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

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

Results of Operations

(All Registrants)

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

The following should be read in conjunction with the Registrants' Condensed Consolidated Financial Statements and the accompanying Notes and with the Registrants' 2022 Form 10-K. Capitalized terms and abbreviations are defined in the glossary. Dollars are in millions, except per share data, unless otherwise noted.

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

"Overview" provides a description of each Registrant's business strategy and a discussion of important financial and operational developments.
"Results of Operations" for all Registrants includes a "Statement of Income Analysis," which discusses significant changes in principal line items on the Statements of Income, comparing the three and nine months ended September 30, 2023 with the same periods in 2022. The PPL "Results of Operations" also includes "Segment Earnings" which provides a detailed analysis of earnings by reportable segment. These discussions include the non-GAAP financial measure, "Earnings from Ongoing Operations" and provide an explanation of the non-GAAP financial measure and a reconciliation of the measure to the most comparable GAAP measure.
"Financial Condition - Liquidity and Capital Resources" provides an analysis of the Registrants' liquidity positions and credit profiles. This section also includes a discussion of rating agency actions.
"Financial Condition - Risk Management" provides an explanation of the Registrants' risk management programs relating to market and credit risk.

Overview

Introduction

(PPL)

PPL, headquartered in Allentown, Pennsylvania, is a utility holding company. PPL, through its regulated utility subsidiaries, delivers electricity to customers in Pennsylvania, Kentucky, Virginia, and Rhode Island; delivers natural gas to customers in Kentucky and Rhode Island; and generates electricity from power plants in Kentucky.

PPL's principal subsidiaries are shown below (* denotes a Registrant).


		PPL Corporation*

				PPL Capital Funding Provides financing for the operations of PPL and certain subsidiaries



PPL Electric* Engages in the regulated transmission and distribution of electricity in Pennsylvania		LKE A holding company that owns regulated utility operations through its subsidiaries, LG&E and KU			RIE Engages in the regulated transmission, distribution and sale of electricity and regulated distribution and sale of natural gas in Rhode Island


	LG&E* Engages in the regulated generation, transmission, distribution and sale of electricity and regulated distribution and sale of natural gas in Kentucky		KU* Engages in the regulated generation, transmission, distribution and sale of electricity, primarily in Kentucky

Pennsylvania Regulated Segment		Kentucky Regulated Segment			Rhode Island Regulated Segment

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

(PPL Electric)

PPL Electric, headquartered in Allentown, Pennsylvania, is a wholly-owned subsidiary of PPL and a regulated public utility that is an electricity transmission and distribution service provider in eastern and central Pennsylvania. PPL Electric is subject to regulation as a public utility by the PAPUC, and certain of its transmission activities are subject to the jurisdiction of the FERC under the Federal Power Act. PPL Electric delivers electricity in its Pennsylvania service area and provides electricity supply to retail customers in that area as a PLR under the Customer Choice Act. PPL Electric was organized in 1920 as Pennsylvania Power & Light Company.

(LG&E)

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

(KU)

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

Segment Information (PPL)

Beginning on January 1, 2023, the Kentucky Regulated segment consists primarily of the regulated electricity generation, transmission and distribution operations conducted by LG&E and KU, as well as LG&E's regulated distribution and sale of natural gas. Prior to January 1, 2023, the Kentucky Regulated segment also included the financing activities of LKE. The financing activity of LKE is presented in "Corporate and Other" beginning on January 1, 2023. Prior periods have been adjusted to reflect this change. As a result, PPL’s segments consist of its regulated operations in Kentucky, Pennsylvania and Rhode

Island and exclude any incremental financing activities of holding companies, which Management believes is a more meaningful presentation as it provides information on the core regulated operations of PPL.

Business Strategy

(All Registrants)

PPL operates four fully regulated utilities located in Pennsylvania, Kentucky and Rhode Island, which are constructive regulatory jurisdictions with distinct regulatory structures and customer classes.

PPL's strategy, which is supported by the other Registrants and subsidiaries, is to achieve industry-leading performance in safety, reliability, customer satisfaction and operational efficiency; to advance a clean energy transition while maintaining affordability and reliability; to maintain a strong financial foundation and create long-term value for our shareowners; to foster a diverse and exceptional workplace; and to build strong communities in areas that we serve.

Central to PPL's and the other Registrants' strategy is recovering capital project costs efficiently through various rate-making mechanisms, including periodic base rate case proceedings using forward test years, annual FERC formula rate mechanisms and other regulatory agency-approved recovery mechanisms designed to limit regulatory lag. In Kentucky, in addition to FERC formula rates, the KPSC has adopted a series of regulatory mechanisms (ECR, DSM, GLT, fuel adjustment clause, and gas supply clause) and recovery on construction work-in-progress that reduce regulatory lag and provide timely recovery of and return on, as appropriate, prudently incurred costs. In Pennsylvania, FERC formula rates, DSIC mechanism, Smart Meter Rider and other recovery mechanisms operate to reduce regulatory lag and provide for timely recovery of and a return on, as appropriate, prudently incurred costs. In Rhode Island, FERC formula rates, the gas cost adjustment, net metering, infrastructure, safety and reliability (ISR) and revenue decoupling mechanisms and other rate adjustment mechanisms operate to reduce regulatory lag and provide timely recovery of and return on, as appropriate, prudently incurred costs.

Financial and Operational Developments

IRS Revenue Procedure 2023-15 (PPL and LG&E)

On April 14, 2023, the IRS issued Revenue Procedure 2023-15, which provides a safe harbor method of accounting that taxpayers may use to determine whether expenses to repair, maintain, replace, or improve natural gas transmission and distribution property must be capitalized for tax purposes. PPL and LG&E are currently reviewing the revenue procedure to determine what impact the guidance may have on their financial statements.

Regulatory Requirements

(All Registrants)

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

(PPL, LG&E and KU)

Environmental Considerations for Coal-Fired Generation

The businesses of LG&E and KU are subject to extensive federal, state and local environmental laws, rules and regulations, including those pertaining to CCRs, GHG, and ELGs. See Notes 6, 10 and 15 to the Financial Statements for a discussion of these significant environmental matters. These and other environmental requirements led PPL, LG&E and KU to retire approximately 1,200 MW of coal-fired generating plants in Kentucky since 2010. As part of the long-term generation planning process, LG&E and KU evaluate a range of factors including the impact of potential stricter environmental regulations, fuel price scenarios, the cost of replacement generation, continued operations and major maintenance costs and the risk of major equipment failures in determining when to retire generation assets.

As a result of environmental requirements and aging infrastructure, LG&E anticipates retiring two older coal-fired units at the Mill Creek Plant and KU anticipates retiring one coal-fired unit at each of the E.W. Brown and Ghent plants. Mill Creek Unit 1, with 300 MW of capacity, is expected to be retired in 2024. Mill Creek Unit 2, with 297 MW of capacity, is expected to be retired in 2027. E.W. Brown Unit 3, with 412 MW of capacity, and Ghent Unit 2, with 486 MW of capacity, are expected to be

retired in 2028. On May 10, 2023, LG&E and KU submitted an application with the KPSC requesting approval of the relevant proposed retirements. LG&E and KU expect to recover the associated retirement costs, including the remaining net book value, for these coal-fired generating units through the RAR or other rate mechanisms in the future.

CPCN and SB 4 Application

On December 15, 2022, LG&E and KU filed an application with the KPSC for a CPCN for the construction of two 621 MW net summer rating NGCC combustion turbine facilities, one at LG&E's Mill Creek Generating Station in Jefferson County, Kentucky and the other at KU's E.W. Brown Generating Station in Mercer County, Kentucky, including on-site natural gas and electric transmission construction associated with those facilities and site compatibility certificates. LG&E and KU also applied for a CPCN to construct a 120 MWac solar photovoltaic electric generating facility in Mercer County, Kentucky, and for a CPCN to acquire a 120 MWac solar facility to be built by a third-party solar developer in Marion County, Kentucky. LG&E and KU further applied for a CPCN to construct a 125 MW, 4-hour battery energy storage system facility at KU's E.W. Brown Generating Station and for approval of their proposed 2024-2030 DSM programs. The plan includes adding 14 new, adjusted or expanded energy efficiency programs, which would reduce LG&E's and KU's overall need by approximately 100 MW each. Finally, LG&E and KU requested a declaratory order to confirm that their entry into non-firm energy-only power-purchase agreements for the output of four solar photovoltaic facilities with a combined capacity of 637 MW does not require KPSC approval and that LG&E and KU may recover the costs of the solar PPAs through their fuel adjustment clause mechanisms as previously approved for a prior solar PPA. LG&E and KU plan to accrue AFUDC on the constructed NGCC facilities, the solar facility in Mercer County, Kentucky and the battery energy storage system facility and have requested regulatory asset treatment to recover the financing costs of these projects.

The plan is consistent with PPL's goal to achieve net-zero carbon emissions by 2050. PPL has estimated that the replacement strategy contemplated by the plan would reduce the carbon intensity of LG&E and KU's generation fleet and result in greenhouse gas emissions reductions that support achievement of 2035 and 2040 interim targets of 70% and 80%, respectively.

The KPSC accepted the CPCN filing as of January 6, 2023. On March 24, 2023, Kentucky Senate Bill 4 (SB 4) went into effect, which requires KPSC approval of fossil fuel-fired electric generating unit retirements in the state. On May 10, 2023, LG&E and KU filed an application with the KPSC seeking approval of the retirement of seven fossil fuel-fired generating units as required by the recently enacted SB 4. On May 16, 2023, the KPSC entered an Order consolidating the SB 4 filing proceeding into the CPCN case. On August 29, 2023, a hearing with the KPSC and all parties concluded, and all post-hearing briefs have been filed. The KPSC has indicated its intention to issue an order on all issues by November 6, 2023. PPL, LG&E and KU cannot predict the outcome of these matters.

