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What changed in PPL Corporation's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of PPL Corporation's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+407 added−461 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-17)

Top changes in PPL Corporation's 2023 10-K

407 paragraphs added · 461 removed · 306 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

79 edited+28 added−28 removed96 unchanged
Biggest changeLG&E and KU also applied for a CPCN to construct a 120 MWac solar photovoltaic electric generating facility in Mercer County, Kentucky, and for a CPCN to acquire a 120 MWac solar facility to be built by a third-party solar developer in Marion County, Kentucky.
Biggest changeOn November 6, 2023, the KPSC issued an order approving LG&E’s and KU’s requests (i) to construct a 640 MW net summer rating NGCC combustion turbine at LG&E's Mill Creek Generating Station in Jefferson County, Kentucky, (ii) to construct a 120 MWac solar photovoltaic electric generating facility in Mercer County, Kentucky, (iii) to acquire a 120 MWac solar facility to be built by a third-party solar developer in Marion County, Kentucky and (iv) to construct a 125 MW, 4-hour battery energy storage system facility at KU's E.W.
Costs not covered by the ECR mechanism for LG&E and KU and all such costs for PPL Electric are subject to rate recovery at the discretion of the companies' respective state regulatory authorities, or the FERC, if applicable. Because PPL Electric and RIE do not own any generating plants, they have less exposure to related environmental compliance costs.
Costs not covered by the ECR mechanism for LG&E and KU and all such costs for PPL Electric and RIE are subject to rate recovery at the discretion of the companies' respective state regulatory authorities, or the FERC, if applicable. Because PPL Electric and RIE do not own any generating plants, they have less exposure to related environmental compliance costs.
The Registrants can provide no assurances as to the ultimate outcome of future proceedings before regulatory authorities. Air NAAQS (PPL, LG&E and KU) Applicable regulations require each state to identify areas within its boundaries that fail to meet the NAAQS, (known as nonattainment areas), and develop a state implementation plan to achieve and maintain compliance.
The Registrants can provide no assurances as to the ultimate outcome of future proceedings before regulatory authorities. Air (PPL, LG&E and KU) NAAQS Applicable regulations require each state to identify areas within its boundaries that fail to meet the NAAQS, (known as nonattainment areas), and develop a state implementation plan to achieve and maintain compliance.
PPL offers competitive vacation time, expanded leave for new parents, retirement programs, and internal and external development opportunities, including tuition reimbursement offerings for undergraduate and certain graduate degrees. Senior management conducts annual benchmarking of employee compensation and benefits. • Safety and Compliance - PPL is also committed to maintaining an ethical and safe workplace culture.
PPL offers competitive vacation time, expanded leave for new parents, retirement programs, and internal and external development opportunities, including tuition reimbursement offerings for undergraduate and certain graduate degrees. Senior management conducts annual benchmarking of employee compensation and benefits. • Safety and Compliance - PPL is committed to maintaining an ethical and safe workplace culture.
ENVIRONMENTAL MATTERS (All Registrants) The Registrants are subject to certain existing and developing federal, regional, state and local laws and regulations with respect to air and water quality, land use and other environmental matters, and may be subject to different and more stringent such laws and regulations enacted in the future.
ENVIRONMENTAL MATTERS (All Registrants) The Registrants are subject to certain existing and developing federal, regional, state and local laws and regulations with respect to air and water quality, land use and other environmental matters, and may be subject to different and more stringent laws and regulations enacted in the future.
The proposed reductions in Kentucky state-wide nitrogen oxide budgets are scheduled to commence in 2023, with the largest reductions planned for 2026, based on the installation time frame for certain selective catalytic reduction controls, subject to future specific allowance calculations. PPL, LG&E and KU are currently assessing the potential impact of the proposed Good Neighbor Plan revisions on operations.
The reductions in Kentucky state-wide nitrogen oxide budgets were scheduled to commence in 2023, with the largest reductions planned for 2026, based on the installation time frame for certain selective catalytic reduction controls, subject to future specific allowance calculations. PPL, LG&E and KU are currently assessing the potential impact of the Good Neighbor Plan revisions on operations.
When LG&E has excess generation capacity after serving its own customers and its generation cost is lower than that of KU, KU purchases electricity from LG&E and vice versa. Due to environmental requirements and energy efficiency measures, as of December 31, 2022, LG&E and KU have retired approximately 1,200 MW of coal-fired generation plants since 2010.
When LG&E has excess generation capacity after serving its own customers and its generation cost is lower than that of KU, KU purchases electricity from LG&E and vice versa. Due to environmental requirements and energy efficiency measures, as of December 31, 2023, LG&E and KU have retired approximately 1,200 MW of coal-fired generation plants since 2010.
PPL's investment in the success of our workforce is embodied in the following areas with dedicated leadership and Board oversight: • Diversity, equity and inclusion (DEI) - Foster an inclusive, respectful and diverse workplace through a comprehensive DEI strategy and commitments. PPL created a chief diversity officer position in 2022 to lead the company's DEI efforts.
PPL's investment in the success of its workforce is embodied in the following areas with dedicated leadership and Board oversight: • Diversity, equity and inclusion (DEI) - Foster an inclusive, respectful and diverse workplace through a comprehensive DEI strategy and commitments. PPL created a chief diversity officer position in 2022 to lead the company's DEI efforts.
KU provides electric service to approximately 541,000 customers in 77 counties in central, 4 Table of Contents southeastern and western Kentucky and approximately 28,000 customers in five counties in southwestern Virginia, covering approximately 4,800 non-contiguous square miles. KU also sells wholesale electricity to two municipalities in Kentucky under load following contracts.
KU provides electric service to approximately 545,000 customers in 77 counties in central, southeastern and western Kentucky and approximately 28,000 customers in five counties in southwestern Virginia, covering 4 Table of Contents approximately 4,800 non-contiguous square miles. KU also sells wholesale electricity to two municipalities in Kentucky under load following contracts.
The Biden administration is currently undertaking changes in a wide range of environmental programs. See “Legal Matters” in Note 14 to the Financial Statements for a discussion of environmental commitments and contingencies. See "Financial Condition - Liquidity and Capital Resources - Forecasted Uses of Cash - Capital Expenditures" in "Item 7.
The Biden administration is currently undertaking changes in a wide range of environmental programs. See “Legal Matters” in Note 13 to the Financial Statements for a discussion of environmental commitments and contingencies. See "Financial Condition - Liquidity and Capital Resources - Forecasted Uses of Cash - Capital Expenditures" in "Item 7.
The current and proposed rules provide for reduced availability of nitrogen oxide allowances that have historically permitted operational flexibility for fossil units and could potentially result in constraints that may require implementation of additional emission controls or accelerate implementation of lower emission generation technologies.
The rules provide for reduced availability of nitrogen oxide allowances that have historically permitted operational flexibility for fossil units and could potentially result in constraints that may require implementation of additional emission controls or accelerate implementation of lower emission generation technologies.
The Board annually reviews the company's safety programs and results. The Board is also immediately engaged in the event of a fatality. • Compliance – The Corporate Compliance Committee, including senior executives, meets quarterly to discuss metrics and other matters related to the compliance and ethics culture.
The Board reviews the company's safety programs and results at least annually. The Board is also immediately engaged in the event of a fatality. • Compliance – The Corporate Compliance Committee, including senior executives, meets quarterly to discuss metrics and other matters related to the compliance and ethics culture.
Pursuant to the agreements, LG&E and KU would purchase output of the facility and resell power as renewable energy to certain large customers. The generation facility is currently expected to be operational in the fourth quarter of 2024.
Pursuant to the agreements, LG&E and KU would purchase output of the facility and resell power as renewable energy to certain large customers. The generation facility is currently expected to be operational in the fourth quarter of 2026.
Additional steps to ensure Board oversight in these areas include: • Safety – PPL carries out programs focused on health and safety, including emergency preparedness, vehicle safety and accident prevention. Employees receive safety training and are encouraged to share, implement, and follow best practices. Senior management receives monthly safety data updates to determine whether additional safety measures should be implemented.
Additional steps to ensure Board oversight in these areas include: • Safety – PPL implements programs focused on health and safety, including emergency preparedness, vehicle safety and accident prevention. Employees receive safety training and are encouraged to share, implement, and follow best practices. Senior management receives monthly safety data updates to determine whether additional safety measures should be implemented.
Power Supply At December 31, 2022, LG&E owned generating capacity of 2,760 MW and KU owned generating capacity of 4,775 MW. See "Item 2. Properties - Kentucky Regulated Segment" for a complete list of generating facilities.
Power Supply At December 31, 2023, LG&E owned generating capacity of 2,760 MW and KU owned generating capacity of 4,775 MW. See "Item 2. Properties - Kentucky Regulated Segment" for a complete list of generating facilities.
Among the items discussed are 15 Table of Contents statistics regarding Ethics Helpline reports and employee concerns. This information is also reviewed with the Audit Committee of the Board quarterly. PPL will continue to engage with employees and to assess these priorities as we work to best position individuals and the company for future success.
Among the items discussed are statistics regarding Ethics Helpline reports and employee concerns. This information is also reviewed with the Audit Committee of the Board quarterly. PPL will continue to engage with employees and to assess these priorities as we work to best position individuals and the company for future success.
The new NGCC would be jointly owned by LG&E (31%) and KU (69%) and the solar units would be jointly owned by LG&E (37%) and KU (63%), the battery storage unit would be owned by LG&E, and the proposed PPA transactions and DSM programs would be entered into or conducted jointly by LG&E and KU, consistent with LG&E and KU's shared dispatch, cost allocation, tariff or other frameworks.
The new NGCC facility will be jointly owned by LG&E (31%) and KU (69%) and the solar units will be jointly owned by LG&E (37%) and KU (63%), the battery storage unit will be owned by LG&E, and the proposed PPA transactions and DSM programs will be entered into or conducted jointly by LG&E and KU, consistent with LG&E and KU's shared dispatch, cost allocation, tariff or other frameworks.
In addition to operating the electricity transmission network, PJM also administers regional markets for energy, capacity and ancillary services. A primary objective of any RTO is to separate the operation of, and access to, the transmission grid from market participants that buy or sell electricity in the same markets.
In addition to operating the electricity transmission network, PJM also administers regional markets for energy, capacity and ancillary services. A primary objective of any RTO is to separate the operation of, and access to, the 8 Table of Contents transmission grid from market participants that buy or sell electricity in the same markets.
PPL, LG&E and KU are unable to predict the outcome or financial impact of future regulatory proceedings and litigation. Waters of the United States PPL, LG&E, and KU are subject to permitting and mitigation requirements for certain construction activities that impact "Waters of the United States." On April 21, 2020, the EPA and U.S.
PPL, LG&E and KU are unable to predict the outcome or financial impact of future regulatory proceedings and litigation. 14 Table of Contents Waters of the U.S. PPL, LG&E, and KU are subject to permitting and mitigation requirements for certain construction activities that impact "Waters of the United States." On April 21, 2020, the EPA and U.S.
PPL, LG&E, and KU are unable to predict the outcome of future evaluations by the EPA and the states with respect to the NAAQS standards. In January 2018, the EPA designated Jefferson County, Kentucky (Louisville) as being in nonattainment with the existing 2015 ozone standard.
PPL, LG&E, and KU are unable to predict future implementation actions or the outcome of future evaluations by the EPA and the states with respect to the NAAQS standards. In January 2018, the EPA designated Jefferson County, Kentucky (Louisville) as being in nonattainment with the existing 2015 ozone standard.
This plan also includes eight solicitations for alternative energy credits held semiannually in January and July. Through January 2023, four alternative energy credit solicitations have been completed. 9 Table of Contents Pursuant to the plans, PPL Electric contracts for all of the electricity supply for residential, commercial and industrial customers who elect to take default service from PPL Electric.
This plan also includes eight solicitations for alternative energy credits held semiannually in January and July. Through January 2024, six alternative energy credit solicitations have been completed. 9 Table of Contents Pursuant to the plans, PPL Electric contracts for all of the electricity supply for residential, commercial and industrial customers who elect to take default service from PPL Electric.
Insurance policies maintained by LG&E and KU may be available to cover certain of the costs or other obligations related to these matters, but the amount of insurance coverage or reimbursement cannot be estimated or assured. 14 Table of Contents See “Legal Matters” in Note 14 to the Financial Statements for additional information.
Insurance policies maintained by LG&E and KU may be available to cover certain of the costs or other obligations related to these matters, but the amount of insurance coverage or reimbursement cannot be estimated or assured. See “Legal Matters” in Note 13 to the Financial Statements for additional information.
Senior management reviews corporate culture with the Board annually. • Professional development - Invest in our current and future workforce through training and development, succession planning and creation of a pipeline for internal advancement.
Senior management reviews corporate culture with the Board at least annually. • Professional development - Invest in the current and future workforce through training and development, succession planning and creation of a pipeline for internal advancement.
In December 2020, the PAPUC approved PPL Electric’s default service plan for the period June 1, 2021 through May 31, 2025, which includes a total of eight solicitations for electricity supply held semiannually in April and October. Through December 31, 2022, four auctions of the plan were completed.
In December 2020, the PAPUC approved PPL Electric’s default service plan for the period June 1, 2021 through May 31, 2025, which includes a total of eight solicitations for electricity supply held semiannually in April and October. Through December 31, 2023, six auctions of the plan were completed.
As such, LG&E and KU generally earn a return on regulatory assets in Kentucky. 7 Table of Contents KU's Virginia base rates are calculated based on a return on rate base (net utility plant plus working capital less accumulated deferred income taxes and miscellaneous deductions).
As such, LG&E and KU generally earn a return on regulatory assets in Kentucky. KU's Virginia base rates are calculated based on a return on rate base (net utility plant plus working capital less accumulated deferred income taxes and miscellaneous deductions).
LG&E and KU received approval from the KPSC to develop a 4 MW Solar Share facility to service a Solar Share program. The Solar Share program is a voluntary program that allows customers to subscribe capacity in the Solar Share facility. Construction 5 Table of Contents commences, in 500-kilowatt phases, when subscription is complete.
LG&E and KU received approval from the KPSC to develop a 4 MW Solar Share facility to service a Solar Share program. The Solar Share program is a voluntary program that allows customers to subscribe capacity in the Solar Share facility. Construction commences, in 500-kilowatt phases, when subscription is complete.
Pursuant to the agreements, LG&E and KU would purchase the initial 20 years of output of a proposed third-party solar generation facility and resell the bulk of the power as renewable energy to two large industrial customers and use the remaining power for other customers. The generation facility is currently expected to be operational in the fourth quarter of 2024.
Pursuant to the agreements, LG&E and KU would purchase the initial 20 years of output of a proposed third-party solar generation facility and resell the bulk of the power as renewable energy to two large industrial customers and use the remaining power for other customers. The generation facility is currently expected to be operational in early 2025.
CAPITAL EXPENDITURE REQUIREMENTS See "Financial Condition - Liquidity and Capital Resources - Forecasted Uses of Cash - Capital Expenditures" in "Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" for information concerning projected capital expenditure requirements for 2023 through 2025. See "Item 1.
CAPITAL EXPENDITURE REQUIREMENTS See "Financial Condition - Liquidity and Capital Resources - Forecasted Uses of Cash - Capital Expenditures" in "Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" for information concerning projected capital expenditure requirements for 2024 through 2026. See "Item 1.
It is uncertain how the Supreme Court ruling may impact future EPA rulemaking. All of these developments are preliminary or ongoing in nature and the Registrants cannot predict the final outcome or ultimate impact on operations.
Supreme Court ruling may impact future EPA rulemaking. All of these developments are preliminary or ongoing in nature and the Registrants cannot predict the final outcome or ultimate impact on operations.
Business - Environmental Matters" for additional information concerning the potential impact on capital expenditures from environmental matters. HUMAN CAPITAL PPL, together with its subsidiaries, is committed to fostering an exceptional workplace for employees.
Business - Environmental Matters" for additional information concerning the potential impact on capital expenditures from environmental matters. 15 Table of Contents HUMAN CAPITAL PPL, together with its subsidiaries, is committed to fostering an exceptional workplace for employees.
LG&E provides electric service to approximately 433,000 customers in Louisville and adjacent areas in Kentucky, covering approximately 700 square miles in nine counties and provides natural gas service to approximately 334,000 customers in its electric service area and eight additional counties in Kentucky.
LG&E provides electric service to approximately 436,000 customers in Louisville and adjacent areas in Kentucky, covering approximately 700 square miles in nine counties and provides natural gas service to approximately 335,000 customers in its electric service area and eight additional counties in Kentucky.
In February 2022, the EPA Administrator released a proposed Federal Implementation Plan under the Good Neighbor provisions of the Clean Air Act providing for significant additional nitrogen oxide emission reductions for compliance with the revised 2015 ozone NAAQS.
In March 2023, the EPA Administrator released a final Federal Implementation Plan under the Good Neighbor provisions of the Clean Air Act providing for significant additional nitrogen oxide emission reductions for compliance with the revised 2015 ozone NAAQS.
In March 2021, the EPA released final revisions to the CSAPR, aimed at ensuring compliance with the 2008 ozone NAAQS and providing for reductions in ozone season nitrogen oxide emissions for 2021 and subsequent years from sources in 12 states, including Kentucky. Additionally, the EPA reversed its previous approval of the Kentucky State Implementation Plan with respect to these requirements.
In March 2021, the EPA released final revisions to the Cross-State Air Pollution Rule (CSAPR) aimed at ensuring compliance with the 2008 ozone NAAQS and providing for reductions in ozone season nitrogen oxide emissions for 2021 and subsequent years. Additionally, the EPA reversed its previous approval of the Kentucky State Implementation Plan with respect to these requirements.
Climate Change (All Registrants) The Biden administration is undertaking wide-ranging efforts to address climate change. Recent government actions and policy developments, including the President’s announced goal of a carbon free electricity sector by 2035, could have far-reaching impacts on PPL’s business operations, products, and services.
Climate Change (All Registrants) The Biden administration continues to undertake wide-ranging efforts to address climate change. Recent government actions and policy developments, including the President’s announced goal of a carbon free electricity sector by 2035, could have far-reaching impacts on PPL’s business operations, products, and services. On June 30, 2022, the U.S.
Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" for information on projected environmental capital expenditures for 2023 through 2025. See Note 20 to the Financial Statements for information related to the impacts of CCRs on AROs.
Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" for information on projected environmental capital expenditures for 2024 through 2026. See Note 19 to the Financial Statements for information related to the impacts of CCRs on AROs.
(PPL and PPL Electric) PPL Electric delivers electricity to approximately 1.5 million customers in a 10,000-square mile territory in 29 counties within eastern and central Pennsylvania. PPL Electric also provides electricity to retail customers in this territory as a PLR under the Customer Choice Act. See Note 3 to the Financial Statements for revenue information.
(PPL and PPL Electric) PPL Electric delivers electricity to approximately 1.5 million customers in a 10,000-square mile territory in 29 counties within eastern and central Pennsylvania. PPL Electric also provides electricity to retail customers in this territory as a PLR under the Customer Choice Act.
In 2022, the following average percentages of PPL Electric's customer load were provided by competitive suppliers: 37% of residential, 76% of small commercial and industrial and 95% of large commercial and industrial customers. PPL Electric’s electricity generation costs are established based upon the results of a competitive solicitation process.
In 2023, the following average percentages of PPL Electric's customer load were provided by competitive suppliers: 42% of residential, 80% of small commercial and industrial and 97% of large commercial and industrial customers. PPL Electric’s electricity generation costs are established based upon the results of a competitive solicitation process.
See Note 3 to the Financial Statements for revenue information. Franchises and Licenses LG&E and KU provide electricity delivery service, and LG&E provides natural gas distribution service, in their respective service territories pursuant to certain franchises, licenses, statutory service areas, easements and other rights or permissions granted by state legislatures, cities or municipalities or other entities.
Franchises and Licenses LG&E and KU provide electricity delivery service, and LG&E provides natural gas distribution service, in their respective service territories pursuant to certain franchises, licenses, statutory service areas, easements and other rights or permissions granted by state legislatures, cities or municipalities or other entities.
PPL had a turnover rate of 10.7% for the year ended December 31, 2022. Looking forward, we will maintain our strong focus on workforce planning to address future talent needs.
PPL had a turnover rate of 9.08% for the year ended December 31, 2023. Looking forward, PPL will maintain our strong focus on workforce planning to address future talent needs.
Although PPL and LG&E expect Jefferson County to be redesignated as in attainment, if the EPA declines to issue such a redesignation, Jefferson County could be subject to additional requirements including requirements for installation of reasonably available control technology on coal-fired generating units. Compliance with such requirements may require installation of additional pollution controls or other compliance actions.
If the EPA declines to issue such a redesignation, Jefferson County could be subject to additional requirements including requirements for installation of reasonably available control technology on coal-fired generating units. Compliance with such requirements may require installation of additional pollution controls or other compliance actions.
RIE recognizes ARPs with a corresponding offset to a regulatory asset or liability account when the regulatory specified events or conditions have been met, when the amounts are determinable, and are probable of recovery (or payment) through future rate adjustments.
RIE recognizes ARPs with a corresponding offset to a regulatory asset or liability account when the regulatory specified events or conditions have been met, when the amounts are determinable, and are probable of recovery (or payment) through future rate adjustments. Last Resort Service RIE is required by the RIPUC and by statute to provide Last Resort Service.
Construction of five 500-kilowatt phases was completed as of December 31, 2022. LG&E and KU continue to market the program and have started receiving subscriptions for the sixth 500-kilowatt phase.
Construction of five 500-kilowatt phases was completed as 5 Table of Contents of December 31, 2022. LG&E and KU continue to market the program and are accepting subscriptions for the sixth 500-kilowatt phase.
As a result of this change, beginning on January 1, 2023, PPL’s segments will consist of the regulated operations of Kentucky, Pennsylvania and Rhode Island and will exclude any incremental financing activities of holding companies, which Management believes is a more meaningful presentation as it provides information on the core regulated operations of PPL.
As a result, PPL’s segments consist of its regulated operations in Kentucky, Pennsylvania and Rhode Island and exclude any incremental financing activities of holding companies, which Management believes is a more meaningful presentation as it provides information on the core regulated operations of PPL. A comparison of PPL's Regulated segments is shown below.
On June 30, 2022, the Supreme Court ruled that provisions of the EPA's Clean Power Plan, premised on generation shifting from coal-fired plants to lower emitting natural gas-fired plants and renewables, exceeded the authority granted to the EPA under the Clean Air Act. The EPA has announced that it plans on issuing new greenhouse gas rules in the future.
Supreme Court ruled that provisions of the EPA's Clean Power Plan, premised on generation shifting from coal-fired plants to lower emitting natural gas-fired plants and renewables, exceeded the authority granted to the EPA under the Clean Air Act. The EPA has announced proposed new greenhouse gas rules discussed above. It is uncertain how the U.S.
LG&E and KU cannot predict the outcome of these matters. Fuel Supply Coal and natural gas are expected to be the predominant fuels used by LG&E and KU for generation for the foreseeable future. Natural gas used for generation is primarily purchased using contractual arrangements separate from LG&E's natural gas distribution operations.
See Note 7 to the Financial Statements for additional information. Fuel Supply Coal and natural gas are expected to be the predominant fuels used by LG&E and KU for generation for the foreseeable future. Natural gas used for generation is primarily purchased using contractual arrangements separate from LG&E's natural gas distribution operations.
These include various deferral mechanisms such as capital trackers, energy efficiency programs, and other programs that qualify as Alternative Revenue Programs (ARPs). ARPs enable RIE to adjust rates in the future, in response to past activities or completed events.
Deferral Mechanisms RIE records revenues in accordance with accounting principles for rate-regulated operations for arrangements between RIE and the applicable regulator. These include various deferral mechanisms such as capital trackers, energy efficiency programs, and other programs that qualify as Alternative Revenue Programs (ARPs). ARPs enable RIE to adjust rates in the future, in response to past activities or completed events.
LG&E's and KU's Kentucky base rates are calculated based on a return on capitalization (common equity, long-term debt and short-term debt) including adjustments for certain net investments and costs recovered separately through other means.
LG&E and KU operate under a FERC-approved open access transmission tariff. 7 Table of Contents LG&E's and KU's Kentucky base rates are calculated based on a return on capitalization (common equity, long-term debt and short-term debt) including adjustments for certain net investments and costs recovered separately through other means.
To enhance the reliability of natural gas supply, LG&E and KU have secured firm long-term pipeline transport capacity services with contracts of various durations through 2024 on the interstate pipeline serving Cane Run Unit 7.
To enhance the reliability of natural gas supply, LG&E and KU have secured firm long-term pipeline transport capacity services with contracts of various durations through 2056 on the interstate pipeline serving Cane Run Unit 7, six simple cycle combustion turbines at the Trimble County site, and the future Mill Creek Unit 5.
Depending on the final standard adopted by the EPA, the EPA could potentially designate Jefferson County, Kentucky (Louisville) as being in nonattainment with the new particulate matter standard and require additional particulate matter reductions from sources including LG&E’s Mill Creek Station.
Based on the new standard, the EPA could potentially designate Jefferson County, Kentucky (Louisville) as being in nonattainment with the new particulate matter standard and require additional particulate matter reductions from sources including LG&E’s Mill Creek Station. The new particulate matter standard may also result in more stringent requirements for new generation located in nonattainment areas.
PPL, LG&E, and KU are unable to predict future emission reductions that may be required by future federal rules or state implementation actions. Compliance with the NAAQS, CSAPR and related requirements may require installation of additional pollution controls or other compliance actions, inclusive of retirements, the costs of which PPL, LG&E and KU believe would be subject to rate recovery.
Compliance with the NAAQS, CSAPR, Good Neighbor Plan, and related requirements may require installation of additional pollution controls or other compliance actions, inclusive of retirements, the costs of which PPL, LG&E and KU believe would be subject to rate recovery.
In December 2020, the EPA released final actions keeping the existing NAAQS standard for particulate matter and ozone without change, but the EPA subsequently announced reconsideration of those decisions in June 2021.
In December 2020, the EPA released final actions keeping the existing NAAQS standard for particulate matter and ozone without change, but the EPA subsequently announced reconsideration of those decisions in June 2021. On February 7, 2024, the EPA released a pre-publication revision to the particulate matter standard that lowers the primary standard for fine particulates.
Electric utilities continue to own the transmission assets and to receive their share of transmission revenues, but the RTO directs the control and operation of the transmission facilities.
Electric utilities continue to own the transmission assets and to receive their share of transmission revenues, but the RTO directs the control and operation of the transmission facilities. Certain types of transmission investments are subject to competitive processes outlined in the PJM tariff.
To address these risks, PPL continues to work to advance grid modernization and improve the Company's equipment to help mitigate the impacts of extreme weather events and improve reliability.
PPL is also aware of the various risks associated with climate change, including increased frequency and severity of severe weather. To address these risks, PPL continues to work to advance grid modernization and improve the Company's equipment to help mitigate the impacts of extreme weather events and improve reliability.
Rates LG&E is subject to the jurisdiction of the KPSC and the FERC, and KU is subject to the jurisdiction of the KPSC, the FERC and the VSCC. LG&E and KU operate under a FERC-approved open access transmission tariff.
Rates LG&E is subject to the jurisdiction of the KPSC and the FERC, and KU is subject to the jurisdiction of the KPSC, the FERC and the VSCC.
See Note 2 to the Financial Statements for additional financial information by segment. Beginning on January 1, 2023, the Kentucky Regulated segment will consist primarily of the regulated electricity generation, transmission and distribution operations conducted by LG&E and KU, as well as LG&E's regulated distribution and sale of natural gas.
Beginning on January 1, 2023, the Kentucky Regulated segment consists primarily of the regulated electricity generation, transmission and distribution operations conducted by LG&E and KU, as well as LG&E's regulated distribution and sale of natural gas. Prior to January 1, 2023, the Kentucky Regulated segment also included the financing activities of LKE.
Kentucky Regulated Segment (PPL) The Kentucky Regulated segment consists primarily of the regulated electricity generation, transmission and distribution operations conducted by LG&E and KU, as well as LG&E's regulated distribution and sale of natural gas. In addition, the Kentucky Regulated segment includes certain financing and other costs at LKE.
Each of LG&E and KU operates as a single operating and reportable segment. Kentucky Regulated Segment (PPL) The Kentucky Regulated segment consists primarily of the regulated electricity generation, transmission and distribution operations conducted by LG&E and KU, as well as LG&E's regulated distribution and sale of natural gas.
Natural gas is stored during the summer season for withdrawal during the following winter heating season. Without this storage capacity, LG&E would need to purchase additional natural gas and pipeline transportation services during winter months when customer demand increases and the cost of natural gas supply and pipeline transportation services are expected to be higher.
Without this storage capacity, LG&E would need to purchase additional natural gas and pipeline transportation services during winter months when customer demand increases, and the cost of natural gas supply and pipeline transportation services are expected to be higher. At December 31, 2023, LG&E had 9 Bcf of natural gas stored underground with a carrying value of $34 million.
Any difference between the revenue requirement in effect for the prior year and actual expenditures incurred for that year is recorded as a regulatory asset or regulatory liability.
Under the mechanism, any difference between the revenue requirement in effect and actual expenditures incurred for that year is recorded as a regulatory asset or regulatory liability, and the regulatory asset or regulatory liability is to be recovered from or returned to customers starting one year after the conclusion of the rate year.
RIE provides electric service to approximately 480,000 customers and natural gas service to approximately 270,000 customers. RIE's service area covers substantially all of Rhode Island. See Note 3 to the Financial Statements for revenue information.
RIE provides electric service to approximately 514,000 customers and natural gas service to approximately 278,000 customers. RIE's service area covers substantially all of Rhode Island.
Reliability of coal deliveries can be affected from time to time by several factors including fluctuations in demand, coal mine production issues, high or low river level events, lock outages and other supplier or transporter operating or financial difficulties.
Reliability of coal deliveries can be affected from time to time by several factors including fluctuations in demand, coal mine production issues, high or low river level events, lock outages and other supplier or transporter operating or financial difficulties. 6 Table of Contents LG&E and KU have entered into coal supply agreements with various suppliers for coal deliveries through 2028 and augment their coal supply agreements with spot market purchases, as needed.
During 2022, LG&E's and KU's power plants generated the following amounts of electricity: GWh Fuel Source LG&E KU Coal 10,488 13,880 Oil — 6 Gas 1,816 5,039 Hydro 278 61 Solar 8 12 Total (a) 12,590 18,998 (a) This generation represents an increase for LG&E of 5% and a decrease for KU of 1% from 2021 output.
During 2023, LG&E's and KU's power plants generated the following amounts of electricity: GWh Fuel Source LG&E KU Coal 10,509 13,219 Gas 1,241 4,120 Hydro 272 44 Solar 8 12 Total (a) 12,030 17,395 (a) This generation represents a decrease for LG&E of 4% and a decrease for KU of 8% from 2022 output.
The net-zero goal relates to direct and indirect carbon emissions consistent with Greenhouse Gas Protocol guidance and referenced by the EPA Center for Corporate Climate Leadership.
The net-zero goal relates to direct and indirect carbon emissions consistent with Greenhouse Gas Protocol guidance and referenced by the EPA Center for Corporate Climate Leadership. Through 2021, PPL reduced carbon emissions nearly 60% from 2010 levels and is targeting a 70% reduction from 2010 levels by 2035 and an 80% reduction by 2040.
At December 31, 2022, LG&E had 10 Bcf of natural gas stored underground with a carrying value of $68 million. LG&E will continue work in 2023 on a multi-year project to retire one of its underground natural gas storage fields with a working natural gas capacity of 4 Bcf, with plans to complete by no later than 2025.
LG&E will continue work in 2024 on a multi-year project to retire a fifth underground natural gas storage field, which is no longer in service, and plans to complete the project by no later than 2025. This field had a working natural gas capacity of 4 Bcf.
Brown facility, no firm long-term pipeline transport capacity has been purchased due to the facility's connection to two interstate pipelines and some of the units having dual fuel capability. LG&E and KU have firm contracts for a portion of the natural gas fuel for Cane Run Unit 7 through October 2024.
This pipeline also serves the two simple cycle units at the Paddy's Run site. For the seven simple cycle combustion turbines at the E.W. Brown facility, no firm long-term pipeline transport capacity has been purchased due to the facility's connection to two interstate pipelines and some of the units having dual fuel capability.
The bulk of the natural gas fuel remains purchased on the spot market. (PPL and LG&E) Natural Gas Distribution Supply Five underground natural gas storage fields, with a current working natural gas capacity of approximately 15 billion cubic feet (Bcf), are used to provide natural gas service to LG&E's firm sales customers.
(PPL and LG&E) Natural Gas Distribution Supply Four underground natural gas storage fields in service, with a current working natural gas capacity of approximately 11 Bcf, are used to provide natural gas service to LG&E's firm sales customers. Natural gas is stored during the summer season for withdrawal during the following winter heating season.
Prior to January 1, 2023, the Kentucky Regulated segment also included the financing activities of LKE. The financing activity of LKE will be presented in Corporate and Other beginning on January 1, 2023.
The financing activity of LKE is presented in "Corporate and Other" beginning on January 1, 2023. Prior periods have been adjusted to reflect this change.
Kentucky Pennsylvania Rhode Island Regulated Regulated Regulated (a) For the year ended December 31, 2022: Operating Revenues (in billions) $ 3.8 $ 3.0 $ 1.0 Net Income (in millions) $ 507 $ 525 $ (44) Electricity delivered (GWh) 30,892 37,593 4,494 Natural gas delivered (Bcf) 31 — 14 At December 31, 2022: Regulatory Asset Base (in billions) (b) $ 11.7 $ 9.3 $ 3.2 Service area (in square miles) 8,000 10,000 1,200 Customers (in millions) 1.3 1.5 0.8 (a) On May 25, 2022, PPL Rhode Island Holdings acquired 100% of the outstanding shares of common stock of Narragansett Electric.
Kentucky Pennsylvania Rhode Island Regulated Regulated Regulated For the year ended December 31, 2023: Operating Revenues (in billions) $ 3.5 $ 3.0 $ 1.9 Net Income (in millions) $ 552 $ 519 $ 96 Electricity delivered (GWh) 28,809 35,704 7,174 Natural gas delivered (Bcf) 41 — 38 At December 31, 2023: Regulatory Asset Base (in billions) (a) $ 12.0 $ 9.8 $ 3.2 Service area (in square miles) 8,000 10,000 1,200 Customers (in millions) 1.3 1.5 0.8 (a) Represents capitalization for Kentucky Regulated and rate base for Pennsylvania Regulated and Rhode Island Regulated.
LG&E and KU continue to purchase certain quantities of ultra-low sulfur content coal from Wyoming for blending at Trimble County Unit 2. Coal is delivered to the generating plants primarily by barge and rail.
For their existing units, LG&E and KU expect, for the foreseeable future, to purchase most of their coal from western Kentucky, southern Indiana, southern Illinois, northern West Virginia and western Pennsylvania. LG&E and KU continue to purchase certain quantities of ultra-low sulfur content coal from Wyoming for blending at Trimble County Unit 2.
PPL, through its regulated utility subsidiaries, delivers electricity to customers in Pennsylvania, Kentucky, Virginia, and Rhode Island; delivers natural gas to customers in Kentucky and Rhode Island; and generates electricity from power plants in Kentucky. PPL's principal subsidiaries at December 31, 2022 are shown below (* denotes a Registrant).
ITEM 1. BUSINESS General (All Registrants) PPL, headquartered in Allentown, Pennsylvania, is a utility holding company, incorporated in 1994. PPL, through its regulated utility subsidiaries, delivers electricity to customers in Pennsylvania, Kentucky, Virginia, and Rhode Island; delivers natural gas to customers in Kentucky and Rhode Island; and generates electricity from power plants in Kentucky.
Under this formula, rates are put into effect in June of each year based upon prior year actual expenditures and current year forecasted capital additions. Rates are then adjusted the following year to reflect actual annual expenses and capital additions, as reported in PPL Electric’s annual FERC Form 1, filed under the FERC’s Uniform System of Accounts.
Rates are compared during the year to the estimated annual expenses and capital additions that will be filed in PPL Electric’s annual FERC Form 1, filed under the FERC's Uniform System of Accounts.
(PPL Electric, LG&E and KU) PPL Electric has two operating segments, distribution and transmission, which are aggregated into a single reportable segment. LG&E and KU are individually single operating and reportable segments.
