filings.toolsItem 1. Financial Statements
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Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, except share data)
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Operating Revenues | $ | 2,304 | $ | 2,415 | |||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Operation | |||||||||||||||||||||||
| Fuel | 209 | 201 | |||||||||||||||||||||
| Energy purchases | 520 | 734 | |||||||||||||||||||||
| Other operation and maintenance | 626 | 559 | |||||||||||||||||||||
| Depreciation | 316 | 313 | |||||||||||||||||||||
| Taxes, other than income | 88 | 110 | |||||||||||||||||||||
| Total Operating Expenses | 1,759 | 1,917 | |||||||||||||||||||||
| Operating Income | 545 | 498 | |||||||||||||||||||||
| Other Income (Expense) - net (Note 12) | 22 | 30 | |||||||||||||||||||||
| Interest Expense | 179 | 164 | |||||||||||||||||||||
| Income Before Income Taxes | 388 | 364 | |||||||||||||||||||||
| Income Taxes | 81 | 79 | |||||||||||||||||||||
| Net Income | $ | 307 | $ | 285 | |||||||||||||||||||
| Earnings Per Share of Common Stock: | |||||||||||||||||||||||
| Basic and Diluted | |||||||||||||||||||||||
| Net Income Available to PPL Common Shareowners | $ | 0.42 | $ | 0.39 | |||||||||||||||||||
| Weighted-Average Shares of Common Stock Outstanding (in thousands) | |||||||||||||||||||||||
| Basic | 737,512 | 736,829 | |||||||||||||||||||||
| Diluted | 738,820 | 737,698 |
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Net income | $ | 307 | $ | 285 | |||||||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||
| Amounts arising during the period - gains (losses), net of tax (expense) benefit: | |||||||||||||||||||||||
| Equity investees' other comprehensive income (loss), net of tax of $0, $0 | 1 | 1 | |||||||||||||||||||||
| Reclassifications from AOCI - (gains) losses, net of tax expense (benefit): | |||||||||||||||||||||||
| Qualifying derivatives, net of tax of $0, $0 | 1 | 1 | |||||||||||||||||||||
| Defined benefit plans: | |||||||||||||||||||||||
| Net actuarial (gain) loss, net of tax of $0, $0 | — | (1) | |||||||||||||||||||||
| Total other comprehensive income (loss) | 2 | 1 | |||||||||||||||||||||
| Comprehensive income | $ | 309 | $ | 286 |
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash Flows from Operating Activities | |||||||||||
| Net income | $ | 307 | $ | 285 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities | |||||||||||
| Depreciation | 316 | 313 | |||||||||
| Amortization | 24 | 17 | |||||||||
| Defined benefit plans - (income) expense | (15) | (18) | |||||||||
| Deferred income taxes and investment tax credits | 72 | 77 | |||||||||
| Other | 3 | 8 | |||||||||
| Change in current assets and current liabilities | |||||||||||
| Accounts receivable | (75) | (94) | |||||||||
| Accounts payable | (221) | (63) | |||||||||
| Unbilled revenues | 57 | 109 | |||||||||
| Fuel, materials and supplies | 33 | 10 | |||||||||
| Prepayments | (108) | (83) | |||||||||
| Taxes payable | (47) | (42) | |||||||||
| Regulatory assets and liabilities, net | (61) | (46) | |||||||||
| Accrued interest | 90 | 67 | |||||||||
| Other | (103) | (14) | |||||||||
| Other operating activities | |||||||||||
| Defined benefit plans - funding | (5) | (3) | |||||||||
| Other assets | (1) | (61) | |||||||||
| Other liabilities | 16 | (32) | |||||||||
| Net cash provided by operating activities | 282 | 430 | |||||||||
| Cash Flows from Investing Activities | |||||||||||
| Expenditures for property, plant and equipment | (596) | (499) | |||||||||
| Other investing activities | 5 | (4) | |||||||||
| Net cash used in investing activities | (591) | (503) | |||||||||
| Cash Flows from Financing Activities | |||||||||||
| Issuance of long-term debt | 1,148 | 3,127 | |||||||||
| Retirement of long-term debt | — | (1,750) | |||||||||
| Payment of common stock dividends | (177) | (171) | |||||||||
| Net increase (decrease) in short-term debt | (701) | (985) | |||||||||
| Other financing activities | (22) | (44) | |||||||||
| Net cash provided by financing activities | 248 | 177 | |||||||||
| Net Decrease in Cash, Cash Equivalents and Restricted Cash | (61) | 104 | |||||||||
| Cash, Cash Equivalents and Restricted Cash at Beginning of Period | 382 | 357 | |||||||||
| Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 321 | $ | 461 | |||||||
| Supplemental Disclosures of Cash Flow Information | |||||||||||
| Significant non-cash transactions: | |||||||||||
| Accrued expenditures for property, plant and equipment at March 31, | $ | 253 | $ | 257 | |||||||
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, shares in thousands)
| March 31, 2024 | December 31, 2023 | ||||||||||
| Assets | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | 276 | $ | 331 | |||||||
| Accounts receivable (less reserve: 2024, $146; 2023, $123) | |||||||||||
| Customer | 999 | 950 | |||||||||
| Other | 271 | 271 | |||||||||
| Unbilled revenues (less reserve: 2024, $4; 2023, $4) | 371 | 428 | |||||||||
| Fuel, materials and supplies | 477 | 505 | |||||||||
| Prepayments | 212 | 103 | |||||||||
| Regulatory assets | 330 | 293 | |||||||||
| Other current assets | 101 | 51 | |||||||||
| Total Current Assets | 3,037 | 2,932 | |||||||||
| Property, Plant and Equipment | |||||||||||
| Regulated utility plant | 39,031 | 38,608 | |||||||||
| Less: accumulated depreciation - regulated utility plant | 9,327 | 9,156 | |||||||||
| Regulated utility plant, net | 29,704 | 29,452 | |||||||||
| Non-regulated property, plant and equipment | 71 | 72 | |||||||||
| Less: accumulated depreciation - non-regulated property, plant and equipment | 24 | 23 | |||||||||
| Non-regulated property, plant and equipment, net | 47 | 49 | |||||||||
| Construction work in progress | 1,996 | 1,917 | |||||||||
| Property, Plant and Equipment, net | 31,747 | 31,418 | |||||||||
| Other Noncurrent Assets | |||||||||||
| Regulatory assets | 1,859 | 1,874 | |||||||||
| Goodwill | 2,247 | 2,247 | |||||||||
| Other intangibles | 304 | 306 | |||||||||
| Other noncurrent assets (less reserve for accounts receivable: 2024, $3; 2023 $2) | 437 | 459 | |||||||||
| Total Other Noncurrent Assets | 4,847 | 4,886 | |||||||||
| Total Assets | $ | 39,631 | $ | 39,236 |
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, shares in thousands)
| March 31, 2024 | December 31, 2023 | ||||||||||
| Liabilities and Equity | |||||||||||
| Current Liabilities | |||||||||||
| Short-term debt | $ | 291 | $ | 992 | |||||||
| Long-term debt due within one year | 1 | 1 | |||||||||
| Accounts payable | 903 | 1,104 | |||||||||
| Taxes | 83 | 130 | |||||||||
| Interest | 214 | 124 | |||||||||
| Dividends | 186 | 173 | |||||||||
| Regulatory liabilities | 223 | 225 | |||||||||
| Other current liabilities | 474 | 591 | |||||||||
| Total Current Liabilities | 2,375 | 3,340 | |||||||||
| Long-term Debt | 15,753 | 14,611 | |||||||||
| Deferred Credits and Other Noncurrent Liabilities | |||||||||||
| Deferred income taxes | 3,195 | 3,105 | |||||||||
| Investment tax credits | 113 | 114 | |||||||||
| Accrued pension obligations | 255 | 275 | |||||||||
| Asset retirement obligations | 127 | 133 | |||||||||
| Regulatory liabilities | 3,351 | 3,340 | |||||||||
| Other deferred credits and noncurrent liabilities | 404 | 385 | |||||||||
| Total Deferred Credits and Other Noncurrent Liabilities | 7,445 | 7,352 | |||||||||
| Commitments and Contingent Liabilities (Notes 6 and 10) | |||||||||||
| Equity | |||||||||||
| Common stock - $0.01 par value (a) | 8 | 8 | |||||||||
| Additional paid-in capital | 12,314 | 12,326 | |||||||||
| Treasury stock | (931) | (948) | |||||||||
| Earnings reinvested | 2,828 | 2,710 | |||||||||
| Accumulated other comprehensive loss | (161) | (163) | |||||||||
| Total Equity | 14,058 | 13,933 | |||||||||
| Total Liabilities and Equity | $ | 39,631 | $ | 39,236 |
(a)1,560,000 shares authorized, 770,013 shares issued and 737,736 shares outstanding at March 31, 2024. 1,560,000 shares authorized, 770,013 shares issued and 737,130 shares outstanding at December 31, 2023.
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
PPL Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
| Common stock shares outstanding (a) | Common stock | Additional paid-in capital | Treasury stock | Earnings reinvested | Accumulated other comprehensive loss | Noncontrolling interests | Total | |||||||||||||||||||
| December 31, 2023 | 737,130 | $ | 8 | $ | 12,326 | $ | (948) | $ | 2,710 | $ | (163) | $ | — | $ | 13,933 | |||||||||||
| Treasury stock issued | 606 | — | 17 | 17 | ||||||||||||||||||||||
| Stock-based compensation | (12) | (12) | ||||||||||||||||||||||||
| Net income | 307 | 307 | ||||||||||||||||||||||||
| Dividends and dividend equivalents (b) | (189) | (189) | ||||||||||||||||||||||||
| Other comprehensive income (loss) | 2 | 2 | ||||||||||||||||||||||||
| March 31, 2024 | 737,736 | $ | 8 | $ | 12,314 | $ | (931) | $ | 2,828 | $ | (161) | $ | — | $ | 14,058 | |||||||||||
| December 31, 2022 | 736,487 | $ | 8 | $ | 12,317 | $ | (967) | $ | 2,681 | $ | (124) | $ | 3 | $ | 13,918 | |||||||||||
| Treasury stock issued | 580 | 2 | 17 | 19 | ||||||||||||||||||||||
| Stock-based compensation | (9) | (9) | ||||||||||||||||||||||||
| Net income | 285 | 285 | ||||||||||||||||||||||||
| Dividends and dividend equivalents (b) | (178) | (178) | ||||||||||||||||||||||||
| Other comprehensive income (loss) | 1 | 1 | ||||||||||||||||||||||||
| March 31, 2023 | 737,067 | $ | 8 | $ | 12,310 | $ | (950) | $ | 2,788 | $ | (123) | $ | 3 | $ | 14,036 | |||||||||||
(a)Shares in thousands. Each share entitles the holder to one vote on any question presented at any shareowners' meeting.
(b)Dividends declared per share of common stock were $0.2575 for the three months ended March 31, 2024 and $0.2400 for the three months ended March 31, 2023.
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
| THIS PAGE INTENTIONALLY LEFT BLANK. |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Operating Revenues | $ | 770 | $ | 891 | |||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Operation | |||||||||||||||||||||||
| Energy purchases | 214 | 358 | |||||||||||||||||||||
| Other operation and maintenance | 181 | 162 | |||||||||||||||||||||
| Depreciation | 99 | 99 | |||||||||||||||||||||
| Taxes, other than income | 36 | 44 | |||||||||||||||||||||
| Total Operating Expenses | 530 | 663 | |||||||||||||||||||||
| Operating Income | 240 | 228 | |||||||||||||||||||||
| Other Income (Expense) - net (Note 12) | 9 | 12 | |||||||||||||||||||||
| Interest Income from Affiliate | 10 | — | |||||||||||||||||||||
| Interest Expense | 62 | 57 | |||||||||||||||||||||
| Income Before Income Taxes | 197 | 183 | |||||||||||||||||||||
| Income Taxes | 48 | 45 | |||||||||||||||||||||
| Net Income (a) | $ | 149 | $ | 138 |
(a)Net income equals comprehensive income.
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash Flows from Operating Activities | |||||||||||
| Net income | $ | 149 | $ | 138 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities | |||||||||||
| Depreciation | 99 | 99 | |||||||||
| Amortization | 12 | 9 | |||||||||
| Defined benefit plans - expense (income) | (11) | (10) | |||||||||
| Deferred income taxes and investment tax credits | 32 | 26 | |||||||||
| Other | (7) | (5) | |||||||||
| Change in current assets and current liabilities | |||||||||||
| Accounts receivable | (33) | (115) | |||||||||
| Accounts payable | (59) | 30 | |||||||||
| Unbilled revenues | 30 | 20 | |||||||||
| Materials and supplies | (4) | (17) | |||||||||
| Prepayments | (110) | (77) | |||||||||
| Regulatory assets and liabilities, net | (28) | (12) | |||||||||
| Taxes payable | (48) | (36) | |||||||||
| Accrued interest | 35 | 15 | |||||||||
| Other | (26) | 17 | |||||||||
| Other operating activities | |||||||||||
| Defined benefit plans - funding | (1) | (1) | |||||||||
| Other assets | — | (22) | |||||||||
| Other liabilities | (2) | (20) | |||||||||
| Net cash provided by operating activities | 28 | 39 | |||||||||
| Cash Flows from Investing Activities | |||||||||||
| Expenditures for property, plant and equipment | (229) | (155) | |||||||||
| Expenditures for intangible assets | (1) | (1) | |||||||||
| Notes receivable from affiliates | (554) | — | |||||||||
| Other investing activities | 4 | — | |||||||||
| Net cash used in investing activities | (780) | (156) | |||||||||
| Cash Flows from Financing Activities | |||||||||||
| Issuance of long-term debt | 649 | 1,329 | |||||||||
| Retirement of long-term debt | — | (1,150) | |||||||||
| Contributions from parent | 675 | 200 | |||||||||
| Payment of common stock dividends to parent | (88) | (74) | |||||||||
| Net decrease in short-term debt | (509) | (145) | |||||||||
| Debt issuance costs | (5) | (12) | |||||||||
| Net cash provided by (used in) financing activities | 722 | 148 | |||||||||
| Net Increase in Cash, Cash Equivalents and Restricted Cash | (30) | 31 | |||||||||
| Cash, Cash Equivalents and Restricted Cash at Beginning of Period | 51 | 25 | |||||||||
| Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 21 | $ | 56 | |||||||
| Supplemental Disclosure of Cash Flow Information | |||||||||||
| Significant non-cash transactions: | |||||||||||
| Accrued expenditures for property, plant and equipment at March 31, | $ | 146 | $ | 142 |
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, shares in thousands)
| March 31, 2024 | December 31, 2023 | ||||||||||
| Assets | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | 21 | $ | 51 | |||||||
| Accounts receivable (less reserve: 2024, $57; 2023, $46) | |||||||||||
| Customer | 450 | 434 | |||||||||
| Other | 10 | 8 | |||||||||
| Accounts receivable from affiliates | 10 | 10 | |||||||||
| Notes receivable from affiliate | 554 | — | |||||||||
| Unbilled revenues (less reserve: 2024, $2; 2023, $2) | 119 | 149 | |||||||||
| Materials and supplies | 103 | 99 | |||||||||
| Prepayments | 155 | 44 | |||||||||
| Regulatory assets | 84 | 57 | |||||||||
| Other current assets | 33 | 17 | |||||||||
| Total Current Assets | 1,539 | 869 | |||||||||
| Property, Plant and Equipment | |||||||||||
| Regulated utility plant | 15,740 | 15,575 | |||||||||
| Less: accumulated depreciation - regulated utility plant | 3,889 | 3,822 | |||||||||
| Regulated utility plant, net | 11,851 | 11,753 | |||||||||
| Construction work in progress | 744 | 680 | |||||||||
| Property, Plant and Equipment, net | 12,595 | 12,433 | |||||||||
| Other Noncurrent Assets | |||||||||||
| Regulatory assets | 592 | 598 | |||||||||
| Intangibles | 269 | 269 | |||||||||
| Other noncurrent assets (less reserve for accounts receivable: 2024, $3; 2023, $2) | 121 | 125 | |||||||||
| Total Other Noncurrent Assets | 982 | 992 | |||||||||
| Total Assets | $ | 15,116 | $ | 14,294 |
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
CONDENSED CONSOLIDATED BALANCE SHEETS
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars, shares in thousands)
| March 31, 2024 | December 31, 2023 | ||||||||||
| Liabilities and Equity | |||||||||||
| Current Liabilities | |||||||||||
| Short-term debt | $ | — | $ | 509 | |||||||
| Accounts payable | 404 | 454 | |||||||||
| Accounts payable to affiliates | 52 | 44 | |||||||||
| Taxes | 3 | 51 | |||||||||
| Interest | 78 | 43 | |||||||||
| Regulatory liabilities | 90 | 91 | |||||||||
| Other current liabilities | 82 | 100 | |||||||||
| Total Current Liabilities | 709 | 1,292 | |||||||||
| Long-term Debt | 5,211 | 4,567 | |||||||||
| Deferred Credits and Other Noncurrent Liabilities | |||||||||||
| Deferred income taxes | 1,608 | 1,573 | |||||||||
| Regulatory liabilities | 839 | 836 | |||||||||
| Other deferred credits and noncurrent liabilities | 110 | 123 | |||||||||
| Total Deferred Credits and Other Noncurrent Liabilities | 2,557 | 2,532 | |||||||||
| Commitments and Contingent Liabilities (Notes 6 and 10) | |||||||||||
| Equity | |||||||||||
| Common stock - no par value (a) | 364 | 364 | |||||||||
| Additional paid-in capital | 4,715 | 4,040 | |||||||||
| Earnings reinvested | 1,560 | 1,499 | |||||||||
| Total Equity | 6,639 | 5,903 | |||||||||
| Total Liabilities and Equity | $ | 15,116 | $ | 14,294 |
(a)170,000 shares authorized; 66,368 shares issued and outstanding at March 31, 2024 and December 31, 2023.