Kentucky March 2023 Storm

On March 3, 2023, LG&E and KU experienced significant windstorm activity in their service territories, resulting in substantial damage to certain of LG&E's and KU's assets with total costs incurred through September 30, 2023 of $75 million ($33 million at LG&E and $42 million at KU). On March 17, 2023, LG&E and KU submitted a filing with the KPSC requesting regulatory asset treatment of the extraordinary operations and maintenance expenses portion of the costs incurred related to the windstorm. On April 5, 2023, the KPSC issued an order approving the request for accounting purposes, noting that approval for recovery would be determined in LG&E’s and KU’s next base rate cases. As of September 30, 2023, LG&E and KU recorded regulatory assets related to the storm of $8 million and $11 million.

FERC Transmission Rate Filing

In 2018, LG&E and KU applied to the FERC requesting elimination of certain on-going waivers and 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 the FERC's orders on the elimination of the mitigation and required transition mechanism. In August 2022, the D.C. Circuit Court of Appeals issued an order remanding the proceedings back to the FERC. On May 18, 2023, the FERC issued an

order on remand reversing its 2019 decision and requiring LG&E and KU to refund credits previously withheld, including under such transition mechanism. LG&E and KU requested and received an extension of time to process refunds until December 2023. LG&E and KU filed a request for rehearing of the May 18, 2023 order, which was denied by operation of law on July 17, 2023. LG&E and KU filed petition for review of FERC's May 18, 2023 order with the D.C. Circuit Court of Appeals on July 28, 2023. The FERC has indicated in its filings before the D.C. Circuit Court of Appeals that it intends to issue a substantive order on rehearing before November 13, 2023. The D.C. Circuit Court of Appeals will likely set the procedural schedule soon after FERC files the certified index to the record in mid-November 2023. LG&E and KU recorded regulatory liabilities of $3 million and $9 million related to potential refunds resulting from the FERC’s May 18, 2023 order. LG&E and KU cannot predict the ultimate outcome of the proceedings or any other post decision process but do not expect the annual impact to have a material effect on their operations or financial condition. LG&E and KU currently receive recovery of certain waivers and credits provided primarily through base rates with increases associated with the FERC's May 18, 2023 order expected to be primarily subject to base rate recovery in future rate proceedings.

(PPL)

Advanced Metering Functionality (AMF)

In 2021, RIE filed its Updated AMF Business Case and Grid Modernization Plan (GMP) with the RIPUC in accordance with the ASA, and which, among other things, sought approval to deploy smart meters throughout the service territory. In 2021, the RIPUC stayed the AMF and GMP proceedings pending further consideration following the issuance of a final Order by the Rhode Island Division of Public Utilities and Carriers on the acquisition of RIE. RIE filed notice of withdrawal of the original Updated AMF Business Case and GMP with the RIPUC, and in November 2022 filed a new AMF Business Case with the RIPUC. The new AMF Business Case filing consists of a detailed proposal for full-scale deployment of AMF across its electric service territory. The proposal will enable significant customer and grid benefits in line with the state’s climate mandates. In its filing, RIE estimated that the proposed program would cost $188 million on a net present value (NPV) basis and provide benefits of $729 million NPV over the 20-year project life, yielding a benefit-cost ratio of 3.9x. RIE believes AMF is a foundational technology that is a necessary first step to transforming Rhode Island’s electric distribution system.

On September 27, 2023, the RIPUC unanimously approved RIE to deploy an AMF-based metering system for the electric distribution business. RIE is authorized to seek recovery of the approved capital investment through the ISR process with an overall multi-year cap on recovery at approximately $153 million, subject to certain terms, conditions and limitations with respect to the potential offsets and recoverability of certain costs. RIE is required to continue spending, even if above the recovery cap, until it achieves the functionalities outlined in the AMF Business Case. RIE is required to file with the RIPUC (i) by December 27, 2023, an updated electric Service Quality Plan for RIPUC review and approval, and (ii) additional tariff provisions regarding recovery and plans that address certain programs related to AMF.

FY 2024 Gas Infrastructure, Safety and Reliability (ISR) Plan

On December 23, 2022, RIE filed its FY 2024 Gas ISR Plan with the RIPUC. At its January 20, 2023 Open Meeting, the RIPUC directed RIE to file supplemental budget and rate schedules to reflect an April 1 to March 31 fiscal year. The supplemental budget that was filed with the RIPUC on January 27, 2023 includes $187 million of capital investment spend. The supplemental rate schedules were filed on February 3, 2023. RIE and the Rhode Island Division of Public Utilities and Carriers reached an agreement on an approximately $171 million capital investment spending plan, and RIE filed a second supplemental budget on March 13, 2023. The RIPUC held a hearing on the plan on March 14, 2023. At an Open Meeting on March 29, 2023, the RIPUC approved the plan with an adjustment to the budget for the Proactive Main Replacement Program category resulting in a total approved FY 2024 Gas ISR Plan of $163 million for capital investment spend. On March 31, 2023, the RIPUC approved RIE's March 30, 2023 compliance filing for rates effective April 1, 2023. The RIPUC continues to consider the appropriate rate recovery treatment of projects not covered by an ISR plan for the applicable fiscal year, and additional definitions and procedures that may be implemented related to the ISR plan review and approval process starting with the FY 2025 ISR Plan. A new docket will be opened to address this matter with the goal of implementing changes for the FY 2025 ISR Plan. RIE cannot predict the outcome of these matters.

FY 2024 Electric ISR Plan

On December 23, 2022, RIE filed its FY 2024 Electric ISR Plan with the RIPUC. At its January 20, 2023 Open Meeting, the RIPUC directed RIE to file supplemental budget and rate schedules to reflect an April 1 to March 31 fiscal year. The supplemental budget filed with the RIPUC on January 27, 2023 includes $176 million of capital investment spend, $14 million of vegetation operations and management (O&M) spend and $3 million of Other O&M spend. The supplemental rate schedules

were filed on February 3, 2023. RIE filed second supplemental budget schedules on March 21, 2023, which includes $166 million of capital investment spend, $14 million of vegetation management O&M spend and $1 million of Other O&M spend. The RIPUC held hearings in March 2023, and on March 29, 2023, approved the plan with modifications to the proposed capital investment spend, resulting in a total approved FY 2024 Electric ISR Plan of $112 million for capital investment spend, $14 million for vegetation management O&M spend, and $1 million for Other O&M spend. On March 31, 2023, the RIPUC approved RIE's March 30, 2023 compliance filing for rates effective April 1, 2023. The RIPUC continues to consider the appropriate rate recovery treatment of projects not covered by an ISR plan for the applicable fiscal year, and additional definitions and procedures that may be implemented related to the ISR plan review and approval process. A new docket has been opened to address this matter with the goal of implementing changes for the FY 2025 ISR Plan. RIE cannot predict the outcome of these matters.

Labor Union Agreements

(PPL and KU)

In July 2023, KU and the United Steelworkers of America local ratified a five-year labor agreement through August 2028. The agreement covers approximately 45 employees. The terms of the new labor agreement are not expected to have a significant impact on the financial results of KU.

In August 2023, KU and the IBEW local failed to reach agreement on an annual wage reopener under their existing labor agreement which expires in August 2024. The agreement covers approximately 60 employees. The parties are currently operating under the terms of a general wage increase unilaterally implemented by KU. The IBEW local has filed certain unfair labor practice claims with the U.S. Department of Labor and approved a strike authorization vote. PPL and KU cannot predict the outcome of the matter, including any future negotiations, agreements or other developments.

(PPL and LG&E)

LG&E and the IBEW local currently operate under a three-year collective bargaining agreement, which expires on November 10, 2023. The agreement covers approximately 600 employees. The parties commenced negotiations regarding a new collective bargaining agreement on October 16, 2023. PPL and LG&E cannot predict the outcome of this matter, including any future negotiations, agreements or other developments.

Results of Operations

(PPL)

The "Statement of Income Analysis" discussion below describes significant changes in principal line items on the Statements of Income, comparing the three and nine months ended September 30, 2023 with the same periods in 2022. The "Segment Earnings" discussion provides a review of results by reportable segment. These discussions include the non-GAAP financial measure, "Earnings from Ongoing Operations" and provide an explanation of the non-GAAP financial measure and a reconciliation of the measure to the most comparable GAAP measure.

(PPL Electric, LG&E and KU)

A "Statement of Income Analysis" is presented separately for PPL Electric, LG&E and KU. The "Statement of Income Analysis" discussion below describes significant changes in principal line items on the Statements of Income, comparing the three and nine months ended September 30, 2023 with the same periods in 2022.

