probabilities of default and estimated recovery rates based on historical observances. When the credit valuation adjustment is significant to the overall valuation, the contracts are classified as Level 3.

Financial Instruments Not Recorded at Fair Value (All Registrants)

The carrying amounts of long-term debt on the Balance Sheets and their estimated fair values are set forth below. Long-term debt is classified as Level 2. The effect of third-party credit enhancements is not included in the fair value measurement.

			December 31, 2021												December 31, 2020
			Carrying Amount (a)						Fair Value						Carrying Amount (a)						Fair Value
PPL			$	11,140					$	12,955					$	14,689					$	17,774
PPL Electric			4,484						5,272						4,236						5,338
LG&E			2,006						2,363						2,007						2,499
KU			2,618						3,120						2,618						3,334

(a)Amounts are net of debt issuance costs.

The carrying amounts of other current financial instruments (except for long-term debt due within one year) approximate their fair values because of their short-term nature.

18. Derivative Instruments and Hedging Activities

Risk Management Objectives

(All Registrants)

PPL has a risk management policy approved by the Board of Directors to manage market risk associated with commodities, interest rates on debt issuances and foreign exchange (including price, liquidity and volumetric risk) and credit risk (including non-performance risk and payment default risk). The Risk Management Committee, comprised of senior management and chaired by the Senior Director-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, verification of risk and transaction limits, value-at-risk analyses (VaR, 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) and the coordination and reporting of the Enterprise Risk Management program.

Market Risk

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

The following summarizes the market risks that affect PPL and its subsidiaries.

Interest Rate Risk

• PPL and its subsidiaries are exposed to interest rate risk associated with forecasted fixed-rate and existing floating-rate debt issuances. Prior to the sale of the U.K. utility business on June 14, 2021, PPL and WPD held over-the-counter cross currency swaps to limit exposure to market fluctuations on interest and principal payments from changes in foreign currency exchange rates and interest rates. PPL and LG&E utilize over-the-counter interest rate swaps to limit exposure to market fluctuations on floating-rate debt. PPL, LG&E and KU utilize forward starting interest rate swaps to hedge changes in benchmark interest rates, when appropriate, in connection with future debt issuances.

• PPL and its subsidiaries are exposed to interest rate risk associated with debt securities and derivatives held by defined benefit plans. This risk is significantly mitigated to the extent that the plans are sponsored at, or sponsored on behalf of, the regulated domestic utilities and, prior to the sale of the U.K. utility business on June 14, 2021, for certain plans at WPD due to the recovery methods in place.

Foreign Currency Risk (PPL)

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

(All Registrants)

Commodity Price Risk

PPL is exposed to commodity price risk through its domestic subsidiaries as described below.

• PPL Electric is required to purchase electricity to fulfill its obligation as a PLR. Potential commodity price risk is insignificant and mitigated through its PUC-approved cost recovery mechanism and full-requirement supply agreements to serve its PLR customers which transfer the risk to energy suppliers.

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

Volumetric Risk

Volumetric risk is the risk related to the changes in volume of retail sales due to weather, economic conditions or other factors. PPL is exposed to volumetric risk through its subsidiaries as described below.

• WPD was exposed to volumetric risk which was significantly mitigated as a result of the method of regulation in the U.K.

• PPL Electric, LG&E and KU are exposed to volumetric risk on retail sales, mainly due to weather and other economic conditions for which there is limited mitigation between rate cases.

Equity Securities Price Risk

• PPL and its subsidiaries are exposed to equity securities price risk associated with the fair value of the defined benefit plans' assets. This risk is significantly mitigated due to the recovery methods in place.

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

Credit Risk

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

PPL is exposed to credit risk from "in-the-money" transactions with counterparties, as well as additional credit risk through certain of its subsidiaries, as discussed below.

In the event a supplier of PPL Electric, LG&E or KU defaults on its obligation, those Registrants would be required to seek replacement power or replacement fuel in the market. In general, subject to regulatory review or other processes, appropriate incremental costs incurred by these entities would be recoverable from customers through applicable rate mechanisms, thereby mitigating the financial risk for these entities.

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

Master Netting Arrangements (PPL, LG&E and KU)

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

PPL had no obligation and an immaterial obligation to return cash collateral under master netting arrangements at December 31, 2021 and 2020.