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
PPL Electric Utilities Corporation and Subsidiaries
(Unaudited)
(Millions of Dollars)
| Common stock shares outstanding (a) | Common stock | Additional paid-in capital | Earnings reinvested | Total | |||||||||||||||||||||||||
| December 31, 2023 | 66,368 | $ | 364 | $ | 4,040 | $ | 1,499 | $ | 5,903 | ||||||||||||||||||||
| Net income | 149 | 149 | |||||||||||||||||||||||||||
| Capital contributions from parent | 675 | 675 | |||||||||||||||||||||||||||
| Dividends declared | (88) | (88) | |||||||||||||||||||||||||||
| March 31, 2024 | 66,368 | $ | 364 | $ | 4,715 | $ | 1,560 | $ | 6,639 | ||||||||||||||||||||
| December 31, 2022 | 66,368 | $ | 364 | $ | 4,084 | $ | 1,303 | $ | 5,751 | ||||||||||||||||||||
| Net income | 138 | 138 | |||||||||||||||||||||||||||
| Capital contributions from parent | 200 | 200 | |||||||||||||||||||||||||||
| Dividends declared | (74) | (74) | |||||||||||||||||||||||||||
| March 31, 2023 | 66,368 | $ | 364 | $ | 4,284 | $ | 1,367 | $ | 6,015 |
(a)Shares in thousands. All common shares of PPL Electric stock are owned by PPL Energy Holdings.
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
| THIS PAGE INTENTIONALLY LEFT BLANK. |
CONDENSED STATEMENTS OF INCOME
Louisville Gas and Electric Company
(Unaudited)
(Millions of Dollars)
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Operating Revenues | |||||||||||||||||||||||
| Retail and wholesale | $ | 460 | $ | 461 | |||||||||||||||||||
| Electric revenue from affiliate | 16 | 13 | |||||||||||||||||||||
| Total Operating Revenues | 476 | 474 | |||||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Operation | |||||||||||||||||||||||
| Fuel | 86 | 79 | |||||||||||||||||||||
| Energy purchases | 71 | 84 | |||||||||||||||||||||
| Energy purchases from affiliate | 1 | 1 | |||||||||||||||||||||
| Other operation and maintenance | 88 | 91 | |||||||||||||||||||||
| Depreciation | 76 | 75 | |||||||||||||||||||||
| Taxes, other than income | 13 | 12 | |||||||||||||||||||||
| Total Operating Expenses | 335 | 342 | |||||||||||||||||||||
| Operating Income | 141 | 132 | |||||||||||||||||||||
| Other Income (Expense) - net | 2 | 2 | |||||||||||||||||||||
| Interest Expense | 26 | 25 | |||||||||||||||||||||
| Income Before Income Taxes | 117 | 109 | |||||||||||||||||||||
| Income Taxes | 24 | 23 | |||||||||||||||||||||
| Net Income (a) | $ | 93 | $ | 86 |
(a)Net income equals comprehensive income.
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
CONDENSED STATEMENTS OF CASH FLOWS
Louisville Gas and Electric Company
(Unaudited)
(Millions of Dollars)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash Flows from Operating Activities | |||||||||||
| Net income | $ | 93 | $ | 86 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities | |||||||||||
| Depreciation | 76 | 75 | |||||||||
| Amortization | 3 | 3 | |||||||||
| Defined benefit plans - expense (income) | 1 | — | |||||||||
| Deferred income taxes and investment tax credits | 2 | — | |||||||||
| Change in current assets and current liabilities | |||||||||||
| Accounts receivable | (19) | 28 | |||||||||
| Accounts receivable from affiliates | (11) | 14 | |||||||||
| Accounts payable | 6 | (35) | |||||||||
| Accounts payable to affiliates | 34 | 31 | |||||||||
| Unbilled revenues | 16 | 33 | |||||||||
| Fuel, materials and supplies | 13 | 41 | |||||||||
| Regulatory assets and liabilities, net | (21) | 21 | |||||||||
| Taxes payable | (26) | (27) | |||||||||
| Accrued interest | 23 | 18 | |||||||||
| Other | (19) | (11) | |||||||||
| Other operating activities | |||||||||||
| Defined benefit plans - funding | (1) | — | |||||||||
| Expenditures for asset retirement obligations | (2) | (2) | |||||||||
| Other assets | — | (10) | |||||||||
| Other liabilities | (2) | (1) | |||||||||
| Net cash provided by operating activities | 166 | 264 | |||||||||
| Cash Flows from Investing Activities | |||||||||||
| Expenditures for property, plant and equipment | (92) | (86) | |||||||||
| Net increase in notes receivable with affiliates | (28) | (9) | |||||||||
| Net cash used in investing activities | (120) | (95) | |||||||||
| Cash Flows from Financing Activities | |||||||||||
| Issuance of long-term debt | — | 399 | |||||||||
| Retirement of long-term debt | — | (300) | |||||||||
| Net increase (decrease) in short-term debt | 28 | (179) | |||||||||
| Payment of common stock dividends to parent | (37) | (31) | |||||||||
| Return of capital to parent | (51) | (120) | |||||||||
| Other financing activities | — | (3) | |||||||||
| Net cash used in financing activities | (60) | (234) | |||||||||
| Net Decrease in Cash, Cash Equivalents, and Restricted Cash | (14) | (65) | |||||||||
| Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | 44 | 93 | |||||||||
| Cash, Cash Equivalents, and Restricted Cash at End of Period | $ | 30 | $ | 28 | |||||||
| Supplemental Disclosure of Cash Flow Information | |||||||||||
| Significant non-cash transactions: | |||||||||||
| Accrued expenditures for property, plant and equipment at March 31, | $ | 35 | $ | 46 |
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
CONDENSED BALANCE SHEETS
Louisville Gas and Electric Company
(Unaudited)
(Millions of Dollars, shares in thousands)
| March 31, 2024 | December 31, 2023 | ||||||||||
| Assets | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | 8 | $ | 18 | |||||||
| Accounts receivable (less reserve: 2024, $5; 2023, $6) | |||||||||||
| Customer | 121 | 116 | |||||||||
| Other | 24 | 17 | |||||||||
| Unbilled revenues (less reserve: 2024, $0; 2023, $0) | 72 | 88 | |||||||||
| Accounts receivable from affiliates | 40 | 29 | |||||||||
| Notes receivable from affiliates | 28 | — | |||||||||
| Fuel, materials and supplies | 130 | 143 | |||||||||
| Prepayments | 11 | 11 | |||||||||
| Regulatory assets | 14 | 7 | |||||||||
| Other current assets | 6 | — | |||||||||
| Total Current Assets | 454 | 429 | |||||||||
| Property, Plant and Equipment | |||||||||||
| Regulated utility plant | 7,715 | 7,669 | |||||||||
| Less: accumulated depreciation - regulated utility plant | 1,599 | 1,549 | |||||||||
| Regulated utility plant, net | 6,116 | 6,120 | |||||||||
| Construction work in progress | 342 | 312 | |||||||||
| Property, Plant and Equipment, net | 6,458 | 6,432 | |||||||||
| Other Noncurrent Assets | |||||||||||
| Regulatory assets | 388 | 395 | |||||||||
| Goodwill | 389 | 389 | |||||||||
| Other intangibles | 17 | 18 | |||||||||
| Other noncurrent assets | 92 | 90 | |||||||||
| Total Other Noncurrent Assets | 886 | 892 | |||||||||
| Total Assets | $ | 7,798 | $ | 7,753 |
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
CONDENSED BALANCE SHEETS
Louisville Gas and Electric Company
(Unaudited)
(Millions of Dollars, shares in thousands)
| March 31, 2024 | December 31, 2023 | ||||||||||
| Liabilities and Equity | |||||||||||
| Current Liabilities | |||||||||||
| Short-term debt | $ | 28 | $ | — | |||||||
| Accounts payable | 121 | 115 | |||||||||
| Accounts payable to affiliates | 83 | 49 | |||||||||
| Customer deposits | 35 | 34 | |||||||||
| Taxes | 15 | 41 | |||||||||
| Price risk management liabilities | 1 | 1 | |||||||||
| Regulatory liabilities | 2 | 16 | |||||||||
| Interest | 44 | 21 | |||||||||
| Asset retirement obligations | 13 | 13 | |||||||||
| Other current liabilities | 32 | 47 | |||||||||
| Total Current Liabilities | 374 | 337 | |||||||||
| Long-term Debt | 2,469 | 2,469 | |||||||||
| Deferred Credits and Other Noncurrent Liabilities | |||||||||||
| Deferred income taxes | 782 | 776 | |||||||||
| Investment tax credits | 30 | 31 | |||||||||
| Price risk management liabilities | 4 | 6 | |||||||||
| Asset retirement obligations | 71 | 72 | |||||||||
| Regulatory liabilities | 824 | 827 | |||||||||
| Other deferred credits and noncurrent liabilities | 67 | 63 | |||||||||
| Total Deferred Credits and Other Noncurrent Liabilities | 1,778 | 1,775 | |||||||||
| Commitments and Contingent Liabilities (Notes 6 and 10) | |||||||||||
| Stockholder's Equity | |||||||||||
| Common stock - no par value (a) | 424 | 424 | |||||||||
| Additional paid-in capital | 1,942 | 1,993 | |||||||||
| Earnings reinvested | 811 | 755 | |||||||||
| Total Equity | 3,177 | 3,172 | |||||||||
| Total Liabilities and Equity | $ | 7,798 | $ | 7,753 |
(a)75,000 shares authorized; 21,294 shares issued and outstanding at March 31, 2024 and December 31, 2023.
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
CONDENSED STATEMENTS OF EQUITY
Louisville Gas and Electric Company
(Unaudited)
(Millions of Dollars)
| Common stock shares outstanding (a) | Common stock | Additional paid-in capital | Earnings reinvested | Total | |||||||||||||||||||||||||
| December 31, 2023 | 21,294 | $ | 424 | $ | 1,993 | $ | 755 | $ | 3,172 | ||||||||||||||||||||
| Net income | 93 | 93 | |||||||||||||||||||||||||||
| Return of capital to parent | (51) | (51) | |||||||||||||||||||||||||||
| Dividends declared | (37) | (37) | |||||||||||||||||||||||||||
| March 31, 2024 | 21,294 | $ | 424 | $ | 1,942 | $ | 811 | $ | 3,177 | ||||||||||||||||||||
| December 31, 2022 | 21,294 | $ | 424 | $ | 2,087 | $ | 655 | $ | 3,166 | ||||||||||||||||||||
| Net income | 86 | 86 | |||||||||||||||||||||||||||
| Return of capital to parent | (120) | (120) | |||||||||||||||||||||||||||
| Dividends declared | (31) | (31) | |||||||||||||||||||||||||||
| March 31, 2023 | 21,294 | $ | 424 | $ | 1,967 | $ | 710 | $ | 3,101 |
(a)Shares in thousands. All common shares of LG&E stock are owned by LKE.
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
| THIS PAGE INTENTIONALLY LEFT BLANK. |
CONDENSED STATEMENTS OF INCOME
Kentucky Utilities Company
(Unaudited)
(Millions of Dollars)
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Operating Revenues | |||||||||||||||||||||||
| Retail and wholesale | $ | 524 | $ | 498 | |||||||||||||||||||
| Electric revenue from affiliate | 1 | 1 | |||||||||||||||||||||
| Total Operating Revenues | 525 | 499 | |||||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Operation | |||||||||||||||||||||||
| Fuel | 123 | 122 | |||||||||||||||||||||
| Energy purchases | 6 | 6 | |||||||||||||||||||||
| Energy purchases from affiliate | 16 | 13 | |||||||||||||||||||||
| Other operation and maintenance | 102 | 109 | |||||||||||||||||||||
| Depreciation | 99 | 98 | |||||||||||||||||||||
| Taxes, other than income | 12 | 10 | |||||||||||||||||||||
| Total Operating Expenses | 358 | 358 | |||||||||||||||||||||
| Operating Income | 167 | 141 | |||||||||||||||||||||
| Other Income (Expense) - net | 2 | 2 | |||||||||||||||||||||
| Interest Expense | 34 | 33 | |||||||||||||||||||||
| Income Before Income Taxes | 135 | 110 | |||||||||||||||||||||
| Income Taxes | 27 | 22 | |||||||||||||||||||||
| Net Income (a) | $ | 108 | $ | 88 |
(a)Net income equals comprehensive income.
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
CONDENSED STATEMENTS OF CASH FLOWS
Kentucky Utilities Company
(Unaudited)
(Millions of Dollars)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash Flows from Operating Activities | |||||||||||
| Net income | $ | 108 | $ | 88 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities | |||||||||||
| Depreciation | 99 | 98 | |||||||||
| Amortization | 5 | 5 | |||||||||
| Defined benefit plans - (income) | (1) | — | |||||||||
| Deferred income taxes and investment tax credits | (1) | (1) | |||||||||
| Other | (1) | (1) | |||||||||
| Change in current assets and current liabilities | |||||||||||
| Accounts receivable | (21) | 16 | |||||||||
| Accounts payable | (13) | (16) | |||||||||
| Accounts payable to affiliates | 52 | 2 | |||||||||
| Unbilled revenues | 6 | 25 | |||||||||
| Fuel, materials and supplies | 8 | (8) | |||||||||
| Regulatory assets and liabilities, net | 1 | 8 | |||||||||
| Taxes payable | (17) | (11) | |||||||||
| Accrued interest | 32 | 26 | |||||||||
| Other | (7) | 2 | |||||||||
| Other operating activities | |||||||||||
| Defined benefit plans - funding | (1) | — | |||||||||
| Expenditures for asset retirement obligations | (2) | (5) | |||||||||
| Other assets | 8 | (13) | |||||||||
| Other liabilities | (3) | (1) | |||||||||
| Net cash provided by operating activities | 252 | 214 | |||||||||
| Cash Flows from Investing Activities | |||||||||||
| Expenditures for property, plant and equipment | (148) | (141) | |||||||||
| Net cash used in investing activities | (148) | (141) | |||||||||
| Cash Flows from Financing Activities | |||||||||||
| Net increase in notes payable to affiliates | 37 | 9 | |||||||||
| Issuance of long-term debt | — | 399 | |||||||||
| Retirement of long-term debt | — | (300) | |||||||||
| Net decrease in short-term debt | (48) | (101) | |||||||||
| Payment of common stock dividends to parent | (47) | (35) | |||||||||
| Return of capital to parent | (50) | (54) | |||||||||
| Other financing activities | — | (3) | |||||||||
| Net cash used in financing activities | (108) | (85) | |||||||||
| Net Decrease in Cash, Cash Equivalents, and Restricted Cash | (4) | (12) | |||||||||
| Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | 38 | 21 | |||||||||
| Cash, Cash Equivalents, and Restricted Cash at End of Period | $ | 34 | $ | 9 | |||||||
| Supplemental Disclosure of Cash Flow Information | |||||||||||
| Significant non-cash transactions: | |||||||||||
| Accrued expenditures for property, plant and equipment at March 31, | $ | 44 | $ | 60 |
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
CONDENSED BALANCE SHEETS
Kentucky Utilities Company
(Unaudited)
(Millions of Dollars, shares in thousands)
| March 31, 2024 | December 31, 2023 | ||||||||||
| Assets | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | 12 | $ | 14 | |||||||
| Accounts receivable (less reserve: 2024, $3; 2023, $2) | |||||||||||
| Customer | 152 | 143 | |||||||||
| Other | 19 | 12 | |||||||||
| Unbilled revenues (less reserve: 2024, $0; 2023, $0) | 91 | 97 | |||||||||
| Fuel, materials and supplies | 177 | 185 | |||||||||
| Prepayments | 11 | 13 | |||||||||
| Regulatory assets | 7 | 3 | |||||||||
| Other current assets | 2 | 1 | |||||||||
| Total Current Assets | 471 | 468 | |||||||||
| Property, Plant and Equipment | |||||||||||
| Regulated utility plant | 10,038 | 9,896 | |||||||||
| Less: accumulated depreciation - regulated utility plant | 2,547 | 2,476 | |||||||||
| Regulated utility plant, net | 7,491 | 7,420 | |||||||||
| Construction work in progress | 594 | 604 | |||||||||
| Property, Plant and Equipment, net | 8,085 | 8,024 | |||||||||
| Other Noncurrent Assets | |||||||||||
| Regulatory assets | 435 | 439 | |||||||||
| Goodwill | 607 | 607 | |||||||||
| Other intangibles | 18 | 19 | |||||||||
| Other noncurrent assets | 157 | 157 | |||||||||
| Total Other Noncurrent Assets | 1,217 | 1,222 | |||||||||
| Total Assets | $ | 9,773 | $ | 9,714 |
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
CONDENSED BALANCE SHEETS
Kentucky Utilities Company
(Unaudited)
(Millions of Dollars, shares in thousands)
| March 31, 2024 | December 31, 2023 | ||||||||||
| Liabilities and Equity | |||||||||||
| Current Liabilities | |||||||||||
| Short-term debt | $ | 45 | $ | 93 | |||||||
| Notes payable to affiliates | 37 | — | |||||||||
| Accounts payable | 70 | 80 | |||||||||
| Accounts payable to affiliates | 123 | 72 | |||||||||
| Customer deposits | 38 | 35 | |||||||||
| Taxes | 15 | 32 | |||||||||
| Regulatory liabilities | 6 | 1 | |||||||||
| Interest | 56 | 24 | |||||||||
| Asset retirement obligations | 16 | 13 | |||||||||
| Other current liabilities | 44 | 52 | |||||||||
| Total Current Liabilities | 450 | 402 | |||||||||
| Long-term Debt | 3,064 | 3,064 | |||||||||
| Deferred Credits and Other Noncurrent Liabilities | |||||||||||
| Deferred income taxes | 917 | 912 | |||||||||
| Investment tax credits | 83 | 83 | |||||||||
| Asset retirement obligations | 48 | 53 | |||||||||
| Regulatory liabilities | 1,016 | 1,018 | |||||||||
| Other deferred credits and noncurrent liabilities | 32 | 30 | |||||||||
| Total Deferred Credits and Other Noncurrent Liabilities | 2,096 | 2,096 | |||||||||
| Commitments and Contingent Liabilities (Notes 6 and 10) | |||||||||||
| Stockholder's Equity | |||||||||||
| Common stock - no par value (a) | 308 | 308 | |||||||||
| Additional paid-in capital | 2,983 | 3,033 | |||||||||
| Earnings reinvested | 872 | 811 | |||||||||
| Total Equity | 4,163 | 4,152 | |||||||||
| Total Liabilities and Equity | $ | 9,773 | $ | 9,714 |
(a)80,000 shares authorized; 37,818 shares issued and outstanding at March 31, 2024 and December 31, 2023.