(All Registrants)

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

PPL: Statement of Income Analysis and Segment Earnings

Statement of Income Analysis

Net income for the periods ended September 30 includes the following results:


	Three Months						Nine Months
	2023		2022		$ Change		2023		2022		$ Change
Operating Revenues	$	2,043	$	2,134	$	(91)	$	6,281	$	5,612	$	669

Operating Expenses
Operation
Fuel	199		267		(68)		567		708		(141)
Energy purchases	356		436		(80)		1,430		1,093		337
Other operation and maintenance	637		678		(41)		1,805		1,671		134
Depreciation	314		312		2		940		872		68
Taxes, other than income	100		100		—		299		230		69
Total Operating Expenses	1,606		1,793		(187)		5,041		4,574		467
Other Income (Expense) - net	16		10		6		51		36		15
Interest Expense	165		136		29		494		361		133
Income Before Income Taxes	288		215		73		797		713		84
Income Taxes	58		41		17		170		147		23




Net Income	$	230	$	174	$	56	$	627	$	566	$	61

Operating Revenues

The increase (decrease) in operating revenues was due to:


	Three Months		Nine Months
PPL Electric distribution price (a)	$	23	$	63
PPL Electric distribution volume (b)	(6)		(53)
PPL Electric PLR (c)	(65)		33
PPL Electric transmission formula rate (d)	20		37



LG&E volumes (b)	(3)		(33)
LG&E fuel and other energy purchases (e)	(37)		(88)

LG&E economic relief billing credit, net of amortization of $0	—		12

KU volumes (b)	(3)		(49)
KU fuel and other energy purchases (e)	(43)		(81)





KU economic relief billing credit, net of amortization of $0	—		5
Acquisition of RIE (f)	—		814
RIE customer bill credits	50		50
RIE electric last resort service	(20)		(20)
Other	(7)		(21)








Total	$	(91)	$	669

(a)The increases were primarily due to reconcilable cost recovery mechanisms approved by the PAPUC.

(b)The decreases were primarily due to milder weather, along with other lower usage in 2023 at PPL Electric.

(c)The increase for the nine month period was primarily the result of higher energy prices, partially offset by less PLR customers, lower customer volumes due to weather and other lower usage.

(d)The increases were primarily due to the point to point border rate settlement variance and returns on additional transmission capital investments, partially offset by a lower PPL zonal peak load billing factor in 2023.

(e)The decreases were primarily due to lower recoveries of fuel and energy purchases due to lower commodity costs and volumes.

(f)The increase is primarily due to the results for the nine months ended September 30, 2023 including a full nine months of RIE operations compared to the comparable period in 2022 which includes only operations beginning on the acquisition date of May 25, 2022.

Fuel

Fuel decreased $68 million for the three months ended September 30, 2023 compared with 2022, primarily due to a decrease in commodity costs of $21 million at LG&E and $42 million at KU.

Fuel decreased $141 million for the nine months ended September 30, 2023 compared with 2022, primarily due to a decrease in commodity costs of $32 million at LG&E and $62 million at KU and a decrease in volumes due to weather of $16 million at LG&E and $32 million at KU.

Energy Purchases

Energy purchases decreased $80 million for the three months ended September 30, 2023 compared with 2022, primarily due to lower PLR volumes of $49 million and lower PLR prices of $24 million at PPL Electric, a decrease in commodity costs at LG&E of $11 million and a decrease in commodity costs of $9 million at RIE, partially offset by higher alternative energy credits prices of $13 million at PPL Electric.

Energy purchases increased $337 million for the nine months ended September 30, 2023 compared with 2022, primarily due to higher PLR prices of $137 million and higher alternative energy credits prices of $22 million at PPL Electric and an additional $347 million primarily due to the results for the nine months ended September 30, 2023 including a full nine months of RIE operations compared to the comparable period in 2022 which includes only operations beginning on the acquisition date of May 25, 2022, partially offset by lower PLR volumes of $126 million at PPL Electric, a decrease in commodity costs at LG&E of $20 million and a decrease in volumes due to weather at LG&E of $19 million.

Other Operation and Maintenance

The increase (decrease) in other operation and maintenance was due to:


	Three Months		Nine Months
PPL Electric storm costs	$	9	$	5
PPL Electric vegetation management expenses	—		(6)
PPL Electric support costs	8		14
PPL Electric bad debts	3		14
PPL Electric universal service programs	—		(5)
PPL Electric IT cloud amortization costs	7		20

LG&E plant operations and maintenance expenses	(4)		(12)
LG&E transmission credits	—		3

LG&E vegetation management expenses	(1)		(5)

KU plant operations and maintenance	(6)		(6)
KU generation outage expenses	(1)		(7)
KU transmission credits	1		9


KU vegetation management expenses	(5)		(9)
Acquisition of RIE (a)	—		185
Sale of Safari Holdings (b)	(67)		(61)
Transition costs associated with RIE	28		51
Transaction costs associated with RIE	—		(18)
Other	(13)		(38)
Total	$	(41)	$	134

(a)The increase is primarily due to the results for the nine months ended September 30, 2023 including a full nine months of RIE operations compared to the comparable period in 2022 which includes only operations beginning on the acquisition date of May 25, 2022.

(b)See Note 8 to the Financial Statements for additional information.

Depreciation

Depreciation increased $68 million for the nine months ended September 30, 2023 compared with 2022, primarily due to the results for the nine months ended September 30, 2023 including a full nine months of RIE operations compared to the comparable period in 2022 which includes only operations beginning on the acquisition date of May 25, 2022.

Taxes, Other Than Income

The increase (decrease) in taxes, other than income was due to:


	Three Months		Nine Months
State gross receipts tax (a)	$	(5)	$	29
Domestic property tax expense (a)	6		40
Other	(1)		—
Total	$	—	$	69

(a)The increase for the nine months ended September 30, 2023 is primarily due to the results for the nine months ended September 30, 2023 including a full nine months of RIE operations compared to the comparable period in 2022 which includes only operations beginning on the acquisition date of May 25, 2022.

Other Income (Expense) - net

The increase (decrease) in other income (expense) - net was due to:


	Three Months		Nine Months
Defined benefit plans - non-service credits (Note 9)	$	6	$	3
Interest income	4		24
Other (a)	(4)		(12)
Total	$	6	$	15

(a)See Note 12 to the Financial Statements for additional information.

Interest Expense

The increase (decrease) in interest expense was due to:


	Three Months		Nine Months

Long-term debt (a)	$	29	$	125

Short-term debt	—		5
Other	—		3
Total	$	29	$	133

(a) The increases were primarily due to increased borrowings at LG&E, KU, PPL Electric, and PPL Capital Funding, along with higher rates at LG&E, KU and PPL Capital Funding. See Note 7 to the Financial Statements for additional information. The increase is also due to the results for the nine months ended September 30, 2023 including a full nine months of RIE operations compared to the comparable period in 2022 which includes only operations beginning on the acquisition date of May 25, 2022.

Income Taxes

The increase (decrease) in income taxes was due to:


	Three Months		Nine Months
Change in pre-tax income	$	23	$	11
Income tax credits (a)	(8)		(8)




Amortization of excess deferred income taxes	(6)		14
State deferred tax rate change	6		5
Other	2		1
Total	$	17	$	23

(a) Primarily includes a deferred tax benefit from renewable tax credits that will be acquired at a discount.

Segment Earnings

PPL's Net Income by reportable segment for the periods ended September 30 was as follows:


	Three Months						Nine Months
	2023		2022		$ Change		2023		2022		$ Change

Kentucky Regulated (a)	$	175	$	164	$	11	$	432	$	465	$	(33)
Pennsylvania Regulated	136		143		(7)		384		410		(26)
Rhode Island Regulated	6		(26)		32		70		(55)		125
Corporate and Other (a)(b)	(87)		(107)		20		(259)		(254)		(5)

Net Income	$	230	$	174	$	56	$	627	$	566	$	61

(a)The financing activity of LKE is presented in Corporate and Other beginning on January 1, 2023. Prior periods have been adjusted to reflect this change.

(b)Primarily represents financing and certain other costs incurred at the corporate level that have not been allocated or assigned to the segments, which are presented to reconcile segment information to PPL's consolidated results.

Earnings from Ongoing Operations

Management utilizes "Earnings from Ongoing Operations" as a non-GAAP financial measure that should not be considered as an alternative to net income, an indicator of operating performance determined in accordance with GAAP. PPL believes that Earnings from Ongoing Operations is useful and meaningful to investors because it provides management's view of PPL's earnings performance as another criterion in making investment decisions. In addition, PPL's management uses Earnings from Ongoing Operations in measuring achievement of certain corporate performance goals, including targets for certain executive incentive compensation. Other companies may use different measures to present financial performance.

Earnings from Ongoing Operations is adjusted for the impact of special items. Special items are presented in the financial tables on an after-tax basis with the related income taxes on special items separately disclosed. Income taxes on special items, when applicable, are calculated based on the statutory tax rate of the entity where the activity is recorded. Special items may include items such as:

Gains and losses on sales of assets not in the ordinary course of business.
Impairment charges.
Significant workforce reduction and other restructuring effects.
Acquisition and divestiture-related adjustments.
Significant losses on early extinguishment of debt.
Other charges or credits that are, in management's view, non-recurring or otherwise not reflective of the company's ongoing operations.

PPL's Earnings from Ongoing Operations by reportable segment for the periods ended September 30 were as follows:


	Three Months						Nine Months
	2023		2022		$ Change		2023		2022		$ Change
Kentucky Regulated (a)	$	175	$	166	$	9	$	438	$	473	$	(35)
Pennsylvania Regulated	145		134		11		399		401		(2)
Rhode Island Regulated	22		28		(6)		116		37		79
Corporate and Other (a)	(25)		(23)		(2)		(69)		(79)		10
Earnings from Ongoing Operations	$	317	$	305	$	12	$	884	$	832	$	52

(a)The financing activity of LKE is presented in Corporate and Other beginning on January 1, 2023. Prior periods have been adjusted to reflect this change.

See "Reconciliation of Earnings from Ongoing Operations" below for a reconciliation of this non-GAAP financial measure to Net Income.

Kentucky Regulated Segment

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

Net Income and Earnings from Ongoing Operations for the periods ended September 30 include the following results.