The amount for Rhode Island Regulated excludes acquisition-related adjustments for non-earning assets. See Note 2 to the Financial Statements for additional financial information by segment. See Note 3 to the Financial Statements for additional revenue information. (PPL Electric, LG&E and KU) PPL Electric has two operating segments, distribution and transmission, which are aggregated into a single reportable segment.
At December 31, 2022, PPL and its subsidiaries had the following full-time employees and employees represented by labor unions: Total Full-Time Employees Number of Union Employees Percentage of Total Workforce PPL 6,527 2,411 37 % PPL Electric 1,382 913 66 % LG&E 964 618 64 % KU 807 109 14 % (PPL and PPL Electric) In March 2022, members of the IBEW Local 1600 ratified a new five-year labor agreement with PPL and PPL Electric.
At December 31, 2023, PPL and its subsidiaries had the following full-time employees and employees represented by labor unions: Total Full-Time Employees Number of Union Employees Percentage of Total Workforce PPL 6,629 2,450 37 % PPL Electric 1,438 960 67 % LG&E 927 592 64 % KU 759 111 15 % (PPL and KU) In August 2023, KU and the IBEW local failed to reach agreement on an annual wage reopener under their existing labor agreement which expires on August 1, 2024.
The tariff rates approved by the RIPUC are designed to recover the costs incurred by RIE for products and services provided, along with a return on investment. Transmission RIE owns an electric transmission system in Rhode Island. RIE’s transmission services are regulated by the FERC and coordinated with ISO – New England.
The tariff rates approved by the RIPUC are designed to recover the costs incurred by RIE for products and services provided, along with a return on investment. RIE’s distribution base rates are calculated based on a return on rate base (net utility plant plus a cash working capital allowance less plant-related deferred taxes and other miscellaneous additions and deductions).
Certain types of transmission investments are subject to competitive processes outlined in the PJM tariff. 8 Table of Contents As a transmission owner, PPL Electric's transmission revenues are recovered through PJM and billed in accordance with a FERC-approved Open Access Transmission Tariff that allows recovery of incurred transmission costs, a return on transmission-related plant and an automatic annual update based on a formula-based rate recovery mechanism.
PPL Electric's transmission revenues are billed in accordance with a FERC-approved Open Access Transmission Tariff that utilizes a formula-based rate recovery mechanism.
See "Financial and Operational Developments" in "Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 7 to the Financial Statements for additional information on rate mechanisms and regulatory matters.
As a PLR, PPL Electric also purchases transmission services from PJM. See "PLR" below. See Note 7 to the Financial Statements for additional information on rate mechanisms and regulatory matters.
On December 15, 2022, LG&E and KU filed an application with the KPSC for a CPCN for the construction of two 621 MW net summer rating NGCC combustion turbine facilities, one at LG&E's Mill Creek Generating Station in Jefferson County, Kentucky and the other at KU's E.W.
On December 15, 2022, LG&E and KU filed an application with the KPSC for a CPCN for the construction and purchase of various generating facilities in conjunction with the retirement of four existing coal-fired generation units and three small gas-fired units.
The filing also notes planned retirement dates for certain existing coal-fired generation units, including Mill Creek 1 (300 MW) in 2024 and E.W. Brown 3 (412 MW) in 2028 , and updates and advances the planned retirement dates for Mill Creek 2 (297 MW) to 2027 and Ghent 2 (486 MW) to 2028 .
The KPSC order included approval of the requested retirements of two existing coal-fired generation units at LG&E's Mill Creek Unit 1 (300 MW) and 2 (297 MW) in 2024 and 2027, subject to certain conditions, and three small gas-fired units. The order denied approval of the retirement of KU's E.W.
"Corporate and Other" primarily includes financing and other costs incurred at the corporate level that have not been allocated or assigned to the segments, as well as certain non-recoverable costs resulting from commitments made to the Rhode Island Division of Public Utilities and Carriers and the Attorney General of the State of Rhode Island in conjunction with the acquisition of Narragansett Electric.
"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 and the financial results of Safari Energy, prior to its sale on November 1, 2022.
(PPL and KU) Labor agreement negotiations with the KU USW are expected to commence in July 2023. The current contract covers over 40 employees and is scheduled to expire in August 2023. (PPL and LG&E) Labor agreement negotiations with the LG&E IBEW are expected to commence in October 2023.
KU expects to begin negotiating their new contract during July 2024, ahead of the August expiration. 16 Table of Contents (PPL) Labor agreement negotiations with the Rhode Island UWUA are expected to commence in March 2024. The current contracts cover over 530 employees and are scheduled to expire in May 2024. AVAILABLE INFORMATION (All Registrants) PPL's Internet website is www.pplweb.com.
Removed
ITEM 1. BUSINESS General (All Registrants) PPL, headquartered in Allentown, Pennsylvania, is a utility holding company, incorporated in 1994 to serve as the holding company for the regulated utility that is now PPL Electric and pursue other business activities in the deregulated power sector.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe effects of climate change may accelerate or magnify fluctuations in our operating results. Operating expenses could be affected by weather conditions, including storms, as well as by significant man-made or accidental disturbances, including terrorism or natural disasters. Weather and other factors can significantly affect our profitability or operations by causing outages, damaging infrastructure and requiring significant repair costs.
Biggest changeExtreme weather and other significant disruptive events could significantly affect our profitability or operations by causing outages, damaging infrastructure and requiring significant repair costs. Storm outages and damage often directly decrease revenues and increase expenses, due to reduced usage and restoration costs. The effects of climate change may cause, contribute to or magnify fluctuations in our operating results.
In addition to regulating the rates we charge, various federal and state regulatory authorities regulate many aspects of our utility operations, including: • the terms and conditions of our service and operations; • financial and capital structure matters; • siting, construction and operation of facilities; • mandatory reliability and safety standards under the Energy Policy Act of 2005 and other standards of conduct; • accounting, depreciation and cost allocation methodologies; • tax matters; • affiliate transactions; • acquisition and disposal of utility assets and issuance of securities; and • various other matters, including energy efficiency.
In addition to regulating the rates we charge, various federal and state regulatory authorities regulate many aspects of our utility operations, including: • the terms and conditions of our service and operations; • financial and capital structure matters, and issuance of securities; • siting, construction and operation of facilities; • mandatory reliability and safety standards under the Energy Policy Act of 2005 and other standards of conduct; • accounting, depreciation and cost allocation methodologies; • tax matters; • affiliate transactions; • acquisition, retirement and disposal of utility assets; and • various other matters, including energy efficiency.
Business and "Regulatory Matters" in Note 7 to the Financial Statements and in "Legal Matters" and "Regulatory Issues" in Note 14 to the Financial Statements. We cannot predict the ultimate outcome of these matters, nor can we reasonably estimate the costs or liabilities that could potentially result from a negative outcome in each case.
Business and "Regulatory Matters" in Note 7 to the Financial Statements and in "Legal Matters" and "Regulatory Issues" in Note 13 to the Financial Statements. We cannot predict the ultimate outcome of these matters, nor can we reasonably estimate the costs or liabilities that could potentially result from a negative outcome in each case.
Due to general inflation with respect to such costs, the aging demographics of our workforce and other 23 Table of Contents factors, we have experienced significant health care cost inflation in recent years, and we expect our health care costs, including prescription drug coverage, to continue to increase despite measures that we have taken and expect to take to require employees and retirees to bear a higher portion of the costs of their health care benefits.
Due to general inflation with respect to such costs, the aging demographics of our workforce and other factors, we have experienced significant health care cost inflation in recent years, and we expect our health care costs, including prescription drug coverage, to continue to increase despite measures that we have taken and expect to take to require employees and retirees to bear a higher portion of the costs of their health care benefits.
The completion of these projects without delays or cost overruns is subject to risks in many areas, including: • approval, licensing and permitting; • land acquisition and the availability of suitable land; • skilled labor or equipment shortages; • construction problems or delays, including disputes with third-party intervenors; • increases in commodity prices or labor rates; • potential supply chain disruptions or delays; and • contractor performance.
The completion of these projects without delays or cost overruns is subject to risks in many areas, including: • approval, licensing and permitting; • land acquisition and the availability of suitable land; 19 Table of Contents • skilled labor or equipment shortages; • construction problems or delays, including disputes with third-party intervenors; • increases in commodity prices or labor rates; • potential supply chain disruptions or delays; and • contractor performance.
These assumptions include investment returns, interest rates, health care cost trends, inflation rates, benefit improvements, salary increases and the demographics of plan participants. If our assumptions prove to be inaccurate, our future costs and cash contribution requirements to fund these benefits could increase significantly. We may incur liabilities in connection with divestitures.
These assumptions include investment returns, interest rates, health care cost 23 Table of Contents trends, inflation rates, benefit improvements, salary increases and the demographics of plan participants. If our assumptions prove to be inaccurate, our future costs and cash contribution requirements to fund these benefits could increase significantly. We may incur liabilities in connection with divestitures.
In addition, such permits or approvals may be subject to denial, revocation or modification under circumstances.
In addition, such permits or approvals may be subject to denial, revocation or modification under certain circumstances.
The PPL Electric transmission business, operating under a FERC-approved PJM Open Access Transmission Tariff, is subject to 20 Table of Contents competition pursuant to FERC Order 1000 from entities that are not incumbent PJM transmission owners with respect to the construction and ownership of transmission facilities within PJM. Increased competition can result in lower rate base growth.
The PPL Electric transmission business, operating under a FERC-approved PJM Open Access Transmission Tariff, is subject to competition pursuant to FERC Order 1000 from entities that are not incumbent PJM transmission owners with respect to the construction and ownership of transmission facilities within PJM. Increased competition can result in lower rate base growth.
Set forth below are risk factors common to the regulated segments, followed by sections identifying separately the risks specific to each of these segments. 18 Table of Contents Our profitability is highly dependent on our ability to recover the costs of providing energy and utility services to our customers and earn an adequate return on our capital investments.
Set forth below are risk factors common to the regulated segments, followed by sections identifying separately the risks specific to each of these segments. Our profitability is highly dependent on our ability to recover the costs of providing energy and utility services to our customers and earn an adequate return on our capital investments.
These integration risks include potential difficulties in conversion of systems and information, difficulties in harmonizing inconsistencies in standards, controls, procedures, practices and policies, disruption from the acquisition making it more difficult to maintain relationships with customers, employees or suppliers, and diversion of management time and attention to integration and other acquisition-related issues.
These integration risks include potential difficulties in conversion of systems and information, difficulties in harmonizing inconsistencies in standards, controls, procedures, practices and policies, disruption from the acquisition making it more difficult to maintain relationships with customers, employees or suppliers, and diversion of management time and attention to integration and other acquisition-related 18 Table of Contents issues.
Numerous functions affecting the efficient operation of our businesses are dependent on the secure and reliable storage, processing and communication of electronic data and the use of sophisticated computer hardware and software systems.
Numerous functions affecting the efficient operation of our businesses are dependent on the secure and reliable storage, processing and communication of electronic data and the use of sophisticated computer hardware and software systems and network infrastructure.
We may be subject to liability for the costs of environmental remediation of property now or formerly owned by us with respect to substances that we may have generated regardless of whether the liabilities arose before, during or after the time we owned 19 Table of Contents or operated the facilities.
We may be subject to liability for the costs of environmental remediation of property now or formerly owned by us with respect to substances that we may have generated regardless of whether the liabilities arose before, during or after the time we owned or operated the facilities.
See "Guarantees and Other Assurances" in Note 14 to the Financial Statements. We are subject to liability risks relating to our generation, transmission and distribution operations.
See "Guarantees and Other Assurances" in Note 13 to the Financial Statements. We are subject to liability risks relating to our generation, transmission and distribution operations.
Therefore, PPL's rights and the rights of its creditors, including rights of debt holders, to participate in the assets of any of its subsidiaries, in the event that such a subsidiary is liquidated or reorganized, will be subject to the prior claims of such subsidiary's creditors. ( All Registrants ) B.
Therefore, PPL's rights and the rights of its creditors, including rights of debt holders, to participate in the assets of any of its subsidiaries, in the event that such a subsidiary is liquidated or reorganized, will be subject to the prior claims of such subsidiary's creditors.
Depending on the results of integrity tests and other integrity program activities, we could incur significant and unexpected costs to perform remedial activities on our natural gas infrastructure to ensure our continued safe and reliable operation.
Depending on the results of integrity tests and other integrity program 20 Table of Contents activities, we could incur significant and unexpected costs to perform remedial activities on our natural gas infrastructure to ensure our continued safe and reliable operation.
Combined Management's Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Liquidity and Capital Resources - Ratings Triggers" for additional information on the financial impact of a downgrade in our credit ratings.
See "Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Liquidity and Capital Resources - Ratings Triggers" for additional information on the financial impact of a downgrade in our credit ratings.
Business," "Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 14 to the Financial Statements for additional information concerning the risks described below and for other risks, uncertainties and factors that could impact our businesses and financial results.
Business," "Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 13 to the Financial Statements for additional information concerning the risks described below and for other risks, uncertainties and factors that could affect our businesses and financial results.
At this time, the Registrants’ cannot predict the extent to which these or other pandemic-related factors may affect their business, earnings or other financial results. 21 Table of Contents Our business operations are continually subject to cyber-based security and data integrity risks from vulnerabilities related to our IT systems, operational technology infrastructure and supply chain relationships.
At this time, the Registrants’ cannot predict the ways in which and the extent to which these or other pandemic-related factors may affect their business, earnings or other financial results. Our business operations are continually subject to cyber-based security and data integrity risks from vulnerabilities related to our IT systems, operational technology infrastructure and supply chain relationships.
Credit ratings assigned by Moody's and S&P to our businesses and their financial obligations have a significant impact on the cost of capital incurred by our businesses. A ratings downgrade could increase our short-term borrowing costs and negatively affect our ability to fund liquidity needs and access new long-term debt at acceptable interest rates. See "Item 7.
Credit ratings assigned by Moody's and S&P to our businesses and their financial obligations have a significant impact on the cost of capital incurred by our businesses. A ratings downgrade could increase our short-term borrowing costs and negatively 22 Table of Contents affect our ability to fund liquidity needs and access new long-term debt at acceptable interest rates.
As used in this Item 1A., the terms "we," "our" and "us" generally refer to PPL and its consolidated subsidiaries taken as a whole, or PPL Electric and its consolidated subsidiaries taken as a whole within the Pennsylvania Regulated segment discussion, LKE and its consolidated subsidiaries taken as a whole within the Kentucky Regulated segment discussion, and RIE and its consolidated subsidiaries taken as a whole within the Rhode Island Regulated segment discussion.
As used in this Item 1A., the terms "we," "our" and "us" generally refer to PPL and its consolidated subsidiaries taken as a whole, or PPL Electric and its consolidated subsidiaries taken as a whole within the Pennsylvania Regulated segment discussion, LG&E, KU and their consolidated subsidiaries taken as a whole within the Kentucky Regulated segment discussion, and RIE within the Rhode Island Regulated segment discussion.
In addition, the potential physical effects of climate change, such as increased frequency and severity of storms, floods, and other climatic events, could disrupt our operations and cause us to incur significant costs to prepare for or respond to these effects. These or other meteorological changes could lead to increased operating costs, capital expenses or power purchase costs.
In addition, the potential physical effects of climate change, such as increased frequency and severity of storms, floods, and other climatic events, could disrupt our operations and cause us to incur significant costs to prepare for or respond to these effects.
In addition to the possible imposition of fines in such cases, we may be required to undertake significant capital investments in pollution control technology and obtain additional operating permits or approvals, which could have an adverse impact on our business, results of operations, cash flows and financial condition. 24 Table of Contents War, other armed conflicts or terrorist attacks could have a material adverse effect on our business.
In addition to the possible imposition of fines in such cases, we may be required to undertake significant capital investments in pollution control technology and obtain additional operating permits or approvals, which could have an adverse impact on our business, results of operations, cash flows and financial condition.
Any such changes could increase tax expense and could have a significant negative impact on our results of operations and cash flows. The effects of the TCJA have been reflected in our financial statements, and we continue to evaluate the application of the law in calculating income tax expense.
Any such changes could increase tax expense and could have a significant negative impact on our results of operations and cash flows. We continue to evaluate the application of relevant laws, including the TCJA and the IRA in calculating income tax expense.
PPL may not realize the anticipated financial and operational benefits from the RIE acquisition if the business is not integrated in an efficient and effective manner or if integration takes longer than anticipated.
PPL may not realize the anticipated benefits of the RIE acquisition, which could materially adversely affect PPL's business, financial condition and results of operations. PPL may not realize the anticipated financial and operational benefits from the RIE acquisition if the business is not integrated in an efficient and effective manner or if integration takes longer than anticipated.
We are subject to the risk that our workforce and its knowledge base may become depleted in coming years. We experience attrition due primarily to retiring employees, with the risk that critical knowledge will be lost and that it may be difficult to replace departed personnel, and to attract and retain new personnel, with appropriate skills and experience.
We experience attrition due primarily to retiring employees, with the risk that critical knowledge will be lost and that it may be difficult to replace departed personnel, and to attract and retain new personnel, with appropriate skills and experience.
The Pipeline and Hazardous Materials Safety Administration enforces regulations that govern the design, construction, operation and maintenance of pipeline facilities. Failure to comply with these regulations could result in the assessment of fines or penalties against LG&E. These regulations require, among other things, that pipeline operators take certain measures with respect to pipeline integrity.
Failure to comply with these regulations could result in the assessment of fines or penalties against LG&E. These regulations require, among other things, that pipeline operators take certain measures with respect to pipeline integrity.
Storm outages and damage often directly decrease revenues and increase expenses, due to reduced usage and restoration costs. Our businesses are subject to physical, market and economic risks relating to potential effects of climate change. Climate change may produce changes in weather or other environmental conditions, including temperature or precipitation levels, and thus may impact consumer demand for electricity.
Our businesses are subject to physical, market and economic risks relating to potential effects of climate change. Climate change may produce changes in weather or other environmental conditions, including temperature or precipitation levels, and thus may impact consumer demand for electricity.
Our operating revenues could fluctuate on a seasonal basis, especially as a result of extreme weather conditions, including conditions caused or exacerbated by climate change. Our businesses are subject to seasonal demand cycles.
Our operating revenues could fluctuate on a seasonal basis, especially as a result of extreme weather conditions, including storms, or from changes in average temperatures for extended periods, which may be caused or exacerbated by climate change. Our businesses are subject to seasonal demand cycles.