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
CONDENSED STATEMENTS OF EQUITY
Kentucky Utilities Company
(Unaudited)
(Millions of Dollars)
| Common stock shares outstanding (a) | Common stock | Additional paid-in capital | Earnings reinvested | Total | |||||||||||||||||||||||||||||||
| December 31, 2023 | 37,818 | $ | 308 | $ | 3,033 | $ | 811 | $ | 4,152 | ||||||||||||||||||||||||||
| Net income | 108 | 108 | |||||||||||||||||||||||||||||||||
| Return of capital to parent | (50) | (50) | |||||||||||||||||||||||||||||||||
| Dividends declared | (47) | (47) | |||||||||||||||||||||||||||||||||
| March 31, 2024 | 37,818 | $ | 308 | $ | 2,983 | $ | 872 | $ | 4,163 | ||||||||||||||||||||||||||
| December 31, 2022 | 37,818 | $ | 308 | $ | 3,041 | $ | 689 | $ | 4,038 | ||||||||||||||||||||||||||
| Net income | 88 | 88 | |||||||||||||||||||||||||||||||||
| Return of capital to parent | (54) | (54) | |||||||||||||||||||||||||||||||||
| Dividends declared | (35) | (35) | |||||||||||||||||||||||||||||||||
| March 31, 2023 | 37,818 | $ | 308 | $ | 2,987 | $ | 742 | $ | 4,037 |
(a)Shares in thousands. All common shares of KU stock are owned by LKE.
The accompanying Notes to Condensed Financial Statements are an integral part of the financial statements.
Combined Notes to Condensed Financial Statements (Unaudited)
Index to Combined Notes to Condensed Financial Statements
The notes to the condensed financial statements that follow are a combined presentation. The following list indicates the Registrants to which the notes apply:
| Registrant | ||||||||||||||||||||||||||
| PPL | PPL Electric | LG&E | KU | |||||||||||||||||||||||
| 1. Interim Financial Statements | x | x | x | x | ||||||||||||||||||||||
| 2. Segment and Related Information | x | x | x | x | ||||||||||||||||||||||
| 3. Revenue from Contracts with Customers | x | x | x | x | ||||||||||||||||||||||
| 4. Earnings Per Share | x | |||||||||||||||||||||||||
| 5. Income Taxes | x | x | x | x | ||||||||||||||||||||||
| 6. Utility Rate Regulation | x | x | x | x | ||||||||||||||||||||||
| 7. Financing Activities | x | x | x | x | ||||||||||||||||||||||
| 8. Acquisitions, Development and Divestitures | x | x | x | |||||||||||||||||||||||
| 9. Defined Benefits | x | x | x | x | ||||||||||||||||||||||
| 10. Commitments and Contingencies | x | x | x | x | ||||||||||||||||||||||
| 11. Related Party Transactions | x | x | x | |||||||||||||||||||||||
| 12. Other Income (Expense) - net | x | x | ||||||||||||||||||||||||
| 13. Fair Value Measurements | x | x | x | x | ||||||||||||||||||||||
| 14. Derivative Instruments and Hedging Activities | x | x | x | x | ||||||||||||||||||||||
| 15. Asset Retirement Obligations | x | x | x | |||||||||||||||||||||||
| 16. Accumulated Other Comprehensive Income (Loss) | x | |||||||||||||||||||||||||
| 17. New Accounting Guidance Pending Adoption | x | x | x | x |
1. Interim Financial Statements
(All Registrants)
Capitalized terms and abbreviations appearing in the unaudited combined notes to condensed financial statements are defined in the glossary. Dollars are in millions, except per share data, unless otherwise noted. The specific Registrant to which disclosures are applicable is identified in parenthetical headings in italics above the applicable disclosure or within the applicable disclosure for each Registrant's related activities and disclosures. Within combined disclosures, amounts are disclosed for any Registrant when significant.
The accompanying unaudited condensed financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all of the information and footnote disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation in accordance with GAAP are reflected in the condensed financial statements. All adjustments are of a normal recurring nature, except as otherwise disclosed. Each Registrant's Balance Sheet at December 31, 2023 is derived from that Registrant's 2023 audited Balance Sheet. The financial statements and notes thereto should be read in conjunction with the financial statements and notes contained in each Registrant's 2023 Form 10-K. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full year ending December 31, 2024 or other future periods, because results for interim periods can be disproportionately influenced by various factors, developments and seasonal variations.
2. Segment and Related Information
(PPL)
PPL is organized into three segments: Kentucky Regulated, Pennsylvania Regulated and Rhode Island Regulated. PPL's segments are determined by geographic location.
The Kentucky Regulated segment includes 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.
The Pennsylvania Regulated segment includes the regulated electricity transmission and distribution operations of PPL Electric.
The Rhode Island Regulated segment includes the regulated electricity transmission and distribution and natural gas distribution operations of RIE.
"Corporate and Other" primarily includes corporate level financing costs, certain unallocated costs and certain non-recoverable costs incurred in conjunction with the acquisition of Narragansett Electric. "Corporate and Other" is presented to reconcile segment information to PPL's consolidated results.
Income Statement data for the segments and reconciliation to PPL's consolidated results for the periods ended March 31 are as follows:
| Three Months | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Operating Revenues from external customers | |||||||||||||||||||||||
| Kentucky Regulated | $ | 984 | $ | 960 | |||||||||||||||||||
| Pennsylvania Regulated | 770 | 891 | |||||||||||||||||||||
| Rhode Island Regulated | 549 | 565 | |||||||||||||||||||||
| Corporate and Other | 1 | (1) | |||||||||||||||||||||
| Total | $ | 2,304 | $ | 2,415 | |||||||||||||||||||
| Net Income (Loss) | |||||||||||||||||||||||
| Kentucky Regulated | $ | 190 | $ | 166 | |||||||||||||||||||
| Pennsylvania Regulated | 149 | 138 | |||||||||||||||||||||
| Rhode Island Regulated | 64 | 54 | |||||||||||||||||||||
| Corporate and Other | (96) | (73) | |||||||||||||||||||||
| Total | $ | 307 | $ | 285 |
The following provides Balance Sheet data for the segments and reconciliation to PPL's consolidated Balance Sheets as of:
| March 31, 2024 | December 31, 2023 | ||||||||||
| Assets | |||||||||||
| Kentucky Regulated | $ | 17,074 | $ | 17,029 | |||||||
| Pennsylvania Regulated | 15,116 | 14,294 | |||||||||
| Rhode Island Regulated | 6,614 | 6,515 | |||||||||
| Corporate and Other (a) | 827 | 1,398 | |||||||||
| Total | $ | 39,631 | $ | 39,236 |
(a)Primarily consists of unallocated items, including cash, PP&E, goodwill and the elimination of inter-segment transactions.
(PPL Electric, LG&E and KU)
PPL Electric has two operating segments, distribution and transmission, which are aggregated into a single reportable segment. Each of LG&E and KU operate as a single operating and reportable segment.
3. Revenue from Contracts with Customers
(All Registrants)
See Note 3 in the Registrants' 2023 Form 10-K for a discussion of the principal activities from which PPL Electric, LG&E and KU and PPL’s Pennsylvania Regulated, Rhode Island Regulated, and Kentucky Regulated segments generate their revenues. The following tables reconcile "Operating Revenues" included in each Registrant's Statement of Income with revenues generated from contracts with customers for the periods ended March 31.
| 2024 Three Months | |||||||||||||||||||||||
| PPL | PPL Electric | LG&E | KU | ||||||||||||||||||||
| Operating Revenues (a) | $ | 2,304 | $ | 770 | $ | 476 | $ | 525 | |||||||||||||||
| Revenues derived from: | |||||||||||||||||||||||
| Alternative revenue programs (b) | 7 | (3) | 2 | 5 | |||||||||||||||||||
| Other (c) | (8) | (5) | (1) | (1) | |||||||||||||||||||
| Revenues from Contracts with Customers | $ | 2,303 | $ | 762 | $ | 477 | $ | 529 | |||||||||||||||
| 2023 Three Months | |||||||||||||||||||||||
| PPL | PPL Electric | LG&E | KU | ||||||||||||||||||||
| Operating Revenues (a) | $ | 2,415 | $ | 891 | $ | 474 | $ | 499 | |||||||||||||||
| Revenues derived from: | |||||||||||||||||||||||
| Alternative revenue programs (b) | 36 | 1 | 1 | — | |||||||||||||||||||
| Other (c) | (4) | (2) | (1) | (1) | |||||||||||||||||||
| Revenues from Contracts with Customers | $ | 2,447 | $ | 890 | $ | 474 | $ | 498 |
(a)PPL includes $549 million for the three months ended March 31, 2024 and $565 million for the three months ended March 31, 2023 of revenues from external customers reported by the Rhode Island Regulated segment. PPL Electric represents revenues from external customers reported by the Pennsylvania Regulated segment and LG&E and KU, net of intercompany power sales and transmission revenues, represent revenues from external customers reported by the Kentucky Regulated segment. See Note 2 for additional information.
(b)This line item shows the over/under collection of rate mechanisms deemed alternative revenue programs with over-collections of revenue shown as positive amounts in the table above and under-collections shown as negative amounts.
(c)Represents additional revenues outside the scope of revenues from contracts with customers, such as lease and other miscellaneous revenues.
The following tables show revenues from contracts with customers disaggregated by customer class for the periods ended March 31.
| Three Months | |||||||||||||||||||||||||||||||||||||||||||||||
| Residential | Commercial | Industrial | Other (a) | Wholesale - municipality | Wholesale - other (b) | Transmission | Revenues from Contracts with Customers | ||||||||||||||||||||||||||||||||||||||||
| PPL | |||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| PA Regulated | $ | 426 | $ | 106 | $ | 12 | $ | 13 | $ | — | $ | — | $ | 205 | $ | 762 | |||||||||||||||||||||||||||||||
| KY Regulated | 443 | 267 | 161 | 97 | 6 | 15 | — | 989 | |||||||||||||||||||||||||||||||||||||||
| RI Regulated | 261 | 78 | 4 | 161 | — | — | 47 | 551 | |||||||||||||||||||||||||||||||||||||||
| Corp and Other | — | — | — | 1 | — | — | — | 1 | |||||||||||||||||||||||||||||||||||||||
| Total PPL | $ | 1,130 | $ | 451 | $ | 177 | $ | 272 | $ | 6 | $ | 15 | $ | 252 | $ | 2,303 | |||||||||||||||||||||||||||||||
| 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
| PA Regulated | $ | 537 | $ | 128 | $ | 20 | $ | 13 | $ | — | $ | — | $ | 192 | $ | 890 | |||||||||||||||||||||||||||||||
| KY Regulated | 443 | 274 | 164 | 60 | 7 | 11 | — | 959 | |||||||||||||||||||||||||||||||||||||||
| RI Regulated | 229 | 101 | 9 | 215 | — | — | 45 | 599 | |||||||||||||||||||||||||||||||||||||||
| Corp and Other | — | — | — | (1) | — | — | — | (1) | |||||||||||||||||||||||||||||||||||||||
| Total PPL | $ | 1,209 | $ | 503 | $ | 193 | $ | 287 | $ | 7 | $ | 11 | $ | 237 | $ | 2,447 | |||||||||||||||||||||||||||||||
| Three Months | |||||||||||||||||||||||||||||||||||||||||||||||
| Residential | Commercial | Industrial | Other (a) | Wholesale - municipality | Wholesale - other (b) | Transmission | Revenues from Contracts with Customers | ||||||||||||||||||||||||||||||||||||||||
| PPL Electric | |||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | $ | 426 | $ | 106 | $ | 12 | $ | 13 | $ | — | $ | — | $ | 205 | $ | 762 | |||||||||||||||||||||||||||||||
| 2023 | $ | 537 | $ | 128 | $ | 20 | $ | 13 | $ | — | $ | — | $ | 192 | $ | 890 | |||||||||||||||||||||||||||||||
| LG&E | |||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | $ | 218 | $ | 138 | $ | 47 | $ | 52 | $ | — | $ | 22 | $ | — | $ | 477 | |||||||||||||||||||||||||||||||
| 2023 | $ | 241 | $ | 152 | $ | 49 | $ | 16 | $ | — | $ | 16 | $ | — | $ | 474 | |||||||||||||||||||||||||||||||
| KU | |||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | $ | 225 | $ | 129 | $ | 114 | $ | 46 | $ | 6 | $ | 9 | $ | — | $ | 529 | |||||||||||||||||||||||||||||||
| 2023 | $ | 202 | $ | 123 | $ | 115 | $ | 44 | $ | 7 | $ | 7 | $ | — | $ | 498 |
(a)Primarily includes revenues from pole attachments, street lighting, other public authorities and other non-core businesses. The Rhode Island Regulated segment primarily includes open access tariff revenues, which are calculated on combined customer classes.
(b)Includes wholesale power and transmission revenues. LG&E and KU amounts include intercompany power sales and transmission revenues, which are eliminated upon consolidation at the Kentucky Regulated segment.
As discussed in Note 2, PPL segments its business by geographic location. Revenues from external customers for each segment/geographic location are reconciled to revenues from contracts with customers in the footnotes to the tables above.
Contract receivables from customers are primarily included in "Accounts receivable - Customer", "Unbilled revenues", and "Other noncurrent assets" on the Balance Sheets.
The following table shows the accounts receivable and unbilled revenues balances that were impaired for the periods ended March 31.
| Three Months | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| PPL (a) | $ | 42 | $ | 21 | |||||||||||||||||||
| PPL Electric (a) | 28 | 10 | |||||||||||||||||||||
| LG&E | 1 | 1 | |||||||||||||||||||||
| KU | 1 | — |
(a) 2024 includes amounts impaired related to PPL Electric's billing issues. See Note 6 for additional information.
The following table shows the balances and certain activity of contract liabilities resulting from contracts with customers.
| PPL | PPL Electric | LG&E | KU | ||||||||||||||||||||
| Contract liabilities at December 31, 2023 | $ | 43 | $ | 29 | $ | 6 | $ | 7 | |||||||||||||||
| Contract liabilities at March 31, 2024 | 30 | 20 | 5 | 5 | |||||||||||||||||||
| Revenue recognized during the three months ended March 31, 2024 that was included in the contract liability balance at December 31, 2023 | 25 | 11 | 6 | 7 | |||||||||||||||||||
| Contract liabilities at December 31, 2022 | $ | 34 | $ | 23 | $ | 5 | $ | 6 | |||||||||||||||
| Contract liabilities at March 31, 2023 | 46 | 35 | 5 | 5 | |||||||||||||||||||
| Revenue recognized during the three months ended March 31, 2023 that was included in the contract liability balance at December 31, 2022 | 17 | 6 | 5 | 6 |
Contract liabilities result from recording contractual billings in advance for customer attachments to the Registrants' infrastructure and payments received in excess of revenues earned to date. Advanced billings for customer attachments are generally recognized as revenue ratably over the quarterly billing period. Payments received in excess of revenues earned to date are recognized as revenue as services are delivered in subsequent periods.
4. Earnings Per Share
(PPL)
Basic EPS is computed by dividing income available to PPL common shareowners by the weighted-average number of common shares outstanding during the applicable period. Diluted EPS is computed by dividing income available to PPL common shareowners by the weighted-average number of common shares outstanding, increased by the number of incremental shares that would be outstanding if potentially dilutive share-based payment awards were converted to common shares as calculated using the Two-Class Method or Treasury Stock Method. Incremental non-participating securities that have a dilutive impact are detailed in the table below.
Reconciliations of the amounts of income and shares of PPL common stock (in thousands) for the periods ended March 31 used in the EPS calculation are:
| Three Months | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Income (Numerator) | |||||||||||||||||||||||
| Net income attributable to PPL | $ | 307 | $ | 285 | |||||||||||||||||||
| Less amounts allocated to participating securities | — | 1 | |||||||||||||||||||||
| Net income available to PPL common shareowners - Basic and Diluted | $ | 307 | $ | 284 | |||||||||||||||||||
| Shares of Common Stock (Denominator) | |||||||||||||||||||||||
| Weighted-average shares - Basic EPS | 737,512 | 736,829 | |||||||||||||||||||||
| Add: Dilutive share-based payment awards (a) | 1,308 | 869 | |||||||||||||||||||||
| Weighted-average shares - Diluted EPS | 738,820 | 737,698 | |||||||||||||||||||||
| Basic and Diluted EPS | |||||||||||||||||||||||
| Net Income available to PPL common shareowners | $ | 0.42 | $ | 0.39 | |||||||||||||||||||
(a) The Treasury Stock Method was applied to non-participating share-based payment awards.