	Three Months						Nine Months
	2023		2022 (a)		$ Change		2023		2022 (a)		$ Change
Operating revenues	$	893	$	977	$	(84)	$	2,631	$	2,864	$	(233)
Fuel	199		267		(68)		567		708		(141)
Energy purchases	23		35		(12)		141		181		(40)
Other operation and maintenance	199		224		(25)		625		683		(58)
Depreciation	174		171		3		521		513		8
Taxes, other than income	24		23		1		70		69		1
Total operating expenses	619		720		(101)		1,924		2,154		(230)
Other Income (Expense) - net	3		2		1		9		8		1

Interest Expense	59		53		6		176		149		27

Income Taxes	43		42		1		108		104		4
Net Income	175		164		11		432		465		(33)
Less: Special Items	—		(2)		2		(6)		(8)		2
Earnings from Ongoing Operations	$	175	$	166	$	9	$	438	$	473	$	(35)

(a)The financing activity of LKE is presented in Corporate and Other beginning on January 1, 2023. Prior periods have been adjusted to reflect this change.

The following after-tax gains (losses), which management considers special items, impacted the Kentucky Regulated segment's results and are excluded from Earnings from Ongoing Operations during the periods ended September 30.


	Income Statement Line Item		Three Months						Nine Months
		2023			2022			2023			2022


Strategic corporate initiatives, net of tax of $0, $0, $2 (a)	Other operation and maintenance		$	—		$	(2)		$	(1)		$	(8)
FERC transmission credit refund, net of tax of $2 (b)	Other operation and maintenance		—			—			(5)			—




Total Special Items			$	—		$	(2)		$	(6)		$	(8)

(a)Costs incurred related to PPL's corporate centralization efforts.

(b)Prior period impact related to a FERC refund order. See Note 6 to the Financial Statements for additional information.

The changes in the components of the Kentucky Regulated segment's results between these periods were due to the factors set forth below, which exclude the items that management considers special.

Lower operating revenues for the three month period primarily due to a $79 million decrease in recoveries of fuel and energy purchases primarily due to lower commodity costs and a $6 million decrease in sales volumes primarily due to weather.
Lower operating revenues for the nine month period primarily due to a $170 million decrease in recoveries of fuel and energy purchases due to lower commodity costs and lower volumes and an $82 million decrease in sales volumes primarily due to weather, partially offset by a $17 million increase due to the expiration of the economic relief billing credit in June 2022 and other items that were not individually significant.
Lower fuel expense for the three month period primarily due to a decrease in commodity costs.
Lower fuel expense for the nine month period primarily due to a $94 million decrease in commodity costs and a $48 million decrease in volumes due to weather.
Lower energy purchases for the three month period primarily due to a decrease in commodity costs.
Lower energy purchases for the nine month period primarily due to a $20 million decrease in commodity costs and a $19 million decrease in volumes due to weather.
Lower operation and maintenance expense for the three month period primarily due to a $10 million decrease in plant operations and maintenance expenses, a $6 million decrease in vegetation management expenses and other items that were not individually significant.
Lower operation and maintenance expense for the nine month period primarily due to an $18 million decrease in plant operations and maintenance expenses, a $14 million decrease in vegetation management expenses, an $11 million decrease in generation outage expenses and other items that were not individually significant.
Higher interest expense for the three and nine month periods primarily due to increased borrowings at higher rates.

Pennsylvania Regulated Segment

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

Net Income and Earnings from Ongoing Operations for the periods ended September 30 include the following results.


	Three Months						Nine Months
	2023		2022		$ Change		2023		2022		$ Change
Operating revenues	$	737	$	766	$	(29)	$	2,295	$	2,217	$	78

Energy purchases	226		285		(59)		788		759		29
Other operation and maintenance	151		127		24		454		415		39
Depreciation	99		99		—		297		296		1
Taxes, other than income	36		39		(3)		110		108		2
Total operating expenses	512		550		(38)		1,649		1,578		71
Other Income (Expense) - net	8		7		1		29		24		5
Interest Expense	54		43		11		165		122		43


Income Taxes	43		37		6		126		131		(5)
Net Income	136		143		(7)		384		410		(26)
Less: Special Items	(9)		9		(18)		(15)		9		(24)
Earnings from Ongoing Operations	$	145	$	134	$	11	$	399	$	401	$	(2)

The following after-tax gains (losses), which management considers special items, impacted the Pennsylvania Regulated segment's results and are excluded from Earnings from Ongoing Operations during the periods ended September 30.


	Income Statement Line Item		Three Months						Nine Months
		2023			2022			2023			2022


PA tax rate change (a)	Income Taxes		$	—		$	9		$	1		$	9
PPL Electric billing issue, net of tax of $4, $6 (b)	Other operation and maintenance		(8)			—			(14)			—
PPL Electric billing issue, net of tax of $0 (b)	Other Income (Expense) - net		—			—			(1)			—
Strategic corporate initiatives, net of tax of $0, $0 (c)	Other operation and maintenance		(1)			—			(1)			—


Total Special Items			$	(9)		$	9		$	(15)		$	9

(a)Impact of Pennsylvania state tax reform. See Note 5 to the Financial Statements for additional information.

(b)Certain expenses related to billing issues. See Note 6 to the Financial Statements for additional information.

(c)Costs incurred related to PPL's corporate centralization efforts.

The changes in the components of the Pennsylvania Regulated segment's results between these periods are due to the factors set forth below, which exclude the items that management considers special.

Lower operating revenues for the three month period primarily due to $65 million of lower PLR, partially offset by $23 million of higher distribution prices and $20 million of transmission formula rate impacts.
Higher operating revenues for the nine month period primarily due to $63 million of higher distribution prices, $37 million of transmission formula rate impacts and $33 million of higher PLR, partially offset by $53 million of lower distribution volumes primarily due to weather and other lower usage in 2023.
Lower energy purchases for the three month period primarily due to lower PLR volumes of $49 million and lower PLR prices of $24 million, partially offset by higher alternative energy credits prices of $13 million.
Higher energy purchases for the nine month period primarily due to higher PLR prices of $137 million and higher alternative energy credits prices of $22 million, partially offset by lower PLR volumes of $126 million.
Higher operation and maintenance expense for the three month period primarily due to $9 million of storm costs and $7 million of higher IT cloud amortization costs, partially offset by other items that were not individually significant.
Higher operation and maintenance expense for the nine month period primarily due to $20 million of higher IT cloud amortization costs and $6 million of unrecoverable bad debt expense, partially offset by $6 million of lower vegetation management expenses and other items that were not individually significant.
Higher interest expense for the three and nine month periods primarily due to increased borrowings.

Rhode Island Regulated Segment

The Rhode Island Regulated segment consists primarily of the regulated electricity transmission and distribution operations and regulated distribution and sale of natural gas conducted by RIE.

Net Income and Earnings from Ongoing Operations for the periods ended September 30 include the following results.


	Three Months						Nine Months
	2023		2022		$ Change		2023		2022		$ Change (a)
Operating revenues	$	413	$	384	$	29	$	1,355	$	512	$	843

Energy purchases	107		116		(9)		501		154		347
Other operation and maintenance	207		215		(8)		485		308		177
Depreciation	41		38		3		120		53		67
Taxes, other than income	39		39		—		119		53		66
Total operating expenses	394		408		(14)		1,225		568		657
Other Income (Expense) - net	6		5		1		10		7		3
Interest Expense	21		15		6		60		22		38


Income Taxes	(2)		(8)		6		10		(16)		26
Net Income	6		(26)		32		70		(55)		125
Less: Special Items	(16)		(54)		38		(46)		(92)		46
Earnings from Ongoing Operations	$	22	$	28	$	(6)	$	116	$	37	$	79

The following after-tax gains (losses), which management considers special items, impacted the Rhode Island Regulated segment's results and are excluded from Earnings from Ongoing Operations during the periods ended September 30.


	Income Statement Line Item		Three Months						Nine Months
		2023			2022			2023			2022



Acquisition integration, net of tax of $4, $4, $12, $14 (a)	Other operation and maintenance		$	(16)		$	(14)		$	(46)		$	(53)
Acquisition integration, net of tax of $0 (a)	Other Income (Expense) - net		—			—			—			1
Acquisition integration, net of tax of $10, $10 (a)	Operating revenues		—			(40)			—			(40)





Total Special Items			$	(16)		$	(54)		$	(46)		$	(92)

(a)Includes costs incurred primarily related to certain TSA costs for IT systems that will not be part of PPL’s ongoing operations. 2022 also includes costs for certain commitments made during the acquisition process.

The changes in the components of the Rhode Island Regulated segment's results between the three month period are due to the factors set forth below, which exclude the items that management considers special.

Lower operating revenues for the three month period primarily due to $20 million of lower electric last resort service and $13 million of lower transmission pass through revenue, partially offset by $13 million of higher FERC transmission revenue.
Lower energy purchases for the three month period primarily due to a decrease in commodity costs.
Lower operation and maintenance expense for the three month period primarily due to $13 million of lower pass through transmission costs, partially offset by $9 million of higher labor costs due to the filling of open positions.
Higher depreciation expense for the three month period primarily due to additions to PP&E, net of retirements.
Higher interest expense for the three month period primarily due to increased short-term debt.
Lower income taxes for the three month period primarily due to the change in pre-tax income.