PPL had no obligation to post cash collateral under master netting arrangements at December 31, 2021 and 2020.

LG&E and KU had no obligation to return cash collateral under master netting arrangements at December 31, 2021 and 2020.

LG&E and KU had no cash collateral posted under master netting arrangements at December 31, 2021 and 2020.

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

Interest Rate Risk

(All Registrants)

PPL and its subsidiaries issue debt to finance their operations, which exposes them to interest rate risk. A variety of financial derivative instruments are utilized to adjust the mix of fixed and floating interest rates in their debt portfolios, adjust the duration of the debt portfolios and lock in benchmark interest rates in anticipation of future financing, when appropriate. Risk limits under PPL's risk management program are designed to balance risk exposure to volatility in interest expense and changes in the fair value of the debt portfolio due to changes in benchmark interest rates. In addition, the interest rate risk of certain subsidiaries is potentially mitigated as a result of the existing regulatory framework or the timing of rate cases.

Cash Flow Hedges (PPL)

Interest rate risks include exposure to adverse interest rate movements for outstanding variable rate debt and for future anticipated financings. Financial interest rate swap contracts that qualify as cash flow hedges may be entered into to hedge floating interest rate risk associated with both existing and anticipated debt issuances. PPL had no such contracts at December 31, 2021.

As of December 31, 2021, PPL had no aggregate notional value in cross-currency interest rate swap contracts. In March 2021,

$500 million of WPD's U.S. dollar-denominated senior notes were repaid prior to maturity and $500 million notional value of

cross-currency interest rate swap contracts matured.

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

For 2021, 2020 and 2019, PPL had no cash flow hedges reclassified into earnings associated with discontinued cash flow hedges.

At December 31, 2021, the amount of accumulated net unrecognized after-tax gains (losses) on qualifying derivatives expected to be reclassified into earnings during the next 12 months is insignificant. Amounts are reclassified as the hedged interest expense is recorded.

Economic Activity (PPL and LG&E)

LG&E enters into interest rate swap contracts that economically hedge interest payments. Because realized gains and losses from the swaps, including terminated swap contracts, are recoverable through regulated rates, any subsequent changes in fair value of these derivatives are included in regulatory assets or liabilities until they are realized as interest expense. Realized gains and losses are recognized in "Interest Expense" on the Statements of Income at the time the underlying hedged interest expense is recorded. At December 31, 2021, LG&E held contracts with a notional amount of $64 million that mature in 2033.

Foreign Currency Risk

(PPL)

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

Net Investment Hedges

PPL entered into foreign currency contracts on behalf of a subsidiary to protect the value of a portion of its net investment in WPD. There were no contracts outstanding at December 31, 2021.

At December 31, 2020, PPL had $33 million of accumulated net investment hedge after tax gains (losses) that were included in the foreign currency translation adjustment component of AOCI. The remaining balance was transferred out of AOCI and

realized in discontinued operations as a result of the sale of the U.K. utility business.

Economic Activity

PPL entered into foreign currency contracts on behalf of subsidiaries to economically hedge foreign-denominated anticipated earnings and anticipated transactions, including the sale of its U.K. utility business.

Accounting and Reporting

(All Registrants)

All derivative instruments are recorded at fair value on the Balance Sheet as an asset or liability unless the Normal Purchase Normal Sale scope exception (NPNS) is elected. NPNS contracts include certain full-requirement purchase contracts and other physical purchase contracts. Changes in the fair value of derivatives not designated as NPNS are recognized in earnings unless specific hedge accounting criteria are met and designated as such, except for the changes in fair values of LG&E's interest rate swaps that are recognized as regulatory assets or regulatory liabilities. See Note 7 for amounts recorded in regulatory assets and regulatory liabilities at December 31, 2021 and 2020.