For the periods ended March 31, the following shares (in thousands) were excluded from the computations of diluted EPS because the effect would have been antidilutive.
| Three Months | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Stock-based compensation awards | — | 534 |
5. Income Taxes
Reconciliations of income tax expense (benefit) for the periods ended March 31 are as follows.
| (PPL) | |||||||||||||||||||||||
| Three Months | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Federal income tax on Income Before Income Taxes at statutory tax rate - 21% | $ | 81 | $ | 76 | |||||||||||||||||||
| Increase (decrease) due to: | |||||||||||||||||||||||
| State income taxes, net of federal income tax benefit | 17 | 22 | |||||||||||||||||||||
| Utility rate-making tax adjustments (a) | (5) | (5) | |||||||||||||||||||||
| Amortization of excess deferred federal and state income taxes | (13) | (12) | |||||||||||||||||||||
| Other | 1 | (2) | |||||||||||||||||||||
| Total increase (decrease) | — | 3 | |||||||||||||||||||||
| Total income tax expense (benefit) | $ | 81 | $ | 79 |
(a) Primarily consists of tax impacts of AFUDC equity and related depreciation across all PPL utilities and flow through tax impacts of Pennsylvania utility ratemaking. Flow through occurs when the regulator excludes deferred tax expense or benefit from recoverable costs when determining income tax expense.
| (PPL Electric) | |||||||||||||||||||||||
| Three Months | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Federal income tax on Income Before Income Taxes at statutory tax rate - 21% | $ | 41 | $ | 38 | |||||||||||||||||||
| Increase (decrease) due to: | |||||||||||||||||||||||
| State income taxes, net of federal income tax benefit | 14 | 14 | |||||||||||||||||||||
| Utility rate-making tax adjustments (a) | (4) | (4) | |||||||||||||||||||||
| Amortization of excess deferred federal and state income taxes | (2) | (2) | |||||||||||||||||||||
| Other | (1) | (1) | |||||||||||||||||||||
| Total increase (decrease) | 7 | 7 | |||||||||||||||||||||
| Total income tax expense (benefit) | $ | 48 | $ | 45 |
(a) Primarily consists of tax impacts of AFUDC equity and related depreciation and flow through tax impacts of Pennsylvania utility ratemaking. Flow through occurs when the regulator excludes deferred tax expense or benefit from recoverable costs when determining income tax expense.
| (LG&E) | |||||||||||||||||||||||
| Three Months | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Federal income tax on Income Before Income Taxes at statutory tax rate - 21% | $ | 25 | $ | 23 | |||||||||||||||||||
| Increase (decrease) due to: | |||||||||||||||||||||||
| State income taxes, net of federal income tax benefit | 4 | 4 | |||||||||||||||||||||
| Amortization of excess deferred federal and state income taxes | (3) | (3) | |||||||||||||||||||||
| Other | (2) | (1) | |||||||||||||||||||||
| Total increase (decrease) | (1) | — | |||||||||||||||||||||
| Total income tax expense (benefit) | $ | 24 | $ | 23 | |||||||||||||||||||
| (KU) | |||||||||||||||||||||||
| Three Months | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Federal income tax on Income Before Income Taxes at statutory tax rate - 21% | $ | 28 | $ | 23 | |||||||||||||||||||
| Increase (decrease) due to: | |||||||||||||||||||||||
| State income taxes, net of federal income tax benefit | 5 | 4 | |||||||||||||||||||||
| Amortization of excess deferred federal and state income taxes | (5) | (4) | |||||||||||||||||||||
| Other | (1) | (1) | |||||||||||||||||||||
| Total increase (decrease) | (1) | (1) | |||||||||||||||||||||
| Total income tax expense (benefit) | $ | 27 | $ | 22 |
Other
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.
Transfer of Certain Credits under the Inflation Reduction Act (PPL)
On April 25, 2024, the IRS released the final Internal Revenue Code Section 6418 regulations related to the transfer of certain credits under the Inflation Reduction Act. The regulations were published in the Federal Register on April 30, 2024, and will be effective on July 1, 2024. PPL is currently reviewing the final regulations to determine what impact the guidance may have on their financial statements.
6. Utility Rate Regulation
(All Registrants)
The following table provides information about the regulatory assets and liabilities of cost-based rate-regulated utility operations.
| PPL | PPL Electric | LG&E | KU | ||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2024 | December 31, 2023 | March 31, 2024 | December 31, 2023 | March 31, 2024 | December 31, 2023 | March 31, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||
| Current Regulatory Assets: | |||||||||||||||||||||||||||||||||||||||||||||||
| Rate adjustment mechanisms | $ | 129 | $ | 118 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||
| Renewable energy certificates | 15 | 14 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Derivative instruments | 29 | 51 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Smart meter rider | 6 | 6 | 6 | 6 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Universal service rider | 8 | — | 8 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Storm damage costs | 33 | 12 | 33 | 12 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Gas supply clause | 4 | — | — | — | 4 | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Fuel adjustment clause | 12 | 4 | — | — | 6 | 3 | 6 | — | |||||||||||||||||||||||||||||||||||||||
| Transmission service charge | 36 | 43 | 26 | 31 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Transmission formula rate | 15 | 5 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Distribution system improvement charge | 8 | 7 | 8 | 7 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Other | 35 | 33 | 3 | 1 | 4 | 4 | 1 | 3 | |||||||||||||||||||||||||||||||||||||||
| Total current regulatory assets | $ | 330 | $ | 293 | $ | 84 | $ | 57 | $ | 14 | $ | 7 | $ | 7 | $ | 3 | |||||||||||||||||||||||||||||||
| Noncurrent Regulatory Assets: | |||||||||||||||||||||||||||||||||||||||||||||||
| Defined benefit plans | $ | 880 | $ | 887 | $ | 417 | $ | 417 | $ | 212 | $ | 217 | $ | 134 | $ | 136 | |||||||||||||||||||||||||||||||
| Plant outage costs | 36 | 38 | — | — | 9 | 10 | 27 | 28 | |||||||||||||||||||||||||||||||||||||||
| Net metering | 123 | 112 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Environmental cost recovery | 97 | 99 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Storm costs | 96 | 97 | — | — | 14 | 15 | 14 | 14 | |||||||||||||||||||||||||||||||||||||||
| Unamortized loss on debt | 22 | 22 | 3 | 3 | 10 | 10 | 7 | 7 | |||||||||||||||||||||||||||||||||||||||
| Interest rate swaps | 5 | 7 | — | — | 5 | 7 | — | — | |||||||||||||||||||||||||||||||||||||||
| Terminated interest rate swaps | 56 | 58 | — | — | 33 | 34 | 23 | 24 | |||||||||||||||||||||||||||||||||||||||
| Accumulated cost of removal of utility plant | 171 | 178 | 171 | 178 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| AROs | 288 | 289 | — | — | 76 | 76 | 212 | 213 | |||||||||||||||||||||||||||||||||||||||
| Derivatives instruments | 4 | 8 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Other | 81 | 79 | 1 | — | 29 | 26 | 18 | 17 | |||||||||||||||||||||||||||||||||||||||
| Total noncurrent regulatory assets | $ | 1,859 | $ | 1,874 | $ | 592 | $ | 598 | $ | 388 | $ | 395 | $ | 435 | $ | 439 | |||||||||||||||||||||||||||||||
| PPL | PPL Electric | LG&E | KU | ||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2024 | December 31, 2023 | March 31, 2024 | December 31, 2023 | March 31, 2024 | December 31, 2023 | March 31, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||
| Current Regulatory Liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Generation supply charge | $ | 64 | $ | 51 | $ | 64 | $ | 51 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||
| Tax Cuts and Jobs Act customer refund | — | 5 | — | 5 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Act 129 compliance rider | 12 | 15 | 12 | 15 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Transmission formula rate | 17 | 21 | 14 | 18 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Rate adjustment mechanism | 68 | 72 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Energy efficiency | 25 | 23 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Gas supply clause | — | 15 | — | — | — | 15 | — | — | |||||||||||||||||||||||||||||||||||||||
| Other | 37 | 23 | — | 2 | 2 | 1 | 6 | 1 | |||||||||||||||||||||||||||||||||||||||
| Total current regulatory liabilities | $ | 223 | $ | 225 | $ | 90 | $ | 91 | $ | 2 | $ | 16 | $ | 6 | $ | 1 | |||||||||||||||||||||||||||||||
| Noncurrent Regulatory Liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated cost of removal of utility plant | $ | 1,008 | $ | 996 | $ | — | $ | — | $ | 309 | $ | 306 | $ | 402 | $ | 399 | |||||||||||||||||||||||||||||||
| Power purchase agreement - OVEC | 16 | 19 | — | — | 11 | 13 | 5 | 6 | |||||||||||||||||||||||||||||||||||||||
| Net deferred taxes | 1,960 | 1,977 | 759 | 763 | 454 | 459 | 517 | 523 | |||||||||||||||||||||||||||||||||||||||
| Defined benefit plans | 256 | 252 | 80 | 73 | 20 | 20 | 60 | 59 | |||||||||||||||||||||||||||||||||||||||
| Terminated interest rate swaps | 56 | 57 | — | — | 28 | 29 | 28 | 28 | |||||||||||||||||||||||||||||||||||||||
| Energy efficiency | 18 | 5 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Other | 37 | 34 | — | — | 2 | — | 4 | 3 | |||||||||||||||||||||||||||||||||||||||
| Total noncurrent regulatory liabilities | $ | 3,351 | $ | 3,340 | $ | 839 | $ | 836 | $ | 824 | $ | 827 | $ | 1,016 | $ | 1,018 |
Regulatory Matters
Rhode Island Activities (PPL)
Rate Case Proceedings
Pursuant to Report and Order No. 23823 issued May 5, 2020, the RIPUC approved the terms of an Amended Settlement Agreement (ASA), reflecting an allowed return on equity (ROE) rate of 9.275% based on a common equity ratio of approximately 51%. RIE is currently in year six of the multi-year rate plan (Rate Plan). On June 30, 2021, the Rhode Island Division of Public Utilities and Carriers consented to an open-ended extension of the term of the Rate Plan. Pursuant to the settlement with the Rhode Island Office of the Attorney General in connection with the acquisition of RIE by PPL, RIE currently does not anticipate filing a new base rate case before October 1, 2025. Pursuant to the open-ended extension, the Rate Year 3 level of base distribution rates under ASA will remain in effect and RIE will continue to operate under the current Rate Plan until a new Rate Plan is approved by the RIPUC.
The ASA includes additional provisions, including (i) an Electric Transportation Initiative (the ET Initiative) to facilitate the growth of Electric Vehicle (EV) adoption and scaling of the market for EV charging equipment to advance Rhode Island's zero emission vehicles and greenhouse gas emissions policy goals, (ii) two energy storage demonstration projects, which are online and fully connected, (iii) a performance incentive for System Efficiency: Annual Megawatt Capacity Savings, which sunset in 2021 and is a tracking and reporting only metric, and (iv) several additional metrics for tracking and reporting purposes only. The RIPUC discussed the ET Initiative at an Open Meeting on August 30, 2022, advising RIE to seek RIPUC authorization to continue the ET Initiative and/or to alter any of the targets established in the ASA for Rate Year 5 and beyond. No votes or official rulings were taken; however, based on this feedback, RIE paused the ET programs in Rate Year 5.
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 approved by the RIPUC in August 2018, and which, among other things, sought approval to deploy smart meters throughout the service territory. After PPL completed the acquisition of RIE, RIE filed a new AMF Business Case with the RIPUC in 2022, consisting of a detailed proposal for full-scale deployment of AMF across its electric service territory.
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 filed with the RIPUC (i) an updated electric Service Quality Plan on December 27, 2023 for RIPUC approval and (ii) additional compliance tariff provisions regarding recovery and updated cost schedules to reflect the RIPUC's decision on December 22, 2023 for RIPUC approval. RIE cannot predict the outcome of these matters.
Grid Modernization
RIE filed a new GMP with the RIPUC on December 30, 2022. The new GMP filing consists of a holistic suite of grid modernization investments that will provide RIE with the tools and capability to manage the electric distribution system more granularly considering a range of distributed energy resources adoption levels, accelerated by Rhode Island's climate mandates, while at the same time maintaining a safe and reliable electric distribution system. The GMP is an informational guidance document that supports the grid modernization investments to be proposed in future electric ISR plans. Consequently, RIE did not request approval from the RIPUC for any specific investments or seek cost recovery as part of the GMP; rather, RIE requested that the RIPUC issues an order affirming RIE's compliance with its obligation to file a GMP that meets the requirements of the ASA. The RIPUC held a status conference on October 26, 2023, to discuss the scope of the RIPUC’s review of the GMP and its potential impact future electric ISR plans. RIE cannot predict the outcome of this matter.
Petition for Deferral of Credit Card Fees
On January 31, 2024, RIE filed a petition to request approval to recognize regulatory assets related to the credit card, debit card, and related fees (Electronic Transaction Fees) that RIE has waived and will continue to waive on a going forward basis pursuant to the RIPUC orders in RIPUC Docket No. 5022 related to COVID-19 impacts. If approved, RIE plans to include a proposal as part of its next base distribution rate case for the amortization/recovery of the regulatory assets and to include future Electronic Transaction Fees in base distribution rates. The Rhode Island Division of Public Utilities and Carriers (the Division) and Intervenor testimony is due two weeks following the filing of RIE's Revised 2022 Earnings Reports, which RIE intends to file in the second quarter of 2024. RIE's rebuttal testimony is due two weeks following the Division's filing of its testimony. No hearings have been scheduled at this time. RIE simultaneously filed a Notice of Withdrawal of its April 2021 petition to create regulatory assets for COVID-19 related bad debt expense and the lost revenue from unassessed late payment charges pending in Docket No. 5154. RIE is continuing to evaluate these other COVID-19 related costs and intends to reserve its rights to file for recovery of these costs in the future. RIE cannot predict the outcome of this matter.
FY 2023 Gas Infrastructure, Safety and Reliability (ISR) Plan
At an Open Meeting on March 29, 2022, the RIPUC conditionally approved RIE's FY 2023 Gas ISR Plan and associated revenue requirement, subject to further review regarding RIE's Proactive Main Replacement Program and its decision to reconstruct and purchase heating and pressure regulation equipment located at RIE's Wampanoag and Tiverton take stations. In response to RIPUC direction, RIE filed testimony with the RIPUC on May 16, 2022 regarding its replacement of heating and pressure regulation facilities at the Wampanoag and Tiverton take stations and addressing: (i) a cost-benefit analysis arising from RIE's decision to take ownership of the reconstructed take station equipment; (ii) the potential that the benefits derived from the reconstruction and ownership transfer of the take station equipment will not be realized due to the future use of hydrogen or abandonment of the gas system; and (iii) the depreciation and accounting treatment of the reconstructed take station equipment. The RIPUC has not taken any action to date on this issue, including in its recent action on the FY 2025 Gas ISR Plan.
FY 2024 Gas ISR Plan
At an Open Meeting on March 29, 2023, the RIPUC approved RIE's FY 2024 Gas ISR 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. Certain open issues regarding the Gas ISR Plan budgetary and reconciliation framework, raised in connection with the FY 2024 Gas ISR Plan, have been resolved in connection with the approval of the FY 2025 Gas ISR Plan, as discussed below.
FY 2025 Gas ISR Plan
On December 22, 2023, RIE filed its FY 2025 Gas ISR Plan with the RIPUC with a budget that includes $185 million of capital investment spend, plus up to an additional $11 million of contingency plan spend in light of the Pipeline and Hazardous Materials Safety Administration’s potential enactment of regulations during FY 2025 that, if enacted, would significantly alter RIE's leak detection and repair obligations under such regulations. RIE also filed its proposed gas ISR plan budgetary and reconciliation framework, addressing issues raised in connection with its FY 2024 submission, with its FY 2025 ISR Plan. The RIPUC held hearings in March 2024, and on March 26, 2024, approved the plan, including the proposed budgetary and reconciliation framework, with a total approved FY 2025 Gas ISR Plan of $180 million of which $168 million is for capital investment spend and $12 million spend for paving costs as operations and maintenance (O&M), plus the potential additional $11 million available if the above-mentioned regulations are implemented by the Pipeline and Hazardous Materials Safety Administration. On March 28, 2024, the RIPUC approved RIE's compliance filing for rates effective April 1, 2024.
FY 2024 Electric ISR Plan
The RIPUC held hearings in March 2023, and on March 29, 2023, approved RIE's FY 2024 Electric ISR Plan, as supplemented, 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 compliance filing for rates effective April 1, 2023. Certain open issues regarding the Electric ISR Plan budgetary and reconciliation framework, raised in connection with the FY 2024 Electric ISR Plan, have been resolved in connection with the approval of the FY 2025 Electric ISR plan, as discussed below.
FY 2025 Electric ISR Plan
On December 21, 2023, RIE filed its FY 2025 Electric ISR Plan with the RIPUC with a budget that includes $141 million of capital investment spend, $13 million of vegetation O&M spend and $1 million of Other O&M spend. RIE also filed its proposed electric ISR plan budgetary and reconciliation framework, addressing issues raised in connection with its FY 2024 submission, with its FY 2025 ISR Plan. The RIPUC held hearings in March 2024, and on March 26, 2024, approved the plan, including the proposed budgetary and reconciliation framework, with modifications to the proposed capital investment spend, resulting in a total approved FY 2025 Electric ISR Plan of $132 million for capital investment spend, $13 million for vegetation management O&M spend, and $1 million for Other O&M spend. On March 28, 2024, the RIPUC approved RIE's compliance filing for rates effective April 1, 2024.
Kentucky Activities (PPL, LG&E and KU)
KPSC Investigation Related to Winter Storm Elliott
On December 22, 2023, the KPSC initiated an investigation into the practices of LG&E and KU regarding the provision of electric service from December 23, 2022 through December 25, 2022, during a period of extreme temperatures during Winter Storm Elliott. The investigation is the result of LG&E's and KU's need to implement brief service interruptions to approximately 55,000 customers during this period. The purpose of the investigation is to supplement discovery and examination already completed through LG&E's and KU's CPCN proceedings, a legislative hearing completed in February 2023 and reports completed by the NERC and the FERC related to the issue. Additionally, the investigation will evaluate LG&E's and KU's actions taken, or planned to be taken, since Winter Storm Elliott that affect their ability to provide service during periods of variable weather and power system stress. LG&E and KU believe actions taken during the period under question were necessary and appropriate. Several parties have been granted intervenor status for the proceeding and a hearing on the matter is scheduled for May 23, 2024. LG&E and KU cannot predict the outcome of this matter, and an estimate of the impact, if any, cannot be determined, but LG&E and KU do not believe this matter will have a significant impact on their operations or financial condition.