Reconciliation of Earnings from Ongoing Operations

The following tables contain after-tax gains (losses), in total, which management considers special items, that are excluded from Earnings from Ongoing Operations and a reconciliation to PPL's "Net Income" for the periods ended September 30.





















































									2022 Nine Months


	2023 Three Months
	KY Regulated		PA Regulated		RI Regulated		Corporate and Other		Total
Net Income	$	175	$	136	$	6	$	(87)	$	230
Less: Special Items (expense) benefit:

Talen litigation costs, net of tax of $1 (a)	—		—		—		(3)		(3)
Strategic corporate initiatives, net of tax of $0, $1 (b)	—		(1)		—		(3)		(4)
Acquisition integration, net of tax of $4, $15 (c)	—		—		(16)		(55)		(71)



Sale of Safari Holdings, net of tax of ($1) (d)	—		—		—		1		1
PPL Electric billing issue, net of tax of $4 (e)	—		(8)		—		—		(8)

Other non-recurring charges, net of tax of $0 (f)	—		—		—		(2)		(2)
Total Special Items	—		(9)		(16)		(62)		(87)
Earnings from Ongoing Operations	$	175	$	145	$	22	$	(25)	$	317

(a)PPL incurred legal expenses related to litigation with its former affiliate, Talen Montana. See Note 10 to the Financial Statements for additional information.

(b)Represents costs primarily related to PPL's centralization efforts and other strategic efforts.

(c)Rhode Island Regulated includes costs incurred primarily related to certain TSA costs for IT systems that will not be part of PPL’s ongoing operations. Corporate and Other primarily includes integration and related costs associated with the acquisition of RIE.

(d)Primarily final closing and other related adjustments for the sale of Safari Holdings.

(e)Certain expenses related to billing issues. See Note 6 to the Financial Statements for additional information.

(f)Certain expenses related to distributed energy investments.


	2022 Three Months
	KY Regulated (e)		PA Regulated		RI Regulated		Corporate and Other (e)		Total
Net Income	$	164	$	143	$	(26)	$	(107)	$	174
Less: Special Items (expense) benefit:


Strategic corporate initiatives, net of tax of $0 (a)	(2)		—		—		—		(2)
Acquisition integration, net of tax of $14, $6 (b)	—		—		(54)		(22)		(76)
Solar panel impairment, net of tax of $0	—		—		—		(1)		(1)
PA tax rate change (c)	—		9		—		(5)		4
Sale of Safari Holdings, net of tax of $19 (d)	—		—		—		(56)		(56)



Total Special Items	(2)		9		(54)		(84)		(131)
Earnings from Ongoing Operations	$	166	$	134	$	28	$	(23)	$	305

(a)Costs incurred primarily in connection with corporate centralization efforts.

(b)Rhode Island Regulated includes costs incurred primarily related to certain TSA costs for IT systems that will not be part of PPL’s ongoing operations and costs for certain commitments made during the acquisition process. Corporate and Other primarily includes integration and related costs associated with the acquisition of RIE.

(c)Impact of Pennsylvania state tax reform. See Note 5 to the Financial Statements for additional information.

(d)Primarily the estimated loss on the sale of Safari Holdings at September 30, 2022.

(e)The financing activity of LKE is presented in Corporate and Other beginning on January 1, 2023. Prior periods have been adjusted to reflect this change.


	2023 Nine Months
	KY Regulated		PA Regulated		RI Regulated		Corporate and Other		Total
Net Income	$	432	$	384	$	70	$	(259)	$	627
Less: Special Items (expense) benefit:

Talen litigation costs, net of tax of $2 (a)	—		—		—		(6)		(6)
Strategic corporate initiatives, net of tax of $0, $0, $2 (b)	(1)		(1)		—		(7)		(9)
Acquisition integration, net of tax of $12, $42 (c)	—		—		(46)		(159)		(205)
PA tax rate change (d)	—		1		—		—		1
Sale of Safari Holdings, net of tax of $1 (e)	—		—		—		(3)		(3)
PPL Electric billing issue, net of tax of $6 (f)	—		(15)		—		—		(15)
FERC transmission credit refund, net of tax of $2 (g)	(5)		—		—		—		(5)
Other non-recurring charges, net of tax of $0 (h)	—		—		—		(15)		(15)
Total Special Items	(6)		(15)		(46)		(190)		(257)
Earnings from Ongoing Operations	$	438	$	399	$	116	$	(69)	$	884

(a)PPL incurred legal expenses related to litigation with its former affiliate, Talen Montana. See Note 10 to the Financial Statements for additional information.

(b)Represents costs primarily related to PPL's centralization efforts and other strategic efforts.

(d)Impact of Pennsylvania state tax reform. See Note 5 to the Financial Statements for additional information.

(e)Primarily final closing and other related adjustments for the sale of Safari Holdings.

(f)Certain expenses related to billing issues. See Note 6 to the Financial Statements for additional information.

(g)Prior period impact related to a FERC refund order. See Note 6 to the Financial Statements for additional information.

(h)Certain expenses related to distributed energy investments.


	2022 Nine Months
	KY Regulated (f)		PA Regulated		RI Regulated		Corporate and Other (f)		Total
Net Income	$	465	$	410	$	(55)	$	(254)	$	566
Less: Special Items (expense) benefit:

Talen litigation costs, net of tax of ($1) (a)	—		—		—		5		5
Strategic corporate initiatives, net of tax of $2, $4 (b)	(8)		—		—		(15)		(23)
Acquisition integration, net of tax of $24, $28 (c)	—		—		(92)		(104)		(196)

PA tax rate change (d)	—		9		—		(5)		4
Sale of Safari Holdings, net of tax of $19 (e)	—		—		—		(56)		(56)



Total Special Items	(8)		9		(92)		(175)		(266)
Earnings from Ongoing Operations	$	473	$	401	$	37	$	(79)	$	832

(a)PPL incurred legal expenses and received insurance reimbursement related to litigation with its former affiliate, Talen Montana. See Note 10 to the Financial Statements for additional information.

(b)Costs incurred primarily related to the acquisition of RIE and corporate centralization efforts.

(c)Rhode Island Regulated includes costs incurred primarily related to certain TSA costs for IT systems that will not be part of PPL’s ongoing operations and costs for certain commitments made during the acquisition process. Corporate and Other primarily includes integration and related costs associated with the acquisition of RIE.

(d)Impact of Pennsylvania state tax reform. See Note 5 to the Financial Statements for additional information.

(e)Primarily the estimated loss on the sale of Safari Holdings at September 30, 2022.

(f)The financing activity of LKE is presented in Corporate and Other beginning on January 1, 2023. Prior periods have been adjusted to reflect this change.

PPL Electric: Statement of Income Analysis

Statement of Income Analysis

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


	Three Months						Nine Months
	2023		2022		$ Change		2023		2022		$ Change
Operating Revenues	$	737	$	766	$	(29)	$	2,295	$	2,217	$	78
Operating Expenses
Operation
Energy purchases	226		285		(59)		788		759		29

Other operation and maintenance	151		127		24		454		415		39
Depreciation	99		99		—		297		296		1
Taxes, other than income	36		39		(3)		110		108		2
Total Operating Expenses	512		550		(38)		1,649		1,578		71
Other Income (Expense) - net	8		6		2		29		19		10
Interest Income from Affiliate	—		1		(1)		—		5		(5)
Interest Expense	54		43		11		165		122		43
Income Taxes	43		37		6		126		131		(5)
Net Income	$	136	$	143	$	(7)	$	384	$	410	$	(26)

Operating Revenues

The increase (decrease) in operating revenues was due to:


	Three Months		Nine Months
Distribution price (a)	$	23	$	63
Distribution volume (b)	(6)		(53)
PLR (c)	(65)		33
Transmission formula rate (d)	20		37


Other	(1)		(2)
Total	$	(29)	$	78

(a)The increases were primarily due to reconcilable cost recovery mechanisms approved by the PAPUC.

(b)The decreases were primarily due to milder weather and other lower usage in 2023.

(c)The increase for the nine month period was primarily the result of higher energy prices, partially offset by less PLR customers, lower customer volumes due to weather and other lower usage.

Energy Purchases

Energy purchases decreased $59 million for the three months ended September 30, 2023 compared with 2022, primarily due to lower PLR volumes of $49 million and lower PLR prices of $24 million, partially offset by higher alternative energy credits prices of $13 million.

Energy purchases increased $29 million for the nine months ended September 30, 2023 compared with 2022, primarily due to higher PLR prices of $137 million and higher alternative energy credits prices of $22 million, partially offset by lower PLR volumes of $126 million.

Other Operation and Maintenance

The increase (decrease) in other operation and maintenance was due to:


	Three Months		Nine Months

Support costs	$	8	$	14

IT cloud amortization costs	7		20
Vegetation management costs	—		(6)
Storm costs	9		5

Universal service rider	—		(5)
Bad debts	3		14





Other	(3)		(3)
Total	$	24	$	39

Interest Expense

Interest expense increased $11 million and $43 million for the three and nine months ended September 30, 2023 compared with the corresponding periods in 2022, primarily due to increased borrowings.

LG&E: Statement of Income Analysis

Statement of Income Analysis

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


	Three Months						Nine Months
	2023		2022		$ Change		2023		2022		$ Change
Operating Revenues
Retail and wholesale	$	396	$	433	$	(37)	$	1,204	$	1,313	$	(109)
Electric revenue from affiliate	2		3		(1)		23		26		(3)
Total Operating Revenues	398		436		(38)		1,227		1,339		(112)
Operating Expenses
Operation
Fuel	70		94		(24)		217		265		(48)
Energy purchases	17		28		(11)		123		162		(39)
Energy purchases from affiliate	8		9		(1)		11		18		(7)
Other operation and maintenance	91		98		(7)		275		301		(26)
Depreciation	76		74		2		227		223		4
Taxes, other than income	12		12		—		36		36		—
Total Operating Expenses	274		315		(41)		889		1,005		(116)
Other Income (Expense) - net	—		—		—		2		3		(1)
Interest Income from Affiliates	1		—		1		1		—		1
Interest Expense	25		23		2		76		64		12
Income Taxes	21		21		—		55		49		6
Net Income	$	79	$	77	$	2	$	210	$	224	$	(14)

Operating Revenues

The increase (decrease) in operating revenues was due to:


	Three Months		Nine Months
Fuel and other energy purchases (a)	$	(37)	$	(90)


Volumes (b)	(3)		(33)
Economic relief billing credit, net of amortization of $0	—		12





Other	2		(1)
Total	$	(38)	$	(112)

(a)The decreases were primarily due to lower recoveries of fuel and energy purchases due to lower commodity costs and volumes.