Greenhouse gas regulation could increase the cost of electricity, particularly power generated by fossil fuels, and such increases could have a depressive effect on regional economies.
These or other meteorological changes could lead to increased operating costs, capital expenses or power purchase costs. Greenhouse gas regulation could increase the cost of electricity, particularly power generated by fossil fuels, and such increases could have a depressive effect on regional economies.
These risks and their consequences could result in increased costs or decreases in the amount of expected revenues and could have a material adverse effect on PPL's business, financial condition and results of operations. We are subject to operational, regulatory and other risks regarding natural gas supply infrastructure in Rhode Island.
These risks and their consequences could result in increased costs or decreases in the amount of expected revenues and could have a material adverse effect on PPL's business, financial condition and results of operations. ( All Registrants ) B.
If sources of our capital are reduced, capital costs could increase materially. 22 Table of Contents A downgrade in our credit ratings could negatively affect our ability to access capital and increase the cost of maintaining our credit facilities and any new debt.
In addition, certain sources of debt and equity capital have expressed reservations about investing in companies that rely on fossil fuels. If sources of our capital are reduced, capital costs could increase materially. A downgrade in our credit ratings could negatively affect our ability to access capital and increase the cost of maintaining our credit facilities and any new debt.
Market prices for energy and capacity also affect this cost-effectiveness analysis. Many of these environmental law considerations are also applicable to the operations of our key suppliers or customers, such as coal producers, power producers and industrial power users, and may impact the costs of their products and demand for our services.
Many of these environmental law considerations are also applicable to the operations of our key suppliers or customers, such as coal producers, power producers and industrial power users, and may impact the costs of their products and demand for our services. ( PPL and LG&E ) We are subject to operational, regulatory and other risks regarding natural gas supply infrastructure.
We are subject to counterparty performance, credit or other risk in the provision of goods or services to us, which could adversely affect our ability to operate our facilities or conduct business activities.
In addition, we may incur increased costs for security, including additional physical plant security and security personnel or increased capability following a terrorist incident. 24 Table of Contents We are subject to counterparty performance, credit or other risk in the provision of goods or services to us, which could adversely affect our ability to operate our facilities or conduct business activities.
( PPL and LG&E ) We are subject to operational, regulatory and other risks regarding natural gas supply infrastructure. A natural gas pipeline explosion or associated incident could have a significant impact on LG&E’s natural gas operations or result in significant damages and penalties that could have an adverse impact on LG&E’s financial position and results of operations.
A natural gas pipeline explosion or associated incident could have a significant impact on LG&E’s natural gas operations or result in significant damages and penalties that could have an adverse impact on LG&E’s financial position and results of operations. The Pipeline and Hazardous Materials Safety Administration enforces regulations that govern the design, construction, operation and maintenance of pipeline facilities.
While its impact is waning in many respects, a resurgence, new variant or other pandemic and related remediation efforts could present challenges to businesses, communities, workforces, markets and supply chains. The COVID-19 virus continues to pose risks to the health and welfare of the Registrants’ customers, employees, contractors and suppliers, and to affect the conduct of their business.
Risks Related to All Segments ( All Registrants ) Pandemic health events and their impact on business and economic conditions could negatively affect our business. A resurgence, or new variant of COVID-19 or other pandemic health event and related remediation efforts could present challenges to businesses, communities, workforces, markets and supply chains.
War, terrorist attacks and unrest have caused and may continue to cause instability in the world's financial and commercial markets. In addition, unrest could lead to acts of terrorism in the United States or elsewhere, and acts of terrorism could be directed against companies such as ours.
In addition, unrest could lead to acts of terrorism in the United States or elsewhere, and acts of terrorism could be directed against companies such as ours. Armed conflicts and terrorism and their effects on us or our markets may significantly affect our business and results of operations in the future.
The operation of our transmission and distribution systems, including gas distribution systems, as well as our generation plants, are all reliant on cyber-based technologies and, therefore, subject to the risk that these systems could be the target of disruptive actions by terrorists, nation state actors or criminals or otherwise be compromised by unintentional events.
In addition, these complex systems are subject to the risk that they could be the target of disruptive actions by terrorists, nation state actors or criminals or otherwise be compromised.
Removed
Risks Related to the Rhode Island Regulated Segment ( PPL ) PPL may not realize the anticipated benefits of the RIE acquisition, which could materially adversely affect PPL's business, financial condition and results of operations.
Added
Our ability to retire plants we believe are uneconomic is expected to be subject to receipt of regulatory approvals. Market prices for energy and capacity also affect this cost-effectiveness analysis.
Removed
Risks Related to All Segments ( All Registrants ) COVID-19 or other pandemics and resultant impact on business and economic conditions could negatively affect our business. The COVID-19 pandemic disrupted the U.S. and global economies.
Added
Risks Specific to the Rhode Island Regulated Segment ( PPL ) We are subject to operational, regulatory and other risks regarding natural gas supply infrastructure in Rhode Island.
Removed
The COVID-19 pandemic has been a contributing factor to certain supply chain shortages that have created risks of potential equipment and fuel supply chain disruptions. These issues may continue or become worse, as a result of pandemics and other factors, and Registrants may be forced to rely on a larger pool of suppliers, which could pose operational risks.
Added
The operation of our transmission and distribution systems, including gas distribution systems, as well 21 Table of Contents as our generation plants, are all reliant on cyber-based, complex and integrated technologies. Systemic issues could arise as a result of upgrades to particular software or human error.
Removed
These factors have the potential to materially and adversely affect the Registrants’ business and operations, especially if they are exacerbated by a resurgence or other pandemics.
Added
Attacks could also target our personnel or contractors through attempts to gain access or credentials that could be used to breach our systems.
Removed
In addition, certain sources of debt and equity capital have expressed reservations about investing in companies that rely on fossil fuels.
Added
Climate change may also contribute to heightened risk or severity of wildfires, which could disrupt our operations and cause us to incur significant costs, though the annual FEMA National Risk Index for wildfires in the jurisdictions in which we provide service is very low to relatively moderate.
Removed
Armed conflicts and terrorism and their effects on us or our markets may significantly affect our business and results of operations in the future. In addition, we may incur increased costs for security, including additional physical plant security and security personnel or increased capability following a terrorist incident.
Added
War, other armed conflicts or terrorist attacks could have a material adverse effect on our business. War, terrorist attacks and unrest have caused and may continue to cause instability in the world's financial and commercial markets.
Added
We are subject to the risk that our workforce and its knowledge base may become depleted in coming years. Our businesses depend upon our ability to employ and retain key officers and other skilled professional and technical employees.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeBusiness - General - Segment Information - Kentucky Regulated Segment." At December 31, 2022, LG&E's and KU's electricity transmission and distribution systems and LG&E's natural gas transmission and distribution systems were: 26 Table of Contents LG&E KU Distribution Transmission Distribution Transmission Electricity System Substations (a) 96 78 461 211 Capacity (in millions of kVA) 5 8 8 15 Overhead lines (circuit miles) 3,883 669 14,062 4,056 Underground lines (circuit miles) 2,791 — 2,728 — Natural Gas System Distribution mains (miles) 4,439 — — — Transmission pipeline (miles) — 234 — — Transmission storage lines (miles) — 112 — — Combustion turbine lines (miles) — 19 — 11 Storage fields — 5 — — Storage field capacity (Bcf) — 15 — — (a) 191 substations (61 at LG&E and 130 at KU) are shared between the distribution and transmission systems.
Biggest changeBusiness - General - Segment Information - Kentucky Regulated Segment." At December 31, 2023, LG&E's and KU's electricity transmission and distribution systems and LG&E's natural gas transmission and distribution systems were: 27 Table of Contents LG&E KU Distribution Transmission Distribution Transmission Electricity System Substations (a) 96 78 462 212 Capacity (in millions of kVA) 5 8 8 15 Overhead lines (circuit miles) 3,880 663 14,086 4,064 Underground lines (circuit miles) 2,824 6 2,789 4 Natural Gas System Distribution mains (miles) 4,447 — — — Transmission pipeline (miles) — 234 — — Transmission storage lines (miles) — 95 — — Combustion turbine lines (miles) — 19 — 11 Storage fields — 4 — — Storage field capacity (Bcf) — 11 — — (a) 191 substations (61 at LG&E and 130 at KU) are shared between the distribution and transmission systems.
The electricity generating capacity at December 31, 2022 was: LG&E KU Primary Fuel/Plant Total MW Capacity Summer % Ownership or Other Interest Ownership or Other Interest in MW % Ownership or Other Interest Ownership or Other Interest in MW Coal Ghent - Units 1- 4 1,919 100.00 1,919 Mill Creek - Units 1- 4 1,465 100.00 1,465 E.W.
The electricity generating capacity at December 31, 2023 was: LG&E KU Primary Fuel/Plant Total MW Capacity Summer % Ownership or Other Interest Ownership or Other Interest in MW % Ownership or Other Interest Ownership or Other Interest in MW Coal Ghent - Units 1- 4 1,919 100.00 1,919 Mill Creek - Units 1- 4 1,465 100.00 1,465 E.W.
See Note 8 to the Financial Statements for additional information. LG&E and KU continuously reexamine development projects based on market conditions and other factors to determine whether to proceed with the projects, sell, cancel or expand them or pursue other options. See Item 1. Business for a discussion related to LG&E's and KU's Solar Share program.
See Note 8 to the Financial Statements for additional information. LG&E and KU continuously reexamine development projects based on market conditions and other factors to determine whether to proceed with the projects, sell, cancel or expand them or pursue other options. See Item 1. Business for a discussion related to LG&E's and KU's Solar Share program and 2022 CPCN filing.
See Note 13 to the Financial Statements for additional information. (b) There is an inlet air cooling system attributable to these units.
See Note 12 to the Financial Statements for additional information. (b) There is an inlet air cooling system attributable to these units.
Business - General - Segment Information - Rhode Island Regulated Segment." At December 31, 2022, RIE's electric transmission system includes 44 substations with capacity of 33 kVA or higher, 342 circuit miles of overhead lines and 19 underground circuit miles. RIE's electric distribution system includes 59 substations, 5,328 circuit miles of overhead lines and 1,259 underground circuit miles.
Business - General - Segment Information - Rhode Island Regulated Segment." At December 31, 2023, RIE's electric transmission system includes 44 substations with capacity of 33 kVA or higher, 342 circuit miles of overhead lines and 45 underground circuit miles. RIE's electric distribution system includes 59 substations, 5,328 circuit miles of overhead lines and 1,234 underground circuit miles.
At December 31, 2022, PPL Electric's transmission system includes 52 substations with a total capacity of 31 million kVA and 5,307 circuit miles in service. PPL Electric's distribution system includes 353 substations with a total capacity of 14 million kVA, 36,524 circuit miles of overhead lines and 8,802 underground circuit miles. All of PPL Electric's facilities are located in Pennsylvania.
At December 31, 2023, PPL Electric's transmission system includes 52 substations with a total capacity of 32 million kVA and 5,295 circuit miles in service. PPL Electric's distribution system includes 353 substations with a total capacity of 15 million kVA, 36,569 circuit miles of overhead lines and 8,891 underground circuit miles. All of PPL Electric's facilities are located in Pennsylvania.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePPL Electric paid common stock dividends to PPL of $340 million in 2022 and $334 million in 2021. Louisville Gas and Electric Company There is no established public trading market for LG&E's common stock, as LKE owns 100% of the outstanding common shares. Dividends paid to LKE on those common shares are determined by LG&E's Board of Directors.
Biggest changePPL Electric paid common stock dividends to PPL of $323 million in 2023 and $340 million in 2022. Louisville Gas and Electric Company There is no established public trading market for LG&E's common stock, as LKE owns 100% of the outstanding common shares. Dividends paid to LKE on those common shares are determined by LG&E's Board of Directors.
There were no purchases by PPL of its common stock during the fourth quarter of 2022. PPL Electric Utilities Corporation There is no established public trading market for PPL Electric's common stock, as PPL owns 100% of the outstanding common shares. Dividends paid to PPL on those common shares are determined by PPL Electric's Board of Directors.
There were no purchases by PPL of its common stock during the fourth quarter of 2023. PPL Electric Utilities Corporation There is no established public trading market for PPL Electric's common stock, as PPL owns 100% of the outstanding common shares. Dividends paid to PPL on those common shares are determined by PPL Electric's Board of Directors.
LG&E paid common stock dividends to LKE of $275 million in 2022 and $192 million in 2021. Kentucky Utilities Company There is no established public trading market for KU's common stock, as LKE owns 100% of the outstanding common shares. Dividends paid to LKE on those common shares are determined by KU's Board of Directors.
LG&E paid common stock dividends to LKE of $166 million in 2023 and $275 million in 2022. Kentucky Utilities Company There is no established public trading market for KU's common stock, as LKE owns 100% of the outstanding common shares. Dividends paid to LKE on those common shares are determined by KU's Board of Directors.
PPL Corporation Additional information for this item is set forth in the sections entitled "Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" and "Shareowner and Investor Information" of this report. At January 31, 2023 there were 46,380 common stock shareowners of record.
PPL Corporation Additional information for this item is set forth in the sections entitled "Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" and "Shareowner and Investor Information" of this report. At January 31, 2024 there were 44,305 common stock shareowners of record.
KU paid common stock dividends to LKE of $296 million in 2022 and $250 million in 2021.
KU paid common stock dividends to LKE of $190 million in 2023 and $296 million in 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeReconciliation of Earnings from Ongoing Operations The following tables contain after-tax gains (losses), in total, which management considers special items, that are excluded from Earnings from Ongoing Operations, and a reconciliation to PPL's "Net Income" for the years ended December 31: 2022 KY Regulated PA Regulated RI Regulated Corporate and Other Discontinued Operations (a) Total Net Income (Loss) $ 507 $ 525 $ (44) $ (274) $ 42 $ 756 Less: Special Items (expense) benefit: Income (loss) from Discontinued Operations (a) — — — — 42 42 Talen litigation costs, net of tax of $0 (b) — — — 1 — 1 Strategic corporate initiatives, net of tax of $3, $4 (c) (8) — — (15) — (23) Acquisition integration, net of tax of $28, $39 (j) — — (109) (148) — (257) PA tax rate change (e) — 9 — (4) — 5 Sale of Safari Holdings, net of tax of $16 (i) — — — (53) — (53) Total Special Items (8) 9 (109) (219) 42 (285) Earnings from Ongoing Operations $ 515 $ 516 $ 65 $ (55) $ — $ 1,041 39 Table of Contents 2021 KY Regulated PA Regulated RI Regulated Corporate and Other Discontinued Operations (a) Total Net Income (Loss) $ 468 $ 445 $ — $ (895) $ (1,498) $ (1,480) Less: Special Items (expense) benefit: Income (loss) from Discontinued Operations (a) — — — — (1,502) (1,502) Talen litigation costs, net of tax of $4 (b) — — — (16) — (16) Strategic corporate initiatives, net of tax of $0, $2 (c) (1) — — (8) — (9) Valuation allowance adjustment (d) 4 — — (4) 4 4 Transmission formula rate return on equity reduction, net of tax of $8 — (20) — — — (20) Acquisition integration, net of tax of $6 (j) — — — (22) — (22) U.K. tax rate change (f) — — — (383) — (383) Solar panel impairment, net of tax of $9 (g) — — — (26) — (26) Loss on early extinguishment of debt, net of tax of $83 (h) — — — (312) — (312) Total Special Items 3 (20) — (771) (1,498) (2,286) Earnings from Ongoing Operations $ 465 $ 465 $ — $ (124) $ — $ 806 (a) See Note 9 to the Financial Statements for additional information.
Biggest changeCorporate and Other primarily includes certain expenses related to distributed energy investments. 42 Table of Contents 2022 KY Regulated (g) PA Regulated RI Regulated Corporate and Other (g) Discontinued Operations (a) Total Net Income (Loss) $ 549 $ 525 $ (44) $ (316) $ 42 $ 756 Less: Special Items (expense) benefit: Income (loss) from Discontinued Operations (a) — — — — 42 42 Talen litigation costs, net of tax of $0 (b) — — — 1 — 1 Strategic corporate initiatives, net of tax of $3, $4 (c) (8) — — (15) — (23) Acquisition integration, net of tax of $28, $39 (d) — — (109) (148) — (257) PA tax rate change (e) — 9 — (4) — 5 Sale of Safari Holdings, net of tax of $16 (f) — — — (53) — (53) Total Special Items (8) 9 (109) (219) 42 (285) Earnings from Ongoing Operations $ 557 $ 516 $ 65 $ (97) $ — $ 1,041 (a) See Note 9 to the Financial Statements for additional information.
Senior Unsecured Senior Secured Commercial Paper Issuer Moody's S&P Moody's S&P Moody's S&P PPL PPL Capital Funding Baa1 BBB+ P-2 A-2 Rhode Island Energy A3 A- PPL and PPL Electric PPL Electric A1 A+ P-2 A-1 PPL, LG&E and KU LG&E A1 A P-2 A-2 KU A1 A P-2 A-2 The rating agencies have taken the following actions related to the Registrants and their subsidiaries.
Senior Unsecured Senior Secured Commercial Paper Issuer Moody's S&P Moody's S&P Moody's S&P PPL PPL Capital Funding Baa1 BBB+ P-2 A-2 Rhode Island Energy A3 A- P-2 A-2 PPL and PPL Electric PPL Electric A1 A+ P-2 A-1 PPL, LG&E and KU LG&E A1 A P-2 A-2 KU A1 A P-2 A-2 The rating agencies have taken the following actions related to the Registrants and their subsidiaries.
Risk Management Market Risk (All Registrants) See Notes 1, 17 and 18 to the Financial Statements for information about the Registrants' risk management objectives, valuation techniques and accounting designations. The forward-looking information presented below provides estimates of what may occur in the future, assuming certain adverse market conditions and model assumptions. Actual future results may differ materially from those presented.
Risk Management Market Risk (All Registrants) See Notes 1, 16 and 17 to the Financial Statements for information about the Registrants' risk management objectives, valuation techniques and accounting designations. The forward-looking information presented below provides estimates of what may occur in the future, assuming certain adverse market conditions and model assumptions. Actual future results may differ materially from those presented.