Pennsylvania Activities (PPL and PPL Electric)
PAPUC investigation into billing issues
On January 31, 2023, the PAPUC initiated an investigation focused on billing issues related to estimated, irregular bills and customer service concerns following customer complaints, which for many customers were driven by increased prices for electricity supply. Certain bills issued during the time period of December 20, 2022 through January 9, 2023 were estimated due to a technical issue that prevented PPL Electric from providing actual collected meter data to customer facing and other internal systems. Customers also reported difficulties accessing PPL Electric's website and contacting the customer service call center. The PAPUC’s Bureau of Investigation & Enforcement (I&E) has directed PPL Electric to respond to certain inquiries and document requests. PPL Electric submitted its responses to the information request and cooperated fully with the investigation. PPL Electric reached a Settlement Agreement with I&E on November 21, 2023. In the settlement, PPL Electric agreed to pay a civil penalty of $1 million, make certain remedial improvements to its billing systems and processes, and agreed to not seek recovery for extraordinary costs incurred in responding to or resulting from the billing event. On November 21, 2023, PPL Electric and I&E submitted a Joint Petition for Approval of Settlement to the PAPUC. On January 18, 2024, the PAPUC issued an Order requesting public comment prior to the PAPUC entering a Final Order on the petition. Comments were due on February 28, 2024, and comments were filed by the Office of Consumer Advocate, CAUSE-PA (low-income advocate), and individual customers. On March 19, 2024, PPL Electric filed reply comments. On April 25, 2024, the PAPUC announced at its public meeting that it would be issuing an order approving the Settlement Agreement with modifications. The modifications included converting the $1 million civil penalty to a $1 million donation to PPL Electric’s hardship fund, Operation HELP, and requiring PPL Electric to make various progress reports on efforts to remediate the billing issue. PPL Electric and I&E have 20 business days from the issuance of the PAPUC order to accept or reject the proposed modifications to the Settlement Agreement. The final approval of the Settlement Agreement is pending the issuance of the PAPUC's order and PPL Electric and I&E's decision on whether to accept the modifications. PPL Electric cannot predict the outcome of this matter.
PPL Electric incurred costs related to the billing issues of $15 million and $3 million for the three-month periods ended March 31, 2024 and March 31, 2023. PPL Electric will not seek regulatory recovery of these costs.
DSIC Petition
On April 26, 2024, PPL Electric filed a Petition with the PAPUC requesting that the PAPUC waive PPL Electric’s DSIC cap of 5% of billed revenues and increase the maximum allowable DSIC to 9% for bills rendered on or after January 1, 2025. PPL Electric requested PAPUC approval no later than the PAPUC’s public meeting on December 5, 2024. PPL Electric cannot predict the outcome of this matter.
Federal Matters
FERC Transmission Rate Filing (PPL, LG&E and KU)
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 filed a petition for review of the FERC's May 18, 2023 order with the D.C. Circuit Court of Appeals and provided refunds in accordance with the FERC order on December 1, 2023. The FERC issued an order on LG&E and KU's compliance filing on November 16, 2023, and LG&E and KU filed a petition for review of this November 16, 2023 order on February 14, 2024. The proceedings at the D.C. Circuit Court of Appeals were held on abeyance to allow the FERC time to substantively address LG&E and KU's request for rehearing of the November 16 order. FERC issued the substantive order on rehearing on March 21, 2024. LG&E and KU filed an unopposed motion to lift the abeyance on April
24, 2024 and anticipate a resumption of activities with the D.C. Circuit Court of Appeal in May of 2024. 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 primarily through base rates increases, provided, however, that increases associated with the FERC's May 18, 2023 order are expected to be subject to future rate proceedings.
Recovery of Transmission Costs (PPL)
Until December 2022, RIE's transmission facilities were operated in combination with the transmission facilities of National Grid USA's New England affiliates, Massachusetts Electric Company (MECO) and New England Power (NEP), as a single integrated system with NEP designated as the combined operator. As of January 1, 2023, RIE operates its own transmission facilities. NE-ISO allocates RIE's costs among transmission customers in New England, in accordance with the ISO Open Access Transmission Tariff (ISO-NE OATT). According to the FERC orders, RIE is compensated for its actual monthly transmission costs, with its authorized maximum ROE of 11.74% on its transmission assets.
The ROE for transmission rates under the ISO-NE OATT is the subject of four complaints that are pending before the FERC. On October 16, 2014, the FERC issued an order on the first complaint, Opinion No. 531-A, resetting the base ROE applicable to transmission assets under the ISO-NE OATT from 11.14% to 10.57% effective as of October 16, 2014 and establishing a maximum ROE of 11.74%. On April 14, 2017, this order was vacated and remanded by the D. C. Circuit Court of Appeals (Court of Appeals). After the remand, the FERC issued an order on October 16, 2018 applicable to all four pending cases where it proposed a new base ROE methodology that, with subsequent input and support from the New England Transmission Owners (NETO), yielded a base ROE of 10.41%. Subsequent to the FERC's October 2018 order in the New England Transmission Owners cases, the FERC further refined its ROE methodology in another proceeding and has applied that refined methodology to transmission owners’ ROEs in other jurisdictions, and the NETOs filed further information in the New England matters to distinguish their case. Those determinations in other jurisdictions have recently been vacated and remanded back to the FERC for further proceedings by the D.C. Circuit Court of Appeals. The proceeding and the final base rate ROE determination in the New England matters remain open, pending a final order from the FERC. PPL cannot predict the outcome of this matter, and an estimate of the impact cannot be determined.
Other
Purchase of Receivables Program
(PPL and PPL Electric)
In accordance with a PAPUC-approved purchase of accounts receivable program, PPL Electric purchases certain accounts receivable from alternative electricity suppliers at a discount, which reflects a provision for uncollectible accounts. The alternative electricity suppliers have no continuing involvement or interest in the purchased accounts receivable. Accounts receivable that are acquired are initially recorded at fair value on the date of acquisition. During the three months ended March 31, 2024 and 2023, PPL Electric purchased $419 million and $358 million of accounts receivable from alternative suppliers.
(PPL)
In 2021 and 2022, the RIPUC approved various components of a Purchase of Receivables Program (POR) in Rhode Island for effect on April 1, 2022. Municipal aggregators and non-regulated power producers (collectively, Competitive Suppliers) are eligible to participate in accordance with RIE's approved electric tariffs for municipal aggregation and non-regulated power producers. Under the POR program, RIE will purchase the Competitive Suppliers' accounts receivables, including existing receivables, at discounted rates, regardless of whether RIE has collected the owed monies from customers. The program is intended to make RIE whole through the implementation of a discount rate or Standard Complete Bill Percentage (SCBP) paid by Competitive Suppliers. RIE calculates the SCBP for each customer class and files the calculations with the RIPUC for review and approval by February 15 of each year. At an Open Meeting on March 26, 2024, the RIPUC approved the SCBP for effect beginning on April 1, 2024, for a one-year period.
7. Financing Activities
Credit Arrangements and Short-term Debt
(All Registrants)
The Registrants maintain credit facilities to enhance liquidity, provide credit support and provide a backstop to commercial paper programs. For reporting purposes, on a consolidated basis, the credit facilities and commercial paper programs of PPL Electric, LG&E and KU are attributable to PPL. The amounts listed in the borrowed column below are recorded as "Short-term debt" on the Balance Sheets. The following credit facilities were in place at:
| March 31, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||
| Expiration Date | Capacity | Borrowed | Letters of Credit and Commercial Paper Issued (c) | Unused Capacity | Borrowed | Letters of Credit and Commercial Paper Issued (c) | |||||||||||||||||||||||||||||||||||
| PPL | |||||||||||||||||||||||||||||||||||||||||
| PPL Capital Funding (a) | |||||||||||||||||||||||||||||||||||||||||
| Syndicated Credit Facility (b) | Dec. 2028 | $ | 1,250 | $ | — | $ | 218 | $ | 1,032 | $ | — | $ | 390 | ||||||||||||||||||||||||||||
| Bilateral Credit Facility | Feb. 2025 | 100 | — | — | 100 | — | — | ||||||||||||||||||||||||||||||||||
| Bilateral Credit Facility | Feb. 2025 | 100 | — | 13 | 87 | — | 13 | ||||||||||||||||||||||||||||||||||
| Total PPL Capital Funding Credit Facilities | $ | 1,450 | $ | — | $ | 231 | $ | 1,219 | $ | — | $ | 403 | |||||||||||||||||||||||||||||
| PPL Electric | |||||||||||||||||||||||||||||||||||||||||
| Syndicated Credit Facility | Dec. 2028 | $ | 650 | $ | — | $ | 1 | $ | 649 | $ | — | $ | 511 | ||||||||||||||||||||||||||||
| Total PPL Electric Credit Facilities | $ | 650 | $ | — | $ | 1 | $ | 649 | $ | — | $ | 511 | |||||||||||||||||||||||||||||
| LG&E | |||||||||||||||||||||||||||||||||||||||||
| Syndicated Credit Facility | Dec. 2028 | $ | 500 | $ | — | $ | 28 | $ | 472 | $ | — | $ | — | ||||||||||||||||||||||||||||
| Total LG&E Credit Facilities | $ | 500 | $ | — | $ | 28 | $ | 472 | $ | — | $ | — | |||||||||||||||||||||||||||||
| KU | |||||||||||||||||||||||||||||||||||||||||
| Syndicated Credit Facility | Dec. 2028 | $ | 400 | $ | — | $ | 45 | $ | 355 | $ | — | $ | 93 | ||||||||||||||||||||||||||||
| Total KU Credit Facilities | $ | 400 | $ | — | $ | 45 | $ | 355 | $ | — | $ | 93 |
(a)PPL Capital Funding's obligations are fully and unconditionally guaranteed by PPL.
(b)The PPL Capital Funding $1.25 billion syndicated credit facility includes a $400 million borrowing sublimit for RIE and a $850 million sublimit for PPL Capital Funding at March 31, 2024. 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 December 31, 2023, the borrowing sublimit for RIE was $250 million and a $1 billion sublimit for PPL Capital Funding. At March 31, 2024, PPL Capital Funding had $218 million commercial paper outstanding and RIE had no commercial paper outstanding. At December 31, 2023, PPL Capital Funding had $365 million commercial paper outstanding and RIE had $25 million commercial paper outstanding. RIE's obligations under the facility are not guaranteed by PPL.
(c)Commercial paper issued reflects the undiscounted face value of the issuance.
(All Registrants)
PPL Capital Funding, RIE, PPL Electric, LG&E and KU maintain commercial paper programs to provide an additional financing source to fund short-term liquidity needs. Commercial paper issuances, included in "Short-term debt" on the Balance Sheets, are supported by the respective Registrant's credit facilities. The following commercial paper programs were in place at:
| March 31, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| Weighted - Average Interest Rate | Capacity | Commercial Paper Issuances (c) | Unused Capacity | Weighted - Average Interest Rate | Commercial Paper Issuances (c) | ||||||||||||||||||||||||||||||
| PPL Capital Funding (a) (b) | 5.51% | $ | 1,350 | $ | 218 | $ | 1,132 | 5.66% | $ | 365 | |||||||||||||||||||||||||
| RIE (b) | 400 | — | 400 | 5.72% | 25 | ||||||||||||||||||||||||||||||
| PPL Electric | 650 | — | 650 | 5.67% | 510 | ||||||||||||||||||||||||||||||
| LG&E | 5.49% | 500 | 28 | 472 | — | ||||||||||||||||||||||||||||||
| KU | 5.49% | 400 | 45 | 355 | 5.64% | 93 | |||||||||||||||||||||||||||||
| Total | $ | 3,300 | $ | 291 | $ | 3,009 | $ | 993 |
(a)PPL Capital Funding's obligations are fully and unconditionally guaranteed by PPL.
(b)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. At March 31, 2024, the borrowing sublimits were $400 million for RIE and $850 million for PPL Capital Funding. At December 31, 2023, the borrowing sublimits under the facility were $250 million at RIE and $1 billion at PPL Capital Funding. PPL Capital Funding’s Commercial paper program is also backed by a separate bilateral credit facility for $100 million.
(c)Commercial paper issued reflects the undiscounted face value of the issuance.
(PPL Electric, LG&E, and KU)
See Note 11 for discussion of intercompany borrowings.
Long-term Debt
(PPL)
In March 2024, RIE issued $500 million of 5.35% Senior Notes due 2034. RIE received proceeds of $496 million, net of discounts and underwriting fees, which will be used to repay short-term debt and for other general corporate purposes.
(PPL and PPL Electric)
In January 2024, PPL Electric issued $650 million of 4.85% First Mortgage Bonds due 2034. PPL Electric received proceeds of $644 million, net of discounts and underwriting fees, which will be used to repay short-term debt and for other general corporate purposes.
Dividends
In February 2024, PPL declared a quarterly cash dividend on its common stock, payable April 1, 2024, of 25.75 cents per share (equivalent to $1.03 per annum).
8. Acquisitions, Developments and Divestitures
Acquisitions (PPL)
Acquisition of Narragansett Electric
On May 25, 2022, PPL Rhode Island Holdings acquired 100% of the outstanding shares of common stock of Narragansett Electric from National Grid USA, a subsidiary of National Grid plc (the Acquisition) for approximately $3.8 billion. Following the closing of the Acquisition, Narragansett Electric provides services doing business under the name Rhode Island Energy (RIE).
In connection with the Acquisition, National Grid USA Service Company, Inc., National Grid USA and Narragansett Electric have entered into a transition services agreement (TSA), pursuant to which the National Grid entities have agreed to provide certain transition services to Narragansett Electric to facilitate the transition of the operation of Narragansett Electric to PPL following the Acquisition, as agreed upon in the Narragansett share purchase agreement. The TSA is for an initial two-year
term and certain aspects have been extended to the third quarter of 2024. TSA costs of $48 million and $58 million were incurred during the three months ended March 31, 2024 and 2023.
Commitments to the Rhode Island Division of Public Utilities and Carriers and the Attorney General of the State of Rhode Island
As a condition to the Acquisition, PPL made certain commitments to the Rhode Island Division of Public Utilities and Carriers and the Attorney General of the State of Rhode Island. See Note 9 in PPL's 2023 Form 10-K for a complete listing of those commitments. PPL incurred the following expenses related to some of the remaining commitments:
-
RIE will forgo potential recovery of any and all transition costs which includes (1) the installation of certain information technology systems; (2) modification and enhancements to physical facilities in Rhode Island; and (3) incurring costs related to severance payments, communications and branding changes, and other transition related costs. These costs, which are being expensed as incurred, were $81 million and $54 million for the three months ended March 31, 2024 and 2023.
-
RIE will not seek to recover in rates any markup charged by National Grid USA and/or its affiliates under the TSA which were $1 million and $2 million for the three months ended March 31, 2024 and 2023.
Developments (PPL, LG&E and KU)
Mill Creek Unit 5 Construction
In December 2022, LG&E and KU filed a Certificate of Public Convenience and Necessity (CPCN) with the KPSC requesting approval to construct a 640 MW net summer rating Natural Gas Combined Cycle (NGCC) combustion turbine at LG&E’s Mill Creek Generating Station. In November 2023, the KPSC issued an order approving the request as well as the requested AFUDC accounting treatment for associated financing costs relating to the NGCC. The new NGCC facility will be jointly owned by LG&E (31%) and KU (69%). In February 2024, LG&E and KU entered into agreements to begin construction. Total project costs are estimated at approximately $1.0 billion, including AFUDC. Commercial operation of the facility is anticipated to begin mid-2027.
See Note 7 in PPL's 2023 Form 10-K for additional information on the CPCN filing.
9. Defined Benefits
(PPL)
Certain net periodic defined benefit costs are applied to accounts that are further distributed among capital, expense, regulatory assets and regulatory liabilities, including certain costs allocated to applicable subsidiaries for plans sponsored by PPL Services and LKE. Following are the net periodic defined benefit costs (credits) of the plans sponsored by PPL and its subsidiaries for the periods ended March 31:
| Pension Benefits | |||||||||||||||||||||||
| Three Months | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| PPL | |||||||||||||||||||||||
| Service cost | $ | 9 | $ | 9 | |||||||||||||||||||
| Interest cost | 46 | 46 | |||||||||||||||||||||
| Expected return on plan assets | (75) | (78) | |||||||||||||||||||||
| Amortization of: | |||||||||||||||||||||||
| Prior service cost | 1 | 2 | |||||||||||||||||||||
| Actuarial loss | 2 | — | |||||||||||||||||||||
| Net periodic defined benefit costs (credits) | $ | (17) | $ | (21) |
| Other Postretirement Benefits | |||||||||||||||||||||||
| Three Months | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| PPL | |||||||||||||||||||||||
| Service cost | $ | 1 | $ | 2 | |||||||||||||||||||
| Interest cost | 7 | 7 | |||||||||||||||||||||
| Expected return on plan assets | (7) | (8) | |||||||||||||||||||||
| Amortization of: | |||||||||||||||||||||||
| Actuarial loss | (1) | (1) | |||||||||||||||||||||
| Net periodic defined benefit costs (credits) | $ | — | $ | — | |||||||||||||||||||
(All Registrants)
The non-service cost components of net periodic defined benefit costs (credits) (interest cost, expected return on plan assets, amortization of prior service cost and amortization of actuarial gain and loss) are presented in "Other Income (Expense) - net" on the Statements of Income. See Note 12 for additional information.
10. Commitments and Contingencies
Legal Matters
(All Registrants)
PPL and its subsidiaries are involved in legal proceedings, claims and litigation in the ordinary course of business. PPL and its subsidiaries cannot predict the outcome of such matters, or whether such matters may result in material liabilities, unless otherwise noted.
Narragansett Electric Litigation (PPL)
Energy Efficiency Programs Investigation
Narragansett Electric, while under the ownership of National Grid, performed an internal investigation into conduct associated with its energy efficiency programs. On June 27, 2022, the RIPUC opened a new docket (RIPUC Docket No. 22-05-EE) to investigate RIE’s actions and the actions of employees of National Grid USA and affiliates during the time RIE was a National Grid USA affiliate being provided services by National Grid USA Service Company, Inc. relating to the manipulation of the reporting of invoices affecting the calculation of past energy efficiency shareholder incentives and the resulting impact on customers. The Rhode Island Attorney General and National Grid USA intervened in the docket.