(b)The decreases were primarily due to weather.

Fuel

Fuel decreased $24 million for the three months ended September 30, 2023 compared with 2022, primarily due to a decrease in commodity costs.

Fuel decreased $48 million for the nine months ended September 30, 2023 compared with 2022, due to a $32 million decrease in commodity costs and a $16 million decrease in volumes primarily due to weather.

Energy Purchases

Energy purchases decreased $11 million for the three months ended September 30, 2023 compared with 2022, primarily due to a decrease in commodity costs.

Energy purchases decreased $39 million for the nine months ended September 30, 2023 compared with 2022, due to a $20 million decrease in commodity costs and a $19 million decrease in volumes primarily due to weather.

Other Operation and Maintenance

The increase (decrease) in other operation and maintenance was due to:


	Three Months		Nine Months
Plant operations and maintenance expense	$	(4)	$	(12)
Transmission credits	—		3
Generation outage expenses	—		(4)
Vegetation management expense	(1)		(5)


Storm costs	4		4


Other	(6)		(12)
Total	$	(7)	$	(26)

Interest Expense

Interest expense increased $12 million for the nine months ended September 30, 2023 compared with 2022, primarily due to increased borrowings at higher rates.

KU: Statement of Income Analysis

Statement of Income Analysis

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


	Three Months						Nine Months
	2023		2022		$ Change		2023		2022		$ Change
Operating Revenues
Retail and wholesale	$	497	$	544	$	(47)	$	1,428	$	1,551	$	(123)
Electric revenue from affiliate	8		9		(1)		11		18		(7)
Total Operating Revenues	505		553		(48)		1,439		1,569		(130)
Operating Expenses
Operation
Fuel	129		174		(45)		350		444		(94)
Energy purchases	6		6		—		18		18		—
Energy purchases from affiliate	2		3		(1)		23		26		(3)
Other operation and maintenance	101		115		(14)		327		348		(21)
Depreciation	98		96		2		294		289		5
Taxes, other than income	12		11		1		34		33		1
Total Operating Expenses	348		405		(57)		1,046		1,158		(112)
Other Income (Expense) - net	1		2		(1)		6		6		—
Interest Expense	33		31		2		99		86		13
Interest Expense with Affiliate	—		—		—		1		—		1
Income Taxes	24		24		—		59		63		(4)
Net Income	$	101	$	95	$	6	$	240	$	268	$	(28)

Operating Revenues

The increase (decrease) in operating revenues was due to:


	Three Months		Nine Months



Fuel and other energy purchases (a)	$	(44)	$	(85)


Economic relief billing credit, net of amortization of $0	—		5
Volumes (b)	(3)		(49)


Other	(1)		(1)
Total	$	(48)	$	(130)

(a)The decreases were primarily due to lower recoveries of fuel and energy purchases due to lower commodity costs and volumes.

(b)The decreases were primarily due to weather.

Fuel

Fuel decreased $45 million for the three months ended September 30, 2023 compared with 2022, primarily due to a decrease in commodity costs.

Fuel decreased $94 million for the nine months ended September 30, 2023 compared with 2022, due to a $62 million decrease in commodity costs and a $32 million decrease in volumes primarily due to weather.

Other Operation and Maintenance

The increase (decrease) in other operation and maintenance was due to:


	Three Months		Nine Months
Plant operations and maintenance	$	(6)	$	(6)
Transmission credits	1		9
Generation outage expenses	(1)		(7)
Vegetation management expenses	(5)		(9)


Storm costs	2		—



Other	(5)		(8)
Total	$	(14)	$	(21)

Interest Expense

Interest expense increased $13 million for the nine months ended September 30, 2023 compared with the corresponding periods in 2022, primarily due to increased borrowings at higher rates.

Financial Condition

The remainder of this Item 2 in this Form 10-Q is presented on a combined basis, providing information, as applicable, for all Registrants.

Liquidity and Capital Resources

(All Registrants)

The Registrants had the following at:


	PPL		PPL Electric		LG&E		KU
September 30, 2023
Cash and cash equivalents	$	353	$	56	$	8	$	8

Short-term debt	287		187		—		25
Long-term debt due within one year	91		90		—		—
Notes payable to affiliates			—		6		21

December 31, 2022
Cash and cash equivalents	$	356	$	25	$	93	$	21
Short-term debt	985		145		179		101
Long-term debt due within one year	354		340		—		13
Notes payable to affiliates			—		—		—

(PPL)

The Statements of Cash Flows separately report the cash flows of discontinued operations. The "Operating Activities", "Investing Activities" and "Financing Activities" sections below include only the cash flows of continuing operations.

(All Registrants)

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


	PPL		PPL Electric		LG&E		KU
2023
Operating activities	$	1,648	$	589	$	526	$	540
Investing activities	(1,739)		(655)		(277)		(425)
Financing activities	88		97		(334)		(128)
2022
Operating activities	$	1,511	$	498	$	473	$	556
Investing activities	(5,186)		(120)		(273)		(397)
Financing activities	407		(377)		(184)		(147)
Change - Cash Provided (Used)
Operating activities	$	137	$	91	$	53	$	(16)
Investing activities	3,447		(535)		(4)		(28)
Financing activities	(319)		474		(150)		19

Operating Activities

The components of the change in cash provided by (used in) operating activities for the nine months ended September 30, 2023 compared with 2022 were as follows.


	PPL		PPL Electric		LG&E		KU
Change - Cash Provided (Used)
Net income	$	61	$	(26)	$	(14)	$	(28)
Non-cash components	31		(8)		5		(2)
Working capital	146		108		75		30
Defined benefit plan funding	(6)		(5)		1		—
Other operating activities	(95)		22		(14)		(16)
Total	$	137	$	91	$	53	$	(16)

(PPL)

PPL's cash provided by operating activities in 2023 increased $137 million compared with 2022.

Net income increased $61 million between the periods and included an increase in non-cash charges of $31 million. The increase in non-cash charges was primarily due to an increase in depreciation (primarily due to the acquisition of RIE) and an increase in deferred income taxes and investment tax credits (primarily due to the acquisition of RIE), partially offset by an increase in defined benefit plans income (primarily due to a higher expected return) and an impairment of assets held for sale in 2022.
The $146 million increase in cash from changes in working capital was primarily due to a decrease in unbilled revenues and accounts receivable (primarily due to weather) and an increase in regulatory liabilities (primarily due to prior years' refunds to customers related to the transmission formula rate return on equity reduction), partially offset by a decrease in accounts payable (primarily due to timing of payments).
The $95 million decrease in cash provided by other operating activities was driven primarily by a decrease in regulatory liabilities (primarily due to the acquisition of RIE).

(PPL Electric)

PPL Electric's cash provided by operating activities in 2023 increased $91 million compared with 2022.

Net income decreased $26 million between the periods and included a decrease in non-cash components of $8 million. The decrease in non-cash components was primarily due to a decrease in deferred income taxes and investment tax credits (primarily related to a change in state tax rates) and an increase in defined benefit plan income (primarily due to a higher expected return), partially offset by an increase in amortization expense (primarily due an increase in IT projects placed into service).
The $108 million increase in cash from changes in working capital was primarily due to a decrease in unbilled revenue (primarily due to weather), an increase in regulatory liabilities (primarily due to prior years' refunds to customers

related to the transmission formula rate return on equity reduction) and an increase in accrued interest (primarily due to new debt issuances in 2023), partially offset by an increase in accounts receivable (primarily due to pricing) and a decrease in accounts payable (primarily due to timing of payments).

The $22 million increase in cash provided by other operating activities was driven primarily by other assets (primarily related to an increase in costs associated with work optimization and management projects).

(LG&E)

LG&E's cash provided by operating activities in 2023 increased $53 million compared with 2022.

Net income decreased $14 million between the periods and included an increase in non-cash components of $5 million. The increase in non-cash components was primarily due to an increase in amortization expense (primarily due to the expiration of the economic relief billing credit in June 2022).
The $75 million increase in cash from changes in working capital was primarily due to a decrease in accounts receivable and unbilled revenues (primarily due to weather), a decrease in fuel, materials and supplies (primarily due to lower commodity costs), a decrease in net regulatory assets (primarily due to the timing of rate recovery mechanisms), a decrease in accounts receivable from affiliates (primarily due to timing of payments) and an increase in accrued interest (primarily due to higher borrowings), partially offset by a decrease in accounts payable and accounts payable to affiliates (primarily due to timing of payments).
The $14 million decrease in cash provided by other operating activities was driven by an increase in other assets (primarily related to deferred storm costs recorded as noncurrent regulatory assets).

(KU)

KU's cash provided by operating activities in 2023 decreased $16 million compared with 2022.