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

(PPL)

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

			December 31, 2021																								December 31, 2020
			Derivatives designated as hedging instruments												Derivatives not designated as hedging instruments												Derivatives designated as hedging instruments												Derivatives not designated as hedging instruments
			Assets						Liabilities						Assets						Liabilities						Assets						Liabilities						Assets						Liabilities
Current:
Price Risk Management
Assets/Liabilities (a):
Interest rate swaps (b)			$	—					$	—					$	—					$	1					$	—					$	—					$	—					$	2
Cross-currency swaps (c)			—						—						—						—						94						—						—						—
Foreign currency contracts (c)			—						—						—						—						—						—						—						137
Total current			—						—						—						1						94						—						—						139
Noncurrent:
Price Risk Management
Assets/Liabilities (a):
Interest rate swaps (b)			—						—						—						17						—						—						—						21
Cross-currency swaps (c)			—						—						—						—						52						—						—						—
Total noncurrent			—						—						—						17						52						—						—						21
Total derivatives			$	—					$	—					$	—					$	18					$	146					$	—					$	—					$	160

(a)Current portion is included in "Price risk management assets" and "Other current liabilities" and noncurrent portion is included in "Price risk management assets" and "Other deferred credits and noncurrent liabilities" on the Balance Sheets.

(b)Excludes accrued interest, if applicable.

(c)Included in "Current assets held for sale" and "Current liabilities held for sale" on the Balance Sheet.

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

Derivative Relationships						Derivative Gain (Loss) Recognized in OCI						Location of Gain (Loss) Recognized in Income on Derivative						Gain (Loss) Reclassified from AOCI into Income
2021
Cash Flow Hedges:
Interest rate swaps						$	—					Interest Expense						$	11
												Income (Loss) from Discontinued operations (net of taxes)						(2)
Cross-currency swaps						(50)						Income (Loss) from Discontinued operations (net of taxes)						(39)
Total						$	(50)											$	(30)
Net Investment Hedges:
Foreign currency contracts in Discontinued operations						$	1
2020
Cash Flow Hedges:
Interest rate swaps						$	(9)					Interest Expense						$	(8)
												Income (Loss) from Discontinued operations (net of taxes)						(2)
Cross-currency swaps						(15)						Income (Loss) from Discontinued operations (net of taxes)						(22)
Total						$	(24)											$	(32)
Net Investment Hedges:
Foreign currency contracts in Discontinued operations						$	1
2019
Cash Flow Hedges:
Interest rate swaps						$	(30)					Interest Expense						$	(9)
Cross-currency swaps						17						Income (Loss) from Discontinued operations (net of taxes)						(9)
Total						$	(13)											$	(18)
Net Investment Hedges:
Foreign currency contracts in Discontinued operations						$	2

Derivatives Not Designated as Hedging Instruments						Location of Gain (Loss) Recognized in Income on Derivative						2021						2020						2019
Foreign currency contracts						Income (Loss) from Discontinued Operations (net of taxes)						$	(266)					$	(98)					$	(14)
Interest rate swaps						Interest Expense						(2)						(5)						(5)
						Total						$	(268)					$	(103)					$	(19)

Derivatives Not Designated as Hedging Instruments						Location of Gain (Loss) Recognized as Regulatory Liabilities/Assets						2021						2020						2019
Interest rate swaps						Regulatory assets - noncurrent						$	5					$	(2)					$	(1)

The following table presents the effect of cash flow hedge activity on the Statement of Income for the year ended December 31, 2021:

			Location and Amount of Gain (Loss) Recognized in Income on Hedging Relationships
			Interest Expense						Income (Loss) from Discontinued Operations (net of income taxes)
Total income and expense line items presented in the income statement in which the effect of cash flow hedges are recorded			$	918					$	(1,498)
The effects of cash flow hedges:
Gain (Loss) on cash flow hedging relationships:
Interest rate swaps:
Amount of gain (loss) reclassified from AOCI to income			11						(2)
Cross-currency swaps:
Hedged items			—						39
Amount of gain (loss) reclassified from AOCI to income			—						(39)

The following table presents the effect of cash flow hedge activity on the Statement of Income for the year ended December 31, 2020:

			Location and Amount of Gain (Loss) Recognized in Income on Hedging Relationships
			Interest Expense						Income (Loss) from Discontinued Operations (net of income taxes)
Total income and expense line items presented in the income statement in which the effect of cash flow hedges are recorded			$	634					$	829
The effects of cash flow hedges:
Gain (Loss) on cash flow hedging relationships:
Interest rate swaps:
Amount of gain (loss) reclassified from AOCI to income			(8)						(2)
Cross-currency swaps:
Hedged items			—						22
Amount of gain (loss) reclassified from AOCI to income			—						(22)