PPL also participates in efforts by the Edison Electric Institute and American Gas Association to provide the appropriate subset of sustainability information that can be applied consistently across the electric and gas utility industry. Additionally, PPL consults widely used reporting frameworks for discrete sustainability topics, including corporate political contributions and climate-related issues.
PPL also participates in efforts by the Edison Electric Institute and American Gas Association to provide the appropriate subset of sustainability information that can be applied consistently across the electric and gas utility industries. Additionally, PPL consults widely used reporting frameworks for discrete sustainability topics, including corporate political contributions and climate-related issues.
See Note 15 to the Financial Statements for further discussion of intercompany credit facilities. Commercial Paper (All Registrants) The Registrants maintain commercial paper programs to provide an additional financing source to fund short-term liquidity needs, as necessary. Commercial paper issuances, included in "Short-term debt" on the Balance Sheets, are supported by the respective Registrant's credit facilities.
See Note 14 to the Financial Statements for further discussion of intercompany credit facilities. Commercial Paper (All Registrants) The Registrants maintain commercial paper programs to provide an additional financing source to fund short-term liquidity needs, as necessary. Commercial paper issuances, included in "Short-term debt" on the Balance Sheets, are supported by the respective Registrant's credit facilities.
The Registrants can provide no assurances as to the ultimate outcome of future environmental or rate proceedings before regulatory authorities. See "Legal Matters" in Note 14 to the Financial Statements for a discussion of the more significant environmental claims. See "Financial Condition - Liquidity and Capital Resources - Forecasted Uses of Cash - Capital Expenditures" in "Item 7.
The Registrants can provide no assurances as to the ultimate outcome of future environmental or rate proceedings before regulatory authorities. See "Legal Matters" in Note 13 to the Financial Statements for a discussion of the more significant environmental claims. See "Financial Condition - Liquidity and Capital Resources - Forecasted Uses of Cash - Capital Expenditures" in "Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of Operations" includes the following information: • "Overview" provides a description of each Registrant's business strategy and a discussion of important financial and operational developments. • "Results of Operations" for all Registrants includes a "Statement of Income Analysis," which discusses significant changes in principal line items on the Statements of Income, comparing 2022 with 2021.
"Management's Discussion and Analysis of Financial Condition and Results of Operations" includes the following information: • "Overview" provides a description of each Registrant's business strategy and a discussion of important financial and operational developments. • "Results of Operations" for all Registrants includes a "Statement of Income Analysis," which discusses significant changes in principal line items on the Statements of Income, comparing 2023 with 2022.
The Registrants and their subsidiaries have no credit rating triggers that would result in the reduction of access to capital markets or the acceleration of maturity dates of outstanding debt. The following table sets forth the Registrants' and their subsidiaries' credit ratings for outstanding debt securities or commercial paper programs as of December 31, 2022.
The Registrants and their subsidiaries have no credit rating triggers that would result in the reduction of access to capital markets or the acceleration of maturity dates of outstanding debt. The following table sets forth the Registrants' and their subsidiaries' credit ratings for outstanding debt securities or commercial paper programs as of December 31, 2023.
See Notes 1, 7 and 12 to the Financial Statements for additional information about the plans and the accounting for defined benefits. A summary of plan sponsors by Registrant and whether a Registrant or its subsidiaries sponsor (S) or participate in and receives allocations (P) from those plans is shown in the table below.
See Notes 1, 7 and 11 to the Financial Statements for additional information about the plans and the accounting for defined benefits. A summary of plan sponsors by Registrant and whether a Registrant or its subsidiaries sponsor (S) or participate in and receives allocations (P) from those plans is shown in the table below.
Additionally, subject to market conditions, the Registrants and their subsidiaries may access the capital markets, and PPL Electric, LG&E and KU anticipate receiving equity contributions from their parent or member in 2023. Credit Facilities The Registrants maintain credit facilities to enhance liquidity, provide credit support and provide a backstop to commercial paper programs.
Additionally, subject to market conditions, the Registrants and their subsidiaries may access the capital markets, and PPL Electric, LG&E and KU anticipate receiving equity contributions from their parent or member in 2024. Credit Facilities The Registrants maintain credit facilities to enhance liquidity, provide credit support and provide a backstop to commercial paper programs.
Subject to certain exceptions, PPL may not declare or pay any cash dividend or distribution on its capital stock during any period in which PPL Capital Funding defers interest payments on its 2007 Series A Junior Subordinated Notes due 2067. At December 31, 2022, no interest payments were deferred.
Subject to certain exceptions, PPL may not declare or pay any cash dividend or distribution on its capital stock during any period in which PPL Capital Funding defers interest payments on its 2007 Series A Junior Subordinated Notes due 2067. At December 31, 2023, no interest payments were deferred.
Primarily includes, as applicable, the purchase obligations of electricity, coal, natural gas and limestone, as well as certain construction expenditures, which are also included in the Capital Expenditures discussion above. (e) Represents contracts to purchase coal, natural gas and natural gas transportation. See Note 14 to the Financial Statements for additional information.
Primarily includes, as applicable, the purchase obligations of electricity, coal, natural gas and limestone, as well as certain construction expenditures, which are also included in the Capital Expenditures discussion above. (e) Represents contracts to purchase coal, natural gas and natural gas transportation. See Note 13 to the Financial Statements for additional information.
(f) Represents future minimum payments under OVEC power purchase agreements through June 2040. See Note 14 to the Financial Statements for additional information. (g) Represents construction commitments, which are also reflected in the Capital Expenditures table presented above.
(f) Represents future minimum payments under OVEC power purchase agreements through June 2040. See Note 13 to the Financial Statements for additional information. (g) Represents construction commitments, which are also reflected in the Capital Expenditures table presented above.
In selecting a rate of compensation increase, plan sponsors consider past experience, the potential impact of movements in inflation rates and expectations of ongoing compensation practices. See Note 12 to the Financial Statements for details of the assumptions selected for pension and other postretirement benefits.
In selecting a rate of compensation increase, plan sponsors consider past experience, the potential impact of movements in inflation rates and expectations of ongoing compensation practices. See Note 11 to the Financial Statements for details of the assumptions selected for pension and other postretirement benefits.
Failure to comply with the covenants after applicable grace periods could result in acceleration of repayment of borrowings and/or termination of the agreements. The Registrants monitor compliance with the covenants on a regular basis. At December 31, 2022, the Registrants were in compliance with these covenants.
Failure to comply with the covenants after applicable grace periods could result in acceleration of repayment of borrowings and/or termination of the agreements. The Registrants monitor compliance with the covenants on a regular basis. At December 31, 2023, the Registrants were in compliance with these covenants.
Additionally, the regulatory agencies can provide flexibility in the manner and timing of recovery of regulatory assets. See Note 7 to the Financial Statements for regulatory assets and regulatory liabilities recorded at December 31, 2022 and 2021, as well as additional information on those regulatory assets and liabilities.
Additionally, the regulatory agencies can provide flexibility in the manner and timing of recovery of regulatory assets. See Note 7 to the Financial Statements for regulatory assets and regulatory liabilities recorded at December 31, 2023 and 2022, as well as additional information on those regulatory assets and liabilities.
Risk factors” for a discussion of cybersecurity risks affecting the Registrants and the related strategies for managing these risks. Competition See "Competition" under each of PPL's reportable segments in "Item 1. Business - General - Segment Information" and "Item 1A. Risk Factors" for a discussion of competitive factors affecting the Registrants.
Cybersecurity” for a discussion of cybersecurity risks affecting the Registrants and the related strategies for managing these risks. Competition See "Competition" under each of PPL's reportable segments in "Item 1. Business - General - Segment Information" and "Item 1A. Risk Factors" for a discussion of competitive factors affecting the Registrants.
The following interest rate hedges were outstanding at December 31: 2022 2021 Exposure Hedged Fair Value, Net - Asset (Liability) (a) Effect of a 10% Adverse Movement in Rates (b) Maturities Ranging Through Exposure Hedged Fair Value, Net - Asset (Liability) (a) Effect of a 10% Adverse Movement in Rates (b) PPL and LG&E Economic hedges Interest rate swaps (c) $ 64 $ (7) $ (1) 2033 $ 64 $ (19) $ (1) (a) Includes accrued interest, if applicable.
The following interest rate hedges were outstanding at December 31: 2023 2022 Exposure Hedged Fair Value, Net - Asset (Liability) (a) Effect of a 10% Adverse Movement in Rates (b) Maturities Ranging Through Exposure Hedged Fair Value, Net - Asset (Liability) (a) Effect of a 10% Adverse Movement in Rates (b) PPL and LG&E Economic hedges Interest rate swaps (c) $ 64 $ (7) $ (1) 2033 $ 64 $ (7) $ (1) (a) Includes accrued interest, if applicable.
Plan Sponsor PPL PPL Electric LG&E KU PPL Services S P LKE P P Management makes certain assumptions regarding the valuation of benefit obligations and the performance of plan assets. As such, annual net periodic defined benefit costs are recorded in current earnings or regulatory assets and liabilities based on 59 Table of Contents estimated results.
Plan Sponsor PPL PPL Electric LG&E KU PPL Services S P LKE P P Management makes certain assumptions regarding the valuation of benefit obligations and the performance of plan assets. As such, annual net periodic defined benefit costs are recorded in current earnings or regulatory assets and liabilities based on estimated results.
In Kentucky, in addition to FERC formula rates, the KPSC has adopted a series of regulatory mechanisms (ECR, DSM, GLT, fuel adjustment clause, and gas supply clause) and recovery on construction work-in-progress that reduce regulatory lag and provide timely recovery of and return on, as appropriate, prudently incurred costs.
In Kentucky, in addition to FERC formula rates, the KPSC has adopted a series of regulatory mechanisms (ECR, DSM, GLT, fuel adjustment clause, and gas 30 Table of Contents supply clause) and recovery on construction work-in-progress that reduce regulatory lag and provide timely recovery of and return on, as appropriate, prudently incurred costs.
The amounts involved may be material. Rating Agency Actions Moody's and S&P periodically review the credit ratings of the debt of the Registrants and their subsidiaries. Based on their respective independent reviews, the rating agencies may make certain ratings revisions or ratings affirmations.
The amounts involved may be material. 54 Table of Contents Rating Agency Actions Moody's and S&P periodically review the credit ratings of the debt of the Registrants and their subsidiaries. Based on their respective independent reviews, the rating agencies may make certain ratings revisions or ratings affirmations.
The plan-specific cash flows are matched against the coupons and expected maturity values of Aa-rated non-callable (or callable with make-whole provisions) bonds that could be purchased for a hypothetical settlement portfolio.
The plan-specific cash flows are matched against the coupons and expected maturity values of Aa-rated non-callable (or callable with make-whole provisions) bonds that could be purchased 59 Table of Contents for a hypothetical settlement portfolio.
Environmental Considerations for Coal-Fired Generation (PPL, LG&E and KU) The businesses of LG&E and KU are subject to extensive federal, state and local environmental laws, rules and regulations, including those pertaining to CCRs, GHG, and ELGs. See Notes 7, 14 and 20 to the Financial Statements for a discussion of these significant environmental matters.
(PPL, LG&E and KU) Environmental Considerations for Coal-Fired Generation The businesses of LG&E and KU are subject to extensive federal, state and local environmental laws, rules and regulations, including those pertaining to CCRs, GHG, and ELGs. See Notes 7 , 13 and 19 to the Financial Statements for a discussion of these significant environmental matters.
The credit ratings of the Registrants and their subsidiaries affect their liquidity, access to capital markets and cost of borrowing under their credit facilities. A downgrade in the Registrants' or their subsidiaries' credit ratings could result in higher borrowing 54 Table of Contents costs and reduced access to capital markets.
The credit ratings of the Registrants and their subsidiaries affect their liquidity, access to capital markets and cost of borrowing under their credit facilities. A downgrade in the Registrants' or their subsidiaries' credit ratings could result in higher borrowing costs and reduced access to capital markets.
Central to PPL's and the other Registrants' strategy is recovering capital project costs efficiently through various rate-making mechanisms, including periodic base rate case proceedings using forward test years, annual FERC formula rate mechanisms 29 Table of Contents and other regulatory agency-approved recovery mechanisms designed to limit regulatory lag.
Central to PPL's and the other Registrants' strategy is recovering capital project costs efficiently through various rate-making mechanisms, including periodic base rate case proceedings using forward test years, annual FERC formula rate mechanisms and other regulatory agency-approved recovery mechanisms designed to limit regulatory lag.
Neither the information in such annual sustainability report nor the information at such websites is incorporated in this Form 10-K by reference, and it should not be considered a part of this Form 10-K.
Neither the information in such annual sustainability report nor the information at such websites is incorporated in this Form 10-K by reference, and it should not be considered a part of this Form 58 Table of Contents 10-K.
For comparison of the Registrants’ results of operations and cash flows for the years ended December 31, 2021 to December 31, 2020, refer to “Item 7. Combined Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2021 Form 10-K, filed with the SEC on February 18, 2022.
For comparison of the Registrants’ results of operations and cash flows for the years ended December 31, 2022 to December 31, 2021, refer to “Item 7. Combined Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2022 Form 10-K, filed with the SEC on February 17, 2023.
In the event a supplier of PPL, PPL Electric, LG&E or KU defaults on its contractual obligation, those Registrants would need to seek replacement power or replacement fuel in the market.
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.
See "Long-Lived and Intangible Assets - Asset Retirement Obligations" in Note 1, Note 7 and Note 20 to the Financial Statements for additional information on AROs. At December 31, 2022, the total recorded balances and information on the most significant recorded AROs were as follows.
See "Long-Lived and Intangible Assets - Asset Retirement Obligations" in Note 1, Note 7 and Note 19 to the Financial Statements for additional information on AROs. At December 31, 2023, the total recorded balances and information on the most significant recorded AROs were as follows.
In Pennsylvania, the FERC transmission formula rate, DSIC mechanism, Smart Meter Rider and other recovery mechanisms operate to reduce regulatory lag and provide for timely recovery of and a return on, as appropriate, prudently incurred costs.
In Pennsylvania, FERC formula rates, DSIC mechanism, Smart Meter Rider and other recovery mechanisms operate to reduce regulatory lag and provide for timely recovery of and a return on, as appropriate, prudently incurred costs.
See Note 14 to the Financial Statements for additional information about guarantees. Other Contingent Obligations (All Registrants) The Registrants have entered into certain agreements that may contingently require payment to a guaranteed or indemnified party. See Note 14 to the Financial Statements for a discussion of these agreements.
See Note 13 to the Financial Statements for additional information about guarantees. 55 Table of Contents Other Contingent Obligations (All Registrants) The Registrants have entered into certain agreements that may contingently require payment to a guaranteed or indemnified party. See Note 13 to the Financial Statements for a discussion of these agreements.
At December 31, 2022, a 10% increase to retirement cost would increase these ARO liabilities by $7 million at LG&E and $10 million at KU.
At December 31, 2023, a 10% increase to retirement cost would increase these ARO liabilities by $7 million at LG&E and $11 million at KU.
PPL also responds to the climate survey of CDP, a not-for-profit organization based in the United Kingdom formerly known as the Carbon Disclosure Project, that runs the global disclosure system that enables investors, companies, cities, states and regions to measure and manage their environmental impacts. Cybersecurity See “Cybersecurity Management” in “Item 1. Business” and “Item 1A.
PPL also responds to the climate survey of CDP, a not-for-profit organization based in the United Kingdom formerly known as the Carbon Disclosure Project, that runs the global disclosure system that enables investors, companies, cities, states and regions to measure and manage their environmental impacts. Cybersecurity See “Item 1A. Risk Factors” and “Item 1C.
Capital Expenditures The table below shows the Registrants' current capital expenditure projections for the years 2023 through 2025. Expenditures for the domestic regulated utilities are expected to be recovered through rates, pending regulatory approval.
Capital Expenditures The table below shows the Registrants' current capital expenditure projections for the years 2024 through 2026. Expenditures for the domestic regulated utilities are expected to be recovered through rates, pending regulatory approval.
(PPL Electric) PPL Electric is authorized to issue, at the discretion of management and subject to market conditions and regulatory approvals, up to $1 billion of long-term debt securities, the proceeds of which would be used to fund capital expenditures and for general corporate purposes. 51 Table of Contents (LG&E) LG&E is authorized to issue, at the discretion of management and subject to market conditions and regulatory approvals, up to $500 million of long-term debt securities, the proceeds of which would be used to repay short-term debt incurred to fund capital expenditures and for general corporate purposes.
(LG&E) LG&E is authorized to issue, at the discretion of management and subject to market conditions and regulatory approvals, up to $500 million of long-term debt securities, the proceeds of which would be used to repay short-term debt incurred to fund capital expenditures and for general corporate purposes.
Intercompany (LG&E and KU) Committed Capacity Borrowed Commercial Paper Program Capacity Unused Capacity LG&E Money Pool (a) $ 750 $ — $ 500 $ 250 KU Money Pool (a) 650 — 400 250 (a) LG&E and KU participate in an intercompany money pool agreement whereby LKE and/or KU make available to LG&E, and LKE and/or LG&E make available to KU funds up to the difference between LG&E's and KU's FERC borrowing limit and LG&E's and KU's commercial paper capacity limit, at an interest rate based on the lower of a market index of commercial paper issues and two additional rate options based on LIBOR.
Intercompany (LG&E and KU) Committed Capacity Borrowed Commercial Paper Issued Unused Capacity LG&E Money Pool (a) $ 750 $ — $ — $ 750 KU Money Pool (a) 650 — 93 557 (a) LG&E and KU participate in an intercompany money pool agreement whereby LKE and/or KU make available to LG&E, and LKE and/or LG&E make available to KU funds up to the difference between LG&E's and KU's FERC borrowing limit and LG&E's and KU's commercial paper capacity limit, at an interest rate based on the lower of a market index of commercial paper issues and two additional rate options based on the lower of a market index of commercial paper issues and two additional rate options based on SOFR.
Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" for information on projected environmental capital expenditures for 2023 through 2025. See Note 20 to the Financial Statements for information related to the impacts of CCRs on AROs. See "Item 1. Business - Environmental Matters" for additional information.
Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" for information on projected environmental capital expenditures for 2024 through 2026. See Note 19 to the Financial Statements for information related to the impacts of CCRs on AROs. See "Item 1. Business - Environmental Matters" for additional information.