On January 19, 2023, the Rhode Island Division of Public Utilities and Carriers (the Division) filed a motion to dismiss RIPUC Docket No. 22-05-EE without prejudice. As grounds for its motion, the Division stated that sufficient evidence exists in the docket to warrant an independent summary investigation by the Division, to include an audit of RIE. If the Division finds sufficient grounds, the Division may proceed to a formal hearing regarding the matters under investigation. Upon the conclusion of its investigation, the Division will provide the RIPUC with a report outlining the Division’s findings and final decision. On January 30, 2023, the Rhode Island Attorney General filed an objection to the Division’s motion to dismiss; RIE and National Grid USA each filed responses with the RIPUC requesting that any additional action taken by the RIPUC or the Division be considered after National Grid USA completes its internal investigation report, which National Grid USA filed with the RIPUC on March 10, 2023. On February 24, 2023, the Division initiated the independent summary investigation that it had referenced in its motion to dismiss. The RIPUC held a hearing on March 28, 2023 to hear oral arguments regarding the Division’s motion to dismiss and subsequently denied the motion. On November 27, 2023, the Division filed testimony recommending the RIPUC disallow a portion of the performance incentive awarded from 2012 through 2021. On January 19, 2024, the Division and the Rhode Island Attorney General filed their respective briefs recommending that the RIPUC assess financial penalties on the Company. The Division also recommended that the RIPUC consider further regulatory investigations and analysis within each of the energy efficiency dockets from 2012 through 2020, to confirm the accuracy of claimed savings and to document all conduct and actions that would trigger penalties. On April 2, 2024, the RIPUC issued an amended order that expressly expands the scope of the proceeding to address issues of accountability and the question of whether statutory penalties should be assessed against RIE relating to the manipulation of the reporting of invoices affecting the recovery of past shareholder incentives and the resulting impact on RIE’s customers. This proceeding remains open and, in parallel, the
Division’s summary investigation remains ongoing. At this time, it is not possible to predict the final outcome or determine the total amount of any additional liabilities that may be incurred by RIE in connection with this matter or the Division’s summary investigation. RIE does not expect this matter will have a material adverse effect on its results of operations, financial position or cash flows.
E.W. Brown Environmental Assessment *(*PPL and KU)
KU is undertaking extensive remedial measures at the E.W. Brown plant including closure of the former ash pond, implementation of a groundwater remedial action plan and performance of a corrective action plan including aquatic study of adjacent surface waters and risk assessment. The aquatic study and risk assessment are being undertaken pursuant to a 2017 agreed Order with the Kentucky Energy and Environment Cabinet (KEEC). KU conducted sampling of Herrington Lake in 2017 and 2018. In June 2019, KU submitted to the KEEC the required aquatic study and risk assessment, conducted by an independent third-party consultant, finding that discharges from the E.W. Brown plant have not had any significant impact on Herrington Lake and that the water in the lake is safe for recreational use and meets safe drinking water standards. On May 31, 2021, the KEEC approved the report and released a response to public comments. On August 6, 2021, KU submitted a Supplemental Remedial Alternatives Analysis report to the KEEC that outlines proposed additional fish, water, and sediment testing. On February 18, 2022, the KEEC provided approval to KU to proceed with the proposed sampling, which commenced in the spring of 2022. On November 17, 2022, KU submitted a Supplemental Performance Monitoring Report to the KEEC finding that there are no significant unaddressed risks to human health or the environment at the plant. KU revised the Supplemental Performance Monitoring Report on June 8, 2023, in response to KEEC comments from April 24, 2023. On September 1, 2023, the KEEC requested KU to propose additional monitoring or remedial measures. KU submitted a revised Supplemental Performance Monitoring and Corrective Action Completion on December 28, 2023. Discussions between KU and the KEEC are ongoing.
Water/Waste (PPL, LG&E and KU)
ELGs
In 2015, the EPA finalized ELGs for wastewater discharge permits for new and existing steam electricity generating facilities. These guidelines require deployment of additional control technologies providing physical, chemical and biological treatment and mandate operational changes including "zero discharge" requirements for certain wastewaters. The implementation date for individual generating stations was to be determined by the states on a case-by-case basis according to criteria provided by the EPA. Legal challenges to the final rule were consolidated before the U.S. Court of Appeals for the Fifth Circuit. In April 2017, the EPA announced that it would grant petitions for reconsideration of the rule. In September 2017, the EPA issued a rule to postpone the compliance date for certain requirements. In October 2020, the EPA published final revisions to its best available technology standards for certain wastewaters and potential extensions to compliance dates (the Reconsideration Rule). On April 25, 2024, the EPA released a pre-publication version of a final rule modifying the 2020 ELG revisions. The rule increases the stringency of previous control technology and zero discharge requirements, revises certain exemptions for generating units planned for retirement, and requires case-by-case limitations for legacy wastewaters based on the best professional judgment of the state regulators. The final rule is currently under evaluation by PPL, LG&E, and KU, but could potentially result in significant operational changes and additional controls for LG&E and KU plants. The ELGs are expected to be implemented by the states or applicable permitting authorities in the course of their normal permitting activities. Certain costs are included in the Registrants' capital plans and expected to be recovered from customers through rate recovery mechanisms, but additional costs and recovery will depend on further regulatory developments at the state level.
CCRs
In 2015, the EPA issued a final rule governing management of CCRs which include fly ash, bottom ash and sulfur dioxide scrubber wastes. The CCR Rule imposes extensive new requirements for certain CCR impoundments and landfills, including public notifications, location restrictions, design and operating standards, groundwater monitoring and corrective action requirements, and closure and post-closure care requirements, and specifies restrictions relating to the beneficial use of CCRs. In July 2018, the EPA issued a final rule extending the deadline for closure of certain impoundments and adopting other substantive changes. In August 2018, the D.C. Circuit Court of Appeals vacated and remanded portions of the CCR Rule. In December 2019, the EPA addressed certain deficiencies identified by the court and proposed amendments to change the closure deadline. In August 2020, the EPA published a final rule extending the deadline to initiate closure to April 11, 2021, while providing for certain extensions. PPL, LG&E, and KU are monitoring the EPA’s ongoing efforts to refine and implement the regulatory program under the CCR Rule. In January 2022, the EPA issued several proposed regulatory determinations, facility notifications, and public announcements which indicate increased scrutiny by the EPA to determine the adequacy of measures
taken by facility owners and operators to achieve closure of CCR surface impoundments and landfills. In particular, the agency indicated that it will focus on certain practices which it views as posing a threat of continuing groundwater contamination. On April 25, 2024, the EPA released a pre-publication version of a final rule establishing regulatory requirements for inactive surface impoundments at inactive electricity generation facilities (legacy impoundments). The rule also establishes identification, groundwater monitoring, corrective action, closure, and post-closure care requirements for all CCR management units, as defined in the rule, at regulated CCR facilities regardless of how or when the CCR was placed. The rule also requires PPL to complete applicability determinations, implement site security measures, initiate weekly inspections and monthly monitoring of the impoundment, create a website, and complete hazard assessments and reports for its legacy impoundments. Additionally, the rule could potentially subject management units that have previously completed remedial action and closure and certain beneficial use projects to additional federal regulatory requirements. Future guidance, regulatory determinations, rulemakings, implementation determinations and other developments could potentially require revisions to current LG&E and KU compliance plans including additional monitoring and remediation at surface impoundments and landfills, the cost of which could be substantial. PPL, LG&E and KU are unable to predict the outcome of the ongoing litigation, rulemaking, and regulatory determinations or potential impacts on current LG&E and KU compliance plans. PPL, LG&E and KU are currently finalizing or revising closure plans and schedules in accordance with applicable regulations.
LG&E and KU received KPSC approval for a compliance plan providing for the closure of impoundments at the Mill Creek, Trimble County, E.W. Brown, and Ghent stations, and construction of process water management facilities at those plants. In addition to the foregoing measures required for compliance with the federal CCR rule, KU also received KPSC approval for its plans to close impoundments at the retired Green River, Pineville and Tyrone plants to comply with applicable state law. LG&E and KU have completed planned closure measures at most of the subject impoundments and have commenced post closure groundwater monitoring as required at those facilities. LG&E and KU generally expect to complete all impoundment closures within five years of commencement, although a longer period may be required to complete closure of some facilities. Associated costs are expected to be subject to rate recovery.
In connection with the final CCR rule, LG&E and KU recorded adjustments to existing AROs beginning in 2015 and continue to record adjustments as required. See Note 15 for additional information. Further changes to AROs, current capital plans or operating costs may be required as estimates are refined based on closure developments, groundwater monitoring results, and regulatory or legal proceedings. Costs relating to this rule are expected to be subject to rate recovery.
Superfund and Other Remediation
(All Registrants)
The Registrants are potentially responsible for investigating and remediating contamination under the federal Superfund program and similar state programs. Actions are under way at certain sites including former coal gas manufacturing plants in Pennsylvania, Rhode Island and Kentucky previously owned or operated by, or currently owned by predecessors or affiliates of, PPL subsidiaries.
Depending on the outcome of investigations at identified sites where investigations have not begun or been completed, or developments at sites for which information is incomplete, additional costs of remediation could be incurred. PPL, PPL Electric, LG&E and KU lack sufficient information about such additional sites to estimate any potential liability or range of reasonably possible losses, if any, related to these sites. Such costs, however, are not currently expected to be significant.
The EPA is evaluating the risks associated with polycyclic aromatic hydrocarbons and naphthalene, chemical by-products of coal gas manufacturing. As a result, individual states may establish stricter standards for water quality and soil cleanup, that could require several PPL subsidiaries to take more extensive assessment and remedial actions at former coal gas manufacturing plants. The Registrants cannot reasonably estimate a range of possible losses, if any, related to these matters.
(PPL and PPL Electric)
PPL Electric is a potentially responsible party for a share of clean-up costs at certain sites. Cleanup actions have been or are being undertaken at these sites as requested by governmental agencies, the costs of which have not been and are not expected to be significant to PPL Electric.
As of March 31, 2024 and December 31, 2023, PPL Electric had a recorded liability of $8 million, representing its best estimate of the probable loss incurred to remediate these sites.
(PPL)
RIE is a potentially responsible party for a share of clean-up costs at certain sites including former manufactured gas plant (MGP) facilities formerly owned by the Blackstone Valley Gas and Electric Company and the Rhode Island gas distribution assets of the New England Gas division of Southern Union Company and electric operations at certain RIE facilities. RIE is currently investigating and remediating, as necessary, those MGP sites and certain other properties under agreements with governmental agencies, the costs of which have not been and are not expected to be significant to PPL.
As of March 31, 2024 and December 31, 2023, PPL had a recorded liability of $98 million and $99 million, representing its best estimate of the remaining costs of RIE's environmental remediation activities. These undiscounted costs are expected to be incurred over approximately 30 years and generally to be subject to rate recovery. However, remediation costs for each site may be materially higher than estimated, depending on changing technologies and regulatory standards, selected end uses for each site, and actual environmental conditions encountered. RIE has recovered amounts from certain insurers and potentially responsible parties, and, where appropriate, may seek additional recovery from other insurers and from other potentially responsible parties, but it is uncertain whether, and to what extent, such efforts will be successful.
The RIPUC has approved two settlement agreements that provide for rate recovery of qualified remediation costs of certain contaminated sites located in Rhode Island and Massachusetts. Rate-recoverable contributions for electric operations of approximately $3 million are added annually to RIE's Environmental Response Fund, established with RIPUC approval in March 2000 to address such costs, along with interest and any recoveries from insurance carriers and other third parties. In addition, RIE recovers approximately $1 million annually for gas operations under a distribution adjustment charge in which the qualified remediation costs are amortized over 10 years. See Note 6 for additional information on RIE's recorded environmental regulatory assets and liabilities.
Regulatory Issues
(All Registrants)
See Note 6 for information on regulatory matters related to utility rate regulation.
Electricity - Reliability Standards
The NERC is responsible for establishing and enforcing mandatory reliability standards (Reliability Standards) regarding the bulk electric system in North America. The FERC oversees this process and independently enforces the Reliability Standards.
The Reliability Standards have the force and effect of law and apply to certain users of the bulk electric system, including electric utility companies, generators and marketers. Under the Federal Power Act, the FERC may assess civil penalties for certain violations.
PPL Electric, LG&E, KU and RIE monitor their compliance with the Reliability Standards and self-report or self-log potential violations of applicable reliability requirements whenever identified, and submit accompanying mitigation plans, as required. The resolution of a small number of potential violations is pending. Penalties incurred to date have not been significant. Any Regional Reliability Entity determination concerning the resolution of violations of the Reliability Standards remains subject to the approval of the NERC and the FERC.
In the course of implementing their programs to ensure compliance with the Reliability Standards by those PPL affiliates subject to the standards, certain other instances of potential non-compliance may be identified from time to time. The Registrants cannot predict the outcome of these matters, and an estimate or range of possible losses cannot be determined.
Gas - Security Directives (PPL and LG&E)
In May and July of 2021, the Department of Homeland Security’s (DHS) Transportation Security Administration (TSA) released two security directives applicable to certain notified owners and operators of natural gas pipeline facilities (including local distribution companies) that the TSA has determined to be critical. The TSA has determined that LG&E is within the scope of the directive, while RIE has not been notified of this distinction. The first security directive required notified owners/operators to implement cybersecurity incident reporting to the DHS, designate a cybersecurity coordinator, and perform a gap assessment of current entity cybersecurity practices against certain voluntary TSA security guidelines and report relevant results and proposed mitigation to applicable DHS agencies. The second security directive, revised in July of 2023, requires refinement
of the cybersecurity implementation plan and the cybersecurity assessment plan. LG&E does not believe the security directives have had or will have a significant impact on LG&E’s operations or financial condition.
Other
Guarantees and Other Assurances
(All Registrants)
In the normal course of business, the Registrants enter into agreements that provide financial performance assurance to third parties on behalf of certain subsidiaries. Examples of such agreements include: guarantees, stand-by letters of credit issued by financial institutions and surety bonds issued by insurance companies. These agreements are entered into primarily to support or enhance the creditworthiness attributed to a subsidiary on a stand-alone basis or to facilitate the commercial activities in which these subsidiaries engage.
(PPL)
PPL fully and unconditionally guarantees all of the debt securities and loan obligations of PPL Capital Funding.
(All Registrants)
The table below details guarantees provided as of March 31, 2024. "Exposure" represents the estimated maximum potential amount of future payments that could be required to be made under the guarantee. The Registrants believe the probability of expected payment/performance under each of these guarantees is remote, except for the guarantees and indemnifications related to the sale of Safari Holdings, which PPL believes are reasonably possible but not probable of occurring. For reporting purposes, on a consolidated basis, the guarantees of PPL include the guarantees of its subsidiary Registrants.
| Exposure at March 31, 2024 | Expiration Date | ||||||||||||||||
| PPL | |||||||||||||||||
| Indemnifications related to certain tax liabilities related to the sale of the U.K. utility business | £ | 50 | (a) | 2028 | |||||||||||||
| PPL guarantee of Safari payment obligations under certain sale/leaseback financing transactions related to the sale of Safari Holdings | $ | 121 | (b) | 2028 | |||||||||||||
| Indemnifications for losses suffered related to items not covered by Aspen Power's representation and warranty insurance associated with the sale of Safari Holdings | 140 | (c) | 2028 | ||||||||||||||
| LG&E and KU | |||||||||||||||||
| LG&E and KU obligation of shortfall related to OVEC | (d) |
(a)PPL WPD Limited, a PPL indirect U.K. subsidiary, entered into a Tax Deed dated June 9, 2021, in which it agreed to a tax indemnity regarding certain potential tax liabilities of the entities sold with respect to periods prior to the completion of the sale, subject to customary exclusions and limitations. Because National Grid Holdings One plc, the buyer, agreed to purchase indemnity insurance, the amount of the cap on the indemnity for these liabilities is £1, except with respect to certain surrenders of tax losses, for which the amount of the cap on the indemnity is £50 million.
(b)PPL guaranteed the payment obligations of Safari under certain sale/leaseback financing transactions executed by Safari. These guarantees will remain in place until Safari exercises its option to buy-out the projects under the sale/leaseback financings by the year 2028. Safari will indemnify PPL for any payments made by PPL or claims against PPL under the sale/leaseback transaction guarantees up to $25 million.
(c)Aspen Power has obtained representation and warranty insurance, therefore, PPL generally has no liability for its representations and warranties under the agreement except for losses suffered related to items not covered. Pursuant to the agreement, expiration of these indemnifications range from 18 months to 6 years from the date of the closing of the transaction, and PPL’s aggregate liability for these claims will not exceed $140 million, pursuant to the agreement, subject to certain adjustments plus the support obligations provided by PPL under sale-leaseback financings.
(d)Pursuant to the OVEC power purchase contract, LG&E and KU are obligated to pay for their share of OVEC's excess debt service, post-retirement, and decommissioning costs, as well as any shortfall from amounts included within a demand charge designed and expected to cover these costs over the term of the contract. PPL's proportionate share of OVEC's outstanding debt was $86 million at March 31, 2024, consisting of LG&E's share of $60 million and KU's share of $26 million. The maximum exposure and the expiration date of these potential obligations are not presently determinable. See "Energy Purchase Commitments" in Note 13 in PPL's, LG&E's and KU's 2023 Form 10-K for additional information on the OVEC power purchase contract.
The Registrants provide other miscellaneous guarantees through contracts entered into in the normal course of business. These guarantees are primarily in the form of indemnification or warranties related to services or equipment and vary in duration. The amounts of these guarantees often are not explicitly stated, and the overall maximum amount of the obligation under such guarantees cannot be reasonably estimated. Historically, no significant payments have been made with respect to these types of guarantees and the probability of payment/performance under these guarantees is generally remote.
PPL, on behalf of itself and certain of its subsidiaries, maintains insurance that covers liability assumed under contract for bodily injury and property damage. The coverage provides maximum aggregate coverage of $231 million. This insurance may be applicable to obligations under certain of these contractual arrangements.
11. Related Party Transactions
Support Costs (PPL Electric, LG&E and KU)
PPL Services and LKS provide the Registrants, their respective subsidiaries and each other with administrative, management and support services. For all services companies, the costs of directly assignable and attributable services are charged to the respective recipients as direct support costs. General costs that cannot be directly attributed to a specific entity are allocated and charged to the respective recipients as indirect support costs. PPL Services and LKS use a three-factor methodology that includes the applicable recipients' invested capital, operation and maintenance expenses and number of employees to allocate indirect costs. PPL Services and LKS charged the following amounts for the periods ended March 31, including amounts applied to accounts that are further distributed between capital and expense on the books of the recipients, based on methods that are believed to be reasonable.
| Three Months | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| PPL Electric from PPL Services | $ | 56 | $ | 59 | |||||||||||||||||||
| LG&E from LKS | 29 | 32 | |||||||||||||||||||||
| LG&E from PPL Services | 11 | 8 | |||||||||||||||||||||
| KU from LKS | 38 | 41 | |||||||||||||||||||||
| KU from PPL Services | 11 | 9 |
In addition to the charges for services noted above, LKS makes payments on behalf of LG&E and KU for fuel purchases and other costs for products or services provided by third parties. LG&E and KU also provide services to each other and to LKS. Billings between LG&E and KU relate to labor and overheads associated with union and hourly employees performing work for the other company, charges related to jointly-owned generating units and other miscellaneous charges. Tax settlements between PPL and LG&E and KU are reimbursed through LKS.