The following table presents the effect of cash flow hedge activity on the Statement of Income for the year ended December 31,2019:

			Location and Amount of Gain (Loss) Recognized in Income on Hedging Relationships
			Interest Expense						Income (Loss) from Discontinued Operations (net of income taxes)
Total income and expense line items presented in the income statement in which the effect of cash flow hedges are recorded			$	621					$	1,010
The effects of cash flow hedges:
Gain (Loss) on cash flow hedging relationships:
Interest rate swaps:
Amount of gain (loss) reclassified from AOCI to income			(9)						—
Cross-currency swaps:
Hedged items			—						9
Amount of gain (loss) reclassified from AOCI to income			—						(9)

(LG&E)

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

						December 31, 2021												December 31, 2020
						Assets						Liabilities						Assets						Liabilities
Current:
Price Risk Management
Assets/Liabilities:
Interest rate swaps						$	—					$	1					$	—					$	2
Total current						—						1						—						2
Noncurrent:
Price Risk Management
Assets/Liabilities:
Interest rate swaps						—						17						—						21
Total noncurrent						—						17						—						21
Total derivatives						$	—					$	18					$	—					$	23

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

Derivative Instruments						Location of Gain (Loss)						2021						2020						2019
Interest rate swaps						Interest Expense						$	(2)					$	(5)					$	(5)

Derivative Instruments						Location of Gain (Loss)						2021						2020						2019
Interest rate swaps						Regulatory assets - noncurrent						$	5					$	(2)					$	(1)

(PPL, LG&E and KU)

Offsetting Derivative Instruments

PPL, LG&E and KU or certain of their subsidiaries have master netting arrangements in place and also enter into agreements pursuant to which they purchase or sell certain energy and other products. Under the agreements, upon termination of the agreement as a result of a default or other termination event, the non-defaulting party typically would have a right to set off amounts owed under the agreement against any other obligations arising between the two parties (whether under the agreement or not), whether matured or contingent and irrespective of the currency, place of payment or place of booking of the obligation.

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

						Assets																								Liabilities
												Eligible for Offset																								Eligible for Offset
						Gross						Derivative Instruments						Cash Collateral Received						Net						Gross						Derivative Instruments						Cash Collateral Pledged						Net
December 31, 2021
Treasury Derivatives
PPL						$	—					$	—					$	—					$	—					$	18					$	—					$	—					$	18
LG&E						—						—						—						—						18						—						—						18
December 31, 2020
Treasury Derivatives
PPL						$	146					$	34					$	—					$	112					$	160					$	34					$	—					$	126
LG&E						—						—						—						—						23						—						—						23

Credit Risk-Related Contingent Features

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

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

(PPL)

At December 31, 2021, there were no derivative contracts in a net liability position that contain credit risk-related contingent features, collateral posted on those positions and the related effect of a decrease in credit ratings below investment grade.

19. Goodwill and Other Intangible Assets

Goodwill

(PPL)

Goodwill for the Kentucky Regulated segment was $662 million at December 31, 2021 and 2020. Goodwill for Corporate and Other was $53 million at December 31, 2021 and 2020. There were no accumulated impairment losses related to goodwill.

Other Intangible Assets

(PPL)

The gross carrying amount and the accumulated amortization of other intangible assets were:

			December 31, 2021												December 31, 2020
			Gross Carrying Amount						Accumulated Amortization						Gross Carrying Amount						Accumulated Amortization
Subject to amortization:
Contracts (a)			$	125					$	90					$	125					$	82
Land rights and easements			406						135						401						133
Licenses and other			20						6						21						4
Total subject to amortization			551						231						547						219
Not subject to amortization due to indefinite life:
Land rights and easements			17						—						17						—
Other			6						—						6						—
Total not subject to amortization due to indefinite life			23						—						23						—
Total			$	574					$	231					$	570					$	219

(a)Gross carrying amount in 2021 and 2020 includes the fair value at the acquisition date of the OVEC power purchase contract with terms favorable to market recognized as a result of the 2010 acquisition of LKE by PPL.

Current intangible assets are included in "Other current assets" and long-term intangible assets are included in "Other intangibles" on the Balance Sheets.