Net income decreased $28 million between the periods and included a decrease in non-cash components of $2 million.
The $30 million increase in cash from changes in working capital was primarily due to a decrease in accounts receivable and unbilled revenues (primarily due to weather), a decrease in net regulatory assets (primarily due to the timing of rate recovery mechanisms) and an increase in accrued interest (primarily due to higher borrowings), partially offset by a decrease in accounts payable and accounts payable to affiliates (primarily due to timing of payments).
The $16 million decrease in cash provided by other operating activities was driven by an increase in other assets (primarily related to deferred storm costs recorded as noncurrent regulatory assets).

Investing Activities

(All Registrants)

The components of the change in cash provided by (used in) investing activities for the nine months ended September 30, 2023 compared with 2022 were as follows.


	PPL		PPL Electric		LG&E		KU
Change - Cash Provided (Used)
Expenditures for PP&E	$	(226)	$	(32)	$	(4)	$	(33)



Acquisition of Narragansett Electric, net of cash acquired	3,674		—		—		—

Notes receivable from affiliate	—		(499)		—		—
Other investing activities	(1)		(4)		—		5
Total	$	3,447	$	(535)	$	(4)	$	(28)

For PPL, the increase in expenditures for PP&E was due to project expenditures at RIE and an increase in project expenditures at PPL Electric, LG&E and KU. The increase in expenditures at PPL Electric was primarily due to an increase in transmission capital spending projects. The increase in expenditures at KU was primarily due to higher spending on projects related to economic development in its service territory, storm restoration and Advanced Metering Infrastructure projects, partially offset by lower spending on ELG projects and other projects that are not individually significant.

For PPL Electric, the change in "Notes receivable from affiliate" activity resulted from payments received on a short-term note between affiliates in 2022, issued to support general corporate purposes. See Note 11 to the Financial Statements for further discussion of intercompany borrowings.

Financing Activities

(All Registrants)

The components of the change in cash provided by (used in) financing activities for the nine months ended September 30, 2023 compared with 2022 were as follows.


	PPL		PPL Electric		LG&E		KU
Change - Cash Provided (Used)
Debt issuance/retirement, net	$	777	$	179	$	(201)	$	(214)




Dividends	94		11		109		109

Capital contributions/distributions, net	—		255		(151)		(90)


Change in short-term debt, net	(1,139)		42		(220)		(76)

Net increase (decrease) in notes payable with affiliate	—		—		316		293
Other financing activities	(51)		(13)		(3)		(3)
Total	$	(319)	$	474	$	(150)	$	19

See Note 7 to the Financial Statements in this Form 10-Q for information on 2023 short-term and long-term debt activity, equity transactions and PPL dividends. See Note 8 to the Financial Statements in the Registrants' 2022 Form 10-K for information on 2022 activity.

Credit Facilities

The Registrants maintain credit facilities to enhance liquidity, provide credit support and provide a backstop to commercial paper programs. Amounts borrowed under these credit facilities are reflected in "Short-term debt" on the Balance Sheets. At September 30, 2023, the total committed borrowing capacity under credit facilities and the borrowings under these facilities were:

External


	Committed Capacity		Borrowed		Letters of Credit and Commercial Paper Issued		Unused Capacity
PPL Capital Funding Credit Facilities (a)	$	1,350	$	—	$	75	$	1,275
PPL Electric Credit Facility	650		—		188		462


LG&E Credit Facilities	500		—		—		500
KU Credit Facilities	400		—		25		375
Total Credit Facilities (b)	$	2,900	$	—	$	288	$	2,612

(a)Includes a syndicated credit facility with a $250 million borrowing sublimit for RIE and a $1 billion sublimit for PPL Capital Funding. RIE’s borrowing sublimit is adjustable, at the borrowers’ option, from $0 to $600 million, with the remaining balance of the $1.25 billion available under the facility allocated to PPL Capital Funding. At September 30, 2023, PPL Capital Funding had no commercial paper outstanding and RIE had $75 million of commercial paper outstanding.

(b)The commitments under the credit facilities are provided by a diverse bank group, with no one bank and its affiliates providing an aggregate commitment of more than the following percentages of the total committed capacity: PPL - 9%, PPL Electric - 7%, LG&E - 7% and KU - 7%.

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

Intercompany (LG&E and KU)


	Committed Capacity		Borrowed		Commercial Paper Issued		Unused Capacity

LG&E Money Pool (a)	$	750	$	6	$	—	$	744
KU Money Pool (a)	650		21		25		604

(a)LG&E and KU participate in an intercompany money pool agreement whereby LKE and/or KU make available to LG&E, and LKE and/or LG&E make available to KU funds up to the difference between LG&E's and KU's FERC borrowing limit and LG&E's and KU's commercial paper issued, at an interest rate based on the lower of a market index of commercial paper issues and two additional rate options based on SOFR.

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

Commercial Paper (All Registrants)

The Registrants, and PPL Capital Funding and RIE, maintain commercial paper programs to provide an additional financing source to fund short-term liquidity needs, as necessary. Commercial paper issuances, included in "Short-term debt" on the Balance Sheets, are supported by the respective Registrant's credit facility, with PPL Capital Funding and RIE’s issuances supported by PPL Capital Funding’s syndicated credit facility. The following commercial paper programs were in place at September 30, 2023:


	Capacity		Commercial Paper Issuances		Unused Capacity
PPL Capital Funding (a)	$	1,350	$	—	$	1,350
Rhode Island Energy (a)	400		75		325
PPL Electric	650		187		463

LG&E	500		—		500
KU	400		25		375
Total PPL	$	3,300	$	287	$	3,013

(a)Issuances under the PPL Capital Funding and RIE commercial paper programs are supported by the PPL Capital Funding syndicated credit facility, which has a total capacity of $1.25 billion, currently with a $250 million borrowing sublimit for RIE and a $1 billion sublimit for PPL Capital Funding. RIE’s borrowing sublimit is adjustable, at the borrowers’ option, from $0 to $600 million, with the remaining balance of the $1.25 billion available under the facility allocated to PPL Capital Funding.

Long-term Debt (All Registrants)

See Note 7 to the Financial Statements for information regarding the Registrants’ long-term debt activities.

Forecasted Uses of Cash (PPL)

Common Stock Dividends

In August 2023, PPL declared a quarterly common stock dividend, payable October 2, 2023, of 24.0 cents per share. Future dividends, declared at the discretion of the Board of Directors, will depend upon future earnings, cash flows, financial and legal requirements and other factors.

Rating Agency Actions

(All Registrants)

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

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

The credit ratings of the Registrants and their subsidiaries affect their liquidity, access to capital markets and cost of borrowing under their credit facilities. A downgrade in the Registrants' or their subsidiaries' credit ratings could result in higher borrowing costs and reduced access to capital markets. The Registrants and their subsidiaries have no credit rating triggers that would result in the reduction of access to capital markets or the acceleration of maturity dates of outstanding debt.

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

(PPL)

In June 2023, Moody’s assigned RIE's commercial paper a Short-Term Rating of P-2.

In June 2023, S&P assigned RIE's commercial paper a Short-Term Rating of A-2.

Ratings Triggers

(PPL, LG&E and KU)

Various derivative and non-derivative contracts, including contracts for the sale and purchase of electricity and fuel, commodity transportation and storage, and interest rate instruments, contain provisions that require the posting of additional collateral or permit the counterparty to terminate the contract, if PPL's, LG&E's or KU's or their subsidiaries' credit rating, as applicable, were to fall below investment grade. See Note 14 to the Financial Statements for a discussion of "Credit Risk-Related Contingent Features," including a discussion of the potential additional collateral requirements for PPL for derivative contracts in a net liability position at September 30, 2023.

(All Registrants)

For additional information on the Registrants' liquidity and capital resources, see "Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Registrants' 2022 Form 10-K.

Risk Management (All Registrants)

Market Risk

See Notes 13 and 14 to the Financial Statements for information about the Registrants' risk management objectives, valuation techniques and accounting designations.

The forward-looking information presented below provides estimates of what may occur in the future, assuming certain adverse market conditions and model assumptions. Actual future results may differ materially from those presented. These are not precise indicators of expected future losses, but are rather only indicators of possible losses under normal market conditions at a given confidence level.

Interest Rate Risk

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.

The following interest rate hedges were outstanding at September 30, 2023.


	Exposure Hedged		Fair Value, Net - Asset (Liability) (a)		Effect of a 10% Adverse Movement in Rates (b)		Maturities Ranging Through
PPL and LG&E
Economic hedges
Interest rate swaps (c)	$	64	$	(3)	$	(1)	2033

(a)Includes accrued interest, if applicable.

(b)Effects of adverse movements decrease assets or increase liabilities, as applicable, which could result in an asset becoming a liability. Sensitivities represent a 10% adverse movement in interest rates.

(c)Realized changes in the fair value of such economic hedges are recoverable through regulated rates and any subsequent changes in the fair value of these derivatives are included in regulatory assets or regulatory liabilities.

The Registrants are exposed to a potential increase in interest expense and to changes in the fair value of their debt portfolios. The estimated impact of a 10% adverse movement in interest rates on the fair value of debt at September 30, 2023 is shown below.


	10% Adverse Movement in Rates on Fair Value of Debt
PPL	$	600
PPL Electric	247
LG&E	96
KU	136

Commodity Price Risk

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

PPL Electric is required to purchase electricity to fulfill its obligation as a PLR. Potential commodity price risk is mitigated through its PAPUC-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 costs. These mechanisms generally provide for timely recovery of market price fluctuations associated with these costs.
RIE utilizes derivative instruments pursuant to its RIPUC-approved plan to manage commodity price risk associated with its natural gas purchases. RIE's commodity price risk management strategy is to reduce fluctuations in firm gas sales prices to its customers. RIE's costs associated with derivatives instruments are recoverable through its RIPUC-approved cost recovery mechanisms. RIE is required to purchase electricity to fulfill its obligation to provide Last Resort Service (LRS). Potential commodity price risk is mitigated through its RIPUC-approved cost recovery mechanisms and full requirements service agreements to serve LRS customers, which transfer the risk to energy suppliers. RIE is required to contract through long-term agreements for clean energy supply under the Rhode Island Renewable Energy Growth program and Long-term Clean Energy Standard. Potential commodity price risk is mitigated through its RIPUC-approved cost recovery mechanisms, which true-up cost differences between contract prices and market prices.