Intercompany Borrowings
(PPL Electric)
CEP Reserves maintains a $800 million revolving line of credit with a PPL Electric subsidiary. At March 31, 2024, CEP Reserves had $554 million of borrowings outstanding. At December 31, 2023, CEP Reserves had no borrowings outstanding. The interest rates on borrowings are equal to an adjusted one-month SOFR plus a spread. Interest income is reflected in "Interest Income from Affiliate" on the applicable Income Statements.
(LG&E and KU)
LG&E participates in an intercompany money pool agreement whereby LKE and/or KU make available to LG&E funds up to the difference between LG&E's FERC borrowing limit and LG&E's commercial paper 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. At March 31, 2024, LG&E's money pool unused capacity was $722 million. At March 31, 2024 and December 31, 2023, LG&E had insignificant borrowings outstanding from KU and/or LKE. These balances would be reflected in "Notes payable to affiliates" on the LG&E Balance Sheets.
KU participates in an intercompany money pool agreement whereby LKE and/or LG&E make available to KU funds up to the difference between KU's FERC borrowing limit and KU's commercial paper 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. At March 31, 2024, KU's money pool unused capacity was $568 million. At March 31, 2024, KU had borrowings outstanding from LG&E and/or LKE of $37 million. These balances are reflected in "Notes payable to affiliates" on the KU Balance Sheets. At December 31, 2023, KU had no borrowings outstanding from LG&E and/or LKE.
12. Other Income (Expense) - net
(PPL)
The details of "Other Income (Expense) - net" for the periods ended March 31, were:
| Three Months | |||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Defined benefit plans - non-service credits (Note 9) | $ | 8 | $ | 17 | |||||||||||||||||||||||||||||||||||||||||||
| Interest income | 9 | 9 | |||||||||||||||||||||||||||||||||||||||||||||
| AFUDC - equity component | 9 | 6 | |||||||||||||||||||||||||||||||||||||||||||||
| Charitable contributions | (2) | (1) | |||||||||||||||||||||||||||||||||||||||||||||
| Miscellaneous | (2) | (1) | |||||||||||||||||||||||||||||||||||||||||||||
| Other Income (Expense) - net | $ | 22 | $ | 30 |
(PPL Electric)
The details of "Other Income (Expense) - net" for the periods ended March 31, were:
| Three Months | |||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Defined benefit plans - non-service credits (Note 9) | $ | 4 | $ | 5 | |||||||||||||||||||||||||||||||||||||||||||
| Interest income | 1 | 4 | |||||||||||||||||||||||||||||||||||||||||||||
| AFUDC - equity component | 5 | 4 | |||||||||||||||||||||||||||||||||||||||||||||
| Charitable contributions | (1) | (1) | |||||||||||||||||||||||||||||||||||||||||||||
| Other Income (Expense) - net | $ | 9 | $ | 12 |
13. Fair Value Measurements
(All Registrants)
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). A market approach (generally, data from market transactions), an income approach (generally, present value techniques and option pricing models) and/or a cost approach (generally, replacement cost) are used to measure the fair value of an asset or liability, as appropriate. These valuation approaches incorporate inputs such as observable, independent market data and/or unobservable data that management believes are predicated on the assumptions market participants would use to price an asset or liability. These inputs may incorporate, as applicable, certain risks such as nonperformance risk, which includes credit risk. The fair value of a group of financial assets and liabilities is measured on a net basis. See Note 1 in each Registrant's 2023 Form 10-K for information on the levels in the fair value hierarchy.
Recurring Fair Value Measurements
The assets and liabilities measured at fair value were:
| March 31, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||||||||||||||
| PPL | |||||||||||||||||||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 276 | $ | 276 | $ | — | $ | — | $ | 331 | $ | 331 | $ | — | $ | — | |||||||||||||||||||||||||||||||
| Restricted cash and cash equivalents (a) | 45 | 45 | — | — | 51 | 51 | — | — | |||||||||||||||||||||||||||||||||||||||
| Total Cash, Cash Equivalents and Restricted Cash (b) | 321 | 321 | — | — | 382 | 382 | — | — | |||||||||||||||||||||||||||||||||||||||
| Special use funds (a): | |||||||||||||||||||||||||||||||||||||||||||||||
| Money market fund | 2 | 2 | — | — | 1 | 1 | — | — | |||||||||||||||||||||||||||||||||||||||
| Commingled debt fund measured at NAV (c) | 7 | — | — | — | 9 | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Commingled equity fund measured at NAV (c) | 7 | — | — | — | 8 | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Total special use funds | 16 | 2 | — | — | 18 | 1 | — | — | |||||||||||||||||||||||||||||||||||||||
| Price risk management assets (d): | |||||||||||||||||||||||||||||||||||||||||||||||
| Gas contracts | 1 | — | 1 | — | 1 | — | 1 | — | |||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 338 | $ | 323 | $ | 1 | $ | — | $ | 401 | $ | 383 | $ | 1 | $ | — | |||||||||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||
| Price risk management liabilities (d): | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate swaps | $ | 5 | $ | — | $ | 5 | $ | — | $ | 7 | $ | — | $ | 7 | $ | — | |||||||||||||||||||||||||||||||
| Gas contracts | 34 | — | 33 | 1 | 60 | — | 41 | 19 | |||||||||||||||||||||||||||||||||||||||
| Total price risk management liabilities | $ | 39 | $ | — | $ | 38 | $ | 1 | $ | 67 | $ | — | $ | 48 | $ | 19 | |||||||||||||||||||||||||||||||
| PPL Electric | |||||||||||||||||||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 21 | $ | 21 | $ | — | $ | — | $ | 51 | $ | 51 | $ | — | $ | — | |||||||||||||||||||||||||||||||
| Total assets | $ | 21 | $ | 21 | $ | — | $ | — | $ | 51 | $ | 51 | $ | — | $ | — | |||||||||||||||||||||||||||||||
| LG&E | |||||||||||||||||||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 8 | $ | 8 | $ | — | $ | — | $ | 18 | $ | 18 | $ | — | $ | — | |||||||||||||||||||||||||||||||
| Restricted cash and cash equivalents (a) | 22 | 22 | — | — | 26 | 26 | — | — | |||||||||||||||||||||||||||||||||||||||
| Total Cash, Cash Equivalents and Restricted Cash (b) | 30 | 30 | — | — | 44 | 44 | — | — | |||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 30 | $ | 30 | $ | — | $ | — | $ | 44 | $ | 44 | $ | — | $ | — | |||||||||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||
| Price risk management liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate swaps | $ | 5 | $ | — | $ | 5 | $ | — | $ | 7 | $ | — | $ | 7 | $ | — | |||||||||||||||||||||||||||||||
| Total price risk management liabilities | $ | 5 | $ | — | $ | 5 | $ | — | $ | 7 | $ | — | $ | 7 | $ | — | |||||||||||||||||||||||||||||||
| KU | |||||||||||||||||||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 12 | $ | 12 | $ | — | $ | — | $ | 14 | $ | 14 | $ | — | $ | — | |||||||||||||||||||||||||||||||
| Restricted cash and cash equivalents (a) | 22 | 22 | — | — | 24 | 24 | — | — | |||||||||||||||||||||||||||||||||||||||
| Total Cash, Cash Equivalents and Restricted Cash (b) | 34 | 34 | — | — | 38 | 38 | — | — | |||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 34 | $ | 34 | $ | — | $ | — | $ | 38 | $ | 38 | $ | — | $ | — |
(a)Current portion is included in "Other current assets" and noncurrent portion is included in "Other noncurrent assets" on the Balance Sheets.
(b)Total Cash, Cash Equivalents and Restricted Cash provides a reconciliation of these items reported within the Balance Sheets to the sum shown on the Statements of Cash Flows.
(c)In accordance with accounting guidance, certain investments that are measured at fair value using net asset value per share (NAV), or its equivalent, have not been classified in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Balance Sheets.
(d)Current portion is included in "Other current asset" and "Other current liabilities" and noncurrent portion is included in "Other noncurrent assets" and "Other deferred credits and noncurrent liabilities" on the Balance Sheets.
A reconciliation of net liabilities classified as Level 3 for the three months ended March 31 is as follows:
| Gas Contracts | |||||
| 2024 | |||||
| Balance at beginning of period | $ | 19 | |||
| Settlements | (18) | ||||
| Balance at end of period | $ | 1 |
Special Use Funds (PPL)
The special use funds are investments restricted for paying active union employee medical costs. In 2018, PPL received a favorable private letter ruling from the IRS permitting a transfer of excess funds from the PPL Bargaining Unit Retiree Health Plan VEBA to a new subaccount within the VEBA to be used to pay medical claims of active bargaining unit employees. The funds are invested primarily in commingled debt and equity funds measured at NAV and are classified as investments in equity securities. Changes in the fair value of the funds are recorded to the Statements of Income.
Price Risk Management Assets/Liabilities
*Interest Rate Swaps (*PPL, LG&E and KU)
To manage interest rate risk, PPL, LG&E and KU use interest rate contracts such as forward-starting swaps, floating-to-fixed swaps and fixed-to-floating swaps. An income approach is used to measure the fair value of these contracts, utilizing readily observable inputs, such as forward interest rates (e.g., SOFR and government security rates), as well as inputs that may not be observable, such as credit valuation adjustments. In certain cases, market information cannot practicably be obtained to value credit risk and therefore internal models are relied upon. These models use projected probabilities of default and estimated recovery rates based on historical observances. When the credit valuation adjustment is significant to the overall valuation, the contracts are classified as Level 3.
Gas Contracts (PPL)
To manage gas commodity price risk associated with natural gas purchases, RIE utilizes over-the-counter (OTC) gas swaps contracts with pricing inputs obtained from the New York Mercantile Exchange (NYMEX) and the Intercontinental Exchange (ICE), except in cases where the ICE publishes seasonal averages or where there were no transactions within the last seven days. RIE may utilize discounting based on quoted interest rate curves, including consideration of non-performance risk, and may include a liquidity reserve calculated based on bid/ask spread. Substantially all of these price curves are observable in the marketplace throughout at least 95% of the remaining contractual quantity, or they could be constructed from market observable curves with correlation coefficients of 95% or higher. These contracts are classified as Level 2.
RIE also utilizes gas option and purchase and capacity transactions, which are valued based on internally developed models. Industry-standard valuation techniques, such as the Black-Scholes pricing model, are used for valuing such instruments. For valuations that include both observable and unobservable inputs, if the unobservable input is determined to be significant to the overall inputs, the entire valuation is classified as Level 3. This includes derivative instruments valued using indicative price quotations whose contract tenure extends into unobservable periods. In instances where observable data is unavailable, consideration is given to the assumptions that market participants would use in valuing the asset or liability. This includes assumptions about market risks such as liquidity, volatility, and contract duration. Such instruments are classified as in Level 3 as the model inputs generally are not observable. RIE considers non-performance risk and liquidity risk in the valuation of derivative instruments classified as Level 2 and Level 3.
The significant unobservable inputs used in the fair value measurement of the gas derivative instruments are implied volatility and gas forward curves. A relative change in commodity price at various locations underlying the open positions can result in significantly different fair value estimates.
Financial Instruments Not Recorded at Fair Value (All Registrants)
Long-term debt is classified as Level 2. The effect of third-party credit enhancements is not included in the fair value measurement. The carrying amounts of long-term debt on the Balance Sheets and their estimated fair values are set forth below.
| March 31, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Carrying Amount (a) | Fair Value | Carrying Amount (a) | Fair Value | ||||||||||||||||||||
| PPL | $ | 15,754 | $ | 15,016 | $ | 14,612 | $ | 14,031 | |||||||||||||||
| PPL Electric | 5,211 | 5,023 | 4,567 | 4,475 | |||||||||||||||||||
| LG&E | 2,469 | 2,344 | 2,469 | 2,369 | |||||||||||||||||||
| KU | 3,064 | 2,832 | 3,064 | 2,861 |
(a)Amounts are net of debt issuance costs.
The carrying amounts of other current financial instruments (except for long-term debt due within one year) approximate their fair values because of their short-term nature.
14. Derivative Instruments and Hedging Activities
(All Registrants)
Risk Management Objectives
PPL has a risk management policy approved by the Board of Directors to manage market risk associated with commodities, interest rates on debt issuances (including price, liquidity and volumetric risk) and credit risk (including non-performance risk and payment default risk). The Risk Management Committee, comprised of senior management and chaired by the Vice President-Financial Strategy and Chief Risk Officer, oversees the risk management function. Key risk control activities designed to ensure compliance with the risk policy and detailed programs include, but are not limited to, credit review and approval, validation of transactions, verification of risk and transaction limits, value-at-risk analyses (VaR, a statistical model that attempts to estimate the value of potential loss over a given holding period under normal market conditions at a given confidence level) and the coordination and reporting of the Enterprise Risk Management program.
Market Risk
Market risk includes the potential loss that may be incurred as a result of price changes associated with a particular financial or commodity instrument as well as market liquidity and volumetric risks. Forward contracts, futures contracts, options, swaps and structured transactions are utilized as part of risk management strategies to minimize unanticipated fluctuations in earnings caused by changes in commodity prices and interest rates. Many of these contracts meet the definition of a derivative. All derivatives are recognized on the Balance Sheets at their fair value, unless NPNS is elected.
The following summarizes the market risks that affect PPL and its subsidiaries.
Interest Rate Risk
-
PPL and its subsidiaries are exposed to interest rate risk associated with forecasted fixed-rate and existing floating-rate debt issuances. PPL and LG&E utilize over-the-counter interest rate swaps to limit exposure to market fluctuations on floating-rate debt. PPL, LG&E and KU utilize forward starting interest rate swaps to hedge changes in benchmark interest rates, when appropriate, in connection with future debt issuance.
-
PPL and its subsidiaries are exposed to interest rate risk associated with debt securities and derivatives held by defined benefit plans. This risk is significantly mitigated to the extent that the plans are sponsored at, or sponsored on behalf of, the regulated utilities due to the recovery methods in place.
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.
Equity Securities Price Risk
-
PPL and its subsidiaries are exposed to equity securities price risk associated with the fair value of the defined benefit plans' assets. This risk is significantly mitigated due to the recovery methods in place.
-
PPL is exposed to equity securities price risk from future stock sales and/or purchases.
Credit Risk
Credit risk is the potential loss that may be incurred due to a counterparty's non-performance.
PPL is exposed to credit risk from "in-the-money" transactions with counterparties as well as additional credit risk through certain of its subsidiaries, as discussed below.
In the event a supplier of PPL, PPL Electric, LG&E or KU defaults on its contractual obligation, those Registrants would be required to seek replacement power or replacement fuel in the market. In general, subject to regulatory review or other processes, appropriate incremental costs incurred by these entities would be recoverable from customers through applicable rate mechanisms, thereby mitigating the financial risk for these entities.
PPL and its subsidiaries have credit policies in place to manage credit risk, including the use of an established credit approval process, daily monitoring of counterparty positions and the use of master netting agreements or provisions. These agreements generally include credit mitigation provisions, such as margin, prepayment or collateral requirements. PPL and its subsidiaries may request additional credit assurance, in certain circumstances, if a counterparty's credit ratings fall below investment grade, their tangible net worth falls below specified percentages or its exposures exceed an established credit limit.
Master Netting Arrangements (PPL, LG&E and KU)
Net derivative positions on the balance sheets are not offset against the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) under master netting arrangements.
PPL, LG&E and KU had no obligation to return or post cash collateral under master netting arrangements at March 31, 2024 and December 31, 2023.
See "Offsetting Derivative Instruments" below for a summary of derivative positions presented in the balance sheets where a right of setoff exists under these arrangements.
Interest Rate Risk
(All Registrants)
PPL and its subsidiaries issue debt to finance their operations, which exposes them to interest rate risk. A variety of financial derivative instruments are utilized to adjust the mix of fixed and floating interest rates in their debt portfolios, adjust the duration of the debt portfolios and lock in benchmark interest rates in anticipation of future financing, when appropriate. Risk limits under PPL's risk management program are designed to balance risk exposure to volatility in interest expense and changes in the fair value of the debt portfolio due to changes in benchmark interest rates. In addition, the interest rate risk of certain subsidiaries is potentially mitigated as a result of the existing regulatory framework or the timing of rate cases.
Cash Flow Hedges (PPL)
Interest rate risks include exposure to adverse interest rate movements for outstanding variable rate debt and for future anticipated financings. Financial interest rate swap contracts that qualify as cash flow hedges may be entered into to hedge floating interest rate risk associated with both existing and anticipated debt issuances. PPL had no such contracts at March 31, 2024.
Cash flow hedges are discontinued if it is no longer probable that the original forecasted transaction will occur by the end of the originally specified time period and any amounts previously recorded in AOCI are reclassified into earnings once it is determined that the hedged transaction is not probable of occurring.
For the three months ended March 31, 2024 and 2023, PPL had no cash flow hedges reclassified into earnings associated with discontinued cash flow hedges.
At March 31, 2024, the amount of accumulated net unrecognized after-tax gains (losses) on qualifying derivatives expected to be reclassified into earnings during the next 12 months is insignificant. Amounts are reclassified as the hedged interest expense is recorded.
Economic Activity (PPL and LG&E)
LG&E enters into interest rate swap contracts that economically hedge interest payments. Because realized gains and losses from the swaps, including terminated swap contracts, are recoverable through regulated rates, any subsequent changes in fair value of these derivatives are included in regulatory assets or liabilities until they are realized as interest expense. Realized gains and losses are recognized in "Interest Expense" on the Statements of Income at the time the underlying hedged interest expense is recorded. See Note 6 for amounts recorded in regulatory assets and regulatory liabilities at March 31, 2024 and December 31, 2023. At March 31, 2024, LG&E held contracts with a notional amount of $64 million that mature in 2033.