Amortization expense was as follows:
			2021						2020						2019
Intangible assets with no regulatory offset			$	9					$	7					$	6
Intangible assets with regulatory offset			8						8						9
Total			$	17					$	15					$	15

Amortization expense for each of the next five years is estimated to be:

			2022						2023						2024						2025						2026
Intangible assets with no regulatory offset			$	5					$	5					$	5					$	5					$	5
Intangible assets with regulatory offset			8						8						9						9						2
Total			$	13					$	13					$	14					$	14					$	7

(PPL Electric)

The gross carrying amount and the accumulated amortization of other intangible assets were:

			December 31, 2021												December 31, 2020
			Gross Carrying Amount						Accumulated Amortization						Gross Carrying Amount						Accumulated Amortization
Subject to amortization:
Land rights and easements			$	382					$	130					$	379					$	129
Licenses and other			2						1						2						1
Total subject to amortization			384						131						381						130
Not subject to amortization due to indefinite life:
Land rights and easements			17						—						17						—
Total			$	401					$	131					$	398					$	130

Intangible assets are shown as "Intangibles" on the Balance Sheets.

Amortization expense was as follows:

			2021						2020						2019
Intangible assets with no regulatory offset			$	4					$	4					$	4

Amortization expense for each of the next five years is estimated to be:

			2022						2023						2024						2025						2026
Intangible assets with no regulatory offset			$	4					$	4					$	4					$	4					$	4

(LG&E)

The gross carrying amount and the accumulated amortization of other intangible assets were:

			December 31, 2021												December 31, 2020
			Gross Carrying Amount						Accumulated Amortization						Gross Carrying Amount						Accumulated Amortization
Subject to amortization:
Land rights and easements			$	7					$	1					$	7					$	1
OVEC power purchase agreement (a)			86						62						86						57
Total subject to amortization			$	93					$	63					$	93					$	58

(a) Gross carrying amount represents the fair value at the acquisition date of the OVEC power purchase contract recognized as a result of the 2010 acquisition by PPL. An offsetting regulatory liability was recorded related to this contract, which is being amortized over the same period as the intangible asset, eliminating any income statement impact. See Note 7 for additional information.

Long-term intangible assets are presented as "Other intangibles" on the Balance Sheets.

Amortization expense was as follows:

			2021						2020						2019
Intangible assets with regulatory offset			$	5					$	6					$	6

Amortization expense for each of the next five years is estimated to be:

			2022						2023						2024						2025						2026
Intangible assets with regulatory offset			$	6					$	6					$	6					$	6					$	1

(KU)

The gross carrying amount and the accumulated amortization of other intangible assets were:

			December 31, 2021												December 31, 2020
			Gross Carrying Amount						Accumulated Amortization						Gross Carrying Amount						Accumulated Amortization
Subject to amortization:
Land rights and easements			$	16					$	4					$	15					$	3
OVEC power purchase agreement (a)			39						28						39						25
Total subject to amortization			$	55					$	32					$	54					$	28

(a) Gross carrying amount represents the fair value at the acquisition date of the OVEC power purchase contract recognized as a result of the 2010 acquisition by PPL. An offsetting regulatory liability was recorded related to this contract, which is being amortized over the same period as the intangible asset, eliminating any income statement impact. See Note 7 for additional information.

Long-term intangible assets are presented as "Other intangibles" on the Balance Sheets.

Amortization expense was as follows:

			2021						2020						2019
Intangible assets with no regulatory offset			$	1					$	—					$	—
Intangible assets with regulatory offset			3						2						3

Amortization expense for each of the next five years is estimated to be:

			2022						2023						2024						2025						2026
Intangible assets with regulatory offset			$	2					$	2					$	3					$	3					$	1

20. Asset Retirement Obligations

(PPL and PPL Electric)

PPL Electric has identified legal retirement obligations for the retirement of certain transmission assets that could not be reasonably estimated due to indeterminable settlement dates. These assets are located on rights-of-way that allow the grantor to require PPL Electric to relocate or remove the assets. Since this option is at the discretion of the grantor of the right-of-way, PPL Electric is unable to determine when these events may occur.