The estimated impact of a 10% adverse movement in interest rates on the fair value of debt and interest expense at December 31 is shown below. 56 Table of Contents 10% Adverse Movement in Rates on Fair Value of Debt 10% Adverse Movement in Rates on Interest Expense For Floating Exposure 2022 2021 2022 2021 PPL $ 495 $ 394 $ 16 $ — PPL Electric 178 164 6 — LG&E 84 74 3 — KU 127 115 2 — 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.
The estimated impact of a 10% adverse movement in interest rates on the fair value of debt and interest expense at December 31 is shown below. 10% Adverse Movement in Rates on Fair Value of Debt 10% Adverse Movement in Rates on Interest Expense For Floating Exposure 2023 2022 2023 2022 PPL $ 593 $ 495 $ 8 $ 16 PPL Electric 250 178 3 6 LG&E 95 84 — 3 KU 137 127 1 2 56 Table of Contents 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.
The reporting units of PPL include the Kentucky Regulated reporting unit, the Pennsylvania Regulated reporting unit, and the Rhode Island Regulated reporting unit. LG&E and KU are individually single operating and reportable segments and each are single reporting units.
The reporting units of PPL include the Kentucky Regulated reporting unit, the Pennsylvania Regulated reporting unit, and the Rhode Island Regulated reporting unit. LG&E and KU are each single reporting units .
Dividends/Distributions (PPL) PPL views dividends as an integral component of shareowner return and expects to continue to pay dividends in amounts intended to maintain a capitalization structure that supports investment grade credit ratings. In November 2022, PPL declared its quarterly common stock dividend, payable January 3, 2023, at 22.50 cents per share (equivalent to $0.90 per annum).
Dividends/Distributions (PPL) PPL views dividends as an integral component of shareowner return and expects to continue to pay dividends in amounts intended to maintain a capitalization structure that supports investment grade credit ratings. In November 2023, PPL declared its quarterly common stock dividend, payable January 2, 2024, at 24.00 cents per share (equivalent to $0.96 per annum).
See "Long-Lived and Intangible Assets - Asset Impairment (Excluding Investments)" in Note 1 to the Financial Statements for further discussion of goodwill impairment tests. See Note 19 to the Financial Statements for information on goodwill balances by reportable segment at December 31, 2022.
See "Long-Lived and Intangible Assets - Asset Impairment (Excluding Investments)" in Note 1 to the 61 Table of Contents Financial Statements for further discussion of goodwill impairment tests. See Note 18 to the Financial Statements for information on goodwill balances by reportable segment at December 31, 2023.
These discussions include non-GAAP financial measures, including "Earnings from Ongoing Operations" and "Adjusted Gross Margins" and provide explanations of the non-GAAP financial measures and a reconciliation of the non-GAAP financial measures to the most comparable GAAP measure. • "Financial Condition - Liquidity and Capital Resources" provides an analysis of the Registrants' liquidity positions and credit profiles.
These discussions include the non-GAAP financial measure "Earnings from Ongoing Operations" and provide an explanation of the non-GAAP financial measure and a reconciliation of the measure to the most comparable GAAP measure. • "Financial Condition - Liquidity and Capital Resources" provides an analysis of the Registrants' liquidity positions and credit profiles.
Overview For a description of the Registrants and their businesses, see "Item 1. Business." Business Strategy (All Registrants) PPL operates four fully regulated high-performing utilities. These utilities are located in Pennsylvania, Kentucky and Rhode Island, constructive regulatory jurisdictions with distinct regulatory structures and customer classes.
Overview For a description of the Registrants and their businesses, see "Item 1. Business." Business Strategy (All Registrants) PPL operates four regulated utilities located in Pennsylvania, Kentucky and Rhode Island. Each of these jurisdictions has distinct regulatory structures and each of the utilities has distinct customer classes.
LG&E and KU cannot predict the outcome of these matters. 31 Table of Contents 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 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.
FERC Transmission Rate Filing In 2018, LG&E and KU applied to the FERC requesting elimination of certain on-going waivers and credits to a sub-set of transmission customers relating to the 1998 merger of LG&E's and KU's parent entities and the 2006 withdrawal of LG&E and KU from the Midcontinent Independent System Operator, Inc.
Increase (Decrease) Actuarial assumption Discount Rate (0.25 %) Expected Return on Plan Assets (0.25 %) Rate of Compensation Increase 0.25 % 60 Table of Contents Increase (Decrease) Increase (Decrease) (Increase) Decrease Increase (Decrease) Increase (Decrease) Actuarial assumption Defined Benefit Asset Defined Benefit Liabilities AOCI (pre-tax) Net Regulatory Assets Defined Benefit Costs PPL Discount rates $ (14) $ (78) $ 27 $ 65 $ 14 Expected return on plan assets n/a n/a n/a n/a 10 Rate of compensation increase (2) (6) 2 6 3 PPL Electric Discount rates — (34) — 34 5 Expected return on plan assets n/a n/a — n/a 4 Rate of compensation increase — (2) — 2 1 LG&E Discount rates (9) 1 n/a 10 2 Expected return on plan assets n/a n/a n/a n/a 1 Rate of compensation increase (1) — n/a 1 — KU Discount rates (8) 1 n/a 9 2 Expected return on plan assets n/a n/a n/a n/a 1 Rate of compensation increase (1) — n/a 1 — Income Taxes (All Registrants) Significant management judgment is required in developing the Registrants' provision for income taxes, primarily due to the uncertainty related to tax positions taken or expected to be taken on tax returns and valuation allowances on deferred tax assets.
Increase (Decrease) Actuarial assumption Discount Rate (0.25 %) Expected Return on Plan Assets (0.25 %) Rate of Compensation Increase 0.25 % Increase (Decrease) Increase (Decrease) (Increase) Decrease Increase (Decrease) Increase (Decrease) Actuarial assumption Defined Benefit Asset Defined Benefit Liabilities AOCI (pre-tax) Net Regulatory Assets Defined Benefit Costs PPL Discount rates $ (21) $ (80) $ 27 $ 74 $ — Expected return on plan assets n/a n/a n/a n/a 10 Rate of compensation increase (3) (7) 3 7 1 PPL Electric Discount rates — (35) — 35 (1) Expected return on plan assets n/a n/a — n/a 4 Rate of compensation increase — (3) — 3 — LG&E Discount rates (9) 1 n/a 10 1 Expected return on plan assets n/a n/a n/a n/a 1 Rate of compensation increase (1) — n/a 1 — KU Discount rates (7) 1 n/a 8 — Expected return on plan assets n/a n/a n/a n/a 1 Rate of compensation increase (1) — n/a 1 — Income Taxes (All Registrants) Significant management judgment is required in developing the Registrants' provision for income taxes, primarily due to the uncertainty related to tax positions taken or expected to be taken on tax returns and valuation allowances on deferred tax assets. 60 Table of Contents Additionally, significant management judgment is required to determine the amount of benefit recognized related to an uncertain tax position.
See Note 18 to the Financial Statements for a discussion of "Credit Risk-Related Contingent Features," including a discussion of the potential additional collateral requirements for PPL and LG&E for derivative contracts in a net liability position at December 31, 2022. 55 Table of Contents Guarantees for Subsidiaries (PPL) PPL guarantees certain consolidated affiliate financing arrangements.
See Note 17 to the Financial Statements for a discussion of "Credit Risk-Related Contingent Features," including a discussion of the potential additional collateral requirements for derivative contracts in a net liability position at December 31, 2023. Guarantees for Subsidiaries (PPL) PPL guarantees certain consolidated affiliate financing arrangements.
On February 17, 2023, PPL announced a quarterly common stock dividend of 24.00 cents per share, payable April 3, 2023, to shareowners of record as of March 10, 2023. Future dividends will be declared at the discretion of the Board of Directors and will depend upon future earnings, cash flows, financial and legal requirements and other factors.
On February 16, 2024, PPL announced a quarterly common stock dividend of 25.75 cents per share, payable April 1, 2024, to shareowners of record as of March 8, 2024. Future dividends will be declared at the discretion of the Board of Directors and will depend upon future earnings, cash flows, financial and legal requirements and other factors.
New Accounting Guidance There has been no new accounting guidance adopted in 2022 and there is no new significant accounting guidance pending adoption as of December 31, 2022. Application of Critical Accounting Policies Financial condition and results of operations are impacted by the methods, assumptions and estimates used in the application of critical accounting policies.
New Accounting Guidance There has been no new accounting guidance adopted in 2023, please refer to Note 21 for discussion of significant accounting guidance pending adoption as of December 31, 2023. Application of Critical Accounting Policies Financial condition and results of operations are impacted by the methods, assumptions and estimates used in the application of critical accounting policies.
The costs of compliance or alleged non-compliance cannot be predicted with certainty but could be significant. In addition, costs may increase significantly if the requirements or scope of environmental laws or regulations, or similar rules, are expanded or changed. Costs may take the form of increased capital expenditures or operating and maintenance expenses, monetary fines, penalties or other restrictions.
In addition, costs may increase significantly if the requirements or scope of environmental laws or regulations, or similar rules, are expanded or changed. Costs may take the form of increased capital expenditures or operating and maintenance expenses, monetary fines, penalties or other restrictions.
Most Significant AROs Total ARO Recorded Amount Recorded % of Total Description LG&E $ 86 $ 65 76 Ponds, landfills and natural gas mains KU 82 55 67 Ponds and landfills The most significant assumptions surrounding AROs are the forecasted retirement costs (including settlement dates and the timing of cash flows), discount and inflation rates.
Most Significant AROs Total ARO Recorded Amount Recorded % of Total Description LG&E $ 85 $ 63 74 Ponds, landfills and natural gas mains KU 66 37 56 Ponds and landfills The most significant assumptions surrounding AROs are the forecasted retirement costs (including settlement dates and the timing of cash flows), discount and inflation rates.
Circuit Court of Appeals regarding the FERC's orders on the elimination of the mitigation and required transition mechanism. On August 4, 2022, the D.C. Circuit Court of Appeals issued an order remanding the proceedings back to the FERC. LG&E and KU cannot predict the outcome of the proceedings at the FERC on remand.
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.
See "Long-term Debt and Equity Securities" below for additional information on current year activity. See "Forecasted Sources of Cash" for a discussion of the Registrants' plans to issue debt and equity securities, as well as a discussion of credit facility capacity available to the Registrants.
See "Forecasted Sources of Cash" for a discussion of the Registrants' plans to issue debt and equity securities, as well as a discussion of credit facility capacity available to the Registrants.
For PPL, "Results of Operations" also includes "Segment Earnings" and "Adjusted Gross Margins," which provide a detailed analysis of earnings by reportable segment.
For PPL, "Results of Operations" also includes "Segment Earnings," which provides a detailed analysis of earnings by reportable segment.
For PPL Electric, the changes in "Notes receivable from affiliate" activity resulted from payments received on the short-term note between affiliates in 2022, issued to support general corporate purposes. See Note 15 to the Financial Statements for further discussion of intercompany borrowings.
See "Forecasted Uses of Cash" for detail regarding projected capital expenditures for the years 2024 through 2026. For PPL Electric, the changes in "Notes receivable from affiliate" activity resulted from payments received on the short-term note between affiliates in 2022, issued to support general corporate purposes. See Note 14 to the Financial Statements for further discussion of intercompany borrowings.
As a result of environmental requirements and aging infrastructure, LG&E anticipates retiring two older coal-fired units at the Mill Creek Plant and KU anticipates retiring one coal-fired unit at each of the E.W. Brown and Ghent plants. Mill Creek Unit 1, with 300 MW of capacity, is expected to be retired in 2024.
As a result of environmental requirements and aging infrastructure, LG&E has sought and obtained approval to retire two older coal-fired units at the Mill Creek Plant. Mill Creek Unit 1, with 300 MW of capacity, is expected to be retired in 2024.
The Registrants had the following at: PPL PPL Electric LG&E KU December 31, 2022 Cash and cash equivalents $ 356 $ 25 $ 93 $ 21 Short-term debt 985 145 179 101 Long-term debt due within one year 354 340 — 13 Notes payable with affiliates — — — December 31, 2021 Cash and cash equivalents $ 3,571 $ 21 $ 9 $ 13 Short-term debt 69 — 69 — Long-term debt due within one year 474 474 — — Notes payable with affiliates — 324 294 (PPL) The statements of Cash Flows separately report the cash flows of discontinued operations.
The Registrants had the following at: 46 Table of Contents PPL PPL Electric LG&E KU December 31, 2023 Cash and cash equivalents $ 331 $ 51 $ 18 $ 14 Short-term debt 992 509 — 93 Long-term debt due within one year 1 — — — Notes payable with affiliates — — — December 31, 2022 Cash and cash equivalents $ 356 $ 25 $ 93 $ 21 Short-term debt 985 145 179 101 Long-term debt due within one year 354 340 — 13 Notes payable with affiliates — — — (PPL) The Statements of Cash Flows separately report the cash flows of discontinued operations.
(b) The 2023 total excludes amounts included in accounts payable as of December 31, 2022. Capital expenditure plans are revised periodically to reflect changes in operational, market and regulatory conditions. Contractual Obligations The Registrants have assumed various financial obligations and commitments in the ordinary course of conducting business.
Capital expenditure plans are revised periodically to reflect changes in operational, market and regulatory conditions. Contractual Obligations The Registrants have assumed various financial obligations and commitments in the ordinary course of conducting business.
Borrowings generally bear interest at LIBOR-based rates, or applicable SOFR, plus an applicable margin. (c) Commercial paper issued reflects the undiscounted face value of the issuance. In addition to the financial covenants noted in the table above, the credit agreements governing the above credit facilities contain various other covenants.
(c) Each company pays customary fees under its respective syndicated credit facility. Borrowings generally bear interest at applicable SOFR, plus an applicable margin. (d) Commercial paper issued reflects the undiscounted face value of the issuance. In addition to the financial covenants noted in the table above, the credit agreements governing the above credit facilities contain various other covenants.
A goodwill impairment test is performed annually or more frequently if events or changes in circumstances indicate that the carrying amount of the reporting unit may be greater than the reporting unit's fair value. Management assigned the assets acquired and liabilities assumed in the RIE acquisition to the Rhode Island Regulated reporting unit.
A goodwill impairment test is performed annually or more frequently if events or changes in circumstances indicate that the carrying amount of the reporting unit may be greater than the reporting unit's fair value.
(b) Primarily represents financing and certain other costs incurred at the corporate level that have not been allocated or assigned to the segments, which are presented to reconcile segment information to PPL's consolidated results.
Prior periods have been adjusted to reflect this change. (b) Primarily represents financing and certain other costs incurred at the corporate level that have not been allocated or assigned to the segments, which are presented to reconcile segment information to PPL's consolidated results. (c) See Note 9 to the Financial Statements for additional information.
(LG&E) LG&E's cash provided by operating activities in 2022 increased $85 million compared with 2021. • Net income increased $23 million between the periods and included an increase in non-cash components of $11 million.
(LG&E) LG&E's cash provided by operating activities in 2023 increased $66 million compared with 2022. • Net income decreased $6 million between the periods and included a decrease in non-cash components of $6 million.
An ARO must be recognized when incurred if the fair value of the ARO can be reasonably estimated. An equivalent amount is recorded as an increase in the value of the capitalized asset and amortized to expense over the asset's useful life. 62 Table of Contents In determining AROs, management must make significant judgments and estimates to calculate fair value.
An equivalent amount is recorded as an increase in the value of the capitalized asset and amortized to expense, regulatory assets or regulatory liabilities over the asset's useful life. In determining AROs, management must make significant judgments and estimates to calculate fair value.
Income (Loss) from Discontinued Operations (net of income taxes) Income (loss) from discontinued operations (net of income taxes) decreased $1,540 million in 2022 compared with 2021. The decrease was due to the completion of the U.K. utility business in the second quarter of 2021.
Income (Loss) from Discontinued Operations (net of income taxes) Income from discontinued operations (net of income taxes) decreased $42 million in 2023 compared with 2022. The decrease was due to an income tax benefit recorded in 2022 related to the 2021 sale of the U.K. utility business.
Long-term Debt and Equity Securities Long-term debt and equity securities activity for 2022 included: 49 Table of Contents Debt Stock Issuances (a) Retirements Issuances (b) Repurchases Cash Flow Impact: PPL $ 850 $ 264 $ 18 $ — PPL Electric 250 250 — — LG&E 300 — — — KU 300 — — — (a) Issuances are net of pricing discounts, where applicable, and exclude the impact of debt issuance costs.
Long-term Debt and Equity Securities Long-term debt and equity securities activity for 2023 included: Debt Stock Issuances (a) Retirements Issuances (b) Repurchases Cash Flow Impact: PPL $ 3,252 $ 1,854 $ 5 $ — PPL Electric 1,329 1,240 — — LG&E 464 300 — — KU 459 313 — — (a) Issuances are net of pricing discounts, where applicable, and exclude the impact of debt issuance costs.
Based on management's assessment of new information, a tax benefit may subsequently be recognized for a previously unrecognized tax position, a previously recognized tax position may be derecognized, or the benefit of a previously recognized tax position may be remeasured.
On a quarterly basis, uncertain tax positions are reassessed by considering information known as of the reporting date. Based on management's assessment of new information, a tax benefit may subsequently be recognized for a previously unrecognized tax position, a previously recognized tax position may be derecognized, or the benefit of a previously recognized tax position may be remeasured.
While a final rulemaking is currently expected to be issued in the spring of 2023, PPL cannot predict the final legal requirements or when the requirements will be effective. 58 Table of Contents As has been PPL’s practice, to the extent sustainability issues have or may have a material impact on the Registrants’ financial condition or results of operation, PPL discloses such matters in accordance with applicable securities law and SEC regulations.
As has been PPL’s practice, to the extent sustainability issues have or may have a material impact on the Registrants’ financial condition or results of operation, PPL discloses such matters in accordance with applicable securities law and SEC regulations.
(b) PPL incurred legal expenses and received insurance reimbursement related to litigation with its former affiliate, Talen Montana. See Note 14 to the Financial Statements for additional information. (c) Costs incurred for 2022 relate to PPL's strategic repositioning and corporate centralization efforts. Costs incurred for 2021 are related to the sale of the U.K. utility business and PPL's strategic repositioning.
(b) PPL incurred legal expenses and received insurance reimbursement related to litigation with its former affiliate, Talen Montana. See Note 13 to the Financial Statements for additional information. (c) Costs incurred primarily in connection with corporate centralization efforts.