Commodity Price Risk (PPL)
Economic Activity
RIE enters into derivative contracts that economically hedge natural gas purchases. Realized gains and losses from the derivatives are recoverable through regulated rates, therefore subsequent changes in fair value are included in regulatory assets or liabilities until they are realized as purchased gas. Realized gains and losses are recognized in "Energy Purchases" on the Statements of Income upon settlement of the contracts. At March 31, 2024, RIE held contracts with notional volumes of 41 Bcf that range in maturity from 2024 through 2029.
Accounting and Reporting
(All Registrants)
All derivative instruments are recorded at fair value on the Balance Sheet as an asset or liability unless NPNS is elected. NPNS contracts include certain full requirement purchase contracts and other physical purchase contracts. Changes in the fair value of derivatives not designated as NPNS are recognized in earnings unless specific hedge accounting criteria are met and designated as such, except for the changes in fair values of LG&E's interest rate swaps and certain RIE commodity gas contracts that are recognized as regulatory assets or regulatory liabilities. See Note 6 for amounts recorded in regulatory assets and regulatory liabilities at March 31, 2024 and December 31, 2023.
See Note 1 in each Registrant's 2023 Form 10-K for additional information on accounting policies related to derivative instruments.
(PPL)
The following table presents the fair value and the location on the Balance Sheets of derivatives not designated as hedging instruments.
| March 31, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Assets | Liabilities | Assets | Liabilities | ||||||||||||||||||||||||||||||||||||||||||||
| Current: | |||||||||||||||||||||||||||||||||||||||||||||||
| Price Risk Management Assets/Liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate swaps (a) | $ | — | $ | 1 | $ | — | $ | 1 | |||||||||||||||||||||||||||||||||||||||
| Gas contracts (a) | 1 | 30 | 1 | 51 | |||||||||||||||||||||||||||||||||||||||||||
| Total current | 1 | 31 | 1 | 52 | |||||||||||||||||||||||||||||||||||||||||||
| Noncurrent: | |||||||||||||||||||||||||||||||||||||||||||||||
| Price Risk Management Assets/Liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate swaps (a) | — | 4 | — | 6 | |||||||||||||||||||||||||||||||||||||||||||
| Gas contracts (a) | — | 4 | — | 9 | |||||||||||||||||||||||||||||||||||||||||||
| Total noncurrent | — | 8 | — | 15 | |||||||||||||||||||||||||||||||||||||||||||
| Total derivatives | $ | 1 | $ | 39 | $ | 1 | $ | 67 |
(a)Current portion is included in "Other current assets" and "Other current liabilities" and noncurrent portion is included in "Other noncurrent assets" and "Other deferred credits and noncurrent liabilities" on the Balance Sheets. Excludes accrued interest, if applicable.
The following tables present the pre-tax effect of derivative instruments recognized in income, OCI or regulatory assets and regulatory liabilities for the period ended March 31, 2024.
| Three Months | Three Months | |||||||||||||||||||||||||||||||
| Derivative Relationships | Derivative Gain (Loss) Recognized in OCI | Location of Gain (Loss) Recognized in Income on Derivative | Gain (Loss) Reclassified from AOCI into Income | |||||||||||||||||||||||||||||
| Cash Flow Hedges: | ||||||||||||||||||||||||||||||||
| Interest rate swaps | $ | — | Interest expense | $ | (1) | |||||||||||||||||||||||||||
| Derivatives Not Designated as Hedging Instruments | Location of Gain (Loss) Recognized in Income on Derivative | Three Months | ||||||||||||||||||
| Gas contracts | Energy purchases | $ | (16) | |||||||||||||||||
| Total | $ | (16) | ||||||||||||||||||
| Derivatives Not Designated as Hedging Instruments | Location of Gain (Loss) Recognized as Regulatory Liabilities/Assets | Three Months | ||||||||||||||||||
| Interest rate swaps | Regulatory assets - noncurrent | $ | 2 | |||||||||||||||||
| Gas contracts | Regulatory assets - current | 22 | ||||||||||||||||||
| Regulatory assets - noncurrent | 4 | |||||||||||||||||||
| Total | $ | 28 |
The following tables present the pre-tax effect of derivative instruments recognized in income, OCI or regulatory assets and regulatory liabilities for the period ended March 31, 2023.
| Three Months | Three Months | |||||||||||||||||||||||||||||||
| Derivative Relationships | Derivative Gain (Loss) Recognized in OCI | Location of Gain (Loss) Recognized in Income on Derivative | Gain (Loss) Reclassified from AOCI into Income | |||||||||||||||||||||||||||||
| Cash Flow Hedges: | ||||||||||||||||||||||||||||||||
| Interest rate swaps | $ | — | Interest expense | $ | (1) | |||||||||||||||||||||||||||
| Derivatives Not Designated as Hedging Instruments | Location of Gain (Loss) Recognized in Income on Derivative | Three Months | ||||||||||||||||||
| Interest rate swaps | Interest expense | $ | — | |||||||||||||||||
| Gas contracts | Energy purchases | (2) | ||||||||||||||||||
| Other income (expense) - net | 1 | |||||||||||||||||||
| Total | $ | (1) | ||||||||||||||||||
| Derivatives Not Designated as Hedging Instruments | Location of Gain (Loss) Recognized as Regulatory Liabilities/Assets | Three Months | ||||||||||||||||||
| Interest rate swaps | Regulatory assets - noncurrent | $ | (1) | |||||||||||||||||
| Gas contracts | Regulatory assets - current | 28 | ||||||||||||||||||
| Regulatory assets - noncurrent | (7) | |||||||||||||||||||
| Total | $ | 20 | ||||||||||||||||||
The following table presents the effect of cash flow hedge activity on the Statement of Income for the period ended March 31, 2024.
| Location and Amount of Gain (Loss) Recognized in Income on Hedging Relationships | |||||||||||||||||||||||||||||
| Three Months | |||||||||||||||||||||||||||||
| Interest Expense | |||||||||||||||||||||||||||||
| Total income and expense line items presented in the income statement in which the effect of cash flow hedges are recorded | $ | 179 | |||||||||||||||||||||||||||
| The effects of cash flow hedges: | |||||||||||||||||||||||||||||
| Gain (Loss) on cash flow hedging relationships: | |||||||||||||||||||||||||||||
| Interest rate swaps: | |||||||||||||||||||||||||||||
| Amount of gain (loss) reclassified from AOCI to income | (1) | ||||||||||||||||||||||||||||
The following table presents the effect of cash flow hedge activity on the Statement of Income for the period ended March 31, 2023.
| Location and Amount of Gain (Loss) Recognized in Income on Hedging Relationships | |||||||||||||||||||||||||||||
| Three Months | |||||||||||||||||||||||||||||
| Interest Expense | |||||||||||||||||||||||||||||
| Total income and expense line items presented in the income statement in which the effect of cash flow hedges are recorded | $ | 164 | |||||||||||||||||||||||||||
| The effects of cash flow hedges: | |||||||||||||||||||||||||||||
| Gain (Loss) on cash flow hedging relationships: | |||||||||||||||||||||||||||||
| Interest rate swaps: | |||||||||||||||||||||||||||||
| Amount of gain (loss) reclassified from AOCI to income | (1) | ||||||||||||||||||||||||||||
(LG&E)
The following table presents the fair value and the location on the Balance Sheets of derivatives not designated as hedging instruments.
| March 31, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Assets | Liabilities | Assets | Liabilities | ||||||||||||||||||||
| Current: | |||||||||||||||||||||||
| Price Risk Management Assets/Liabilities: | |||||||||||||||||||||||
| Interest rate swaps | $ | — | $ | 1 | $ | — | $ | 1 | |||||||||||||||
| Total current | — | 1 | — | 1 | |||||||||||||||||||
| Noncurrent: | |||||||||||||||||||||||
| Price Risk Management Assets/Liabilities: | |||||||||||||||||||||||
| Interest rate swaps | — | 4 | — | 6 | |||||||||||||||||||
| Total noncurrent | — | 4 | — | 6 | |||||||||||||||||||
| Total derivatives | $ | — | $ | 5 | $ | — | $ | 7 |
The following tables present the pre-tax effect of derivatives not designated as cash flow hedges that are recognized in income or regulatory assets for the period ended March 31, 2024.
| Location of Gain (Loss) Recognized in | ||||||||||||||||||||
| Derivative Instruments | Income on Derivatives | Three Months | ||||||||||||||||||
| Interest rate swaps | Interest expense | $ | — | |||||||||||||||||
| Location of Gain (Loss) Recognized in | ||||||||||||||||||||
| Derivative Instruments | Regulatory Assets | Three Months | ||||||||||||||||||
| Interest rate swaps | Regulatory assets - noncurrent | $ | 2 |
The following tables present the pre-tax effect of derivatives not designated as cash flow hedges that are recognized in income or regulatory assets for the period ended March 31, 2023.
| Location of Gain (Loss) Recognized in | ||||||||||||||||||||
| Derivative Instruments | Income on Derivatives | Three Months | ||||||||||||||||||
| Interest rate swaps | Interest expense | $ | — | |||||||||||||||||
| Location of Gain (Loss) Recognized in | ||||||||||||||||||||
| Derivative Instruments | Regulatory Assets | Three Months | ||||||||||||||||||
| Interest rate swaps | Regulatory assets - noncurrent | $ | (1) |
(PPL, LG&E and KU)
Offsetting Derivative Instruments
PPL, LG&E and KU or certain of their subsidiaries have master netting arrangements in place and also enter into agreements pursuant to which they purchase or sell certain energy and other products. Under the agreements, upon termination of the agreement as a result of a default or other termination event, the non-defaulting party typically would have a right to set off amounts owed under the agreement against any other obligations arising between the two parties (whether under the agreement or not), whether matured or contingent and irrespective of the currency, place of payment or place of booking of the obligation.
PPL, LG&E and KU have elected not to offset derivative assets and liabilities and not to offset net derivative positions against the right to reclaim cash collateral pledged (an asset) or the obligation to return cash collateral received (a liability) under derivatives agreements. The table below summarizes the derivative positions presented in the balance sheets where a right of setoff exists under these arrangements and related cash collateral received or pledged.
| Assets | Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||
| Eligible for Offset | Eligible for Offset | ||||||||||||||||||||||||||||||||||||||||||||||
| Gross | Derivative Instruments | Cash Collateral Received | Net | Gross | Derivative Instruments | Cash Collateral Pledged | Net | ||||||||||||||||||||||||||||||||||||||||
| March 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| Derivatives | |||||||||||||||||||||||||||||||||||||||||||||||
| PPL | $ | 1 | $ | — | $ | — | $ | 1 | $ | 39 | $ | — | $ | — | $ | 39 | |||||||||||||||||||||||||||||||
| LG&E | — | — | — | — | 5 | — | — | 5 |
| Assets | Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||
| Eligible for Offset | Eligible for Offset | ||||||||||||||||||||||||||||||||||||||||||||||
| Gross | Derivative Instruments | Cash Collateral Received | Net | Gross | Derivative Instruments | Cash Collateral Pledged | Net | ||||||||||||||||||||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
| Derivatives | |||||||||||||||||||||||||||||||||||||||||||||||
| PPL | $ | 1 | $ | — | $ | — | $ | 1 | $ | 67 | $ | — | $ | — | $ | 67 | |||||||||||||||||||||||||||||||
| LG&E | — | — | — | — | 7 | — | — | 7 |
Credit Risk-Related Contingent Features
Certain derivative contracts contain credit risk-related contingent features which, when in a net liability position, would permit the counterparties to require the transfer of additional collateral upon a decrease in the credit ratings of PPL, LG&E and KU or certain of their subsidiaries. Most of these features would require the transfer of additional collateral or permit the counterparty to terminate the contract if the applicable credit rating were to fall below investment grade. Some of these features also would allow the counterparty to require additional collateral upon each downgrade in credit rating at levels that remain above investment grade. In either case, if the applicable credit rating were to fall below investment grade, and assuming no assignment to an investment grade affiliate were allowed, most of these credit contingent features require either immediate payment of the net liability as a termination payment or immediate and ongoing full collateralization on derivative instruments in net liability positions.
Additionally, certain derivative contracts contain credit risk-related contingent features that require adequate assurance of performance be provided if the other party has reasonable concerns regarding the performance of PPL's, LG&E's and KU's obligations under the contracts. A counterparty demanding adequate assurance could require a transfer of additional collateral or other security, including letters of credit, cash and guarantees from a creditworthy entity. This would typically involve negotiations among the parties. However, such amounts would represent assumed immediate payment or immediate and ongoing full collateralization for derivative instruments in net liability positions with "adequate assurance" features.
(PPL)
At March 31, 2024, derivative contracts in a net liability position that contain credit risk-related contingent features was $28 million. At March 31, 2024, the aggregate fair value of additional collateral requirements in the event of a credit downgrade below investment grade was $29 million.
15. Asset Retirement Obligations
(PPL, LG&E and KU)
PPL's, LG&E's and KU's ARO liabilities are primarily related to CCR closure costs. See Note 10 for information on the CCR rule. LG&E and RIE also have AROs related to natural gas mains and wells. LG&E's and KU's transmission and distribution lines largely operate under perpetual property easement agreements, which do not generally require restoration upon removal of the property. Therefore, no material AROs are recorded for transmission and distribution assets. For LG&E, KU and RIE, all ARO accretion and depreciation expenses are reclassified as a regulatory asset or regulatory liability. ARO regulatory assets associated with certain CCR projects are amortized to expense in accordance with regulatory approvals. For other AROs, deferred accretion and depreciation expense is recovered through cost of removal.
The changes in the carrying amounts of AROs were as follows.
| PPL | LG&E | KU | |||||||||||||||
| Balance at December 31, 2023 | $ | 158 | $ | 85 | $ | 66 | |||||||||||
| Accretion | 2 | 1 | 1 | ||||||||||||||
| Obligations settled | (5) | (2) | (3) | ||||||||||||||
| Other | 1 | — | — | ||||||||||||||
| Balance at March 31, 2024 | $ | 156 | $ | 84 | $ | 64 |
16. Accumulated Other Comprehensive Income (Loss)
(PPL)
The after-tax changes in AOCI by component for the periods ended March 31 were as follows.
| Unrealized gains (losses) on qualifying derivatives | Defined benefit plans | ||||||||||||||||||||||||||||||||||||||||||||||
| Equity investees' AOCI | Prior service costs | Actuarial gain (loss) | Total | ||||||||||||||||||||||||||||||||||||||||||||
| PPL | |||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2023 | $ | 6 | $ | 3 | $ | (4) | $ | (168) | $ | (163) | |||||||||||||||||||||||||||||||||||||
| Amounts arising during the period | — | 1 | — | — | 1 | ||||||||||||||||||||||||||||||||||||||||||
| Reclassifications from AOCI | 1 | — | — | — | 1 | ||||||||||||||||||||||||||||||||||||||||||
| Net OCI during the period | 1 | 1 | — | — | 2 | ||||||||||||||||||||||||||||||||||||||||||
| March 31, 2024 | $ | 7 | $ | 4 | $ | (4) | $ | (168) | $ | (161) | |||||||||||||||||||||||||||||||||||||
| December 31, 2022 | $ | 3 | $ | 2 | $ | (5) | $ | (124) | $ | (124) | |||||||||||||||||||||||||||||||||||||
| Amounts arising during the period | — | 1 | — | — | 1 | ||||||||||||||||||||||||||||||||||||||||||
| Reclassifications from AOCI | 1 | — | — | (1) | — | ||||||||||||||||||||||||||||||||||||||||||
| Net OCI during the period | 1 | 1 | — | (1) | 1 | ||||||||||||||||||||||||||||||||||||||||||
| March 31, 2023 | $ | 4 | $ | 3 | $ | (5) | $ | (125) | $ | (123) |
The following table presents PPL's gains (losses) and related income taxes for reclassifications from AOCI for the periods ended March 31.
| Three Months | Affected Line Item on the | |||||||||||||||||||||||||||||||
| Details about AOCI | 2024 | 2023 | Statements of Income | |||||||||||||||||||||||||||||
| Qualifying derivatives | ||||||||||||||||||||||||||||||||
| Interest rate swaps | $ | (1) | $ | (1) | Interest Expense | |||||||||||||||||||||||||||
| Total Pre-tax | (1) | (1) | ||||||||||||||||||||||||||||||
| Income Taxes | — | — | ||||||||||||||||||||||||||||||
| Total After-tax | (1) | (1) | ||||||||||||||||||||||||||||||
| Defined benefit plans | ||||||||||||||||||||||||||||||||
| Net actuarial loss (a) | — | 1 | ||||||||||||||||||||||||||||||
| Total Pre-tax | — | 1 | ||||||||||||||||||||||||||||||
| Income Taxes | — | — | ||||||||||||||||||||||||||||||
| Total After-tax | — | 1 | ||||||||||||||||||||||||||||||
| Total reclassifications during the period | $ | (1) | $ | — |
(a) These AOCI components are included in the computation of net periodic defined benefit cost. See Note 9 for additional information.
17. New Accounting Guidance Pending Adoption
(All Registrants)
Improvements to Reportable Segment Disclosures
In November 2023, the FASB issued ASU 2023-07 which improves reportable segment disclosure requirements, primarily through enhanced disclosures about segment expenses. The standard also requires public entities to disclose the title and position of the Chief Operating Decision Maker (CODM) and explain how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Disclosure of certain segment-related disclosures that previously were required only on an annual basis will be required in interim periods. In addition, public entities
that have a single reportable segment are required to provide disclosures required by the new ASU and existing segment disclosure in Topic 280 (Segment Reporting).
For public business entities, this guidance will be applied retrospectively to all prior periods presented in the financial statements and will be effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted.
The Registrants are currently assessing the impact of adopting this guidance.
Improvements to Income Tax Disclosures
In December 2023, the FASB issued ASU 2023-09 which requires public business entities to provide additional income tax disclosures including a disaggregated rate reconciliation as well as information on income taxes paid.
For public business entities, this guidance will be applied on a prospective basis. Retrospective application is permitted. This guidance will be effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance.
The Registrants are currently assessing the impact of adopting this guidance.
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