(PPL, LG&E and KU)

PPL's, LG&E's and KU's ARO liabilities are primarily related to CCR closure costs. See Note 14 for information on the CCR rule. LG&E also has AROs related to natural gas mains and wells. LG&E's and KU's transmission and distribution lines largely operate under perpetual property easement agreements, which do not generally require restoration upon removal of the property. Therefore, no material AROs are recorded for transmission and distribution assets. For LG&E and KU, all ARO accretion and depreciation expenses are reclassified as a regulatory asset or regulatory liability. ARO regulatory assets associated with certain CCR projects are amortized to expense in accordance with regulatory approvals. For other AROs, deferred accretion and depreciation expense is recovered through cost of removal.

The changes in the carrying amounts of AROs were as follows:

			PPL												LG&E												KU
			2021						2020						2021						2020						2021						2020
ARO at beginning of period			$	182					$	215					$	67					$	73					$	115					$	142
Accretion			16						15						5						5						11						10
Changes in estimated timing or cost			56						40						40						13						16						27
Obligations settled			(65)						(88)						(28)						(24)						(37)						(64)
ARO at end of period			$	189					$	182					$	84					$	67					$	105					$	115

21. Accumulated Other Comprehensive Income (Loss)

(PPL)

The after-tax changes in AOCI by component for the years ended December 31 were as follows:

																											Defined benefit plans
			Foreign currency translation adjustments												Unrealized gains (losses) on qualifying derivatives												Prior service costs						Actuarial gain (loss)						Total
PPL
December 31, 2018			$	(1,533)											$	(7)											$	(19)					$	(2,405)					$	(3,964)
Amounts arising during the year			108												(11)												(1)						(592)						(496)
Reclassifications from AOCI			—												13												2						87						102
Net OCI during the year			108												2												1						(505)						(394)
December 31, 2019			$	(1,425)											$	(5)											$	(18)					$	(2,910)					$	(4,358)
Amounts arising during the year			267												(19)												(1)						(341)						(94)
Reclassifications from AOCI			—												24												3						205						232
Net OCI during the year			267												5												2						(136)						138
December 31, 2020			$	(1,158)											$	—											$	(16)					$	(3,046)					$	(4,220)

																											Defined benefit plans
			Foreign currency translation adjustments												Unrealized gains (losses) on qualifying derivatives												Prior service costs						Actuarial gain (loss)						Total
Amounts arising during the year			372												(39)												—						(1)						332
Reclassifications from AOCI			—												25												2						126						153
Reclassifications from AOCI due to the sale of the U.K. utility business (Note 9)			786												15												8						2,769						3,578
Net OCI during the year			1,158												1												10						2,894						4,063
December 31, 2021			$	—											$	1											$	(6)					$	(152)					$	(157)

The following table presents PPL's gains (losses) and related income taxes for reclassifications from AOCI for the years ended December 31, 2021, 2020 and 2019. The defined benefit plan components of AOCI are not reflected in their entirety in the statement of income; rather, they are included in the computation of net periodic defined benefit costs (credits) and subject to capitalization. See Note 12 for additional information.

						PPL
Details about AOCI						2021						2020						2019						Affected Line Item on the Statements of Income
Qualifying derivatives
Interest rate swaps						$	11					$	(8)					$	(9)					Interest Expense
						(2)						(2)						—						Income (Loss) from Discontinued Operations (net of income taxes)
Cross-currency swaps						(39)						(22)						(9)						Income (Loss) from Discontinued Operations (net of income taxes)
Total Pre-tax						(30)						(32)						(18)
Income Taxes						5						8						5
Total After-tax						(25)						(24)						(13)
Defined benefit plans
Prior service costs						(3)						(4)						(3)
Net actuarial loss						(159)						(256)						(109)
Total Pre-tax						(162)						(260)						(112)
Income Taxes						34						52						23
Total After-tax						(128)						(208)						(89)
Sale of the U.K. utility business (Note 9)
Foreign currency translation adjustments						(646)						—						—						Income (Loss) from Discontinued Operations (net of income taxes)
Qualifying derivatives						(15)						—						—						Income (Loss) from Discontinued Operations (net of income taxes)
Defined benefit plans						(3,577)						—						—						Income (Loss) from Discontinued Operations (net of income taxes)
Total Pre-tax						(4,238)						—						—
Income Taxes						660						—						—
Total After-tax						(3,578)						—						—
Total reclassifications during the year						$	(3,731)					$	(232)					$	(102)