Long-term Debt and Equity Securities (PPL) PPL and its subsidiaries are authorized to issue, at the discretion of management and subject to market conditions, up to $3.50 billion of long-term debt securities, the proceeds of which would be used to fund capital expenditures and for general corporate purposes.
(PPL Electric) PPL Electric is authorized to issue, at the discretion of management and subject to market conditions and regulatory approvals, up to $1 billion of long-term debt securities, which includes the $650 million issued in January 2024, the proceeds of which would be used to fund capital expenditures and for general corporate purposes.
Net Loss and Earnings from Ongoing Operations include the following results: Change 2022 2021 2022 vs. 2021 Operating revenues $ 1,038 $ — $ 1,038 Energy purchases 365 — 365 Other operation and maintenance 531 — 531 Depreciation 92 — 92 Taxes, other than income 92 — 92 Total operating expenses 1,080 — 1,080 Other Income (Expense) - net 23 — 23 Interest Expense 39 — 39 Income Taxes (14) — (14) Net Loss (44) — (44) Less: Special Items (109) — (109) Earnings from Ongoing Operations $ 65 $ — $ 65 The following after-tax gains (losses), which management considers special items, impacted the Rhode Island Regulated segment's results and are excluded from Earnings from Ongoing Operations: Income Statement Line Item 2022 2021 Acquisition integration, net of tax of $18, $0 (a) Other operation and maintenance $ (70) $ — Acquisition integration, net of tax of $0, $0 (a) Other Income (Expense) - net 1 — Acquisition integration, net of tax of $10, $0 (a) Operating revenues (40) — Total Special Items $ (109) $ — (a) Represents costs related to the acquisition of Rhode Island Energy including certain costs associated with its integration, commitments made during the acquisition process and related costs.
Net Income (Loss) and Earnings from Ongoing Operations include the following results: 40 Table of Contents Change 2023 2022 2023 vs. 2022 Operating Revenues $ 1,851 $ 1,038 $ 813 Energy purchases 658 365 293 Other operation and maintenance 705 531 174 Depreciation 156 92 64 Taxes, other than income 156 92 64 Total operating expenses 1,675 1,080 595 Other Income (Expense) - net 19 23 (4) Interest Expense 83 39 44 Income Taxes 16 (14) 30 Net Income (Loss) 96 (44) 140 Less: Special Items (56) (109) 53 Earnings from Ongoing Operations $ 152 $ 65 $ 87 The following after-tax gains (losses), which management considers special items, impacted the Rhode Island Regulated segment's results and are excluded from Earnings from Ongoing Operations: Income Statement Line Item 2023 2022 Acquisition integration, net of tax of $17, $18 (a) Other operation and maintenance $ (65) $ (70) Acquisition integration, net of tax of $0 Other Income (Expense) - net — 1 Acquisition integration, net of tax of ($2), $10 (b) Operating Revenues 8 (40) Acquisition integration, net of tax of ($1) Depreciation 2 — Acquisition integration, net of tax of $0 Interest Expense (1) — Total Special Items $ (56) $ (109) (a) Primarily includes certain TSA costs for IT systems that will not be part of PPL's ongoing operations. 2022 also includes costs for certain commitments made during the acquisition process.
(c) As reported on the Statements of Income. 42 Table of Contents PPL Electric: Statement of Income Analysis Net income for the years ended December 31 includes the following results: Change 2022 2021 2022 vs. 2021 Operating Revenues $ 3,030 $ 2,402 $ 628 Operating Expenses Operation Energy purchases 1,048 566 482 Other operation and maintenance 605 557 48 Depreciation 393 424 (31) Taxes, other than income 149 120 29 Total Operating Expenses 2,195 1,667 528 Other Income (Expense) - net 30 21 9 Interest Income from Affiliate 5 5 — Interest Expense 171 162 9 Income Taxes 174 154 20 Net Income $ 525 $ 445 $ 80 Operating Revenues The increase (decrease) in operating revenues was due to: 2022 vs. 2021 Distribution Price (a) $ (19) Distribution volume (b) 20 PLR (c) 520 Transmission Formula Rate (d) 92 Other (e) 15 Total $ 628 (a) Distribution price variance was primarily due to reconcilable cost recovery mechanisms approved by the PAPUC.
PPL Electric: Statement of Income Analysis Net income for the years ended December 31 includes the following results: Change 2023 2022 2023 vs. 2022 Operating Revenues $ 3,008 $ 3,030 $ (22) Operating Expenses Operation Energy purchases 992 1,048 (56) Other operation and maintenance 605 605 — Depreciation 397 393 4 Taxes, other than income 143 149 (6) Total Operating Expenses 2,137 2,195 (58) Other Income (Expense) - net 39 30 9 Interest Income from Affiliate — 5 (5) Interest Expense 223 171 52 Income Taxes 168 174 (6) Net Income $ 519 $ 525 $ (6) Operating Revenues The increase (decrease) in operating revenues was due to: 2023 vs. 2022 Distribution Price (a) $ 58 Distribution volume (b) (68) PLR (c) (61) Transmission Formula Rate (d) 51 Other (2) Total $ (22) (a) The increase was primarily due to reconcilable cost recovery mechanisms approved by the PAPUC.
PPL continues to assess the applicability of these provisions to PPL and its subsidiaries. Regulatory Requirements ( All Registrants) The Registrants cannot predict the impact that future regulatory requirements may have on their financial condition or results of operations.
PPL and LG&E are currently reviewing the revenue procedure to determine its potential impact on their financial statements. Regulatory Requirements ( All Registrants) The Registrants cannot predict the impact that future regulatory requirements may have on their financial condition or results of operations.
(PPL Electric, LG&E and KU) A "Statement of Income Analysis" is presented separately for PPL Electric, LG&E and KU. The "Statement of Income Analysis" discussion below describes significant changes in principal line items on the Statements of Income, comparing 2022 with 2021.
The "Statement of Income Analysis" discussion below describes significant changes in principal line items on the Statements of Income, comparing 2023 with 2022.
LG&E: Statement of Income Analysis Net income for the years ended December 31 includes the following results: Change 2022 2021 2022 vs. 2021 Operating Revenues Retail and wholesale $ 1,762 $ 1,545 $ 217 Electric revenue from affiliate 36 24 12 Total Operating Revenues 1,798 1,569 229 Operating Expenses Operation Fuel 346 265 81 Energy purchases 245 167 78 Energy purchases from affiliates 25 23 2 Other operation and maintenance 416 400 16 Depreciation 298 279 19 Taxes, other than income 48 46 2 Total Operating Expenses 1,378 1,180 198 Other Income (Expense) - net 4 (5) 9 Interest Expense 89 81 8 Income Taxes 63 54 9 Net Income $ 272 $ 249 $ 23 Operating Revenues The increase (decrease) in operating revenues was due to: 2022 vs. 2021 Fuel and other energy prices (a) $ 149 Retail rates (b) 50 Volumes 33 Other (3) Total $ 229 (a) The increase was primarily due to higher recoveries of fuel and energy purchases due to higher commodity costs.
LG&E: Statement of Income Analysis Net income for the years ended December 31 includes the following results: Change 2023 2022 2023 vs. 2022 Operating Revenues Retail and wholesale $ 1,580 $ 1,762 $ (182) Electric revenue from affiliate 33 36 (3) Total Operating Revenues 1,613 1,798 (185) Operating Expenses Operation Fuel 286 346 (60) Energy purchases 168 245 (77) Energy purchases from affiliates 12 25 (13) Other operation and maintenance 364 416 (52) Depreciation 302 298 4 Taxes, other than income 48 48 — Total Operating Expenses 1,180 1,378 (198) Other Income (Expense) - net 3 4 (1) Interest Income from Affiliates 1 — 1 Interest Expense 102 89 13 Income Taxes 69 63 6 Net Income $ 266 $ 272 $ (6) Operating Revenues The increase (decrease) in operating revenues was due to: 2023 vs. 2022 Fuel and other energy purchases (a) $ (160) Volumes (b) (37) Economic relief billing credit, net of amortization of $0 12 Total $ (185) (a) The decrease was primarily due to lower recoveries of fuel and energy purchases due to lower commodity costs and volumes.
In certain cases, regulatory liabilities are recorded based on an understanding or agreement with the regulator that rates have been set to recover costs that are expected to be incurred in the future, and the regulated entity is accountable for any amounts charged pursuant to such rates and not yet expended for the intended purpose. 61 Table of Contents Management continually assesses whether the regulatory assets are probable of future recovery by considering factors such as changes in the applicable regulatory and political environments, the ability to recover costs through regulated rates, recent rate orders to the Registrants and other regulated entities, and the status of any pending or potential deregulation legislation.
In certain cases, regulatory liabilities are recorded based on an understanding or agreement with the regulator that rates have been set to recover costs that are expected to be incurred in the future, and the regulated entity is accountable for any amounts charged pursuant to such rates and not yet expended for the intended purpose.
The commitments under the credit facilities are provided by a diverse bank group, with no one bank and its affiliates providing an aggregate commitment of more than the following percentages of the total committed capacity: PPL - 14%, PPL Electric - 18%, LG&E - 19% and KU - 21%. 50 Table of Contents (b) Each company pays customary fees under its respective syndicated credit facility.
(b) The syndicated credit facilities and PPL Capital Funding's bilateral facility, each contain a financial covenant requiring debt to total capitalization not to exceed 70% for PPL Capital Funding, RIE, PPL Electric, LG&E and KU, as calculated in accordance with the facility, and other customary covenants. 50 Table of Contents The commitments under the credit facilities are provided by a diverse bank group, with no one bank and its affiliates providing an aggregate commitment of more than the following percentages of the total committed capacity: PPL - 9%, PPL Electric - 7%, LG&E - 7% and KU - 7%.
Any resulting transactions may impact future financial results. Environmental Matters Extensive federal, state and local environmental laws and regulations are applicable to the Registrants' air emissions, water discharges and the management of hazardous and solid waste, as well as other aspects of the Registrants' businesses.
Environmental Matters Extensive federal, state and local environmental laws and regulations are applicable to the Registrants' air emissions, water discharges and the management of hazardous and solid waste, as well as other aspects of the Registrants' businesses. The costs of compliance or alleged non-compliance cannot be predicted with certainty but could be significant.
There were no indicators of impairment for any of the reporting units as the fair value of each of the reporting units significantly exceeded their carrying values. Asset Retirement Obligations (LG&E and KU) ARO liabilities are required to be recognized for legal obligations associated with the retirement of long-lived assets. Initial obligations are measured at estimated fair value.
Asset Retirement Obligations (LG&E and KU) ARO liabilities are required to be recognized for legal obligations associated with the retirement of long-lived assets. Initial obligations are measured at estimated fair value. An ARO must be recognized when incurred if the fair value of the ARO can be reasonably estimated.
The following after-tax gains (losses), which management considers special items, impacted the Kentucky Regulated segment's results and are excluded from Earnings from Ongoing Operations: Income Statement Line Item 2022 2021 Valuation allowance adjustment (a) Income Taxes $ — $ 4 Strategic corporate initiatives, net of tax of $3, $0 (b) Other operation and maintenance (8) — Strategic corporate initiatives, net of tax of $0, $0 Other Income (Expense) - net — (1) Total $ (8) $ 3 (a) Adjustment of valuation allowances related to certain tax credits recorded in 2017 as a result of the TCJA.
The following after-tax gains (losses), which management considers special items, impacted the Kentucky Regulated segment's results and are excluded from Earnings from Ongoing Operations: Income Statement Line Item 2023 2022 Strategic corporate initiatives, net of tax of $0, $3 (a) Other operation and maintenance $ (1) $ (8) FERC transmission credit refund, net of tax of $2 (b) Other operation and maintenance (6) — Unbilled revenue estimate adjustment, net of tax of $2 (c) Operating Revenues (5) — Total $ (12) $ (8) (a) Costs incurred related to PPL's corporate centralization efforts.
Mill Creek Unit 2, with 297 MW of capacity, is expected to be retired in 2027. E.W. Brown Unit 3, with 412 MW of capacity, and Ghent Unit 2, with 486 MW of capacity, are expected to be retired in 2028.
Mill Creek Unit 2, with 297 MW of capacity, is expected to be retired in 2027, subject to certain conditions.
Kentucky Regulated Segment The Kentucky Regulated segment consists primarily of LG&E's and KU's regulated electricity generation, transmission and distribution operations, as well as LG&E's regulated distribution and sale of natural gas.
Rhode Island Regulated Segment The Rhode Island Regulated segment consists primarily of the regulated electricity transmission and distribution operations and regulated distribution and sale of natural gas conducted by RIE.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeHow the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the amount of goodwill from the Acquisition assigned to each of the Company’s reporting units based on management’s fair value calculation included the following, among others: • We tested the effectiveness of management’s internal controls over their assignment of goodwill from the Acquisition to each reporting unit, including those over the determination of the fair value calculated based on a with-and-without expected benefit. • We evaluated the reasonableness of management’s expected benefit by comparing to: ◦ Historical results. ◦ Internal communications to management and the board of directors. ◦ Information included in the Company’s press releases as well as in analyst and industry reports for the Company. • With the assistance of our fair value specialists, we evaluated the reasonableness of the amount of goodwill from the Acquisition assigned to each reporting unit based on management’s fair value calculation by: ◦ Testing the source information underlying the determination of discount and growth rates. ◦ Testing the mathematical accuracy of the calculation. /s/ Deloitte & Touche LLP Morristown, New Jersey February 17, 2023 We have served as the Company's auditor since 2015. 66 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareowner and the Board of Directors of PPL Electric Utilities Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of PPL Electric Utilities Corporation and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of income, equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements").
Biggest changeWe tested the effectiveness of management’s internal controls over the recognition of amounts as regulatory assets or liabilities and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates. • We obtained and read relevant regulatory orders issued by the regulatory commissions for the Company and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the treatment of similar costs under similar circumstances. • We evaluated the Company’s disclosures related to the impacts of rate-regulation, including the balances recorded and regulatory developments. /s/ Deloitte & Touche LLP Morristown, New Jersey February 16, 2024 We have served as the Company's auditor since 2015. 65 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareowner and the Board of Directors of PPL Electric Utilities Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of PPL Electric Utilities Corporation and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of income, equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").
Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits.
Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits.
Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits.
Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits.
Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Combined Management's Discussion and Analysis of Financial Condition and Results of Operations." 63 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareowners and the Board of Directors of PPL Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of PPL Corporation and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements").
Combined Management's Discussion and Analysis of Financial Condition and Results of Operations." 63 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareowners and the Board of Directors of PPL Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of PPL Corporation and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 16, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.
We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management in continually assessing whether the regulatory assets are probable of future recovery by considering factors, such as changes in the applicable regulatory and political environments, the ability to recover costs through regulated rates, recent rate orders, and the status of any pending legislation.
We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management in continually assessing whether the regulatory assets are probable of future recovery by considering factors such as changes in the applicable regulatory environments, the ability to recover costs through regulated rates, and recent rate orders.
We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management in continually assessing whether the regulatory assets are probable of future recovery by considering factors such as changes in the applicable regulatory and political environments, the ability to recover costs through regulated rates, recent rate orders, and the status of any pending legislation.
We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management in continually assessing whether the regulatory assets are probable of future recovery by considering factors such as changes in the applicable regulatory environments, the ability to recover costs through regulated rates, and recent rate orders.
We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management in continually assessing whether the regulatory assets are probable of future recovery by considering factors such as changes in the applicable regulatory and political environments, the ability to recover costs through regulated rates, recent rate orders, and the status of any pending legislation.
We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management in continually assessing whether the regulatory assets are probable of future recovery by considering factors such as changes in the applicable regulatory environments, the ability to recover costs through regulated rates, and recent rate orders.
We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management in continually assessing whether the regulatory assets are probable of future recovery by considering factors such as changes in the applicable regulatory and political environments, the ability to recover costs through regulated rates, recent rate orders, and the status of any pending legislation.
We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management in continually assessing whether the regulatory assets are probable of future recovery by considering factors such as changes in the applicable regulatory environments, the ability to recover costs through regulated rates, and recent rate orders.
While PPL Electric has indicated that it expects to recover costs from customers through regulated rates, there is a risk that the FERC or PAPUC will not approve full recovery of such costs or approve recovery on a timely basis in future regulatory decisions.
While PPL Electric has indicated that it expects to recover costs from customers through regulated rates, there is a risk that the regulatory commissions will not approve full recovery of and return on such costs or approve recovery on a timely basis in future regulatory decisions.
While the Company has indicated that it expects to recover costs from customers through regulated rates, there is a risk that the KPSC or FERC will not approve full recovery of such costs or approve recovery on a timely basis in future regulatory decisions.
While the Company has indicated that it expects to recover costs from customers through regulated rates, there is a risk that the regulatory commissions will not approve full recovery of and return on such costs or approve recovery on a timely basis in future regulatory decisions.
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the uncertainty of future decisions by the FERC and PAPUC included the following, among others: • We tested the effectiveness of management’s internal controls over evaluating the likelihood of recovery in future rates of costs deferred as regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the uncertainty of future decisions by regulatory commissions included the following, among others: • We tested the effectiveness of management’s internal controls over evaluating the likelihood of recovery or refund in future rates of costs deferred as regulatory assets and liabilities.
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the uncertainty of future decisions by the KPSC and FERC included the following, among others: • We tested the effectiveness of management’s internal controls over evaluating the likelihood of recovery in future rates of costs deferred as regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the uncertainty of future decisions by regulatory commissions included the following, among others: • We tested the effectiveness of management’s internal controls over evaluating the likelihood of recovery or refund in future rates of costs deferred as regulatory assets and liabilities.
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the uncertainty of future decisions by the KPSC, VSCC, and FERC included the following, among others: • We tested the effectiveness of management’s internal controls over evaluating the likelihood of recovery in future rates of costs deferred as regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the uncertainty of future decisions by regulatory commissions included the following, among others: • We tested the effectiveness of management’s internal controls over evaluating the likelihood of recovery or refund in future rates of costs deferred as regulatory assets and liabilities.
While the Company has indicated that it expects to recover costs from customers through regulated rates, there is a risk that the KPSC, VSCC, or FERC will not approve full recovery of such costs or approve recovery on a timely basis in future regulatory decisions.