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:

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.
RIE is exposed to volumetric risk, which is significantly mitigated by regulatory mechanisms. RIE's electric and gas distribution rates both have a revenue decoupling mechanism, which allows for annual adjustments to RIE's delivery rates.

Inflation and Supply Chain Related Risk

PPL and its subsidiaries continue to monitor the impact of inflation and supply chain disruptions. PPL and its subsidiaries monitor the cost of fuel, construction, regulatory and environmental compliance costs and other costs. Mechanisms are in place to mitigate the risk of inflationary effects and supply chain disruptions, to the extent possible, but increased costs and supply chain disruptions may directly or indirectly affect our ongoing operations. These mechanisms include pricing strategies, productivity improvements and cost reductions in order to ensure that the Registrants are able to procure the necessary materials and other resources needed to maintain services in a safe and reliable manner, and to grow infrastructure consistent with the capital expenditure plan. For additional information see "Forward-looking Information” at the beginning of this report and “Item 1A. Risk Factors" of the Registrants' 2022 Form 10-K.

Credit Risk

See Notes 13 and14 to the Financial Statements in this Form 10-Q and "Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Risk Management - Credit Risk" in the Registrants' 2022 Form 10-K for additional information.

Related Party Transactions (All Registrants)

The Registrants are not aware of any material ownership interests or operating responsibility by senior management in outside partnerships, including leasing transactions with variable interest entities, or other entities doing business with the Registrants. See Note 11 to the Financial Statements for additional information on related party transactions for PPL Electric, LG&E and KU.

Acquisitions, Development and Divestitures (All Registrants)

The Registrants from time to time evaluate opportunities for potential acquisitions, divestitures and development projects. Development projects are reexamined based on market conditions and other factors to determine whether to proceed with, modify or terminate the projects. Any resulting transactions may impact future financial results. See Note 8 to the Financial Statements for additional information on the share purchase agreement to acquire Narragansett Electric.

Environmental Matters (All Registrants)

Extensive federal, state and local environmental laws and regulations are applicable to the Registrants' air emissions, water discharges and the management of hazardous and solid waste, as well as other aspects of the Registrants' businesses. The costs of compliance or alleged non-compliance cannot be predicted with certainty but could be significant. In addition, costs may increase significantly if the requirements or scope of environmental laws or regulations, or similar rules, are expanded or changed. Costs may take the form of increased capital expenditures or operating and maintenance expenses, monetary fines, penalties or other restrictions. Many of these environmental law considerations are also applicable to the operations of key suppliers, or customers, such as coal producers and industrial power users, and may impact the costs for their products or their demand for the Registrants' services. Increased capital and operating costs are expected to be subject to rate recovery. The Registrants can provide no assurances as to the ultimate outcome of future environmental or rate proceedings before regulatory authorities.

See "Environmental Matters" in Item 1. "Business" in the Registrants' 2022 Form 10-K for information about environmental laws and regulations affecting the Registrants' business. See "Financial Condition - Liquidity and Capital Resources - Forecasted Uses of Cash - Capital Expenditures" in "Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrants' 2022 Form 10-K for information on projected environmental capital expenditures for 2023 through 2025. See "Legal Matters" in Note 10 to the Financial Statements for a discussion of the more significant environmental claims. See Note 15 to the Financial Statements for information related to the impacts of CCRs on AROs.

The information below represents an update to “Item 1. Business – Environmental Matters” in the Registrants' 2022 Form 10-K.

(PPL, LG&E and KU)

NAAQS

In March 2021, the EPA released final revisions to the Cross-State Air Pollution Rule (CSAPR), aimed at ensuring compliance with the 2008 ozone NAAQS and providing for reductions in ozone season nitrogen oxide emissions for 2021 and subsequent years. Additionally, the EPA reversed its previous approval of the Kentucky State Implementation Plan with respect to these requirements. In March 2023, the EPA Administrator released a final Federal Implementation Plan under the Good Neighbor provisions of the Clean Air Act providing for significant additional nitrogen oxide emission reductions for compliance with the revised 2015 ozone NAAQS. The reductions in Kentucky state-wide nitrogen oxide budgets are scheduled to commence in 2023, with the largest reductions planned for 2026, based on the installation time frame for certain selective catalytic reduction controls, subject to future specific allowance calculations. PPL, LG&E and KU are currently assessing the potential impact of the Good Neighbor Plan revisions on operations. The rules provide for reduced availability of NOx allowances that have historically permitted operational flexibility for fossil units and could potentially result in constraints that may require implementation of additional emission controls or accelerate implementation of lower emission generation technologies. In

response to judicial orders that stayed the EPA’s denial of certain state implementation plans, the EPA in July 2023 issued an interim stay of implementation of Good Neighbor Plan requirements for emission sources in several states including Kentucky. Legal challenges to CSAPR and related determinations remain pending. In January 2023, the EPA released a proposed revision to increase the stringency of the current NAAQS for particulate matter. The EPA is continuing review of its previous determinations made in December 2020 to retain the existing NAAQS for ozone without change.

PPL, LG&E, and KU are unable to predict the ultimate outcome of pending litigation or future emission reductions that may be required by future federal rules or state implementation actions. Compliance with the NAAQS, CSAPR, Good Neighbor Plan, and related requirements may require installation of additional pollution controls or other compliance actions, inclusive of retirements, the costs of which PPL, LG&E and KU believe would be subject to rate recovery.

Mercury and Air Toxics Standards

In 2012, the EPA issued the Mercury and Air Toxics Standards (MATS) rule requiring reductions in mercury and other hazardous air pollutants from fossil fuel-fired power plants. LG&E and KU installed significant controls to achieve compliance with MATS and other rules. In April 2023, the EPA proposed to increase the stringency of MATS and further reduce emissions of certain hazardous air pollutants by reducing certain particulate matter standards by approximately two-thirds to reflect developments in control technologies. While the exact impact will depend on the provisions adopted in the final rule, PPL, LG&E, and KU do not expect significant operational changes or additional controls. PPL, LG&E, and KU will continue to monitor the ongoing rulemaking process.

Proposed Greenhouse Gas Standards

On May 11, 2023, the EPA released proposed rules under Section 111 of the Clean Air Act to establish performance standards and emissions limits aimed at reducing GHG emissions from certain new, existing, and modified fossil fuel-fired electric generating units (EGUs). The proposed standards would require phased implementation of carbon mitigation technologies including state-of-the-art efficiency requirements, carbon capture and sequestration, low GHG hydrogen co-firing, and natural gas co-firing. New natural gas EGUs would be immediately subject to the stricter efficiency standard. The EPA’s proposed new GHG reduction requirements, if adopted, could potentially require significant additional compliance measures including changes in current operations, installation of capital equipment, and early retirement of certain coal-fired generating units. PPL, LG&E, and KU are unable to predict the precise impact of new GHG reduction requirements until issuance of final rules and resolution of related legal and regulatory proceedings. While the impact of new GHG reduction requirements on operations and financial results of operations could potentially be substantial, the cost of complying with such requirements is expected to be subject to rate recovery.

Waters of the U.S.

On May 25, 2023, the U.S. Supreme Court issued an opinion in Sackett v. EPA holding that the government’s jurisdiction to regulate wetlands under the Clean Water Act extends to wetlands with a continuous surface connection to bodies that are "waters of the United States." On September 8, 2023, the EPA issued a conforming rule that incorporated the holding of Sackett into federal definitions of waters of the United States. By limiting water bodies that fall within the jurisdiction of the Clean Water Act, the Supreme Court's decision could reduce the number of projects or the scope of project activities subject to federal permitting for wetlands.

New Accounting Guidance (All Registrants)

There has been no new accounting guidance adopted in 2023 and there is no new significant accounting guidance pending adoption as of September 30, 2023.

Application of Critical Accounting Policies (All Registrants**)**

Financial condition and results of operations are impacted by the methods, assumptions and estimates used in the application of critical accounting policies. The following table summarizes the accounting policies by Registrant that are particularly important to an understanding of the reported financial condition or results of operations and require management to make estimates or other judgments of matters that are inherently uncertain. See "Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrants' 2022 Form 10-K for a discussion of each critical accounting policy.


		PPL
	PPL	Electric	LG&E	KU

Defined Benefits	X	X	X	X
Income Taxes	X	X	X	X
Regulatory Assets and Liabilities	X	X	X	X
Price Risk Management	X
Goodwill Impairment	X		X	X
AROs			X	X
Revenue Recognition - Unbilled Revenue	X	X	X	X

Following is an update to the critical accounting policies disclosed in PPL's 2022 Form 10-K.

Revenue Recognition - Unbilled Revenues (PPL and PPL Electric)

For PPL Electric, unbilled revenues for a month are typically calculated by multiplying the actual unbilled volumes by the price per tariff. In the first quarter of 2023, PPL Electric estimated deliveries to customers due to a temporary issue. In the second quarter of 2023, the temporary issue was resolved and unbilled volumes resumed being calculated by multiplying the actual unbilled volumes by the price per tariff.

PPL Corporation

PPL Electric Utilities Corporation

Louisville Gas and Electric Company

Kentucky Utilities Company

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