While KU has indicated that it expects to recover costs from customers through regulated rates, there is a risk that the regulatory commissions will not approve full recovery of and return on such costs or approve recovery on a timely basis in future regulatory decisions.
Regulatory assets are recognized for the effect of transactions or events where future recovery of underlying costs is probable in regulated customer rates. The effect of such accounting is to defer certain or qualifying costs that would otherwise currently be charged to expense. Regulatory liabilities are recognized for amounts expected to be returned through future regulated customer rates.
The effect of such accounting is to defer certain or qualifying costs that would otherwise currently be charged to expense. Regulatory liabilities are recognized for amounts expected to be returned through future regulated customer rates.
Auditing these judgments required specialized knowledge of accounting for rate regulation and the rate-setting process due to its inherent complexities.
Auditing these judgments required specialized knowledge of accounting for rate regulation due to its inherent complexities.
Regulatory assets are recognized for the effect of transactions or events where future recovery of underlying costs is probable in regulated customer rates. The effect of such accounting is to defer certain or qualifying costs that would otherwise currently be charged to expense. Regulatory liabilities are recognized for amounts expected to be returned through future regulated customer rates.
The effect of such accounting is to defer certain or qualifying costs that would otherwise currently be charged to expense. Regulatory liabilities are recognized for amounts expected to be returned through future regulated customer rates.
Auditing these judgments required specialized knowledge of accounting for rate regulation and the rate-setting process due to its inherent complexities.
Auditing these judgments required specialized knowledge of accounting for rate regulation due to its inherent complexities.
Auditing these judgments required specialized knowledge of accounting for rate regulation and the rate-setting process due to its inherent complexities.
Auditing these judgments required specialized knowledge of accounting for rate regulation due to its inherent complexities.
Auditing these judgments required specialized knowledge of accounting for rate regulation and the rate-setting process due to its inherent complexities.
Auditing these judgments required specialized knowledge of accounting for rate regulation due to its inherent complexities.
Regulatory Assets and Liabilities – Impact of Rate Regulation on Various Account Balances and Disclosures – Refer to Notes 1 and 7 to the financial statements Critical Audit Matter Description As discussed in Note 1 to the financial statements, PPL Electric Utilities Corporation (PPL Electric) is a cost-based rate-regulated utility for which rates are set by the Federal Energy Regulatory Commission (FERC) and the Pennsylvania Public Utility Commission (PAPUC) to enable the regulated utility to recover the costs of providing electric service and to provide a reasonable return to shareholders.
Regulatory Assets and Liabilities– Impact of Rate-Regulation on Regulatory Assets and Liabilities and Related Disclosures – Refer to Notes 1 and 7 to the financial statements Critical Audit Matter Description As discussed in Note 1 to the financial statements, PPL Electric Utilities Company (PPL Electric) is a cost-based rate-regulated utility for which rates are set by regulatory commissions to enable the regulated utility to recover the costs of providing electric service and to provide a reasonable return to shareholders.
Regulatory Assets and Liabilities– Impact of Rate-Regulation on Various Account Balances and Disclosures – Refer to Notes 1 and 7 to the financial statements Critical Audit Matter Description As discussed in Note 1 to the financial statements, the Company is a cost-based rate-regulated utility for which rates are set by the Kentucky Public Service Commission (KPSC) and the Federal Energy Regulatory Commission (FERC) to enable the regulated utility to recover the costs of providing electric or gas services, as applicable, and to provide a reasonable return to shareholders.
Regulatory Assets and Liabilities– Impact of Rate-Regulation on Regulatory Assets and Liabilities and Related Disclosures – Refer to Notes 1 and 7 to the financial statements Critical Audit Matter Description As discussed in Note 1 to the financial statements, Louisville Gas & Electric Company (LG&E) is a cost-based rate-regulated utility for which rates are set by regulatory commissions to enable the regulated utility to recover the costs of providing electric or gas services, as applicable, and to provide a reasonable return to shareholders.
Regulatory assets are recognized for the effect of transactions or events where future recovery of underlying costs is probable in regulated customer rates. The effect of such accounting is to defer certain or qualifying costs that would otherwise currently be charged to expense. Regulatory liabilities are recognized for amounts expected to be returned through future regulated customer rates.
The effect of such accounting is to defer certain or qualifying costs that would otherwise currently be charged to expense. Regulatory liabilities are recognized for amounts expected to be returned through future regulated 64 Table of Contents customer rates.
Regulatory Assets and Liabilities – Impact of Rate-Regulation on Various Account Balances and Disclosures – Refer to Notes 1 and 7 to the financial statements Critical Audit Matter Description As discussed in Note 1 to the financial statements, the Company is a cost-based rate-regulated utility for which rates are set by the Kentucky Public Service Commission (KPSC), the Virginia State Corporation Commission (VSCC), and the Federal Energy Regulatory Commission (FERC) to enable the regulated utility to recover the costs of providing electric service, as applicable, and to provide a reasonable return to shareholders.
Regulatory Assets and Liabilities– Impact of Rate-Regulation on Regulatory Assets and Liabilities and Related Disclosures – Refer to Notes 1 and 7 to the financial statements Critical Audit Matter Description As discussed in Note 1 to the financial statements, Kentucky Utilities Company (KU) is a cost-based rate-regulated utility for which rates are set by regulatory commissions to enable the regulated utility to recover the costs of providing electric service and to provide a reasonable return to shareholders.
Regulatory assets are recognized for the effect of transactions or events where future recovery of underlying costs is probable in regulated customer rates. The effect of such accounting is to defer certain or qualifying costs that would otherwise currently be charged to expense. Regulatory liabilities are recognized for amounts expected to be returned through future regulated customer rates.
The effect of such accounting is to defer certain or qualifying costs that would otherwise currently be charged to expense. Regulatory liabilities are recognized for amounts expected to be returned through future regulated customer rates. The accounting for regulatory assets and regulatory liabilities is based on specific rate orders or, in certain cases, regulatory commission precedent for transactions or events.
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the uncertainty of future decisions by the FERC, KPSC, VSCC, PAPUC, RIPUC, and Rhode Island Division of Public Utilities and Carriers included the following, among others: • We tested the effectiveness of management’s internal controls over evaluating the likelihood of recovery in future rates of costs deferred as regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the uncertainty of future decisions by regulatory commissions included the following, among others: • We tested the effectiveness of management’s internal controls over evaluating the likelihood of recovery or refund in future rates of costs deferred as regulatory assets and liabilities.
Regulatory Assets and Liabilities – Impact of Rate Regulation on Various Account Balances and Disclosures – Refer to Notes 1 and 7 to the financial statements Critical Audit Matter Description As discussed in Note 1 to the financial statements, the Company owns and operates four cost-based rate-regulated utilities for which rates are set by the Federal Energy Regulatory Commission (FERC), the Kentucky Public Service Commission (KPSC), the Virginia State Corporation Commission (VSCC), the Pennsylvania Public Utility Commission (PAPUC), and the Rhode Island Public Utilities Commission (RIPUC) to enable the regulated utilities to recover the costs of providing electric or gas services, as applicable, and to provide a reasonable return to shareholders.
Regulatory Assets and Liabilities– Impact of Rate-Regulation on Regulatory Assets and Liabilities and Related Disclosures – Refer to Notes 1 and 7 to the financial statements Critical Audit Matter Description As discussed in Note 1 to the financial statements, the Company owns and operates four cost-based rate-regulated utilities for which rates are set by regulatory commissions to enable the regulated utility to recover the costs of providing electric or gas service, as applicable, and to provide a reasonable return to shareholders.
We inspected minutes of the Board of Directors, other public information, regulatory orders and other filings with the commissions to identify any evidence that may contradict management’s assertion regarding probability of an abandonment. • We evaluated PPL Electric’s disclosures related to the impacts of rate-regulation, including the balances recorded and regulatory developments, in the financial statements. /s/ Deloitte & Touche LLP Morristown, New Jersey February 17, 2023 We have served as the Company's auditor since 2015. 68 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholder and the Board of Directors of Louisville Gas and Electric Company Opinion on the Financial Statements We have audited the accompanying balance sheets of Louisville Gas and Electric Company (the “Company”) as of December 31, 2022 and 2021, the related statements of income, equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).
We tested the effectiveness of management’s internal controls over the recognition of amounts as regulatory assets or liabilities and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates. • We obtained and read relevant regulatory orders issued by the regulatory commissions for PPL Electric and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the treatment of similar costs under similar circumstances. • We evaluated PPL Electric’s disclosures related to the impacts of rate-regulation, including the balances recorded and regulatory developments. /s/ Deloitte & Touche LLP Morristown, New Jersey February 16, 2024 We have served as the Company's auditor since 2015. 67 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholder and the Board of Directors of Louisville Gas and Electric Company Opinion on the Financial Statements We have audited the accompanying balance sheets of Louisville Gas and Electric Company (the "Company") as of December 31, 2023 and 2022, the related statements of income, equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").
Base rates are generally established based on a future test period. As a result, the financial statements are subject to the accounting for certain types of regulation as prescribed by generally accepted accounting principles and reflect the effects of regulatory actions.
As a result, the financial statements are subject to the accounting for certain types of regulation as prescribed by generally accepted accounting principles and reflect the effects of regulatory actions. Regulatory assets are recognized for the effect of transactions or events where future recovery of underlying costs is probable in regulated customer rates.
Base rates are generally established based on a future test period. As a result, the financial statements are subject to the accounting for certain types of regulation as prescribed by generally accepted accounting principles and reflect the effects of regulatory actions.
As a result, the financial statements are subject to the accounting for certain types of regulation as prescribed by generally accepted accounting principles and reflect the effects of regulatory actions. Regulatory assets are recognized for the effect of transactions or events where future recovery of underlying costs is probable in regulated customer rates.
Base rates are generally established based on a future test period. As a result, the financial statements are subject to the accounting for certain types of regulation as prescribed by generally accepted accounting principles and reflect the effects of regulatory actions.
As a result, the financial statements are subject to the accounting for certain types of regulation as prescribed by generally accepted accounting principles and reflect the effects of regulatory actions. Regulatory assets are recognized for the effect of transactions or events where future recovery of underlying costs is probable in regulated customer rates.
Base rates are generally established based on a future test period. As a result, the financial statements are subject to the accounting for certain types of regulation as prescribed by generally accepted accounting principles and reflect the effects of regulatory actions.
As a result, the financial statements are subject to the accounting for certain types of regulation as prescribed by generally accepted accounting principles and reflect the effects of regulatory actions. Regulatory assets are recognized for the effect of transactions or events where future recovery of underlying costs is probable in regulated customer rates.
While the Company’s utilities have indicated that they expect to recover costs from customers through regulated rates, there is a risk that the FERC, KPSC, VSCC, PAPUC, RIPUC, and Rhode Island Division of Public Utilities and Carriers will not approve full recovery of such costs or approve recovery on a timely basis in future regulatory decisions.
While LG&E has indicated that it expects to recover costs 68 Table of Contents from customers through regulated rates, there is a risk that the regulatory commissions will not approve full recovery of and return on such costs or approve recovery on a timely basis in future regulatory decisions.
We inspected minutes of the board of directors, other public information, regulatory orders and other filings with the KPSC and FERC to identify any evidence that could indicate utility plant may be abandoned. • We evaluated the Company’s disclosures related to the impacts of rate-regulation, including the balances recorded and regulatory developments. /s/ Deloitte & Touche LLP Louisville, Kentucky February 17, 2023 We have served as the Company’s auditor since 2015. 70 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholder and the Board of Directors of Kentucky Utilities Company Opinion on the Financial Statements We have audited the accompanying balance sheets of Kentucky Utilities Company (the “Company”) as of December 31, 2022 and 2021, the related statements of income, equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).
We tested the effectiveness of management’s internal controls over the recognition of amounts as regulatory assets or liabilities and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates. • We obtained and read relevant regulatory orders issued by the regulatory commissions for LG&E and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the treatment of similar costs under similar circumstances. • We evaluated LG&E’s disclosures related to the impacts of rate-regulation, including the balances recorded and regulatory developments. /s/ Deloitte & Touche LLP Louisville, Kentucky February 16, 2024 We have served as the Company’s auditor since 2015. 69 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholder and the Board of Directors of Kentucky Utilities Company Opinion on the Financial Statements We have audited the accompanying balance sheets of Kentucky Utilities Company (the "Company") as of December 31, 2023 and 2022, the related statements of income, equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").
We tested the effectiveness of management’s internal controls over the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates. • We obtained and read relevant regulatory orders issued by the FERC and PAPUC for PPL Electric and other public utilities in Pennsylvania, regulatory statutes, interpretations, procedural memorandums, filings made by intervening parties, and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the treatment of similar costs under similar circumstances.
We tested the effectiveness of management’s internal controls over the recognition of amounts as regulatory assets or liabilities and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates. • We obtained and read relevant regulatory orders issued by the regulatory commissions for KU and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the treatment of similar costs under similar circumstances. • We evaluated KU’s disclosures related to the impacts of rate-regulation, including the balances recorded and regulatory developments. /s/ Deloitte & Touche LLP Louisville, Kentucky February 16, 2024 We have served as the Company’s auditor since 2015. 71 Table of Contents (THIS PAGE LEFT BLANK INTENTIONALLY.) 72 Table of Contents
The accounting for regulatory assets and regulatory liabilities is based on specific ratemaking decisions or precedent for each transaction or event as prescribed by the FERC, KPSC, VSCC, PAPUC, RIPUC, and Rhode Island Division of Public Utilities 64 Table of Contents and Carriers.
The accounting for regulatory assets and regulatory liabilities is based on specific rate orders or, in certain 66 Table of Contents cases, regulatory commission precedent for transactions or events.
Removed
The accounting for the economics of rate-regulation impacts various account balances, disclosures, including regulated utility plant, regulatory assets and liabilities, operating revenues, depreciation and income taxes. As of December 31, 2022, the Company had a recorded regulatory assets balance of $2,077 million and regulatory liabilities balance of $3,650 million.
Added
The accounting for regulatory assets and regulatory liabilities is based on specific rate orders or, in certain cases, regulatory commission precedent for transactions or events.
Removed
The Company’s regulated utilities’ rates are subject to cost-based rate-setting processes and annual earnings oversight.
Added
The accounting for regulatory assets and regulatory liabilities is based on specific rate orders or, in certain 70 Table of Contents cases, regulatory commission precedent for transactions or events.
Removed
Rates are established based on an analysis of the costs incurred and the regulated utility’s capital structure and must be approved by one or more federal or state regulatory commissions, including the FERC, KPSC, VSCC, PAPUC, RIPUC, and Rhode Island Division of Public Utilities and Carriers.
Removed
Regulatory decisions can have an impact on the recovery of costs, the rate earned on invested capital, and the timing and amount of assets to be recovered by rates.
Removed
The FERC, KPSC, VSCC, PAPUC, RIPUC, and Rhode Island Division of Public Utilities and Carriers regulation of rates is premised on the full recovery of prudently incurred costs and an adequate return on capital investments.
Removed
Current and future regulatory decisions can impact the timing of future utility plant retirements, the rate of return earned on investments, and the timing and amounts of cost recovery.
Removed
We tested the effectiveness of management’s controls over the recognition of amounts as regulated utility plant, regulatory assets or liabilities, operating revenues, depreciation, income taxes, and note disclosures.
Removed
We tested the effectiveness of management’s internal controls over the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates. • We obtained and read relevant regulatory orders issued by the FERC, KPSC, VSCC, PAPUC, RIPUC and Rhode Island Division of Public Utilities and Carriers for the Company’s regulated utilities and other public utilities, regulatory statutes, interpretations, procedural memorandums, filings made by intervening parties, and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the treatment of similar costs under similar circumstances.
Removed
We evaluated the external information and compared it to management’s recorded regulatory asset and liability balances for completeness. • We inquired of management about regulated utility plant that may be abandoned.
Removed
We inspected minutes of the Board of Directors, other public information, regulatory orders, and other filings with the commissions to identify any evidence that could indicate utility plant may be abandoned. • We evaluated the Company’s disclosures related to the impacts of rate-regulation, including the balances recorded and regulatory developments, in the financial statements.
Removed
Goodwill arising from Acquisition of Rhode Island Energy – Refer to Notes 1, 9 and 19 to the Financial Statements Critical Audit Matter Description The Company’s balance sheet includes $2,248 million of goodwill as of December 31, 2022, of which $1,586 million was recorded as a result of the acquisition of Rhode Island Energy (the "Acquisition") and assigned to the Company’s reporting units.
Removed
To determine the amount of goodwill from the Acquisition assigned to each of the Company’s reporting units, management calculated the fair value of the Kentucky Regulated and the Pennsylvania Regulated reporting units with-and-without the expected benefit to those reporting units from the Acquisition.
Removed
The difference in the fair values of the Kentucky Regulated and Pennsylvania Regulated reporting units with-and-without the expected benefit from the Acquisition represents goodwill derived from the Acquisition and was assigned to the respective reporting units.
Removed
The remainder of the goodwill from the Acquisition was assigned to the Rhode Island Regulated reporting unit. 65 Table of Contents We identified the assignment of goodwill from the Acquisition to the Company’s reporting units as a critical audit matter due to the significant judgments made by management to determine the amount assigned to each reporting unit.
Removed
This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the assignment of goodwill to the Company’s reporting units.
Removed
The accounting for regulatory assets and regulatory liabilities is based on specific ratemaking decisions or precedent for each transaction or event as prescribed by the FERC and PAPUC. The accounting for the economics of rate-regulation impacts various account balances and disclosures, including regulated utility plant, regulatory assets and liabilities, operating revenues, depreciation, and income taxes.
Removed
As of December 67 Table of Contents 31, 2022, PPL Electric had a recorded regulatory assets balance of $581 million and regulatory liabilities balance of $905 million. PPL Electric’s regulated utility’s rates are subject to cost-based rate-setting processes and annual earnings oversight.
Removed
Rates are established based on an analysis of the costs incurred and the regulated utility’s capital structure and must be approved by one or more federal or state regulatory commissions, including the FERC and PAPUC.
Removed
Regulatory decisions can have an impact on the recovery of costs, the rate earned on invested capital, and the timing and amount of assets to be recovered by rates. The FERC and PAPUC regulation of rates is premised on the full recovery of prudently incurred costs and an adequate return on capital investments.
Removed
Current and future regulatory decisions can impact the rate of return earned on investments and the timing and amounts of cost recovery.

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